NGK Insulators : Published "Interim Report 2021"

Securities Code: 5333

FY2021 Interim Report

(From April 1 to September 30, 2021)

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Note: This document has been translated from a part of the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail. The Company assumes no responsibility for this translation or for direct, indirect or any other forms of damages arising from the translation.

Message

We would like to express our deepest gratitude for your continued support.

We hereby present a summary of consolidated financial results for the first half (six months) of the 156th fiscal year ended September 30, 2021 (from April 1 to September 30, 2021).

During the first half of the fiscal year under review, the prolonged state of emergency caused growing concerns, but the Japanese economy showed signs of recovery toward the end of the period as economic activities resumed thanks to progress in the COVID-19 vaccine rollout. In developed countries overseas in Europe and the United States, where vaccinations are progressing relatively well, the economy was on a recovery track as activity restrictions were eased. However, the impact of infectious diseases caused by COVID- 19 variants is still significant, which leaves the situation uncertain, such as a global shortage of semiconductors, rising prices of materials and energy, a slowdown in the Chinese economy, and concerns over subsequent waves of infection in developed countries.

In the NGK Group, sales of insulators in the Energy Infrastructure Business increased mainly because of the repricing effect, while weak domestic demand continued for some time. In the Ceramics Business, shipments of automobile-related products increased significantly due to a recovery in the global automobile market. In the Electronics Business, despite stronger demand for beryllium copper wrought materials and piezoelectric microactuators for HDDs, overall sales decreased due to the exclusion of Soshin Electric Co., Ltd. and its group companies from the scope of consolidation. In the Process Technology Business, shipments of products for semiconductor manufacturing equipment increased, supported by expanding semiconductor markets.

As a result, consolidated net sales for the first half ended September 30, 2021 increased 28.3% year-on-year to ¥250,159 million. In terms of profit, operating income was up 296.8% year-on-year to ¥45,925 million, ordinary income increased 259.3% to ¥43,905 million, and profit attributable to owners of the parent grew 339.7% to ¥31,950 million, owing mainly to an increase in sales in the Ceramics Business and the weak yen effect.

On a full-year basis, we expect year-on-year increases of 13.9% in net sales to ¥515 billion, 63.3% in operating income to ¥83 billion, and 54.7% in ordinary income to ¥82 billion. This is due to stronger demand for products related to electronics and semiconductor manufacturing equipment in the wake of the progress of digitization. Profit attributable to owners of the parent is expected to be ¥60 billion, or up 55.9% from the previous fiscal year, and mark record-highs both in sales and profit on a full-year basis as well as on a half-year one.

The interim dividend for the fiscal year will be ¥30 per share, an increase of ¥10 from ¥20 at the end of the previous fiscal year. The year-end dividend is set at ¥30 at the moment, making for a total of ¥60 for the full year, which will be the highest payout ever.

The business environment still remained uncertain in the second half for reasons like a global shortage of semiconductors, rising prices of materials and energy, and so on; however, we will address the following priority issues announced in the beginning of the fiscal year, with the aim of becoming a company that continues to grow globally.

1. Advancement of ESG management
2. Enhancement of profitability in existing businesses and creation of new products and businesses

In addition, under the NGK Group Vision: Road to 2050, announced in April 2021, we position "carbon neutrality" for humans to coexist with nature and a "digital society," in which we can live safely, conveniently, comfortably, and healthily, as focus areas in anticipation of social changes toward 2050; we are committed to new product development and new business promotion by investing our management resources intensively in promising development themes.

Through these efforts, the NGK Group will further strengthen the management base and continue to grow for a sustainable future by delivering products that exceed society's expectations with our unique ceramic technology. We are looking forward to your continued support and additional guidance.

December 2021

President

Shigeru Kobayashi

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Consolidated financial highlights	FY2021-1H	Full year	Full year (forecast)
Net sales	Ordinary income		Profit attributable to owners of parent
(100 million yen)	(100 million yen)		(100 million yen)

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Topics

NGK Group will be 100% powered by renewable energy by FY2025 at overseas sites

Our policy is to switch to being 100% powered by renewable energy at overseas sites by FY2025. We will start using green power at our main production sites in Europe and completely go green at all production sites in Europe by January 2022. As of FY2025, about 60% of the electricity used by the NGK Group will be based on renewable energy sources, which should contribute to a reduction of about 330,000 tons of CO2 per year.

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Business Overview by Segment

		FY2021-1H	FY2020-1H	Year-on-
		(100 million yen)	(100 million yen)	year
Energy Infrastructure Business	Net sales	202	194	+4%
Sales rose 4.1% to ¥20,239 million. Cost reduction and
repricing effects associated with insulators reduced a deficit.
Operating
Operating loss was ¥930 million (cf. operating loss of ¥2,280	(9)	(23)	-
million in the same period of the previous year).	income
Ceramics Business	Net sales	1,476	983	+50%
Sales rose 50.1% to ¥147,564 million. Sales and profit
increased due to growing demand for automobile-related
Operating	368	66	+454%
products on the back of a recovery in sales of vehicles/trucks.
Operating income rose 453.6% to ¥36,777 million.	income
Electronics Business	Net sales	257	268	-4%
Sales fell 4.1% to ¥25,701 million. Sales decreased due to
the impact of excluding the Soshin Electric Group from
consolidation and changes in revenue recognition standards.
Profit increased due to growing demand for piezoelectric	Operating	30	6	+365%
elements for HDDs and metal products. Operating income	income
rose 365.1% to ¥3,005 million.
Process Technology Business	Net sales	582	519	+12%
Sales rose 12.1% to ¥58,160 million. Demand for
semiconductor manufacturing equipment increased on the	Operating	71	66	+8%
back of strong foundry investment.
income
Operating income rose 7.9% to ¥7,069 million.

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Condensed Financial Statements (Consolidated)
Quarterly Consolidated Balance Sheet (as of September 30, 2021)
		(Million yen)
Assets		Liabilities
Account	Amount	Account	Amount
Current assets	458,842	Current liabilities	133,922
Cash and bank deposits	127,489	Notes and accounts payable - trade	38,698
Short-term borrowings	7,412
Notes and accounts receivable trade, and	112,682	Current portion of long-term borrowings	26,919
Income taxes payable	14,746
contract assets		Provision for NAS battery safety measures	1,042
Securities	38,089	Other	45,102
Long term liabilities	231,737
Inventories	164,293	Bonds payable	25,000
Other	16,407	Long-term borrowings	178,441
Net defined benefit liability	22,103
Allowance for doubtful accounts	(120)	Other	6,191
Total liabilities	365,659
Non-current assets	442,162	Net assets
Tangible assets	364,606	Shareholders' equity	515,707
		Common stock	69,849
Buildings and structures	117,629	Capital surplus	70,199
Machinery and vehicles	179,199	Retained earnings	386,666
Treasury stock	(11,007)
Other	67,777	Accumulated other comprehensive income	13,425
Intangible assets	5,478	Unrealized gain on available for sale securities	18,178
Deferred (loss) on derivatives under hedge	(469)
Investments and other assets	72,077	accounting	(1,256)
Foreign currency translation adjustments
Investment securities	58,318	Defined retirement benefit plans	(3,027)
Other	14,088	Stock acquisition rights	991
Allowance for doubtful accounts	(329)	Non-controlling interests	5,221
Total net assets	535,345
Total assets	901,005	Total liabilities and net assets	901,005
		(Amounts of less than 1 million yen omitted.)
Consolidated Statement of Income (From April 1 to September 30, 2021)
		(Million yen)
Account	Amount
Net sales			250,159
Cost of sales			166,340
Gross profit			83,819
Selling, general and administrative expenses			37,893
Operating income			45,925
Non-operating income			2,065
Non-operating expenses			4,086
Ordinary income			43,905

Extraordinary income		1,439
Extraordinary loss		220
Income before income taxes and non controlling interests		45,125
Income taxes - current		13,673
Income taxes - deferred		(690)
Profit		32,142
Profit attributable to non-controlling interests		192
Profit attributable to owners of parent		31,950
	(Amounts of	less than 1 million yen omitted.)

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