Alinco Incorporated : Summary of Consolidated Financial Results for the Third Quarter of the Fiscal Year Ending March 20, 2022

Summary of Consolidated Financial Results

for the Third Quarter of the Fiscal Year Ending March 20, 2022

(Nine Months Ended December 20, 2021)

		[Japanese GAAP]
		February 2, 2022
Company name:	ALINCO INCORPORATED	Listing: TSE 1st section
Stock code:	5933	URL: https://www.alinco.co.jp/
Representative:	Nobuo Kobayashi, Representative Director and President, Chief Operating Officer
Contact:	Takashi Sakaguchi, Director, Managing Executive Officer,
	General Manager of Accounting and Control Division	Tel: [phone]

Scheduled date of filing of Quarterly Report:	February 2, 2022
Scheduled date of payment of dividend:	-
Preparation of supplementary materials for quarterly financial results: None
Holding of quarterly financial results meeting:	None

(All amounts are rounded down to the nearest million yen)

1. Consolidated Financial Results for the Third Quarter of the Fiscal Year Ending March 20, 2022 (March 21, 2021 - December 20, 2021)

(1) Consolidated results of operations				(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	%
Nine months ended Dec. 20, 2021	41,025	2.7	1,267	(38.0)	955	(58.0)	406	(70.2)
Nine months ended Dec. 20, 2020	39,950	(6.5)	2,044	(33.9)	2,276	(32.2)	1,363	(40.8)

Note: Comprehensive income	Nine months ended Dec. 20, 2021:	287 million yen	(down 75.3%)
	Nine months ended Dec. 20, 2020:	1,163 million yen	(down 52.9%)
	Net income per share	Diluted net income	EBITDA
	per share
	Yen		Yen	Million yen		%
Nine months ended Dec. 20, 2021	20.97		-		4,175		14.5)
Nine months ended Dec. 20, 2020	69.65		-		4,885	(19.1)
		(
Note: EBITDA = Ordinary profit +	Depreciation + Amortization of goodwill + Equity in earnings of affiliates

(2) Consolidated financial position

	Total assets	Net assets	Equity ratio	Net assets per share
	Million yen	Million yen	%	Yen
As of Dec. 20, 2021	58,379	27,254	46.6	1,403.12
As of Mar. 20, 2021	55,443	27,679	49.8	1,428.84
Reference: Shareholders' equity	As of Dec. 20, 2021: 27,230 million yen	As of Mar. 20, 2021: 27,597 million yen

2. Dividends

			Dividend per share
	1Q-end	2Q-end		3Q-end		Year-end	Total
	Yen	Yen		Yen		Yen	Yen
Fiscal year ended Mar. 20, 2021	-	19.00		-		19.00	38.00
Fiscal year ending Mar. 20, 2022	-	20.00		-
Fiscal year ending Mar. 20, 2022 (forecast)						20.00	40.00

Note: Revision to the most recently announced dividend forecast: None

3. Consolidated Forecast for the Fiscal Year Ending March 20, 2022 (March 21, 2021 - March 20, 2022)

(Percentages represent year-on-year changes)

	Net sales		Operating profit	Ordinary profit	Profit attributable to	Net income per
		owners of parent	share
	Million yen		%	Million yen		%	Million yen		%	Million yen	%	Yen
Full year	56,030		5.0	1,200		53.0)	1,000		65.2)	410	(75.4)	21.16
					ending March	20, 2022 4,940 million	yen (down 22.9%)
Reference:	EBITDA forecast for the fiscal year		(			(

Note: Revision to the most recently announced consolidated forecast: Yes

* Notes

1. Changes in significant subsidiaries during the period (changes in specified subsidiaries resulting in changes in scope of consolidation): None

Newly added: -

Excluded: -

1. Application of special accounting methods for presenting quarterly consolidated financial statements: None
2. Changes in accounting policies and accounting-based estimates, and restatements
3. 1. Changes in accounting policies due to revisions in accounting standards, others: None
   2. Changes in accounting policies other than 1) above: None
   3. Changes in accounting-based estimates: None
   4. Restatements: None
4. Number of shares outstanding (common shares)
5. 1. Number of shares outstanding at the end of the period (including treasury shares)

As of Dec. 20, 2021:	21,039,326 shares	As of Mar. 20, 2021:	21,039,326 shares
2) Number of treasury shares at the end of the period
As of Dec. 20, 2021:	1,631,925 shares	As of Mar. 20, 2021:	1,724,357 shares
3) Average number of shares outstanding during the period
Nine months ended Dec. 20, 2021:	19,363,805 shares	Nine months ended Dec. 20, 2020:	19,571,439 shares

Note: For the purpose of calculating net assets per share, the number of shares of the Company held by the ALINCO Employee Shareholding Association Exclusive Trust Account (438,900 shares as of December 20, 2021) under the "Trust-type Employee Shareholding Incentive Plan (E-Ship)" is included in the number of treasury shares, which was to be deducted from the calculation of the number of shares outstanding at the end of the period. For the purpose of calculating net income per share, the Company's shares held by the trust are also included in the number of treasury shares, which was to be deducted from the calculation of the average number of shares outstanding during the period (469,880 shares for the nine months ended December 20, 2021).

*The current quarterly financial report is not subject to quarterly review by certified public accountants or auditing firms.

*Cautionary statement with respect to forward-looking statements and other special items

Forecasts of future performance in these materials are based on assumption judged to be valid and information available to the ALINCO's management at the time the materials were prepared. Actual results may differ materially from the forecasts for a number of reasons. Please refer to "Explanation of Consolidated Forecast and Other Forward-looking Statements" on page 5 for forecast assumptions and notes of caution for usage.

ALINCO INCORPORATED (5933) Financial Results for the Third Quarter of FY3/22

Contents of Attachments

1. Qualitative Information on Quarterly Consolidated Financial Performance	2
(1)	Explanation of Results of Operations	2
(2)	Explanation of Financial Position	4
(3)	Explanation of Consolidated Forecast and Other Forward-looking Statements	5
2. Quarterly Consolidated Financial Statements and Notes	6
(1)	Quarterly Consolidated Balance Sheet	6
(2)	Quarterly Consolidated Statements of Income and Comprehensive Income	8
(3)	Notes to Quarterly Consolidated Financial Statements	10
	Going Concern Assumption	10
	Significant Changes in Shareholders' Equity	10
	Segment and Other Information	10

1

ALINCO INCORPORATED (5933) Financial Results for the Third Quarter of FY3/22

1. Qualitative Information on Quarterly Consolidated Financial Performance

(1) Explanation of Results of Operations

During the first nine months of the fiscal year ending March 20, 2022, the operating environment remained challenging as a new variant of the COVID-19 virus had a severe impact on the Japanese economy and resulted in states of emergency and other measures to slow the spread of infections. The economy started to recover in October following the end of states of emergency and many other pandemic measures. However, the outlook remains uncertain because of the increase in COVID-19 cases caused by the omicron variant.

In the construction and housing related sectors, which are the primary industry of ALINCO group, there were indications of a recovery in industry trends in the first nine months of the current fiscal year, such as the continuation of year-on-year growth in building construction starts based on floor area. In this kind of situation, sales of the new ring lock ALBATROSS system ("ALBATROSS"), our main product, have recovered to the level recorded between October 2019 and March 2020, just before the impact of the COVID-19 crisis started. Currently, the market share of ALBATROSS and its related products has steadily increased because of the start of shipments to a major construction company and other reasons. In the rental business, the utilization rate for rental scaffolding materials recovered to the pre-pandemic level during the summer of 2021 and continued to increase. However, the sales of home fitness equipment, which made a record high sales during the pandemic in the previous fiscal year, has decreased significantly due to the peak out of stay-home demand.

Sales in the first nine months were 41,025 million yen, 2.7% higher than one year earlier, because of the recovery of sales in our core business of scaffolding manufacture, sales and rental. Operating profit decreased 38.0% to 1,267 million yen due to several factors that made expenses significantly higher than anticipated. Major factors include the steady increase in prices of raw materials, including steel and aluminum, which are affected by the international commodity market prices, and the rising cost of purchasing items from suppliers in other countries due to the depreciation of yen along with higher freight rates. Although selling prices were increased to reflect the higher cost of materials in order to improve profit margins, the benefits from increased selling prices were limited because prices of materials continued to climb as the yen depreciated even more.

Ordinary profit fell 58.0% to 955 million yen because of an equity-method loss associated with PT. KAPURINDO SENTANA BAJA (KAPURINDO), an equity-method affiliate in Indonesia. By making investments in KAPURINDO, ALINCO has been involved in Indonesia with the business of renting scaffolding and other construction materials for use at private sector building and civil engineering projects and power plant construction projects. Currently, activity at many construction sites has been temporarily suspended and other construction projects have been delayed or postponed because of the extended impact of the pandemic. Due to this situation, there are doubts about the ability of KAPURINDO to repay long-term loans received from ALINCO. (For more information, see the press release dated February 2, 2022 titled "Announcement of Non-operating Expenses (Equity-method Loss) and Revisions to Fiscal Year Forecast.")

Profit attributable to owners of parent decreased 70.2% to 406 million yen mainly because of subsidy income related to construction of the Fukuchiyama Logistic Center and extraordinary income from a gain on the partial sales of stock held for business relationships.

HIGASHI ELECTRONICS INDUSTRY CO., LTD. has been added to the consolidated financial statements based on an acquisition date of July 31, 2021 for accounting purposes. Consequently, the income statement for the first nine months includes results of operations of Higashi Electronics Industry for the three-month period from August 1 to October 31, 2021. This company is included in the electronic equipment segment.

2

ALINCO INCORPORATED (5933) Financial Results for the Third Quarter of FY3/22

Major components of year-on-year changes in sales and earnings

					(Millions of yen)
	First nine	First nine
	months of	months of	YoY Change		Major components of changes
	FY3/21	FY3/22
					Increase in sales of scaffolding materials (+1,883)
					Increase in distribution warehouse rack sales and
Net sales	39,950	41,025	+1,074		scaffolding material rental business sales (+692)
	Newly consolidated subsidiary (+324)
					Lower fitness equipment sales due to the end of
					pandemic stay-at-home demand (-1,825)
					Higher earnings due to higher sales (+275)
					Decrease in amortization of goodwill (+226)
					Rising costs of raw materials including steel and
Operating profit	2,044	1,267	(776)		aluminum (-616)
	Rising procurement cost due to the depreciation of yen
					(-369)
					Lower profit margins in the scaffolding material rental
					business (-252)
					Increase in freight rates (-46)
					Increase in foreign exchange gain due to hedging effect
					of foreign exchange contract, etc. (+132)
Ordinary profit	2,276	955	(1,321)		Increase in gain on sales of scrap and other
					miscellaneous income (+125)
				 Increase in equity-method loss (-822)
Profit					Lower taxes due to decline in earnings (+177)
				Increase in extraordinary income due to subsidy income
attributable to	1,363	406	(957)
owners of parent					related to construction of Fukuchiyama Logistic Center
					(+119)

The performance for each business segment was as follows. Segment sales do not include intersegment sales.

First nine months of FY3/22						(Millions of yen)
Segment	Net sales		Segment profit (loss)
Amount	YoY change (%)	Amount		YoY change (%)
Construction materials	14,647	(	17.9	1,212	40.9
Scaffolding material rental	12,018	3.0		255	(16.8)
Home equipment	11,337	13.5)		84)	-
Electronic equipment	3,021	9.6		( 68	401.7
Total for reportable segments	41,025		2.7	1,451	(29.1)
Adjustment	-		-	(	496)	-
Amounts shown on quarterly	41,025		2.7	955	(58.0)
consolidated statement of income

Notes: 1. Segment profit (loss) is adjusted to be consistent with ordinary profit in the quarterly consolidated statement of income.

2. The adjustment to segment profit (loss) is primarily non-operating income and expenses, such as equity-method income and losses, foreign exchange gains and losses, and interest expenses that cannot be allocated to a reportable segment.

In accordance with Implementation Guidance for Equity-method Accounting, there is an equity-method loss of 835 million yen for long-term loans extended by ALINCO to equity-method affiliate PT. KAPURINDO SENTANA BAJA.

Construction materials

Sales increased 17.9% from one year earlier to 14,647 million yen. Sales of scaffolding and other temporary materials used at construction sites rose sharply by 46.4% year on year because of additional purchases by existing customers, and sales to new customers, including sales of ALBATROSS to a major construction company. In addition, sales of racks for distribution warehouses also remained strong.

3