Quarterly trends and results

Cumulative		FY03/21				FY03/22				FY03/22
(JPYmn)		Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4	% of Est.	FY Est.
Revenue		187,315	424,503	709,830	1,043,534	166,862	350,668	539,068	763,838	100.1%	763,300
	YoY	-8.8%	-10.1%	-0.1%	10.5%	-10.9%	-17.4%	-24.1%	-26.8%		-26.9%
Gross profit		15,666	33,233	55,019	81,851	14,465	29,699	44,682	64,141
	YoY	-6.0%	-16.5%	-6.9%	0.5%	-7.7%	-10.6%	-18.8%	-21.6%
	Gross profit margin	8.4%	7.8%	7.8%	7.8%	8.7%	8.5%	8.3%	8.4%
SG&A expenses		11,036	22,379	33,817	46,823	10,071	19,893	29,805	40,081
	YoY	-2.3%	-6.7%	-5.0%	-3.7%	-8.7%	-11.1%	-11.9%	-14.4%
	SG&A ratio	5.9%	5.3%	4.8%	4.5%	6.0%	5.7%	5.5%	5.2%
Operating profit		4,629	10,853	21,201	35,028	4,393	9,806	14,877	24,059	103.7%	23,200
	YoY	-13.8%	-31.4%	-9.9%	6.7%	-5.1%	-9.6%	-29.8%	-31.3%		-33.8%
	Operating profit margin	2.5%	2.6%	3.0%	3.4%	2.6%	2.8%	2.8%	3.1%		3.0%
Recurring profit		4,786	11,052	21,630	35,781	4,521	9,883	15,066	24,554	104.0%	23,600
	YoY	-11.8%	-30.3%	-8.3%	7.8%	-5.5%	-10.6%	-30.3%	-31.4%		-34.0%
	Recurring profit margin	2.6%	2.6%	3.0%	3.4%	2.7%	2.8%	2.8%	3.2%		3.1%
Net income		4,290	8,803	16,369	25,715	3,114	7,015	10,478	16,988	104.9%	16,200
	YoY	17.1%	-17.0%	7.4%	21.4%	-27.4%	-20.3%	-36.0%	-33.9%		-37.0%
	Net margin	2.3%	2.1%	2.3%	2.5%	1.9%	2.0%	1.9%	2.2%		2.1%
Quarterly		FY03/21				FY03/22
(JPYmn)		Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Revenue		187,315	237,188	285,327	333,704	166,862	183,806	188,400	224,770
	YoY	-8.8%	-11.0%	19.6%	42.9%	-10.9%	-22.5%	-34.0%	-32.6%
Gross profit		15,666	17,567	21,786	26,832	14,465	15,234	14,983	19,459
	YoY	-6.0%	-24.1%	12.8%	20.0%	-7.7%	-13.3%	-31.2%	-27.5%
	Gross profit margin	8.4%	7.4%	7.6%	8.0%	8.7%	8.3%	8.0%	8.7%
SG&A expenses		11,036	11,343	11,438	13,006	10,071	9,822	9,912	10,276
	YoY	-2.3%	-10.6%	-1.5%	-0.3%	-8.7%	-13.4%	-13.3%	-21.0%
	SG&A ratio	5.9%	4.8%	4.0%	3.9%	6.0%	5.3%	5.3%	4.6%
Operating profit		4,629	6,224	10,348	13,827	4,393	5,413	5,071	9,182
	YoY	-13.8%	-40.4%	34.3%	48.4%	-5.1%	-13.0%	-51.0%	-33.6%
	Operating profit margin	2.5%	2.6%	3.6%	4.1%	2.6%	2.9%	2.7%	4.1%
Recurring profit		4,786	6,266	10,578	14,151	4,521	5,362	5,183	9,488
	YoY	-11.8%	-39.9%	36.9%	47.1%	-5.5%	-14.4%	-51.0%	-33.0%
	Recurring profit margin	2.6%	2.6%	3.7%	4.2%	2.7%	2.9%	2.8%	4.2%
Net income		4,290	4,513	7,566	9,346	3,114	3,901	3,463	6,510
	YoY	17.1%	-35.0%	63.3%	57.4%	-27.4%	-13.6%	-54.2%	-30.3%
	Net margin	2.3%	1.9%	2.7%	2.8%	1.9%	2.1%	1.8%	2.9%

Note: The company began applying the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29; March 31, 2020). Its FY03/22 earnings forecast reflects this standard’s application. Ratios indicating YoY change between the company’s FY03/22 forecast and actual results in FY03/21 are reference values calculated by Shared Research and do not account for impact from the company’s application of the Accounting Standard for Revenue Recognition.
Source: Shared Research based on company data
Notes: Figures may differ from company materials due to differences in rounding methods.

By segment

By segment (cumulative)			FY03/21				FY03/22
(JPYmn)			Q1	Q1–Q2	Q1–Q3	Q1–Q4	Q1	Q1–Q2	Q1–Q3	Q1–Q4
Revenue			187,315	424,503	709,830	1,043,534	166,862	350,668	539,068	763,838
	YoY		-8.8%	-10.1%	-0.1%	10.5%	-10.9%	-17.4%	-24.1%	-26.8%
	IT Infrastructure Distribution		169,523	386,870	655,037	969,748	149,878	315,155	485,355	691,281
		YoY	-8.3%	-9.4%	1.6%	13.2%	-11.6%	-18.5%	-25.9%	-28.7%
		% of total	90.5%	91.1%	92.3%	92.9%	89.8%	89.9%	90.0%	90.5%
	Fiber		15,824	31,179	46,000	61,033	14,460	29,360	43,446	58,289
		YoY	-12.4%	-17.2%	-16.6%	-15.4%	-8.6%	-5.8%	-5.6%	-4.5%
		% of total	8.4%	7.3%	6.5%	5.8%	8.7%	8.4%	8.1%	7.6%
	Industrial Machinery		1,783	5,994	7,979	11,582	2,333	5,727	7,827	11,610
		YoY	-15.8%	-7.9%	-12.1%	-10.8%	30.8%	-4.5%	-1.9%	0.2%
		% of total	1.0%	1.4%	1.1%	1.1%	1.4%	1.6%	1.5%	1.5%
	Other		183	459	813	1,169	190	424	2,439	2,657
		YoY	-61.7%	-55.6%	-58.1%	-37.7%	3.8%	-7.6%	200.0%	127.3%
		% of total	0.1%	0.1%	0.1%	0.1%	0.1%	0.1%	0.5%	0.3%
Operating profit			4,629	10,853	21,201	35,028	4,393	9,806	14,877	24,059
	YoY		-13.8%	-31.4%	-9.9%	6.7%	-5.1%	-9.6%	-29.8%	-31.3%
	Operating profit margin		2.5%	2.6%	3.0%	3.4%	2.6%	2.8%	2.8%	3.1%
	IT Infrastructure Distribution		3,838	10,749	20,234	33,226	3,558	8,556	12,981	21,651
		YoY	-17.1%	-18.9%	1.1%	18.0%	-7.3%	-20.4%	-35.8%	-34.8%
		Operating profit margin	2.3%	2.8%	3.1%	3.4%	2.4%	2.7%	2.7%	3.1%
		% of total	82.9%	99.0%	95.4%	94.9%	81.0%	87.3%	87.3%	90.0%
	Fiber		887	-194	659	1,350	729	957	1,394	1,617
		YoY	1.1%	-	-77.1%	-65.2%	-17.8%	-	111.5%	19.8%
		Operating profit margin	5.6%	-0.6%	1.4%	2.2%	5.0%	3.3%	3.2%	2.8%
		% of total	19.2%	-1.8%	3.1%	3.9%	16.6%	9.8%	9.4%	6.7%
	Industrial Machinery		-45	375	362	537	124	302	354	656
		YoY	-	-3.8%	-22.0%	-28.7%	-	-19.5%	-2.2%	22.2%
		Operating profit margin	-2.5%	6.3%	4.5%	4.6%	5.3%	5.3%	4.5%	5.7%
		% of total	-1.0%	3.5%	1.7%	1.5%	2.8%	3.1%	2.4%	2.7%
	Other		-51	-77	-54	-87	-19	-12	144	130
		YoY	-	-	-	-	-	-	-	-
		Operating profit margin	-27.9%	-16.8%	-6.6%	-7.4%	-10.0%	-2.8%	5.9%	4.9%
		% of total	-1.1%	-0.7%	-0.3%	-0.2%	-0.4%	-0.1%	1.0%	0.5%
	Company-wide, eliminations		0	0	0	0	0	1	3	4
By segment (quarterly)			FY03/21				FY03/22
(JPYmn)			Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Revenue			187,315	237,188	285,327	333,704	166,862	183,806	188,400	224,770
	YoY		-8.8%	-11.0%	19.6%	42.9%	-10.9%	-22.5%	-34.0%	-32.6%
	IT Infrastructure Distribution		169,523	217,347	268,167	314,711	149,878	165,277	170,200	205,926
		YoY	-8.3%	-10.2%	23.2%	48.0%	-11.6%	-24.0%	-36.5%	-34.6%
		% of total	90.5%	91.6%	94.0%	94.3%	89.8%	89.9%	90.3%	91.6%
	Fiber		15,824	15,355	14,821	15,033	14,460	14,900	14,086	14,843
		YoY	-12.4%	-21.7%	-15.2%	-11.7%	-8.6%	-3.0%	-5.0%	-1.3%
		% of total	8.4%	6.5%	5.2%	4.5%	8.7%	8.1%	7.5%	6.6%
	Industrial Machinery		1,783	4,211	1,985	3,603	2,333	3,394	2,100	3,783
		YoY	-15.8%	-4.0%	-22.8%	-7.9%	30.8%	-19.4%	5.8%	5.0%
		% of total	1.0%	1.8%	0.7%	1.1%	1.4%	1.8%	1.1%	1.7%
	Other		183	276	354	356	190	234	2,015	218
		YoY	-61.7%	-50.3%	-61.0%	-	3.8%	-15.2%	469.2%	-38.8%
		% of total	0.1%	0.1%	0.1%	0.1%	0.1%	0.1%	1.1%	0.1%
Operating profit			4,629	6,224	10,348	13,827	4,393	5,413	5,071	9,182
	YoY		-13.8%	-40.4%	34.3%	48.4%	-5.1%	-13.0%	-51.0%	-33.6%
	Operating profit margin		2.5%	2.6%	3.6%	4.1%	2.6%	2.9%	2.7%	4.1%
	IT Infrastructure Distribution		3,838	6,911	9,485	12,992	3,558	4,998	4,425	8,670
		YoY	-17.1%	-19.9%	40.6%	59.3%	-7.3%	-27.7%	-53.3%	-33.3%
		Operating profit margin	2.3%	3.2%	3.5%	4.1%	2.4%	3.0%	2.6%	4.2%
		% of total	82.9%	111.0%	91.7%	94.0%	81.0%	92.4%	87.3%	94.4%
	Fiber		887	-1,081	853	691	729	228	437	223
		YoY	1.1%	-	15.9%	-30.8%	-17.8%	-	-48.8%	-67.7%
		Operating profit margin	5.6%	-7.0%	5.8%	4.6%	5.0%	1.5%	3.1%	1.5%
		% of total	19.2%	-17.4%	8.2%	5.0%	16.6%	4.2%	8.6%	2.4%
	Industrial Machinery		-45	420	-13	175	124	178	52	302
		YoY	-	-19.7%	-	-39.4%	-	-57.6%	-	72.6%
		Operating profit margin	-2.5%	10.0%	-0.7%	4.9%	5.3%	5.2%	2.5%	8.0%
		% of total	-1.0%	6.7%	-0.1%	1.3%	2.8%	3.3%	1.0%	3.3%
	Other		-51	-26	23	-33	-19	7	156	-14
		YoY	-	-	-84.4%	-	-	-	578.3%	-
		Operating profit margin	-27.9%	-9.4%	6.5%	-9.3%	-10.0%	3.0%	7.7%	-6.4%
		% of total	-1.1%	-0.4%	0.2%	-0.2%	-0.4%	0.1%	3.1%	-0.2%
	Company-wide, eliminations		0	-	-	-0	0	1	2	1

Source: Shared Research based on company data
Notes: Figures may differ from company materials due to differences in rounding methods.

Full-year FY03/22 results (out May 12, 2022)

Summary

Revenue: JPY763.8bn (-26.8% YoY). The company has adopted the Accounting Standard for Revenue Recognition starting in FY03/22. Hereinafter, YoY revenue comparisons are Shared Research estimates for reference and do not take into account the change in accounting standards.
Operating profit: JPY24.1bn (-31.3% YoY)
Recurring profit: JPY24.6bn (-31.4% YoY)
Net income*: JPY17.0bn (-33.9% YoY)
*Net income attributable to owners of the parent

Key takeaways from earnings results

Revenue was JPY763.8bn. The company adopted the Accounting Standard for Revenue Recognition starting in FY03/22. As a result, revenue was JPY64.9bn lower than it would have been under the previous accounting standard. According to the company’s estimates, revenue fell 21.6% YoY in real terms when compared against FY03/21 revenue adjusted to reflect the new accounting standard.

Factors contributing to lower revenue (excluding the change in accounting standard): In the IT Infrastructure Distribution segment, sales of PCs and other products for the education market fell YoY due to the falloff of GIGA School concept-related demand seen during the same period in FY03/21. Sales of PCs and peripheral equipment for the consumer market also declined compared with a year ago when the shift to teleworking fueled strong demand. In the Fiber segment, revenue suffered from a reactionary drop in demand for masks and antibacterial sheets from FY03/21, as well as temporary store closures in Japan and other factors.

Operating profit fell 31.3% YoY to JPY24.1bn. Operating profit improved by 19.8% YoY in the Fiber segment and 22.2% YoY in the Industrial Machinery segment, but fell 34.8% YoY in the IT Infrastructure Distribution segment.

Progress versus forecasts

Progress against the revised company forecast (out April 15, 2022) was 100.1% for revenue, 103.7% for operating profit, 104.0% for recurring profit, and 104.9% for net income attributable to owners of the parent.

Results by segment

IT Infrastructure Distribution segment

Revenue: JPY691.3bn (-28.7% YoY). The company has adopted the Accounting Standard for Revenue Recognition starting in FY03/22. YoY sales comparisons are Shared Research estimates for reference and do not reflect the change in accounting standards.
Operating profit: JPY21.7bn (-34.8% YoY)
OPM: 3.1% (3.4% in FY03/21)

In the corporate market, with many regions placed under emergency declarations related to the COVID-19 pandemic, the company pushed forward with sales efforts with a close focus on local communities by looking at its nationwide sales locations to identify where in-person sales were possible and being flexible with teleworking. In the business targeting companies and government agencies, contract numbers for subscription services rose as customers shifted to building cloud environments and using cloud services. Sales of PCs, and monitors to these customers were also up YoY.

Shipments of PCs and tablets for the education market declined YoY due to the concentration of GIGA School-related orders in FY03/21.

In the consumer market, sales of PCs and peripheral equipment fell YoY owing to exceptionally strong teleworking demand in FY03/21.

Company performance in the domestic PC market

Number of PCs shipped: 2,838,000 units (-44.7% YoY)
Number of servers shipped: 56,000 units (-7.6% YoY)

Company performance in the subscription business

Trading volume from subscription-based services: JPY70.8bn (+4.1% YoY)

Of which, trading volume from sales partners through the iKAZUCHI subscription management portal: JPY14.7bn (+31.8% YoY)

Fiber segment

Revenue: JPY58.3bn (-4.5% YoY)
Operating profit: JPY1.6bn (+19.8% YoY)
OPM: 2.8% (2.2% in FY03/21)

In the synthetic fibers and rayon divisions, sales of flameproof and flame-retardant rayon cotton for the US market were strong against the backdrop of growing environmental and safety awareness, but sales of synthetic nonwoven fabrics for disinfection and cosmetic uses fell due to a drop in demand versus FY03/21. In the industrial material division, orders for cartridge filters and rubber sponges increased, but orders for construction sheeting and synthetic sailcloth were sluggish. In the clothing products division, sales of clothing and inner-wear for the US market increased sharply, but the Japan market was affected by temporary store closures. The sharp rise in raw material and fuel prices across the segment's businesses put downward pressure on operating profit.

In 1H FY03/21, improper transactions negatively affected revenue by JPY640mn and operating profit by JPY2.0bn.

Industrial Machinery segment

Revenue: JPY11.6bn (+0.2% YoY)
Operating profit: JPY656mn (+22.2% YoY)
OPM: 5.7% (4.6% in FY03/21)

Orders

Machine tools division: Orders rose 59.0% YoY (The Japan Machine Tool Builders’ Association reported a 68.7% YoY increase in total orders between April 2021 and March 2022.)
Automatic machinery division: Orders rose 37.7% YoY

In the machine tools division, orders increased in the Chinese market, where capital investment has been expanding, while orders in Japan gradually recovered. However, FY03/22 revenue and profit were both down YoY due to the decline in orders in FY03/21 and impact from the soaring price of materials. In the automatic machinery division, revenue and profit increased on the capture of orders for parts replacement, renovation work, and other services.

Full-year company forecast for FY03/23

		FY03/22			FY03/23			YoY
(JPYmn)		1H Act.	2H Act.	FY Act.	1H Est.	2H Est.	FY Est.	1H Est.	2H Est.	FY Est.
Revenue		350,668	413,170	763,838	377,300	452,700	830,000	7.6%	9.6%	8.7%
Cost of revenue		320,969	378,728	699,697
Gross profit		29,699	34,442	64,141
	Gross profit margin	8.5%	8.3%	8.4%
SG&A expenses		19,893	20,188	40,081
	SG&A ratio	5.7%	4.9%	5.2%
Operating profit		9,806	14,253	24,059	11,040	16,320	27,360	12.6%	14.5%	13.7%
	Operating profit margin	2.8%	3.4%	3.1%	2.9%	3.6%	3.3%
Recurring profit		9,883	14,671	24,554	11,100	16,400	27,500	12.3%	11.8%	12.0%
	Recurring profit margin	2.8%	3.6%	3.2%	2.9%	3.6%	3.3%
Net income		7,015	9,973	16,988	7,600	11,000	18,600	8.3%	10.3%	9.5%
	Net margin	2.0%	2.4%	2.2%	2.0%	2.4%	2.2%

Source: Shared Research based on company data
Note: 2H estimates for FY03/22 are calculated by subtracting 1H figures from the full-year figures. The company began applying the new Accounting Standard for Revenue Recognition (ASBJ Statement No. 29) from April 1, 2021. The estimates for FY03/22 are based on the new standard; YoY % change is a comparison against FY03/21 figures under the previous accounting standard. Figures are Shared Research estimates based on simple comparisons without reflecting changes in accounting standards.

			FY03/22			FY03/22			YoY
(JPYmn)			1H Act.	2H Act.	FY Act.	1H Est.	2H Est.	FY Est.	1H Est.	2H Est.	FY Est.
IT Infrastructure Distribution
	Revenue		315,155	376,126	691,281	340,850	413,970	754,820	8.2%	10.1%	9.2%
	Operating profit		8,556	13,095	21,651	9,420	14,280	23,700	10.1%	9.0%	9.5%
		Operating profit margin	2.7%	3.5%	3.1%	2.8%	3.4%	3.1%
Fiber
	Revenue		29,360	28,929	58,289	30,280	31,780	62,060	3.1%	9.9%	6.5%
	Operating profit		957	660	1,617	1,200	1,560	2,760	-	136.4%	70.7%
		Operating profit margin	3.3%	2.3%	2.8%	4.0%	4.9%	4.4%
Industrial Machinery
	Revenue		5,727	5,883	11,610	6,030	6,450	12,480	5.3%	9.6%	7.5%
	Operating profit		302	354	656	415	475	890	37.4%	34.2%	35.7%
		Operating profit margin	5.3%	6.0%	5.7%	6.9%	7.4%	7.1%

Source: Company materials よりSR社作成

Overview

FY03/23 is the second year of the medium-term management plan. Versus the medium-term management plan announced in May 2021, the new plan calls for lower operating profit in Fiber segment (JPY2.8bn versus JPY4.0bn) and Industrial Machinery segment (JPY890mn versus JPY950mn). The company downgraded its outlook for the Fiber segment owing to high raw material and fuel prices and the delayed recovery in demand. It also adjusted its outlook for the Industrial Machinery segment slightly downward in light of soaring raw material prices and the state of orders for automated machinery. Profit targets for the IT Infrastructure Distribution segment remain unchanged.

By segment

IT Infrastructure Distribution

Revenue: JPY754.8bn (+9.2% YoY)
Operating profit: JPY23.7bn (+9.5% YoY)
OPM: 3.1% (3.1% in FY03/21)

Fiber

Revenue: JPY62.1bn (+6.5% YoY)
Operating profit: JPY2.8bn (+70.7% YoY)
OPM: 4.4% (2.8% in FY03/21)

Industrial Machinery

Revenue: JPY12.5bn (+7.5% YoY)
Operating profit: JPY890mn (+35.7% YoY)
OPM: 7.1% (5.7% in FY03/21)

Daiwabo Holdings 3107