Kanematsu Electronics : Consolidated Financial Results for the Six Months Ended September 30, 2022

Disclaimer: This document is an English translation of the original document in Japanese and has been prepared solely for reference purposes. In the event of any discrepancy between this English translation and the original in Japanese, the original shall prevail in all respects.

Consolidated Financial Results

for the Six Months Ended September 30, 2022

[Japanese GAAP]

October 28, 2022

Company name: KANEMATSU ELECTRONICS LTD.

Stock exchange listing: Tokyo Stock Exchange

Code number: 8096

URL: https://www.kel.co.jp/english/

Representative: Akira Watanabe, Representative Director, President & CEO

Contact: Yasuhiro Okazaki, Executive Officer, Manager of Accounting Department

Phone: [phone]

Scheduled date of filing quarterly securities report: November 4, 2022

Scheduled date of commencing dividend payments: December 1, 2022

Availability of supplementary explanatory materials on quarterly financial results: Available

Schedule of quarterly financial results briefing session: Scheduled (for institutional investors and securities analysts)

(Amounts of less than one million yen are rounded down.)

1. Consolidated Financial Results for the Six Months Ended September 30, 2022 (April 1, 2022 - September 30, 2022)

(1) Consolidated Operating Results				(% indicates changes from the previous corresponding period.)
			Net sales		Operating profit		Ordinary profit		Profit attributable to
						owners of parent
	Six months ended		Million yen	%	Million yen	%		Million yen	%		Million yen	%
	September 30, 2022		39,791	16.8		6,702	10.3		6,735	9.9		4,552	8.7
	September 30, 2021		34,064	8.2		6,074	21.3		6,128	19.3		4,187	20.4
	Note: Comprehensive	income: Six months	ended September 30, 2022: ¥4,636 million [11.7 %]
			Six months ended September 30, 2021: ¥4,150 million [18.4 %]
			Basic earnings		Diluted
				earnings
			per share
					per share
	Six months ended			Yen			Yen
	September 30, 2022		159.10			-
	September 30, 2021		146.36			-
(2) Consolidated Financial Position
			Total assets		Net assets	Equity ratio
				Million yen		Million yen		%
	As of September 30, 2022	89,458		64,305		71.8
	As of March 31, 2022		82,446		61,928		75.1

Reference: Equity: As of September 30, 2022: ¥64,262 million

As of March 31, 2022: ¥61,885 million

2. Dividends

				Annual dividends
		1st quarter-end	2nd quarter-end		3rd quarter-end	Year-end	Total
Fiscal year ended		Yen	Yen		Yen	Yen	Yen
	-	75.00		-	80.00		155.00
March 31, 2022
Fiscal year
ending		-	80.00
March 31, 2023
Fiscal year ending
March 31, 2023					-	80.00		160.00
(Forecast)

Note: Revision to the forecast for dividends announced most recently: Yes

3. Consolidated Financial Results Forecast for the Fiscal Year Ending March 31, 2023 (April 1, 2022 - March 31, 2023)

(% indicates changes from the previous corresponding period.)

							Profit attributable	Basic earnings
	Net sales		Operating profit	Ordinary profit	to owners of
		per share
							parent
Full year	Million yen	%	Million yen	%	Million yen	%	Million yen	%	Yen
77,000	7.9	13,400	5.6	13,500	5.6	9,100	3.6	318.00
Note: Revision to the forecast for dividends announced most recently: Yes

* Notes:

1. Changes in significant subsidiaries during the period under review: No (Changes in specified subsidiaries resulting in changes in scope of consolidation)

Newly included: - ( )

Excluded: - ( )

1. Accounting methods adopted particularly for the preparation of quarterly consolidated financial statements: No
2. Changes in accounting policies, changes in accounting estimates and retrospective restatement
3. 1. Changes in accounting policies due to the revision of accounting standards: None
   2. Changes in accounting policies other than 1) above: None
   3. Changes in accounting estimates: None
   4. Retrospective restatement: None
4. Total number of shares issued and outstanding (common shares)
5. 1. Total number of shares issued and outstanding at the end of the period (including treasury shares):

September 30, 2022:	28,633,952 shares
March 31, 2022:	28,633,952 shares
2) Total number of treasury shares at the end of the period:
September 30, 2022:	13,344 shares
March 31, 2022:	20,992 shares
3) Average number of shares during the period:
Six months ended September 30, 2022:	28,616,679 shares
Six months ended September 30, 2021:	28,608,752 shares

• These quarterly consolidated financial results are outside the scope of quarterly review by certified public accountants or an audit firm.
• Explanation on the proper use of financial results forecasts and other notes

The financial results forecasts and other forward-looking statements herein are based on information currently available to the Company and certain assumptions deemed reasonable, and are not intended to be a promise by the Company to achieve them. As such, actual results may differ significantly from these forecasts due to a wide range of factors. For the assumptions used as the basis for the financial results forecast and notes on their use, please refer to "1. Qualitative Information on Quarterly Financial Results (3) Explanation of Consolidated Financial Results Forecast and Other Forward-looking Information" on page 3 of the Attachments.

Table of Contents - Attachments
1. Qualitative Information on Quarterly Financial Results .........................................................................	2
(1)	Explanation of Operating Results ........................................................................................................	2
(2)	Explanation of Financial Position for the First Quarter under Review .................................................	3
(3)	Explanation of Consolidated Financial Results Forecast and Other Forward-looking Information .....	3
2. Quarterly Consolidated Financial Statements and Principal Notes .........................................................	4
(1)	Quarterly Consolidated Balance Sheets ..............................................................................................	4
(2)	Quarterly Consolidated Statements of Income and Comprehensive Income ......................................	6
(3) Quarterly Consolidated Statements of Cash Flows .............................................................................	8
(4)	Notes to Quarterly Consolidated Financial Statements .......................................................................	9
	(Notes on going concern assumption) ............................................................................................	9
	(Notes in case of significant changes in shareholders' equity) .......................................................	9
	(Segment information, etc.) ..........................................................................................................	10
	(Significant subsequent events)......................................................................................................	12

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1. Qualitative Information on Quarterly Financial Results

(1) Explanation of Operating Results

During the six months ended September 30, 2022, the Japanese economy continued to show signs of recovery thanks to the effects of various policies, as social and economic activities proceeded to go back to normal. Meanwhile, with rising concerns for the international situation including the protracted conflict in Ukraine and the constraints on economic activities in China, compounded with the sharply depreciating yen due to a significant rise in the U.S. policy interest rate, as well as rising resource prices, the outlook of the Japanese economy remained uncertain.

In the Japanese IT industry, amid the sense of increasing uncertainty due to the restrictions on supply brought on by the shortage of semiconductors and other components and the disrupted supply chain as well as the impact of the rapidly depreciating yen on procurement costs, the new normal under the COVID-19 pandemic has firmly established itself facilitating changes in lifestyles and work styles, which, in turn, has accelerated corporate efforts toward digital transformation (DX). Furthermore, in addition to the rising demand for security measures to combat increasingly sophisticated and varied cyberattacks, such as those by ransomware, strategic IT investments for promoting operational efficiency and automation amid manpower shortages have acquired added significance.

In such an environment, KANEMATSU ELECTRONICS LTD. (the "Company") and its consolidated subsidiaries (collectively, the "Group") continued to focus on developing its infrastructure construction business pivoting on the technological capability it has accumulated, as well as its solutions business mainly in the areas of virtualization and security, which are the foundation of its business. The Group also worked on building remote working environments for its customers, among others.

Specifically, the Group worked on workstyle reform and COVID-19 countermeasures through the construction of robust environments for virtual desktop infrastructure (VDI) and security solutions in line with the era of zero trust networks. At the same time, the Group further expanded sales of its service- oriented businesses centered on the 3Ks*. Furthermore, in August 2022, the Company entered into a capital and business alliance agreement with Terilogy Co., Ltd. The agreement aims to further expand and deepen security business domains for the sake of increasing corporate value over the medium- to long-term.

As a result of the above, in the six months ended September 30, 2022, net sales increased by 5,727 million yen year on year to 39,791 million yen (up 16.8% year on year). Operating profit increased by 627 million yen year on year to 6,702 million yen (up 10.3% year on year), and ordinary profit increased by 606 million yen year on year to 6,735 million yen (up 9.9% year on year), while profit attributable to owners of parent increased by 365 million yen year on year to 4,552 million yen (up 8.7% year on year).

*3Ks: The service business cluster comprising KEL Briefing Center (KBC); KEL Custom Cloud (KCC); and KEL Managed Service (KMS).

The status of reportable segments was as follows:

(IT Systems Business)

Net sales in the IT Systems Business increased by 5,524 million yen year on year to 29,681 million yen (up 22.9% year on year), mainly due to strong performances in the server-related business for the manufacturing industry.

(Services and Support Business)

Net sales in the Services and Support Business increased by 203 million yen year on year to 10,110 million yen (up 2.1% year on year), mainly due to an increase in sales related to the cloud services for the manufacturing industry.

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