Kanro : Non-consolidated Financial Results for the Six Months Ended June 30, 2021

Non-consolidated Financial Results

for the Six Months Ended June 30, 2021

[Japanese GAAP]

August 5, 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:	August 10, 2021
Scheduled date of commencing dividend payments:	August 27, 2021
Supplementary materials prepared for quarterly financial results: Yes
Schedule of quarterly 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 the Six Months Ended June 30, 2021 (January 1, 2021 to June 30, 2021)

(1) Non-consolidated Operating Results			(% of change from the previous fiscal year.)
		Net sales		Operating income	Ordinary income	Net income
	Six months ended	Million yen	%	Million yen	%	Million yen	%	Million yen	%
	June 30, 2021	11,640	4.4	436	26.8	457	30.3	367	53.6
	June 30, 2020	11,152	(5.4)	344	(31.1)	351	(30.6)	239	1.0

		Basic earnings per share	Diluted earnings per share
Six months ended		Yen	Yen
June 30, 2021	52.17	－
June 30, 2020	33.95	－
(2) Non-consolidated Financial Position
		Total assets		Net assets		Equity ratio
		Million yen		Million yen		%
As of June 30, 2021		19,115		11,370		59.5
As of December 31, 2020		19,779		11,175		56.5

(Reference) Equity: As of June 30, 2021: ¥11,370 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)			－	15.00	30.00

(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	24,700	5.9	870	4.0	900	4.5	660	8.1	93.60

(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 June 30, 2021	As of December 31,
			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	606,590 shares	606,390 shares
		January 1, 2021 to	January 1, 2020 to
		June 30, 2021	June 30, 2020
3)	Average number of shares during the period	7,051,312 shares	7,051,508 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) (June 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 August 5, 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 six months ended June 30, 2021 suffered from the continued impact of COVID-19. Although vaccination against COVID-19 has gradually progressed, there is still no prospect of when COVID-19 will be contained, 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 continued to be restricted and wearing face masks were normalized, despite a recent move to recovery. Meanwhile, the gummy category turned to recovery in all channels and saw an increase year on year.

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 six months ended June 30, 2021 increased by ¥487 million (4.4%) year on year to ¥11,640 million.

Looking at sales by product category, sales of hard candy products decreased year on year due to a significant decrease in sales of the bag type hard candy products, mainly the throat drops (のど飴) products, as well as a continued decline in sales of the stick type hard candy products and small bags with zip type products due to a decrease in office and outing consumption. By product, sales of many of the leading brands, such as 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), Non-SugarFruit Nodoame (ノンシュガー果実の ど飴), and Kinno Milk (金のミルク), 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 with a new texture realized through the use of technology to confine air in gummies, 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 ¥425 million (8.2%) year on year to ¥5,600 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 ¥92 million (26.8%) year on year to ¥436 million. This was because of some expenses carried over to the second half of the current fiscal year, combined with an increase in sales promotion expenses in reaction to the decrease in the previous fiscal year and an increase in personnel expenses resulting from increased number of employees. Ordinary income increased by ¥106 million (30.3%) year on year to ¥457 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 ¥128 million (53.6%) year on year to ¥367 million, partly 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 second quarter of the fiscal year under review decreased by ¥663 million (3.4%) from the end of the previous fiscal year to ¥19,115 million.

The decrease in total assets was mainly attributable to a decrease in accounts receivable - trade by ¥1,251 million, a decrease in property, plant and equipment by ¥141 million, and a decrease in investment securities by ¥117 million, despite an increase in cash and deposits by ¥649 million and an

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