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.
Financial situation:
As of the end of March 2024, the financial status of Nakaniishi Manufacturing Co., Ltd. <5941> has shown total assets of JPY 2,909.7 million (+JPY 296.3 million from the previous period end). This is mainly due to an increase of JPY 361.2 million in cash and deposits, and JPY 314 million in work in progress, despite a decrease of JPY 616 million in bills receivable and JPY 358 million in goods and products. Liabilities amounted to JPY 998.8 million (+JPY 148.1 million from the previous period end). This is mainly due to an increase of JPY 845 million in electronic recording liabilities and an increase of JPY 234 million in unpaid corporate taxes, despite a decrease of JPY 302 million in accounts payable and a decrease of JPY 348 million in unpaid consumption taxes, etc. Net assets amounted to JPY 1,910.8 million (+JPY 181.1 million from the previous period end). This is mainly due to a dividend of JPY 201 million from surplus, the posting of JPY 1,519 million in net income for the period, and a JPY 205 million increase in net unrealized gains on valuation and translation differences. As a result, the financial situation has become more stable.
The cash flow situation shows a cash inflow from operating activities of JPY 4,333 million. This is mainly due to a decrease of JPY 690 million in trade receivables, but offset by JPY 2,135 million in pre-tax net income, and an increase of JPY 647 million in trade payables. The cash outflow from investing activities amounted to JPY 454 million. This is mainly due to an income of JPY 143 million from the sale of investment securities, but offset by expenditures of JPY 282 million on tangible fixed assets, JPY 188 million on the acquisition of investment securities, and JPY 95 million on the acquisition of intangible fixed assets. The cash outflow from financing activities amounted to JPY 266 million. This is mainly due to an expenditure of JPY 202 million on dividend payments and an expenditure of JPY 51 million on the purchase of treasury stocks. As a result, the cash flow became abundant, and the balance of cash and cash equivalents at the end of March 2024 amounted to JPY 5,810 million (+JPY 312 million from the previous period end).
The revenue is expected to increase slightly, but the forecast is conservative because it is still early in the term.
3. Performance outlook for the year ending March 2025
Regarding the performance for the fiscal year ending March 2025, the company expects sales of JPY 3,700 million (+1.1% from the previous period), operating profit of JPY 181 million (-8.0%), ordinary profit of JPY 193 million (-7.5%), and net income of JPY 137 million (-9.4%). Although the revenue and gross profit margin are conservatively estimated, the company aims to exceed the targets of the medium-term management plan achieved in the fiscal year-end March 2024.
As for the Japanese economy, it is predicted that the extremely uncertain environment will continue as it is unclear when the historical high price trend will end, despite the recent improvement in the business condition. The company has been actively developing and proposing hygienic and labor-saving kitchen systems, taking advantage of the global awareness of food tech in recent years. In addition, as a relatively large-scale equipment investment in the medium to long term, the company is considering expansion of the Gunma factory and relocation of the aging Nara factory.
(Author: FISCO guest analyst Nobumitsu Miyata)