Kaga Electronics : Earnings Release FY2024/3 Q1

August 3, 2023

Summary of Consolidated Financial Results

for the First Quarter Ended June 30, 2023 [Japan GAAP]

Name of Company:	KAGA ELECTRONICS CO., LTD.
Stock Code:	8154	URL: https://www.taxan.co.jp/
Stock Exchange Listing:	Tokyo Stock Exchange, Prime Market
Representative	Title: Representative Director,		Name: Ryoichi Kado
	President & COO
Contact Person	Title: Senior Executive Officer		Name: Yasuhiro Ishihara
	Head of Administration Headquarters
Phone:	[phone]
Date of filing of quarterly securities report (tentative):	August 10, 2023
Date of commencement of dividend payment (tentative):	-
Quarterly earnings supplementary explanatory documents: Yes
Quarterly earnings presentation:		No

(Yen in millions, rounded down)

1. Financial results for the first quarter of the fiscal year ending March 2024 (April 1, 2023 - June 30, 2023)

1. Result of operations (Consolidated, year-to-date)

(Percentage figures represent year on year changes)

Profit attributable

Net sales

Operating income

Ordinary income

to owners of

parent

Million yen

%

Million yen

%

Million yen

%

Million yen

%

First quarter ended June 2023

137,694

(7.8)

6,994

(28.8)

6,909

(29.9)

5,767

(17.4)

First quarter ended June 2022

149,302

40.9

9,820

120.6

9,858

115.9

6,984

143.2

Note: Comprehensive income: 1Q of FY2024/3: 9,404 million yen [(16.9%)]

1Q of FY2023/3: 11,314 million yen[ 234.4%]

Earnings per

Earnings per

share

share

(diluted)

Yen

Yen

First quarter ended June 2023

219.63

－

First quarter ended June 2022

266.10

－

(2) Financial Position (Consolidated)

Total assets

Net assets

Equity ratio

Million yen

Million yen

%

As of June 30, 2023

292,822

135,983

46.4

As of March 31, 2023

286,217

129,737

45.3

129,608 million yen

Reference: Shareholders' equity：As of June 30, 2023: 135,850 million yen

As

of March 31, 2023:

2. Dividends

Dividend per share

1Q

2Q

3Q

Year-end

Full year

Yen

Yen

Yen

Yen

Yen

Fiscal year ended March 2023

－

100.00

－

120.00

220.00

Fiscal year ending March 2024

－

Fiscal year ending March 2024 (Forecast)

110.00

－

110.00

220.00

Notes: Change in the dividend forecast from the latest announcement: None

Breakdown of interim dividend for FY2023/3: Ordinary dividend: 70.00 yen; Extraordinary dividend: 30.00 yen

Breakdown of year-end dividend for FY2023/3: Ordinary dividend: 70.00 yen; 55th anniversary commemorative

dividend: 10.00 yen; Extraordinary dividend: 40.00 yen

3. Forecast for the fiscal year ending March 2024 (Consolidated, April 1, 2023 - March 31, 2024)

(Percentage figures represent year on year changes)

	Net sales	Operating income	Ordinary income	Profit attributable	Earnings per
	to owners of parent	share
	Million yen	%	Million yen	%	Million yen	%	Million yen	%	Yen
Full year	550,000	(9.5)	25,000	(22.5)	25,000	(23.6)	18,000	(22.0)	685.42

Note: Change in the forecast from the latest announcement: None

• Notes

1. Changes in significant subsidiaries (Changes in specified subsidiaries accompanied by changes in the

scope of consolidation): None

(2) Use of accounting methods specifically for the preparation of the quarterly consolidated financial

statements

: None

1. Changes in accounting policies, estimates, and retrospective restatement

1. Changes due to revision of accounting standards : None

(b) Changes other than (a)	: None
(c) Changes in accounting estimates	: None
(d) Retrospective restatement	: None

1. Number of shares outstanding (common stock)

1. Shares outstanding (including treasury shares)

As of June 30, 2023:	28,702,118	As of March 31, 2023	28,702,118
(b) Treasury shares
As of June 30, 2023:	2,441,233	As of March 31, 2023	2,440,983
(c) Average number of shares (quarterly consolidated during the period)
Period ended June 30, 2023:	26,261,015	Period ended June 30, 2022:	26,247,868

• The quarterly audit procedures by a certified public accountant or auditing firm are not applicable to this Quarterly Financial Results report.
• Cautionary statement regarding forecasts of operating results and special notes

(Caution regarding forward-looking statements)

Forward-looking statements in these materials are based on information available to management at the time this report was prepared and assumptions that management believes are reasonable. Actual results may differ significantly from these statements for a number of reasons. For conditions as assumption for earnings forecast and cautionary statement regarding use of the forecast, please see "1. Results of Operations, (3) Qualitative information on consolidated earnings forecast" on page 4.

(How to obtain supplementary materials on quarterly financial results)

Supplementary materials on quarterly financial results are disclosed through TDnet and posted on the Company's website today (August 3, 2023).

Index for Supplementary Information
1. Results of Operations	2
(1)	Overview of consolidated business performance	2
(2)	Overview of financial condition	4
(3) Qualitative information on consolidated earnings forecast	4
2. Quarterly Consolidated Financial Statements and Major Notes	5
(1)	Quarterly consolidated balance sheet	5
(2)	Quarterly consolidated statements of income and comprehensive income	7
	For the first quarter (April 1, 2023 - June 30, 2023)	7
(3) Notes to quarterly consolidated financial statements	9
	(Notes to going concern assumptions)	9
	(Significant change in shareholders' equity)	9
	(Changes in accounting policies)	9
	(Segment information)	9

1. Results of Operations

1. Overview of consolidated business performance

During the first quarter of the consolidated fiscal period under review, while sales increased in the information equipment business, the software business, and the others business, decreased in the electronic components business, which is the Group's core business, due to the disappearance of spot demand and emergence of some impact of inventory adjustments by customers in general, given easing of supply shortages of semiconductors and electronic components. As a result, net sales were 137,694 million yen, down 7.8% year on year. Operating income decreased by 28.8% year on year to 6,994 million yen. Aside from a decline in gross profit due to lower sales, the income decrease resulted from having incorporated loss on valuation of inventories and provision of allowance for doubtful accounts on trade receivables associated with a business partner of the Group that filed a petition for commencement of civil rehabilitation proceedings. Ordinary income decreased by 29.9% year on year to 6,909 million yen. Profit attributable to owners of parent decreased by 17.4% year on year to 5,767 million yen, with gain on sales of securities recorded as extraordinary income in connection with the sale of shares that were held for investment purposes.

In November 2021, the Group formulated its three-year management plan, Medium- Term Management Plan 2024, which runs from the fiscal year ended March 31, 2023, up to the fiscal year ending March 31, 2025. Having achieved, two years ahead of the plan, the targets for the two income items of operating income and ROE in the previous fiscal year, which was the first year of the plan, the Group announced the latest outlook in May 2023, with net sales of 750 billion yen, operating income of 30 billion yen or higher, and ROE of 10% or higher.

In the earnings forecasts the Group announced for the fiscal year ending in March 2024, the second year of the plan, decreases are projected in both net sales and incomes on the assumption that the impact of inventory adjustments would become tangible in the supply chain in which the Group is involved with respect to the electronic components business. Nonetheless, performance exceeded the internal plan in the first quarter under review, which therefore got off to a good start.

	FY 2023/3 1Q	FY 2024/3 1Q
	(April 1, 2022 -	(April 1, 2023 -	YoY
	June 30, 2022)	June 30, 2023)
	（Million yen）	（Million yen）	（Million yen）
Net sales	149,302	137,694	(11,608)		(7.8％)
Gross profit	19,838	17,553	(2,284)		(11.5％)
（Margin）	13.3％	12.7％	(0.6pt)		－
SG&A	10,018	10,559	541		5.4％
Operating income	9,820	6,994	(2,826)		(28.8％)
Ordinary income	9,858	6,909	(2,948)		(29.9％)
Profit before income taxes	9,982	7,912	(2,069)		(20.7%)
Profit attributable to owners	6,984	5,767	(1,216)		(17.4%)
of parent
Exchange Rate
(Average rate during the year period)	129.57yen	137.37yen	7.80yen		－
USD

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Business segment performance was as follows.

1. Electronic components (Development, manufacture and sale of semiconductors, general electronic components and other products, the electronics manufacturing service (EMS), and other activities)
   In this business, sales in the component sales business declined sharply, attributable partly to the disappearance of spot demand for some products and emergence of some impact of inventory adjustments by customers in general, given easing of supply shortages of semiconductors and electronic components that had continued for two consecutive years until the previous fiscal year. In the EMS business, sales in the automotive sector increased due to improved supply and demand balance of semiconductors and electronic components, whereas sales in applications related to medical and industrial equipment decreased due partly to inventory adjustments at key customers.
   As a result, net sales decreased by 10.1% year on year to 120,015 million yen, and segment income decreased by 34.3% year on year to 5,922 million yen.

(Note) Electronics Manufacturing Service: Provision of product development and manufacturing services on an outsourcing basis.

1. Information equipment (Sales of PCs, PC peripherals, home electric appliances, photograph and imaging products, original brand products, and other products)
   In this business, amid the season of high demand for newly enrolled students, sales of PCs to educational institutions were strong. Sales of security software and PC peripheral products also remained solid. The LED installation business made steady progress with contribution from sales of large-scale projects that the Group has been pushing forward on a full scale since the previous fiscal year.
   As a result, net sales increased by 8.1% year on year to 12,050 million yen, and segment income increased by 32.2% year on year to 746 million yen.
2. Software (Production of computer graphics, planning and development of amusement products, and other activities)
   In this business, overall loss decreased reflecting increased sales with contribution from orders for large-scale and new projects in smartphone games development and computer graphics production.
   As a result, net sales increased by 15.8% year on year to 577 million yen, and segment loss of 4 million yen was recorded (33 million yen of segment loss in the same period of the previous fiscal year).
3. Others (Repair and support for electronics equipment, and sales of amusement equipment and sports goods, and others)
   In this business, the PC and PC peripheral recycling business was strong. Sales of game equipment for the amusement industry also increased both in domestic and overseas markets.
   As a result, net sales increased by 20.9% year on year to 5,050 million yen, and segment income increased by 17.0% year on year to 291 million yen.

Financial Results by Business Segment

		FY 2023/3 1Q	FY 2024/3 1Q
		(April 1, 2022 -	(April 1, 2023 -	YoY
		June 30, 2022)	June 30, 2023)
		（Million yen）	（Million yen）	（Million yen）
Electronic	Net sales	133,477	120,015	(13,461)	(10.1%)
components	Segment income	9,018	5,922	(3,095)	(34.3%)
Information	Net sales	11,147	12,050	902	8.1%
equipment	Segment income	564	746	181	32.2％
Software	Net sales	498	577	78	15.8%
	Segment income	(33)	(4)	28	－
Others	Net sales	4,178	5,050	872	20.9％
	Segment income	249	291	42	17.0%
Total	Net sales	149,302	137,694	(11,608)	(7.8％)
	Segment income	9,820	6,994	(2,826)	(28.8％)

Note: "Segment income" shows unadjusted figures for each business segment and adjusted figures for the total.

- 3 -