Nitto Denko : (Complete version) Quarterly financial summary ended June 30, 2020

Date: August 7, 2020

Summary of Consolidated Financial Statements

for the First Quarter Ended June 30, 2020 (IFRS Basis)

Listed company name:	Nitto Denko Corporation
Stock exchange listing:	First Section of Tokyo Stock Exchange
Code Number:	6988	URL	https://www.nitto.com/
Company Representative:	Hideo Takasaki, President
Contact Person:	Kenjiro Asuma, Vice President, Corporate Strategy Management Div.
Phone:	[phone]

Filing date of quarterly financial statements: Estimated starting date of dividend paying: Preparation of supplementary explanatory materials: Holding of quarterly earnings release conference:

July 29, 2020

-

Yes

Yes (for investment analysts and institutional investors)

									(All monetary values noted herein are rounded down to the nearest million yen)
1. Consolidated financial results of the first quarter ended June 30, 2020 (April 1, 2020 through June 30, 2020)
(1) Operating results										(% of change from same period in the previous year)
														Net income		Total
						Operating	Income before			attributable to
			Revenue		Net income		comprehensive
				income	income taxes	owners of the
									income
														parent company
			Millions		%	Millions		%	Millions	%	Millions	%	Millions	%		Millions		%
			of yen		of yen		of yen	of yen	of yen		of yen
First quarter ended		163,310		-7.9	17,442			17.2	17,230	16.0	12,053	17.1	12,038		17.1		11,307		-
June 30, 2020
First quarter ended	177,238		-8.1	14,877			-43.9	14,848	-42.9	10,293	-40.1	10,282		-40.1	-1,080		-
June 30, 2019
			Basic earnings per share	Diluted earnings per share
						Yen				Yen
First quarter ended					80.03					79.97
June 30, 2020
First quarter ended				65.55					65.50
June 30, 2019
(2) Financial position
												Equity attributable to owners	Ratio of equity attributable to
			Total assets					Total equity		owners of the parent company
								of the parent company
													to total assets
					Millions of yen			Millions of yen		Millions of yen						%
June 30, 2020					876,712					659,547			658,797						75.1
March 31, 2020				921,900					690,204			689,446						74.8
2. Dividends
Record Date								Dividends per share
1Q		2Q		3Q		Year-end	Annual
					yen				yen		yen		yen			yen
March, 2020				-				100.00		-		100.00			200.00
March, 2021			-
March, 2021 (Forecast)								100.00		-		100.00			200.00

(Note) Revision of dividend forecast in the current quarter: Yes

3. Forecast for fiscal year ending March 31, 2021 (April 1, 2020 through March 31, 2021)

(% of change from same period in the previous year)

										Net income
	Revenue		Operating income	Income before	Net income	attributable to	Basic earnings
		income taxes	owners of the	per share
										parent company
	Millions		%	Millions	%	Millions	%	Millions	%	Millions	%	yen
	of yen		of yen	of yen	of yen	of yen
First half	350,000		-7.5	35,000	-14.8	35,000	-14.7	25,000	-14.3	25,000	-14.2	162.42
Annual	675,000		-8.9	64,000	-8.2	64,000	-7.3	45,000	-4.7	45,000	-4.6	301.95

(Note) Revision of consolidated forecast in the current quarter: Yes

• Others
• 1. Changes in significant subsidiaries during the first quarter ended June 30, 2020: No
  2. Changes in accounting policies applied and changes in accounting estimates
  3. 1. Changes in accounting policies required by IFRS: No
     2. Changes in accounting policies other than the above: No
     3. Changes in accounting estimates: No
  4. Number of shares outstanding (Common stock)
  5. 1. Number of shares outstanding at the end of the period (including treasury stock)

	June 30, 2020:	158,758,428	March 31, 2020: 158,758,428
2.	Number of treasury stock at the end of the period
	June 30, 2020:	9,725,655	March 31, 2020: 4,839,755
3.	Average number of outstanding shares during the period (cumulative from the beginning of the period)
	April-June 2020: 150,422,040	April-June 2019: 156,851,102

• These quarterly financial results are not subject to quarterly review procedures by Certified Public Accountants or audit firm.
• Explanations for adequate utilization of the forecast and other special matters

The forward-looking statements shown in this report, including the forecast, are prepared based on information available to the Company and on certain assumptions deemed reasonable as of the issuing date of the report. Consequently, the statements herein do not constitute promises regarding actual results by the Company. Actual results may differ materially from forecasted figures due to various unknown factors. For conditions regarding this forecast and precaution for use, please refer to "1. Qualitative Information Regarding Quarterly Settlement of Accounts (3) Explanation of forecasts and other projections" on page 4 of the Attachment to this summary of consolidated financial results.

(Attached Documents)
Index
1. Qualitative Information Regarding Quarterly Settlement of Accounts...................................................................................	2
(1)	Explanation of operating results........................................................................................................................................	2
(2)	Explanation of financial position.......................................................................................................................................	3
(3)	Explanation of forecasts and other projections..................................................................................................................	4
2. Quarterly Consolidated Financial Statements and Key Notes................................................................................................	5
(1)	Quarterly consolidated statements of financial position....................................................................................................	5
(2)	Quarterly consolidated statements of income and quarterly consolidated statements of comprehensive income............	7
(3)	Quarterly consolidated statements of changes in equity...................................................................................................	9
(4)	Quarterly consolidated statements of cash flows..............................................................................................................	10
(5)	Notes on quarterly consolidated financial statements.......................................................................................................	11
	(Notes on going concern assumption).........................................................................................................................	11
	(Segment information).................................................................................................................................................	12
	(Notes in cases where there was a substantial change in the amount of shareholders' equity)...................................	13
	(Significant subsequent events)...................................................................................................................................	13

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1. Qualitative Information Regarding Quarterly Settlement of Accounts

1. Explanation of operating results

During the first quarter of the fiscal year ending March 31, 2021 (April 1, 2020 through June 30, 2020), economic environment worsened rapidly and significantly as a result of the global spread of COVID-19. In the key markets of Nitto Group (the "Group") under this economic environment, the demands for semiconductor-related materials and the materials for laptop and tablet device have increased from the background of expanding telework. In addition, the Group progressed in its alliances with business partners in general-purpose TV polarizer, and recorded royalty income from the licensing of technologies in this first quarter. Businesses related to nucleic acid drug also remained strong with the growing market. The spread of COVID-19 has created a new demand for porous material for medical-use masks. Meanwhile, automobile market has faced sluggish demand and worldwide decrease in its production. Smartphone production has decreased as a whole, but the demands were different among smartphone manufacturers. In response to COVID-19, the Group promoted telework to place top priority on employee safety and took measures that meet the requests of governments in each country.

As a result of the above, revenue decreased by 7.9% from the same period of the previous year (changes hereafter are given in comparison with the same period of the previous year) to 163,310 million yen. Operating income increased by 17.2% to 17,442 million yen, income before income taxes increased by 16.0% to 17,230 million yen, net income increased by 17.1% to 12,053 million yen, and net income attributable to owners of the parent company increased by 17.1% to 12,038 million yen.

Summary of results by segment

• Industrial Tape

For Functional Base Products, demands for general industry materials and housing-related materials were sluggish under the impact of COVID-19. While customers consumed their own inventory for electronic component manufacturing, demand for server application of semiconductor-related materials used in the manufacturing process expanded from the background of expanding telework. Demand for some materials used in the upper supply chain was strong, reflecting customer's recovery from temporary lowered operating rate under the impact of COVID-19.

Transportation Business faced worldwide decrease in automobile production under the impact of COVID-19. While automobile production in China moved toward recovery, that in Europe and US decreased significantly and thus implemented its adjustment.

As a result of the above, revenue decreased by 23.7% to 60,900 million yen and operating income decreased by 70.4% to 1,650 million yen.

• Optronics

In Information Fine Materials, the demand for laptop and tablet device increased from the background of expanding telework. Materials for smartphone faced sluggish production of smartphone under the impact of COVID-19, but the demands were different among smartphone manufacturers. In the TV market, while the balance between supply and demand has changed significantly with the expansion of the supply capacity of panel makers, the Group progressed in its alliances with business partners in general-purpose TV polarizer, and recorded royalty income from the licensing of technologies in this first quarter.

In Flexible Printed Circuits, under the impact of COVID-19, production of hard disk drive (HDD) was sluggish mainly for personal computers, however, high-capacity HDD used in data center helped the demand to expand steadily. In addition, production of wireless charging system for hearing instruments has begun.

As a result of the above, revenue increased by 5.4% to 96,173 million yen and operating income increased by 60.3% to 17,717 million yen.

• Life Science

In Life Science, in oligonucleotide contract manufacturing business, demand expanded steadily with the growing market. With a rising expectation for nucleic acid drug as vaccine against COVID-19, demand for Polymer Beads NittoPhase expanded for synthesizing nucleic acid drug. Under the impact of COVID-19, demands for transdermal therapeutic patches and medical sanitary materials weakened.

In nucleic acid new drug development, the Group continues working on the clinical trials of Idiopathic Pulmonary Fibrosis and intractable cancer drugs.

As a result of the above, revenue increased by 20.3% to 7,043 million yen and operating loss amounted to 518 million yen. (operating loss of 1,424 million yen was reported in the same period of the previous year)

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• Others

For Membranes (Polymer Separation Membrane), under the impact of COVID-19, some projects for seawater desalination were postponed. The demand for various industrial applications and energy field weakened. Please note that this segment includes new business that has not generated sufficient revenue yet.

As a result of the above, revenue decreased by 29.4% to 5,392 million yen and operating loss amounted to 1,021 million yen. (operating loss of 26 million yen was reported in the same period of the previous year)

(Reference) Segment Information

(Yen in Millions)

				First quarter ended June 30, 2019		First quarter ended June 30, 2020
				(April 1, 2019		(April 1, 2020
				through June 30, 2019)		through June 30, 2020)
				Revenue		Revenue		Y-o-Y (%)
		Functional Base Products	43,717	40,154	91.9
Industrial Tape		Transportation		36,084		20,746		57.5
	Total		79,801		60,900		76.3
		Operating income		5,567		1,650		29.6
		Information Fine Materials	81,408	85,782	105.4
Optronics		Flexible Printed Circuits		9,794		10,390		106.1
	Total		91,203		96,173		105.4
		Operating income		11,051		17,717		160.3
Life Science		Revenue		5,856		7,043		120.3
	Operating income		-1,424		-518		-
Others		Revenue		7,639		5,392		70.6
	Operating income		-26		-1,021		-
Corporate/Elimination		Revenue		-7,261		-6,199		-
	Operating income		-290		-385		-
Total		Revenue		177,238		163,310		92.1
	Operating income	14,877	17,442	117.2

(Note) With the changes in the management structure that have been made during the fiscal year 2020 under review, partial changes have been made to reporting segments.

Such change has also been reflected in the figures for the first quarter ended June 30, 2019.

(2) Explanation of financial position

The Group's financial position at the end of the first quarter of the fiscal year ending March 31, 2021 was as follows. Compared with the end of the fiscal year ended March 31, 2020, total assets decreased by 45,187 million yen to 876,712

million yen and total liabilities decreased by 14,531 million yen to 217,164 million yen. Total equity decreased by 30,656 million yen to 659,547 million yen. As a result, the ratio of equity attributable to owners of the parent company to total assets changed from 74.8% at the end of the fiscal year ended March 31, 2020 to 75.1% at the end of the first quarter of the fiscal year ending March 31, 2021.

The main changes in assets were a decrease in cash and cash equivalents of 54,620 million yen, an increase in inventories of 5,076 million yen, an increase in other current assets of 1,497 million yen, an increase in financial assets of 1,472 million yen. In terms of liabilities, income tax payables decreased by 5,542 million yen, trade and other payables decreased by 5,027 million yen, other current financial liabilities decreased by 2,196 million yen, other current liabilities decreased by 2,369 million yen.

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(3) Explanation of forecasts and other projections

We have not been able to determine consolidated financial and dividend forecasts for the fiscal year ending March 31, 2021, as it was difficult to estimate the impact of COVID-19 on our financial results rationally. However, now that the restrictions on the movement of people, etc. have been eased in various countries, we hereby announce the forecasts, which are based on currently available data and projections concerning the impact on our Group companies.

Consolidated financial forecasts for the fiscal year ending March 31, 2021 (April 1, 2020 through March 31, 2021)

Revenue	675,000 million yen (down by 8.9%)
Operating income	64,000 million yen (down by 8.2%)
Income before income taxes	64,000 million yen (down by 7.3%)
Net income	45,000 million yen (down by 4.7%)

The above up or down is a comparison with the same period of the fiscal year ended March 2020.

• Industrial Tape

For Functional Base Products, we expect that the impact of COVID-19 will be mitigated overall toward the end of the current fiscal year but that demand for general-purpose industrial materials and housing-related products will weaken compared to the previous fiscal year.

For the Transportation Business, we expect that demand for automobiles will recover toward the end of the current fiscal year, but not to the previous year's level due to the lingering impact of COVID-19.

• Optronics

For Information Fine Materials, we expect demand for notebook and tablet computers to increase as work styles have diversified and more people are working from home due to COVID-19. Meanwhile, demand for TV and smartphone applications is expected to decline.

Regarding Flexible Printed Circuits, we expect that the impact of COVID-19 will be mitigated toward the end of the current fiscal year. In addition, as we make further inroads into non-HDD applications, we expect this business to perform strongly.

• Life Science

COVID-19 is still dampening the market for nucleic acid medicine, but growth potential remains as research and development activities and clinical trials continue. We expect that the oligonucleotide contract manufacturing service and its related businesses will continue to drive the performance of this segment.

• Others

For Membranes (Polymer Separation Membrane), we expect that the impact of COVID-19 will be mitigated toward the end of the current fiscal year but that demand for seawater desalination and industrial applications, as well as demand in the energy field, will decrease from the previous fiscal year.

The financial forecasts, forward-looking statements, etc. above are prepared based on information currently available to the Company and therefore involve potential risks and uncertainties, depending on the termination of COVID-19. Please note that actual results may differ from forecasted figures due to various unknown factors.

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2. Quarterly Consolidated Financial Statements and Key Notes

(1) Quarterly consolidated statements of financial position

				(Yen in Millions)
	March 31, 2020			June 30, 2020
(Assets)
Current assets
Cash and cash equivalents	304,922	250,302
Trade and other receivables	154,473	154,102
Inventories	96,124	101,201
Other financial assets	2,642	1,868
Other current assets	17,893	19,391
Total current assets		576,056		526,866
Non-current assets
Property, plant and equipment	266,948	267,462
Right-of-use assets	16,266	16,640
Goodwill	4,852	4,783
Intangible assets	10,198	11,184
Investments accounted for using equity method	206	1,082
Financial assets	7,242	8,714
Deferred tax assets	25,694	25,585
Other non-current assets		14,434		14,392
Total non-current assets		345,843		349,845
Total assets	921,900	876,712

- 5 -

			(Yen in Millions)
	March 31, 2020		June 30, 2020
Liabilities and equity
(Liabilities)
Current liabilities
Trade and other payables	90,811	85,783
Bonds and borrowings	90	88
Income tax payables	10,036	4,494
Other financial liabilities	24,050	21,853
Other current liabilities	36,907		34,537
Total current liabilities	161,895	146,758
Non-current liabilities
Other financial liabilities	18,976	18,680
Defined benefit liabilities	48,272	48,845
Deferred tax liabilities	284	635
Other non-current liabilities	2,266		2,245
Total non-current liabilities	69,800		70,406
Total liabilities	231,696	217,164
(Equity)
Equity attributable to owners of the parent company
Share capital	26,783	26,783
Capital surplus	50,271	50,081
Retained earnings	643,521	640,167
Treasury stock	-27,505	-53,921
Other components of equity	-3,624		-4,313
Total equity attributable to owners of the parent	689,446	658,797
company
Non-controlling interests	757		750
Total equity	690,204		659,547
Total liabilities and equity	921,900	876,712

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1. Quarterly consolidated statements of income and quarterly consolidated statements of comprehensive income (Quarterly consolidated statements of income)

			(Yen in Millions)
	First quarter ended June 30, 2019		First quarter ended June 30, 2020
	(April 1, 2019		(April 1, 2020
	through June 30, 2019)		through June 30, 2020)
Revenue	177,238	163,310
Cost of sales	126,408		112,788
Gross profit	50,830		50,522
Selling, general and administrative expenses	27,767	24,891
Research and development expenses	8,078	8,223
Other income	1,100	1,160
Other expenses	1,208		1,125
Operating income	14,877		17,442
Financial income	290	198
Financial expenses	329	416
Equity in profits (losses) of affiliates	10		5
Income before income taxes	14,848		17,230
Income tax expenses	4,555		5,176
Net income	10,293	12,053
Net income attributable to:
Owners of the parent company	10,282	12,038
Non-controlling interests	11		14
Total	10,293	12,053
Earnings per share attributable to owners of the parent company
Basic earnings per share (yen)	65.55	80.03
Diluted earnings per share (yen)	65.50	79.97

- 7 -

(Quarterly consolidated statements of comprehensive income)

			(Yen in Millions)
	First quarter ended June 30, 2019		First quarter ended June 30, 2020
	(April 1, 2019		(April 1, 2020
	through June 30, 2019)		through June 30, 2020)
Net income	10,293	12,053
Other comprehensive income
Items that will not be reclassified to profit or loss
Net gain (loss) on financial assets measured at fair value	-199	125
through other comprehensive income
Items that will be reclassified to profit or loss
Exchange differences on translating foreign operations	-11,167	-869
Net gain (loss) in fair value of cash flow hedges	-0	-1
Share of other comprehensive income of associates	-6	-0
accounted for using equity method
Total other comprehensive income	-11,373		-745
Total comprehensive income	-1,080	11,307
Total comprehensive income attributable to:
Owners of the parent company	-1,089	11,292
Non-controlling interests	9		14
Total	-1,080	11,307

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(3) Quarterly consolidated statements of changes in equity

For the first quarter ended June 30, 2019 (April 1, 2019 through June 30, 2019)

(Yen in Millions)

			Equity attributable to owners of the parent company
													Non-
	Share		Capital		Retained		Treasury		Other
					components		Total		controlling		Total equity
	capital		surplus		earnings		stock
					of equity				interests
Balance as of April 1,	26,783	50,319	622,025	-11,081	12,395	700,443	744	701,187
2019
Net income	-	-	10,282	-	-	10,282	11	10,293
Other comprehensive	-	-	-	-	-11,372	-11,372	-1	-11,373
income
Total comprehensive	-	-	10,282	-	-11,372	-1,089	9	-1,080
income
Share-based payment	-	-37	-	-	48	11	-	11
transactions
Dividends	-	-	-14,116	-	-	-14,116	-23	-14,140
Changes in treasury	-	11	-	25	-	37	-	37
stock
Total transactions with	-	-25	-14,116	25	48	-14,068	-23	-14,091
owners
Balance as of June 30,	26,783	50,294	618,190	-11,055	1,072	685,285	730	686,015
2019
For the first quarter ended June 30, 2020 (April 1, 2020 through June 30, 2020)
													(Yen in Millions)
			Equity attributable to owners of the parent company
													Non-
	Share		Capital		Retained		Treasury		Other
					components		Total		controlling		Total equity
	capital		surplus		earnings		stock
					of equity				interests
Balance as of April 1,	26,783	50,271	643,521	-27,505	-3,624	689,446	757	690,204
2020
Net income	-	-	12,038	-	-	12,038	14	12,053
Other comprehensive	-	-	-	-	-745	-745	-0	-745
income
Total comprehensive	-	-	12,038	-	-745	11,292	14	11,307
income
Share-based payment	-	-200	-	-	56	-144	-	-144
transactions
Dividends	-	-	-15,391	-	-	-15,391	-22	-15,414
Changes in treasury	-	10	-	-26,415	-	-26,405	-	-26,405
stock
Total transactions with	-	-190	-15,391	-26,415	56	-41,941	-22	-41,963
owners
Balance as of June 30,	26,783	50,081	640,167	-53,921	-4,313	658,797	750	659,547
2020

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(4) Quarterly consolidated statements of cash flows

			(Yen in Millions)
	First quarter ended June 30, 2019		First quarter ended June 30, 2020
	(April 1, 2019		(April 1, 2020
	through June 30, 2019)		through June 30, 2020)
Cash flows from operating activities
Income before income taxes	14,848	17,230
Depreciation and amortization	12,331	11,840
Impairment losses	-	63
Increase (decrease) in defined benefit liabilities	708	559
Decrease (increase) in trade and other receivables	1,553	-28
Decrease (increase) in inventories	-7,057	-5,161
Increase (decrease) in trade and other payables	1,400	-4,940
Interest and dividend income	244	190
Interest expenses paid	-147	-180
Income taxes (paid) refunded	-5,771	-11,301
Others	-3,384		-3,187
Net cash provided by (used in) operating activities	14,727	5,083
Cash flows from investing activities
Purchase of property, plant and equipment and intangible	-17,264	-15,581
assets
Proceeds from sale of property, plant and equipment and	72	51
intangible assets
Decrease (increase) in time deposits	-1,385	674
Purchase of investment securities	-696	-322
Purchase of shares of subsidiaries and associates	-	-879
Others	0		0
Net cash provided by (used in) investing activities	-19,274	-16,057
Cash flows from financing activities
Net increase (decrease) in short-term loans payable	24	-1
Repayment of finance lease obligations	-1,471	-1,471
Decrease (increase) in treasury stock	-0	-26,605
Cash dividends paid	-14,130	-15,391
Others	-23		-29
Net cash provided by (used in) financing activities	-15,601		-43,499
Effect of exchange rate changes on cash and cash	-2,967	-146
equivalents
Net increase (decrease) in cash and cash equivalents	-23,115		-54,620
Cash and cash equivalents at the beginning of the period	297,682		304,922
Cash and cash equivalents at the end of the period	274,566	250,302

- 10 -

(5) Notes on quarterly consolidated financial statements

(Notes on going concern assumption) Not applicable.

- 11 -

(Segment information)

Information regarding revenue, income, or loss by segments

First quarter ended June 30, 2019 (April 1, 2019 through June 30, 2019)

(Yen in Millions)

							Quarterly
	Industrial	Optronics	Life Science	Others	Total	Adjustment	consolidated
	Tape						statements of
							income
Revenue from outside customers	76,092	89,454	4,792	6,647	176,987	251	177,238
Inter-segment revenue	3,709	1,748	1,063	992	7,513	-7,513	-
Total segment revenue	79,801	91,203	5,856	7,639	184,500	-7,261	177,238
Total operating income (loss)	5,567	11,051	-1,424	-26	15,167	-290	14,877
Financial income
						290
Financial expenses							-329
Equity in profits (losses) of affiliates							10
Income before income taxes							14,848

(Note) With the changes in the management structure that have been made during the fiscal year 2020 under review, partial changes have been made to reporting segments.

Such change has also been reflected in the figures for the first quarter ended June 30, 2019.

Major products for each segment
	Business segment	Major products
	Industrial Tape	Functional Base Products (bonding and joining products, protective materials,
	processing materials, etc.), Automotive Products
	Optronics	Information Fine Materials, Flexible Printed Circuits
	Life Science	Medical Products
	Others	Membrane Products, Other Products

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First quarter ended June 30, 2020 (April 1, 2020 through June 30, 2020)

(Yen in Millions)

					Quarterly
Industrial	Optronics Life Science	Others	Total	Adjustment	consolidated
Tape					statements of
					income

Revenue from outside customers Inter-segment revenue

Total segment revenue

Total operating income (loss) Financial income Financial expenses

Equity in profits (losses) of affiliates Income before income taxes

Major products for each segment

Business segment

Industrial Tape

Optronics

Life Science

Others

57,752	94,510	6,098	4,752	163,113	197	163,310
3,148	1,662	945	640	6,396	-6,396	-
60,900	96,173	7,043	5,392	169,510	-6,199	163,310
1,650	17,717	-518	-1,021	17,827	-385	17,442
						198
						-416
						5
						17,230

Major products

Functional Base Products (bonding and joining products, protective materials, processing materials, etc.), Automotive Products

Information Fine Materials, Flexible Printed Circuits

Medical Products

Membrane Products, Other Products

(Notes in cases where there was a substantial change in the amount of shareholders' equity)

Pursuant to the resolution at the Board of Directors meeting on January 27, 2020, the Company has acquired its treasury shares amounted to 26,605 million yen for the first quarter of the fiscal year ending March 31, 2021. As a result, the number of treasury shares at the end of the first quarter of the fiscal year ending March 31, 2021 was 9,725 thousand, and the book balance was 53,921 million yen.

(Significant subsequent events) Not applicable.

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