01

My name is Kawamura, Kaga Electronics. Thank you very much for yourcontinued support. I would also like to thank you for your participation in
today's financial results briefing. I would like to present an overview of our
financial results for Q2 of the fiscal year ending March 31, 2023.

Net sales increased JPY75.7 billion, or 34%, from the previous year toJPY298.7 billion. In the mainstay electronic components business, sales grewin a wide range of fields, particularly in the automotive and industrial
equipment-related sectors.
Operating income increased JPY10 billion, or 121.3%, from the previous year
to JPY18.3 billion. Gross profit increased significantly due to an increase insales and an improvement in the gross profit margin resulting from a better
sales mix.
All items from net sales to quarterly net income reached record highs for Q2.
Net sales and operating income exceeded the internal plan by JPY23.7 billion
and JPY4.8 billion, respectively.
The forecast for FY2023/03 has been changed. The outlook for thesemiconductor market, the situation of COVID-19 and Ukraine, and exchange
rate fluctuations are unpredictable. So the upward revision reflects only theupward swing in Q2. The forecast at the beginning of the period remains
unchanged from Q3 onward.
Next, shareholder returns. The annual dividend has been revised to JPY200
per share, up JPY50 from the previous forecast of JPY150 per share. We planto pay an interim dividend of JPY100 and a year-end dividend of JPY100. Thisis an increase of JPY80 per share over the previous year's dividend of JPY120

per share.

3Here are the financial highlights for Q2.
Net sales, as I mentioned earlier, were JPY298,760 million. Gross profit
amounted to JPY40,001 million, up 47.4% from the previous year. Grossmargin was 13.4%, an improvement of 1.2% from the previous year.
SG&A expenses totaled JPY21,639 million, and here, SG&A expenses
increased slightly in line with the increase in sales. As a result, operating
profit was JPY18,361 million, up 121.2% from the previous year, ordinary profit
was JPY18,932 million, up 124.0%, and net income attributable to owners ofthe parent was JPY13,412 million, up 138.5%.
As a result, net income per share was JPY510.88. The dollar exchange rate
was JPY133.97 to the US dollar, which represents a depreciation of about
JPY24 from the previous year.
Compared to the previously announced forecasts, the progress rate of net
sales, operating profit, and parent company net income is 55.3%, 76.5%, and83.8%, respectively.

This is segment information for Q2.
Electronic components accounted for 90% of total sales, and its electronic
components business recorded sales of JPY268,464 million, up 38.1% fromthe previous year, and segment profit of JPY16,617 million, up 133.3%.
You can see that all other segments, including Information Equipment,software, and others, are also profitable.

Here is a graphic representation of the impact of M&A.
Net sales are shown separately for the existing Kaga Electronics Group, KagaFEI, which joined the Group three years ago, and Excel, which joined theGroup two years ago.
Net sales of all three companies increased significantly, driven by theelectronic components business. The breakdown is JPY43.1 billion increasefor Kaga Electronics and JPY30.5 billion increase for FEI.
As for gross profit, KAGA Electronics and KAGA FEI reported significant
increases. Gross profit margin also improved. The breakdown is JPY7.8 billion
increase for Kaga Electronics and JPY 4.9 billion increase for FEI. The grossmargin ratio increased from 15.1% to 15.9% for Kaga Electronics and from
9.3% to 11.4% for FEI. There is a slight decline for Excel.
As for SG&A expenses and the expense ratio, SG&A expenses increased inline with sales growth, but the expense ratio was reduced.
Finally, operating profit. As a result, operating income increased JPY5.8 billionat Kaga Electronics and JPY4.1 billion at FEI, which were the major factors
behind the overall increase in income.

8

9

Here is a side-by-side view of the most recent three-month results, Q1 andQ2.
As you can see, sales were almost flat in both Q1 and Q2.
As you can see, the gross profit margin improved by 0.2 points compared toQ1.
As you can see, compared to the same period last year, net sales increased
significantly and the gross profit margin improved by more than 1.5%.

This chart shows Q1 and Q2 results by segment, side by side.
You can see that electronic components increased significantly in both Q1and Q2 compared to the previous year.

The following are the results by company for Kaga Electronics, FEI, and Excel.
As you can see, Kaga Electronics was flat in Q1 and Q2, but its sales
increased significantly compared to the previous year.
As for FEI, you can see that it increased in Q2 compared to Q1.
As for Excel, sales in Q2 were slightly lower than in Q1.

14

15

Here is a graph showing the factors that caused operating income tofluctuate in Q2.
Operating profit increased JPY10.06 billion over the previous year.
Here is a breakdown of the profit increase.
JPY9.9 billion from an increase in sales mix and sales volume, JPY2.9 billion
from spot sales, and JPY2.8 billion from an increase in SG&A expenses.
Compared to the internal plan, this is an upward revision of more than JPY4.8billion.
The increase in sales volume and sales mix was JPY4.4 billion, JPY1.2 billion
was due to spot sales, and JPY0.8 billion was due to an increase in SG&Aexpenses.

The table here shows Q2 results for each segment of the medium-term plan
into new segments.
The past three fiscal years are listed side by side.
You can see that electronic components and EMS have been on a steady risefor the past three fiscal years.
On a Q2 results basis, electronic components sales totaled JPY202,867 million,
up 40.1% from the previous year, and segment income totaled JPY11,689
million, up 196.1% from the previous year.
EMS totaled JPY69,486 million, up 30.0% from the previous year, and segment
income totaled JPY5,311 million, up 59.9%.
These two segments, electronic components and EMS, are the major factors
behind the increase in sales and profit.

This is a side-by-side presentation of results by mid-term business segment
for Q1 and Q2, with actual results for each three-month period.
Both electronic components and EMS have seen significant increases in sales
and profits in Q1 and Q2 compared to the previous year, but you can see thatQ1 and Q2 have been almost flat.
As for CSI, there is the slight decrease in sales in Q2. This was due to thesignificant increase in Q1 with the for new students project and other factors.

I would like to explain the main items on the balance sheet.
Total assets amounted to JPY290,923 million, an increase of JPY18,783
million from the end of March.
Current assets totaled JPY251,765 million, an increase of JPY17,780 million.
Fixed assets totaled JPY39,158 million, an increase of JPY1,003 million.
Liabilities and net assets.
Total liabilities amounted to JPY165,995 million, down JPY344 million.
Net assets totaled JPY124,928 million, an increase of JPY19,128 million.

20

Inventories are among the major items on the balance sheet.
The total amount was JPY71,286 million, an increase of JPY8,679 million fromthe end of March. However, inventories increased by about JPY33.3 billion
compared to the end of March 2021, mainly due to the shortage of electroniccomponents.
However, based on current business volume, an appropriate inventory level
would be about JPY50 billion. As the President will explain later, we plan toshrink this inventory amount by the end of March next year.
As for notes and accounts receivable and notes and accounts payable, thebalance of notes and accounts receivable was JPY124,540 million, anincrease of JPY3,591 million. Account payables amounted to JPY84,968million, a decrease of JPY1,525 million.
You can see that both accounts receivable and accounts payable turnovers
have decreased.

21

Cash and deposits / cash flow.
Cash and deposits totaled JPY48,484 million, an increase of JPY7,432 million.
Interest-bearing debt totaled JPY52,504 million, an increase of JPY1,333million.
As for cash flow, operating cash flow was JPY10.65 billion. Investment cashflow used was JPY3,492 million. Financing cash flow used was JPY3,187million.

23

Here we would like to explain our full-year forecasts for FY2023/03.
As mentioned at the beginning of this report, we have revised our full-yearforecasts.
We have revised upward our previous forecast for net sales from JPY540
billion to JPY570 billion, operating profit from JPY24 billion to JPY28 billion,
ordinary profit from JPY24.5 billion to JPY29 billion, and net income
attributable to owners of the parent from JPY16 billion to JPY20 billion.
With this upward revision, net income per share will be JPY761.7 and ROE willbe 17.0%. The annual dividend is JPY200, an increase of JPY50. The dividend
payout ratio will be 26.3%.

This is incorporated into the forecast for each segment.
All of the JPY30 billion increase in sales is added to the electroniccomponents business.
As a result, net sales of the electronic components business are expected toincrease from JPY477 billion to JPY507 billion and segment profit fromJPY21.3 billion to JPY24.8 billion.

I am Kadoof KAGA ELECTRONICS CO., LTD. Thank you for your continuedsupport and cooperation in our IR activities.
IwouldnowliketoreportonmanagementtopicsforH1ofFY2022.

26

First, I would like to report on the revision of the operating income target ofthe medium-term management plan 2024, which was announced lastNovember.
The financial results for this March exceeded the operating incomeannounced in the mid-term business plan 2024. Therefore, we had said that
we would announce the revised figures this November after assessing thefigures for H1 of the current fiscal year. However, we have decided todisclose the management target figures together with the forecast for thefiscal year ending March 31, 2024, at the announcement of the fiscal year
ending March 31, 2023, in May next year.
The primary reason for the change is to determine the profit level at the endof FY2023/03, as we expect earnings momentum to keep continuing in H2,
which has been progressing above plan in Q1 and Q2. The second reason isto improve the accuracy of the profit forecast for FY2024/03, where there areconcerns about downward pressure on earnings due to the elimination ofspot sales, inventory adjustments by customers, and other factors.
In this way, we would like to report you our management targets with a highdegree of certainty of realization based on a thorough assessment of both
upside and downside risks.

From here, I would like to report on two growth investments in the EMS
business.
The first is a new plant in Malaysia. As we have already announced in a press
release, we have been producing electrical circuit boards for power supply
products, sanitary equipment, and consumer electronics in Malaysia since
2000. With the semiconductor shortage and supply chain disruptions
beginning to dissipate, and with a rapid recovery in customer requests forincreased production and new inquiries, we have decided to renew ourexisting aging factory buildings and facilities and establish a system that canrespond to strong demand. Mass production began from the end of October.
The new plant is 1.3 times larger than the old plant, and cutting-edge
equipment is installed to further improve production quality and efficiency. In
addition to an increase in orders from existing customers, we aim to achievesales of JPY10 billion within five years of the start of operations, with a view
to meeting the needs for distributed production in the ASEAN region andreceiving new orders from local companies.

Another new plant is under construction in Turkey to start mass production inJune next year.
In Turkey, we made a capital investment in 2018 as a branch plant of theCzech plant, and since then we have been developing production mainly for
air conditioning equipment-related unit assembly. This time, we have decided
to construct a new plant in order to expand its functions and establish asystem that can handle the mounting of electrical circuit boards in Turkey aswell. In addition to meeting the needs of customers who are strengthening
local production and local procurement in Europe, we will use Turkey as abase to expand our European operations for board mounting.
We aim to expand our customer base from air-conditioning equipment to invehicle and industrial equipment, and to achieve sales of JPY5 billion within
five years of the start of operations.

So far, I have explained offensive management, but in this slide, I will explain
defensive management.
One of the most pressing management issues is inventory reduction. Many
manufacturers have been reviewing their procurement policies and building
up parts inventories over the past year or two against a backdrop of global
shortages of semiconductors and electronic components, longer lead times,
and disruptions in international logistics networks.
We are no exception. In our parts sales business, we need to secure thequantity of goods as customers place advance or duplicate orders. In theEMS business, there was an increase in work in process due to difficulties inprocuring some components and securing safety stock as BCP.
As a result, inventories at the beginning of the current period wereapproximately JPY25 billion higher than a year ago, and the one in thisSeptember were approximately JPY8 billion higher than at the beginning of
the period. Since these inventories are all on a firm order basis withcustomers, they will not remain stagnant, but in any case, we are working toconvert them to cash as soon as possible.
We believe that the increase in turnover days peaked out in Q2, and we willcontinue to reduce turnover days toward the end of March to 15 days in the30

parts sales business and 45 days in the EMS business.
By achieving these goals, we expect to normalize inventory levels to less than
JPY50 billion and turnover days to 30 days at the end of the current fiscal year.
At the same time, needless to say, cash will be generated.

30

The last two slides were prepared from the perspective of sustainability
management.
First, in terms of human investment, I have shown four graphs here. All of thisinformation was disclosed in this year's integrated report. The average lengthof service is roughly 15 years, which is neither good nor bad, but the turnoverrate is around 2%, which I believe is quite low.
The number of paid holidays granted is around 18 days, which is on par withthe average, but we grant 6 days of refreshment leave in addition to this,which is not counted here. The paid leave utilization rate is around 55%,
which is higher than the average of 48.6% for the wholesale and retailindustries, according to data from the Ministry of Health, Labour and Welfare.
About 20 employees take parental leave every year, and almost 100% return
to work. Recently, some male employees have finally taken parental leave.
Since there are still so few, we are in the process of educating our employee
through internal newsletters and other means.
The average annual salary has been increasing aggressively every year,
driven by the recent expansion of business performance. We recognize that
our salaries are among the highest in the industry.

Since we have talked about salaries, the last slide presents two data on thedistribution and return of profits to stakeholders.
First, the labor share has remained around 60%. We are aware that theaverage for the wholesale industry is about 50%, so this level is higher thanthat. In addition to monthly salaries and regular bonuses, we have a uniquesystem of performance-linked year-end bonuses. The payment will be madewhen the financial results exceed the profit forecast.
At the same time, the return of profits to shareholders is also an importantmanagement issue. As noted here, the dividends are divided into three
categories: ordinary dividends, special dividends, and commemorativedividends.
We emphasize stable and sustainable dividends for ordinary dividends, andperformance-linked dividends for special dividends. We usually pay anordinary dividend at the beginning of the fiscal year, and then revise the profit
forecast upward during the fiscal year, or pay a special dividend if thefinancial results ultimately exceed the profit forecast.
We have again revised our forecast to JPY200 per share by adding a special

32dividend of JPY50 to the initial forecast of JPY150 per share.
This is the KAGA ELECTRONICS way of distributing and returning profits tostakeholders that reward employees with year-end bonuses and shareholders
with special dividends in return for their good performance. This is the policyof our founder, Isao Tsukamoto, since the establishment of the Company:
profits are shared by all, and we will continue to cherish this policy as part ofour company DNA to be passed on to the next generation. We hope that all
the investors gathered here today will join us in the circle of sharing.
This concludes my explanation. Thank you very much for your time today.

32

33

Here are the sales by region.
As of Q2 FY2023/03, sales by region were JPY78,286 million in Japan, which isin the gray area. The dark blue area at the bottom is Asia, with sales ofJPY53,761 million.
Green is for North America, with sales of JPY12,422 million, and orange is for
Europe, with sales of JPY4,987 million.

Finally, the exchange rate.
The applicable exchange rates as of this Q2 were JPY133.97 for the US dollar,
JPY18.94 for Chinese yuan, JPY3.79 for Thai baht, and JPY17.07 for the HongKong dollar.
For your reference, the impact of the 1% change in the US dollar exchange
rate on sales and operating profit will be JPY584 million in sales and JPY27
million in operating profit; the impact of the Chinese yuan will be JPY147
million in sales and JPY4 million in operating profit; the impact of Thai baht
will be JPY145 million in sales and JPY8 million in operating profit; and theimpact of the Hong Kong dollar will be JPY98 million in sales and JPY3 million
in operating profit.
For FY2023/03, our internal plan assumes exchange rates of JPY130 for theUS dollar JPY20 for the Chinese yuan, JPY3.5 for Thai baht and JPY16.5 for
the Hong Kong dollar.
As of Q2 FY2023/03, the overall foreign currency transactions accounted isjust under half of the total transaction value, and of those foreign currencytransactions, just over half were denominated in US dollars.
I have now presented an overview of the financial results for Q2 2023. Thank37

you for your attention.

37

38

39