To Shareholders and Investors

We would like to express our sincere gratitude to our shareholders and investors for their continued support.
This is our FY 2023 financial report (from April 1, 2023 to March 31, 2024).

Looking at the world economy during the reporting year, the US economy continued to grow as a result of increased consumer spending despite the impact of monetary tightening, whereas global economic growth remained tepid due to some volatilities such as a decline in China’s capital spending due to its continued property market downturn and economic slowdown in Europe.

The world demand slump dragged down the overall global manufacturing activities in major producing countries and regions, whereas global auto production and sales, a key focus area to the group business, were back on recovery track while global shortage of components such as chips were gradually easing. Nevertheless, the global economy showed signs of slowdown as a result of customers’ manufacturing slowdown in China, the end of EVs subsidies in Europe, etc. during the latter half of the year.

In the given business environment, the IRISO group increased sales in the auto infotainment market through expanding its global business and sales of new high-speed transmission connectors, as well as in the powertrain market, driven by rising demand for xEVs (EVs, FCHVs, PHVs, HEVs), whereas sales in some regions showed signs of growth slump from FY2023 H2. Besides, as a result of decreasing demand in the consumer market and capital spending cuts in the industrial market, net sales remained at ¥55,271 million, up 4.5% YoY.

When it comes to profit, although the impact of exchange rate swings and soaring raw material costs were offset through executing some strategies to improve profitability, the planned targets of sales and capacity utilization rate were not met because of an increase in fixed costs, such as upfront investments for the new ERP system launch from April 2024 and Akita plant operation to start in 2025. As a result, an operating profit decreased to ¥5,936 million, down 14.5% YoY, ordinary profit to ¥7,189 million, down 6.2% YoY whereas profit attributable to owners of parent increased to ¥5,593 million, up 0.9% YoY, supported by foreign exchange gains.

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

Looking at the business environment surrounding the company, economic growth continues mainly in the US whereas China and Europe are facing lower economic growth. Not only geopolitical risks in the Middle East, Ukraine and other regions but also growing political tensions due to presidential elections in some countries cause the rise of global economic uncertainty. Similarly, Japan is facing increasing uncertainties such as the risk that yen’s sharp decline cannot be slowed for a long time, the risk of soaring fuel and raw material prices, and political risks resulting from the dissolution of the House of Representatives.

Although the auto (future mobility) market anticipates auto production slump and xEV market growth slowdown, rising demand for xEVs and autonomous driving are expected. During this fiscal year, global auto production remains nearly the same as the prior year level, with only a slight increase, while the percentage of xEVs including PHVs and HEVs in production is expected to rise from approximately 25% in FY2023 to around 30%. Accelerating electrification, autonomous driving and telecommunication, etc. are also expected to drive an increase in demand for the high-speed transmission connector. In the consumer and industrial markets, however, customers’ manufacturing slowdown is likely to continue in FY2024, much like it did through FY2023, and the company will be forced to tackle this tough environment.

In the given business environment, the company is aiming to take the next step forward into growth through increasing net sales in the automotive (future mobility) market, mainly driven by growing sales for infotainment systems that allow high-speed transmission, etc. expanding sales of the products that meet necessary standards set by Europe and the US in the powertrain market, as well as reviewing the sales channels and approaches in the industrial market. When it comes to operating profit, although an increase in fixed costs, such as increasing depreciation expense associated with the new ERP system operation and upfront investment for the Akita plant launch, is expected, the company is aiming to reduce such fixed costs through improving productivity with the new ERP operation, etc. as well as to increase revenue through creating results of the profitability improvement project progressed since FY 2021.
Based on the above strategies, the company’s projected performance in FY2024 is; consolidated net sales of ¥58 billion (up 4.9% YoY), consolidated operating profit of ¥7 billion (up 17.9 % YoY), consolidated ordinary profit of ¥6.8 billion (down 5.4% YoY), and profit attributable to owners of parent of ¥5.2 billion (down 7.0 % YoY). The budget rates are ¥145/$, ¥160/€ and ¥20/CNY.

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

May 2024
Sadao Sato, Chairman
Hitoshi Suzuki, President and CEO