Kanro : Non-consolidated Financial Results for the Three Months Ended March 31, 2021

Non-consolidated Financial Results

for the Three Months Ended March 31, 2021

[Japanese GAAP]

April 28, 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:	May 13, 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 Three Months Ended March 31, 2021 (January 1,

	2021 to March 31, 2021)
(1) Non-consolidated Operating Results			(% of change from the previous fiscal year.)
			Net sales	Operating income	Ordinary income	Net income
	Three months ended		Million yen	%	Million yen	%	Million yen	%	Million yen	%
	March 31, 2021		5,439	(11.0)	91	(79.1)	93	(78.7)	109	(67.3)
	March 31, 2020		6,112	2.8	439	10.1	439	10.3	333	30.8

	Basic earnings per share	Diluted earnings per share
Three months ended	Yen	Yen
March 31, 2021	15.47	－
March 31, 2020	47.30	－
(2) Non-consolidated Financial Position
	Total assets	Net assets	Equity ratio
	Million yen	Million yen	%
As of March 31, 2021	18,877	11,122	58.9
As of December 31, 2020	19,779	11,175	56.5

(Reference) Equity: As of March 31, 2021: ¥11,122 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	－
FY2021 (Forecast)		15.00	－	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
First half	11,700	4.9	270	(21.6)	280	(20.3)	150	(37.3)	21.27
Full year	24,600	5.5	840	0.4	860	(0.1)	590	(3.4)	83.67

(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 March 31,	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	606,470 shares	606,390 shares
		January 1, 2021 to	January 1, 2020 to
		March 31, 2021	March 31, 2020
3) Average number of shares during the period	7,051,358 shares	7,051,538 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) (March 31, 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 April 28, 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 three months ended March 31, 2021 suffered from the unstoppable spread of COVID-19, with another state of emergency declared in January. Although the declaration was fully lifted in March, there is still no prospect of when COVID-19 will be contained, and consumer spending is weak.

As for the candy market, the hard candy category saw a decrease year on year due to a drop in consumption of throat drops (のど飴) and other products as people spent more time at home and became used to wearing face masks in their daily life. The gummy category also saw a decline year on year as a result of the continued decrease in demand for office consumption due to the proliferation of work-from-home policies, despite a recent recovery.

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." However, net sales during the three months ended March 31, 2021 decreased by ¥672 million (11.0%) year on year to ¥5,439 million.

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 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), all decreased year on year. On the other hand, sales of gummy products increased year on year, even amid the COVID- 19 pandemic, due 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, as well as the addition of new products. Sales of healthy snacks decreased year on year due to the growing number of private-label products at convenience stores.

In terms of profits, gross profit decreased by ¥404 million (13.6%) year on year to ¥2,574 million, due to a decrease in net sales.

Operating income decreased by ¥347 million (79.1%) year on year to ¥91 million due to an increase in personnel expenses despite decreased selling expenses resulting from the decrease in sales. Ordinary income decreased by ¥346 million (78.7%) year on year to ¥93 million.

In addition, net income for the period under review decreased ¥224 million (67.3%) year on year to ¥109 million, as a result of the posting of ¥83 million in gain on sales of investment securities associated with the sale of certain stocks to reduce strategic shareholdings.

(2) Explanation of Financial Position

Total assets at the end of the first quarter of the fiscal year under review decreased by ¥901 million (4.6%) from the end of the previous fiscal year to ¥18,877 million.

The decrease in total assets was mainly attributable to a decrease in accounts receivable - trade by ¥989 million, a decrease in other current assets by ¥182 million, a decrease in property, plant and equipment by ¥132 million, and a decrease in investment securities by ¥102 million, despite an increase in cash and deposits by ¥284 million, and an increase in merchandise and finished goods by ¥149 million.

Liabilities decreased by ¥849 million (9.9%) from the end of the previous fiscal year to ¥7,754 million. The decrease in liabilities was mainly attributable to a decrease in accounts payable - other by ¥267 million, a decrease in provision for bonuses by ¥211 million, and a decrease in income taxes payable

by ¥205 million.

Net assets decreased by ¥52 million (0.5%) from the end of the previous fiscal year to ¥11,122 million.

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