Kurabo Industries : Consolidated Financial Results for theSix Months Ended September 30, 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.

November 9, 2023

	Consolidated Financial Results
	for the Six Months Ended September 30, 2023
	(Under Japanese GAAP)
Company name:	Kurabo Industries Ltd.
Listing:	Tokyo Stock Exchange
Securities code:	3106
URL:	https://www.kurabo.co.jp/
Representative:	Haruya Fujita, President
Inquiries:	Kiyoshi Hamaguchi, Manager of Finance & Accounting Department
Telephone:	[phone]

Scheduled date to file quarterly securities report:	November 14, 2023
Scheduled date to commence dividend payments:	December 1, 2023
Preparation of supplementary material on quarterly financial results: Yes
Holding of quarterly financial results briefing:	Yes (for institutional investors and analysts)

(Yen amounts are rounded down to millions, unless otherwise noted.)

1. Consolidated financial results for the six months ended September 30, 2023 (from April 1, 2023 to September 30, 2023)

(1) Consolidated operating results (cumulative)		(Percentages indicate year-on-year changes.)
	Net sales		Operating profit	Ordinary profit	Profit attributable to
		owners of parent
Six months ended	Millions of yen		%	Millions of yen	%	Millions of yen	%	Millions of yen	%
September 30, 2023	72,653		0.8	3,877	13.8	4,525	(2.6)	2,522	(22.7)
September 30, 2022	72,043		20.0	3,405	11.4	4,647	26.9	3,264	37.1

Note: Comprehensive income	For the six months ended September 30, 2023:	¥10,235 million	[156.9%]
		For the six months ended September 30, 2022:	¥3,983 million	[96.2%]
	Basic earnings	Diluted earnings
		per share	per share
Six months ended		Yen	Yen
September 30, 2023		134.06	-
September 30, 2022		167.23	-

(2) Consolidated financial position

	Total assets		Net assets
As of	Millions of yen	Millions of yen
September 30, 2023	187,122	112,069
March 31, 2023	174,086	102,907
Reference: Equity
As of September 30, 2023:	¥110,862 million
As of March 31, 2023:	¥101,334 million

Equity-to-asset ratio

%

59.2

58.2

2. Cash dividends

		Annual dividends per share
	First quarter-end	Second quarter-end	Third quarter-end		Fiscal year-end	Total
	Yen	Yen	Yen		Yen	Yen
Fiscal year ended	-	35.00	-			35.00		70.00
March 31, 2023
Fiscal year ending	-	40.00
March 31, 2024
Fiscal year ending
March 31, 2024			-		40.00		80.00
(Forecast)

Note: Revisions to the forecast of cash dividends most recently announced: Yes

3. Forecast of consolidated financial results for the fiscal year ending March 31, 2024 (from April 1, 2023

to March 31, 2024)						(Percentages indicate year-on-year changes.)
	Net sales		Operating profit	Ordinary profit	Profit attributable to	Basic earnings
		owners of parent	per share
	Millions		%	Millions	%	Millions		%	Millions	%	Yen
	of yen		of yen	of yen		of yen
Full year	154,000		0.3	7,900	(8.9)	8,500		(15.2)	5,800	5.1	308.25
Note: Revisions to the forecast of financial results most recently announced: None

* Notes

1. Changes in significant subsidiaries during the period (changes in specified subsidiaries resulting in the change in scope of consolidation): None
2. Adoption of accounting treatment specific to the preparation of quarterly consolidated financial statements: Yes
   Note: For the details, please refer to "(Adoption of accounting treatment specific to the preparation of quarterly consolidated financial statements)" of "(4) Notes to quarterly consolidated financial statements in 2. Quarterly consolidated financial statements and significant notes thereto" on page 10 of the attached materials.
3. Changes in accounting policies, changes in accounting estimates, and restatement
4. 1. Changes in accounting policies due to revisions to accounting standards and other regulations: None
   2. Changes in accounting policies due to other reasons: None
   3. Changes in accounting estimates: None
   4. Restatement: None
5. Number of issued shares (common shares)
6. 1. Total number of issued shares at the end of the period (including treasury shares)

As of September 30, 2023

As of March 31, 2023

20,000,000 shares

20,000,000 shares

(ii) Number of treasury shares at the end of the period

As of September 30, 2023

As of March 31, 2023

1,183,004 shares

1,186,212 shares

1. Average number of shares outstanding during the period (cumulative from the beginning of the fiscal year)

Six months ended September 30, 2023

Six months ended September 30, 2022

18,814,755 shares

19,523,834 shares

Note: The Company has introduced the Board Benefit Trust, a share-based compensation plan for directors, etc. using a trust, and the Company's shares held by the trust account are included in the number of treasury shares.

• Quarterly financial results reports are exempt from quarterly review conducted by certified public accountants or an audit corporation.
• Proper use of earnings forecasts, and other special matters (Caution regarding forward-looking statements and others)
  The forward-looking statements, including earnings forecasts, contained in these materials are based on information currently available to the Company and on certain assumptions deemed to be reasonable. Consequently, the statements herein do not constitute assurances regarding the Company's actual results. Actual financial and other results may differ substantially from the statements herein due to various factors. For matters regarding the above earnings forecasts, please refer to "(3) Explanation of consolidated financial forecasts and other forward-looking statements" of "1. Qualitative information regarding financial results for the six months ended September 30, 2023" on page 3 of the attached materials.
  (Regarding the financial results briefing)
  The Company plans to hold a financial results briefing for institutional investors and analysts on Monday, November 27, 2023. The explanatory materials on financial results to be distributed at the briefing will be posted on the Company's website following the briefing.

Attached Material
1. Qualitative information regarding financial results for the six months ended September 30, 2023	2
(1)	Explanation of operating results	2
(2)	Explanation of financial position	3
(3)	Explanation of consolidated financial forecasts and other forward-looking statements	3
2. Quarterly consolidated financial statements and significant notes thereto	4
(1)	Quarterly consolidated balance sheet	4
(2)	Quarterly consolidated statement of income and quarterly consolidated statement of comprehensive
	income	6
	Quarterly consolidated statement of income (cumulative)	6
	Quarterly consolidated statement of comprehensive income (cumulative)	7
(3)	Quarterly consolidated statement of cash flows	8
(4)	Notes to quarterly consolidated financial statements	10
	(Notes on premise of going concern)	10
	(Notes on quarterly consolidated balance sheet)	10
	(Notes on significant changes in the amount of shareholders' equity)	10
	(Adoption of accounting treatment specific to the preparation of quarterly consolidated financial statements)
	....................................................................................................................................................................	10
	(Segment information)	11
	(Relationship to revenue recognition)	12
	(Subsequent events)	14
3. Others	15

- 1 -

1. Qualitative information regarding financial results for the six months ended September 30, 2023

1. Explanation of operating results
   During the first six months of the fiscal year ending March 31, 2024 (from April 1, 2023 to September 30, 2023), the Japanese economy was strong due to a recovery in production activities in the manufacturing industry, an increase in demand from inbound tourism, etc. accompanying the reclassification of COVID-19 to a Class V Infectious Disease and the resolution of supply restrictions. However, the overall outlook remained uncertain due to persistently high resource prices, weakening of the yen, and sluggish growth in private consumption caused by rising prices.
   In this type of environment, the Group has strived to expand business operations of growth and priority businesses, and to enhance the earning capability of core businesses based on the basic policy of "expand high-profit businesses and strengthen core businesses to achieve sustainable growth" in the medium-term corporate business plan "Progress '24" that came into effect in April 2022.
   For the results for the six months ended September 30, 2023, net sales were ¥72.6 billion (up 0.8% YoY), operating profit was ¥3.87 billion (up 13.8% YoY), ordinary profit was ¥4.52 billion (down 2.6% YoY), and profit attributable to owners of parent was ¥2.52 billion (down 22.7% YoY).
   Results by segment are as follows. (Textiles)
   Yarns experienced decreased revenue from decreased orders at overseas subsidiaries due to the impact of inventory adjustments by customers despite steady sales of high-performance products that we produce with our unique technologies.
   Fabrics experienced increased revenue due to steady orders of casual clothing materials despite weak sales of uniform materials.
   Textile products (sewn products, etc.) experienced decreased revenue from decreased orders mainly due to inventory adjustments by customers.
   As a result, net sales were ¥24.6 billion (down 11.8% YoY) with operating loss of ¥0.37 billion (operating profit of ¥0.36 billion in the same period of the previous fiscal year) due in part to increased costs.
   (Chemical Products)
   Flexible polyurethane foam for automotive interior experienced increased revenue due to steady orders at domestic and Brazilian subsidiaries, despite the sluggish sales at Chinese subsidiaries.
   Functional resin products experienced decreased revenue due to a decrease in orders for high-performance plastic products for semiconductor production in line with a slowdown in semiconductor demand, despite a recovery in orders of functional films for solar cells and automobiles.
   Housing construction products experienced decreased revenue due to a decline in heat-insulating work, despite steady sales of heat-insulating materials.
   Nonwoven fabrics experienced decreased revenue due to weak orders for masks.
   As a result, net sales were ¥29.2 billion (up 2.6% YoY) with operating profit of ¥1.63 billion (up 11.0% YoY). (Advanced Technology)
   Electronics businesses experienced increased revenue due to steady sales of film thickness meters as well as large-scale projects at a subsidiary for silicon wafer cleaning equipment, despite sluggish sales of AFVI systems for HDI/Flex PCB.
   Engineering businesses experienced increased revenue due to steady performance by chemical supply systems for the semiconductor industry and large-scale facilities projects at a subsidiary for the pharmaceutical manufacturing industry.
   Biomedical businesses experienced increased revenue due to strong overseas sales of mixer/deaerator and machine tools experienced increased revenue due to solid performance in Japan and China.
   As a result, net sales were ¥12.2 billion (up 33.0% YoY) with operating profit of ¥1.61 billion (up 185.5% YoY).
2. • 2 -

(Food and Services)

Freeze-dried foods experienced decreased revenue due to sluggish sales of instant noodle ingredients, molding soup, etc. because of the impact of restrained purchasing caused by increased retail sales prices as well as declining demand for in-home foods associated with the recovery of demand for eating out.

Hotels and their related services experienced increased revenue due to the effects of abolishment of restrictions on activity and support measures for the tourism business.

As a result, net sales were ¥4.5 billion (up 2.2% YoY) with operating profit of ¥0.27 billion (up 12.2% YoY). (Real Estate)

Due to the start of rentals of new properties, real estate leasing recorded net sales of ¥1.8 billion (up 1.3% YoY), but operating profit totaled ¥1.24 billion (down 2.9% YoY) resulting from an increase in repair expenses, etc.

1. Explanation of financial position
   (i) Assets, liabilities and net assets

Total assets at the end of the second quarter of the fiscal year ending March 31, 2024 increased by ¥13.0 billion from the end of the previous fiscal year to ¥187.1 billion mainly due to increases in investment securities, notes and accounts receivable - trade, and contract assets.

Liabilities increased by ¥3.8 billion from the end of the previous fiscal year to ¥75.0 billion mainly due to increases in deferred tax liabilities, which are included in "other" under non-current liabilities, and notes and accounts payable - trade, although there was a decrease in short-term borrowings.

Net assets increased by ¥9.1 billion from the end of the previous fiscal year to ¥112.0 billion mainly due to increases in valuation difference on available-for-sale securities and retained earnings.

As a result of the above, the equity-to-asset ratio was 59.2%, up 1.0 percentage points.

(ii) Cash flows

Cash and cash equivalents (hereinafter "cash") at the end of the second quarter of the fiscal year ending March 31, 2024 increased by ¥0.1 billion from the end of the previous fiscal year to ¥10.46 billion (¥11.88 billion at the end of the same period of the previous fiscal year). The respective cash flow positions and the factors thereof are as follows.

Cash flows from operating activities

Net cash provided by operating activities in the six months ended September 30, 2023 was ¥5.83 billion (compared to ¥1.71 billion in net cash used in operating activities in the six months ended September 30, 2022). This was mainly due to profit before income taxes of ¥4.52 billion and internal reserves for depreciation of ¥2.44 billion, despite a decrease in cash of ¥1.39 billion from an increase in trade receivables and contract assets.

Cash flows from investing activities

Net cash used in investing activities in the period under review was ¥1.97 billion (compared to ¥1.97 billion in net cash used in investing activities in the same period of the previous fiscal year). This was mainly due to purchase of property, plant and equipment and intangible assets of ¥1.8 billion.

Cash flows from financing activities

Net cash used in financing activities in the period under review was ¥3.98 billion (compared to ¥1.08 billion in net cash provided by financing activities in the same period of the previous fiscal year). This was mainly due to a net decrease in short-term borrowings of ¥2.09 billion and dividends paid of ¥0.66 billion.

1. Explanation of consolidated financial forecasts and other forward-looking statements
   At this point in time, there are no changes in consolidated earnings forecasts announced on August 9, 2023 for the full year (April 1, 2023 to March 31, 2024).
2. • 3 -

2. Quarterly consolidated financial statements and significant notes thereto

(1) Quarterly consolidated balance sheet

			(Millions of yen)
		As of March 31, 2023	As of September 30, 2023
Assets
Current assets
Cash and deposits	10,392	10,496
Notes and accounts receivable - trade, and contract	37,894	39,827
assets
Merchandise and finished goods	16,561	17,968
Work in process	9,801	10,414
Raw materials and supplies	6,821	5,993
Other	3,345	3,645
Allowance for doubtful accounts	(45)	(46)
Total current assets	84,771	88,298
Non-current assets
Property, plant and equipment
Buildings and structures, net	23,230	22,775
Other, net	23,945	24,454
Total property, plant and equipment	47,176	47,230
Intangible assets	1,447	1,597
Investments and other assets
Investment securities	36,868	46,264
Other	4,058	3,976
Allowance for doubtful accounts	(236)	(245)
Total investments and other assets	40,690	49,995
Total non-current assets	89,315	98,823
Total assets	174,086	187,122
Liabilities
Current liabilities
Notes and accounts payable - trade	21,242	22,684
Short-term borrowings	13,002	11,345
Income taxes payable	1,636	1,432
Provision for bonuses	1,461	1,511
Other	8,687	9,204
Total current liabilities	46,030	46,178
Non-current liabilities
Long-term borrowings	1,555	1,321
Provision for retirement benefits for directors (and	226	198
other officers)
Provision for share-based payments	128	151
Retirement benefit liability	12,891	12,985
Other	10,348	14,216
Total non-current liabilities	25,149	28,873
Total liabilities		71,179	75,052

- 4 -

			(Millions of yen)
		As of March 31, 2023	As of September 30, 2023
Net assets
Shareholders' equity
Share capital	22,040	22,040
Capital surplus	15,210	15,245
Retained earnings	61,137	62,997
Treasury shares	(2,477)	(2,470)
Total shareholders' equity	95,910	97,812
Accumulated other comprehensive income
Valuation difference on available-for-sale securities	13,193	19,740
Deferred gains or losses on hedges	(43)	123
Foreign currency translation adjustment	(7,523)	(6,616)
Remeasurements of defined benefit plans	(202)	(197)
Total accumulated other comprehensive income	5,424	13,049
Non-controlling interests	1,572	1,207
Total net assets	102,907	112,069
Total liabilities and net assets		174,086	187,122

- 5 -

1. Quarterly consolidated statement of income and quarterly consolidated statement of comprehensive income
   Quarterly consolidated statement of income (cumulative)

			(Millions of yen)
		Six months ended	Six months ended
		September 30, 2022	September 30, 2023
Net sales	72,043	72,653
Cost of sales	58,522	58,353
Gross profit	13,521	14,300
Selling, general and administrative expenses	10,115	10,422
Operating profit	3,405	3,877
Non-operating income
Interest income	36	48
Dividend income	646	683
Share of profit of entities accounted for using equity	17	18
method
Other	914	300
Total non-operating income	1,614	1,049
Non-operating expenses
Interest expenses	140	171
Other	232	230
Total non-operating expenses	372	401
Ordinary profit	4,647	4,525
Extraordinary income
Gain on sale of investment securities	224	126
Total extraordinary income	224	126
Extraordinary losses
Loss on disposal of non-current assets	71	121
Loss on sale of investment securities	-	9
Total extraordinary losses	71	131
Profit before income taxes	4,800	4,520
Income taxes	1,476	2,016
Profit	3,324	2,504
Profit (loss) attributable to non-controlling interests	59	(18)
Profit attributable to owners of parent		3,264	2,522

- 6 -

Quarterly consolidated statement of comprehensive income (cumulative)

		(Millions of yen)
	Six months ended	Six months ended
	September 30, 2022	September 30, 2023
Profit	3,324	2,504
Other comprehensive income
Valuation difference on available-for-sale securities	(1,018)	6,543
Deferred gains or losses on hedges	111	167
Foreign currency translation adjustment	1,510	986
Remeasurements of defined benefit plans, net of tax	18	4
Share of other comprehensive income of entities	38	29
accounted for using equity method
Total other comprehensive income	659	7,731
Comprehensive income	3,983	10,235
Comprehensive income attributable to
Comprehensive income attributable to owners of parent	3,755	10,147
Comprehensive income attributable to non-controlling	227	88
interests

- 7 -