MEC : Consolidated Financial Results for the Six Months Ended June 30, 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.

August 9, 2023

Consolidated Financial Results for the Six Months Ended June 30, 2023

(Under Japanese GAAP)

Company name:	MEC COMPANY LTD.
Listing:	Tokyo Stock Exchange (Securities code: 4971)
URL:	https://www.mec-co.com/en/
Representative:	Kazuo MAEDA, CEO & President
Inquiries:	Aya MATSUSHITA, Corporate Communication Office
Telephone:	[phone]

Scheduled date for submitting quarterly reports:	August 10, 2023
Scheduled date to commence dividend payments:	September 5, 2023
Preparation of supplementary material on financial results:	Yes
Holding of financial results briefing:	Yes (for institutional investors, securities analysts)
	(Yen amounts are rounded down to millions, unless otherwise noted.)

1. Consolidated financial results for the Six Months ended June 30, 2023 (from January 1, 2023 to June 30, 2023)

(1) Operating results					(Percentages indicate year-on-year changes.)
		Net sales		Operating income	Ordinary income	Net income attributable to
			owners of parent
	Six months ended	Millions of yen	%	Millions of yen	%	Millions of yen	%	Millions of yen	%
	June 30, 2023	6,198	-23.7	838	-59.8	1,003	-57.7	1,076	-35.2
	June 30, 2022	8,127	15.7	2,084	6.9	2,374	17.4	1,661	13.3

Note: Comprehensive income

For the six months ended June 30, 2023:

¥1,905 million

[-15.0%]

For the six months ended June 30, 2022:

¥2,242 million

[13.1%]

Basic earnings

Diluted earnings

per share

per share

Six months ended

Yen

Yen

June 30, 2023

56.79

-

June 30, 2022

87.40

-

(2) Financial position

Total assets

Net assets

Equity-to-asset ratio

As of

Millions of yen

Millions of yen

%

June 30, 2023

27,438

23,852

86.9

December 31, 2022

27,499

23,325

84.8

Reference:

Equity

As of June 30, 2023:

¥23,852 million

As of December 31, 2022:

¥23,325 million

2.Cash dividends

Annual dividends per share

1Q-end

2Q-end

3Q-end

Fiscal

Total

year-end

Yen

Yen

Yen

Yen

Yen

FY2022

-

20.00

-

25.00

45.00

FY2023

-

20.00

FY2023 (Forecast)

-

25.00

45.00

(Note) Revision of recently announced dividends forecast: None

3. Consolidated earnings forecasts for the fiscal year ending December 31, 2023 (January 1, 2023 to December 31, 2023)

(Percentages indicate changes from previous fiscal year for full-year figures, and year-on-year changes for quarterly changes.)

								Net income
	Net sales		Operating income	Ordinary income	attributable to parent	Net income
		company's		per share
								shareholders
	Millions of yen		%	Millions of yen	%	Millions of yen		Millions of		%	Millions of yen
			yen
Full year	13,500		-17.3	1,800	-55.1	1,900	-55.3	1,730		-43.5	91.89

(Note) Revision of recently announced earnings forecast: None

• Notes

1. Changes in significant subsidiaries during the period (changes in specified subsidiaries resulting in the change in scope of consolidation): None
2. Application of concise accounting procedures or particular accounting procedures in the creation of consolidated financial statements during this quarter: Yes

Note: For details, please see "Specific accounting treatments applied in the preparation of quarterly consolidated financial statements" on page 8 of the attached materials.

1. Changes in accounting policies, changes in accounting estimates, and restatement
2. 1. Changes in accounting policies due to revisions to accounting standards and other regulations: Yes
   2. Changes in accounting policies due to other reasons: None
   3. Changes in accounting estimates: None
   4. Restatement: None
3. Number of issued shares (common shares)
4. 1. Total number of issued shares at the end of the period (including treasury shares)

As of June 30, 2023	20,071,093 shares
As of December 31, 2022	20,071,093 shares

1. Number of treasury shares at the end of the period

As of June 30, 2023

As of December 31, 2022

1. Average number of shares outstanding during the period

1,346,171 shares

1,060,144 shares

Six months ended June 30, 2023

Six months ended June 30, 2022

18,952,670 shares

19,006,219 shares

• Financial results reports are exempt from audit conducted by certified public accountants or an audit corporation.
• Proper use of earnings forecasts, and other special matters
• • 
    -The business forecasts and such like stated in this material are based on the information currently available to the Company and certain assumptions that are judged to be rational. Actual results may vary significantly from the forecasts due to various factors.
    In addition, for matters concerning the above forecasts, please refer to "1. Qualitative information regarding consolidated results for this quarter (3) Statement of forward looking" on page 3 of the attachment.
  • We are planning to hold financial results briefing for institutional investors and analysts on Wednesday, August 9, 2023. Materials of financial results briefings are posted on our website.

MEC COMPANY LIMITED<4971> Consolidated Financial Results for the Six Months ended of the Fiscal Year Ending December 31, 2023
 Table of Contents for Attached Material
1. Qualitative information regarding consolidated results for this quarter	2
(1)	Analysis relating to the operating results	2
(2)	Analysis relating to the financial situation	3
(3)	Statement of forward looking	3
2. Consolidated quarterly financial statements and major notes	4
(1)	Consolidated quarterly balance sheet	4
(2)	Consolidated quarterly statement of income and consolidated quarterly statement of comprehensive income	6
	Consolidated quarterly statement of income
	Consolidated second quarter	6
	Consolidated quarterly statement of comprehensive income
	Consolidated second quarter	7
(3)	Notes on quarterly consolidated financial statements	8
	(Notes on the premise of a going concern)	8
	(Notes on marked changes in the amount of shareholders' equity)	8
	(Specific accounting treatments applied in the preparation of quarterly consolidated financial statements) 8
	(Changes in accounting policies)	8

1

MEC COMPANY LIMITED<4971> Consolidated Financial Results for the Six Months ended of the Fiscal Year Ending December 31, 2023

1. Qualitative information regarding consolidated results for this quarter

1. Analysis relating to the operating results

For the first six months of the year under review (January 1, 2023 to June 30, 2023), global inflation remained high, monetary tightening continued, and geopolitical risks remained highly tense.

In the electronics industry, demand for consumer electronics remained weak. In the datacenter sector, where investments in digital transformation (DX) and responding to new lifestyles were strong, investments in AI were prioritized over general-purpose fields.

The electronic substrate and parts industry, which is a market related to the Company's Group, is generally affected by the electronics industry, and orders for our related products remained low. However, inventory adjustments are progressing within the industry and signs of recovery are beginning to appear.

In this environment, the Group has focused on developing and selling products for high-density electronic substrates.

Looking at the sales trends of major products compared to the same period of the previous year, though it was sluggish, the EXE Series for displays showed signs of recovery in demand for related electronic components. On the other hand, sales of the CZ Series of super-roughened adhesion improvers, V-Bond Series of adhesion improvers for multilayer electronic substrates, and SF Series for displays, which have a high market share for semiconductor-mounted package substrates, declined overall due to weak demand for related electronic substrates and parts. Although there are signs of recovery after bottoming out in the first quarter, the situation remains unpredictable.

As a result, total consolidated sales for the first and second quarters amounted to 6,198 million yen (down 1,929 million yen year-on-year, or 23.7%). Selling, general and administrative expenses were 2,807 million yen (down 26 million yen year-on-year, or 1.0%), operating income was 838 million yen (down 1,245 million yen year-on-year, or 59.8%), and operating income to net sales was 13.5%, a decrease of

12.1 percentage points year-on-year. Ordinary income amounted to 1,003 million yen (down 1,370 million yen year-on-year, or 57.7%). Quarterly net income before income taxes amounted to 1,548 million yen (down 825 million yen year-on-year, or 34.8%), and quarterly net income attributable to owners of parent was 1,076 million yen (down 584 million yen year-on-year, or 35.2%).

Looking at a breakdown of sales, sales of chemicals were 6,085 million yen (down 1,947 million yen year-on-year, or 24.2%), machinery sales were 66 million yen (up 11 million yen year-on-year, or 22.0%), sales of materials were 43 million yen (up 6 million yen year-on-year, or 17.0%), and other sales were 3 million yen (down 0 million yen year-on-year, or 3.6%).

The overseas sales ratio was 62.5%, up 1.2 percentage points compared with the 61.3% in the same period last year. The overseas sales ratio becomes 75.5% (down 3.7 percentage points year-on-year) when sales to overseas customers sold through agents in Japan are included.

Results by segment are as follows:

In Japan, orders for our products were also sluggish due to weak demand for electronic substrates and parts related to personal computers, smartphones, and servers. Demand for electronic components showed signs of recovery, although demand for displays remained weak. For sales to Korea, which are handled through agents in Japan, inventory adjustments between customers and distributors have been improving, resulting in net sales of 2,423 million yen (down 834 million yen year-on-year, or 25.6%) and a segment profit of 245 million yen (down 1,143 million yen year-on-year, or 82.3%) for the first six months of the year under review.

Taiwan was in a similar situation as Japan, with net sales of 1,205 million yen (down 539 million yen year-on-year, or 30.9%) and a segment profit of 98 million yen (down 96 million yen year-on-year, or 49.5%) for the first six months of the year under review.

In Hong Kong (Hong Kong, Zhuhai), although there are signs of recovery, demand for electronic substrates and parts related to smartphones and automobiles remained sluggish, and orders for our related products were also weak, resulting in sales of 720 million yen (down 341 million yen year-on-year, or 32.1%) and a segment profit of 92 million yen (down 116 million yen year-on-year, or 55.8%) for the first

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MEC COMPANY LIMITED<4971> Consolidated Financial Results for the Six Months ended of the Fiscal Year Ending December 31, 2023

six months of the year under review.

In China (Suzhou), although some customers showed signs of recovery, demand for electronic substrates and parts related to personal computers and smartphones was weak. Orders for our related products were also affected, resulting in sales of 1,128 million yen (down 228 million yen year-on-year, or 16.8%) and a segment profit of 54 million yen (down 129 million yen year-on-year, or 70.3%) for the first six months of the year under review.

In Europe, although customer production activities are at a low level amidst high inflation, net sales were 436 million yen (up 31 million yen year-on-year, or 7.7%) and segment profit was 15 million yen (down 34 million yen year-on-year, or 68.6%) for the first six months of the year under review.

In Thailand, amidst increased capital investment by electronic substrate manufacturers in Southeast Asia, factors such as delays in the start-up of production by new customers and a decline in customer production and inventory adjustments resulted in net sales of 283 million yen (down 17 million yen year-on-year, or 5.7%) and a segment profit of 2 million yen (down 49 million yen year-on-year, or 95.0%) for the first six months of the year under review.

(2) Analysis relating to the financial situation

Despite an increase due to investment securities and land, assets came to 27,438 million yen, down 60 million yen year-on-year, mainly due to a decrease in cash and deposits, and notes and accounts receivable.

Liabilities came to 3,585 million yen, down 587 million yen year-on-year, mainly due to a decrease in notes and accounts payable and electronically recorded monetary obligations-operating.

Despite a decrease due to the acquisition of treasury stock, net assets rose by 526 million yen year-on- year to total 23,852 million yen, mainly due to an increase in retained earnings and foreign currency translation and adjustment.

As a result of the above, the equity ratio reached 86.9%.

(3) Statement of forward looking

There is no change to the consolidated earnings forecasts for the full year that were announced in "Notice Concerning Transfer of Noncurrent Assets and Recording of Extraordinary Income, Revision of Earnings Forecast for the FY12/2023" on May 23, 2023.

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