Nisshin OilliO : Consolidated Financial Results for the Six Months Ended September 30, 2023

Note: This document is a translation of the original Japanese version and provided for reference purposes only. In the event of any discrepancy between the Japanese original and this English translation, the Japanese original shall prevail.

Consolidated Financial Results

for the Six Months Ended September 30, 2023

[Japanese GAAP]

November 8, 2023

Company name: The Nisshin OilliO Group, Ltd.

Stock exchange listing: Tokyo

Code number: 2602

URL: https://www.nisshin‐oillio.com/english/

Representative: Takahisa Kuno, Representative Director and President

Contact: Koji Miki, General Manager of Financial Dept.

Phone: +81‐3 (3206) 5036

Scheduled date of filing quarterly securities report: November 14, 2023

Scheduled date of commencing dividend payments: December 4, 2023

Availability of supplementary briefing material on quarterly financial results: Yes

Quarterly financial results briefing session: Yes (for analysts and institutional investors)

(Amounts of less than one million yen are rounded down.)

1. Consolidated Financial Results for the Six Months Ended September 30, 2023 (April 1, 2023 to September 30, 2023)

(1) Consolidated Operating Results					(% indicates changes from the previous corresponding period.)
			Net sales	Operating profit	Ordinary profit	Profit attributable to
			owners of parent
Six months ended			Million yen		%	Million yen	%	Million yen		%	Million yen		%
September 30, 2023			254,839		(7.5)	11,545	22.4	11,132		12.5	7,976		2.5
September 30, 2022			275,621		41.1	9,436	50.2	9,895		38.0	7,784		46.9
(Note) Comprehensive income:	Six months ended September 30, 2023: ¥14,216 million [8.4%]
			Six months ended September 30, 2022: ¥13,115 million [56.0%]
		Basic earnings per share	Diluted earnings per
		share
Six months ended					Yen		Yen
September 30, 2023				246.09		‐
September 30, 2022				240.20		‐
(2) Consolidated Financial Position
			Total assets	Net assets	Capital adequacy ratio
As of				Million yen		Million yen			%
September 30, 2023				382,964		183,170			45.4
March 31, 2023				374,453		171,418			43.4
(Reference) Equity:	As of September 30, 2023: ¥173,715 million
	As of March 31, 2023: ¥162,559 million

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2. Dividends

			Annual dividends
	1st	2nd	3rd		Year‐end	Total
	quarter‐end	quarter‐end	quarter‐end
	Yen	Yen	Yen		Yen	Yen
Fiscal year ended March 31, 2023	‐	45.00	‐		75.00	120.00
Fiscal year ending March 31, 2024	‐	60.00
Fiscal year ending March 31, 2024			‐		60.00	120.00
(Forecast)
(Note) Revision to the dividend forecast announced most recently: No

3. Consolidated Financial Results Forecast for the Fiscal Year Ending March 31, 2024 (April 1, 2023 to March 31, 2024)

(% indicates changes from the previous corresponding period.)

	Net sales		Operating profit	Ordinary profit	Profit attributable to	Basic earnings per
		owners of parent	share
	Million yen		%	Million yen	%	Million yen	%	Million yen	%	Yen
Full year	510,000		(8.4)	18,000	11.2	17,500	7.7	12,500	12.0	385.65

(Note) Revision to the financial results forecast announced most recently: Yes

For consolidated financial results forecast, please refer to the "Announcement of Revision of Full‐Year Consolidated Earnings Forecasts" made today (November 8, 2023).

• Notes:

(1) Changes in significant subsidiaries during the six months ended September 30, 2023 (changes in specified subsidiaries resulting in changes in scope of consolidation): No

New:	‐	(Company name)
Exclusion:	‐	(Company name)

1. Accounting policies adopted specially for the preparation of quarterly consolidated financial statements: No
2. Changes in accounting policies, changes in accounting estimates and retrospective restatement
3. 1. Changes in accounting policies due to the revision of accounting standards: No
   2. Changes in accounting policies other than 1) above: No
   3. Changes in accounting estimates: No
   4. Retrospective restatement: No
4. Total number of issued shares (common stock)
5. 1. Total number of issued shares at the end of the period (including treasury stock):

September 30, 2023: 33,716,257 shares

March 31, 2023: 33,716,257 shares

1. Total number of treasury stock at the end of the period: September 30, 2023: 1,303,458 shares
   March 31, 2023: 1,305,677 shares
2. Average number of shares during the period (quarterly cumulative): Six months ended September 30, 2023: 32,412,361 shares
   Six months ended September 30, 2022: 32,409,347 shares

(Note) The Company's shares held by the Trust Account for Stock Delivery to Directors are included in treasury stocks.

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• The Quarterly Consolidated Financial Results are not subject to quarterly review by certified public accountants or audit firms.
• Explanation of the appropriate use of earnings forecasts and other notes: The forward‐looking statements, including earnings forecasts, contained in this document are based on information currently available to the Company and certain assumptions deemed reasonable, and are not intended as a promise by the Company that they will be achieved. Actual results may differ materially due to a variety of factors. Please refer to "1. Qualitative Information on the Quarterly Consolidated Financial Results, (3) Explanation of the Forecast Data, including Consolidated Results Forecast" on page 11 for the conditions that form the assumptions for the forecast of financial results and cautions concerning the use of the forecast of financial results.

The Company will hold a financial results briefing for analysts and institutional investors via live webcast on Thursday, November 16, 2023. Language used: Japanese.

Materials to be used in this briefing will be posted on the Company's website on the same day as the briefing.

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[Reference]
Table of Contents
1. Qualitative Information on the Quarterly Consolidated Financial Results	5
(1) Overview of Business Performance	5
(2)	Overview of Financial Position	11
(3)	Explanation of the Forecast Data, including Consolidated Results Forecast	11
2. Quarterly Consolidated Financial Statements and Related Notes	12
(1)	Quarterly Consolidated Balance Sheets	12
(2) Quarterly Consolidated Statements of Income and Comprehensive Income	14
(3)	Quarterly Consolidated Statements of Cash Flows	16
(4)	Notes to the Quarterly Consolidated Financial Statements	17
Notes on going concern assumption	17
Notes on any significant fluctuation in the amount of shareholders' equity	17
Additional information	17
Segment information	18
Revenue recognition	20
Significant subsequent events	21

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1. Qualitative Information on the Quarterly Consolidated Financial Results

Any forward‐looking statement herein is based on management's judgment as of September 30, 2023.

(1) Overview of Business Performance

Although the global economy showed signs of resilience in personal consumption, primarily in the U.S., during the first half of the fiscal year ending March 31, 2024, the future outlook remains unclear owing to factors such as the prolongation of monetary tightening, the emergence of geopolitical risks, and others.

Meanwhile, the Japanese economy saw a recovery in consumption, led by the eating‐out and travel sectors, and an increase in inbound demand, triggered by the Japanese government's decision to lower the classification of COVID‐19 to Class 5 under the Infectious Diseases Act. On the other hand, there are concerns about the deterioration in corporate earnings and possible slumping of consumption due to rising prices caused by soaring energy costs and raw material prices.

Within this environment, the Group continues to mobilize its core policy, "Transform ourselves into a corporate group that continuously creates diverse value through customer centricity," in advancing the "Value Up+" medium‐ term management plan (FY2021‐FY2024). This includes accelerating the Group's growth route with the creation of shared values in six priority sectors as the drivers to growth, while leveraging the "Natural Power of Plants" as the basis for value creation. The aim is to sustain growth through cultivation of diverse values to be shared with society.

The Group has set achieving an ROE level that exceeds equity cost as a material business goal. In FY2022, ROIC was added to the business performance metrics, and, more than ever before, the Group has worked to improve its profitability and asset efficiency. Furthermore, the Group has organized a framework ("Achievement Chart") of KPIs and concrete initiatives under the four perspectives of "growth," "active investment," "sustainability," and "efficiency," and continues to work toward achieving its targets of 8.0% ROE and 4.6% ROIC for FY2024.

The consolidated financial results for the six months of the fiscal year ending March 31, 2024, were as detailed below.

				(Million yen)
	Six months ended	Six months ended	Change	YoY (%)
	September 30, 2022	September 30, 2023
Net sales	275,621	254,839	(20,781)	92.5
Operating profit	9,436	11,545	+2,109	122.4
Ordinary profit	9,895	11,132	+1,237	112.5
Profit attributable to owners	7,784	7,976	+191	102.5
of parent

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Overview by Segment

<< Oil and Fat >>

In the oil and fat segment, in terms of oil and meal, although raw material prices have exceeded their one‐time peak, they remained high due to concerns about production cutbacks caused by unfavorable weather and the yen's depreciation against the dollar, among other factors. In response, the Group worked to maintain and form appropriate sales prices. In addition to expanding sales of value‐added products, the Company focused on creating new markets and strengthening solution proposals. Overall, the oil and fat segment reported a decrease in net sales due to the significant impact of the decline in unit sales prices of overseas processed oil and fat, but operating profit increased due to sales of domestic oils and fats at appropriate prices.

◆ Oil and Meal				(Million yen)
		Six months ended	Six months ended	Change	YoY (%)
		September 30, 2022	September 30, 2023
	Net sales	170,311	162,110	(8,200)	95.2
	Operating profit	4,188	8,839	+4,651	211.0

Procurement environment of raw materials

In the procurement of raw materials, there was a fall from last year's historically high market prices of both soybean and rapeseed prices, which are major raw materials. However, the price of soybeans was flat from the same period of the previous fiscal year due to the dollar‐yen market, where the yen weakened against the dollar compared to the same period of the previous fiscal year.

Market prices of main raw materials

Regarding the market price for soybeans, from April onward, despite market prices remaining bearish due to increased optimism over the prospect of a bumper harvest in Brazil and the successful planting of new crops in the U.S., the market price went up to US$15 range in July due to projections of decrease in area under cultivation and high temperatures and dry weather in growing areas. Later, prices fell to the US$12 range in September due to selling pressures for the harvest season.

The market price for rapeseed saw the downward trend continue due to an improvement in global supply and demand resulting from the recovery in Canadian production, a good harvest in Australia, and an increase in exports from Ukraine. In May, the market price fell to the C$600 level for the first time in about two years. As a result of high temperatures and dry weather in the growing areas of Canada, however, the price increased to the mid‐C$800 range in July. Later, however, the weather improved, and joining the bearish price decline of other oil markets, the price fell to the C$700 range.

Exchange rates

The dollar‐yen market saw the yen continue to weaken against the U.S. dollar to the 150‐yen level in October last year for the first time in 24 years, but the U.S. halting interest rate hikes and anticipation over Japan's large‐scale monetary easing policy shift caused the yen to temporarily appreciate and the dollar weaken to below 130 yen. However, in June, the dollar reached the 140‐yen level, because there was no change in the direction of monetary policies by both Japan and the U.S., and in September, the yen depreciated against the dollar to around 150 yen, due to strengthening views that higher interest rates in the U.S. would become prolonged.

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Sales of oil and fat

In commercial‐use products, amid a downward trend in the prices of raw materials falling from historic highs, the Group worked to maintain and form appropriate sales prices. Also, through "collaborative‐sales‐to‐identify‐needs marketing," continuous efforts were made to enhance and improve solution proposals for issues such as improving the quality of end products, reducing costs, and improving productivity. Efforts were likewise made to expand sales through active proposals with value‐added products as priority categories, such as "customer‐solution‐type frying oil" that curtails oxidation and coloration of the frying oil. COVID‐19 was reclassified as Class 5 under the Infectious Diseases Act, bringing a recovery trend to demand for food services and tourism, but sales volume and unit sales prices were both down, resulting in a decline in net sales from the same period of the previous fiscal year.

For the food processing sector, net sales rose with the efforts to advance sales at appropriate prices in view of costs, against the backdrop of the market price of raw materials falling from the peak price.

As for household‐use products, with the market shrinking due to the impact of rising belt‐tightening behavior among consumers due to continued rise in the cost of living, including food price hikes, efforts were made to increase the value of edible oils and to form a new price equilibrium point by increasing sales of products, such as Nisshin Healthy Off, which curtails the absorption of oil when foods are deep‐fried. With the price of raw materials such as olive oil and sesame oil continuing to rise steeply, efforts were made to revise sales prices and to continue to embed value‐added products such as "pour‐and‐enjoy fresh edible oil" and "flavored oil" into the market. As a result, while sales volume was on a par with the same period of the previous fiscal year, unit sales prices were higher, leading to an increase in net sales.

Hence, net sales of overall domestic oils and fats were flat and unit sales prices increased from the same period of the previous year, resulting in an increase in operating profit.

Meal sales

As for soybean meal, sales prices rose due to a rise in Chicago Board of Trade prices for soybean meal and the weaker yen against the U.S. dollar, but sales volume decreased due to lower soybean crushing volume compared to the same period of the previous fiscal year, resulting in lower net sales.

Sales prices of rapeseed meal rose due to the impact of higher soybean meal prices and other factors, but the crushing volume was down from the same period of the previous fiscal year, and thus sales volume and net sales decreased.

◆ Processed Oil and Fat				(Million yen)
			Six months ended	Six months ended	Change	YoY (%)
			September 30, 2022	September 30, 2023
	Net sales		63,403	49,306	(14,097)	77.8
	Operating profit		4,621	2,195	(2,426)	47.5

As for overseas processed oil and fat, despite an impact on sales at Intercontinental Specialty Fats Sdn. Bhd. in Malaysia caused by a shift in the shipment timing to major European customers, sales to domestic customers were strong and overall sales volume was flat from the same period of the previous fiscal year. Furthermore, net sales decreased due to sales prices dropping as a result of a decline in the market price of palm oil, and this, combined with factors such as the lower mark‐to‐market valuation gains on palm oil transactions, led to a decrease in operating profit.

Net sales at Intercontinental Specialty Fats (Italy) S.r.l. increased thanks to expanded sales to new customers.

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In terms of profit, despite a reaction to the increase in demand for palm oil due to Russia's invasion of Ukraine in the same period of the previous year, an increase in operating profit was achieved owing to stable sales to existing customers as well as the acquisition of new customers.

In the domestic processed oil and fat sector, despite the continuation of the difficult circumstances of consumers opting to save money due to the rise in the cost of living and clients reducing the amount of oils and fats they use by making their products smaller, sales volume increased due to capturing new users and existing customers adopting new products proposed by us. Also, both net sales and operating profit increased as a result of measures to set appropriate sales prices commensurate with costs.

<< Processed Food and Materials > >			(Million yen)
		Six months ended	Six months ended	Change	YoY (%)
		September 30, 2022	September 30, 2023
	Net sales	30,366	32,864	+2,498	108.2
	Operating profit	56	121	+65	214.5

In the processed food and materials segment, despite effects from rising prices of raw materials and energy costs, net sales and operating profit increased due to higher sales volume of chocolate products and revision to appropriate sales prices.

In chocolate products, Daito Cacao Co., Ltd. had higher sales volume compared to the same period of the previous fiscal year due to a recovery in demand in the souvenir market and for premixed products in the bakery industry in conjunction with the reclassification of COVID‐19 as Class 5 under the Infectious Diseases Act. Also, amid rising raw material prices and energy costs, progress was made in setting appropriate sales prices commensurate with costs, and as a result, net sales and operating profit increased. T.&C. Manufacturing Co., Pte. Ltd. of Singapore remained affected by continuing decline in demand for premixed products in Japan as in last year, and as a result, its sales volume decreased. At PT Indoagri Daitocacao of Indonesia, sales volume was flat year on year as a result of maintaining firm sales to existing customers while prioritizing improvement of profitability. The chocolate category as a whole saw net sales and operating profit increase, in part, thanks to the performance of Daito Cacao Co., Ltd.

In seasonings, sales volume of dressings was up from the same period of the previous fiscal year, and net sales increased, but operating profit declined due to the significant impact of the rise in the cost of sales ratio and increased SG&A expenses.

In functional materials and foods, the Company continued to market the functionality of MCT (medium‐chain triglyceride) under the concept of "shifting to a body‐fat‐burning constitution." The Company also worked to expand the size of the market by promoting the launch of MCT products in collaboration with processed food manufacturers. However, despite striving for sales at appropriate prices in response to the rising prices of raw materials, net sales increased but operating profit fell due to increased SG&A expenses and other factors.

In soybean materials and foods, net sales and operating profit both increased due to selling soybean protein and other products at appropriate prices in response to rising raw material prices.

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<< Fine Chemical > >				(Million yen)
		Six months ended	Six months ended	Change	YoY (%)
		September 30, 2022	September 30, 2023
	Net sales	10,234	9,301	(932)	90.9
	Operating profit	848	622	(226)	73.3

In the fine chemical segment, net sales and operating profit fell due to a decrease in sales volume at our European subsidiary caused by the effects from the stagnant markets in Europe and other factors.

As for fine chemical products, although domestic demand for cosmetics is showing signs of a recovery, in China, a major sales destination, economic recovery was sluggish and excessive inventories of end products persisted. In Europe, personal consumption was stagnant due to effects from prolonged inflation and other factors, and sales volume at our European subsidiary, which performed well last year, decreased significantly. Although the cost of raw materials is on a downward trend, net sales and operating profit fell due to issues such as the continuing surge in energy costs.

Environment and hygiene‐related products saw a drop in sales volume due to a reduced demand for alcohol preparations, and despite advancing sales price revision efforts, net sales and operating profit declined under the heavy impact of soaring raw materials prices and energy costs.

<< Other > >				(Million yen)
		Six months ended	Six months ended	Change	YoY (%)
		September 30, 2022	September 30, 2023
	Net sales	1,306	1,255	(50)	96.2
	Operating profit	211	233	+21	110.2

In the other business segment including information systems, net sales decreased and operating profit increased year on year.

Net sales by region				(Million yen)
		Six months ended	Six months ended	Change	YoY (%)
		September 30, 2022	September 30, 2023
	Japan	206,800	202,699	(4,100)	98.0
	Asia	36,117	27,661	(8,455)	76.6
	Other	32,703	24,478	(8,225)	74.8
	Overseas sales ratio	25.0%	20.5%	―	(4.5P)

Net sales to Malaysia, China and other Asian markets; and other markets, such as Europe and the US, fell due to the impact of factors such as lower sales prices of overseas processed oil and fat products against the backdrop of a decline in the market price of palm oil.

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Reference: Net sales (non‐consolidated)			(Million yen)
		Six months ended	Six months ended	Change	YoY (%)
		September 30, 2022	September 30, 2023
	Oil and Meal	152,882	146,474	(6,407)	95.8
	Commercial‐use and	64,293	63,468	(824)	98.7
	food processing
Oil and Fat	Household‐use	36,301	37,124	+823	102.3
Meal	52,287	45,881	(6,406)	87.7
	Processed Oil and Fat	6,169	7,129	+960	115.6
	Subtotal	159,052	153,604	(5,447)	96.6
Processed Food and Materials	9,503	10,879	+1,375	114.5
Fine Chemical	2,923	3,301	+377	112.9
Other	169	191	+21	112.9
	Total	171,648	167,976	(3,672)	97.9

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