T Hasegawa : Summary of Consolidated Financial Results for the Three Months Ended December 31, 2021

3. Forecast of consolidated financial results for the year ending September 30, 2022 (from October 1, 2021 to September 30, 2022)

Percentages indicate year-on-year changes

Note: For details, please refer to "Application of special accounting methods for preparing quarterly consolidated financial statements" under "2. Quarterly consolidated financial statements and significant notes thereto, (3) Notes to quarterly consolidated financial statements" on page 8 of the Attached Material.

(3) Changes in accounting policies, changes in accounting estimates, and restatement of prior period financial statements

Note: For details, please refer to "Changes in accounting policies" under "2. Quarterly consolidated financial statements and significant notes thereto, (3) Notes to quarterly consolidated financial statements" on page 8 of the Attached Material.

(4) Number of issued shares (common shares)

Total number of issued shares at the end of the period (including treasury shares)

• Quarterly financial results reports are exempt from quarterly review conducted by certified public accountants or an audit corporation.
• Proper use of forecasts of financial results, and other special matters
  The forward-looking statements, including the earnings forecasts, shown in this document are based on information currently available to the Company and on certain assumptions deemed to be reasonable. These statements do not purport that the Company pledges to realize such statements. Actual results may differ substantially due to various factors. For the suppositions that form the assumptions for financial forecasts and cautions concerning the use thereof, please refer to "1. Qualitative information on financial results for the period, (3) Explanation of consolidated financial results forecast and other forward-looking statements" on page 3 of the Attached Material.

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1. Qualitative information on financial results for the period

(1) Explanation of operating results

In the three months ended December 31, 2021, amid the prolonged impact of the novel coronavirus disease (COVID-19), the Japanese economy faced concerns about the impact of infection trends, including variants, on economic activities in Japan and overseas, and the future remained uncertain.

The flavor and fragrance industry remained in a severe situation due largely to maturation of the domestic market, fiercer competition among peers, and growing demand for quality assurance.

Under this environment, giving primary consideration to quality control of products and securing of safety, the Group worked to further improve research and technology development capabilities and focused on development of the Company's unique high quality and high value added products.

In addition, earnings performance of US-based MISSION FLAVORS & FRAGRANCES, INC. ("MISSION"), which newly became a consolidated subsidiary in December 2020, contributed to consolidated operating results of the Group (no record in the three months ended December 31, 2020).

Furthermore, our Thailand subsidiary T. HASEGAWA (SOUTHEAST ASIA) CO., LTD. and our Taiwan subsidiary T. HASEGAWA FLAVOURS AND FRAGRANCES (TAIWAN) CO., LTD., which were non-consolidated subsidiaries, have newly been included under the scope of consolidation effective from the first quarter ended December 31, 2021, due to their increased materiality for the Group.

In the three months ended December 31, 2021, net sales increased year on year, amounting to ¥14,295 million (up 17.5% year on year). The Company's non-consolidated net sales increased by 6.5% year on year. As for net sales of major overseas consolidated subsidiaries, net sales of subsidiaries in the USA (including MISSION) increased by 63.8% (up 50.5% on a local currency basis), those of subsidiaries in China increased by 25.2% year on year (up 11.4% on a local currency basis), and those of subsidiaries in Malaysia increased by 35.9% (up 27.3% on a local currency basis).

By division, net sales of the Flavor Division increased by 18.5% year on year, amounting to ¥12,223 million, due mainly to increased net sales from our U.S. subsidiaries (including MISSION) and our Chinese subsidiaries and the new addition of our Thailand subsidiary and Taiwan subsidiary to the scope of consolidation.

Net sales of the Fragrance Division increased by 11.8% year on year, amounting to ¥2,071 million due mainly to an increase in non-consolidated sales of the Company.

As for profit, although selling, general and administrative expenses increased in line with an increase in personal expenses and the recording of amortization of goodwill of MISSION, etc., operating profit increased by ¥605 million (60.0%) year on year to ¥1,614 million due largely to an increase in gross profit resulting from the increase in net sales and improvement in the ratio of cost to sales. Ordinary profit increased by ¥689 million (64.5%) year on year to ¥1,758 million. Profit attributable to owners of parent decreased by ¥366 million (23.2%) year on year to ¥1,217 million, due mainly to a decrease in extraordinary income with the recording of ¥1,137 million in extraordinary income from a gain on sale of investment securities in the same period of the previous fiscal year, despite an increase in ordinary profit.

Operating results by segment are as follows. Furthermore, operating results by segment include inter-segment sales, etc.

(Japan)

Net sales were ¥9,257 million (up 6.5% year on year), and segment profit was ¥1,071 million (up 104.9% year on year).

(Asia)

Net sales were ¥3,170 million (up 46.0% year on year), and segment profit was ¥580 million (up 41.0% year on year).

(USA)

Net sales were ¥2,458 million (up 62.3% year on year), and segment loss was ¥3 million (segment profit of ¥59 million in the same period of the previous fiscal year).

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1. Explanation of financial position (Current assets)
   While cash and deposits decreased by ¥802 million, compared to the end of the fiscal year ended September 30, 2021, merchandise and finished goods and raw materials and supplies increased by ¥337 million and ¥385 million, respectively. Due largely to these factors, current assets decreased by ¥152 million compared to the end of the fiscal year ended September 30, 2021 to ¥55,089 million.
   (Non-current assets)
   While investment securities decreased by ¥2,164 million, compared to the end of the fiscal year ended September 30, 2021, non-current assets decreased by ¥1,535 million compared to the end of the fiscal year ended September 30, 2021 to ¥64,167 million, due largely to an increase of ¥519 million in construction in progress, included in property, plant and equipment.
   (Current liabilities)
   While notes and account payable - trade, increased by ¥526 million, compared to the end of the fiscal year ended September 30, 2021, income taxes payable and provision for bonuses decreased by ¥1,066 million and ¥1,049 million, respectively. Due largely to these factors, current liabilities decreased by ¥1,231 million compared to the end of the fiscal year ended September 30, 2021 to ¥10,372 million.
   (Non-current liabilities)
   While retirement benefit liability increased by ¥111 million, compared to the end of the fiscal year ended September 30, 2021, long-term accounts payable - other and deferred tax liabilities decreased by ¥403 million and ¥569 million, respectively. Due largely to these factors, non-current liabilities decreased by ¥877 million compared to the end of the fiscal year ended September 30, 2021 to ¥10,162 million.
   (Net assets)
   Compared to the end of the fiscal year ended September 30, 2021, while retained earnings and foreign currency translation adjustment increased by ¥195 million and ¥1,454 million, respectively, valuation difference on available-for-sale securities decreased by ¥1,467 million. Due largely to these factors, total net assets increased by ¥420 million compared to the end of the fiscal year ended September 30, 2021 to ¥98,721 million.
2. Explanation of consolidated financial results forecast and other forward-looking statements
   No revisions have been made to the consolidated financial results forecast announced on November 12, 2021.

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