Nippon Gas : Consolidated Financial Results for the Nine Months Ended December 31st, 2021

Consolidated Financial Results

for the Nine Months Ended December 31st, 2021

[Japanese GAAP]

January 27th, 2022

Company name: NIPPON GAS CO., LTD.

Code number: 8174

URL: http://www.nichigas.co.jp/en/

Stock exchange listing: Tokyo Stock Exchange

Representative: Shinji Wada, Representative Director, Chief Executive Officer

Contact: Shinichi Kiyota, Managing Executive Officer

Scheduled date of filing quarterly securities report: February 14th, 2022

Scheduled date of commencing dividend payments: ―

Availability of supplementary briefing material on quarterly financial results: Available

Schedule of quarterly financial results briefing session: Scheduled (for institutional investors)

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

1. Consolidated Financial Results for the Nine Months Ended December 31st, 2021 (April 1st, 2021 to December 31st, 2021)

(1) Consolidated Results of Operations	(% indicates changes from the previous corresponding period.)
	Net sales		Operating income	Ordinary income	Profit attributable to
		owners of parent
Nine Months ended	Millions of yen	%	Millions of yen	%	Millions of yen	%	Millions of yen	%
107,134	―	6,291	―	6,354	―	5,161	―
Dec. 31st, 2021
Nine Months ended	95,042	4.1	6,831	23.8	7,120	40.7	4,484	38.6
Dec. 31st, 2020
(Note) Comprehensive	income: Nine Months ended Dec. 31st, 2021	¥	4,938 million [ ―%]
	Nine Months ended Dec. 31st, 2020	¥4,595 million [50.9%]
	Basic earnings	Diluted earnings
	per share		per share
Nine Months ended		Yen		Yen
	44.56		―
Dec. 31st, 2021
Nine Months ended		37.61		―
Dec. 31st, 2020

(Note 1) The Company has adopted the "Accounting Standard for Revenue Recognition" (Accounting Standards Board of Japan (ASBJ) Statement No. 29, March 31st, 2020), etc., from the beginning of the first quarter of the consolidated fiscal year under review. Due to a significant impact on net sales and profit, percentage changes from the previous corresponding period for the nine months ended December 31st, 2021 are not stated.

(Note 2) The Company conducted a 3-for-1 stock split on April 1st, 2021. "Basic earnings per share" is calculated on the assumption that the stock split was implemented at the beginning of the previous consolidated fiscal year.

(2) Consolidated Financial Position

	Total assets	Net assets	Equity ratio
	Millions of yen	Millions of yen	%
As of Dec. 31st, 2021	149,453		67,432	45.1
As of Mar. 31st, 2021	140,120		69,342	49.5
(Reference) Equity:	As of Dec. 31st, 2021 ¥67,429 million	As of Mar. 31st, 2021 ¥69,338	million

2. Dividends

						Annual dividends
		End of 1Q		End of 2Q		End of 3Q	Year-end	Total
Fiscal year ended		Yen		Yen		Yen	Yen	Yen
	―	62.50		―	62.50	125.00
Mar. 31st, 2021
Fiscal year ending		―	25.00		―
Mar. 31st, 2022
Fiscal year ending
Mar. 31st, 2022									25.00	50.00
(Forecast)

(Note 1) Revision of dividend projection from recently announced figures: No

(Note 2) The Company conducted a 3-for-1 stock split on April 1st, 2021. Actual amounts of dividends before the stock split are shown for the fiscal year ended March 31st, 2021. Dividends for the fiscal year ending March 31st, 2022 are stated after taking into account the effect of the stock split.

3. Consolidated Financial Results Forecast for the Fiscal Year Ending March 31st, 2022 (April 1st, 2021 to March 31st, 2022)

(% indicates changes from the previous corresponding period.)

							Profit attributable	Basic
	Net sales	Operating income	Ordinary income	earnings
	to owners of parent
							per share
	Millions of yen	%	Millions of yen	%	Millions of yen	%	Millions of yen	%	Yen
Full-year	160,000	11.5	13,000	△4.6	13,000	△7.6	10,000	6.7	86.47

(Note 1) Revision of financial results projection from recently announced figures: Yes

(Note 2) Due to the adoption of the new accounting standard for revenue recognition from the fiscal year ending March 31st, 2022, the sales of the LP gas and electricity businesses are recorded based on revenue estimation between the meter reading and the settlement of accounts.

(Note 3) The Company conducted a 3-for-1 stock split on April 1st, 2021. Basic earnings per share for the consolidated financial results forecast for the fiscal year ending March 31st, 2022 are stated after taking into account the effect of the stock split.

4. Notes

1. Significant changes of subsidiaries during the period under review: No
2. Adoption of special accounting processes for preparing quarterly consolidated financial statements: No
3. Changes to accounting policies, changes to accounting estimates, and revision restatements
4. 1. Changes to accounting policies accompanying the revision of accounting standards, etc.: Yes
   2. Changes to accounting policies other than 1) above: No
   3. Changes to accounting estimates: No
   4. Revision restatements: No
5. Total number of issued shares (common shares)

1)	Total number of issued shares (including treasury shares):
		Dec. 31st, 2021		118,603,698 shares
2)		Mar. 31st, 2021		120,591,498 shares
	Total number of treasury shares at the end of the period:
		Dec. 31st, 2021		3,544,363 shares
3)	Mar. 31st, 2021		3,592,506 shares
Average number of shares during the period:
		Nine months ended Dec. 31st, 2021		115,817,095 shares
		Nine months ended Dec. 31st, 2020		119,239,590 shares

(Note 1) The Company conducted a 3-for-1 stock split of common shares on April 1st, 2021. "Total number of issued shares," "Total number of treasury shares at the end of the period," and "Average number of shares during the period" are calculated on the assumption that the stock split was implemented at the beginning of the previous consolidated fiscal year.

(Note 2) The number of treasury shares includes the shares of the Company held by the "Directors' Compensation BIP (Board Incentive Plan) Trust" (As of December 31st, 2021: 1,426,053 shares, as of March 31st, 2021: 1,474,194 shares). The number of shares is calculated on the assumption that the stock split was implemented at the beginning of the previous consolidated fiscal year.

• These financial results are outside the scope of quarterly review by a certified public accountant or an audit corporation.
• Explanation of the proper use of performance forecast and other notes
  The earnings forecasts and other forward-looking statements herein are based on information available to the Company and certain assumptions deemed reasonable as of the date of publication of this document, but not intended to deliver the Company's commitment to fulfilling them. Actual results may differ significantly from these forecasts due to a wide range of factors. Please refer to "1. Qualitative Information on Consolidated Performance for the Period under Review (3) Explanation of Consolidated Financial Results Forecast and Other Forward-looking Information" on page 6 of the attached Appendix for the notes on the use of preconditions for the earnings forecast and the use of the earnings forecast.

Contents of Appendix
1. Qualitative Information on Consolidated Performance for the Period under Review ---------------------------	2
(1)	Explanation of Results of Operations ---------------------------------------------------------------------------------	2
(2)	Explanation of Financial Position and Cash Flows -----------------------------------------------------------------	5
(3)	Explanation of Consolidated Financial Results Forecast and Other Forward-lookingInformation----------	6
2. Consolidated Financial Statements and Primary Notes--------------------------------------------------------------	7
(1)	Consolidated Balance Sheet --------------------------------------------------------------------------------------------	7
(2)	Consolidated Statement of Income and Comprehensive Income -------------------------------------------------	9
(3)	Consolidated Statement of Cash Flows------------------------------------------------------------------------------	11
(4)	Notes to Consolidated Financial Statements ------------------------------------------------------------------------	13
	(Notes on Going Concern Assumption) -----------------------------------------------------------------------	13
	(Notes in Case of Significant Changes in Shareholder's Equity)------------------------------------------	13
	(Changes to Accounting Policies) ----------------------------------------------------------------------------	13
3. Others ----------------------------------------------------------------------------------------------------------------------	16
(1)	Production, Order and Sales Status-----------------------------------------------------------------------------------	16
(2)	Trends in the Number of Households, etc. --------------------------------------------------------------------------	18

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1. Qualitative Information on Consolidated Performance for the Period under Review

(1) Explanation of Results of Operations

During the nine months ended December 31st, 2021, while expectations were high for economic activity in Japan to recover on the back of progressive COVID-19 vaccination rollouts, uncertainty remained due to the rapid spread of the new variant seen in overseas as well as in Japan. However, signs of a return to economic normality are starting to become apparent across the board.

Amid the drastically changing business environment caused by the paradigm shift against the backdrop of the global spread of COVID-19, we are moving forward with efforts to transform ourselves from the conventional concept of "gas and electricity retailer" to an "energy solution package service company" that will provide a one-stop system for optimal energy usage centered on digital technologies. We are also continuing with the steady implementation of growth strategies, keeping in mind that incorporating technological advances and the trend of decarbonization into management is essential for the sustainable growth of the Company.

By providing our customers with an "energy solution package service," our aim is to deliver on the realization of a "community-integrated and disaster-resilient smart energy city that is green both in terms of energy and lifestyle." As a first step towards this, we have commenced provision of equipment for distributed energy resources (DER; solar power generation equipment, electric vehicle charging equipment, and hybrid water heaters) to our customers as part of efforts to promote a shift towards the popularization of the smart home. For the second step of this initiative, we will connect entire local communities over power distribution networks whereby we will implement AI-based algorithmic controls via a virtual power plant in the metaverse that will ensure the optimal usage of DERs, with the ultimate aim of providing a service that will ensure optimal usage of energy. Our strategy of evolving our company's business domain towards optimization of customer energy usage is based on the high quality of our energy business that we have been promoting for 70 years and on a culture of prioritizing the needs of our customers. It is a strategy that is predicated on the position that we as a society are facing an urgent crisis, and means facing up to the risks that should be tackled through backcasting. Continuing to provide new solutions of optimal usage of energy to increasingly complex social issues and being a company that is needed by the local community are prerequisites for the creation of sustainable corporate value. The Company's sustainability policy aims to improve corporate value over the medium to long term by implementing Environment, Social and Governance (ESG) initiatives through "co-creation" enabled by partnerships and by balancing economic and social aspects. Under this policy, we are recomposing our balance sheet into highly efficient assets with a strong awareness of return on invested capital (ROIC). Furthermore, we are also striving to create shareholder value by pursuing shareholder performance (ROE) that exceeds the costs of shareholders' equity while solving new social issues, such as the reduction of CO2 emissions and workstyle reform, through digitization by open innovation.

This year, we introduced a digital twin system and also began operations of a new delivery system. These systems utilize AI-driven analysis and deep learning to optimize the entirety of LP gas operations by reproducing all IoT data and physical assets pertaining to the LP gas business in real time in metaverse, through automatic authentication technology and other such tools. The information subject to such reproduction includes the customer's real-time gas meter readings as obtained from the Space Hotaru online smart meter, vehicles, cylinder positions, and people. This, when combined with remote monitoring and the fact that it is

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