H1 Results for the Fiscal Year

TSE Code: 5938

Ending March 31, 2023 (IFRS)

(From April 1, 2022, to September 30, 2022)

LIXIL Corporation

October 31, 2022

Copyright © LIXIL Corporation. All rights reserved.

LIXIL TRANSITIONED TO IFRS FROM FYE2016

CHANGE IN PROFIT LEVEL STRUCTURE IS AS SHOWN

JGAAPBELOW

IFRS (LIXIL Financial Reporting)

Continuing operations

Net sales

Revenue

Cost of sales

Cost of sales

Gross profit

Gross profit

SG&A

SG&A

Operating profit

Core earnings (CE)

Non-operating income/expenses

Other income/expenses

Ordinary income

Operating profit

Extraordinary income/loss

Finance income/costs

Share of profit (loss) of investments accounted for using equity method

Profit before income taxes

Profit before tax

Profit from continuing operations

Discontinued operations

Profit for discontinued operations

Net profit attributable to

Profit attributable to

Non-controlling interests

Owners of the parent

Owners of the parent

Non-controlling interests

"Core earnings" in IFRS is equivalent to JGAAP's "Operating profit"

1

(1) Press release announced on June 23, 2022 "Partial Revision of Manufacturer's Suggested Retail Prices for Building Materials and Equipment"
(Japanese only)2
(2) Q1 FYE2023 presentation material p.26 Business and ESG related topics "Responding to supply chain disruptions and higher logistics costs"
KEY HIGHLIGHTSRe-postedfrom Financial Results for the Fiscal Year Ended March 31, 2022
Outlook for FYE2023 (estimateof initial plan for FYE2023)(1)
+20.0

KEY HIGHLIGHTS

  • Revenue increased while profits declined year-on-year for H1 FYE2023
  • Cost of sales was sharply impacted by the rapid depreciation of JPY beyond our estimation, additional price increases for components, and cost increases due to supply chain disruptions
  • Revised full-year forecasts also reflect economic slowdowns in the Americas and China
  • Dividend forecast remains unchanged (Resolved interim dividend of JPY45)

Summary of results for H1 FYE2023 and outlook

  • Steady progress has been made for price optimization(1)
  • Revenues increased due to stable supply of products despite a challenging business environment, but profits decreased due to the rapid depreciation of JPY beyond our estimation, the accelerated increase in component prices, and the impact of logistics cost increases
  • Despite supply constraints in H1 due to the supply chain disruptions caused by COVID-19 and the conflict in Ukraine, the situation is expected to improve from Q3 with the launch of new distribution centers in Europe(2)

（Unit: JPY billion)

40.0(2)

-92.0

125.0

-50.0

+10.0

105.0

+48.0

FYE2023

FYE2022

+25.0

FYE2022

Plan

Plan

195

Result

81.0

80.0

Vs Plan

64.9

Q1-Q3:-27.0 bn

Q4: -23.0 bn

33.0

Increase of

Price

Anticipated

Cost

Price

Revenue growth

raw material /

adjustments,

costs related

increase

optimization

distribution

structural

to business

Expected core earnings excl. one-

expected

& structural

costs, response

reform,

environment

from

reform

time costs incl. inflation and

costs to

SG&A

& risks

inflation

contingency measures due to

supply chain

expense

and others

logistics disruptions

disruptions

reduction

(1)

Management basis

3

(2)

Mainly costs that could be mitigated but were incurred due to rapid occurrence and a time-lag between when the response

measures became effective

KEY HIGHLIGHTS

Outlook for FYE2023 revised plan (estimate)

Revisions due largely to factors including rapid JPY depreciation beyond our estimation, increased component prices, as well as a different sales mix from initial assumptions

（Unit: JPY billion)

Major revisions

・ Increase in component and energy prices

Current procurement conditions and procurement costs

based on the latest transaction prices are reflected

・ Forex fluctuation

No change in assumptions announced on Apr. 28 for unit

purchase prices of metals (aluminum and copper) in USD

terms. However, impact of JPY depreciation is incorporated,

with an assumption of JPY150/USD from JPY115/USD

・ Forex risks

Downside risk for higher costs if JPY further declines

to JPY160/USD in H2 (-JPY2.0 billion)

Impact of forex fluctuations on core earnings

Major currency: USD and Euro

Forex fluctuations, which previously had little impact on

core earnings in our business structure, have become a

factor pushing down profits in the following ways:

・

Against the USD: 1) Decreased forex impact due to

Initial

Sales

Price

Higher

Forex

Supply

Improve

Forex

Revised

lower profits in the Americas, and 2) Increased settlement

f'cst

mix

optimi

compo

fluctua

chain

ment of

risks

F'cst

of purchase price of metals and imported components

(Apr 28

impact

zation

nent

tion(1)

disruptions

indirect

(Oct 31

・

Against the Euro: Decreased forex translation effect on

announc

cost

costs

announ

profits due to smaller appreciation against the JPY

ed)

efficiency

ced)

compared to the USD/JPY

(1) Mainly due to settlement of purchase price of metals from LME

4

KEY HIGHLIGHTS

Revision of FYE2023 forecast: Business outlook and assumptions

Group wide

• Mitigate the impact of sharp JPY depreciation and increase in cost of sales due to an unexpected increase in component prices by implementing additional measures for price optimization scheduled for H2

• Prepare for a business performance recovery in FYE2024 by responding within FYE2023 to rapid changes in the business environment over the past two years

Japan

• New houses: Closely monitor impact of increased component prices on housing starts

• Renovation: Expect renovation demand to increase from December due to strong demand for products that improve heat insulation, especially windows, driven by rising energy prices and government policy responses

International

• EMENA: Despite concerns of a recession in Europe due to rising energy prices and interest rate hikes, there is growth opportunity from a healthy order book and a stabilizing supply chain

• Americas: Expect inventory adjustment in each sales channel to settle in October. However, due to rising interest rates, a full recovery in demand is not expected until FYE2024

• China: Expect low demand growth as in H1 caused by challenging real estate market conditions

• Asia Pacific: Expect continued economic recovery

5

KEY HIGHLIGHTS

Executive Compensation

Annual performance-linked compensation, which represents 25% to 30% of total compensation for Executive Officers, is expected not to be paid, in case that the profits are recorded as the revised performance forecast (announced today), since it will be less than the lower limit of the performance target(1).

Percentage of performance target for the performance-linked compensation consists of ROIC (40%), Core earnings (30%), and Net profit (30%).

[Representative Executive

[Representative Executive Officer

[Executive Officer and

Officer and President]

and Executive Vice President]

Executive Vice Presidents]

Stock-linked

Annual Base

Stock-linked

compensation

Salary

Annual Base

19%

compensation

Annual Base

25%

Stock-linked

Salary

30%

40%

Salary

Performance-linked

Performance-linked compensation

54%

compensation

compensation

50%

Performance-linked

27%

25%

compensation

30%

Payout Rates According to Achievement Level of Performance Targets

Achievement level of performance targets

Payout rate

Less than 50%

0%

50% or more but less than 100%

Same as achievement level of performance targets

100% or more but less than 150%

{(Achievement level of performance target-100)×2+100}%

150% or more

200%

(1) With regards to the payment of performance-linked compensation, it is decided after the determination of the Compensation

6

Committee.

KEY HIGHLIGHTS

New avenue for growth by capturing rising demand for sustainability-related products against a backdrop of decarbonization and rising energy prices

Changes in external

Strengthening product lines that capture current trends

environment

Creating more efficient homes

Expanding environmentally

(Examples)

(responding to

friendly products

• Acceleration of environmental

energy-saving needs)

(responding to new needs)

issues

Prevent heat loss from openings Energy/water saving and new bathing experiences

• Energy crisis/higher energy costs

Creation of new demand

SHIN-ON

• Strengthening environment-

High-performance windows

related measures and public-

private partnerships in Japan

Promote solar power

Utilize plastics that are

Body Hug Shower

(reducing energy consumption in the

generation at home

difficult to recycle

Reduce the use of

household sector) (1)

• Changes in consumption behavior

natural resources

- Growing interest in

environmental issues

- Increased interest in ethical

consumption

Tatetoku series(2)

revia

Cradle to Cradle®

(1) LIXIL participates in the public-private partnership council "A national movement to create new and prosperous lifestyles that leads to decarbonization"

(launched in October 25, 2022)7 October 28, 2022 Cabinet decisionhttps://www5.cao.go.jp/keizai1/keizaitaisaku/2022-2/20221028_taisaku_gaiyo.pdf(Japanese only)

(2) Designed for consumers that uses designated LIXIL products, the service allows consumers to install a solar power generation at a reduced initial cost

PERFORMANCE HIGHLIGHTS

Revenue increased but profits decreased year-on-year

  • Revenue: JPY732.7 billion, up 5% year-on-year
    • Q2 (3 months) YoY: +2% in Japan and +14% in international markets (-0.5% excluding foreign exchange impact)
    • H1 (6 months) YoY: +1% in Japan and +13% in international markets (+0.4% excluding foreign exchange impact)
  • Core earnings: JPY6.2 billion, down JPY31.1 billion year-on-year
    • Q2 (3 months) YoY: -JPY9.5 billion in Japan, -JPY6.0 billion in international markets and +JPY0.5 billion for consolidation adjustment/other factors
    • H1 (6 months) YoY: -JPY16.8 billion in Japan, -JPY15.9 billion in international markets and +JPY1.6 billion for consolidation adjustment/other factors
  • Profit for the quarter(1): JPY3.7 billion, down JPY22.0 billion year-on-year
    • Decreased primarily due to decrease in core earnings

(1) Profit for the quarter = Profit for the quarter attributable to owners of the parent

8

H1 FYE2023 CONSOLIDATED BUSINESS RESULTS

H1 (6 months)

Q2 (3 months)

FYE2022

FYE2023

Increase/

%

FYE2023

Increase/

%

JPY billion

decrease

decrease

(YoY)

(YoY)

Revenue

696.2

732.7

+36.4

+5.2%

372.4

+21.9

+6.3%

Gross profit

244.2

229.3

-14.9

-6.1%

112.9

-6.3

-5.3%

(%)

35.1%

31.3%

-3.8pp

-

30.3%

-3.7pp

-

SG&A

206.9

223.1

+16.2

+7.8%

113.7

+8.7

+8.3%

Core earnings (CE)(1)

37.3

6.2

-31.1

-83.5%

-0.8

-15.0

-

(%)

5.4%

0.8%

-4.5pp

-

-0.2%

-

-

Profit for the quarter including

25.7

3.7

-22.0

-85.6%

-2.0

-10.9

-

Discontinued Operations(2)

EPS (JPY)

88.46

12.85

-75.61

-85.5%

-7.04

-37.59

-

EBITDA(3)

77.4

46.4

-31.0

-40.0%

19.5

-14.8

-43.2%

(%)

11.1%

6.3%

-4.8pp

-

5.2%

-4.6pp

-

  • CE margin: Declined by 4.5pp (Gross profit margin declined by 3.8pp, SG&A ratio declined by 0.7pp)
  • Gross profit margin and core earnings margin: Declined as fixed cost reductions were outweighed by cost increases in H1 ahead of price optimizations scheduled for Q3
  • SG&A expenses: Increased by JPY16.2billion YoY (in Japan JPY3.6 billion increase, International JPY6.0 billion increase, forex effect JPY6.6 billion increase) due to expanded sales activities and higher logistics costs. SG&A ratio declined by 0.7pp mainly due to higher personnel expenses in the international business and logistics costs

(1)

Equivalent to "Operating profit" of JGAAP

9

(2)

Profit for the quarter attributable to owners of the parent

(3)

EBITDA=Core earnings + Depreciation + Amortization

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LIXIL Group Corporation published this content on 31 October 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 31 October 2022 06:38:54 UTC.