Balmuda, rising cost rate, difficulty in procuring parts drastically reduced profits–“Efforts to turn a pinch into an opportunity” –CNET Japan

Balmuda announces its first quarter (January-March 2022) results for the first quarter of 2022. Sales increased 10.5% year-on-year to 4,092 million yen, operating income decreased 62.0% to 172 million yen, ordinary income decreased 68.7% to 144 million yen, and net income decreased 67.8%. It was 96 million yen.

2022 Q1 Earnings Summary

Regarding the significant decrease in profits, Mr. Gen Terao, President and CEO of Balmuda, said, “The cause is simple and clear.” Difficulties have occurred and the situation is not good. Due to design changes, we have not stopped shipping products, and design changes may lead to cost reductions. ” He emphasized that he is working to turn a pinch into an opportunity.

Mr. Gen Terao, President and CEO of Balmuda

The cost of sales ratio deteriorated by 5.8 points from 57.7% in the same period of the previous year to 63.5%. The operating profit margin has deteriorated by 8.1 points from 12.3% to 4.2%.

Regarding the impact of the depreciation of the yen, he said, “The exchange rate was expected in the first quarter and had little impact on profits. However, we need to look carefully and take countermeasures in the future.”

In addition, “Sales have been strong mainly in Japan. Kitchen-related products such as the coffee maker” BALMUDA The Brew “launched in November 2021 and” BALMUDA The Range “launched for South Korea have been strong. There was. “

Sales by product category were 740 million yen, up 8.9% year-on-year for air conditioning, 2,73200 yen for kitchens, and 177 million yen for mobile phones. Others decreased by 48.3% to 441 million yen.

Sales by product category in the first quarter of 2022 (air conditioning related, kitchen related)

Sales by product category in the first quarter of 2022 (mobile terminal related, etc.)

“In the air-conditioning-related area, sales of autumn / winter products for overseas markets increased. In the kitchen-related area, the new addition of BALMUDA The Range has the effect. Other than that, the decrease in cleaners has had an impact. Cleaners released in November 2020 There was a strong shipment from January to March 2021, and we also put in an initial lot for the Korean market. This is because it was quite calm in 2022. “

Sales by region increased 19.1% to 2,905 million yen in Japan, decreased 26.5% to 715 million yen, North America increased 70.1% to 160 million yen, and others increased 60.3% to 300 million yen. It was 11 million yen. Regarding the significant growth in North America, he self-analyzed, “While the marketing team couldn’t go there, the promotion that was persistently carried out by utilizing digital was effective.”

Sales trends by region category

SG & A expenses increased by 2.2 points from 30.0% in the same period of the previous year to 32.3%. “Most of the increase is labor costs,” he said. The breakdown of SG & A expenses is as follows: personnel expenses are 379 million yen (274 million yen in the same period of the previous year), advertising expenses are 96 million yen (115 million yen), and test and research expenses are 70 million yen (same). 63 million yen).

The number of employees increased from 119 in the same period of the previous year to 152. “We continue to invest in future growth and are actively hiring. In particular, we are strengthening the hiring of engineers. BALMUDA Technologies has released products with a high degree of technology integration one after another. We have set out what to do, and it is a necessary resource for that. We believe that the investment here is sound. ” The number of engineers has increased from 58 in the same period of the previous year to 83.

“Sales are strong, costs are low, and we continue to invest, which is the result of this first quarter,” he summed up.

What are the three priority points to deal with the high cost price and the soaring transportation cost?

For the second quarter of 2022 (April-June 2022), three important points were given.
The first is “improvement of gross profit margin”. Here, we are working to further reduce costs, improve parts procurement capabilities, and raise the prices of home appliances.

“The cost remains high and it is also affected by the soaring transportation costs. We must continue to carry out cost reduction activities in various ways,” he said. “One of the measures is the product itself. There is a redesign. Many Balmuda products have a long life, and the basic design was done 4 to 5 years ago. BALMUDA The Brew, which was developed in the first half of 2021, is made with the latest idea. There are many things that can reduce costs if you redesign with this idea. It has already started, but it will take time for this result to come out. “

He added, “Even if we make efforts to reduce the cost of parts, there is still a risk of foreign exchange. We believe that the diversification of destinations can minimize the profit impact of foreign exchange risk, and we are working on this as soon as possible. “There are companies that think that product planning has changed from people, but in terms of financial sense, they are generally with many people. How many people assumed that it was 130 yen per dollar?” . The depreciation of the yen is going to worsen for Balmuda. “

The company has been raising the price of home appliances since April 2022. “The last-minute demand in March, when we announced the price increase, was not as strong as we expected. We are not aware of the impact of the price increase on the decrease in sales volume in April. However, we need to look carefully,” he said. Although the impact is limited, “Balmuda is not a product sold at a low price, but a product sold at a value. Since the price of Balmuda products is high, there is no effect even if the price is raised a little. As a business person, price increases are very scary. The more proven products are, the more scary they are. I don’t want to do scary things. I’m not considering additional price increases. We are instructing our employees to do their best at this price. “

The second is “Expansion of appliance products. In the second quarter, we plan to announce new home appliances, which will be expanded not only in Japan but also overseas.

Currently, the company has a lineup of 15 products, but the products it handles are limited overseas. President Terao said, “In Japan, there is a recognition rate of 60%, but this also has the effect of a full lineup. I would like to decide on priority areas and develop in terms of aspects. For example, we are launching in the North American market. There are only three products. We are planning to launch products while considering the sales channel and branding strategy. We are beginning to make detailed plans for when and to which region to develop the strategy to be shown in terms of development. The department is preparing for that. “

The third is “Challenge to the BALMUDA Technologies category.” While demonstrating his commitment to continuously increasing the value of BALMUDA Phone, “BALMUDA Phone has been updated many times and improved hundreds of points. A major software update will be made in mid-May. We are planning to further improve the quality of the experience. This is a mechanism that was unthinkable in home appliances, and it is getting better and better. It is not enough compared to other home appliances, so we have to increase this. In addition to the irregular questionnaires so far, we will conduct regular questionnaires in the future. SNS reaction We will capture and verify which update was effective. We will also continue to release dedicated accessories and release the next accessory in the near future. We will not give up for the successor. , With full power, we will continue with never give up. “

BALMUDA Phone is sold through Softbank. A campaign to reduce the price by up to about half will be implemented from February. The price of the SIM-free version has also been reduced since March. “It got off to a tough start when it was released in November 2021, but since the price cut, the SIM-free version has been selling accordingly, and the number of users is increasing. I want to increase it. “

In addition, “BALMUDA Phone is the first product of BALMUDA Technologies, expanding the lineup of BALMUDA Technologies and remodeling BALMUDA Phone to the next product. Its development is in progress at this point. So, I think that it will be effective later to carefully polish the experience value to the smallest detail. In a few years, BALMUDA Phone will definitely become one of our main products. ” Showed.

There is no change in the business outlook for FY2022 (January-December 2022), with sales increasing 0.2% year-on-year to 18,410 million yen, operating income decreasing 47.3% to 800 million yen, and ordinary income. Is down 46.0% to 790 million yen, and net income is down 45.8% to 550 million yen. The operating profit margin is expected to be 4.3% and the cost of sales ratio is expected to be 62.6%. President Terao said, “We have taken sufficient measures to deal with the rise in costs. However, what was unplanned was the depreciation of the yen. If this sticks, it will be different from the expected figures. I do not know how the exchange rate will move. Yen If the yen continues, we have no choice but to do our best. I want to keep the stance of keeping the plan. “