KITZ : Consolidated Financial Results for the Fiscal Year December 2022

Consolidated Financial Results for the Fiscal Year December 2022

(Japanese Accounting Standards)

This document has been prepared as a guide for non-Japanese investors and contains forward-looking statements that are based on managements' estimates, assumptions and projections at the time of publication. A number of factors could cause actual results to differ materially from expectations. This document is a translation of excerpts taken from the Japanese language original. All numbers are rounded down to the nearest until in accordance with standard Japanese practice. Please be advised that the Company cannot accept responsibility for investment decisions made based on the information contained in this report.

February 13, 2023

Company Name: KITZ CORPORATION

Stock Listing: Tokyo Stock Exchange Stock Code: 6498 URL https://www.kitz.com

President and Chief Executive Officer: Makoto Kohno

Inquiries: Makoto Ushimaru, Division Manager, Accounting & Finance Center

Telephone: [phone]

Date of General Meeting of Shareholders (Planned): March 29, 2023

Date of Dividend Payment (Planned): March 13, 2023

Date of Financial Statement Filing (Planned): March 29, 2023

Availability of Financial Results Supplementary Presentation Materials: Yes

Financial Results Presentation Meeting: Yes (For institutional investors and analysts)

(Figures of less than one million yen are rounded down to the nearest decimal)

1. Consolidated Financial Results (Jan. 1, 2022 - Dec. 31, 2022)

(1) Consolidated Operating Results(% figures represent year-over-year change)

	Net Sales		Operating Income		Ordinary Income		Net Income attributable to
				owners of the parent
	Million yen	％	Million yen	％	Million yen	％	Million yen	％
FY December 2022	159,914	17.8	11,051	22.9	12,045	34.2	8,549	72.6
FY December 2021	135,790	―	8,990	―	8,975	―	4,954	―

(Note) Comprehensive Income: ¥12,163 million in FY Dec. 2022 (64.7%)	¥7,384 million in FY Dec. 2021 (―%)
	Net Income per Share	Net Income per Share	Return on Equity	Ratio of Ordinary	Ratio of Operating
	(Diluted)	Income to Total Assets	Income to Net Sales
	Yen	Yen	％	％	％
FY December 2022	95.35	95.32	10.0	8.1	6.9
FY December 2021	55.26	―	6.4	6.3	6.6

(Reference) Gain from investments in subsidiaries and affiliates accounted for by the equity method: FY Dec. 2022: - FY Dec. 2021: - (Note) The Company changed the fiscal year-end from March to December from FY2020. Accordingly, year-over-year change figures are not presented above.

(Note) Diluted earnings per share for the fiscal year ending December 31, 2021 is not shown in the above table, as there are no residual shares.

(2) Consolidated Financial Position

Total Assets

Net Assets

Equity Ratio

Net Assets per Share

Million Yen

Million Yen

%

Yen

FY December 2022

152,569

91,042

59.0

1,002.69

FY December 2021

143,419

81,253

56.0

896.55

(Reference) Equity: ¥89,941 million in FY Dec. 2022

¥80,369 million in FY Dec. 2021

(3) Consolidated Cash Flows

Net Cash Provided by

Net Cash Used in

Net Cash Provided by

(Used

Cash and Cash Equivalents at

Operating Activities

Investing Activities

in) Financing Activities

End of Fiscal Year

Million Yen

Million Yen

Million Yen

Million Yen

FY December 2022

8,541

(7,471)

(5,567)

24,076

FY December 2021

8,280

(3,236)

(11,527)

27,658

2. Dividends

Annual Dividend

Total Dividends

Payout Ratio

Dividends to Net

from Surplus

Assets Ratio

(Consolidated)

(Annual)

(Consolidated)

1Q

2Q

3Q

4Q

Total

FY December 2021

Yen

Yen

Yen

Yen

Yen

Million Yen

%

%

―

9.00

―

11.00

20.00

1,802

36.2

2.3

FY December 2022

―

15.00

―

18.00

33.00

2,973

34.6

3.5

FY December 2023 (Planned)

―

16.00

―

17.00

33.00

34.4

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3. Consolidated Financial Forecasts for the Fiscal Year December 2023 (Jan. 1, 2023-Dec. 31, 2023)

(% figures represent year-over-year change)

	Net Sales		Operating Income		Ordinary Income		Net Income attributable to	Net Income per
				owners of the parent	Share
H1 FY December 2023	Million Yen		％	Million Yen		％	Million Yen		％	Million Yen	％	Yen
79,600		3.5	5,500		(1.8)	5,840		(4.8)	4,100	(1.1)	45.72
FY December 2023	167,000		4.4	11,900		7.7	12,300		2.1	8,600	0.6	95.91

* Annotation

1. Changes in significant subsidiaries (Changes in subsidiaries affecting the scope of consolidation): None
   Newly consolidated: None
   Removed from consolidation: None
2. Changes in accounting methods, procedures and presentations concerning preparation of consolidated financial statements
3. 1. Changes accompanying revisions in accounting standards: Yes
   2. Other changes: None
   3. Changes in accounting estimates: Yes
   4. Redisplay of revisions: None

1. Number of shares outstanding (Common stock)
2. 1. Shares issued as of term end (including treasury stock):
   2. Treasury stock as of term end:
   3. Average during the term:

FY December 2022	90,396,511 sharesFY December 2021	90,396,511 shares
FY December 2022	697,124 sharesFY December 2021	753,976 shares
FY December 2022	89,663,099 sharesFY December 2021	89,643,016 shares

(Note) The shares held within the BIP trust accounts are included in term-end treasury stocks. (FY December 2022: 418,587 shares, FY

December 2021: 477,535 shares)

Furthermore, the shares held within the BIP trust accounts are included in treasury stocks that are deducted in the calculation of the average number of shares for the period. (FY December 2022: 444,618 shares, FY December 2021: 477,535 shares)

(Reference) Fiscal Year December 2022 Non-Consolidated Financial Results (Jan. 1, 2022 - Dec. 31, 2022)

(1) Non-Consolidated Operating Results

(% figures represent year-over-year change)

Net Sales

Operating Income

Ordinary Income

Net Income

Million yen

％

Million yen

％

Million yen

％

Million yen

％

FY December 2022

69,338

15.5

2,067

(8.6)

4,657

(7.1)

4,120

54.8

FY December 2021

60,041

―

2,262

―

5,015

―

2,662

―

Net Income per Share

Net Income per Share

(Diluted)

Yen

Yen

45.95

FY December 2022

45.94

29.70

FY December 2021

―

(Note) The Company changed the fiscal year-end from March to December from FY2020. Accordingly, year-over-year change figures are not presented above.

(Note) Diluted earnings per share for the fiscal year ending December 31, 2021 is not shown in the above table, as there are no residual shares.

(2)Non-Consolidated Financial Position

			Total Assets	Net Assets		Equity Ratio	Net Assets per Share
			Million Yen	Million Yen		%	Yen
	FY December 2022		107,706	55,645		51.6	620.13
	FY December 2021		110,065	53,584		48.7	597.75
	(Reference) Equity:	¥55,625 million in FY Dec. 2022	¥53,584 million in FY Dec. 2021

• This document is not subject to audit procedures.
• Explanations regarding the appropriate uses of our earnings projections and other information:

The future prospects of the business results, etc., described in this document are based on currently available information and certain premises that are judged to be rational at the time of writing, and are not intended as a guarantee that the Company will achieve these targets. Actual performance and other results may differ significantly due to various factors.

• Investor presentation materials relating to our financial results are expected to be published on our corporate website on or after February 15, 2023.

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1. Overview of results of operations

1. Overview of results of operations for the current period

In the global economy for the current consolidated fiscal year, there was a recovery of economic activities because measures, such as vaccinations for COVID-19, resulted in a lifting of the behavioral and immigration restrictions. Meanwhile, the uncertainty about the prospects was unchanged because the geopolitical risk caused by the zero-COVID policy of China and the Russian invasion of Ukraine led to confusion in the supply chain and deteriorated inflation due to increased prices of energy resources and raw materials. The Japanese economy started to show a recovery trend because a rise in vaccinations for COVID- 19 resulted in mitigation of behavioral restrictions, including complete lifting of the quasi-emergency coronavirus measures. But the situation remained severe because of the resumption of the spread of the variant, sharply increased prices for energy resources and raw materials which are associated with geopolitical risks, and a rapid depreciation of the Japanese yen arising from global rate hikes for controlling inflation.

Under such situations, for the current consolidated fiscal year, there were the effects of price revisions, which were made in the previous and current periods, and continued strength of semiconductor manufacturing equipment in the domestic market in the valve manufacturing business. Also, at overseas markets in the business, there were the effects of the exchange rate and revenue growth for the Americas and ASEAN. The brass bar manufacturing business recorded revenue growth due to higher sale prices accompanying rising raw-material prices and an increase in sales volumes. As a result, total net sales were up 17.8% YoY to ¥159,914 million.

Operating income was up 22.9% YoY to ¥11,051 million because of continued solidity for semiconductor manufacturing equipment in the valve manufacturing business and profit growth resulting from revenue growth in the Japanese and overseas markets arising from the economic recovery. Ordinary income was 34.2% YoY to ¥12,045 million because of exchange gains arising from the yen depreciation, and net income attributable to owners of the parent was up 72.6% YoY to ¥8,549 million.

The company applied the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 31, 2020) from the beginning of the current consolidated fiscal year. Compared with the conventional method, net sales decreased ¥1,025 million; cost of sales decreased ¥408 million; selling, general, and administrative expenses decreased ¥311 million; and operating income decreased ¥305 million for the current consolidated fiscal year. Ordinary income and net income before income taxes increased ¥0 million, respectively. The initial balance of retained earnings decreased ¥3 million for the current fiscal year.

Each segment results are as follows:

- Valve manufacturing business

External sales in the valve manufacturing business were up 17.3% YoY to ¥125,189 million mainly due to revenue growth for semiconductor manufacturing equipment in Japan and overseas, the contribution from the effect of price revisions in the Japanese market, and the effect of the exchange rate and revenue growth for the Americas and ASEAN in overseas markets.

Operating income was up 23.9% YoY to ¥14,980 million mainly due to increased raw material prices covered by effect of price revisions and effect of revenue growth.

- Brass bar manufacturing business

External sales in the brass bar manufacturing business were up 18.8% YoY to ¥32,513 million due to increased sale unit prices accompanying the rising market prices of raw materials, which affected the market prices of products, and growth in sales volume.

Operating income was down 66.6% YoY to ¥222 million due to decreased sale unit prices accompanying rapidly decreasing market prices of raw materials during the period and increased cost of energy.

- Others

External sales in Others were up 32.6% YoY to ¥2,212 million mainly due to increased guests in the hotel business resulting from the mitigation of behavioral restrictions, including complete lifting of the quasi-emergency coronavirus measures. Operating income totaled ¥68 million (vs. an operating loss of ¥243 million in the previous year) mainly due to increased sales.

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(2) Overview of financial position for the current period

Assets stood at ¥152,569 million, up ¥9,149 million from the end of the previous consolidated fiscal year, at the end of this consolidated fiscal year due to growth in inventories; property, plant, and equipment; notes, accounts receivable-trade, and contract assets despite decreased cash and deposits for payment of long-term borrowings.

Liabilities were down ¥639 million from the end of the previous consolidated fiscal year to ¥61,526 million due to factors that included decreased long-term borrowings resulting from their payment despite an increase in notes and accounts payable - trade.

Net assets increased by ¥9,789 million from December 31, 2021, to ¥91,042 million, reflecting such factors as the recording of ¥8,549 million in net income attributable to owners of the parent and increased translation adjustments despite payments of dividend.

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(3) Overview of cash flows for the current period

As of December 31, 2022, cash and cash equivalents (hereinafter referred to as "funds") amounted to ¥24,076 million, down ¥3,582 million compared with December 31, 2021.

The state and the reasons for the cash flow changes during the current consolidated fiscal year are outlined below.

- Cash flows from operating activities

With net income before income taxes and non-controlling interests of ¥12,004 million, depreciation of ¥6,809 million, an increase of ¥313 million in accounts payable, an increase of ¥4,594 million in inventories, payment of income taxes of ¥4,554 million, and an increase of ¥2,787 million in notes and accounts receivable and contract assets, cash flows from operating activities resulted in an increase of ¥8,541 million.

- Cash flows from investing activities

Cash flows from investing activities resulted in a decrease of ¥7,471 million due to such factors as payments of ¥7,024 million for the purchase of property, plant, and equipment, mainly in the valve manufacturing business.

- Cash flows from financing activities

As a result of factors that included payment of ¥10,474 million for redemption of bonds, payment of ¥2,343 million in dividends, and payment of ¥2,315 million in long-term borrowings despite of proceeds of ¥9,939 million from issuance of bonds, cash flows from financing activities led to a decrease of ¥5,567 million.

(Reference) Developments in indicators related to cash flows

	Fiscal year ended	Fiscal year ended	Fiscal year ended
	December 31,	December 31,	December 31,
	2020	2021	2022
Equity ratio (%)	52.8	56.0	59.0
Equity ratio based on market value (%)	40.0	44.5	46.4
Interest-bearing debts/cash flow ratio (%)	492.3	479.5	449.4
Interest coverage ratio (multiple)	57.0	31.4	33.7
Equity ratio = equity capital / total assets

Equity ratio based on market value = market capitalization / total assets Interest-bearing debts/cash flow ratio = interest-bearing debts / cash flows Interest coverage ratio = cash flows / interest payments

(Note) 1. All values are based on consolidated financial values.

1. Market capitalization is based on outstanding shares excluding treasury stock.
2. Cash flows represent operating cash flow.
3. Interest-bearingdebts include all debts with payments of interests among debts posted on the consolidated balance sheet.
4. The fiscal year ended December 2020 is the nine-month period due to the change in the fiscal period. Therefore, interest-bearing debts/cash flow ratio and interest coverage ratio represent values based on cash flows and interest payments for nine months.

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