Performance Trend 1. Overview of performance for FY3/2024 Consolidated performance for FY3/2024 of G-7 Holdings <7508> was 192,992 million yen in increased operating income of 9.1% over the previous year, and increased ordinary income of 7.4% to 7,318 million yen, and attributed to the parent company's net income of 5,175 million yen, an increase of 35.3% over the previous year. Sales were driven by the Business Supermarket Business and the Meat Business, and continued to set a new record high, exceeding the company's plan by 4.3%. However, in terms of profits, the automobile-related business was affected by a decrease in profits due to poor sales of winter tires due to a warm winter, and could not reach the company's plan, it turned to a profit increase for the second time due to the growth of other businesses centered on the Business Supermarket business. The sales cost ratio has increased by 0.8 points over the previous year due to changes in the sales composition ratio; however, the selling, general and administrative expense ratio decreased by 0.7 points due to the effect of increased earnings, and the operating margin decreased by 0.1 points to 3.6%. The main reasons for the increase/decrease of selling, general and administrative expenses were a decrease of 600 million yen in energy costs due to subsidies from rising electricity prices, and an increase of 1 billion yen in labor costs due to improvements in employee treatment and increased education costs. In addition to this, depreciation expenses increased by nearly 600 million yen due to rising construction material costs and rising costs of opening stores etc. The EBITDA margin has increased by 0.1 points from the previous year. Also, the reason for the large increase in the net income of the parent company's shareholders attributable to the current period is due to the elimination of 500 million yen in retirement benefits paid to executives that were recorded as special losses in the previous year, a decrease of 455 million yen in impairment losses, and a gain of 127 million yen on the sale of investment securities in FY3/2024.

3. Performance outlook for the year ending December 2024.

Kyoei Gas <9539> expects sales of 117.4 billion yen (-4.4% YoY), operating profit of 11 million yen (-35.4% YoY), ordinary profit of 18 million yen (-26.0% YoY), and net income attributable to parent company shareholders of 13 million yen (-11.0% YoY) for the year ending December 2024. Sales are expected to decline due to downward pressure on gas sales prices due to the raw material cost adjustment system, while profitability is expected to decline due to the impact of a sliding time lag (losses) in the gas business. The segment-by-segment outlook is based on a decrease in sales volume due to the record high temperatures in 2023, while assuming a downward adjustment in gas sales prices due to the raw material cost adjustment system. On the profit front, despite a lag (gain) in gas raw material prices following a decline in gas raw material prices in the previous year, based on the raw material cost adjustment system, a lag (loss) in the 2024 period is expected due to an increase in gas raw material prices. The electricity retail business is expected to make a significant contribution to profit improvement by overcoming the worst period due to a decrease in electricity procurement costs, but it is still a long way off from turning profitable. Therefore, revenue improvement measures such as targeting families who use it steadily every day will also be taken. For real estate, it is expected to contribute to profit growth as some rental income begins to contribute with the full-scale opening of Leafsity Ichikawa in 2025-2026. For other sectors, performance is expected to be generally similar to the previous fiscal year.

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I want to establish each of the three areas as a revenue pillar.

Mid-term growth image.

The next medium-term management plan is expected to continue to focus on strategies for achieving the long-term management vision 2030, as the current "medium-term management plan 2022-2024" is proceeding smoothly except for performance. In the regional energy sector, stable growth is expected as the demand for low-carbon natural gas remains strong over the long term, but there will also be a focus on selling urban gas with more carbon-neutral credits. In the area management sector, revenue contribution is expected from Leafsity Ichikawa, but as stable revenue can be expected from real estate, it is also envisioned to purchase properties and develop them as rental real estate, in addition to the redevelopment of held real estate. In the total life support sector, it has become a challenging business for the company, but it seems that they are considering challenging total renovation by leveraging their strengths in areas such as water circulation and combustion. In the next medium-term management plan, we aim to establish revenue pillars in each area and achieve performance results. In addition, as we need to correct the current PBR (price/book value ratio) of around 0.3 times, we will need to consider capital strategies.

(Author: FISCO guest analyst Nobumitsu Miyata)