Daido Metal : Consolidated Financial Results for the Three Months Ended June 30, 2020

Note:This document is a translation of a part of the original Japanese version and provided for reference purposes only. In the event of any discrepancy between the Japanese original and this English translation, the Japanese original shall prevail.

Consolidated Financial Results

for the Three Months Ended June 30, 2020

[Japanese GAAP]

August 07, 2020

Company name:

Daido Metal Co., Ltd.

Stock exchange listing: Tokyo,Nagoya

Code number:

7245

URL: https://www.daidometal.com

Representative: Seigo Hanji

Chairman and Chief Executive Officer

Contact:

Motoyuki Miyo

Director and Managing Executive Officer, Head of Corporate and Financial Planning Division

Phone:

[phone]

Scheduled filing date of quarterly securities report:

August 07, 2020

Scheduled start date of dividend payments:

－

Availability of supplementary briefing material on quarterly financial results:

Yes

Schedule of quarterly financial results briefing session:

No

(Fractional amounts of less than one million yen are rounded down)

1. Consolidated Financial Results for the Three Months Ended June 30, 2020 (April 01, 2020 to June 30, 2020)

(1) Consolidated Operating Results

(% indicates changes from the previous corresponding period.)

Net sales

Operating profit

Ordinary profit

Profit attributable to

owners of parent

Three months ended

Million yen

%

Million yen

%

Million yen

%

Million yen

%

June 30, 2020

18,870

(25.9)

(1,054)

－

(1,403)

－

(1,151)

－

June 30, 2019

25,482

(4.5)

1,144

(34.6)

1,075

(28.3)

498

(33.7)

(Note) Comprehensive income:	Three months ended June 30, 2020:
	Three months ended June 30, 2019:

¥	(2,664)	million	[	－ %]
¥	931	million	[	－ %]

		Basic earnings	Diluted earnings per
		per share		share
Three months ended		Yen			Yen
June 30, 2020		(24.93)			－
June 30, 2019		10.48			－
(2) Consolidated Financial Position
		Total assets		Net assets	Capital adequacy ratio
As of		Million yen			Million yen			%
June 30, 2020		160,302			60,627			33.1
March 31, 2020		159,539			64,168			35.1
(Reference) Net assets less non controlling interests:	As of	June 30, 2020:	¥	53,074	million
				As of	March 31, 2020:	¥	55,988	million

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2. Dividends

					Annual dividends
		1st	2nd	3rd		Year-end	Total
	quarter-end	quarter-end	quarter-end
		Yen		Yen	Yen		Yen	Yen
Fiscal year ended March 31, 2020		－		20.00	－		15.00	35.00
Fiscal year ending March 31, 2021		－
Fiscal year ending March 31, 2021				－	－		－	－
(Forecast)
(Note) Revision of the forecast for dividends announced most recently:	No
(Note) Breakdown of the interim dividend for the fiscal year ended March 31, 2020 :
Regular dividend	15	yen
Commemorative dividend	5	yen

(Note)The forecast of dividends for the fiscal year ending March 31, 2021 is not available at this moment.

3. Consolidated Financial Results Forecast for the Fiscal Year Ending March 31, 2021(April 01, 2020 to March 31, 2021)

As for Consolidated Financial Results for the Fiscal Year Ending March 31, 2021, forecast is not available at this moment due to uncertain circumstances caused by the worldwide spread of the n ew coronavirus (COVID 19). Consolidated Financial Results Forecast for full year will be announced when more detailed information is available.

• Notes:

1. Changes in significant subsidiaries during the three months ended June 30, 2020

(changes in specified subsidiaries resulting in changes in scope of consolidation):	No
New	-	(Company name:				)
Exclusion:	-	(Company name:				)
(2) Accounting policies adopted specially for the preparation of quarterly consolidated financial statements:	No
(3) Changes in accounting policies, changes in accounting estimates and retrospective restatement
1)	Changes in accounting policies due to the revision of accounting standards: No
2)	Changes in accounting policies other than 1) above:		No
3)	Changes in accounting estimates:		No
4)	Retrospective restatement:		No
(4) Total number of issued shares (common shares)
1)	Total number of issued shares at the end of the period (including treasury shares):
	June 30, 2020:		47,520,253	shares
	March 31, 2020:		47,520,253	shares
2)	Total number of treasury shares at the end of the period:
	June 30, 2020:		1,303,233	shares
	March 31, 2020:		1,350,633	shares
3) Average number of shares during the period:
	Three months ended June 30, 2020:	46,188,532	shares
	Three months ended June 30, 2019:	47,519,929	shares

(Note)The Company introduced an E-Ship® Trust Type Employee Stock Purchase Incentive Plan and a performance linked stock based remuneration for Directors and Executive Officers. For the calculation of total number of treasury share s at the end of the period and average number of shares during the period, Company shares held in the trusts are included in treasury shares to be deducted.

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• Numbers in parentheses denote negative numbers.
• This financial result is not required to be reviewed by certificated public accountants or audit firm.
• Explanation of appropriate use of earnings projections, other explanatory notes

As for Consolidated Financial Results for the fiscal year ending March 31, 2021, forecast is not available at this moment due to uncertain circumstances caused by the worldwide spread of the new coronavirus (COVID 19). Consolidated Financial Results Forecast for full year will be announced when more detailed information is available.

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1.Quarterly Consolidated Financial Statements (1)Quarterly Consolidated Balance Sheets

				(Million yen)
			As of March 31,2020	As of June 30,2020
Assets
	Current assets
		Cash and deposits	22,475	30,618
		Notes and accounts receivable - trade	23,625	19,228
		Electronically recorded monetary claims -	2,304	1,940
		operating
		Merchandise and finished goods	12,278	12,321
		Work in process	9,039	9,321
		Raw materials and supplies	6,889	6,460
		Other	2,613	2,816
		Allowance for doubtful accounts	(445)	(464)
		Total current assets	78,781	82,241
	Non-current assets
		Property, plant and equipment
		Buildings and structures, net	15,822	15,231
		Machinery, equipment and vehicles, net	24,628	23,104
		Other, net	20,523	19,606
		Total property, plant and equipment	60,974	57,942
		Intangible assets
		Goodwill	6,193	6,197
		Other	6,124	6,027
		Total intangible assets	12,317	12,225
		Investments and other assets
		Investments and other assets, gross	7,522	7,949
		Allowance for doubtful accounts	(56)	(56)
		Total investments and other assets	7,465	7,893
		Total non-current assets	80,758	78,060
	Total assets	159,539	160,302

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				(Million yen)
			As of March 31,2020	As of June 30,2020
Liabilities
	Current liabilities
		Notes and accounts payable - trade	7,481	6,257
		Electronically recorded obligations - operating	8,065	6,994
		Short-term borrowings	27,644	36,663
		Current portion of long-term borrowings	5,762	5,701
		Income taxes payable	885	259
		Provision for bonuses	1,685	683
		Provision for bonuses for directors (and other	105	－
		officers)
		Provision for product compensation	185	186
		Provision for environmental measures	50	35
		Electronically recorded obligations - non-	809	796
		operating
		Other	9,140	9,341
		Total current liabilities	61,816	66,918
	Non-current liabilities
		Long-term borrowings	21,889	21,362
		Provision for share-based remuneration	8	10
		Provision for share-based remuneration for	16	20
		directors (and other officers)
		Provision for loss on guarantees	186	167
		Retirement benefit liability	6,967	7,018
		Asset retirement obligations	17	17
		Other	4,468	4,159
		Total non-current liabilities	33,554	32,756
	Total liabilities	95,370	99,674
Net assets
	Shareholders' equity
		Share capital	8,413	8,413
		Capital surplus	13,114	13,114
		Retained earnings	37,693	35,828
		Treasury shares	(1,016)	(981)
		Total shareholders' equity	58,204	56,375
	Accumulated other comprehensive income
		Valuation difference on available-for-sale	361	571
		securities
		Foreign currency translation adjustment	(654)	(2,038)
		Remeasurements of defined benefit plans	(1,922)	(1,834)
		Total accumulated other comprehensive income	(2,216)	(3,300)
	Non-controlling interests	8,180	7,553
	Total net assets	64,168	60,627
Total liabilities and net assets	159,539	160,302

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(2)Quarterly Consolidated Statements of Income and Comprehensive Income

Quarterly Consolidated Statements of Income (For the three months)

			(Million yen)
		For the three months	For the three months
		ended June 30,2019	ended June 30,2020
Net sales	25,482	18,870
Cost of sales	19,007	15,290
Gross profit	6,474	3,580
Selling, general and administrative expenses	5,330	4,634
Operating profit (loss)	1,144	(1,054)
Non-operating income
	Interest income	17	16
	Dividend income	37	28
	Foreign exchange gains	43	－
	Share of profit of entities accounted for using equity	20	－
	method
	Other	98	65
	Total non-operating income	217	110
Non-operating expenses

Interest expenses

Share of loss of entities accounted for using equity method

Foreign exchange losses

Other

241	197
-	6
-	222
44	32

Total non-operating expenses	286	459
Ordinary profit (loss)	1,075	(1,403)
Gain on sales of non-current assets	-	186
Total extraordinary income	-	186
Profit (loss) before income taxes	1,075	(1,216)
Income taxes - current	553	239
Income taxes - deferred	(81)	(345)
Total income taxes	471	(105)
Profit (loss)	604	(1,110)
Profit attributable to non-controlling interests	105	41
Profit (loss) attributable to owners of parent	498	(1,151)

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Quarterly Consolidated Statements of Comprehensive Income (For the three months)

			(Million yen)
	For the three months		For the three months
	ended June 30,2019		ended June 30,2020
Profit (loss)		604	(1,110)
Other comprehensive income

Valuation difference on available-for-sale securities

Foreign currency translation adjustment

Remeasurements of defined benefit plans, net of tax

Share of other comprehensive income of entities accounted for using equity method

(75)	211
267	(1,765)
86	93
49	(92)

Total other comprehensive income

Comprehensive income

Comprehensive income attributable to

Comprehensive income attributable to owners of parent

Comprehensive income attributable to non-controllinginterests

327	(1,553)
931	(2,664)
707	(2,236)
224	(427)

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(3)Quarterly Consolidated Statements of Cash Flows

	(Million yen)
For the three months	For the three months
ended June 30,2019	ended June 30,2020

Cash flows from operating activities

Profit (loss) before income taxes

Depreciation

Amortization of goodwill

Share of loss (profit) of entities accounted for using equity method

1,075	(1,216)
2,207	2,088
211	176
(20)	6

Increase (decrease) in allowance for doubtful accounts

Increase (decrease) in provision for bonuses

Increase (decrease) in provision for bonuses for directors (and other officers)

Increase or decrease in net defined benefit asset and liability

Increase (decrease) in provision for share-based remuneration

Increase (decrease) in provision for share-based remuneration for directors (and other officers) Increase (decrease) in provision for environmental measures

94	42
(1,076)	(1,000)
(110)	(105)
(73)	102
-	2
-	3
-	(14)

Increase (decrease) in provision for loss on guarantees	-	(19)
Interest and dividend income	(55)	(45)
Interest expenses	241	197
Loss (gain) on sales of non-current assets	-	(186)
Decrease (increase) in trade receivables	1,109	4,123
Decrease (increase) in inventories	(640)	(694)
Increase (decrease) in trade payables	(911)	(1,738)
Increase (decrease) in accrued consumption taxes	(144)	(297)
Increase (decrease) in other liabilities	2,489	1,313
Other, net	(929)	494
Subtotal	3,464	3,231
Interest and dividends received	55	44
Interest paid	(236)	(189)
Income taxes paid	(945)	(941)
Net cash provided by (used in) operating activities	2,337	2,144

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		(Million yen)
	For the three months	For the three months
	ended June 30,2019	ended June 30,2020
Cash flows from investing activities
Payments into time deposits	(726)	(410)
Proceeds from withdrawal of time deposits	711	409
Purchase of investment securities	(5)	(5)
Purchase of property, plant and equipment	(1,954)	(2,186)
Proceeds from sales of property, plant and equipment	47	904
Purchase of intangible assets	(370)	(69)
Loan advances	(6)	(129)
Collection of loans receivable	4	9
Other, net	3	(72)
Net cash provided by (used in) investing activities	(2,296)	(1,551)
Cash flows from financing activities
Net increase (decrease) in short-term borrowings	402	9,722
Proceeds from long-term borrowings	196	303
Repayments of long-term borrowings	(870)	(843)
Proceeds from sale and leaseback transactions	380	－
Repayments of finance lease obligations	(276)	(215)
Proceeds from disposal of treasury shares	-	35
Dividends paid	(675)	(668)
Dividends paid to non-controlling interests	(173)	(167)
Net cash provided by (used in) financing activities	(1,018)	8,166
Effect of exchange rate change on cash and cash	89	(354)
equivalents
Net increase (decrease) in cash and cash equivalents	(887)	8,405
Cash and cash equivalents at beginning of period	17,127	19,170
Cash and cash equivalents at end of period	16,239	27,575

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(4)Notes to Quarterly Consolidated Financial Statements

(Notes on going concern assumption) Not applicable

(Notes on material changes in Shareholders' Equity) Not applicable

(Additional information)

(Assumptions of Accounting Estimates for the Spread of Novel Coronavirus Infection)

To deal with a decline in the number of units produced by automotive manufacturers, etc. due to the spread of the infections, the Group has adjusted production volumes by tentatively suspending factory operations across the world.

Based on the information of the production forecast and the timing of the resumption of production by automotive manufacturers in each country and various economic forecasts, the production volume declined significantly in the first quarter of the current fiscal year, but will start to recover in the second quarter, and that production will recover gradually over the next fiscal year.

According to the assumptions set forth above, the Group has applied impairment accounting to noncurrent assets and estimated the recoverability of its deferred tax assets.

(Segment information)

I First quarter of previous period (from April 1, 2019 to June 30, 2019)

1. Information on sales and profit (loss) by each reporting segment

						(Unit JPY million)
		Reporting Segment
						Others
	Automotive	Automotive	Non-	Other		Total
		(*)
	engine	non-engine	automotive	automotive	Sub total
	bearings	bearings	bearings	parts
Net sales
External sales	14,264	4,525	2,487	3,735	25,013	468	25,482
Internal sales or
transfer between	149	30	1	54	235	157	392
segments
Total	14,414	4,555	2,488	3,790	25,249	626	25,875
Segment profit(loss)	1,647	726	388	(12)	2,750	135	2,885

1. "Others" includes business areas not included in above reporting segments. It includes electrode sheets for electric double layer capacitors, the metallic dry bearings business, pump-related products businesses, and real estate leasing business.

2. Reconciliation between total reporting segment profit (loss) and profit (loss) reported in Quarterly Consolidated Statements of Income

	(Unit JPY million)
Profit	Amount
Reporting segments total	2,750
Profit from "Others" category	135
Elimination of intersegment transactions	1
Unattributable costs (*)	(1,743)
Operating profit	1,144
as per Quarterly Consolidated Statements of Income

1. Unattributable costs are principally general administrative expenses not attributable to reporting segments.
   ―10―

1. First quarter of current period (from April 1, 2020 to June 30, 2020)
   1. Information on sales and profit (loss) by each reporting segment

						(Unit JPY million)
		Reporting Segment
						Others
	Automotive	Automotive	Non-	Other		Total
		(*)
	engine	non-engine	automotive	automotive	Sub total
	bearings	bearings	bearings	parts
Net sales
External sales	10,360	3,412	2,579	2,156	18,509	361	18,870
Internal sales or
transfer between	136	21	8	108	275	168	443
segments
Total	10,497	3,434	2,587	2,265	18,785	529	19,314
Segment profit(loss)	373	265	388	(659)	368	103	471

1. "Others" includes business areas not included in above reporting segments. It includes electrode sheets for electric double layer capacitors, the metallic dry bearings business, pump-related products businesses, and real estate leasing business.

2. Reconciliation between total reporting segment profit (loss) and profit (loss) reported in Quarterly Consolidated Statements of Income

	(Unit JPY million)
Profit	Amount
Reporting segments total	368
Profit from "Others" category	103
Elimination of intersegment transactions	4
Unattributable costs (*)	(1,530)
Operating profit(loss)	(1,054)
as per Quarterly Consolidated Statements of Income
(*) Unattributable costs are principally general administrative expenses not attributable to reporting segments.

3. Changes in Reporting Segments

Effective from the beginning of the fiscal year ending March 31, 2021, in accordance with a review of the Group's business management classification, the Group has reclassified a portion of its "Automotive engine bearings" to the "Automotive non-engine bearings" or "Non-automotive bearings" .

The segment information for the first quarter of the previous period ended June 30, 2019 has been prepared in accordance with the changed classification.

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