Risk of higher materials prices and supply quality issues

「Probability of occurrence Medium → High Impact Medium → High Change in materiality from the previous year Increase」

「Although business profit was affected by lower revenue and expenses recognized in connection with the ceramic siding business, price revisions and cost reductions offset these effects, leaving business profit nearly unchanged year on year at ¥12.257 billion, down 0.4%.」

「Business profit declined 18.7% year on year to ¥29.172 billion, due to the substantial impact of sluggish sales for new construction and the continued effect of higher costs resulting from persistently high materials and energy prices.」

「Business profit declined 25.7% year on year to ¥13.837 billion because the effects of higher cost of sales and SG&A expenses resulting from persistently high materials and energy prices, in addition to the impact of lower revenue, could not be fully offset by higher remodeling sales and an improved product mix.」

「Supply constraints caused by supply-chain disruptions have been almost resolved, while the domestic business has expanded its capture of remodeling demand and is strengthening its earnings capability.」

「In addition to further increases in materials, energy and component prices, and higher costs associated with logistics constraints in Europe,」

「Although we implemented price revisions in both domestic and overseas operations to reflect higher materials and logistics costs resulting from inflation and the weaker yen, the impact of a sharper-than-expected decline in the yen, further increases in materials, energy and component prices, and higher costs associated with logistics constraints in Europe resulted in additional cost increases,」

「Although we promoted price revisions to reflect higher materials and logistics costs resulting from inflation and the weaker yen, the impact of a sharper-than-expected decline in the yen, further increases in materials, energy and component prices, and logistics disruptions resulted in additional cost increases,」

「Although first-quarter consolidated cumulative-period results were affected by supply-chain disruptions and lockdowns in China, revenue increased year on year due to foreign-exchange effects and growth in remodeling sales in the domestic business. Meanwhile, although we promoted price revisions to reflect higher raw-material and logistics costs resulting from inflation and the weaker yen, the effect during the consolidated cumulative period remained limited.」

「Although both domestic and overseas operations faced substantial cost increases from external factors, including surging materials and energy prices that became particularly pronounced in the second half and higher logistics costs caused by supply-chain disruptions,」

「Recently, in addition to further increases in materials prices, costs have been trending higher, particularly in Japan, as a result of addressing supply problems involving various components.」

「In addition to heightened geopolitical risks, other risk factors coexist, including shortages of components such as semiconductors, higher raw-material prices, logistics disruptions and higher transportation costs, and power shortages in China, making the outlook increasingly uncertain.」

「In particular, substantial fluctuations in new housing starts and construction order intake by construction companies, as well as sharp increases in timber prices known as the “wood shock,” may adversely affect the Group’s operating results and financial position.」

「As higher gross profit resulting from revenue growth, an improved product mix and the effects of price revisions proved effective, business profit increased 3.9-fold year on year to ¥18.211 billion, resulting in higher revenue and profit.」

「Although we continued to reduce costs through synergies, business profit declined 18.4% year on year to ¥60.233 billion due to a lower gross margin resulting from changes in the product mix, higher materials prices and upfront investment, including showroom installations in Asia.」

「Overseas business recorded lower profit due to higher labor and materials costs, as well as the burden of upfront investment associated with marketing initiatives such as showroom openings.」

「Although we sought to pass higher costs on through product prices, price increases were still being implemented through the second quarter consolidated accounting period and had not yet offset the decline in gross profit.」

「In the Housing Technology business, revenue declined 1.7% year on year to ¥127.518 billion and business profit declined 63.1% to ¥2.556 billion, due in part to lower operating rates following a drop in new housing starts in the immediately preceding quarter and higher costs resulting from increased raw-material prices.」

「Delays in responding to higher-than-expected raw-material prices and the decline in new housing starts in Japan became major factors depressing results in the Housing Technology business, which supplies residential building materials.」

「The Group seeks to mitigate the risk of price fluctuations in raw materials, mainly aluminum ingots and copper, by using commodity swaps.」

「A substantial amount of cash outlay may be required due to increased industry demand and higher raw-material prices. In addition, supplied materials, components and other services may contain defects or be unavailable, potentially adversely affecting the reliability and reputation of the Group’s products.」