Bull s
JK Holdings
Quarterly ReportInternationalOctober,2023
CONTENTS72No.

P1 JK Holdings overview of 1Q business results
for year ending March 2024

P2 Business Prospect for October–December 2023
P3 Market Outlook of Plywood
Japan Kenzai held exhibition and sales event
P4 Memorial tree-planting for “KEY TEC Forest
Kashiyama”
Nihon Paneform’s community contribution activities

JK Holdings overview of 1Q businessresults for year ending March 2024
The Japanese economy in the first quarter of the year
ending March 2024 showed gradual recovery as socioeconomic activities normalized following the downgrading of
COVID-19 to Infections of Category 5 for common infectious diseases. Meanwhile, we are facing soaring prices ofmaterials and energy imposed by geopolitical risks due tothe prolonged Russian invasion of Ukraine, coupled withthe depreciation of the yen due to the interest rate differential between Japan and the United States.
In the housing industry, prices for lumber and woodenmaterials have been falling in response to the end of the“wood crisis”. On the other hand, prices for building materials and housing equipment have continued to rise, as do
general material prices, leading to higher housing prices. Asa result, the market for new houses, mainly custom-builthousing, has been sluggish. While overall housing starts
decreased by 4.7%, the number of owner-occupied houses
and wooden houses, which are our group’s forte, showed alarge decline of 11.9% and 5.3% respectively.
Under these severe business circumstances, we arestrengthening sales activities with an eye on the current aswell as future environments of the industry. While we workon optimizing inventory levels, we also promote proposal
for change of products with consideration of factors such as
price and mobility, as well as of high value-added products
for “Building homes that retain their asset value”.
As a result, our financial performance for the first quarter
was as follows.
Net sales decreased 6.3% compared to a year ago, reaching

Keiichiro Aoki

President
JK Holdings Co., Ltd.

94.752 billion yen, which is still higher than the level
before the “wood crisis”, although it did not surpass theresult in the same term of the previous year which significantly broke the past records. As for profits, while the retailbusiness of general building materials secured profit growth
and remained strong, the plywood manufacturing and woodprocessing business posted a small loss. As a whole, there
was a significant decrease in profit unfortunately. Operating
income was 1.702 billion yen (down 49.4% year-on-year),and ordinary income was 1.863 billion yen (down 51.0%).
Net income attributable to the shareholders of the parent
company was 0.938 billion yen (down 61.3%), unfortunately a significant decrease.
Thus, our first-quarter results were challenging against a
backdrop of declining housing demand. While material
prices are expected to bottom out sometime soon, there areconcerns such as price hikes for other materials and risinginterest rates, making the situation unpredictable.
We take such shifting tides as an opportunity to overcome
this difficult phase and grow, as we have done in the past.

All the articles contain information as of September 2023

Bulls International No.72

2Surveybuilding companies) and distributors
predicted a smaller negative index compared to the previous quarter's survey. By
region, negative growth is expected tonarrow in all regions except Hokkaido
and Kyushu, indicating their expectations
for autumn demand. In the remodelingsector, the overall number of both positive
and negative views did not change somuch compared to the previous quarter,
demonstrating a sense of sluggish workload. However, the percentage of respondents who answered that the average sales
per project was “2.51 million yen ormore” increased from 30.6% to 37.8%,
indicating that the value of orders received has become higher.

Business Prospect for
October–December 2023Housing starts for January to June 2023,
announced by the Ministry of Land,
Infrastructure, Transport and Tourism,
totaled 409,549 units, 97.8% of the yearon-year result. By owner/occupant, builtfor-sale condominiums marked 105.3%
and rental houses did 102.5%, remaining
firm. On the other hand, built-for-saledetached houses marked 95.6%, and in
the case of owner-occupied houses, theresult dropped to 89.5%, decreasing by
more than 10% from the same period lastyear. Detached houses built for salemarked their year-on-year decline for theeighth consecutive month, while owner-occupied homes experienced a nineteenth consecutive month of year-on-year
drop. It highlights a slump in detachedhousing.

Home sale prices continue to rise due tovarious cost increases in materials, energy, and labor. Meanwhile, consumers areexperiencing an increased burden on
household expenditure due to high prices,which is causing a shrinkage in theirwillingness to buy houses. In addition,
fixed mortgage rates have risen, bringing
about a change in the state of long-standing low interest rates.

〈Demand Forecast byBuilders and Distributors〉
Both small builders (contractors and other
Demand Forecast by Builders
100

-20
-30

-10.0

1.5

-10

-16.6

-9.0
-21.1

-24.0

-15.0

-32.1
-32.6

-40
-50
-60
-70

-80 Oct-Dec.
2021

Apr-Jun.
2022

Oct-Dec.
2022

Apr-Jun.
2023

Starting in January 2024, thetax deduction for mortgages
will be stricter. To qualify forthe relief program, houses
must adhere to energy conservation standards. The
borrowing limit will varydepending on the energy
conservation performance ofPoint0=business result in April-June,1992

0-20-30〈Various Surveys〉
A new system for issuing and storing
qualified invoices and delivery notes will
begin in October. About half of thesurveyed businesses have completed
their registrations for the system, proceeding preparations. In terms of logistics, it is important to secure humanresources. To address this issue, it isnecessary to take stronger action toreduce working hours. As for business
continuity planning against disasters or
emergencies, less than 40% of the surveyed companies have not yet started. Itis hoped that they will proceed based on
the guidelines provided by the relatedministries.

65-13.060- 20.5-15.6 -19.1-26.2

Manufacturers reduced the forecasted
decrease, except in ceramics & insulation, compared to the previous survey. In
the housing equipment, sales forecast for“increase” exceeded that for “decrease”.
This indicates that they predict they cansecure a certain amount of work for
remodeling and renovation projects
although housing starts remain flat.

Dealing Volume of Lumber

-1.3

-10

〈Sales Forecast byLeading Manufacturers〉

The forecast survey for October – December, 2023 is based on the totaled
data gathered from 3,000 client companies in Japan through the internet,
which took place from late-July to mid-August, 2023.

Oct-Dec.
2023

Demand Forecast by Distributors
10the housing. Those who purchase houses
will inevitably have more room to consider their plans. For businesses, it will
be necessary to provide customers withproposals that reflect not only the purchase price of homes but also preferential treatment for loans and utility costs.

- 37.9-40

55- 26.7-5050- 36.9

Laminated lumber
Solid lumber
Precut lumber
LVL45-60

40-70-80 Oct-Dec.
2021

Apr-Jun.
2022

Oct-Dec.
2022

Apr-Jun.
2023

35 Oct-Dec.

Oct-Dec.
2023

2021

Apr-Jun.
2022

Oct-Dec.
2022

Apr-Jun.
2023

Oct-Dec.
2023

Point100=all responses expect increase

Point0=business result in April-June,1992

Sales Forecast by Major Supplying Manufacturers（Oct-Dec. 2023）
increase

Plywood（12 firms）
Wooden Building Materials（17 firms）
Ceramic/Heat Insulation（23 firms）
Housing Equipment（24 firms）
averagelevel-offdecreaseover15％14 ～ 10％

below10％

below10％10 ～ 14％

over15％0.0

16.7

8.3

25.0

41.7

8.3

0.0

0.0

5.9

23.5

29.4

23.5

11.8

5.9

0.0

4.3

13.0

43.6

34.8

0.0

4.3

4.2

0.0

25.0

45.8

25.0

0.0

0.0

1.1

6.7

17.5

36.0

31.3

5.0

2.6

Bulls International No.72

Trend
Market Outlookof Plywood〈Trend of Japanese Plywood〉
Japan’s production of softwood plywood in July 2023 was 213,562 cubic
meters (82.8% of the same month in theprevious year), and the shipment of theitem was 219,210 cubic meters(87.3%). The inventory was 162,640
cubic meters (159.8%).
Japanese manufacturers have been
maintaining their supply adjustments
through production cuts. The market
has completely bottomed out and there
are no more extreme price reductions,
resulting in the prices remaining flat.
Although there was a rush of orders
before the major holidays in August,the situation has now calmed down andbuyers have shifted to purchases for
immediate demand. In any case, in asituation of slowing growth in housing
starts, each company maintains thepurchase for current demand. Unlessthere are any unexpected factors, theshipments of products are not expected
to see significant improvement in theforeseeable future. Currently the supply
and demand manage to balance due tothe effects of the production cutbacks.

Topics 1〈Trend of Imported Plywood〉

wood due to its unpredictable factors.

Japan’s import of plywood in July 2023
was 149,959 cubic meters (62.1% of
the same month in the previous year)
increasing 5.1% from 142,632 cubic
meters in the previous month. By
country of origin, 38,844 cubic meters(54.8%) came from Malaysia, 51,142
cubic meters (64.8%) from Indonesia,and 37,001 cubic meters (60.5%) fromChina.

Although the market prices are currently leveling off with a sign of bottoming
out, they show sluggish response andremaining strong resistance to priceincreases driven by exchange rates.
There is still no sign of change in thelocal prices, but the rapid depreciationof the yen has led buyers to adopt a
wait-and-see approach to determine theextent of their orders. In the meantime,they would continue to make hand-tomouth buying. With unpredictable
future demand and unstable exchange
rates, it is likely that the wait-and-seeattitude will maintain for the time
being.

The continuing significant decline inport arrivals has been reducing thewarehouse occupancy rate. Somewarehouses have started to accept awider range of cargoes, avoiding ply-

Wholesalers’ Prices of Plywood in Tokyo

yen/sheet

4,500
4,000
3,500
3,000

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

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

Oct.
Nov.
Dec.
Jan.
Feb.
Mar.
Apr.
May
Jun.
2022 2022 2022 2023 2023 2023 2023 2023 2023

Jul.
Aug.
Sep.
2023 2023 2023

Japan Kenzai held exhibition and sales event

Japan Kenzai Co., Ltd. held a trade exhibition, “JapanKenzai Fair” at Tokyo Big Sight on August 24 and 25. It
was the first time in four years that the show was organized without the impact of COVID-19. It was a great
success with the number of visitors totaling 14,556, or112% of the planned number of visitors, and the sales
reached 30.69 billion yen, or 102% of the planned
amount.
The event theme was “Road to 2030, Connecting now,and to the Future,” the same as last year. There weremany exhibits showcasing efforts toward a sustainable
Ribbon-cutting ceremony at the opening ceremony

future. Topics that stood out at the seminars held at thefair venue included extending the service lifespan ofwooden houses, sustainable management, increasing theasset value of houses, and renovation.

Large LEDs are placed at the entrance tocreate the feeling of entering a forest

Volume of carbon storage per one sheet ofsoftwood plywood expressed in a balloon

Japan Kenzai provided the visitors with a great opportunity to reassess the environments surrounding the housing
industry as well as to get hands-on experience with thelatest equipment and devices.

3

4Bulls International No.72

Topics 2Planting trees

Memorial tree-planting for“KEY TEC Forest Kashiyama”

Land cleared this year will continue to be planted and underbrushed
next year and beyond

KEY TEC Co., Ltd. implemented
reforestation at the “KEY TEC Forest
Kashiyama” in Hokuto City, Yamanashi
Prefecture in April, and conducted acommemorative tree-planting on June
1. The memorial tree-planting was partof a project in which the owners andstakeholders collectively promotesustainable forestry on approximately
57 hectares of land owned by Yamanashi Prefecture and managed by theKashiyama Common Forest Management and Protection Association.
KEY TEC concluded a forest maintenance agreement with forest owners
and log producers in Yamanashi Prefecture on March 2. The agreement is toestablish a mechanism to ensure theimplementation of the logging-reforestation cycle, and to reduce costs andmanpower by integrating the processfrom logging to ground preparation forafforestation and reducing the numberof trees to be planted. KEY TEC encourages sustainable forest management by purchasing logs systematicallyfor its plywood and LVL manufacturing
at prices that support reforestation.

For the tree-planting event, 27 people
gathered, including the four parties tothe agreement as well as forest owners
from the surrounding area. They planted trees on eight hectares of land thatwas cleared last year. It is in the processof logging another eight hectares thisyear, with plans for planting and underbrushing to continue next year andbeyond.
KEY TEC built a plywood plant in
Minobu-cho, Yamanashi Prefecture fiveyears ago. Through working in partnership with the local community, we willcontribute to the promotion of forestry
including securing a stable supply ofwood grown in the prefecture andnurturing future forest resources.

In front of the sign for “KEY TEC Forest Kashiyama”

Nihon Paneform’s community contribution activities Topics 3
The Hiroshima Factory of Nihon
Paneform Co., Ltd. accepted students
for a workplace experience program,“Waku-Waku (Exciting) Work Experience Week”as part of its social contribution to the local community. The
program is offered to second-year
students at junior high schools inHigashi-Hiroshima City, Hiroshima
Prefecture.

During the work experience session,
the students received a job explanation
with drawings and related diagrams
prepared by the design section, followed by hands-on experience with
CAD input. Afterward, the participants
had the opportunity to see and touch
actual wood and plywood while hammering nails in the factory.

Explaining contents with drawings

In addition, the students watched avideo about 2x4 housing, tried creating
quotations, and crafted flower pots
using timber offcuts.
Nihon Paneform will continue tocontribute to local social activities byproviding workplace experience opportunities.

Nail hammering experience

Coloring of homemade flower pots
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 2023
JK Holdings Publication Copyright○