Toho Titanium : Consolidated Financial Results for the Six Months Ended September 30, 2023 (Japanese GAAP)

Translation from the Original Japanese Version.

Consolidated Financial Results for the Six Months Ended September 30, 2023 (Japanese GAAP)

October 26, 2023

Company name: Toho Titanium Co., Ltd.

Code number: 5727

Stock Exchange Listings: Tokyo

URL: https://www.toho-titanium.co.jp/en/

Representative: Yasuji Yamao, Representative Director and President

Contact person: Hiromu Tomeba, General Manager, Planning, Corporate Management Division Telephone: [phone]

Scheduled date of filing of Securities Report: November 10, 2023

Scheduled date of commencement of dividend payments: December 1, 2023

Supplemental materials for the financial results: None

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

（Figures of less than ¥1 million are rounded off.）

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

(1) Consolidated Operating Results							(Percentage figures are changes from the same period in the previous fiscal year.)
						Net sales						Operating income				Ordinary income	Profit attributable to
														owners of parent
					Millions of yen		%		Millions of yen				%		Millions of	%		Millions of yen	%
																								yen
	Six months Ended			36,649		(5.8)				2,341			(59.8)		3,182	(50.3)		2,436	(46.3)
	September 30, 2023
	Six months Ended			38,890		48.0				5,823			122.0		6,406	148.0		4,536	142.4
	September 30, 2022
(Note) Comprehensive income	Six months ended September 30, 2023:	¥ 2,410 million [(47.4%)]
						Six months ended September 30, 2022:	¥ 4,582 million [148.2 %]
					Net income	Diluted net income
					per share				per share
						Yen					Yen
	Six months Ended		34.24					-
	September 30, 2023
	Six months Ended		63.74					-
	September 30, 2022
(2) Consolidated Financial Position
					Total assets						Net assets				Shareholders' equity ratio
					Millions of yen						Millions of yen					%
	September 30, 2023				116,833							54,339						46.4
	March 31, 2023					111,429							53,281						47.7
	(For reference) Shareholders' equity : September 30, 2023: ¥54,204 million	March 31, 2023: ¥53,146	million
2. Dividends
							Annual cash dividend per share
				End of 1Q	End of 2Q	End of 3Q	Year-End				Total
					Yen		Yen					Yen		Yen					Yen
	FY2022			-		11.00				-		19.00				30.00
	FY2023			-		6.00
	FY2023 (Forecast)											-		14.00			20.00
(Note) Revisions to the previously announced forecast of cash dividends: Yes
※Fiscal year ending March 31, 2024 Breakdown of year-end dividends-
Ordinary dividend	¥11.00
Commemorative dividend		¥3.00 (70th anniversary commemorative dividend)

3. Consolidated Financial Forecasts for FY2023 (From April 1, 2023 to March 31, 2024)

(Percentage figures are changes from the same period in the previous fiscal year.)

	Net Sales		Operating income	Ordinary income	Profit attributable to	Net income
		owners of parent	per share
	Millions of yen		%	Millions of yen	%	Millions of yen	%	Millions of yen	%	Yen
FY2023	80,700		0.4	4,800	(55.1)	5,000	(52.5)	4,100	(45.4)	57.61

(Note) Revisions to the previously announced forecasts: Yes

For details, please see the release "Notice of Difference between Previous Forecast and Actual Results for the Six Months Ended September 30, 2023, Revision of Financial Forecasts for Fiscal Year 2023 and Revision of Dividend Forecast" dated October 26,

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2023.

Notes

1. Changes in the scope of material subsidiaries during the period (i.e. changes in specified subsidiaries involving a change in the scope of consolidation): None.
2. Adoption of accounting treatment specific to the preparation of quarterly consolidated financial statements: None
3. Changes in accounting policies or in accounting estimates, and restatement
4. 1. Changes in accounting policies owing to revisions in accounting rules and standards: None.
   2. Changes in accounting policies other than (i) above: None.
   3. Changes in accounting estimates: None.
   4. Restatement: None.
5. Number of shares issued (common stock)
6. 1. Number of issued shares at the end of the period (including treasury stock)

September 30, 2023:	71,270,910 shares
March 31, 2023:	71,270,910 shares

(ii) Number of shares of treasury stock at the end of the period

September 30, 2023:	98,636 shares
March 31, 2023:	98,590 shares

(iii) Average number of issued and outstanding shares during the period

September 30, 2023:	71,172,287 shares
September 30, 2022:	71,172,544 shares

This document is outside the scope of audit procedures.

Explanation concerning appropriate use of performance forecasts and other special notes

(Notes concerning forward-looking statements)

Business performance forecasts and other forward-looking statements contained in this document are based on the information available to the Company at the time of its announcement and on certain assumptions that the Company considers reasonable, and the Company makes no representations that they are achievable. Actual results may differ materially from the forecasts depending on a variety of factors.

(How supplementary materials and details of financial results briefings can be obtained)

A briefing to discuss financial results is scheduled to be held on November 10, 2023. Briefing materials covering financial results will be posted on the Company's website promptly after the briefing.

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Attached Materials: Table of Contents
1.	Qualitative Information on the Quarterly Results	4
(1)	Explanations on Operating Results	4
(2)	Explanations on Financial Position	6
(3)	Explanations on Consolidated Financial Forecasts and Other Future Forecast Information	6
2.	Consolidated Financial Statements	7
(1)	Consolidated Balance Sheets	7
(2)	Consolidated Statements of Operations and Comprehensive Income (Loss)	9
	Consolidated Statements of Operations
	Six Months Ended September 30, 2023	9
	Consolidated Statements of Comprehensive Income (Loss)
	Six Months Ended September 30, 2023	10
(3)	Consolidated Statements of Cash flows	11
(4)	Explanatory Notes to Consolidated Financial Statements	12
	Notes on the Assumption of a Going Concern	12
	Notes on Significant Changes in Shareholders' Equity	12
	Segment Information etc	12

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1. Qualitative Information on the Quarterly Results

1. Explanations on Operating Results

During the six months ended September 30, 2023 (from April 1, 2023 to September 30, 2023), the Japanese economy continued to recover as personal consumption remained strong with improvements in employment and income conditions. However, there were signs of a pause in this economic recovery due to rising prices.

In the global economy, slowdowns have been noted in some regions, and increases in policy interest rates by central banks in various countries to curb inflation have dampened economic recovery. Concerns about a slowdown in the pace of economic recovery remain due to factors such as the impact of prolonged monetary tightening globally, slowdowns in overseas economies, worries over the future of the Chinese economy, as well as weakened capital investment due to high production costs and sluggish personal consumption (against the backdrop of rising prices).

With regard to the Group's business environment, sales of its main titanium products remained firm due to recovery in the demand for aircraft and the moving away of procurement from Russia due to the conflict in Ukraine. On the other hand, sales of some titanium products for semiconductors and the catalyst and chemicals business remained sluggish due to prolonged economic downturn overseas. However, although the weaker yen led to improving earnings, the high cost of imported raw materials and secondary materials significantly weighed on earnings.

Under such circumstances, operating results for this period under review included net sales of 36,649 million yen (down 5.8% year-on-year), operating income of 2,341 million yen (down 59.8% year-on-year), and ordinary income of 3,182 million yen (down 50.3% year-on-year), while profit attributable to parent shareholders totaled 2,436 million yen (down 46.3% year-on-year).

Results by business segment are as stated below.

Titanium Metal Business

The sales volume of titanium metal in the six months ended September 30, 2023 (from April 1, 2023 to September 30, 2023) was lower than that of the same period in the previous fiscal year. Although demand for titanium for aerospace and general industrial applications remained firm, there were no more sales from inventory reversals, which contributed to sales during the previous fiscal year, and there was slow demand for high-purity titanium for semiconductors.

In addition, net sales was 27,401 million yen (up 2.7% from the same period last year), and operating income was

1,318 million yen (down 62.0% from the same period last year). Net sales increased due to a correction in sales prices and the depreciation of the yen. However, profits decreased because, in spite of a correction in sales prices, sales volume decreased and cost increased, due to soaring prices for raw ore and electricity.

Catalyst Business

The sales volume of catalysts in the six months ended September 30, 2023 (from April 1, 2023 to September 30,

2023) was much lower than that of the same period in the previous fiscal year. This was due to softening demand for catalysts for polyolefin in Asia and Europe.

In addition, net sales was 3,569 million yen (down 18.3% from the same period last year), and operating income was 1,032 million yen (down 37.1% from the same period last year). This was due to an increase in fixed costs from the establishment of new plants.

Chemicals Business

The sales volume of the Chemicals business in the six months ended September 30, 2023 (from April 1, 2023 to September 30, 2023) was lower than that of the same period in the previous fiscal year. This was due to continued

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decline in the demand for multilayer ceramic capacitors (MLCCs), which are commercially important and the main source of demand for ultra-fine nickel powder-in addition to rising US interest rates and prolonged economic stagnation in China.

In addition, net sales was 5,679 million yen (down 27.6% from the same period last year), and operating income was 784 million yen (down 40.3% from the same period last year). This was due to the rising prices for raw materials, materials, and utilities.

Net Sales by Segment

		(Millions of yen)
Business Segment	Six months	Six months	Change
ended September 30, 2023	ended September 30, 2022
Titanium Metal	27,401	26,682	2.7%
Catalysts	3,569	4,368	(18.3%)
Chemicals	5,679	7,839	(27.6%)
Consolidated Total	36,649	38,890	(5.8%)

Operating Income by Segment

		(Millions of yen)
Business Segment	Six months	Six months	Change
ended September 30, 2023	ended September 30, 2022
Titanium Metal	1,318	3,469	(62.0%)
Catalysts	1,032	1,640	(37.1%)
Chemicals	784	1,313	(40.3%)
Common Costs and Expenses Not	(794)	(600)	-
Allocated to the Individual Segments
Total	2,341	5,823	(59.8%)

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1. Explanations on Financial Position

(i) Balance Sheet

Total assets as of September 30, 2023 increased by 5,404 million yen from March 31, 2023, amounting to 116,833 million yen, which is mainly attributable to increases in cash and inventories.

Total liabilities as of September 30, 2023 amounted to 62,493 million yen, an increase of 4,346 million yen from March 31, 2023, which is mainly attributable to increase in loans payable.

Total net assets as of September 30, 2023 amounted to 54,339 million yen, an increase of 1,058 million yen from March 31, 2023, as a result of the increase in retaining earnings.

As a result, the shareholders' equity ratio as of September 30, 2023 decreased from 47.7% at the end of the previous

fiscal year to 46.4%.

(ii) Cash Flow

Cash and cash equivalents as of September 30, 2023 were 3,768 million yen, an increase of 352 million yen from the amount of April 1, 2023. Cash flow positions are as follows.

Cash flows provided by operating activities during the six months ended September 30, 2023 amounted to an outflow of 1,928 million yen, mainly as a result of an inflow from depreciation and amortization of 3,652 million yen and an inflow from an increase in accounts payable of 619 million yen, while there were factors that decreased funds, such as an increase in inventories of 8,015 million yen.

Cash flows from investing activities amounted to an outflow of 3,234 million yen, including the acquisition of tangible fixed assets of 3,203 million yen.

Cash flows from financing activities amounted to an inflow of 5,521 million yen, which consisted mainly of loans payable.

(3) Explanations on Consolidated Financial Forecasts and Other Future Forecast Information

The Company revised the consolidated financial forecasts FY2023 that were announced on May 8, 2023. For details, please see the release "Notice of Difference between Previous Forecast and Actual Results for the Six Months Ended September 30, 2023, Revision of Financial Forecasts for Fiscal Year 2023 and Revision of Dividend Forecast" dated October 26, 2023.

Those forecasts are based on the information that is available to the Company as of the date of release of this document. The actual financial results may differ from the forecasts due to various factors.

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2. Consolidated Financial Statements

(1) Consolidated Balance Sheets

				(Millions of yen)
			March 31, 2023	September 30, 2023
	Assets
	Current assets:
	Cash and deposits		3,416	3,768
	Notes and accounts receivable-trade	15,338	12,980
	Electronically recorded monetary claims		117	218
	Merchandise and finished goods	19,089	28,533
	Work in process		9,904	9,150
	Raw materials and supplies	13,203	12,529
	Accounts receivable-other		812	665
	Others	1,175	1,343
	Allowance for doubtful debts		(64)	-
	Total current assets	62,992	69,188
	Non-current assets:
	Property, plant and equipment:
	Buildings and structures, net		15,655	15,399
	Machinery, equipment and vehicles, net	21,794	19,777
	Tools, furniture and fixtures, net		360	376
	Land	2,449	2,449
	Lease assets, net		1,795	1,696
	Construction in progress	3,141	5,153
	Total property, plant and equipment		45,196	44,853
	Intangible assets
	Software		1,005	916
	Software in progress	-	45
	Others		23	19
	Total intangible assets	1,028	981
	Investments and other assets:
	Stocks of affiliated companies	214	218
	Deferred tax assets		925	492
	Net defined benefit asset	439	436
	Others		633	664
	Allowance for doubtful accounts	(1)	(1)
	Total investments and other assets		2,211	1,809
	Total non-current assets	48,436	47,644
	Total assets		111,429	116,833

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	(Millions of yen)
March 31, 2023	September 30, 2023

Liabilities

Current liabilities:

Notes and accounts payable-trade

Short-term loans payable

Lease obligations

Income taxes payable

Provision for bonuses

Provision for directors' bonuses

Others

Total current liabilities

Non-current liabilities:

	3,932		4,570
	22,458	31,388
	211		209
	2,257	568
	2,040		988
	301	66
	2,962		2,757
	34,165	40,548

Long-term loans payable

Lease obligations

Asset retirement obligations

Total non-current liabilities

Total liabilities

Net assets

Shareholders' equity:

	20,314	18,365
	1,612		1,508
	2,055	2,072
	23,982		21,945
	58,147	62,493

Common stock

Capital surplus

Retained earnings

Treasury stock

Total shareholders' equity Accumulated other comprehensive income:

Deferred gains or losses on hedges Foreign currency translation adjustment

Retirement benefits liability adjustment

	11,963		11,963
	13,022	13,022
	28,496		29,554
	(77)	(77)
	53,378		54,462
	40		-
	(396)	(369)
	124		111

Total accumulated other comprehensive income	(231)	(257)
Non-controlling interests		134	134
Total net assets	53,281	54,339
Total liabilities and net assets		111,429	116,833

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1. Consolidated Statements of Operations and Comprehensive Income (Loss) Consolidated Statements of Operations

				(Millions of yen)
			Six months ended	Six months ended
			September 30, 2022	September 30, 2023
	Net sales		38,890	36,649
	Cost of sales	27,610	29,688
	Gross profit		11,279	6,961
	Selling, general and administrative expenses	5,455	4,619
	Operating income		5,823	2,341
	Non-operating income:
	Net foreign exchange gain		627	927
	Gain on sales of goods	20	17
	Equity Gains of Affiliated Companies		5	8
	Others	18	40
	Total non-operating income		673	994
	Non-operating expenses:
	Interest expenses		83	102
	Others	6	50
	Total non-operating expenses		90	152
	Ordinary income(loss)	6,406	3,182
	Special gain:
	Gain on sales of non-current assets	1	-
	Total special gain		1	-
	Special loss:
	Loss on retirement of non-current assets		4	24
	Total special loss	4	24
	Income before income taxes		6,402	3,158
	Income taxes-current	871	262
	Income taxes-deferred		994	459
	Total income taxes	1,866	721
	Profit		4,536	2,436
	Profit (loss) attributable to non-controlling interests	(0)	0
	Profit attributable to owners of parent		4,536	2,436

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Consolidated Statements of Comprehensive Income (Loss)

		(Millions of yen)
	Six months ended	Six months ended
	September 30, 2022	September 30, 2023
Profit	4,536	2,436
Other comprehensive income (loss):
Deferred gains or losses on hedges	9	(40)
Foreign currency translation adjustment	50	26
Retirement benefits liability adjustment	(14)	(12)
Total other comprehensive income (loss)	45	(26)
Comprehensive income (loss)	4,582	2,410
Attributable to owners of parent	4,582	2,410
Attributable to non-controlling interests	(0)	0

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