Addressing Rising Costs Through Steel Price Pass-Through and Improved Logistics Efficiency

「Negotiations with customers to reflect the impact of North American tariffs in selling prices have been completed, and we will be able to pass through almost the full impact of tariffs arising during the current fiscal year into selling prices. Although a partial timing mismatch in recovery has occurred, recovery will be possible in the following fiscal year.」

「In addition to record-high cost-reduction initiatives centered on reducing direct-materials costs through improved global procurement sourcing and the expanded in-house adoption of outsourced processing technologies, the pass-through into selling prices of the inflationary impact of labor, steel and materials costs has been progressing steadily」

「The increase was supported by steady progress in reflecting the inflationary impact of labor costs, steel and materials in selling prices.」

「The Company was also able, in most cases, to reflect the inflationary impact of labor costs, steel and materials in customer selling prices without any timing mismatch during the period.」

「Inflation in steel, materials, logistics, utilities and energy costs, including the impact of increases in the previous fiscal year, exerted significant downward pressure on profit. However, the Company was able to negotiate appropriate pass-throughs into selling prices with customers in Japan and overseas, thereby offsetting almost all of the inflationary impact.」

「In addition to improving profitability by beginning mass production of the new SDM stabilizer equipped with new technology, we offset the impact of inflation through cost reductions beyond existing approaches, including strengthened improvements in global direct-material procurement, and revisions to selling prices for customers.」

「As part of its cost-reduction initiatives, the company undertook activities beyond its traditional framework, including globally supporting process improvements at suppliers in direct-materials procurement rather than merely comparing costs, thereby working with suppliers to lower costs. Going forward, we will continue challenging cost-reduction activities globally and link them to improved profitability.」

「The partial pass-through of higher steel costs into selling prices and the recovery of costs incurred from customers resulted in net sales of ¥16,966 million, up 15.3% year on year. However, the impact of soaring steel, utilities and energy, and materials costs resulted in an operating loss of ¥49 million, compared with an operating loss of ¥13 million in the same quarter of the previous year.」

「Although we made every effort to recover by passing higher costs through to customers and implementing cost-reduction initiatives across all expense items with the participation of all employees, some pass-through was carried over into the following fiscal year under customary business practices, and we were unable to offset the impact of rising costs.」

「Although we will continue our unrelenting cost-reduction initiatives and implement the maximum possible pass-through of inflation into selling prices once negotiations with customers are concluded by the end of the fiscal year, a significant portion will, under customary business practices, be carried over for pass-through in the following fiscal year. As a result, we cannot cover the pressure from rising costs and have been forced to revise earnings downward.」

「Although increases in steel, material, logistics, power and utility costs reached approximately 3 times the increases in the same quarter of the previous year, exposing the Company to severe inflationary pressure, it offset the higher costs by implementing rationalization improvements exceeding the previous record level and through efforts to reflect most of the inflationary pressure in selling prices, thereby securing higher operating income.」

「From the third quarter onward, in addition to recovering production volumes, we aim to achieve our full-year targets by further advancing rationalization improvements through company-wide participation, including improvements in direct material and purchased-component costs, which are at record-high levels, all processing costs, particularly labor costs, and all fixed costs. We are also taking into account the situation in which final decisions on passing through the overall inflationary impact of steel and logistics costs, materials, utilities and fuel costs, and other expenses into selling prices to major customers will be made in concentrated fashion in the second half of the fiscal year, and aim to achieve our full-year targets through profit generation in the second half.」

「Of the increase in net sales, approximately ¥1.6 billion was attributable to the pass-through of higher steel prices into selling prices and foreign exchange movements, making the underlying increase in sales approximately ¥5.8 billion. Although the increase in production volumes by major customers contributed to higher profit, inflationary pressures included much larger-than-expected increases in steel and logistics costs, as well as higher materials, utilities and energy costs. However, record-high cost-reduction initiatives implemented across the group lifted operating profit by ¥565 million, or 44.9%, year on year to ¥1.826 billion.」

「The company secured higher profit through record-high cost-reduction initiatives and the partial pass-through of surging steel prices into selling prices.」

「In the second half of the fiscal year, the decline in consolidated operating income resulting from lower net sales will be absorbed through accelerated rationalization and improvement, but the impact of higher steel and logistics costs will continue. The Company is negotiating with customers so that higher steel costs can be reflected in its selling prices. For logistics costs, it will work to minimize the impact by improving packaging efficiency and through other measures, but operating income will decline in line with the revised published plan.」