Hirose Electric : Quarterly Financial Report (Second Quarter)

English translation

【Document to be filed】Quarterly Financial Report

【Provisions to base upon】Article 24-4-7, paragraph 1 of the Financial Instruments and Exchange Act 【Filing to】Director-General of the Kanto Local Finance Bureau

【Date of filing】November 12, 2021

【Fiscal Period】2nd quarter of 75th term (from July 1, 2021 to September 30, 2021) 【Company name】HIROSE ELECTRIC CO., LTD.

【Title and name of representative】Kazunori Ishii, President

【Location of head office】2-6-3 Nakagawa Chuoh, Tsuzuki-Ku, Yokohama, Kanagawa, Japan 【Telephone number】[phone]

【Contact person】Keiji Hara, General Manager of Accounting Department

【Place of contact】2-6-3 Nakagawa Chuoh, Tsuzuki-Ku, Yokohama, Kanagawa, Japan 【Telephone number】[phone]

【Contact person】Keiji Hara, General Manager of Accounting Department

【Place where the document to be filed is available for public inspection】Tokyo Stock Exchange, Inc. (2-1,Nihonbashi-kabutocho,Chuo-ku, Tokyo, Japan)

【Company Information】

1. Overview of the Company

1. Changes in major management indicators

			(Yen in millions)
	74th Fiscal Term	75th Fiscal Term	74th Fiscal Term
	Consolidated First Half	Consolidated First Half
Fiscal period	From April 1, 2020	From April 1, 2021	From April 1, 2020
to September 30, 2020	to September 30, 2021	to March 31, 2021
Revenue	61,036	79,188	133,538
(Second quarter from July 1 to Sep 30)	(33,636)	(40,745)
Quarterly profit before tax or	12,887	20,384	28,332
profit before tax
Quarterly profit attributable to	9,338	14,797	19,916
owners of parent
(4,921)	(8,111)
(Second quarter from July 1 to Sep 30)
Quarterly comprehensive income	9,918	14,132	28,431
attributable to owners of parent
Equity attributable to owners of	311,706	321,338	326,092
parent
Total Assets	348,072	365,731	370,504
Quarterly earnings per share	257.48	414.96	549.10
-basic (Yen)
(135.70)	(229.48)
(Second quarter from July 1 to Sep 30)
Quarterly earnings per share	257.48	414.85	549.04
-diluted (Yen)
Ratio of total equity attributable to	89.6	87.9	88.0
owners of parent (%)
Cash flows from operating	15,300	20,116	35,818
activities
Cash flows from investing	(8,472)	13,649	(20,702)
activities
Cash flows from financing	(4,754)	(19,277)	(9,278)
activities
Balance of cash and cash	52,892	72,415	57,837
equivalents at end of the quarter

(Notes) 1. We prepare the condensed quarterly consolidated financial statements, and the transition of the major management indicators are not included.

1. The financial data above are based on the condensed quarterly consolidated financial statements and consolidated financial statements prepared in accordance with International Financial Reporting Standards (IFRS).
2. "Diluted quarterly earnings per share" is listed at the same price as "Basic quarterly earnings per share", because there were no potential shares with dilutive effect in the first half of the 74th fiscal term.

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2. Description of Business

There were no significant changes in our business during the first half of the fiscal year ending March 31, 2022. There were also no changes in major subsidiaries.

1. Business Overview

1. Risk Factors
   Regarding the business and financial situation stated in this report, there were no matters that may have significant impact on the investment decision and no significant changes in the risk factors stated in the annual securities report for the previous fiscal year during the six months ended September 30, 2021.
   There were no material events.

2. Management Analysis of Financial Position, Operating Results and Cash Flows Forward-looking statements below were determined as of September 30, 2021.

(1) Overview of Operating Results

In the first half of the fiscal year ending March 31, 2022, due to the spread of COVID-19 and repeated state of emergency, consumer spending has still been sluggish. However mainly in manufacturing industry, the business sentiment has been improved because overseas economy has been recovering and exports have been increasing. Business situation varies depending on industry sector and the difference is becoming clear.

In overseas market, COVID-19 vaccination has been progressing. In Europe and the United States, activity restriction was lifted and the economy has been recovering. In China, although recovery speed has decreased because of some concerns about overinvestment, the economy has been strong.

Under this situation, Hirose group has been expanding global business mainly for consumer market, automotive market and industrial market, and promoting reinforcement of development, sales and production system for new products with highly added value to respond advanced market needs quickly. The sales for mainly consumer electronics, automotive and industrial business has grown. As a result, revenue in the first half increased by 29.7% to JPY 79,188 million compared to the same period of the previous fiscal year. Operating profit increased by 53.5% to JPY 19,792 million, and quarterly profit attributable to owners of parent increased by 58.5% to JPY 14,797 million as compared with the first half of fiscal 2020.

The business results by reportable segments are as stated below. [Multi-pin connectors]

Our flagship multi-pin connectors include a variety of connector types such as circular connectors, rectangular connectors, connectors for ribbon cables, connectors for printed circuit boards, connectors used for FPCs (flexible printed circuits boards) and nylon connectors. This kind of connectors are used widely, such as for smartphones, tablet PC, communication equipment, automotive electronics, measuring and control equipment, FA equipment, and medical electronics equipment, as well as other industrial equipment. We expect that demands for this connectors will grow associated with progress of advanced information and telecommunications network society, and energy saving society considering environment in the future. Segment sales for the first half of the fiscal year ending March 31, 2022 increased by 30.4% to JPY 71,038 million, operating profit increased by 50.6% to JPY 18,320 million compared with the first half of the fiscal 2020.

[Coaxial connectors]

Coaxial connectors are a special type of high-performance connector used primarily for microwave and other high- frequency signals. This is used mainly for microwave communication device, satellite communication device, electronic measuring instruments, smartphone and 4K/8K broadcasting equipment. Optical fiber connectors and coaxial switches are also included in this segment. Segment sales for the first half of the fiscal 2021 increased by 23.1% to JPY 5,663 million. Operating profit increased by 103.4% to JPY 1,430 million.

[Other products]

This segment includes micro switches and instruments for connectors. Segment sales for the first half of the fiscal 2021 increased by 26.9% to JPY 2,487 million, operating profit increased by 44.5% to JPY 42 million.

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(2) Overview of Cash Flows

Cash and cash equivalents at the first half of the fiscal year ending March 31, 2022 increased by JPY 14,578 million to JPY 72,415 million compared to the end of the fiscal year ended March 31, 2021.

a. Cash flows from operating activities

Cash flows from operating activities increased by JPY 20,116 million. (In the fiscal 2020.1H, it increased by JPY 15,300 million.) This increase was mainly due to a rise in capital by appropriating quarterly profit before tax, JPY 20,384 million, and depreciation and amortization, JPY 8,292 million.

b. Cash flows from investing activities

Cash flows from investing activities increased by JPY 13,649 million. (In the fiscal 2020.1H, it decreased by JPY 8,472 million.) This is mainly due to proceeds from net decrease in time deposits, JPY 15,778 million, and proceeds from sale and redemption of investments, JPY 8,325 million.

c. Cash flows from financing activities

Cash flows from financing activities decreased by JPY 19,277 million. (In the fiscal 2020.1H, it decreased by JPY 4,754 million.) This is because of decrease in capital by payment for share buy-back, JPY 14,575 million and dividends paid, JPY 4,354 million.

(3) Analysis of financial condition

Total assets of FY2021.2Q decreased by JPY 4,772 million to JPY 365,731 million compared to the end of the previous consolidated fiscal year mainly because other financial assets decreased. Total liabilities decreased by JPY 18 million to JPY 44,393 million due to the decrease in income taxes payable. Although quarterly profit was recorded and retained earnings increased, treasury shares increased because of off-auction own share repurchase and other components of equity including foreign currency translation adjustment decreased. As a result, total equity decreased by JPY 4,754 million to JPY 321,338 million. The ratio of total equity attributable to owners of parent resulted 87.9%, decreased by 0.1% compared with the previous consolidated fiscal year end.

(4) Assumptions used for accounting estimates

There are no significant changes in the accounting estimated from "Management Analysis of Financial Position, Operating Results and Cash Flows" stated in the annual securities report of FY 2020 and assumptions used for the estimates.

(5) Research and development

Our research and development expenses for the six months ended September 30, 2021 were JPY 3,846 million. As the achievement of research and development activities, fixed assets including tools appropriated to JPY 1,101 million. When these amount are added up, the total of R&D investment amount was JPY 4,947 million. There were no significant changes in research and development activities for the period.

3. Material Agreements, etc

There were no decision or conclusion of significant business agreement during the three months ended September 30, 2021.

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3. Information on the Company

1. Information on the Company's Shares

(1) Total number of shares, etc.

① Total Number of Shares

	Class		Total number of shares authorized to be issued (Shares)
	Ordinary share				80,000,000
	Total				80,000,000
②Issued Shares
	Number of shares issued as	Number of shares	Stock exchange on which
	the Company is listed or
Class	of the end of second quarter	issued as of the filing	authorized financial	Description
(Shares)	date (Shares)	instruments firms
	(September 30, 2021)	(November 12, 2021)	association where the
				Company is registered
Ordinary				Tokyo Stock Exchange, Inc.	The number of shares
38,175,942	38,175,942	per unit of shares is
share	(the first section)
			100 shares
Total	38,175,942	38,175,942	−	−

(Note) The number of shares issued as of the filing date do not include the share issued by share acquisition rights from November 1, 2021 to the filing date of this report.

1. Information on the share acquisition rights, etc.

• Details of share option plans

Not applicable.

• Other information about share acquisition rights Not applicable.

1. Information on Moving Strike Convertible Bonds Not applicable.
2. Changes in the total number of shares issued, common stock, etc.

	Change in the	Balance of the	Change in	Balance of	Change in capital	Balance of
Date	total number of	total number of	common stock
common stock	reserve	capital reserve
issued shares	issued shares	(Yen in
	(Yen in millions)	(Yen in millions)	(Yen in millions)
	(Shares)	(Shares)	millions)
From July 1, 2021 to	−	38,175,942	−	9,404	−	12,007
September 30, 2021

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