A&D HOLON : Consolidated Financial Results for the Nine Months Ended December 31, 2022

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1. Qualitative Information on Quarterly Financial Results for the Period

(1) Business Results

During the nine months ended December 31, 2022, the outlook for the Japanese and overseas economies remained uncertain due to such factors as high raw material prices and continued energy price hikes due to the prolonged situation in Ukraine, concerns about economic recession due to tight monetary policies taken by countries to curb rising prices, and significant fluctuations in exchange rates, although various restrictions on activities as a measure to prevent the spread of COVID-19 were gradually eased and economic activities began to normalize.

Amid such circumstances, A&D HOLON Holdings Company, Limited (the "Company"), and its subsidiaries (collectively, the "Group") started a new group formation on April 1, 2022, and have set up several subcommittees and worked on activities to maximize the creation of the reorganization effects. In addition, we have sought to differentiate ourselves from our competitors through ongoing, active investment in research and development to respond to the diverse and changing needs of clients and society.

In terms of an overview by business segment, the measurement and weighing instruments business remained steady against the backdrop of the recovery of the global economy. The medical and healthcare business maintained sales at the same level year-on-year on a local currency basis, mainly in Japan and the Americas, although there were signs of a decline in consumer purchasing appetite due to concerns about global inflation, especially in the U.S. In addition, yen-translated net sales for both businesses increased due to the impact of the weaker yen. The semiconductor-related business, which was added as a segment due to the group reorganization, posted increased both sales and profit due to strong orders since the previous fiscal year. An increase in the cost of sales associated with the elimination of unrealized gains on inventories that occurred in the six months ended September 30, 2022 was eased by the depreciation of the yen reaching its peak. The Company has been working continuously to minimize the impact of foreign exchange by optimizing inventory levels.

As a result, net sales for the nine months ended December 31, 2022, were ¥42,217 million (up 13.1% year- on-year), operating profit was ¥4,729 million (up 32.5% year-on year), ordinary profit was ¥4,873 million (up 32.2% year-on-year), and net profit attributable to parent company shareholders was ¥3,523 million (up 63.1% year-on-year).

Business results by segment are as follows.

From the first quarter of the fiscal year ending March 31, 2023, the reportable segments have been changed, and comparisons and analyses shown for the nine months ended December 31, 2022, are based on the reclassified reportable segments.

1) Measurement and Weighing Instruments Business

In Japan, while sales of measurement and control simulation systems (DSP systems) remained steady, the business saw little growth in sales of testing equipment and weighing instruments due to a shortage of parts and materials for certain products, preventing the achievement of planned production. However, profits increased through efforts to reduce costs and improve production efficiency.

In the Americas, sales grew due to special demand for general-purpose balances in addition to the continued popularity of mainstay weighing instruments. Additionally, both sales and profit significantly increased, driven by the progress in the production of DSP systems for which we received orders in the previous fiscal year.

In Asia and Oceania, both sales and profit increased, driven by the growth in sales of weighing instruments in Australia and South Korea and metal detectors and checkweighers in India.

As a result, net sales in the measurement and weighing instruments business were ¥19,871 million (up 11.8% year-on-year) and operating profit was ¥1,582 million (up 89.9% year-on-year).

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2) Semiconductor-Related Business

In the semiconductor-related business, which was separated from the measurement and weighing instruments business due to the group reorganization, orders received and inquiries increased on the back of strong demand in the semiconductor market, leading to sales.

As a result, net sales in the semiconductor-related business were ¥3,951 million (up 14.3% year-on-year) and operating profit was ¥1,254 million (up 17.8% year-on-year).

3) Medical and Healthcare Business

In Japan, while demand for home-use blood pressure monitors remained strong, demand for blood pressure monitors for nursing care in hospitals slowed. Due to this and other factors, sales were on par with the same period of the previous year, but profit increased due to efforts to reduce costs.

In the Americas, sales increased due to the continuation of a large-scale project in the U.S., growth in sales of home-use blood pressure monitors for general consumers in Canada, and the impact of the yen's depreciation. However, profit decreased due to the impact of soaring transportation costs to the U.S., including air shipment.

In Europe, although sales volume decreased in some areas, both yen-translated sales and profit increased due to the significant impact of the weaker yen.

As a result, net sales in the medical and healthcare business were ¥18,395 million (up 14.3% year-on-year) and operating profit was ¥3,824 million (up 20.0% year-on-year).

(2) Financial Position

(Assets, liabilities and net assets)

Total assets as of December 31, 2022, were ¥68,125 million, an increase of ¥8,886 million compared to the end of the previous fiscal year. This was mainly due to an increase in current assets of ¥8,099 million due to an increase in inventories due to the effect of the depreciation of the yen and the effects of longer transportation period caused by supply chain disruptions.

Total liabilities as of December 31, 2022, were ¥37,224 million, an increase of ¥5,026 million compared to the end of the previous fiscal year. This was primarily due to an increase of ¥5,522 million in current liabilities resulting from increases of short-term borrowings due to such factors as advance procurement of materials caused by supply chain disruptions.

Net assets as of December 31, 2022, were ¥30,901 million, an increase of ¥3,860 million compared to the end of the previous fiscal year. This was driven by an increase of ¥1,089 million in accumulated other comprehensive income, which is due to changes in foreign currency translation adjustments as well as an increase of ¥5,551 million in shareholders' equity and a decrease of ¥2,780 million in non-controlling interests due to the management integration implemented on April 1, 2022.

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

There are no changes from the consolidated financial results forecast announced on November 8, 2022.

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