February 3rd., 2023
Pacific Industrial Co., Ltd.
Financial Results Briefing for Fiscal Year 2022 Third Quarter Q & A《Q3 Financial Results and Q4 Forecast》
Q1：Regarding the Q3 of stamping & molding business, did the profitability in Q3 returnto the same level as in Q2? On the other hand, considering the increase in domestic
production by Toyota, the Q4 sales seem conservative. Please explain.
A1：Comparing Q3 with the previous forecast, it is almost as planned. Automobile
production volume remained at the same level as Q2. New vehicle models werelaunched in Japan, North America, and China, and return on investment in molds
increased sales and profits.
Regarding Q4, there are regional differences. In Japan, automobile production
will recover and production volumes will increase. But in Asia and North America,
they will be lower than the previous forecast. We assumed the overall global
performance in Q4 to be in line with the previous forecast.
Q2：How did you factor in Toyota's production volume of 14,000 to 15,000 units/day
in Japan in Q4? Looking at your analysis, you appear to be planning to control
costs. Does this mean that you will strengthen cost control in Q4?
A2： We are planning to produce slightly less production units than what has been
proposed by the customer. As for the costs, we are implementing various
improvements not only in Japan but also overseas to reduce expenses and laborcosts, and incorporating those effects into our forecasts.
Q3：Please explain the decline in profitability in the valve business in Q4.
A3：Assuming an exchange rate of 130 yen to the dollar in the Q4, we factored in adecline in profits due to exchange rate fluctuations. Also, valve production trendsto lag behind the recovery of automobile production, which is reflected in thevolume forecast. The price of brass and aluminum, which are valve materials,remains high, and profits are declining. We will continue to pass on these costs toimprove profitability.
《Expansion Valves for BEV》
Q4：When will BEV valves be profitable and how big of an impact will they have?
Will the profit margin improve compared to traditional valve products? Is market
competitiveness high in terms of technology and cost?
A4：Production will start in May or June this year. Other models are under development.
Since the volume is small at first, it will take some time before it is reflected in sales
and profits. We believe that the global trend toward BEVs will accelerate, so we areprioritizing development accordingly. We are aiming for the same level ofprofitability as existing valves, but there will be initial investment and additionalcosts at the start of production. We will continue to improve costs and strive tostrengthen our competitiveness.
Our strength lies in our technological capabilities in fluid control. Specifically, we
have a high market share in valves for automobiles, and had been developing
valves for home air conditioners in the past. We are highly rated by customers
because we can present drawings and prototypes based on solid technology andmake valuable proposals. In the future, we are also considering adding value to
BEV valves by combining them with electronic parts such as ICs. Through TPMS
development, we have possessed the technology for automotive electroniccomponents, and we can make advanced proposals that will be adopted bycustomers.
《The Introduction of Renewable Energy》
Q5：From an environmental perspective, it is necessary to promote the introduction ofrenewable energy. However, some believe it is not linked to profitability or
business acquisition. Please explain your opinion on whether this would be arequirement for new business orders or possibly have any other direct benefit in
the future.
A5：We believe that the introduction of renewable energy does not necessarily lead tothe acquisition of orders, however we believe that this is a socially responsible
initiative and we are promoting carbon-neutral activities with a 2050 target.
Indeed, some European companies have made it mandatory to become carbon
neutral. Since our company adopts the PPA method for introducing solar power
generation, there is no initial investment, but there is an additional cost. With thegoal of reducing power consumption, we are carrying out conventional energysaving activities and daily improvements at the same time. We believe that theseongoing activities are very important.
《About the Change of President》
Q6：Why are you changing the president at this time? How will you strengthen andenhance management under the new president?
A6：Fiscal Year 2022 is the final year of our ongoing medium-term management plan,
OCEAN-22, and we will soon reach a milestone. Currently, under the leadership ofthe vice president, we are formulating a new medium-term management plan,
OCEAN-26, for the future vision on 2030. There are challenges in the automobile
industry and new businesses. Under the leadership of the new president, we will
promote OCEAN-26 by concentrating the potential of everyone, leveraging thepotential of young employees as well. The former president will support thecompany as chairman and strengthen management.