Hosokawa Micron : Financial Statement (2ndQ FY2025)

May 9, 2025

1. Consolidated Financial Results (Interim Period) from October 1, 2024, to March 31, 2025

   1. Consolidated Results of Operation (Percentages represent year-on-year changes)

      	Net sales		Operating profit		Ordinary profit		Profit attributable to owners of parent
      	Million yen	%	Million yen	%	Million yen	%	Million yen	%
      Interim period ended Mar. 2025	38,477	(7.2)	3,573	(5.4)	3,938	(7.5)	2,691	10.5
      Interim period ended Mar. 2024	41,477	11.5	3,779	18.0	4,259	26.5	2,434	(3.7)

      (Reference) Comprehensive Income (million Yen) Interim period ended Mar. 2025: 3,701 [(8.2)%]

      Interim period ended Mar. 2024: 4,030 [53.3%]

      	Earnings per share	Diluted earnings per share
      	Yen	Yen
      Interim period ended Mar. 2025	181.85	181.45
      Interim period ended Mar. 2024	162.14	161.66

   2. Consolidated Financial Position

   	Total assets	Net assets	Equity ratio
   	Million yen	Million yen	%
   As of Mar. 31, 2025	98,453	64,338	65.3
   As of Sept. 30, 2024	98,071	61,623	62.8

   (Reference) Shareholders' Equity (million Yen) Mar. 2025: 64,294 Sept. 2024: 61,540

2. Dividends

   	Dividends per share
   	1st Quarter	2nd Quarter	3rd Quarter	Year-end	Annual
   	Yen	Yen	Yen	Yen	Yen
   Year ended Sept. 2024 (actual)	-	50.00	-	70.00	120.00
   Year ended Sept. 2025 (actual)	-	60.00
   Year ended Sept. 2025 (forecast)			-	60.00	120.00

   Note: Revisions of the forecast dividends since the latest announcement: None

3. Consolidated Forecasts for the Fiscal Year Ending September 30, 2025 (October 1, 2024 - September 30, 2025)

   (Percentages represent year-on-year changes)

   	Net sales		Operating profit		Ordinary profit		Profit attributable to owners of parent		Earnings per share
   	Million yen	%	Million yen	%	Million yen	%	Million yen	%	Yen
   Full Year	83,000	(2.8)	6,500	(21.5)	6,900	(25.3)	5,100	(8.6)	344.96

   Note: Revisions of the Consolidated forecast since the latest announcement: None

4. Others

1. Significant changes in consolidated subsidiaries during the period (changes in scope of consolidation): None

2. Adoption of simplified accounting treatment for interim closing: Yes

   Note: For details, please refer to "Notes to Interim Consolidated Financial Statements" on page 9 of the attachment

3. Changes in accounting treatment for interim consolidated financial statements:

   1. Changes in accounting policies due to the revision of accounting standards: Yes

   2. Changes in accounting policies other than 1) above: None

   3. Changes in accounting estimates: None

   4. Retrospective restatement: None

4. Number of shares outstanding (common stock)

   1. Number of shares outstanding at the end of the period (incl. treasury stock)

      As of March 31, 2025	15,730,538 shares
      As of September 30, 2024	15,730,538 shares

   2. Number of treasury stock at the end of the period

      As of March 31, 2025	914,826 shares
      As of September 30, 2024	946,096 shares

   3. Average number of shares in the fiscal year

• Review of the Japanese-language original of the attached consolidated interim financial statement by certified public accounts or an audit firm: None

• Explanation regarding appropriate use of earnings forecasts and other special notes

Note: The forecasts above are based on currently available information at the time of announcement. Actual results may differ from these forecasts for a number of factors.

Interim Consolidated Financial Statements and Major Notes 4

1. Interim Consolidated Balance sheets 4

2. Interim Consolidated Statements of Income and Comprehensive Income 6

   Interim Consolidated Statements of Income 6

   Interim Consolidated Statements of Comprehensive income 7

3. Interim Consolidated Statements of Cash Flows 8

4. Notes to Interim Consolidated Financial Statements 9

   Matters related to the assumption of going concern 9

   Significant change in the amounts of shareholders' equity 9

   Significant change in the scope of consolidation 9

   Adoption of special accounting methods on interim consolidated financial statements 9

   Change in accounting policies 9

   Segment information and other 10

   Business combination 11

   Interim Consolidated Financial Statements and Major Notes

   1. Interim Consolidated Balance Sheets

      		(Millions of Yen)
      As of September 30, 2024		As of March 31, 2025
      Assets
      Current Assets
      Cash and deposits	27,420	28,208
      Notes and accounts receivable-trade, and contract assets	21,449	19,330
      Electronically recorded monetary claims -operating	1,240	675
      Securities	-	1,000
      Finished goods	3,146	4,088
      Work in process	4,933	4,816
      Raw materials and supplies	4,853	3,880
      Other	1,963	2,765
      Allowance for doubtful accounts	(398)	(463)
      Total Current Assets	64,608	64,302
      Non-Current Assets
      Property, plant and equipment
      Buildings and structures	27,379	28,120
      Machinery, equipment and vehicles	17,541	18,057
      Land	7,150	7,214
      Construction in progress	792	1,572
      Other	3,953	4,127
      Accumulated depreciation and impairment loss	(27,740)	(29,196)
      Total property, plant and equipment	29,075	29,896
      Intangible assets
      Goodwill	128	117
      Other	669	629
      Total intangible assets	798	747
      Investments and other assets
      Investment securities	2,655	2,479
      Deferred tax assets	812	904
      Other	121	121
      Total investments and other assets	3,589	3,506
      Total Non-Current Assets	33,463	34,150
      Total Assets	98,071	98,453

      		(Millions of Yen)
      As of September 30, 2024		As of March 31, 2025
      Liabilities
      Current Liabilities
      Notes and accounts payable-trade	8,706	6,633
      Electronically recorded obligations - operating	1,649	1,158
      Current portion of long-term loans payable	323	173
      Accrued expenses	4,862	4,357
      Income taxes payable	1,185	1,294
      Contract liabilities	8,584	10,153
      Provision for bonuses	721	353
      Provision for directors' bonuses	82	53
      Provision for product warranties	872	962
      Provision for share awards	27	19
      Other	2,653	2,526
      Total Current Liabilities	29,669	27,685
      Non-Current Liabilities
      Long-term loans payable	1,286	1,199
      Provision for share awards	12	16
      Net defined benefit liability	3,224	3,179
      Deferred tax liabilities	1,243	1,207
      Other	1,012	826
      Total Non-Current Liabilities	6,778	6,429
      Total Liabilities	36,447	34,114
      Net Assets
      Shareholders' Equity
      Capital stock	14,496	14,496
      Capital surplus	3,220	3,205
      Retained earnings	42,128	43,783
      Treasury stock	(2,877)	(2,773)
      Total Shareholders' Equity	56,967	58,711
      Accumulated other comprehensive income
      Valuation difference on available-for-sale securities	734	656
      Deferred gains or losses on hedges	33	12
      Foreign currency translation adjustment	4,174	5,266
      Remeasurements of defined benefit plans	(369)	(352)
      Total accumulated other comprehensive income	4,572	5,582
      Subscription rights to shares	83	44
      Total Net Assets	61,623	64,338
      Total Liabilities and Net Assets	98,071	98,453

   2. Interim Consolidated Statements of Income and Comprehensive Income

      Interim Consolidated Statement of Income

      		(Millions of Yen)
      Oct. 1, 2023 - Mar. 31, 2024		Oct. 1, 2024- Mar. 31, 2025
      Net sales	41,477	38,477
      Cost of sales	27,322	25,031
      Gross profit	14,154	13,446
      Selling, general and administrative expenses	10,374	9,872
      Operating profit	3,779	3,573
      Non-operating income
      Interest income	283	275
      Dividend income	26	57
      Equity in earnings of affiliates	112	30
      Foreign exchange gains	1	22
      Gain on valuation of derivatives	45	22
      Other	28	51
      Total non-operating Income	498	459
      Non-operating expenses
      Interest expenses	10	8
      Litigation expenses	-	68
      Other	8	17
      Total non-operating Expenses	18	94
      Ordinary profit	4,259	3,938
      Extraordinary income
      Gain on sales of non-current assets	3	1
      Total extraordinary income	3	1
      Extraordinary losses
      Loss on sales and retirement of non-current assets	2	1
      Loss on development of system	783	-
      Impairment losses	154	-
      Business structure improvement expenses	-	201
      Total extraordinary loss	939	202
      Income before income taxes	3,323	3,737
      Income taxes	888	1,046
      Net income	2,434	2,691
      Profit attributable to owners of parent	2,434	2,691

      Interim Consolidated Statements of Comprehensive Income

      		(Millions of Yen)
      Oct. 1, 2023 - Mar. 31, 2024		Oct. 1, 2024 - Mar. 31, 2025
      Net income	2,434	2,691
      Other comprehensive income
      Valuation difference on available-for-sale securities	413	(77)
      Deferred gains or losses on hedges	(31)	(21)
      Foreign currency translation adjustment	1,205	1,092
      Remeasurements of defined benefit plans	8	16
      Total other comprehensive income	1,595	1,010
      Comprehensive income	4,030	3,701
      Comprehensive income attributable to
      Comprehensive income attributable to owners of parent	4,030	3,701
      Comprehensive income attributable to non-controlling interests	-	-

   3. Interim Consolidated Statements of Cash Flows

      		(Millions of Yen)
      Oct. 1, 2023 - Mar. 31, 2024		Oct. 1, 2024 - Mar. 31, 2025
      Cash flows from operating activities;
      Income before income taxes	3,323	3,737
      Depreciation and amortization	1,120	1,122
      Impairment losses	154	-
      Loss on development of system	783	-
      Amortization of goodwill	12	12
      Increase (decrease) in allowance for doubtful accounts	47	54
      Increase (decrease) in provision for bonuses	(290)	(380)
      Increase (decrease) in provision for directors' bonuses	(22)	(32)
      Increase (decrease) in provision for product warranties	187	67
      Increase (decrease) in net defined benefit liability	(0)	(68)
      Increase (decrease) in provision for share awards	(11)	(3)
      Interest and dividends income	(310)	(333)
      Interest expenses	10	8
      Equity in (earnings) losses of affiliates	(112)	(30)
      Loss (gain) on valuation of derivatives	(45)	(22)
      Loss (gain) on sales and retirement of non-current assets	(1)	0
      Decrease (increase) in notes and accounts receivable-trade, and contract assets	1,601	3,186
      Decrease (increase) in inventories	(637)	393
      Increase (decrease) in notes and accounts payable-trade	(811)	(2,667)
      Increase (decrease) in contract liabilities	11	1,386
      Increase (decrease) in accrued expenses	(411)	(632)
      Other	(470)	(748)
      Sub total	4,124	5,048
      Interests and dividends income received	410	433
      Interest expenses paid	(10)	(8)
      Income taxes paid	(1,504)	(1,238)
      Net cash provided by (used in) operating activities	3,020	4,234
      Cash flows from investing activities;
      Payments into time deposits	(335)	(762)
      Proceeds from withdrawal of time deposits	235	375
      Proceeds from redemption of securities	1,000	-
      Purchase of securities	-	(1,000)
      Purchase of property, plant and equipment	(1,309)	(1,663)
      Purchase of intangible assets	(236)	(57)
      Other	5	0
      Net cash provided by (used in) investing activities	(640)	(3,107)
      Cash flows from financing activities;
      Repayment of long-term loans payable	(62)	(236)
      Purchase of treasury shares	(0)	(0)
      Cash dividends paid	(753)	(1,038)
      Repayments of lease liabilities	(41)	(44)
      Net cash provided by (used in) financing activities	(857)	(1,320)
      Effect of exchange rate change on cash and cash equivalents	576	604
      Net increase (decrease) in cash and cash equivalents	2,098	410
      Cash and cash equivalents at beginning of period	25,689	26,995
      Cash and cash equivalents at end of period	27,787	27,406

   4. Notes to Interim Consolidated Financial Statements

(Matters related to the assumption of going concern)

There is no applicable information.

(Significant change in the amounts of shareholders' equity)

Hosokawa Micron Corporation (hereafter referred to as "the Company") resolved, at a meeting of the Board of Directors held on November 21, 2024 to file a proposal regarding reduction of capital surplus at the Annual General Meeting of Shareholders held on December 17, 2024, and the proposal was approved at its meeting. As the result of the transfer to other capital surplus, the legal capital surplus was reduced by ¥3,000 million on February 28, 2025.

(Significant change in the scope of consolidation)

There is no applicable information.

In addition, significant change in the scope of consolidation is not applicable as the follows;

The Company absorbed Hosokawa Micron Cosmetics Corporation on October 1, 2024, which resulted in exclusion of the scope of consolidation.

(Adoption of the special accounting methods on interim consolidated financial statements)

The company, its domestic consolidated subsidiaries, and certain foreign consolidated subsidiaries calculate the tax expense by multiplying the reasonably estimated tax rate by the income before income taxes.

However, the effective statutory tax rate is used when the reasonably estimated tax rate results in an unreasonable tax expense.

(Change in accounting policies)

Application of "Accounting Standard for Current Income Taxes", etc.

The Company has applied the "Accounting Standard for Current Income Taxes" (ASBJ Statement No. 27, October 28, 2022 and other relevant standards from the beginning of the first quarter of the current fiscal year.

With regard to revisions to categories for recording current income taxes (taxation on other comprehensive income), the Company complies with the transitional treatment stipulated in the proviso of paragraph 20-3 of the Revised Accounting Standard of 2022 and the transitional treatment stipulated in the proviso of paragraph 65-2 (2) of the "Guidance on Accounting Standard for Tax Effect Accounting"(ASBJ Guidance No. 28, October 28, 2022). These changes in the accounting policy do not affect the interim consolidated financial statements.

(Segment information and other)

(Powder related business)

The fixed assets that Hosokawa Solids solutions GmbH (HSS) holds have written down to the recoverable amounts due to the decision that the land and building should be sold. As a result, it recognized impairment loss of ¥ 154 million as extraordinary expense.

In all assets not allocated to reportable segments, the software in progress that the Company recorded have written down to the recoverable amounts due to consideration of introducing new enterprise resource systems. As a result, it recognized impairment loss of

¥568 million as extraordinary expense, which is included in loss on development of system.

There is no applicable information.

(Business combination)

(Absorption-type merger with a wholly-owned subsidiary)

The Company resolved to merge with Hosokawa Micron Cosmetics Corporation, a wholly-owned consolidated subsidiary of the Company, at the Board of Directors meeting held on July 25, 2024, and entered into a merger agreement with Hosokawa Micron Cosmetics Corporation on the same date. The merger took place on October 1, 2024.

1. Overview of the merger

   1. Overview of the disappearing company and the business Name: Hosokawa Micron Cosmetics Corporation

      Business: Sales of hair growth agents, cosmetics, and oral care products.

   2. Date of the merger October 1, 2024

   3. Method of the merger

      Hosokawa Micron Corporation, the surviving company, absorbed Hosokawa Micron Cosmetics Corporation, which was dissolved as a result of the merger.

   4. Name after the merger

      Hosokawa Micron Corporation

   5. Background and purpose of the merger

   Hosokawa Micron Cosmetics Corporation operates a mail-order business of which the main products are hair-growth agents, cosmetics, and oral care products developed based on the Company's proprietary technology of encapsulating ingredients into functional nanoparticles (PLGA) effective for hair growth, beauty, and periodontal disease prevention. This merger is intended to optimize and speed up the processes for marketing, research/product development, manufacturing, and sales by integrating the Material Business Division, which is responsible for manufacturing and R&D of these products, and to further accelerate the growth of our material business by streamlining management and improving the efficiency of organizational operations.

2. The outline of the implemented accounting processes

Pursuant to the "Accounting Standard for Business Combinations"(ASBJ Statement No.21, January 16, 2019) and the "Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures"(ASBJ Guidance No.10, January 16, 2019), the accounting processes are treated as a transaction under common control.