MEC : Consolidated Financial Results for the Three Months Ended March 31, 2023(Under Japanese GAAP)

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.

May 10, 2023

Consolidated Financial Results for the Three Months Ended March 31, 2023

(Under Japanese GAAP)

Company name:	MEC COMPANY LTD.
Listing:	Tokyo Stock Exchange (Securities code: 4971)
URL:	https://www.mec-co.com/en/
Representative:	Kazuo MAEDA, CEO & President
Inquiries:	Aya MATSUSHITA, Corporate Communication Office
Telephone:	[phone]

Scheduled date for submitting quarterly reports:	May 12, 2023
Scheduled date to commence dividend payments:	-
Preparation of supplementary material on financial results:	Yes
Holding of financial results briefing:	Yes (for institutional investors, securities analysts)
	(Yen amounts are rounded down to millions, unless otherwise noted.)

1. Consolidated financial results for the Three Months ended March 31, 2023 (from January 1, 2023 to March 31, 2023)

(1) Operating results					(Percentages indicate year-on-year changes.)
		Net sales		Operating income	Ordinary income	Net income attributable to
			owners of parent
	Three months ended	Millions of yen	%	Millions of yen	%	Millions of yen	%	Millions of yen	%
	March 31, 2023	2,765	-30.1	168	-83.9	223	-81.2	82	-89.6
	March 31, 2022	3,955	12.8	1,051	8.0	1,186	14.5	793	6.9

Note: Comprehensive income

For the three months ended March 31, 2023:

¥297 million

[-72.8%]

For the three months ended March 31, 2022:

¥1,096 million

[-1.0%]

Basic earnings

Diluted earnings

per share

per share

Three months ended

Yen

Yen

March 31, 2023

4.32

-

March 31, 2022

41.76

-

(2) Financial position

Total assets

Net assets

Equity-to-asset ratio

As of

Millions of yen

Millions of yen

%

March 31, 2023

26,820

23,144

86.3

December 31, 2022

27,499

23,325

84.8

Reference:

Equity

As of March 31, 2023:

¥23,144 million

As of December 31, 2022:

¥23,325 million

2.Cash dividends

Annual dividends per share

1Q-end

2Q-end

3Q-end

Fiscal

Total

year-end

Yen

Yen

Yen

Yen

Yen

FY2022

-

20.00

-

25.00

45.00

FY2023

-

FY2023 (Forecast)

20.00

-

25.00

45.00

(Note) Revision of recently announced dividends forecast: None

3. Consolidated earnings forecasts for the fiscal year ending December 31, 2023 (January 1, 2023 to December 31, 2023)

(Percentages indicate changes from previous fiscal year for full-year figures, and year-on-year changes for quarterly changes.)

								Net income
	Net sales		Operating income	Ordinary income	attributable to parent	Net income
		company's		per share
								shareholders
	Millions of yen		%	Millions of yen	%	Millions of yen		Millions of		%	Millions of yen
			yen
1st half	6,000		-26.2	450	-78.4	500	-78.9	300		-81.9	15.85
Full year	13,500		-17.3	1,800	-55.1	1,900	-55.3	1,350		-55.9	71.71

(Note) Revision of recently announced earnings forecast: Yes

• Notes

1. Changes in significant subsidiaries during the period (changes in specified subsidiaries resulting in the change in scope of consolidation): None
2. Application of concise accounting procedures or particular accounting procedures in the creation of consolidated financial statements during this quarter: Yes

Note: For details, please see "Specific accounting treatments applied in the preparation of quarterly consolidated financial statements" on page 8 of the attached materials.

1. Changes in accounting policies, changes in accounting estimates, and restatement
2. 1. Changes in accounting policies due to revisions to accounting standards and other regulations: Yes
   2. Changes in accounting policies due to other reasons: None
   3. Changes in accounting estimates: None
   4. Restatement: None
3. Number of issued shares (common shares)
4. 1. Total number of issued shares at the end of the period (including treasury shares)

As of March 31, 2023	20,071,093 shares
As of December 31, 2022	20,071,093 shares

1. Number of treasury shares at the end of the period

As of March 31, 2023

As of December 31, 2022

1. Average number of shares outstanding during the period

1,060,144 shares

1,060,144 shares

Three months ended March 31, 2023

Three months ended March 31, 2022

19,010,949 shares

19,003,950 shares

• Financial results reports are exempt from audit conducted by certified public accountants or an audit corporation.
• Proper use of earnings forecasts, and other special matters
• • 
    -The business forecasts and such like stated in this material are based on the information currently available to the Company and certain assumptions that are judged to be rational. Actual results may vary significantly from the forecasts due to various factors.
    In addition, for matters concerning the above forecasts, please refer to "1. Qualitative information regarding consolidated results for this quarter (3) Statement of forward looking" on page 3 of the attachment.
  • We are planning to hold financial results briefing for institutional investors and analysts on Wednesday, May 10, 2023. Materials of financial results briefings are posted on our website.

MEC COMPANY LIMITED<4971> Consolidated Financial Results for the Three Months ended of the Fiscal Year Ended March 31, 2023
 Table of Contents for Attached Material
1. Qualitative information regarding consolidated results for this quarter	2
(1)	Analysis relating to the operating results	2
(2)	Analysis relating to the financial situation	3
(3)	Statement of forward looking	3
2. Consolidated quarterly financial statements and major notes	4
(1)	Consolidated quarterly balance sheet	4
(2)	Consolidated quarterly statement of income and consolidated quarterly statement of comprehensive income	6
	Consolidated quarterly statement of income
	Consolidated first quarter	6
	Consolidated quarterly statement of comprehensive income
	Consolidated first quarter	7
(3)	Notes on quarterly consolidated financial statements	8
	(Notes on the premise of a going concern)	8
	(Notes on marked changes in the amount of shareholders' equity)	8
	(Specific accounting treatments applied in the preparation of quarterly consolidated financial statements) 8
	(Changes in accounting policies)	8

1

MEC COMPANY LIMITED<4971> Consolidated Financial Results for the Three Months ended of the Fiscal Year Ended March 31, 2023

1. Qualitative information regarding consolidated results for this quarter

1. Analysis relating to the operating results

During the first quarter of the current fiscal year (January 1, 2023 to March 31, 2023), although economic activity was moving toward normalcy as a result of the easing of the restrictions on activities caused by the novel coronavirus, the market remained subject to high global inflation, monetary tightening, and geopolitical risks, which remain highly strained.

In the electronics industry, demand for consumer electronics remained sluggish, as was the case last year, and investment in data centers, which had been strong on the back of investments in digital transformation (DX) and in response to new lifestyles, was also suppressed.

The electronic substrate and parts industry, which is a related market of our Group, was in an inventory adjustment phase affected by the electronics industry, which also affected orders for the Company's related products.

In this environment, the Group has focused on developing and selling products for high-density electronic substrates.

Compared with the same period of the previous fiscal year, sales of key products decreased across the board, as a result of weak demand for related electronic substrates and parts, including the CZ Series of super-roughening agents for use with package substrates on which semiconductors are mounted, the V- Bond Series of adhesion improvers for multilayer electronic substrates, the SF Series for displays, and the EXE Series.

As a result, total consolidated sales for the first quarter amounted to 2,765 million yen (down 1,189 million yen year-on-year, or 30.1%). Selling, general and administrative expenses were 1,414 million yen (up 37 million yen year-on-year, or 2.7%), operating income was 168 million yen (down 882 million yen year-on-year, or 83.9%), and operating income to net sales was 6.1%, a decrease of 20.5 percentage points from the same period of the previous fiscal year. Ordinary income amounted to 223 million yen (down 963 million yen year-on-year, or 81.2%). Quarterly net income before income taxes amounted to 219 million yen (down 966 million yen year-on-year, or 81.5%), and quarterly net income attributable to owners of parent was 82 million yen (down 711 million yen year-on-year, or 89.6%).

Looking at a breakdown of sales, sales of chemicals were 2,712 million yen (down 1,185 million yen year-on-year, or 30.4%), machinery sales were 34 million yen (down 2 million yen year-on-year, or 6.2%), sales of materials were 16 million yen (down 1 million yen year-on-year, or 10.2%), and other sales were 1 million yen (down 0 million yen year-on-year, or 6.5%).

The overseas sales ratio was 63.7%, up 2.3 points compared with the 61.4% in the same period last year. When sales to overseas customers sold through domestic distributors in Japan are included in the overseas sales ratio, the ratio is 72.5% (down 6.5 points compared with the same period last year).

Results by segment were as follows.

In Japan, orders for the Company's related products were sluggish due to weak demand for electronic substrates and parts for PCs, smartphones, displays, and servers. Sales to South Korea in particular, which are handled through Japanese distributors, showed a rather weak demand trend, with net sales of 1,046 million yen (down 533 million yen year-on-year, or 33.7%) and a segment loss of 52 million yen (compared with a profit of 556 million yen in the same period last year) for the period under review.

Taiwan is in a similar situation to Japan, with net sales of 615 million yen (down 237 million yen year-on- year, or 27.9%) and a segment profit of 61 million yen (down 23 million yen year-on-year, or 28.0%) for the period under review.

2

MEC COMPANY LIMITED<4971> Consolidated Financial Results for the Three Months ended of the Fiscal Year Ended March 31, 2023

In Hong Kong (Hong Kong, Zhuhai), demand for smartphone-related electronic substrates and parts remained sluggish, and orders for the Company's related products remained weak amid the impact of semiconductor shortages, despite a recovery trend in automobiles. As a result, sales in Hong Kong were 317 million yen (down 192 million yen year-on-year, or 37.8%) and segment profit was 24 million yen (down 70 million yen year-on-year, or 74.1%) for the period under review.

In China (Suzhou), weak demand for electronic substrates and parts related to servers and smartphones affected orders for the Company's related products, resulting in net sales of 450 million yen (down 222 million yen year-on-year, or 33.1%) and a segment loss of 3 million yen (compared with a profit of 99 million yen in the same period last year) for the period under review.

In Europe, despite high inflation, customers' production activities have been on the upswing, resulting in net sales of 195 million yen (down 12 million yen year-on-year, or 6.1%) and a segment profit of 0 million yen (down 31 million yen year-on-year, or 98.6%) for the period under review.

In Thailand, sales of 140 million yen (up 9 million yen year-on-year, or 7.1%) and a segment loss of 0 million yen (compared with a profit of 28 million yen in the same period last year) were recorded for the period under review due to a decrease in production by customers and inventory adjustment, although new customer production is starting amid active capital investment in Southeast Asia by electronic substrate manufacturers.

(2) Analysis relating to the financial situation

Assets were 26,820 million yen, a decrease of 679 million yen from the previous consolidated fiscal year, primarily due to a decrease in cash and deposits and accounts receivable.

Liabilities were 3,675 million yen, a decrease of 497 million yen from the previous consolidated fiscal year, primarily due to a decrease in payables and accounts payable for equipment.

Net assets were 23,144 million yen, a decrease of 181 million yen from the previous consolidated fiscal year, primarily due to a decrease in retained earnings due to dividend payments and an increase in foreign currency translation adjustments due to the weak yen.

As a result of the above, the equity ratio reached 86.3%.

(3) Statement of forward looking

We revised the consolidated earnings forecast for the first and second quarters and for the full year initially released on February 14, 2023, as announced today (May 10, 2023) in our "Revision to Earnings Forecast." The forecasts mentioned in this material are determined based on the information available at this time. Actual results may differ from the earnings forecast due to various factors.

3