Summary: RIZAP Group<2928>The comprehensive enterprise, which is committed to proving that "people can change" as its unique management philosophy, develops a variety of businesses in the three areas of health creation, health care / beauty, lifestyle, and investment. Under the vision of "Global No.1 in the self-investment industry", it has achieved remarkable growth by actively utilizing M&A under the holding company structure and has grown to include 68 group companies, including 5 listed subsidiaries, and 4,606 consolidated employees. Listed on the Sapporo Stock Exchange's Ambitious Market in 2006, it formulated a medium-term management plan in September 2022, but revised it in February 2024 to achieve an operating profit of ¥400 million (fiscal year ending March 2027) by aggressively expanding the new business "chocoZAP". The fiscal 2024 performance was sales revenue of ¥16,629.8 million (+7.6% YoY), operating loss of ¥594 million (compared to a loss of ¥4948 million in the same period of the previous year), pre-tax loss of ¥4524 million (compared to a loss of ¥7,031 million in the same period of the previous year), and net loss attributable to the owners of the parent of ¥4,300 million (compared to a loss of ¥12,673 million in the same period of the previous year). Due to the black ink conversion of the chocoZAP business, it achieved a black ink of ¥417.5 million on an operating profit basis in the fourth quarter alone. As for sales revenue, the RIZAP-related business (including the chocoZAP business) significantly increased its revenue (+¥201 million) by focusing on expanding the convenience gym "chocoZAP". In existing businesses, there was an increase in revenue, including Antiroza Co., Ltd. (+¥419.8 million), while there was a decrease in revenue due to store structure reform in REXT Co., Ltd., etc. (-¥599.8 million) and the impact of selling the Sikata business under the subsidiary BRUNO<3140>at the end of the previous year (-¥511.1 million). As for operating loss, the group as a whole improved due to the transition of the chocoZAP business to the investment recovery period and the success of business portfolio reform such as REXT.
Chubu Steel Plate <5461> is an electric furnace thick plate manufacturer that produces and sells high-quality thick steel plates (hereinafter referred to as thick plates) made from iron scrap as raw materials. The company's thick plates support the social infrastructure in various fields such as industrial machinery, construction machinery, civil engineering, and construction.
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 consolidated financial results for the fiscal year ending March 2024, operating revenue was 67,785 million yen (a decrease of 11.2% compared to the previous year), operating profit was 10,425 million yen (a decrease of 15.0% compared to the previous year), ordinary profit was 10,228 million yen (a decrease of 17.0% compared to the previous year), and net income attributable to the parent company's shareholders was 7,133 million yen (a decrease of 16.8% compared to the previous year). The company revised its performance forecast in November 2023, setting sales revenue at 67,600 million yen (70,600 million yen at the beginning of the fiscal year) and operating profit at 9,900 million yen (10,100 million yen at the beginning of the fiscal year). However, compared to the revised plan, sales revenue slightly exceeded the plan at 100.3%, and both operating profit and ordinary profit exceeded the plan at 105.3% and 104.4%, respectively. It was affected by the suspension of operations due to the large-scale electric furnace construction work carried out in the second quarter, as well as a decrease in demand in various industries such as industrial machinery, construction machinery, and construction/civil engineering, which are the main demand sources for thick plates, due to a decrease in capital investment in equipment and delays in construction projects. As this was also the final year of the Medium-Term Business Plan for 21 (fiscal years 2021-2023), the company proactively pursued sales activities and achieved the plan, but was unable to surpass the strong performance of the previous year. In terms of profit, the procurement cost was reduced as the cost of raw materials and other materials, including iron scrap, fell below the previous year's level, and the average annual metal spread increased over the previous year. It is also considered that the plan was exceeded due to the fact that the sales volume after the plan was revised in November 2023 was achieved.
2. Financial forecast for the March 2025 period.
For the consolidated financial results for the fiscal year ending March 2025, operating revenue is expected to be 68,000 million yen (0.3% increase from the previous year), operating profit 9,500 million yen (8.9% decrease), ordinary profit 9,100 million yen (11.0% decrease), and net income attributable to parent company shareholders 6,100 million yen (14.5% decrease). While operating revenue is expected to remain flat from the previous year, each stage's profit is expected to decrease. From the second quarter to the third quarter of fiscal year 2025, large-scale electric furnace construction work is also planned, and it is expected that the volume of crude steel production will be 510,000 tons, which is less than the actual results of fiscal year 2024 of 560,000 tons, and that the sales quantity will be 530,000 tons, which is the same as fiscal year 2024. However, regarding the domestic thick plate market, it is expected to continue to move at a high level, as the impact of the rise in material prices and labor shortages on demand remains, and the demand for civil engineering and construction-related needs can be expected due to measures to strengthen Japan's resilience, and major domestic suppliers of high furnace steel manufacturers continue to push for continuous price increases due to rising costs of materials and logistics. We believe that the sales revenue forecast is relatively accurate. In terms of profit, it is expected to be a difficult situation due to various factors such as the fact that the price of primary raw materials such as iron scrap has been moving at a high level since fiscal year 2024, the rise in energy and material prices, and the cost increase due to the 2024 logistics problem. In addition, expenses related to construction costs, such as depreciation on equipment, are also planned to be recorded, resulting in an expected decrease in profit. However, we believe that there are no concerns about achieving the plan in terms of profit by reflecting cost increases properly in sales prices.
3. Announcement of Medium-Term Business Plan 24
In May 2024, a three-year medium-term business plan, the 24 Medium-Term Business Plan, which starts in the fiscal year 2024, was formulated. As the basic policy in this mid-term plan, the following three points were raised, which will be promoted utilizing the business partnership with Nakayama Steel Works <5408>.
(1) Sale of 800,000 tons of steel products (thick plates and castings)
In addition to responding to the increased demand for thick plates in the market due to the structural reform of blast furnace manufacturers, we will strengthen our production and sales system to increase the sales volume of steel products to 800,000 tons in order to meet the decarbonization needs of our customers.
(2) Decarbonization support
We will promote decarbonization by implementing energy-saving effects through the operation of a new electric furnace and securing renewable energy.
(3) Sustainable infrastructure development
The company aims to build a foundation for sustainable growth in the group over the long term by promoting human capital strategy, DX strategy and business efficiency improvement, strengthening governance, risk management, compliance, efficient balance sheet operation, environmental, disaster prevention, BCP (business continuity plan), and subsidiary strategies.
As the main KPI, we aim for sales volume of steel products of 800,000 tons, equipment investment of 12 billion yen, ROE (return on equity) of 10%, consolidated ordinary profit of 15 billion yen, DOE (dividend on equity) of 3.5%, and value-added labor productivity of 40 million yen, and aim for a market capitalization of 100 billion yen in this medium-term management plan.
* Calculated by (operating profit + depreciation expense + personnel expenses) ÷ number of employees.
■Key Points
- The carbon dioxide emissions from the electric furnace are about one-fourth of those of the blast furnace.
- We will strengthen shareholder returns through a dividend policy based on DOE (dividend on equity).
- We plan to update to the latest energy-saving and environmentally friendly electric furnace (scheduled to start operation in the fall of 2024).
- We announced a medium-term management plan for the three years until March 2027.
(Writer: FISCO analyst Tomoichi Murase)