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.

Roland <7944> consolidated performance for the fiscal year ending December 2024 is a period initial estimate that sales decreased by 2.5% to 99.9 billion yen compared to the previous period, operating profit decreased by 4.0% to 1.14 billion yen, ordinary profit increased by 1.3% to 1.13 billion yen, and net income attributable to parent company shareholders increased by 4.3% to 850 million yen. Cell-in and sell-through are gradually recovering due to the effect of new product introduction and progress in adjusting dealer inventory, and sales will be secured by steadily executing mid-term management plan measures. Sales gross profit has been continuously improving due to the progress of PMI of Drum Workshop, Inc., a subsidiary that was acquired in 2022, and the normalization of sales strategy is progressing, although slower than planned. Selling and administrative expenses will be carefully controlled by carefully observing demand trends and gross profit improvement situation. At present, Mr. Minowa was appointed Representative Director and President in July 2024. Gordon Raison, the former Representative Director, raised the banner of making the company a true global company and organically made the head office and each overseas base function as One Roland, creating a more cohesive team. Under Mr. Minowa, it is expected that various measures will be promoted with more speed than before, and after the second founding phase after MBO and the phase of true globalization after the re-listing, we will move on to the next stage.

4. Analyst comment

In the previous period, adjustment phase toward normalization of the supply chain continued due to oversupply caused by excessive dealer inventory due to oversupply due to the relaxation of supply constraints caused by the corona disaster, etc. However, in the first quarter of the year ending December 2024, there was a decrease in the reaction reduction of aggressive cell-in aimed at improving the balance sheet of the same company in the fourth quarter of the previous year, but it was generally within expectations. In addition, due to the depreciation effect, the business performance has been progressing smoothly. There is no significant change in the current trend, and new product development is progressing smoothly, so we at our company expect a high probability of achieving the full-year forecast.

Even when adjusting the supply-demand balance due to the corona disaster, the same company responded flexibly to production increase and decrease by utilizing its strength as an electronic musical instrument manufacturer. Electronic musical instruments handled by the company are easier to respond to changes in demand compared to acoustic instruments, and have the characteristic that operating profit is less likely to occur. Since the Corona disaster, the company has also been affected by the rising prices of raw materials and the high logistics costs from Malaysia, which is the production base. However, our company evaluates that the company has implemented four price revisions worldwide from 2021 to 2022 and has made appropriate price transfers.

While the impact on the entire company is not significant, new products are contributing to business performance steadily even in uncertain environments. The period as a new product is defined by the same company as one year from the release, but the mid-term management plan aims to increase the proportion of new products in the overall sales from about 18% in the year ending December 2022 to 25% in the year ending December 2025. As new product development in the first quarter of the year ending December 2024 is progressing smoothly, it is expected that the proportion of new products in sales composition for the year ending December 2024 will improve. The company's product development adopts a method of understanding true needs by interviewing consumers by development personnel. We at our company see that the company's technological and product development capabilities are major strengths.

(Author: FISCO Guest Analyst Ryoji Mogi)