Impact of the COVID-19 Pandemic on Automotive Production and Business Activities

「As economic activity gradually began to recover due to the easing of restrictions on activities associated with COVID-19,」

「During the three months ended the first quarter (1 April 2023 to 30 June 2023), the impact of COVID-19 and the semiconductor supply shortage was recovering, but raw-material and energy prices remained high due to the Russia-Ukraine situation and other factors.」

「Although the decline in production caused by the prolonged global impact of COVID-19 and the semiconductor supply shortage was showing signs of recovery, raw material and energy prices remained high due to the situation in Russia and Ukraine, among other factors, significantly affecting our business activities.」

「During the nine months ended 31 December 2022, the outlook remained uncertain due in part to the renewed spread of COVID-19, the global semiconductor shortage, and higher raw material and energy prices associated with the prolonged situation in Russia and Ukraine.」

「Against this operating backdrop, although the spread of COVID-19 and the global semiconductor shortage had an impact, net sales increased by ¥8,367 million, or 15.3%, year on year to ¥63,011 million. Operating income was a loss of ¥1,446 million, compared with an operating loss of ¥1,443 million in the same period of the previous year, due to the front-loaded preparation costs for the full-scale operation of the new US plant and the impact of higher raw material and energy prices, among other factors.」

「Although sales of products declined because overseas lockdowns associated with the spread of COVID-19 disrupted procurement of automotive parts and the global semiconductor shortage reduced production volumes at customers, net sales increased by ¥183 million, or 0.6%, year on year to ¥30,074 million, supported by higher mold sales in North America and elsewhere and foreign-exchange translation effects. Despite efforts to reduce all expenses and implement cost-improvement activities, including greater production-process efficiency and restrictions and reviews of investments, operating income was a loss of ¥1,241 million. This reflected the impact of reduced domestic production, operating losses from irregular production in response to sharp production fluctuations, and higher preparation costs for the full-scale operation of the new US plant, compared with operating income of ¥645 million in the same period of the previous year.」

「Although sales increased as distribution channels expanded, net sales decreased by ¥33,565 million, or 22.3%, from the previous consolidated fiscal year to ¥116,669 million. This reflected lower production volumes at customers due to the global semiconductor shortage and difficulties procuring automotive parts from Southeast Asia caused by COVID-19, as well as the impact of changes in accounting standards and other factors.」

「During the third quarter of the fiscal year under review (1 April 2021 to 31 December 2021), the spread of COVID-19 led to lockdowns overseas, including in Southeast Asia, and the declaration of a state of emergency in Japan. In addition, the global semiconductor shortage and other factors affected the economy, and uncertainty about the outlook continued.」

「During the six months ended the second quarter (1 April 2021 to 30 September 2021), the outlook remained uncertain as the spread of COVID-19 led to lockdowns overseas, including in Southeast Asia, and the declaration of a state of emergency in Japan.」

「As production volumes increased from the previous year, when they had been significantly affected by reduced production due to COVID-19, net sales increased by ¥2,772 million, or 10.2%, year on year to ¥29,891 million.」

「Consolidated results for the fiscal year ended 31 March 2021, covering the period from 1 April 2020 to 31 March 2021, were affected by reduced production in the first quarter due to COVID-19. Net sales decreased by ¥31,984 million, or 17.6%, from the previous consolidated fiscal year to ¥150,234 million.」

「Regarding accounting estimates associated with the spread of COVID-19, the Group had previously made accounting estimates based on the assumption, disclosed in the additional information in the securities report for the previous consolidated fiscal year, that the impact on production activities would continue until around September 2020. In light of the subsequent spread of COVID-19, as of the end of the third quarter of the current consolidated fiscal year, the Group revised this assumption to one that the impact would continue for a certain period and made its accounting estimates accordingly.」

「Operating income decreased by ¥5,250 million, or 98.9%, year on year to ¥57 million. Although cost reductions and higher sales in Mexico had a positive impact, reduced production had a greater effect. Ordinary income decreased by ¥5,298 million, or 95.8%, year on year to ¥231 million. Quarterly net loss attributable to owners of the parent was ¥159 million, compared with quarterly net income attributable to owners of the parent of ¥4,002 million in the same period of the previous year.」

「Consolidated results for the first quarter of the current fiscal year declined significantly because major business partners substantially reduced production due to the impact of COVID-19. Net sales decreased by ¥22,526 million, or 45.4%, year on year to ¥27,118 million. Despite efforts to reduce expenses amid a challenging operating environment, operating income was a loss of ¥1,657 million due to the impact of reduced production, compared with operating income of ¥3,175 million in the same period of the previous year.」

「Following the government's expansion of the areas subject to the state of emergency declaration to all prefectures in response to the novel coronavirus disease, we closed all operations for 5 days from 27 April to 1 May, which were scheduled operating days. Production adjustments have also continued at our major business partners, and the impact of closures and other measures has continued to affect us.」