Please explain the business results for the first half (from April 2022 to September 2022).

A recovery of demand for capital spending resulted in an increase in sales and a recovery trend in profits.

For the first half of this period (FY 2023/3), there were aggressive monetary tightening in United States, disruptions in Europe caused by the Russian invasion of Ukraine, an economic slowdown in China resulting from the zero COVID policy, and rapid devaluation of the yen in Japan amid the prolonged impact of COVID-19, and the prospects for the global economy generally remained uncertain. In such an environment, our group made proposals on products and services supporting sustainable manufacturing, such as increasing the sales of WHOLEGARMENT® flat knitting machines and expansion of the solution business to customers and industries around the world, based on the medium-term management plan, Ever Onward 2023, which started the previous fiscal year. At Techtexil 2022, the international exhibition by the technical textile industry held in Frankfurt, Germany, in June 2022, we described the appeal of potential opportunities and concurrently promoted an approach to new markets by exhibiting prototype models and samples of knitting machines for industrial materials.
In the apparel and fashion industry where our group supplies products, the sentiment for consumption and manufacturing has improved as economic activities resumed in the previous fiscal year. Also, for the first half of this period, capital spending by customers generally remained on a recovery trend with slight differences between regions. However, there is no improvement in the situation, such as the difficulty in the procurement of parts and raw materials and disruptions in the supply chain, which have been seen since the second half of the previous fiscal year, and there is still the case that it is impossible to set the date of delivery as requested by customers. Coupled with the above, the rising prices for parts and raw materials resulting from the tight supply and demand situation, increasing energy prices, and globally rising marine transportation costs, which have been seen since the previous fiscal year, increased business costs.
As a result of the above, consolidated net sales increased to 17,918 million yen (up 13.3% year over year) for the first half. Operating loss, ordinary loss, and net loss attributable to owners of the parent came to 435 million yen (1,355 million yen for the same period of the previous year), 207 million yen (844 million yen for the same period of the previous year), and 511 million yen (1,068 million yen for the same period of the previous year), respectively. Regrettably, a loss was posted, following the previous period, but it decreased from the same period of the previous year.

How were business results by segment?

Both the flat knitting machine segment and the design system segment increased sales because of the recovery in capital spending.

Our core flat knitting machine segment achieved a steady increase in orders received because of the general recovery in demand in many countries.
In the main market of China, production activities and capital spending became weak due to disruptions in the supply chain resulting from the lockdown in Shanghai while sales increased mainly in N.SVR, a model with high production efficiency, from major Hong Kong customers. The market was mixed. In other Asian markets, including Bangladesh, an OEM hub of knit goods for advanced countries, capital spending became active due to the recovery in orders received from major apparel companies, and our sales also increased.
In the European region, particularly in the Italian market, which is good at developing high-value-added merchandise, capital spending was active along with a resumption in economic activities. Demand increased mainly for WHOLEGARMENT flat knitting machines and fashion knitting machines with a high level of sophisticated designs. Also in Turkey, capital spending became active due to increased orders from European apparel manufacturers, and sales increased mainly in computerized flat knitting machines.
The design system segment also increased both sales volume and net sales of the design system SDS®-ONE APEX4, along with a sales increase in the flat knitting machines. The APEXFiz®, the subscription service for design software, increased license contracts with apparel brands mainly in Europe, the United States, and Japan. The automatic fabric cutting machine P-CAM® also enjoyed a sales increase mainly in overseas markets.

Please show us the prospects for the second half and beyond.

We seek to clear a backlog due to an improvement in the business environment and return to the black for the first time in four periods.

After the second half, we will continuously make proposals around the world according to conditions in regions, placing a focus on WHOLEGARMENT flat knitting machines, which are positioned as a strategic product. In the business results for the first half, profits were severe though demand for capital spending generally showed an upward trend mainly in the European market. Orders received and inquiries steady increased near the level before COVID-19. In the Chinese market where the economy shows a slowing trend, it is expected that consumer spending and production activities will steadily recover mainly due to the impact of government support.
It is still difficult to procure parts and raw materials, but it is estimated that the global supply shortage of semiconductors and electronic parts will steadily resolve. Our procurement of parts and raw materials is also expected to improve after the second half, particularly in the fourth quarter when orders received usually reach a peak, and then we expect to make it possible to make proposals aggressively.
Given the above, the presently accumulated backlog will be cleared through the entire second half, and profits will improve along with an increase in sales. Consequently, net sales, operating income, ordinary income, and net income attributable to owners of the parent are expected to be 44,500 million yen, 1,000 million yen, 1,600 million yen, and 800 million yen, respectively, for the consolidated business results for this period. It is likely that that we will return to the black for the first time in four periods.

Please give a message to shareholders.

We will contribute to the creativity of the apparel and fashion industry and increase enterprise value.

We have a basic policy of continuously paying stable dividends for the long term through the sustainable development of business by setting the return of profits to shareholders as one of the most significant tasks. We posted losses for the first half, following the previous period, but we will pay dividends of 15 yen in total, which consist of interim dividends of 5 yen per share and year-end dividends of 10 yen in light of a recovery of business results for the second half and the basic policy of keeping stable dividends.
Our group reached the milestone of the 60-year anniversary of establishment this year. It started the business with glove knitting machines 60 years ago, and then entered into the flat knitting machine industry and developed WHOLEGARMENT flat knitting machines for the first time in the world. Furthermore, it has performed new challenges to continuously create “things that do not exist in the world,” such as the design system enabling the creation of virtual samples and the automatic fabric cutting machines usable in a wide variety of industries.
We call the new way of manufacturing using these products and services the total fashion system and have proposed it for the industry. Sustainable manufacturing based on the total fashion system contribute to the resolution of problems in the apparel and fashion industry, such as waste arising from mass production and excess inventory and the resulting environmental burden. We think that besides the efficiency through cutting waste and the reduction in the environment burden, the creativity moving and surprising users is the most important to make the industry truly sustainable. SHIMA SEIKI will continuously provide products and services and offer proposals for solutions that continuously enable users to use their creativity as an innovative company in the apparel and fashion industry as we seek sustainable growth. We ask shareholders for their continuing understanding and support.