Seibu Giken (6223) Q2 2024 earnings summary

Executive summary

• Q2 FY12/24 net sales rose 16.7% year-over-year to JPY 14,721 mn, but operating profit fell 24.4% to JPY 1,630 mn and net profit dropped 23.5% to JPY 1,390 mn due to lower sales and gross profit in China despite strong shipments to EV battery plants in Japan and Europe.

• Comprehensive income increased 12.2% year-over-year to JPY 2,983 mn, driven by foreign currency translation gains.

• Profitability was impacted by a pricing strategy in China and a shift in sales mix, with China sales declining sharply while Japan and Europe saw significant growth.

Financial highlights

• Net sales: JPY 14,721 mn (+16.7% YoY); Operating profit: JPY 1,630 mn (−24.4% YoY); Net profit: JPY 1,390 mn (−23.5% YoY); EPS: JPY 67.85.

• Gross profit margin dropped to 33.4% from 42.9% YoY; gross profit decreased to JPY 4,910 mn from JPY 5,414 mn YoY.

• Cash and cash equivalents increased to JPY 13,445 mn as of June 30, 2024.

• Free cash flow for Q2 FY12/24 was JPY 2,010 mn, up from JPY 795 mn in Q2 FY12/23.

• Net cash provided by operating activities rose to JPY 3,147 mn from JPY 1,396 mn YoY.

Outlook and guidance

• FY12/24 guidance unchanged: Net sales JPY 33,417 mn (+16.3% YoY), operating profit JPY 4,434 mn (+3.2% YoY), net profit JPY 3,660 mn (+6.7% YoY).

• Basic earnings per share for the full year is forecast at JPY 178.58.

• Sales and profit growth expected from strong orders for EV battery manufacturing plants in Europe, Japan, and North America.

• Annual dividend forecast at JPY 70 per share, targeting a 40% payout ratio.