Consolidated Financial Statements - Summary (Six months ended September 30, 2024)

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.

Consolidated Financial Results

for the Six Months Ended September 30, 2024

[Japanese GAAP]

Telephone: +81-6-6348-1314

Scheduled date to file semi-annual securities report: November 13, 2024

Scheduled date to commence dividend payments: -

Preparation of supplementary material on financial results: Yes

Holding of financial results briefing: Yes

(Yen amounts are rounded down to millions, unless otherwise noted.)

1. Consolidated Financial Results for the Six Months Ended September 30, 2024 (April 1, 2024 to September 30, 2024)

(2) Consolidated Financial Position

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1. Qualitative Information on Semi-annual Financial Results for the Period under Review

1. Explanation of Business Results

(Overview of Results for the Period under Review)

During the six months ended September 30, 2024 (April 1, 2024 - September 30, 2024), the Japanese economy faced a situation where the economic outlook remained unclear due to factors such as the globally unstable political situation and rapid exchange rate fluctuations. In addition, although real wages are on an upward trend due to the rise in prices associated with soaring labor and logistics costs in addition to raw material prices, 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, ordinary profit, and profit attributable to owners of parent 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 posted a decline in profits primarily due to the impact of the yen’s depreciation since the beginning of the year.

(Results by Business Segment)

[Functional Solutions]

The functional solutions business recorded net sales of ¥25,635 million (up by 5.7% year-on-year) and an operating profit of ¥3,251 million (up by 10.7% 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 ¥6,468 million (up by 17.8% year-on-year) and an operating profit of ¥1,279 million (up by 40.9% year-on-year).

• Expansion of sales of adhesion prevention agent and absorbable medical materials including bone fixation devices progressed in Japan.
• Although aesthetic and medical market was on a gradual recovery trend, the Company struggled due to intensified competition.
• Sales of products for China, with a focus on the tissue reinforcement felt, expanded.

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[Apparel]

The apparel business recorded net sales of ¥29,869 million (up by 1.7% year-on-year) and an operating profit of ¥417 million (down by 46.1% 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 due to the shift to private branding by mass retailers.
• 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 ¥5,737 million (down by 10.8% year-on-year) and an operating profit of ¥303 million (up by 2.1% 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 September 30, 2024, total assets were ¥166,857 million, an increase of ¥4,886 million compared to the end of the previous fiscal year. The main components of the increase included a ¥3,889 million increase in other, net in property, plant and equipment (construction in progress, etc.), a ¥2,527 million increase in cash and deposits, and a ¥1,274 million increase in merchandise and finished goods, while the main components of a decrease included a ¥2,052 million decrease in notes and accounts receivable - trade, and contract assets.

Total liabilities were ¥44,197 million, an increase of ¥2,693 million compared to the end of the previous fiscal year. The main components of the increase included a ¥3,269 million increase in long- and short-term borrowings including commercial papers.

Net assets were ¥122,660 million, an increase of ¥2,192 million compared to the end of the previous fiscal year. The main components of the increase included the recording of profit attributable to owners of parent amounting to ¥2,956 million and a ¥2,327 million increase in foreign currency translation adjustment, while the main components of a decrease included dividends paid of ¥2,552 million.

(Cash Flows)

As of September 30, 2024, consolidated cash and cash equivalents were ¥13,345 million, an increase of ¥2,527 million compared to the end of the previous fiscal year. Below is an overview of cash flows and reasons for changes during the period under review.

Net cash provided by operating activities for the period under review totaled ¥5,651 million, an increase of ¥2,099 million compared to the corresponding period of the previous fiscal year. The major components of cash inflows included profit before income taxes of ¥4,344 million, depreciation of ¥3,389 million, and decrease in accounts receivable - trade, and contract assets of ¥2,582 million. The main components of cash outflows included a ¥1,488 million increase in inventories, income taxes paid of ¥1,443 million, and a ¥1,377 million decrease in other current liabilities.

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Net cash used in investing activities was ¥4,254 million, a decrease of ¥4,191 million compared to the corresponding period of the previous fiscal year. The main components of cash inflows included proceeds from sale of investment securities amounting to ¥968 million. The main components of cash outflows included purchase of non-current assets amounting to ¥5,418 million.

Net cash provided by financing activities totaled ¥571 million, an increase of ¥5,394 million compared to the corresponding period of the previous fiscal year. The main components of cash inflows included increase in short- term borrowings and commercial papers of ¥3,632 million. The main components of cash outflows included ¥2,539 million spend for dividends paid.

(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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Semi-annual Consolidated Financial Statements

Semi-annual Consolidated Balance Sheets

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Semi-annual Consolidated Statements of Income and Comprehensive Income

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