Nippon Aqua : Financial Results (2nd quarter FY2023/12)

Non-consolidated Financial Results

for the Six Months Ended June 30, 2023

[Japanese GAAP]

August 10, 2023

Company name: Nippon Aqua Co., Ltd.

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

(URL: https://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: August 10, 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 Six Months Ended June 30, 2023 (January 1, 2023-June 30, 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		%
Six months ended June 30,	13,158		12.1	1,380		50.7	1,400		49.6	948		51.2
2023
Six months ended June 30,	11,742		9.6	916		176.1	936		179.1	626		193.4
2022
	Basic earnings	Diluted earnings
	per share		per share
			Yen			Yen
Six months ended June 30,			30.20			30.20
2023
Six months ended June 30,			19.39			－
2022
(2) Financial Position
	Total assets	Net assets		Equity ratio
		Million yen		Million yen			%
As of June 30, 2023			18,750			8,250			44.0
As of December 31, 2022			21,969			7,966			36.3
[Reference] Shareholders' equity: As of June 30, 2023: 8,248 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,	－	0.00
2023
Fiscal year ending December 31,			－		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
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 June 30, 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 June 30, 2023	3,351,871 shares
As of December 31, 2022	3,447,171 shares
(iii) Average number of shares during period under review
Six months ended June 30, 2023	31,385,796 shares
Six months ended June 30, 2022	32,311,436 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 6 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	6
2. Quarterly Financial Statements and Primary Notes	8
(1)	Quarterly Balance Sheet	8
(2)	Quarterly Income Statement	10
(3)	Quarterly Cash Flow Statement	11
(4)	Notes to Quarterly Financial Statements	12
(Notes on Going Concern Assumption)	12
(Notes on Significant Changes in Amount of Shareholders' Equity)	12
(Changes in Accounting Policies)	12
(Segment Information, Etc.)	12
(Additional Information)	12
(Important Subsequent Events)	12

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

(1) Explanation Regarding Operating Results

During the six months ended June 30, 2023 (January 1, 2023 to June 30, 2023), the Japanese economy recovered moderately as the employment and income situation improved. However, amid continued global monetary tightening and other developments, there were concerns about the risk that the downturn in overseas economies would exert downward pressure on Japan's economy, price increases, supply-side 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, we have secured stable orders with subsidies and preferential housing loans in line with the Tokyo-based "Tokyo Zero Emission Houses" and other local governments' moves to introduce their own ZEH (Net Zero Energy Houses). In January 2023, we introduced internal installation work personnel Saturdays and Sundays holidays in order to accelerate our response to the 2024 issue in the construction industry. This action reduced the number of construction days, and the division's net sales was 6,508 million yen, slightly lower than in the same period of the previous year. However, the number of applications for internal installation work personnel has increased significantly due to the success of work style innovations such as the introduction of Saturdays and Sundays holidays. We are making steady progress in personnel training, so in the future we will work to increase sales by increasing the number of projects in operation to offset the decline in the number of construction days. In the Buildings Division, demand expanded against the backdrop of the domestic return of the manufacturing industry and urban redevelopment. In addition, there was an increasing need to prevent fires during construction. As a result, the division's Net sales rose sharply to 3,848 million yen, driven by the installation of non-flammable insulation "AQUA MOEN NEO." In addition, the Waterproofing Division's net sales of 248 million yen and other divisions, such as sales of raw materials and machinery, reached 2,552 million yen, marking an increase in both.

				(in million yen, %)
	19th fiscal year	20th fiscal year
	Six months ended	Six months ended	Amount of change	Percentage change
	June 30, 2022	June 30, 2023
Single-family Homes	6,695	6,508	(187)	(2.8)
Division
Buildings Division	2,837	3,848	+1,011	+35.6
Waterproofing Division	120	248	+128	+106.6
Other divisions	2,087	2,552	+464	+22.3
Total	11,742	13,158	+1,416	+12.1

Consequently, net sales for the period under review was 13,158 million yen, an increase of 12.1% year on year. In addition to procurement from multiple companies with the aim of securing raw materials and providing a stable supply of products, we have worked to secure earnings by continuing to revise prices from the autumn of 2021 and emphasizing the profitability of construction work when orders are received. In addition, the recent rise in prices of naphtha and other resources has come to a halt, and the prices of raw materials for urethane are also peaking out. At the same time, with the aim of strengthening our "construction capabilities,", which is one of our strengths, we are focusing on providing a variety of support to certified contractors, including increasing the amount of construction fees and leasing of facilities such as our

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employees' assignments and transfers, as well as storage and warehousing facilities.

As a result of the above, gross margin improved by 3.1 points year on year to 23.7%, operating profit increased by 50.7% year on year to 1,380 million yen, ordinary profit increased by 49.6% year on year to 1,400 million yen, and profit totaled 948 million yen, rising 51.2% from a year earlier.

1. Explanation Regarding Financial Position
   (Total assets)
   Total assets totaled 18,750 million yen as of June 30, 2023, down 3,219 million yen, or 14.7%, from the end of the previous fiscal year.
   (Current assets)
   Current assets totaled 13,830 million yen as of June 30, 2023, down 3,305 million yen, or 19.3%, from the end of the previous fiscal year. Key factors contributing to this decrease include decreases of 1,168 million yen in accounts receivable - other, 411 million yen in notes and accounts receivable - trade, and contract assets, and 181 million yen in electronically recorded monetary claims due to collection, 563 million yen in cash and deposits, and 867 million yen in inventories due to adjustments to raw material inventories accompanying improvements in the raw material supply market.
   (Non-current assets)
   Non-current assets totaled 4,919 million yen as of June 30, 2023, up 85 million yen, or 1.8%, from the end of the previous fiscal year. Key factors included 140 million yen increase in buildings due to the completion of the Kita-Kanto Sales Office, 29 million yen increase due to the acquisition of machinery and equipment, 14 million yen increase due to the acquisition of software, and 64 million yen increase in insurance reserves. On the other hand, there was a decrease of 116 million yen in assets due to depreciation, and a decrease of 92 million yen in construction-in-progress included in other in property, plant and equipment due to the completion of the Kita-Kanto Sales Office.
   (Total liabilities)
   Liabilities totaled 10,499 million yen as of June 30, 2023, down 3,504 million yen, or 25.0%, from the end of the previous fiscal year.
   (Current liabilities)
   Current liabilities totaled 10,359 million yen as of June 30, 2023, down 3,542 million yen, or 25.5%, from the end of the previous fiscal year. Main factors contributing to this decrease include decreases of 1,900 million yen in short-term borrowings due to adjustments to raw material inventories accompanying improvements in the raw material supply market, 1,266 million yen in accounts payable - trade due to payment, 245 million yen in income taxes payable due to tax payment, and 376 million yen in accounts payable - other and accrued expenses included in other.
   (Non-current liabilities)
   Non-current liabilities totaled 139 million yen as of June 30, 2023, up 38 million yen, or 37.6%, from the end of the previous fiscal year. Key factors contributing to this increase include an increase of 50 million yen in long-term accounts payable - other included in other, partially offset by a decrease of 15 million yen in long-term lease liabilities.
   (Net assets)
   Net assets totaled 8,250 million yen as of June 30, 2023, up 284 million yen, or 3.6%, from the end of the previous fiscal year. Main factors contributing to this increase include an increase of 948 million yen in profit and an increase in retained earnings of 85 million yen due to the disposal of treasury shares, partially offset by the recording of 751 million yen due to the payment of dividends.
   (Equity ratio)
   Equity ratio was 44.0% on June 30, 2023, up 7.7% 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 June 30, 2023 was 9 million yen. There was no significant change in the status of research and development activities in the six months ended June 30, 2023.

Cash Flows

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