Kanematsu Electronics : Consolidated Financial Results for the Three Months Ended June 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 Three Months Ended June 30, 2022

[Japanese GAAP]

July 29, 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: August 4, 2022

Scheduled date of commencing dividend payments: -

Availability of supplementary explanatory materials on quarterly financial results: Available

Schedule of quarterly financial results briefing session: None

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

1. Consolidated Financial Results for the Three Months Ended June 30, 2022 (April 1, 2022 - June 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
	Three months ended	Million yen	%	Million yen	%			Million yen	%			Million yen	%
	June 30, 2022	12,792	14.1		1,275		38.4			1,301	36.8			866	30.8
	June 30, 2021					11,207	5.0		921		15.3			951	4.0			661	7.6
	Note: Comprehensive income: Three months ended June 30, 2022: ¥521 million [(18.6) %]
							Three months ended June 30, 2021: ¥640 million [2.1 %]
						Basic earnings	Diluted
						earnings
						per share
									per share
	Three months ended			Yen			Yen
	June 30, 2022	30.27					-
	June 30, 2021			23.14					-
(2) Consolidated Financial Position
							Total assets			Net assets	Equity ratio
								Million yen				Million yen		%
	As of June 30, 2022			75,887				60,161		79.2
	As of March 31, 2022			82,446				61,928		75.1

Reference: Equity: As of June 30, 2022: ¥60,114 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		-
March 31, 2023
Fiscal year ending
March 31, 2023			75.00			-		80.00		155.00
(Forecast)

Note: Revision to the forecast for dividends announced most recently: None

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
		Million yen	%	Million yen	%	Million yen	%	Million yen	%	Yen
First half	35,000	2.7	5,950	(2.1)	6,000	(2.1)	4,000	(4.5)	139.81
Full year		72,000	0.9	12,750	0.5	12,800	0.1	8,600	(2.1)	300.58
Note: Revision to the forecast for dividends announced most recently: None
* 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):

June 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:
June 30, 2022:	21,012 shares
March 31, 2022:	20,992 shares
3) Average number of shares during the period:
Three months ended June 30, 2022:	28,612,960 shares
Three months ended June 30, 2021:	28,605,512 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)	Notes to Quarterly Consolidated Financial Statements .......................................................................	8
	(Notes on going concern assumption) ............................................................................................	8
	(Notes in case of significant changes in shareholders' equity) .......................................................	8
	(Segment information, etc.) ............................................................................................................	9

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1. Qualitative Information on Quarterly Financial Results

(1) Explanation of Operating Results

During the three months ended June 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 depreciating yen and the soaring prices of natural resources, 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*.

As a result of the above, in the three months ended June 30, 2022, net sales increased by 1,585 million yen year on year to 12,792 million yen (up 14.1% year on year). Operating profit increased by 353 million yen year on year to 1,275 million yen (up 38.4% year on year), and ordinary profit increased by 350 million yen year on year to 1,301 million yen (up 36.8% year on year), while profit attributable to owners of parent increased by 204 million yen year on year to 866 million yen (up 30.8% 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 1,507 million yen year on year to 8,031 million yen (up 23.1% year on year), mainly due to strong performances in the server-related business for the service industry and government agencies as well as an increase in income from labor charges from system construction.

(Services and Support Business)

Net sales in the Services and Support Business increased by 78 million yen year on year to 4,761 million yen (up 1.7% year on year), mainly due to an increase in sales related to the cloud services for the manufacturing industry.

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