SMC : Consolidated Financial Highlights for the Third Quarter ended December 31, 2022

June 22, 2023

[Updated] Consolidated Financial Highlights for the Third Quarter ended December 31, 2022 [under Japanese GAAP]

Company name :	SMC Corporation
Stock exchange listing :	Tokyo Stock Exchange, Prime Market
Security code :	6273
URL :	https://www.smcworld.com/ir/en/
Representative :	Yoshiki Takada,	President
Contact person :	Masahiro Ota,	Director and Executive Officer
Projected date of filing quarterly report :		February 14, 2023
Projected starting date of dividend payment :	−

1. Consolidated Financial Highlights for the Third Quarter ended December 31, 2022 (April 1, 2022 to December 31, 2022)

(1) Consolidated Operating Results								(Millions of yen)
Third Quarter	Net sales	Operating profit		Ordinary profit	Profit attributable to
ended December 31		owners of parent
2022	627,475	15.7%	197,811	12.9%		234,305	19.8%	173,766	25.0%
2021	542,438	38.4%	175,203	65.5%		195,651	78.1%	139,019	79.4%
(Note) Comprehensive income 3Q ended December 31, 2022 :	¥	197,635 million	18.2%
	3Q ended December 31, 2021 :	¥	167,254 million	68.4%
					(Yen)
Third Quarter	Net income	Net income per share
ended December 31	per share	(diluted basis)
2022	2,659.97	−
2021	2,103.96	−

(2) Consolidated Financial Positions								(Millions of yen)
		Total assets					Net assets	Equity ratio
December 31, 2022	1,898,470					1,686,331			88.6%
March 31, 2022	1,769,951					1,559,274			87.9%
(Reference)	Shareholders' equity As of December 31, 2022 :	¥	1,682,591 million
		As of March 31, 2022 :	¥	1,555,628 million
2. Dividends										(Yen)
For the year					Dividend per share
ended March 31	1Q		2Q			3Q		4Q	Total
2022 (Actual)	−		300.00			−		450.00	750.00
2023 (Actual)	−		450.00			−		NA	NA
2023 (Projected)	NA		NA			NA		450.00	900.00
(Note)	Revision of dividends forecast during this period : None

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SMC Corporation

3. Forecasts of Consolidated Operating Results for the Year ending March 31, 2023

							(Millions of yen, except per share figures)
								Profit	Net income
		Net sales	Operating profit	Ordinary profit	attributable to	per share
								owners of parent	(Yen)
Year ending	824,000	13.3%	248,500	9.1%	302,000	10.6%	220,000	14.0%	3,366.98
March 31, 2023
(Note)	Revision of forecasts of operating results during this period : None

• Notes

1. Changes in significant subsidiaries during the third quarter ended December 31, 2022 : None
2. Adoption of special accounting methods for presenting quarterly consolidated financial statements : Yes
3. Changes in accounting policies, changes in accounting estimates and retrospective restatement

1. Changes in accounting policies applied due to revisions of accounting standards : Yes
2. Changes in accounting policies other than the above : None
3. Changes in accounting estimates : None
4. Retrospective restatement : None

1. Number of shares issued

1. Number of common shares issued (including treasury shares)

As of December 31, 2022

As of March 31, 2022

67,369,359

67,369,359

2. Number of treasury shares

As of December 31, 2022

As of March 31, 2022

2,220,356

2,029,013

3. Average number of common shares for the nine months ended

April 1, 2022 to December 31, 2022

April 1, 2021 to December 31, 2021

65,326,089

66,075,033

(Note) The company's shares held by the Board Benefit Trust (BBT) for the Directors' Stock Compensation Plan (2,600 shares as of December 31, 2021 and as of March 31, 2022, and as of December 31, 2022) is included in the number of treasury shares, which is excluded in the calculation for the above: 2. Number of treasury shares and 3. Average number of common shares for the nine months ended.

These quarterly consolidated financial highlights are not subject to quarterly review procedures by the independent accounting auditor.

Explanation of appropriate use of financial forecasts; other special items

Forecasts are based on information and certain premises that the Company considers to be reasonable at the time these consolidated quarterly financial highlights are released.

Some factors could cause actual results to differ from expectations.

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SMC Corporation

1.Qualitative Information about the Quarterly Results

(1) Operating Results

During the period up to the third quarter of the fiscal year 2022 (from April 1, 2022 to December 31, 2022), economic activities in various countries saw recoveries from the Coronavirus (COVID-19) pandemic. In general, the manufacturing sector has recovered its appetite for capital investments. However, the outlook remains uncertain due to the difficulties seen in procuring parts and materials, in particular semi-conductors, the stagnation of economic activity in China due to its zero-covid strategy, the prolonged Russian military invasion of Ukraine, the rising tensions between the U.S. and China, policy interest rate hikes within the U.S. and Europe, and sharp exchange rate fluctuations.

As for the demand for automation control equipment, the semi-conductor and electrical machinery-related demand was high within the first half of the period. However, within the second half, there were moves to postpone capital investments, mainly in the U.S. and Europe due to global inflation and the economic slowdown. Within the automotive-relatedindustry, the demand for the electric vehicle battery-relatedproducts saw growth in all regions. However, this did not reach a full-scalerecovery due to the continued impact of shortages in semiconductors and other components. Also, machine tool-relateddemand showed signs of slowing down due to the economic slowdown. Finally, the medical-related, food-related,and other industries have remained strong, partly due to the new demands for labor-savingalternatives and automation following COVID-19.

Within this business environment, the SMC Group has continued to make various efforts to reduce the impact on production caused by shortages in the procurement of parts and materials, while aggressively investing in new facilities and creating multi-location production facilities to ensure product supply capabilities based on SMC's Business Continuity Plan (BCP) to meet a growing global demand. Within the third quarter of this fiscal year, SMC has completed its Tono Factory No.2 and Kamaishi Factory No.5. In addition, SMC has also continued to develop new and efficiently performing products that can address environmental issues and contribute to the reduction of CO2 emissions by its customers while also strengthening its global sales activity collaboration with its IT infrastructure.

As a result, the consolidated net sales of SMC were 627,475 million yen (increased by 15.7% from the previous corresponding period) mainly from increase in sales quantity and increase in revenue from the foreign exchange fluctuations for the sales in overseas. Operating profit was 197,811 million yen (increased by 12.9%) due to the revenue increase, in spite of the increases in selling, general and administrative expenses mainly from increases in logistics, personnel, and IT related costs. Ordinary profit was 234,305 million yen (increased by 19.8%), with the increases in interest income from the rise in market interest rate and in foreign exchange gains from depreciation of the yen. With the gain on sale of investment securities, profit before income taxes was 237,022 million yen (increased by 21.2%), and profit attributable to owners of parent was 173,766 million yen (increased by 25.0%).

ROE became 10.7%, increased by 1.0 point from the previous corresponding period.

(2) Financial Positions

Total assets as of the end of the third quarter of the fiscal year 2022 were 1,898,470 million yen, a 128,519 million yen increase from the previous fiscal year end. Cash and deposits were 608,996 million yen, a 75,837 million yen decrease from the previous fiscal year end due to the tax payments, purchase of treasury shares, inventory buildup, and capital expenditures, in spite of earnings from business activities and gains from the foreign exchange on the foreign currency deposits. Notes and accounts receivable-trade were 233,228 million yen, a 21,288 million yen increase from the previous fiscal year end, resulted from the increase in revenue and revenue from the exchange fluctuations on the sales in overseas. Inventories were 386,873 million yen, a 83,327 million yen increase from the previous fiscal year end, by increasing purchase to correspond to the high demands and by strategically increasing parts and raw material inventories to overcome recent constraints on supply chains. Property, plant and equipment was 316,870 million yen, a 46,285 million yen increase from the previous fiscal year end, by further increasing investments for the production and logistics facilities within and outside of Japan,

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from the perspectives to secure productions capabilities in order to correspond to the rising demands and to enforce BCP to enhance its sustainable capability of supplying its products. SMC also acquired land for the relocation of the SMC's core technical center in Tsukuba as to further enhance its engineering functions and to attract talented engineering staffs.

Total liabilities were 212,138 million yen, increased by 1,461 million yen from the previous fiscal year end.

Notes and accounts payable-trade were 80,852 million yen, a 18,751 million yen increase from the previous fiscal year end, resulted from the purchase increase from the increase in sales and strategically increasing parts and raw materials procurements. Income taxes payable was 26,029 million yen, a 18,753 million yen decrease from tax payment.

Total net assets were 1,686,331 million yen, increased by 127,057 million yen from the previous fiscal year end, due to the increases in retained earnings resulted from the increase in profit, and 114,891 million yen, a 26,997 million yen increase in foreign currency translation adjustment from the depreciation of the yen.

As the rate of increase in capital was higher than the rate of increase in assets, equity ratio became 88.6%, increased by 0.7 point from the previous fiscal year end.

(3) Consolidated Forecasts and Other Forward-Looking Information

There is no change to the consolidated forecast for the fiscal year 2022, announced in the "Consolidated Financial Highlights for the Second Quarter ended September 30, 2022 [under Japanese GAAP]" issued on November 14, 2022.

Since June of 2022, SMC has frozen all exports to and new investments at its Russian subsidiaries. If SMC were to complete a full withdrawal from the Russian market in the future, there is a risk that SMC will not be able to obtain the required permits and approvals from the local authorities to recover SMC's remaining assets within the country. As such, the SMC Group may see damages of up to 13 billion yen from the loss of these assets.

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2. Quarterly Consolidated Financial Statements

(1) Quarterly Consolidated Balance Sheet

			(Millions of yen)
		Year end	Third Quarter end
		-Previous year	-Current year
		As of March 31, 2022 As of December 31, 2022
	[ASSETS]
	Current assets
	Cash and deposits	684,834	608,996
	Notes and accounts receivable-trade	211,939	233,228
	Securities	12,219	13,324
	Merchandise and finished goods	130,829	155,333
	Work in process	25,574	29,718
	Raw materials and supplies	147,141	201,821
	Other	46,769	52,944
	Allowance for doubtful accounts	(901)	(778)
	Total current assets	1,258,406	1,294,589
	Non-current assets
	Property, plant and equipment
	Buildings and structures, net	91,705	123,351
	Machinery, equipment and vehicles, net	41,988	49,338
	Land	74,775	83,185
	Other, net	62,115	60,994
	Total property, plant and equipment	270,584	316,870
	Intangible assets	15,183	16,368
	Investments and other assets
	Investment securities	58,750	108,449
	Insurance funds	150,797	144,399
	Other	17,892	19,289
	Allowance for doubtful accounts	(1,664)	(1,495)
	Total investments and other assets	225,776	270,642
	Total non-current assets	511,545	603,881
	Total assets	1,769,951	1,898,470

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