Declining Demand, Sales Constraints and Delays to New Plant Plans Due to COVID-19

「The Group conducts overseas business activities mainly in Asia, Europe and North America, and the overseas sales ratio for the fiscal year was 35.5%.」

「During the cumulative second quarter of the fiscal year, the Japanese economy was on a path of gradual recovery due to moves toward normalization of socioeconomic activity and the effects of various policies. However, the economic outlook remained uncertain due to prolonged global inflation, continued monetary tightening and the downturn in the Chinese economy.」

「As economic activity became more active in various countries in the move toward a return to normality after the pandemic, the Company pursued initiatives to secure demand, including exhibiting domestically at MEX Kanazawa 2023, exhibiting overseas at CIMT2023, China’s largest international machine tool exhibition, holding a private show in Vietnam and holding a joint private show with a dealer in the United States.」

「As measures to combat COVID-19 progressed and economic activity became more active in countries other than China during the nine months ended 31 December, the Company pursued proactive sales activities, exhibiting domestically at JIMTOF2022 and overseas at BIMU2022 in Italy and METALEX in Thailand.」

「As economic activity became more active in various countries with progress in measures to combat COVID-19, the Company pursued proactive sales activities, exhibiting domestically at Robot Technology Japan and overseas at IMTS2022 in the United States and AMB2022 in Germany, while also holding private shows at the Asahi Plant and overseas subsidiaries.」

「Revenue was affected by the prolonged component procurement problems and lower-than-planned performance by the group’s Chinese subsidiaries due to China’s lockdowns. Profit was affected by higher raw material prices, increased selling, general and administrative expenses following the resumption of sales activities, and higher depreciation and other expenses following the start of operations at the Asahi Plant.」

「The Company Group has constructed the Asahi Plant as necessary capital investment to continue increasing corporate value over the long term, and began operations there in April 2022. However, if COVID-19 persists or spreads further, the plant’s operating rate may fall below expectations and affect the Group’s financial position and operating results.」

「During the cumulative third quarter of the fiscal year, the Japanese economy remained uncertain, although exports and capital investment moved toward recovery as economic activity resumed due to the effects of various policies and progress in vaccinations. Concerns also remained about a renewed spread of infections due to the emergence of a new, highly transmissible variant.」

「During the six months ended 30 September, Japan’s economy remained uncertain, with restrictions on social and economic activity due to states of emergency and other measures continuing, although a recovery in exports and capital investment became more evident as vaccinations accelerated and economic policies progressed in response to the spread of COVID-19.」

「Although Japan’s economy was on a gradual recovery path during the first quarter, conditions remained difficult as the COVID-19 pandemic continued and social and economic activity was restricted by the issuance of states of emergency and other measures in various regions.」

「Sales activities have been subject to restrictions, including the cancellation of major trade shows and the suspension of in-person sales visits. Although the new plant is scheduled to begin operations in April 2022, if COVID-19 persists or spreads further, its operating rate may fall below expectations.」

「In the nine months ended 31 December, orders received were ¥3,771 million, down 31.1% year on year; order backlog was ¥4,742 million, down 56.7%; net sales were ¥8,240 million, down 45.5%; and operating loss was ¥187 million, compared with operating profit of ¥1,214 million in the same period of the previous year. Orders received remained weak as companies continued to take a cautious approach to capital investment amid uncertainty over the outlook associated with the COVID-19 pandemic.」

「In light of restrained capital investment due to COVID-19 and the ongoing US-China trade dispute, the Japan Machine Tool Builders' Association revised down its forecast for 2020 calendar-year industry orders from ¥1,200 billion to ¥850 billion.」

「In response to restrictions on sales activities caused by COVID-19 and the cancellation or postponement of major trade shows, the Company has promoted a sales strategy using ICT to showcase its products and technologies.」

「The business environment surrounding the Company Group deteriorated sharply with the spread of COVID-19 and remains uncertain. In the machine tools business, the Group’s principal business, demand has declined particularly markedly, and sales activities have been restricted by measures to prevent the spread of infection. In addition, owing to the impact of the spread of COVID-19, the schedule for construction of the new plant was changed and the planned start of operations was postponed by one year.」