Key Coffee : 1st Quarter Financial Statements

Consolidated Financial Results for the Three Months

Ended June 30, 2023 [Japanese GAAP]

July 31, 2023

Company name: KEY COFFEE INC

Stock exchange listing: Tokyo Stock Exchange

Code number: 2594

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

Representative: Yutaka Shibata, Representative Director and President

Contact: Akihiro Mizutani, General Manager, Finance Department Phone: [phone]

Scheduled date of filing quarterly securities report: August 10, 2023

Scheduled date of commencing dividend payments: -

Availability of supplementary explanatory materials on quarterly financial results: Not available

Schedule of quarterly financial results briefing session: Not scheduled

(Amounts of less than one million yen are rounded down.)

1. Consolidated Financial Results for the Three Months Ended June 30, 2023 (April 1, 2023 - June 30, 2023)

(1) Consolidated Operating Results (Cumulative)	(% 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, 2023	19,219	26.4		754	20.1		782	8.2	591	12.6
	June 30, 2022	15,205	10.4		627	126.5		722	60.3	524	73.9
	(Note) Comprehensive income: Three months ended June 30, 2023: ¥690 million [22.4%]
		Three months ended June 30, 2022: ¥564 million [75.2%]
		Basic earnings per share		Diluted earnings per
			share
	Three months ended		Yen			Yen
	June 30, 2023		27.61			-
	June 30, 2022		24.51			-
(2) Consolidated Financial Position
		Total assets		Net assets		Equity ratio
	As of		Million yen			Million yen			%
	June 30, 2023		54,785			31,113			56.2
	March 31, 2023		51,768			30,530			58.4
	(Reference) Equity:	As of June 30, 2023: ¥30,808 million
		As of March 31, 2023: ¥30,250 million

2. Dividends

			Annual dividends
	1st quarter-end	2nd quarter-end	3rd quarter-end	Year-end	Total
	Yen	Yen	Yen	Yen	Yen
Fiscal year ended March 31, 2023	-	5.00	-	5.00	10.00
Fiscal year ending March 31, 2024	-
Fiscal year ending March 31, 2024		5.00	-	5.00	10.00
(Forecast)
(Note) Revision to the forecast for dividends announced most recently: None

3. Consolidated Financial Results Forecast for the Fiscal Year Ending March 31, 2024 (April 1, 2023 - March 31, 2024)

(% indicates changes from the previous corresponding period.)

	Net sales		Operating profit	Ordinary profit	Profit attributable to	Profit per share
		owners of parent
	Million yen	%	Million yen	%	Million yen	%	Million yen	%	Yen
Full year	75,000	18.5	700	186.0	700	100.4	500	188.9	23.35
(Note) Revision to the financial results forecast announced most recently: None

* Notes:

1. Changes in significant subsidiaries during the period under review: None (Changes in specified subsidiaries resulting in changes in scope of consolidation) Newly included: - (Company name: -)
   Excluded: - (Company name: -)
2. Accounting methods adopted particularly for the preparation of quarterly consolidated financial statements: None
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: None
   2. Changes in accounting policies other than 1) above: None
   3. Changes in accounting estimates: None
   4. Retrospective restatement: None
5. Total number of issued and outstanding shares (common shares)
6. 1. Total number of issued and outstanding shares at the end of the period (including treasury shares):

June 30, 2023:	22,689,000 shares
March 31, 2023:	22,689,000 shares
2) Total number of treasury shares at the end of the period:
June 30, 2023:	1,275,856 shares
March 31, 2023:	1,276,656 shares

3) Average number of shares during the period (cumulative from the beginning of the fiscal year):

Three months ended June 30, 2023:	21,413,144 shares
Three months ended June 30, 2022:	21,412,344 shares

(Note) The total number of treasury shares at the end of the period includes the shares of the Company (266,600 shares on June 30, 2023, 267,400 shares on March 31, 2023) held by Custody Bank of Japan, Ltd. (Trust Account E). In addition, shares of the Company held by Custody Bank of Japan, Ltd. (Trust Account E) are included in treasury shares that are subtracted in calculating the average number of shares during the period. (266,600 shares on June 30, 2023, 267,400 shares on June 30, 2022)

• These quarterly consolidated financial results are outside the scope of quarterly review by certified public accountants or an audit firm.
• Explanation of the proper use of financial results forecast and other notes
  Forward-looking statements and other statements about the future that are included in this material are based on information currently available to the Company and certain assumptions deemed reasonable, and the Company does not in any way guarantee the achievement of the projections. Actual results and others may differ significantly due to various factors. For the assumptions for financial results forecast and precautions for using financial results forecasts, please refer to "(3)
  Explanation of Consolidated Financial Results Forecast and Other Forward-looking Information" on page 5 of the attached document.

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	5
2. Quarterly Consolidated Financial Statements and Principal Notes	6
(1)	Quarterly Consolidated Balance Sheets	6
(2)	Quarterly Consolidated Statements of Income and Comprehensive Income	8
(3)	Notes to Quarterly Consolidated Financial Statements	10
	(Notes on going concern assumption)	10
	(Notes in the event of significant changes in the amount of shareholders' equity)	10
	(Segment information, etc.)	10
	(Significant subsequent events)	11

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1. Qualitative Information on Quarterly Financial Results

1. Explanation of Operating Results
   During the three months ended June 30, 2023 (from April 1, 2023 to June 30, 2023), there were signs of a moderate economic recovery, chiefly reflecting the downgrading of COVID-19 in severity classification, an improvement in employment, and wage increases. However, the economic outlook remained uncertain due in part to price hikes associated with persistently high resource prices and the weaker yen, as well as concern over expected slowdowns in U.S. and European economies.
   In the coffee industry, consumption in the HORECA market continued to grow due to an increase in the movement of people and a rebound of the number of visitors to Japan following the removal of movement restrictions amid the COVID-19 pandemic. Consumption in the Household market was roughly the same as the year-ago level despite rises in retail prices by manufacturers in the fall last year.
   Green beans procurement prices, which have a significant impact on results, remained high due to the continued weaker yen, although the green beans market has stabilized, reflecting a good harvest in Brazil, the largest producing country. Coffee production costs also remained high, chiefly because of rises in resource and energy prices together with increasing materials costs. The business environment remained challenging.
   Under these circumstances, the KEY COFFEE Group established the three pillars of "reforming the business structure," "strengthening profitability," and "reinforcing the comprehensive strengths of the Group," based on our long-held"quality-first principle," and engaged in the creation of new demand, developed products which meets the needs of consumers, and promoted solution-oriented business activities that contribute to the financial results of clients, in order to fulfill our corporate philosophy, to "pursue the ultimate in coffee, focus on our customers, and create a coffee culture which enriches the heart."
   The Company has been environmentally conscious and respects human rights. In the previous fiscal year, it adopted a new corporate message, or a vision for 2030, "Coffee and KISSA as a Sustainable Company". It also established the "Future of Coffee Department" to keep the coffee culture alive and realize sustainable coffee production. Moreover, this fiscal year the "Sustainability Promotion Office" has been established, with the aim of pursuing a wider range of sustainability initiatives.
   Net sales of the KEY COFFEE Group for the first quarter, 2023 were 19,219 million yen (a 26.4% increase compared with the same period of the previous fiscal year), operating profit was 754 million yen (a 20.1% increase compared with the same period of the previous fiscal year), and ordinary profit was 782 million yen (a 8.2% increase compared with the same period of the previous fiscal year). Profit attributable to owners of parent was 591 million yen (a 12.6% increase compared with the same period of the previous fiscal year).
   

				(Million yen)
	Three months	Three months	Year-on-year	Year-on-year
	ended June 30,	ended June 30,	increase	percent increase
	2022	2023	(decrease)	(decrease)
Net sales	15,205	19,219	4,013	26.4%
Operating profit	627	754	126	20.1%
Ordinary profit	722	782	59	8.2%
Profit attributable to owners of parent	524	591	66	12.6%

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An overview of segment operations is provided below.

								(Million yen)
		Net sales			Operating profit
Business segment	Three	Year-on-year	Year-on-year	Three		Year-on-year		Year-on-year
months	percent	months			percent
increase		increase
	ended June	increase	ended June			increase
	(decrease)		(decrease)
	30, 2023	(decrease)	30, 2023			(decrease)
Coffee-related businesses	16,936	3,805	29.0	693		63		10.0
Restaurant-related	1,066	139	15.0	7		56		-
businesses
Other	1,216	68	6.0	198		57		40.9
Adjustment	-	-	-	(144)		(50)		-
Total	19,219	4,013	26.4	754		126		20.1

(Note) Adjustment amounts are mainly the elimination of internal transactions between segments, adjustment amounts

for inventories, and general and administrative expenses that do not belong to the reportable segments.

(Coffee-related businesses)

In the HORECA market, we worked to strengthen customer management through the introduction of digital tools and to automate order receipt through the use of the Internet, while working to enhance the operating efficiency of collecting accounts receivable. We also promoted sales of highly differentiated coffees such as TOARCO TORAJA and HYO ON Aging Coffee and worked to expand sales by strengthening food items, such as liquors, for HORECA market we handle.

As measures to revitalize our clients, we presented high quality coffees from around the world for a month and held coffee seminars, where coffee instructors played a central role. As seasonal events, we held a "Curry Fair" where we offered specially arranged items and a range of local curries.

One new cafe was opened, under "KEY'S CAFÉ" (Shop Opening Service), our model cafe package service that supports cafe openings in various location environments. The number of KEY'S CAFÉ cafes became 73.

Sales grew significantly compared to the same period of the previous fiscal year, due to the increased sales volume of coffee and commercial food items to our clients as a result of the downgrading of the severity classification of COVID-19 and an increase in inbound tourism demand.

In the Household market, we fully renewed the TOARCO TORAJA series, which marked its 45th anniversary, selling DRIP ON and Instant Coffee that reflect the opinions of members of "Coffee Fan Club", our online community. Sales of the GRAND TASTE series, the main product, recovered due to active sales promotions.

For gift items, we have lined up a total of 27 items for the mid-year gift season, including the DRIP ON series as well as standard items, such as "HYO-ON Aging Liquid Coffee Gift" and "Liquid Coffee brewed with natural water in Tetra Prisma", as well as "Liquid Coffee, 100% Juice & Soft Drinks", which is loved by both adults and children.

Sales increased significantly compared to the same period of the previous fiscal year due to the stronger sales promotion described above.

In the ingredient market, sales increased due to a rise in unit sales price, which is linked to the coffee market. Operating profit in the coffee-related businesses increased from the same period of the previous fiscal year due to

significant increases in sales in both the HORECA market and household market, despite increases in manufacturing costs, including green beans procurement prices and personnel expenses.

Consequently, in the first quarter, net sales for our coffee-related businesses were 16,936 million yen (a 29.0% increase compared with the same period of the previous consolidated fiscal year), and operating profit was 693 million yen (a 10.0% increase compared with the same period of the previous consolidated fiscal year).

3