LIXIL PROFITS DECLINE IN Q1

Please see below some highlights of today’s announcement of the financial results for first quarter of the fiscal year ending March 31, 2024 from LIXIL, a manufacturer of pioneering water technologies and housing products whose brand portfolio also includes the GROHE brand. The full press release in English can be found here.

• Economic slowdown continues to impact key global markets, especially Europe, impacting Q1 revenue and profit

• Growing demand for home renovation products in Japan, from high insulation windows to water products, offsets sluggish new housing market 

Statement by Kinya Seto, CEO, LIXIL:

“We faced challenging macroeconomic conditions in the first quarter as demand for housing products and building materials remained sluggish. High interest rates and inflation continued to suppress demand in international markets in particular, especially in Europe, impacting revenue and profit. On the other hand, growing demand for home renovation products in Japan, especially high insulation windows backed by government subsidies, helped offset the slowdown in new housing starts. We recorded lower consolidated profit in the first quarter but remain confident in our forecast that approximately 80% of our annual core earnings will come in the second half of the fiscal year as price optimization measures take hold and international markets recover. 

We are committed to transforming LIXIL into an organization that is more resilient to changes in our external operating environment. To achieve this, we are steadily executing on the strategic initiatives of the LIXIL Playbook, which outlines our management direction. We have solved supply chain constraints, are capturing demand for renovation in Japan, and are strengthening profitability. We are expanding our lineup of environmentally friendly products, including building material PremiAL R100 – consisting of 100% recycled aluminum – which we aim to deliver this autumn. We are also undertaking a comprehensive review of operations and accelerating structural reforms in our international business to drive productivity and build a stronger foundation for sustainable growth.” 

Revenue 

Revenue remained generally flat at ¥359.2 billion in the first quarter. In international markets, revenue decreased by 6% year-on-year to ¥121.0 billion. After factoring out the impact of foreign exchange, revenue in international markets decreased by 13% year-on-year. 

Core Earnings 

Core earnings decreased by 46.3% year-on-year to ¥3.7 billion due to the impact of decreased revenue and higher fixed costs due to lower production volume. Core earnings ratio decreased by 0.9pp to 1.0%. 

Net profit attributable to owners of the parent 

Net profit decreased by ¥5.4 billion year-on-year to ¥0.4 billion, reflecting the decrease in core earnings, the absence of last year’s gain on the transfer of land and other assets, and an increase in finance costs. 

Performance by Business Segment and Region  

LIXIL Water Technology’s international business recorded revenue of ¥115.0 billion, a 5.6% decrease year-on-year. Revenue in all international regions, constituting the Americas, Europe, the Middle East and Africa (EMEA), China, and Asia Pacific, decreased on a local currency basis. Core earnings decreased by ¥7.4 billion year-on-year, resulting in a loss of ¥1.6 billion. The recovery of demand in each region is expected to vary but normalize by the end of FYE2024. LIXIL is executing structural reforms in its international business to improve productivity. 

Jonas Brennwald, Leader LIXIL EMENA, commented: “The first quarter of this fiscal year has been challenging. Factors such as rising costs, the economic downturn in the construction industry and a continuing high level of uncertainty among consumers, who are shying away from investments, are having a major impact on our business and the industry as a whole. With our focus on our targeted product portfolios and service offerings we are able provide the best possible support for our B2B partners and an attractive proposition to consumers.”

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