Bull s
JK Holdings
Quarterly ReportInternationalJanuary,2024
CONTENTS

73No.

P1 JK Holdings Overview of 2Q Business Resultsfor Year Ending March 2024
P2 Business Prospect for January-March 2024
P3 Market Outlook of Plywood
Japan Kenzai Develops 3- and 4-story Timber
Building System

P4 Timberamʼs Community Contribution Activities
Production of Wooden Cover for JKHD Group
Employee Planner Book

JK Holdings Overview of 2Q BusinessResults for Year Ending March 2024
The Japanese economy in the second quarter of the year
ending March 2024 continued to show gradual recovery associoeconomic activities normalized in the post covid.
Meanwhile, we are still facing soaring prices of materials
and energy imposed by geopolitical risks, coupled with thedepreciation of the yen. Currently, situations are expected
to remain uncertain with developments such as the deterioration of the real estate market in China and the escalationof tensions in the Middle East.
In the housing industry to which our group belongs, theprice hikes for building materials and housing equipment,
due to the wild swings in wood prices caused by the “woodcrisis” and the soaring prices of materials and energy, arefinally slowing down. However, housing prices remain highamid sluggish growth in real wages. As a result, the overall
number of housing starts declined by 6.2%, as well as
owner-occupied houses, which are our group’s forte, decreased by 10.2%, showing a continuous reduction respectively.
Under these circumstances, we hosted the Japan Kenzai
Fair in August on the same scale as before the covid pandemic to stimulate our sales activities. At the same time, wehave been strengthening sales activities with an eye on thecurrent as well as future environments of the industry.
While we work on optimizing inventory levels, we also
promote proposals for change of products with consideration of factors such as price and mobility, as well as ofhigh value-added products for “Building homes that retain
their asset value”. In addition, in preparation for the “Logistics 2024 Issue,” we have been steadily improving ourorganizational structure and systemic measures related tologistics.
As a result, our financial performance for the second quarter was as follows.
Net sales decreased by 6.2% compared to a year ago,
reaching 191.165 billion yen, which is still higher than theKeiichiro Aoki

President
JK Holdings Co., Ltd.

level before the “wood crisis”, although it did not surpassthe result in the same term of the previous year whichsignificantly broke the past records. As for profits, while theretail business of general building materials secured asmuch profits as the previous term to remain firm, the plywood manufacturing and wood processing business decreased significantly. As a whole, there was also a sharp
decline in profits. Specifically, operating income was 4.133billion yen (down 40.0% year-on-year), and ordinary
income was 4.393 billion yen (down 40.4%). Net income
attributable to the shareholders of the parent company was
2.46 billion yen (down 47.2%). However, compared to theplan at the beginning of the period, which incorporated
various factors after the “ wood crisis”, the sales werealmost in line with the plan and the profits exceeded thetarget.
Thus, our second-quarter results were challenging compared to a year ago, against a backdrop of declining housing demand. However, the gross profit margin was higher
than we targeted, resulting in the profits exceeding thetarget at the beginning of the fiscal year. As the futurebusiness environment remains uncertain, we must be prepared for the continuation of difficult conditions. However,
we are currently able to sustain the momentum gained in
the first half, particularly in the second quarter, as we moveinto the second half. We are committed to sustaining thismomentum throughout the third and fourth quarters, leading to results that exceed our initial plan.

All the articles contain information as of December 2023

Bulls International No.73

2Survey

since the bottom marked at the AprilJune 2023 survey. Although there aredifferences in extent from area to area,
the overall picture is beginning to lookbrighter. However, the increases inhome prices and energy costs have notbeen restrained, leaving the housing
market in a difficult situation, especially for single-family houses. In November, the Cabinet approved a new economic stimulus package, which
includes support for the acquisition andremodeling of energy-efficient homes.
The implementation of the Residential
Energy Saving Campaign 2024 isscheduled as well. We would like tomake effective use of such subsidy
policies to open up the way for thebusiness.

Business Prospect for
January-March 2024
Housing starts for January-September
2023 totaled 617,030 units, 95.9% of
the year-on-year result. The number ofhousing starts is on the same level as
when the lowest marked at 815,340
units in 2020. The number of owner-occupied homes, in particular, has
dropped nearly 10% following lastyear, and might be the smallest annual
figure since the statistics began.

〈Demand Forecast byBuilders and Distributors〉Both small builders (contractors andother building companies) and distributors predicted a smaller negative index
compared to the previous quarter’ssurvey, showing a negative index of
18.3 points and 23.3 points respectively. The results have been improving

Manufacturers of plywood and woodenbuilding materials reduced a forecasted“decrease.” The plywood sector, inparticular, indicated a forecasted “increase” by more than 20points higher than theprevious survey. On theother hand, the housing-24.0
equipment sector, which
-32.1
-18.3
had been seeing a sales
forecast for “increase”
exceeding “decrease” formore than a year, strength-

Demand Forecast by Builders
100-10

-10.0

1.5

-16.6

-9.0

-20

-15.0

-30

-32.6

-40

〈Sales Forecast by
Leading Manufacturers〉

-50
-60
-70

-80 Jan-Mar.
2022

Jul-Sep.
2022

Jan-Mar.
2023

Jul-Sep.
2023

0-13.060- 20.5- 23.3-15.6 -19.1-30

Many businesses seem to be preparing
for the revision of laws related to theindustry in the next fiscal year, butmore than 20% of the respondents
answered that they “will not change,remaining below the energy conservation standards” or “have no concreteplans to take measures”. As we will
face the “2024 issues” in logistics andvarious other areas, the housing sector
is expected to undergo additionalchanges in the environment, encompassing enhancements in the working
environment, operational efficiency,and productivity.

65-1.3-20

Regarding government subsidies,“Home Living Support Project for
Households with Children and Young
Couples (for remodeling)” was theoption with the highest number of
responses in both the “useful for thebusiness” and “not useful” categories.
While the application requirements
were relatively lenient and a wide rangeof households was eligible, the divided
evaluation is presumably due to concerns that the subsidy cap would bereached early and to the respondents’
status of orders received for remodelingprojects.

Dealing Volume of Lumber

Demand Forecast by Distributors-10〈Various Surveys〉

The forecast survey for January to March, 2024 is based on the totaled data
gathered from 3,000 client companies in Japan through the internet, which
took place from late-October to mid-November, 2023.

Jan-Mar.
2024

Point0=business result in April-June,1992

10

ened a “decrease” forecast in thissurvey.

- 37.9-40

55- 26.7-50

50- 36.9Laminated lumber
Solid lumber
Precut lumber
LVL

45-60

40

-70

-80 Jan-Mar.
2022

Jul-Sep.
2022

Jan-Mar.
2023

Jul-Sep.
2023

35 Jan-Mar.

Jan-Mar.
2024

2022

Jul-Sep.
2022

Jan-Mar.
2023

Jul-Sep.
2023

Jan-Mar.
2024

Point100=all responses expect increase

Point0=business result in April-June,1992

Sales Forecast by Major Supplying Manufacturers（Jan-Mar. 2024）
increase

Plywood（11 firms）
Wooden Building Materials（18 firms）
Ceramic/Heat Insulation（22 firms）
Housing Equipment（23 firms）
averageover15％14 ～ 10％

below10％

18.2

0.0

27.3

0.0

0.0

0.0

level-offdecrease
below10％10 ～ 14％

over15％

9.0

36.4

9.1

0.0

22.2

50.0

22.2

5.6

0.0

0.0

13.6

36.4

50.0

0.0

0.0

4.3

4.3

4.3

56.7

30.4

0.0

0.0

5.6

1.1

16.9

38.0

34.8

3.7

0.0

Bulls International No.73

Trend

the local bottom-line sentiment andexchange rates would have affectedmarket prices to present a reversal, but
in reality, there has only been a slightincrease in prices for items in short
supply. It cannot be asserted withcertainty that a substantial passing onof the yen's depreciation impact to themarket prices is progressing. Thisdevelopment suggests a weakness indemand. Given the current market
conditions, it is inevitable that orders to
the producing regions will be limited tothe bare essentials. For the time being,
it is highly likely that we will continue
to see small port arrivals as the market
adopts a wait-and-see approach.

〈Trend of Imported Plywood〉

Market Outlookof Plywood〈Trend of Japanese Plywood〉
Japan’s production of softwood plywood in October 2023 was 227,074
cubic meters (102.4% of the samemonth in the previous year), and theshipment of the item was 228,860 cubicmeters (108.7%). The inventory was
162,784 cubic meters (97.9%).
Japanese manufacturers are focusing on
producing only enough quantity they
can sell, resulting in no increase in theamount of inventory on hand. However,
the market prices have begun to decline
again, triggered by an article in anindustrial paper about price cuts. The
market prices, which had been thought
to have completely bottomed out, felleven further, leading consumers tobelieve that the prices will still become
lower. They have shifted to an extreme
mode of purchases for current demandout of a sense of caution about thefuture. Unless a strong message isissued by manufacturers, it will taketime for prices to bottom out, and arecovery in shipments is a long wayoff.

Japan’s import of plywood in October
2023 was 173,626 cubic meters (88.4%of the same month in the previousyear), decreasing by 6.6% from
185,928 cubic meters in the previousmonth. By country of origin, 46,178
cubic meters (116.8%) came fromMalaysia, 57,267 cubic meters (74.9%)
from Indonesia, and 41,719 cubicmeters (82.3%) from China.
Due to the decrease in port arrivals,
some items have only short inventory,
showing no sense of oversupply at all.
Meanwhile, there is also no sign oftightness in the market, either. Usually,

Wholesalers’ Prices of Plywood in Tokyo
4,500
4,000

yen/sheet

Structural Use 12mm JAS F4☆
Concrete Form 12mm JASSoftwood Plywood for Structural Use 12mm JAS F4☆
Softwood Plywood for Structural Use Neda-non 24mmwith tongue JAS F4☆

3,500
3,000
2,500
2,000
1,500
1,000

Topics 1Jan.
Feb.
Mar.
Apr.
MayJun.
2023 2023 2023 2023 2023 2023

Jul.
Aug.
Sep.
Oct.
Nov.
Dec.
2023 2023 2023 2023 2023 2023

Japan Kenzai Develops
3- and 4-story Timber
Building System
Japan Kenzai Co., Ltd. has developed a Timber Building
System for three- and four-story structures. While thesystem may not necessarily feature the latest technology or
eye-catching design, it is currently capable of accommodating up to five floors.
In Japan, around 2,500 non-residential non-wooden buildings with five stories or lower are constructed annually.
There is ample potential for them to be replaced withwooden structures. To encourage the adoption of woodenbuildings within communities, Japan Kenzai will propose
the standard system for medium- and large-sized wooden
constructions. This system, based on our extensive experience and technology, provides safety, security, and affordability.

Image of the Timber Building System3

4Bulls International No.73

Topics 2

Timberamʼs Community Contribution Activities

Planting water plants

At the Timberam property

On October 18, 2023, Timberam Co., Ltd. and Hachiro Project,a specified nonprofit organization, installed a “Hachiro-gata*
Mogurium” on the premises of Timberam located in Gojome
Town, Akita Prefecture.
The Hachiro-gata Mogurium project is an initiative to revive andnurture buried seeds of water plants that were dug up from thestrata prior to the reclamation of Hachiro-gata Lagoon. By
cultivating indigenous aquatic plants of Hachiro-gata, it aims torestore a rich ecosystem, encompassing organisms like water
fleas and dragonflies, connecting habitats for aquatic organisms
to facilitate migration, and ultimately fostering a vibrant presence of aquatic life over a wide area.
The initiative has been expanded primarily at elementary
schools in the Hachiro-ko Lake watershed. It marks the first

Cultivated in large aquariums

installation at a private company in Akita Prefecture.
Timberam will continue to contribute to the revitalization of thetown through its community contribution activities.
(*)Hachiro-gata: a lake located in Akita Prefecture. It used to be
the second-largest lake in Japan in terms of surface area until asignificant portion of its water area was reclaimed through land
conversion projects.

Production of Wooden Cover for JKHD Group Topics 3
Employee Planner Book
JK Holdings Co., Ltd. produces an original planner book for
JKHD group employees every year. For the 2024 edition, we
have made a new attempt to create a wooden cover.
The material for the wooden cover is LVL noncombustible
sheets for interior use, which are manufactured at a JKHDGroup company. We have made good use of their superior
formability and applicability that can be applied to curved anduneven surfaces, as the sheets are originally intended for interior
finishing.
This attempt aims to create a symbolic planner book unique to
the JKHD Group while concurrently creating stronger cooperation within the Group.

A planner book

Wooden cover

Wood Land Tower 1-7-22 Shinkiba Koto-ku,Tokyo 136-8405 Japan
Phone +81-3-5534-3800 Fax +81-3-5534-3835
URL https://www.jkhd.co.jp
C 2024JK Holdings Publication Copyright○