November 2, 2023

Consolidated Financial Statements - Summary

(Six months ended September 30, 2023)

This document is an English translation of the Japanese-language original. All financial information has been prepared in accordance with accounting principles generally accepted in Japan.

Company Name:

GUNZE LIMITED

Securities Code:

3002

Stock Market Listings:

Tokyo

URL:

https://www.gunze.co.jp/

Representative:

Toshiyasu Saguchi, President and Representative Director

Contact:

Junko Nakashima, General Manager, Corporate Communications

Tel:

+81 (6) 6348-1314

Filing of Quarterly Securities Report (Shihanki hokokusho) (Scheduled):

November 13, 2023

Start of Distribution of Dividend (Scheduled):

-

Preparation of Supplementary Materials for Quarterly Financial Results:

Yes

Holding of Presentation of Quarterly Financial Results:

Yes (for institutional investors/analysts)

1. Consolidated Operating Results for the six months ended September 30, 2023 (April 1, 2023 to

September 30, 2023)

(1) Consolidated operating results

(Amounts less than one million yen are omitted)

(Percentages represent year-over-year changes)

Net sales

Operating profit

Ordinary profit

Profit attributable to

owners of parent

Six months ended

¥ millions

%

¥ millions

%

¥ millions

%

¥ millions

%

September 30, 2023

65,153

(3.3)

3,230

15.1

3,280

6.3

2,657

20.4

September 30, 2022

67,350

13.4

2,806

(16.0)

3,087

(18.1)

2,206

(55.9)

Note: Comprehensive

income

Six months ended September 30, 2023: ¥5,143 million [9.4%]

Six months ended September 30, 2022: ¥4,703 million [(0.8)%]

EPS

Diluted EPS

Six months ended

¥

¥

September 30, 2023

155.85

155.49

September 30, 2022

127.68

127.38

(2) Consolidated financial position

Total assets

Net assets

Equity ratio

Net assets per share

%

¥ millions

¥ millions

¥

As of September 30, 2023

164,745

120,353

71.9

6,936.93

As of March 31, 2023

165,927

117,691

69.8

6,789.78

Reference: Total equity

As of September 30, 2023: ¥118,386 million

As of March 31, 2023: ¥115,757 million

2. Dividends

Annual dividends per share (¥)

1st quarter-end

2nd quarter-end

3rd quarter-end

Year-end

Total

¥

¥

¥

¥

¥

FY2022

−

−

−

147.00

147.00

FY2023

−

−

FY2023 (projected)

−

150.00

150.00

(Note) Revision to the projected dividends announced most recently: None

3. Projected results for FY2023 (April 1, 2023 to March 31, 2024)

Net sales

Operating profit

Ordinary profit

¥ millions

%

¥ millions

%

¥ millions

%

FY2023 full year

140,000

2.9

7,500

29.0

7,500

24.6

Profit attributable to

EPS

owners of parent

¥ millions

%

¥

FY2023 full year

4,800

6.6

281.37

(Note) Revision to the projected results announced most recently: None

Notes

  1. Changes in significant subsidiaries during the period (changes in specified subsidiaries during the period accompanied by changes in the scope of consolidation): No
  2. Application of an accounting method specific to the preparation of quarterly consolidated financial statements: Yes
  3. Changes in accounting policies, changes in accounting estimates, and restatement after error corrections
    1. Changes in accounting policies due to revisions to accounting standards and other regulations: No
    2. Changes in accounting policies other than (a) above: No
    3. Changes in accounting estimates: No
    4. Restatement after error corrections: No
  5. Number of shares issued and outstanding (common stock)
    1. Number of shares at the end of period (including treasury stock):

As of September 30, 2023: 17,293,516 shares

As of March 31, 2023: 17,293,516 shares

(b) Treasury stock at the end of period:

As of September 30, 2023: 227,434 shares

As of March 31, 2023: 244,692 shares

(c) Average number of shares during the period:

Six months ended September 30, 2023: 17,053,657 shares

Six months ended September 30, 2022: 17,280,751 shares

  • This summary of quarterly consolidated results is exempt from the quarterly review procedures by certified public accountants or an audit corporation.
  • Notes regarding the proper use of projections of the results and other matters
    Projections of results and future developments are based on information available to the Company at the current time, as well as certain assumptions judged by the Company to be reasonable. Various factors could cause actual results to differ materially from these projections. For the assumptions that form the basis of the projected results and notes regarding the use of projections, see "(3) Explanation of Consolidated Financial Results Forecast and Other Forward-looking Information" of "1. Qualitative Information on Quarterly Financial Results for the Period under Review" on page 3 of attached materials.

(Attachment)

Table of Contents

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

2

(1)

Explanation of Business 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

5

(1)

Quarterly Consolidated Balance Sheets

5

(2)

Quarterly Consolidated Statements of Income and Quarterly Consolidated Statements of

Comprehensive Income

7

(3)

Quarterly Consolidated Statements of Cash Flows

9

(4)

Notes to Quarterly Consolidated Financial Statements

11

(Notes regarding assumptions of continuing operations)

11

(Notes in the case of significant changes in shareholders' equity)

11

(Application of an accounting method specific to the preparation of quarterly consolidated financial

statements)

11

(Changes in accounting policies, changes or restatement of accounting estimates)

11

(Segment information, etc.)

12

(Significant subsequent events)

13

3. Supplementary Information

14

1

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

  1. Explanation of Business Results

(Overview of Results for the Period under Review)

During the six months ended September 30, 2023 (April 1, 2023 - September 30, 2023), the Japanese economy showed signs of a moderate recovery, as social and economic activities progressed toward normal primarily owing to the easing of restrictions on activities resulting from the downgrade of COVID-19 to the Category V. The economic outlook, however, remains unclear, with the continuing rise in prices associated with soaring raw material and energy prices against a backdrop of the yen's depreciation due to the differences in monetary policies in Japan and overseas, as well as concerns of a slowdown in the overseas economy and geopolitical problems.

Amid this operating environment, the GUNZE Group continued to pursue the four basic strategies of "Creation of new value," "Capital cost-focused management," "Evolution of corporate constitution," and "Environmentally responsible management" in the second year of its new medium-term management plan, "VISION 2030 stage 1." By segment, the functional solutions business was impacted by the slowdown in demand for films due to rising prices and the high prices of raw materials and fuels. In the medical business, while sales of new products of bioabsorbable medical materials were strong and sales expanded favorably in China, sales of medical lasers struggled. In the apparel business, with the ongoing recovery trend in sales, profitability improved as the Company proceeded with price revision including adding value to its products. The lifestyle creations business performed strongly thanks to the lifting of restrictions on activities. Consequently, for the period under review, net sales decreased by 3.3% year-on-year to ¥65,153 million, operating profit increased by 15.1% year-on-year to ¥3,230 million, ordinary profit increased by 6.3% year-on-year to ¥3,280 million, and profit attributable to owners of

parent increased by 20.4% year-on-year to ¥2,657 million on a consolidated basis.

(Results by Business Segment)

Categories of the reportable segments have been changed starting from the first quarter of the fiscal year ending March 31, 2024. The following year-on-year comparison has been made using the figures for the corresponding period of the previous fiscal year that were reclassified based on the revised reportable segments.

[Functional Solutions]

In plastic films, sales of packaging films in the US remained strong, although the business was impacted by stagnant demand in Japan and Asia. In engineering plastics, despite the slowdown in sales to the office equipment market, products for semiconductors and general industries performed strongly. Electronic components bore the brunt of stagnant market conditions in its touch panel products for China.

As a result of the above, the functional solutions business recorded net sales of ¥24,251 million (down by 2.4% year-on-year) and operating profit of ¥2,937 million (down by 5.7% year-on-year).

[Medical]

In the medical business, although an adhesion prevention agent, a new product, and products for China performed strongly, orders for medical lasers decreased primarily due to the decreased number of openings of aesthetic and medical institutions and their reduced capital investments after the COVID-19 pandemic.

As a result of the above, the medical business recorded net sales of ¥5,492 million (down by 2.5% year-on- year) and operating profit of ¥907 million (down by 15.8 % year-on-year).

[Apparel]

In the apparel business, despite the growth of e-commerce and the channel for company-owned stores, which are being strengthened, the mass retailer channels struggled, while the business was also impacted by the delay in the rollout of autumn and winter items as a result of the record-breakinglate-summer heat. The Company will

2

continue to pursue growth strategies through a shift to the Direct to Consumer channel and improve profits through price revisions. In innerwear, high value-added products that aligned with customer needs performed strongly. In legwear, the Company has been continuously advancing structural reforms in an effort to improve profitability.

As a result of the above, the apparel business recorded net sales of ¥29,373 million (down by 2.4% year-on- year) and operating profit of ¥775 million (up by 305.9% year-on-year).

[Lifestyle Creations]

The real estate category recorded a decline in revenue due to the recording of sales of idle land redevelopment in the previous fiscal year. Both the shopping center and the sports club businesses are back on the recovery track following the lifting of pandemic restrictions.

As a result of the above, the lifestyle creations business recorded net sales of ¥6,428 million (down by 10.4% year-on-year) and operating profit of ¥297 million (up by 49.4% year-on-year).

(2) Explanation of Financial Position

As of September 30, 2023, total assets were ¥164,745 million, a decrease of ¥1,181 million compared to the end of the previous fiscal year. The main components of the increase included a ¥2,142 million increase in merchandise and finished goods, while the main components of the decrease were a ¥2,047 million decrease in investment securities primarily due to sale of cross-shareholdings and a ¥1,914 million decrease in other current assets (accounts receivable-other, etc.).

Total liabilities were ¥44,392 million, a decrease of ¥3,843 million compared to the end of the previous fiscal year. The main components of the decrease included a ¥1,698 million decrease in long- and short-term borrowings including commercial papers, a ¥1,773 million decrease in other current liabilities (accounts payable - other, etc.), and a ¥1,221 million decrease in notes and accounts payable - trade.

Net assets were ¥120,353 million, an increase of ¥2,662 million compared to the end of the previous fiscal year. The main components of the increase included the recording of profit attributable to owners of parent amounting to ¥2,657 million and a ¥1,470 million increase in foreign currency translation adjustment, while the main components of the decrease included dividends paid of ¥ 2,505 million.

(Cash Flows)

As of September 30, 2023, consolidated cash and cash equivalents were ¥10,886 million, a decrease of ¥660 million compared to the end of the previous fiscal year. Below is an overview of cash flows and reasons for changes during the period under review.

Net cash provided by operating activities for the period under review totaled ¥3,552 million, an increase of ¥5,600 million compared to the corresponding period of the previous year. The major components of cash inflows included profit before income taxes of ¥3,865 million, depreciation of ¥3,018 million, and income taxes refund of ¥1,225 million, while the main components of cash outflows included a ¥1,928 million increase in inventories and a ¥1,486 million decrease in trade payables.

Net cash used in investing activities was ¥63 million, an increase of ¥2,612 million compared to the corresponding period of the previous fiscal year. The main components of cash inflows included ¥4,595 million in proceeds from sale of investment securities, while the main components of outflows included purchase of non- current assets amounting to ¥3,626 million and purchase of investment securities amounting to ¥980 million.

Net cash used in financing activities totaled ¥4,822 million, a decrease of ¥4,462 million compared to the corresponding period of the previous fiscal year. The main components of cash outflows included ¥2,495 million spent for dividends paid and a ¥1,877 million decrease in short-term borrowings and commercial papers.

  1. Explanation of Consolidated Financial Results Forecast and Other Forward-looking Information 3

Because the consolidated financial results for the period under review have been almost in line with expectations, the Company has decided not to change its earlier consolidated financial results forecast for the fiscal year ending March 31, 2024, which was announced on May 12, 2023.

4

2. Quarterly Consolidated Financial Statements and Primary Notes

(1) Quarterly Consolidated Balance Sheets

(Million yen)

As of March 31, 2023

As of September 30, 2023

Assets

Current assets

Cash and deposits

11,547

10,886

Notes and accounts receivable - trade, and contract

27,129

27,807

assets

Merchandise and finished goods

24,114

26,257

Work in process

7,128

8,021

Raw materials and supplies

7,054

6,540

Other

6,622

4,708

Allowance for doubtful accounts

(16)

(17)

Total current assets

83,580

84,203

Non-current assets

Property, plant and equipment

Buildings and structures, net

36,657

36,258

Machinery, equipment and vehicles, net

10,398

10,447

Land

10,446

10,489

Other, net

5,614

6,018

Total property, plant and equipment

63,117

63,213

Intangible assets

1,446

1,600

Investments and other assets

Investment securities

11,698

9,650

Other

6,151

6,144

Allowance for doubtful accounts

(67)

(66)

Total investments and other assets

17,782

15,727

Total non-current assets

82,346

80,541

Total assets

165,927

164,745

5

(Million yen)

As of March 31, 2023

As of September 30, 2023

Liabilities

Current liabilities

Notes and accounts payable - trade

Short-term borrowings

Commercial papers

Current portion of long-term borrowings

Income taxes payable

Provision for bonuses

Other

Total current liabilities

Non-current liabilities

Long-term borrowings

Retirement benefit liability

Long-term leasehold and guarantee deposits received

Other

Total non-current liabilities

Total liabilities

Net assets

Shareholders' equity

Share capital

Capital surplus

Retained earnings

Treasury shares

Total shareholders' equity

Accumulated other comprehensive income

Valuation difference on available-for-sale securities

Deferred gains or losses on hedges

Revaluation reserve for land

Foreign currency translation adjustment

Remeasurements of defined benefit plans

Total accumulated other comprehensive income

Share acquisition rights

Non-controlling interests

Total net assets

Total liabilities and net assets

10,010

8,788

6,077

1,226

−

3,500

438

471

263

1,123

1,353

1,383

11,907

10,134

30,052

26,627

8,638

8,258

4,494

4,618

4,220

4,082

830

805

18,183

17,764

48,235

44,392

26,071

26,071

6,566

6,568

78,972

79,124

(1,044)

(970)

110,566

110,793

2,464

3,060

(144)

166

(13)

(13)

2,941

4,411

(56)

(33)

5,191

7,592

124

124

1,808

1,842

117,691

120,353

165,927

164,745

6

  1. Quarterly Consolidated Statements of Income and Quarterly Consolidated Statements of Comprehensive Income

Quarterly Consolidated Statements of Income

For the six months ended September 30

(Million yen)

For the six months ended

For the six months ended

September 30, 2022

September 30, 2023

Net sales

67,350

65,153

Cost of sales

47,336

44,640

Gross profit

20,013

20,513

Selling, general and administrative expenses

17,206

17,283

Operating profit

2,806

3,230

Non-operating income

Interest income

Dividend income

Rental income from non-current assets

Foreign exchange gains

Other

Total non-operating income

Non-operating expenses

Interest expenses

Rental expenses on non-current assets

Other

Total non-operating expenses

Ordinary profit

Extraordinary income

Gain on sale of non-current assets

Gain on sale of investment securities

Other

Total extraordinary income

Extraordinary losses

Loss on sale and retirement of non-current assets

Loss on sales of investments in capital

Loss on COVID

Other

Total extraordinary losses

Profit before income taxes

Income taxes

Profit

Profit attributable to non-controlling interests

Profit attributable to owners of parent

22

41

268

251

215

227

170

22

154

78

831

621

80

155

208

219

262

195

551

571

3,087

3,280

352

7

0

700

7

−

359

707

135

122

40

−

115

−

11

−

301

122

3,145

3,865

914

1,196

2,231

2,669

24

11

2,206

2,657

7

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Gunze Ltd. published this content on 02 November 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 02 November 2023 08:25:48 UTC.