- 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
Tokyo – LIXIL Corporation (“LIXIL”, TSE Code: 5938), maker of pioneering water and housing products, today announced its first quarter results for the fiscal year ending March 31, 2024.
CEO Statement:
“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.”
- Kinya Seto, CEO, LIXIL
Financial Highlights
Revenue
Revenue remained generally flat at ¥359.2 billion in the first quarter. In Japan, revenue increased by 2% year-on-year to ¥240.4 billion, driven by increased demand for home renovation products, especially high insulation windows, which helped offset the sluggish new housing market. 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
Revenue from LIXIL Water Technology (LWT) in Japan declined marginally to ¥99.1 billion. Core earnings decreased by 27.3% to ¥5.3 billion as the impact of lower new housing starts outweighed the effect of LIXIL’s price optimization measures and reduction in fixed costs. Core earnings margin subsequently declined to 5.4%, a decrease of 2.0pp year-on-year. Focusing on rising demand for home renovation products centered around the bathroom, the ratio of revenue generated by renovation-related sales increased by 2.3pp year-on-year to 51%, surpassing LWT’s goal of achieving 50% renovation-related sales in Japan by FYE 2025 for the first time.
LWT’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.
Revenue from LIXIL Housing Technology (LHT) increased by 3.1% year-on-year to ¥147.7 billion, reflecting favorable sales of high insulation windows in Japan. In addition to the impact of higher energy prices and greater environmental awareness, government subsidies to renovate windows to improve home insulation and save energy are driving demand. Core earnings grew by 167.5% to ¥8.4 billion, and core earnings margin increased by 3.5pp to 5.7%. Increased revenue and stabilizing raw material costs, including aluminum, contributed to higher core earnings.
*Please see disclosures here.
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