Connectors - IRISO Electronics co.,ltd.

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 TO SHAREHOLDERS AND INVESTORS

To Shareholders and Investors

We would like to express our sincere gratitude to our shareholders and investors for their continued support and interest in our company. 
The following is our financial report for the fiscal year 2022 (from April 1, 2022 to March 31, 2023).

During the reporting year, the global economy was slowly returning to its normal state over time as restrictions or controls on economic operations or businesses due to the COVID-19 pandemic were gradually eased around the world. However, uncertainties such as the prolonged Russia-Ukraine war, and global inflation and monetary tightening still remain. Global auto production and sales, a key focus area in the group business, showed signs of recovery as the global chip shortage gradually improved over time. Nevertheless, they have not yet been fully normalized because there were also several factors such as production decline which was caused by China's decision to shift away from the zero-COVID policy.

Despite such uncertain business environment, the company’s sales achieved in the reporting year were at the highest level ever recorded because they were driven by electrification-led sales growth in the powertrain market and weakening yen. Net sales in the automotive market increased by 22.0%, compared to the previous year level, although it was affected by China’s Covid-led lockdowns and chip supply constraints during the first quarter. Particularly in the powertrain market, xEVs (EVs, FCHVs, PHVs, and HEVs) production and sales growth, as well as customer orders boosted by offering our unique anti-vibration solutions for powertrain equipment resulted in a remarkable 84.2% rise in net sales, compared to the previous year level, which led to the company’s revenue growth. In the consumer market, rising demand for game consoles led to the company’s revenue growth. In the industrial market, although equipment demand for China was adjusted from the third quarter, the company’s revenue increased thanks to growing demand for FA equipment during the first half of the fiscal year 2022. As a result, net sales reached ¥5,293 million, representing a year-over year increase of 20.6%.

With respect to the company’s profit, despite the impacts of China’s COVID-led lockdowns and the soaring prices of raw materials and others during the first quarter, an operating profit increased to ¥6,940 million by 53.5% compared to the previous year level, ordinary profit increased to ¥7,661 million by 58.3% compared to the previous year level and net profit attributable to the parent company's shareholders increased to ¥5,541 million by 41.6% compared to the previous year level, thanks to the company’s net sales recovery, our strong commitment to profitability improvement and cost saving promotions.

Besides, the impact of China’s lockdowns on our production subsidiary in Shanghai during the first quarter of the fiscal year 2022 caused a special loss of ¥364 million.

Next, we would like to present our outlook for the near future.

1. Market Environment

・Automotive market: 
In the automotive market, a key focus area in the group business, the global production will go back to the usual level as supply constraints for chips and other materials are easing over time, yet there will only be a modest increase in global auto production due to economic slump around the world in the fiscal year 2023, compared to the previous year level. On the other hand, the xEVs market is expected to grow thanks to the positive outcomes of global decarbonization efforts and automakers’ active operations.

・Consumer and industrial markets
We anticipate that the markets will remain in an adjustment phase mainly during the first half of the fiscal year 2023 after the nesting demands end and China’s capital spending slows.

2. Key strategies for the Fiscal Year 2023

Although the world economy has been facing uncertainty so far, we will focus our efforts on boosting sales by capturing the growth of the xEV market. The company’s profit will not reach the expectations set in the mid-term management plan as a result of auto production downturn and the impact of soaring raw material prices, yet we have set five key strategies to focus our efforts on:

・Reaping the results of the profitability improvement project
・Increasing the strategic product lines
・Boosting sales force
・Increasing production capacity and improving business continuity planning (BCP) management
・Launching the new ERP system smoothly

3. Forecast for the Fiscal Year 2023

We expect ¥55 billion sales (4.0% increase, compared to the previous year level), an operating profit of ¥7.7 billion (10.9% increase, compared to the previous year level), an ordinary profit of ¥7.55 billion (1.4% decrease, compared to the previous year level), and a net profit attributable to the parent company's shareholders of ¥5.7 billion (2.9% increase, compared to the previous year level). These forecasts are based on exchange rates of ¥130/USD, ¥140/EUR, and ¥19.5/CNY.

We would appreciate the continued support and understanding of our shareholders and investors.

June 2023
Sadao Sato, Chairman
Hitoshi Suzuki, President and CEO