Nihon Chouzai : Summary of Consolidated Financial Results for the Fiscal Year Ended March 31, 2022

April 28, 2022

Summary of Consolidated Financial Results for the Fiscal Year Ended March 31, 2022

[Japanese GAAP]

Company name: Stock code: Representative:NIHON CHOUZAI Co., Ltd. 3341

Yosuke Mitsuhara, President & CEOListing: Tokyo Stock Exchange, Prime Market URL:https://www.nicho.co.jp

Contact:

Masahiro Tojo, Executive Officer and General Manager of Corporate Planning Department

Tel: [phone]

Scheduled date of Annual General Meeting of Shareholders:	June 23, 2022
Scheduled date of filing of Annual Securities Report:	June 24, 2022
Scheduled date of payment of dividend:	June 24, 2022
Preparation of supplementary materials for financial results:	Yes
Holding of financial results meeting:	Yes (for institutional investors and analysts)

Note: The original disclosure in Japanese was released on April 28, 2022 at 15:00 (GMT +9).

(All amounts are rounded down to the nearest million yen)

1. Consolidated Financial Results for the Fiscal Year Ended March 31, 2022 (April 1, 2021 - March 31, 2022)

(1) Consolidated results of operations

Net sales

%	Million yen	%
Fiscal year ended Mar. 31, 2022	299,392	7.3	3,705	4.7
Fiscal year ended Mar. 31, 2021	278,951	3.9	16,286	3,538	(47.2)

Million yen

Note: Comprehensive income (million yen)

EBITDA

(Percentages represent year-on-year changes)

Operating profitOrdinary profitProfit attributable to owners of parent

Million yen

% Million yen

%Million yen

%

14,974 (8.1)

6,589 (18.7)

6,767 (19.5)

5.1

8,106

6.8

8,409

13.6

FY3/22: 3,758 ( up 6.0％)FY3/21: 3,545 ( down 47.5％)

Net income per share	Diluted net income per share	Return on equity	Ordinary profit on total assets	Operating profit to net sales
Fiscal year ended Mar. 31, 2022 Fiscal year ended Mar. 31, 2021	Yen 123.56 118.01	Yen － －	% 7.2 7.3	% 3.7 4.5	% 2.2 2.9

Reference: Equity in income (losses) of affiliates (million yen)

Note: EBITDA = Operating profit + depreciation + goodwill amortization

(2) Consolidated financial position

FY3/22: －

FY3/21: －

Total assets	Net assets	Equity ratio	Net assets per share
As of Mar. 31, 2022 As of Mar. 31, 2021	Million yen 178,753 186,262	Million yen 52,876 49,868	% 29.6 26.8	Yen 1,763.34 1,663.01

Reference: Shareholders' equity (million yen)

(3) Consolidated cash flows

As of Mar. 31, 2022:

52,876

As of Mar. 31, 2021:

49,868

Cash flows from operating activities	Cash flows from investing activities	Cash flows from financing activities	Cash and cash equivalents at end of period
Fiscal year ended Mar. 31, 2022 Fiscal year ended Mar. 31, 2021	Million yen 19,411 11,213	Million yen (9,313) (7,767)	Million yen (17,448) (2,806)	Million yen 25,543 32,893

2. Dividends

Dividend per share	Total dividends	Dividend payout ratio (consolidated)	Dividend on net assets (consolidated)
1Q-end	2Q-end	3Q-end	Year-end	Total
Fiscal year ended Mar. 31, 2021 Fiscal year ended Mar. 31, 2022	Yen － －	Yen 12.50 12.50	Yen － －	Yen 12.50 12.50	Yen 25.00 25.00	Million yen 749 749	% 21.2 20.2	% 1.5 1.5
Fiscal year ending Mar. 31, 2023 (forecasts)	－	12.50	－	12.50	25.00	17.0

3. Consolidated Forecast for the Fiscal Year Ending March 31, 2023 (April 1, 2022 - March 31, 2023)

First half Full year

% 6.7 7.4

156,000 321,400

EBITDA

Million yen 6,900

% 6.5

17,600 17.5

Million yen 2,600

Operating profit

8,500 29.0

Ordinary profit

Million yen

2,500 (1.1)

8,400

(Percentages represent year-on-year changes)

%

Profit attributable to owners of parent

1,000 (25.4)

Net income per share

24.1

4,400

18.7

Yen 33.35 146.73

* Notes

• (1) Changes in significant subsidiaries during the period (changes in specified subsidiaries resulting in changes in scope of consolidation): None

• (2) Changes in accounting policies and accounting-based estimates, and restatements

  • 1) Changes in accounting policies due to revisions in accounting standards, others: Yes

  • 2) Changes in accounting policies other than 1) above: None

  • 3) Changes in accounting-based estimates: None

  • 4) Restatements: None

• (3) Number of outstanding shares (common stock shares)

  • 1) Number of shares outstanding at the end of period (including treasury shares)

    As of Mar. 31, 2022: 32,048,000 shares As of Mar. 31, 2021: 32,048,000 shares

  • 2) Number of treasury shares at the end of period

As of Mar. 31, 2022:

2,061,175 shares As of Mar. 31, 2021:

2,061,074 shares

• 3) Average number of shares outstanding during the period

Fiscal year ended Mar. 31, 2022: 29,986,857 sharesFiscal year ended Mar. 31, 2021:

29,987,040 shares

(For reference) Summary of Non-consolidated Financial Results

1. Non-consolidated Financial Results for the Fiscal Year Ended March 31, 2022 (April 1, 2021 - March 31, 2022)

(1) Non-consolidated results of operations

(Percentages represent year-on-year changes)Net sales

Operating profit

Ordinary profit

Profit

Million yen

Fiscal year ended Mar. 31, 2022

Fiscal year ended Mar. 31, 2021

259,171 233,619

% 10.9 4.4

Million yen 5,945 5,326

% 11.6 15.7

Million yen 6,614 7,018

(5.7) 32.9

Million yen 2,316 3,499

%

(33.8) (25.1)

Net income per share	Diluted net income per share
Fiscal year ended Mar. 31, 2022 Fiscal year ended Mar. 31, 2021	Yen 77.25 116.69	Yen － －

(2) Non-consolidated financial position

Total assets	Net assets	Equity ratio	Net assets per share
As of Mar. 31, 2022 As of Mar. 31, 2021	Million yen 140,086 145,540	Million yen 39,224 37,657	% 28.0 25.9	Yen 1,308.05 1,255.80

As of Mar. 31, 2021: 37,657

Reference: Shareholders' equity (million yen)As of Mar. 31, 2022: 39,224

Note 1: This financial report is not subject to audit by certified public accountants or auditing firms. Note 2: Cautionary statement with respect to forward-looking statements and other special items

• (1) Note concerning forward-looking statements

  Forecasts and other forward-looking statements in this document incorporate risks and uncertainties because these statements are based on Nihon Chouzai's judgments and assumptions using information that is currently available. These materials are not promises by Nihon Chouzai regarding future performance. Actual results may differ significantly from these forecasts for a number of reasons.

• (2) How to view supplementary materials for financial results

  The supplementary materials for financial results will be disclosed on TDNet, and will be posted on the Company's website.

Nihon Chouzai Co., Ltd. (3341) FY3/22 Financial Results
Contents of Attachments
1. Overview of Results of Operations	2
(1) Results of Operations	2
(2) Financial Position	4
(3) Cash Flows	4
(4) Outlook	5
2. Basic Approach to the Selection of Accounting Standards	6
3. Consolidated Financial Statements and Notes	7
(1) Consolidated Balance Sheet	7
(2) Consolidated Statements of Income and Comprehensive Income	9
(3) Consolidated Statement of Changes in Equity	11
(4) Consolidated Statement of Cash Flows	13
(5) Notes to Consolidated Financial Statements	15
(Going-concern Assumption)	15
(Change in Accounting Policy)	15
(Segment and Other Information)	16
(Per Share Information)	20
(Subsequent Events)	20

1. Overview of Results of Operations

(1) Results of Operations

In the fiscal year ended March 2022 (April 1, 2021-March 31, 2022), the Japanese economy continued to suffer from factors including restrictions on socioeconomic activity imposed by the reinstatement of the state of emergency and implementation of priority measures to prevent the spread of COVID-19 amid a resurgence of the pandemic. Economic conditions were exacerbated by intensifying international tensions, and the outlook going forward remains uncertain.

Under these conditions, the Nihon Chouzai Group, keenly aware of its role as a healthcare company tasked with supporting community healthcare, continued endeavoring to provide quality healthcare services while thoroughly implementing infection prevention measures at all its pharmacies. The Group also kept up efforts to reduce costs across the organization.

While maintaining the spirit of its founding philosophy, "Achieving the True Separation of Drug Prescribing and Dispensing Services," the Group has redefined its responsibilities to better align with the changing times and formulated a new corporate philosophy to pursue the realization of a sustainable society. The Group has set its mission as "To give people the closest possible support," with the vision for 2030 of becoming "The most trusted partner in healthcare." Based on this corporate philosophy- mission and vision for 2030, the Group will pursue sustainability through resolving social issues in its business endeavors centered on healthcare and contribute to the wellbeing of all people.

With an eye toward the transition to the Prime Market of the Tokyo Stock Exchange in April 2022, the Group introduced an executive officer system to fulfill the following: to separate management's decision-making and supervisory functions from the business execution function; to further clarify the authority and responsibilities involved in business execution; to expedite decision-making; to enhance management agility; to strengthen corporate governance; to flexibly respond to changes in the operating environment; and to enhance enterprise value. Further, the Group views its employees as valuable management resources and hence considers creating a workplace where employees can work safely and in healthy conditions an important management theme. In light of this, the Group declared its commitment to health management and has pushed forward with efforts to strengthen health management through its health management promotion system led by the President & CEO of the Group as Chief Health Manager. As a result of these initiatives, on March 9, 2022, the Group was certified as an Outstanding Health & Productivity Management Organization 2022 (in large enterprise category) under the Certified Health & Productivity Management Outstanding Organization Recognition Program of the Ministry of Economy, Trade and Industry.

In the Dispensing Pharmacy Business, on March 1, 2022, the Group launched an official website for Nihon Chouzai Online Pharmacy Service NiCOMS. A new logo was designed for NiCOMS using the color orange to highlight the website's goal of facilitating sincere, heartfelt communication with patients online, and the design and color scheme for the website's reservation and call pages were also updated. The Group plans to further enhance the usability of the online pharmacy service, offering patients an easy-to-access communication tool to closely support them in drug therapy. We also plan to make NiCOMS compatible with the prescription refill system introduced in April 2022 and the electronic prescribing system expected to be utilized in full-scale going forward.

Further, the number of registered users of Okusuri Techo Plus, an electronic medication notebook developed in-house in 2014 that can be used at Nihon Chouzai Group pharmacies nationwide, exceeded one million as of February 2022. In addition to features common to conventional medication notebooks, Okusuri Techo Plus has a range of functions that support patients' health management, including the electronic prescription transfer function which helps shorten waiting time at pharmacies and the Tsunagaru function through which patients can consult pharmacists regarding their medications. Thanks to these functions, Okusuri Techo Plus is being utilized by many patients even amid the pandemic.

In the Pharmaceutical Manufacturing and Sales Business, Nihon Generic Co., Ltd.-a member of the Nihon Chouzai Group which promotes ESG management to preserve the environment through reduction or efficient use of electricity, gas, water, and other types of resources-has begun using carbon neutral city gas and joined the Carbon Neutral LNG Buyers Alliance. Nihon Generic became the first company in the generic drug industry to use carbon neutral city gas supplied by Tokyo Gas Co., Ltd., and the subsidiary expects this to result in an annual reduction in CO2 emissions of about 4,000 tons across its three business offices.

In the Medical Professional Staffing and Placement Business, demand for pharmacist staffing and placement continued to fall due to the ongoing impact of the pandemic, but the Group's track record of physician placement, including for COVID-19 vaccination programs, expanded. On March 31, 2022, the Group renewed its Outstanding Staffing Business Operator certification awarded by the Ministry of Health, Labour and Welfare (MHLW).

For the fiscal year ended March 31, 2022, we posted net sales of 299,392 million yen (+7.3％ YoY), operating profit of 6,589 million yen (-18.7％ YoY), ordinary profit of 6,767 million yen (-19.5％ YoY), and profit attributable to owners of parent of 3,705 million yen (+4.7％ YoY).

The Group will continue to make every effort to prevent the spread of COVID-19 and provide high-quality medical care to ensure that patients and customers can use our services with peace of mind.

Segment-specific earnings are as indicated below.

1) Dispensing Pharmacy Business

In the fiscal year under review, the Dispensing Pharmacy Business reported net sales of 265,624 million yen (+8.8％ YoY) and operating profit of 13,009 million yen (+22.9％ YoY).

As of March 31, 2022, the Group had a total of 697 stores (including one merchandise store), reflecting 40 new store openings and 13 closures during the fiscal year under review.

Net sales and operating profit increased despite ongoing impact of the COVID-19 pandemic, owing to contributions from stores opened in the previous fiscal year and an increase in the number of prescriptions filled. The Japanese government targets to increase the generic drug usage ratio (on a volume basis) to 80% or above in all prefectures by the end of FY2023. The Group reached the government's generic drug usage target of 80% at its pharmacies in all prefectures by the end of March 2022, with an all-pharmacy average of 89.3%. Further, the percentage of the Group's pharmacies that provide at-home medical care (those that make 12 or more home visits annually) steadily increased, reaching 93.1% at the end of March 2022.

2) Pharmaceutical Manufacturing and Sales Business

In the fiscal year under review, the Pharmaceutical Manufacturing and Sales Business reported net sales of 44,836 million yen (-1.9％ YoY) and operating loss of 53 million yen (operating profit 2,350 million yen same period a year ago).

Net sales decreased mainly due to a decline in sales prices of existing products following the NHI price revision of April 2021, while sales of new NHI-listed products in 2019 and beyond were strong. Operating profit fell, despite efforts to reduce costs, a sales policy focused on profitability, and ongoing sales expansion of in -house manufactured products, including those newly listed on the NHI drug price list, due mainly to a temporary loss from the disposal of non-performing assets caused by a quality problem at Choseido Pharmaceutical Co., Ltd. Operations at Choseido Pharmaceutical Co., Ltd. steadily improved in line with the disclosed business improvement plan. The Company had launched 15 newly listed items during the fiscal year under review, bringing the total number of listed products to 642 at fiscal year-end (including 2 OTC drugs).

3) Medical Professional Staffing and Placement Business

In the fiscal year under review, the Medical Professional Staffing and Placement Business generated net sales of 6,991 million yen (-16.7％ YoY) and operating profit of 576 million yen (-19.1％ YoY).

Net sales declined as temporary pharmacist staffing demand fell due to the COVID-19 pandemic. Operating profit was also down as a result of diminished earnings from temporary pharmacist staffing and placement, but earnings from the physician placement business, including for COVID-19 vaccination programs, expanded.