LIXIL Revenue and Profit Decrease in FYE 2024 Due to Sluggish Demand in International Markets

- High interest rates and prolonged inflation impacted international business, particularly in Europe and the US
- Japan business faces decline in new housing starts but robust sales of window renovation products helps achieve initial targets 

Tokyo – LIXIL Corporation (“LIXIL”, TSE Code: 5938), maker of pioneering water and housing products, today announced its fourth-quarter and full-year results for the fiscal year ending March 31, 2024.

CEO Comment:
“During the fiscal year ending in March 2024, LIXIL experienced a decline in both revenue and profit on a consolidated level.  Although the new housing market in Japan contracted more than initially projected, robust demand for renovation products, especially for home insulation, helped to sustain our financial performance. However, we encountered particularly adverse market conditions in our international business, with a slowdown in demand across the year, most acutely felt in Europe and the US. 

In response to these extraordinary market conditions, we have taken decisive actions aligned with the strategic initiatives set forth in our 'LIXIL Playbook.' We initiated structural reforms early in the fiscal year aimed at recovering the profitability of our international business operations. This included optimizing our personnel allocation in Europe and the US, further reviewing our business portfolio, including the streamlining of loss-making entities, and restructuring our supply chain. We anticipate these initiatives will further improve our profitability from the fiscal year ending March 2025.

To enhance financial performance and achieve sustainable growth, we remain focused on serving consumers with more differentiated products while also delivering a positive impact for society and the environment. Concurrently, we are transforming LIXIL into a more agile, entrepreneurial organization, through accelerated digital transformation and building an inclusive culture that can drive innovation and seek new avenues for growth.”

- Kinya Seto, CEO, LIXIL 

Financial Highlights (Full-Year): 
Revenue
For the full year, LIXIL recorded revenue of ¥1,483.2 billion, marking a 0.9% decline year-on-year.
In Japan, despite a significant shortfall in new housing starts relative to initial projections, sales of high insulation windows in the renovation sector saw a year-on-year increase. This growth contributed to maintaining nearly flat revenue at ¥991.3 billion.

Internationally, high interest rates and prolonged inflation in Europe and the US impacted demand for housing-related products, resulting in revenue of ¥502.1 billion. This figure represents a 4% decrease year-on-year, and a 12% decline on a local currency basis. While the downturn in demand stabilized in the fourth quarter, demand has yet to recover.

Core Earnings
For the full year, LIXIL recorded core earnings of ¥23.2 billion, a 10% decrease from the previous year. Sluggish demand, with the exception of parts of Asia, was a key factor for this decrease. Despite a gross profit margin improvement of 0.5pp to 31.9%, the core earnings margin decreased by 0.2pp to 1.6%, impacted by an increase in selling, general, and administrative (SG&A) expenses, attributable to foreign exchange effects.

In the fourth quarter (three-month period), LIXIL reported core earnings loss of ¥3.5 billion, which is a reduction of ¥8.2 billion compared to the same period in the previous fiscal year.

Net Profit Attributable to Owners of the Parent
For the full year, LIXIL recorded a net loss of ¥13.9 billion, marking a decline of ¥29.9 billion from the previous year. This reflects an increase in expenses associated with the early realization of structural reforms, including the reorganization of certain businesses, and an increase in financial expenses from rising interest rates, and increased tax expenses linked to a temporary decline in profitability. Additionally, LIXIL recorded a loss related to Permasteelisa S.p.A., which was a former consolidated subsidiary of our company.

Year-End Dividend Forecast
LIXIL maintains its year-end dividend forecast at ¥45 per share. The annual dividend is expected to remain the same as the previous year at ¥90 per share.

Full-Year Forecast for FYE2025
LIXIL expects to generate ¥1,570 billion in revenue and ¥35 billion in core earnings. The company intends to maintain its annual dividend of ¥90 per share. 

Performance by Business Segment and Region (Full-Year):
Revenue from LIXIL Water Technology (LWT) in Japan remained generally flat at ¥420.5 billion. Despite the successful implementation of price optimization measures and a rise in sales of renovation products, core earnings decreased 16.4% compared to the previous year, amounting to ¥20.9 billion. This decline was primarily due to the impact of reduced new housing starts, which outweighed the benefits of price optimization and fixed cost reduction measures. Consequently, the core earnings margin contracted to 5.0%, marking a reduction of 1.0pp. Over the course of the full year, the proportion of renovation product sales grew by 1.6pp year-on-year, constituting 51% of total sales.

Revenue from LWT’s international business was impacted by the continued slowdown in demand, attributed to rising interest rates and inflation, resulting in a 4.1% year-on-year decline to ¥476.4 billion. In the Americas region, expectations of a decrease in interest rates suppressed demand, leading to 5% lower sales on a local currency basis. In the Europe, Middle East, and Africa (EMEA) region, and particularly in Europe, sustained high interest rates further constrained housing investment demand, causing sales to drop by 17% on a local currency basis. In the Greater China region, the slump in the real estate market coupled with a decrease in consumer spending, amid a deteriorating economy, contributed to a sales decline of 2%. In the Asia Pacific region, despite India's continued robust sales growth, Vietnam experienced softening demand, which led to a sales decrease of 4% on a local currency basis. Core earnings for the international business decreased by 91.7% year-on-year to ¥1.8 billion, and the core earnings margin contracted to 0.4%, a 4.1pp decline from the previous year, partly due to an increase in SG&A expenses as a result of foreign exchange effects.

Revenue at LIXIL Housing Technology (LHT) remained generally flat at ¥596.4 billion. While LHT successfully captured growing demand for renovation, its revenue was affected by the downturn in new housing starts. Core earnings significantly increased by 85.4% from the previous fiscal year, reaching ¥35.9 billion, reflecting the impact of price optimization measures to mitigate rising costs. Additionally, sales of high insulation windows, bolstered by government subsidies, contributed considerably to the increase in profit. The core earnings margin stood at 6.0%, representing a 2.8pp increase from the previous year. The proportion of sales attributed to domestic renovations climbed by 3.5pp year-on-year, accounting for 38% of total sales.

LIXIL Playbook Progress
LIXIL established the "LIXIL Playbook" to outline the fundamental direction of its management. In the fiscal year ending March 2024, LIXIL implemented the following measures in line with the Playbook’s five strategic initiatives:
 
Tackle Inflation and Supply Chain Challenges
In response to inflation and supply chain challenges, and in line with the structural reform of the international business, LIXIL has been reorganizing its supply chain, including the consolidation of factories in the Asia region. For the fiscal year ending March 2025, it will continue implementing measures to enhance competitiveness and productivity, including in its supply chain.
 
Optimize Japan and Drive New Growth
LIXIL is capturing steady growth in demand for renovation products such as high insulation windows. In addition to digitalization utilizing artificial intelligence (AI), LIXIL is transferring differentiated technology developed in Japan into international markets.
 
Grow Global Water Business
LIXIL has implemented structural reforms aimed at restoring profitability in its international water business. These reforms include optimizing personnel allocation and further reviewing its business portfolio, particularly by divesting businesses that are unprofitable or where synergies are not expected. The positive impact of these reforms on profitability is expected to be realized from the fiscal year ending March 2025. Additionally, LIXIL is actively expanding faucets sales in the US market and further expanding its presence in growing markets, such as the Middle East.
 
Embed Robust Environment Strategy
LIXIL has been expanding its environmentally friendly product lineup to help solve social and environmental challenges. In particular, PremiAL, a low-carbon aluminum material, is experiencing a surge in demand due to growing awareness of decarbonization across supply chains.
 
Develop New Core
By expanding its lineup of differentiated products and establishing new core businesses, LIXIL aims to address changing consumer needs and solve a wide range of social challenges, enabling it to achieve sustainable growth. 

Through innovative technologies and concepts, LIXIL has launched products such as PremiAL, a low-carbon aluminum material; revia, a material blending recycled plastic and wood waste; and KINUAMI, a foam shower that helps caretakers. In addition, it has unveiled high insulation products to improve energy efficiency, water systems to enhance the safety and enjoyment of water while reducing plastic waste, and shower toilets that leverage femtech to support women’s health. By achieving a product mix where such offerings represent the majority of sales, LIXIL aims to deliver sustainable, high profitability, thereby becoming a company that achieves sustainable  growth while positively impacting society. In the fiscal year ending March 2025, LIXIL will focus on laying the groundwork to achieve this, while aiming to complete structural reforms.

-  END

*Please see disclosures here.