四国化成工業（4099） – Consolidated Financial Results for the Nine Months Ended December 31, 2021

Consolidated Financial Results for the Nine Months Ended December 31, 2021 [Japanese GAAP] January 25, 2022 Company name: SHIKOKU CHEMICALS CORPORATION Stock exchange listing: Tokyo Stock Exchange Code number: 4099 URL: https://www.shikoku.co.jp/ Representative: Naoto Tanaka, President and C.E.O. Contact: Yoshinori Manabe, Director, Executive Officer, Head of Business Promotion Division Phone: +81-877-22-4111 Scheduled date of filing quarterly securities report: February 14, 2022 Scheduled date of commencing dividend payments: – Availability of supplementary briefing material on quarterly financial results: Available Schedule of quarterly financial results briefing session: Not scheduled 1. Consolidated Financial Results for the Nine Months Ended December 31, 2021 (from April 1, 2021 to December (Amounts less than one million yen are rounded down) 31, 2021) (1) Consolidated Operating Results (% indicates changes from the previous corresponding period.) Net sales Operating profit Ordinary profit Profit attributable to owners of parent Nine months ended December 31, 2021 December 31, 2020 (Note) Comprehensive income: Nine months ended December 31, 2021: ¥5,561 million [4.7 %] Nine months ended December 31, 2020: ¥5,310 million [13.5 %] % Million yen 6,721 5,206 % Million yen 6,158 4,888 Million yen 39,229 36,024 % Million yen 4,794 3,911 26.0 (12.2) 29.1 (9.6) 8.9 (5.6) % 22.6 (2.9) Basic earnings per share Diluted earnings per share Nine months ended December 31, 2021 December 31, 2020 Yen 87.27 70.05 Yen – – (2) Consolidated Financial Position As of December 31, 2021 As of March 31, 2021 (Reference) Equity: As of December 31, 2021: ¥78,660 million Million yen 109,946 107,344 Total assets Net assets Million yen 79,514 76,566 As of March 31, 2021: ¥75,718 million 2. Dividends Equity ratio % 71.5 70.5 1st quarter-end Yen – – 2nd quarter-end Yen 12.00 12.00 Year ended March 31, 2021 Year ending March 31, 2022 Year ending March 31, 2022 (Forecast) (Note) Revisions to the cash dividends forecasts most recently announced: None Annual dividends 3rd quarter-end Yen – – Fiscal year- end Total Yen 12.00 12.00 Yen 24.00 24.00 3. Forecast of Consolidated Financial Results for the Year Ending March 31, 2022 (from April 1, 2021 to March 31, 2022) (% indicates changes from the previous corresponding period.) Net sales Operating profit Ordinary profit Full year Million yen 53,500 % Million yen 8,400 7.9 % Million yen 9,000 13.5 Profit attributable to owners of parent % 16.3 % Million yen 6,700 12.5 Basic earnings per share Yen 122.12 (Notes) 1. Revisions to the financial results forecast most recently announced: Yes 2. For the forecast of consolidated financial results, please also refer to the “Notice Concerning Financial Results Forecast” announced today (January 25, 2022). * Notes: (1) Changes in significant subsidiaries during the period (changes in specified subsidiaries resulting in changes in (2) Accounting policies adopted specially for the preparation of quarterly consolidated financial statements: Yes scope of consolidation): No 1) Changes in accounting policies due to the revision of accounting standards: Yes 2) Changes in accounting policies other than 1) above: No 3) Changes in accounting estimates: No 4) Retrospective restatement: No (3) Changes in accounting policies, changes in accounting estimates and retrospective restatement (4) Total number of issued shares (ordinary shares) 1) Total number of issued shares at the end of the period (including treasury shares): December 31, 2021: 54,832,263 shares March 31, 2021: 55,877,263 shares 2) Total number of treasury shares at the end of the period: December 31, 2021: 205,688 shares March 31, 2021: 212,603 shares 3) Average number of shares during the period: Nine months ended December 31, 2021: 54,936,628 shares Nine months ended December 31, 2020: 55,842,155 shares * These quarterly financial results are outside the scope of quarterly review by certified public accountants or audit firms * Explanation regarding the appropriate use of financial results forecasts and other special items Forward-looking statements such as operating results forecasts and other projections contained in this report are based on information currently available to the Company and certain assumptions deemed reasonable. Actual results may differ significantly from these forecasts due to a wide range of factors. For the assumptions underlying the operating results forecasts and cautionary notes concerning their use, please refer to “(3) Explanation of Consolidated Financial Results Forecast and Other Forward-looking Information” under “1. Qualitative Information on Quarterly Financial Results for the Period under Review” on page 3 of the attached documents to the quarterly financial statements. Table of Contents 1. Qualitative Information on Quarterly Financial Results for the Period under Review …………………………. 2 (1) Explanation of Operating Results ……………………………………………………………………………………………… 2 (2) Explanation of Financial Position …………………………………………………………………………………………….. 3 (3) Explanation of Consolidated Financial Results Forecast and Other Forward-looking Information ……. 3 2. Quarterly Consolidated Financial Statements and Primary Notes …………………………………………………….. 4 (1) Quarterly Consolidated Balance Sheets …………………………………………………………………………………….. 4 (2) Quarterly Consolidated Statements of Income and Comprehensive Income …………………………………… 6 (3) Notes to Quarterly Consolidated Financial Statements ………………………………………………………………… 8 (Notes on going concern assumption) ……………………………………………………………………………………….. 8 (Notes in the case of significant changes in shareholders’ equity) …………………………………………………. 8 (Accounting policies adopted specially for the preparation of quarterly consolidated financial statements) . 8 (Changes in accounting policies) ……………………………………………………………………………………………… 8 (Additional information) …………………………………………………………………………………………………………. 9 (Segment information, etc.) ……………………………………………………………………………………………………. 10 1 1. Qualitative Information on Quarterly Financial Results for the Period under Review (1) Explanation of Operating Results The Japanese economy during the nine months ended December 31, 2021 saw a gradual recovery following progress in vaccination against the novel coronavirus disease (COVID-19) and the lifting of the state of emergency on September 30. However, economic outlook is becoming more uncertain due to growing impact of the spread of the Omicron strain from the end of the year, consumer sentiment worsened by rising prices on the back of high resource prices and the depreciation of the yen, and supply constraints such as semiconductor shortages. Overseas economies continue to pick up globally, but supply constraints and high resource prices are becoming more serious, raising concerns for rising inflation. Therefore, the situation remains unpredictable. Under these circumstances, for the nine months ended December 31, 2021 (from April 1, 2021 to December 31, 2021), the Group posted net sales of ¥39,229 million (up 8.9% year-on-year), operating profit of ¥6,158 million (up 26.0% year-on-year), ordinary profit of ¥6,721 million (up 29.1% year-on-year) and profit attributable to owners of parent of ¥4,794 million (up 22.6% year-on-year), all of which increased from the previous year’s results. In addition, even when compared with periods before the COVID-19 pandemic, net sales, ordinary profit, and profit attributable to owners of parent achieved high levels against the backdrop of global economic recovery, hitting record highs. Operating results by segment are as follows. 1) Chemicals operations (Inorganic chemicals) Sales of insoluble sulfur, a material for radial tires, largely surpassed those of the previous fiscal year, which was affected by the spread of COVID-19, due to solid demand for replacement tires, despite a decline in automobile production resulting from semiconductor shortages. Sales of carbon disulfide for rayon and cellophane, and sodium sulfate for bath agents and detergents increased year on year due to a rebound from the COVID-19 pandemic. (Organic chemicals) Regarding chlorinated isocyanuric acid for disinfectants, the domestic market performed better than the previous year mainly due to a recovery in sales of agents for swimming pools following the partial resumption of swimming lessons at schools. In the U.S. market, the balance between supply and demand is tightening mainly due to a recovery in economic conditions and stay-at-home demand, and the Company tried to improve profitability by passing on soaring resource prices and distribution costs, which resulted in a significant increase in profitability. (Fine chemicals) Regarding Glicoat-SMD, a heat-resistant soluble OSP (Organic Solderability Preservative) for printed wiring boards, sales remained solid, against a backdrop of the growth of electronics markets worldwide. Sales of advanced & specialty chemicals such as epoxy resin curing agent (imidazoles), resin modifier (glycoluril derivatives, etc.) and semiconductor processing materials increased year on year, backed by a recovery in demand for use in electronic components and automobiles. As a result, net sales for the chemicals operations segment were ¥25,499 million (up 16.0% year-on-year), and segment profit was ¥5,734 million (up 47.3% year-on-year), both surpassing the previous year’s results. 2) Housing Materials operations Although the number of new housing starts showed signs of a slight recovery, sales of interior, exterior finishes and paving materials and exterior products remained sluggish, as governments and private companies deferred or had a wait-and-see attitude for their projects or capital investment, against a backdrop of falling consumer sentiment and uncertainty about the future. Profitability also declined due to soaring prices of raw materials including aluminum ingots. As a result, net sales for the housing materials operations segment were ¥12,772 million (down 4.4% year-2 Reference information [Overseas net sales] on-year), and segment profit was ¥1,693 million (down 25.0% year-on-year), both falling below the previous year’s results. Nine months ended December 31, 2020 (from April 1, 2020 to December 31, 2020) Nine months ended December 31, 2021 (from April 1, 2021 to December 31, 2021) Net sales (Million yen) Overseas net sales to consolidated net sales (%) Net sales (Million yen) Overseas net sales to consolidated net sales (%) 14.1 12.5 3.9 30.5 6,348 5,587 1,560 13,495 39,229 16.2 14.2 4.0 34.4 Asia North America Other regions Total Consolidated net sales 5,103 4,496 1,405 11,004 36,024 (2) Explanation of Financial Position (Status of assets, liabilities and net assets) Total assets increased by ¥2,602 million from the end of the previous fiscal year to ¥109,946 million. Major increases were ¥2,094 million in investment securities and ¥860 million in notes and accounts receivable – trade, and a major decrease was ¥2,550 million in cash and deposits. Liabilities decreased by ¥346 million from the end of the previous fiscal year to ¥30,431 million. Major decreases were ¥1,537 million in retirement benefit liability and ¥565 million in income taxes payable. Net assets increased by ¥2,948 million from the end of the previous fiscal year to ¥79,514 million. Major increases were ¥2,184 million in retained earnings and ¥685 million in valuation difference on available-for-sale securities. As a result, equity ratio rose to 71.5%, from 70.5% at the end of the previous fiscal year. (3) Explanation of Consolidated Financial Results Forecast and Other Forward-looking Information The full-year financial results forecast has been revised from the initial plan (announced on April 27, 2021). Economic activities picked up during the nine months ended December 31, 2021 following progress in vaccination against COVID-19 and the lifting of the state of emergency on September 30. Although the situation looks to remain unpredictable due to the spread of the Omicron strain from the end of the year and other factors, full-year financial results are now expected to exceed the previously announced forecast, in light of continuing strong sales of chlorinated isocyanuric acid in the U.S. market and improvement in profitability of the chemicals operations due to a depreciation of the yen exchange rate. Net sales, operating profit, ordinary profit, profit attributable to owners of parent, and basic earnings per share are all forecast to reach new highs. Assumptions for the average exchange rates for the full year are ¥111 to U.S. dollar and ¥130 to Euro. For details, please also refer to the “Notice Concerning Financial Results Forecast” announced today (January 25, 2022). 3 2. Quarterly Consolidated Financial Statements and Primary Notes (1) Quarterly Consolidated Balance Sheets As of March 31, 2021 As of December 31, 2021 Assets Current assets Cash and deposits Notes and accounts receivable – trade Electronically recorded monetary claims – operating Securities Merchandise and finished goods Work in process Raw materials and supplies Other Allowance for doubtful accounts Total current assets Non-current assets Property, plant and equipment Buildings and structures, net Machinery, equipment and vehicles, net Land Construction in progress Other, net Total property, plant and equipment Intangible assets Investments and other assets Investment securities Deferred tax assets Retirement benefit asset Other Allowance for doubtful accounts Total investments and other assets Total non-current assets Total assets 25,907 12,637 2,678 13,999 6,259 46 3,024 471 65,024 5,040 3,176 8,857 3,771 646 21,492 165 19,705 324 309 325 (1) (3) 20,662 42,319 107,344 (Million yen) 23,356 13,497 2,503 13,600 6,986 43 3,538 609 (0) 64,135 5,294 3,973 8,861 4,031 608 22,769 249 21,800 323 310 362 (3) 22,792 45,810 109,946 4 Liabilities Current liabilities Notes and accounts payable – trade Electronically recorded obligations – operating Short-term borrowings Current portion of long-term borrowings Accrued expenses Income taxes payable Accrued consumption taxes Notes payable – facilities Electronically recorded obligations – facilities Other Total current liabilities Non-current liabilities Long-term borrowings Deferred tax liabilities Deferred tax liabilities for land revaluation Provision for retirement benefits for directors (and other officers) Retirement benefit liability Asset retirement obligations Provision for share awards Other Total non-current liabilities Total liabilities Net assets Shareholders’ equity Share capital Capital surplus Retained earnings Treasury shares Total shareholders’ equity Accumulated other comprehensive income Valuation difference on available-for-sale securities Deferred gains or losses on hedges Revaluation reserve for land Foreign currency translation adjustment Remeasurements of defined benefit plans Total accumulated other comprehensive income Non-controlling interests Total net assets Total liabilities and net assets As of March 31, 2021 As of December 31, 2021 (Million yen) 7,341 386 2,530 83 1,122 823 122 12 181 3,078 15,682 11,974 222 1,111 86 597 380 44 331 14,749 30,431 6,867 5,740 59,324 (236) 71,696 4,475 (10) 2,533 (46) 11 6,963 854 79,514 109,946 6,602 338 2,530 74 1,418 1,389 201 17 75 3,055 15,702 10,957 16 1,111 77 2,134 379 32 365 15,075 30,778 6,867 5,740 57,140 (236) 69,512 3,789 (27) 2,533 (90) 0 6,205 847 76,566 107,344 5 (2) Quarterly Consolidated Statements of Income and Comprehensive Income Quarterly Consolidated Statements of Income Nine Months Ended December 31 Nine months ended December 31, 2020 Net sales Cost of sales Gross profit Selling, general and administrative expenses Transportation and storage costs Advertising expenses Salaries Retirement benefit expenses Provision for retirement benefits for directors (and other officers) Research and development expenses Other Total selling, general and administrative expenses Operating profit Non-operating income Interest income Dividend income Foreign exchange gains Miscellaneous income Total non-operating income Non-operating expenses Interest expenses Sales discounts Foreign exchange losses Donations Miscellaneous losses Total non-operating expenses Ordinary profit Extraordinary income Gain on sale of non-current assets Gain on sale of investment securities Subsidy income Total extraordinary income Extraordinary losses Loss on retirement of non-current assets Loss on sale of investment securities Loss on valuation of investment securities Total extraordinary losses Profit before income taxes Income taxes Profit Profit attributable to non-controlling interests Profit attributable to owners of parent 6 36,024 21,807 14,216 3,365 296 1,671 153 13 861 2,966 9,328 4,888 33 397 － 78 510 16 93 77 － 5 192 5,206 0 478 35 513 16 38 7 63 5,656 1,725 3,931 19 3,911 (Million yen) Nine months ended December 31, 2021 39,229 22,705 16,523 4,260 322 1,677 117 13 962 3,010 10,364 6,158 49 422 110 51 633 18 － － 50 2 70 6,721 0 － 28 28 12 － 5 18 6,731 1,929 4,802 8 4,794 Quarterly Consolidated Statements of Comprehensive Income Nine Months Ended December 31 Profit Other comprehensive income Valuation difference on available-for-sale securities Deferred gains or losses on hedges Foreign currency translation adjustment Remeasurements of defined benefit plans, net of tax Total other comprehensive income Comprehensive income Comprehensive income attributable to Comprehensive income attributable to owners of parent Comprehensive income attributable to non-controlling interests Nine months ended December 31, 2020 3,931 1,401 4 (47) 20 1,379 5,310 5,290 20 (Million yen) Nine months ended December 31, 2021 4,802 687 17 43 10 759 5,561 5,551 10 7 (3) Notes to Quarterly Consolidated Financial Statements (Notes on going concern assumption) There is no relevant information. (Notes in the case of significant changes in shareholders’ equity) (Purchase of treasury shares) The Company resolved on June 10, 2021 to purchase its treasury shares pursuant to the provisions of the articles of incorporation, as set forth in Article 459, Paragraph 1 of the Companies Act, and purchased 1,045,000 shares of treasury shares, in accordance with Article 370 of the Companies Act and Article 25 of the articles of incorporation of the Company (Written resolution in lieu of resolution at the Board of Directors). As a result, during the nine months ended December 31, 2021, treasury shares increased by ¥1,290 million. (Cancellation of treasury shares) The Company resolved on June 10, 2021 to cancel its treasury shares pursuant to the provisions in Article 178 of the Companies Act, and cancelled 1,045,000 shares of treasury shares, in accordance with Article 370 of the Companies Act and Article 25 of the articles of incorporation of the Company (Written resolution in lieu of resolution at the Board of Directors). As a result, during the nine months ended December 31, 2021, retained earnings and treasury shares decreased by ¥1,283 million and ¥1,283 million, respectively. (Accounting policies adopted specially for the preparation of quarterly consolidated financial statements) (Calculation of tax expenses) The Company makes a reasonable estimate of the effective tax rate after the application of tax effect accounting to profit before income taxes for the current fiscal year, including the third quarter under review, and multiply profit before income taxes for the quarter by the estimated effective tax rate. Income taxes – deferred is included in income taxes. (Changes in accounting policies) (Adoption of Accounting Standard for Revenue Recognition, etc.) The Company has applied the “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, March 31, 2020, hereinafter referred to as “Revenue Recognition Accounting Standard”) from the beginning of the first quarter to recognize revenue when control of promised goods or services is transferred to a customer in the estimated amount to be received in exchange for those goods or services. The application of the Revenue Recognition Accounting Standard follows the transitional measures set forth in the proviso of Paragraph 84 of the Revenue Recognition Accounting Standard, but has no impact on the beginning balance of retained earnings. In addition, the adoption of the Revenue Recognition Accounting Standard has no impact on profit and loss. In accordance with the transitional measures set forth in Paragraph 89-2 of the Revenue Recognition Accounting Standard, the Company made no reclassification of the previous fiscal year’s results to conform to the new presentation method. Moreover, in accordance with the transitional measures set forth in Paragraph 28-15 of the “Accounting Standard for Quarterly Financial Reporting” (ASBJ Statement No. 12, March 31, 2020), the Company did not provide information on composition of revenue from contracts with customers for the nine months ended December 31, 2020. (Adoption of Accounting Standard for Fair Value Measurement, etc.) The Company has applied the “Accounting Standard for Faire Value Measurement” (ASBJ Statement No. 30, 8 July 4, 2019, hereinafter referred to as “Fair Value Measurement Accounting Standard”) from the beginning of the first quarter. In accordance with the transitional measures set forth in Paragraph 19 of the Fair Value Measurement Accounting Standard and Paragraph 44-2 of the “Accounting Standard for Financial Instruments” (ASBJ Statement No. 10, July 4, 2019), the Company applies the new accounting policies set forth in the Fair Value Measurement Accounting Standard into the future. This application has no impact on the quarterly consolidated financial statements. (Additional information) (Establishment of Retirement Benefit Trust) During the nine months ended December 31, 2021, the Company established a Retirement Benefit Trust for further improving the soundness of the retirement benefit system and contributed ¥1,500 million in cash and deposits. As a result, retirement benefit liability decreased by the same amount. 9 (Segment information, etc.) I. For the nine months ended December 31, 2020 (from April 1, 2020 to December 31, 2020) Information on net sales and profit (loss) by reportable segment Other (Note) 1 Total Adjustment (Note) 2 Total (Million yen) Amount recorded in quarterly consolidated statement of income (Note) 3 Reportable segment Chemicals operations Housing Materials operations 0 1 Net sales Net sales to outside customers Inter-segment net sales or transfers Total Segment profit 21,983 13,356 35,340 684 36,024 － 2 217 (217) 21,983 3,892 13,358 2,256 35,342 6,149 36,241 6,242 (217) (1,353) 214 898 92 36,024 － 36,024 4,888 (Notes) 1. The “Other” category represents business segments not included in the reportable segments, and includes the IT systems operations and food operations. 2. The adjustment for segment profit of ¥(1,353) million includes inter-segment eliminations of ¥0 million and corporate expenses in the amount of ¥(1,354) million not allocated to each reportable segment. The relevant corporate expenses are mainly general and administrative expenses not allocated to the reportable segments. 3. Segment profit is adjusted with operating profit on the quarterly consolidated statement of income. II. For the nine months ended December 31, 2021 (from April 1, 2021 to December 31, 2021) Information on net sales and profit (loss) by reportable segment and information on composition of revenue Reportable segment Chemicals operations Housing Materials operations Other (Note) 1 Total Adjustment (Note) 2 Total (Million yen) Amount recorded in quarterly consolidated statement of income (Note) 3 Net sales Inorganic chemicals Organic chemicals Fine chemicals Interior, exterior finishes and paving materials Exterior products Other Revenue from contracts with customers Net sales to outside customers Inter-segment net sales or transfers 9,247 8,909 7,343 － － － － － － 9,247 8,909 7,343 1,024 1,024 11,748 － 11,748 － 25,499 12,772 38,272 － － － － － 956 956 9,247 8,909 7,343 1,024 11,748 956 39,229 25,499 12,772 38,272 956 39,229 － － － － － － － － 0 1 2 206 209 (209) Total Segment profit 25,500 5,734 12,774 1,693 38,274 7,428 1,163 122 39,438 7,550 (209) (1,392) (Notes) 1. The “Other” category represents business segments not included in the reportable segments, and includes the IT systems operations and food operations. 2. The adjustment for segment profit of ¥(1,392) million includes inter-segment eliminations of ¥0 million and corporate expenses in the amount of ¥(1,392) million not allocated to each reportable segment. The relevant corporate expenses are mainly general and administrative expenses not allocated to the reportable segments. 3. Segment profit is adjusted with operating profit on the quarterly consolidated statement of income. 9,247 8,909 7,343 1,024 11,748 956 39,229 39,229 － 39,229 6,158 10