Osaka Soda : CONSOLIDATED FINANCIAL RESULTS For the quarterly period ended June 30, 2020

(Reference Translation)

Aug 7, 2020

OSAKA SODA CO., LTD.

CONSOLIDATED FINANCIAL RESULTS

For the quarterly period ended June 30, 2020 (Prepared under Japan GAAP, unaudited)

Company name:	OSAKA SODA CO., LTD.	Stock Exchange Listing:	Tokyo
Securities code:	4046			URL: http://www.osaka-soda.co.jp
Representative:	Kenshi Terada, Representative Director, President & Chief Executive Officer
For inquiry:	Yoshihiro Ueda, Director, General Manager, Administration Division
		(Telephone: [phone])
Scheduled date of filing of quarterly securities report:	Aug 11, 2020
Scheduled date of commencement of dividend payment:	－
Supplementary materials prepared for the financial results:	None
Quarterly financial results briefings:			None
1. Consolidated Financial Results	(Amounts are rounded down to the nearest million yen)
(1)Results of Operations
						Three Months Ended
					June 30, 2020		June 30, 2019
						Change *				Change *
Net sales		Millions of yen		23,257	(13.0)%			26,736		2.2%
Operating income		Millions of yen		1,947	(26.5)%			2,649		7.6%
Ordinary income		Millions of yen		2,165	(23.3)%			2,821		(2.3)%
Net income		Millions of yen		1,470	(13.2)%			1,693		(18.0)%
Comprehensive income	Millions of yen		2,577	82.0%			1,415		(13.9)%
Net income per share	Yen		61.96	-			73.02		-
Diluted net income per share	Yen		55.05	-			63.56		-
(Note) Percent changes for three months are year-on-year comparisons.
(2)Financial Condition
					June 30, 2020		March 31, 2020
	Total assets		Millions of yen			111,431					110,851
	Net assets		Millions of yen			70,930					69,121
	Equity		Millions of yen			70,927					69,121
	Equity ratio		%			63.7					62.4

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2. Dividends

		Year ending Mar. 31, 2021		Year ended Mar. 31, 2020
		(Forecast)	Year ending Mar. 31, 2021
End of first quarter				－	－
End of second quarter	32.50			32.50
End of third quarter		－		－
End of fourth quarter	32.50			32.50
Full year	65.00			65.00

	(Note) Change in dividends forecast from the most recent announcement: None
3. Earnings Forecast for the fiscal year ending March 31, 2021
			First half		Full-year
					Change*			Change*
	Net sales	Millions of yen	46,000		(13.3)%	96,000		(9.0)%
	Operating income	Millions of yen	3,300		(33.4)%	8,000		(17.5)%
	Ordinary income	Millions of yen	3,500		(32.6)%	8,400		(18.6)%
	Net income	Millions of yen	2,400		(24.8)%	5,700		(12.4)%
	Earnings per share	Yen	101.14		-	240.22		-

(Note) Change in dividends forecast from the most recent announcement: None

* Notes
(1) Changes in significant subsidiaries during the current quarterly period
(Changes in specified subsidiaries resulting in the change in scope of consolidation):	None

1. Application of accounting methods used specifically for the preparation of quarterly

consolidated financial statements:	None
(3) Changes in accounting policies, accounting estimates and restatements of revisions	None
1)	Changes in accounting policies due to revisions of accounting standards, etc.:	None
2)	Changes in accounting policies other than 1):	None
3)	Changes in accounting estimates:	None
4)	Restatement of revisions:	None

1. Number of outstanding shares (common stock)

1)	Number of shares outstanding at the end of the period (including treasury shares)
	As of June 30, 2020:	26,731,415	shares
	As of March 31, 2020:	26,731,415	shares
2)	Number of treasury shares at the end of period
	As of June 30, 2020:	3,002,736	shares
	As of March 31, 2020:	3,002,722	shares
3)	Average number of shares outstanding in each period
	Three months ended June 30, 2020	23,728,689	shares
	Three months ended June 30, 2019	23,191,445	shares

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*Disclosure regarding the execution of the quarterly review process:

This quarterly financial results are outside the scope of the quarterly review by certified public accountants or an audit firm.

*Appropriate use of financial forecasts, other special notes:

This material contains forward-looking statements such as earnings forecast about OSAKA SODA CO., LTD. and its group companies ("Osaka Soda Group"). These forward-looking statements are based on the current assumptions and beliefs of Osaka Soda Group in light of the information currently available to it, and contain known and unknown risks, uncertainties and other factors. Osaka Soda Group therefore wishes to caution readers that actual results could be materially different from any future results.

DISCLAIMER:

This is an English translation of the original Japanese document and is prepared for reference. Should there be any inconsistency between the translation and the Japanese original, the latter shall prevail. This translation is subject to change without notice. Osaka Soda Group shall individually or jointly accept no responsibility or liability for damage or loss caused by any error, inaccuracy, misunderstanding, or changes with regard to this translation.

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4. Qualitative Information (1)Results of Operations

During the three months ended June 30, 2020, Japan's economy has remained in an extremely difficult situation due to the sluggish economic activity caused by the spread of novel coronavirus infections. Recently, the number of newly infected person has been on the rise again, and the outlook remains uncertain.

Under the circumstances, in the last year of the Medium-Term Management Plan "BRIGHT - 2020", which was launched from the previous fiscal year, Osaka Soda Group continued to promote three basic policies, "Creating new growth engines", "Establishing a profitable global business", and "Completing business structural reforms".

As a result, net sales were ¥23,257 million, a decrease of 13.0% compared to the same period of fiscal 2019. Operating income was ¥1,947 million, a decrease of 26.5% compared to the same period of fiscal 2019. Ordinary income was ¥2,165 million, a decrease of 23.3% compared to the same period of fiscal 2019. Net income attributable to owners of parent was ¥1,470 million, a decrease of 13.2% compared to the same period of fiscal 2019.

The following is a summary of reporting segments.

Basic Chemical Products

In Chlor-Alkali, net sales decreased due to the decline in overall domestic demand caused by the spread of novel coronavirus infections

In Epichlorohydrin, net sales decreased due to the decline in domestic & overseas demand though electronic materials sales continued to increase steadily.

As a result, Basic Chemical Products reported net sales of ¥10,138 million, down 17.1% compared to the same period of fiscal 2019.

Functional Chemical Products

Diallyl Phthalate Resin was affected by the declining demand of UV curable inks in Europe due to the spread of novel coronavirus infections.

In Allyl Ethers, net sales increased due to volume growth in exported sales to United States.

In Synthetic Rubber and related businesses, Epichlorohydrin Rubber was affected by the decline in the number of global automobiles production. Acrylic Rubber was increasingly adopted by new customers in China and Europe.

In Separation Media in Pharmaceutical Industry (Silica Gel for Liquid Chromatography), the demand for peptide drug purification continued to increase in India and China. In addition, Colum for Liquid Chromatography and Analytical Instruments continued to increase favorably in instruments sales to Korea.

In Active Pharmaceutical Ingredients (API) and their Intermediates, the sales of both anti-tuberculosisdrug intermediates and insomnia treatment intermediates increased. Also, the number of contract manufacturing increased in high pharmacologically active drug.

As a result, Functional Chemical Products reported net sales of ¥9,220 million, down 9.9% compared to the same period of fiscal 2019.

Housing Facilities and Others

Net sales were ¥3,898 million, down 8.8% compared to the same period of fiscal 2019. Construction materials sales were sluggish.

1. Financial Condition Assets
   Current assets were ¥69,504 million, a decrease of 0.5% since March 31, 2020. The decrease was due primarily to a decrease of ¥2,055 million in notes and accounts receivable-trade, a decrease of ¥770 million in

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cash and deposits respectively, an increase of ¥1,043 million in merchandise and finished goods, an increase of ¥1,036 million in electronically recorded monetary claims, an increase of ¥219 million in work in process, an increase of ¥106 million in raw materials and supplies respectively.

Noncurrent assets were ¥41,927 million, an increase of 2.3% since March 31, 2020. The decrease was due primarily to an increase of ¥1,608 million in investment securities, a decrease of ¥491 million in property, plant, and equipment - net.

As a result, Total assets were ¥111,431 million, an increase of 0.5% since March 31, 2020.

Liabilities

Current liabilities were ¥24,783 million, a decrease of 7.0% since March 31, 2020. The decrease was due primarily to a decrease of ¥ 1,033 million in notes and accounts payable- trade, a decrease of ¥835 million in income taxes payable respectively.

Noncurrent liabilities were ¥15,717 million, an increase of 4.3% since March 31, 2020. The increase was due primarily to an increase of ¥706 million in deferred tax liabilities.

As a result, Total liabilities were ¥40,501 million, a decrease of 2.9% since March 31, 2020.

Net assets

Net assets were ¥70,930 million, an increase of 2.6% since March 31, 2020.

(3) Earnings Forecasts

There are no revisions to the earnings forecast from the previous forecast announced in the "Consolidated financial results both for the quarterly period ended September 30, 2020 and for the year ended March 31, 2021" dated on May 11, 2020.

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5. Consolidated Financial Statements

CONSOLIDATED BALANCE SHEETS

(Millions of yen)

		March 31, 2020		June 30, 2020
Assets
Current assets
Cash and deposits	15,099	14,329
Notes and accounts receivable-trade	25,641	23,586
Electronically recorded monetary claims	3,096	4,132
Short term investment securities	14,299	14,798
Merchandise and finished goods	6,901	7,944
Work in process	1,368	1,587
Raw materials and supplies	2,268	2,374
Other current assets	1,296	850
Less: Allowance for doubtful accounts	(100)	(100)
Total current assets	69,871	69,504
Noncurrent assets
Property, plant, and equipment
Property, plant, and equipment - Net	10,110	9,736
Other - Net	11,743	11,625
Total property, plant and equipment	21,853	21,362
Intangible assets
Goodwill	681	635
Other	346	323
Total intangible assets	1,027	959
Investments and other assets
Investment securities	16,803	18,411
Deferred tax assets	368	290
Other, net	933	909
Less: Allowance for doubtful accounts	(6)	(6)
Total investment and other assets	18,099	19,605
Total noncurrent assets	40,980	41,927
Total assets	110,851	111,431

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CONSOLIDATED BALANCE SHEETS (Continued)

(Millions of yen)

		March 31, 2020		June 30, 2020
Liabilities
Current liabilities
Notes and accounts payable- trade	13,159	12,125
Short term loans payable	7,767	7,767
Income taxes payable	1,278	443
Provision for bonuses	911	457
Other current liabilities	3,543	3,990
Total current liabilities	26,660	24,783
Noncurrent liabilities
Bonds with subscription rights to shares	10,000	10,000
Deferred tax liabilities	436	1,142
Provision for directors retirement benefits	281	13
Net defined benefit liability	3,265	3,243
Other noncurrent liabilities	1,085	1,317
Total noncurrent liabilities	15,069	15,717
Total liabilities	41,730	40,501
Net assets
Shareholders' equity
Capital stock	15,870	15,870
Capital surplus	14,387	14,387
Retained earnings	41,870	42,569
Treasury stock	(6,682)	(6,682)
Total shareholders' equity	65,446	66,145
Accumulated other comprehensive income
Valuation difference on available-for-sale securities	4,177	5,305
Deferred gains or losses on hedges	8	5
Foreign currency translation adjustments	7	(21)
Re-measurements of defined benefit plans	(518)	(508)
Total accumulated other comprehensive income	3,674	4,781
Non-controlling interests	-	3
Total net assets	69,121	70,930
Total net assets and liabilities	110,851	111,431

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CONSOLIDATED STATEMENTS OF INCOME

(Millions of yen)

		Three Months Ended
		June 30, 2019		June 30, 2020
Net sales	26,736	23,257
Cost of sales	20,939	18,314
Gross profit	5,797	4,942
Selling, general, and administrative expenses	3,147	2,994
Operating income	2,649	1,947
Non-operating income
Interest income	3	4
Dividend income	239	256
Share of profit of entities accounted for using equity	11	-
method
Other	14	21
Total non-operating income	268	282
Non-operating expenses
Interest expenses	24	22
Share of loss of entities accounted for using equity	-	10
method
Foreign exchange loss	64	24
Other	8	6
Total non-operating expenses	96	64
Ordinary income	2,821	2,165
Extraordinary loss
Loss on retirement of noncurrent assets	25	42
Loss on valuation of investment securities	363	-
Other	2	-
Total extraordinary loss	391	42
Income before income taxes	2,430	2,123
Income taxes - current	345	371
Income taxes - deferred	391	282
Total income taxes	737	653
Net income	1,693	1,470
Net income attributable to non-controlling interests	－	(0)
Net income attributable to owners of parent	1,693	1,470

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Millions of yen)

	Three Months Ended
	June 30, 2019		June 30, 2020
Net income	1,693	1,470
Other comprehensive income
Valuation difference on available-for-sale securities	(283)	1,128
Deferred gains or losses on hedges	(6)	(2)
Foreign currency translation adjustments	3	(26)
Re-measurements of defined benefit plans	8	9
Share of other comprehensive income of entities	(0)	(2)
accounted for using equity method
Total other comprehensive income	(277)	1,107
Comprehensive income	1,415	2,577
Comprehensive income attributable to:
Owners of parent	1,415	2,577
Non-controlling interests	－	(0)

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6. Notes to the Consolidated Financial Statements

(1)	Notes regarding the going concern assumption:	None
(2)	Notes on significant changes in shareholders' equity:	None

1. Segment information

Three months ended June 30, 2019			(Millions of yen)
	Basic	Functional	Housing			Consolidated
	Chemical	Chemical	Facilities	Total	Adjustments*1	operating
	Products	Products	and Others			income *2
Net sales
External sales	12,233	10,228	4,274	26,736	－	26,736
Intersegment sales	9	25	231	266	(266)	－
or reclassifications
Total	12,242	10,254	4,506	27,003	(266)	26,736
Segment income	1,374	1,407	160	2,942	(292)	2,649

Note 1: Adjustments of segment income of ¥(292) million are corporate expenses not allocated to reportable segments. Corporate expenses are mainly expenses not attributable to a reporting segment and related to fundamental research and development as well as administrative departments.

Note 2: Segment income has been adjusted for the operating income appearing in the quarterly consolidated statements of income.

Three months ended June 30, 2020			(Millions of yen)
	Basic	Functional	Housing			Consolidated
	Chemical	Chemical	Facilities	Total	Adjustments *1	operating
	Products	Products	and Others			income *2
Net sales
External sales	10,138	9,220	3,898	23,257	－	23,257
Intersegment sales	8	53	133	194	(194)	－
or reclassifications
Total	10,147	9,273	4,031	23,452	(194)	23,257
Segment income	1,089	1,075	66	2,231	(283)	1,947

Note 1: Adjustments of segment income of ¥(283) million are corporate expenses not allocated to reportable segments. Corporate expenses are mainly expenses not attributable to a reporting segment and related to fundamental research and development as well as administrative departments.

Note 2: Segment income has been adjusted for the operating income appearing in the quarterly consolidated statements of income.

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