Nippon Aqua : The 3rd Quarter Report (FY2022/12) has been posted.

Non-consolidated Financial Results

for the Nine Months Ended September 30, 2022

[Japanese GAAP]

November 9, 2022

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, General Manager of Finance and Accounting

Phone: [phone]

Scheduled filing date of quarterly report: November 9, 2022

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 Nine Months Ended September 30, 2022 (January 1, 2022-September 30, 2022)

(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		%
Nine months ended	18,259		7.2	1,631		96.9	1,660		98.3	1,122		103.0
September 30, 2022
Nine months ended	17,033		10.8	828		(28.8)	837		(28.7)	553		(29.1)
September 30, 2021
	Basic earnings	Diluted earnings
	per share		per share
			Yen			Yen
Nine months ended			34.75			－
September 30, 2022
Nine months ended			17.12			－
September 30, 2021
(2) Financial Position
	Total assets	Net assets		Equity ratio
		Million yen		Million yen			%
As of September 30, 2022			20,560			8,429			41.0
As of December 31, 2021			18,279			7,951			43.5
[Reference] Shareholders' equity: As of September 30, 2022: 8,429 million yen
	As of December 31, 2021: 7,951 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, 2021	－	0.00	－		20.00	20.00
Fiscal year ending December 31,	－	0.00	－
2022
Fiscal year ending December 31,					22.00	22.00
2022 (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, 2022 (January 1, 2022-December 31, 2022)

(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	26,490		10.8	2,121	50.2	2,121	48.4	1,470		54.1	45.50
December 31, 2022
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.: Yes
   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 September 30, 2022	34,760,000 shares
As of December 31, 2021	34,760,000 shares
(ii) Number of treasury shares at end of period under review
As of September 30, 2022	2,447,171 shares
As of December 31, 2021	2,449,128 shares
(iii) Average number of shares during period under review
Nine months ended September 30, 2022	32,311,917 shares
Nine months ended September 30, 2021	32,306,824 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
(Changes in Accounting Policies)................................................................................................................................	10
(Segment Information).................................................................................................................................................	11
(Additional Information) .............................................................................................................................................	11
(Important Subsequent Events)....................................................................................................................................	11

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

(1) Explanation Regarding Operating Results

During the nine months ended September 30, 2022 (from January 1, 2022 to September 30, 2022), although the Japanese economy showed signs of improvement, 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, 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" (hereinafter referred to as the Revised Building Energy Efficiency Act) was passed on June 13, 2022 in line with the greenhouse gas reduction target for 2030 in Japan. Consequently, it will become mandatory for all houses and building to be newly built in and after 2025 to meet energy efficiency standards. In this environment, 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, AQUA FOAM series have secured steady orders due to the growing attention to highly-airtight and highly-insulated houses, mainly because local governments set high standards of insulation and energy conservation performance, including "Tokyo Zero Emission Houses" by the Tokyo Metropolitan Government, with the enactment of the Revised Building Energy Efficiency Act. Sales for the Single-family Homes Division amounted to 10,209 million yen. In the buildings market, the Company aggressively promoted sales as many inquiries continued to be made for our non-flammable insulation, and accordingly, sales of the Buildings Division amounted to 4,640 million yen. Sales of the Waterproofing Division came to 203 million yen, and sales of raw materials, machinery, etc., which are under other divisions, were 3,204 million yen. From the beginning of the fiscal year ending December 31, 2022, renovations have been moved from other divisions to the highly compatible Single-family Homes Division, and waterproofing which focuses on future growth has been changed from being included in the Buildings Division to being a stand-alone Waterproofing Division.

				(in million yen, %)
	18th fiscal year	19th fiscal year
	Nine months ended
	Nine months ended	Amount of change	Percentage change
	September 30, 2021
	September 30, 2022
	(after reclassification)
Single-family Homes	9,819	10,209	+390	+4.0
Division
Buildings Division	3,716	4,640	+924	+24.9
Waterproofing Division	73	203	+129	+175.8
Other divisions	3,423	3,204	(219)	(6.4)
Total	17,033	18,259	+1,225	+7.2

As a result, total sales increased by 7.2% year on year to 18,259 million yen in the period under review. Meanwhile, prices of crude oil, naphtha, benzene and other raw materials for urethane raw materials remained high, with the yen continuing to weaken. Amid the continuation of this environment for the raw materials procurement, the Company worked to secure raw materials through measures such as procuring raw materials from multiple companies and to stably supply products. As a measure to deal with cost increases, the Company revised product selling prices, while working to stabilize product quality and lower costs through continuous improvement.

Furthermore, while making companywide efforts to secure income by thoroughly focusing on construction profitability when receiving orders, we provided various support such as increasing construction fees for certified contractors, expanding programs designed to facilitate our employees to go independent, and renting storage warehouses and other facilities for further enhancing "construction capabilities," the Company's strength.

As a result of the above, gross margin improved by 2.1 points year on year to 21.5%, operating profit increased by 96.9%

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year on year to 1,631 million yen, ordinary profit increased by 98.3% year on year to 1,660 million yen, and profit totaled 1,122 million yen, rising 103.0% from a year earlier.

1. Explanation Regarding Financial Position
   (Total assets)
   Total assets amounted to 20,560 million yen as of September 30, 2022, up 2,281 million yen, or 12.5%, from the end of the previous fiscal year.
   (Current assets)
   Current assets totaled 15,925 million yen as of September 30, 2022, up 2,334 million yen, or 17.2%, from the end of the previous fiscal year. Key factors contributing to this increase include increases of 2,200 million yen in inventories, 395 million yen in accounts receivable - other and 156 million yen in consumption taxes receivable included in other, partially offset by decreases of 56 million yen in cash and deposits and 366 million yen in notes and accounts receivable - trade, and contract assets.
   (Non-current assets)
   Non-current assets totaled 4,635 million yen as of September 30, 2022, down 52 million yen, or 1.1%, from the end of the previous fiscal year. Key factors contributing to this decrease include a decrease of 164 million yen in assets due to depreciation, partially offset by increases of 20 million yen in land due to the acquisition of land for constructing the Miyazaki branch office, 40 million yen in acquisition of machinery and equipment included in other in property, plant and equipment, 11 million yen in purchase of software included in other in intangible assets, 17 million yen in deferred tax assets included in other in investments and other assets, and 13 million yen in guarantee deposits due to the opening of a business center.
   (Total liabilities)
   Liabilities totaled 12,131 million yen as of September 30, 2022, up 1,803 million yen, or 17.5%, from the end of the previous fiscal year.
   (Current liabilities)
   Current liabilities totaled 12,012 million yen as of September 30, 2022, up 1,845 million yen, or 18.2%, from the end of the previous fiscal year. Main factors contributing to this increase include increases of 1,400 million yen in short-term borrowings, 466 million yen in accounts payable - trade, 55 million yen in provision for bonuses, and 85 million yen in income taxes payable, partially offset by decreases of 108 million yen in accounts payable - other and accrued expenses included in other and 43 million yen in accrued consumption taxes.
   (Non-current liabilities)
   Non-current liabilities totaled 119 million yen as of September 30, 2022, down 41 million yen, or 25.9%, from the end of the previous fiscal year. Key factors contributing to this decrease include decreases of 24 million yen in long-term lease obligations and 16 million yen in long-term borrowings.
   (Net assets)
   Net assets totaled 8,429 million yen as of September 30, 2022, up 477 million yen, or 6.0%, from the end of the previous fiscal year. Main factors contributing to this increase include an increase of 1,122 million yen in profit and a decrease of 646 million yen due to dividend payouts.
   (Equity ratio)
   Equity ratio was 41.0% on September 30, 2022, down 2.5 percentage points from the end of the previous fiscal year.
2. Notes on Financial Forecasts and Other Forward-looking Statements

Going forward, the outlook remains unclear, although a mild economic recovery is expected. Meanwhile, in the construction and housing industry, with the implementation of the home performance indication system based on the Housing Quality Assurance Act (Act No. 81 of 1999), higher insulation Class 6 and Class 7 were established on October 1, 2022. With this, preferential treatment for housing loans for ZEH (Net Zero Energy House), equivalent to Class 5, has begun. Our strategy under this situation is as follows:

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