サニックス（4651） – [Delayed]Consolidated Financial Results for the Fiscal Year Ended March 31, 2022 (Under Japanese GAAP)

Note: This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail. May 16, 2022 Consolidated Financial Results for the Fiscal Year Ended March 31, 2022 (Under Japanese GAAP) https://sanix.jp/lang_en/ Tokyo Stock Exchange / Fukuoka Stock Exchange Company name: SANIX INCORPORATED Listing: Securities code: 4651 URL: Representative: Hiroshi Munemasa, President and Representative Director Inquiries: Telephone: Scheduled date of annual general meeting of shareholders: June 29, 2022 Scheduled date to commence dividend payments: Scheduled date to file annual securities report: Preparation of supplementary material on financial results: Yes Holding of financial results briefing: – June 29, 2022 Hiroshi Soga, Executive officer, Division manager of Corporate Planning Division +81-92-436-8882 Yes (for Institutional investor) (Yen amounts are rounded down to millions, unless otherwise noted.) 1. Consolidated financial results for the fiscal year ended March 31, 2022 (from April 1, 2021 to March 31, 2022) (1) Consolidated operating results (Percentages indicate year-on-year changes.) Net sales Operating profit Ordinary profit Profit attributable to owners of parent Fiscal year ended Millions of yen % Millions of yen % Millions of yen % Millions of yen % March 31, 2022 March 31,2021 50,936 49,416 3.1 (5.9) (2,618) – (2,900) – 2,325 (16.7) 2,091 (19.3) (3,449) 1,965 – 6.2 Note: Comprehensive income For the fiscal year ended March 31,2022: For the fiscal year ended March 31,2021: ¥(3,360) million ¥2,040 million [-%] [9.5%] Basic earnings per share Diluted earnings per share Return on equity Ratio of ordinary profit to total assets Ratio of operating profit to net sales Fiscal year ended March 31,2022 March 31,2021 Yen (72.16) 41.11 Yen – – % (54.0) 27.9 % (8.5) 6.4 % (5.1) 4.7 Reference: Share of profit (loss) of entities accounted for using equity method For the fiscal year ended March 31,2022: ¥- million For the fiscal year ended March 31,2021: ¥- million The Company started to apply the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 31, 2020), etc. at the beginning of the fiscal year under review. Therefore, figures for the fiscal year ended March 31, 2022 reflect the application of the said Accounting Standard, etc. As of March 31,2022 March 31,2021 Reference: Equity 2. Cash dividends Fiscal year ended March 31,2021 Fiscal year ended March 31,2022 Fiscal year ending March 31,2023 (Forecast) (2) Consolidated financial position Total assets Net assets Equity-to-asset ratio Net assets per share Millions of yen Millions of yen 34,953 32,940 4,732 8,097 % 13.5 24.5 Yen 98.52 168.84 As of March 31,2022: As of March 31,2021: ¥4,709 million ¥8,071 million The Company started to apply the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 31, 2020), etc. at the beginning of the fiscal year under review. Therefore, figures for the fiscal year ended March 31, 2022 reflect the application of the said Accounting Standard, etc. (3) Consolidated cash flows Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Cash and cash equivalents at end of period Fiscal year ended March 31,2022 March 31,2021 Millions of yen Millions of yen Millions of yen Millions of yen (3,067) 2,756 (2,937) (2,564) 4,447 (743) 3,243 4,760 Annual dividends per share First quarter-end Second quarter-end Third quarter-end Fiscal year-end Total Total cash dividends (Total) Payout ratio (Consolidated) Ratio of dividends to net assets (Consolidated) Yen Yen Yen Yen Yen Millions of yen % % 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 – – – – – 3. Consolidated financial forecasts for the fiscal year ended March 31, 2023(from April 1, 2022 to March 31, 2023) Net sales Operating Income Ordinary Income Profit attributable to owners of parent Basic earnings per share Millions of Yen % Millions of Yen % Millions of Yen % Millions of Yen % 24,279 4.9 779 32.2 666 35.8 562 325.4 51,319 0.8 2,113 – 1,841 – 1,441 – Yen 11.76 30.16 First Half Full Year * Notes (1) Changes in significant subsidiaries during the period (changes in specified subsidiaries resulting in the change in scope of consolidation): None Newly included: – companies (Company name) – companies (Company name) Excluded: (2) Changes in accounting policies, changes in accounting estimates, and restatement (i) Changes in accounting policies due to revisions to accounting standards and other regulations: Yes/ (ii) Changes in accounting policies due to other reasons: None (iii) Changes in accounting estimates: None (iv) Restatement: None Note :For details, please see 3.Consolidated Financial Statements and Main Notes to the Statements (5) Notes to the Consolidated Financial Statements (Changes in Accounting Policies) on page 23 of the attachment. (3) Number of issued shares (common shares) (i) Total number of issued shares at the end of the period (including treasury shares) (ii) Number of treasury shares at the end of the period As of March 31,2022 As of March 31,2021 As of March 31,2022 As of March 31,2021 (iii) Average number of shares outstanding during the period Fiscal year ended March 31,2022 Fiscal year ended March 31,2021 [Reference] Overview of non-consolidated financial results 48,919,396 shares 48,919,396 shares 1,114,838 shares 1,114,693 shares 47,804,606 shares 47,804,857 shares 1. Non-consolidated financial results for the fiscal year ended March 31,2022 (from April 1,2021 to March 31,2022) (1) Non-consolidated operating results (Percentages indicate year-on-year changes.) Net sales Operating profit Ordinary profit Profit Fiscal year ended Millions of yen % Millions of yen % Millions of yen % Millions of yen % March 31,2022 March 31,2021 45,627 46,518 (1.9) (5.6) (3,338) – (3,048) – (3,374) – 1,088 (14.4) 1,304 (18.4) 1,286 20.4 Basic earnings per share Diluted earnings per share Fiscal year ended March 31,2022 March 31,2021 Yen (70.58) 26.92 Yen – – The Company started to apply the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 31, 2020), etc. at the beginning of the fiscal year under review. Therefore, figures for the fiscal year ended March 31, 2022 reflect the application of the said Accounting Standard, etc. (2) Non-consolidated financial position Total assets Net assets Equity-to-asset ratio Net assets per share % 3.6 17.2 Yen 20.71 91.75 As of March 31,2022 March 31,2021 Millions of yen Millions of yen 27,835 25,441 989 4,386 Reference: Equity As of March 31,2022: As of March 31,2021: ¥989 million ¥4,386 million The Company started to apply the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 31, 2020), etc. at the beginning of the fiscal year under review. Therefore, figures for the fiscal year ended March 31, 2022 reflect the application of the said Accounting Standard, etc. * Financial results reports are exempt from audit conducted by certified public accountants or an audit corporation. * Proper use of earnings forecasts, and other special matters The forward-looking statements, including results forecasts, included in this material are based on the information that the Company has obtained and certain assumptions that the Company considers reasonable. Actual results may differ significantly for a range of factors. The assumptions for the results forecasts and cautions in the use of the forecasts are described in 1. Information of Business Results & Financial Position for the fiscal year ended March 31, 2022, (4) Information on the Future Outlook, Including the forecasts of Consolidated Business Results on page 8 of the Attachment 1. Index of the attachment 1. Information on Business Results & Financial Position for the fiscal year ended March 31, 2022 ………………………………………………………………………………….. 2 (1) Information on Consolidated Business Results …………………………………………………………………. 2 (2) Information on Consolidated Financial Position …………………………………………………………………. 5 (3) Information on Consolidated Cash Flows ………………………………………………………………………….. 7 (4) Information on the Future Outlook, Including the Forecasts of Consolidated Business Results ……………………………………………………………………………………………………………………………… 8 (5) Important Matters Related to Going Concern Assumption …………………………………………….. 10 2. Basic Position regarding the Choice of Accounting Standards …………………………….. 11 3. Consolidated Financial Statements and Main Notes to the Statements ………………. 12 (1) Consolidated Balance Sheets …………………………………………………………………………………………… 12 (2) Consolidated Statements of Income and Comprehensive Income …………………………………….. 14 Consolidated Statements of Income ………………………………………………………………………………… 14 Consolidated Statements of Comprehensive Income ………………………………………………………. 15 (3) Consolidated Statements of Changes in Net Assets ……………………………………………………. 16 (4) Consolidated Statements of Cash Flows …………………………………………………………………………… 18 (5) Notes to the Consolidated Financial Statements ……………………………………………………………….. 20 Notes to the Assumption of a Going Concern ………………………………………………………………….. 20 Changes in accounting policy ………………………………………………………………………………………. 20 Segment Information ……………………………………………………………………………………………………. 23 Per-share information …………………………………………………………………………………………………… 25 Significant subsequent events ……………………………………………………………………………………… 26 4. Supplemental Information ………………………………………………………………………………………………. 27 Consolidated Net Sales by Division …………………………………………………………………………………………. 27 2 1. Information of Business Results & Financial Position for the fiscal year ended March 31, 2022 (1) Information on Consolidated Business Results During the fiscal year under review, the Japanese economy showed signs of recovery as the state of emergency declared due to the COVID-19 pandemic was ended in October 2021 and economic activity resumed. However, a new highly infectious variant of the COVID-19 coronavirus caused a sharp increase in the number of new infections nationwide in January 2022. Moreover, in addition to the impact of the global shortage of semiconductors on various industries, there were concerns about the impact of Russia’s invasion of Ukraine, and the outlook remained uncertain. In this situation, SANIX INCORPORATED and its consolidated subsidiaries (hereinafter the “Group”) continued their respective operations, while ensuring that COVID-19 preventive measures are taken. Net sales of the Solar Engineering (SE) Division declined reflecting the effects of the Feed-in Tariff (FIT) System revision in photovoltaic systems. However, net sales for the Home Sanitation (HS) Division, the Establishment Sanitation (ES) Division, the Environmental Resources Development (ERD) Division, and the Energy Business (EB) Division increased firmly year on year. As a result, the Group’s consolidated net sales for the consolidated fiscal year under review came to ¥50,936 million (up 3.1% year on year). As for consolidated operating income, in addition to the decline in net sales for the SE Division and a rise in material prices, etc., repair expenses were posted in connection with the legal inspections of Tomakomai power plant in the ERD Division. Further, power procurement costs increased significantly because the Japan Electric Power Exchange (JEPX) market prices of electric power in the EB Division’s PPS (Power Producer and Supplier) business rose sharply in October 2021 onward, and the tight power supply was caused by the earthquake off the coast of Fukushima Prefecture and global energy prices soared due to the Russia-Ukraine conflict in March 2022. In the SE Division and the EB Division, after considering the current business environment and future prospects, and examining the future recoverability, the Company recorded ¥226 million in impairment losses related to non-current assets owned as extraordinary losses. As a result, the Group posted an operating loss of ¥2,618 million (operating income of ¥2,325 million in the previous year), an ordinary loss of ¥2,900 million (ordinary income of ¥2,091 million in the previous year), and a loss attributable to owners of parent of ¥3,449 million (profit attributable to owners of parent of ¥1,965 million in the previous year). At the beginning of the fiscal year under review, the Company began applying the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 31, 2020), etc. Year-on-year increases (decreases) and percentage changes from the results for the previous fiscal year based on the previous accounting method are stated to explain consolidated business results. Please refer to “3. Consolidated Financial Statements and 3 the Primary Notes for the Fiscal Year Ended March 31, 2022 (5) Notes regarding the Consolidated Financial Statements (Changes in accounting policies)” for details. Consolidated results of individual divisions for this fiscal year were as follows: a. Solar Engineering (SE) Division In the SE Division, net sales for photovoltaic systems decreased 17.9% year on year, reflecting the effects of a smaller number of investment projects for business attributable to the FIT system revision, despite an increase in smaller projects for home use, etc. by focusing on photovoltaic systems for surplus and self-consumption. As a result, net sales in this segment decreased to ¥8,780 million (down 17.0% year on The segment posted an operating loss of ¥473 million (operating income of ¥250 million posted in the previous fiscal year) chiefly due to the impact of the decrease in net sales and the increase in material prices. year). b. Home Sanitation (HS) Division The HS Division refrained from new sales visits in areas where a state of emergency and quasi-emergency measures had been declared to prevent the spread of COVID-19. However, in other areas, sales activities were conducted as usual while taking thorough preventive measures. In addition, the number of sales offices increased 5 to a total of 53 for the fiscal year under review. By product, termite extermination services increased 2.1% year on year, the construction of underfloor/ceiling ventilation systems increased 5.9% year on year, basic repair work and housing reinforcement construction increased 16.8% year on year, and others rose 10.1% year on year. As a result, net sales for the segment totaled ¥12,421 million (up 7.5% year on year). Operating income for the segment amounted to ¥2,382 million (up 6.0% year on year) due to an increase of net sales and improvements in the efficiency of installation offsetting increased personnel and other expenses caused by the expansion of the workforce resulting from sales office openings. c. Establishment Sanitation (ES) Division The ES Division improved relationships with building and condominium owners and partner companies, including management companies, by expanding business through an active increase of personnel and the opening of new sales offices. In addition, the number of sales offices increased 3 to a total of 12, for the fiscal year under review. Net sales for the installation of the Company’s main anti-rust equipment (brand name: Daelman Shock) increased 0.6% year on year, and net sales for water supply and drainage repairs rose 16.8% year on year. Net sales for building water proofing work 4 also rose 13.8% year on year. As a result, net sales for the segment totaled ¥2,487 million (up 5.8% year on year). Operating income for the segment came to ¥227 million (down 17.8% year on year), with increases in personnel and other expenses by the expansion of staff resulting from sales office openings. d. Environmental Resources Development (ERD) Division In the ERD Division, plastic fuel sales increased 2.4% year on year due to an increase in the volume of waste accepted, waste water recycling rose 11.3% year on year, and final disposal increased 27.7％ year on year. In addition, net sales declined 4.0% year on year for power plants, the result of conducting biennial legal inspections on SANIX ENERGY’s Tomakomai power plant in April 2021. As a result, net sales for the segment totaled ¥17,008 million (up 2.6% year on year). Operating income for the segment amounted to ¥3,158 million (down 14.0% year on year) chiefly due to the recording of repair expenses associated with the legal inspection of the Tomakomai power plant. e. Energy Business (EB) Division In the EB Division, in the fiscal year under review, we shifted the Tomakomai power plant to direct wholesale sales to external customers, not through the PPS business. In addition, we changed to a method recognizing revenue on a net basis for some transactions associated with the adoption of the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 31, 2020), etc. Net sales decreased mainly because of these factors but the decrease was slight due to a higher negotiated sales value as a result of higher market prices during the winter season as well as an increase in the number of electricity retail contracts. As a result, net sales in this segment decreased to ¥10,296 million (down 1.7% year on year). The segment posted an operating loss of ¥4,435 million (operating loss of ¥529 million in the previous fiscal year). This was attributable to a cost increase associated with a large increase in electricity procurement costs due to an unusually sharp rise in the unit cost of power procurement in the wholesale electricity trading market (JEPX) from October 2021 in the PPS business, as well as the tight power supply caused by the suspension of the operation of thermal power plants due to the earthquake off the coast of Fukushima Prefecture and soaring global energy prices due to the Russia-Ukraine conflict in March 2022. New applications for electricity supply and demand contracts have been suspended since December 2021 due to a sharp rise in electricity procurement prices. 5 (2) Information of Consolidated Financial Position Information on the status of Assets, of Liabilities, and of Net Assets Total assets as of the end of the fiscal year under review amounted to ¥34,953 million, an increase of ¥2,013 million from the end of the previous consolidated fiscal year. Total liabilities stood at ¥30,221 million, an increase of ¥5,378 million from the end of the previous fiscal year. Net assets totaled ¥4,732 million, a decrease of ¥3,364 million from the end of the previous consolidated fiscal year. As a consequence, the shareholders’ equity ratio stood at 13.5% as of March 31, 2022. (The status of Assets) Current assets decreased ¥81 million compared to the end of the previous year, coming to ¥14,551 million (down 0.6% year on year). This was primarily due to increases in notes and accounts receivable-trade of ¥1,364 million, work in process-construction of ¥137 million, and other under current assets of ¥122 million due to an increase in consumption taxes refund receivable. Meanwhile, cash and deposits decreased ¥1,342 million and raw materials and supplies decreased ¥448 million. Fixed assets increased ¥2,095 million compared to the end of the previous year, amounting to ¥20,401 million (up 11.4% year on year). Major factors include a decrease in construction in progress of ¥1,517 million, while increases in machinery, equipment and vehicles of ¥1,233 million, buildings and structures of ¥1,194 million, and other under investments and other assets of ¥1,009 million due to an increase in long-term prepaid expenses. (The status of Liabilities) Current liabilities increased ¥4,856 million compared to the end of the previous year to ¥21,718 million (up 28.8% year on year). This result was largely attributable to increases in short-term loans payable of ¥3,521 million as power procurement funds in the PPS business and contract liabilities of ¥1,705 million through the application of Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 31, 2020), etc., other under current liabilities decreased ¥425 million. Non-current liabilities increased ¥522 million compared to the end of the previous year to ¥8,503 million (up 6.5% year on year). Major factors include decreases in long-term loans payable of ¥119 million and lease obligations of ¥185 million, with increases in other under non-current liabilities of 471 million due to a rise in long-term accounts payable, bonds payable of ¥200 million and liability related to retirement benefits of ¥103 million. 6 (The status of Net Assets) Net assets decreased ¥3,364 million compared to the end of the previous year, coming to ¥4,732 million (down 41.6% year on year). The key factors contributing to the decrease included the posting of loss attributable to owners of parent of ¥3,449 million. 7 (3) Information of Consolidated Cash Flows Cash and cash equivalents as of the end of the fiscal year under review decreased by ¥1,517 million compared to the end of the previous year, amounting to ¥3,243 Cash flows and reasons for changes in cash flows during the period are described (Net Cash Provided by Operating Activities) Net cash used in operating activities was ¥3,067 million (proceeds of ¥2,756 million in the previous year). This is mainly due to loss before income taxes of ¥3,127 million. (Net Cash Provided by Investment Activities) Net cash used in investing activities was ¥2,937 million (expenditure of ¥2,564 million in the previous year). This is mainly due to purchases of property, plant and equipment of ¥2,494 million. (Net Cash Provided by Financing Activities) Net cash provided by financing activities was ¥4,447 million (expenditure of ¥743 million in the previous year). Main factors include ¥3,521 million in short-term loans payable on the net value basis and ¥1,227 million in proceeds from sale and installment million. below. back. (Reference: The Cash Flow Indicators) FY2017 FY2018 FY2019 FY2020 FY2021 Fiscal Year Shareholders’ equity ratio 13.5% 13.4% 18.5% 24.5% 13.5% Shareholders’ equity ratio on a market price basis Interest-bearing liabilities ratio to cash flow Interest coverage ratio 43.8% 37.5% 42.0% 47.5% 35.5% 5.85 10.81 – – 3.04 4.16 21.61 13.02 – – (Note) Shareholder’s equity ratio: Shareholder’s equity/Total assets Share ratio on a market price basis: Total market value of stock/Total assets Interest-bearing liabilities ratio to cash flow: Operating cash flow/Interest payment Interest coverage ratio: Operating cash flow/Interest payment 1. The basis of the calculation for all values is consolidated financial data. 2. Market capitalization is calculated by multiplying the closing price of SANIX shares at the end of the fiscal year by the number of shares outstanding at the end of the fiscal year. 3. Operating cash flow refers to Cash Flows from Operating Activities according to the consolidated statement of cash flows. Interest-bearing liabilities are comprised of all liabilities on the consolidated balance sheet on which interest is payable. Interest expenditure refers to interest expenses paid according to the consolidated statement of cash flows. 8 (4) Information on the Future Outlook, Including the forecasts of Consolidated Business Results Regarding the outlook for the future, the COVID-19 pandemic is expected to continue impacting business. In these circumstances, the Group will continue to work to create a sustainable society based on its corporate philosophy of “A comfortable environment for the next generation” by innovating and leveraging its business experience in living environments, the resource cycle and the energy sector while taking all measures to prevent COVID-19 infections. The SE Division has changed the concepts behind products and the content of proposals and has shifted its business activities since FY2020 when a FIT system based on self-consumption was designed. With the recent surge in energy prices, electricity generated by photovoltaic systems is attracting attention. The Group will continue to advance the development of self-consumption photovoltaic systems for corporations and sales of the systems for home-use with storage batteries. Over the medium to long term, the Division assumes that markets for photovoltaic power generation systems for self-consumption, which reduce the environmental load through zero CO2 emissions while lowering electricity bills, the low initial investment PPA model (third-party owned), etc. will expand and spread across society. The HS Division will strive to reinforce its business base, increase its personnel through hiring, open sales offices and increase the number of new customers and the total number of customers by further enhancing community-based new business development and after-sales systems for existing customers. The ES Division will seek to cultivate partners such as management companies, introduce existing partners through close follow-ups, and increase opportunities for business negotiations with real estate owners, while in parallel facilitating new sales office openings. By doing so, it will continue to expand sales channels for the mainstay anti-rust equipment installation product (brand name: Daelman Shock). The ERD Division has been facilitating the improvement of the quality of plastic fuel and the efficient operation of factories. The Group will continue to strive to improve business performance by increasing acceptance volume while focusing on profitability. We will start selling a new centralized waste management system (product name: Sanix System) at the source of emissions, which will support not only the waste treatment business but also cumbersome tasks such as contracts, management forms (manifest slips), and performance reporting to local governments, leading to continuing business transactions. The Division will also aim to grow the waste water recycling business by facilitating the manufacturing of renewable energy while taking into consideration a role of the resource recycling business in society. Regarding the business environment, there has been a global increase in awareness of environment pollution issues derived from waste plastics 9 leading to the government’s formulation of a Plastic Resources Recycling Strategy in May 2019. The environment-related market is expected to expand in the future as well. The Group will operate its business with an understanding that the business of appropriately processing and recycling waste plastics, a business the Group has been active in to date, is a business that is very much needed by society. In the EB Division, we have decided to downsize the electric power retail business as we have judged that it will be difficult to secure profitability in the PPS business due to soaring prices in the wholesale electricity trading market (JEPX) and the prospect of energy prices remaining high for the time being due to the invasion of Ukraine by Russia. We will continue electricity supply and demand management operations with a view toward the commercialization of renewable energy introduction models such as self-consumption and PPA in sales of photovoltaic power generation systems, as well as energy management such as VPP. The Company’s rugby club, the Munakata Sanix Blues, was founded in 1994 and has been a member of Japan’s top rugby league since 2003, enhancing the corporate brand and contributing to the local community. However, as a result of a comprehensive assessment of the current business environment, we have given up on strengthening and continuing the team under the same structure as before, and have suspended the activities of the rugby club as of the end of the league matches in May 2022. In these circumstances, as for the forecast of consolidated financial results for the next fiscal year (ending March 31, 2023), the Group’s business performance is expected to achieve net sales of ¥51,319 million (up 0.8％ year on year), operating income of ¥2,113 million (operating loss of ¥2,618 million in the previous year), ordinary income of ¥1,841 million (ordinary loss of ¥2,900 million in the previous year), and profit attributable to owners of parent of ¥1,441 million (loss attributable to owners of parent of ¥3,449 million in the previous year). The above forecasts have been prepared based on information available as of the date of the announcement of the financial report. Actual results of operations may differ from forecasts due to many factors that may arise in the future. The Company plans to announce a new medium-term management plan (FY2022-FY2024) as soon as it has been formulated, as we are reconsidering our medium-term business development and outlook due to the uncertain outlook in light of the recent global situation. With respect to measures to address COVID-19, the Group will make efforts to continue its business in consideration of the situation that changes daily while prioritizing the safety of customers, business partners, community residents and employees and their families, preventing infections and any further spread. (Details of the Company’s measures are posted on its website) 10 (5) Important Matters Related to Going Concern Assumption In the consolidated fiscal year under review, the Group posted a significant operating loss, ordinary loss, and loss attributable to owners of parent, and there are events or circumstances that may cast significant doubt on the premise of the Company’s viability as a going concern. This is because power procurement costs increased significantly due to the fact that the JEPX market prices of electric power in the EB Division’s PPS business sharply rose in October 2021 onward, and the tight power supply was caused by the earthquake off the coast of Fukushima Prefecture, and global energy prices soared due to the Russia-Ukraine conflict in March 2022. The Group has changed its policy and decided to conclude supply contracts within the scope of negotiated procurement to resolve this situation. By suspending new applications for electricity supply and demand contracts, shifting some of its electricity retail contracts to agency contracts, and terminating unprofitable negotiated wholesale contracts in March 2022 without renewing them, the risk of price fluctuations in electricity procurement as of the end of the fiscal year under review has been significantly reduced. Meanwhile, business performance in other Divisions remained strong. In terms of funding, we have explained the situation to the financial institutions and received their understanding of financial support. We have already procured the necessary funds and have obtained their agreement not to exercise the right to claim for forfeiture of the benefit of time with regard to the violation of financial covenants that have arisen in some of our loans. Based on the above, the Group believes that there is no material uncertainty regarding the going concern assumption. 11 2. Basic Position regarding the Choice of Accounting Standards The Group will use the Japanese standards for the time being. In addition, our policy is to take proper steps toward the adoption of the International Financial Reporting Standards while giving due consideration to the circumstances in Japan and other countries. 3. Consolidated Financial Statements and Main Notes to the Statements (1) Consolidated Balance Sheets (In Millions of Yen) As of March 31 FY2020 FY2021 12 3,914 – 26 6,567 81 201 2,462 1,453 (154) 14,451 11,096 (8,277) 2,818 14,629 (10,394) 4,235 8,314 1,581 (780) 800 41 888 (717) 170 16,382 701 103 592 794 2,383 (555) 3,318 20,401 34,953 5,256 5,228 – – 36 63 2,910 1,330 (194) 14,633 9,622 (7,997) 1,624 13,243 (10,241) 3,002 8,094 1,513 (635) 877 1,559 970 (807) 163 15,322 773 120 666 611 1,373 (560) 2,210 18,306 32,940 Buildings and structures, net Less: Accumulated depreciation Buildings and structures (net of depreciation) Machinery, Equipment and vehicles, net Less: Accumulated depreciation Machinery, Equipment and vehicles (net of depreciation) Assets: Current Assets: Cash and deposits Notes and accounts receivable-trade Notes receivable Accounts receivable Merchandise and finished goods Work in process-construction Raw materials and supplies Other Allowance for doubtful accounts Total current assets Fixed Assets: Tangible fixed assets: Land Lease assets, net Less: Accumulated depreciation Lease Assets, net Construction in progress Other, net Less: Accumulated depreciation Other, net Total Tangible fixed assets Intangible fixed assets Investments and other assets: Investment securities Deferred tax assets Lease and guarantee deposits Other Allowance for doubtful accounts Total investments and other assets Total fixed assets Total Assets (In Millions of Yen) As of March 31 FY2020 FY2021 13 3,798 10,151 386 200 2,964 1,107 1,705 510 307 137 273 8 166 21,718 700 2,297 1,022 45 4 732 1,963 1,737 8,503 30,221 14,041 1 (7,995) (1,481) 4,566 43 100 (0) 142 22 4,732 34,953 4,037 6,630 230 – 2,696 1,121 476 152 602 256 – 5 648 16,861 500 2,417 1,208 45 9 675 1,859 1,265 7,981 24,842 1 14,041 (4,541) (1,481) 8,020 55 1 (5) 50 25 8,097 32,940 Liabilities: Current Liabilities: Notes and accounts payable-trade Short-term loans payable Current portion of long-term loans payable Current portion of bonds payable Accounts payable Accrued expenses Lease obligations Accrued income taxes Accrued consumption taxes Contract liabilities Provision for bonus Other Total current liabilities Non-Current Liabilities: Bonds payable Long-term loans payable Lease obligations Long-term lease deposited Allowance for resource-recycling expenses Provision for directors’ retirement benefits Provision for disposal site closing expenses Liability related to retirement benefits Other Total non-current 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 Adjustment for retirement benefits (cumulative) Total Accumulated other comprehensive income Non-controlling Interests Total Net Assets Total Liabilities and Assets (2) Consolidated Statements of Income and Comprehensive Income (Consolidated Statements of Income) (In Millions of Yen) From April 1 to March 31 FY2020 FY2021 Selling, General and Administrative expenses Provision of allowance for doubtful accounts Total selling, general and administrative expenses Net sales Cost of Sales Gross Profit Sales commission Advertising expenses Salaries and bonuses Provision for bonuses Retirement benefit expenses Legal welfare expenses Rent expenses Depreciation Other Operating Income (Loss) Non-Operating Income: Interest income Dividends income Land and house rent revenue Subsidy income Other Total non-operating income Non-Operating Expenses: Interest expenses Commission expenses Ordinary Income (Loss) Extraordinary losses Impairment losses Total extraordinary losses Income Taxes-Current Income Taxes-Deferred Total Income Taxes Net Income Loss on retirement of non-current asset Other Total non-operating expenses Income (Loss) Before Income Taxes and Minority Interests Net Income (Loss) Belonging to the Non-Controlling Shareholders Net income (Loss) Belonging to the Shareholders of the Parent Company 49,416 32,263 17,153 642 276 30 7,810 163 171 1,082 1,007 294 3,348 14,827 2,325 15 2 63 65 47 195 208 44 77 98 429 2,091 – – 2,091 189 (62) 127 1,964 (0) 1,965 14 50,936 38,842 12,093 696 353 (14) 7,406 171 195 1,053 1,030 345 3,474 14,711 (2,618) 12 2 63 7 51 137 251 25 75 68 420 226 226 246 78 325 (2,900) (3,127) (3,452) (3) (3,449) (In Millions of Yen) From April 1 to March 31 FY2020 1,964 FY2021 (3,452) (Consolidated Statements of Comprehensive Income) Income Before Minority Interests Other Comprehensive Income: Valuation difference on available-for-sale securities Foreign currency translation adjustment Retirement benefit adjustment Total other comprehensive income Comprehensive Net Income Comprehensive Income Attributable to Comprehensive income (loss) belonging to the shareholders of the parent company Comprehensive income (loss) belonging to non-controlling shareholders 23 91 (39) 75 2,040 2,041 (0) 15 (11) 99 5 92 (3,360) (3,357) (3) 16 (3) Consolidated Statements of Changes in Net Assets The previous consolidated fiscal year (April 1, 2020 to March 31, 2021) Shareholders’ equity Capital stock Capital surplus Retained earnings Treasury stock (In Millions of Yen) Total shareholders’ equity 14,041 1 (6,506) (1,481) 6,055 Balance at the beginning of current period Changes of items during the period Net income belonging to the shareholders of the parent company Purchase of treasury stock Net changes of items other than shareholders’ equity Total changes of items during the period Balance at the end of current period – 14,041 – 1 1,965 (0) 1,965 (0) 1,965 (0) 1,965 (4,541) (1,481) 8,020 Accumulated other comprehensive income Valuation difference on available for sale securities Foreign currency translation adjustment Retirement benefits adjustment Total accumulated other comprehensive income (In Millions of Yen) Minority interests Total net assets 31 (90) 34 (25) 26 6,056 23 23 55 91 91 1 (39) (39) (5) 75 75 50 (0) 1,965 (0) 75 (0) 2,040 25 8,097 Balance at the beginning of current period Changes of items during the period Net income belonging to the shareholders of the parent company Purchase of treasury stock Net changes of items other than shareholders’ equity Total changes of items during the period Balance at the end of current period The consolidated fiscal year (April 1, 2021 to March 31, 2022) 17 (In Millions of Yen) Total shareholders’ equity Shareholders’ equity Capital stock Capital surplus Retained earnings Treasury stock 14,041 1 (4,541) (1,481) 8,020 Restated balance 14,041 1 (4,545) (1,481) 8,016 Balance at the beginning of current period Cumulative effects of changes in accounting policies Changes of items during the period Net loss belonging to the shareholders of the parent company Purchase of treasury stock Net changes of items other than shareholders’ equity Total changes of items during the period Balance at the end of current period – 14,041 – 1 (4) (4) (3,449) (3,449) (0) (0) (3,449) (0) (3,449) (7.995) (1,481) 4,566 Accumulated other comprehensive income Valuation difference on available for sale securities Foreign currency translation adjustment Retirement benefits adjustment Total accumulated other comprehensive income (In Millions of Yen) Minority interests Total net assets 55 1 (5) 50 25 8,097 55 1 (5) 50 25 8,092 (11) (11) 99 99 5 5 92 92 (3) (4) (0) 89 (3,449) (3) (3,360) 43 100 (0) 142 22 4,732 Balance at the beginning of current period Cumulative effects of changes in accounting policies Restated balance Changes of items during the period Net loss belonging to the shareholders of the parent company Purchase of treasury stock Net changes of items other than shareholders’ equity Total changes of items during the period Balance at the end of current period (4) Consolidated Statements of Cash Flows (In Millions of Yen) April 1 to March 31 FY2020 FY2021 Net Cash Provided by (used in) Operating Activities : Income before income taxes and minority interests Depreciation and amortization Impairment losses Increase (decrease) in provision for retirement benefits for directors Increase (Decrease) in provision for bonuses Increase (Decrease) in allowance for disposal site closing expenses 37 Increase (Decrease) in allowance for resource-recycling expenses Increase (Decrease) in liabilities in retirement Increase (Decrease) in allowance for doubtful accounts Interest and dividends income Interest expenses Decrease (Increase) in notes and accounts receivable-trade Decrease (Increase) in inventories Decrease (Increase) in other current assets Increase (Decrease) in notes and accounts payable-trade Increase (Decrease) in accounts payable – other Increase (Decrease) in consumption tax refund receivable Increase (Decrease) in other current liabilities Net cash provided by operating activities Net Cash Provided by (used in) Investment Activities: Interest and dividends income received Other Subtotal Interest expenses paid Income taxes paid Income taxes refund Payments into time deposits Proceeds from withdrawal of time deposits Purchase of tangible fixed assets Proceeds from sales of tangible fixed assets Purchase of intangible assets Other Net cash provided by investing activities (2,564) (2,937) 18 (3,127) 1,509 226 (5) 17 57 (0) 109 (44) (14) 251 (1,332) 301 (88) (390) 138 (465) 71 30 14 (243) (172) 90 (2,756) (3,067) (851) 747 (2,494) 20 (140) (217) 2,091 1,097 – – (0) 3 91 (30) (18) 208 225 752 73 251 (898) (13) (368) 139 3,643 17 (211) (708) 15 2,756 (702) 909 (2,247) 8 (471) (62) April 1 to March 31 FY2021 FY2020 Net Cash Provided by (used in) Financing Activities: Increase (Decrease) in short-term loans payable Proceeds from long-term loans payable Repayments of long-term loans payable Proceeds from issuance of bonds Redemption of bonds Proceeds from sale and leaseback transactions Repayments of finance lease liabilities Proceeds from sale and installment back Repayments of installment payables Other Net cash provided by financing activities Effect of Exchange Rate Changes on Cash and Cash Equivalents Net Increase (Decrease) in Cash and Cash Equivalents Balance of Cash and Equivalents at beginning of period Balance of Cash and Equivalents at end of period (2,895) 2,420 (963) – – 635 (338) 681 (239) (44) (743) 52 (498) 5,259 4,760 19 3,521 297 (261) 1,000 (600) 185 (476) 1,227 (420) (25) 4,447 39 (1,517) 4,760 3,243 20 (5) Notes to the Consolidated Financial Statements (Notes to Assumption of Going Concern) : None (Changes in accounting policies) (Adoption of the Accounting Standard for Revenue Recognition） From the beginning of the first quarter of the fiscal year ending March 31, 2022, the Company began adopting the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29. March 31, 2020, hereinafter “Revenue Recognition Accounting Standard”), etc. The Company has decided to recognize revenue at the amount it expects to receive in exchange for the promised goods or services when control of the goods or services is transferred to the customer. Major changes due to the adoption of the Revenue Recognition Accounting Standard are as follows: period. 1. Revenue Recognition from the Satisfaction of Performance Obligations For some warrantied parts of solar photovoltaic generation systems sales, revenue was previously recognized, including revenue from system sales, at the completion of installation. However, we have changed to a method recognizing revenue over the warranty In addition, regarding retail sales of electricity, revenue was previously recognized based on the meter reading date (a method of recognizing revenue based on the amount of usage confirmed by meter readings conducted on days other than the end of each month). However, we have changed to a method estimating and recording the revenue generated from the date of meter reading conducted in the closing month to the closing date, in accordance with Paragraph 103-2 of the “Application Guidance on Revenue Recognition Accounting Standard ” (ASBJ Guidance No. 30, March 26, 2021). 2. Recognition of Revenue from Proxy Transactions For transactions in which the Group’s role in the sale to the customer is that of an agent, the Group previously recognized the total amount of the consideration received from the customer as revenue. However, the Group has changed to a method of recognizing revenue on a net basis deducting the amount paid to third parties from the total amount of the consideration. We apply the Revenue Recognition Accounting Standard, etc. in accordance with the transitional treatment prescribed in the proviso of Paragraph 84 of the Revenue Recognition Accounting Standard. The cumulative effect of retroactively applying the new accounting policy prior to the beginning of the fiscal year under review was added to or 21 deducted from retained earnings at the beginning of the fiscal year under review, and the new accounting policy has been applied from the beginning balance of the fiscal year under review. However, we have applied the method prescribed in Paragraph 86 of the Revenue Recognition Accounting Standard and have not retrospectively applied the new accounting policy to contracts in which almost all of the revenue amount was recognized in accordance with the previous treatment prior to the beginning of the fiscal year under review. In addition, we account for all contract changes made prior to the beginning of the fiscal year under review by applying the method prescribed in (1) of Paragraph 86 of the Revenue Recognition Accounting Standard based on the contract terms, after reflecting all contract changes, and added or subtracted their cumulative effect to or from retained earnings at the beginning of the fiscal year under review. In addition, notes and accounts receivable – trade, which was indicated under current assets in the consolidated balance sheets for the previous fiscal year, began to be included in notes receivables and accounts receivable from the fiscal year under review, and advances received, which was indicated in other under current liabilities, began to be included in contract liabilities from the fiscal year under review. In accordance with the transitional treatment prescribed in Paragraph 89-2 of the Revenue Recognition Accounting Standard, no reclassification has been made to the prior year’s consolidated financial statements to conform to the new presentation. As a result, compared to before the application of the Revenue Recognition Accounting Standard, etc. in the consolidated balance sheet for the fiscal year under review, accounts receivable increased ¥102 million, other under current assets increased ¥280 million, other under investments and other assets increased ¥1,039 million, notes and accounts payable-trade increased ¥141 million and contract liabilities increased ¥1,705 million, respectively, while other under current liabilities decreased ¥425 million. In the consolidated statement of income for the fiscal year under review, net sales, the cost of sales, and selling, general and administrative expenses decreased ¥1,515 million, ¥1,515 million and ¥10 million, respectively, while operating income, ordinary income and income before income taxes all increased ¥10 million. In the consolidated statement of cash flows for the fiscal year under review, income before income taxed increased ¥10 million. The initial balance of retained earnings in the consolidated statement of changes in net assets decreased by ¥4 million due to the application of the cumulative effect to net assets as of the beginning of the fiscal year under review. The effect on per-share information is stated in relevant sections. According to the transitional measures prescribed in Paragraph 89-3 of the Revenue Recognition Accounting Standard, information that breaks down revenue from contracts with customers for the previous fiscal year is not presented. 22 (Application of the Accounting Standard for Fair Value Measurement, etc.) The Company began applying the Accounting Standard for Fair Value Measurement (ASBJ Statement No. 30. July 4, 2019), etc. from the first quarter of the current fiscal year. Accordingly, the Company decided to apply into the future new accounting policies prescribed in the Accounting Standard for Fair Value Measurement, etc., in accordance with transitional treatment prescribed in Paragraph 19 of the said Accounting Standard and Paragraph 44-2 of the Accounting Standard for Financial Instruments (ASBJ Statement No. The application of the new accounting policies has no effect on quarterly consolidated 10. July 4, 2019). financial statements. 23 (In Millions of Yen) Consolidated (note2) Elimination or Group (note1) – – (2,123) (3,593) 49,416 2,325 (Segment information) ⅠInformation concerning the Amount of Net Sales and Operating Income (loss) by Segments SE HS ES ERD EB Total Sales to customers 10,584 11,549 2,351 14,467 10,463 49,416 49,416 – 2,111 12 2,123 (2,123) Total 10,584 11,549 2,351 16,578 10,475 51,540 Operating income (loss) 250 2,248 276 3,673 (529) 5,919 5,450 2,641 348 16,292 1,947 26,680 6,259 32,940 i) FY2020 (From April 1, 2020 to March 31, 2021) segment Sales: Internal sales Among segments and transfer accounts Assets Others: Depreciation Increase in property, plant and equipment and intangible assets – 86 116 – 42 30 2 8 736 5 873 2,248 13 2,417 223 666 1,097 3,083 (note1) Negative ¥3,593 million for adjustments of Operating income (loss) represents corporate expenses not allocated to reportable segments. Corporate expenses are mainly general and administrative expenses note attributable to reportable segments. (note2) An adjustment of segment assets is the Company assets of ¥6,259 million that are not allocated to the reportable segments and consist mainly of surplus funds for investment (cash and deposits), long-term invested funds (investment securities) and assets related to administrative divisions. (note3) Operating income (loss) is adjusted to operating loss of quarterly consolidated statements of income. ⅡInformation concerning the Amount of Net Sales and Operating Income (loss) by Segment i) FY2021 (From April 1, 2021 to March 31, 2022) 24 (note1) Negative ¥3,477 million for adjustments of Operating income (loss) represents corporate expenses not allocated to reportable segments. Corporate expenses are mainly general and administrative expenses note attributable to reportable segments. (note2) An adjustment of segment assets is the Company assets of ¥5,813 million that are not allocated to the reportable segments and consist mainly of surplus funds for investment (cash and deposits), long-term invested funds (investment securities) and assets related to administrative divisions. (note3) Operating income (loss) is adjusted to operating loss of quarterly consolidated statements of income. SEHSESERDEBTotalSalesSales and installationof PV system8,447—-8,447-8,447Wholesale of PVsystem261—-261-261Termite controlconstruction-3,641—3,641-3,641Under-floor/atticventilation system-3,141—3,141-3,141Foundation Repair/Home ReinforcementSystem-2,054—2,054-2,054Anti-rust equipmentinstallation–1,221–1,221-1,221Water supply anddrainage repair–659–659-659Waterproofing andrenovation of buildings–207–207-207Plastic fuel—10,574-10,574-10,574Power Plant—2,958-2,958-2,958Organic Waste liquidtreatment—2,073-2,073-2,073Landfill—911-911-911Sales of Electricity—-9,8089,808-9,808Others713,5843984614594,976-4,976Revenue fromcontracts withcustomers8,78012,4212,48716,97910,26850,936-50,936Sales　to customers8,78012,4212,48716,97910,26850,936-50,936Internal sales amongsegments and transferaccounts—282756(56)-Total8,78012,4212,48717,00810,29650,993(56)50,936(473)2,3822273,158(4,435)859(3,477)(2,618)5,3642,59534317,6863,14929,1405,81334,953OthersDepreciation634431,09831,2122971,509Impairment losses186–40226-226AssetsElimination orGroup (note1)Consolidated(note 2)SegmentsOperating income(loss)252,5172592,776Increase in property,plant and equipmentand intangible assets265132,41025 ii) Information on changes in reportable segments As described in (Changes in Accounting Policies), starting from the beginning of the fiscal year under review, the Company began adopting the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 31, 2020), etc. The Company has changed its accounting method for revenue recognition. Net sales in the SE Division increased by ¥145 million, net sales in HS Division, ERD Division, and EB Division decreased by ¥10 million, ¥206 million, and ¥1,338 million respectively for the fiscal year under review due to the change, compared with those under the previous accounting method. The impact on segment income or loss is immaterial. (Per-share information) FY2020 (Apr.1, 2020 to Mar.31, 2021) FY2021 (Apr.1, 2021 to Mar.31, 2022) Net assets per share Net Income per Share, Diluted ¥168.84 ¥41.11 ¥98.52 (¥72.16) 1. The diluted earnings per share for the fiscal year under review is not stated because it is net loss per share and there are no residual shares. The diluted earnings per share for the previous fiscal year is not stated because there are no residual shares. 2. As described in (Changes in Accounting Policies), the Company applied the Revenue Recognition Accounting Standard, etc. (ASBJ Statement No. 29, March 31, 2020) and followed the transitional measures prescribed in the proviso of Paragraph 84 of the Revenue Recognition Accounting Standard. Consequently, net assets per share increased ¥0.11 and net loss per share decreased ¥0.21 during the fiscal year under review. FY2020 (Apr.1, 2020 to Mar.31, 2021) FY2021 (Apr.1, 2021 to Mar.31, 2022) Total amount in net assets (¥ million) Amounts deducted from the total amount in net assets (¥ million) Non-controlling interests (¥ million) Net assets at the end of period on common shares (¥ million) Number of common shares at the end of period used in calculation of net assets per share (shares) 8,097 25 (25) 8,071 4,732 22 (22) 4,709 47,804,703 47,804,558 3.The calculation basis of net income per share is as follows. FY2020 (Apr.1, 2020 to Mar.31, 2021) FY2021 (Apr.1, 2021 to Mar.31, 2022) 26 (3,449) － (3,449) 1,965 － 1,965 47,804,857 47,804,606 Net Income per Share, Diluted (¥ million) The calculation basis of net income per share is as follows (¥ million) Profit attributable to owners of parent on common shares (¥ million) Average number of common shares during the fiscal year (shares) None (Significant subsequent events) 4. Supplemental Information Consolidated Net Sales by Division 27 (Note 1) Descriptions are omitted for items that are handled in such a wide range that it is difficult to grasp their quantity. (Note 2) 1,000 tsubo is approximately 3,305.785 ㎡. (Note 3) From the beginning of the first quarter of fiscal year ending March 31, 2022, the Company began adopting the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29. March 31, 2020), etc. The figures for the first quarter of the fiscal year ending March 31, 2022 are the figures after the application of the relevant accounting standards. 　（In Million of Yen）QTYAmountQTYAmountQTYAmountSales and installation of PV systemkW52,22510,28430,6058,447-21,620-1,837Wholesale of PV system－－210－261－50Others－－89－71－-17－－10,584－8,780－-1,803Termite control construction*1,000tsubo5793,5685893,641973Under-floor/attic ventilation system－－2,965－3,141－175Foundation Repair/Home Reinforcement SystemHouse4,2901,7594,9572,054667294Others－－3,256－3,584－327－－11,549－12,421－871Anti-rust equipment installationPiece1,1221,2141,1711,221497Water supply and drainage repair－－564－659－94Waterproofing and renovation ofbuildings－－182－207－25Others－－390－398－8－－2,351－2,487－135Plastic fuelｔ266,46410,330281,80110,57415,337244Power Plant－－3,110－2,986－-123Waste liquid treatmentｔ95,8821,863102,2102,0736,328209Landfill－－713－911－197Others－－561－461－-99－－16,578－17,008－429Sales of Electricity－－9,890－9,836－-54Others－－585－459－-125－－10,475－10,296－-179－－-2,123－-56－2,067－－49,416－50,936－1,520Establishment SanitationDivision TotalEnvironmental ResourcesDevelopment Division TotalTotal Net SalesItemUnitComparisonSolar Engineering Division TotalHome Sanitation Division TotalEnergy Business DivisionAdjustment of intersegment salesFrom April 1 to December 31FY2020FY2021