Kanro : Non-consolidated Financial Results for the Fiscal Year Ended December 31, 2021

KANRO Financial Results for the Fiscal Year Ended December 31, 2021

Non-consolidated Financial Results

for the Fiscal Year Ended December 31, 2021

[Japanese GAAP]

February 10, 2022

Company name:

Kanro Inc.

Stock exchange listing:

Tokyo Stock Exchange

Code number:

2216

URL:

https://www.kanro.co.jp/en/

Representative:

Kazuyasu Misu, President and CEO

Contact person:

Kazuhiro Abe, Director, Managing Executive Officer and CFO, and

Division COO, Finance & Accounting Div.

Phone:

[phone]

Scheduled date of Ordinary General Meeting of

Shareholders:

March 29, 2022

Scheduled date of commencing dividend payments:

March 10, 2022

Scheduled date of filing annual securities report:

March 30, 2022

Supplementary materials prepared for annual

financial results:

Yes

Schedule of annual financial results briefing session:

Yes (for institutional investors and financial analysts)

(Amounts are rounded down to the nearest million yen)

1. Non-consolidated Financial Results for FY2021 (January 1, 2021 to December 31, 2021)

(1) Non-consolidated Operating Results

(% of change from the previous fiscal year.)

Net sales

Operating income

Ordinary income

Net income

Fiscal year ended

Million yen

%

Million yen

%

Million yen

%

Million yen

%

December 31, 2021

25,663

10.0

1,259

50.6

1,296

50.6

882

44.5

December 31, 2020

23,321

(3.0)

836

(9.5)

860

(14.6)

610

(6.4)

Basic earnings

Diluted

Return on

Ordinary

Operating

earnings per

income to

income to

per share

equity

share

total assets

net sales

Fiscal year ended

Yen

Yen

%

%

%

December 31, 2021

125.12

－

7.7

6.3

4.9

December 31, 2020

86.58

－

5.5

4.4

3.6

(Reference) Equity in earnings (losses) of affiliates: FY2021: ¥ - million

FY2020: ¥ - million

(2) Non-consolidated Financial Position

Total assets

Net assets

Equity ratio

Net assets per

share

Million yen

Million yen

%

Yen

As of December 31,

21,155

11,776

55.7

1,670.21

2021

As of December 31,

19,779

11,175

56.5

1,584.80

2020

(Reference) Equity: As of December 31, 2021: ¥11,776 million

As of December 31, 2020: ¥11,175 million

(3) Non-consolidated Cash Flows

Cash flows from

Cash flows from

Cash flows from

Cash and cash

equivalents at end

operating activities

investing activities

financing activities

of period

Fiscal year ended

Million yen

Million yen

Million yen

Million yen

December 31, 2021

2,620

(1,002)

(770)

2,099

December 31, 2020

1,442

(1,572)

(48)

1,253

1

KANRO Financial Results for the Fiscal Year Ended December 31, 2021

2. Cash Dividends

		Annual cash dividends per share		Total		Dividends to
						Payout ratio
	1st quarter-	2nd quarter-	3rd quarter-	Year-end	Total	dividends	net assets
	end	end	end
	Yen	Yen	Yen	Yen	Yen	Million yen	%	%
FY2020	－	15.00	－	17.00	32.00	228	37.0	2.1
FY2021	－	15.00	－	25.00	40.00	286	32.0	2.5
FY2022 (Forecast)	－	20.00	－	20.00	40.00		34.4

3. Non-consolidated Financial Results Forecast for FY2022 (January 1, 2022 to December 31, 2022)

(% of change from the previous fiscal year.)

	Net sales		Operating	Ordinary income	Net income	Basic earnings
		income	per share
	Million yen	%	Million yen	%	Million yen	%	Million yen	%	Yen
First half	10,600	8.3	280	(36.4)	290	(37.1)	170	(54.1)	24.11
Full year	22,600	4.7	1,140	(9.2)	1,160	(10.2)	820	(6.7)	116.29

• The "Accounting Standard for Revenue Recognition" (ASBJ Statement No. 29), etc. will be applied from the beginning of the fiscal year ending December 31, 2022. Accordingly, the forecasts stated above are the amounts after the application of the said standard, etc. The percentage changes from the previous corresponding period stated herein are calculated on the assumption that the said standard, etc. were applied in the fiscal year ended December 31, 2021.

2

KANRO Financial Results for the Fiscal Year Ended December 31, 2021

* Notes:

1. Changes in accounting policies, changes in accounting estimates and retrospective restatement
2. 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
3. Total number of issued shares (common shares)

	FY2021	FY2020
1) Total number of issued shares at the end of the period	7,657,802 shares	7,657,802 shares
(including treasury shares)
2) Total number of treasury shares at the end of the period	606,634 shares	606,390 shares
3) Average number of shares during the period	7,051,242 shares	7,051,477 shares

• • Total number of treasury shares at the end of the period includes the Company's treasury shares owned by Custody Bank of Japan, Ltd. (Trust Account) (December 31, 2021: 123,600 shares and December 31, 2020: 103,600 shares).
• These financial results are outside the scope of audit procedures by a certified public accountant or audit firm.
• Explanation of the proper use of financial results forecast and other notes

The earnings forecasts and other forward-looking statements herein are based on currently available information and certain assumptions deemed reasonable. Actual results may differ significantly from these forecasts due to a wide range of factors.

(Method of obtaining supplementary material on financial results)

Supplementary material on financial results is disclosed on TDnet on February 10, 2022 as well as on the Company's website.

3

	KANRO Financial Results for the Fiscal Year Ended December 31, 2021
Table of Contents (Appendix)
1. Overview of Business Results, etc. ................................................................................................	2
(1)	Overview of Business Results for the Fiscal Year under Review ................................................	2
(2)	Overview of Financial Position for the Fiscal Year under Review................................................	2
(3)	Overview of Cash Flows for the Fiscal Year under Review .........................................................	3
(4)	Future Outlook ...........................................................................................................................	4
2. Basic Concept Regarding Selection of Accounting Standards .......................................................	4
3. Non-consolidated Financial Statements and Primary Notes...........................................................	5
(1)	Non-consolidated Balance Sheets..............................................................................................	5
(2)	Non-consolidated Statements of Income ....................................................................................	8
(3)	Non-consolidated Statement of Changes in Equity...................................................................	10
(4)	Non-consolidated Statement of Cash Flows .............................................................................	14
(5)	Notes to Non-consolidated Financial Statements .....................................................................	16
	(Notes on going concern assumption) ......................................................................................	16
	(Segment information, etc.) ......................................................................................................	16
	(Equity in earnings or losses of affiliates, etc.) ..........................................................................	16
	(Per share information).............................................................................................................	17
	(Significant subsequent events)................................................................................................	18

1

KANRO Financial Results for the Fiscal Year Ended December 31, 2021

1. Overview of Business Results, etc.

(1) Overview of Business Results for the Fiscal Year under Review

The Japanese economy during the fiscal year under review suffered from the continued impact of COVID-19. However, the number of infected people decreased at the end of the fiscal year due to progress in vaccination, and there were signs of recovery due to a recent increase in flows of people. Nevertheless, the outlook remains uncertain mainly due to the impact of the emergence and expansion of mutant strains of COVID-19 on the domestic and overseas economies, soaring crude oil prices, rising raw material prices, and stagnant production activities due to disruptions in the supply chain.

As for the candy market, the market as a whole saw a decline year on year due to a drop in consumption as flows of people decreased due to repeated declarations of states of emergency and the normalization of wearing face masks. Meanwhile, the gummy category saw an increase year on year as a result of a recovery beginning due to an increase in at-home consumption.

In such a business environment, Kanro has strived to advance measures of the "Growth strategy" and "Reinforcement of management base" which are basic strategies of the medium-term corporate strategy "NewKANRO 2021" while adapting to a "new lifestyle." As a result, net sales during the fiscal year under review increased by ¥2,342 million (10.0%) year on year to ¥25,663 million.

Looking at sales by product category, sales of hard candy products decreased year on year despite bag type hard candy products seeing the increase in the gourmet and fancy category making up for the decrease in throat drops (のど飴), as the sales of the stick type hard candy products and small bags with zip type products continued to decline due to a decrease in office and outing consumption. By product, while sales increased for Kinno Milk candy (金のミルクキャンデイ) with newly released flavors, and the Non-SugarSakan (ノンシュガー茶館) series, sales of the Kenko Nodoame (健康のど飴) series, Non-SugarSuper Menthol Nodoame (ノンシュガースーパーメントールのど飴), and Non-SugarFruit Nodoame (ノンシュガー果実のど飴) decreased year on year. Sales of healthy snacks also decreased year on year due to the growing number of private-label products at convenience stores. On the other hand, sales of gummy products increased significantly year on year. In addition to strong sales of renewed Puré Gummy (ピュレグミ) and Puré Ring (ピュレリング) for parents and children, sales of Candemina Gummy (カンデミーナグミ), which has grown into a leading brand, were also strong, and a new product Marosh (マロッシュ), a marshmallow product, was received favorably. As a result, the increase in sales of gummy products significantly exceeded the decreases in sales of hard candy products and healthy snacks.

In terms of profits, gross profit increased by ¥1,558 million (14.3%) year on year to ¥12,422 million, due to an increase in net sales and a decrease in cost-of-sales ratio resulting from an increase in production.

Operating income increased by ¥423 million (50.6%) year on year to ¥1,259 million despite an increase in sales promotion expenses in reaction to the decrease in the previous fiscal year, an increase in advertising expenses due to the implementation of TV commercials for a new product, and an increase in personnel expenses mainly due to an increased number of employees. Ordinary income increased by ¥435 million (50.6%) year on year to ¥1,296 million, due to income from loss recognized in association with the delay in installation of factory equipment, in addition to the above factors.

Net income increased by ¥271 million (44.5%) year on year to ¥882 million, as a result of the posting of ¥94 million in gain on sales of investment securities associated with the reduction of strategic shareholdings coupled with ¥132 million in impairment losses associated with the renewal of facilities to increase production capacity.

(2) Overview of Financial Position for the Fiscal Year under Review

Total assets at the end of the fiscal year under review increased by ¥1,376 million (7.0%) from the

2