Iino Kaiun Kaisha : Consolidated Financial Results For the Six Months Ended September 30, 2023

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.

October 31, 2023

Consolidated Financial Results

For the Six Months Ended September 30, 2023

(Under Japanese GAAP)

Company name:	IINO Kaiun Kaisha, Ltd. (IINO LINES)
Listing:	Tokyo Stock Exchange
Securities code:	9119
URL:	https://www.iino.co.jp/kaiun/english/
Representative:	Yusuke Otani, President
Inquiries:	Osamu Fushida, Director and Executive Officer, General Manager of Finance & Accounting Department
Telephone:	[phone]

Scheduled date to file annual securities report (Only in Japanese):	November 10, 2023
Scheduled date to commence dividend payments:	November 27, 2023
Preparation of supplementary material on quarterly financial results: Yes
Holding of quarterly financial results briefing:	Yes

(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

(Percentages indicate year-on-year changes.)

Profit attributable to

Net sales

Operating profit

Ordinary profit

owners of the parent

company

Six months ended

Millions of yen

%

Millions of yen

%

Millions of yen

%

Millions of yen

%

Sep 30, 2023

67,573

(4.1)

8,820

(15.3)

10,357

(12.0)

9,667

(32.7)

Sep 30, 2022

70,474

43.9

10,415

－

11,768

－

14,369

－

Note: Comprehensive income

For the six months ended September 30, 2023:

¥ 16,441 million

(4.5％)

For the six months ended September 30, 2022:

¥ 17,222 million

(－％)

Basic earnings

Diluted earnings

per share

per share

Six months ended

Yen

Yen

Sep 30, 2023

91.37

－

Sep 30, 2022

135.81

－

Note: Percentage changes from the same period of the previous fiscal year are not shown, because the figures were retroactively adjusted due to a change in accounting policy.

(2) Consolidated financial position

		Total assets		Net assets	Equity-to-asset ratio	Net assets per share
	As of	Millions of yen	Millions of yen	%	Yen
	Sep 30, 2023	282,339		122,970	43.5	1,161.96
	Mar 31, 2023	265,453		110,587	41.6	1,044.95
Reference: Equity
	As of September 30, 2023:	¥122,940 million
	As of March 31, 2023:	¥110,560 million

(Unaudited translation of earnings report (kessan tanshin), provided for reference only)

2. Cash dividends

		Annual dividends per share
	First	Second	Third		Fiscal		Total
	quarter-end	quarter-end	quarter-end		year-end
	Yen	Yen	Yen		Yen		Yen
Fiscal year ended March 31, 2023	－	27.00	－	38.00	65.00
Fiscal year ending March 31,	－	25.00
2024
Fiscal year ending			－	25.00	50.00
March 31, 2024 (Forecast)
Note: Revisions to the forecast of cash dividends most recently announced: Yes

3. Forecast of Consolidated Earnings For the Year Ending March 31, 2024 (April 1, 2023 to March 31, 2024)

(The percentage figures represent changes from the previous corresponding period)

							Profit attributable	Net income
	Net Sales	Operating profit	Ordinary profit	to owners of the	per share
							parent company
Fiscal Year	Millions of yen	%	Millions of yen	%	Millions of yen	%	Millions of yen	%	yen
ending March	135,000	(4.5)	16,200	(19.1)	17,400	(16.6)	17,500	(25.1)	165.40
31, 2024

Note: Revision to financial forecasts most recently announced: Yes

Percentage change year-on-year and percentage change from the same period of the previous fiscal year are shown in comparison with the retroactively adjusted figures for the previous year due to a change in accounting policy.

*Note

1. Changes in significant subsidiaries during the period (changes in specified subsidiaries involving change in consolidation scope: None

Newly included:	- companies (Company name)
Excluded:	- companies (Company name)

1. Application of particular accounting procedures in preparing quarterly consolidated financial statements: Yes (information is available only in Japanese)
2. Changes in accounting policies, changes in accounting estimates, and restatement
3. 1. Changes in accounting policies due to revisions to accounting standards and other regulations: None
   2. Changes in accounting policies due to other reasons: Yes
   3. Changes in accounting estimates: None
   4. Restatement: None
4. Number of issued shares (common shares)
5. 1. Total number of issued shares at the end of the period (including treasury shares)

	2Q for the fiscal year ending March 2024		108,900,000 shares
	The fiscal year ended March 2023		108,900,000 shares
(ii) Number of treasury shares at the end of the period
	2Q for the fiscal year ending March 2024		3,095,971 shares
	The fiscal year ended March 2023		3,095,914 shares
(iii) Average number of shares outstanding during the period
	2Q for the fiscal year ending March 2024		105,804,048 shares
	2Q for the fiscal year ended March 2023		105,804,813 shares

• Quarterly financial results reports are exempt from audit conducted by certified public accountants or an audit corporation.

2

(Unaudited translation of earnings report (kessan tanshin), provided for reference only)

• Proper use of earnings forecasts, and other special matters:
  This report contains various forward-looking statements and other forecasts regarding performance and other matters. Such statements are based on information available at the time of preparation as well as certain reasonable assumptions. Actual results may differ materially from those expressed or implied by forward-looking statements due to a range of factors.

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(Unaudited translation of earnings report (kessan tanshin), provided for reference only)

Operating Results and Financial Position

1. Results for the Six months ended September 30, 2023

In the six months ended September 30, 2023, although the global economy showed signs of picking up except in some regions, it has slowed down overall against the backdrop of monetary tightening.

In the U.S., consumer spending and capital investment remained firm and the economy showed signs of picking up, despite ongoing strong concerns regarding inflation being stuck at a high level. In Europe, the economy remained at a standstill, weighed down by delays in the recovery of the manufacturing industry and raising interest rates, despite the settling down of inflation. In China, the slowing of economic activity was halted due to a robust services industry and manufacturing industry, however real estate investment and imports and exports continue to be in weak. The Japanese economy recovered moderately due to improved consumer spending and an increase in inbound demand, despite concerns over a downturn in the global economy.

In Shipping business of IINO Group ("the Group"), although the markets for some types of ship softened at times due to a slowdown in global economy, the chemical tanker and large gas carrier markets remained at a high level. In this environment, the Group worked to improve ship operation profitability by making efforts to renew existing contracts on favorable terms and efficiently allocate vessels. In Real Estate business, the Group secured stable earnings overall supported by steady operation of owned buildings.

In addition to the above, as a result of depreciation of yen against the U.S. dollar compared with the same period of the previous fiscal year, the consolidated net sales for the six months ended September 30, 2023 totaled ¥67,573 million (down 4.1% year on year) and consolidated operating profit was ¥8,820 million (down 15.3% year on year) and consolidated ordinary profit was ¥10,357 million (down 12.0% year on year), net income attributable to owners of the parent company was ¥9,667 million (down 32.7% year on year).

The following is an overview of conditions by segment.

1) Oceangoing Shipping

Market conditions in Oceangoing Shipping segment for the six months ended September 30, 2023, were as follows.

In oil tankers, market conditions generally softened due to the delayed recovery of the Chinese economy and the extension of cooperative production cuts by OPEC+.

In chemical tankers, although market conditions remained at a high level, the trend softened from the beginning of the fiscal year to the summer against the backdrop of current concerns over a global economic recession and delayed recovery of the Chinese economy. Later, the market conditions were generally stable as a result of market recovery for the competing product tankers, in addition to tightening supply and demand for vessels mainly due to unsettled weather in the Asian region.

Among large gas carrier operations, LPG carrier market conditions were generally firm, supported by stable cargo movements. In particular, from late-August onward, long-distance shipments from North America to the Far East increased, and supply and demand for vessels were tightened particularly in the Middle-East region, causing freight rates to rise and greatly surpass the record high of the previous fiscal year. LNG carrier market conditions saw weakening demand due to sufficient inventories of natural gas in Europe. However, in mid-September, vessel procurement became more active in preparation for the winter demand season, and market levels rose toward the end of the second quarter. In dry bulk carriers, market levels fell due to sluggish cargo movements related to delays in the recovery of the Chinese economy. However, market levels recovered after summer owing to an increase in coal and grain shipments together with vessel delays in the Panama Canal.

During the six months ended September 30, 2023, the Group's average exchange rate was ¥139.93/US$ (¥131.56/US$ in the same period of the previous fiscal year). The average price of very low sulfur fuel oil, was US$597/MT (US$910/MT in the same period of the previous fiscal year).

In above business environment, the activities of Oceangoing Shipping segment are summarized as follows.

4

(Unaudited translation of earnings report (kessan tanshin), provided for reference only)

In oil tanker operations, we continued to keep our fleets to long-term contracts and it contributed to supporting the business performance, although a part of our fleets underwent drydocking.

In chemical tanker operations, in addition to stable contracts of affreightment in our core routes, from the Middle East to Europe and Asia, and other routes, ship operation profitability exceeded our initial forecast by proactively taking in spot cargoes.

In large gas carrier operations, both LPG and LNG carriers secured stable revenues mainly from existing medium- to long-term contracts. In addition, a market-linked vessel enjoyed favorable market conditions.

In dry bulk carrier operations, dedicated vessels operated smoothly and contributed to earnings. In tramper business, mainly in the Post-Panamax and Handy sectors, we strived to efficiently allocate and operate vessels by deploying vessels on freight contracts. Despite the impact of the market decline partially, we secured the operating profitability slightly exceeding our initial projection.

As a result, Oceangoing Shipping segment posted net sales of ¥56,155 million (down 4.5% year on year) and operating profit of ¥6,959 million (down 13.9% year on year).

2) Domestic and Shor-sea Shipping

Market conditions in Domestic and Short-sea Shipping segment for the six months ended September 30, 2023, were as follows.

Despite sluggish cargo movements due to periodic repairs at a number of plants, the earlier-than usual start of the off-demand season and the chronic cooling of domestic demand, market conditions for domestic gas shipping remained firm, as supply and demand for vessels tightened due to the regulation of crew working hours in accordance with the revision of the Coastal Shipping Act, etc.

The short-sea gas shipping market remained strong in the Asian region, our main market, against a backdrop of stable marine transportation demand for LPG, as well as limited newbuilding deliveries, despite the impact of a decrease in transportation demand for propylene and vinyl chloride monomer due to the slowdown of the Chinese economic recovery.

In above mentioned market conditions, Domestic and Short-sea Shipping segment worked on efficient vessel allocation mainly from existing contracts. However, repair costs increased due to the docking of vessels in operation, and this placed stress on profits.

As a result, Domestic and Short-sea Shipping segment posted net sales of ¥4,958 million (down 6.9% year on year) and operating loss of ¥59 million (operating income was ¥246 million in the same period of the previous year).

3) Real Estate Business

Market conditions in Real Estate segment for the six months ended September 30, 2023, were as follows.

In the central Tokyo office building leasing market, there was a continuing trend of decrease in rent accompanying the spread for remote work, mainly among large corporations, and the vacancy rate remained at a high level in the 6% range. However, signs of a market recovery have also begun to emerge due to expansion to new large buildings and relocations for consolidation.

In the hall and conference room business, following the earlier recovery in demand for cultural events, there was a marked recovery in demand for business events as well.

In the photo studio operations business, which is a real estate related business, demand was firm mainly among the corporate advertising activities.

In the office building leasing market in London, demand for office space was in a trend on recovery, mainly for the high-grade buildings to promote return to the office. However, new supply has exceeded demand and vacancy rates have risen.

The activities of Real Estate segment in above mentioned environment are summarized as follows.

In office leasing operations, we secured stable earnings overall supported by generally steady operation of office floors. In commercial floor operations, although some vacancies remained, there was a recovery trend in sales, particularly among food and beverage tenants.

5

(Unaudited translation of earnings report (kessan tanshin), provided for reference only)

In the hall and conference room business, IINO Hall & Conference Center, the operation headed toward improvement with a recovery in demand.

At IINO Mediapro Co., Ltd., which is engaged in studio-related business, utilization of its mainstay studio operations remained strong.

In real estate business in London, both of the office floors and commercial floors operated smoothly and maintained profitability.

As a result, Real Estate segment posted net sales of ¥6,506 million (up 1.5% year on year) and operating profit of ¥1,919 million (down 7.9% year on year).

2. Consolidated Financial Condition

Total assets as of the end of the second quarter (September 30, 2023) were ¥282,339 million, an increase of ¥16,886 million from the end of the previous fiscal year (March 31, 2023). This is mainly because of deliveries of new vessels. Total liabilities were ¥159,369 million as of September 30, 2023, an increase of ¥4,503 million from the end of the previous fiscal year. This was mainly due to the borrowing of capital funds associated with the completion of vessels. Net assets were ¥122,970 million as of September 30, 2023, an increase of ¥12,383 million from the end of the previous fiscal year. This was mainly due to an increase in retained earnings.

3. Cash Flows

Cash flows from operating activities were ¥12,998 million in the six months ended September 30, 2023 (¥15,666 million for the six months ended September 30, 2022). This figure mainly reflects profit before income taxes of ¥10,395 million.

Cash flows from investing activities were an outflow of ¥8,939 million (an outflow of ¥3,237 million for the six months ended September 30, 2022), mainly because the spent of ¥7,057 million on purchasing fixed assets, primarily capital investment in vessels.

Cash flows from financing activities were an outflow of ¥1,499 million (an outflow of ¥7,100 million for the six months ended September 30, 2022). This was mainly because cash dividends paid exceeded the net increases in long-term and short-term loans payable.

As a result, the balance of cash and cash equivalents on September 30, 2023, were ¥18,978 million (¥18,066 million for the six months ended September 30, 2022).

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(Unaudited translation of earnings report (kessan tanshin), provided for reference only)

4. Outlook for the Full Year Ending March 31, 2024

Compared to the assumptions made at the time of our most recent earnings forecast announcement (July 31, 2023), we expect market conditions for chemical tankers and large LPG carriers to be firmer from the third quarter onward than the previous forecast. We have revised the forecast after considering the depreciating trend of the yen against the U.S. dollar and the expected recording of a gain on sale of a vessel, which was not expected at the time of the most recent forecast was announced. The escalation of tensions in the Middle East due to the military clashes between Israel and Hamas, the Islamic organization, has not had any impact on our business performance at this point, and has not been incorporated into our full-year earnings forecast. If it becomes necessary to revise our earnings forecast in light of the situation in the Middle East, we will promptly disclose the revised forecast.

Forecast of Consolidated Earnings for the Year Ending March 31, 2024

(April 1, 2023 to March 31, 2024)

			(Millions of yen)
	Previous Forecast	Revised Forecast	Amount Change/
	(July 31, 2023)	(October 31, 2023)	Percent Change
Net sales	128,000	135,000	+7,000 / +5.5%
Operating profit	13,000	16,200	+3,200 / +24.6%
Ordinary profit	13,300	17,400	+4,100 / +30.8%
Profit attributable
to owners of	12,300	17,500	+5,200 / +42.3%
the parent company

• The following shows the exchange rates and bunker oil prices assumptions used in the latest and revised forecasts.

＜Previous Forecast (as of July 31, 2023)＞
Foreign exchange rate	2H: ¥128.0 / US$
Bunker oil price	2H: US$610 / MT
	(Oil Type: Very Low Sulfur Fuel Oil in Singapore)
＜Revised Forecast (as of October 31, 2023)＞
Foreign exchange rate	3Q: ¥145.0 / US$	4Q: ¥140.0 / US$
Bunker oil price	2H: US$700 / MT
	(Oil Type: Very Low Sulfur Fuel Oil in Singapore)

In addition to continuing to pay stable dividends by increasing corporate value over the long term, IINO's basic policy is to maintain a dividend payout ratio of 30% of full-year results in order to enhance the linkage between dividend amounts and profit growth.

As amended in our full-year consolidated earnings forecast for the fiscal year ending March 31, 2024, the financial results for the current fiscal year are expected to improve from the time of the announcement of latest results and dividend forecasts (as of July 31, 2023). Based on the expected improvement in business performance and the above-mentioned basic policy, we decided to increase the interim dividend per share at the end of the second quarter by 7.00 yen to 25.00 yen at the Board of Directors held on October 31, 2023. The year-end dividend will be 25.00 yen, an increase of 8.00 yen per share from the latest dividend forecast, for a total dividend of 50.00 yen per share for the full year.

We make continuous efforts to improve the business performance and plan to decide comprehensively on the year-end dividend per share, taking into account our future profit level and financial position as well as the shareholder return policy.

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(Unaudited translation of earnings report (kessan tanshin), provided for reference only)

Consolidated Financial Statements

(1) Consolidated Balance Sheet

		(Millions of yen)
	As of March 31, 2023	As of September 30, 2023
Assets
Current assets
Cash and deposits	14,545	17,003
Notes and accounts receivable - trade, and	11,656	12,189
contract assets
Supplies	3,961	4,584
Merchandise	104	112
Real estate for sale	3	3
Deferred and prepaid expenses	2,559	2,622
Other	7,277	7,696
Allowance for doubtful accounts	△1	－
Total current assets	40,104	44,209
Non-current assets
Property, plant and equipment
Vessels, net	95,188	100,028
Buildings and structures, net	44,638	43,889
Land	42,332	42,528
Leased assets, net	4,602	4,923
Construction in progress	13,856	11,747
Other, net	507	484
Total property, plant and equipment	201,124	203,600
Intangible assets
Telephone subscription right	9	9
Other	265	247
Total intangible assets	274	256
Investments and other assets
Investment securities	20,300	24,316
Long-term loans receivable	351	512
Retirement benefit asset	278	299
Other	3,022	9,146
Total investments and other assets	23,951	34,274
Total non-current assets	225,350	238,130
Total assets	265,453	282,339

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(Unaudited translation of earnings report (kessan tanshin), provided for reference only)

			(Millions of yen)
		As of March 31, 2023	As of September 30, 2023
Liabilities
Current liabilities
Accounts payable - trade	9,198	9,254
Short-term borrowings	29,190	32,054
Current portion of bonds payable	5,000	5,000
Accrued expenses		471	418
Income taxes payable		1,456	850
Advanced received and contract debt	3,193	3,326
Provision for bonuses		710	724
Provision for shareholder benefit program	33	23
Provision for removal cost of propery, plant	－	211
and equipment
Lease liabilities		1,054	4,327
Other		2,474	2,028
Total current liabilities	52,780	58,214
Non-current liabilities
Long-term borrowings		80,494	81,128
Provision for retirement benefits for directors	94	62
(and other officers)
Retirement benefit liability	795	828
Provision for special repairs	4,445	4,533
Provision for removal cost of property, plant	199	－
and equipment
Leasehold and guarantee deposits received	8,884	8,816
Lease liabilities		3,675	767
Deferred tax liabilities	2,959	4,899
Other		542	123
Total non-current liabilities	102,086	101,156
Total liabilities		154,866	159,369
Net assets
Shareholders' equity
Share capital		13,092	13,092
Capital surplus		6,275	6,275
Retained earnings		85,455	91,101
Treasury shares		△1,908	△1,908
Total shareholders' equity	102,913	108,559
Accumulated other comprehensive income
Valuation difference	on available-for-sale	5,171	7,422
securities
Deferred gains or losses on hedges	1,076	4,270
Foreign currency translation adjustment	1,400	2,689
Total accumulated	other comprehensive	7,647	14,381
income
Non-controlling interests		27	30
Total net assets		110,587	122,970
Total liabilities and net assets	265,453	282,339

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(Unaudited translation of earnings report (kessan tanshin), provided for reference only)

(2) Consolidated Statement of Operations and Consolidated Statements of Comprehensive Income

(Consolidated Statement of Operations)

		(Millions of yen)
	Six months ended	Six months ended
	September 30, 2022	September 30, 2023
Net sales	70,474	67,573
Cost of sales	55,786	53,653
Gross profit	14,688	13,920
Selling, general and administrative expenses	4,273	5,101
Operating profit	10,415	8,820
Non-operating income
Interest income	26	74
Foreign exchange gains	1,362	1,480
Dividend income	421	419
Share of profit of entities accounted for using	70	137
equity method
Other	65	129
Total non-operating income	1,945	2,238
Non-operating expenses
Interest expenses	540	558
Other	52	143
Total non-operating expenses	592	700
Ordinary profit	11,768	10,357
Extraordinary income
Gain on sale of non-current assets	3,487	－
Insurance claim income	165	51
Gain on cancellation of chartered vessels	180	－
Other	11	－
Total extraordinary income	3,843	51
Extraordinary losses
Impairment losses	20	－
Loss on retirement of non-current assets	0	1
Loss on sale of investment securities	28	－
Loss on liquidation of investment securities	23	－
Provision for loss on removal of fixed assets	－	13
Other	4	－
Total extraordinary losses	76	14
Profit before income taxes	15,535	10,395
Income taxes	1,150	653
Profit	14,385	9,742
Profit attributable to non-controlling interests	15	75
Profit attributable to owners of parent	14,369	9,667

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