Nippon Gas : Consolidated Financial Results for the Three Months Ended June 30th, 2021

Consolidated Financial Results

for the Three Months Ended June 30th, 2021

[Japanese GAAP]

July 29th, 2021

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: August 13th, 2021

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 Three Months Ended June 30th, 2021 (April 1st, 2021 to June 30th, 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
Three Months ended	Millions of yen	%	Millions of yen	%	Millions of yen	%	Millions of yen	%
34,697	―	2,565		―	2,577	―	1,772	―
Jun. 30th, 2021
Three Months ended	33,620	2.6	3,722		8.3	3,803	24.1	2,642	22.8
Jun. 30th, 2020
(Note) Comprehensive	income: Three Months	ended Jun. 30th, 2021	¥	1,679 million [―%]
	Three Months ended Jun. 30th, 2020	¥2,807 million [44.5%]
	Basic earnings	Diluted earnings
	per share		per share
Three Months ended	Yen		Yen
15.18		―
Jun. 30th, 2021
Three Months ended	22.07		―
Jun. 30th, 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 three months ended June 30th, 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 Jun. 30th, 2021		140,489		69,462		49.4
As of Mar. 31st, 2021		140,120		69,342		49.5
(Reference) Equity:	As of	Jun. 30th, 2021	¥	69,458 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		－
Mar. 31st, 2022
Fiscal year ending
Mar. 31st, 2022				25.00		－	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 (Forecast) are stated 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
Six months ending	Millions of yen	%	Millions of yen	%	Millions of yen	%	Millions of yen	%	Yen
64,000	4.0	2,800	(25.2)	2,800	(28.7)	2,700	11.6	23.21
Sep. 30th, 2021
Full-year	150,000	4.2	14,500	6.4	14,500	3.1	10,500	12.0	90.25

(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):
		Jun. 30th, 2021		118,603,698 shares
2)		Mar. 31st, 2021		120,591,498 shares
	Total number of treasury shares at the end of the period:
		Jun. 30th, 2021		2,263,585 shares
3)	Mar. 31st, 2021		3,592,506 shares
Average number of shares during the period:
		Three months ended Jun. 30th, 2021		116,806,315 shares
		Three months ended Jun. 30th, 2020		119,737,563 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 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 June 30th, 2021: 1,445,353 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-looking Information ------------	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 ---------------------------------------------------------------------------------------------------------------------------	15
(1)	Production, Order and Sales Status -----------------------------------------------------------------------------------	15
(2) Trends in the Number of Houses, 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 three months ended Jun. 30th, 2021, the outlook for the Japanese economy continued to require attention as a state of emergency was declared again in some areas due to the impact of the spread of the novel coronavirus disease (COVID-19). However, a path to recovery in economic activity is gradually beginning to be seen, owing to progress being made with vaccination in Japan and other factors.

Although the global spread of COVID-19 has caused constraint on economic activities, the Company sees this as an opportunity for drastic changes in new lifestyles, social structure and industrial structure. It is essential for us, as an energy business operator, to understand the new needs of our customers against the backdrop of such a paradigm shift and to swiftly redefine our business in order to achieve sustainable corporate growth. In addition, the economic stagnation triggered by COVID-19 has placed pressure on companies to take urgent measures to decarbonize their operations to combat global warming, which, like COVID-19, will have an impact on humanity on a global scale, and has confirmed the global trend of drawing up new growth strategies to realize a carbon-neutral society.

Providing solutions to social issues and being a company that is needed by the local community are prerequisites for the sustainable growth of corporate value. The Company has adopted a sustainability policy that aims to improve corporate value over the medium to long term by implementing Environment, Society and Governance (ESG) initiatives through "co-creation" enabled by partnerships and by balancing economic and social aspects. Under this policy, we are striving to further improve the performance of shareholders' equity (ROE) by recomposing our balance sheet into highly efficient assets with a strong awareness of return on invested capital (ROIC), and solving new social issues, such as the reduction of CO2 emissions and the labor shortage, through digitization by open innovation. With respect to realizing a decarbonized society, which we consider to be a particularly high hurdle to overcome among our materiality issues, we have set the following goals for 2030: to achieve a roughly 50% reduction in the energy industry's CO2 emissions by having industry members use its LPG Network Service, and to cut CO2 emissions per household by roughly 50% by promoting the procurement of electricity from non-fossil fuel sources, the development of a service menu adapted to the shift to EVs, and the widespread adoption of electric-gas hybrid water heaters. Furthermore, the Company is also working to achieve net zero CO2 emissions by 2050.

In May 2021, the Company developed and started operation of "NICIGAS Twin on DL,"* a digital twin system, in conjunction with the completion of "Yume no Kizuna Kawasaki," one of the world's largest LP gas hub filling plants. (*DL is an abbreviation for "deep learning.")

The Company codeveloped "NICIGAS Twin on DL" with Future Corporation, our IT strategic partner. It is a system that enables us to grasp and operate the status of conveyors, gas fillers, gas cylinders, vehicles, and other IoT real data and physical assets related to the LP gas business by reproducing them in cyber space, without directly visiting the site. This kind of system is commonly referred to as a cyber-physical system. "NICIGAS Twin on DL" will enable AI to analyze and process data collected from the production (filling), delivery, inventory, and demand cycles of the LP gas business in cyberspace through deep learning, and dramatically improve operational efficiency. As a result, the cost burden and environmental impact of the LP gas business can be further reduced. The Company will launch "LPG Network Service," as a platform to provide LPG

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