Message from the President

I would like to thank all of our shareholders for their continued support.
I would like to extend my greetings as I deliver the 210th Interim Report (April 1, 2022 to March 31, 2023).

The Japanese economy took a hit in the first half of fiscal 2022 from another wave of COVID-19 infections while resource prices soared against a backdrop of rapid yen depreciation and the prolonging of Russia's invasion of Ukraine, but a fall in the rate of severe cases and a shift in attitude towards living with COVID-19 led to an ongoing mild recovery. However, there is an ongoing state of economic uncertainty against a backdrop of continuance of the Zero-Covid policy that is hindering economic growth in China and rising interest rates and record-breaking inflation in the West.

It is in such a business environment that as a group, we commenced our new "ACTION22-24" medium-term business plan on April 1 this year as the first step towards realizing our long-term vision "Mermaid 2042" in 2042, the 150th anniversary of our establishment. In ACTION22-24, we are aiming for recovery from the COVID-19 pandemic, further accelerating our level of growth towards the realization of our long-term vision, creating new things and taking on new initiatives. As part of this, in the textile segment we are undertaking initiatives such as strengthening business alliances that include collaborations with other companies and investments in fashion brands, increased utilization of the "Saisei" upcycling system in partnership with our subsidiary Shinnaigai Textile Ltd., and female staff members launching a Femtech Project. Meanwhile, the Real Estate / Service segment has started work on plant expansion at our subsidiary Shikibolinen Inc. in order to deal with increasing demand in the linen supply business.

However, in the textile segment in particular, soaring raw material, dye, and compound prices and increasing logistics costs that include overseas transportation coupled with a rapid decline in the value of the yen had significantly strained profit margins. As a result, sales of 18.5 billion yen (8.0% increase year-on-year) and operating profit of 580 million yen (11.9% decrease year-on-year) were recorded in this second quarter consolidated accounting period, and ordinary profit was 586 million yen (28.0% increase year-on-year) due to currency exchange gains. In addition, due to extraordinary profits that include the insurance payout received for damage from the fire that occurred on September 8, 2021 at our overseas consolidated subsidiary Mermaid Textile Industry Indonesia, quarterly net profit attributable to the parent company was 767 million yen (89.7% increase year-on-year).

For the second half of fiscal 2022, manufacturing costs will remain high due to soaring energy and raw material prices, and it is expected that the business environment the group finds itself in is unlikely to show any signs of improvement while we continue seeing a weak yen, frugality especially due to the soaring retail cost of food and everyday goods, and a negative consumer sentiment among other factors.
And so we shall work on the pressing issues of further reducing costs in our existing businesses, improving production efficiency, and reallocating costs, and take other such actions to improve our profit margins.

As part of improving our profitability for our existing business with importance given to capital efficiency and revising our business portfolio in "ACTION22-24," we have sold all of our shares in our former subsidiary The Mermaid Sports Ltd.As well as proceeding to make a range of investments to improve corporate value on the basis of an increase in cash flow through the sale of the aforementioned shares and other means, and with regard to the dividend for the fiscal year ending March 31, 2023 to give back to shareholders, in consideration of maintaining a stable dividend payouts, we have revised the dividend forecast published on May 12, 2022 and increased it by 10 yen to 50 yen.

We will continue to aim to fulfill our social responsibility and improve our corporate value as a group of companies that aim to realize a safe, reliable, and comfortable society that is kind to the environment to gain the support of our shareholders and stakeholders.

I would like to thank you again, and I hope to continue receiving support from all of our shareholders.

December 2022