ニチレキ（5011） – Consolidated Financial Results for the Nine Months Ended December 31, 2021 [Japanese GAAP]

Consolidated Financial Results for the Nine Months Ended December 31, 2021 [Japanese GAAP] February 7, 2022 Company name: Nichireki Co., Ltd. Stock exchange listing: Tokyo Stock Exchange Code number: 5011 URL: https://www.nichireki.co.jp/english/ Representative: Manabu Obata, President and Representative Director Contact: Takeshi Goto, Executive Officer and General Manager of Finance and Accounting Department Phone: +81-3-3265-1511 Scheduled date of filing quarterly securities report: February 9, 2022 Scheduled date of commencing dividend payments: – Availability of supplementary briefing material on quarterly financial results: Not available Schedule of quarterly financial results briefing session: Not scheduled 1. Consolidated Financial Results for the Nine Months Ended December 31, 2021 (April 1, 2021 to December 31, (Amounts of less than one million yen are rounded down.) 2021) (1) Consolidated Operating Results Net sales Operating profit Ordinary profit (% indicates changes from the previous corresponding period.) Profit attributable to owners of the parent company Nine months ended December 31, 2021 December 31, 2020 (Note) Comprehensive income: Nine months ended December 31, 2021: ¥4,961 million [(7.8)%] Nine months ended December 31, 2020: ¥5,378 million [830.9%] % Million yen 6,752 – 6,669 7.6 % Million yen 7,027 7,139 Million yen 56,325 49,801 (1.6) 77.1 1.2 71.7 % Million yen 5,060 4,922 % 2.8 – Basic earnings per share Diluted earnings per share Nine months ended December 31, 2021 December 31, 2020 (Note) As the Company has implemented the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, Yen – 171.39 Yen 165.63 171.52 March 31, 2020) and such since the beginning of the first quarter of the consolidated fiscal year, the figures presented for the nine months ended December 31, 2021 are those after the implementation of the said standard and such. Accordingly, changes in net sales from the previous corresponding period are not presented. Total assets (2) Consolidated Financial Position As of December 31, 2021 As of March 31, 2021 (Reference) Equity: As of December 31, 2021: ¥66,236 million As of March 31, 2021: ¥61,997 million Million yen 86,530 82,732 Net assets Equity ratio Million yen 66,236 62,010 % 76.5 74.9 2. Dividends 1st quarter-end Yen 2nd quarter-end Yen Annual dividends 3rd quarter-end Yen Year-end Total – Fiscal year ended March 31, 2021 Fiscal year ending March 31, 2022 Fiscal year ending March 31, 2022 (Forecast) (Note) Revision to the dividends forecast announced most recently: No 3. Forecasts of Consolidated Financial Results in the Fiscal Year Ending March 31, 2022 (April 1, 2021 to March 38.00 42.00 38.00 42.00 Yen Yen – – – – – 31, 2022) Net sales Operating profit Ordinary profit (% indicates changes from the previous corresponding period.) Profit attributable to owners of the parent company Basic earnings per share Million yen 78,000 Full year (14.4) (Note) Revision to the financial results forecast announced most recently: No (Note) As the Company has implemented the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, 8,000 (12.5) % Million yen – % Million yen 8,200 % Million yen 5,300 % (16.6) Yen 173.50 March 31, 2020) and such since the beginning of the first quarter of the consolidated fiscal year, forecasts of consolidated financial results shown above are those after the implementation of the said standard and such. Accordingly, changes in net sales from the previous corresponding period are not presented. * Notes: (1) Changes in significant subsidiaries during the nine months ended December 31, 2021 (changes in specified subsidiaries resulting in changes in scope of consolidation): No (2) Accounting policies adopted specially for the preparation of quarterly consolidated financial statements: No (3) Changes in accounting policies, changes in accounting estimates and retrospective restatement (Note) For more details, please refer to “(3) Notes to the Quarterly Consolidated Financial Statements (Changes in 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 Accounting Policies)” in “2. Quarterly Consolidated Financial Statements and Primary Notes” on page 8 of the Appendix. (4) Total number of issued shares (common shares) 1) Total number of issued shares at the end of the period (including treasury shares): As of December 31, 2021: 31,685,955 shares As of March 31, 2021: 31,685,955 shares 2) Total number of treasury shares at the end of the period: As of December 31, 2021: 1,117,337 shares As of March 31, 2021: 1,414,587 shares 3) Average number of shares during the period (cumulative from the beginning of the fiscal year): Nine months ended December 31, 2021: 30,555,107 shares Nine months ended December 31, 2020: 28,701,344 shares * These quarterly consolidated financial results are outside the scope of quarterly review by certified public accountants or audit firms. * Explanation of the proper use of financial results forecast and other notes The earnings forecasts and other forward-looking statements herein are based on information currently available to the Company and certain assumptions deemed reasonable as of the date of publication of this document. Actual results may differ significantly from these forecasts due to a wide range of factors. For assumptions of the forecasts of the financial results and precautions in using the forecasts, please refer to “(3) Explanation of Consolidated Financial Results Forecast and Other Forward-Looking Information” in “1. Qualitative Information on Quarterly Financial Results for the Period under Review” on page 3 of these quarterly consolidated financial results (Appendix). 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 the Quarterly Consolidated Financial Statements ……………………………………………………………… 8 (Notes on Going Concern Assumption) ………………………………………………………………………………………… 8 (Notes in the Case of Significant Changes in Shareholders’ Equity) …………………………………………………. 8 (Changes in Accounting Policies) ………………………………………………………………………………………………… 8 (Segment Information, etc.) ……………………………………………………………………………………………………….. 10 (Revenue Recognition) ……………………………………………………………………………………………………………… 11 1 1. Qualitative Information on Quarterly Financial Results for the Period under Review (1) Explanation of Operating Results In the nine months ended December 31, 2021, the Japanese economy saw an overall trend towards recovery due to a rise in personal consumption as the effects of the novel coronavirus disease (COVID-19) gradually eased and an increase in global demand for digital products, including 5G-related products. In terms of future prospects, while economic recovery is expected to continue due to the effects of government economic measures, attention must still be paid to the impact of the renewed spread of COVID-19, as well as to downside risk due to global inflation trends and rising resource prices. The business environment surrounding the Group continues to require close watch on negative factors for business results, including soaring crude oil prices, while a high level of public investment is expected against the backdrop of growing construction demand for preventing and mitigating disasters, national resilience measures, etc. In such a business environment, the Group established its new Medium-term Management Plan “Resilience 2025 (Shinayaka 2025),” which commenced in this fiscal year, and has implemented various measures aimed at growing into a sustainable corporate group with the entire organization working as one under quick and accurate decision making. In the nine months ended December 31, 2021, the Group posted net sales of ¥56,325 million (net sales of ¥49,801 million in the previous corresponding period), operating profit of ¥6,752 million (up 1.2% year on year), ordinary profit of ¥7,027 million (down 1.6% year on year), and profit attributable to owners of the parent company of ¥5,060 million (up 2.8% year on year). With the application of the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 31, 2020) etc., net sales decreased by ¥299 million. Results by business segment were as follows. Applied and Processed Asphalt Products Business In the Applied and Processed Asphalt Products Business, in addition to coping with hikes in the prices of raw materials, we worked on increasing sales by promoting design and marketing activities for high value-added products contributing to “longer pavement life and higher performance” and “reduction of environmental load.” Net sales for the segment were ¥18,915 million (net sales of ¥14,633 million in the previous corresponding period) and segment profit was ¥5,519 million (up 6.5% year on year) in the nine months ended December 31, 2021. With the application of the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 31, 2020), etc., net sales decreased by ¥299 million. Road Paving Business In the Road Paving Business, in addition to steady progress of construction works including those for preventing and mitigating disasters and national resilience measures, we worked on improving cost management. Net sales for the segment were ¥37,180 million (up 6.4% year on year) and segment profit was ¥3,478 million (up 5.4% year on year) in the nine months ended December 31, 2021. Other Business In the Other Business, net sales for the segment were ¥229 million (up 0.9% year on year) and segment profit was ¥170 million (up 2.3% year on year) mainly due to real estate lease revenue. 2 (2) Explanation of Financial Position Total assets increased by ¥3,797 million from the end of the previous fiscal year to ¥86,530 million. This is attributable mainly to increases in notes and accounts receivable – trade, and contract assets by ¥20,294 million, cash and deposits by ¥1,708 million, long-term time deposits by ¥700 million, and buildings and structures, net by ¥681 million despite a decrease in notes and accounts receivable – trade by ¥20,305 million. Liabilities decreased by ¥428 million from the end of the previous fiscal year to ¥20,294 million. This is attributable mainly to decreases in income taxes payable by ¥1,144 million, short-term borrowings by ¥600 million, and accounts payable – other by ¥464 million despite an increase in accounts payable – trade by ¥1,982 million. Net assets increased by ¥4,225 million from the end of the previous fiscal year to ¥66,236 million. This is attributable mainly to increases in retained earnings by ¥3,910 million and capital surplus by ¥251 million. (3) Explanation of Consolidated Financial Results Forecast and Other Forward-Looking Information With regard to the forecast for the fiscal year ending March 31, 2022, no change has been made to the full-year consolidated financial results forecast, which was announced on October 28, 2021. 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, and contract assets Notes and accounts receivable – trade Electronically recorded monetary claims – operating Merchandise and finished goods Costs on construction contracts in progress Raw materials and supplies Income taxes receivable Current portion of long-term loans receivable from subsidiaries and associates Derivatives 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 Leased assets, net Construction in progress Other, net Total property, plant and equipment Intangible assets Other Total intangible assets Investments and other assets Investment securities Investments in capital of subsidiaries and associates Long-term loans receivable from subsidiaries and associates Deferred tax assets Long-term time deposits Other Allowance for doubtful accounts Total investments and other assets Total non-current assets Total assets 4 25,920 – 20,305 2,922 1,101 328 730 10 67 458 310 (79) 52,076 6,123 3,291 10,541 295 293 591 21,136 728 728 5,143 671 490 408 1,920 593 (438) 8,791 30,656 82,732 (Million yen) 27,629 20,294 – 2,608 1,125 715 981 46 67 669 919 (65) 54,991 6,804 3,392 10,646 297 287 583 22,012 686 686 4,612 709 490 242 2,620 601 (438) 8,839 31,538 86,530 Liabilities Current liabilities Accounts payable – trade Electronically recorded obligations – operating Short-term borrowings Accounts payable – other Income taxes payable Contract liabilities Provision for bonuses Other provisions Other Total current liabilities Non-current liabilities Long-term accounts payable – other Lease obligations Long-term deposits received Deferred tax liabilities Provision for environmental measures Retirement benefit liability Asset retirement obligations 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 Foreign currency translation adjustment Remeasurements of defined benefit plans Total accumulated other comprehensive income Share acquisition rights Total net assets Total liabilities and net assets As of March 31, 2021 As of December 31, 2021 (Million yen) 8,761 1,485 1,900 1,438 2,022 – 961 198 2,159 18,926 5 230 48 533 287 557 133 1,796 20,722 2,919 3,430 53,574 (835) 59,088 2,093 318 6 490 2,908 12 62,010 82,732 10,743 2,441 1,300 974 878 248 543 75 1,686 18,891 5 218 48 759 – 235 135 1,402 20,294 2,919 3,681 57,484 (659) 63,426 1,894 399 74 440 2,809 – 66,236 86,530 5 (2) Quarterly Consolidated Statements of Income and Comprehensive Income Consolidated Statements of Income For the Nine-Month Period For the nine months ended December 31, 2020 For the nine months ended December 31, 2021 (Million yen) Net sales Cost of sales Gross profit Selling, general and administrative expenses Operating profit Non-operating income Interest income Dividend income Share of profit of entities accounted for using equity method Foreign exchange gains Gain on valuation of derivatives Other Total non-operating income Non-operating expenses Interest expenses Share acquisition rights issuance costs Other Total non-operating expenses Ordinary profit Extraordinary income Gain on sale of non-current assets Gain on sale of investment securities Compensation income Other Total extraordinary income Extraordinary losses Loss on retirement of non-current assets Loss on disaster Special repairs expenses Other Total extraordinary losses Profit before income taxes Income taxes – current Income taxes – deferred Total income taxes Profit Profit attributable to owners of the parent company 49,801 36,423 13,378 6,708 6,669 16 367 95 – – 15 495 10 7 8 26 7,139 20 63 54 7 145 8 39 78 0 127 7,157 1,980 254 2,234 4,922 4,922 56,325 42,523 13,802 7,050 6,752 5 138 15 5 94 33 292 7 – 9 17 7,027 11 296 119 68 496 15 10 119 3 148 7,375 1,852 461 2,314 5,060 5,060 6 Consolidated Statements of Comprehensive Income For the Nine-Month Period 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 Share of other comprehensive income of entities accounted for using equity method Total other comprehensive income Comprehensive income Comprehensive income attributable to Comprehensive income attributable to owners of the parent company For the nine months ended December 31, 2020 For the nine months ended December 31, 2021 (Million yen) 4,922 323 171 (0) (34) (3) 455 5,378 5,378 5,060 (198) 80 13 (50) 55 (99) 4,961 4,961 7 (3) Notes to the Quarterly Consolidated Financial Statements (Notes on Going Concern Assumption) There is no relevant information. (Notes in the Case of Significant Changes in Shareholders’ Equity) For the Nine Months Ended December 31, 2021 (From April 1, 2021 to December 31, 2021) There is no relevant information. (Changes in Accounting Policies) 1. Application of the Accounting Standard for Revenue Recognition, etc. With the application of the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 31, 2020; hereinafter the “Revenue Recognition Accounting Standard”), etc., effective from the beginning of the first quarter, revenue is recognized when the control of promised goods or services is transferred to the customer in the amount expected to be received in exchange for the said promised goods or services. Major changes resulting from the application of the Revenue Recognition Accounting Standard, etc. are as follows. (1) Revenue recognition on transactions through agent Though revenue mainly from the domestic distribution business in the Applied and Processed Asphalt Products Business was previously recognized as the total amount of consideration received from customers, revenue from transactions, in which the role of the Company falls under an agent in providing merchandise to customers, is now recognized in the net value obtained by subtracting the amount to be paid to suppliers of the merchandise from the amount received from customers. (2) Revenue recognition on construction contracts Concerning construction contracts in the Road Paving Business, previously the percentage-of-completion method was applied to construction works whose outcome in the degree of completion is deemed certain, while the completed-contract method was applied to construction works whose construction periods were very short. Now, revenue is recognized over a certain period as performance obligations are being fulfilled. In addition, percentage of completion regarding the fulfillment of performance obligations is estimated by the input method based on incurred cost. As for construction contracts under which the term from the transaction commencement date to the time when performance obligations are expected to be fulfilled completely is quite short, revenue is not recognized for a certain period but recognized at the time when performance obligations are completely fulfilled, by applying the alternative treatment. The Revenue Recognition Accounting Standard, etc. are applied according to the transitional treatment specified in the proviso in Paragraph 84 of the Revenue Recognition Accounting Standard. Accordingly, the accumulated amount in a case where the new accounting policy is retroactively applied before the beginning of the first quarter is adjusted on retained earnings at the beginning of the first quarter, with the new accounting policy being applied to the said balance at the beginning of the first quarter. However, as a result of the application of the method specified in Paragraph 86 of the Revenue Recognition Accounting Standard, the new accounting policy is not retroactively applied to the contracts for which amounts of almost all revenues had been 8 recognized under the previous treatment before the beginning of the first quarter. In addition, concerning contract changes made before the beginning of the first quarter, accounting treatment was conducted under the contract terms that reflected all contract changes, and the accumulated amount is adjusted on retained earnings at the beginning of the first quarter, by applying the method specified in (1) of Paragraph 86 of the Revenue Recognition Accounting Standard. As a result, net sales of the nine months ended December 31, 2021 decreased by ¥299 million and cost of sales decreased by ¥299 million. There was no impact on the balance of retained earnings at the beginning of the period. Following the application of the Revenue Recognition Accounting Standard, etc., “notes and accounts receivable – trade,” which was presented under “current assets” in the quarterly consolidated balance sheets in the previous fiscal year, is included in “notes and accounts receivable – trade, and contract assets,” effective from the first quarter. According to the transitional treatment specified in Paragraph 89-2 of the Revenue Recognition Accounting Standard, rearrangement based on the new presentation method is not conducted for the previous fiscal year. In addition, according to the transitional treatment specified in Paragraph 28-15 of the Accounting Standard for Quarterly Financial Reporting (ASBJ Statement No. 12, March 31, 2020), information on analyses of revenue from contracts with customers for the nine months ended December 31, 2020, is not stated. 2. Application of the Accounting Standard for Fair Value Measurement, etc. With the application of the Accounting Standard for Fair Value Measurement (ASBJ Statement No. 30, July 4, 2019; hereinafter, the “Fair Value Measurement Accounting Standard”), etc., effective from the beginning of the first quarter, the new accounting policy specified in the Fair Value Measurement Accounting Standard, etc. will be applied throughout the future, according to the transitional treatment specified 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 change in accounting policies has no impact on the quarterly consolidated financial statements. 9 (Segment Information, etc.) 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 Reportable segment Applied and Processed Asphalt Products Business Road Paving Business Total Other (Note 1) Total Adjustment (Note 2) Net sales Net sales to outside customers Inter-segment net sales or transfers 14,633 34,941 49,574 227 49,801 – 9,318 – 9,318 48 9,366 (9,366) Segment profit (Notes) Total 49,801 6,669 1. The “Other” category incorporates business segments not included in reportable segments, such as the real estate lease (9,366) (1,981) 23,951 5,184 59,168 8,651 34,941 3,300 58,892 8,485 275 166 business and the non-life insurance agency business. 2. Segment profit adjustment of ¥(1,981) million includes elimination of inter-segment transactions of ¥(67) million and corporate expenses of ¥(1,914) million that are not allocated to reportable segments. Corporate expenses are comprised primarily of expenses related to the administrative divisions not allocated to reportable segments, such as expenses related to the general affairs division of the Company’s head office. 3. Segment profit is adjusted to the operating profit in the quarterly consolidated statements of income. For the nine months ended December 31, 2021 (From April 1, 2021 to December 31, 2021) 1. Information on net sales and profit (loss) by reportable segment Reportable segment Applied and Processed Asphalt Products Business Road Paving Business Total Other (Note 1) Total Adjustment (Note 2) Net sales Net sales to outside customers Inter-segment net sales or transfers 18,915 37,180 56,096 229 56,325 – 8,754 0 8,755 52 8,807 (8,807) Segment profit (Notes) Total 56,325 6,752 1. The “Other” category incorporates business segments not included in reportable segments, such as the real estate lease (8,807) (2,415) 27,670 5,519 65,133 9,167 37,180 3,478 64,851 8,997 282 170 business and the non-life insurance agency business. 2. Segment profit adjustment of ¥(2,415) million includes elimination of inter-segment transactions of ¥(186) million and corporate expenses of ¥(2,228) million that are not allocated to reportable segments. Corporate expenses are comprised primarily of expenses related to the administrative divisions not allocated to reportable segments, such as expenses related to the general affairs division of the Company’s head office. 3. Segment profit is adjusted to the operating profit in the quarterly consolidated statements of income. (Million yen) Amount recorded in Quarterly Consolidated Statements of Income (Note 3) 49,801 – (Million yen) Amount recorded in Quarterly Consolidated Statements of Income (Note 3) 56,325 – 10 2. Matters pertaining to changes, etc. in reportable segments As stated in “Changes in Accounting Policies,” the Revenue Recognition Accounting Standard, etc. are applied, effective from the beginning of the first quarter, and the accounting treatment method concerning revenue recognition is changed. Accordingly, the calculation method of profit or loss of segments is also changed. previous method. As a result of the change, net sales of the Applied and Processed Asphalt Products Business for the nine months ended December 31, 2021, decreased by ¥299 million compared with net sales calculated under the (Revenue Recognition) Information on analyses of revenue that occurs from contracts with customers For the nine months ended December 31, 2021 (From April 1, 2021 to December 31, 2021) (Million yen) Reportable segment Applied and Processed Asphalt Products Business Road Paving Business Total Other (Note) Total Goods to be transferred at one point of time 18,915 – 18,915 Goods to be transferred over a certain period 37,180 37,180 Revenue from contracts with customers 18,915 37,180 56,096 Other revenue – – Net sales to outside customers 18,915 37,180 56,096 – – 17 – 17 212 229 18,933 37,180 56,113 212 56,325 (Note) The “Other” category incorporates business segments not included in reportable segments, such as the real estate lease business and the non-life insurance agency business. 11