Slowdown in China’s Economy, Political Instability in Emerging Markets, and Fluctuations in Crude Oil Prices and Exchange Rates

「During the six-month period ended in the second quarter, Japan’s economy continued to face an uncertain outlook. Restrictions on activity were eased as the classification of COVID-19 was changed, economic normalization progressed, and personal consumption and inbound demand began to recover. However, the prolonged Russia-Ukraine situation, continued yen depreciation, rising energy and raw-material prices, and inflation remained concerns.」

「On the other hand, the global economy remains uncertain due to the yen’s continued depreciation in the foreign exchange market and rising raw-material and resource prices resulting from the prolonged situation in Ukraine.」

「On the other hand, conditions have remained uncertain due to rising resource prices resulting from the prolonged Russia-Ukraine situation and other disruptions in the international community, shortages of semiconductors and raw materials, logistics disruptions, and the yen’s continued depreciation in the foreign exchange market.」

「In the first quarter, the sixth wave of COVID-19 infections caused by the Omicron variant occurred, and in the second quarter, the seventh wave occurred, with infections spreading rapidly nationwide. However, during the seventh wave, there were no restrictions on activity such as a state of emergency declaration as in the past, and social and economic activity gradually moved toward normalization. Meanwhile, uncertainty has persisted due to rising resource prices resulting from the prolonged Russia-Ukraine situation, sharp foreign exchange fluctuations, shortages of semiconductors and raw materials, and logistics disruptions, requiring close monitoring.」

「In addition to the renewed spread of COVID-19 driven by the Omicron variant, raw-material prices have risen sharply, tensions surrounding the situation in Ukraine have intensified, and foreign exchange rates have fluctuated sharply, leaving the outlook uncertain.」

「In China, Oai Mizuki Environmental Protection Technology (Suzhou) Co., Ltd., an overseas subsidiary of the Group, mainly manufactures and sells electrolyzed hydrogen water generators for the Chinese market. However, if operations are suspended or sales become difficult overseas, including in China, due to unpredictable changes in laws and regulations, delays in infrastructure development such as insufficient power supplies accompanying rapid economic growth, terrorism, political upheaval, or other causes of social disruption, the Group’s operating results and financial condition may be affected.」

「However, the continued delay in the recovery of the Chinese subsidiary’s earnings affected results, resulting in net sales of ¥1,851.893 million, down 11.5% year on year, and operating income of ¥39.242 million, down 73.4%.」

「However, the continued delay in the recovery of the Chinese subsidiary’s earnings affected results, resulting in net sales of ¥1,321.783 million, down 9.3% year on year, and operating income of ¥84.817 million, down 43.5%.」

「However, in the water-related equipment business, the delayed recovery in the earnings of the local subsidiary, which continued to be affected by China’s economic slowdown from the previous fiscal year, resulted in net sales of ¥637.594 million, down 8.5% year on year, and operating income of ¥6.526 million, down 87.5%.」

「Net income attributable to owners of the parent was ¥90.362 million. Due to the deterioration in the earnings of the local subsidiary resulting from China’s economic slowdown, the company fully impaired ¥137.615 million in investments, including in the large-scale exhibition facility “Suimitsu Ma-kan,” constructed in 2016, and recorded the amount as an extraordinary loss. The prior-year period recorded a net loss attributable to owners of the parent of ¥252.737 million.」

「However, if operations are suspended or sales in the Chinese market become difficult due to unpredictable changes in laws and regulations, delays in infrastructure development such as insufficient power supplies accompanying rapid economic growth, terrorism, political upheaval, or other causes of social disruption, the Group’s operating results and financial condition may be affected.」

「On the other hand, concerns about instability in Europe and the United States, against the backdrop of the slowdown in emerging Asian economies, particularly China, and the UK’s withdrawal from the EU, have left the economic outlook uncertain.」

「On the other hand, crude oil prices and foreign exchange rates have remained volatile due to the slowdown in emerging Asian economies, particularly China, and the UK’s withdrawal from the EU, leaving the economic outlook uncertain.」