Sumitomo Riko : Financial Statements 2021

SUMITOMO RIKO COMPANY LTD.

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED MARCH 31, 2021 AND 2020

Disclaimer: This document is a translation of the Japanese original Annual Securities Report ("Yukashoken Hokokusho") and prepared and provided for the reader's convenience only.The Japanese original has been audited by independent auditor and disclosed in Japan in accordance with International Financial Reporting Standards (IFRS) and the Financial Instruments and Exchange Act.

This document does not contain or constitute any guarantee and the Company will not compensate any losses and/or damage stemming from actions taken based on this document. In the case that there is any discrepancy between the Japanese original and this document, the Japanese original is assumed to be correct.

1. Consolidated Financial Highlights

Fiscal year					IFRS
	129th	130th	131th	132th		133th
Year end		March 2017	March 2018	March 2019	March 2020		March 2021
Net sales	Millions	422,630	462,885	469,705	445,148	397,940	Thousands of	3,594,436
	of yen						U.S. dollars
Profit or loss before	Millions	13,300	11,285	700	7,435	(608)	Thousands of	(5,491)
income taxes	of yen						U.S. dollars
Profit or loss
attributable to	Millions	5,195	3,528	(5,022)	881	(4,957)	Thousands of	(44,773)
owners of the parent	of yen						U.S. dollars
company
Comprehensive
income for the year	Millions						Thousands of
attributable to	3,279	5,162	(5,585)	(6,551)	3,031	27,379
owners of the parent	of yen						U.S. dollars
company
Equity attributable to	Millions	161,293	164,379	158,319	150,625	152,636	Thousands of	1,378,700
owners of the parent	of yen						U.S. dollars
Total assets	Millions	404,799	414,233	397,279	373,262	379,502	Thousands of	3,427,892
	of yen						U.S. dollars
Equity attributable to
owners of the parent	Yen	1,553.44	1,583.17	1,524.82	1,450.72	1,470.11	U.S. dollars	13.28
per share
Profit or loss
attributable to
owners of the parent	Yen	50.04	33.98	(48.37)	8.48	(47.74)	U.S. dollars	(0.43)
company per share
(basic)
Profit attributable to
owners of the parent	Yen	―	―	―	―	―	U.S. dollars	―
company per share
(diluted)
Equity attributable to
owners of the parent	%	39.8	39.7	39.9	40.4	40.2
ratio
Profit to equity
attributable to	%	3.2	2.1	(3.1)	0.6	(3.3)
owners of the parent
ratio
Price earnings ratio	Times	22.5	31.7	―	69.0	(14.9)
Net cash provided by	Millions	33,161	31,622	31,462	36,302	29,830	Thousands of	269,445
operating activities	of yen						U.S. dollars
Net cash used in	Millions	(32,534)	(27,445)	(28,251)	(28,645)	(26,126)	Thousands of	(235,985)
investing activities	of yen						U.S. dollars
Net cash provided by	Millions						Thousands of
(used in) financing	10,715	(6,127)	(8,368)	(12,584)	(6,032)	(54,484)
activities	of yen						U.S. dollars
Cash and cash	Millions						Thousands of
equivalents at end of	43,854	41,973	38,371	33,212	31,080	280,733
year	of yen						U.S. dollars
Number of		24,453	25,689	26,156	26,109	25,796
employees
Persons
[average number of
	[1,786]	[1,633]	[1,770]	[1,714]	[1,646]
temporary workers]

―1―

(Notes) 1. Consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS").

1. Consumption tax is not included in net sales.
2. Profit attributable to owners of the parent company per share (diluted) is not stated here because there were no residual shares.
3. The amounts shown are rounded to the nearest whole unit.

―2―

2. Summary of Results

(1) Business Results

Regarding the business environment surrounding the Sumitomo Riko Group, in the automotive industry, our main market, vehicle production volume in the first half decreased compared with the same period of the previous fiscal year, affected by the spread of COVID-19. Despite a recovery in vehicle production volume in the second half in line with the resumption of economic activities and economic stimulus packages by national governments of multiple countries, the full-year business environment remained harsh. Meanwhile, China, a country where COVID-19 spread toward the end of the previous fiscal year but was abated early, saw vehicle production volume increase compared with the previous fiscal year, thanks to successful economic stimulus packages.

Regarding industries other than the automotive industry, in the market for office automation equipment, demand for printers and copiers for office use decreased for the full year, reflecting the impact of the spread of COVID-19 and diversification of work styles in the first half, although demand showed signs of a recovery in the second half. In the construction machinery market, demand increased because of buoyant infrastructure investment, partly due to economic stimulus measures in China.

In these circumstances, the Sumitomo Riko Group is striving to improve profitability through optimization of operations by integration and consolidation of sites as well as through further cost reduction activities, in order to transform itself into a solid business structure capable of securing profits even at low operating levels.

Consolidated net sales in the fiscal year under review decreased 10.6% year on year to ¥397,940 million, reflecting lower sales in the first half due to the impact of the COVID-19 pandemic. Business profit decreased 30.6% year on year to ¥7,862 million in line with the decrease in net sales. The Company recorded restructuring-related costs, including costs incurred as a result of the sale of shares in French subsidiaries, and impairment loss on fixed assets of subsidiaries in Japan due to a decline in profitability in line with changes in the business environment. As a result, operating profit decreased 97.5% year on year to ¥227 million, loss before income taxes amounted to ¥608 million compared with profit before income taxes amounting to ¥7,435 million for the previous fiscal year, and loss attributable to owners of the parent company was ¥4,957 million compared with profit attributable to owners of the parent company of ¥881 million for the previous fiscal year.

Business results by segment are described below.

Effective the fiscal year under review, the rubber sealants business, which had been included in "General Industrial Products," has been included in "Automotive Products" as a result of a review of the Group's performance management classification. The segment information for the previous fiscal year has been reclassified based on the new classification of reporting segments.

―3―

1) Automotive Products

Sales to external customers decreased 11.4% year on year to ¥344,204 million owing to the impact of the COVID-19 pandemic in the first half, despite a recovery trend in the second half due to gradual resumption of economic activities and economic stimulus measures by governments of multiple countries.

Full-year revenues in Japan, the Americas, and Europe decreased, reflecting a decrease in vehicle production volume in the first half despite recovery in the second half. Meanwhile, automotive hose manufacturing subsidiaries in Europe saw an increase in sales owing to expansion of sales to European manufacturers.

Revenue in Asia as a whole increased, reflecting an increase in vehicle production volume by Japanese manufacturers against the backdrop of China's incentives for purchase of cars.

Although profit increased in China owing to an increase in sales,

Business profit decreased 47.4% year on year to ¥4,977 million because of decreased sales in regions except China, where profit increased owing to an increase in sales.

2) General Industrial Products

Sales to external customers decreased 5.4% year on year to ¥53,736 million because of a decrease in sales of functional components for printers and copiers for office use, which were particularly affected by the COVID-19 pandemic.

Japan showed signs of recovery in demand for printers and copiers for office use compared with the first half, supported by the resumption of business activities in the second half, but saw full-year revenue decrease, significantly affected by the COVID-19 pandemic.

In Asia, sales of high-pressure hoses rose owing to an increase in construction machinery production volume, reflecting buoyant infrastructure investment in China.

Business profit increased 54.9% year on year to ¥2,885 million owing to higher sales of high-pressure hoses.

Consolidation

The consolidated financial statements include the accounts of the Company and its 75 subsidiaries. Investments in 8 associates meeting the significant influence requirement were accounted for by the equity method. There were no unconsolidated subsidiaries or associates to which the equity method was applied.

Research and development costs

Expenses related to research and development of new products and basic research are charged to income when incurred. The Companies' research and development expenses for the year ended March 31, 2021 were ¥13,050 million.

―4―