Tsubaki Nakashima : Consolidated Financial Results for the Three Months Ended March 31, 202

(% indicates changes from the previous corresponding period.)

This document is an English excerpt translation of the Japanese version of the consolidated financial summary of Tsubaki Nakashima has produced for immediate reference purpose. In the event of any discrepancy between the translated document and the Japanese version, the original shall prevail.

Consolidated Financial Results

for the Three Months Ended March 31, 2023

Unaudited [IFRS]

May 12, 2023

Company name: Tsubaki Nakashima Co., Ltd.

Stock exchange listing: Tokyo Stock Exchange

Code number: 6464

URL: https://www.tsubaki-nakashima.com/en/

Representative: Koji Hirota, Director and Representative Executive Officer, CEO

Contact: Hisashi Tate, Director and Executive Officer, Senior EVP, CFO

Phone: [phone]

Scheduled date of filing quarterly securities report: May 12, 2023

Availability of supplementary briefing material on financial results: Available

Schedule of financial results briefing session: Not scheduled

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

1. Consolidated Financial Results for the Three months ended March 31, 2023 (January 1, 2023 to March 31, 2023)

(1) Consolidated Operating Results

				Sales						Operating profit			Profit before taxes	Net profit for the
												period
	Three months ended		Million yen		%			Million yen		%			Million yen		%	Million yen		%
	March 31, 2023		19,702		5.8		1,509		(1.1)			1,229	(14.5.)	655		(37.4)
	March 31, 2022		18,627		10.3		1,525		(14.8)			1,438	(18.8)	1,046		(21.2)
			Net profit for the		Total comprehensive					Basic earnings	Diluted earnings
			period attributable to
					income					per share				per share
			owners of the parent
	Three months ended		Million yen		%			Million yen		%									Yen				Yen
	March 31, 2023		655		(37.3)		1,931		(65.1)							16.49			16.46
	March 31, 2022		1,045		(21.3)		5,534		14.9							25.76			25.71
(Reference) EBITDA: The three months ended March 31, 2023: 2,268 million yen (down 5.7%)
		The three months ended March 31, 2022: 2,406 million yen
	EBITDA = Operating profit + depreciation and amortization.
(2) Consolidated Financial Position
																Equity attributable to	Ratio of equity
				Total assets		Total equity		attributable to
							owners of the parent
																	owners of the parent
				Million yen		Million yen					Million yen			%
	As of March 31, 2023		160,089				51,416						51,380			32.1
	As of December 31, 2022		159,891				50,131						50,096			31.3
2. Dividends
																Annual dividends
											1st			2nd				3rd				Year-end		Total
								quarter-end		quarter-end				quarter-end
											Yen			Yen			Yen				Yen			Yen
	Fiscal year ended December 31, 2022						－		13.00				－				17.00		30.00
	Fiscal year ending December 31, 2023						－
	Fiscal year ending December 31, 2023																					48.00
	(Forecast)

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(Note) Revision to the forecast for dividends announced most recently: No

3. Consolidated Financial Results Forecast for the Fiscal Year Ending December 31, 2023 (January 1, 2023 to December 31, 2023)

(% indicates changes from the previous corresponding period.)

							Net profit for the	Basic earnings
	Sales		Operating profit	Profit before taxes	period attributable to
		per share
							owners of the parent
	Million yen	%	Million yen	%	Million yen	%	Million yen	%	Yen
Full year	86,000	8.8	9,000	－	7,700	－	5,400	－	133.89
(Note) Revision to the forecast for dividends announced most recently: No

* Notes:

1. Changes in significant subsidiaries during the period under review (changes in specified subsidiaries resulting in changes in scope of consolidation): No
2. Changes in accounting policies and changes in accounting estimates
3. 1. Changes in accounting policies required by IFRS: Yes
   2. Changes in accounting policies other than 1) above: No
   3. Changes in accounting estimates: No
4. Total number of issued shares (common shares)
5. 1. Total number of issued shares at the end of the period (including treasury shares):

March 31, 2023: 41,599,600 shares

December 31, 2022: 41,599,600 shares

1. Total number of treasury shares at the end of the period: March 31, 2023: 1,871,615 shares December 31, 2022: 1,871,615 shares
2. Average number of shares during the period:

Three months ended March 31, 2023: 39,727,985 shares

Three months ended March 31, 2022: 40,561,255 shares

*These financial results are outside the scope of audit by a certified public accountant or an audit corporation. *Explanation of the proper use of financial results forecast and other notes:

The earnings forecasts and other forward-looking statements herein are based on information currently available to the Company and certain assumptions deemed to be reasonable and are not intended to be construed as assurance that they will be accomplished in the future. Actual results may differ significantly from these forecasts due to a wide range of factors.

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1. Qualitative Information on Financial Results

(1) Explanation of Business Results

In Japan, the increase in flow of people due to the decrease in the number of new cases of coronavirus infection is boosting the economy, but on the other hand, energy and raw material prices remain high, and prices of all kinds of commodities, including daily necessities, are also rising, which continues to put pressure on corporate earnings. In Europe and the U.S., there are concerns about the impact of reluctance to lend to companies related to the failure of some banks, and interest rate policies are not moving in the direction of easing. Uncertainties surrounding financial markets may pose a downside risk to the economy, and we are closely monitoring developments.

Under these circumstances, sales for the three months ended March 31, 2023, increased 5.8% year on year to 19,702 million yen, due to the impact of energy and raw material price hikes passed on to selling price and the effect of yen depreciation, despite sluggish sales of major products in the mainstay Precision components business, affected by the global automotive industry downturn.

On the profit front, operating profit decreased 1.1% year on year to 1,509 million yen due to the impact of higher energy and all other costs, as well as sluggish sales growth, despite the positive effects of cost improvements. Net profit for the period attributable to owners of the parent for the quarter decreased 37.3% year on year to 655 million yen.

In fiscal 2023, the final year of our Mid-Term Strategy, we will continue to focus on the growth of our growth strategy and thoroughly implement initiatives centered on improving profitability to provide better corporate value to our shareholders, customers, business partners, and group employees.

The segment performance is as follows. Precision Components Business

Sales in the segment increased 7.6% year on year to 18,682 million yen, despite sluggish growth due to the impact of the global automotive industry downturn, due to higher energy and raw material passed in to selling prices and the impact of the yen's depreciation. Segment profit (operating profit) increased 3.4% year on year to 1,554 million yen due to the impact of higher costs of all kinds, especially energy prices, and sluggish sales growth.

Linear Business

Sales in the segment decreased 19.0% year on year to 1,020 million yen due to inventory adjustments by customers. Segment loss (operating loss) amounted to 50 million yen, decreased by 67 million yen from the same period of the previous period due to a decrease in gross profit resulting from lower sales. .

(2) Explanation of Financial Position

Total assets at the end of first quarter increased by 198 million yen from the end of the previous fiscal year to 160,089 million yen. This was mainly due to an increase in inventories by 1,547 million yen and a decrease in cash and cash equivalents by 2,680 million yen, resulting in 1,018 million yen decrease in current assets, with an increase of 1,216 million yen in non-current assets due to an increase in property, plant and equipment by 1,148 million yen resulting from capital investment.

Total liabilities decreased by 1,087 million yen from the end of the previous fiscal year to 108,673 million yen. This was mainly due to decreases of 455 million yen in trade and other payables, 290 million yen in income taxes payable and 505 million yen in other current liabilities. Current portion of borrowings of 42,474 million yen that was in breach of financial covenants at the end of the previous period were recorded as bonds and borrowings, excluding current portion at the end of first quarter of the current fiscal year.

Total equity increased 1,285 million yen from the end of the previous fiscal year to 51,416 million yen. This was mainly due to an increase in other components of equity by 1,275 million yen, including foreign currency translation adjustments.

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(Analysis of Status of Cash Flows)

The cash flow status and factors for each activity during the first quarter are as follows.

Net cash used in operating activities amounted to 1,026 million yen. Cash increase factors included income before income taxes of 1,229 million yen and depreciation and amortization of 759 million yen, while cash decrease factors included an increase in inventories of 1,043 million yen and a decrease in trade and other payables of 656 million yen.

Net cash used in investing activities amounted to 1,083 million yen, due to payments for acquisition of property, plant and equipment and intangible assets.

Net cash used in financing activities amounted to 736 million yen, due to cash dividends paid of 626 million yen. After adding a translation adjustment of 165 million yen due to the appreciation of the U.S. dollar and Euro during the first quarter, cash and cash equivalents at the end of the first quarter decreased by 2,680 million yen from the end

of previous fiscal year to 21,439 million yen.

(3) Explanation of Consolidated Financial Results Forecast and Other Forward-looking Information

There is no revision to the full-year consolidated forecast for the fiscal year ending December 31, 2023, which was announced on February 20, 2023.

(4) Significant events regarding premise of a going concern

As a result of recording an operating loss in the previous consolidated fiscal year, the Group was in breach of financial covenants in syndicated loan contracts with some financial institutions at the end of the previous consolidated fiscal year. However, as of the end of the first quarter of the current consolidated fiscal year, the Group received formal consent from the relevant financial institutions to waive of the right to forfeit the benefit of time with respect to the borrowings that are in breach of the financial covenants and has determined that significant uncertainties regarding the premise of a going concern is not recognized.

2. Summary Information (Notes)

1. Changes in significant subsidiaries during the period Not Applicable
2. Changes in accounting policies and accounting estimates

The accounting policies of materiality applied in the Group's condensed quarterly consolidated financial statements are the same as those applied in the consolidated financial statements for the previous fiscal year, except for the following items.

(Changes in accounting policies)

The Group has applied the amendment to IAS 12, "Deferred Tax related to Assets and Liabilities arising from a Single Transaction," effective from the first quarter of the current fiscal year.

The adoption clarifies the accounting for transactions that give rise to the same amount of additional temporary differences and subtractive temporary differences at the time of initial recognition and results in the recognition of deferred tax liabilities and deferred tax assets for such additional temporary differences and subtractive temporary differences in the consolidated statement of financial position, respectively.

The effect of the change in accounting policy on the condensed consolidated quarterly financial statements is not material.

(Changes in accounting estimates) Not Applicable

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3. Consolidated Financial Statements

(1) Consolidated Statements of Financial Position

			(Millions of yen)
		As of December 31, 2022	As of March 31, 2023
Assets
Current assets
Cash and cash equivalents	24,119	21,439
Trade and other receivables, net	20,930	20,906
Inventories	35,048	36,595
Other current assets	1,787	1,926
Total current assets	81,884	80,866
Non-current assets
Property, plant and equipment, net	30,763	31,911
Intangible assets, net and goodwill	40,958	41,147
Other investments	212	266
Deferred tax assets	2,254	2,260
Other non-current assets	3,820	3,639
Total non-current assets	78,007	79,223
Total assets	159,891	160,089
Liabilities and equity
Liabilities
Current liabilities
Trade and other payables	7,722	7,267
Current portion of borrowings	52,609	10,288
Income taxes payable	1,416	1,126
Other current liabilities	6,541	6,036
Total current liabilities	68,288	24,717
Non-current liabilities
Bonds and borrowings, excluding current portion	35,378	77,869
Net defined benefit liability	2,320	2,288
Deferred tax liabilities	1,650	1,762
Other non-current liabilities	2,124	2,037
Total non-current liabilities	41,472	83,956
Total liabilities	109,760	108,673
Equity
Share capital	17,117	17,117
Capital surplus	11,519	11,548
Treasury stock	(2,616)	(2,616)
Accumulated other comprehensive income (loss)	6,425	7,700
Retained earnings	17,651	17,631
Equity attributable to owners of the parent	50,096	51,380
Non-controlling interests	35	36
Total equity	50,131	51,416
Total liabilities and equity	159,891	160,089

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