Hanwa : Financial Results for the first Quarter ended June 30, 2022

Financial Results for the First Quarter ended June 30, 2022

			(Japan GAAP)
			August 12, 2022
Company name:	HANWA Co., Ltd.	Listed stock exchange: Tokyo
Stock exchange code:	8078		(URL https://www.hanwa.co.jp)
Representative:	Yoichi Nakagawa	President
Enquiries:	Hisashi Honda	Executive Officer	Phone [phone]

Scheduled date of issue of audited financial statements: August 12, 2022

Scheduled date of payout of dividend: －

(Amounts less than one million yen are rounded down)

１．Consolidated financial results for the First Quarter ended June 30, 2022 (April 1, 2022 to June 30, 2022)

(1) Consolidated operating results

（Percentage indicate a change from the previous year）

Net sales

Operating income

Ordinary income

Profit attributable to

owners of the Company

For the 1st Quarter

(Millions of yen)

(％)

(Millions of yen)

(％)

(Millions of yen)

(％)

(Millions of yen)

(％)

ended June 30, 2022

665,580

47.1

24,143

78.8

33,332

137.6

23,917

152.0

ended June 30, 2021

452,604

－

13,503

206.2

14,028

337.9

9,492

329.3

Note: Comprehensive

income

For the Fiscal

Year ended June 30, 2022

33,680

million yen

143.3

%

For the Fiscal Year ended June 30, 2021

13,843

million yen

－ %

Net income

Net income

per share

per share(diluted)

For the 1st Quarter

(yen)

(yen)

ended June 30, 2022

588.55

－

ended June 30, 2021

233.59

－

• From the beginning of the fiscal year ending March 31, 2022, the Company applies the Accounting Standard for Revenue Recognition (Accounting Standards Board of Japan Statement No. 29). As a result, the figures for the 1st quarter ended June 30, 2021 in the above consolidated operating results constitute the figures after application of said accounting standard. For this reason, rates of increase/decrease YoY are not shown for net sales ended June 30, 2021.

(2) Consolidated financial position

		Total assets		Net assets		Shareholders'	Net assets
				equity ratio	per share
		(Millions of yen)			(Millions of yen)	(％)	(yen)
As of June 30, 2022		1,507,932			272,340		17.8	6,597.34
As of March 31, 2022		1,715,394			240,497		13.8	5,834.98
Note: Shareholders' equity	As of June 30, 2022		268,097	million yen
		As of March 31, 2022	237,117	million yen

２．Cash dividends

		Cash dividends per share
	1st Quarter	2nd Quarter	3rd Quarter	Year-end	Annual
	(yen)	(yen)	(yen)	(yen)	(yen)
Year ended March 31, 2022	－	50.00	－	50.00	100.00
Year ended March 31, 2023	－
Year ending March 31, 2023		50.00	－	50.00	100.00
（estimated）

３．Forecast of consolidated financial results for fiscal year ending March 31, 2023 (April 1, 2022 to March 31, 2023)

（Percentage indicate a change from the previous year）

	Net sales		Operating income	Ordinary income	Profit attributable to	Net income
		owners of the Company	per share
	(Millions of yen)	(％)	(Millions of yen)	(％)	(Millions of yen)	(％)	(Millions of yen)	(％)	(yen)
Annual	2,600,000	20.1	65,000	4.2	65,000	3.6	46,000	5.5	1,131.97

• For more information, please refer to "Notice Concerning Amendments to Forecasts of consolidated financial results for FY2022" announced on August 12, 2022.The above forecasts reflect assumptions and prospects based on the information currently available. They are subject to various risks and uncertainties that could cause actual results to differ materially from this information.

－1－

Financial Results for the First Quarter ended June 30, 2022 《Consolidated Balance Sheets》

	(Amounts less than one million yen are rounded down)
		Millions of yen
		March 31, 2022	June 30, 2022
Assets
Current assets;
Cash and deposits	165,451	115,699
Trade notes, accounts receivable and contract assets	542,444	539,474
Electronically recorded monetary claims	33,012	42,821
Inventories	243,603	265,442
Accounts receivable-other	222,549	136,029
Others	66,569	79,899
Allowance for doubtful receivables	(1,580)	(1,450)
Total current assets	1,272,049	1,177,916
Fixed assets;
Property and equipment;
Land	34,677	35,357
Others	43,211	47,038
Total property and equipment	77,889	82,395
Intangible assets	10,556	10,739
Investments and other assets;
Investment securities	81,443	84,188
Long-term guarantee deposits	248,541	125,317
Others	26,317	28,563
Allowance for doubtful receivables	(1,403)	(1,188)
Total investments and other assets	354,898	236,881
Total fixed assets	443,344	330,016
Total assets	1,715,394	1,507,932
Liabilities;
Current liabilities;
Trade notes and accounts payable	388,294	329,787
Electronically record obligations	33,456	35,903
Short-term loans payable	458,984	387,326
Commercial paper	40,000	40,000
Current portion of bonds payable	10,000	10,000
Income taxes payable	16,098	10,112
Accrued bonuses	4,223	2,220
Provision for product warranties	66	63
Commodity forwards contracts liabilities	186,766	72,120
Others	100,725	123,890
Total current liabilities	1,238,615	1,011,425
Long-term liabilities;
Bonds payable	20,000	10,000
Long-term loans payable	190,890	185,862
Retirement benefits liabilities	4,454	4,476
Others	20,935	23,827
Total long-term liabilities	236,280	224,166
Total liabilities	1,474,896	1,235,592
Net assets;
Shareholders' equity;
Common stock	45,651	45,651
Capital surplus	26	26
Retained earnings	180,119	202,147
Treasury stock	(3,729)	(3,729)
Total shareholders' equity	222,066	244,094
Accumulated other comprehensive income
Net unrealized holding gains on securities	16,725	18,136
Deferred hedge profit and loss	(1,000)	644
Land revaluation difference	3,191	3,191
Foreign currency translation adjustments	(531)	5,185
Remeasurements of defined benefit plans	(3,334)	(3,155)
Total accumulated other comprehensive income	15,050	24,002
Minority interests	3,379	4,242
Total net assets	240,497	272,340
Total liabilities and net assets	1,715,394	1,507,932

－2－

Financial Results for the First Quarter ended June 30, 2022

《Consolidated Statements of Income and Comprehensive Income》

		(Amounts less than one million yen are rounded down)
			Millions of yen
			Year ended	Year ended
			June 30, 2021	June 30, 2022
Net sales		452,604	665,580
Cost of sales		425,764	626,705
Gross profit		26,839	38,874
Selling, general and administrative expenses		13,335	14,731
Operating income		13,503	24,143
Other income;
	Interest income		331	525
	Dividend income		633	5,947
	Equity in earnings of affiliates		544	2,030
	Foreign exchange gain		―	2,916
	Others		364	456
	Total other income		1,873	11,876
Other expenses;
	Interest expenses		860	2,046
	Foreign exchange loss		224	―
	Others		264	640
	Total other expenses		1,349	2,686
Ordinary income		14,028	33,332
Extraordinary income
	Gain on sale of investment securities		―	541
	Arbitration related income		―	248
	Total extraordinary income		―	789
Extraordinary loss;
	Loss on devaluation of investment securities		―	268
	Total extraordinary loss		―	268
Income before income taxes and minority interest		14,028	33,853
Income taxes		4,434	9,394
Net income		9,593	24,459
Net income attributable to
	Owners of the parent		9,492	23,917
	Non-controlling interests		101	542
Other Comprehensive Income
	Valuation difference on available-for-sale securities		2,040	1,414
	Deferred hedge profit and loss		(231)	1,644
	Foreign currency translation adjustments		1,952	5,110
	Remeasurements of defined benefit plans		191	162
	Share of other comprehensive income of entities accounted	296	888
	for using equity method
	Total other comprehensive Income		4,249	9,221
Comprehensive Income		13,843	33,680
Comprehensive income attributable to
	Owners of the parent		13,600	32,816
	Non-controlling interests		242	864

－3－

Financial Results for the First Quarter ended June 30, 2022

《Segment information》

Segment information by business category for the 1st Quarter ended June 30, 2021 and 2022, is as follows:

							(Amounts less than one million yen are rounded down)
1st Quarter ended June 30, 2021										Millions of yen
			Reportable segment						Consoli-
		Primary	Metal		Energy	Overseas	Sub-	Other	Total	Adjustment
	Steel	Foods	& Living	sales	dated
	Metal	Recycling	total
			Materials	subsidiaries
Net sales
Customers	202,576	44,749	29,975	27,746	59,287	66,225	430,561	22,042	452,604	―	452,604
Inter-segment	3,877	1,024	941	0	1,836	1,325	9,006	1,132	10,138	(10,138)	―
Total	206,454	45,774	30,916	27,746	61,124	67,551	439,567	23,175	462,743	(10,138)	452,604
Segment income	8,105	2,121	1,579	846	1,478	1,088	15,220	326	15,546	(1,518)	14,028
1st Quarter ended June 30, 2022										Millions of yen
			Reportable segment						Consoli-
		Primary	Metal		Energy	Overseas	Sub-	Other	Total	Adjustment
	Steel	Foods	& Living	sales	dated
	Metal	Recycling	total
			Materials	subsidiaries
Net sales
Customers	301,850	57,418	42,378	28,915	85,301	111,548	627,414	38,165	665,580	―	665,580
Inter-segment	6,983	1,255	785	184	3,260	14,532	27,002	1,231	28,233	(28,233)	―
Total	308,834	58,674	43,164	29,100	88,561	126,081	654,416	39,397	693,813	(28,233)	665,580
Segment income	10,191	6,751	4,926	345	2,818	2,691	27,725	1,774	29,500	3,832	33,332

Notes:

1. "Other" comprises businesses that are not included in reportable segments, such as lumber section and machinery section.
2. Adjustments for segment income include inter-segment elimination and Group costs that have not been distributed to reportable segments. These group costs consist mainly of expenses of administrative departments.
3. Segment income is adjusted between ordinary income on the consolidated statements of income and comprehensive income.
4. Since January 2022, the Company has changed its method of classification of business segments, integrating a part of the Overseas sales subsidiaries business into the Foods business.The classification change also applies to segment information for the 1st quarter of the previous fiscal year.

－4－

August 12, 2022

Highlights of Consolidated Financial Results for the 1st Quarter of FY2022

(Japan GAAP)

Outline of Financial Results for the 1st Quarter of FY2022

・ During the 1st quarter of the fiscal year, net sales increased to 665.5 billion yen, because as economic activities continued to be on the right track for recovery, price of the products

represented by steel, non-ferrous metal and crude oil remained at a high level. In addition, enhancement in business performance of the overseas sales subsidiaries contributed to the net

sales increase.

Profits expanded in all business segments except for Foods business. Operating income increased by 79% YoY, to 24.1 billion yen, while ordinary income increased by 138% YoY, to

HANWA Co., Ltd.

(Unit: billion yen, rounded down to 0.1 billions yen)

Financial Position	Mar. 2022	Jun. 2022	Comparison with Mar. 2022	Main Factors
Change	rate

33.3 billion yen, as dividend income from strategic investment increased and equity in earnings of affiliates expanded, mainly in the Primary metals business, and net income

attributable to owners of the parent increased by 152% to 23.9 billion yen.

・ We plan to pay 100 yen as the annual (50 yen as the interim and 50 yen as the year-end) dividend.

Operating Results	1Q of	1Q of	Y o Y		Main Factors
FY2021	FY2022	Change	rate

Total assets	1,715.3	1,507.9	(207.4)	(12%)
(Current assets)	1,272.0	1,177.9	(94.1)	(7%)
(Fixed assets)		443.3		330.0	(113.3)	(26%)
Total liabilities	1,474.8	1,235.5	(239.3)	(16%)
(Interest-bearing debt)	722.9	636.2	(86.6)	(12%)

(Overview)

While we have conducted hedge transactions which involve valuation gains or losses attributable to counter parties based on contracts, accounts receivable-other and long-term guarantee deposits decreased due to decrease in the outstanding contract amount of the commodity forwards contracts, collection of accounts receivable-other and a fall in futures prices on the London Metal Exchange. In addition, the Company repaid part of short-term loan payable provided by financial institute.

(Total Assets)

Net sales	452.6
Gross profit	26.8
SG&A expenses	13.3
Operating income	13.5
Non-operating income	1.8
Non-operating expenses	1.3
Ordinary income	14.0
Extraordinary gain		―

665.5	212.9	47%
38.8	12.0	45%
14.7	1.3	10%
24.1	10.6	79%
11.8	10.0	534%
2.6	1.3	99%
33.3	19.3	138%
0.7	0.7	―

(Net sales)

Net sales increased to 665.5 billion yen, because as economic activities continued to be on the right track for recovery, price of the products represented by steel, non-ferrous metal and crude oil remained at a high level. In addition, enhancement in business performance of the overseas sales subsidiaries contributed to the net sales increase.

(SG&A expenses)

SG & A expenses increased by 1.3 billion yen YoY, with newly consolidated subsidiaries contributing 90 million yen to this figure. Personnel expenses rose by 0.4 billion yen YoY, with 58 million yen of this figure deriving from newly consolidated subsidiaries.

(Non-operating income/expenses)

(Net interest-bearing debt)	557.4	520.5	(36.8)	(7%)
Net DER	*	*	(41pt)	(21%)
	235%/203%		194%/169%
Total net assets	240.4	272.3	31.8	13%
(Equity capital)	222.0	244.0	22.0	10%
(Valuation & translation	15.0	24.0	8.9	60%
adjustments)
(Minority interests)	3.3	4.2	0.8	26%
BPS (yen)	5,834.98	6,597.34	762.36	13%
Shareholders' equity	237.1	268.0	30.9	13%
Shareholders' equity ratio	13.8/15.3*%	17.8/19.4*%	4.0pt	29%

【Changes in Net Sales】

Total assets decreased by 12% from the end of the previous fiscal year, mainly because of decreases in accounts receivable-other and long-term guarantee deposits

(Liabilities)

Liabilities decreased by 16% from the end of the previous fiscal year, mainly as a result of decreases in short-term loans payable and commodity forwards contracts liabilities. As interest- bearing debt decreased by 12%, net debt-equity ratio was turned into 194%（*169%).

(Net assets)

Total net assets increased 13% from the end of the previous fiscal year because of accumulation of retained earnings from net income attributable to owners of parent as well as a fluctuation in foreign currency translation adjustments.Shareholders' equity ratio was 17.8% (*19.4%), which is 4.0 percentage points higher than at the end of the previous fiscal year.

*Reflecting equity credit attributes of the subordinated loan

【Quarterly Operating Results】

Extraordinary loss		―
Income before income	14.0
taxes and others
Income taxes	4.4
Net income	9.5
Owners of the parent	9.4
Non-controlling interests	0.1
EPS (yen)	233.59
Comprehensive	13.8
income

0.2	0.2	―
33.8	19.8	141%
9.3	4.9	112%
24.4	14.8	155%
23.9	14.4	152%
0.5	0.4	436%
588.55	354.96	152%
33.6	19.8	143%

Non-operating income increased by 10 billion yen and non-operating expenses increased by 1.3 billion yen.

The main impacts on ordinary income were as follows. Interest income：increase of 0.1 billion yen(YoY) Dividend income：increase of 5.3 billion yen(YoY)

Equity in earnings of affiliates：increase of 1.4 billion yen(YoY)

Foreign exchange gain：increase of 3.1 billion yen (YoY)

Interest expenses：increase of 1.1 billion yen(YoY)

(Extraordinary gain/loss)

Gain on sale of investment securities：0.5 billion yen

Loss on devaluation of investment securities：0.2 billion yen

3000.0	1st half		2nd half	1st quarter	1000.0		Net sales	Operating income	24 .1	24.0
				2,600.0		Applyng the Accounting Standard for Revenue Recognition
							22.0
2500.0								18 .8
				800.0					20.0
			2,164.0
					16 .9
									18.0
2000.0	1,907.4	1,745.5							623.0	665.5
1,183.7						16.0
		13 .5		560.7
	961.4				600.0	527.7
			Applying the
	944.4	Applying the					14.0
		Accounting
1500.0			Accounting		452.6					12.0
		Standard for
			Standard for					13 .1
			Revenue
			Revenue	400.0					10.0
			Recognition
1000.0			Recognition							8.0
	946.0		980.3
	801.0								6.0
				200.0
500.0			6 6 5 .5						4.0
	4 7 2 .4	3 7 5 .6	4 5 2 .6								2.0
0.0		0.0						0.0
	FY2019	FY2020	FY2021	FY2022 (E)		FY2021/1Q	2Q	3Q	4Q	FY2022/1Q

Segment

Information

Steel

Primary Metal

Metal Recycling

Foods

Energy&

Living Materials

Overseas sales

subsidiaries Total for reportable

segments

Other

Total

Net sales

1Q of	1Q of	rate
FY2021	FY2022
206.4	308.8	50%
45.7	58.6	28%
30.9	43.1	40%
27.7	29.1	5%
61.1	88.5	45%
67.5	126.0	87%
439.5	654.4	49%
23.1	39.3	70%
462.7	693.8	50%

Segment income		Main Factors
1Q of	1Q of	rate
FY2021	FY2022
8.1	10.1	26%		(Steel business)
	Segment income increased. Transaction volume continued to be stable mainly in the domestic construction
				industry and steel prices remained at a high level due to the spread of increases in manufacturing cost were
2.1	6.7	218%		reflected in steel prices. In addition, foreign exchange gains were reported in the steel coil service center in the
	overseas countries contributed to segment income increased.
1.5	4.9	212%		(Primary metals business)
	Segment income increased. Transaction volume of stainless base metals continued to be stable and prices of
				various merchandises, which seemed to have entered an adjustment phase, remained at a relatively high level.
0.8	0.3	(59%)		In addition, dividend income from strategic investment as well as equity in earnings of affiliates from
				SAMANCOR CHROME HOLDINGS PROPRIETARY LTD. contributed to segment income increased.
1.4	2.8	91%		(Metal recycling business)
	Segment income increased. Base metal prices remained at a high level globally and the value of the yen fell.
				In addition, appraisal gain from commodity forwards contracts in hedge transactions contributed to segment
1.0	2.6	147%		income increased.
	(Foods business)
				Segment income decreased. While demand for marine products expanded on a global scale, purchase cost risings
15.2	27.7	82%
	due to the depreciation of yen were not sufficiently reflected in the selling prices.
	In addition, as import of crabs from Russia were banned in some countries including the U.S., appraisal loss on
0.3	1.7	443%		the products was reported by the Company and its consolidated subsidiaries, and as the result the segment
	income decreased.
				(Energy & Living Materials business)
15.5	29.5	90%		Segment income increased. Market prices of crude oil and petroleum products rose further due to the crisis in
	Ukraine, income from the products such as bunker fuel oil increased. In addition, both transaction volume and
				unit prices of palm kernel shells (PKS) and wood pellet fuel rose due to a demand increase on a global scale

【Changes in Net Income】

60.0
				1st half					2nd half			1st quarter
50.0											46.0
												43.6
40.0
													22.7
30.0
20.0									19.6
																23 .9
											20.9
									12.8
10.0
		4 .1
											9 .4
									6.8
0.0			5.1
		-18.8				2 .2
-10.0
-20.0
-13.6
			FY2019	FY2020	FY2021	FY2022(E)

Forecast	FY2021	FY2022
(Annual)	(estimated)	change

【Changes in Interest-bearing Debt】

900.0	Interest-bearing debt			4.0
	Net DER
	Reflecting subordinated loan	722.9
			636.2	3.0
600.0		2 .4
331.1			1 .9	2.0
1 .6	301.6
2 .0
	1 .3
300.0		1 .7
1 .3	1 .1			1.0
0.0				0.0
FY2019	FY2020	FY2021	FY2022/1Q

Cash Dividends	FY2020	FY2021	FY2022
(estimated)

Adjustment

Consolidated

(10.1)	(28.2)	179%
452.6	665.5	47%

(1.5)	3.8	―	contributed to segment income increased.
(Overseas sales subsidiaries)
			Segment income increased. Transaction volume in steel increased in some countries, including Indonesia and
14.0	33.3	138%	Singapore., In addition,while profitability at consolidated subsidiaries in the U.S. improved contributed to
segment income increased.

Net sales	2,164.0	2,600.0	20%	Interim (yen)	30.00	50.00	50.00
Operating income	62.3	65.0	4%	Year-end (yen)	30.00	50.00	50.00

・ Jun. Established Hanwa Daisun as a consolidated subsidiary of the Company.

Topics

Ordinary income	62.7	65.0	4%	Annual (yen)	60.00	100.00	100.00
Net income attributable	43.6	46.0	6%	Dividend payout ratio	12%	9%	9%
to owners of the parent