Consolidated Financial Statements - Summary (Nine months ended December 31, 2024)

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1. Qualitative Information on Quarterly Financial Results for the Period under Review

1. Explanation of Business Results

(Overview of Results for the Period under Review)

During the nine months ended December 31, 2024 (April 1, 2024 - December 31, 2024), the Japanese economy faced a situation where the economic outlook remained unclear due to factors such as the globally unstable political situation and volatile exchange rate fluctuations. In addition, real wage growth has come to a standstill due to the rise in prices associated with soaring labor and logistics costs in addition to raw material prices, and consumers’ awareness of the need to protect their lives has been firmly established. Amid this operating environment, the GUNZE Group continued to pursue the four basic strategies of “Creation of new value,” “Capital cost-focused management,” “Evolution of corporate constitution,” and “Environmentally responsible management” in the last year of its medium-term management plan, “VISION 2030 stage 1.”

The GUNZE Group’s operating results for the period under review are as follows:

Net sales increased due to the strong performance of the functional solutions business where the materials market was on a recovery trend and the medical business where new products and products for China expanded. Operating profit and ordinary profit increased as a whole primarily owing to the profit increase in the functional solutions business and the medical business, as well as the restructuring of the sports clubs, although the apparel business recorded a decline in profits due to the impact of higher costs and lower sales volume. Profit attributable to owners of parent increased mainly due to the recording of ¥1,072 million in gain on sale of investment securities as a result of the sale of cross-shareholdings, despite the recording of ¥1,154 million in business restructuring expenses primarily due to the wind-down of the electronic components business and additional loss associated with transfer of a subsidiary.

(Results by Business Segment)

[Functional Solutions]

The functional solutions business recorded net sales of ¥38,604 million (up by 3.4% year-on-year) and an operating profit of ¥5,179 million (up by 14.9% year-on-year).

• In plastic films, sales in Japan remained strong, although the business was impacted by stagnant demand overseas.
• In engineering plastics, in addition to the recovery of the office equipment market, products for semiconductors performed strongly.

[Medical]

The medical business recorded net sales of ¥9,625 million (up by 9.8% year-on-year) and an operating profit of ¥1,784 million (up by 9.6% year-on-year).

• Expansion of sales of adhesion prevention agent and absorbable medical materials including bone fixation devices progressed in Japan.

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• Although aesthetic and medical market was on a gradual recovery trend, the Company struggled due to intensified competition.
• Sales of products in China expanded with a focus on the tissue reinforcement felt, despite the impact of regulations on high-cost medical care.

[Apparel]

The apparel business recorded net sales of ¥46,549 million (up by 0.2% year-on-year) and an operating profit of ¥1,320 million (down by 34.5% year-on-year) primarily due to the impact of increased purchasing cost caused by the yen’s depreciation.

• In the apparel business, although expansion of sales through e-commerce progressed, sales of men’s innerwear stagnated, affected by the shift to private branding by mass retailers in response to consumer preference for low-priced products and sluggish sales of autumn and winter items due to the late-summer heat.
• Profit decreased, affected by the impact of higher costs due to production cutbacks and higher labor and other costs, in addition to the impact of the yen’s depreciation since the beginning of the year.

[Lifestyle Creations]

The lifestyle creation business recorded net sales of ¥8,765 million (down by 7.3% year-on-year) and an operating profit of ¥634 million (up by 14.8% year-on-year).

• The real estate category recorded a decline in revenue due to the impact of sales of idle land redevelopment in the previous fiscal year.
• The sports club business improved the profitability, although its revenue decreased due to the re-examining of unprofitable stores.

(2) Explanation of Financial Position

As of December 31, 2024, total assets were ¥168,857 million, an increase of ¥6,886 million compared to the end of the previous fiscal year. The main components of the increase included a ¥3,364 million increase in other, net in property, plant and equipment (construction in progress, etc.), a ¥2,000 million increase in notes and accounts receivable - trade, and contract assets, and a ¥1,489 million increase in cash and deposits, while the main components of a decrease included a ¥1,474 million decrease in investment securities due to the sale of cross- shareholdings.

Total liabilities were ¥48,466 million, an increase of ¥6,963 million compared to the end of the previous fiscal year. The main components of the increase included a ¥7,392 million increase in long- and short-term borrowings including commercial papers, while the main components of a decrease included a ¥931 million decrease in provision for bonuses.

Net assets were ¥120,391 million, a decrease of ¥76 million compared to the end of the previous fiscal year. The main components of an increase included the recording of profit attributable to owners of parent amounting to ¥4,441 million, while the main components of the decrease included dividends paid of ¥2,552 million and ¥1,432 million spent for the purchase of treasury shares.

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

Because the consolidated financial results for the period under review have been almost in line with expectations, the Company has decided not to change its earlier consolidated financial results forecast for the fiscal year ending March 31, 2025, which was announced on May 14, 2024.

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２.Quarterly Consolidated Financial Statements and Primary Notes

1. Quarterly Consolidated Balance Sheets

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(2)Quarterly Consolidated Statements of Income and Comprehensive Income

Quarterly Consolidated Statements of Income (For the nine months)

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Quarterly Consolidated Statements of Comprehensive Income (For the nine months)

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1. Notes to Quarterly Consolidated Financial Statements (Notes regarding assumptions of continuing operations) None applicable

(Notes in the case of significant changes in shareholders’ equity) None applicable

(Application of an accounting method specific to the preparation of quarterly consolidated financial statements) (Calculation of income tax expenses)

The Company calculates income tax expenses by reasonably estimating the effective tax rate expected to be imposed on profit before income taxes for the fiscal year ending March 31, 2025 and then multiplying profit before income taxes for the nine months ended December 31, 2024 by the effective tax rate thus estimated.

However, in cases where calculating tax expenses using the estimated effective tax rate yields a result that is notably lacking rationality, tax expenses will be calculated using the statutory effective tax rate.

Income taxes-deferred are included in income taxes.

(Changes in accounting policies, changes or restatement of accounting estimates) None applicable

(Notes to quarterly consolidated statements of income) * Business restructuring expenses

Nine months ended December 31, 2023 (April 1, 2023 - December 31, 2023)

Loss associated with business restructuring including the transfer of shares of a consolidated subsidiary in the electronic components business

Nine months ended December 31, 2024 (April 1, 2024 - December 31, 2024)

Loss on business restructuring including the wind-down of the electronic components business and additional loss associated with transfer of shares of a consolidated subsidiary

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