インフロニア・ホールディングス（5076） – [Delayed] Consolidated Financial Results for the Year Ended March 31, 2022 (Based on Japanese GAAP)

Translation Notice: This document is a translation of the original Japanese document and is only for reference purposes. In the event of any discrepancy between this translated document and the original Japanese document, the latter shall prevail. May 13, 2022 Consolidated Financial Results for the Year Ended March 31, 2022 (Based on Japanese GAAP) Company name: INFRONEER Holdings Inc. Stock exchange listing: Tokyo Stock code: 5076 URL https://www.infroneer.com Representative: Representative Executive Officer and President Kazunari Kibe Inquiries: Scheduled date of ordinary general meeting of shareholders: General Manager of Financial Strategy Kazutaka Deguchi June 23, 2022 Scheduled date to file Securities Report: Scheduled date to commence dividend payments: Preparation of supplementary material on financial results: Holding of financial results meeting: TEL 03-6380-8253 June 23, 2022 June 24, 2022 Yes Yes (for institutional investors and analysts) 1. Consolidated financial results for the year ended March 31, 2022 (from April 1, 2021 to March 31, 2022) (1) Consolidated operating results (cumulative) (Amounts less than one million yen are rounded down) Net sales Operating profit Percentages indicate year-on-year changes Profit attributable to owners of parent Ordinary profit Millions of yen 682,912 – % Millions of yen 37,489 – – – % Millions of yen 38,036 – – – % Millions of yen 26,689 – – – % – – Fiscal year ended March 31, 2022 Fiscal year ended March 31, 2021 (Note) Comprehensive income: Fiscal year ended March 31, 2022: ¥16,756 million [–%] Fiscal year ended March 31, 2021: ¥– million [–%] Fiscal year ended March 31, 2022 Fiscal year ended March 31, 2021 Earnings per share Diluted earnings per share Ordinary profit/total assets Operating profit/net sales Profit attributable to owners of parent/equity Yen 94.73 – Yen – – % 8.7 – % 4.1 – % 5.5 – (Reference) Share of profit (loss) of entities accounted for using equity method: Fiscal year ended March 31, 2022: ¥652 million (Notes) 1. The Company was established by joint share transfer on October 1, 2021; therefore, there are no year-on-year results. Fiscal year ended March 31, 2021: ¥– million 2. The “Accounting Standard for Revenue Recognition” (Accounting Standards Board of Japan (ASBJ) Statement No. 29, March 31, 2020), etc., has been applied from the beginning of the first quarter of the fiscal year ending March 31, 2022 of Maeda Corporation, the former parent company, which has become a wholly-owned subsidiary of the Company resulting from the share transfer, and figures for the fiscal year ended March 31, 2022 are based on the application of this Accounting Standard, etc. (2) Consolidated financial position As of March 31, 2022 As of March 31, 2021 Total assets Net assets Equity ratio Net assets per share Millions of yen 926,432 – Millions of yen 355,865 – % 37.4 – Yen 1,312.19 – (Reference) Equity: As of March 31, 2022: ¥346,911 million (Notes) 1. The Company was established by joint share transfer on October 1, 2021; therefore, there are no year-on-year results. As of March 31, 2021: ¥– million 2. The “Accounting Standard for Revenue Recognition” (Accounting Standards Board of Japan (ASBJ) Statement No. 29, March 31, 2020), etc., has been applied from the beginning of the first quarter of the fiscal year ending March 31, 2022 of Maeda Corporation, the former parent company, which has become a wholly-owned subsidiary of the Company resulting from the share transfer, and figures as of March 31, 2022, are based on the application of this Accounting Standard, etc. 1 Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Millions of yen (16,333) – Millions of yen (22,547) – Millions of yen 15,288 – Cash and cash equivalents at end of period Millions of yen 76,018 – (Note) The Company was established by joint share transfer on October 1, 2021; therefore, there are no year-on-year results. (3) Consolidated cash flows Fiscal year ended March 31, 2022 Fiscal year ended March 31, 2021 2. Cash dividends Annual dividends per share 1st quarter-end 2nd quarter-end 3rd quarter-end Fiscal year-end Total Total cash dividends (Total) Dividend payout ratio (Consolidated) Ratio of dividends to net assets (Consolidated) Fiscal year ended March 31, 2021 Fiscal year ended March 31, 2022 Fiscal year ending March 31, 2023 (Forecast) (Notes) 1. The Company was established by joint share transfer on October 1, 2021; therefore, there are no results for the preceding year or through – 10,770 – 40.00 – 40.00 Yen Millions of yen – 42.2 – 2.9 40.00 40.00 32.4 – – – – – – Yen Yen Yen Yen – – – % % the six months ended September 30, 2021. 2. The source of all dividends for the fiscal year ended March 31, 2022 is to be other capital surplus. For more details, please refer to “Breakdown of the dividends paid out of other capital surplus” described later. 3. Forecast of consolidated financial results for the fiscal year ending March 31, 2023 (from April 1, 2022 to March 31, 2023) Net sales Operating profit Ordinary profit Percentages indicate year-on-year changes Profit attributable to owners of parent Earnings per share Full year Millions of yen 730,600 % Millions of yen 42,600 7.0 % Millions of yen 43,500 13.6 % Millions of yen 32,400 14.4 % 21.4 Yen 123.55 * Notes (1) Changes in significant subsidiaries during the year ended March 31, 2022 (changes in specified subsidiaries resulting in the change in scope of consolidation): Notes on changes in significant subsidiaries during the year ended March 31, 2022 (2) Changes in accounting policies, changes in accounting estimates, and restatement of prior period financial statements 1) Changes in accounting policies due to revisions to accounting standards and other regulations: 2) Changes in accounting policies due to other reasons: 3) Changes in accounting estimates: 4) Restatement of prior period financial statements: Notes on changes in accounting policies, changes in accounting estimates, and restatement of prior period financial statements No (3) Number of issued shares (common shares) 1) Total number of issued shares at the end of the period (including treasury shares) As of March 31, 2022 291,070,502 shares As of March 31, 2021 2) Number of treasury shares at the end of the period As of March 31, 2022 26,694,723 shares As of March 31, 2021 3) Average number of shares during the period – shares – shares – shares Fiscal year ended March 31, 2022 281,728,696 shares Fiscal year ended March 31, 2021 (Notes) 1. The Company’s shares held by the Stock Benefit Trust Disposition-type Employee Stock Ownership Plan Trust are included in the number of treasury shares at the end of the period (4,221,300 shares at the end of the year ended March 31, 2022). The Company’s shares held by the Stock Benefit Trust Disposition-type Employee Stock Ownership Plan Trust are included in the number of treasury shares deducted in the calculation of the average number of shares during the period (324,715 shares at the end of the year ended March 31, 2022). 2. The Company’s shares held by Board Benefit Trust (BBT) are included in the number of treasury shares at the end of the period (657,500 shares at the end of the year ended March 31, 2022). The Company’s shares held by Board Benefit Trust (BBT) are included in the number of treasury shares deducted in the calculation of the average number of shares during the period (657,500 shares at the end of the year ended March 31, 2022). 2 No Yes No No * These financial results are outside the scope of audit by certified public accountants or audit corporations. * Explanation of the proper use of performance forecast and other notes The above forecasts are based on assumptions in light of information available as of the date of announcement of this material and factors of uncertainty that may possibly impact the future results of operation. These statements do not indicate that the Company pledges to realize these forecasts. Actual results may differ significantly from those presented herein as a result of numerous factors. The Company was established on October 1, 2021, as a wholly-owning parent company of Maeda Corporation, Maeda Road Construction Co., Ltd. (hereinafter “Maeda Road”) and Maeda Seisakusho Co., Ltd. (hereinafter “Maeda Seisakusho”) by means of a joint share transfer. Prior to the business integration, Maeda Road and Maeda Seisakusho were consolidated subsidiaries of Maeda Corporation, and as there has been no substantial change in the scope of consolidation of the Company due to the integration, the business results of the Company will be calculated based on full-year consolidated business results of the former Maeda Corporation. Breakdown of the dividends paid out of capital surplus Of the year-end dividends for the fiscal year ended March 31, 2022, the breakdown of the dividends paid out of capital surplus is as follows. Record date Fiscal year-end Total Dividend per share ¥40.00 ¥40.00 Total dividends ¥10,770 million ¥10,770 million (Note) Percentage decrease in net assets: 0.037 3 ○ Table of Contents 1. Overview of Operating Results, etc. …………………………………………………………………………………………………………… 5 (1) Overview of Operating Results for the Fiscal Year under Review ……………………………………………………………….. 5 (2) Overview of Financial Position for the Fiscal Year under Review ……………………………………………………………….. 6 (3) Overview of Cash Flows for the Fiscal Year under Review ………………………………………………………………………… 6 (4) Future Outlook ……………………………………………………………………………………………………………………………………… 7 (5) Basic Policy on Distribution of Profit and Dividends for Current and Next Fiscal Years ………………………………… 8 2. Status of Corporate Group …………………………………………………………………………………………………………………………. 8 3. Basic Approach to the Selection of Accounting Standards …………………………………………………………………………….. 9 4. Consolidated Financial Statements and Primary Notes ………………………………………………………………………………… 10 (1) Consolidated Balance Sheet …………………………………………………………………………………………………………………. 10 (2) Consolidated Statement of Income and Comprehensive Income ……………………………………………………………….. 12 Consolidated Statement of Income ………………………………………………………………………………………………………… 12 Consolidated Statement of Comprehensive Income …………………………………………………………………………………. 13 (3) Consolidated Statement of Changes in Shareholders’ Equity ……………………………………………………………………. 14 (4) Consolidated Statement of Cash Flows ………………………………………………………………………………………………….. 15 (5) Notes to Consolidated Financial Statements …………………………………………………………………………………………… 17 (Notes on going concern assumption) ………………………………………………………………………………………………. 17 (Important matters that form the basis for preparation of consolidated financial statements) …………………… 17 (Changes to accounting policies) …………………………………………………………………………………………………….. 21 (Additional information) ………………………………………………………………………………………………………………… 22 (Notes to consolidated balance sheet) ………………………………………………………………………………………………. 25 (Notes to consolidated statement of income) …………………………………………………………………………………….. 27 (Notes to consolidated statement of changes in shareholders’ equity) ……………………………………………………. 28 (Notes to consolidated statement of cash flows) ………………………………………………………………………………… 30 (Segment information, etc.) …………………………………………………………………………………………………………….. 30 (Per share information) …………………………………………………………………………………………………………………… 32 (Business combination) ………………………………………………………………………………………………………………….. 33 (Significant subsequent event) ………………………………………………………………………………………………………… 34 5. Others …………………………………………………………………………………………………………………………………………………… 35 (1) (Building Construction Segment) Classified by Public and Private: Orders Received, Net Sales and Backlog .. 35 (2) (Civil Engineering Segment) Classified by Public and Private: Orders Received, Net Sales and Backlog ……… 36 (3) (Road Civil Engineering Segment) Classified by Type: Orders Received, Net Sales and Backlog ………………… 36 (4) Summary of Forecast of Consolidated Financial Results …………………………………………………………………………. 37 (Reference) Maeda Corporation: Supplementary Information ……………………………………………………………………….. 38 4 1. Overview of Financial Results, etc. The Company was established on October 1, 2021, as a wholly-owning parent company of Maeda Corporation, Maeda Road Construction Co., Ltd. (hereinafter “Maeda Road”) and Maeda Seisakusho Co., Ltd. (hereinafter “Maeda Seisakusho”) by means of a joint share transfer. Prior to the business integration, Maeda Road and Maeda Seisakusho were consolidated subsidiaries of Maeda Corporation, and there has been no substantial change in the scope of consolidation of the Company due to the integration. However, as the current fiscal year ended March 31, 2022 is the first consolidated accounting period since the establishment of the Company, no comparison with the previous fiscal year ended March 31, 2021 has been done. (1) Overview of Operating Results for the Fiscal Year under Review During the fiscal year ended March 31, 2022, the Japanese economy continued to face difficult conditions due to an uncertain outlook caused by concern over the spread of the novel coronavirus infection (COVID-19) variants and the situation in Ukraine, although signs of recovery appeared owing to the gradual relaxation of COVID-19 restrictions on socioeconomic activities given the effects of vaccinations and various policies. In the construction industry, although public investment remained at high levels due to the execution of related budgets, capital investments, which had included weakness in both this area and in housing construction, showed signs of movement toward recovery. Under these circumstances, the Company was established on October 1, 2021, as a wholly-owning parent company of the three companies of Maeda Corporation, Maeda Road, and Maeda Seisakusho by means of a joint share transfer. With the objective of the entire group achieving sustained growth under the Company, the Company will strive to be a “company trusted by all stakeholders” by determining to aim for the mid- to long-term state of being an “integrated infrastructure service company,” establishing a “highly profitable and stable revenue base” without being influenced by external factors, operating expeditiously and appropriately, such as by building an effective governance structure and promoting digital transformation, and strengthening the ability to deal with social changes. In addition, the Company resolved at the Board of Directors’ Meeting held on December 16, 2021 to select the Prime Market, and having applied for selection in accordance with the prescribed procedure, transition to the Prime Market was made on April 4, 2022. Furthermore, at the Board of Directors’ Meeting held on March 22, 2022, the Company Group decided to acquire common shares of Toyo Construction Co., Ltd., an equity method affiliate, through a tender offer for the purpose of strengthening the group’s overall competitiveness while enhancing its corporate value. A tender offer for that company has been in effect since March 23, 2022. The business results for the fiscal year ended March 31, 2022 are as follows. Consolidated net sales for the fiscal year amounted to about ¥682.9 billion. 1) Net sales 2) Profit In the fiscal year under review, strong performance in the construction business segment generated operating profit of around ¥37.4 billion and ordinary profit amounted to roughly ¥38.0 billion. Profit attributable to owners of parent was about ¥26.6 billion. The “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, March 31, 2020), etc., has been applied from the beginning of the first quarter of the fiscal year ended March 31, 2022 of Maeda Corporation, the former parent company, which has become a wholly-owned subsidiary of the Company resulting from the share transfer. Please refer to “4. Consolidated Financial Statements and Primary Notes (5) Notes to Consolidated Financial Statements (Changes to accounting policies)” for details. 5 Performance results by business segment are as follows. [Building Construction] In the building construction business, which engages in construction work primarily for multi-dwelling complexes and office buildings, as well as related activities, net sales were about ¥216.1 billion primarily due to domestic construction operations that had work in hand remaining firm on account of orders for large-scale projects, as well as solid work volume during the period. Segment profit was around ¥8.4 billion on efforts to raise profits generated by construction work. [Civil Engineering] The civil engineering business is engaged in construction work, mainly bridges and tunnels, as well as related businesses. Net sales amounted to roughly ¥142.6 billion on account of a decrease in the completion of large-scale projects for domestic civil engineering projects. Segment profit was about ¥14.6 billion due to the reversal of losses in line with the conclusion of disputed projects in overseas construction work. [Road Civil Engineering] Road civil engineering mainly engages in pavement work and other construction business, and manufacture and sale of asphalt mixture. As a result of firm sales, the segment posted net sales of around ¥232.7 billion. Segment profit was about ¥2.6 billion due to a steep rise in oil prices on account of a sustained and coordinated production cut policy in oil-producing countries and the situation in Ukraine. [Machinery] For machinery, which focuses on the manufacture and sale of construction machinery, net sales amounted to roughly ¥35.3 billion and segment profit was around ¥1.6 billion due to steady sales of construction machinery-related products, etc. and improved sales of industrial machinery-related products, etc., mainly for overseas export. [Infrastructure Management] For infrastructure management, which is mainly engaged in renewable energy and concession business, net sales amounted to around ¥18.6 billion and segment profit was about ¥6.0 billion due to solid results at Aichi Road Concession Co., Ltd. and other business companies, as well as the sale of two solar power energy generation businesses. [Others] The others business segment ranges from the retail business to manufacturing and sale of construction materials, building management, and real estate business, etc. Net sales amounted to roughly ¥37.4 billion and segment profit was about ¥1.8 billion. (2) Overview of Financial Position for the Fiscal Year under Review Total assets for the current fiscal year were about ¥926.4 billion. Liabilities stood at around ¥570.5 billion. Net assets amounted to roughly ¥355.8 billion. As a result of the above, equity, which is net assets minus non-controlling interests, amounted to about ¥346.9 billion, and the equity ratio was 37.4%. (3) Overview of Cash Flows for the Fiscal Year under Review Net cash used in operating activities in the current fiscal year was about ¥16.3 billion. Net cash used in investing activities amounted to roughly ¥22.5 billion. Net cash provided by financing activities amounted to around ¥15.2 billion. As a result of the above, the balance of cash and cash equivalents at the end of the current fiscal year decreased by about ¥22.9 billion from the end of the previous fiscal year, to roughly ¥76.0 billion. 6 Fiscal year ended March 31, 2022 Trends in Cash Flow Indices Equity ratio (%) Equity ratio at market price (%) Interest-bearing debt to cash flow ratio (times) Interest coverage ratio (times) (Notes) Equity ratio: Equity/Total assets 37.4 31.7 ― ― Equity ratio at market price: Current aggregate value of shares/Total assets Interest-bearing debt to cash flow ratio: Interest-bearing debt/Cash flows from operating activities Interest coverage ratio: Cash flows from operating activities/Interest expenses *All indicators are calculated based on consolidated financial figures. *The current aggregate value of shares is calculated by multiplying the closing share price at the end of the period by the number of shares outstanding (less treasury shares) at the end of the period. *Cash flows from operating activities in the consolidated statement of cash flows are used for the cash flows from operating activities. Interest-bearing debt covers all debt bearing interest recorded in the consolidated balance sheet. In addition, for interest payments, the amount of interest paid in the consolidated statement of cash flows are used. (4) Future Outlook Signs of a recovery from the COVID-19 pandemic had appeared owing to measures to prevent the spread of infection and the effects of various policies, but concerns of new variants of the virus have led to uncertainties about the timing of containment. In line with government policies, together with placing utmost priority on ensuring the safety of our customers and employees, and preventing the spread of infection by continuing to take actions promptly, it is necessary to pay sufficiently close attention to the impact on socioeconomic activities such as employment and income environment. We also need to keep a close eye on the impact of raw material price increases due to the uncertain situation in Ukraine, fluctuations in financial and capital markets, and supply-side constraints. We will closely monitor future trends and promptly disclose any revisions to our management policies or strategies as necessary. In the business environment surrounding the Company Group, national and local governments’ finances are expected to become increasingly severe due to declining tax revenues on account of a declining population and increasing social security costs caused by the aging of society, while the constant deterioration of social infrastructure will make it difficult to invest in new construction, let alone in the maintenance and renewal of existing infrastructure. In addition, given increasingly critical labor shortages due to the shrinking working-age population caused by the falling birthrate and aging population, we also believe that a transformation to digitalization and responding to global environmental issues will be unavoidable, and that conventional values in the construction industry will evolve, while the industrial structure will itself be transformed. Even in this environment, the Company Group has shifted to a holding company structure through the business integration of the three companies, namely, Maeda Corporation, Maeda Road, and Maeda Seisakusho, to sustain corporate development as a company that earns the trust of all its stakeholders. We are committed to heightening synergies within the Company Group more than ever before, and to forge ahead in unison, further strengthening management by aggressively investing in human resource development, promoting greater use of IT, digital transformation, and other digital tools, improving productivity, establishing new revenue bases and increasing profitability, while bolstering and enhancing governance. 7 On a consolidated basis, we expect net sales of ¥730.6 billion for the next fiscal year. By segment, we project net sales of ¥238.3 billion in building construction, ¥155.5 billion in civil engineering, ¥240.1 billion in road civil engineering, ¥35.5 billion in machinery, ¥21.7 billion in infrastructure management, and ¥39.5 billion in others. 3) Net sales 4) Profit For the next fiscal year, on a consolidated basis, we forecast ¥42.6 billion in operating profit, ¥43.5 billion in ordinary profit, and ¥32.4 billion in profit attributable to owners of parent. (5) Basic Policy on Distribution of Profit and Dividends for Current and Next Fiscal Years The Company regards the return of profits to shareholders as one of its most important management policies. The Company’s returns policy is based on that of the medium-term management plan “INFRONEER Medium-term Vision 2024,” and is planned to be 30% or more. In addition, in order to further return profits to shareholders and enhance share value through the execution of a flexible capital policy, the Company began a share buyback program of up to ¥20.0 billion on November 16, 2021, which was completed on April 13, 2022. The Company will pay a dividend of ¥40 per share to shareholders for the current fiscal year, in line with the year-end dividend forecast announced on February 8, 2022. Shareholder dividends in the following fiscal year are planned to be ¥40 per share. 2. Status of Corporate Group The Group (the Company and its subsidiaries and affiliates) is comprised of 58 subsidiaries and 24 affiliates, led by Maeda Corporation, Maeda Road Construction Co., Ltd. (hereinafter “Maeda Road”) and Maeda Seisakusho Co., Ltd. (hereinafter “Maeda Seisakusho”). It engages primarily in building construction, civil engineering, road civil engineering, machinery, and infrastructure management businesses. It also conducts a wide array of other businesses, from retail to real estate. The segmentation is the same as that described in the segment information in “4. Notes to Consolidated Financial Statements.” [Building Construction] The building construction business engages in construction work primarily for multi-dwelling complexes and office buildings and related activities. Subsidiary Maeda Corporation, affiliate Toyo Construction Co., Ltd. (hereinafter “Toyo Construction”) and other companies operate this business, and these companies place orders with subsidiaries and affiliates for a portion of the construction work and delivery of materials. [Civil Engineering] The civil engineering business engages in construction work, mainly of bridges and tunnels, and related businesses. Subsidiary Maeda Corporation and affiliate Toyo Construction operate this business, and these companies place orders with subsidiaries and affiliates for part of the construction work they execute and for the delivery of materials. [Road Civil Engineering] Road civil engineering engages in pavement work and other construction business, and manufacture and sale of asphalt mixture. Subsidiary Maeda Road and other companies operate this business, and places orders for certain portions of construction and delivery of materials to subsidiaries and affiliates. [Machinery] The machinery business is engaged in the manufacture and sale of construction machinery, and the rental business. This business is operated by subsidiary Maeda Seisakusho and other companies, and these companies sell or lease certain machinery to subsidiaries and affiliates. 8 [Infrastructure Management] Infrastructure management focuses on developing the renewable energy and concession businesses. Subsidiary Anonymous Association Happo Wind Development maintains and manages the wind power generation project, subsidiaries Aichi Road Concession Co., Ltd. and Anonymous Association Aichi Road Concession engages in the road maintenance and administration business, affiliate Sendai International Airport Co., Ltd. conducts airport maintenance and administration business, Aichi Sky Expo Co., Ltd. engages in exhibition maintenance and administration business, and subsidiary Maeda Corporation and other companies accept construction work orders. [Others] The others business segment is involved in a wide array of businesses, from retail to the manufacture and sale of construction materials, as well as building management, real estate, and other operations. JM Corporation, a subsidiary, is engaged in the inspection, diagnosis, and repair of buildings and equipment. In addition, Fujimi Koken Co., Ltd. is engaged in the manufacture and sale of secondary concrete products, and FBS Corporation is engaged in building renewal and building management, etc. Affiliate Hikarigaoka Corporation is engaged in the real estate business, mainly leasing and selling land and buildings, and our subsidiary entrusts the leasing rights of land and buildings to affiliates and receives orders for construction work. The following is a schematic diagram of the business. CustomersThe Company Management and administration of subsidiaries and the Group, and operations incidental or related to such operationsConstruction work, material and equipment deliveryBusiness managementConstruction work, material and equipment deliveryBusiness managementManufacture and sale of construction machineryBusiness managementMaintanence,operation, otherBusiness managementBusiness managementConstruction(Buildings, civil engineering)(Subsidiary)Maeda Corporation(Affiliate)T oyo Construction Co., Ltd.*4Road Civil Engineering(Subsidiary)Maeda Road Construction Co., Ltd.24 other companies *1, *3Machinery(Subsidiaries)Maeda SeisakushoCo., Ltd.Neox Inc.Sun Network Maeda, Co., Ltd(Affiliates)2 companies *5Infrastructure Management(Subsidiaries)Aichi Road Concession Co., Ltd.Anonymous Association AichiRoad ConcessionAnnonymous Association HappoWind Development12 other companies *3(Affiliates)Sendai International Airport Co., Ltd. *4Aichi Sky Expo Co., Ltd. *48 other companies *5Building and equipmentinspection & diagnosisManufacturing and sale ofconstruction materialsBuilding managementReal estate Others(Subsidiaries)JM CorporationFBS CorporationT hai Maeda Corporation Ltd.Fujimi Koken Co., Ltd.10 other companies *2, *3 (Affiliates)Hikarigaoka Corporation *4Koho Co., Ltd. *49 other companies *5Construction work, manufacture and sale of equipment and materials, real estate sales and leasing, etc.(Notes) 1. Unmarked: 12 consolidated subsidiaries; *1: 15 consolidated subsidiaries; *2: One non-consolidated subsidiary accounted for by the equity method; *3: 30 non-consolidated subsidiaries not accounted for by the equity method; *4: Five affiliates accounted for by the equity method; and *5: 19 affiliates not accounted for by the equity method. 2. In addition to the construction business, Toyo Construction Co., Ltd. is engaged in certain other businesses. 3. Basic Approach to the Selection of Accounting Standards The Company has decided, and is preparing to voluntarily adopt, International Financial Reporting Standards (IFRS) in place of Japanese GAAP for the consolidated financial statements at the end of the fiscal year ending March 31, 2024, for the purpose of further streamlining and maintaining the quality of the financial and management reporting system for Group business management, and to improve the comparability of international financial information in capital markets. 9 4. Consolidated Financial Statements and Primary Notes (1) Consolidated Balance Sheet (Millions of yen) As of March 31, 2022 *3 78,035 *3 310,801 30 1,987 1,573 *7 13,698 *3 3,444 43,149 (117) 452,602 *3, *5 107,476 *3 171,647 83,599 1,334 2,550 (203,029) 163,578 *3 109,721 24,122 19,891 14,988 168,724 *1, *2 120,123 221 354 840 14,907 *2 5,418 (402) 141,464 473,767 62 926,432 Assets Current assets Cash and deposits Notes receivable, accounts receivable from completed construction contracts and other Securities Real estate for sale Merchandise and finished goods Costs on construction contracts in progress Raw materials and supplies Other Allowance for doubtful accounts Total current assets Non-current assets Property, plant and equipment Buildings and structures Machinery, vehicles, tools, furniture and fixtures Land Leased assets Construction in progress Accumulated depreciation Total property, plant and equipment Intangible assets Right to operate public facilities Assets related to replacement investment to operate public facilities Goodwill Other Total intangible assets Investments and other assets Investment securities Long-term loans receivable Distressed receivables Deferred tax assets Retirement benefit asset Other Allowance for doubtful accounts Total investments and other assets Total non-current assets Deferred assets Total assets 10 (Millions of yen) As of March 31, 2022 Liabilities Current liabilities Electronically recorded obligations – operating Account payable for works in progress and other Short-term borrowings Current portion of non-recourse loans Lease liabilities Accounts payable – other Income taxes payable Advances received on construction contracts in progress Provision for repairs Provision for bonuses Provision for bonuses for directors (and other officers) Provision for share awards Provision for warranties for completed construction Provision for loss on construction contracts Liabilities related to right to operate public facilities Liabilities related to replacement investment to operate public facilities Liabilities related to right to operate public facilities Liabilities related to replacement investment to operate Other Total current liabilities Non-current liabilities Bonds payable Long-term borrowings Non-recourse loans Lease liabilities Deferred tax liabilities Retirement benefit liability public facilities 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 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 11 6,933 110,997 84,492 *3 1,194 236 9,614 10,896 34,862 181 8,080 406 379 1,083 836 4,555 1,016 23,468 299,236 45,000 52,851 *3 9,947 451 14,305 16,767 103,843 24,588 3,573 271,330 570,566 20,000 134,117 198,273 (24,342) 328,048 18,275 3 (95) 680 18,863 8,953 355,865 926,432 (2) Consolidated Statement of Income and Comprehensive Income Consolidated Statement of Income (Millions of yen) Fiscal year ended March 31, 2022 390,678 292,234 682,912 *2 338,718 *1,*2 252,583 591,302 51,959 39,651 91,610 *3 54,120 37,489 221 2,253 543 652 407 4,078 2,571 960 3,531 38,036 *5 331 7,808 320 8,460 *6 529 686 *7 494 261 1,972 44,524 14,649 95 14,744 29,779 3,089 26,689 Net sales Net sales of completed construction contracts Sales in other businesses Total net sales Cost of sales Total cost of sales Gross profit Cost of sales of completed construction contracts Cost of sales in other businesses Gross profit on completed construction contracts Gross profit – other business Total gross profit Selling, general and administrative expenses Operating profit Non-operating income Interest income Dividend income Foreign exchange gains Share of profit of entities accounted for using equity method Other Total non-operating income Non-operating expenses Interest expenses Other Total non-operating expenses Ordinary profit Extraordinary income Gain on sale of non-current assets Gain on sale of investment securities Other Total extraordinary income Extraordinary losses Loss on retirement of non-current assets Loss on valuation of investment securities Impairment losses Other Total extraordinary losses Profit before income taxes Income taxes – current Income taxes – deferred Total income taxes Profit Profit attributable to non-controlling interests Profit attributable to owners of parent 12 Consolidated Statement of Comprehensive Income 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 parent Comprehensive income attributable to non-controlling interests (Millions of yen) Fiscal year ended March 31, 2022 29,779 (13,905) 46 (71) 854 52 (13,023) 16,756 17,029 (273) 13 (3) Consolidated Statement of Changes in Shareholders’ Equity Fiscal year ended March 31, 2022 Share capital Capital surplus Retained earnings Treasury shares Shareholders’ equity (Million yen) Total shareholders’ equity Balance at beginning of period 28,463 37,549 (2,833) 241,706 28,463 37,549 (2,833) 241,528 Increase by share transfers (8,463) 193,866 (8,463) 20,000 96,567 134,117 19,925 198,273 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 Non-controlling interests Total net assets Balance at beginning of period 29,218 (19) (883) 28,317 97,504 367,527 Restated balance 29,218 (19) (883) 28,317 97,504 367,350 Cumulative effects of changes in accounting policies Restated balance Changes during period Dividends of surplus Profit attributable to owners of parent Purchase of treasury shares Disposal of treasury shares Cancellation of treasury shares Change in ownership interest of parent due to transactions with non-controlling interests Change in scope of consolidation Net changes in items other than shareholders’ equity Total changes during period Balance at end of period Cumulative effects of changes in accounting policies Changes during period Dividends of surplus Profit attributable to owners of parent Purchase of treasury shares Disposal of treasury shares Cancellation of treasury shares Change in ownership interest of parent due to transactions with non-controlling interests Change in scope of consolidation Increase by share transfers Net changes in items other than shareholders’ equity Total changes during period Balance at end of period (10,942) (10,942) 18,275 23 23 3 589 (97,782) (78) (26) 2 2 14 178,526 (177) 178,348 (7,144) 26,689 0 (141) 520 (22,406) 1,374 97,923 (98,401) (21,509) (24,342) 0 (78) (177) (7,144) 26,689 (22,406) 1,964 – 494 87,001 86,519 328,048 (177) (7,144) 26,689 (22,406) 1,964 – (78) 494 87,001 (98) (98) (95) 1,563 1,563 680 (9,453) (88,551) (98,004) (9,453) (88,551) (11,484) 18,863 8,953 355,865 (4) Consolidated Statement of Cash Flows Cash flows from operating activities Profit before income taxes Depreciation Impairment losses Amortization of goodwill Increase (decrease) in allowance for doubtful accounts Increase (decrease) in provision for loss on construction contracts Increase (decrease) in retirement benefit liability Interest and dividend income Interest expenses Foreign exchange losses (gains) Share of loss (profit) of entities accounted for using equity method Loss (gain) on sale of short-term and long-term investment securities Loss (gain) on valuation of short-term and long-term investment securities Loss (gain) on sale of non-current assets Loss on retirement of non-current assets Decrease (increase) in trade receivables Decrease (increase) in costs on construction contracts in progress Decrease (increase) in inventories Decrease (increase) in consumption taxes refund receivable Increase (decrease) in trade payables Increase (decrease) in advances received on construction contracts in progress Increase (decrease) in deposits received Other, net Subtotal Interest and dividends received Interest paid Income taxes paid Net cash provided by (used in) operating activities (Millions of yen) Fiscal year ended March 31, 2022 44,524 24,890 494 6,748 84 206 (2,985) (2,475) 2,571 (169) (638) (7,807) 686 (309) 529 (41,622) (1,238) (287) 1,391 122 (2,119) (20,840) (2,963) (1,208) 3,131 (2,286) (15,970) (16,333) 15 (Millions of yen) Fiscal year ended March 31, 2022 Cash flows from investing activities Purchase of property, plant and equipment and intangible assets Purchase of rights to operate public facilities Payments for replacement investment to operate public facilities Proceeds from sale of property, plant and equipment and intangible assets Purchase of investment securities Proceeds from sale and redemption of investment securities Purchase of shares of subsidiaries and associates Loan advances Proceeds from collection of loans receivable Other, net Net cash provided by (used in) investing activities Cash flows from financing activities Net increase (decrease) in short-term borrowings Repayments of long-term borrowings Decrease in non-recourse payable Redemption of bonds Repayments of finance lease liabilities Proceeds from sale of treasury shares Purchase of treasury shares Dividends paid Dividends paid to non-controlling interests Purchase of shares of subsidiaries not resulting in change in scope of consolidation Other, net Net cash provided by (used in) financing activities Effect of exchange rate change on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of period Increase in cash and cash equivalents resulting from inclusion of subsidiaries in consolidation Cash and cash equivalents at end of period (21,698) (4,168) (1,676) 686 (4,551) 11,018 (3,311) (20) 704 469 (22,547) 72,490 (21,893) (1,313) (5,000) (433) 1,690 (17,876) (7,144) (5,304) 160 (86) 15,288 163 (23,429) 98,976 471 *1 76,018 16 (5) Notes to Consolidated Financial Statements (Notes on going concern assumption) Not applicable. (Important matters that form the basis for preparation of consolidated financial statements) The Company was established on October 1, 2021, as a wholly-owning parent company of Maeda Corporation, Maeda Road Construction Co., Ltd. and Maeda Seisakusho Co., Ltd. by means of a joint share transfer. The Company, the wholly-owning parent company established through the joint share transfer, has succeeded to and prepared the consolidated financial statements of Maeda Corporation, the former parent company that became a wholly owned subsidiary through the share transfer. 1. Scope of consolidation (1) Number of consolidated subsidiaries: 27 Names of consolidated subsidiaries Maeda Corporation Maeda Road Construction Co., Ltd. Maeda Seisakusho Co., Ltd. Effective from the current fiscal year, Neox Inc. and Sun Network Maeda Co., Ltd. which had been non-consolidated subsidiaries, are included in the scope of consolidation due to their increased importance. In addition, Anonymous Association Goyozan Solar Power and Anonymous Association Mine Solar Power, which were consolidated subsidiaries, were excluded from the scope of consolidation due to their sale to an anonymous association equity interest. (2) Number of major non-consolidated subsidiaries Company name: J.CITY Corporation (Reason for excluding from scope of consolidation) Non-consolidated subsidiaries are excluded because they are small companies and their combined total assets, net sales, net income/loss (the amount equivalent to equity), and retained earnings (the amount equivalent to equity) have no material impact on the consolidated financial statements. 2. Matters with regard to the equity method (1) Number of non-consolidated subsidiaries accounted for by the equity method: 1 Company name: J.CITY Corporation (2) Number of affiliates accounted for by the equity method: 5 Name of principal company: Toyo Construction Co., Ltd. (3) Non-consolidated subsidiaries (Chiba City Consumer Life PFI Service Co., Ltd., others) and affiliates (Toyota City Eastern School Lunch Center Co., Ltd., others), which are not accounted for by the equity method, are excluded from the application of the equity method because they have only a minor impact on net income or loss (amount corresponding to equity) and retained earnings (amount corresponding to equity), and lack overall importance. 3. Matters with regard to the fiscal year of consolidated subsidiaries Among consolidated subsidiaries, the account settlement date of Maeda Pacific Corporation is December 31. Consequently, in preparing the consolidated financial statements, the Company uses the financial statements of the subsidiaries as of their fiscal year-end, and makes necessary adjustments for significant transactions that occurred between their fiscal year-end and the consolidated fiscal year-end. 4. Matters with regard to accounting policies (1) Valuation standard and valuation method of important assets 1) Securities Bonds held to maturity Stated using the amortized cost method (straight-line method) Available-for-sale securities Those other than shares, etc. without market value Stated using the market price method (Net unrealized gains or losses on these securities are included directly in overall net assets, and costs of securities sold are calculated based on the moving-average method). Shares, etc. without market value Mainly stated at cost determined by the moving-average method. 17 2) Derivatives Stated at fair value. 3) Inventories Costs on construction contracts in progress Stated at cost by the specific identification method. Real estate for sale, merchandise and finished goods, project costs for development and others, and raw materials and supplies Stated using the specific identification cost method (write-down according to decreased profitability). Certain consolidated subsidiaries state raw materials and supplies at cost determined by the last purchase price method (write-down according to decreased profitability). (2) Depreciation and amortization method for significant depreciable assets 1) Property, plant and equipment (excluding leased assets) Stated using the declining-balance method. However, buildings (excluding building fixtures) acquired on or after April 1, 1998 and equipment and structures attached to buildings acquired on or after April 1, 2016 are depreciated by the straight-line method. Useful life and residual value are mainly based on the same standard as stipulated in the Corporation Tax Law of Japan. Certain assets of consolidated subsidiaries are depreciated using either the straight-line method or the unit-of-production method, and the useful life of the straight-line method is based on the economic useful life of the asset. 2) Intangible assets (excluding leased assets) and long-term prepaid expense Stated using the straight-line method. However, the unit-of-production method is used for right to operate public facilities and assets related to replacement investment to operate public facilities. Software of the Company is amortized by the straight-line method over 5 years, the useful life set by the Company. 3) Leased assets The leased assets under finance lease contracts that transfer ownership to the lessee are depreciated by the same method applicable to the Company’s own fixed assets, but the leased assets that do not transfer ownership are fully depreciated to a zero residual value by the straight-line method over the period of the lease contract. Bond issuance expenses and inaugural expenses are fully amortized at the time of expenditure. (3) Handling method of deferred assets 1) Bond issuance expenses and inaugural expenses 2) Opening expenses Amortized on a straight-line basis over 5 years (4) Basis for recognition of significant reserves 1) Allowance for doubtful accounts To provide for losses due to bad debt, an allowance is provided for general receivables based on historical bad debt ratios, and for specific doubtful receivables based on a case-by-case determination of collectability. A provision for repair costs of heavy machinery has been provided based on an estimated cost until the current fiscal year. 2) Provision for repairs 3) Provision for bonuses To provide for the payment of bonuses to employees, a provision is provided for the estimated amount of bonuses to be paid, which is to be borne by the Company in the current fiscal year. 4) Provision for bonuses for directors (and other officers) To provide for the payment of bonuses to directors and other officers, a provision is provided for the estimated amount of bonuses to be paid in the current fiscal year. 5) Provision for warranties for completed construction To provide for expenses related to defect guarantees on completed construction contracts, a provision is provided based on actual results over a certain period of time in the past. 18 6) Provision for loss on construction contracts To prepare for future losses on construction contracts, a provision is provided for estimated losses on construction contracts in progress at the end of the current fiscal year for which losses are expected and the amount of such losses can be estimated in a reasonable manner. 7) Provision for share awards To prepare for future payments of the Company’s shares to directors and other officers in accordance with the Officers’ Share Benefit Regulations, a provision is provided for the estimated amount of the share benefit obligation as of the end of the current fiscal year. (5) Accounting method for retirement benefits 1) Method of attributing estimated retirement benefits to periods In calculating the retirement benefit obligation, the estimated amount of retirement benefits is attributed to the period up to the end of the current fiscal year based on the benefit formula method. Certain consolidated subsidiaries use the straight-line attribution method. 2) Method of amortizing actuarial gains and losses and prior service cost Actuarial gains and losses are amortized by the straight-line method over a fixed number of years (10 to 15 years) within the average remaining service period of employees at the time the gains or losses are recognized, and the amount is expensed from the following fiscal year. Prior service cost is amortized by the straight-line method over a fixed number of years (10 to 15 years) within the average remaining service period of employees at the time the cost is incurred. 3) Adoption of the simplified method by small enterprises, etc. Certain consolidated subsidiaries apply the simplified method in which the retirement benefit amount required for voluntary termination at year-end is deemed a retirement benefit obligation for the calculation of retirement benefit liability and retirement benefit expenses. (6) Significant hedge accounting methods 1) Hedge accounting methods Hedging instruments Hedged items 3) Hedging policy Deferred hedge accounting is applied. Forward exchange contracts that qualify for hedge accounting are accounted for using the allocation method, and interest rate swaps that qualify for special matching criteria are accounted for using special accounting treatment. 2) Hedging instruments and hedged items Derivative transactions (interest rate swap transactions and forward exchange contracts) Assets or liabilities with potential losses due to market fluctuations, etc., for which cash flows are fixed and fluctuations are avoided. Intended to avoid the risk of future fluctuations in interest rates and foreign exchange rates. 4) Methods of assessing the hedging effectiveness The cumulative cash flow fluctuation of the hedged item and the hedging instrument are compared for the respective periods. (7) Basis for recording significant revenues and expenses The Group applies the “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, March 31, 2020) and the “Implementation Guidance on Accounting Standard for Revenue Recognition” (ASBJ Guidance No. 30, March 26, 2021) and recognizes revenue based on the following five-step approach. Step 1. Identify the contract(s) with a customer Step 2. Identify the performance obligations in the contract Step 3. Determine the transaction price Step 4. Allocate the transaction price to the performance obligations in the contract Step 5. Recognize revenue when (or as) the entity satisfies a performance obligation principal operations are as follows 19 The identification of performance obligations and the point in time at which revenue is recognized in the Company Group’s 1) Revenue recognition with regard to construction work The Group enters into construction contracts with customers, mainly in the civil engineering, construction, and road civil engineering businesses, to construct buildings or structures and to perform related services. The Group identifies the work it performs with respect to these contracts as performance obligations. For construction contracts for which the degree of completion can be reasonably estimated, the percentage of completion is estimated by the input method based on the cost incurred, and revenue is recognized over a period of time as the performance obligation to transfer goods or services to the customer is satisfied. Except for the initial stages of a contract, revenue is recognized on a cost recovery basis for construction projects for which the progress of completion cannot be reasonably estimated. For construction contracts with a very short period of time between the transaction commencement date and the point in time when the performance obligation is expected to be fully satisfied, revenue is recognized when the performance obligation is fully satisfied. For construction projects that require a long period of time from the satisfaction of performance obligations to the receipt of consideration from the customer and for which a significant financial component is recognized, an adjustment shall be made for the portion that corresponds to financial income. 2) Revenue recognition with regard to sales of merchandise, product manufacturing and sales The Group manufactures and sells asphalt mixture, emulsion, and other construction materials in the road civil engineering business, and sells construction equipment products and manufactures and sells industrial machinery and other equipment in the machinery business. The Group recognizes the work it performs with respect to these as performance obligations. For the sale of these goods and products, the Company Group recognizes revenue at the time of their delivery because control is transferred to the customer and the performance obligation is satisfied when the goods or products are delivered to the customer. The Group does not recognize a significant financing component because the consideration is generally received within approximately one year of satisfaction of the performance obligation. 3) Revenue recognition with regard to renewable energy and concession businesses In infrastructure management, the Company Group sells electricity from renewable energy sources and maintains, manages, and operates public facilities for which the Company Group holds operating rights. In these businesses, revenue is recognized at a point in time because the performance obligation is satisfied when the services are rendered to the customer. The Group does not recognize a significant financing component because the consideration is generally received within approximately one year of satisfaction of the performance obligation. (8) Amortization of goodwill and amortization period In the case the amount is significant, goodwill is amortized on a straight-line basis over 5 years. In case the amount is immaterial, goodwill is charged to expense in the current fiscal year. (9) Scope of funds in the consolidated statement of cash flows Consists of cash, demand deposits, time deposits with maturities of three months or less, certificates of deposit, and commercial paper. (10) Other important matters for preparation of consolidated financial statements Accounting treatment principles and procedures adopted in the absence of clear provisions of related accounting standards, etc. Method of accounting treatment for construction joint ventures (JVs) Assets, liabilities, income and expenses are recognized primarily in proportion to the member’s investment. 20 (Changes to accounting policies) Application of Accounting Standard for Revenue Recognition, etc. The “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, March 31, 2020; hereinafter the “Revenue Recognition Standard”), etc., has been applied from the beginning of the current fiscal year, and revenue is recognized at the amount expected to be received in exchange for the promised goods or services when control of the goods or services is transferred to the customer. Previously, the Company Group applied the percentage-of-completion method for construction projects for which the outcome of construction activity is deemed certain during the course of the activity, and the completed-contract method for other projects. From the beginning of the current fiscal year, for construction projects for which the degree of completion pertaining to the satisfaction of performance obligations can be reasonably estimated, the Company Group recognizes revenue over a certain period of time as performance obligations are satisfied. The Company Group primarily applies the input method based on the cost incurred as a method of estimating the degree of completion pertaining to the satisfaction of performance obligations. Except for the initial stage of a contract, the Company Group recognizes revenue using the cost recovery method for construction projects for which the degree of completion pertaining to the satisfaction of performance obligations cannot be reasonably estimated but for which the Company Group expects to recover the costs incurred. For construction contracts with a very short period between the commencement date of the transaction in the contract and the date when the performance obligations are expected to be fully satisfied, the Company Group recognizes revenue when the performance obligations are fully satisfied. For the application of the Revenue Recognition Standard, etc., the Company Group has followed the transitional treatment prescribed in the proviso to Paragraph 84 of the Revenue Recognition Standard, and the cumulative effect of retroactively applying the new accounting policies prior to the beginning of the current fiscal year has been added to or deducted from retained earnings at the beginning of the current fiscal year, and the new accounting policies have been applied from the balance at the beginning of said period. However, the Company Group has applied the method prescribed in Paragraph 86 of the Revenue Recognition Standard and has not applied the new accounting policies retrospectively to contracts for which almost all revenue amounts were recognized in accordance with the previous treatment prior to the beginning of the current fiscal year. In addition, the Company Group has applied the method prescribed in Paragraph 86, Subparagraph 1 of the Revenue Recognition Standard to account for contract changes made prior to the beginning of the current fiscal year based on the contract terms after reflecting all contract changes, and has added or subtracted its cumulative effect to retained earnings at the beginning of the current fiscal year. As a result, operating profit decreased by ¥34 million, as net sales and cost of sales for the current fiscal year increased by ¥1,646 million and ¥1,681 million, respectively. Due to an increase of ¥162 million in non-operating income, ordinary profit and profit before income taxes both increased by ¥127 million. In addition, the balance of retained earnings at the beginning of the current period decreased by ¥177 million. Application of Accounting Standard