Consolidated Financial Results
for the Six Months Ended September 30, 2021

SAKAI HEAVY INDUSTRIES, LTD.
Stock code: 6358
URL https://www.sakainet.co.jp/en

November 11, 2021

Contents

1.

Summary of Consolidated Financial Results for the Six Months
Ended September 30, 2021

2.

Implementing Key Initiatives Outlined in the Medium-Term
Management Policy

3.

Implementing ESG Initiatives

11. Summary of Consolidated Financial Results
for the Six Months Ended September 30, 2021

1. Summary of Consolidated Financial Results for the Six Months Ended September 30, 2021

Summary of Consolidated Financial Results

3

1. Summary of Consolidated Financial Results for the Six Months Ended September 30, 2021

Highlights of Consolidated Business Performance
1. Summary of Consolidated Business Performance for the Six Months Ended September 30, 2021
(1) Consolidated net sales: ¥12,987 million, up 27.8% YoY・Solid recovery of major overseas markets, in addition to a strong domestic market, against the backdrop of global
economic recovery
・Overseas sales rose 49.2% YoY to ¥6,019 million.
・Overseas sales ratio went up 6.6 points YoY to 46.3%.

(2) Operating profit: ¥725 million, up 3.8 times YoY(3) Sales in Japan: ¥6,968 million, up 13.7% YoY
Sales were strong, fueled by robust public works executed under the Fundamental Plan for National Resilience(4) Sales in North America: ¥2,297 million, up 61.5% YoYDemand for construction machinery back on track to recovery as robust investment in construction projects continues(5) Sales in Asia: ¥3,298 million, up 38.1% YoY
Following Thailand, Vietnam, South Korea, and China, economic activities in Indonesia also showing signs of recovery

2. Adapting to a Changing Business Environment(1) Shifting to business management with a focus on a sound capital policy
Formulating the medium-term management policy with the goals of achieving net sales of ¥30 billion, an ROE of 8%, adividend payout ratio of 50%, a DOE of 4%, and buying back treasury shares flexibly.

(2) Becoming more agile in dealing with volatile demand
Reduced inventory by 18.1% YoY to ¥6.732 billion.

4

1. Summary of Consolidated Financial Results for the Six Months Ended September 30, 2021

Highlights of Consolidated Business Performance
3. Mid- to long-term Growth Strategy(1) Make more significant inroads into the Asian market:

Step up marketing and sales efforts centering on theIndonesian market. Grow Indonesian domestic sales to 2.1 times current level.
(2) Expand the scope of overseas business: Enter the road-maintenance machinery segment. Secure ODA business forAfrican countries.
(3) Pursue business opportunities in North America: Increase our market share through stepped-up niche marketing.
Increasing the number of service and maintenance agents.
(4) Start developing next-generation businesses: Focus on developing emergency brakes, compaction management
system and autonomous vibratory rollers.

4. Outlook for Business Environment(1) Japan
Demand for construction machinery is projected to remain strong, buoyed by the Japanese government’s ¥15-trillion initiative to accelerate thepace of building national resilience to prevent and mitigate natural disasters over the next five years.

(2) Overseas
Global demand for construction machinery is on a steady recovery trend, led by infrastructure investment and major economic packages todrive green growth strategy, particularly in the United States and the EU. The US Congress passed the Infrastructure Investment and Jobs Act,
expected to spend US$ 1.2 trillion in the next 5 years.

(3) Business risks

・Structural appreciation of energy and components costs as a side effect of transformation of industry structure in regard
to decarbonization
・Delay in procuring manufacturing components due to surge in container shipping costs and shortage of semi-conductors,
caused by the rapid economic recovery(4) Social requirements
We need to transform our business management with a focus on DX, SDGs/ESG, and a sound capital policy to better
respond to social requirements for adopting digital solutions and green business practices.

51. Summary of Consolidated Financial Results for the Six Months Ended September 30, 2021

Consolidated Business Results(Millions of yen)

1st half ended 1st half ended
September 30, September 30,
2020
2021

YoY change
Amount%Net sales

10,163

12,987+2,824+27.8%

Japan

6,127

6,968

+840

+13.7%

Overseas

4,035

6,019

+1,983+49.2%

Operating profit

191725+534+279.2%

Operating profit ratio

1.9%

5.6%

Ordinary profit (loss)

169

732

+563

+332.8%

Profit (loss) attributable toowners of parent(373)

509

+882

ー75.1%

75.2%

Cost-of-sales ratio

61. Summary of Consolidated Financial Results for the Six Months Ended September 30, 2021

Consolidated Business Results
Net sales(Millions of yen)

Operating profit(Millions of yen)

14,00012,00012,987700

Net sales
10,163725（5.6 %）
6,019

10,000

8,000

6,000

4,000

2,000

800

600
500

4,035
Overseas Operating profit

400(Operating profit ratio)

6,127
Japan

300

6,968

191（1.9 %）

200
10000

1st half endedSeptember 30, 2020

1st half ended
September 30, 2021

7

1. Summary of Consolidated Financial Results for the Six Months Ended September 30, 2021

Sales by Region in which customers are located(Millions of yen)
1st half
ended
September
30, 2020

1st half
ended
September
30, 2021

YoY change
Amount%

Japan

6,127

6,968

+840

+13.7%

Overseas

4,035

6,019

+1,983+49.2%

North America

1,423

2,297+874+61.5%

Asia

2,388

3,298

+909

+38.1%

34+1+26.1%

219

418

+198

+90.4%

10,163

12,987+2,824+27.8%ME and Russia/CIS
Other regions

Total8

1. Summary of Consolidated Financial Results for the Six Months Ended September 30, 2021

Sales by Region
1st half ended 1st half ended（Millions of yen） September 30, September 30,2020
2021

YoY change

Japan

6,127

6,968+840 +13.7%

Overseas

4,035

6,019

+1,983 +49.2%

Total

10,163

12,987+2,824 +27.8%(Amounts less than one million yen are rounded down)

91. Summary of Consolidated Financial Results for the Six Months Ended September 30, 2021

Segment Information by Region in which our manufacturing facilities and sales offices are located(Millions of yen)

(Millions of yen)

1st half
ended
September
30, 2020

1st half
ended
September
30, 2021

Amount

8,234

9,761

+1,527+18.6%

Sales to externalcustomers

447

1,104+657+146.9%

Intercompany sales

Total net sales

8,681

10,866+2,185+25.2%

Operating profit

272

562+289+106.4%

Japan
Sales to externalcustomers
Intercompany sales

1st half
ended
September
30, 2020

1st half
ended
September
30, 2021

Amount1,423

2,297+874+61.5%

1225+13+103.5%

Total net sales

1,435

2,323+887+61.8%

Operating profit(60)

133+194

ー%

YoY change

North America%(Millions of yen)
1st half
ended
September
30, 2020

1st half
ended
September
30, 2021

Amount297

627+329+110.9%

1,073

1,803

+730

+68.0%

Total net sales

1,370

2,430

+1,060+77.3%

Operating profit

2134+132

ー%Indonesia
Sales to externalcustomers
Intercompany sales

YoY change%(Millions of yen)
1st half
ended
September
30, 2020

1st half
ended
September
30, 2021

AmountSales to externalcustomers

208300+91+44.0%

Intercompany sales

186172(13)(7.3%)

Total net sales

394

472

+78

+19.8%

Operating profit

(35)

(34)

0ー%

YoY change

China%

YoY change%101. Summary of Consolidated Financial Results for the Six Months Ended September 30, 2021

Segment Information by Region(Millions of yen)

North America

Japan

10,866
1,104

8,681

1,435
12(60)

1,423

1st half ended September 30, 2020

562
Indonesia

Intercompany
sales 447

Operatingprofit 272

1,370

9,761

1,073
2 297

1st half ended September 30, 2020

China

Sales toexternalcustomers

394

8,234
1st half ended September 30,2020(35) 186
1st half ended September 30,2021

2,323
133

25

2,297
1st half ended September 30, 2021

2,430
134
1,803
627
1st half ended September 30, 2021

472
172
300(34)208
1st half ended September 30, 2020

1st half ended September 30, 2021

11

1. Summary of Consolidated Financial Results for the Six Months Ended September 30, 2021

Breakdown of YoY Changes in Operating Profit•Gross Profit increased by ¥702 million, in line with YoY increase in sales of ¥2,824 million.

•

SG&A Expenses increased by ¥157 million as we came out of restricted operational conditions and resumed
business activities.

•As a result, Operating Profit rose 3.8 times YoY to ¥725 million.
(Millions of yen)
1st half ended 1st half ended
Impact on
September 30, September 30, YoY change
operating profit
2020
2021

NoteNet sales

10,163

12,987+2,824+702

2,824 ｘ （1 - 75.1％）

Cost-of-sales ratio

75.1%

75.2%

+0.09%(11)

12,987 ｘ 0.09％

Gross profit

2,529

3,220+691

SG&A expenses

Operating profit

2,338

2,495

191

725+157

Salaries and bonuses: up 56; Transportation(157) costs: up 37; Technical research expenses: up20; Other SG&A expenses: up 43+53412

1. Summary of Consolidated Financial Results for the Six Months Ended September 30, 2021

Breakdown of YoY Changes in Operating Profit(Millions of yen)

Increase incost-of-sales
ratio
(11)

Operating profit
for 1st half ended
September 30,2020

Increase in
net sales+702

Increase insalaries and Increase intransportationbonusescosts
(56)
(37)

191

Increase intechnicalresearchexpenses(20)

Increase in other
SG&A expenses(43)

Operatingprofit
for 1st half
ended
September
30, 2021
725＋534
Operating profit ratio
1.9%

Operating profit ratio
5.6%

13

1. Summary of Consolidated Financial Results for the Six Months Ended September 30, 2021

Net Working Capital (Trade receivables + Inventories – Trade payables)•We managed to decrease working capital appropriated forbusiness operations by ¥2,445 million YoY to ¥8,576 million.

24,448•The main reason for the decrease was increased efficiency ofinventory management, bringing down inventory by ¥1,492 million
YoY to ¥6,732 million.

•

Inventory/Sales turnover improved by 1.1 times YoY to an annual
3.6 times.

Annualized
consolidated net sales
20,80920,42923,14821,624(Millions of yen)

(Millions of yen)

As of
As of
September 30, September 30,
2020
2021

Trade
receivables
6,379

YoY change
Amount%7,706

Annualized
consolidated net sales

20,80924,448+3,639+17.5%Net working
capital11,021

Trade receivables

6,379

7,706

+1,327+20.8%

Inventories
8,224

6,732

Inventories

8,224

6,732(1,492)(18.1%)
Tradepayables(3,582)(5,862)

Trade payables(3,582)(5,862)(2,280)+63.7%Net working capital

11,021

8,576(2,445)(22.2%)

10,982

10,321
9,061

8,576

As of Sep 30, As of Dec 31, As of Mar 31, As of Jun 30, As of Sep 30,
2020
2020
2021
2021
2021

14

1. Summary of Consolidated Financial Results for the Six Months Ended September 30, 2021

Consolidated Business Forecast•Sales Forecast for the Full Year: Amid the continued trend of global recovery of demand for construction
machinery, we anticipate robust sales to continue into the second half of the FY. We therefore have upwardly revised
our forecast from that of ¥23,500 million, made at the beginning of the FY, to ¥25,000 million.

•Profit Forecast for the Full Year: As we anticipate cost increases of approximately ¥500 million in the second halfof the FY, due to price increases in components such as steel products and a surge in container shipping costs, weare maintaining our profit forecasts made at the beginning of the FY.
(Millions of yen)First half

Full year

Six months
ended
September 30,2020(Results)Six months
ended
September 30,2021(Originalforecast)

Six months
ended
September 30,2022(Results)

10,163

11,60012,987

Operating profit

191300Ordinary profit

169

Profit (loss)
attributable toowners of parent

Net sales

Earnings per share（Yen）

Fiscal year
ending MarchYoY change YoY change
31, 2022(amount)(%)(Amendedforecast)Fiscal year
ended March
31, 2021(Results)

Fiscal year
ending March
31, 2022(Forecast)+27.8%

21,62423,50025,000+3,375+15.6%

725+534 +279.2%

701

900

900+198+28.3%

250

732+563 +332.8%659

800

800+140+21.4%(373)

180509+882ー

4520

520+515ー(87.01)¥41.74¥119.52ーー¥0.93¥120.57¥120.57ーー

YoY change YoY change(amount)(%)+2,82415

2. Implementing Key Initiatives Outlined in theMedium-Term Management Policy

2. Implementing Key Initiatives Outlined in the Medium-Term Management Policy

KPIs Established in the Medium-Term Management Policy•

Results on all KPIs in the First Half outstripped Medium-Term Plan levels.

•We continue to promote the restructuring of our profit structure through review of sales prices
and increased manufacturing efficiency in order to address the anticipated structured
appreciation of component costs etc. from the second half onward.
(Millions of yen)
1st half ended 1st half ended Fiscal year
September
September ending March30, 202030, 2021
31, 2022(Results)(Results)(Forecast)

Net sales
Operating profit
Annualized return on equity (ROE) ¹
Share buybacks(through March 31, 2026)

Target for
fiscal year
endingMarch 31,2024

Target for
fiscal year
endingMarch 31,2026

10,163

12,98725,00026,50030,000

191

725

900

2,000

3,100(3.4%)

4.6%

ー

5.5%

8.0%

ー

340340 ²500 ～ 2,000 ³

1. The annualized ROEs were calculated based on the results of the corresponding fiscal year.
2. The amount of share buybacks projected for the fiscal year ending March 31, 2022, represents theamount of buybacks conducted for the year to date as of November 11, 2021.
3. The cumulative amount of buybacks projected through March 31, 2026

17

2. Implementing Key Initiatives Outlined in the Medium-Term Management Policy

Dividends per ShareSetting a goal of an ROE of 8%, for each fiscal year until the end of March 2026, we have set a dividend policy as follows:• When ROE falls below 3%, a payout ratio of 100% will apply.
• When ROE is between 3% and 6%, a DOE of 3% will apply.
• When ROE exceeds 6%, a payout ratio of 50% will apply.
(Yen)

150

91%

140
130

100%

52%

45%
26%

120

ー％

18%

20%

110

26%

16%

Payout ratio

120

22%
100

100

100

Bonus
dividend

100
20

90
75

80
70

25

60

1065

70

50

50

40

Payout ratio

50

35

Year-end
dividend
Interimdividend

3525256020156035353020604550408050202525

FY2014FY201530355040300
FY2012FY2013

FY2016FY2017FY2018FY2019FY2020

FY2021

FY2022(Year-endforcast)

Note: We made a ten-for-one share consolidation effective October 1, 2017. Dividend payouts for the periods
prior to the share consolidation are adjusted to be in line with the post-consolidation payouts.

18

2. Implementing Key Initiatives Outlined in the Medium-Term Management Policy

Progress in the Key Medium-Term Management Initiatives(1) Share buybacks
Completed the first round of share buybacks with a ceiling of 130,000 sharesfor ¥500 million:
June 17 to July 15: Bought back 130,000 shares for ¥340.4 million(2) Implementing a medium-term dividend policy
Announced a dividend forecast for the fiscal year ending March 31, 2022:• ¥120 per share (up 50% YoY)
• Payout ratio: 100% (an estimated ROE of 2.3%)(3) Disclosing financial information in English① Convocation notice of general meeting of shareholders② Medium-Term Management Policy③ Annual Report④ Quarterly earnings announcements

193. Implementing ESG Initiatives

3. Implementing ESG Initiatives

Achieve Carbon Neutrality
Goal: Cut the Group's CO2 Emissions


By 50%The Group's manufacturing plants in Japan emit an estimated 2,000 metric tons ofCO2 a year.
The Group's annual CO2 emissions are determined by combining the Scope 1 andScope 2 emissions. The Group has decided to reduce indirect CO2 emissions fromelectricity use by switching to renewable energy.

Scope 1*

Scope 2**

Carbon neutrality
Consumed energy

Fossil fuelsElectricity

Annual CO2emissions (t)***1,000

1,000Total of Scopes 1 and 2emissions (t)2,000Reduce CO2 emissions
by switching to renewable energy

A state achieved by balancing
CO2 emissions with CO2absorption* Scope 1: Direct CO2 emissions from on-site fuel-burning equipment that the Group owns and operates, such as gas boilers, vehicles, and air conditioners** Scope 2: Indirect CO2 emissions from the use of electricity, heat, refrigeration, and steam that the Group sources from external providers*** CO2 emissions are calculated using the CO2 emission coefficient for electricity consumption, published by the Ministry of the Environment of Japan.

21

3. Implementing ESG Initiatives

Become Compliant with the Revised Corporate Governance Code
Determination of Policies
We have established our Medium-Term Policy to "Become a world-class niche company specializing in roadconstruction machinery".
The Company appoints Directors and Executive Officers who are capable of making sound and objective
management decisions so that the Company can operate on globally-recognized management standards andSkill Matrix of increase its corporate value as well as shareholder value.
the Board of In compliance with the recently revised Corporate Governance Code, the Company has determined that theskills to be possessed by our Board of Directors, composed of Directors and Executive Officers, are in the areas
Directorsof corporate management, road-construction machinery, global perspective, capital market, manufacturing,marketing, and administration. The Company is working to disclose these skills as a skill matrix of its Board ofDirectors.

Nomination
andRemuneration
Committee

The Company has determined to establish, under the Board of Directors, a Nomination and Remuneration
Committee, the majority of whose members are Outside Directors. This is to ensure greater independence,
objectivity, and accountability of the Board of Directors when nominating and compensating Directors.

Future Actions
Promoteworkplace
diversity andinclusion
Use the TCFD
Guidelines tomanage climatechange risks

Half of the Group's employees are non-Japanese because a growing number of its manufacturing plants are located outside Japan. The Group's plants and offices inJapan proactively hire employees of non-Japanese nationality every year.
The Company is working to establish a quota for female managers, as well as a policy to ensure diversity when promoting key employees.

The Company is working to disclose TCFD-compliant climate-related financial information.

22

SAKAI HEAVY INDUSTRIES, LTD.

Contact us

IR Office :Takao Yoshikawa

Email: sakai.ir＠sakainet.co.jp

Telephone: +81-3-3434-3401 (from outside Japan)
Fax: +81-3-3436-6513 (from outside Japan)

Performance forecasts and other forward-looking statements in this document are based onInformation available at the time of this writing, as well as certain assumptions deemed reasonable.
Actual performance and other results may differ depending on a variety of factors.