Consolidated Financial Report

for the First Six Months of Fiscal Year Ending March 2024

November 9, 2023

SATO HOLDINGS CORPORATION

Company code:

6287

Website:

www.sato-global.com

Shares traded on:

TSE Prime

Executive position of legal representative:

Hiroyuki Konuma, Representative Director,

President and Group CEO

Please address all communications to:

Fusaaki Matsumoto, Executive Officer,

CFO and CCO

Phone: +81-3-6628-2423

Scheduled submission date for quarterly securities report:

November 13, 2023

Commencement date of dividend payments:

December 11, 2023

Supplementary explanatory materials for quarterly results:

Available

Holding of meeting to explain quarterly results (for analysts and institutional investors): Yes

1. Consolidated operating results for the first six months (from April 1, 2023 to September 30, 2023) of fiscal year 2023

  1. Consolidated financial results (cumulative)

(Percentage figures show year-on-year change)

Net sales

Operating income

Ordinary income

Six months ended

Millions of yen

%

Millions of yen

%

Millions of yen

%

September 30, 2023

69,786

(1.0)

4,620

22.4

4,307

(13.3)

September 30, 2022

70,463

16.9

3,776

35.8

4,968

84.3

(Note) Comprehensive income:

Six months ended September 30, 2023:

¥4,748 million (-52.6%)

Six months ended September 30, 2022:

¥10,010 million (293.7%)

Net income attributable to owners

Basic earnings per share

Diluted earnings per share

of parent

Six months ended

Millions of yen

%

Yen

Yen

September 30, 2023

1,991

(38.3)

61.47

61.46

September 30, 2022

3,229

74.7

96.70

96.66

(2) Consolidated financial position

Total assets

Net assets

Equity ratio

Net assets per share

As of

Millions of yen

Millions of yen

%

Yen

September 30, 2023

125,193

71,302

55.0

2,124.58

March 31, 2023

122,858

67,694

53.3

2,020.83

(Note) Total equity:

As of September 30, 2023:

¥68,852 million

As of March 31, 2023:

¥65,452 million

2. Dividends

Annual dividend per share

First quarter

Second quarter

Third quarter

Year-end

Total

Yen

Yen

Yen

Yen

Yen

Fiscal year 2022

-

36.00

-

36.00

72.00

Fiscal year 2023

-

36.00

Fiscal year 2023 (Forecast)

-

36.00

72.00

(Note) Revision to recently announced dividend forecast: None

3. Consolidated forecasts for fiscal year 2023 (from April 1, 2023 to March 31, 2024)

(Percentage figures show year-on-yearchange)

Net income

Net sales Operating income Ordinary income attributable to owners of parent

Millions of yen

%

Millions of yen

%

Millions of yen

%

Millions of yen

%

Basic earnings per

share

Yen

Full year

144,000

0.8

9,500

7.4

9,100

0.4

5,000 19.5

154.33

(Note) Revision to recently announced consolidated forecast: Yes

For details, please refer to section 1-(3) "Explanation of consolidated forecasts and other projections" (page 5) of the attached materials.

* Notes

  1. Changes in subsidiaries during the first six months (changes resulting in the change in scope of consolidation): None
  2. Application of special accounting procedures for preparing the quarterly consolidated financial statements: None
  3. Changes in accounting policies and estimates, and restatement of prior-period financial statements after error corrections
    1. Changes in accounting policies due to revisions to accounting standards: None
    2. Changes in accounting policies due to other reasons: None
    3. Changes in accounting estimates: None
    4. Restatement of prior-period financial statements after error corrections: None
  5. Number of issued shares (common shares)
    1. Number of issued shares (including treasury shares) at the end of term:

As of September 30, 2023:

34,921,242 shares

As of March 31, 2023:

34,921,242 shares

2) Number of treasury shares at the end of term:

As of September 30, 2023:

2,513,693 shares

As of March 31, 2023:

2,532,252 shares

  1. Average number of shares during the term (cumulative from the beginning of the fiscal year to the end of the first six months):

Six months ended September 30, 2023:

32,398,100 shares

Six months ended September 30, 2022:

33,394,038 shares

  • Quarterly financial reports are not subject to quarterly reviews conducted by certified public accountants or audit firms.
  • Explanation about the proper use of consolidated forecasts and other notes

Forward-looking statements, including the consolidated forecasts stated in these materials, are based on information currently available to the Company and certain assumptions deemed reasonable. Any statements herein do not assure particular results by the Company. Results may differ from the consolidated forecasts due to various factors. Please refer to section 1-(3) "Explanation of consolidated forecasts and other projections" (page 5) of the attached materials for assumptions behind the consolidated forecasts and other information.

Attached Materials

Index

1. Qualitative Information Regarding Settlement of Accounts for the First Six Months

(1)

Explanation of financial results (percentage changes, year-on-year)

2

(2)

Explanation of financial position

4

(3)

Explanation of consolidated forecasts and other projections

5

2. Consolidated Financial Statements and Significant Notes Thereto

(1)

Consolidated balance sheets

6

(2)

Consolidated statements of (comprehensive) income

Consolidated statements of income

8

Consolidated statements of comprehensive income

9

(3)

Consolidated statements of cash flows

10

(4)

Notes to consolidated financial statements

Notes related to going-concern assumption

11

Notes in the event of material changes in amount of shareholders' equity

11

Changes in accounting policies

11

Segment information

11

1

1. Qualitative Information Regarding Settlement of Accounts for the First Six Months

(1) Explanation of financial results (percentage changes, year-on-year)

The SATO Group runs its business based on management principles, growth strategies and business targets set out in its most recent three-yearMedium-term Management Plan (FY 2021- 2023), with the vision to be "the customer's most trusted partner for mutual growth, and always essential in an ever-changing world."

We concentrate resources on our auto-ID solutions business, which involves offering solutions centered on tagging - the process of physically attaching information to people and things - for customers operating in diverse markets and industries, so that on-site information can be collected in real time, converted into meaningful data, and fed to their core IT systems to optimize individual worksites, supply chains and even the circular economy. With this data that provides visibility into frontline operations, we help businesses and societies run smoothly so as to achieve "Tagging for Sustainability" and contribute toward a better and more sustainable world in the long term. To grow our business and profit sustainably, we have set three new priority agendas as follows and will coordinate how we work on them while looking into multiple angles to make strategic investments and allocate resources with precision.

  1. Global business strategies: To grow our overseas business by applying our auto-ID solutions horizontally across multiple customers/industries with the same pain points, and to improve the selling and earning capabilities of our Japan business from value chain perspectives.
  2. Innovation and R&D: To advance our tagging technologies (automation, RFID, sensors, software, etc.) and to establish "Tagging for Sustainability" business by shifting to data-driven business and entering new domains.
  3. Sustainability management: To create value for society through the value propositions we offer customers and our response to climate change, and to increase our corporate value with strong corporate governance and human capital management.

In the first six months of this fiscal year, we closed an increasing number of deals for market/industry-specific solutions but recorded slightly lower sales for our auto-ID solutions business year on year as resellers in Europe and the Americas adjusted their printer inventories over economic recession concerns. Operating income increased, however, as our primary labels companies maintained a favorable performance.

As a result, the SATO Group posted net sales of ¥69,786 million (down 1.0% compared with the same period of the previous fiscal year), operating income of ¥4,620 million (up 22.4%), ordinary income of ¥4,307 million (down 13.3%), and net income attributable to owners of parent of ¥1,991 million (down 38.3%).

Performance by segment is as follows.

Auto-ID solutions (Japan)

Net sales increased slightly, thanks to improved sales for mechatronics products (primarily software) and price revision effects for consumables products. Segment profit decreased, however, due to reduced printer exports (to overseas subsidiaries), cost of raw materials for consumables rising beyond what we could offset with the repricing of finished products, and

2

higher SG&A expenses.

As for sales by market, mechatronics and consumables sales in logistics and health care sectors both increased, with heightened demand driven by rising delivery volumes and a greater number of outpatients visiting medical institutions. On the other hand, our sales in manufacturing and retail both decreased year on year, because of slowing mechatronics and consumables demand from semiconductor manufacturing and related industries, and because of the absence of large- scale mechatronics deals from the e-commerce industry that were recorded in the same period last year.

Under these circumstances, net sales increased 1.8% year on year to ¥36,229 million, and segment loss of ¥103 million was incurred (compared with segment profit of ¥933 million in the same period of the previous fiscal year).

Auto-ID solutions (Overseas)

Outside Japan, net sales declined for the first six months mainly due to resellers adjusting their printer inventories and due to the absence of demand spike for printers in the US, unlike a year ago. However, segment profit increased as we captured robust market needs through our primary labels companies.

For our base business, the Americas and Europe posted lower net sales as resellers adjusted their printer inventories and major customers were less inclined to make new investments, staying on the lookout for recession. That, coupled with the bankruptcy filing of a major customer, led to lower profit as well. Meanwhile, Asia and Oceania also reported lower profit although sales subsidiaries in Vietnam and Australia were going strong. This is because sales subsidiaries in Taiwan sold less printers due to inventory adjustments at their resellers and because factories received less printer orders and ended up underutilizing their production capacity.

Our companies specializing in primary labels increased sales and profit on a local currency basis, thanks to strong demand from essential industries (that provide daily commodities such as food, beverages and sanitary supplies) since the previous fiscal year and steady progress with price revisions.

Under these circumstances, net sales decreased 3.8% to ¥33,557 million (increase of 3.2%, excluding foreign currency effects), and segment profit increased 49.1% to ¥4,515 million, compared with the same period of the previous fiscal year.

3

  1. Explanation of financial position
    At the end of the second quarter, the balance of current assets decreased by ¥887 million to
    ¥80,249 million (from ¥81,137 million recorded at the end of the previous fiscal year). This was primarily the result of increases of ¥654 million in notes and accounts receivable - trade, and contract assets, ¥386 million in raw materials and supplies, ¥180 million in merchandise and finished goods, and ¥193 million in work in process, and a decrease of ¥2,393 million in cash and deposits. The balance of non-current assets increased by ¥3,222 million to ¥44,943 million (from ¥41,721 million at the end of the previous fiscal year). This was primarily due to increases of ¥1,003 million in buildings and structures, ¥195 million in machinery, equipment and vehicles (both included in property, plant and equipment), ¥1,085 million in software in progress and ¥222 million in goodwill (both included in intangible assets).
    The balance of current liabilities decreased by ¥1,060 million to ¥43,902 million (from ¥44,963 million at the end of the previous fiscal year). This was primarily due to decreases of ¥1,219 million in notes and accounts payable - trade and ¥662 million in short-term borrowings, and increases of ¥370 million in electronically recorded obligations - operating and ¥298 million in contract liabilities. The balance of non-current liabilities decreased by ¥212 million to ¥9,987 million (from ¥10,200 million at the end of the previous fiscal year), primarily due to a decrease of ¥212 million in long-term lease obligations.
    At the end of the second quarter, the balance of net assets increased by ¥3,608 million to
    ¥71,302 million (from ¥67,694 million recorded at the end of the previous fiscal year), primarily due to increases of ¥819 million in retained earnings and ¥2,200 million in foreign currency translation adjustment (classified under accumulated other comprehensive income).
    Cash flows
    At the end of the second quarter, cash and cash equivalents stood at ¥18,527 million, a decrease of ¥2,223 million from the end of the previous fiscal year.
    Cash flows from operating activities
    Cash flow from operating activities was positive at ¥4,648 million.
    This resulted primarily from cash inflows including ¥3,379 million of income before income taxes, ¥2,404 million of depreciation and amortization, and ¥915 million of loss on valuation of investment securities, and cash outflows including ¥1,107 million of income taxes paid.
    Cash flows from investing activities
    Cash flow from investing activities was negative at ¥4,940 million.
    This was primarily due to proceeds of ¥1,180 million from withdrawal of time deposits, and expenditures of ¥949 million for payments into time deposits, ¥3,529 million for purchase of property, plant and equipment, ¥1,122 million for purchase of intangible assets, and ¥600 million for purchase of shares of subsidiaries resulting in change in scope of consolidation.
    Cash flows from financing activities
    Cash flow from financing activities was negative at ¥2,618 million.
    This resulted primarily from cash inflows including ¥2,930 million proceeds from long-term

4

borrowings, and cash outflows including ¥2,963 million repayment of long-term borrowings, a ¥872 million net decrease in short-term borrowings and ¥1,167 million dividends paid.

  1. Explanation of consolidated forecasts and other projections
    Considering the trend in our operating results for the first six months, we have revised our consolidated forecasts for the full fiscal year as follows.

Consolidated forecasts for the fiscal year ending March 31, 2024

Net sales

¥144,000 million

(previous forecast ¥140,000 million)

Operating income

¥9,500 million

(previous forecast ¥8,000 million)

Ordinary income

¥9,100 million

(previous forecast ¥7,800 million)

Net income attributable

¥5,000 million

(no change)

to owners of parent

The foreign exchange rates assumed in the above forecasts are US$1 = ¥143 and €1 = ¥155.

Forward-looking statements, including the consolidated forecasts stated in these materials, are based on information currently available to the Company and certain assumptions deemed reasonable. Results may differ from the consolidated forecasts due to various factors.

5

2. Consolidated Financial Statements and Significant Notes Thereto

(1) Consolidated balance sheets

Unit: Millions of yen

As of March 31, 2023

As of September 30, 2023

Assets

Current assets

Cash and deposits

21,879

19,485

Notes and accounts receivable - trade, and contract

27,113

27,768

assets

Securities

44

48

Merchandise and finished goods

13,685

13,865

Work in process

590

784

Raw materials and supplies

12,579

12,966

Accounts receivable - other

1,763

1,791

Other

3,712

3,960

Allowance for doubtful accounts

(230)

(420)

Total current assets

81,137

80,249

Non-current assets

Property, plant and equipment

Buildings and structures, net

13,962

14,965

Machinery, equipment and vehicles, net

11,602

11,798

Land

3,776

3,934

Other, net

2,988

3,641

Total property, plant and equipment

32,331

34,339

Intangible assets

Software

1,780

1,589

Software in progress

1,682

2,767

Goodwill

222

444

Other

687

792

Total intangible assets

4,372

5,594

Investments and other assets

5,017

5,009

Total non-current assets

41,721

44,943

Total assets

122,858

125,193

Liabilities

Current liabilities

Notes and accounts payable - trade

7,379

6,160

Electronically recorded obligations - operating

11,981

12,352

Short-term borrowings

6,364

5,701

Contract liabilities

7,322

7,620

Accounts payable - other

4,212

4,197

Income taxes payable

1,082

1,028

Provisions

1,510

1,603

Other

5,109

5,237

Total current liabilities

44,963

43,902

Non-current liabilities

Long-term borrowings

3,613

3,537

Lease obligations

4,182

3,969

Retirement benefit liability

1,002

1,053

Other

1,401

1,426

Total non-current liabilities

10,200

9,987

Total liabilities

55,163

53,890

6

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Disclaimer

SATO Holdings Corporation published this content on 17 November 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 20 November 2023 06:48:17 UTC.