Explanatory Materials for
Financial Results
Six Months Ended September 30, 2023
IWATSU ELECTRIC CO., LTD. | November 10, 2023

目次

1Financial Highlights/Progress of Medium-term Management Plan

2

Results for the Six Months Ended September 30, 2023

3

Forecast for the Fiscal Year Ending March 31, 2024

© 2023 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

2

1

Financial
Highlights/Progress of
Medium-termManagement PlanFinancial Highlights for the Six Months Ended September 30, 2023

Revenue

Operating profit

Profit attributable toowners of parent

ROE¥10.02 billion¥(0.63) billion¥0.30 billion

1.2%

YoY

-8.5% [¥(0.93) billion]

External
Environment

YoY–% [¥(0.13) billion]

YoY–% [+¥0.77 billion]

YoY

+3.1%

The outlook is uncertain because high prices due to fuel prices remaining high and the depreciation of the yen are affecting consumption.
On the other hand, the normalization of economic activities has been advanced as the COVID-19 pandemic transitioned to the fifth
category.
Despite improvement in the components supply environment, difficulty in procuring certain parts continued.
Business communication
systems

Major Impacts
on Business

Printing systems

The domestic communication equipment market remained sagging, affecting inventory adjustment of distributors, deferred capital
investment, etc.
The overall printing market experienced a shrinking trend due to advancement of paperless working practices because ofenvironment conservation and an increased awareness of cost reduction.
Shift to businesses focusing on products that apply chemical technology cultivated in the printing business.

Test and measurement
equipment

Property leasing

Orders for power electronics-related products increased due to rising environmental awareness.
Demand for electronic components, which temporarily increased in the previous fiscal year, was normalized due to improvement in
the supply chain.
Although the office vacancy rate was on the rise, rental property held was operated steadily.
Rental residential apartments obtained by an anonymous association that is a consolidated subsidiary were also operated smoothly.

© 2023 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

4

Progress of Medium-term Management Plan

Tier 1

Thorough reduction of fixed costs

There is no major problem in both tier 1 and tier 2 at the moment. However, since a delay has arisen in somemeasures, each will take countermeasures and work toward the achievement of the plan for the final fiscal year.
Theme

Cost reduction of
Kugayama
Headquarters

Contents

Kugayama Headquarters, etc.
 Improved efficiency of indirect operations(Review of operations through the introductionof ERP, etc.)

multiple locations
 Improvement of product organization andpurchasing methods
 Improved production efficiency through factory
DX, etc.
 Reduction of obsolete parts support

Improved efficiency ofdevelopment

 Commonization of multiple business phonearchitectures, etc.
 Reduction of outsourcing costs by increasing

inhouse production

Review of businessprofitability© 2023 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

The amount of operating profit
improvement for the fiscal year
ending March 31, 2024 (Plan) Reduction of property maintenance costs for Improved efficiency of production system with

Improved efficiency of
production

State of progress

 Review of printing business operations

The new ERP started operation in May 2023
to promote improvement in efficiency ofoperations. It is on track compared to the plan.

¥0 million

Completed transfer of all shares of Iwatsu(Malaysia) (a manufacturing subsidiary) in
September 2023. Although the production ofbusiness communication systems was
consolidated into domestic factories and theimprovement in production efficiency is being
promoted, it is somewhat behind the plan.

¥70 million

Measures are mostly progressing to plan, andthe examination of a common architecture ofbusiness phones was finished. It will be
adopted for development in next fiscal year.
We are also promoting a common
development environment for businessphones.

¥0 million

Iwatsu Chemical Cross is expanding
businesses utilizing chemical technology inaddition to the existing printing business.
Commercialization takes time, but operationalchanges are progressing steadily.

¥0 million
5Progress of Medium-term Management Plan

Theme

Tier 2

Promote growth strategies through business selection and concentration
and alliances

Contents

 Accelerate overseas expansion (China, Europe,

Growth of test andmeasurement equipment

America) with a focus on instrumentation in the
power electronics-related field Expand lineup of power electronics-related

products

 Strengthen subscription business

Growth of business
communication systems• Strengthen the business of promoting DX in

the office• Shift to cloud-based services for contact centersystems Strengthen contract production business Initiatives in advanced technologies such as 5G-

related technologies, energy, healthcare,materials, etc.

New area development

 Expansion of IoT business through integration of

information and communication technology andelectronic measurement technology
 Create new markets by applying chemical

technology cultivated in the printing business© 2023 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

State of progress Decided to take a stake in a German probe
maker, a collaborator with which theCompany already established a joint venture.
While we are accelerating expansion of salesin Europe, entry into the North American
market, and promotion of joint development,
among others, based on this strengthened
relationship, there is a slight delay in the
progress compared to the plan.
 The shift to cloud-based services remains
steady through the release of in-house Cloud
Communication Platform Blue Commpaas in
April 2023, etc.
 As part of strengthening of the contract
production business, we are pushing forwardwith ODM production entrusted with by new
outsourcing contractors.

The amount of operating profit
improvement for the fiscal year
ending March 31, 2024 (Plan)¥190 million¥0 million

 Local 5G-related technologies are being tested anddemonstrated within the Group.
 Jointly researching with The University of ElectroCommunications cutting-edge material technology (radio
wave reflector using transparent conductive materials).
 For the application of chemical technologies in areas suchas electric printing, we are considering collaboration andcommercialization. Commercialization requires time, but it
is progressing steadily.
6Topics ①
Capital participation in a German probe maker
Accelerate overseas expansion with a focus on the power electronics-related field in the test andmeasurement equipment, which is expected to grow
The Company decided to take a stake in Heimann Industries AG (hereinafter referred to as Heimann), a German probe maker.
Heimann is a probe maker headquartered in Germany and also has a business location in the US. The Company and the Heimann Group have transactions inimport and sale of the said company’s products and export and sale of the Company’s products for Europe for 15 years or more, and have built acollaborative relationship through the joint establishment of the sales company “IWATSU TEST INSTRUMENTS EUROPE GmbH” in 2020 and other means.
We will strengthen this relationship through the capital participation, and strive to accelerate sales expansion of our measurement products in Europe andthe US with Heimann’s bases as a stepping stone, and furthermore improve competitiveness of our products by stably securing high-performance probes of
Heimann.

■Overview of Heimann■Major collaborative measures
1. Strengthening of product appeal of electronic measurement
equipment for the power electronics market
2. Strengthen of sales capabilities and development
capabilities in Europe and the US
3. Market cultivation in new areas other than Europe and theUS
4. Strengthening of the ability to promote businesses throughmutual marketing support, sharing of technology, etc.

Heimann-made probe© 2023 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

Example of connection
between a Heimann-madeprobe and an oscilloscope
made by the Company

Headquarters
Address

Bad Soden am Taunus, Hessen, Germany

Representative

Mark Heimann

EstablishedEstablished in 2008 as the holding company of PMK(PMK, which is an operating company, was establishedin 1991)

Details ofBusiness

Development, manufacturing and sale of probes foroscilloscopes(its own products are sold under PMK brand)

CapitalEUR 100,000
7Topics ②
Continue to focus on “pursuing increased corporate value and sustainable growth through the promotionof ESG management,” one of basic policies of the medium-term management plan
Status of measures to promote ESG management

September 2023

Participated in the TNFD (Taskforce on Nature-related Financial
Disclosures) Forum

Going forward, the Company will assess risks and opportunities that its business activities
give nature capital and biodiversity, and work on proper information disclosure of them

Published “Sustainability Report FY2023”
September 2023

Continuing from FY2022, we will advance the disclosure of sustainability policies andinitiatives from an ESG perspective and report on ESG in a unified manner.

Obtained SBT certification by SBTi (Science Based Targets
October 2023

initiative)
Certified since the Group’s greenhouse gas emission reduction targets are regarded as“science-based reduction targets to limit the increase in average global temperature to
1.5°C above pre-industrial levels, as set in the Paris Agreement.”© 2023 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

8

2

Results for the Six
Months Ended
September 30, 2023

Results for the Six Months Ended September 30, 2023
Given effects of exclusion of two consolidated subsidiaries from consolidation, revenue was almost at the level of the company plan, despite a year-on-year decrease in revenue Operating and ordinary profits decreased year on year and compared to company plan due to a rise in valuation loss on raw materials, etc. of which delivery increased as a result of
improvement in the components supply environment Profit attributable to owners of parent increased year on year and compared to company plan due to the recording of gain on sale of shares of subsidiaries and associates

Results for thesix months ended
September 30,
2022

Results for the six
months ended
September 30,
2023

Revenue

109.5

100.2

Operating profit

(5.0)

(6.3)

(1.3)

Ordinary profit

(4.6)

(6.2)

(1.6)

Profit attributableto owners ofparent

(4.6)

3.0

+7.7

(1.9%)

1.2%

+3.1%

(¥100 million)

ROE

Year-on-year(9.3)[(8.5%)]

[–]

[–]

[–]

Company plan forthe six months
ended September
30, 2023*

105.4

Contrast with plan

(5.3)[(5.0%)]

(4.3)

(2.0)

(3.6)

(2.7)

(3.3)

+6.3

(1.4%)

+2.6%

[–]

[–]

[–]

* Planned figures for the six months ended September 30, 2023 have not been disclosed at the beginning of the fiscal year.
* Announced on May 15, 2023
© 2023 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

10Analysis of Change in Operating Profit from Previous Term(¥100 million)

4.0

Main causes of change

2.0 Increase in loss frominventory valuation:-¥90 million

0.0

Increase in valuation loss on raw
materials, etc. delivered as a result of
overall improvement in thecomponents supply environment

-2.0
-4.0
-6.0

(5.0)

(0.9)

(6.3)

-8.0
-10.0

(3.5)

Personnel costs and expenses
decreased by ¥140 million and ¥10
million, respectively, due topromotion of improved efficiency

(0.1)

-12.0
Business
Six months ended Increase in loss
from inventory communication
September 30,
valuationsystems
2022 (Actual)

Printing
systems

Test andmeasurement
equipment

Changes in segment
gross profit© 2023 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

 Decrease in selling, generaland administrative expenses:+¥150 million

Property
leasing

Decrease in selling,
general andadministrative
expenses.

Six months ended
September 30,
2023 (Actual) Changes in segment grossprofit (total):-¥190 million
Reference: “Segment Overview” section11Analysis of Change in Operating Profit Compared to Company Plan(¥100 million)

Main causes of change

4.0 Increase in loss frominventory valuation:-¥340 million

2.0
0.0

Valuation loss on raw materials, etc.
delivered as a result of overall
improvement in the components
supply environment increased
significantly

-2.0
-4.0
-6.0

(4.3)
(6.3)

-8.0
(3.4)

Expenses and personnel costs
decreased by ¥150 million and ¥150
million, respectively, due topromotion of improved efficiency

-10.0
(2.7)

-12.0
Six months ended
September 30,
2023(Company Plan)

Business
Increase in loss
from inventory communication
systems
valuation

Printing
systems

Test andmeasurement
equipment

Changes in segment
gross profit© 2023 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

 Decrease in selling, generaland administrative expenses:+¥300 million

Property Decrease in selling,
general andleasingadministrative
expensesSix months ended
September 30,
2023 (Actual) Changes in segment grossprofit (total):-¥170 million
Reference: “Segment Overview” section

12

Segment Overview: Business Communication Systems

Main causes of change● Revenue, Segment Profit/Loss(¥100 million)(¥100 million)

100

Reference

85.3
80

80.6

11.7
7.7

60

40

7.7

71.9

11.9

5.9
5.5

6.7

8.3

8

6.9

6
Segment profit/loss (right axis)

4.1

3.7

4
Revenue (left axis)

58.2

52.2

55.1

20

Other

2

0.2
0

Six months ended
September 30, 2023

© 2023 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

Contract production
Cloud solution0

Six months ended
September 30, 2022

 Revenue10

Six months ended
September 30, 2023
(Company Plan)

Business phone

Revenue was ¥7,190 million, adecrease of 15.7% year on year due
to a decrease in sales of businessphones and in production fromcontract production by
manufacturing subsidiaries as aresult of extension of work period of
projects and difficulty in procuring
specific parts, etc., in addition to
exclusion of two consolidated
subsidiaries from consolidation
through share transfer while demandfor cloud services increased Segment profit/loss
Segment profit was ¥20 million, adecrease of 93.3% year on year,
due to a decline in revenue and anincrease in valuation loss on raw
materials, etc. of which delivery
grew as a result of improvement in
the components supply environment

13

Segment Overview: Printing Systems● Revenue, Segment Profit/Loss(¥100 million)(¥100 million)

9.0

10

7.3

Reference

Main causes of change

27.0 Revenue
1

0.1

Segment profit/loss (right axis)00
Six months ended
September 30, 2022

Six months
ended
September 30, 2023

-1.2

-10

© 2023 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

Six months ended
September 30, 2023
(Company Plan)-0.8

 Segment profit/loss
Revenue (left axis)-1

Revenue was ¥900 million, an
increase of 22.1% year on year,
mainly due to a rise in domestic
consumables demand before the pricerevision from September of this year

Segment profit was ¥10 million, an
increase of ¥130 million year on year,
due to a rise in revenue and a decline
in valuation loss in the current fiscal
term as a result of implementing theliquidation of products in the previous
fiscal term in association with businessrestructuring-2

14

Segment Overview: Test and Measurement Equipment● Revenue, Segment Profit/Loss(¥100 million)(¥100 million)

20

Reference

15.3
14.2

Main causes of change

2 Revenue

15.0

Revenue was ¥1,530 million, an
increase of 8.1% year on year, mainly
due to a growth in demand for powerelectronics-related products against a
backdrop of rising environmental
awareness

6.0
1.0

6.4

7.0
10

1

9.3

Segment profit/loss (right axis)

8.6

0.3

Revenue (left axis)

0.4

7.4
0

0

Six months ended
September 30, 2022

Six months ended
September 30, 2023

© 2023 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

Six months ended
September 30, 2023
(Company Plan)

Electronic components
Test and measurement
equipment

 Segment profit/loss
Segment profit was ¥100 million, an
increase of 254.3% year on year, due
to a rise in revenue from sales ofpower electronics-related products
whose profit ratio is high15

Segment Overview: Property Leasing● Revenue, Segment Profit/Loss(¥100 million)(¥100 million)

5

Reference

Main causes of change

24.0 Revenue

4

Revenue was ¥400 million, an
increase of 49.1% year on year, due tostart of operation of rental apartments
at an anonymous association that is a
consolidated subsidiary, and theimproved occupancy ratio of rental
offices

1.2
3

2.9

2.7

1
2

0.7

1.0

Segment profit/loss (right axis)

1

Revenue (left axis)00

Six months ended
September 30, 2022

Six months ended
September 30, 2023

© 2023 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

Six months ended
September 30, 2023
(Company Plan) Segment profit/loss
Segment profit was ¥120 million, an
increase of 65.0% year on year, due tothe improved occupancy ratio of rental
offices and the new operation of rental
apartments

16Consolidated Balance Sheet(¥100 million)

As of March 31, 2023

As of September 30,
2023

Change fromprevious year

Main causes of change Current assets: -¥990 million
Accounts receivable-trade: -1,080
Cash and deposits: -200
Raw materials and supplies: -100
Merchandise and finished goods: +80
Work in process: +80
Other: +210 etc.

Current assets

168.7

158.8

(9.9)

Non-current
assets

184.4

269.7

+85.4

353.0

428.5

+75.5

 Non-current assets: +¥8,540 million

41.3

37.1

(4.2)

 Current liabilities: -¥420 million

Total assets
Current
liabilities

Land: +5,090
Buildings and structures: +3,180 etc.

70.2

131.9

+61.7

Notes and accounts payable-trade: -130
Provision for bonuses: -70
Other: -220 etc.

Total liabilities

111.5

169.0

+57.5

 Non-current liabilities: +¥6,170 million
Long-term borrowings: +5,990
Retirement benefit liability: +50 etc.

Net assets

241.5

259.5

+18.0

Total liabilities andnet assets

353.0

428.5

+75.5

Non-current
liabilities© 2023 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

 Net assets: +¥1,800 million
Non-controlling interests: +1,360
Retained earnings: +300
Valuation difference on available-for-salesecurities: +280 etc.

17Consolidated Statement of Cash Flows
Cash and cash equivalents were ¥4.47 billion, down ¥0.20 billion from the end of the previous fiscal year.

(¥100 million)

Results for the six
months ended
September 30, 2022

Results for the six
months ended
September 30, 2023

Year-on-year

Cash flows fromoperating activities

(0.5)

+7.6

+8.1

Cash flows frominvesting activities(1.8)(83.5)(81.7)

Free cash flows(2.3)(75.9)(73.6)Cash flows fromfinancing activities

(2.5)

+73.6

+76.2

Cash and cash
equivalents© 2023 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

53.2

44.7

(8.6)

Major breakdown items
 Cash flows from operating
activities: +¥760 million
Profit before income taxes: +260
Depreciation: +560
Loss (gain) on sale of shares of subsidiaries
and associates: -880
Increase in inventories: -610
Other, net: +1,340 etc.

 Cash flows from investment
activities: -¥8,350 million
Purchase of property, plant and equipment:-8,920
Proceeds from (payments for) sale ofshares of subsidiaries resulting in change inscope of consolidation: +590 etc.

 Cash flows from financing
activities: +¥7,360 million
Proceeds from long-term borrowings:+6,000
Proceeds from share issuance to noncontrolling shareholders: +1,370 etc.

18

3Forecast for the
Fiscal Year Ending
March 31, 2024

Forecast for the Fiscal Year Ending March 31, 2024
The forecast was revised in light of lack and postponement of possible projects, deterioration of the profit ratio stemming from arise in outsourced work and inventory adjustment of distributors while the domestic communication equipment market was sagging
mainly for business phones, in addition to the exclusion of a subsidiary (Iwatsu (Malaysia) Sdn. Bhd.) from consolidation throughshare transfer being a cause of decreasing revenue.

(¥100 million)

Previous forecast
for the fiscal year
ending March 31,
2024*

Revised forecast
for the fiscal year
ending March 31,
2024

221.0

210.0

5.0

0.0

Revenue
Operating profit
Ordinary profit

6.0

Profit attributableto owners ofparent

13.0

ROE

5.4%
25.0 yen

Dividend per share

0.0

8.0

Change fromprevious forecast(%)(11.0)[(5.0%)]

(5.0)
[–]

Results for the
fiscal year ended
March 31, 2023

229.0
(9.8)

(6.0)
[–]

(9.1)

(5.0)

Change from results
for the previous
fiscal year

(19.0)[(8.3%)]

+9.8
[–]

+9.1
[–]

+19.8

[(38.5%)](11.8)

3.3%(2.1%)(4.8%)+8.1%

25.0 yen

0.0 yen

0.0 yen+25.0 yen[–]

* Announced on May 23, 2023
© 2023 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

20

Analysis of Change in Operating Profit Compared to the Previous Forecast(¥100 million)

Main causes of change Increase in loss frominventory valuation:-¥100 million
(1.0)

(3.9)

(0.0)

(0.6)

-

Forecast for FY Increase in loss
ending March 2024 from inventory
valuation

Business
communication
systems

Printing systems

Test andmeasurement
equipment

Property
leasing

Increase in selling, Revised forecast for
general and
FY ending Marchadministrative2024
expenses, etc.

Estimated amount of valuation loss
on inventories which is expected toincrease at this time due to overall
improvement in the components
supply environment. However,measures to reduce inventories andvaluation loss are being promoted
through improvement of purchasing
methods and other means.

 Changes in segment grossprofit (total):-¥400 million
Reference: “By Segment” section

Changes in segment
gross profit© 2023 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

21

Forecast for the Fiscal Year Ending March 31, 2024: By Segment
Previous forecast for Revised forecast for
the fiscal year
the fiscal year
ending March 31,
ending March 31,(¥100 million)
2024
2024
Business
communication
systems
Printing
systems
Test andmeasurement
equipment
Property
leasing

Adjustment
amountTotal

Change fromprevious forecast

Revenue

164.4

152.5

(11.9)

Segment
profit/loss

16.2

10.7

(5.5)

Revenue

15.4

15.7

+0.3

Segment
profit/loss

(0.5)

(0.8)

(0.3)

Revenue

33.3

33.9

+0.6

4.2

4.6

+0.4

Revenue

7.9

7.9

+0.0

Segment
profit/loss

2.1

2.5

+0.4

-

-

-

Selling,
general andadministrative
expenses(17.0)(17.0)(0.0)

Revenue

221.0

210.0

(11.0)

5.0

0.0

(5.0)

© 2023 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

Decreased revenue and profit are expected in light offluctuations in demand for business phones and effects
of project delays for new contract production in addition
to effects of the transfer of shares of a subsidiary(Iwatsu (Malaysia) Sdn. Bhd.).

Mostly progressing to the previous forecast

Segment
profit/loss

OperatingprofitMain causes of change

-

-

22

Forecasts of Capital Investment/R&D Expenses/Depreciation
No change from the initial forecast.

● Capital Investment(¥100 million)● R&D Expenses

Tangible
Intangible, others

10(¥100 million)

0.3

16.0
15

5.7
5

1.1

Test and measurement equipment
Printing systems
Business communication systems

20

7.1

3.8
1.5

3.7

10

0.3

● Depreciation

4.7

15

16.5
15.0
4.2
3.9

10.8

10.7

FY ended
March 2022

FY ended
March 2023

11.6

10

1.2

1.2

6.8
5

(¥100 million)

10.7

9.8

FY ended
March 2022

FY ended
March 2023

11.2

5

3.4
0
FY ended
March 2022

FY ended
March 2023

FY endingMarch 2024
(forecast)Fiscal year ended March 31, 2023
 Decrease in tangible mainly due to lower

capital investment
 Decrease in intangible, others due to no
development of main products

00
FY endingMarch 2024
(forecast)

FY endingMarch 2024
(forecast)Fiscal year ended March 31, 2023

Fiscal year ended March 31, 2023

 Results to decrease ¥100 million compared Generally in line with the previous fiscal year

to the previous fiscal year

Fiscal year ending March 31, 2024

Fiscal year ending March 31, 2024

Fiscal year ending March 31, 2024

 Tangible, intangible and others forecast to Forecast to increase ¥150 million compared Forecast to increase ¥90 million compared toincrease ¥350 million compared to theprevious fiscal year
© 2023 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

to the previous fiscal year

the previous fiscal year due to increased
capital investment
23

Caution Regarding Forward-Looking Information
Statements in this document regarding future plans, forecasts, strategies and other future information of the Company and the Group are basedon certain assumptions that the Company determines to be reasonable based on information available at the time this document was prepared,
and actual results may differ significantly from these assumptions. These statements regarding forward-looking information involve a variety ofrisks and uncertainties, the principal ones are listed below, but this list is not exhaustive.
 Trends at major customers

 Litigation and other legal proceedings

 Bias towards second-half performance Natural disasters, etc.

 Intensifying market competition with competitors  Information leaks
 Deterioration in business performance ofbusiness partners, etc.

 Spread of infectious disease

The statements contained herein do not constitute a public offering of securities.

 Procurement risks (e.g., supply shortages due torapid changes in international conditions andincreasing procurement prices) Economic trends