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 year ending March 2024, the consolidated sales of Maesawa Construction Industry Co., Ltd. (6485) were JPY 32,008 million (up 3.2% from the previous period), operating profit was JPY 2,466 million (up 12.9% YoY), ordinary profit was JPY 2,598 million (up 14.6% YoY), and net income attributable to the parent company's shareholders was JPY 1,681 million (up 17.3% YoY). Despite the fact that the number of newly constructed housing starts has fallen to a low level since fiscal 2010, when it was down 7.0% YoY to 800,176 units, the revision of sales prices contributed to increased revenue and profit for the third consecutive period, setting a new record for sales revenue. In terms of product structure, operating income from JPY 10-30 billion products was JPY 401/1,288/60 million respectively.

Operating income secured an increased profit as the price revision effect in the water supply equipment business pulled through, although the number of newly constructed housing starts did not show any significant effect and there was no quantity effect due to the rise in raw material prices and other factors. Total company expenses increased by JPY 472 million YoY, to JPY 4,842 million.

(1) Water supply equipment business

The water supply equipment business achieved sales of JPY 17,006 million (up 4.6% YoY) and segment profit of JPY 5,090 million (up 17.5% YoY). Despite a decrease in the number of newly constructed housing starts, demand for steady water supply pipe replacement work supported the business, and revenue increased due to the company's continued supply to water supply pipe replacement work. In addition, the company focused on proposing products with excellent seismic performance and constructability and increased revenue by the effect of price revision. In terms of regional sales, all regions except Hokkaido achieved increased revenue. On the profit side, even though the price of copper, the main raw material, has remained high, the company secured increased profit due to the price revision effect and improvement in revenue.

(2) Housing and building equipment business

The housing and building equipment business achieved sales of JPY 12,350 million (up 0.6% YoY) and segment profit of JPY 1,959 million (down 1.5% YoY), maintaining stable performance. Despite the fact that the number of newly constructed housing starts remained weak, sales revenue increased slightly due to the effect of sales price revision and concentrated delivery of water supply and hot water supply piping system products for collective housing such as condominiums. On the profit side, the company minimized the decrease in profit by revising sales of low-profit products and the effect of sales price revision. Furthermore, as a result of the merger with Maesawa Living Solutions, there is no internal sales revenue between segments, and it is expected that the integration will contribute to the efficiency of earnings.

(3) Product sales business

The product sales business achieved sales of JPY 2,651 million (up 6.7% YoY) and segment profit of JPY 259 million (up 12.0% YoY), thanks to an increase in sales of cast-iron products.

(4) Regional sales trends

In terms of sales by region, the Kanto, Chubu, and Kinki regions accounted for 72.6% of the total. In the fiscal year ending March 2024, increased revenue was secured in all regions except Hokkaido. The mainstay water supply equipment business achieved higher growth than the previous period, with Chubu up 8.2% and Kinki up 7.9%. The housing and building equipment business has a high proportion of revenue from the Kanto and Kinki regions due to its handling of floor heating systems in related companies such as Tokyo Gas (9531) and Osaka Gas (9532), accounting for 72.0% of the revenue, but remained flat overall.

2. Financial condition and performance indicators.

Total assets for the fiscal year ending March 2024 increased by JPY 1,321 million from the previous period to JPY 45,965 million. Of this, current assets increased by JPY 30 million to JPY 30,706 million. This was mainly due to an increase in electronic record bonds of JPY 908 million due to increased sales and a decrease of JPY 390 million in cash and deposits and JPY 400 million due to redemption of corporate bonds. The company maintains a high self-capital ratio of 84.9% (85.6% at the end of the previous period) and a high current ratio of 537.6% (547.6% at the end of the previous period).

For the consolidated cash flow for March 2024, cash flow from operating activities amounted to a revenue of 2,060 million yen. This was mainly due to an increase of 1,765 million yen in the change in accounts payable and a decrease of 1,314 million yen in the change in inventory assets. Cash flow from investing activities resulted in an expenditure of 273 million yen, mainly due to a decrease of 401 million yen in intangible fixed assets acquisitions. As a result, free cash flow turned positive, amounting to 1,786 million yen. The ending balance of cash and cash equivalents decreased by 11 million yen compared to the previous period and amounted to 10,486 million yen, but remains at a comfortable level.

(Written by FISCO Guest Analyst Hiroshi Okamoto)