Hokuto : Consolidated Financial Results for the Three Months Ended June 30, 2023 (Based on Japanese GAAP)

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.

		Consolidated Financial Results
		for the Three Months Ended June 30, 2023
		(Based on Japanese GAAP)
		August 10, 2023
Company name:	HOKUTO CORPORATION
Stock exchange listing:	Tokyo
Stock code:	1379	URL https://www.hokto-kinoko.co.jp
Representative:	President	Masayoshi Mizuno

Inquiries:	Executive Officer, General Manager of	Kohei Nakada	TEL [phone]
Accounting Department
Scheduled date to file Quarterly Securities Report:	August 10, 2023
Scheduled date to commence dividend payments:	-
Preparation of supplementary material on quarterly financial results:	Yes
Holding of quarterly financial results meeting:	No

(Amounts less than one million yen are rounded down)

1. Consolidated financial results for the three months ended June 30, 2023 (from April 1, 2023 to June 30, 2023)

(1) Consolidated operating results (cumulative)								Percentages indicate year-on-year changes
			Net sales			Operating profit		Ordinary profit		Profit attributable to
								owners of parent
		Millions of yen		%	Millions of yen	%	Millions of yen			%	Millions of yen		%
Three months ended June 30, 2023		16,849		7.6		(1,248)	-				(304)			-		(332)		-
Three months ended June 30, 2022		15,665		2.4		(1,701)	-				(594)			-		(557)		-
Note: Comprehensive income Three months ended June 30, 2023	¥(117) million	[-%]
	Three months ended June 30, 2022	¥(520) million	[-%]
			Earnings per share	Diluted earnings per share
						Yen					Yen
Three months ended June 30, 2023				(10.50)					-
Three months ended June 30, 2022				(17.65)					-
(2) Consolidated financial position
			Total assets		Net assets		Equity ratio
			Millions of yen		Millions of yen							%
As of June 30, 2023			106,957				49,934						46.7
As of March 31, 2023			104,897				50,955						48.6
Reference: Equity	As of June 30, 2023		¥49,934		million
	As of March 31, 2023	¥50,955		million
2. Cash dividends
								Annual dividends per share
			1st quarter-end		2nd quarter-end		3rd quarter-end		Fiscal year-end	Total
			Yen		Yen				Yen					Yen			Yen
Year ended March 31, 2023				-		10.00				-					30.00			40.00
Year ending March 31, 2024				-
Year ending March 31, 2024 (Forecast)							10.00				-						-			-

Notes: 1. Revisions to the cash dividend forecasts most recently announced: None

2. The forecast for the year-end dividends for the year ending March 31, 2024 has not yet been determined.

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 profit		Ordinary profit		Profit attributable to	Earnings per share
				owners of parent
Six months ending	Millions of yen	%	Millions of yen		%	Millions of yen		%	Millions of yen		%	Yen
35,800	13.2	(2,730)		-	(2,650)		-		(2,110)		-	(66.58)
September 30, 2023
Full year	80,200	9.9	1,920		-	2,110		-		700		-	22.08
Note: Revisions to the	earnings forecasts most recently announced: None
4. Notes
(1) Changes in significant subsidiaries during the three months ended June 30, 2023			No
(changes in specified subsidiaries resulting in the change in scope of consolidation):
(2) Application of special accounting methods for preparing quarterly consolidated financial statements:	No
(3) Changes in accounting policies, changes in accounting estimates, and restatement of prior period financial statements
Changes in accounting policies due to revisions to accounting standards and other regulations:	No
Changes in accounting policies due to other reasons:						No
Changes in accounting estimates:									No
Restatement of prior period financial statements:						No

(4) Number of issued shares (common shares)

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

As of June 30, 2023

33,359,040 shares

As of March 31, 2023

33,359,040 shares

Number of treasury shares at the end of the period

As of June 30, 2023

1,673,376 shares

As of March 31, 2023

1,698,816 shares

Average number of shares during the period (cumulative from the beginning of the fiscal year)

Three months ended June 30, 2023

31,672,114 shares

Three months ended June 30, 2022

31,587,881 shares

• Quarterly financial results reports are exempt from quarterly review conducted by certified public accountants or an audit corporation.
• Proper use of forecasts of financial results, and other special matters

(Cautions on forward-looking statements, etc.)

Forward-looking statements, including the earnings forecasts stated in this document, are based on information currently available to the Company and certain assumptions deemed reasonable. Consequently, any statements herein do not constitute assurances regarding actual results by the Company. Actual results may differ materially from the forecasts due to various factors. For the suppositions that form the assumptions for earnings forecasts and cautions concerning the use thereof, please refer to '(3) Information regarding consolidated earnings forecasts and other forward-looking statements' in '1. Qualitative Information Regarding Financial Results for the Three Months Ended June 30, 2023,' on page 3 of the attached materials.

1. Qualitative Information Regarding Financial Results for the Three Months Ended June 30, 2023

1. Explanation of operating results
   The Japanese economy during the first three months ended June 30, 2023 showed signs of resumption of economic activities and a recovery in consumer spending and capital investment due to the transition of COVID-19 to a Class 5 infectious disease and other relaxations of activity restrictions designed to prevent the spread of the virus. However, the outlook is uncertain due to the protracted situation in Ukraine, soaring prices of resources and raw materials, and rising prices of commodities due to the weak yen.
   In this economic environment, the Group believes that its priority is the safety of all consumers and employees, and it carried out business activities primarily in the mushroom business to deliver deliciousness and health to more and more people through research & development, production, and sales of mushrooms, which are a health food, while taking into account measures to prevent the spread of COVID-19. Furthermore, the Group carried out initiatives with the Management Vision to "Expand the market and consumption, with delivering health through mushrooms as our mission" and to "Achieve both generation of profit and social responsibility as a company."
   As a result of the above, the operating results of the Group for the three months ended June 30, 2023 were net sales of ¥16,849 million (up 7.6% from the same period of the previous fiscal year), operating loss of ¥1,248 million (operating loss of ¥1,701 million in the same period of the previous fiscal year), ordinary loss of ¥304 million (ordinary loss of ¥594 million in the same period of the previous fiscal year), and loss attributable to owners of parent of ¥332 million (loss attributable to owners of parent of ¥557 million in the same period of the previous fiscal year).
   Production output for the three months ended June 30, 2023 consists of 11,050t of Bunashimeji, including Bunapi (down 5.8% from the same period of the previous fiscal year), 4,418t of Eryngii (up 0.1% from the same period of the previous fiscal year), and 3,721t of Maitake (down 0.1% from the same period of the previous fiscal year).
   Performance in each business segment for the three months ended June 30, 2023 was as follows.
   [Mushroom business in Japan]
   The production division, amid a significant rise in raw material prices, electricity costs, packaging costs, and other production costs, worked to reduce costs, performed even more thorough hygiene control, worked to improve quality and for stable cultivation, and provided mushrooms safely and securely, while continuing to take into account measures to prevent the spread of COVID-19.
   The R&D division worked to strengthen the quality control system, develop new high value-added products, improve existing mushrooms, and pursue pharmacological effects and functionality of mushrooms.
   The sales division advocated for "Kinkatsu through mushrooms" (the lifestyle habit of incorporating mushrooms into daily meals) with the three pillars of health, beauty and sports in order to stimulate mushroom demand and carried out sales activities with a commitment to freshness. In terms of sales, production adjustments made since the beginning of the current fiscal year have resulted in improved supply and demand of mushrooms, and prices have remained relatively firm, maintaining a stable state.
   As a result, net sales for the mushroom business in Japan as a whole were ¥10,776 million (up 11.9% year on year).

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[Mushroom business outside Japan]

Hokto Kinoko Company, a local subsidiary in the U.S., faced difficult conditions in overall fresh produce sales, including mushrooms, due to a long rainy season and low temperatures. In addition, net sales and operating profit fell short of the plan due to higher manufacturing costs caused by soaring energy costs and raw material and material costs. At Taiwan Hokuto Corporation, a local subsidiary in Taiwan, sales in the retail market as a whole were sluggish due to falling vegetable prices. Amid this, mushroom sales were also weak, and net sales fell slightly short of the plan. However, thanks to the effects of cost-cutting measures and other factors, operating profit slightly exceeded the plan. Hokto Malaysia Sdn. Bhd., a local subsidiary in Malaysia, faced a difficult market environment due to inflation since last year, while a large volume of Chinese mushrooms were imported into the ASEAN region at low prices, which had a significant impact on the company's mushroom sales. Consequently, both net sales and operating profit fell short of the plan. However, net sales increased year on year for the local subsidiary in the U.S. as a result of raising prices twice from the second half of last year.

As a result, net sales for the mushroom business outside Japan as a whole were ¥1,657 million (up 7.8% year on year).

[Processed products business]

The processed products business carried out sales of processed mushroom products, such as those that are boiled or frozen, and worked to develop new products and develop markets. In the restaurant divisions, sales of products for delicatessen and home meal service were strong, and in terms of sales of processed products for the commercial fruit and vegetable market were also steady, mainly for dried and boiled products and pre-packaged shiitake mushroom rice products. Meanwhile, sales of fresh and frozen mushroom products for commercial use struggled for home meals and convenience stores. We launched dried shiitake mushrooms, etc., in the mail-order business, and sales were strong despite raising prices, mainly through our e-commerce website. Furthermore, at the subsidiary Arden Corporation, net sales fell short of projections due to reduced orders as a result of raising prices in April.

As a result, net sales for the processed products business were ¥1,568 million (down 12.6% year on year).

[Chemical products business]

The First Business Department, whose main business is packaging materials, worked on proposal-based marketing for value-added products, with a focus on functional packaging materials that limit quality deterioration and environmental packaging materials made from recycled materials. While sales to mass retailers remained strong, sales of industrial materials for semiconductor and automotive parts-related manufacturers struggled.

The Second Business Department, which primarily produces and sells agricultural materials and our own products, continued to focus on stable supply of some production materials and culture medium, which are in tight supply and demand, to mushroom growers, and also worked to improve the quality of our own products and expand sales.

As a result, net sales for the chemical products business were ¥2,846 million (up 5.2% year on year).

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1. Explanation of financial position
   Positions of assets, liabilities and net assets, and the factors thereof as of June 30, 2023 are as follows. (Assets)
   Current assets as of June 30, 2023 amounted to ¥33,204 million, up ¥2,413 million from the previous fiscal year end. This was due mainly to an increase of ¥2,365 million in cash and deposits. Non-current assets amounted to ¥73,752 million, down ¥353 million from the previous fiscal year end.
   As a result, total assets amounted to ¥106,957 million, up ¥2,060 million from the previous fiscal year end.
   (Liabilities)
   Current liabilities as of June 30, 2023 amounted to ¥38,876 million, up ¥939 million from the previous fiscal year end. Non-current liabilities amounted to ¥18,146 million, up ¥2,141 million from the previous fiscal year end. This was due mainly to an increase of ¥2,159 million in long-term borrowings.
   As a result, total liabilities amounted to ¥57,022 million, up ¥3,081 million from the previous fiscal year end.
   (Net assets)
   Total net assets as of June 30, 2023 amounted to ¥49,934 million, down ¥1,020 million from the previous fiscal year end. This was due mainly to a decrease of ¥1,286 million in retained earnings associated with the recording of ¥332 million in loss attributable to owners of parent and the payment of dividend of ¥954 million.
   As a result, the equity ratio was 46.7% (48.6% at the end of the previous fiscal year).
2. Information regarding consolidated earnings forecasts and other forward-looking statements
   There is no change in the earnings forecasts in the "Summary of Consolidated Financial Results for the Year Ended March 31, 2023 (Based on Japanese GAAP)," dated May 12, 2023.
   The earnings forecasts are based on information currently available to the Company and certain assumptions deemed reasonable. Actual results may differ materially from the forecasts due to various factors.

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