In the Machine Tools Segment, sales of CNC automatic lathes decreased in 2023. Notwithstanding progress from the beginning of the year under review to reduce the order backlog from the previous year mainly in the U.S. and European markets, this decrease was ostensibly due to delays in market recovery in China. By geographic region, sales in the U.S. declined overall owing to sluggish market conditions, which largely reflected such factors as the prolonged upswing in interest rates. In addition, sales in the European market increased significantly centered mainly on automotive-related products. Sales volume exceeded 1,000 units for the first time in 14 years. Meanwhile, sales decreased substantially in the Asian market. This was essentially attributable to weak sales of automotive- and telecommunications-related products on the back of the continued cautious approach toward capital investment in China over the latter half of the previous year and other factors. Sales declined significantly in the domestic market, for the most part due to the continued lackluster performance of the automotive sector.

Accounting for these factors, net sales in the Machine Tools Segment decreased 10.6% compared with the previous year, to ¥62,085 million (US$437,218 thousand), while operating income declined 15.5% year on year, to ¥10,350 million (US$72,887 thousand).

* In conjunction with its decision to dissolve the Precision Products Division, Star Micronics Co., Ltd. took steps to revise the classification of its business segments in 2020. Effective from 2021, the Company reclassified the three Special Products, Machine Tools, and Precision Products segments into the two Special Products and Machine Tools segments. Meanwhile, turning to segment information in 2020, the amount included in the Precision Products Segment is now included in the Machine Tools Segment.

Under these circumstances, and in the context of the Company’s consolidated business performance for the coming year, sales in the mainstay Machine Tools Segment are forecast to decline in 2024. Despite expectations of a recovery mainly for automotive-related products in Japan and an anticipated gradual positive turnaround overseas toward the latter half of the coming year, this forecast decline is amid sluggish capital investment demand across all regions since the previous year.

Looking ahead, Star Micronics will move forward with plans to undertake the large-scale renovation of its domestic factories. In specific terms, the Company will undertake work on the Kikugawa South Factory to boost manufacturing of core components and on the Makinohara Factory to engage in body assembly, thereby expanding production capacity through three manufacturing bases. In addition, the Asia Solution Center commenced operations in 2023, and preparations are underway for the Europe Solution Center. Building on these endeavors, Star Micronics is also strengthening its sales structure by enhancing before- and after-sales services in Japan, Europe, and Asia.

Furthermore, we are planning to establish a machine tool sales subsidiary in India, where demand for CNC Swiss-type automatic lathes is expected to grow.

As far as business results are concerned, net sales in the Machine Tools Segment are forecast to decline 18.0% compared with the year under review, to ¥50,930 million. Operating income is anticipated to decrease 25.4% year on year, to ¥7,720 million.