Iwatani : Supplementary Explanation for FY23 (with scripts)

About this update from Iwatani Corporation

Financial Results for FY2023 (Results for the Fiscal Year Ended March 31, 2024) May 23, 2024 Iwatani Corporation (Forward-Looking Statements) 〔 Security Code 8088 〕 This material contains forward-looking statements based on expectations and are not guarantees or assurances of future performance. Accordingly, please be fully aware that results may differ materially from those expectations. Copyright © Iwatani Corporation. All rights reserved. Contents 1.FY 2023 Overview -Highlights -Consolidated Operating Results -Consolidated Operating Results of each Segment -Operating Profit Analysis of each Segment -Balance Sheet (Consolidated) 2.FY 2024 Forecasts -Forecasts for the Year Ending March 31, 2025 -Forecasts of each Segment 3.Progress of Medium-Term Management Plan "PLAN27" -Progress of Management Targets -Progress of Priority Measures 4.Capital and Business Alliance with Cosmo Energy Holdings Co., Ltd. (For Reference) FY2023 Statement of Cash Flows PLAN27 Progress by Business Segments Copyright © Iwatani Corporation. All rights reserved. 1 1 FY 2023 Overview Copyright © Iwatani Corporation. All rights reserved. 2 2 Highlights Net sales decreased. Operating profit increased. Ordinary profit and profit attributable to owners of parent reached record highs for the ninth consecutive year. Summary of Financial Results for FY2023 Net sales decreased due to low import prices compared to the previous year and lower selling prices of LPG, as well as weak sales of rechargeable battery materials for next-generation automobiles. (FY2023 average CP in yen: 81,774 yen (CP: $569 USD Exchange rate: ¥143.50/$) (FY2022 average CP in yen: 96,106 yen (CP: $725 USD Exchange rate: ¥133.73/$) ■ Operating profit increased due to the efforts in Industrial Gases & Machinery business to reduce the increased production costs and positive impact of LPG price fluctuation versus the previous year. Ordinary profit and profit attributable to owners of parent increased, due in part to the recording of a gain on bargain purchase as non-operating profit resulting from accounting for Cosmo Energy Holdings(hereinafter Cosmo Energy HD) using the equity method. Net sales Operating profit Ordinary profit Profit attributable to owners of parent 847.8 billion yen YoY (58.3) billion yen (6.4)% 50.6 billion yen YoY +10.6 billion yen +26.5% 66.2 billion yen YoY +19.1 billion yen +40.8% 47.3 billion yen YoY +15.3 billion yen +47.9% Copyright © Iwatani Corporation. All rights reserved. ■ Operating profit quarterly trends (100 million yen) 165 173 187 88 91 85 60 54 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q FY2022* FY2023 *Reflects the finalization of provisional accounting treatment for business combinations. 3 In the fiscal year ended March 31, 2024, sales declined YoY, but operating profit increased, and ordinary profit and net income reached new highs for the ninth consecutive year. 3 Consolidated Operating Results (100 million yen) ■ Net sales FY23 FY22 YoY FY23 9,062 Integrated Results Results (A)-(B) Energy 217 Forecasts Materials 1 (A) (B) (A)/(B) 8,478 Net Sales 8,478 9,062 (583) 9,070 (360) Industrial (441) Others (6.4)% Gases & Machinery Gross profit 2,294 2,129 +165 ー +7.8% Operating 506 400 +106 450 profit +26.5% Operating profit +67 FY22 FY23 excluding impact of 498 431 450 LPG import price +15.5% fluctuation ■ Operating profit Non-operating 155 69 +85 ー profit +123.1% 51 Materials Others 506 Equity gains of +93 ー ー (2) (1) affiliated companies 93 58 related to Cosmo Energy HD ー 400 Industrial 662 470 +191 503 Gases & Ordinary profit Integrated Machinery +40.8% Energy Profit attributable 473 320 +153 335 to owners of parent +47.9% FY22 FY23 Copyright © Iwatani Corporation. All rights reserved. 4 Net sales decreased JPY58.3 billion, or 6.4%, from the previous fiscal year to JPY847.8 billion, mainly due to lower LPG import prices, which were lower than the previous fiscal year, and lower sales volumes of battery-related materials for next-generation vehicles. Gross profit increased JPY16.5 billion, or 7.8%, to JPY229.4 billion as a result of improved profitability in the LPG retail sector and the industrial gases & machinery business' response to higher production costs from the previous fiscal year. Operating profit increased JPY10.6 billion or 26.5% to JPY50.6 billion due to higher gross profit, despite a JPY5.9 billion increase in SG&A expenses due to higher personnel and depreciation costs. Non-operating income increased by JPY8.5 billion from the previous year due to a gain on bargain purchase of JPY9.3 billion resulting from accounting for Cosmo Energy Holdings (hereinafter Cosmo Energy HD) using the equity method. As a result, ordinary profit increased by JPY19.1 billion or 40.8% to JPY66.2 billion, and net profit increased by JPY15.3 billion or 47.9% to JPY47.3 billion. 4 Consolidated Operating Results (Segment Analysis) (100 million yen) FY23 FY22 YoY YoY Results (A) Results (B) (A)-(B) (A)/(B) Net sales 8,478 9,062 (583) (6.4)% ■ Integrated Energy 3,571 3,932 (360) (9.2)% ■ Industrial Gases & Machinery 2,621 2,404 +217 +9.1% ■ Materials 1,982 2,424 (441) (18.2)% ■ Others 303 302 +1 +0.4% Operating profit 506 400 +106 +26.5% ■ Integrated Energy 201 143 +58 +41.1% ■ Industrial Gases & Machinery 217 165 +51 +31.1% ■ Materials 123 126 (2) (2.4)% ■ Others, Adjustments (35) (34) (1) ー Operating profit excluding impact of LPG import 498 431 +67 +15.5% price fluctuation Ordinary profit 662 470 +191 +40.8% Profit attributable to owners of parent 473 320 +153 +47.9% Copyright © Iwatani Corporation. All rights reserved. 5 5 Impact of LPG Import Price Fluctuations Assumption Wholesale price is linked to LPG import price. Assumption Term from import to sale is ① ② approx. three months. Approx. three months LPG import price linked to Wholesale price -LPG from Middle East(CP) -LPG from the US(MB) Gas-producing country Iwatani's LPG LPG users import & storage terminal Legally required reserves:40 days LPG import Produces short-term impact on performance(due to market fluctuations) price (If LPG import prices return to original levels, impact will be zero*.) fluctuation Rising phase Cheap inventory sold at high price Falling phase Expensive inventory sold at low price Basis for selling price Cost basis Earnings Earnings Cost basis booster effect depressor effect Basis for selling price *Actual impact on performance varies depending on inventory volume, time of sale, sales volume, etc. 6 Copyright © Iwatani Corporation. All rights reserved. I will briefly explain the impact of LPG import price fluctuations on our business performance. The Company imports LPG from the Middle East and the US, and in order to smooth out import price fluctuations, with many of our wholesale partners, we have a pricing structure that links the selling price to the import price. On the other hand, the "first-in,first-out" method is used for inventory valuation. However, since it takes approximately three months from the importation of LPG to its sale, plus the 40-day legal stockpiling period, at the time of sale, the inventory purchased approximately three months earlier is sold. While this results in selling low cost inventory at a higher price when LPG import prices rise, in the event of a decline, high cost inventory will be sold at a lower price. These effects are referred to as the impact of LPG import price fluctuations. 6 Operating Profit Analysis of Integrated Energy Results (100 million yen) FY23 FY22 YoY YoY FY23 Achievement Results Results Forecasts rate (A)-(B) (A) ／ (B) (A) (B) (C) (A)/(C) Net sales 3,571 3,932 (360) (9.2)% 3,980 89.7% Operating profit 201 143 +58 +41.1% 180 112.1% Operating profit 194 174 +19 +11.3% 180 107.9% excluding impact of LPG import price fluctuation Analysis of changes in operating profit (million yen) 1,120 330 760 20,173 3,890 (230) 14,301 Main factors (million yen) Impact of LPG import price fluctuation +3,890 (100 million 1Q 2Q 1H 3Q 4Q Full yen) year FY23 (17.3) (34.0) (51.3) +32.6 +26.3 +7.5 FY22 +20.4 (15.0) +5.3 (29.3) (7.3) (31.3) Changes (37.7) (19.0) (56.7) +61.9 +33.7 +38.9 Retail +1,120 -improvement in profitability of LPG Wholesale +330 - improvement in profitability by reducing procurement costs and revising selling prices Industrial (230) -decrease in LPG demand for calorific adjustment for city gas Others +760 -solid sales of cassette gas canisters and gas- related safety equipment Copyright © Iwatani Corporation. All rights reserved. 7 In the integrated energy business, sales decreased by JPY36 billion to JPY357.1 billion due to lower LPG import prices compared to the previous year and lower LPG sales in the industrial sector, mainly to large customers. Profits, on the other hand, increased 41.1% to JPY20.1 billion due to improved profitability in the LPG retail sector and the impact of LPG import price fluctuations that added about JPY3.8 billion versus the previous year. Operating profit excluding the impact of LPG import price fluctuations was JPY19.4 billion, an increase of JPY1.9 billion. 7 Operating Profit Analysis of Industrial Gases & Machinery Results (100 million yen) FY23 FY22 YoY YoY FY23 Achievement Results Results Forecasts rate (A)-(B) (A) ／ (B) (A) (B) (C) (A)/(C) Net sales 2,621 2,404 +217 +9.1% 2,592 101.1% Operating profit 217 165 +51 +31.1% 175 124.0% Analysis of changes in operating profit (million yen) 1,880 570 21,705 1,220 1,470 16,561 FY22 Air separation Hydrogen Specialty Gas-related FY23 gases Business gases equipment Main factors (million yen) ■ Air separation gases +1,470 -decrease in sales volume mainly for the electronic component industry -took an action toward growing production cost ■ Hydrogen Business +1,220 -decrease in sales volume mainly for the semiconductor industry -took an action toward growing production cost ■ Specialty gases +1,880 -stable procurement and supply of helium and carbon dioxide ■ Gas-related equipment +570 -increase in sales of power semiconductors- related equipment and gas-related equipment Copyright © Iwatani Corporation. All rights reserved. 8 In the industrial gases & machinery business, sales volumes of air separation gas and hydrogen gas declined due to a drop in demand, mainly from the semiconductor and electronic components industries, but profitability improved as a result of efforts to address rising production costs. For specialty gases, we worked to ensure a stable supply of helium gas and carbon dioxide gas, and for machinery and equipment, sales of equipment for power semiconductors, a growing field, and gas supply facilities increased. As a result, net sales increased JPY21.7 billion to JPY262.1 billion, and operating profit increased by 31.1% to JPY21.7 billion. 8 Operating Profit Analysis of Materials Results (100 million yen) Main factors (million yen) FY23 FY22 YoY YoY FY23 Achievement Results Results Forecasts rate (A)-(B) (A) ／ (B) (A) (B) (C) (A)/(C) ■ Functional plastics products +150 Net sales 1,982 2,424 (441) (18.2)% 2,202 90.0% -increase in sales of PET resin for beverage bottles Operating profit 123 126 (2) (2.4)% 123 100.0% ■ Resources & advanced materials (60) -increase in sales of biomass fuel Analysis of changes in operating profit (million yen) -mineral sands sales declined in Japan despite strong production and sales at our own overseas mining sites 150 150 ■ Metals + 150 12,604 (60) -solid sales of stainless steel and overseas 12,305 processed metal business (530) ■ Electronic Materials (530) -sluggish sales of battery-related materials for next-generation vehicles due in part to inventory adjustments at sales destinations -strong sales of functional films for smartphones FY22 Functional Resources & Metals Electronic FY23 Plastics Advanced Materials Products Materials Copyright © Iwatani Corporation. All rights reserved. 9 In the materials business, sales of PET resins for beverage bottles, biomass fuels, and high-performance film materials for smartphones were strong. Sales of stainless steel remained steady. As for mineral sands, production and sales at our own overseas mining sites were strong, but domestic sales to titanium dioxide manufacturers, our major customer, declined. Sales of battery-related materials for next-generation vehicles were sluggish due to declining market conditions and inventory adjustments for customers. As a result, net sales decreased JPY44.1 billion to JPY198.2 billion, and operating profit decreased by 2.4% to JPY12.3 billion. 9

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