Q1 Results for the Fiscal Year Ending March 31, 2018 (IFRS)

Transcription

1 Q1 Results for the Fiscal Year Ending March 31, 2018 (IFRS) (From April 1, 2017 to June 30, 2017) TSE Code: 5938 LIXIL Group Corporation August 7, 2017 Copyright LIXIL Group Corporation All rights reserved LIXIL Group has Transitioned to IFRS from FYE2016 Change in Profit Level Structure is as Shown Below JGAAP Net sales Cost of sales Gross profit SG&A Operating profit Non-operating income/expenses Ordinary income Extraordinary income/losses IFRS (LIXIL Group Financial Reporting) Revenue Cost of sales Gross Profit SG&A Core earnings (CE) Other income/expenses Operating profit Finance income/costs Share of profit (loss) for using the equity method Profit before income taxes Net profit attributable to Non-controlling interests attributable to Owners of the parent Profit before tax Net profit attributable to Owners of the parent attributable to Non-controlling interests "Core earnings" in IFRS is equivalent to JGAAP s "Operating profit" 2

2 Q1 Financial Results Summary (IFRS) 1 Q1 Financial Results Summary (IFRS) 2 Q1 Business Update 3 Appendix LIXIL Water LIXIL Housing LIXIL Building LIXIL Kitchen Distribution and Retail Business Housing and Services Business LIXIL Group Q1 Key Performance Highlights Revenue increased by 12% to JPY4319bn Driven by organic growth despite impact from divestment and deconsolidation Strong performance of LWT globally and especially with strong performance in renovation and new housing LHT showing signs of improvement due to new housing related sales recovery Core earnings increased by 27% to JPY187bn despite impact of divestment and deconsolidation Driven by the sales volume increase mainly in LWT, further supported by marketing activities and cost improvement from Group synergies LBT business has shown improved profitability in both and overseas LIXIL Group core earnings margin up from 35% to 43% Profit attributable to owners of the parent was JPY 102bn (-JPY14bn ) due to absence of one-off positive impact from foreign-currency denominated debt conversion recognized in previous year (-JPY104bn) Decrease in interest expense due to debt repayment (+JPY15bn) and tax expense (+JPY27bn) Impact of LIXIL VIVA April 2017 IPO leading to decrease of attributable profits (-JPY10bn) 4

3 Q1 Consolidated Business Results Revenue, gross profit and core earnings show positive trend Q1 Q1 Increase / (Decrease) Amount Results Results As of Forex % Revenue % Gross Profit % % 310% 321% Core Earnings (1) % (%) 35% 43% Net Profit (2) % EPS (yen) EBITDA (3) % (%) 70% 82% Foreign exchange rates (actual) Q1 Actual Q1 Actual (Yen) US dollars Euros Thai bahts RMB *average exchange rates Q1 Gross Profit Margin +11pp 310% 321%: Continued improvement through Group synergies Focus on development and sales of mid to high-end products Improvement on production efficiency EBITDA improved +186% due to the increase in core earnings Net profit impacted by one-off FX gains in Q1 (1) "Core earnings" is equivalent to "Operating profit" of JGAAP (2) Profit attributable to owners of the parent (3) EBITDA: Core earnings + Depreciation 5 LIXIL Group Q1 Highlights Strong momentum drives Core Earnings up 27% Revenue Core Earnings (CE) : JPY +52bn (+1%) On like-for-like basis : JPY+115bn (+3%) CE%: 35% 147 CE%: 43% +4bn (+27%) Q1 Business divestment Forex impacts Increase on like-for-like basis(*) Q1 0 Q1 Q1 Revenue increase(*) on like-for-like basis due to: Growth in LWT ( and Overseas) due to active marketing investments, introduction of new products Positive contributions from LHT, LBT and LKT LBT revenue increase for both and Overseas Significant contribution from as well as improvement of profitability in LBT business Profitability improvement is on track Core earnings increased in LWT, LKT and D&R Reduced losses in LBT due to conversion of healthy project pipeline into project execution +21bn (+1), Overseas +10bn (+12%) 6

4 Net Debt Position Smooth debt repayment continues to be a capital management priority (A) (B) Mar-17 Jun-17 (B)-(A) % Cash and Equivalents % Interest-bearing Debt % Net Interest-bearing Debt % Total Assets 2,0422 2, % Equity Ratio (%) (1) Net Debt/Equity Ratio (%) Net interest-bearing debt decreased by JPY305bn Mainly due to prepayment of debt of JPY491bn in April 2017 Total assets increased by JPY18bn Mainly due to forex fluctuation (Euro: JPY120 (end of March 2017) JPY128 (end of June 2017)) Equity ratio increased by 13 pp, Net Debt/Equity ratio improved by 11pp (117% 105%) Improvement due to interest-bearing debt repayment of JPY491bn (1) Ratio of equity attributable to owners of the parent 7 Working Capital & Capex Cash flow impacted by debt repayments and increasing stakes in subsidiaries Q1 Q1 Increase/decrease Profit before tax Depreciation and amortization Income taxes paid Working capital Others Net cash flows from operating activities Net cash flows from investing activities (of which purchase of property, plant and equipment and intangible assets) Free cash flows Net cash flows from financing activities Cash and cash equivalents (Balance at the fiscal year end) Decrease in free cash flows mostly due to additional acquisition of shares of the subsidiaries Net cash out-flows from financing activities impacted by repayment of borrowings, partly offset by LIXIL VIVA IPO proceeds of JPY324bn (LIXIL) and JPY91bn(VIVA) 8

5 Q1 Business Update LIXIL Group Earnings LIXIL Group core earnings and margins show improvement - LWT and LHT contributed 67% of Q1 revenues and 88% of Q1 core earnings Revenue Core Earnings Margin (%) 1800 (+45%) 4319bn (+12%) bn (+271%) 12% 1664 Q1 Q % 10% (-21%) % (+3) 609 (-02%) (+79%) (-236%) 115 LWT LHT LBT LKT D&R H&S % 69 5% 2% LWT LHT LBT LKT D&R H&S (-) 6% 2% 0% -2% 10

6 Business Environment Update All the key regions support momentum with housing market conditions Asia Pacific Europe Americas Q1 new housing starts increased by 11% ese government initiatives provide positive economic conditions Raw materials prices remain stable over the quarter Increasing brand recognition amongst China s consumers for LWT product lines with rising middle class a key catalyst for future demand Gradual recovery in Vietnam with ongoing weak demand in Thailand Investment in new building and renovation driven by low interest rate environment Increasing demand for eco-friendly and watersaving technologies drives global LWT revenue Favorable construction market conditions drive sales in building and water technology businesses Slower than expected recovery in India following decline of demand due to currency reform and likely pressure from new tax reform 11 LIXIL Water Q1 topline driven by strong growth in ; profitability increasing Apr-Jun In Revenues by Region *1 Core Earnings Americas EMEA Asia Pacific LIXIL Water LIXIL Water Margin Q Adjustments % +5% (forecast) % +5% +15% +0% % +08pp Like for like +1% +2% + +6% +5% 10% +6% Q1 revenue increased by JPY72bn or 5% Innovative products such as Aqua ceramic and increased marketing activities continue to contribute to revenue growth in (Sanitary ware +11 ) Strong success in China with innovative new GROHE and American Standard products, driving strong sales growth (Revenue +12% ) Core earnings grew due to cost improvement reflecting benefits of ongoing synergies *1 Region: Management basis, Total: Statutory basis Currency : Q1 1USD=11161JPY, 1EUR=12314JPY, (Region) 1USD=115JPY, 1EUR=120JPY 12

7 LIXIL Water Innovative new products in and China contribute to improving profitability Actively expanded marketing activities in through TV commercials New TV commercials, including for PATTO Reform, driving growth in brand recognition Positive response to new technologies and design for ease of cleaning China Key initiatives driving positive momentum and brand recognition in China Brand power roll-out through participation in the largest tradeshow in China and third largest globally, The 22 nd Kitchen & Bath China 2017 (KBC) *1 and largest GROHE SPA Showroom in Asia opened in May 2017 Innovation and successful new product launches are driving strong growth with Smart Control and Sensia Arena (GROHE), Milano Collection and EasySET (American Standard) American Standard ranked #1 toilet in China* 2, regaining its traditional brand strength *1 Press Release on May 31 *2 According to our own research 13 LIXIL Housing Q1 impacted by investment for future sales growth Apr-Jun In Revenues by Region Core Earnings LIXIL Housing LIXIL Housing Margin Q Overseas % -3% like-for-like: +1% *2 +60% -2% like-for-like: +2% *2-22% like-for-like: -21% *2-14pp (forecast) % 0% +7% *1 0% +6% Q1 revenue decreased by JPY28bn or 2%, impacted by divestment of HIVIC (-JPY49bn) in previous year Developed new products focused on fast and easy installation - PATTO Reform: added 6 products Discussions with TEPCO Energy Partner on new initiatives for dissemination of Net Zero Energy House Decrease in core earnings by JPY20bn due to the increase in SG&A and impact from the HIVIC divestment The increase in SG&A is the result of a new allocation method of group-wide strategic costs that impacts LWT and LHT *1 Revised FYE18 Overseas revenues forecast *2 Excluding impact of divestment 14

8 LIXIL Building Positive momentum in domestic business driving revenue growth Apr-Jun In Revenues by Region LIXIL Building Q1 218 Overseas % +05% +3% (forecast) % +10% +6% Q1 revenue increase in LBT business for both and Overseas +9% growth in supported by completion of several construction projects Core earnings loss in due to expected seasonal factors, overall improvement Profitability in overseas business has improved through continuous selective order intake initiatives Core Earnings LIXIL Building Margin -04 Loss reduced % 2% Currency : Q1 1USD=11161JPY, 1EUR=12314JPY, 1USD=115JPY, 1EUR=120JPY 15 LIXIL Kitchen Stronger performance in and Overseas drives margin improvement Apr-Jun In Revenues by Region* LIXIL Kitchen Q1 258 Overseas % +8% +8% (forecast) % +9% +0% Q1 increase in sale of mid to high-end price range products with strong sales of key product series (Richelle and Alesta) Continued increase in demand for built rental apartments drove increase in mini-kitchen sales Positive core earnings due to cost improvement in business Margin improvement, moving from negative to positive Core Earnings LIXIL Kitchen Margin 2% % Turned profitable 16

9 Distribution & Retail and Housing & Services Core earnings up 5% due to improving store procurement and cost savings initiatives Apr-Jun In D&R Margin *1 Q1 Revenue * % -02% % Core Earnings * % % +03pp (forecast) 5% Q1 D&R revenue flat Core earnings up +03pp through the improvement of procurement, strengthening of non-core products and cost reduction at existing stores Performance impacted by deconsolidation of subsidiaries Apr-Jun In H&S Q1 (forecast) Revenue % like-for-like: 570 like-for-like: - *2 +9% *2 Core Earnings 04-57% 35-21% Q1 revenue and core earnings impacted by JIO Corporation deconsolidation and completion property sale Margin -29pp 6% *1 Disclosed as of IFRS basis *2 Excluding impact of sale of businesses 17 Summary of Strategic Priorities and its progression Q1 Progressing as planned, the new medium-term management plan to be announced at the second quarter results announcement Group-wide Continue to improve management efficiency through simplification Enhance agility of workforce through change initiatives (eg ACE@LIXIL*) Accelerate global Social Sanitation Initiative activities New medium-term management plan to be announced in November Progression To be updated on Nov 6 Drive and respond to new demand in the renovation market Actively invest in marketing activities Review and optimize product line-up to get closer to customers Implement initiatives for work style reform P Overseas Develop differentiated products(eg smart products) Improve standardized platforms for product development Establish global exchange program for engineers and specialists Further strengthen operational governance P *Activating a Culture of Entrepreneurship 18

10 Appendix Q1 Revenue Increase / Decrease +1% +5% -2% +3% +8% -0% -2 Like-for-like +3% Overseas + (Overseas excluding forex impact +2%) Revenues by business renovation +9% Others +9% Total +6% Overseas +3% (Like for like: +5%) Impact of sale of Hivic -49 Renovation -3% Others +0% Like-for-like +2% Q1 result +52 (+1%) (like-for-like +115(+3%)) LWT LHT LBT LKT D&R H&S Consolidation adjustments and other Q1 result 20

11 Q1 Core Earnings Increase / Decrease +27% By Business By Factor Domestic +20 Overseas CE margin Q1 result 147 CE margin Q1 result 20 LWT 32 Sales in Domestic -18 Overseas LHT 01 Mix/pricing Domestic +17 Overseas LBT 30 Cost 07 +4(+27%) LKT 01 Sale of subsidiaries ese Biz +25( +23%) Domestic +07 Overseas -0 +4(+27%) 01 D&R 35 SG&A 06 H&S 09 GROHE -02 ASB -05 Perma +13 Overseas business 09 Consolidation adjustment/ other 01 Forex translation Overseas Biz +10( +12%) 187 CE margin Q1 result 05 Distribution & retail/ Services 09 Consolidation adjustment/ other Domestic +1 Overseas +12% 187 CE margin Q1 result 21 Results and Forecasts by Segment LIXIL Group core earnings and margins show improvement Unit: LWT LHT LBT LKT D&R H&S Consolidation, adj & other LIXIL Group Q1 Results Q1 Results Overseas Total Overseas Total H1 Forecasts Total % Overseas Total Total % Revenue % % Core earnings % % CE margin 65% 106% 87% 87% 103% 96% +08 9% 10% 9% -0 Revenue % % Core earnings % % CE margin 65% 183% 67% 53% 65% 53% -14 7% - 7% -0 Revenue % loss turned Core earnings reduced profitable CE margin % 1% 1% +2 Revenue % turned Core earnings profitable % CE margin - 12% - 20% 08% 19% Revenue % % Core earnings % % CE margin 55% 55% 58% 58% +03 6% 6% +1 Revenue % % Core earnings % % CE margin 67% 67% 38% 38% Revenue Core earnings Revenue % % Core earnings % % CE margin 47% 6 35% 5 69% 43% +09 7% 7% -0 22

12 Q1 Other Income and Other Expenses, Finance Income and Finance Costs Items Q1 Q1 Increase/ decrease Note Rental income Gains on sales of fixed assets Q1 Gains on valuation of Gains on sales of subsidiaries' stocks result derivatives is matched with Other Gains on valuation of derivatives 118 Exchange differences losses Other Income Exchange differences losses 42 Costs of rent Net 76 Profit 3 Losses on sale or disposal of fixed assets Other Q1 Losses on valuation of Other Expenses result derivatives is matched with Foreign exchange gains 72 Foreign exchange gains Interest income Losses on valuation of derivatives 86 Dividend income Net -13 Loss Gains on valuation of derivatives Foreign exchange gains Foreign exchange gains booked in Q1 include Finance Income one-off valuation gains of the following: Interest expense (1) Foreign exchange gains (JPY4bn) recorded at the time of the Exchange differences losses translation of Euro-denominated borrowings to ese Yen Losses on valuation of derivatives (2) Foreign exchange gains (JPY64bn) recorded on foreign currency Finance Costs translation of Euro-denominated borrowings at the end of reporting period, which was repaid in Sep 2016 Total JPY104bn 23 Consolidated Financial Position (1) (2) Mar 2017 Jun 2017 Increase /Decrease Cash and cash equivalents Trade and other receivables Inventories Non-current assets 1,1924 1, Others Total Assets 2,0422 2, Trade and other payables Interest-bearing debt Others Total Liabilities 1,4827 1, Treasury shares Others Total Equity Equity Ratio (%) Net Assets per Share (Yen) 1, , Number of Shares (in thousands) 287, , Total Equity/Others +JPY563bn Breakdown Net profit (3) Dividend Other comprehensive income Variation due to sale of LIXIL Viva shares Foreign exchange rates (actual) Q4 Actual Amount JPY111bn -JPY86bn +JPY171bn (FX translation adjustment + JPY99bn and others) JPY367bn (Out of which difference from consolidated book value +JPY115bn) Q1 Actual US dollars Euros Thai bahts RMB * year-end exchange rates (Yen) (1) Ratio of equity attributable to owners of the parent (2) Equity per share attributable to owners of the parent (3) Includes net profit attributable to non-controlling interests 24

13 Performance of Major Overseas Subsidiaries (1) Company Unit Accounting Q1 Q1 ASB (ASD Holdings) USDm period Results Results Results Forecasts Exchange rate Revenue % 1,090 1,149 5% Core earnings % % % 8% 6% -19 7% 8% +08 Goodwill Intangible assets Revaluation of fixed assets, inventories and other Company Unit Accounting Q1 Q1 Grohe Group (GROHE) EURm period Results Results Results Forecasts Exchange rate Revenue % 1,391 1,506 8% Core earnings % 11% 10% % Goodwill 1,206 1,291-1,215 1,291 - Intangible assets 1,550 1,594 1, Revaluation of fixed assets, inventories and other 25 Performance of Major Overseas Subsidiaries (2) Company Unit Accounting Q1 Q1 Permasteelisa EURm period Results Results Results Forecasts Exchange rate Revenue % 1,286 1,391 8% Core earnings % % - 1% - 0% 2% 128% Goodwill Intangible assets Revaluation of fixed assets, inventories and other 26

14 Renovation Strategy in Continued progress leveraging on economic growth and reform Sales of Renovation Products Sales of Renovation Products Q1 Result Q1 Result % Renovation Ratio 39% 38% -1 Expanded PATTO Reform Product Lineup Products subject to PATTO Reform service have increased to 22 items by end July 2017, starting with 2 items in October 2016 Features of PATTO designed to reduce installment process and time required Despite increase in sales of renovation products, renovation ratio decreased due to greater increase in new housing related sales Number of member homebuilders Stores Mar-16 Sep-16 Mar-17 Jun-17 LIXIL Reform Shop (FC) LIXIL Reform Shop (Voluntary) 12,492 12,898 13,227 13,237 LIXIL PATTO Reform - (1) 500 3,365 3,513 Reframe Replus Windows for replacement Links Box, delivery locker for detached houses (1) The number of registered-service shops for LIXIL PATTO Reform when it started the service on October 1, (Reference) Revenue by Products and Services Segment Major products results Q1 results Unit: Ybn Unit: % Q1 results Quarterly Q1 Q2 Q3 Q4 Q1 LWT Sanitary ware Bathroom units Washstand cabinet units LHT Tiles Housing sashes and related products Exterior Wooden interior furnishing materials LHT Other LBT Building sashes * LKT Kitchens D&R Home center revenue * H&S Housing and Services business Sales of sales subsidiaries and others Overseas Total 1, *1 Building sashes are revised to IFRS figures including LIXIL s subsidiary retrospectively and Other are refigured concurrently *2 Home center revenue of D&R excluding impact of Ken Depot carve out in Sep 2015 (): Q1: 30%, Q2: 78% 28

15 External Recognition MSCI Empowering Women Index Selected as a constituent of the MSCI Empowering Women Index (WIN), created by MSCI Inc (July 2017) 2017 All- Executive Team Rankings Ranked first for Best CEO, second for Best CFO, third for Best IR, and second for Best IR Website in the construction sector of the 2017 All- Executive Team rankings from Institutional Investor Magazine (May 2017) 29 Cautionary Statements with Respect to Forward Looking Statements Statements made in these materials with respect to plans, strategies and future performance that are not historical facts are forward looking statements LIXIL Group Corporation cautions that a number of factors could cause actual results to differ materially from those discussed in the forward looking statements