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.

2024 FY Performance Overview 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. Changes in the ratio of revenues - while the revenue composition ratio increased by 0.8 points from the previous year, 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 factors affecting selling, general and administrative expenses were a drop of 600 million yen in energy costs due to subsidies from rising electricity rates and an increase of 1 billion yen in labor costs due to increases in treatment and education expenses for employees. Depreciation expenses also rose by just under 600 million yen due to increased costs of construction materials and opening new stores. The EBITDA (earnings before interest, taxes, depreciation, and amortization) margin rose 0.1 points from the previous year. Lastly, the reason for the increase in the net income of the parent company's shareholders attributable to the current period was due to the elimination of the 500 million yen for executive retirement bonuses paid in the previous period, the reduction of impairment losses by 455 million yen, and the realization of gains on investment securities of 127 million yen in FY3/2024.

For the fiscal year ending March 2024, Hi Highst's revenue was 2,310 million yen (4.3% decrease from the previous year), operating loss was 158 million yen (loss of 5 million yen in the previous year), ordinary loss was 156 million yen (profit of 3 million yen in the previous year), and the net loss attributable to the parent company's shareholders was 221 million yen (loss of 2 million yen in the previous year).

While direct drive equipment sales remained solid for their main customer, THK, overall growth remained slight due to low orders in the Chinese market. Precision component processing saw a decrease in revenue compared to the previous period due to a reduction in orders, mainly in relation to Honda's F1 withdrawal, but the results were within expectations. Unit products saw a decrease in revenue compared to the previous period due to a downturn in Chinese sales, as well as stagnation in electronic component and LCD equipment investments.

In addition to a decrease in overall revenue leading to a decline in operating rates, depreciation expenses increased by 33 million yen compared to the previous period from accumulated investments in equipment over the past few years, resulting in a significant drop in gross profit margin to 13.6% (19.8% in the previous period). As a result, gross sales profit also significantly decreased to 315 million yen (33.9% decrease compared to the previous period). On the other hand, sales and general expenses were kept to a minimum with expenses only decreasing slightly to 474 million yen (1.8% decrease), however, the significant decrease in gross sales profit led to an operating loss.

Investment in equipment amounted to 468 million yen (422 million yen in the previous period), with the main investments being in machinery, equipment, and buildings. Depreciation expense was 232 million yen (199 million yen in the previous period).

2. Breakdown by product

The breakdown by product is as follows:

(1) Direct drive equipment

While direct drive equipment sales remained solid for their main customer, THK, the full-year sales were only 1,591 million yen (4.3% increase compared to the previous period), which was not as much as expected.

(2) Precision component processing

Although the impact of Honda's F1 withdrawal was seen this fiscal year, orders for some parts continue mainly for Red Bull. Revenue decreased to 529 million yen (21.4% decrease) due to a decrease in revenue related to Honda's F1 downturn, but the results were within expectations.

(3) Unit products

Unit products saw a decrease in revenue compared to the previous period due to a downturn in Chinese sales, as well as stagnation in electronic component and LCD equipment investments, resulting in a 188 million yen decrease in revenue (11.7% decrease compared to the previous period).

(Written by FISCO guest analyst Noboru Terashima)