Kaneka : Quarterly Financial Results for the 1st Quarter, Ended June 30, 2023

Quarterly Consolidated Financial Results for the 1st Quarter, Ended June 30, 2023 (Japanese GAAP)

			August 9, 2023
Name of Listed Company: Kaneka Corporation		Stock Exchange Listing: Tokyo
Code Number:	4118	URLhttps://www.kaneka.co.jp/en/

Representative: Minoru Tanaka, President, Representative Director

Contact Person: Osamu Ishida, Executive Officer - Investors & Public Relations Department

Phone: [phone]

Scheduled date for filing financial statements: August 10, 2023 Scheduled date of dividend distribution: －

Note: Figures have been rounded down to the nearest million yen.

1. Consolidated Financial Results for the 1st Quarter, Ended June 30, 2023 (from April 1, 2023 to June 30, 2023)

(1) Consolidated operating results				(% indicates year-on-year change)
	Net sales	Operating income	Ordinary income	Net income attributable
	to owners of parent
	¥ million	%	¥ million	%	¥ million	%	¥ million	%
Apr.1, 2023 - Jun. 30, 2023	182,740	(5.2)	5,603	(54.1)	6,674	(54.8)	4,241	(59.7)
Apr.1, 2022 - Jun. 30, 2022	192,739	17.4	12,212	3.1	14,756	37.1	10,518	35.6

Note: Comprehensive income: ¥17,123 million (△3.1%) for the three months ended June 30, 2023 ¥17,664 million (108.6%) for the three months ended June 30, 2022

	Basic net income	Diluted net
	per share	income per share
	¥	¥
Apr.1, 2023 - Jun. 30, 2023	65.35	65.17
Apr.1, 2022 - Jun. 30, 2022	161.22	160.80
(2) Consolidated financial position
	Total assets	Net assets	Equity ratio
	¥ million	¥ million	%
As of June 30, 2023	815,841	449,541	52.7
As of March 31, 2023	782,640	436,422	53.3

Reference: Equity (Shareholders' equity + Accumulated other comprehensive income): ¥429,981 million as of June 30, 2023

¥417,372 million as of March 31, 2023

2. Dividends

			Annual dividends
		1st Quarter	2nd Quarter	3rd Quarter	Year-end	Annual
	¥		¥	¥	¥	¥
Apr.1, 2022 - Mar. 31, 2023		－	55.00	－	55.00	110.00
Apr.1, 2023 - Mar. 31, 2024		－
Apr.1, 2023 - Mar. 31, 2024			55.00	－	55.00	110.00
(Forecasts)

Note: Changes in dividend forecast during the quarter under review: None

3. Forecast for Consolidated Financial Results for the Fiscal Year Ending March 31, 2024 (from April 1, 2023 to March 31, 2024)

(Percentage figures represent changes from the corresponding periods of the previous fiscal year)

			Operating				Net income	Net income
	Net sales			Ordinary income	attributable to
		income		per share
						owners of parent
	¥ million	%	¥ million	%	¥ million	%	¥ million	%	¥
Full year	800,000	5.8	42,000 19.7	38,500	18.8	27,000	17.3	416.06

Note: Revisions to consolidated business performance forecasts during the quarter under review: None

• Notes

1. Changes in principal subsidiaries during the term: None
2. Application of simplified methods of accounting and specific accounting methods: None
3. Changes in accounting principles, changes in estimates, or restatements

1. Changes owing to revisions in accounting standards: None
2. Changes other than 1. above: None
3. Changes in accounting estimates: None
4. Restatements: None

1. Number of shares issued (common stock)
2. 1. Number of shares issued at the end of the period (including treasury stock):
   2. Number of shares of treasury stock at the end of the period:
   3. Average number of shares outstanding during the period (calculated cumulatively from the beginning of the fiscal year):

June 30, 2023	68,000,000	March 31, 2023	68,000,000
	shares		shares
June 30, 2023	3,096,229	March 31, 2023	3,106,293
	shares		shares
June 30, 2023	64,900,739	June 30, 2022	65,243,568
	shares		shares

※These financial statements are exempt from audit procedures to be performed by certified public accountants or an audit firm.

※Explanations or other items pertaining to appropriate use of business performance forecasts The business performance forecasts and certain other statements contained in this document are forward-looking statements, which are based on information currently available to the Company and certain assumptions determined to be reasonable by the Company. For a variety of reasons, actual performance may differ substantially from these forecasts. They do not constitute a guarantee that the Company will achieve these forecasts or other forward-looking statements. For cautionary items used in business performance forecasts, please refer to the section entitled "(3) Earnings Forecasts and Other Forward-lookingStatements" under "1. Quarterly Consolidated Financial Results" on page 5.

Quarterly Financial Results for the 1st Quarter, Ended June 30, 2023, Kaneka Corporation (4118)

Supplementary Materials

Contents

1. Quarterly Consolidated Financial Results--------------------------------------------------------------	P. 2
(1)	Operating Results --------------------------------------------------------------------------------------	P. 2
(2)	Financial Position ---------------------------------------------------------------------------------------	P. 4
(3)	Earnings Forecasts and Other Forward-looking Statements --------------------------------	P. 5
2. Quarterly Consolidated Financial Statements and Main Notes ---------------------------------	P. 6
(1)	Quarterly Consolidated Balance Sheets ----------------------------------------------------------	P. 6
(2)	Quarterly Consolidated Statements of Income and Comprehensive Income ------------	P. 8
(3)	Notes to the Consolidated Financial Statements -----------------------------------------------	P. 10
	(Going Concern Assumption) ------------------------------------------------------------------------	P. 10
	(Notes in the Event of Significant Changes in the Amount of Shareholders' Equity)	--- P. 10
	(Segment Information) --------------------------------------------------------------------------------	P. 10

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Quarterly Financial Results for the 1st Quarter, Ended June 30, 2023, Kaneka Corporation (4118)

1.Quarterly Consolidated Financial Results

1. Operating Results

• State of the Global Economy - Prevailing sense of stagnation with weak recovery momentum - During the first three months (April 1 to June 30, 2023, "1Q") of the fiscal year ending March 31, 2024, the global economy remained sluggish due to ongoing inflation and tightening of monetary policy in Europe and the U.S., and economic slowdown reflecting China's faltering recovery. The pace of economic recovery is uncertain with weak performance in the manufacturing sector, while some recovery is noted in the service sector.
• Kaneka Group's Business Performance - Sales and profits decreased regardless of solid performance in Health Care SU and Nutrition SU -
  Under these circumstances, Kaneka Group's business performance for 1Q was as follows. Consolidated net sales were ¥182,740 million (down 5.2% year-on-year), operating income was ¥5,603 million (down 54.1% year-on-year), ordinary income was ¥6,674 million (down 54.8% year-on- year), and net income attributable to owners of parent was ¥4,241 million (down 59.7% year-on-year). Under the severe demand environment, overseas demands in Material Solutions Unit (SU), E & I Technology, and Performance Fibers remained sluggish, while Health Care SU and Nutrition SU steadily contributed to profits. Both sales and profits decreased compared to the previous 1Q. Ordinary income and net profit have steadily improved since the previous 3Q (October 1 to December 31, 2022).

Business performance for the first three months (April 1, 2023 to June 30, 2023)	(Millions of yen)
	FY2022	FY2023	Difference
	1Q(Apr.-Jun.)	1Q(Apr.-Jun.)	(year-on-year)
Net sales	192,739	182,740	(9,998)
(5.2%)
Operating income	12,212	5,603	(6,608)
(54.1%)
Ordinary income	14,756	6,674	(8,082)
(54.8%)
Net income attributable to	10,518	4,241	(6,277)
owners of parent	(59.7%)

Net sales and operating income by segments for the first three months	(Millions of yen)
		Net sales		Operating income
	FY2022	FY2023	Difference	FY2022	FY2023	Difference
	1Q(Apr.-Jun.)1Q(Apr.-Jun.)	(year-on-year)	1Q(Apr.-Jun.)1Q(Apr.-Jun.) (year-on-year)
Material SU	88,919	77,659	(11,259)	10,756	5,513	(5,242)
(12.7%)	(48.7%)
Quality of Life SU	45,000	40,878	(4,122)	4,600	2,939	(1,660)
(9.2%)	(36.1%)
Health Care SU	16,623	17,745	1,121	3,856	2,967	(889)
6.7%	(23.1%)
Nutrition SU	41,879	46,037	4,158	806	2,277	1,470
9.9%	182.3%
Others	316	419	103	186	288	101
32.6%	54.1%
Adjustment	-	-	-	(7,994)	(8,381)	(386)
-
Total	192,739	182,740	(9,998)	12,212	5,603	(6,608)
(5.2%)	(54.1%)

※SU：Solutions Unit

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Quarterly Financial Results for the 1st Quarter, Ended June 30, 2023, Kaneka Corporation (4118)

The operating performance by business segment was as follow:

• Material Solutions Unit

This unit was affected by a prolonged economic slowdown in Europe, the U.S., and Asia, resulting in lower sales and profits.

• For Vinyls and Chlor-Alkali, sales of both PVC and caustic soda were affected by the stagnant Chinese economy and a significant decline in the Asian market.
• For Modifiers, the demand-supply adjustments for construction use are prolonged on the back of ongoing inflation and high interest rates in Europe and the U.S., resulting in low sales volume. The shipment level of non-PVC products also remained low.
• For Modified Silicone polymers, a sign of recovery is seen from the late 1Q despite a weak construction demand in the U.S. and Europe. To address the rising global demand, we are rapidly considering the next capacity expansion in the U.S., following the ongoing construction to increase capacity in Belgium.
• For Green Planet, steady progress has been made in joint development and product launch with major brand holders in Japan, the U.S., and Europe. We are rapidly expanding the scope of applications by establishing various processing technologies. Resource recycling initiative using waste cooking oil has also accelerated.
  Our innovative project to produce Green Planet from CO2 and H2, which was selected for NEDO*'s "Green Innovation Fund Project," has started in full swing.

• New Energy and Industrial Technology Development Organization

• Quality of Life Solutions Unit

This unit decreased sales and profits due to the supply-demand adjustments in the smartphone market globally, rising inflation and weak consumer spending in Africa.

• For Foam & Residential Techs, profit margin improved significantly through price revisions of expandable polystyrene resin. Demand is recovering for expanded polyolefin foam products in the overseas automotive sector, including Europe. Solutions Vehicle (SV) as a whole achieved a significant increase in both sales and profits.
• For PV & Energy management, sales of high-efficiency photovoltaic modules for residential use are increasing. The mandatory installation of PV in new houses is spreading nationwide, including by the Tokyo Metropolitan Government, thus further growth in demand is expected. We will start an integral electric power service combining solar power generation with power storage facility as regional microgrid businesses in Toyooka City.
• For E & I Technology, demand for the large-screen TV material has started to recover. The smartphone market showed a weaker recovery momentum than expected, and the sales of polyimide products are weak, leading to a delay in profit recovery.
• For Performance Fibers, demand for hair accessory products remained sluggish due to low consumer spending against the backdrop of higher inflation in African countries. We will strive to regain demand early by launching new products with high performance, such as light-weight,water-repellent, and anti- bacterial. Further, we will work to increase the sales of products for flame-retardant materials in light of the new regulations on flame-retardant materials to be implemented in China and India.

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