Oki Electric Industry : Presentation (with notes)

Financial Results for FY2023

May 9, 2024

Oki Electric Industry Co., Ltd.

© Copyright 2024 Oki Electric Industry Co., Ltd.

1

Today's Explanations

• Summary of Financial Results for FY2023
• Financial Forecasts for FY2024
• FY2023 Review and FY2024 Outlook

© Copyright 2024 Oki Electric Industry Co., Ltd.	2/18

• Hello, everyone. Thank you very much for participating in our financial results presentation today.
• The details of the explanation are shown here.
• We will explain them in order.

2

Summary of Financial Results

• Net sales and operating income increased significantly YOY as a result of the recovery from production impacts due to the supply chain and large-scale projects in Enterprise Solutions.

	FY2023	FY2022	Variance	FY2023	Variance
(Billion yen)	(Forecasts)
(Actual)	(Actual)
		(As of Feb. 7)
Net sales	421.9	369.1	+52.8	425.0	(3.1)
Operating income	18.7	2.4	+16.3	17.0	+1.7
Ordinary income	18.3	(0.3)	+18.6	15.5	+2.8
Profit attributable to	* 25.6	(2.8)	+28.4	12.0	+13.6
owners of parent
USD average exchange rate	144.6	135.5	9.1	143.3	1.3
(Yen)
EUR average exchange rate	156.8	141.0	15.8	155.3	1.5
(Yen)

*Profit attributable to owners of parent includes income tax adjustments of ¥11 billion.

© Copyright 2024 Oki Electric Industry Co., Ltd.	3/18

• First of all, I will explain the overview of the financial results for FY2023.
• Net sales were JPY421.9 billion, operating income was JPY18.7 billion, ordinary income was JPY18.3 billion, and profit attributable to owners of parent was JPY25.6 billion.
• Steady acquisition of large-scale demand and the normalization of production capacity that supports this resulted in a 14% increase in net sales with a JPY52.8 billion increase in revenues and a JPY16.3 billion increase in operating income.
• Ordinary income increased due to the effects of the foreign exchange rates.
• Profit attributable to owners of parent was JPY25.6 billion due to an increase in profits before taxes, along with a JPY11.0 billion corporate tax adjustment.
• Compared to the previous forecast, net sales were almost as expected, operating income increased due to the difference in product mix and reduced expenses, while increases in ordinary income and profit attributable to owners of parent are as mentioned earlier.
• The exchange rates are JPY144.6 to US dollar and JPY156.8 to the euro.
• The dividend for FY2023 is expected to be JPY30 per share, as forecasted at the beginning of the fiscal year.

3

Reasons for Changes in Operating Income/Loss

• Operating income rose significantly due to steady increases in the volume of large- scale projects and price pass-through.
• Investments in human resources and growth were steadily implemented.

(Billion yen)

+2.9	(6.5)	+4.1	18.7
	±0.0
+15.8
2.4

FY2022	Changes in	Price
(Actual)	volume &	optimization
		product mix
	Public Solutions	+1.8
	Enterprise Solutions	+18.4
	（Increase in cost of materials
	procured in the previous year	(4.1) )
	Component Products	(3.3)
	EMS		(1.1)

Changes in	Impact of	One-time factor
fixed costs,	currency	(Reversal of allowance for
etc.	exchange	doubtful accounts）

• Labor cost
• Growth investment

（Depreciation expense・R＆D)

FY2023

(Actual)

© Copyright 2024 Oki Electric Industry Co., Ltd.	4/18

• Next, I will explain the factors behind the fluctuations in operating income.
• The chart shows the fluctuations in operating income from JPY2.4 billion in FY2022.
• Effects of revenue increases and differences in product mix increase to JPY15.8 billion.
• By segment, Enterprise Solutions posted a significant increase in profits attributed to increased sales. The concentration of highly profitable projects in FY2023 was also a factor that boosted profits more than expected. While profits also increased for Public Solutions, Component Products had a significant impact on revenue decrease, resulting in negative performance YoY.
• The effects of price optimization, which we continue promoting, resulted in a JPY2.9 billion increase.
• Fixed costs increased by JPY8.7 billion due to investments in personnel, growth, etc. On the other hand, we conducted cost reductions amounting to JPY2.2 billion, resulting in a net increase of JPY6.5 billion.

4

Segment Information (Net Sales / Operating Income)

(Billion yen)	FY2023	FY2022	Variance	FY2023	Variance
(Forecasts)
(Actual)	(Actual)
		(As of Feb. 7)

Public Solutions	Net sales	94.0	95.7	(1.7)	95.0	(1.0)
Operating income	4.4	3.4	+1.0	3.5	+0.9
Enterprise Solutions	Net sales	180.1	112.9	+67.2	180.0	+0.1
Operating income	22.0	1.5	+20.5	20.5	+1.5
Component Products	Net sales	73.4	84.6	(11.2)	75.0	(1.6)
Operating income	0.6	1.6	(1.0)	0.5	+0.1
EMS	Net sales	73.9	75.3	(1.4)	75.0	(1.1)
Operating income	1.1	2.3	(1.2)	1.5	(0.4)
Others	Net sales	0.4	0.5	(0.1)	-	+0.4
Operating income	(1.1)	0.4	(1.5)	(1.5)	+0.4
Corporate & Eliminations	Operating income	(8.3)	(6.8)	(1.5)	(7.5)	(0.8)
Total	Net sales	421.9	369.1	+52.8	425.0	(3.1)
Operating income	18.7	2.4	+16.3	17.0	+1.7

© Copyright 2024 Oki Electric Industry Co., Ltd.	5/18

• Net sales and operating income by segment.
• Public Solutions posted decreased revenues but increased profits, while Enterprise Solutions posted significant increases in revenues and profits.
• Component Products and EMS posted decreases in revenues and profits.
• Others, along with elimination and head office expenses, include R&D and other investments essential for growth to create future businesses.
• I will explain the details in the following pages.

5

Overview by Segment (Public Solutions / Enterprise Solutions)

Public Solutions

Enterprise Solutions

• The business fields of roads, firefighting, disaster prevention, and TOKKI steadily increased.
  Although there was a decrease in the number of projects for communication carriers, operating income increased in the segment as a whole.

• Net sales increased significantly due to easing of the supply chain impact and large-scale projects.
  Operating income increased due to higher hardware and software sales, as well as improved earnings from construction and maintenance.

Net sales（Billion yen）

95.794.0

FY2022		FY2023
22年度実績		23年度実績
Operating income （Billion yen）
		4.4

Net sales（Billion yen）	180.1

112.9

年度実績	年度実績
FY2022	FY2023

Operating income （Billion yen）

22.0

(Reference)Breakdown

	FY2022	FY2023
Hardware/	63.7	125.8
Software
Construction&	49.2	54.4
Maintenance

3.4

9 monthsFY2022022

9 monthsFY2023FY2023

22年度実績

23年度実績

© Copyright 2024 Oki Electric Industry Co., Ltd.

(Reference)Breakdown

1.5

FY2022

FY2023

Hardware/

(4.9)

11.2

Software

Construction&

6.4

10.8

FY2022

FY2023

22年度実績

23年度実績

Maintenance

6/18

• First, I will explain Public Solutions.
• Net sales were JPY94 billion with a 2% decrease YoY. The decreased revenues were due to a decrease in projects for some communications carriers. On the other hand, firefighting, disaster prevention, and road projects, which are areas we have decided to focus on, performed well. This is also true for TOKKI. In particular, TOKKI business contributed to profits, resulting in an increase in profits.
• Next is Enterprise Solutions.
• Net sales increased by 60% YoY to JPY180.1 billion. As mentioned earlier, we managed to normalize and increase production and respond to large-scale demand. The construction and maintenance business also grew more than expected, which was related to such demands.
• In addition to the effects of increased revenues in terms of profits, we experienced a concentration of highly profitable projects in FY2023, which coincided with the reversal of allowance for doubtful accounts relating to the projects in China and other matters, resulting in significant increases in revenues and profits.

6

Overview by Segment (Component Products / EMS)

Component Products

EMS

• IoT is positive due to improvement from procurement difficulties due to supply chain impact.
  Printer operating income declined due to the impact of a significant decrease in net sales on stagnant overseas demand.

Net sales（Billion yen）

84.673.4

22FY2022年度実績 23FY2023年度実績 Operating income （Billion yen）

1.6

0.6

22FY2022年度実績 23FY2023年度実績

© Copyright 2024 Oki Electric Industry Co., Ltd.

• Net sales and operating income declined due to the impact of lower demand in the semiconductor market and the FA and robot markets due to the slowdown in the Chinese economy.

Net sales（Billion yen）

75.373.9

22FY2022年度実績 23FY2023年度実績

Operating income （Billion yen）

2.3

1.1

22FY2022年度実績 23FY2023年度実績

7/18

• Next is Component Products.
• Net sales decreased 13% YoY to JPY73.4 billion, whereas operating income decreased by JPY1.0 billion YoY to JPY0.6 billion, which was a difficult situation for us.
• In the printer business, the main factors can be attributed to sluggish demand in Europe and a recoil from last-minute demand during the previous fiscal year.
• Finally, I will explain EMS.
• Net sales decreased 2% YoY to JPY73.9 billion, whereas operating income decreased by JPY1.2 billion YoY to JPY1.1 billion.
• The semiconductor market and the sluggish Chinese economy have resulted in lower- than-expected demand for printed circuit boards for semiconductor manufacturing equipment, along with cables and other components for factory automation and robotics, resulting in decreased revenues and profits.

7

Balance Sheets

• Inventories decreased steadily at the end of the previous fiscal year.
• Shareholders' equity ratio improved by 7.9 points YOY to 33.3%

Inventories / Turnover by days

		Turnover by days
Inventories
(Billion yen)		(days)

(Billion yen)

Mar. 2024

Mar. 2023

Variance

Current assets	239.7	230.2	+9.5
Fixed assets	183.7	160.2	+23.5
Assets	423.4	390.4	+33.0
Current liabilities	188.4	205.3	(16.9)

86.4

86.2

86.6

86.9

83.1

76.9

75.4

71.0

58.2

End of

End of

End of

End of

End of

End of

End of

End of

End of

Mar. 2022

Jun. 2022

Sep. 2022

Dec. 2022

Mar. 2023

Jun. 2023

Sep. 2023

Dec. 2023

Mar. 2024

Purchases in FY23 (Sales in FY23)

Purchases in FY23 (Sales after FY24)

Inventories at the end of Mar. 2023

Fixed liabilities	93.7	85.9	+7.8
Liabilities	282.1	291.1	(9.0)
Shareholders' equity	141.2	99.1	+42.1
Others	0.１	0.2	(0.1)
Net assets	141.3	99.3	+42.0
Total liabilities and net assets	423.4	390.4	+33.0
Shareholders' equity ratio (%)	33.3		25.4	+7.9
D/E ratio (times)	0.8	1.2	(0.4)

© Copyright 2024 Oki Electric Industry Co., Ltd.

Trade receivables

												114.1
														97.7
94.5
						94.6
									85.6
				80.3		80.8
								78.2
		75.3

End of	End of	End of	End of	End of	End of	End of	End of	End of
Mar. 2022	Jun. 2022	Sep. 2022	Dec. 2022	Mar. 2023 Jun. 2023 Sep. 2023	Dec. 2023	Mar. 2024

						Reference:
						Book value basis at
Cross-Shareholdings					the end of Mar. 2023
			End of Mar.	End of Mar.			End of Mar.
			2023	2024			2024
	Number of stocks	74	65			65
	Book value (Billion yen)	31.2	41.0			29.6
					8/18

• Next is the balance sheet.
• Total assets increased by JPY33.0 billion from the end of the previous fiscal year to JPY423.4 billion.
• This was mainly due to an increase in trade receivables resulting from increased sales and an increase in the value of fixed assets from higher stock prices.
• Similar to the Q3 results, the graph on the right side shows the trends in inventory assets and trade receivables. Trade receivables increased due to increased sales in Q4. For inventory assets, the inventory at the end of the last fiscal year has been steadily decreasing, and we are in the process of creating a system for future sales. We will continue optimizing working capital.
• The status of cross-shareholding is shown on the lower right-hand side. Reduction efforts are continuing, with nine stocks sold in FY2023.
• Capital increased by JPY42.1 billion to JPY141.2 billion, the equity ratio was 33.3%, and the DE ratio was 0.8.

8

Cash Flows

 Operating cash flow turned positive due to improved profit.  Repaid borrowings due to improved free cash flow.

(Billion yen)	FY2023	FY2022	Variance
(Actual)	(Actual)
Ⅰ Cash flows from operating activities	24.7	(3.1)	+27.8
Ⅱ Cash flows from investing activities	(14.3)	(17.6)	+3.3
Free cash flows (Ⅰ ＋Ⅱ)	10.4	(20.7)	+31.1
Ⅲ Cash flows from financing activities	(15.7)	23.3	(39.0)
Cash and cash equivalents	34.4	37.5	(3.1)
Purchases of PP&E and intangible assets	17.0	16.5	+0.5
Depreciation	14.2	12.3	+1.9

© Copyright 2024 Oki Electric Industry Co., Ltd.	9/18

• Next is cash flow.
• Operating cash flow increased by JPY27.8 billion YoY to JPY24.7 billion due to improved profits.
• In accordance with the Medium-Term Business Plan 2025 policy, investment cash flow has been promoted while prioritizing investments that are essential for growth.
• Free cash flow increased by JPY10.4 billion, and we implemented debt reduction.
• Cash equivalents amounted to JPY34.4 billion, ensuring that we have the necessary funds.

9

Financial Forecasts

（Billion yen）	FY2024	FY2023	Variance
(Forecasts)	(Actual)

Public Solutions	Net sales	135.0	94.0	+41.0
Operating income	10.5	4.4	+6.1
Enterprise Solutions	Net sales	170.0	180.1	(10.1)
Operating income	12.5	22.0	(9.5)
Component Products	Net sales	75.0	73.4	+1.6
Operating income	1.5	0.6	+0.9
EMS	Net sales	80.0	73.9	+6.1
Operating income	2.5	1.1	+1.4
Others	Net sales	0.0	0.4	(0.4)
Operating income	(1.8)	(1.1)	(0.7)
Corporate & Eliminations	Operating income	(9.2)	(8.3)	(0.9)
	Net sales	460.0	421.9	+38.1
Total	Operating income	16.0	18.7	(2.7)
Ordinary income	14.5	18.3	(3.8)
	Profit attributable to	9.5	25.6	(16.1)
	owners of parent					Exchange rate
						assumptions
						USD︓¥140
Dividend per share (yen)		30	30	±0		EUR︓¥150

© Copyright 2024 Oki Electric Industry Co., Ltd.	10/18

• I would now like to describe our earnings forecast for FY2024.
• We expect net sales of JPY460.0 billion, operating income of JPY16.0 billion, and current net income of JPY9.5 billion.
• Although performance may seem below par in terms of profits, revenues and profits technically increased, excluding the one-time factor from the last fiscal year.
• By segment, we expect a significant increase in revenues and profits for Public Solutions. The last fiscal year's activities are expected to pay off in the form of figures this year.
• For Enterprise Solutions, large-scale projects continue like the previous year. However, although profits will decrease from the last fiscal year when favorable factors coincided, including one-time factors, we expect to achieve a certain level of profits.
• For Component Products, we expect it to remain at nearly the same level as last year, reflecting trends in the overseas market for printers.
• For EMS, we expect increases in both revenues and profits as we assume a market recovery from H2 of the fiscal year.
• The planned annual dividend is JPY30 per share.
• The decision was made based on a comprehensive review of how we adopt a basis of continued stable dividends while making investments essential to long-term growth, along with the cash flow status and other matters.

10