Risk of lower sales, production and orders due to COVID-19

「As the impact of COVID-19 eased, social and economic activity recovered and the economy showed signs of a gradual recovery.」

「The Group’s operating environment remains uncertain in both Japan and overseas. Although the impact of COVID-19 has gradually eased, shortages and price increases for materials, including semiconductors, logistics disruptions and concerns over the prolonged situation in Ukraine have compounded the challenges facing the automotive aftermarket and construction and industrial vehicle markets in which the Group operates.」

「While event cancellations due to COVID-19 and the semiconductor shortage continued, the CUSPA Sales Division, as D-SPORT Racing Team, continued to participate in the TOYOTA GAZOO Racing Rally Challenge and the All Japan Rally Championship. In August, it also held the D-SPORT & DAIHATSU Challenge Cup motorsports driving event with Daihatsu Motor Co., Ltd.」

「While COVID-19 and the semiconductor shortage continued to have a significant impact on the market, the CUSPA Sales Division actively promoted its products to users. As D-SPORT Racing Team, it participated in the TOYOTA GAZOO Racing Rally Challenge and the All Japan Rally Championship, and resumed the D-SPORT CUP circuit driving event, which had been cancelled for 2 years as a COVID-19 precaution. These efforts contributed to continued expansion of sales of the division’s own brands and other brands and products for which it holds exclusive sales and import rights. As a result, revenue was ¥783 million, up 32.4% year on year.」

「The industrial vehicle market recovered from the slowdown caused by COVID-19, led particularly by strong markets in Europe and North America, and construction equipment, agricultural machinery and forklift manufacturers continued to increase production. As a result, net sales were ¥4.008 billion, up 29.6% year on year.」

「The CUSPA Sales Division faced continued declines in consumer sentiment toward customisation parts and market demand due to event cancellations, as well as the additional headwind of difficulty procuring electronic customisation products because of the semiconductor shortage. Nevertheless, the division focused on brands and products in which it has strengths. As a result, revenue was ¥1,176 million, up 21.7% year on year.」

「The impact of COVID-19 on overseas markets subsided, and orders for the Overseas Sales Division’s core engine and undercarriage parts recovered from the beginning of the year. COVID-19 continued to affect Asia, and recovery was somewhat delayed by disruptions to shipping schedules, but other regions, led by Latin America, performed well. As a result, revenue was ¥3,170 million, up 32.5% year on year.」

「In the Overseas Sales Division, exports to Europe and the Middle East showed signs of recovery in the third quarter, while North American exports and local sales were both on a recovery trend. Sales at the consolidated subsidiary in Singapore had also recovered to approximately the previous year’s level. However, the market recovery in Asia and Latin America remained delayed due to the spread of COVID-19, and the downward trend in sales continued. As a result, revenue was ¥7,719 million, down 21.5% year on year.」

「Although the Overseas Sales Division was generally on a recovery trend, the continued spread of COVID-19 in Asia and Latin America delayed the recovery in customers’ local sales and contributed to lower revenue. Consolidated subsidiaries in Singapore and the United States also reported lower revenue due to the pandemic. As a result, revenue was ¥4,882 million, down 26.0% year on year.」

「Although the Overseas Sales Division is generally on a recovery trend, the spread of COVID-19 continued unabated in Asia and Latin America, delaying the recovery in customers’ local sales and contributing to lower revenue. Consolidated subsidiaries in Singapore and the United States also reported lower revenue due to the impact of the pandemic. As a result, revenue was ¥2,392 million, down 24.6% year on year.」

「As COVID-19 spread, the Group faced the following risks in each segment. In the Domestic Sales Division, declining consumer sentiment due to the uncertain outlook created a risk of lower replacement rates for vehicle inspection parts and postponed purchases of highly discretionary customisation parts. The Overseas Sales Division does business in approximately 80 countries, and in 40 of them, more than half, the relevant governments imposed stay-at-home orders, activity restrictions, states of emergency and similar measures from late March to mid-April 2020, significantly affecting customers’ business activities. As a result, the impact on the Company has begun to emerge, creating a risk of lower revenue due to declining orders. In the Industrial Machinery Sales Division, vehicle and parts production has been temporarily suspended, or may be suspended, at vehicle manufacturers and parts suppliers in many of the countries and regions with which it does business, creating a risk of deterioration in the Group’s performance.」