日工（6306） – [Delayed]Financial Results for Fiscal Year Ended March 31, 2022 [Japanese GAAP] (Consolidated Data)

Financial Results for the Fiscal Year Ended March 31, 2022 [Japanese GAAP] (Consolidated Data) May 13, 2022 Stock Exchange Listing: Tokyo Stock Exchange URL: http://www.nikko-net.co.jp Company Name: Nikko Co., Ltd. Stock Code: Representative For inquiries: 6306 Representative Director and President Senior Managing Director/General Manager of Administrative Division Masaru Tsuji Hiroshi Fujii TEL 078-947-3141 June 27, 2022 June 24, 2022 Scheduled date of Ordinary General Shareholders’ Meeting: Scheduled date for filing the annual securities report: Full-year earnings supplementary explanatory materials: Financial results briefing session: 1. Consolidated Performance for the Fiscal Year Ended March 31, 2022 (April 1, 2021 – March 31, 2022) Yes Yes (for analysts) Scheduled date for cash dividends: June 27, 2022 (1) Consolidated Operating Results (Amounts rounded down to the nearest million yen) Fiscal year ended March 31, 2022 Fiscal year ended March 31, 2021 Note: Comprehensive income: Net sales Operating income Ordinary income million yen % million yen 2,053 2,302 38,846 2.6 37,866 7.7 % million yen 2,274 2,973 (10.8) 12.1 % million yen 1,649 2,082 (23.5) 38.8 % (20.8) 31.1 (% represents year-on-year change) Net income attributable to owners of parent Fiscal year ended March 31, 2022:1,782 million yen (-38.2%) Fiscal year ended March 31, 2021:2,885 million yen(387.2%) Net income per share Diluted net income per share Return on equity Return on assets Operating margin Fiscal year ended March 31, 2022 Fiscal year ended March 31, 2021 yen 43.16 54.31 yen － － % 5.2 6.8 % 4.5 6.3 (2) Consolidated Financial Position Total assets Net assets Equity ratio Net assets per share As of March 31, 2022 As of March 31, 2021 million yen 52,079 48,697 million yen 32,050 31,451 (Reference) Capital: As of March 31, 2022: 32,003 million yen As of March 31, 2021: 31,427 million yen (3) Consolidated Cash Flows % 61.5 64.5 Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Fiscal year ended March 31, 2022 Fiscal year ended March 31, 2021 million yen 2,224 2,784 million yen (2,165) (1,867) million yen (282) (1,129) Cash and cash equivalents at end of year million yen 12,389 12,444 % 5.3 6.1 yen 837.22 823.01 2. Dividends Annual dividends End of 1Q yen End of 2Q yen End of 3Q yen Year-end yen Total dividend (total) Total Dividend payout ratio (consolidated) Rate of total dividends to net assets (consolidated) yen Fiscal year ended March 31, 2021 － 15.00 － 18.00 33.00 Fiscal year ended March 31, 2022 － 15.00 － 15.00 30.00 － 15.00 － 15.00 30.00 Fiscal year ending March 31, 2023 (Forecasts) million yen 1,260 1,146 % 60.5 69.5 71.7 % 4.1 3.6 – 1 – (Percentages indicate year-on-year changes from full fiscal year and first half of the previous fiscal year, respectively) 3. Consolidated Performance Forecast for the Fiscal Year Ending March 31, 2023 (April 1, 2022 – March 31, 2023) Operating income Ordinary income Net sales 2Q (first half) Full year % million yen million yen % million yen 1,150 1,000 3.3 2,500 2,300 12.0 20,000 5.2 42,000 8.1 % 4.1 9.9 Net income attributable to owners of parent million yen 700 1,600 % (19.3) (3.0) per share Net income yen 18.32 41.87 *Notes (1) Changes in important subsidiaries during the period under review (changes in specific subsidiaries which involve changes in the scope of consolidation): None (2) Changes in accounting policy, changes in accounting estimates, and retrospective restatements (i) Changes in accounting policy arising from revision of accounting standards, etc.: Yes (ii) Changes in accounting policy other than those noted in (i) above: None (iii) Changes in accounting estimates: None (iv) Retrospective restatements: None (Note) Please refer to (5) Notes to Consolidated Financial Statements (Changes in Accounting Policy) of 4. Consolidated Financial Statements and Notes to the Statements on page 16 of Accompanying Material for details. (3) Shares issued (common stock) (i) Number of shares issued at end of period (including treasury stock) (ii) Number of shares held in treasury at (iii) Average number of shares outstanding end of period during the period As of March 31, 2022 As of March 31, 2022 As of March 31, 2022 40,000,000 shares 1,774,135 shares 38,215,523 shares As of March 31, 2021 As of March 31, 2021 As of March 31, 2021 40,000,000 shares 1,814,260 shares 38,349,338 shares This report is exempt from audit procedures by certified public accountants or an auditing firm. Explanation of the appropriate use of earnings forecasts, and other special notes (Cautionary statement with respect to forward-looking statements) Any forecasts and forward-looking statements given herein are based on information available as of this report’s publication and on certain assumptions that are deemed reasonable and these forecasts are not guarantees of future performance. Actual results may differ significantly from forecasts due to various factors. For the assumptions underlying the forecasts herein and other notice on the use of earnings forecasts, please refer to (1) Overview of Operating Results for Fiscal Year Ended March 31, 2022 in 1. Overview of Operating Results, etc. on page 2 in the accompanying materials. (How to obtain the earnings supplementary explanatory materials and the date of the financial results briefing session) The Company is scheduled to post the earnings supplementary explanatory materials on its website on Friday, May 13, 2022. The Company has scheduled a financial results briefing session (live streaming) for securities analysts on Friday, June 10, 2022. – 2 – * * Accompanying Material – Table of Contents 2 1. Overview of Operating Results, etc.…………………………………………………………….……………………… 2 (1) Overview of Operating Results for Fiscal Year Ended March 31, 2022………………………………………… 3 (2) Overview of Financial Conditions for Fiscal Year Ended March 31, 2022……………………………………… 5 (3) Basic Policy Concerning Profit Distribution and Dividends for the Current Term and Next Term..…………… 5 (4) Risks Associated with Business, etc.………………………………………………………………………………… 7 2. Status of the Nikko Corporate Group…………………………………………………………………….……………… 8 3. Basic Approach to the Selection of Accounting Standards……………………………………………………….…… 9 4. Consolidated Financial Statements and Notes to the Statements……………………….…………………………… (1) Consolidated Balance Sheets………………………………………………………………………………………… 9 (2) Consolidated Statements of Income and Consolidated Statements of Comprehensive Income……………… 11 11 12 (3) Consolidated Statements of Changes in Equity………………………………………………………………..…… 13 (4) Consolidated Statements of Cash Flows……………………………………………………………………..……… 15 (5) Notes to Consolidated Financial Statements………………………………………………………………………… 16 16 (Going Concern Assumption)………………………………………………………………………………………… 16 (Changes in Accounting Policy)……………………………………………………………………………………… 16 (Change in the method of presentation)…………………………………….……………………………………… 17 (Segment Information)………………………………………………………………………………………………… 20 (Per Share Information)……………………………………………………………………………………………… (Significant Subsequent Events)……………………………………………….…………………………………… 21 5. Other Information…………………………………………………………………………………………………………… 22 Consolidated Statements of Income……………………………………………………………………………… Consolidated Statements of Comprehensive Income…………………………………..……………………… – 3 – 1. Overview of Operating Results, etc. (1) Overview of Operating Results for Fiscal Year Ended March 31, 2022 (i) Operating Results for Fiscal Year Ended March 31, 2022 During the fiscal year under review, the Japanese as well as global economies started off on the path towards normalization even as COVID-19 infections repeatedly expanded and decreased. Price rises spread reflecting the increase in resource and raw material costs, supply restrictions, and tight logistic conditions. While the U.S. and many other countries, mindful of inflation, started active discussions on financial tightening such as raising interest rates, Japan continued with monetary easing, and this difference in financial policy directions led to a continued weakening of the yen. Furthermore, Russia’s invasion of Ukraine beginning in February started having significant impact on the global economy such as the soaring prices of oil and natural gas. Under such circumstances, in the fiscal year under review, which is the final year of the three-year Medium-Term Management Plan, the Nikko Group posted consolidated net sales of 38,846 million yen (up 2.6% from a year earlier) and consolidated operating income of 2,053 million yen (down 10.8% from a year earlier). Consolidated ordinary income totaled 2,274 million yen (down 23.5% from a year earlier) and net income attributable to owners of parent came to 1,649 million yen (down 20.8% from a year earlier). Compared with the targets of 38,000 million yen in consolidated net sales and 3,000 million yen in operating income under the three-year Medium-Term Management Plan, the Group was able to achieve the net sales plan, while its profit target was not met. With respect to the forecasts of 39,000 million yen in consolidated net sales and 2,300 million yen in operating income for the fiscal year under review, both net sales and operating income fell short of the forecasts, with net sales being slightly below the target. While demand was strong in the Company’s mainstay Asphalt Plant-Related Business, there was a temporary slowing in progress of projects, due to major road paving companies, who are its core customers, pushing forward organizational restructuring, which had some impact on the sales and orders. Meanwhile, net sales in the Concrete Plant-Related Business increased reflecting strong user demand for capital investment given the concrete price that remained stable at a relatively high level. New businesses such as mobile plants and waterproof boards also performed strongly. In terms of profits, gross profit margin came to a level similar to the previous fiscal year, as reduction of outsourcing cost and improved productivity absorbed a large increase in costs of steel and other raw materials. However, an increase in general administrative costs such as those for launching the business of the Thai subsidiary and R&D expenses resulted in lower-than-forecast profits. The Company has been steadily taking measures to achieve the five Long-term Basic Policies: (i) strengthen revenue base in Japan (improve profitability by boosting product appeal by raising the level of all divisions of sales, service, engineering, and manufacturing [profit margin of 10%]); (ii) establish overseas sales (As a manufacturer, establish new overseas bases to spread Nikko products, which are the best in the world, in the ASEAN region (doubling overseas net sales to 9.0 billion yen from the current 4.5 billion yen); (iii) promote new businesses (incl. M&As) (invest management resources in expansion of new businesses and nurture new pillar products in the industrial and construction machinery fields [generating 10.0 billion yen in net sales from new businesses]); (iv) put work-style reform into practice (boost operation efficiency and significantly improve labor productivity [to centralize office work and utilize IoT and AI]); and (v) make ROE a KPI (aim to achieve a market capitalization of at least 50.0 billion yen and ROE of at least 8% and payout ratio 60% or more to enhance shareholder returns). Overview of operating results by segment is as follows. Net sales of the Asphalt Plant-Related Business declined 5.9% compared with a year earlier to 18,328 million yen due to the impact of temporary slowdown in the progress of projects primarily in product sales. Order backlog also was affected by the low progress in projects and fell 6.2% to 7,725 million yen. Net sales of the Concrete Plant-Related Business rose 17.7% compared with a year earlier to 10,839 million yen, as sales of both products and maintenance services increased given strong user demand for capital investment. Order backlog also grew significantly by 27.7% compared with a year earlier to 5,755 million yen. Net sales of the Environment- and Conveyor-Related Business, which was relatively more affected by the spread of COVID-19 infection, recovered and increased 26.3% compared with a year earlier to 3,018 million yen. Order backlog was almost unchanged at 631 million yen, which is down 0.8% compared with a year earlier. – 4 – Net sales of the Other Businesses declined 2.0% compared with a year earlier to 6,660 million yen, as net sales of the mobile plants and waterproof boards increased but those of temporary construction materials declined. Order backlog rose significantly by 142.3% compared with a year earlier to 2,377 million yen. The order backlog includes 1,484 million yen in those of Ube Kohki Co., Ltd. Net sales by business segment (comparison with the previous fiscal year) Asphalt Plant-Related Business Concrete Plant-Related Business Environment- and Conveyor-Related Business Other business Total Fiscal year ended March 31, 2022 Fiscal year ended March 31, 2021 Share (%) Share (%) Net sales (mil. yen) 18,328 10,839 3,018 6,660 38,846 Net sales (mil. yen) 19,467 2,390 6,796 37,866 47.2 51.4 27.9 9,212 24.3 7.8 17.1 100 6.3 18.0 100 Note: 1. Net sales are rounded down to the nearest million yen. 2. Shares are rounded to the first decimal place. (ii) Future outlook In the Asphalt Plant-Related Business in Japan, while there was a temporary slowdown in progress of projects apparently due to the impact of the organizational restructuring of major road paving companies, which are the main customers, replacement demand for plants manufactured in 1980s continues to plateau, and the demand for the Asphalt Plant-Related Business in Japan continues to be strong similar to the Concrete Plant-Related Business. Overseas, the sales subsidiary in Thailand has been making steady progress in sales activities primarily through influential sales agents, although the start of full operation of the new plant of the Thai manufacturing subsidiary was delayed until March 2022 due to lack of labor caused by the spread of COVID-19 infection and bad weather. In China, active infrastructure investment is expected for the time being and demand for asphalt plants is expected to continue while there are concerns such as personnel costs and rising prices of raw materials, etc. resulting from price increases, and the impact of the recent lockdown related to COVID-19 countermeasures. The Company expects that a market environment, where the Nikko Group can leverage the advanced technological capabilities it has been developing in Japan will continue for the time being, given the tightening of environmental restrictions and popularization of recycled mixture. For the fiscal year ending March 31, 2023, the Company expects to achieve consolidated net sales of 42,000 million yen, operating income of 2,300 million yen, ordinary income of 2,500 million yen, and net income attributable to owners of parent of 1,600 million yen. (2) Overview of Financial Conditions for Fiscal Year Ended March 31, 2022 (i) Assets, Liabilities, and Net Assets Total assets at the end of the fiscal year (March 31, 2022) amounted to 52,079 million yen, an increase of 3,381 million yen from the end of the previous fiscal year. Current assets came to 34,127 million yen, increasing 1,746 million yen from the end of the last consolidated fiscal year. Main factors contributing to the change are increases of 2,733 million yen in work in process and partly-finished construction, 225 million yen in raw materials and supplies, and 116 million yen in electronically recorded monetary claims as well as decreases of 1,092 million yen in notes and accounts receivable-trade and 503 million yen in merchandise and finished goods. Noncurrent assets came to 17,951 million yen, up 1,635 million yen from the end of the previous consolidated fiscal year. Factors contributing to the change include an increase of 1,387 million yen in buildings and structures, an increase of 371 million yen in land, and an increase of 177 million yen in machinery, equipment and vehicles, and a decrease of 484 million yen in construction in progress. Liabilities totaled 20,029 million yen, increasing 2,783 million yen from the end of the last consolidated fiscal year. Factors contributing to the change include contract liabilities (advances received till the previous fiscal year) rising 1,472 million yen, long-term loans payable rising 1,279 million yen, notes and accounts payable-trade rising 540 million yen, and retirement benefit-related liabilities rising 131 million yen as well as electronically recorded obligations declining 146 million yen and accounts payable-other declining 100 million yen. – 5 – Net assets came to 32,050 million yen, increasing 598 million yen from the end of the last consolidated fiscal year. Factors contributing to the change include an increase from recording of 1,649 million yen in income attributable to owners of parent, an increase in foreign currency translation adjustment of 296 million yen, a decrease due to dividend payment of 1,260 million yen and a decline of 139 million yen in valuation difference on available-for-sale securities. As a result, equity ratio dropped to 61.5% from 64.5% at the end of the previous fiscal year. (ii) Cash Flows Fiscal year ended March 31, 2022 Fiscal year ended March 31, 2021 Change Cash flow from operating activities (mil. yen) Cash flow from investing activities (mil. yen) Cash flows from financing activities (million yen) Effect of exchange rate changes on cash and cash equivalents (million yen) Net increase (decrease) in cash and cash equivalents (million yen) Cash and cash equivalents at beginning of year (million yen) Cash and cash equivalents at end of year (million yen) 2,224 (2,165) (282) 168 (54) 12,444 12,389 2,784 (560) (1,867) (297) (1,129) 847 80 (131) 87 77 12,575 (131) 12,444 (54) Cash provided by operating activities totaled 2,224 million yen (compared with 2,784 million yen in cash provided by operating activities in the previous fiscal year). Major items in cash flow from operating activities include 2,599 million yen in net income before income taxes, 745 million yen in depreciation and amortization, 1,653 million yen in decrease in notes and accounts receivable-trade, and 126 million yen in interest and dividends income received as well as 325 million yen in gain on sales and valuation of investment securities, 1,583 million yen in expenditure from an increase in inventories, 28 million yen in decrease in notes and accounts payable-trade, and 1,002 million yen in income taxes paid. Cash used in investing activities totaled 2,165 million yen (compared with 1,867 million yen in cash used in investing activities in the previous fiscal year). Major items in cash flow from investing activities include 754 million yen in proceeds from sales and redemption of investment securities as well as 1,697 million yen in purchase of property, plant and equipment and intangible assets, 733 million yen in purchase of shares of subsidiaries resulting in change in scope of consolidation. Cash used in financing activities totaled 282 million yen (compared with 1,129 million yen in cash used in financing activities in the previous fiscal year). Major items in cash flow from financing activities include 1,099 million yen in proceeds from long-term loans payable as well as 1,260 million yen in cash dividends paid. As a result, consolidated cash and cash equivalents at the end of the fiscal year under review decreased by 54 million yen from the end of the previous fiscal year to 12,389 million yen. Changes in cash flow-related indicators Fiscal year ended March 31, 2019 Fiscal year ended March 31, 2020 Fiscal year ended March 31, 2021 Fiscal year ended March 31, 2022 Equity ratio (%) Return on equity based on market value (%) (years) Cash flow to interest-bearing debt 66.3 51.7 2.5 82.4 64.5 57.3 0.9 75.2 61.5 44.6 1.7 44.1 Interest coverage ratio (times) Notes: Return on equity: Total equity/Total assets Return on equity based on market value: Market valuation/Total assets Cash flow to interest-bearing debt: Interest-bearing debt/Operating cash flow Interest coverage ratio: Operating cash flow/Interest expenses 69.2 42.0 – – – 6 – *All indicators are calculated based on consolidated figures. *Market valuation is calculated by multiplying the number of shares issued at end of period (excluding treasury stock) with the closing stock price of the period. Cash flows from operating activities in the Consolidated Statements of Cash Flows are used for operating cash flow. Interest-bearing debt includes all liabilities recorded on the Consolidated Balance Sheets on which interest is paid. Interest paid in the Consolidated Statements of Cash Flows is used for Interest expenses. (3) Basic Policy Concerning Profit Distribution and Dividends for the Current Term and Next Term The Company identifies the return of profits to shareholders as an important management goal, and in principle, pays dividends continuously by taking into account the business performance in the period. It is the Company’s basic policy to strive to strengthen its management foundation and enhance corporate value to meet the shareholders’ expectations and make decisions on return of profits from a comprehensive perspective including enhancement of internal reserves. The Company expects to propose dividends of 15.00 yen per share at the 159th Ordinary General Shareholders’ Meeting scheduled on June 24, 2022. For the next fiscal year, the Company plans annual dividend of 30.00 yen per share (dividend payout ratio of 71.7%), consisting of interim and year-end dividends of 15.00 yen per share each. (4) Risks Associated with Business, etc. (i) Risks associated with the Asphalt Plant-Related Business in Japan The asphalt plant market in Japan is an oligopoly where the Company and another competing company account for almost 100% of the market. The Company’s market share is more than 70% and its positioning as the top manufacturer has not changed for years. The Company will pursue differentiation by developing new products that contribute to realizing carbon-neutral society and CO2 reduction and through business model reform of the maintenance service business as well as the offering of remote and automated support to secure our position as the overwhelming top manufacturer. However, there is a possibility that the appeal of this differentiation for customers becomes weak if the Company is unable to engage in sufficient product development or if other companies develop a meticulous maintenance system that compares favorably with the Company’s system. In recent years, no foreign manufacturer has entered the asphalt plant market in Japan, but Chinese and Korean manufacturers have been gradually acquiring technical strengths and may be planning to enter the Japanese market. While it would not be easy for foreign manufacturers to enter the Japanese market without sufficient maintenance structures, there is a possibility that they would seriously consider entering the Japanese market when the growth in their respective market has stalled. If foreign manufacturers join the Japanese market, the competition among manufacturers may intensify. The organizational restructuring of major road paving companies has been gathering pace, which could lead to reorganization of the road paving industry in the future. If industrial reorganization results in further consolidation of asphalt plants, the market may shrink. (ii) Risk associated with Nikko’s technological innovation not catching up with the initiatives for reducing environmental burden Asphalt plants primarily use fossil fuels as energy source. About 1.5 million tons a year of CO2 is estimated to be emitted in Japan for manufacturing asphalt mixture, and 70% of the emissions are thought to be from Nikko-manufactured plants based on the market share. In close collaboration with road pavement companies, who are the customers, Nikko is working on early social implementation of technological innovations such as fuel efficiency improvement and shifting of heat source at asphalt plants (carbon-neutral fuels, electrical heating, etc.), improvement of transportation efficiency through innovation of mixture transportation method, collection of CO2 emitted by asphalt plants, and CO2 absorption using ready-mixed concrete. However, there is a possibility of our technological innovation not keeping pace if the global movement of reducing environmental burden advances faster than expected. – 7 – (iii) Risks associated with the overseas business The Company has secured a certain position in the high-end model category in the asphalt plant market in China and has been steadily recording sales and profit every year. So far, the competitors in the high-end market are two European companies in addition to one or two top Chinese manufacturers, and competition has been mild. However, Chinese companies in general have been gaining technical strength and the competition may intensify if many Chinese manufacturers enter the high-end market in the future. As part of the growth strategy, we established a manufacturing subsidiary in Thailand in FY 2020 and invested more than 1.0 billion yen in the factory. The premise of this investment is that we can stably sell asphalt plants every year in Thailand and other ASEAN countries. However, if the Company’s plants do not gain enough support from customers in the ASEAN countries including Thailand and the Company cannot sell the planned number of plants, the manufacturing plant would record losses, running a risk of impairment of the plant. (iv) Risks associated with reduction in budget for public investment In the past, when political power shifted to the Democratic Party of Japan from the Liberal Democratic Party, “from concrete to people” became the former’s slogan and many of the Company’s customers began curbing capital investment. As a result, our sales declined significantly. In the future, if a party that holds up a policy to reduce public investment forms the government, our customers may shift to curb investment like they did during the previous Democratic Party of Japan regime. (v) Risk regarding securing of human resources to engage in on-site operations With our business model, we carry out the entire process from plant manufacture to installation on site and offering of maintenance service all in-house. In maintenance service, the Company has been promoting labor saving in maintenance operations utilizing IoT, etc., but recently it is becoming more difficult to recruit human resources to engage in on-site operations such as maintenance service workers and those engaging in construction work given the labor shortage. If we are unable to hire the required number of on-site workers, it may become difficult to maintain a competitive edge with our business model. (vi) Risk associated with spread of COVID-19 As the country sees gradual recovery from the impact of the COVID-19 pandemic, the Japanese construction industry, in general, has not had any significant direct impact from the COVID-19 pandemic and has been performing solidly, and we also expect minimal impact on the industry in the future. However, there remains the risk of the pandemic resurging with new strains, and there are countries and regions around the world including China where the infection is spreading. Under such circumstances, if any of our employees get infected with COVID-19 or is identified as a close contact, he or she must temporarily stay away from work. It may significantly affect delivery to customers, as our products are designed according to the order and then manufactured, especially if an employee in the engineering division gets infected and the designing operation has to stop for a certain period of time. Further, in overseas operations, if the spread of COVID-19 in countries where we have operations restricts social activities, it may become difficult to carry out sales activities there. In particular, if the infection spreads in China, Thailand, and Taiwan, where the Nikko Group has business bases, there is a possibility of direct impact. (vii) Risk associated with rising prices of materials, etc. As the global economy heads towards a recovery from the world-wide COVID-19 pandemic, and amid spreading price increases caused by supply restrictions and the tight logistic situation, prices of fuels such as crude oil and natural gas have risen drastically due to the Russia-Ukraine situation, accelerating price increases. The prices of materials the Company purchases are also continuing to rise and its profitability may worsen if this situation persists into the future. (viii) Risk associated with the Russia-Ukraine situation The Company has suspended transactions with Russia. In recent years, its transactions for Russia were limited to parts worth several tens of millions of yen a year and the impact of the suspension of the transactions is negligible. However, the rises in crude oil and other prices and the disruption in the global economy due to the impact of the Russia-Ukraine situation may impact capital investment plans, etc. to customers of the Company. – 8 – 2. Status of the Nikko Corporate Group The Nikko corporate group consists of the Company and 12 subsidiaries. The principal business of Nikko Group is manufacture and distribution of asphalt plants, concrete plants, and environment and conveyor machinery, and it is also engaged in real estate leasing and sales of housing renovation, etc. In the segment information by type of business, the asphalt plant business is classified as the Asphalt Plant-Related Business, concrete plant business as the Concrete Plant-Related Business, the environment and conveyor business as the Environment- and Conveyor-Related Business and the other business including temporary construction materials and hand tools as the Other Business. Main products Main companies Category Asphalt Plant-Related Business Concrete Plant-Related Business Environment- and Conveyor-Related Business Other business Asphalt plants Recycling plants Mixture silos Electronic control devices, plant management system Concrete plants Compact concrete plants Concrete pumps Electronic control devices, plant management system Concrete manufacturing plant facilities, etc. Belt conveyors, conveyors for facilities, beverage container recycling plants Soil remediation plant, plastic recycling plant Pipe scaffoldings, steel gangplanks, pipe supports Temporary aluminum staircases Shovels, spades Small-sized concrete mixers, mortar mixers Sluices, waterproof boards, crushers Real estate leasing, construction machinery product leasing Housing renovation Industrial machinery, gas holders, solar LED Nikko Co., Ltd. Nikko Electronics Co., Ltd. Nikko Machinery Co., Ltd. Nikko (Shanghai) Construction Machinery Co., Ltd. Nikko Asia (Thailand) Co., Ltd. Nikko Nilkhosol Co.,Ltd. Nikko Co., Ltd. Nikko Electronics Co., Ltd. Nikko Machinery Co., Ltd. Nikko (Shanghai) Construction Machinery Co., Ltd. Nikko Co., Ltd. Nikko Co., Ltd. Nikko Machinery Co., Ltd. Tombo Industry Co., Ltd. Nikko Sec Co., Ltd. Nikko Kosan Co., Ltd. Maekawa Kogyosho Co., Ltd. Maekawa Shanghai Qiankun Machinery Co., Ltd. Ube Kohki Co., Ltd. Nikko Baumaschinen GmbH The group organizational chart is shown in the following page. – 9 – 3. Basic Approach to the Selection of Accounting Standards The Nikko Group plans to continue applying the Japanese accounting standards for the time being taking into consideration availability of periodical comparison of its consolidated financial statements and availability of comparison among other companies. It plans to respond appropriately to the application of the International Financial Reporting Standards (IFRS) by taking into consideration the situation in Japan and overseas. – 10 – 4. Consolidated Financial Statements and Notes to the Statements (1) Consolidated Balance Sheets (million yen) As of March 31, 2021 As of March 31, 2022 Assets Current assets Cash and cash equivalents Notes and accounts receivable-trade Electronically recorded monetary claims Merchandise and finished goods Work in process Raw materials and supplies Other business Allowance for doubtful accounts Total current assets Non-current assets Property and equipment Buildings and structures (net) Machinery, equipment and vehicles (net) Tools, furniture and fixtures (net) Land Lease assets (net) Right-of-use assets (net) Construction in progress Total property, plant and equipment Intangible assets Goodwill Other business Total intangible assets Investments and other assets Investment securities Investments in capital Long-term loans receivable Deferred tax assets Other business Allowance for doubtful accounts Total investments and other assets Total noncurrent assets Total assets 12,491 10,530 1,477 1,494 4,236 1,470 685 (5) 32,381 3,839 1,078 365 3,205 2 71 619 9,183 – 660 660 4,528 11 11 792 1,259 (131) 6,472 16,315 48,697 12,436 9,438 1,594 990 6,970 1,695 1,002 (0) 34,127 5,227 1,256 399 3,577 1 72 134 10,669 266 769 1,036 4,336 15 8 864 1,152 (131) 6,246 17,951 52,079 – 11 – (million yen) As of March 31, 2021 As of March 31, 2022 Liabilities Current liabilities Notes and accounts payable-trade Electronically recorded obligations Accounts payable-factoring Short-term loans payable Income taxes payable Accounts payable-other Advances received Contract liabilities Provision for bonuses Provision for directors’ bonuses Provision for loss on order received Other business Total current liabilities Long-term liabilities Long-term loans payable Deferred tax liabilities Provision for directors’ retirement benefits Retirement benefit-related liabilities Other business Total noncurrent liabilities Total liabilities Net assets Shareholders’ equity Capital stock Capital surplus Retained earnings Treasury stock Total shareholders’ equity Accumulated other comprehensive income Valuation difference on available-for-sale securities Foreign currency translation adjustment Accumulated retirement benefit-related adjustment Total accumulated other comprehensive income Non-controlling interests Total net assets Total liabilities and net assets 2,591 1,015 2,806 2,188 586 765 2,949 – 531 76 126 782 14,418 304 5 170 1,995 351 2,827 17,246 9,197 7,926 13,366 (805) 29,685 1,592 264 (114) 1,742 24 31,451 48,697 3,132 868 2,783 2,229 518 664 17 4,405 483 76 35 559 15,774 1,583 7 182 2,126 354 4,254 20,029 9,197 7,925 13,755 (784) 30,093 1,453 560 (104) 1,910 46 32,050 52,079 – 12 – (2) Consolidated Statements of Income and Consolidated Statements of Comprehensive Income (Consolidated Statements of Income) (million yen) Fiscal year ended March 31, 2021 (from April 1, 2020 to March 31, 2021) Fiscal year ended March 31, 2022 (from April 1, 2021 to March 31, 2022) Net sales Cost of sales Gross profit Selling, general and administrative expenses Operating income Non-operating income Interest income Dividends income Insurance income Foreign exchange gains Outsourcing service income Other business Total non-operating income Non-operating expenses Interest expenses Loss on disposal of noncurrent assets Compensation for damage Expenses for dismantling and removal Other business Total non-operating expenses Ordinary income Extraordinary income Gain on sales of investment securities Total extraordinary income Extraordinary loss Loss on sales of investment securities Loss on valuation of investment securities Total extraordinary loss Net income before income taxes Income taxes-current Income taxes-deferred Total income taxes Net income Loss attributable to non-controlling interests Net income attributable to owners of parent 37,866 27,675 10,191 7,889 2,302 2 546 30 56 49 114 800 37 12 64 – 15 129 2,973 152 152 69 10 79 3,045 1,057 (94) 963 2,082 – 2,082 38,846 28,346 10,500 8,447 2,053 2 123 – 77 49 82 335 50 0 14 24 25 114 2,274 326 326 0 – 0 2,599 944 40 985 1,614 (34) 1,649 – 13 – (Consolidated Statements of Comprehensive Income) Net income Other comprehensive income Valuation difference on available-for-sale securities Foreign currency translation adjustment Retirement benefit-related adjustment Total other comprehensive income Comprehensive income (Breakdown) Comprehensive income attributable to owners of the parent Comprehensive income attributable to non-controlling interests (mil. yen) Fiscal year ended March 31, 2021 (from April 1, 2020 to March 31, 2021) Fiscal year ended March 31, 2022 (from April 1, 2021 to March 31, 2022) 2,082 473 209 120 802 2,885 2,884 1 1,614 (139) 296 10 167 1,782 1,817 (34) – 14 – (3) Consolidated Statements of Changes in Equity Fiscal year ended March 31, 2021 (from April 1, 2020 to March 31, 2021) (million yen) Shareholders’ equity Capital stock Capital surplus Retained earnings Treasury stock Total shareholders’ equity 9,197 7,918 12,632 (420) 29,328 (1,348) 2,082 (1,348) 2,082 (400) 22 (400) 14 – 7 7 734 9,197 7,926 13,366 (385) (805) 356 29,685 Accumulated other comprehensive income Valuation difference on available-for-sale securities Foreign currency translation adjustment Accumulated retirement benefit-related adjustment Total accumulated other comprehensive income Non-controlling interests Total net assets 1,119 55 (235) 939 25 30,293 473 473 1,592 209 209 264 120 120 (114) 802 802 1,742 (1) (1) 24 (1,348) 2,082 (400) 22 801 1,158 31,451 Balance at beginning of term Changes during term Cash dividends Net income attributable to owners of parent Purchase of treasury stock Disposal of treasury stock Change in ownership interest of parent due to transactions with non-controlling interests Net changes of items other than shareholders’ equity Total changes of items during the period Balance at end of term Balance at beginning of term Changes during term Cash dividends Net income attributable to owners of parent Purchase of treasury stock Disposal of treasury stock Change in ownership interest of parent due to transactions with non-controlling interests Net changes of items other than shareholders’ equity Total changes of items during the period Balance at end of term – 15 – Fiscal year ended March 31, 2022 (from April 1, 2021 to March 31, 2022) (million yen) Shareholders’ equity Capital stock Capital surplus Retained earnings Treasury stock Total shareholders’ equity 9,197 7,926 13,366 (805) 29,685 Balance at beginning of term Changes during term Cash dividends Net income attributable to owners of parent Purchase of treasury stock Disposal of treasury stock Change in ownership interest of parent due to transactions with non-controlling interests Net changes of items other than shareholders’ equity Total changes of items during the period Balance at end of term Balance at beginning of term Changes during term Cash dividends Net income attributable to owners of parent Purchase of treasury stock Disposal of treasury stock Change in ownership interest of parent due to transactions with non-controlling interests Net changes of items other than shareholders’ equity Total changes of items during the period Balance at end of term – (1) 388 20 408 9,197 7,925 13,755 (784) 30,093 Accumulated other comprehensive income Valuation difference on available-for-sale securities Foreign currency translation adjustment Accumulated retirement benefit-related adjustment Total accumulated other comprehensive income Non-controlling interests Total net assets 1,592 264 (114) 1,742 24 31,451 11 (12) (1,260) 1,649 (0) 20 (1,260) 1,649 (0) 32 (12) 22 22 46 (1,260) 1,649 (0) 32 (12) 190 598 (139) (139) 1,453 296 296 560 10 10 167 167 (104) 1,910 32,050 – 16 – (4) Consolidated Statements of Cash Flows Cash flows from operating activities Net income before income taxes Depreciation and amortization Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Increase (decrease) in retirement benefit-related adjustment Increase (decrease) in provision for directors’ retirement benefits Interest and dividends income Interest expenses Foreign exchange losses (gains) Loss (gain) on sales and valuation of investment securities Decrease (increase) in notes and accounts receivable-trade Decrease (increase) in inventories Increase (decrease) in notes and accounts payable-trade Increase (decrease) in advances received Increase (decrease) in contract liabilities Other business Subtotal Interest and dividends income received Interest expenses paid Income taxes paid Cash flows from operating activities Cash flows from investing activities Payments into time deposits Proceeds from withdrawal of time deposits Purchase of investment securities Proceeds from sales and redemption of investment securities Purchase of property, plant and equipment and intangible assets Purchase of shares of subsidiaries resulting in change in scope of consolidation Payments for acquisition of businesses Payments of loans receivable Collection of loans receivable Other business Cash flows from investing activities Cash flows from financing activities Net increase (decrease) in short-term loans payable Proceeds from long-term loans payable Repayment of long-term loans payable Proceeds from sale of shares of subsidiaries not resulting in change in scope of consolidation Purchase of treasury stock Repayments of finance lease obligations Cash dividends paid Cash flows from financing activities Effect of exchange rate changes on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year (million yen) Fiscal year ended March 31, 2021 (from April 1, 2020 to March 31, 2021) Fiscal year ended March 31, 2022 (from April 1, 2021 to March 31, 2022) 2,599 745 14 (5) 71 (9) (126) 50 (72) (325) 1,653 (1,583) (28) – 1,172 (1,006) 3,150 126 (50) (1,002) 2,224 (47) 47 (423) 754 (1,697) (733) (127) (4) 7 60 (2,165) (125) 1,099 (46) 51 – – (1,260) (282) 168 (54) 12,444 12,389 3,045 677 – (27) 80 24 (548) 37 (19) (72) (300) (359) (627) 1,281 – 187 3,377 548 (37) (1,105) 2,784 (47) 47 (14) 579 (2,414) – – (2) 2 (18) (1,867) 550 140 (70) – (402) (0) (1,345) (1,129) 80 (131) 12,575 12,444 – 17 – (5) Notes to Consolidated Financial Statements (Going Concern Assumption) Not applicable (Changes in Accounting Policy) (Application of the Accounting Standard for Revenue Recognition) The Company has applied the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 31, 2020. ) and other standards from the beginning of the fiscal year under review. The Company now recognizes revenue as the amount expected to be received in exchange for promised goods or services when control of said goods or services is transferred to the customer. The application of the said accounting standard does not affect the consolidated financial statements. As the Company applied the Accounting Standard for Revenue Recognition, “advances received,” which was recorded as current liabilities in the consolidated balance sheet for the previous fiscal year, shall be included under “contract liabilities” from the fiscal year under review. In accordance with the transitional treatment prescribed by Article 89-2 of the Accounting Standard for Revenue Recognition, the Company did not reclassify the figures for the previous fiscal year using the new description method. (Application of the Accounting Standard for Fair Value Measurement) The Company has applied the Accounting Standard for Fair Value Measurement (ASBJ Statement No. 30, July 4, 2019 ) and other standards from the beginning of the fiscal year under review. In accordance with the transitional treatments prescribed in Article 19 of the Accounting Standard for Fair Value Measurement and Article 44-2 of the Accounting Standard for Financial Instruments (ASBJ Statement No. 10, July 4, 2019), the Company plans to apply the new accounting policies prescribed in the Accounting Standard for Fair Value Measurement and other standards through the future. The application of the said accounting standard does not affect the consolidated financial statements. (Change in the method of presentation) (Consolidated Statements of Income) From the current fiscal year, the Company independently records outsourcing service income, which used to be included in other of non-operating income, as outsourcing service income accounted for more than 10% of the total amount of non-operating income. To reflect this change in the method of presentation, the Company has reclassified the financial statements for the previous accounting period. As a result, the 164 million yen of other in non-operating income in the balance sheet for the previous fiscal year has been reclassified as 49 million yen in outsourcing service income and 114 million yen in other. – 18 – (Segment Information) [Segment Information] 1. Overview of reportable segment The Company’s reportable segments are components of the Nikko Group about which separate financial information is available. These segments are subject to periodic examinations to enable the Company’s Board of Directors to decide how to allocate resources and assess performance. The Company formulates comprehensive strategy for products and services in Japan and overseas and implements business activities. The Company, therefore, classifies its operations into three reportable segments of Asphalt Plant-Related Business, Concrete Plant-Related Business and Environment- and Conveyor-Related Business. The Asphalt Plant-Related Business produces asphalt mixing plants, recycling plants, etc. and provides maintenance services. The Concrete Plant-Related Business produces concrete batching plants, etc. and provides maintenance services. The Environment- and Conveyor-Related Business produces environmental and recycling plants, various types of conveyor systems, etc. 2. Calculation of net sales, income/loss, assets, and other items by reportable segment Accounting methods applied in the reportable business segments are roughly in accordance with the Significant Matters Serving as a Basis for the Presentation of Consolidated Financial Statements. Reportable segment income is based on operating income. Intersegment sales or transfers are based on market price. 3. Net sales, income/loss, assets, and other items by reportable segment Fiscal year ended March 31, 2021 (from April 1, 2020 to March 31, 2021) Asphalt Plant-Related Business Concrete Plant-Related Business Reportable segment (mil. yen) Environment- and Conveyor-related Business 2,390 17 2,408 482 1,228 9 – Total 31,070 17 31,088 2,601 23,244 317 – Other business (note) Total 104 6,796 37,866 121 6,900 37,988 1,170 3,771 9,336 32,581 508 – 191 – 47 2,078 461 2,540 9,212 – 9,212 879 5,835 102 – 460 Net sales Sales to outside customers Inter-segment sales and transfers Total Segment income Segment assets Other items Depreciation and amortization Amortization of goodwill Increase (decrease) in tangible and intangible assets Note: Other is a business segment that is not included in reportable segments and includes temporary construction material business, hand tool business, floodgate business, and crusher business. Fiscal year ended March 31, 2022 (from April 1, 2021 to March 31, 2022) Asphalt Plant-Related Business Concrete Plant-Related Business Reportable segment (mil. yen) Environment- and Conveyor-related Business 3,018 4 3,023 587 1,423 13 – Other business (note) Total 262 6,660 38,846 266 6,922 39,113 3,346 1,073 12,708 36,739 575 14 199 – Total 32,186 4 32,191 2,273 24,030 375 14 19 1,059 494 1,554 10,839 – 10,839 1,123 5,570 132 – 283 Net sales Sales to outside customers Inter-segment sales and transfers Total Segment income Segment assets Other items Depreciation and amortization Amortization of goodwill Increase (decrease) in tangible and intangible assets Note: Other is a business segment that is not included in reportable segments and includes temporary construction material business, hand tool business, floodgate business, and crusher business. 19,467 – 19,467 1,239 16,181 205 – 1,571 18,328 – 18,328 562 17,037 228 14 757 – 19 – 4. Difference between reportable segment total and consolidated financial statement amounts and main factors in the difference (related to difference adjustment) Net sales Reportable segment total Net sales for Other Elimination of intersegment transaction Net sales in consolidated financial statements Fiscal year ended March 31, 2021 Fiscal year ended March 31, 2022 32,191 6,922 (266) 31,088 6,900 (121) 37,866 38,846 Earnings Reportable segment total Earnings for Other Elimination of intersegment transaction Corporate expenses (note) Operating income in consolidated financial statements Note: Corporate expenses are expenses of planning and administrative divisions of the Company that are not Fiscal year ended March 31, 2021 Fiscal year ended March 31, 2022 2,273 1,073 – (1,293) 2,601 1,170 － (1,469) 2,302 2,053 (mil. yen) (mil. yen) attributable to reportable segments. (million yen) Assets Reportable segment total Assets in Other Corporate assets (note) Total assets in consolidated financial statements Note: Assets in Other are assets that are not attributable to reportable segments, including surplus funds managed Fiscal year ended March 31, 2021 Fiscal year ended March 31, 2022 24,030 12,708 15,340 23,244 9,336 16,116 52,079 48,697 by the Company, funds for long-term investment, and assets associated with administrative divisions. Reportable segment total Other business Adjustment (note) (mil. yen) Amount in consolidated financial statements Other items Fiscal year ended March 31, 2021 Fiscal year ended March 31, 2022 Fiscal year ended March 31, 2021 Fiscal year ended March 31, 2022 Fiscal year ended March 31, 2021 Fiscal year ended March 31, 2022 Fiscal year ended March 31, 2021 Fiscal year ended March 31, 2022 191 317 375 Depreciation and amortization Amortization of goodwill Increase (decrease) in tangible and intangible assets Note: The adjustments for increase in property, plant and equipment and intangible assets are capital investment related to the planning and administrative divisions of the Company. 1,059 2,078 2,748 677 170 168 199 208 461 352 494 14 – – – – – – 745 14 1,907 – 20 – [Related Information] Fiscal year ended March 31, 2021 (from April 1, 2020 to March 31, 2021) 1. Information by product and service The categories of products and services are omitted as they are the same as the reportable segments. 2. Information by region (1) Net sales Japan China Other Total 3,509 (Note) Net sales are categorized by country or region based on the locations of the customers. 34,130 226 37,866 (mil. yen) (2) Property and equipment The amount of property and equipment located in Japan is omitted as it accounted for more than 90% of the property and equipment on the balance sheet. 3. Information by major customer Sales to outside customers are omitted because net sales to no customer account for 10% or more of net sales on the consolidated statement of income. Fiscal year ended March 31, 2022 (from April 1, 2021 to March 31, 2022) 1. Information by product and service The categories of products and services are omitted as they are the same as the reportable segments. 2. Information by region (1) Net sales (2) Property and equipment 3. Information by major customer Japan China Other Total 3,670 (Note) Net sales are categorized by country or region based on the locations of the customers. 34,099 1,076 38,846 (mil. yen) (mil. yen) Japan China Other Total 9,147 471 1,049 10,669 Sales to outside customers are omitted because net sales to no customer account for 10% or more of net sales on the consolidated statement of income. – 21 – [Information regarding impairment of non-current assets by reportable segment] Fiscal year ended March 31, 2021 (from April 1, 2020 to March 31, 2021) Not applicable Fiscal year ended March 31, 2022 (from April 1, 2021 to March 31, 2022) Not applicable [Information regarding the amount of goodwill amortization and the balance of unamortized goodwill by reportable segment] Fiscal year ended March 31, 2021 (from April 1, 2020 to March 31, 2021) Not applicable Fiscal year ended March 31, 2022 (from April 1, 2021 to March 31, 2022) Amortization for term Balance at end of term Asphalt Plant -Related Business Concrete Plant -Related Business Environment- and Conveyor-related Business － 14 117 － － － 149 － － － 14 266 Other (note) Corporate/elimination Total Note: Other is a business segment that is not included in reportable segments and includes temporary construction material business, hand tool business, floodgate business, and crusher business. [Information regarding gain on bargain purchase by reportable segment] Not applicable (Per Share Information) Fiscal year ended March 31, 2021 Fiscal year ended March 31, 2022 (from April 1, 2020 to March 31, 2021) (from April 1, 2021 to March 31, 2022) Net assets per share Net income per share 823.01 yen 54.31 yen 837.22 yen 43.16 yen Notes 1. Diluted net income per share is not described, as dilutive shares do not exist. 2. The calculation base for profit for the period per share is as follows: Fiscal year ended March 31, 2021 (from April 1, 2020, to March 31, 2021) Fiscal year ended March 31, 2022 (from April 1, 2021 to March 31, 2022) Net income per share Net income attributable to owners of parent (in million yen) Amount not attributable to common stockholders (million yen) Net income attributable to common stock of owners of parent (million yen) Average number of shares outstanding during the term (shares) 2,082 － 2,082 1,649 － 1,649 38,349,338 38,215,523 – 22 – (Significant Subsequent Events) Not applicable – 23 – 5. Other Information (1) Changes in Officers (i) Changes in Representative Directors Not applicable (ii) Changes in Other Officers -Directors to be promoted Tomomi Nakayama, Managing Director, General Manager, Business Division, Manager, Business Planning Department, and Manager, Asphalt Plant Sales Management Department (currently, Director, General Manager, Business Division, Manager, Business Planning Department, and Manager, Asphalt Plant Sales Management Department) Shigeru Sadakari, Outside Audit & Supervisory Board Member (currently Outside Audit & Supervisory Board -Candidates for Directors Member, Nikko Co., Ltd.) -Candidates for new Audit & Supervisory Board Members Koji Yoneda, Outside Audit & Supervisory Board Member (currently lawyer, Tamon Law Office) -Directors to retire Noriaki Nagahara, Outside Director -Audit & Supervisory Board Member to retire Shigeru Sadakari, Outside Audit & Supervisory Board Member -Executive Officers to be promoted Takeshi Sone, Senior Executive Officer, Branch Manager of Kanto Branch, and Manager of Mobile Plant (currently Executive Officer, Branch Manager of Kanto Branch, and Manager of Mobile Plant Business Business Department Department) (iii) Expected date of changes June 24, 2022 (2) Other Not applicable – 24 –