Kanro : Non-consolidated Financial Results for the Nine Months Ended September 30, 2021

Non-consolidated Financial Results

for the Nine Months Ended September 30, 2021

[Japanese GAAP]

October 29, 2021

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 filing quarterly securities report:	November 9, 2021
Scheduled date of commencing dividend payments:	-
Supplementary materials prepared for quarterly financial results: Yes
Schedule of quarterly financial results briefing session:	No

(Amounts are rounded down to the nearest million yen)

1. Non-consolidated Financial Results for the Nine Months Ended September 30, 2021 (January 1, 2021 to September 30, 2021)

(1) Non-consolidated Operating Results			(% of change from the previous fiscal year.)
		Net sales		Operating income	Ordinary income	Net income
	Nine months ended	Million yen	%	Million yen	%	Million yen	%	Million yen	%
	September 30, 2021	17,639	9.2	512	200.1	543	186.1	435	205.4
	September 30, 2020	16,154	(4.2)	170	(44.1)	189	(50.2)	142	(3.8)

		Basic earnings per share	Diluted earnings per share
Nine months ended		Yen	Yen
September 30, 2021	61.81		－
September 30, 2020	20.24		－
(2) Non-consolidated Financial Position
		Total assets		Net assets		Equity ratio
		Million yen		Million yen		%
As of September 30, 2021		19,311		11,330		58.7
As of December 31, 2020		19,779		11,175		56.5

(Reference) Equity: As of September 30, 2021: ¥11,330 million As of December 31, 2020: ¥11,175 million

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2. Cash Dividends

		Annual cash dividends per share
	1st quarter-end	2nd quarter-end	3rd quarter-end	Year-end	Total
	Yen	Yen	Yen	Yen	Yen
FY2020	－	15.00	－	17.00	32.00
FY2021	－	15.00	－
FY2021 (Forecast)				25.00	40.00

(Note) Revision to the forecast for dividends announced most recently: No

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

(% 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
Full year	25,300	8.5	1,160	38.7	1,200	39.4	880	44.1	124.80

(Note) Revision to the financial results forecast announced most recently: No

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* Notes:

1. Accounting policies adopted specially for the preparation of non-consolidated financial statements: No
2. Changes in accounting policies, changes in accounting estimates and retrospective restatement
3. 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
4. Total number of issued shares (common shares)

		As of September 30,	As of December 31,
		2021	2020
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	606,630 shares	606,390 shares
		January 1, 2021 to	January 1, 2020 to
		September 30,
		September 30, 2021
		2020
3)	Average number of shares during the period	7,051,274 shares	7,051,489 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) (September 30, 2021: 123,600 shares and December 31, 2020: 103,600 shares).
• These financial results are outside the scope of the quarterly review 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. Please refer to "(3) Explanation of Non-consolidated Financial Results Forecast and Other Forward-looking Information" on page 3 of the Appendix for assumptions on financial results forecasts and notes on the use of such forecasts.

(Method of obtaining supplementary material on financial results)

Supplementary material on financial results is disclosed on TDnet on October 29, 2021 as well as on the Company's website.

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Table of Contents (Appendix)
1. Qualitative Information on Financial Results for the Period under Review......................................	2
(1)	Explanation of Business Results ................................................................................................	2
(2)	Explanation of Financial Position................................................................................................	2
(3)	Explanation of Non-consolidated Financial Results Forecast and Other Forward-looking
	Information .................................................................................................................................	3
2. Non-consolidated Financial Statements and Primary Notes...........................................................	4
(1)	Non-consolidated Balance Sheets..............................................................................................	4
(2)	Non-consolidated Statements of Income ....................................................................................	6
(3)	Notes to Non-consolidated Financial Statements .......................................................................	7
	(Notes on going concern assumption) ........................................................................................	7
	(Notes in the case of significant changes in shareholders' equity) ..............................................	7

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1. Qualitative Information on Financial Results for the Period under Review

(1) Explanation of Business Results

The Japanese economy during the nine months ended September 30, 2021 suffered from the continued impact of COVID-19. Although vaccination against COVID-19 has progressed and the number of infected people is currently declining, the situation remains uncertain, and consumer spending is weak.

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, despite a trend towards recovery. Meanwhile, the gummy category saw an increase year on year in all channels.

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 nine months ended September 30, 2021 increased by ¥1,485 million (9.2%) year on year to ¥17,639 million.

Looking at sales by product category, sales of bag type hard candy products decreased year on year despite 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 Candemina Gummy (カン デミーナグミ), a leading brand, sales of renewed Puré Gummy (ピュレグミ) and Puré Ring (ピュレリ ング) for parents and children were 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 exceeded the decreases in sales of hard candy products and healthy snacks.

In terms of profits, gross profit increased by ¥991 million (13.4%) year on year to ¥8,359 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 ¥341 million (200.1%) year on year to ¥512 million despite an increase in sales promotion expenses in reaction to the decrease in the previous fiscal year and an increase in personnel expenses resulting from an increased number of employees. Ordinary income increased by ¥353 million (186.1%) year on year to ¥543 million, due to income from loss recognized in association with the delay in installation of factory equipment, in addition to the above factors.

In addition, net income for the period under review increased by ¥293 million (205.4%) year on year to ¥435 million, as the amount posted in gain on sales of investment securities associated with the reduction of strategic shareholdings exceeded that posted for the corresponding period of the previous fiscal year.

(2) Explanation of Financial Position

Total assets at the end of the third quarter of the fiscal year under review decreased by ¥467 million (2.4%) from the end of the previous fiscal year to ¥19,311 million.

The decrease in total assets was mainly attributable to a decrease in accounts receivable - trade by ¥1,365 million and a decrease in property, plant and equipment by ¥173 million, despite an increase in cash and deposits by ¥753 million and an increase in merchandise and finished goods by ¥328 million.

Liabilities decreased by ¥622 million (7.2%) from the end of the previous fiscal year to ¥7,981 million. 2