Iwatani : Supplementary Explanation for 1st Half FY23 (with scripts)

FY2023 1st Half Financial Results

(Results for the Six Months Ended September 30, 2023)

(Forward-Looking Statements)

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.

November 17, 2023 Iwatani Corporation

[Securities code 8088]

Contents

1. FY2023 1st Half Overview -Highlights
   -Consolidated Operating Results (Analysis of Net Sales)
   -Consolidated Operating Results (Analysis of Operating Profit) -Consolidated Operating Results (Segment Analysis) -Operating Profit Analysis of Each Segment
   -Balance Sheet (Consolidated) -Statement of Cash Flows
2. FY2023 Forecasts

-Forecasts for the year ending March 31, 2024 -Forecasts of Each Segment

-Returns to Shareholders

3. Progress of Medium-Term Management Plan "PLAN27"

-Overview

-Progress of Priority Measures

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1

FY2023 1st Half Overview

Copyright © Iwatani Corporation. All rights reserved.

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2

Highlights

Decrease in net sales. Despite the negative impact of LPG import price fluctuation, strong sales of products for industrial use contributed to increase in operating profit which marked record high.

Summary of Financial Results for the 1st Half of FY2023

• Decrease in net sales due to lower LPG import prices, decrease in sales volumes of LPG and decline in sales of rechargeable battery materials.
• Increase in operating profit due to strong sales of products for industrial use, despite the negative impact of LPG import price fluctuation compared to the previous year.
• Full-yearfinancial forecasts: no change

Net sales

Operating profit

Ordinary profit

Profit attributable to

owners of parent

394.2

14.5

18.1

12.0

■ Operating profit quarterly trends (100 million yen)

billion yen

YoY (19.0) billion yen

(4.6%)

165

billion yen

YoY +0.2

billion yen

+1.9%

88

91

85

54

60

billion yen

YoY (0.1)

billion yen

(0.7%)

billion yen

YoY (0.5)

billion yen

(4.3%)

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

FY2022

FY2023

*The figures for the 1Q, 2Q, 3Q of FY2022 reflect the finalization of the

3

Copyright © Iwatani Corporation. All rights reserved.

provisional accounting treatment for a business combination.

Although net sales declined YoY in this FY2023 H1 financial results, operating income increased and reached a new record high due to strong sales of products for the industrial sector, despite the negative impact of factors in the LPG market.

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Consolidated Operating Results (Analysis of Net Sales)

(100 million yen)

FY23 1H	FY22 1H	YoY	FY23
Results	Results	(A)-(B)	Progress
Forecasts
(A)	(B) *	(A)/(B)

	Net sales	3,942	4,132	(190)	9,070	43.5%
	(4.6%)
				+27	-	-
	Gross profit	1,009	981
	+2.8%
	Operating profit	145	143	+2	450	32.4%
	+1.9%
	Operating profit			+59
	excluding impact	197	137	450	43.8%
	of LPG import	+43.1%
	price fluctuation
	Non-operating	35	39	(3)	-	-
	income/expenses	(9.8%)
	Ordinary profit	181	183	(1)	503	36.2%
	(0.7%)
	Profit attributable			(5)
	120	126	335	36.0%
	to owners of parent	(4.3%)

Decrease factors

■ lower LPG import prices and decrease in sales volume due to higher temperature

■ decrease in sales of rechargeable battery materials caused by inventory adjustments at sales destinations

■ strong sales of products for industrial use

■ Net sales

Integrated
4,132 Energy	189	Materials	Others	3,942
(253)	Industrial	(124)	(1)
	Gases &

Machinery

* The figures for the 1st half of FY2022 reflect the finalization of the provisional accounting treatment for a	FY22 1H	FY23 1H
business combination.
Copyright © Iwatani Corporation. All rights reserved.	4

Net sales decreased JPY19 billion, or 4.6%, YoY to JPY394.2 billion as a result of lower LPG import prices and lower LPG sales volume due to higher temperatures, as well as weak sales of EV-related battery materials due to industry-wide inventory adjustments.

Despite the negative JPY5.6 billion impact of LPG import price fluctuation compared to the previous year, gross profit increased 2.8% to JPY100.9 billion, up JPY2.7 billion, as a result of strong sales of products for the industrial sector and our response to increased manufacturing and procurement costs.

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Consolidated Operating Results (Analysis of Operating Profit)

(100 million yen)

FY23 1H	FY22 1H	YoY	FY23
Results	Results	(A)-(B)	Progress
Forecasts
(A)	(B) *	(A)/(B)

Net sales	3,942	4,132	(190)	9,070	43.5%
(4.6%)
Gross profit	1,009	981	+27	-	-
+2.8%
Operating profit	145	143	+2	450	32.4%
+1.9%
Operating profit			+59
excluding impact

Increase factors

■ strong sales of products for industrial use contributed to increase in operating profit despite the negative impact of LPG import price fluctuation

■ decrease in non-operating income/expenses due to decline in share of profit of entities accounted for using equity method and increase in interest expense, which led to decrease in ordinary profit and profit attributable to owners of parent

■ Operating profit

143	Integrated		4	5	145
Energy	44

of LPG import	197	137	+43.1%	450	43.8%
price fluctuation
Non-operating	35	39	(3)	-	-
income/expenses	(9.8%)
Ordinary profit	181	183	(1)	503	36.2%
(0.7%)
Profit attributable			(5)
120	126	335	36.0%
to owners of parent	(4.3%)

Materials

1. Industrial
   Gases &

Machinery

Others

• The figures for the 1st half of FY2022 reflect the finalization of the provisional accounting treatment for a business combination.

FY22 1H

FY23 1H

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SG&A expenses increased by JPY2.4 billion due to increases in personnel expenses and depreciation and amortization, but operating income increased by JPY0.2 billion, or 1.9%, to JPY14.5 billion.

As a result, the company recorded its highest profit ever in Q2.

Non-operating income decreased due to a decrease in equity in earnings of affiliates and an increase in interest expenses, and ordinary income decreased by JPY0.1 billion, or 0.7%, to JPY18.1 billion.

As a result, net income for the quarter declined JPY0.5 billion, or 4.3%, to JPY12 billion.

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Consolidated Operating Results (Segment Analysis)

(100 million yen)

	FY23 1H	FY22 1H *	YoY	YoY	FY23	Progress
	Results (A)	Results (B)	(A)-(B)	(A)/(B)	Forecasts
Net sales	3,942	4,132	(190)	(4.6%)	9,070	43.5%
■ Integrated Energy	1,433	1,686	(253)	(15.0%)	3,980	36.0%
■ Industrial Gases & Machinery	1,268	1,079	+189	+17.6%	2,592	48.9%
■ Materials	1,085	1,210	(124)	(10.3%)	2,202	49.3%
■ Others	155	156	(1)	(1.1%)	296	52.4%
Operating profit	145	143	+2	+1.9%	450	32.4%
■ Integrated Energy	(11)	39	(51)	-	180	-
■ Industrial Gases & Machinery	108	64	+44	+69.5%	175	62.0%
■ Materials	62	57	+4	+8.1%	123	50.9%
■ Others, Adjustments	(13)	(17)	+4	-	(28)	-
Operating profit excluding impact of LPG	197	137	+59	+43.1%	450	43.8%
import price fluctuation
Ordinary profit	181	183	(1)	(0.7%)	503	36.2%
Profit attributable to owners of parent	120	126	(5)	(4.3%)	335	36.0%

* The figures for the 1st half of FY2022 reflect the finalization of the provisional accounting treatment for a business combination.

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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)
							Iwatani's LPG
				Gas-producingcountry import & storage terminal	LPG users
					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
Cost basis
Earnings	Basis for selling price
		Earnings
booster effect			depressor effect

Basis for selling price	Cost basis
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We will briefly explain the impact of LPG import price fluctuations on our business performance.

We import LPG from the Middle East and the US. in order to equalize the fluctuation of import prices. We have a pricing structure with many of our wholesale partners whereby selling prices are linked to import prices.

On the other hand, we use the FIFO method for inventory valuation, but because of the time it takes to import and sell LPGs, we sell inventory purchased approximately three months in advance.

In this way, when LPG import prices rise, we sell inventories purchased at low costs at a higher price, while when prices fall, we sell inventories purchased at high cost at a lower price. We refer to these effects as LPG import price fluctuation.

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Operating Profit Analysis of Integrated Energy

	Results								(100 million yen)		Main factors
												■ Impact of LPG import price fluctuation (5,670)
		FY23 1H	FY22 1H	YoY	YoY		FY23	Progress
		Results (A)	Results (B)	(A)-(B)	(A)/(B)		Forecasts				(100 million	1Q	2Q	1H	3Q	4Q		Full
	Net Sales	1,433		1,686	(253)	(15.0%)	3,980	36.0%			yen)								year
				FY23	(17.3)	(34.0)	(51.3)	-	-		-
	Operating	(11)		39	(51)		-	180	-			FY22	+20.4	(15.0)	+5.3	(29.3)	(7.3)		(31.3)
	Profit
												Changes	(37.7)	(19.0)	(56.7)	-	-		-
	Operating profit	39		33	+5	+16.7%	180	21.9%
	of LPG import				■ Retail	+630
	excluding impact
	price fluctuation												-improvement in profitability of LPG
	Analysis of Changes in Operating Profit		(million yen)	■ Wholesale	(120)
3,910
											-decrease in sales due to cancellation of barter trading
												■ Industrial	(150)
													-decrease in LPG sales for calorific adjustment
													for city gas
				630					200			■ Others	+200
											-strong sales of gas-related safety equipment
(5,670)		(120)	(150)			(1,199)
FY22 1H Impact of LPG	Retail	Wholesale	Industrial		Others	FY23 1H
	import price				Copyright © Iwatani Corporation. All rights reserved.								8
	fluctuation

In the Integrated Energy Business, net sales declined JPY25.3 billion to JPY143.3 billion due to low LPG import prices and lower sales volume caused by high temperatures.

Despite improved profitability in the LPG retail sector and solid sales of gas safety equipment and other products, LPG import price fluctuation resulted in a negative JPY5.6 billion versus the previous year, resulting in a JPY1.1 billion operating loss, a JPY5.1 billion decrease.

Excluding these LPG import price fluctuation, operating income was JPY3.9 billion, an increase of JPY0.5 billion.

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Operating Profit Analysis of Industrial Gases & Machinery

	Results							(100 million yen)
		FY23 1H	FY22 1H	YoY	YoY	FY23	Progress
		Results (A)	Results (B)	(A)-(B)	(A)/(B)	Forecasts
	Net Sales	1,268	1,079	+189	+17.6%	2,592	48.9%
	Operating
	108	64	+44	+69.5%	175	62.0%
	Profit
	Analysis of Changes in Operating Profit		(million yen)

2,690 330 10,852

900 530

6,402

Main factors

■ Air separation gases +900

-decrease in sales volume mainly for the electronic component industry

-took an action toward growing production cost

■ Hydrogen Business +530

-decrease in sales volume mainly for the semiconductor industry

-took an action toward growing production cost

■ Specialty gases +2,690

-strong sales of carbon dioxide for the beverage and chemical industries

-stable procurement and supply of helium

■ Gas-related equipment +330

-improve in sales of power semiconductors-related equipment

-increase in sales of gas-related equipment

FY22 1H	Air separation	Hydrogen	Specialty	Gas-related	FY23 1H
	gases	Business	gases	equipment			9
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In the Industrial Gases & Machinery Business, sales volumes of air separaIion gas and hydrogen gas decreased, mainly to the semiconductor and electronic components industries, but profitability improved as a result of efforts to respond to increased production costs associated with higher electricity rates.

With regard to specialty gases, carbon dioxide gas sales to the beverage and chemical industries remained strong, and efforts were made to ensure a stable supply of helium amid a worldwide supply- demand crunch.

In machinery and equipment, sales of equipment for power semiconductors, a growing market, and gas supply facilities increased.

As a result, net sales increased JPY18.9 billion to JPY126.8 billion and operating income rose 69.5% to JPY10.8 billion.

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