Nippon Aqua : Financial Results (1st quarter FY2023/12)

Non-consolidated Financial Results

for the Three Months Ended March 31, 2023

[Japanese GAAP]

May 11, 2023

Company name: Nippon Aqua Co., Ltd.

Code number: 1429 (listed on the Tokyo Stock Exchange)

(URL: http://www.n-aqua.jp)

Representative: Fumitaka Nakamura, President and Representative Director

Contact: Shoji Sato, Executive Officer in charge of Finance and Accounting

Phone: [phone]

Scheduled filing date of quarterly report: May 11, 2023

Scheduled date of dividend payout: －

Supplementary quarterly materials prepared: Yes

Quarterly results briefings held: Yes (for institutional investors and analysts)

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

1. Non-consolidated Financial Results for the Three Months Ended March 31, 2023 (January 1, 2023-March 31, 2023)

(1) Financial Results						(Percentage figures indicate year-on-year changes.)
	Net sales		Operating profit	Ordinary profit	Profit
	Million yen		%	Million yen		%	Million yen		%	Million yen		%
Three months ended	6,368		11.8	627		38.9	641		38.2	432		39.3
March 31, 2023
Three months ended	5,697		11.7	451		163.7	464		170.3	310		180.7
March 31, 2022
	Basic earnings	Diluted earnings
	per share		per share
			Yen			Yen
Three months ended			13.78			13.78
March 31, 2023
Three months ended			9.60			－
March 31, 2022
(2) Financial Position
	Total assets	Net assets		Equity ratio
		Million yen		Million yen			%
As of March 31, 2023			19,405			7,735			39.8
As of December 31, 2022			21,969			7,966			36.3
[Reference] Shareholders' equity: As of March 31, 2023: 7,732 million yen
	As of December 31, 2022: 7,966 million yen

2. Dividends

			Dividend per share
	End of	End of	End of		Year-end	Total
	1st quarter	2nd quarter	3rd quarter
	Yen	Yen	Yen		Yen	Yen
Fiscal year ended December 31, 2022	－	0.00	－		24.00	24.00
Fiscal year ending December 31,	－
2023
Fiscal year ending December 31,		0.00	－		30.00	30.00
2023 (forecast)
Note: Revisions to dividend payout forecasts disclosed most recently: No

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3. Financial Forecasts for the Fiscal Year Ending December 31, 2023 (January 1, 2023-December 31, 2023)

(Percentage figures indicate year-on-year changes.)

	Net sales		Operating profit	Ordinary profit	Profit		Basic earnings
			per share
	Million yen		%	Million yen	%	Million yen	%	Million yen		%	Yen
Six months ending	13,386		14.0	1,161	26.8	1,161	24.1	772		23.2	24.67
June 30, 2023
Fiscal year ending	29,021		13.1	2,750	18.1	2,750	16.5	1,828		18.1	58.41
December 31, 2023
Note: Revisions to financial forecasts disclosed most recently: No

* Notes

1. Use of special accounting methods in preparing quarterly financial statements: No
2. Changes in accounting policies, changes in accounting estimates and restatements
3. 1. Changes in accounting policies due to revisions of accounting standards, etc.: No
   2. Changes in accounting policies other than (i): No
   3. Changes in accounting estimates: No
   4. Restatements: No
4. Number of issued shares (common shares)
5. 1. Number of issued shares at end of period under review (including treasury shares)

As of March 31, 2023	34,760,000 shares
As of December 31, 2022	34,760,000 shares
(ii) Number of treasury shares at end of period under review
As of March 31, 2023	3,351,871 shares
As of December 31, 2022	3,447,171 shares
(iii) Average number of shares during period under review
Three months ended March 31, 2023	31,363,216 shares
Three months ended March 31, 2022	32,310,872 shares

• Quarterly financial results are not subject to quarterly review by certified public accountants or audit corporations.
• Notes concerning appropriate use of financial forecasts and other significant matters
  Financial forecasts and other forward-looking statements in this release are based on data currently available to the Company and certain assumptions that the Company believes are reasonable. They are not intended as a guarantee that the Company will achieve such results. Actual results may differ materially from them for various reasons. For details of the assumptions used in the forecast of financial results and cautionary notes concerning appropriate use of the financial forecasts, please refer to "(3) Notes on Financial Forecasts and Other Forward-looking Statements" in "1. Qualitative Information Concerning Financial Results for the Period Under Review" on page 5 of the Attachment.

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Contents of Attachment
1. Qualitative Information Concerning Financial Results for the Period Under Review	...................................................... 4
(1)	Explanation Regarding Operating Results	4
(2)	Explanation Regarding Financial Position	5
(3)	Notes on Financial Forecasts and Other Forward-looking Statements	5
2. Quarterly Financial Statements and Primary Notes	7
(1)	Quarterly Balance Sheet	7
(2)	Quarterly Income Statement	9
(3)	Notes to Quarterly Financial Statements	10
(Notes on Going Concern Assumption)	10
(Notes on Significant Changes in Amount of Shareholders' Equity)	10
(Segment Information)	10
(Additional Information)	10
(Important Subsequent Events)	10

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1. Qualitative Information Concerning Financial Results for the Period Under Review

(1) Explanation Regarding Operating Results

During the three months ended March 31, 2023 (January 1, 2023 to March 31, 2023), while the Japanese economy saw a gradual recovery despite weakness in some sectors, there are concerns mainly about the risk of a downward swing in the global economy putting downward pressure on the Japanese economy amid the global credit crunch, and the impact of rising prices, supply constraints, and fluctuations in the financial and capital markets.

In the construction and housing industry where the Company operates, the "Act Partially Revising the Act on the Improvement of the Energy Consumption Performance of Buildings in Order to Contribute to the Realization of a Carbon Neutral Society" was promulgated in June 2022. Consequently, it became necessary to improve energy efficiency, and particularly enhancement of insulation performance has become an important issue. In addition to this, partly due to the sharp rise in electricity rates, the world's attention on insulation materials is increasing. Buildings excellent in insulation performance reduce energy consumption for heating and cooling, help save electricity rates, and can achieve a comfortable housing environment with less burden on the environment. Under such circumstances, the Company proactively made efforts to win orders in each division by taking advantage of the product appeal of highly-airtight and highly-insulated AQUA FOAM series and the strength of our nationwide construction network.

In the Single-family Homes Division, local governments are introducing their own ZEH (Net Zero Energy House), as represented by the Tokyo Metropolitan Government's "Tokyo Zero Emission Houses." Thanks to preferential programs such as subsidies and housing loans aligning with such a trend, we secured a stable level of orders. Meanwhile, in the course of advancing work-style reform measures aimed at securing a construction system, we introduced Saturdays and Sundays off work to installation work personnel. This resulted in fewer work days at construction sites, and division sales were 3,221 million yen, slightly below that in the same period of the previous year. However, as we established a sufficient construction system in February, sales are projected to grow steadily going forward. In the Buildings Division, demand expanded on the back of urban redevelopment projects and manufacturing bases returning to Japan. In addition, thanks to a rise in needs for fire prevention at sites under construction, installation of "AQUA MOEN NEO," a non-flammable insulation, drove the performance and led to favorable division sales of 1,912 million yen. Sales of the Waterproofing Division came to 126 million yen, and sales of raw materials, machinery, etc., which are under other divisions, were 1,108 million yen.

				(in million yen, %)
	19th fiscal year	20th fiscal year
	Three months ended	Three months ended	Amount of change	Percentage change
	March 31, 2022	March 31, 2023
Single-family Homes	3,255	3,221	(34)	(1.1)
Division
Buildings Division	1,414	1,912	+498	+35.2
Waterproofing Division	57	126	+69	+120.7
Other divisions	969	1,108	+138	+14.3
Total	5,697	6,368	+671	+11.8

As a result, net sales for the period under review totaled 6,368 million yen, up 11.8% year on year. Meanwhile, although prices of raw materials for urethane raw materials remained high, the Company has been continuously revising product prices from autumn 2021, while procuring raw materials from multiple companies for the purpose of securing raw materials and stably supplying products, in an effort to secure income by thoroughly focusing on construction profitability when receiving orders. Furthermore, we focused on various support such as increasing construction fees for certified contractors, dispatching and seconding our employees, and renting storage warehouses and other facilities for enhancing "construction capabilities," the Company's strength.

As a result of the above, gross margin improved by 1.8 points year on year to 22.9%, operating profit increased by 38.9% year on year to 627 million yen, ordinary profit increased by 38.2% year on year to 641 million yen, and profit totaled 432

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million yen, rising 39.3% from a year earlier.

1. Explanation Regarding Financial Position
   (Total assets)
   Total assets totaled 19,405 million yen as of March 31, 2023, down 2,564 million yen, or 11.7%, from the end of the previous fiscal year.
   (Current assets)
   Current assets totaled 14,668 million yen as of March 31, 2023, down 2,468 million yen, or 14.4%, from the end of the previous fiscal year. Key factors contributing to this decrease include decreases of 1,115 million yen in accounts receivable - other, 439 million yen in notes and accounts receivable - trade, and contract assets due to collection, 588 million yen in cash and deposits, and 244 million yen in inventories.
   (Non-current assets)
   Non-current assets totaled 4,737 million yen as of March 31, 2023, down 95 million yen, or 2.0%, from the end of the previous fiscal year. Key factors contributing to this decrease include decreases of 56 million yen in assets due to depreciation, 68 million yen in deferred tax assets included in other in investments and other assets, and 10 million yen in long-term prepaid expenses, partially offset by increases of 24 million yen in acquisition of machinery and equipment and 7 million yen in purchase of software.
   (Total liabilities)
   Liabilities totaled 11,670 million yen as of March 31, 2023, down 2,332 million yen, or 16.7%, from the end of the previous fiscal year.
   (Current liabilities)
   Current liabilities totaled 11,516 million yen as of March 31, 2023, down 2,385 million yen, or 17.2%, from the end of the previous fiscal year. Main factors contributing to this decrease include decreases of 900 million yen in short-term borrowings, 707 million yen in accounts payable - trade due to payment, 514 million yen in income taxes payable due to tax payment, and 374 million yen in accounts payable - other and accrued expenses included in other.
   (Non-current liabilities)
   Non-current liabilities totaled 154 million yen as of March 31, 2023, up 53 million yen, or 52.6%, from the end of the previous fiscal year. Key factors contributing to this increase include an increase of 61 million yen in long-term accounts payable - other included in other, partially offset by a decrease of 7 million yen in long-term lease liabilities.
   (Net assets)
   Net assets totaled 7,735 million yen as of March 31, 2023, down 231 million yen, or 2.9%, from the end of the previous fiscal year. Main factors contributing to this decrease include a decrease of 751 million yen in retained earnings due to dividend payouts, partially offset by the recording of 432 million yen in profit and an increase of 57 million yen due to disposal of treasury shares.
   (Equity ratio)
   Equity ratio was 39.8% on March 31, 2023, up 3.6% from the end of the previous fiscal year.

(Research and development activities)

The total amount of research and development expenditures by the Company in the three months ended March 31, 2023 was 7 million yen. There was no significant change in the status of research and development activities in the three months ended March 31, 2023.

(3) Notes on Financial Forecasts and Other Forward-looking Statements

Regarding the future outlook, the Company pursues following strategies to address the rising demand for insulation materials and to achieve sustainable growth, while paying attention to the recent economic recovery, the revision of laws and regulations pertaining to homes and buildings, and various support measures such as subsidies, preferential taxation and low-interest loans in relation to energy conservation.

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