Shikoku Chemicals : Consolidated Financial Results for the Three Months Ended June 30, 2022

Consolidated Financial Results

for the Three Months Ended June 30, 2022

[Japanese GAAP]

July 26, 2022

Company name: SHIKOKU CHEMICALS CORPORATION

Stock exchange listing: Tokyo Stock Exchange

Code number: 4099

URL: https://www.shikoku.co.jp/

Representative: Naoto Tanaka, President and C.E.O.

Contact: Yoshiaki Ando, Executive Officer, General Manager of Corporate Strategy & Finance

Phone: [phone]

Scheduled date of filing quarterly securities report: August 10, 2022

Scheduled date of commencing dividend payments: -

Availability of supplementary briefing material on quarterly financial results: Available

Schedule of quarterly financial results briefing session: Not scheduled

(Amounts less than one million yen are rounded down)

1. Consolidated Financial Results for the Three Months Ended June 30, 2022 (from April 1, 2022 to June 30,

2022)
(1) Consolidated Operating Results		(% indicates changes from the previous corresponding period.)
		Net sales		Operating profit	Ordinary profit	Profit attributable to
			owners of parent
	Three months ended	Million yen	%	Million yen	%	Million yen	%	Million yen	%
	June 30, 2022	15,796	22.7	1,775	0.3	2,561	29.6	1,578	16.8
	June 30, 2021	12,869	11.0	1,770	40.3	1,975	37.1	1,351	42.8

(Note) Comprehensive income: Three months ended June 30, 2022: ¥1,219 million [21.9 %]

Three months ended June 30, 2021: ¥1,000 million [(46.5) %]

Basic earnings

Diluted earnings

per share

per share

Three months ended

Yen

Yen

June 30, 2022

29.33

-

June 30, 2021

24.40

-

(2) Consolidated Financial Position

Total assets

Net assets

Equity ratio

Million yen

Million yen

%

As of June 30, 2022

113,820

81,477

70.9

As of March 31, 2022

113,805

80,908

70.3

(Reference) Equity: As of June 30, 2022: ¥80,665 million

As of March 31, 2022: ¥80,049 million

2. Dividends

Annual dividends

1st

2nd

3rd

Year-end

Total

quarter-end

quarter-end

quarter-end

Yen

Yen

Yen

Yen

Yen

Year ended March 31, 2022	-	12.00
Year ending December 31, 2022	-
Year ending December 31, 2022		13.00
(Forecast)
(Note) Revisions to the cash dividends forecasts most recently announced: None

-

-

12.00 24.00

13.00 26.00

3. Forecast of Consolidated Financial Results for the Year Ending December 31, 2022 (from April 1, 2022 to December 31, 2022)

(% indicates changes from the previous corresponding period.)

			Net sales		Operating profit	Ordinary profit	Profit attributable	Basic earnings
				to owners of		per share
									parent
	Full year		Million yen	%	Million yen	%	Million yen	%	Million yen	%	Yen
		46,000	-	5,800	-	6,100	-	3,700	-	68.76
(Notes) 1.	Revisions to the financial results forecast most recently announced: None

2. The Company plans to change its fiscal year-end (the last day of the fiscal year) from March 31 to December 31 of each year beginning with the 103rd fiscal year. Due to this change in fiscal year-end, the 103rd fiscal year will be a transitional period of nine months from April 1, 2022 to December 31, 2022. Therefore, the above forecast of consolidated financial results for the year ending December 31, 2022 represents nine-month forecast figures, and the percentage changes from the previous corresponding period are omitted.

* Notes:

1. Changes in significant subsidiaries during the period (changes in specified subsidiaries resulting in changes in scope of consolidation): No
2. Accounting policies adopted specially for the preparation of quarterly consolidated financial statements: Yes
3. Changes in accounting policies, changes in accounting estimates and retrospective restatement
4. 1. Changes in accounting policies due to the revision of accounting standards: No
   2. Changes in accounting policies other than 1) above: No
   3. Changes in accounting estimates: No
   4. Retrospective restatement: No
5. Total number of issued shares (ordinary shares)
6. 1. Total number of issued shares at the end of the period (including treasury shares):

June 30, 2022: 54,018,563 shares

March 31, 2022: 54,018,563 shares

1. Total number of treasury shares at the end of the period: June 30, 2022: 205,938 shares
   March 31, 2022: 205,788 shares
2. Average number of shares during the period:

Three months ended June 30, 2022: 53,812,706 shares

Three months ended June 30, 2021: 55,403,410 shares

• These quarterly financial results are outside the scope of quarterly review by certified public accountants or audit firms
• Explanation regarding the appropriate use of financial results forecasts and other special items

Forward-looking statements such as operating results forecasts and other projections contained in this report are based on information currently available to the Company and certain assumptions deemed reasonable. Actual results may differ significantly from these forecasts due to a wide range of factors. For the assumptions underlying the operating results forecasts and cautionary notes concerning their use, please refer to "(3) Explanation of Consolidated Financial Results Forecast and Other Forward-looking Information" under "1. Qualitative Information on Quarterly Financial Results for the Period under Review" on page 3 of the attached documents to the quarterly financial statements.

Table of Contents
1. Qualitative Information on Quarterly Financial Results for the Period under Review ..............................	2
(1)	Explanation of Operating Results ...........................................................................................................	2
(2)	Explanation of Financial Position ..........................................................................................................	3
(3)	Explanation of Consolidated Financial Results Forecast and Other Forward-looking Information ......	3
2. Quarterly Consolidated Financial Statements and Primary Notes ...............................................................	4
(1)	Quarterly Consolidated Balance Sheets ...................................................................................................	4
(2)	Quarterly Consolidated Statements of Income and Comprehensive Income ...........................................	6
(3)	Notes to Quarterly Consolidated Financial Statements ............................................................................	8
	(Notes on going concern assumption) ......................................................................................................	8
	(Notes in the case of significant changes in shareholders' equity) ...........................................................	8
	(Accounting policies adopted specially for the preparation of quarterly consolidated financial statements) .............	8
	(Segment information, etc.) ......................................................................................................................	9

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1. Qualitative Information on Quarterly Financial Results for the Period under Review

(1) Explanation of Operating Results

The Japanese economy during the three months ended June 30, 2022 continued to recover with personal consumption showing signs of recovery as restrictions on economic activities were eased and such activities were normalized. Overseas economies continued to pick up globally, especially in Europe and the United States. However, the effects of prolonged constraints on supply of semiconductors and other materials, chronically high energy and resource prices due to the prolonged Russian invasion of Ukraine, disruptions in global distribution networks and soaring sea freight rates are becoming more serious globally, and monetary tightening and rising interest rates in multiple countries against the backdrop of these global price increases posed downside risks to the economy.

Under these circumstances, for the three months ended June 30, 2022 (from April 1, 2022 to June 30, 2022), the Group posted net sales of ¥15,796 million (up 22.7% year-on-year), operating profit of ¥1,775 million (up 0.3% year-on-year), ordinary profit of ¥2,561 million (up 29.6% year-on-year) and profit attributable to owners of parent of ¥1,578 million (up 16.8% year-on-year), all of which increased from the previous year's results. In addition, net sales, ordinary profit, and profit attributable to owners of parent all hit record highs and achieved high levels, driven by overseas demand, against the backdrop of global economic recovery from the COVID-

19 pandemic.

1. Operating results by segment are as follows.

2. Chemicals operations

(Inorganic chemicals)

Sales of insoluble sulfur, a material for radial tires, largely surpassed those of the previous fiscal year due to solid demand for replacement tires and industrial vehicle tires, despite a decline in automobile production resulting from semiconductor shortages. As for sales of carbon disulfide for rayon and cellophane, and sodium sulfate for bath agents and detergents, the Company strove to improve profitability by the price pass-through of the impact of yen depreciation in exchange rates and resource prices.

(Organic chemicals)

Regarding chlorinated isocyanuric acid for disinfectants, the domestic market performed better than the previous year mainly due to a recovery in sales of agents for swimming pools. In the U.S. market, the pool market continues to be brisk, and the Tokushima Plant continues to be in full production. In addition, both sales and profits were significantly higher than the previous year as the Company passed soaring resource prices and distribution costs on selling prices amid the tightening balance between supply and demand.

(Fine chemicals)

Regarding electronic chemicals, particularly Glicoat-SMD, a heat-resistant soluble OSP (Organic Solderability Preservative) for printed wiring boards, and advanced & specialty chemicals, such as epoxy resin curing agent (imidazoles), resin modifier (glycoluril derivatives, etc.) and semiconductor processing materials, sales also remained strong, despite the current lockdown in China and Shanghai, against a backdrop of the favorable conditions in semiconductor and electronics markets that have recovered from the COVID-19 pandemic.

As a result, net sales for the chemicals operations segment were ¥11,327 million (up 35.0% year-on-year), and segment profit was ¥1,937 million (up 10.5% year-on-year), both surpassing the previous year's results.

2) Housing Materials operations

The number of new housing starts continued to be weak for owned houses, and sales of interior, exterior finishes and paving materials and exterior products remained sluggish. In response to soaring prices of aluminum ingots and other raw materials, the Company revised prices and strove to improve profitability, but the business environment remained severe as higher end-of-line prices acted to further reduce demand.

As a result, net sales for the housing materials operations segment were ¥4,174 million (up 2.4% year-on- year), and segment profit was ¥296 million (down 37.6% year-on-year).

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Reference information [Overseas net sales]

Three months ended June 30, 2021 (from April 1, 2021 to June 30, 2021)

Three months ended June 30, 2022 (from April 1, 2022 to June 30, 2022)

	Net sales	Overseas net sales to	Net sales	Overseas net sales to
	(Million yen)	consolidated net sales (%)	(Million yen)	consolidated net sales (%)
Asia	1,844	14.3	2,293	14.5
North America	2,047	15.9	4,199	26.6
Other regions	476	3.7	679	4.3
Total	4,367	33.9	7,171	45.4
Consolidated net	12,869		15,796
sales

(Note) Net sales are classified based on the actual destinations of products.

1. Explanation of Financial Position (Status of assets, liabilities and net assets)
   Total assets increased by ¥14 million from the end of the previous fiscal year to ¥113,820 million. Major increases were ¥2,319 million in machinery, equipment and vehicles, and ¥576 million in buildings and structures, and major decreases were ¥1,726 million in construction in progress and ¥1,016 million in investment securities.
   Liabilities decreased by ¥553 million from the end of the previous fiscal year to ¥32,343 million. A major increase was ¥1,254 million in electronically recorded obligations - facilities, and major decreases were ¥1,202 million in income taxes payable and ¥797 million in notes and accounts payable - trade.
   Net assets increased by ¥568 million from the end of the previous fiscal year to ¥81,477 million. A major increase was ¥931 million in retained earnings, and a major decrease was ¥479 million in valuation difference on available-for-sale securities.
   As a result, the equity ratio rose to 70.9%, from 70.3% at the end of the previous fiscal year.
2. Explanation of Consolidated Financial Results Forecast and Other Forward-looking Information

The full-year financial results forecast has not been changed from the initial plan (announced on April 28, 2022). Assumptions for the exchange rates of major currencies are ¥120 to U.S. dollar and ¥130 to Euro.

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