Abalance : 〔delayed〕Consolidated Financial Results for the Six Months Ended December 31,2023(Under Japanese GAAP)

Note: This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail.

March 14, 2024

Consolidated Financial Results
for the Six Months Ended December 31, 2023
(Under Japanese GAAP)
Company name:	Abalance Corporation
Listing:	Tokyo Stock Exchange
Securities code:	3856
URL:	https://www.abalance.jp/en/
Representative:	Yasuaki Mitsuyuki, Representative Director and President
Inquiries:	Hironori Tokumoto, General Manager of Accounting Department
Telephone:	[phone]

Scheduled date to file quarterly securities report: March 14, 2024

Scheduled date to commence dividend payments: March 29, 2024 Preparation of supplementary material on quarterly financial results: Yes

Holding of quarterly financial results briefing: None

(Yen amounts are rounded down to millions, unless otherwise noted.)

1. Consolidated financial results for the six months ended December 31, 2023 (from July 1, 2023 to December 31, 2023)

(1) Consolidated operating results (cumulative)

(Percentages indicate year-on-year changes.)

Net sales	Operating profit	Ordinary profit	Profit attributable to owners of parent
Six months ended December 31, 2023 December 31, 2022	Millions of yen 108,543 111,553	% (2.7) 323.5	Millions of yen 10,057 4,908	% 104.9 －	Millions of yen 10,507 5,602	% 87.6 －	Millions of yen 3,635 2,148	% 69.2 190.5

Note: Comprehensive income

For the six months ended December 31, 2023:	¥7,734 million	[77.3%]
For the six months ended December 31, 2022:	¥4,362 million	[335.2%]

Basic earnings per share	Diluted earnings per share
Six months ended December 31, 2023 December 31, 2022	Yen 209.75 129.27	Yen 207.68 128.60

Note: Effective September 1, 2022, the Company conducted a three-for-one stock split with respect to its common stock. The total number of issued shares at the end of the period, the number of treasury shares at the end of the period, and the average number of shares outstanding during the period were calculated assuming that the stock split had been conducted on July 1, 2022.

(2) Consolidated financial position

Total assets	Net assets	Equity ratio
As of December 31, 2023 June 30, 2023	Millions of yen 148,993 143,691	Millions of yen 30,022 22,771	% 10.6 8.8

Reference:	Equity
As of December 31, 2023:	¥15,856 million
As of June 30, 2023:	¥12,595 million

2. Dividends

Annual dividends per share
First quarter-end	Second quarter-end	Third quarter-end	Fiscal year-end	Total
Fiscal year ended June 30, 2023 Fiscal year ending June 30, 2024	Yen － －	Yen 3.00 3.00	Yen －	Yen 5.00	Yen 8.00
Fiscal year ending June 30, 2024 (Forecast)	－	－	－

Notes: 1. Revisions to the forecast of dividends most recently announced: Yes

2. The year-end dividend forecast for the fiscal year ending June 30, 2024 is to be determined.

3. Consolidated financial result forecasts for the fiscal year ending June 30, 2024 (from July 1, 2023 to June 30, 2024)

(Percentages indicate year-on-year changes.)Net sales

Millions of yen 251,800

Operating profitOrdinary profit

% Millions of yen

% Millions of yen

17.0 15,800 23.4

15,800

Note:Revisions to the financial result forecast most recently announced: NoneProfit attributable to owners of parent

12.5

%

Millions of yen 7,000 41.0

Basic earnings per share

%

Yen 413.53

* Notes

• (1) Changes in significant subsidiaries during the period (changes in specified subsidiaries resulting in change in scope of consolidation): None

  Newly included: - (Company name) Excluded: - (Company name)

• (2) Adoption of accounting treatment specific to the preparation of quarterly consolidated financial statements: None

• (3) Changes in accounting policies, changes in accounting estimates, and restatement

  • (i) Changes in accounting policies due to revisions to accounting standards and other regulations: None

  • (ii) Changes in accounting policies due to other reasons: None

  • (iii) Changes in accounting estimates: None

  • (iv) Restatement: None

(4) Number of issued shares (common shares)

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

  As of December 31, 2023	17,475,333 shares
  As of June 30, 2023	17,465,033 shares

• (ii) Number of treasury shares at the end of the period

As of December 31, 2023	82,522 shares
As of June 30, 2023	82,474 shares

(iii) Average number of shares outstanding during the period (cumulative from the beginning of the fiscal year)

Six months ended December 31, 2023	17,332,772 shares
Six months ended December 31, 2022	16,621,917 shares

Note: Effective September 1, 2022, the Company conducted a three-for-one stock split with respect to its common stock. The total number of issued shares at the end of the period, the number of treasury shares at the end of the period, and the average number of shares outstanding during the period were calculated assuming that the stock split had been conducted on July 1, 2022.

* Quarterly financial results reports are exempt from quarterly review conducted by certified public accountants or an audit corporation.

* Proper use of earnings forecasts and other special matters

The earnings forecasts and other forward-looking statements in the report are based on information currently available to the Company and certain assumptions that the Company determines reasonable, and the Company does not in any way guarantee the achievement of the forecasts. Actual results and other data may differ significantly from the forecasts depending on various factors. For the assumptions used as the basis for the forecasts and precautions on the use of the forecasts, please refer to "(3) Explanation of Consolidated Financial Results Forecast and Other Forward-looking Information" on page 6 of the Attachments to this report.

Table of Contents - Attachments

1. Qualitative Information on Quarterly Financial Results ................................................................................ 2

(1) Explanation of Operating Results ............................................................................................................... 2

(2) Explanation of Financial Position .............................................................................................................. 5

(3) Explanation of Consolidated Financial Results Forecast and Other Forward-looking Information ............ 6

2. Quarterly Consolidated Financial Statements and Principal Notes ................................................................ 7

(1) Quarterly Consolidated Balance Sheets ..................................................................................................... 7

(2) Quarterly Consolidated Statements of Income and Comprehensive Income ............................................. 9

Quarterly Consolidated Statements of Income ........................................................................................... 9

Six Months Ended December 31 ............................................................................................................. 9

Quarterly Consolidated Statements of Comprehensive Income ............................................................... 10

Six Months Ended December 31 ........................................................................................................... 10

(3) Quarterly Consolidated Statements of Cash Flows .................................................................................... 11

(4) Notes to Quarterly Consolidated Financial Statements ............................................................................ 13

(Notes on going concern assumption) ................................................................................................. 13

(Notes in case of significant changes in shareholders' equity) ............................................................ 13

(Changes in accounting policies) ......................................................................................................... 13

(Changes in accounting estimates) ...................................................................................................... 13

(Business combinations) ........................................................................................................................ 13

(Significant subsequent events) ............................................................................................................. 13

1. Qualitative Information on Quarterly Financial Results

(1) Explanation of Operating Results

During the six months ended December 31, 2023, the Japanese economy showed a moderate recovery against the backdrop of a pickup in consumer spending and an improvement in the employment situation. Nevertheless, the future economic outlook remains uncertain due to concerns about soaring resource and raw material prices, inflation caused by the weakening yen, ongoing monetary tightening policies worldwide, low economic recovery in China, and the impacts of geopolitical risks in Ukraine and the Middle East.

Regarding the business environment in the renewable energy market, in Japan, a target of reducing greenhouse gas emissions by 46% compared to 2013 levels by 2030 has been set based on the Japanese government's declaration of carbon neutrality in 2050. Internationally, further progress is expected in efforts to build a carbon-free society, through climate change responses in accordance with the 28th Conference of the Parties to the UN Framework Convention on Climate Change (COP 28) held last year, the US Inflation Reduction Act (IRA), and other responses.

In such a business environment, the Group has positioned the "Abalance Group Medium-Term Management Plan (2024-2026)" as a period of acceleration to achieve the 2030 Group Vision of becoming a global core renewable energy company. With the Solar Panel Manufacturing Business and Green Energy Business as our growth engines, we are striving to improve the Group's corporate value over the medium to long term.

As a result of the above, for the six months ended December 31, 2023, Abalance Corporation (the "Company," together with its subsidiaries, the "Group") recorded net sales of 108,543 million yen (down 2.7% year on year), operating profit of 10,057 million yen (up 104.9% year on year), ordinary profit of 10,507 million yen (up 87.6% year on year), and profit attributable to owners of parent of 3,635 million yen (up 69.2% year on year).

Amid the uncertain external environment, in the solar panel manufacturing business operated by Vietnam Sunergy Joint Stock Company ("VSUN") in Vietnam, strengthening of the supply chain and robust panel sales to the United States contributed to the consolidated business results.

In the green energy business, while continuing with the sale of solar power plants and related equipment (one-time revenue business model), we are working to enhance our business foundations by promoting company ownership of solar power plants (recurring revenue business model).

The business results by segment are as follows.

1. Solar Panel Manufacturing Business

For the six months ended December 31, 2023, net sales amounted to 104,259 million yen (down 3.0% year on year), and segment profit was 10,062 million yen (up 118.2% year on year).

VSUN has adopted Japanese production and quality control methods and systems and expanded its business foundations by selling solar panels for industrial and domestic use to Europe and the United States. Although sales of solar panels to long-term customers of good standing remained strong, net sales decreased year on year due to a fall in market prices of solar panels caused by global over-supply. Meanwhile, in October 2023, construction was completed of a cell plant to create an in-house production system for cells (N-type TOPCon), the main component of solar panels, with the aim of stabilizing the supply chain and improving profit margins. Segment profit increased year on year due to the promotion of a shift to mass production at the plant, reductions in cost prices, and increased efficiency of the production system and operations. Going forward, the Group has plans to sell cells to external parties and will continue its efforts to improve its business competitiveness by maintaining stable transactions with good customers and improving the efficiency of its business operations.

2. Green Energy Business

For the six months ended December 31, 2023, solar power plant sales and component sales of 1,810 million yen and sales of electricity and revenue from operation and maintenance (O&M) of 2,136 million yen were recorded, resulting in net sales of 3,947 million yen (up 1.0% year on year), and segment profit of 636 millionyen (down 5.6% year on year).

The Group, led by WWB Corporation and VALORS Corporation, sells products related to solar power generation facilities such as solar panels, PCS, and industrial and residential storage batteries, in addition to sales of solar power plants in a one-time revenue business model. At the same time, it is also pursuing a recurring revenue business model, in which the Company retains ownership of the power plants even after the completion of construction, as a way of securing stable revenue from sales of electricity. To accelerate this business model, we are actively promoting M&As with the aim of acquiring multiple solar power plants at once. In addition, the Group has entered the grid-connected batteries business in the Hokkaido area, which will enable stable power supply in preparation for times of high electricity demand or during power outages.

3. IT Business

For the six months ended December 31, 2023, net sales amounted to 301 million yen (down 8.1% year on year), and segment profit was 20 million yen (up 88.4% year on year).

With Digital Sign Co., Ltd., at the center, the Group promotes the provision of technological solutions that meet a wide range of needs, from consulting on business issues and DX support services for various industries to the development and maintenance of operational systems that take advantage of our strengths, such as electronic authentication and security technologies.

The Group is also promoting the provision of solutions with a high QCD balance, using packaged products such as "KnowledgeMarket®", a product of Abit Corporation that achieves the improvement of labor productivity through the sharing of knowledge (information, knowledge, and experience) and the restructuring of business processes, "e-Digi DataSharing," a product of FORTHINK Co., Ltd. that provides transaction document delivery and lifecycle management in response to Japan's new invoice system and the Act concerning Preservation of Electronic Books, "e-Digi Sign," a one-stop electronic contract service that assists in processes from the drafting of contracts to their execution and administration, and Microsoft 365.

4. Photocatalyst Business

For the six months ended December 31, 2023, net sales amounted to 19 million yen (up 4.2% year on year) and segment loss was 10 million yen (segment loss of 23 million yen in the same period of the previous year).

In the Photocatalyst Business, where products are valued for their visibility, product characteristics, and quality, WWB Corporation, Japan Photocatalyst Center Corporation, and Meiji Machine Co., Ltd. formed a business alliance. With the conclusion of this agreement, we engaged in creating synergies that enable each company to demonstrate its strengths, expanding joint sales, and making high-value-added proposals to all customers involved in food and sanitation. As a result, we have achieved sales of blocKIN to ZEN-NOH (JA) Group companies through Meiji Machine Co., Ltd. In addition, we are working to diversify the business, such as the recent establishment of a photocatalyst business that undertakes mold removal and prevention work for major supermarkets. We will continue to build our business foundations and stabilize profits.

(Enhancement and strengthening of information disclosure in English)

In the belief that management information disclosed to our stakeholders, including shareholders and investors overseas, will serve as a foundation for constructive dialogue with those stakeholders, we are working on the disclosure of IR information in English to a reasonable extent for the enhancement of disclosure.

(Recent initiatives on social and environmental issues)

In the belief that, in order for a company to grow over the long term, the fulfillment of its social responsibilities to all stakeholders will lead to the enhancement of corporate value, the Group has established a system of transparent and sound corporate governance.

The Group is also working to realize a sustainable society (SDGs) through the implementation of ESG management that aims to realize a sustainable, enriched society.

Our major initiatives on social and environmental issues are as follows:

 Reduction of greenhouse gas emissions through the promotion of the Green Energy Business

•  Development of a storage system for hydrogen energy, the next-generation energy

•  Launch of the recycling and re-use business to address solar panel disposal issues

•  Contribution to initiatives for decarbonization by supplying EV port cargo-handling machinery

•  Donation of large concrete pump vehicles (Dai Kirin) at the time of the Fukushima Daiichi nuclear accident

•  Development and donation of "RAKUDEN KUN," a foldable lightweight portable battery to support disaster-affected areas

•  Donation of charity funds to rebuild and open elementary schools in poverty-stricken areas in Vietnam <.Photocatalyst Business>

 Development of Maxar® EneZone, a greenhouse that generates electricity and is effective in sterilizing and repelling insects

 Provision of SDGs training to students of junior and senior high schools  Assistance and technical support for social and environmental activity events

•  Appointment of an SDGs expert as outside director

•  Declaration of endorsement of the Task Force on Climate-related Financial Disclosures (TCFD)

•  Activities through membership in SDGs-related organizations

(2) Explanation of Financial Position

(i) Assets, Liabilities and Net Assets

(Assets)

Current assets as of December 31, 2023 totaled 92,584 million yen, a decrease of 7,464 million yen from the end of the previous fiscal year. This was mainly due to a decrease of 15,881 million yen in merchandise and finished goods, despite an increase of 8,044 million yen in cash and deposits.

Non-current assets amounted to 56,345 million yen, an increase of 12,744 million yen from the end of the previous fiscal year. This was mainly due to an increase of 12,034 million yen in machinery, equipment and vehicles.

As a result, total assets were 148,993 million yen, an increase of 5,301 million yen from the end of the previous fiscal year.

(Liabilities)

Current liabilities as of December 31, 2023 totaled 94,184 million yen, a decrease of 6,172 million yen from the end of the previous fiscal year. This was mainly due to decreases of 3,234 million yen in accounts payable - trade and 3,797 million yen in short-term borrowings. Non-current liabilities amounted to 24,786 million yen, an increase of 4,222 million yen from the end of the previous fiscal year. This was mainly due to an increase of 4,295 million yen in long-term accounts payable - installment purchase.

As a result, total liabilities amounted to 118,970 million yen, a decrease of 1,949 million yen from the end of the previous fiscal year.

(Net Assets)

Total net assets as of December 31, 2023 amounted to 30,022 million yen, an increase of 7,251 million yen from the end of the previous fiscal year. This was mainly due to 3,635 million yen in profit attributable to owners of parent.

As a result, the equity ratio was 10.6% (8.8% at the end of the previous fiscal year).

(ii) Cash Flows

Cash and cash equivalents (hereinafter referred to as "cash") at the end of the period under review increased by 8,557 million yen from the end of the previous fiscal year to 28,064 million yen.

The analysis of cash flows for the six months under review is as follows:

(Cash flows from operating activities)

Net cash provided by operating activities was 16,727 million yen (net cash provided of 13,127 million yen for the same period of the previous fiscal year). The main factors were, in addition to the recording of profit before income taxes of 10,456 million yen and depreciation of 1,602 million yen, working capital items such as increases in cash of 7,239 million yen due to a decrease in advance payments to suppliers and 13,938 million yen due to a decrease in inventories, offset by decreases in cash of 2,983 million yen due to an increase in trade receivables and 2,525 million yen due to a decrease in trade payables. In addition, cash decreased by 1,064 million yen due to interest paid and 419 million yen due to income taxes paid.

(Cash flows from investing activities)

Net cash used in investment activities was 8,667 million yen (net cash used of 7,337 million yen for the same period of the previous year). The main factors were 3,311 million yen in the purchase of property, plant and equipment in connection with the development and ownership of solar power plants and capital investments at VSUN and others, and 6,014 million yen in payments of deposit.

(Cash flows from financing activities)

Net cash provided by financing activities was 2,437 million yen (net cash provided of 9,550 million yen for the same period of the previous fiscal year). The main factors were proceeds from short-term borrowings of 42,476 million yen and proceeds from long-term borrowings of 1,746 million yen, offsetting repayments of short-term borrowings of 41,675 million yen and repayments of long-term borrowings of 4,035 million yen.

(3) Explanation of Consolidated Financial Results Forecast and Other Forward-looking Information

The consolidated financial results forecast for the fiscal year ending June 30, 2024 is unchanged from the figures in the "Consolidated Financial Results for the Fiscal Year Ended June 30, 2023 (Under Japanese

GAAP)" announced on August 18, 2023. As announced on September 22, 2023, we have formulated the "Abalance Group Medium-Term Management Plan (2024-2026)" for the three years from the fiscal year ending June 30, 2024 to the fiscal year ending June 30, 2026.

2. Quarterly Consolidated Financial Statements and Principal Notes (1) Quarterly Consolidated Balance Sheets

(Millions of yen)

As of June 30, 2023	As of December 31, 2023
Assets
Current assets
Cash and deposits	20,619	28,664
Notes and accounts receivable - trade	2,011	4,738
Real estate for sale	452	498
Merchandise and finished goods	48,827	32,946
Raw materials and supplies	6	7
Work in process	4,335	4,422
Advance payments to suppliers	10,977	3,399
Other	12,854	17,937
Allowance for doubtful accounts	(36)	(30)
Total current assets	100,049	92,584
Non-current assets
Property, plant and equipment
Machinery, equipment and vehicles	27,463	40,915
Accumulated depreciation	(5,901)	(7,318)
Machinery, equipment and vehicles, net	21,562	33,596
Land	2,403	2,460
Construction in progress	7,823	7,582
Other	1,154	2,141
Total property, plant and equipment	32,943	45,780
Intangible assets
Goodwill	5,324	5,179
Other	2,199	2,061
Total intangible assets	7,523	7,240
Investments and other assets
Other	3,314	3,509
Allowance for doubtful accounts	(180)	(186)
Total investments and other assets	3,134	3,323
Total non-current assets	43,600	56,345
Deferred assets	42	63
Total assets	143,691	148,993