Tomoegawa : Consolidated Financial Results for the Six Months Ended March 31, 2024

Note: This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail.

Member, Financial Accounting Standards Foundation

The Announcement date: November 10, 2023 (14:00 JST)

Consolidated Financial Results

for the Six Months Ended March 31, 2024

(Under Japanese GAAP)

Company name:	TOMOEGAWA CO., LTD.
Listing:	Tokyo Stock Exchange
Securities code:	3878
URL:	https://www.tomoegawa.co.jp/
Representative:	Yoshio Inoue, President and Representative Director, Group CEO
Inquiries:	Masaaki Yamaguchi, Director, Senior Managing Executive Officer, Group CFO
Telephone:	[phone]

Scheduled date to file quarterly securities report:	November 13, 2023
Scheduled date to commence dividend payments:	‐
Preparation of supplementary material on quarterly financial results: None
Holding of quarterly financial results briefing:	None

(Yen amounts are rounded down to millions, unless otherwise noted.)

1. Consolidated financial results for the six months ended March 31, 2024 (from April 1, 2023 to September 30, 2023)

(1) Consolidated operating results (cumulative)		(Percentages indicate year-on-year changes.)
		Net sales			Operating profit	Ordinary profit	Profit attributable to
				owners of parent
	Six months ended	Millions of yen			%	Millions of yen	%	Millions of yen	%	Millions of yen	%
	September 30, 2023	16,497		(5.9)		795	(34.0)	996	(26.8)	431	(65.6)
	September 30, 2022	17,532		12.0		1,205	14.6	1,361	9.4	1,255	51.3

Note: Comprehensive income	For the six months ended September 30, 2023:	¥1,297 million	[(30.6 %)]
			For the six months ended September 30, 2022:	¥1,867 million	[89.5%]
			Basic earnings	Diluted earnings
			per share	per share
	Six months ended		Yen	Yen
	September 30, 2023		41.62	‐
	September 30, 2022		116.19	‐

(2) Consolidated financial position

		Total assets		Net assets	Equity-to-asset ratio	Net assets
			per share
	As of	Millions of yen	Millions of yen	%	Yen
	September 30, 2023	44,504	18,179	30.6	1,312.17
	March 31, 2023	42,948	18,370	32.7	1,251.36
Reference: Equity
	As of September 30, 2023:	¥13,608 million
	As of March 31, 2023:	¥14,027 million

2. Cash dividends

			Annual dividends per share
		First quarter-end	Second quarter-end	Third quarter-end		Fiscal year-end	Total
		Yen	Yen	Yen		Yen	Yen
	Fiscal year ended	‐	0.00	‐		15.00	15.00
	March 31, 2023
	Fiscal year ending	‐	0.00
	March 31, 2024
	Fiscal year ending			‐		15.00	15.00
	March 31, 2024 (Forecast)
Note:

1. Revisions to the forecasts of cash dividends most recently announced: None
2. The above "2. Cash dividends" shows dividends for Common stock. For details of dividends for Preferred stock (unlisted), the rights of which are different from those of Common stock issued by the Company, please refer to "Reference: Dividends for Preferred Stock" below.

3. Forecasts of Consolidated financial results for Fiscal Year 2024 (from April 1, 2023 to March 31, 2024)

(Percentages indicate year-on-year changes.)

	Net sales		Operating profit	Ordinary profit	Profit attributable to	Basic earnings
		owners of parent	per share
	Millions of yen		%	Millions of yen	%	Millions of yen	%	Millions of yen	%	Yen
Full year	36,000		5.4	1,500	(26.9)	1,500	(30.3)	600	(58.7)	57.85

Note:

1. Revisions to the forecasts of consolidated financial results most recently announced: None
2. Basic earnings per share is calculated assuming that the amount not attributable to common stockholders is zero, since all of the Class A preferred stocks were purchased and cancelled on September 29, 2023, and no preferred dividends will be paid.

* Notes

1. Changes in significant subsidiaries during the six months ended September 30, 2023 (changes in specified subsidiaries resulting in the change in scope of consolidation): None
2. Adoption of accounting treatment specific to the preparation of quarterly consolidated financial statements: None
3. Changes in accounting policies, changes in accounting estimates, and restatement
4. 1. Changes in accounting policies due to revisions to accounting standards and other regulations: None
   2. Changes in accounting policies due to other reasons: None
   3. Changes in accounting estimates: None
   4. Restatement: None
5. Number of issued shares (common shares)
6. 1. Total number of issued shares at the end of the period (including treasury shares)

As of September 30, 2023

As of March 31, 2023

10,389,406 shares

10,389,406 shares

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

As of September 30, 2023

As of March 31, 2023

18,371 shares

18,354 shares

1. Average number of shares outstanding during the period (cumulative from the beginning of the fiscal year)

Six months ended September 30, 2023

Six months ended September 30, 2022

10,371,046 shares

10,371,053 shares

• Quarterly financial results reports are exempt from quarterly review conducted by certified public accountants or an audit corporation.
• Proper use of earnings forecasts, and other special matters
  The forward-looking statements in this document, including earnings forecasts, are based on information currently available to the Company and certain assumptions that the Company considers reasonable, and are not intended as a promise by the Company that they will be achieved. Actual results may differ materially due to various factors. For the assumptions used as the basis for the earnings forecasts and special remarks regarding the use of the earnings forecasts, please refer to "Ⅰ .Qualitative information regarding financial results for the six months 3. Explanation of consolidated earnings forecasts and other forward-looking statements" on page 8 (Attached Material).

Reference: Dividends for Preferred Stock

The breakdown of dividends per share related to Class-A Preferred stock that have different rights from common stock is as follows:

			Annual dividends per share
	First quarter-end		Second quarter-end	Third quarter-end		Fiscal year-end		Total
	Yen		Yen	Yen		Yen		Yen
Fiscal year ended	‐		‐	‐		50.00	50.00
March 31, 2023
Fiscal year ending
‐		‐
March 31, 2024
Fiscal year ending				‐		‐		‐
March 31, 2024 (Forecast)

Note: As a result of the purchase and cancellation of all 1,000,000 unredeemed Class A preferred stocks as of March 31, 2023 on September 29, 2023 based on the resolution of the Board of Directors meeting held on September 11, 2023, no dividends will be paid on the Class A preferred stock for the fiscal year ending March 2024.

【Attachment】

Contents of Attachment

Ⅰ．Qualitative information regarding financial results for the six months ･････････････････････････	2
1.	Explanation of operating results	･･････････････････････････････････････････････････････	2
	(1) Review of operating results	･･･････････････････････････････････････････････････････	2
	・Net sales and profit (loss)････････････････････････････････････････････････････････	2
	・Numbers by Quarter･･･････････････････････････････････････････････････････････	2
	・Observation of the First Half of the Fiscal Year 2024 (April to September, 2023) ･････････････	3
	(2) Consolidated operating results by segment ･･･････････････････････････････････････････	4
	・Reportable segments figures･････････････････････････････････････････････････････	4
	・Overview of reportable segments･････････････････････････････････････････････････	4
2.	Explanation of financial position･･････････････････････････････････････････････････････	6
	・Financial Position･････････････････････････････････････････････････････････････	6
	・Explanation regarding Financial Position･･･････････････････････････････････････････	6
	(Review of cash flow position)	･･････････････････････････････････････････････････････	7
	・Cash Flow･･･････････････････････････････････････････････････････････････････	7
	・Explanation regarding Cash Flow･････････････････････････････････････････････････	7
3.	Explanation of consolidated earnings forecasts and other forward-looking statements ････････････	8
Ⅱ．Quarterly consolidated financial statements and significant notes thereto ･･････････････････････	9
1.	Consolidated balance sheet･･････････････････････････････････････････････････････････	9
2.	Consolidated statement of income (cumulative) and consolidated statement of comprehensive income	11
	(cumulative)･････････････････････････････････････････････････････････････････････
3.	Consolidated statement of cash flows･･････････････････････････････････････････････････	12
4.	Notes to quarterly consolidated financial statements ･･････････････････････････････････････	13
	(Notes on Going Concern Assumption)････････････････････････････････････････････････	13
	(Notes on significant changes in the amount of shareholders' equity) ･････････････････････････	13
	(Segment Information)･････････････････････････････････････････････････････････････	13

p. 1

Ⅰ．Qualitative information regarding financial results for the six months

Figures in Million Yen, unless otherwise noted

1. Explanation of operating results

1. Review of operating results

・Net sales and profit (loss)		from April 1, 2023 through September 30, 2023
						Profit	Basic
			Net sales	Operating	Ordinary	attributable
			earnings
			profit	profit	to owners
				per share
						of parent
Current Fiscal Year (FY 2024)	16,497	795	996	431	41.62Yen
First Half (1H)
Converted	into	Million	58.9	3.1	4.2	2.4	US$0.30
U.S. dollars	(Note)
Previous Fiscal Year (FY 2023)	17,532	1,205	1,361	1,255	116.19Yen
1H
Change to FY 2024 from FY 2023	▲1,035	▲409	▲364	▲823	▲74.57Yen
Percent Change from FY 2023	▲5.9%	▲34.0%	▲26.8%	▲65.6%	-
number
Initial forecasts for FY2024 1H	17,500	600	600	200	16.87Yen
Most recent	FY2024 1H
forecasts released on October	16,500	800	1,000	400	38.57Yen
24, 2023
Change from FY2024 1H Initial	▲1,003	195	396	231	24.75Yen
forecasts
Change from FY2024 1H most	▲3	▲5	▲4	31	3.05Yen
recent forecasts

Note: U.S. dollar amounts are converted from Yen, for convenience only, at the rate of US$1.00 = ¥141.06

・Numbers by Quarter

p. 2

・Observation of the First Half of the Fiscal Year 2024 (April to September, 2023)

During the First Half (1H) of the Fiscal Year (FY) 2024 (April to September, 2023), net sales amounted to ¥16,497 million, down ¥1,035 million or ▲5.9% from that of the previous FY 1H, when the Toner Segment was particularly strong. Due to the slowdown of the Chinese economy and other factors, the Toner Segment, which accounts for more than 30% of consolidated net sales, experienced inventory adjustments from the end of the previous FY and price competition expanded, resulting in a significant decline in sales, and sales of some functional non-wovenfabric-related products were also affected. On the other hand, there was a temporary order acquisition in the Display-related business that was not initially anticipated and the Semiconductor-related business also performed better than expected at the beginning of the period.

Operating profit was ¥795 million, down ¥409 million or ▲34.0% from the previous FY 1H number. While the above-mentioned decrease in sales due to the slowdown in the Chinese economy and the increase in upfront expenses for the launch of new products that had been expected from the beginning, the penetration of price pass-on activities that has continued since the previous FY, the positive effect of the depreciation of the yen, and higher-than-expected sales in the highly profitable Semiconductor and Display-related business resulted in a significant increase in profit compared to the initial forecasts, as announced on October 24, 2023, despite a decrease in profit compared to the previous FY 1H.

Ordinary profit was ¥996 million, only down ¥364 million or ▲26.8% from that of the previous FY 1H, thanks to foreign exchange gains resulting from the depreciation of the yen and the continued equity earnings from an affiliated company that handles processing of optical film used for displays.

Profit attributable to owners of parent is ¥431 million, down ¥823 million or ▲65.6% from that of the previous FY 1H, due to the absence of extraordinary income from asset sales recorded in the previous FY 1H.

p. 3

(2) Consolidated operating results by segment ・Reportable segments figures

		FY 2023	FY 2024	Change to FY	Percent Change
		2024	from FY 2023
		1H	1H
		from FY 2023	numbers
	Net sales	7,322	5,583	▲1,738	▲23.7%
Toner	Operating	1,150	371	▲779	▲67.8%
	profit
Semiconductor	Net sales	2,948	3,399	450	15.3%
and Display-	Operating	202	302	99	49.2%
related
profit
	Net sales	5,234	5,272	38	0.7%
Functional Sheet	Operating	▲129	56	186	-
	profit(loss)
	Net sales	1,907	2,103	196	10.3%
Security Media	Operating	137	261	123	89.4%
	profit
New business	Net sales	28	25	▲2	▲10.2%
development	Operating	▲236	▲263	▲26	-
	loss

・Overview of reportable segments < Toner >

As for the Toner Segment, net sales were ¥5,583 million, down ¥1,738 million or ▲23.7% from that of the previous FY 1H, and Segment (operating) profit was ¥371 million, down ¥779 million or ▲ 67.8% from that of the previous FY 1H.

Despite an increase in overseas-related sales thanks to the depreciation of the yen, the decrease in net sales was caused by a decline in orders received that have continued since the end of the previous FY, as a result of inventory adjustments among major customers. Price competition with competitors has also accelerated this trend. Segment (operating) profit decreased due to the significant sales decline and higher costs from higher raw material and fuel prices.

< Semiconductor and Display-related >

As for the Semiconductor and Display-related Segment, net sales were ¥3,399 million, up ¥450 million or +15.3% from that of the previous FY 2Q, and Segment (operating) profit was ¥302 million, up ¥99 million or +49.2% from that of the previous FY 1H.

Net sales of the semiconductor mounting tape SBU significantly exceeded the plan, but were down compared to the previous FY 1H, which was particularly strong. On the other hand, net sales of the optical film SBU increased due to the receipt of a temporary order that was not initially expected in the current FY 1H. Segment (operating) profit increased from the same period of the previous FY, despite an increase in new product development costs, thanks to the effect of higher sales in the Optical

p. 4

film SBU, as well as an increase in the operating rate of coating machines, a key facility common to this segment.

< Functional Sheet >

As for the Functional Sheet Segment, net sales were ¥5,272 million, up ¥38 million or +0.7% from that of the previous FY 1H, and Segment (operating) profit was ¥56million (loss of ¥129 million in the previous FY 1H).

Net sales increased thanks to the acquisition of projects and product price revisions in the overall business compared to the same period of the previous FY, although orders for the functional non-woven fabric SBU were sluggish due to the slowdown of the Chinese economy.

Segment (operating) profit increased compared to the same period of the previous FY thanks to the reflection of cost increases in product prices, as well as various cost reduction effects, although costs increased due to higher raw material and fuel prices.

< Security Media >

As for the Security Media Segment, net sales were ¥2,103 million, up ¥196 million or +10.3% from that of the previous FY 1H, and Segment (operating) profit was ¥261 million, up ¥123 million or +89.4% from that of the previous FY 1H.

Despite a decrease in card-related products, passbooks and other products increased, as did orders for advertising printed materials. Segment (operating) profit were affected by higher energy prices, but benefited from increased net sales.

< New business development >

As for the New business development Segment, net sales were ¥25 million, down ¥2 million or ▲10.2% from that of the previous FY 1H, and Segment (operating) loss was ¥263 million (loss of ¥236 million in the previous FY 1H).

We are mainly engaged in the development and net sales of iCas-related products, and is particularly focused on the launch of new products for semiconductor manufacturing equipment.

p. 5

2. Explanation of financial position
・Financial Position				September 30, 2023
		Total Assets	Net Asset	Equity-to-asset		Net assets
		ratio		per share
End of FY 2024 1H	44,504	18,179	30.6%		1,312.17Yen
September 30, 2023
Converted into Million	297.5	121.5	-		US$8.77
U.S. dollars	(Note2)
End of FY 2023, March	42,948	18,370	32.7%		1,251.36Yen
31, 2023
Change to FY 2024 1H	1,556	▲191	▲2.1%		60.81Yen
from FY 2023

Note: U.S. dollar amounts are converted from Yen, for convenience only, at the rate of US$1.00 = ¥149.58

・Explanation regarding Financial Position

Total assets amounted to ¥44,504 million at the end of the current FY 1H, up ¥1,556 million from the end of the previous FY. Current assets totaled ¥22,378 million, up ¥840 million from the end of the previous FY. This was mainly due to an increase in cash and deposits and notes and accounts receivable-trade, as a result of the refund of consumption taxes receivable recorded at the end of the previous FY in the current FY and the fact that the end of the current FY 1H under review was a holiday for financial institutions. Non-current assets totaled ¥22,126 million, an increase of ¥715 million from the end of the previous FY. This was mainly due to an increase in property, plant and equipment due to capital expenditures and an increase in value of invested marketable securities.

Total liabilities amounted to ¥26,324 million, up ¥1,747 million from the end of the previous FY. Current liabilities totaled ¥18,056 million, up ¥1,977 million from the end of the previous FY. This was mainly due to an increase in short-term borrowings, despite a decrease in current portion of long-term loans payable. Non-current liabilities totaled ¥8,268 million, down ¥229 million from the end of the previous FY, mainly due to the repayment of long-term debt. Interest-bearing debt increased ¥879 million from the end of the previous FY to ¥13,592 million.

Total net assets amounted to ¥18,179 million, down ¥191 million from the end of the previous FY. This was due to a decrease in capital surplus resulting from the redemption of Class A preferred stock, despite the recording of Profit attributable to owners of parent and increases in unrealized gains on available-for-sale securities and foreign currency translation adjustments resulting from the depreciation of the yen against foreign currencies.

During 1H of FY2024, as disclosed on September 11, 2023, TOMOEGAWA is working to improve its financial soundness by redeemed all of its preferred shares ahead of schedule, thereby reducing the burden of preferred dividend payments. Even after redemption, net asset ratio has remained above 40%, maintaining a stable financial foundation.

p. 6

(Review of cash flow position)
・Cash Flow							September 30, 2023
					Cash flows from	Cash flows	Cash flows		Cash and cash
					operating	from investing	from financing		equivalents at
					activities	activities	activities		end of period
End of	FY 2024	1H		1,966	▲569	▲758		5,142
September 30, 2023
Converted into Million		13.9	▲4.0	▲5.4		34.4
U.S. dollars	(Note)
End of	FY 2023	1H		910	111	▲1,189		4,894
September 31, 2023
Change to FY 2024 from		1,056	▲680	430		247
FY 2023

Note: U.S. dollar amounts are converted from Yen, for convenience only, at the rate of US$1.00 = ¥141.06 as for Cash flow and ¥149.58 as for Cash and cash equivalents at end of period

・Explanation regarding Cash Flow

Cash and cash equivalents (net cash) amounted to ¥5,142 million at the end of the current FY 1H, up ¥859 million from the end of the previous FY.

Net cash from operating activities for the current FY 1H was ¥1,966 million, up ¥1,056 million from the previous FY 1H. The main inflow factors were Profit before income taxes of ¥923 million and depreciation (¥789 million) and a decrease in inventories (¥249 million), while the outflow factors included share of profit of entities accounted for using equity method (¥171 million) and an increase in trade receivables (¥196 million).

Net cash used in investing activities for the current FY 1H was ¥569 million (¥111 million was provided in the previous FY 1H). The main outflow factors were purchase of property, plant and equipment (¥562 million).

Net cash used in financing activities for the current FY 1H was ¥758 million, down ¥430 million from the previous FY 1H. The main inflow factors were net increase in short-term borrowings (¥1,902 million) and proceed from long-term borrowings (¥500 million), while the outflow factors included repayments of long-term borrowings (¥1,578 million) and purchase of treasury shares by redemption of Class A preferred stock (¥1,135 million).

p. 7