Marubun : Summary of Consolidated Financial Results for the Fiscal Year Ended March 31, 2021

Translation

Head Office : 8-1 Nihonbashi Odenmacho, Chuo-ku, Tokyo, Japan
Securities Code : 7537 TSE, 1st section	URL https://www.marubun.co.jp
Representative	: Toru Iino, CEO and Representative Director
Contact	: Toshihiro Shibuya, Director, Corporate Planning Dept.	TEL : [phone]
Preparation of supplementary material : Yes		May 14, 2021
Holding of investor meeting	: No

Summary of Consolidated Financial Results for the Fiscal Year Ended March 31, 2021

1. Consolidated Financial Results for Fiscal Year Ended March 31, 2021 (April 1,2020 - March 31,2021)

(1) Consolidated Operating Results

	Net Sales		Operating Income	Ordinary Income	Profit Attributable
		to Owners of Parent
	Millions of Yen	％	Millions of Yen	％	Millions of Yen	％	Millions of Yen	％
Year ended March 31, 2021	289,283	0.6	1,023	(56.8)	33	(98.3)	(2,133)	-
Year ended March 31, 2020	287,550	(12.0)	2,369	(53.1)	2,006	(33.6)	(75)	-

	Earnings per Share	Earnings Per Share	Ratio of Net Income to	Ratio of Ordinary	Ratio of operating
	-Basic-	-Diluted-	Shareholders' Equity	Income to Total Assets	income to net sales
	Yen	Yen	%	%	%
Year ended March 31, 2021	(81.64)	-	(5.2)	0.0	0.4
Year ended March 31, 2020	(2.89)	-	(0.2)	1.5	0.8
(2) Financial Position
	Total Assets	Total Net Assets	Equity Ratio	Net Assets per Share
	Millions of Yen	Millions of Yen	%	Yen
Year ended March 31, 2021	127,006	45,040	31.5	1,531.10
Year ended March 31, 2020	131,451	48,204	32.2	1,617.98
(3) Cash Flows
	Net Cash flow from	Net Cash flow from	Net Cash flow from	Cash and Cash
	Equivalents at End of
	Operating Activities	Investing Activities	Financing Activities
	Fiscal Year
	Millions of Yen	Millions of Yen	Millions of Yen	Millions of Yen
Year ended March 31, 2021	15,205	(790)	(8,188)	26,274
Year ended March 31, 2020	(309)	(582)	5,188	20,473

2. Dividends

		Dividend Per Share		Dividends in	Dividends	Dividends on
						Total	Payout ratio	Net Assets
	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Annual
	(Fiscal Year)	(Consolidated)	(Consolidated)
	Yen	Yen	Yen	Yen	Yen	Millions of Yen	％	％
Year ended March 31, 2020	-	10.00	-	20.00	30.00	784	-	1.8
Year ending March 31, 2021	-	8.00	-	8.00	16.00	418	-	1.0
Year ending March 31, 2022	-	10.00	-	20.00	30.00		41.3
(Forecast)

Translation

3. Consolidated Financial Forecasts for the Fiscal Year Ending March 31, 2022

	Net Sales		Operating Income		Ordinary Income		Profit Attributable
				to Owners of Parent
Six months ending	Millions of Yen	％	Millions of Yen	％	Millions of Yen	％	Millions of Yen	％
70,000	-	600	-	460	-	230	-
September 30, 2021
Year ending March 31, 2022	153,000	-	3,200	-	3,000	-	1,900	-
	Earnings per Share
	-Basic-
Six months ending	Yen
8.80
September 30, 2021
Year ending March 31, 2022	72.70

Note: These Financial Forecasts are based on management's assumptions and beliefs in light of the information currently available to it and therefore you should not place undue reliance on them. Marubun Corporation cautions you that a number of important factors could cause actual results to differ materially from those discussed in the forward-looking statements.

1. Management's discussion and analysis of results of operations

(1) Summary of operating results for the fiscal year under review

During the consolidated fiscal year under review (April 1, 2020 to March 31, 2021), there were some indications of a recovery of the domestic economy, particularly in the manufacturing sector and exports, given the successful measures addressing COVID-19, the government's economic stimulus package, and a recovery in the economy abroad. However, the environment surrounding the Japanese economy remains challenging due to the pandemic. The future outlook remains uncertain because it is still not possible to predict when the COVID-19 pandemic will end.

In the electronics industry, in which the Marubun Group (the "Group") operates, demand for PCs, communication equipment, and consumer equipment remained strong, given customers' lifestyle changes triggered by the increasing utilization of remote working and online classes. There has been an expansion in the market for semiconductors and electronics component products that are used in these products, along with the surge in demand for semiconductor manufacturing equipment. Meanwhile, private sector companies remain cautious about capital spending in general.

Given this situation, the consolidated net sales of the Group during the fiscal year under review increased 0.6% year on year to 289,283 million yen. Meanwhile, operating income fell 56.8% year on year to 1,023 million yen, reflecting weak sales of products with relatively high profitability and a decline in gross profit in yen terms due to the continued appreciation of the yen during the period. Ordinary income declined 98.3% year on year to 33 million yen, reflecting a foreign exchange loss of 333 million yen for the entire fiscal year, largely due to a translation loss associated with foreign currency-denominated liabilities as of the end of the year, given the yen's depreciation in the fourth quarter of the same year. The Group posted a 1,350 million yen valuation loss associated with investment securities and a 1,229 million yen extra retirement benefit payment due to the solicitation of voluntary retirement as part of the extraordinary loss. Consequently, net loss attributable to owners of parent was 2,133 million yen (compared with 75 million yen for the preceding fiscal year.)

Operating results by business segment are as follows: (Electronic Devices business)

In the Electronics Devices business, net sales grew 1.0% year on year to 242,050 million yen, reflecting strong demand for semiconductors used in communications equipment and consumer equipment given the increased rate of remote working and consumption from people refraining from leaving home.

Meanwhile, the segment posted an operating loss of 951 million yen (compared with a 591 million yen profit in the preceding fiscal year) due to a fall in sales of products with relatively high profitability and a decline in gross profit in yen terms caused by the continued appreciation of the yen during the period.

(Electronic Systems business)

In the Electronic Systems business, sales of medical equipment grew and there was strong demand for electronic component inspection machines. At the same time, there was a decline in demand for high-reliability components for artificial satellites, sensors and laser equipment, reflecting sluggish capital spending in the private sector and delayed planning for project deals amid the pandemic. Consequently, net sales for the segment fell 1.3% year on year to 47,233 million yen with operating income of 1,983 million yen (up 11.0% year on year), reflecting an improved gross profit ratio and the successful reduction of selling, general and administrative expenses.

1. Summary of consolidated financial conditions for the fiscal year under review (Assets)
   Current assets at the end of the consolidated fiscal year under review stood at 114,804 million yen, down 3,813 million yen from the end of the previous fiscal year. This result was mainly attributable to decreases in merchandise and finished goods of 6,504 million yen and notes and accounts receivable - trade of 3,339 million yen, which more than offset an increase of 6,084 million yen in cash and deposits. Non-current assets amounted to 12,202 million yen, decreasing 631 million yen from the end of the previous consolidated fiscal year.
   This was primarily due to a 584 million yen decline in investment securities.
   As a result, total assets decreased by 4,444 million yen from the end of the previous fiscal year, to 127,006 million yen.

(Liabilities)

Current liabilities at the end of the consolidated fiscal year under review totaled 76,165 million yen, down 372 million yen from the end of the previous fiscal year. This was attributable largely to a decrease of 5,149 million yen in short-term borrowings, which more than offset an increase of 4,888 million yen in notes and accounts payable - trade. Non-current liabilities amounted to 5,801 million yen, a decrease of 907 million yen from the end of the previous fiscal year. This was primarily a result of a fall of 828 million yen in retirement benefit liability.

As a result, total liabilities decreased by 1,279 million yen from the end of the previous fiscal year, to 81,966 million yen.

(Net assets)

Net assets totaled 45,040 million yen, down 3,164 million yen from the end of the previous fiscal year. This was a result, in large part, of decreases of 2,802 million yen in retained earnings and 893 million yen in non- controlling interests.

Consequently, the equity ratio as at the end of the period stood at 31.5%, down 0.7 points from the 32.2% recorded at the end of the previous fiscal year. _

(4) Future outlook

Regarding the economic outlook for FY2021, it is expected that there will be a mild recovery in the economy and in social activity in expectation of an accelerating rollout of coronavirus vaccines to stop the spread of COVID-19 and major economies around the world enacting economic policies. Meanwhile, developments in the US-China trade dispute, in other related issues and in the global capital markets are likely to remain unpredictable.

In the electronics industry where the Group operates, the global supply shortage of semiconductors is a major concern. Currently, semiconductor manufacturers are aggressively engaged in capital spending to expand production capacity.

The government's continued promotion of digital transformation drives an expectation that markets for technologies such as 5G telecommunications, artificial intelligence and robotics will continue to expand along with the growth in demand for electronic devices in anticipation of the continued growth of the market for electric vehicles.

Given this situation, the Group expects to achieve growth in the fiscal year ending March 2022, aided by aerospace products and laser equipment in the Electronic Systems business segment which has seen delayed recognition of sales in the preceding year because of the COVID-19, strong demand for 5G communications equipment, new business opportunities in the area of automobile equipment in the Electronic Devices segment, and new semiconductors and electronic component product lines.

In view of the business environment above, the Group expects to achieve 153,000 million yen in sales in the fiscal year ending March 31, 2022.

The Group expects to achieve operating income of 3,200 million yen, ordinary income of 3,000 million yen, and net profit attributable to owners of parent totaling 1,900 million yen for the current fiscal year, assisted by a recovery in the gross profit ratio and the reduction of sales and general administrative expenses.

The Group has adopted a revised accounting standard for revenue recognition (ASBJ Statement No. 29; hereinafter "Accounting Standard for Revenue Recognition"), effective prospectively for the annual periods beginning after April 1, 2021. The consolidated financial results forecast above reflects this new revenue recognition rule.

With the adoption of the new revenue recognition guidance, the Group expects to achieve 153,000 million yen in total sales for the fiscal year ending March 31, 2022, which is 85,000 million yen different than the 238,000 million yen it would be if calculated using the Previous method.

2. Basic approach to the selection of accounting standards

The Group has adopted the policy of preparing its consolidated financial statements in accordance with the Japanese accounting standards to increase international and chronological comparability.

The group will appropriately respond to all matters regarding the adoption of international accounting standards given internal and external circumstances.

Consolidated Financial Statements

(1) Consolidated Balance Sheet

		(Millions of Yen)
	As of March 31, 2020	As of March 31, 2021
Assets
Current assets
Cash and deposits	20,790	26,874
Notes and accounts receivable - trade	50,062	46,723
Electronically recorded monetary claims - operating	5,314	4,334
Merchandise and finished goods	40,678	34,174
Work in process	54	34
Other	1,732	2,673
Allowance for doubtful accounts	(14)	(11)
Total current assets	118,617	114,804
Non-current assets
Property, plant and equipment
Buildings and structures	3,734	4,095
Accumulated depreciation	(2,381)	(2,433)
Buildings and structures, net	1,353	1,662
Machinery, equipment and vehicles	10	10
Accumulated depreciation	(10)	(10)
Machinery, equipment and vehicles, net	0	0
Tools, furniture and fixtures	2,510	2,595
Accumulated depreciation	(1,600)	(1,719)
Tools, furniture and fixtures, net	910	876
Land	1,596	1,596
Leased assets	105	83
Accumulated depreciation	(78)	(65)
Leased assets, net	26	17
Right of use assets	183	154
Accumulated depriciation	(60)	(85)
Right of use assets,net	123	69
Construction in progress	85	－
Total property, plant and equipment	4,094	4,221
Intangible assets	1,146	925
Investments and other assets
Investment securities	3,102	2,518
Deferred tax assets	858	1,136
Other	4,071	3,857
Allowance for doubtful accounts	(440)	(457)
Total investments and other assets	7,592	7,055
Total non-current assets	12,833	12,202
Total assets	131,451	127,006