Message from the President

Greetings to all our valued investors. We would like to give you our sincerest thanks for your continued patronage. We present our business summary for the 97th term to you here.

During the fiscal year under review, the Japanese economy showed signs of recovery in corporate activities and consumer spending, as normalization of economic activities progressed due to the gradual relaxation of behavioral restrictions caused by a new type of coronavirus infectious disease. However, there are concerns about various risks such as the prolonged situation in Ukraine, price increases due to the depreciation of the yen and the appreciation of resources, heightened inflationary pressures, and the trend toward strengthening global monetary tightening accompanying these developments. As a result, the economic outlook is uncertain.

Sakai Trading Group adopted the "Accounting Standard for Revenue Recognition" ("Revenue Recognition Accounting Standard") from the previous fiscal year. Business transactions of our group include a wide mix of "principal transactions" in cases where companies provide goods or services by themselves and "agent transactions" in cases where customers have the obligation to arrange for customers to receive their goods or services in order to handle the same merchandise. We are currently monitoring business results based on total sales from the following factors and other factors.

• There are no material differences in operating profit margins between "principal transactions" and "agent transactions", and significant differences in gross profit margins on the surface will occur even though the impact of these factors on profits is insignificant
• The net sales method is not compatible with the profitability of business transactions and the efficiency of working capital.
• Our "agency transactions" are mainly based on the so-called "outright sale/purchase" model, and trade receivables and payables are generated based on gross transactions. Therefore, conventional standards are desirable for understanding and analyzing counterparty credit information management, etc.

Based on the above and other factors, our Group quantifies total sales as "transaction volume" as a performance management factor and utilizes it for performance analysis and other purposes based on the judgment of management.
Therefore, in the explanation of the analysis and review of the status of operating results, etc., we will also explain the "net sales" based on the revenue recognition accounting standards, etc. and the "transaction volume" as a management indicator within our group in a concurrent format.

The Group's quantifies total sales for the fiscal year are as follows.

The Group's quantifies total sales for the fiscal year (Ending March 31, 2023) :Comparison with the previous fiscal year

The Group's quantifies total sales for the fiscal year (Ending March 31, 2023) :Quarterly Trends

Our Group's consolidated net sales for the fiscal year under review were 13.248 billion yen. Regarding the transaction value in the consolidated fiscal year, environmental and functional materials and electronic materials, which grew significantly in the second half of the previous consolidated fiscal year, performed strongly until the third quarter of the consolidated fiscal year. Due mainly to these factors, they increased by 5.1% from the previous fiscal year to 47.581 billion yen.
In the fiscal year under review, the transaction volume increased significantly from the third quarter of the previous fiscal year. As shown in the above table, the volume of transactions increased from the previous fiscal year in each fiscal year until the third quarter of the fiscal year. However, sales of electronic materials and barium intermediates of environmental and functional materials were sluggish in the fourth quarter due to a sharp drop in the electronic materials market caused by a sharp decline in demand for smartphones, PC, and other products. As a result, sales for the fourth quarter decreased from the previous year.

In terms of profits, operating income for the fiscal year under review increased 5.4% from the previous fiscal year to 1.089 billion yen. Factors behind the increase in profits included an increase in the annual transaction volume, despite a decline from the previous year in the fourth quarter of the fiscal year under review. Ordinary income for the current fiscal year decreased by 2.0% from the previous fiscal year to 1.146 billion yen. The main factors behind this were that although operating income increased, non-operating income and expenses deteriorated due to a year-on-year decrease in foreign exchange gains. In addition, a 1 million yen gain on sales of golf club memberships and a 19 million yen loss on devaluation of investment securities were recorded as extraordinary gains and extraordinary losses in the fiscal year under review. As a result, net income attributable to owners of the parent for the fiscal year under review decreased 3.2% from the previous fiscal year to 722 million yen.

The breakdown of major businesses is as follows.

As mentioned above, our Group's consolidated net sales for the fiscal year under review were 13.248 billion yen. Transaction volume increased 5.1% from the previous fiscal year to 47.581 billion yen.

Environmental and Performance Materials

In the environmental and functional materials business, net sales for the fiscal year under review were 5.978 billion yen. Trading volume increased 19.3% year on year to 24.95 billion yen, mainly due to growth in sales of barium intermediates, catalysts, and other imported products for the domestic market, which grew in the previous fiscal year.

Electronic Materials

In electronic materials, net sales for the fiscal year under review were 1.481 billion yen. As for transaction value, barium and dielectric materials for electronic materials, which grew significantly in the second half of the previous fiscal year, fell sharply in the second half of the fiscal year under review due to a sense of inventory surplus in the market and a decline in demand. As a result, transaction value decreased 12.7% from the previous fiscal year to 12.111 billion yen.

Hygienic and Industrial Materials

As for hygienic and industrial materials, net sales for the fiscal year under review were 5.788 billion yen.
The transaction value increased 0.6% from the previous fiscal year to 10.52 billion yen due to stable sales of hygienic materials for diapers and sanitary products and a slight improvement in the performance of industrial materials.

The business performances for each segment are as follows.

Domestic Corporation

Segment sales for the fiscal year under review amounted to 10.096 billion yen. In terms of transaction value in the fiscal year under review, although there was a decrease in electronic materials, environmental and functional materials increased due to an increase in barium intermediates and other imported products, and hygiene and industrial materials also remained stable. As a result, operating income increased by 3.9% from the previous fiscal year to 41.424 billion yen. Operating income also increased 1.2% to 754 million yen due to an increase in transaction volume.

International Subsidiaries

Segment sales for the fiscal year under review amounted to 3.151 billion yen.
Transaction volume for the fiscal year under review increased 14.0% year on year to 6.157 billion yen due to the premium effect of the depreciation of the yen, the recovery from the corona disaster at the North American corporation, increased sales of denitrification catalysts at the Chinese corporation, and steady performance at the Indonesian corporation. Operating income also rose 17.1% to 342 million yen due to an increase in transaction value and an improvement in business performance in the second half of the fiscal year despite soaring raw materials and export freight charges at the Indonesian subsidiary.

Our group has the following action plans to realize the vision of our management plan.

1. We will focus on new overseas markets and undeveloped fields in order to improve our trade ratio as we work to further expand and deepen our overseas operations.
2. We will further expand our foreign offices beyond the 8 locations we currently have over a 5 year period, as well as increase our number of personnel (including foreign subsidiary staff) by around 30.
3. We will treat staff diversity in terms of nationality, gender and age as a source of competitive strength as we work to improve our corporate performance.
4. We will review our organization and policies in order to encourage ambition and develop our strengths, while promoting human resources that match with the appropriate roles on a global basis.
5. We will take action to improve our working environment with the aim of being a corporate group that is filled with appeal and energy, while working to raise the motivation of our employees.
6. We will create value within the chemical product industry that is unique to Sakai Trading, while broadly contributing to society by responding to the needs of our stakeholders.
7. We aim to improve the quality of our operations through strengthening our corporate governance and internal control system.
8. We will construct a strong business foundation that can withstand changes to the management environment as we aim towards sustainable growth and raising our corporate value.

To all our valued shareholders, we are grateful and look forward to your continued support and guidance.