Message to the shareholders

The Group continues to face an uncertain business environment. Whilesigns of economic recovery have appeared in Japan and the Americas,China and Europe are stagnant. In addition, factors such as the prolongedsituation in Ukraine, greater tensions in the Middle East, and protectionistpolicies in the U.S. mean more adverse impacts on our business.

Under these circumstances, the Group has been making full use of its strength as a comprehensive machinery manufacturer while taking into account major industrial structural changes in the medium to long term,such as the shift toward decarbonization and increased adoption of EVs.The Group is leveraging its strengths in the cutting tools, machine tools,robots, bearings, hydraulic equipment, and special steel businesses to realize the expansion of orders and sales by developing new products and offering technical proposals that contribute to users’ manufacturing. We have also been proceeding with structural reform across our overall business, including the optimization of equipment and personnel, the consolidation of standard bearings production, the streamlining of operations across all departments, and the expansion of in-sourcing of manufacturing, aiming to improve profitability.

As a result of the above, despite strong demand in the industrial machinery and retail sectors in the Americas, net sales for this fiscal year were 239.8 billion yen (a decrease of 9.6% YoY), due to factors such as reduced demand in the construction machinery and manufacturing sectors in China and Europe, and production adjustments among some domestic automobile manufacturers. This includes domestic sales of 117.4 billion yen (a decrease of 6.3% YoY) and overseas sales of 122.4 billion yen (a decrease of 12.6% YoY).

In terms of profitability, we have worked on transferring raw material price increases onto sales prices, automating and streamlining the operations of production lines, and reducing procurement costs, and the yen exchange rate is also weakening. However, due to the major impact seen from decreased operating rates of robots,hydraulic equipment, and other products, this fiscal year’ s operating profit and ordinary profit were 6.6 billion yen (a decrease of 44.1% YoY) and 4.2 billion yen (a decrease of 61.6% YoY) respectively. In addition, the number of cross-shareholding stocks held was reduced to improve capital efficiency, leading to extraordinary income of 3.6 billion yen recorded as gain on sale of investment securities. By contrast, promoting the optimization of personnel and surplus equipment led to extraordinary losses of 4.2 billion yen recorded as structural reform costs. Profit attributable to owners of parent was therefore 3.3 billion yen (a decrease of 48.2% YoY).

With regard to the year-end dividends, considering the profit status and future business developments, we have decided to allocate 100 yen per share, a decrease of 10 yen compared to the previous fiscal year.

Regarding the future business environment, the outlook is generally difficult to forecast. The emergence of new EV manufacturers and reorganization of existing automobile manufacturers is advancing in the automotive sector,the Group’ s key field of business. On the other hand, the prolonged economic stagnation and consequent delayed demand recovery in China and Europe – as well as raw materials prices remaining high – continue to affect the industrial machinery, construction machinery, and retail sectors.

Given such a business environment, the Group intends to significantly raise productivity and become a business which is highly resilient to change through fundamental structural reform such as consolidating production at the Bearings Department. In terms of business expansion,we plan to expand our orders and enhance our business performance by strengthening our sales force in the growing markets of the U.S. and India,as well as developing and launching uniquely-NACHI-FUJIKOSHI products.
Furthermore, with the goal of achieving sustainable business growth, we will commit to challenges, including environmental, social and governance issues through our business activities.

We would like to express our sincerest appreciation to all of our shareholders and other stakeholders for their continued support.