Key Points

• The amount of orders received in the second quarter of the term ending March 2022 was 41,667 million yen, up 12.6% year on year. Despite the postponement of investments in equipment caused by COVID-19, etc., it grew due to the contribution made by affiliated companies, etc. Sales stood at 40,452 million yen, up 19.9% year on year. While the Power Plant Business and Industrial Machinery Business were unchanged from the previous term, Seika Daiya Engine, which became a consolidated subsidiary in the previous term, contributed to the Chemicals and Energy Plant Business, and the rise in selling prices of textile materials in China contributed to the Global Business, increasing operating income to 1,304 million yen, up 36.8% year on year. Although additional expenses were incurred through some of the transactions with China in the Industrial Machinery Business, they were offset by the increase in sales in the Chemicals and Energy Plant Business and the Global Business. Net income increased 31.6% year on year to 698 million yen. Order backlog also grew 8.5% year on year to 62,141 million yen.

• Regarding the earnings forecast for the term ending March 2022, the initial estimates remain unchanged, with sales projected to be 88.5 billion yen, operating income to rise 10.4% year on year to 2,850 million yen and net income to drop 28.4% year on year to 1,950 million yen. With regard to sales, the “Accounting Standard for Revenue Recognition” was adopted this term, which means that only commission fees of agency transactions rather than the total amount will be recorded. The conventional sales will be indicated as trade volume in the new standard. Taking into account the downturn risks brought about by the COVID-19 pandemic, the trade volume is projected to decline 4.6% year on year to 130 billion yen in this term. Net income is expected to drop as the temporary factors present in the previous term (decrease in tax expenses such as the corporate income tax) no longer exist. The company plans to pay a dividend of 55 yen/share, up 10 yen/share from the previous term. The expected payout ratio is 33.8%.

• It is noteworthy whether they can put each marketing project (renewable energy, life science, and mobility) into practice. The key to achieving the goals is the growth of revenues from relatively healthy affiliated companies in addition to the maintenance of revenues from the Power Plant Business and the Chemicals and Energy Plant Business and the expansion of revenues from the Industrial Machinery Business. In the medium/long term, the actualization of power generation from hydrogen in the energy business (the Power Plant Business and the Chemicals and Energy Plant Business), which is the revenue base of the company, for realizing a decarbonized society may become a new revenue source. Accordingly, their future performance is noteworthy.