MonotaRO : Consolidated Financial Results for the First Six Months of Fiscal Year Ending December 31, 2020

July 31, 2020

Consolidated Financial Results for the First Six Months of Fiscal Year

Ending December 31, 2020 (Six Months Ended June 30, 2020)

Company name: MonotaRO Co., Ltd.			Listing: Tokyo Stock Exchange, First Section
Stock code:	3064					URL: https://www.monotaro.com
Representative:	Masaya Suzuki, President & CEO
Contact:	Tetsuya Koda, Senior Executive Officer, General Manager of Admin. Dept.	Tel: [phone]
Scheduled date to file Quarterly Securities Report: August 7, 2020
Scheduled date of dividend payments: September 10, 2020
Supplementary materials: Yes	Investors meeting: Yes
						(Figures are rounded down to the nearest million yen)
1. Consolidated Financial Results for the Six Months Ended June 30, 2020
(January 1, 2020 - June 30, 2020)
(1) Consolidated results of operations		(Percentages show the change from the same period of previous fiscal year)
									Net income
		Net sales		Operating income	Ordinary income	attributable to
									owners of the parent
		Millions of yen		%	Millions of yen	%	Millions of yen	%	Millions of yen		%
Six months ended Jun. 30, 2020	75,281		19.6	9,318	22.7	9,342	22.8	6,540		23.3
Six months ended Jun. 30, 2019	62,970		21.8	7,597	13.2	7,607	13.8	5,302		15.1

Note: Comprehensive income: Six months ended Jun. 30, 2020: 6,357 million yen (23.4%)
Six months ended Jun. 30, 2019: 5,151 million yen (14.9%)
	Net income per share	Diluted net income per share
	Yen	Yen
Six months ended Jun. 30, 2020	26.33	26.32
Six months ended Jun. 30, 2019	21.35	21.34

(2) Consolidated financial position

	Total assets	Net assets		Equity ratio
	Millions of yen	Millions of yen	%
As of Jun. 30, 2020	65,407	41,955	63.6
As of Dec. 31, 2019	59,691	37,512	62.1
Reference: Shareholders' equity	Jun. 30, 2020: 41,621 million yen	Dec. 31, 2019: 37,051 million yen

2. Dividends

				Dividends per share
		1Q-end	2Q-end	3Q-end	Year-end	Annual
		Yen	Yen	Yen	Yen	Yen
Year ended Dec. 31, 2019		-	7.50	-	7.50	15.00
Year ending Dec. 31, 2020	(actual)	-	8.50
Year ending Dec. 31, 2020	(forecast)			-	8.50	17.00

Note: Amendments to dividend forecast compared with the most recent disclosure: None

3. Consolidated Forecasts for the Fiscal Year Ending December 31, 2020 (January 1, 2020 - December 31, 2020)

(Percentages show the change from the same period of previous fiscal year)

								Net income
	Net sales		Operating income	Ordinary income	attributable to owners	Net income per share
								of the parent
	Millions of yen		%	Millions of yen	%	Millions of yen	%	Millions of yen		%	Yen
Full year	156,468		19.0	18,569	17.2	18,584	17.0	12,997		18.3	52.32
Note: Revision of consolidated forecast during this quarter: None

4. Others

1. Changes in the number of material subsidiaries resulting in changes in scope of consolidation during the six-month period ended June 30, 2020: None
2. Application of special accounting methods for the preparation of quarterly consolidated financial statements: None
3. Changes in accounting principles and estimates, or retrospective restatements:
4. 1. Changes in accounting principles caused by the revision of accounting standards: None
   2. Changes in accounting principles other than mentioned in 1): None
   3. Changes in estimates: None
   4. Retrospective restatements: None
5. Number of shares outstanding (common shares)
6. 1. Number of shares outstanding at the end of period (including treasury stock)

Jun. 30, 2020:	250,627,600 shares	Dec. 31, 2019:	250,623,200 shares
2) Number of treasury stock at the end of period
Jun. 30, 2020:	2,221,788 shares	Dec. 31, 2019:	2,200,988 shares
3) Average number of shares outstanding during the period
Six months ended Jun. 30, 2020:	248,415,462 shares	Six months ended Jun. 30, 2019:	248,344,898 shares

This quarterly report of financial results is out of scope from quarterly review procedures conducted by independent auditors.

* Cautionary statement with respect to forward-looking statements

The forecasts above are based on the judgments made in accordance with information currently available. Forecasts therefore include risks and uncertainties. Actual figures may differ from these forecasts due to subsequent changes in the circumstances.

1. Qualitative Information on the Consolidated Financial Statements

(1) Qualitative Information Regarding Consolidated Results of Operations

The Japanese economy during the first six months of the fiscal year ending December 31, 2020 generally continued to be weak with government economic and fiscal policies providing some support, while concerns about the global spread of the novel coronavirus infectious disease (COVID-19) , the policy trend in the United States, and the continuity of the growth momentum of the Chinese economy made the outlook for the future Japanese economy weak and unpredictable.

Among mid-to-small manufacturers, the major customers of our industrial MRO products, economic conditions also remained weak due to uncertain outlook.

In this economic environment, we have continually concentrated on acquiring new customers aggressively mainly through internet advertisements (paid listings) and internet search engine optimization (SEO), which can improve our website's position on the search engines. We also conducted promotion activities including direct mail using e-mail and mail flyers, daily special prices, the publication and distribution of catalogs. In terms of catalogs, we newly published REDBOOK vol. 16 Spring Edition in late February, divided into 11 volumes with 194 thousand items and approximately 2.6 million issues available in total.

Furthermore, the total number of our product lineup reached approximately 18 million items in total and 461 thousand items in stock which are available for the same day shipment to meet the increase in demand corresponding to the expansion of our customer base as of the end of the first six months of the fiscal year ending December 31, 2020.

In addition, in relation to the sales of MRO products to large customers through the integrated purchase systems, both the number of customers and the amount of sales steadily increased.

Consequently, we have successfully obtained 725,681 newly registered accounts for the first six months of the fiscal year ending December 31, 2020 and the number of registered accounts totaled 4,835,382 as of the end of the second quarter.

In addition, NAVIMRO, which is our Korean subsidiary, also aggressively engaged in acquiring new customers mainly through paid listings and focused on increasing both its product lineup and the number of products in stock in order to expand its customer base.

All of our efforts mentioned above resulted in net sales of 75,281 million yen (19.6% increase from the same period of the previous fiscal year), operating income of 9,318 million yen (22.7% increase from the same period of the previous fiscal year), ordinary income of 9,342 million yen (22.8% increase from the same period of the previous fiscal year), and net income attributable to owners of the parent of 6,540 million yen, a corresponding 23.3% increase.

(2) Qualitative Information Regarding Consolidated Financial Position

Total assets as of June 30, 2020 (the end of the first six months of the fiscal year ending December 31, 2020) amounted to 65,407 million yen, an increase of 5,715 million yen from the end of the previous fiscal year. This was attributable to increases of 2,967 million yen, 2,246 million yen and 627 million yen in notes and accounts receivable-trade, construction in progress and software in progress, respectively, despite a decrease of 350 million yen in cash and deposits.

On the other hand, total liabilities as of June 30, 2020 amounted to 23,451 million yen, an increase of 1,272 million yen from the end of the previous fiscal year. This was due mainly to increases of 1,649 million yen and 460 million yen in accounts payable-trade and accounts payable-other, respectively, despite decreases of 1,000 million yen and 612 million yen in long-term loans payable and lease obligations, respectively.

Total net assets amounted to 41,955 million yen, an increase of 4,442 million yen from the end of the previous fiscal year. This was largely due to net income attributable to owners of the parent of 6,540 million yen offset by dividend payments of 1,863 million yen for the first six months of the fiscal year ending December 31, 2020.

As a result, the equity ratio as of June 30, 2020 was 63.6%, up 1.6 percentage points from the end of the previous fiscal year.

(3) Forecast for the Fiscal Year Ending December 31, 2020

Our consolidated financial forecast for the fiscal year ending December 31, 2020 disclosed on February 3, 2020 is calculated based on figures that do not incorporate assumptions about the impact of COVID-19.

However, the spread of COVID-19 infection is expected to have various social and economic effects in the future. The results of the Group for the first six months of this fiscal year were almost in line with the plan. However, if revisions to our business forecasts become necessary, we will disclose them promptly.

2. Consolidated Quarterly Financial Statements

(1) Consolidated quarterly balance sheets

Accounts											(In millions of yen)
				As of Dec. 31, 2019					As of Jun. 30, 2020
Assets
Current assets
Cash and deposits	11,155		10,804
Notes and accounts receivable-trade	13,889		16,857
Electronically recorded monetary claims	582		586
Merchandise	11,267		11,681
Goods in transit	193		401
Supplies	101		120
Accounts receivable-other	4,286		4,104
Other	366		507
Allowance for doubtful accounts	(71)		(78)
Total current assets				41,771				44,984
Noncurrent assets
Property, plant and equipment
Buildings, net	4,110		4,019
Leased assets, net	4,321		4,059
Other, net	3,616		5,843
Total property, plant and equipment			12,048			13,922
Intangible assets
Goodwill			75			66
Other	3,009		3,627
Total intangible assets			3,084			3,693
Investments and other assets
Guarantee deposits	1,371		1,367
Other	1,470		1,491
Allowance for doubtful accounts	(54)		(53)
Total investments and other assets		2,787			2,806
Total noncurrent assets		17,920			20,422
Total assets		59,691			65,407
Liabilities
Current liabilities
Accounts payable-trade	9,829		11,479
Current portion of long-term loans payable	2,498		1,498
Lease obligations	625		639
Accounts payable-other	3,142		3,602
Income taxes payable	2,766		3,120
Provision for employees' bonuses	97		100
Provision for directors' bonuses	28		45
Provision for accident related loss	110		9
Other	873		1,238
Total current liabilities		19,973			21,733
Noncurrent liabilities
Lease obligations	1,225		597
Net defined benefit liability	292		328
Other	687		792
Total noncurrent liabilities		2,205			1,718
Total liabilities		22,179			23,451
Net assets
Shareholders' equity
Capital stock	1,986		1,990
Capital surplus	809		813
Retained earnings	34,513		39,191
Treasury stock	(247)		(315)
Total shareholders' equity		37,062			41,679
Accumulated other comprehensive income
Foreign currency translation adjustment	(15)		(60)
Remeasurements of defined benefit plans	4		2
Total accumulated other comprehensive income		(10)			(57)
Subscription rights to shares		44			53
Non-controlling interests	416		279
Total net assets		37,512			41,955
Total liabilities and net assets		59,691			65,407

（2） Consolidated quarterly statements of (comprehensive) income

Accounts

Net sales

Cost of sales

Gross profit

Selling, general and administrative expenses

Operating income Non-operating income

Interest income Foreign exchange gains Gain on sale of materials Other

Total non-operating income Non-operating expenses

Interest expenses

Loss on disposal of inventories Other

Total non-operating expenses Ordinary income Extraordinary income

Gain on sales of fixed assets Total extraordinary income

Extraordinary loss

Loss on disposal of fixed assets Total extraordinary losses Income before income taxes

Income taxes-current-deferred

Total income taxes Net income

Net income attributable to: owners of the parent non-controlling interests

Other comprehensive income

Foreign currency translation adjustment Remeasurements of defined benefit plans

Total other comprehensive income Comprehensive income

Comprehensive income attributable to: owners of the parent non-controlling interests

							(In millions of yen)
		Six months period				Six months period
		ended Jun. 30, 2019				ended Jun. 30, 2020
	62,970		75,281
	45,102		54,039
		17,867			21,241
		10,270			11,922
		7,597				9,318
	12		11
	30		31
	8		5
	32		24
		83			73
	40		18
	19		15
	14		15
		74			49
		7,607			9,342
	1		1
	1			1
	0		0
		0			0
		7,608			9,343
		2,399			2,925
	17		0
		2,416			2,924
		5,191			6,419
	5,302		6,540
	(110)		(121)
	(41)		(60)
	0		(1)
	(40)			(62)
	5,151			6,357
	5,252		6,493
	(100)		(136)

（3） Consolidated statements of cash flows

								(In millions of yen)
Accounts		Six months period				Six months period
	ended Jun. 30, 2019				ended Jun. 30, 2020
Net cash provided by (used in) operating activities
Income before income taxes and minority interests	7,608		9,343
Depreciation and amortization	644		747
Increase (decrease) in allowance for doubtful accounts	12		5
Increase (decrease) in provision for bonuses	(19)		3
Increase (decrease) in provision for directors' bonuses	8		16
Increase (decrease) in net defined benefit liability	31		36
Interest income	(12)		(11)
Interest expenses	40		18
Decrease (increase) in notes and accounts receivable-trade	(1,706)		(2,977)
Decrease (increase) in inventories	(1,038)		(662)
Decrease (increase) in accounts receivable-other	70		164
Increase (decrease) in notes and accounts payable-trade	526		1,668
Increase (decrease) in accounts payable-other	312		372
Other, net	(439)		367
Subtotal		6,038				9,092
Interest income received		13				13
Interest expenses paid	(49)		(44)
Income taxes paid	(2,721)		(2,632)
Payments for accident related loss		－	(103)
Net cash provided by (used in) operating activities		3,280				6,325
Net cash provided by (used in) investment activities
Payments into time deposits	(236)		(191)
Proceeds from withdrawal of time deposits	380		393
Purchase of property, plant and equipment	(466)		(2,368)
Purchase of intangible assets	(754)		(665)
Other, net	(18)		(0)
Net cash provided by (used in) investment activities		(1,094)				(2,831)
Net cash provided by (used in) financing activities
Repayments of long-term loans payable	(1,000)		(1,000)
Proceeds from exercise of stock option	0		0
Purchase of treasury stock	(21)		(68)
Cash dividends paid	(1,613)		(1,864)
Proceeds from share issuance to non-controlling shareholders	222					－
Repayments of lease obligations	(2,140)		(661)
Net cash provided by (used in) financing activities		(4,553)				(3,594)
Effect of exchange rate change on cash and cash equivalents		(35)				(35)
Net increase (decrease) in cash and cash equivalents		(2,402)			(135)
Cash and cash equivalents at beginning of period		12,040			10,746
Cash and cash equivalents at end of period		9,637				10,610