Krosaki Harima : Summary of Consolidated Financial Statements for 2Q FY2023

Note: This document has been translated from part of the original Japanese version into English for reference purpose only. If there are conflicts between this translated document and the original Japanese version, the original Japanese version shall prevail. The Company assumes no responsibility for this translation or for direct, indirect or any other forms of damages arising from this translation.

Summary of Consolidated Financial Statements

for the Second Quarter of the Fiscal Year Ending March 2024

[Japanese Standards]

October 31, 2023

Listed Company Name: KROSAKI HARIMA CORPORATION

	Listed on the Tokyo Stock Exchange and the Fukuoka Stock Exchange
Securities Code:	5352	URL: https://www.krosaki.co.jp/
Representative:	Kazuhiro Egawa, President
Date to submit quarterly financial statements:	November 13, 2023
Date to start distributing dividends:		November 29, 2023

Supplementary documents for this summary of financial statements: Yes

Explanation meeting for institutional investors and analysts on this summary of financial statements: Yes

(Figures shown are rounded down to the nearest million yen)

1. Consolidated Financial Results for the First Half of the Fiscal Year Ending March 31, 2024 (April 1, 2023, to September 30, 2023)

(1) Consolidated Business Results

	(Percentages indicate changes from the same period of the previous fiscal year.)
	Net sales		Operating profit		Ordinary profit
	Millions of yen	%	Millions of yen	%	Millions of yen	%
First 2Qs, Fiscal Year Ending	89,399	10.9	7,596	54.6	8,593	51.2
March 2024
First 2Qs, Fiscal Year Ended	80,591	23.8	4,914	16.7	5,685	24.7
March 2023
	Profit attributable to owners	Profit per share		Diluted profit per share
	of parent
	Millions of yen	%		Yen		Yen
First 2Qs, Fiscal Year Ending	6,619	85.1		786.09		-
March 2024
First 2Qs, Fiscal Year Ended	3,576	18.5		424.74		-
March 2023

Note: Comprehensive income was ¥9,322 million (6.5%) for the first two quarters of the fiscal year ending March 2024 and ¥8,750 million (120.7%) for the first two quarters of the fiscal year ended March 2023.

(2)	Consolidated Financial Position
		Total assets		Net assets	Equity ratio
		Millions of yen		Millions of yen		%
	September 30, 2023	171,313		85,489		47.0
	March 31, 2023	163,340		77,858		45.0
Reference: Equity capital was ¥80,565 million as of September 30, 2023, and ¥73,528 million as of March 31, 2023.
2.	Dividends
				Dividend
		1Q End	2Q End	3Q End	Year-End	Annual
		Yen	Yen	Yen	Yen	Yen
Fiscal Year Ended March 2023	-	110.00	-	180.00	290.00
Fiscal Year Ending March 2024	-	160.00
Fiscal Year Ending March 2024 (Forecast)			-	210.00	370.00

Note: Revision to the most recent dividend forecasts previously released: Yes

*For details, refer to the Notice Regarding Performance and Dividend Forecasts released today.

3. Forecast of Consolidated Business Results for the Fiscal Year Ending March 31, 2024 (April 1, 2023, to March 31, 2024)

	(The percentages indicate the rates of increase or decrease compared with the preceding fiscal year.)
	Net sales		Operating profit		Ordinary profit
	Millions of yen	%	Millions of yen	%	Millions of yen	%
Full Year	174,000	5.3	13,600	21.7	14,500	20.0
	Profit attributable to owners	Profit per share
	of parent
	Millions of yen	%		Yen
Full Year	12,400	49.7	1,472.58

Note: Revision to the most recent performance forecasts previously released: Yes

*For details, refer to the Notice Regarding Performance and Dividend Forecasts released today.

Notes:

1. Changes in important subsidiaries involving a change in the scope of consolidation during the period: None
2. Adoption of accounting methods specific to preparation of quarterly consolidated financial statements: None
3. Changes in accounting policies or estimates and retrospective restatements
4. 1. Changes in accounting policies in accordance with revision of accounting standards: None
   2. Changes in accounting policies other than above: None
   3. Changes in accounting estimates: None
   4. Retrospective restatements: None
5. Number of shares issued and outstanding (common stock)
6. 1. Number of shares issued and outstanding as of the period-end (including treasury shares):

2Q, Fiscal Year ending March 2024:	9,114,528	Fiscal Year ended March 2023:	9,114,528
2. Number of treasury shares as of the period-end:
2Q, Fiscal Year ending March 2024:	694,075	Fiscal Year ended March 2023:	693,629
3. Average number of shares outstanding:
2Q, Fiscal Year ending March 2024:	8,420,606	2Q, Fiscal Year ended March 2023:	8,421,545

The Summary of Quarterly Consolidated Financial Statements is exempt from the quarterly review by Certified Public Accountants or an Audit Corporation.

Statement regarding the proper use of financial forecasts and other special remarks:

Forward-looking statements, including the forecast of business results, in this Summary are based on information that has been obtained by the Company to date and certain assumptions that are deemed as reasonable, and the Company does not guarantee the realization of these statements. Please understand that actual results may differ significantly from those statements due to various factors. For details of the forecast of business results, see "(2) Explanation of Forecast of Consolidated Business Results and Other Forward-looking Information" under "1. Qualitative Information on Quarterly Financial Results" on page 3 of the attachment.

Contents of the Attachment
1. Qualitative Information on Quarterly Financial Results	2
(1)	Explanation of Business Results	2
(2)	Explanation of Forecast of Consolidated Business Results and Other Forward-looking
	Information	3
2. Quarterly Consolidated Financial Statements and Major Notes	4
(1)	Quarterly Consolidated Balance Sheets	4
(2)	Quarterly Consolidated Statements of Income and Quarterly Consolidated Statements of
	Comprehensive Income	6
(3)	Notes to Quarterly Consolidated Financial Statements	8
	(Notes on Going Concern Assumption)	8
	(Notes on Significant Changes in Shareholders' Equity)	8
3. Others	8

1

1. Qualitative Information on Quarterly Financial Results

(1) Explanation of Business Results

During the first two quarters of the fiscal year ending March 31, 2024 (April 1, 2023 to September 30, 2023), the Japanese economy continued to face an uncertain outlook due to the hike in resource and energy prices, which was triggered by the prolonged Russia's invasion of Ukraine, rising prices around the world, and sharp foreign exchange rate fluctuations due to monetary tightening in many countries, among other factors, while economic activities have been on a gradual recovery trend following the easing of the restrictions on activities caused by COVID-19.

The steel industry, the Group's main customers, saw only a slow recovery in domestic steel demand mainly due to the slow recovery of the Chinese economy and the economic slowdown in Europe and the United States, while demand for steel products for automobile production has been on a recovery trend due to the easing of the semiconductor shortage. On the other hand, global crude steel output recovered to the level of the same period of the previous year due to an increase in demand for steel products in some regions, such as India. Domestic total crude steel output in the first two quarters of the fiscal year ending March 31, 2024 decreased by 2.3% from a year earlier to 43.76 million tons. According to the announcement by the World Steel Association, crude steel output from January to September 2023 increased worldwide by 0.1% from a year earlier to 1,406.40 million tons, while that in India increased by 11.6% from a year earlier to 104.10 million tons.

In this environment, the Group's consolidated net sales for the first two quarters of the fiscal year ending March 31, 2024 increased by 10.9% from a year earlier to ¥89,399 million. This was mainly attributable to the Group's efforts to expand business in the strong Indian steel market and to expand sales to non-ferrous metals fields in the first two quarters of the fiscal year ending March 31, 2024, in addition to the steady progress in passing the rising prices of raw material and energy and other cost increases on to selling prices in the Refractories segment since last fiscal year.

Primarily due to the increase in net sales, the Group's consolidated operating profit for the first two quarters of the fiscal year ending March 31, 2024 increased by 54.6% from a year earlier to ¥7,596 million, ordinary profit increased by 51.2% to ¥8,593 million, and profit attributable to owners of parent increased 85.1% to ¥6,619 million.

Operating results for each business segment are as follows.

The net sales of each segment represent sales to external customers and do not include inter-segment sales or transfers. The amounts of segment profit (loss) are based on operating profit (loss).

[Refractories]

Net sales in the Refractories segment increased by 12.3% from a year earlier to ¥77,137 million and segment profit increased by 78.7% from a year earlier to ¥6,508 million. This was mainly attributable to the Group's efforts to expand business in the strong Indian steel market and to expand sales to non-ferrous metals fields in the first two quarters of the fiscal year ending March 31, 2024, in addition to the steady progress in passing the rising prices of raw material and energy and other cost increases on to selling prices since last fiscal year.

[Furnace]

2

Net sales in the Furnace segment increased by 4.6% from a year earlier to ¥7,323 million due to orders for large-scale construction projects, but segment profit decreased by 27.1% from a year earlier to ¥300 million owing in part to differences in the composition of orders received.

[Ceramics]

Net sales in the Ceramics segment increased by 0.5% from a year earlier to ¥4,157 million. This was mainly attributable to an increase in orders for ceramic materials for semiconductor lithography equipment and increased sales of thermal insulation materials for household fuel cells, despite the impact of a decline in orders for ceramic materials for electronic components and the deterioration of the semiconductor market as customers worked to adjust their supply and demand. Segment profit decreased by 11.3% from a year earlier to ¥490 million due to differences in the composition of orders received.

[Real Estate]

Net sales in the Real Estate segment remained unchanged from a year earlier at ¥368 million. Segment profit decreased by 4.6% from a year earlier to ¥286 million.

[Others]

Net sales in the Others segment increased by 7.3% from a year earlier to ¥411 million. Segment profit increased 10.5 times from a year earlier to ¥11 million.

(2) Explanation of Forecast of Consolidated Business Results and Other Forward-looking Information

The Group revised today the forecast of consolidated business results for the fiscal year ending March 31, 2024, which had been released on July 28, 2023. For details, please refer to the "Notice Regarding Performance and Dividend Forecasts" announced today.

Business results forecasts may vary significantly due to factors such as fluctuations in demand for refractories associated with changes in crude steel output as well as market trends for refractory materials.

3

2. Quarterly Consolidated Financial Statements and Major Notes

(1) Quarterly Consolidated Balance Sheets

		(Millions of yen)
	Fiscal Year Ended	2Q, Fiscal Year Ending
	March 31, 2023	March 31, 2024
	(As of March 31, 2023)	(As of September 30, 2023)
Assets
Current assets
Cash and deposits	4,426	6,479
Notes and accounts receivable - trade, and contract assets	55,180	62,117
Merchandise and finished goods	18,282	17,441
Work in process	4,168	4,738
Raw materials and supplies	16,995	16,273
Other	9,606	8,678
Allowance for doubtful accounts	(435)	(481)
Total current assets	108,224	115,248
Non-current assets
Property, plant and equipment
Buildings and structures	45,810	46,899
Accumulated depreciation	(30,956)	(31,632)
Buildings and structures, net	14,854	15,266
Machinery, equipment and vehicles	73,257	77,172
Accumulated depreciation	(58,667)	(60,827)
Machinery, equipment and vehicles, net	14,589	16,344
Tools, furniture and fixtures	5,662	5,985
Accumulated depreciation	(4,385)	(4,559)
Tools, furniture and fixtures, net	1,277	1,426
Land	6,691	6,795
Construction in progress	1,897	1,589
Total property, plant and equipment	39,310	41,422
Intangible assets
Goodwill	3,852	3,981
Other	514	542
Total intangible assets	4,366	4,524
Investments and other assets
Investment securities	7,580	6,093
Retirement benefit asset	2,302	2,255
Deferred tax assets	147	171
Other	1,633	1,831
Allowance for doubtful accounts	(225)	(233)
Total investments and other assets	11,439	10,119
Total non-current assets	55,116	56,065
Total assets	163,340	171,313

4

	Fiscal Year Ended
	March 31, 2023
	(As of March 31, 2023)
Liabilities
Current liabilities
Electronically recorded obligations - operating	7,458
Accounts payable - trade	17,580
Short-term borrowings	10,918
Commercial papers	11,000
Income taxes payable	1,552
Provision for bonuses	3,212
Provision for loss on construction contracts	27
Other	9,427
Total current liabilities	61,177
Non-current liabilities
Long-term borrowings	17,465
Deferred tax liabilities	2,160
Provision for retirement benefits for directors (and other officers)	438
Retirement benefit liability	505
Asset retirement obligations	25
Other	3,708
Total non-current liabilities	24,304
Total liabilities	85,481
Net assets
Shareholders' equity
Share capital	5,537
Capital surplus	1,971
Retained earnings	62,572
Treasury shares	(1,654)
Total shareholders' equity	68,427
Accumulated other comprehensive income
Valuation difference on available-for-sale securities	3,549
Deferred gains or losses on hedges	155
Foreign currency translation adjustment	520
Remeasurements of defined benefit plans	875
Total accumulated other comprehensive income	5,101
Non-controlling interests	4,330
Total net assets	77,858
Total liabilities and net assets	163,340

5

(Millions of yen)

2Q, Fiscal Year Ending

March 31, 2024

(As of September 30, 2023)

6,357

18,348

11,085

13,000

3,095

3,188

79

8,086

63,241

15,762

1,779

469

523

25

4,023

22,582

85,824

5,537

1,971

67,676

(1,657)

73,527

2,733

78

3,419

806

7,037

4,923

85,489

171,313

(2) Quarterly Consolidated Statements of Income and Quarterly Consolidated Statements of Comprehensive Income

Quarterly Consolidated Statements of Income

Net sales Cost of sales Gross profit

Selling, general and administrative expenses Operating profit

Non-operating income Interest income Dividend income Insurance claim income

Share of profit of entities accounted for using equity method Foreign exchange gains

Other

Total non-operating income Non-operating expenses

Interest expenses

Loss on removal of non-current assets Other

Total non-operating expenses Ordinary profit

Extraordinary income

Gain on sale of non-current assets Gain on sale of investment securities Total extraordinary income

Extraordinary losses

Loss on sale of non-current assets

Loss on retirement of non-current assets Total extraordinary losses

Profit before income taxes Income taxes - current Income taxes - deferred Total income taxes Profit

Profit attributable to non-controlling interests Profit attributable to owners of parent

	(Millions of yen)
First 2Qs, Fiscal Year	First 2Qs, Fiscal Year
Ended March 31, 2023	Ending March 31, 2024
(April 1, 2022, to	(April 1, 2023, to
September 30, 2022)	September 30, 2023)
80,591	89,399
66,086	71,576
14,504	17,822
9,590	10,226
4,914	7,596
10	14
56	71
2	112
213	170
672	874
210	260
1,165	1,504
217	303
116	86
61	116
394	506
5,685	8,593
8	90
-	1,545
8	1,635
1	-
9	188
10	188
5,683	10,041
1,479	2,951
177	24
1,657	2,975
4,025	7,065
448	446
3,576	6,619

6

Quarterly Consolidated Statements of Comprehensive Income

Profit

Other comprehensive income

Valuation difference on available-for-sale securities Deferred gains or losses on hedges

Foreign currency translation adjustment Remeasurements of defined benefit plans, net of tax

Share of other comprehensive income of entities accounted for using equity method Total other comprehensive income

Comprehensive income Comprehensive income attributable to

Comprehensive income attributable to owners of parent Comprehensive income attributable to non-controlling interests

7

	(Millions of yen)
First 2Qs,	First 2Qs,
Fiscal Year Ended	Fiscal Year Ending
March 31, 2023	March 31, 2024
(April 1, 2022, to	(April 1, 2023, to
September 30,	September 30,
2022)	2023)
4,025	7,065
1,283	(816)
122	(76)
3,207	3,169
(68)	(68)
180	47
4,724	2,256
8,750	9,322
7,873	8,556
876	766

1. Notes to Quarterly Consolidated Financial Statements (Notes on Going Concern Assumption)
   Not applicable.

(Notes on Significant Changes in Shareholders' Equity) Not applicable.

3. Others

Trend of Quarterly Business Results

						(Millions of yen)
		Previous Fiscal Year		Fiscal Year under Review
	1Q	2Q	3Q	4Q	1Q	2Q
	(April to	(July to	(Oct. to	(Jan. to	(April to	(July to
	June)	Sept.)	Dec.)	March)	June)	Sept.)
Net sales	40,292	40,299	41,890	42,720	45,357	44,041
Operating profit	2,940	1,973	2,399	3,860	4,133	3,462
Ordinary profit	3,429	2,256	2,496	3,901	4,754	3,839
Profit attributable to	2,148	1,428	1,732	2,972	3,078	3,541
owners of parent

8