Meidensha : Financial Result for FY2022 Q3

FOR IMMEDIATE RELEASE

Meidensha Corporation Reports Earnings for the

Nine Months Ended December 31, 2022

Tokyo, Japan, January 31, 2023 - Meidensha Corporation (TSE: 6508) reported consolidated net sales of ¥170,009 million and a net loss attributable to owners of the parent of ¥2,582 million, or minus ¥56.92 per share, for the nine months ended December 31, 2022.

1. Operating Results

1. Analysis of Operating Results

[Consolidated Results]

The management environment surrounding the Meiden Group in the nine months ended December 31, 2022 underwent a relaxation of various restrictions that have an impact on economic activity, such as revision of Japanese border controls to address COVID-19, but faced issues such as rising energy costs, rising prices and deterioration of availability of various parts and materials, and significant fluctuations in exchange rates. Amid such conditions, the Group conducted business while swiftly addressing these issues surrounding the Company.

The consolidated results for the nine months under review are provided below.

			(Unit: millions of yen)
	Nine months ended	Nine months ended	Change	Change (%)
	December 31, 2021	December 31, 2022
Net sales	158,441	170,009	11,568	7.3
Operating income	(1,121)	(4,692)	(3,571)	-
(loss)
Ordinary income	(875)	(4,269)	(3,394)	-
(loss)
Net income (loss)
attributable to	(1,203)	(2,582)	(1,378)	-
owners of the
parent

The results for each business segment are presented below, with the figures for each segment including inter-segment transactions.

1. Power Infrastructure Business

Although sales decreased in the Power and Energy business mainly operating in Japan due to factors such as the strong impact of longer delivery times for parts and materials, sales increased in the Power T&D business mainly operating overseas due to increased sales in the United States and Singapore. Furthermore, income increased due to the improvement of earnings in the Power T&D business. As a result, net sales in the segment increased 17.1% year on year to ¥38,424 million and operating loss improved by ¥394 million to ¥1,986 million.

1. Public, Industrial & Commercial Sector Business

Although sales increased in the Railways business as demand was seen to recover mainly in Japan, sales decreased in the Social Infrastructure Systems business and the Water Infrastructure business due to the occurrence of delays in shipments associated with longer delivery times for parts and materials, and delays in progress of construction work. Furthermore, income decreased due to a decrease in income associated with reduced sales in the Social Infrastructure Systems business and the Water Infrastructure business, in addition to pressure on revenue caused by high prices of materials and parts materializing across this segment in general. As a result, net sales in the segment decreased 9.0% year on year to ¥54,146 million and operating loss deteriorated by ¥3,806 million to ¥2,236 million.

1. Mobility & Electrical Components Business

Although sales decreased in the Mobility T&S business, which continues to face a difficult order environment, sales increased in the Electronics Products business mainly involving products for the semiconductor market and in the EV business due to an increase in the number of models delivered. Although income decreased slightly in the Electronics Products business mainly due to a deterioration of the product mix, income increased for the Motor Drive Solutions business, the EV business and the Mobility T&S business. As a result, net sales in the segment increased 27.2% year on year to ¥54,428 million and operating income improved by ¥717 million to ¥106 million.

1. Field Service Engineering Business

Although steady demand for maintenance services is continuing, sales and income/loss deteriorated year on year against the backdrop of delays in progress of projects as a result of longer delivery times for parts and materials. As a result, net sales in the segment decreased 2.9% year on year to ¥19,997 million and operating loss deteriorated by ¥1,034 million to ¥133 million.

5) Real Estate Business

Net sales increased by 0.9% year on year to ¥2,426 million and operating income improved by ¥93 million to ¥972 million.

6) Other

In businesses not included in reportable segments, a recovery was seen as a result of progress in the normalization of the economy, resulting in sales increasing by 6.5% year on year to ¥11,775 million, and operating loss improving by ¥216 million to ¥37 million.

(2) Analysis of Financial Condition

Total assets at December 31, 2022 amounted to ¥296,343 million, an increase of ¥5,444 million from the end of the previous fiscal year (March 31, 2022).

Current assets rose ¥4,907 million to ¥176,201 million from the end of the previous fiscal year due to an increase in inventories and a decrease in trade receivables.

Fixed assets rose ¥537 million to ¥120,141 million due to an increase in construction in progress resulting from capital investment.

Total liabilities were ¥195,153 million, an increase of ¥9,675 million from the end of the previous fiscal year, attributable to an increase in commercial paper.

Net assets amounted to ¥101,190 million, a decrease of ¥4,231 million, owing to recording of net loss attributable to owners of the parent and dividends from surplus.

As a result, the equity ratio came to 33.0% as of December 31, 2022, compared with 35.1% at the end of the previous fiscal year.

(3) Forecast of Consolidated Results

Among the Meiden Group's businesses, sales from electrical equipment for electric power companies and government agencies and water purification and sewerage treatment equipment for local governments tend to be concentrated at the end of fiscal year. For this reason, net sales in the first nine months of the fiscal year are low in comparison with the full year figure, and the Company has recorded a loss. However, business performance has developed broadly as forecast, and there is no revision to the results forecast announced on October 31, 2022.

2. Consolidated Financial Statements and Notes

(1) Consolidated Balance Sheets

	As of March 31,	As of December
	2022	31, 2022
	millions of yen	millions of yen
Assets
Current assets
Cash and time deposits	14,070	18,888
Notes and accounts receivable-trade, and	93,772	67,806
contract assets
Electronically recorded monetary claims -	7,034	8,594
operating
Merchandise and finished goods	10,174	12,188
Work in process	32,159	51,241
Raw materials and supplies	8,381	8,419
Other current assets	5,890	9,225
Allowance for doubtful accounts	(188)	(163)
Total current assets	171,294	176,201
Fixed assets
Property, plant and equipment
Buildings and structures, net	40,297	38,874
Machinery, equipment and vehicles, net	14,294	13,218
Land	12,955	12,754
Construction in progress	2,349	5,715
Other property, plant and equipment, net	5,051	5,238
Total property, plant and equipment	74,947	75,802
Intangible assets
Software	5,325	4,759
Goodwill	3,272	2,836
Other	968	1,042
Total intangible assets	9,565	8,638
Investments and other assets
Investment securities	17,132	16,619
Long-term loans receivable	36	38
Deferred tax assets	15,914	17,032
Other assets	2,074	2,072
Allowance for doubtful accounts	(67)	(60)
Total investments and other assets	35,091	35,701
Total fixed assets	119,604	120,141
Total assets	290,899	296,343

	As of March 31,	As of December
	2022	31, 2022
	millions of yen	millions of yen
Liabilities
Current liabilities
Notes and accounts payable-trade	34,796	32,371
Electronically recorded obligations - operating	4,369	4,113
Short-term borrowings	10,255	8,820
Commercial paper	2,000	17,000
Current portion of bonds payable	5,000	-
Accounts payable-other	6,405	5,076
Accrued income taxes	1,543	370
Contract liabilities	11,819	22,630
Accrued bonuses for employees	7,601	4,470
Provision for product warranties	1,108	995
Provision for loss on orders	945	943
Other current liabilities	18,560	16,525
Total current liabilities	104,406	113,318
Long-term liabilities
Bonds payable	6,000	6,000
Long-term debt	25,210	24,670
Net defined benefit liability	44,808	45,983
Provision for environmental measures	406	353
Other long-term liabilities	4,645	4,827
Total long-term liabilities	81,070	81,834
Total liabilities	185,477	195,153
Net assets
Shareholders' equity
Common stock	17,070	17,070
Capital surplus	10,474	10,474
Retained earnings	64,844	59,857
Treasury stock	(192)	(193)
Total shareholders' equity	92,196	87,208
Accumulated other comprehensive income

Unrealized gains on available-for-sale securities

Deferred gains or losses on hedging derivatives, net of taxes

Foreign currency translation adjustment Remeasurements of defined benefit plans

6,826	6,532
5	5
3,711	4,720
(774)	(608)

Total accumulated other comprehensive income	9,769	10,650
Non-controlling interests	3,455	3,331
Total net assets	105,421	101,190
Total liabilities and net assets	290,899	296,343

(2) Consolidated Statements of Income and Consolidated Statements of Comprehensive

Income

Consolidated Statements of Income

	Nine months	Nine months
	ended	ended
	December 31,	December 31,
	2021	2022
	millions of yen	millions of yen
Net sales	158,441	170,009
Cost of sales	121,783	134,157
Gross profit	36,658	35,851
Selling, general and administrative expenses	37,779	40,544
Operating income (loss)	(1,121)	(4,692)
Non-operating income
Interest income	36	42
Dividend income	576	657
Rent income	72	75
Foreign exchange gains	207	263
Other	373	460
Total non-operating income	1,266	1,500
Non-operating expenses
Interest expenses	416	603
Equity in losses of affiliates	25	-
Seconded employee expenses	92	103
Litigation expenses	112	29
Other	373	340
Total non-operating expenses	1,020	1,077
Ordinary income (loss)	(875)	(4,269)
Extraordinary income
Gain on sales of fixed assets	-	578
Gain on sales of investment securities	138	408
Compensation income	-	285
Other	-	6
Total extraordinary income	138	1,279
Extraordinary loss
Loss on fixed asset retirement	-	45
Loss on sales of investment securities	284	0
Loss on liquidation of subsidiaries and associates	-	190
Other	3	-
Total extraordinary losses	288	235
Income (loss) before income taxes	(1,025)	(3,225)
Income taxes
Current	320	415
Deferred	(219)	(1,012)
Total income taxes	100	(596)
Net income (loss)	(1,125)	(2,629)
Net income (loss) attributable to the non-controlling	77	(46)
interests

Net income (loss) attributable to owners of the parent

(1,203)

(2,582)