アネスト岩田（6381） – [Delayed]FY2021 Full-Year Consolidated Financial Results [Japan GAAP]

FY2021 Full-Year Consolidated Financial Results [Japan GAAP] (April 1, 2021 through March 31, 2022) May 10, 2022 Company Name Stock Exchanges on which the shares are listed Code Number URL Representative Contact Person Date of the Ordinary General Shareholders’ Meeting Payment Date of Cash Dividends Scheduled Date for Submission of Financial Statements Supplementary Materials Prepared for Financial Results Holding of the Financial Results Meeting : ANEST IWATA Corporation : Tokyo Stock Exchange in Japan : 6381 : https://www.anestiwata-corp.com : Shinichi Fukase, President : Takayoshi Iribe, General Manager of Corporate Planning Dept. : Tel. +81-(0)45-591-9344 : June 24, 2022 : June 27, 2022 : June 24, 2022 : Yes : Yes (for analysts and institutional investors) 1. Consolidated Results for FY2021 (April 1, 2021 through March 31, 2022) (1) Consolidated Financial Results Net Sales Operating Income Ordinary Income FY2021 FY2020 (Note) Comprehensive Income: FY2021 5,900 million yen (83.0%), FY2020 3,223 million yen (26.6%) Million Yen 42,337 35,588 Million Yen 4,780 3,444 Million Yen 5,572 4,253 % 38.8 (11.1) % 19.0 (9.0) (Amounts are rounded to the nearest million yen) (% of change from FY2020) Net Income Attributable to Owners of Parent Million Yen 3,541 2,623 % 35.0 (3.5) % 31.0 (3.4) Net Income per share – Basic Net Income per share – Diluted Return of Equity Return of Asset Operating Profit on Sales Yen ― ― Yen 86.32 63.34 FY2021 FY2020 (Reference) Equity in income of affiliates FY2021 359 million yen, FY2020 315 million yen (2) Consolidated Financial Position FY2021 FY2020 (Reference) Equity capital: FY2021 35,623 million yen, FY2020 32,242 million yen (3) Consolidated Cash Flow Million Yen 55,818 49,458 Million Yen 40,210 36,133 Total Assets Net Assets Net Cash provided by Operating Activities Net Cash used in Investing Activities % 10.4 8.3 % 10.6 8.7 Equity Ratio Net Assets per share % 63.8 65.2 % 11.3 9.7 Yen 876.20 784.91 Million Yen 3,889 4,602 Million Yen (1,078) (1,067) Million Yen (2,103) (1,958) Million Yen 12,916 11,643 Net Cash used in Financing Activities Cash and Cash Equivalents at End of Period End of 1st Quarter Yen ― ― ― Annual Cash Dividends per share End of 3rd Quarter End of 2nd Quarter Year-end Total Total Amount of Cash Dividends Dividends Payout Ratio (Consolidated) Dividends on Equity (Consolidated) Yen 12.00 13.00 15.00 Yen ― ― ― Yen 12.00 17.00 16.00 Yen 24.00 30.00 31.00 Million Yen 995 1,230 % 37.9 34.8 35.4 % 3.1 3.6 3. Forecast of Consolidated Results for FY2022 (April 1, 2022 through March 31, 2023) Net Sales Operating Income Ordinary Income (% of change from FY2021) Current Net Income Attributable to Owners of Parent Net Income per share Half-Year Full-Year Million Yen 21,500 44,000 % 5.6 3.9 Million Yen 2,430 4,900 % 2.1 2.5 Million Yen 2,750 5,650 % 3.0 1.4 Million Yen 1,700 3,580 % 0.7 1.1 Yen 41.63 87.67 FY2021 FY2020 2. Cash Dividends FY2020 FY2021 FY2022 (forecast) New: None Excluded: None * Note (1) Changes in specified subsidiaries during FY2021: None (Changes in specified subsidiaries that caused a change in scope of consolidation) (2) Change in accounting policy, change and restatement of accounting estimates (i) Change in accounting policy due to the revision of accounting standards, etc.: Yes (ii) Change in accounting policy for other reasons: (iii) Change in accounting estimates: (iv) Restatement: None None None (3) Number of shares issued (common share) (i) Number of shares issued at the end of each fiscal year (including treasury shares) (ii) Number of treasury shares at the end of each fiscal year (iii) Average number of shares outstanding in the period FY2021 FY2021 FY2021 41,745,505 shares 1,089,092 shares 41,028,335 shares FY2020 FY2020 FY2020 41,745,505 shares 667,323 shares 41,418,179 shares * We have introduced the performance-based stock compensation plan, “Board Benefit Trust (BBT)”, since FY2019. Accordingly, in the calculation of the current net income per share, the company shares owned by the Trust are included in the treasury shares, which are deducted in the calculation of the number of treasury shares at the end of each fiscal year and the average number of shares outstanding in the period. (Reference) Non-consolidated financial results Non-consolidated financial results in FY2021 (April 1, 2021 through March 31, 2022) (1) Non-consolidated Financial Results FY2021 FY2020 Million Yen 22,806 20,962 Net Sales % 8.8 23.8 Operating Income Million Yen 2,423 1,908 % 27 59.5 Ordinary Income Million Yen 3,666 2,965 (% of change from FY2020) Net Income % 23.7 6.4 Million Yen 2,751 3,708 % (25.8) 67.3 FY2021 FY2020 Net Income per share – Basic Net Income per share – Diluted Yen 67.06 89.54 Yen ― ― Total Assets (2) Non-consolidated Financial Position FY2021 FY2020 (Reference) Equity capital: FY2021 29,190 million yen, FY2020 27,852 million yen * These financial results are not subject to audits by certified public accountants or audit corporations. * Explanation of the appropriate use of the expected results of operations, other special notes Million Yen 37,842 35,662 Million Yen 29,190 27,852 Net Assets Equity Ratio % 77.1 78.1 Net Assets per share Yen 717.99 678.03 • Forecasts for operations and other descriptions about the future that are contained in this document are based on the information acquired at the time of publication, as well as certain premises that we judge reasonable. The actual results of operations and so on may change greatly as a result of various factors. For information about the conditions acting as the premise for the expected results of operations and notes on the use of the expected results of operations, see “(1) Explanation for results of operations and financial condition” on page 2 of Attachment. Contents of Attachment 1. Analysis of results of operations and financial condition …………………………………………………… 2 (1) Explanation for results of operations and financial condition ………………………………………… 2 (2) Basic policy for profit allocation and current and next-term dividends …………………………….. 4 (3) Risks of businesses, etc. ………………………………………………………………………………………. 4 2. Conditions of the corporate group ……………………………………………………………………………….. 9 3. Management policy ………………………………………………………………………………………………… 10 (1) Basic policy for corporate management …………………………………………………………………. 10 (2) Targeted management index ……………………………………………………………………………….. 10 (3) Mid- to long-term corporate management strategies …………………………………………………. 10 (4) Issues that the company should address ……………………………………………………………….. 10 4. Basic concept on choice of accounting standards …………………………………………………………. 11 5. Consolidated financial statements and main notes ……………………………………………………….. 12 (1) Consolidated balance sheets ……………………………………………………………………………… 12 (2) Consolidated profit and loss statements and consolidated statements of comprehensive income ………………………………………………………………………………………. 14 (3) Consolidated statements of changes in shareholders’ equity ……………………………………… 17 (4) Consolidated cash flow statements ……………………………………………………………………….. 19 (5) Notes on consolidated financial statements …………………………………………………………….. 21 (Notes on the premise of a going concern) ……………………………………………………………… 21 (Basic, important matters for preparing consolidated financial statements) ……………………. 21 (Change of accounting policy)………………………………………………………………………………. 23 (Changes in presentation method) ………………………………………………………………………… 23 (Additional information)……………………………………………………………………………………….. 24 (Related to consolidated balance sheets) ……………………………………………………………….. 25 (Related to consolidated profit and loss statements) …………………………………………………. 26 (Related to consolidated statements of comprehensive income) …………………………………. 27 (Related to consolidated statements of changes in shareholders’ equity)………………………. 28 (Related to consolidated cash flow statements) ……………………………………………………… 29 (Information related to the combination of enterprises, etc.) ……………………………………….. 30 (Segment information, etc.)………………………………………………………………………………….. 30 (Information about items per share) ………………………………………………………………………. 33 (Important subsequent events) ……………………………………………………………………………. 33 6. Non-consolidated financial statements and main notes ………………………………………………….. 34 (1) Balance sheets …………………………………………………………………………………………………. 34 (2) Profit and loss statements ………………………………………………………………………………….. 36 (3) Statements of changes in shareholders’ equity ………………………………………………………. 37 1 1. Analysis of results of operations and financial condition (1) Explanation for results of operations and financial condition (i) Overview and results of operations In the current consolidated fiscal year, the recovery trend has continued in the world economy because of the progress of both Covid-19 measures and economic activities. There are, however, increasing concerns about a downturn in economy due to rising U.S. interest rates, tangible geopolitical risks such as the conflict in Eastern Europe, continuing semiconductor shortages, soaring resource prices, and other factors. In the Japanese economy, the recovery has been weak in response to reviews of production plans due to continuously soaring raw material costs and logistics costs, semiconductor shortages, and other factors. Under such circumstances, our business performance for the current consolidated fiscal year is as follows: sales stood at 42,337 million yen (up 19.0% from the previous consolidated fiscal year), operating income at 4,780 million yen (up 38.8%), ordinary income at 5,572 million yen (up 31.0%), and current net income attributable to owners of parent at 3,541 million yen (up 35.0%). From these results, the ROE in the current consolidated fiscal year stood at 10.4% (up 2.1 points) and sales and all profitability indicators have reached record highs since the company’s foundation. The equity ratio decreased by 1.4 points to 63.8%. Note that because of the application of the “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, March 31, 2020), etc., sales are down 457 million yen and operating income and ordinary income are down 80 million yen each. (Reference values) Results of each division Division (Product Category) Consolidated net sales (Amount: million yen) Current consolidated fiscal year April 1, 2021 – March 31, 2022 Consolidated operating income (Change from the corresponding period of the previous fiscal year) (Change from the corresponding period of the previous fiscal year) Air Energy Division Coating Division Air Compressors Vacuum Equipment Coating Equipment Coating Systems 25,015 22,950 2,064 17,321 14,451 2,869 42,337 19.9% 18.9% 32.2% 17.7% 25.9% (11.4%) Total 4,780 (Note) The consolidated operating income of each division is calculated with our group’s unique standard. 19.0% (ii) Results of operations by segment 2,513 38 2,267 39.7 38.8% Results of operations by regional segment, which our group adopts, are as described below. For details of the results of our operations by segment, refer to (Segment information, etc.) in “(5) Notes on consolidated financial statements” in “5. Consolidated financial statements and main notes”. Japan Sales stood at 22,967 million yen (up 9.5% from the previous consolidated fiscal year) and segment income stood at 3,304 million yen (up 26.2%). In the air compressor field, we have been affected by delays in the supply of electric motors, electric equipment, etc., but sales have been supported by tenacious procurement of parts by the purchasing department, sales campaigns for the purpose of preventing loss of customers, etc. In the vacuum equipment field, the rising semiconductor demand still continues, so that the sales of vacuum pumps for semiconductor manufacture-related equipment have grown greatly. In the coating equipment field, we have conducted certification activities with paint manufacturers and the sales of spray guns for the car repair market have grown. As for coating booths, participation of engineers in remote business meetings by the use of the WEB together with sales personnel has resulted in the promotion of receiving orders, so that the sales are now on a recovery trend. In the coating system field, sales have decreased because of the stagnation of operating activities due to Covid-19, but business meetings have become intensified due to the relaxation of activity restrictions, so that the number of inquiries about articles for the next term is on the increase, as well as the number of unfilled orders. Europe Sales stood at 5,841 million yen (up 31.3% from the previous consolidated fiscal year) and segment income stood at 447 million yen (up 48.5%). In the air compressor field, the development of new sales channels has progressed in Germany and other EU countries, so that the demand for oil-free air compressors has increased and the sales have grown. In the vacuum equipment field, sales have grown solidly, backed by the economy, where a recovery trend continues. In the coating equipment field, despite the spread of infection of variants, the sales of spray guns for the car repair market have mainly grown as a result of active operating activities such as taking sales promotion measures by the use of digital tools and enhancing the collaboration with paint dealers. As for airbrushes, demand continues to grow steadily, increasing the sales via the EC site. 2 Asia Sales stood at 16,557 million yen (up 28.4% from the previous consolidated fiscal year) and segment income stood at 1,475 million yen (up 41.1%). In the air compressor field, there were signs of a slowdown toward the end of the fiscal year in the expansion of the exports of the subsidiary in China and the sales of medical air compressors by the subsidiary in India, but the number of orders has remained at a high level and sales have grown. In the vacuum equipment field, sales have grown because, for example, orders have been received due to an increase in demand in semiconductor manufacture-related markets in China and East Asia, continuing from the consolidated fiscal third quarter, and due to the high evaluation of quick delivery. In the coating equipment field, sales continued to be stagnant due to Covid-19 in Southeast Asia, but in response to deregulation, have shifted to a recovery trend. In the coating system field, sales have grown because the project for which the construction plan had been postponed in China has been delivered steadily. In Southeast Asia, the number of orders is stagnant because the cautious stance toward capital investment has continued. Other Sales stood at 6,414 million yen (up 30.2% from the previous consolidated fiscal year) and segment income stood at 728 million yen (up 67.2%). In the air compressor field, the sales of medical air compressors, as well as air compressors for general industries, have grown. In the vacuum equipment field, sales have grown because of the effect of finding new potential customers and the rush demand before price increases. In the coating equipment field, the sales of hand spray guns for the auto repair market have grown because new potential customers have been successfully found due to the business transfer in the consolidated fiscal first quarter. Sales of airbrushes have still grown steadily. (iii) Analysis of financial condition For assets, our current assets stood at 34,326 million yen (up 18.8% from the previous consolidated fiscal year), mainly due to, for example, an increase of 1,858 million yen in the “merchandise and finished goods” and an increase of 1,368 million yen in “notes and accounts receivable-trade”. Our non-current assets stood at 21,492 million yen (up 4.5%), mainly due to, for example, an increase of 429 million yen in the “software” due to the intensification of IT investment. As a result, our total assets stood at 55,818 million yen (up 12.9%). For liabilities, our current liabilities stood at 11,616 million yen (up 20.9%), mainly due to, for example, an increase of 1,120 million yen in the “notes and accounts payable-trade”. Our non-current liabilities stood at 3,992 million yen (up 7.4%), mainly due to, for example, the incurrence of 283 million yen in the “long-term loans payable”. As a result, our total liabilities stood at 15,608 million yen (up 17.1%). Our net assets stood at 40,210 million yen (up 11.3%), mainly due to an increase of 2,487 million yen in the “retained earnings”. Our equity capital, which is calculated by subtracting the non-controlling shareholders’ equity from the net assets, stood at 35,623 million yen, decreasing our equity ratio by 1.4 percentage points to 63.8%, from 65.2% at the end of the previous consolidated fiscal year. (iv) Cash flow Cash and cash equivalents (referred to as “funds” in the remainder of this document) for the current consolidated fiscal year were up by 1,273 million yen from the end of the previous consolidated fiscal year, at 12,916 million yen (up 10.9%) at the end of the current consolidated fiscal year. Each cash flow in the current consolidated fiscal year, as well as the causes, is as described below. 1) Cash flows from operating activities As a result of operating activities, the fund balance shows earnings of 3,889 million yen (down 15.5%), with a decrease of 712 million yen from the end of the previous consolidated fiscal year, mainly due to, for example, a decrease of 2,038 million in earnings because of fluctuations in the “decrease (increase) in notes and accounts receivable-trade”. 2) Cash flows from investing activities As a result of investing activities, the fund balance shows expenses of 1,078 million yen (up 1.0%), with an increase of 10 million yen in expenses from the end of the previous consolidated fiscal year, mainly due to, for example, an increase of 354 million yen in the “purchase of property, plant and equipment and intangible assets”. 3) Cash flows from financing activities As a result of financing activities, the fund balance shows expenses of 2,103 million yen (up 7.4%), with an increase of 145 million yen in expenses from the end of the previous consolidated fiscal year, mainly due to, for example, an increase of 214 million yen in the “cash dividends paid to non-controlling shareholders”. Trends in the cash flow indexes for corporate groups are as described below. 3 (Reference) Changes in cash flow related indexes Equity ratio (%) Market-base equity ratio (%) Cash flow-to-interest-bearing liabilities ratio (%) Interest coverage ratio March 2019 March 2020 March 2021 March 2022 62.9 85.3 63.4 60.4 64.6 90.9 63.7 52.5 65.2 86.2 53.6 72.8 63.8 60.7 62.1 67.2 (Note) 1. To calculate each index, the following formula is used. Equity ratio: Equity capital/Total assets Market-base equity ratio: Market capitalization/Total assets Cash flow-to-interest-bearing liabilities ratio: Interest-bearing liabilities/Operating cash flow Interest coverage ratio: Operating cash flow/Interest payments 2. Each index is calculated with financial values on a consolidated basis. 3. Market capitalization is calculated as follows: Closing share price at year end x Number of shares issued at year end. 4. As the operating cash flow, the net cash provided by operating activities in the consolidated statements of cash flow is used. Interest-bearing liabilities are all interest-bearing liabilities that are posted to the consolidated balance sheets. For interest payments, those in the consolidated statement of cash flow are used. (v) Prospects for the upcoming year Further economic recovery is anticipated in the next consolidated fiscal year, but it is expected that uncertainty will still continue in the world economy due to, for example, increasing geopolitical risks, soaring resource prices, and shortage of parts including semiconductors. In such a management environment, our group will develop innovative technologies and products by accurately capturing market needs, further increase quality, and enhance the efficiency of production under the new midterm management plan. In addition, we will continue IT and other investments for becoming a 100-year-old company. At present, the expected results of our operations for the full-year fiscal period ending in March 2023 are such that sales will stand at 44,000 million yen (up 3.9% from the current consolidated fiscal year), operating income will be 4,900 million yen (up 2.5%), ordinary income will be 5,650 million yen (up 1.4%), and net income attributable to owners of parent will be 3,580 million yen (up 1.1%). The assumed exchange rates are 118.00 yen to the dollar, 137.00 yen to the euro, and 18.50 yen to the yuan. (2) Basic policy for profit allocation and current and next-term dividends (i) Basic policy Our group would like to enhance our corporate value and meet shareholder expectations by actively injecting money into the development of human resources, research and development, production capacity increase, production rationalization, M&A, etc. and improving our consolidated financial results from a mid- and long-term perspective. For the dividend, therefore, except in cases where sudden fluctuations occur in financial results or financial position, the range of the net income attributable to owners of parent in the consolidated results and a consolidated dividend payout ratio of 35% are used as guidelines. (ii) Current dividend The common dividend paid at the end of the current term will be 17 yen per share. Combined with the dividend of 13 yen per share at the end of the second quarter, this will translate into an annual dividend per share of 30 yen. The dividend at the end of the current term will be decided at the ordinary general meeting of shareholders of our company, scheduled for June 24. At this point, we plan to set the dividend to be paid at the end of the second quarter to 15 yen per share and the year-end dividend to 16 yen per share, giving an annual dividend per share of 31 yen. (iii) Dividend for next term (3) Risks of businesses, etc. The major risks recognized by the management to have a significant impact on our corporate value, financial condition, results of operations, and cash flow of our group (referred to collectively as “results of operations, etc.” in the remainder of this document) are as described below. Matters related to the future appearing in this text have been judged as of the last day of the current consolidated fiscal year, and may be influenced by the economic conditions in and out of Japan, and the risks of businesses, etc. are not limited to the ones described below. (i) Risks related to business activities 1) Changes in business environment Since its foundation, our group has contributed to monozukuri in the world by supplying products such as coating equipment and air compressors, as well as services incidental to them, to the markets. As a result, the overseas sales ratio has become predominant, so that, while the flows of human resources, products and services, and funds diversify, the rate at which we are affected by the rapidly changing business environment is ever increasing. For this reason, if we stay with the existing markets, products, business models, and so on, we may not be able to achieve sustained growth due to, for example, decreasing demand for current products attributable to market structure changes. This may have a significant impact on the results of operations, etc. of our group. 4 In expanding global businesses, the sales, material procurement, and other transactions in our group include foreign currency dominated transactions, so that any unexpected, sudden currency exchange fluctuations can also affect the results of operations, etc. of our group. To prevent such a risk, we need to develop new businesses and create pillar businesses, not to speak of continuing constant effort to improve quality in our existing business, as well as the development of products leading to solving social issues through monozukuri from a global viewpoint and, to that end, we will cultivate a corporate culture to dauntlessly take on a challenge with no fear of failure and, at the same time, promote changes of the mindset and behavior of all employees to collaborate with various outside companies. Our group will aim to further reinforce inter-group company exchanges and information collection, endeavor to determine market needs, and identify the importance of the needs in each country and market first and then create a system and establish management strategies so that we can accommodate changes in business environment in a flexible and prompt manner. In addition, to secure a system for supplying products stably even if a demand increase or a logistics cost increase occurs, we endeavor to reinforce the supply chain by, for example, purchasing from multiple suppliers and reviewing the logistics network. If we ever get into a situation where we cannot achieve sustained growth, adversely affecting our results of operations, etc., we will immediately discuss through the board of directors and the management meeting, for example, to turn around the business strategy. 2) Product quality If any product not meeting the quality standard is supplied to the market, with any defect being overlooked in the procurement, processing, assembly, etc. of products, causing damage attributable to the defect, the loss arising from compensation, the handling of complaints, product recovery, product replacement, etc. will cost a great deal of money and, at the same time, we may lose customers’ trust on products, which may have a significant adverse impact on the results of operations, etc. of our group. Thus, in order to prevent such situations from happening, our group complies with the necessary rules, such as raw material standards and product standards, and the quality assurance division intervenes by taking an objective view right from the initial stages of product development to eliminate potential issues. Furthermore, by preparing an appropriate quality control system on production sites not only in Japan but also overseas by the use of, for example, techniques for promoting ISO9001, our group ensures product quality that meets the market needs and quality standards in the respective countries. If any contingency occurs, this will be immediately reported to the board of directors and the management meeting of our company and, at the same time, the quality assurance division will promptly take the necessary measures including recalls. 3) Business expansion with M&As In order to accelerate the reinforcement of our business foundation and ensure sustained growth, our group actively promotes comprehensive business tie-ups with partners, including capital tie-ups with, and acquisitions of, companies that we recognize are necessary. If we lose customers’ trust in a specific sales area due to a failure to smoothly proceed with the sharing of the future direction or we fail to obtain the initially anticipated effect or benefit, resulting in the poor results of operations of the target company or if we fail to maintain the expected profitability, causing the real value to decrease remarkably, this may have a significant impact on the results of operations, etc. of our group. In M&As, therefore, we have clarified the items to confirm, and we conduct M&As after going through the advance, careful examination of risks and returns, as well as the financial conditions, contractual relationships, etc. of the target company, and due diligence to judge whether sufficient synergetic effect can be obtained. In addition, we conduct PMI appropriately and ensure that the management and the business division in charge provide management assistance in an effort to prevent such risks from occurring. If such a risk occurs for an inevitable reason, we will promptly proceed with management decisions by, for example, deciding whether the contract can be continued and determining losses. 4) Damage to corporate value due to an act of hostile large-scale purchase of company shares Our group, as a listed company, upholds the free trade of company shares. We, therefore, do not flatly deny acts of large-scale purchase of company shares as long as they benefit corporate value and the common interests of shareholders. Nevertheless, large-scale purchases of shares include quite a few that could damage corporate value and the common interest of shareholders remarkably judging from their purposes, etc. and that could practically compel shareholders to sell their shares. In the event of such an act, this could have a significant impact on the results of operations, etc. of our group and greatly damage sustainable growth due to business split and transfer. For this reason, we have introduced a “policy for dealing with acts of large-scale purchase of company shares (takeover defense measures)” for the purpose of protecting corporate value and the common interests of shareholders and securing the time necessary for shareholders to judge appropriately whether to accept the purchase offer. This policy is intended to secure the common interests of shareholders under the conditions that the policy is placed before an ordinary general shareholders’ meeting and approved every year. (ii) Risks related to human resources 1) Securing human resources Our group recognizes that it is vital to secure and train human resources that have diverse personalities and abilities to achieve sustained growth and accommodate market environment changes. In Japan, therefore, in line with the principle of hiring all employees as full-time employees, our group conducts recruiting activities throughout the year. 5 However, if we continue to stick to our existing hiring strategies, as well as the training policy and the personnel evaluation system for hired human resources, without making any improvements based on changes in business environment and so on, we may not be able to secure sufficient human resources toward future sustained growth, stagnating business activities and making sustained growth impossible. For this reason, under legal labor management, we will focus on the development of human resources for placing the right people at the right place, the preparation of diversity management with the creation of a personnel evaluation system from a global viewpoint, intensification of hiring multinational human resources, and education of evaluators, among others. In addition, we will work on the effective use of labor force to accelerate operational reforms by promoting the automation and digitization of various business operations. 2) Labor issues A majority of the employees of our group are locally hired people on sites overseas. Under the circumstances in which a way of working suitable for the social situation and labor environment in each country is demanded, labor issues regarding working conditions, etc. may be raised between us and organizations in and out of the country, such as labor unions. If any labor dispute occurs, and cannot be settled promptly, the stability and continuity of business operations will be impaired. If the dispute becomes serious, this will have a significant impact on the supply of products and, at the same time, we may lose the trust of our customers, thereby adversely affecting results of operations, etc. Thus, through the promotion of the spread of “ANEST IWATA Corporate Philosophy”, with our corporate policy, “Makotono kokoro” (Trustworthy & Sincere), at the core, we improve our employees’ sense of belonging to our group and, at the same time, grant powers to the representatives on overseas sites in accordance with the employment conditions and evaluation system suited for the systems and realities in their respective countries, based on the administrative authority of the representatives on overseas sites, thereby endeavoring to prevent dissatisfaction with the working conditions and the labor environment. (iii) Risks related to IT 1) IT investment We consider that to steadily promote the reinforcement of competitiveness in global expansion, it is vital to change our business model, develop high-value-added products, and improve business efficiency by introducing IT, in which constant innovations are under way. If the execution of an IT strategy stagnates because of the loss of knowledge or now-how about IT from the company due to a contingency or if there occurs a delay in the development of a product that matches the latest IT trend, this may adversely affect results of operations, etc. because of declining competition in the market or impaired management efficiency. Thus, in combination with a management plan, our group formulates mid- to long-term IT strategies and regards IT investment as a key element for driving corporate growth and, at the same time, continually verifies the contribution to corporate growth. If such a risk occurs, we will start active personnel employment, as well as partnerships with new partner companies and, at the same time, rebuild our management foundation by depreciating obsolete IT assets. 2) Information security To promote business activities in a stable and sustainable manner, the importance of maintaining the safety and reliability of an information system is ever increasing. We exercise strict control over confidential information related to technology development and sales that are acquired in the process of expanding business activities, as well as personal information. If information leakage, falsification, or a system fault occurs due to a natural disaster, unexpected cyberattack, unauthorized access attributable to the entry of a computer virus, etc. or if information is leaked by an employee intentionally or negligently and such information is misused, this may adversely affect the results of operations, etc. because we need to bear liability for compensation. Thus, our group prepares an appropriate information security system to take necessary and sufficient security measures such as acquiring appropriate backups of important data and, at the same time, conducts education for employees. If such a risk occurs, we will create a system to promptly determine the cause and the details and take appropriate measures and, at the same time, disclose information about the damage, if necessary, thereby endeavoring to minimize secondary damage and restore trust. (iv) Risks related to laws and regulations, etc. 1) Conformance to regulations and standards about the earth’s environment and climate change Amid increasing global awareness of the earth’s environment and climate change, Japan and other countries have a tendency to establish new environmental laws and regulations and tighten existing ones. If there occurs a delay in complying with laws and regulations or putting products that satisfy such laws and regulations, this may cause the business activities to be restricted and revenue opportunities to be lost, adversely affecting the business and the results of operation of our group. The details of such regulations differ depending on the country or area, and we proceed with the preparation of systems by, for example, transferring the necessary functions, so that the local subsidiaries located in each country can collect information and meet regulations. If, for example, laws and regulations are revised unexpectedly and are further tightened in the future, we will judge whether to further invest in the relevant items or withdraw from them by considering whether meeting the laws and regulations is economically reasonable. We also recognize the importance of information disclosure based on the framework of the TCFD (Task Force on Climate-related Financial Disclosures), and will make the necessary efforts, mainly at the Sustainability and CSR Committee, so as to implement appropriate information disclosure. 6 2) Fraudulent acts by violating laws and regulations, etc. In recent years, an increasing number of misconduct cases, etc. by companies have been reported. If such an act should be committed in our group, this may have a short-term impact on the results of operations, etc. due to compensation. Not only that, but we may get into a situation in which the corporate value of our group worsens over an extended period of time or the existence of our group as companies is threatened because, for example, the sales activities and the recruitment activities are hindered by remarkable damage to the trust in our group. For this reason, our group creates systems and structures for ensuring that officers and employees commit no fraudulent acts and promotes healthy management assistance for group companies and, at the same time, establishes a whistle-blowing system including overseas subsidiaries and creates a monitoring system for conducting audits with audit & supervisory committee members and the internal audit division, thereby endeavoring to prevent acts of violating laws and regulations, etc. We have a system in place whereby if such an incident occurs, this can be promptly reported to our board of directors and we can take measures such as researching with third parties, disclosing facts, and punishing the relevant people properly, develop recurrence prevention measures, and promptly disclose them. 3) Intelligent property Our group aims to become a development-oriented company full of vigor and novelty that is capable of providing high-performance, high-quality products and services to customers all over the world. As a result, we run the risk of having a third party imitate any of the products, technologies, business models, and so on that our group reserves at present or will develop in the future or of infringing on any of the intelligent property rights, patent rights, and trademark rights of third parties unintentionally. In that case, results of operations, etc. of our group may be adversely affected because, for example, costs are incurred due to damage compensation or a lawsuit or we are unable to use the technology itself or are obliged to use it in an unfavorable manner. For this reason, our group will acquire intelligent property rights, patent rights, and trademark rights related to the functions and designs of products and reinforce their management and, at the same time, create a system whereby our group is not impacted by infringement or minimizes the impact, while receiving cooperation from outside organizations concerned. 4) International tax affairs Our group possesses subsidiaries in major areas in the world, expanding business activities globally. In inter-group company transactions, we take meticulous care to the risks of international tax affairs by, for example, endeavoring to adhere to transfer price taxation and other regulations to set appropriate transaction prices. If any finding is received from tax authorities due to a difference of view, this will incur additional taxes, etc. and may adversely affect the results of operations, etc. of our group. Our group will endeavor to prevent differences of view from tax authorities by understanding law correctly, while focusing on the developments of international financial affairs and receiving cooperation from outside organizations. 5) Accounting of impairment loss, etc. of non-current assets Appropriate accounting of impairment loss, etc. of non-current assets requires a business plan that appropriately estimates a future cash flow. As mentioned in 3) of (1), our group makes investment in subsidiaries, etc. actively, including M&As. To make the following accounting decisions, in particular, an appropriate business plan for each subsidiary, etc. is necessary. ・Judgment on the impairment loss on shares, etc. of affiliates in our individual financial statements ・Judgment on the impairment loss on non-current assets of subsidiaries, etc., which is used as basic data for consolidated financial statements ・Calculation of the years of depreciation when posting goodwill in consolidated financial statements and judgment on impairment loss We understand that if the business plan at the points of these judgments is not an appropriate one, we run the risk of losing the trust in us remarkably because that means that inappropriate accounting has been performed as a consequence. For this reason, in establishing the business plan for each subsidiary, etc., the business division and account division of us, the supervising company, are actively involved. Such business plans are reported to the board of directors, of which independent directors, who are knowledgeable about management and accounting, account for a majority, to seek their guidance and supervision. With such transparent procedures, the appropriateness of the business plans is ensured. (v) Other risks 1) Novel coronavirus As for coronavirus disease 2019 (Covid-19), which has spread throughout the world since the end of 2019 up to the present, if any of our customers and group employees is confirmed infected, this may hinder the business activities because of, for example, the business suspension or temporary closure of those concerned, adversely affecting the results of operations, etc. of our group. Our group makes it a top priority to ensure the safety of our customers and employees and endeavors to prevent infection in accordance with administrative guidelines and, at the same time, promotes remote business meetings using IT tools, expands home working (teleworking), and thoroughly adheres to staggered commuting. At the same time, to minimum the impact on the production system, we continue to take measures such as expanding inventory and decreasing the dependence on specific suppliers. If the situation where the global prevalence of the virus is not curbed is prolonged, this could have a severe impact on the corporate value and the results of operations, etc. of our group. Thus, we will hold a crisis management committee with the president and chief executive officer as the chairperson to optimize the BCP (business continuity plan), and we will take the necessary measures by promptly and appropriately determining the management environment surrounding our group. 7 2) Unexpected events Our group expands business operations to various countries in the world. If, in any of these countries and areas, an unpredictable political or economic change is made, a geopolitical risk becomes tangible resulting in an act of war or terror due to the rise of hegemony, an infectious disease spreads, or a natural disaster such as a large-scale earthquake and typhoon occurs, this may have an immense impact on the supply of products to various parts of the world because of damaged offices, the stagnation of raw material procurement and logistics, and so on. If such a situation is prolonged or if the measures for the increasing possibility of such a situation are not sufficient, this will increase the possibility of having a significant adverse impact on the results of operations, etc. of our group because of the impairment of non-current assets, decreased profitability, etc. Our group makes a BCP and, at the same time, endeavors to make our business activities resilient so that we can establish a supply system where the impact of the above events can be minimized by, for example, distributing production functions and seeking a possibility of inter-group company product procurement. 8 2. Conditions of the corporate group Our group, consisting of our company, 33 subsidiaries, and 2 affiliates, manufactures and sells air compressors, vacuum equipment, and coating equipment/systems exclusively, and is in a single business configuration because of similarities in product market, product use, and so on. The positioning of our company, subsidiaries, and affiliates in the business configuration is as shown in the diagram below. Name Companies with an * are specified subsidiaries. Our company [Japan] ANEST IWATA Corporation Description of the main business Manufacture and sale of air compressors, vacuum equipment, coating equipment, and coating systems Consolidated subsidiaries [Japan] A&C Service Corporation [Europe] ANEST IWATA Deutschland GmbH ANEST IWATA Europe GmbH HARDER & STEENBECK GmbH & Co. KG ANEST IWATA STRATEGIC CENTER S.r.l. Anest Iwata Italia S.r.l. ANEST IWATA France S.A. ANEST IWATA (U.K.) Ltd. Anest Iwata Scandinavia AB ANEST IWATA Iberica, S.L.U. ANEST IWATA Polska Sp.z o.o. [Asia] ANEST IWATA INDUSTRIAL MACHINERY (JIAXING) Co.,Ltd ANEST IWATA (SHANGHAI) Corporation ANEST IWATA (DONGGUAN) Corporation ANEST IWATA FEELER Corporation* SHANGHAI SCREW COMPRESSOR Co., Ltd.* SHANGHAI GLOBE SCREW TECHNOLOGY Co., Ltd ANEST IWATA Taiwan Corporation ANEST IWATA SPARMAX Co., Ltd. ANEST IWATA MOTHERSON Pvt. Ltd.* ANEST IWATA MOTHERSON COATING EQUIPMENT Pvt .Ltd. ANEST IWATA SOUTHEAST ASIA Co., Ltd. ANEST IWATA Korea Corp. ANEST IWATA VIETNAM Co., Ltd. PT. ANEST IWATA INDONESIA [Other areas] ANEST IWATA USA, Inc. ANEST Iwata-Medea, Inc. ANEST IWATA AIR ENGINEERING, Inc. ANEST IWATA Mexico, S.de R.L.de C.V. AIRZAP-ANEST IWATA INDUSTRIA E COMERCIO LTDA. ANEST IWATA Australia Pty. Ltd.* ANEST IWATA RUS LLC ANEST IWATA South Africa (Pty) Ltd. Affiliates (equity method applied) ADVANCE RIKEN Inc. Powerex-Iwata Air Technology, Inc. Sale, repair, and incidental work of air compressors, vacuum equipment, coating equipment, and coating systems Sale of coating equipment Manufacture and sale of air compressors; and sale of vacuum equipment Manufacture and sale of coating equipment Manufacture and sale of coating equipment Sale of coating equipment Sale of air compressors and coating equipment Sale of coating equipment Sale of coating equipment Sale of coating equipment Sale of coating equipment Manufacture and sale of coating equipment and coating systems Sale of coating equipment and coating systems Manufacture and sale of coating systems Manufacture and sale of air compressors; and sale of vacuum equipment Manufacture and sale of air compressors Manufacture and sale of air compressors Sale of air compressors and vacuum equipment; and manufacture and sale of coating equipment Manufacture and sale of air compressors and coating equipment Manufacture and sale of air compressors Manufacture and sale of coating equipment and coating systems Manufacture and sale of air compressors, vacuum equipment, coating equipment, and coating systems Manufacture and sale of air compressors and vacuum equipment; and sale of coating equipment Sale of air compressors, coating equipment, and coating systems Sale of air compressors, vacuum equipment, coating equipment, and coating systems Sale of coating equipment; and manufacture and sale of coating systems Manufacture and sale of coating equipment Manufacture and sale of air compressors and vacuum equipment Sale of air compressors, coating equipment, and coating systems Manufacture and sale of air compressors and vacuum equipment; and sale of coating equipment Sale of air compressors and coating equipment Sale of coating equipment Sale of coating equipment Manufacture and sale of oxygen, nitrogen, and ozone gas generators Manufacture and sale of air compressors and vacuum equipment (Notes) 1. On October 8, 2021, the trade name of AIR ENGINEERING Corporation was changed to A&C Service Corporation. 2. On October 1, 2021, AIRZAP-ANEST IWATA INDUSTRIA E COMERCIO LTDA. in Brazil absorbed and merged ANEST IWATA DO BRASIL COMERCIAL LTDA. 9 3. Management policy (1) Basic policy for corporate management Part of the mission of our group is that officers and employees work together as one to sincerely provide attractive products and services that meet customer needs with appropriate levels of quality at appropriate prices with the spirit of founding – “Makotono kokoro” (Trustworthy & Sincere), which is part of our corporate policy. We aim to become a “True World-Class Company” that creates innovative technologies and products by accurately understanding market needs and achieving unexplored solutions. (2) Targeted management index We shall strive to achieve a return on equity (ROE) of not less than 10% as an appropriate indicator that the ANEST IWATA Group has a solid financial base that enables it to invest and take risks for sustained growth. (3) Mid- to long-term corporate management strategies Our group has established the “Management Vision”, described below, toward a “100-year-old company”. • become a development-oriented company full of vigor and novelty that is capable of providing high-performance, high-quality products and services in a sincere manner from the customer’s point of view; • shift from enhancement-based product development focused on cost cutting and internal core technologies to become a flexible company that collaborates with many different businesses based on an accurate understanding of market needs; and • aim to become a “True World-Class Company” where all employees of the group work as one in order to maximize customer satisfaction and constantly create innovative technologies and products for achieving the world’s No. 1 position. (4) Issues that the company should address In the upcoming consolidated fiscal year, we will realize the establishment of a powerful management foundation that will not be affected by Covid-19 or geopolitical risks under the new midterm management plan. We regard market overseas as the main battlefield for business expansion, and we will formulate growth strategies to suit the characteristics of the individual areas individually and proceed with the effective use of management resources, involving all group companies, despite increasing global uncertainty. In such a management environment, our group will intensify multilateral investments to secure sustainable growth. We will develop new businesses to create new needs and increase human investments and development investments to foster a variety of human resources that can promote global expansion, aiming to become a “true development-oriented company” that can inspire all customers beyond our 100th anniversary. • Addressing of social issues in business promotion In air energy business, we are proceeding with the development of scroll expanders by applying the technology for the oil-free scroll air compressor that we have released for the first time in the world. We will contribute to CO2 emission reduction by pursuing the possibilities of the reuse of the water vapor discharged as the surplus energy of the factory using the know-how we have accumulated. In addition, by increasing the sales ratio of oil-free machines, we will reduce the amount of industrial lubricant used, with an aim to reduce environmental load. In coating business, we endeavor to spread environmentally-friendly coating technologies through, for example, the practical use of the electrospray method, which is a new atomization method achieving a coating efficiency close to 100%, and proposals for coating systems that make use of VR, IoT, and other full automation technologies. Furthermore, we will focus on the development of “no VOC (volatile organic compound) emissions” coating systems with low environmental load. • Optimization of the supply chain To avoid the supply chain from being severed due to any of various uncertainties including Covid-19, we establish a BCP for each supplier. For parts that require special materials, processing, and treatment, and production centralized in a single country overseas, in particular, we assist suppliers in conditions of transactions and, at the same time, proceed with the addition of suppliers and producing areas. We have proceeded with the reform of the production plan with an aim to improve the production efficiency and stabilize the supply chain for some time. We will promote this reform more powerfully to achieve stable production and product supply. • Operational reforms for reinforcing the relationship and contact with customers To accommodate the situation in which the business environment changes greatly with the rapid progress of IT, we will establish a contact optimum for customers in the world and promote the penetration and reinforcement of the brand by creating an environment in which information about products and services can be easily accessed from a variety of digital routes. In addition, we will further reinforce the development of products meeting diversifying needs through the creation of an environment that can connect to customers digitally. • Revitalization of the organization by maintaining the health of employees and their families We recognize that in order for our group to contribute to the realization of an affluent society that can achieve sustainable growth, it is an indispensable element to maintain and improve the health of employees and their families. We appoint President as CHO (Chief Health Officer), so that the Health Management Promotion Committee can work together with related departments to 10 tackle with work style reform toward improving health literacy and securing a work-life balance. In the current consolidated fiscal year, a series of our activities has been highly evaluated, so that we have been recognized as an “Outstanding Health and Productivity Management Organization 2022 (White 500)” by the Ministry of Economy, Trade and Industry and the NIPPON KENKO KAIGI and as a “Health and Productivity Management Brand 2022” by the Ministry of Economy, Trade and Industry and the Tokyo Stock Exchange. We will continue effort to improve the health of employees and their families in the future, with an aim to be the “top White 500 company in the machinery sector”. 4. Basic concept on choice of accounting standards Considering the comparability of periods of consolidated financial statements and the comparability of statements among companies, our group has a policy to prepare consolidated financial statements in accordance with the Japanese standards for the time being. Regarding the application of IFRS, we have a policy to appropriately cope with this while considering the situations in and outside of Japan. 11 5. Consolidated financial statements and main notes (1) Consolidated balance sheets Assets Current assets Cash and deposits Notes and accounts receivable-trade Securities Merchandise and finished goods Work in process Raw materials and supplies Other Allowance for doubtful account Total current assets Non-current assets Property, plant and equipment Buildings and structures Accumulated depreciation Buildings and structures, net Machinery, equipment and vehicles Accumulated depreciation Machinery, equipment and vehicles, net Land Lease assets Accumulated depreciation Lease assets, net Construction in progress Other Accumulated depreciation Other, net Total property, plant and equipment Intangible assets Goodwill Software Other Total intangible assets Investments and other assets Investment securities Deferred tax assets Net defined benefit assets Other Allowance for doubtful accounts Total investments and other assets Total non-current assets Total assets 12 (Amount: thousand yen) FY2020 (As of March 31, 2021) FY2021 (As of March 31, 2022) *2 12,900,314 6,636,359 299,992 4,468,215 1,138,424 2,433,388 1,254,136 (237,777) 28,893,053 *2 10,959,113 (5,859,934) 5,099,178 7,538,757 (5,352,165) 2,186,591 *2 2,137,609 2,714,688 (1,384,190) 1,330,498 177,413 2,599,321 (2,175,679) 423,642 11,354,933 973,798 240,286 1,554,856 2,768,942 *1 4,464,876 996,231 687,755 303,611 (10,725) 6,441,749 20,565,625 49,458,678 *2 14,319,597 8,004,883 ― 6,326,762 1,280,101 3,222,945 1,434,802 (262,772) 34,326,320 *2 11,594,241 (6,400,816) 5,193,424 8,053,829 (5,922,278) 2,131,551 *2 2,212,639 2,551,325 (1,340,667) 1,210,657 167,018 2,909,447 (2,376,208) 533,239 11,448,530 981,998 670,050 1,654,647 3,306,695 *1 4,530,045 1,211,958 717,208 288,503 (10,725) 6,736,991 21,492,217 55,818,537 Liabilities Current liabilities Notes and accounts payable-trade Short-term loans payable Current portion of long-term payable Lease obligations Income taxes payable Provision for bonuses Provision for directors’ bonuses Provision for product warranties Other Total current liabilities Non-current liabilities Long-term loans payable Lease obligations Deferred tax liabilities Retirement benefit liability Provision for share-based remuneration for directors and other officers Other Total non-current liabilities Total liabilities Net assets Shareholders’ equity Capital stock Capital surplus Retained earnings Treasury shares Total shareholders’ equity Accumulated other comprehensive income Valuation difference on available-for-sale securities Foreign currency translation adjustments Remeasurements of defined benefit plans Total accumulated other comprehensive income Non-controlling shareholders’ equity Total net assets Total liabilities and net assets (Amount: thousand yen) FY2020 (As of March 31, 2021) FY2021 (As of March 31, 2022) *2 4,104,589 *2, *3 822,970 *2, *3 249,160 247,909 677,692 718,884 81,345 224,122 2,480,221 9,606,895 ― 1,148,600 228,213 2,181,792 83,041 76,232 3,717,880 13,324,776 3,354,353 1,017,080 28,758,216 (685,266) 32,444,383 414,112 (513,712) (102,234) (201,835) 3,891,353 36,133,902 49,458,678 *2 5,225,044 *2, *3 856,923 *2 10,305 254,526 902,879 751,950 80,299 256,356 3,277,995 11,616,282 *2, *3 283,845 1,011,814 229,445 2,231,837 136,788 98,519 3,992,250 15,608,532 3,354,353 1,008,864 31,245,575 (1,025,936) 34,582,856 378,134 679,490 (17,285) 1,040,339 4,586,809 40,210,005 55,818,537 13 (2) Consolidated profit and loss statements and consolidated statements of comprehensive income Consolidated profit and loss statements Net sales Cost of sales Gross profit Selling, general & administrative expenses Sales commission Packing and transportation expenses Directors’ compensations, salaries and allowances Provision for bonuses Provision for directors’ bonuses Provision for share-based remuneration for directors and other officers Retirement benefit expenses Welfare expenses Rent expenses Provision of reserve for product warranties Provision of allowance for doubtful accounts Commission paid Other Total selling, general & administrative expenses Operating income Non-operating income Interest income Dividend income Foreign exchange gains Share of profit of entities accounted for using equity method Subsidies for employment adjustment Other Total non-operating income Non-operating expenses Interest expenses Custom duties for prior years Commitment line commission Other Total non-operating expenses Ordinary income (Amount: thousand yen) FY2020 (April 1, 2020 through March 31, 2021) FY2021 (April 1, 2021 through March 31, 2022) 35,588,516 *1 20,662,193 14,926,322 381,742 784,089 4,270,106 437,488 81,345 43,256 277,602 904,405 469,234 214,374 (18,238) 1,050,659 2,585,863 11,481,929 3,444,393 52,920 69,548 87,615 315,887 181,696 232,781 940,449 63,254 31,009 7,381 29,824 131,469 4,253,373 42,337,011 *1 24,109,236 18,227,774 346,834 918,251 5,116,694 448,463 80,299 53,746 229,251 1,124,247 502,100 201,271 4,957 1,358,888 3,062,556 13,447,564 4,780,210 60,856 65,404 231,773 359,389 11,679 162,946 892,049 57,856 ― 10,514 31,600 99,970 5,572,289 14 Extraordinary income Gain on sales of non-current assets Subsidies for employment adjustment Gain on sales of investment securities Total extraordinary income Extraordinary losses Impairment loss Loss on valuation of investments in capital Loss on sales of non-current assets Loss on retirement of non-current assets Loss due to Covid-19 Total extraordinary losses Profit before Income Taxes Income taxes – current Income taxes – deferred Total income taxes Net income Net income attributable to non-controlling shareholders Net income attributable to owners of parent (Amount: thousand yen) FY2020 (April 1, 2020 through March 31, 2021) FY2021 (April 1, 2021 through March 31, 2022) *3 9,336 76,885 10,288 96,510 *4 107,854 ― *5 97 *6 5,623 99,784 213,359 4,136,523 1,175,145 (82,826) 1,092,319 3,044,204 420,922 2,623,282 *3 3,180 ― 11,950 15,131 ― 34,427 *5 406 *6 10,887 ― 45,721 5,541,699 1,639,721 (246,729) 1,392,992 4,148,706 607,310 3,541,395 15 Consolidated statements of comprehensive income Net Income Other comprehensive income Valuation difference on available-for-sale securities 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 Breakdown of comprehensive income Comprehensive income attributable to owners of parent Comprehensive income attributable to non-controlling interests (Amount: thousand yen) FY2020 (April 1, 2020 through March 31, 2021) FY2021 (April 1, 2021 through March 31, 2022) 3,044,204 196,654 (37,555) 114,0