Fujimori Kogyo : Summary of Consolidated Financial Results for the Nine Months Ended December 31, 2023

Translation

Notice: This document is an excerpt translation of the original Japanese document and is only for reference purposes. In the event of any discrepancy between this translated document and the original Japanese document, the latter shall prevail.

Summary of Consolidated Financial Results for the Nine Months Ended December 31, 2023

(Based on Japanese GAAP)

February 7, 2024

Company name

FUJIMORI KOGYO CO., LTD.

Stock exchange listing Tokyo

Stock Code

7917

URL https://www.zacros.co.jp/

Representative

President & CEO

Eishi Fuyama

Inquiries

Director and Senior Executive Officer in Charge of

Michihiko Sato

TEL [phone]

Administration

Scheduled date to file Quarterly Securities Report

February 14, 2024

Scheduled date to commence dividend payments

-

Preparation of supplementary material on quarterly earnings

yes

Holding of quarterly earnings performance review

none

(Amounts less than one million yen are rounded down)

1. Consolidated financial results for the nine months ended December 31, 2023 (from April 1, 2023 to December 31, 2023)

(1) Consolidated operating results (cumulative)

(Percentages indicate year-on-year changes)

Net sales

Operating income

Ordinary income

Net income attributable

to owners of parent

Millions of yen

%

Millions of yen

%

Millions of yen

%

Millions of yen

%

Nine months ended December 31, 2023

101,763

2.6

6,379

20.9

6,964

14.0

3,150

(29.0)

Nine months ended December 31, 2022

99,149

4.5

5,276

(36.6)

6,111

(30.2)

4,435

(25.8)

Note: Comprehensive income

Nine months ended December 31, 2023

¥5,379 million

[(27.3)%]

Nine months ended December 31, 2022

¥7,399 million

[11.0%]

Net income per share

Diluted net income per

share

Yen

Yen

Nine months ended December 31, 2023

167.44

165.88

Nine months ended December 31, 2022

232.97

230.60

(2) Consolidated financial position

Total assets

Net assets

Equity ratio

Net assets per share

Millions of yen

Millions of yen

%

Yen

As of December 31, 2023

143,071

93,285

59.7

4,558.82

As of March 31, 2023

128,440

89,281

63.9

4,362.66

Reference: Equity

As of December 31, 2023

¥85,397 million

As of March 31, 2023

¥82,064 million

2. Cash dividends

Annual dividends

1st quarter-end

2nd quarter-end

3rd quarter-end

Fiscal year-end

Total

Yen

Yen

Yen

Yen

Yen

Year ended March 31, 2023

－

42.00

－

42.00

84.00

Year ending March 31, 2024

－

42.00

－

Year ending March 31, 2024 (forecast)

42.00

84.00

Note: Revisions to the forecasts of cash dividends most recently announced: none

3. Forecast of consolidated financial results for the year ending March 31, 2024 (from April 1, 2023, to March 31, 2024)

(Percentages indicate year-on-year changes)

Net sales

Operating income

Ordinary income

Net income attributable

Net income per

to owners of parent

share

Millions of yen

%

Millions of yen

%

Millions of yen

%

Millions of yen

%

Yen

Full year

135,000

4.4

8,000

36.0

8,350

22.3

4,000

(17.6)

212.95

Note: Revisions to the forecasts of financial results most recently announced: yes

*Notes
(1) Changes in significant subsidiaries during the nine months ended December 31, 2023
(changes in specified subsidiaries resulting in changes in the scope of consolidation):	none

1. Application of special accounting for preparing quarterly consolidated financial statements: none
2. Changes in accounting policies, changes in accounting estimates, and restatement of prior period financial statements after error corrections

a. Changes in accounting policies due to revisions to accounting standards and other regulations:	none
b. Changes in accounting policies due to other reasons:	none
c. Changes in accounting estimates:	none
d. Restatement of prior period financial statements after error corrections:	none

(4) Number of issued shares (common shares)

a. Total number of issued shares at the end of the period (including treasury shares)

As of December 31, 2023	19,267,760	As of March 31, 2023	19,267,760
b. Number of treasury shares at the end of the period
As of December 31, 2023	535,393	As of March 31, 2023	457,056
c. Average number of shares during the period (cumulative from the beginning of the fiscal year)
Nine months ended December 31, 2023	18,817,593	Nine months ended December 31, 2022	19,038,742

• Quarterly financial results reports are exempt from quarterly reviews conducted by certified public accountants or an audit corporation
• Proper use of earnings forecasts, and other special matters
  The above forecasts of consolidated financial results are based on information currently available to the Company and on certain assumptions deemed to be reasonable. However, the Company makes no guarantee that these forecasts will be achieved. Consequently, actual business and other results may differ substantially due to various factors. For more information on assumptions for the financial results forecasts and use of the forecasts, please refer to "(3) Consolidated earnings forecast and other forward-looking statements" in "1. Review of Operating Results and Financial Statements" on page 3 of the attached document.

○ Contents of Attached Document
1.	Review of Operating Results and Financial Statements	2
	(1)	Analysis of operating results	2
	(2)	Analysis of financial position	3
	(3)	Consolidated earnings forecast and other forward-looking statements	3
2.	Quarterly Consolidated Financial Statements and Significant Notes Thereto	4
	(1)	Quarterly consolidated balance sheets	4

1. Quarterly consolidated statements of income (cumulative) and quarterly consolidated statements of

comprehensive income (cumulative)	6
Quarterly consolidated statements of income (cumulative)	6
(Quarterly consolidated statements of comprehensive income (cumulative))	7
(3) Notes to the quarterly consolidated financial statements	8
(Notes on assumptions of going concern)	8
(Notes on significant changes in the amount of shareholders' equity)	8
(Changes in significant subsidiaries during the nine months ended December 31, 2023)	8
(Segment information)	8

- 1 -

1. Review of Operating Results and Financial Statements

1. Analysis of operating results
   In the first nine months of the fiscal year under review, sales in the Wellness Business and the Environmental Solutions Business declined, but sales in the Electronic Materials Business and the Industrial Infrastructure Business grew. As a result, the Group's sales increased year on year.
   On the profit and loss front, despite factors such as a sharp rise in raw material costs, higher personnel expenses and increasing R&D expenses, operating income and ordinary income increased year on year helped by the promotion of revenue-enhancing measures, such as enhancing production efficiency and having price pass-throughs. On the other hand, net income attributable to owners of parent decreased due to the posting of provision for contingent loss.
   As a result, in the first nine months of the fiscal year under review, net sales increased 2.6% year on year to 101,763 million yen, operating income increased 20.9% year on year to 6,379 million yen, ordinary income was up 14.0% year on year to 6,964 million yen, and net income attributable to owners of parent dropped 29.0% year on year to 3,150 million yen.
   The performance of each segment is as follows.
   From the first quarter of the fiscal year under review, the Company has partially revised its management classification in line with the change in the management structure made in the current fiscal year. It has changed its reporting segments from the previous classification of "Wellness Business," "Environmental Solutions Business," "Electronic Materials Business" and "Building & Civil Engineering Materials Business" to "Wellness Business," "Environmental Solutions Business," "Electronic Materials Business" and "Industrial Infrastructure Business."
   For a year-on-year comparison and analysis, the figures for the same period of the previous fiscal year have been reclassified to conform to the revised segment classification.
   For details, please see "(3) Segment Information" in "2. Quarterly Consolidated Financial Statements and Significant Notes Thereto."
   (Wellness Business)
   Sales of single-use bags for biopharmaceutical production, etc., and related products fell year on year due to a decrease in demand for vaccines. As for pharmaceutical and medical packaging materials, despite growing sales in Japan, sales at our Indonesian subsidiary decreased significantly, which led to a decline in overall sales. On the profit and loss front, in addition to a decrease in sales, we have been making upfront investment for the development of medical devices and in-vitro diagnostic products as well as in the regenerative medicine area, resulting in a decrease in profit.
   As a result, net sales declined 2.2% year on year to 19,832 million yen and operating income decreased 33.3% year on year to 856 million yen.
   (Environmental Solutions Business)
   Sales of liquid containers rose steadily, particularly at an overseas subsidiary, and higher year-on-year sales of refill packaging, cosmetic packaging and food packaging were secured. However, sales of OA equipment-related packaging fell, resulting in a slight decrease in overall sales. In terms of profit and loss, this business posted lower profit due to an increase in upfront fixed costs such as marketing expenses for overseas expansion.
   As a result, net sales declined 0.2% year on year to 25,284 million yen and operating income decreased 2.5% year on year to 1,181 million yen.
   (Electronic Materials Business)
   Sales of electronic components and other related products declined as the business has been significantly affected by the continued weakness in the semiconductor market from the second half of the previous fiscal year. In display-related materials, however, higher year-on-year sales of protective film, our mainstay product, were secured, resulting in an increase in overall sales. Despite a decline in the sales of interlayer insulating film, this business posted an increase in profit due to higher sales of protective film.
   As a result, net sales rose 7.4% year on year to 32,636 million yen and operating income increased 178.9% year on year to 1,866 million yen.
   (Industrial Infrastructure Business)
   Both sales and profit of chemical products increased mainly due to the inclusion of a Chinese subsidiary in the scope of consolidation. In the business related to building materials, sales of air-conditioning pipes remained solid and sales of void slabs (floor construction materials) for housing complexes exceeded the level of the same period of the previous fiscal year, but sales of building-chimney construction declined. Concerning civil engineering materials, net sales of materials for tunnels increased. Overall, the business saw an increase in both sales and profits.
   As a result, net sales rose 3.6% year on year to 24,010 million yen and operating income increased 17.3% year on year to 2,474 million yen.
2. • 2 -

		Nine months ended December	Nine months ended December	Year on Year
		31, 2022	31, 2023
		Amount	Share in	Amount	Share in	Change
		sales or vs.	sales or vs.	Change
		(Millions of	(Millions of	(Millions of
		sales	sales	(%)
		yen)	yen)	yen)
		(%)	(%)
Net sales	99,149	100.0	101,763	100.0	2,614	2.6
	Wellness	20,269	20.4	19,832	19.5	(437)	(2.2)
	Environmental	25,327	25.6	25,284	24.8	(42)	(0.2)
	solutions
	Electronic materials	30,379	30.6	32,636	32.1	2,257	7.4
	Industrial	23,173	23.4	24,010	23.6	836	3.6
	infrastructure
Operating income	5,276	5.3	6,379	6.3	1,102	20.9
	Wellness	1,284	6.3	856	4.3	(428)	(33.3)
	Environmental	1,212	4.8	1,181	4.7	(30)	(2.5)
	solutions
	Electronic materials	669	2.2	1,866	5.7	1,197	178.9
	Industrial	2,110	9.1	2,474	10.3	364	17.3
	infrastructure

1. Analysis of financial position
   Total assets as of December 31, 2023 were 143,071 million yen, an increase of 14,630 million yen from the end of the previous fiscal year due to increases of trade receivables, cash and deposits and property, plant and equipment, despite a decrease in investment securities.
   Liabilities were 49,785 million yen, an increase of 10,626 million yen from the end of the previous fiscal year due to an increase in trade payables and accounts payable-other as well as the posting of provision for contingent loss.
   Net assets were 93,285 million yen, an increase of 4,004 million yen from the end of the previous fiscal year, mainly due to an increase in retained earnings as well as an increase in foreign currency translation adjustment associated with the depreciation of the yen, resulting in an equity ratio of 59.7%.
2. Consolidated earnings forecast and other forward-looking statements
   Net sales are expected to be lower than the forecast previously announced, due to lower-than-expected sales at the Indonesian subsidiary in the Wellness Business, sluggish sales of single-use bags for biopharmaceutical production, etc., and related products, and lackluster sales of information recording materials owing to a slower than expected recovery from the cooling semiconductor market in the Electronic Materials Business.
   On the other hand, we expect operating income and ordinary income to exceed the previous forecast helped by the promotion of revenue-enhancing measures, such as enhancing production efficiency and having price pass-throughs, despite the challenging business environment in which raw materials continued to rise.
   Net income attributable to owners of parent is expected to be lower than previous forecast as we posted a provision for contingent loss in the third quarter of the current fiscal year following a customer's announcement to seek compensation in the Wellness Business.
   Based on the above circumstances, we have revised our earnings forecast.
   The differences from the full-year consolidated earnings forecasts announced on May 11, 2023 are as follows.

		Operating	Ordinary	Net income	Net income per
	Net sales	attributable to
	income	income	share
		owners of parent
	Millions of yen	Millions of yen	Millions of yen	Millions of yen	Yen
Previous forecast (A)	140,000	7,000	7,150	4,650	246.91
Revised forecast (B)	135,000	8,000	8,350	4,000	212.95
Change (B-A)	(5,000)	1,000	1,200	(650)	(33.96)
Change (%)	(3.6%)	14.3％	16.8％	(14.0%)	－
(Reference) Results for the previous
fiscal year	129,364	5,882	6,828	4,854	255.68
(Fiscal year ended March 31, 2023)

There is no revision to the dividend forecast (Annual dividends for the fiscal year ending March 31, 2024: 84 yen (interim dividend of 42 yen and year-end dividend of 42 yen)) following the revision of earnings forecast.

Note: The above forecasts are based on information currently available, and actual business results may differ.

- 3 -

2. Quarterly Consolidated Financial Statements and Significant Notes Thereto

1. Quarterly consolidated balance sheets

			(Millions of yen)
		As of March 31, 2023	As of December 31, 2023
Assets
Current assets
Cash and deposits	11,232	14,750
Notes and accounts receivable-trade, and contract assets	34,017	42,431
Securities	19,389	18,469
Merchandise and finished goods	5,789	7,176
Work in process	2,192	2,199
Raw materials and supplies	6,303	5,660
Other	2,911	3,969
Allowance for doubtful accounts	(31)	(64)
Total current assets	81,804	94,592
Non-current assets
Property, plant and equipment
Buildings and structures	45,813	47,638
Accumulated depreciation	(27,849)	(29,356)
Buildings and structures, net	17,963	18,282
Machinery, equipment and vehicles	63,075	67,217
Accumulated depreciation	(54,359)	(57,570)
Machinery, equipment and vehicles, net	8,716	9,647
Tools, furniture and fixtures	7,956	8,296
Accumulated depreciation	(7,068)	(7,398)
Tools, furniture and fixtures, net	888	897
Land	8,443	8,808
Construction in progress	2,711	4,440
Other	1,922	2,517
Accumulated depreciation	(660)	(1,101)
Other, net	1,262	1,415
Total property, plant and equipment	39,985	43,492
Intangible assets
Goodwill	210	186
Other	680	701
Total intangible assets	890	888
Investments and other assets
Investment securities	4,116	2,507
Deferred tax assets	810	757
Other	845	846
Allowance for doubtful accounts	(13)	(13)
Total investments and other assets	5,758	4,097
Total non-current assets	46,635	48,478
Total assets	128,440	143,071

- 4 -

			(Millions of yen)
		As of March 31, 2023	As of December 31, 2023
Liabilities
Current liabilities
Notes and accounts payable-trade	21,978	27,581
Short-term loans payable	1,112	982
Accounts payable-other	3,791	6,539
Income taxes payable	681	988
Contract liabilities	340	266
Provision for bonuses	1,302	811
Provision for directors' bonuses	91	88
Provision for Contingent Loss	－	2,198
Other	2,047	2,306
Total current liabilities	31,345	41,762
Non-current liabilities
Long-term loans payable	875	800
Deferred tax liabilities	68	50
Net defined benefit liability	4,811	4,929
Provision for directors' retirement benefits	576	588
Other	1,481	1,654
Total non-current liabilities	7,814	8,022
Total liabilities	39,159	49,785
Net assets
Shareholders' equity
Capital stock	6,600	6,600
Capital surplus	6,498	6,496
Retained earnings	66,780	69,100
Treasury shares	(1,335)	(1,660)
Total shareholders' equity	78,544	80,537
Accumulated other comprehensive income
Valuation difference on available-for-sale securities	1,197	728
Foreign currency translation adjustment	2,269	4,069
Remeasurements of defined benefit plans	53	62
Total accumulated other comprehensive income	3,520	4,860
Subscription rights to shares	386	351
Non-controlling interests	6,829	7,536
Total net assets	89,281	93,285
Total liabilities and net assets	128,440	143,071

- 5 -

1. Quarterly consolidated statements of income (cumulative) and quarterly consolidated statements of comprehensive income (cumulative)
   Quarterly consolidated statements of income (cumulative)

			(Millions of yen)
		Nine months ended	Nine months ended
		December 31, 2022	December 31, 2023
Net sales	99,149	101,763
Cost of sales	79,352	79,460
Gross profit	19,796	22,302
Selling, general and administrative expenses	14,519	15,923
Operating income	5,276	6,379
Non-operating income
Interest income	48	113
Dividend income	213	67
Insurance and dividend income	88	110
Foreign exchange gains	303	181
Subsidy income	2	5
Income from recycling	62	51
Other	151	103
Total non-operating income	870	633
Non-operating expenses
Interest expenses	22	26
Loss on investments in investment partnerships	－	13
Other	12	8
Total non-operating expenses	35	48
Ordinary income	6,111	6,964
Extraordinary income
Gain on sales of non-current assets	13	19
Gain on sales of investment securities	945	911
Total extraordinary income	958	931
Extraordinary losses
Loss on sales of non-current assets	0	－
Loss on retirement of non-current assets	10	42
Loss on sales of investment securities	0	－
Loss on valuation of golf club membership	9	－
Provision for contingent loss	－	2,198
Total extraordinary losses	21	2,240
Income before income taxes	7,049	5,655
Income taxes-current	1,475	1,850
Income taxes-deferred	424	234
Total income taxes	1,900	2,084
Net income	5,149	3,571
Net income attributable to non-controlling interests	713	420
Net income attributable to owners of parent	4,435	3,150

- 6 -

(Quarterly consolidated statements of comprehensive income (cumulative))

		(Millions of yen)
	Nine months ended	Nine months ended
	December 31, 2022	December 31, 2023
Net income	5,149	3,571
Other comprehensive income
Valuation difference on available-for-sale securities	(291)	(462)
Foreign currency translation adjustment	2,535	2,257
Remeasurements of defined benefit plans, net of tax	5	12
Total other comprehensive income	2,250	1,808
Comprehensive income	7,399	5,379
Comprehensive income attributable to
Comprehensive income attributable to owners of	6,157	4,490
parent
Comprehensive income attributable to non-controlling	1,241	889
interests

- 7 -

1. Notes to the quarterly consolidated financial statements (Notes on assumptions of going concern)
   Not applicable.
   (Notes on significant changes in the amount of shareholders' equity)
   Not applicable.
   (Changes in significant subsidiaries during the nine months ended December 31, 2023) Not applicable.

However, ZACROS MALAYSIA SDN. BHD. and FS China Co., Ltd. are included in the scope of consolidation from the first quarter of the current fiscal year due to their growing importance as strategic hubs in the Asian and Chinese markets. This does not constitute a change in specified subsidiaries.

(Segment information)

• Nine months ended December 31, 2022 (from April 1, 2022 to December 31, 2022)
  Information on net sales and the amount of profits or losses per reportable segment

						(Millions of yen)
		Reportable segments			Amount
							recorded in
						Adjusted	the quarterly
	Wellness	Environmenta	Electronic	Industrial	Total	amount	consolidated
	l Solutions	materials	infrastructure	(Note 1)	statements of
							income
							(Note 2)
Net sales
Sales to unaffiliated	20,269	25,327	30,379	23,173	99,149	－	99,149
customers
Intersegment sales or	362	1,255	630	1,328	3,576	(3,576)	－
transfers
Total	20,631	26,583	31,009	24,501	102,726	(3,576)	99,149
Segment profit	1,284	1,212	669	2,110	5,276	－	5,276

(Notes) 1. Adjustment of sales amount refers to the elimination of intersegment transactions.

2. The total of segment profit is consistent with operating income in the quarterly consolidated statements of income.

Ⅱ. Nine months ended December 31, 2023 (from April 1, 2023 to December 31, 2023)

1. Information on net sales and the amount of profits or losses per reportable segment

							(Millions of yen)
			Reportable segments				Amount
									recorded in
							Adjusted		the quarterly
		Wellness	Environmenta	Electronic	Industrial	Total	amount		consolidated
		l Solutions	materials	infrastructure	(Note 1)		statements of
									income
									(Note 2)
Net sales
Sales to unaffiliated	19,832	25,284	32,636	24,010	101,763	－		101,763
customers
Intersegment sales or	269	1,102	644	1,157	3,174	(3,174)		－
transfers
Total		20,101	26,387	33,281	25,167	104,937	(3,174)		101,763
Segment profit	856	1,181	1,866	2,474	6,379	－		6,379
(Notes) 1.	Adjustment of sales amount refers to the elimination of intersegment transactions.
2.	The total of segment profit is consistent with operating income in the quarterly consolidated statements of income.

- 8 -