November 8, 2018

Consolidated Financial Results
for the Six Months Ended September 30, 2018
(Japanese Accounting Standards)
Name of the Listed Company:
Listing:
Stock code:
URL:
Representative:
Contact Person:

Nitta Gelatin Inc.

First Section of Tokyo Stock Exchange4977
http://www.nitta-gelatin.co.jp
Koichi Ogata, Representative Director and President
Norifumi Nagaoka, Director and Executive Officer;
General Manager of General Management Division
Tel: +81-72-949-5381
Scheduled date to file Quarterly Securities Report: November 12, 2018
Scheduled date to commence dividend payments: December 6, 2018
Supplementary explanatory materials prepared:
Yes
Explanatory meeting:Yes (For analysts and institutional investors)(Millions of yen with fractional amounts discarded, unless otherwise noted.)

1. Consolidated financial results for the six months ended September 30, 2018(from April 1, 2018 to September 30, 2018)(1) Consolidated operating results(Percentages indicate year-on-year changes.)
Net sales
Six months ended
September 30, 2018
September 30, 2017

Millions of yen%

Operating income

Ordinary income

Net income
attributable toowners of the parent

Millions of yen

Millions of yen%

Millions of yen

594
605

(1.8)
(12.1)

1,253
344

18,010(3.3)
18,623
4.9
Note: Comprehensive income
For the six months ended September 30, 2018:
For the six months ended September 30, 2017:

Net income
per share
Six months ended
September 30, 2018
September 30, 2017

%

428
530

(19.1)(42.6)¥1,475 million, (118.1%)¥676 million, (-%)

Diluted net income
per share

Yen

Yen

68.21
18.74
Note: Diluted net income per share is not disclosed due to the absence of latent shares with dilution effect.

(2) Consolidated financial position
As of
September 30, 2018
March 31, 2018

Total assets

Net assets

Millions of yen

Millions of yen

39,06837,851

18,537
17,197

Reference: Equity
As of September 30, 2018:
As of March 31, 2018:¥16,617 million¥15,189 million

Equity ratio
%

42.5
40.1

%

264.0
(15.0)

2. Cash dividends
Cash dividends per shareFirst quarter

Second quarter

Yen

Fiscal year ended March 31, 2018
Fiscal year ending March 31, 2019
Fiscal year ending March 31, 2019
(Forecasts)
Note: Changes to most recent dividend forecasts: None

Third quarter

Fiscal year-end

Annual

Yen

Yen

Yen

Yen

6.00
6.00

-

6.00

12.00

-

6.00

12.00

3. Consolidated financial forecasts for the fiscal year ending March 31, 2019(from April 1, 2018 to March 31, 2019)(Percentages indicate year-on-year changes.)
OperatingincomeNet sales
Millionsof yen%Millionsof yen%Ordinary income

Net income
attributable toowners of theparentMillionsof yenMillionsof yen%Net income
per share%

Yen

Fiscal year ending
37,100
(1.8)
1,200
9.5
1,000
(0.9)
1,400
－
76.20
March 31, 2019
Note: Changes to most recent consolidated financial forecasts: Yes
For revisions to consolidated business forecasts, please refer to the press release issued today (November 8, 2018) titled
Notice Concerning Recording of Non-Operating Income, Difference between Consolidated Business Forecasts and Actual
Results for the Six Months Ended September 30, 2018, and Revision of Consolidated Business Forecasts for the Fiscal YearEnding March 31, 2019.”

Notes(1) Changes in significant subsidiaries during the period (changes in specified subsidiaries resulting in achange in the scope of consolidation): None
New:
None
Excluded:None(2) Adoption of special accounting methods for the preparation of quarterly consolidated financial
statements: No(3) Changes in accounting policies, changes in accounting estimates, and restatement of revisions
a. Changes in accounting policies due to revisions to accounting standards and other guidelines: No
b. Changes in accounting policies due to reasons other than a. above: No
c. Changes in accounting estimates: No
d. Restatement of revisions: No(4) Number of common shares issued
a. Total number of issued shares at the end of the period (including treasury stock)
As of September 30, 2018 18,373,974 shares
As of March 31, 2018
18,373,974 sharesb. Number of shares of treasury stock at the end of the period
As of September 30, 2018 163 shares
As of March 31, 2018
162 sharesc. Average number of shares
For the six months ended September 30, 2018
For the six months ended September 30, 201718,373,812 shares
18,373,812 shares* This financial report falls outside the scope of quarterly review procedures by Certified Public Accountants or
the independent auditor.
* Proper use of earnings forecasts, and other special matters
The forward-looking statements, including earnings forecasts, contained in these materials are based on information
currently available to the Company and on certain assumptions deemed to be reasonable. These statements do notguarantee that the Company will achieve its earnings forecasts. In addition, actual business and other results may
differ substantially due to various factors. For details on the conditions assumed and the cautionary notes and items in
the financial forecasts, please refer to “(3) Description of Consolidated Business Forecasts and Other
Forward-looking Information” in “1. Qualitative Information Concerning Quarterly Financial Statements” on page 5of the Attachment to this report.

Attachment Contents
1. Qualitative Information Concerning Quarterly Financial Statements ···································· 2(1) Description of Business Results ·················································································· 2(2) Description of Financial Position ················································································ 3(3) Description of Consolidated Business Forecasts and Other Forward-looking Information ·············· 5

2. Quarterly Consolidated Financial Statements and Key Notes ············································· 6(1) Consolidated Balance Sheets ····················································································· 6(2) Consolidated Statements of Income and Consolidated Statements of Comprehensive Income ········· 8Consolidated Statements of Income(Six months ended September 30) ··············································································· 8Consolidated Statements of Comprehensive Income(Six months ended September 30) ··············································································· 9(3) Consolidated Statements of Cash Flows ······································································ 10(4) Notes to Quarterly Consolidated Financial Statements ····················································· 10(Note Concerning Going Concern Assumption) ····························································· 12(Note Concerning Significant Changes in Shareholders’ Equity) ········································· 12(Additional Information) ······················································································· 12(Segment Information) ·························································································· 13(Business Combinations) ······················································································· 14

11. Qualitative Information Concerning Quarterly Financial Statements(1) Description of Business Results
In the first six months of the fiscal year ending March 31, 2019, the global economy continued
to grow gradually, boosted by expansion in the U.S. and emerging countries in Asia. The
Japanese economy also maintained its gradual recovery through increased exports and firm
capital expenditures due to the global economic expansion and despite a series of natural
disasters. Going forward, uncertainty is increasing as trade friction between the U.S. and Chinaheightens and concerns arise of a domestic slowdown if rising oil prices cause prices toincrease.
In this environment, the Nitta Gelatin Group launched a new three-year Medium-Term
Management Plan in April 2018. Under the new Medium-Term Management Plan, the Groupwill implement the following management policies:
1. Our three core areas will be food solutions, health support, and biomedical.
2. We will globally optimize our production system in Japan, Asia, and North America in
response to an era of completely free trade.
3. We will promote selection and concentration and create high-value-added products andservices to recreate the Company as a higher-profit enterprise.
Guided by these management policies, the Group actively worked to conduct research,develop new products and cultivate new markets in its three core areas. The Group strove toenhance productivity and reduce costs at each of its manufacturing sites.
As a result, for the first six months of the fiscal year ending March 31, 2019, net sales
decreased 3.3% year on year to ¥18,010 million and operating income fell 19.1% to ¥428
million, mainly due to a decline in sales in Japan, despite profits being restored at an overseas
subsidiary. Ordinary income decreased 1.8% to ¥594 million, although flue was the impact of
an increase in foreign exchange gains. On the other hand, net income attributable to owners of
the parent increased 264.0% to ¥1,253 million as a result of the Company recording a transfer
gain on business divestiture from the succession of the adhesive business (excluding
manufacturing) as an extraordinary gain of ¥1,151 million.
In the first six months of the fiscal year ending March 31, 2019, the collagen businessbecame the standalone reporting segment. For details, please refer to “2. Quarterly Consolidated
Financial Statements and Key Notes (4) Notes to Consolidated Financial Statements (Segment
Information).”
Products are categorized into the following sales categories.

2

Sales Category

Products

Food solutions

Mainly gelatin for food use, food materials, collagen casings

Health support

Mainly gelatin for capsules, collagen peptide for health foods and beauty
applications, gelatin and collagen for advanced medical care

Specialties

Mainly adhesives, gelatin for industrial use, others

Sales were as follows:
Food solutions
In Japan, net sales increased year on year for delicatessen items in convenience stores andfrozen food against a backdrop of robust demand for ready-made meals, but net sales decreased
for confectionary and food preparation. Overseas, net sales of collagen casing in snack sausages
were robust.
As a result, overall sales in the food solutions category were on par with the previous year,
increasing 0.1% to ¥7,811 million.
Health support
In Japan, net sales were up amid robust demand for capsules for health foods and due to rising
health awareness and an increase in the number of drugstores. On the other hand, sales
decreased in collagen peptide for beauty applications. Overseas, sales of capsules in the U.S.
market were robust due to market recovery. Sales of capsules in the Asian market declined,
affected by the outbreak of floods in southern India.
As a result, overall sales in the health support category decreased 3.4% year on year to¥6,670 million.
Specialties
In adhesives, overall sales decreased 9.8% year on year to ¥3,528 million due to the influence of
declining sales in adhesives for hygiene products due to customers’ inventory adjustments.

(2) Description of Financial Position(a) Assets, liabilities and net assets(Assets)
Total assets amounted to ¥39,068 million at September 30, 2018, ¥1,217 million higher than at
March 31, 2018. This was mainly attributable to increase in inventories and investment
securities.

3

(Liabilities)
Total liabilities stood at ¥20,531 million at September 30, 2018, ¥123 million lower than at
March 31, 2018. This was mainly attributable to decreases in short-term loans payable and net
defined benefit liability.
(Net assets)
Net assets amounted to ¥18,537 million at September 30, 2018, ¥1,340 million higher than at
March 31, 2018. This was mainly attributable to increases in retained earnings and valuationdifference on other available-for-sale securities.
As a result, the equity ratio stood at 42.5% at September 30, 2018, compared to 40.1% at
March 31, 2018.
(b) Cash flows
Cash and cash equivalents (“cash”) as of September 30, 2018 was ¥1,373 million, down ¥164
million from March 31, 2018.
Cash flows for each activity and reasons are as follows.
(Net cash provided by operating activities)
Operating activities provided net cash of ¥123 million, compared to ¥146 million provided in
the same period of the previous fiscal year. The main components were income before
provision of income taxes of ¥1,606 million, depreciation and amortization of ¥768 million,
increase in inventories of ¥667 million, transfer gain on business divestiture of ¥655 million,
and gain on change in equity of ¥416 million.
(Net cash provided by investing activities)
Investing activities provide net cash of ¥263 million, compared to ¥857 million used in thesame period of the previous fiscal year. This was mainly attributable to ¥887 million inproceeds from business divestiture, ¥814 million for purchase of property, plant and equipmentand ¥472 million in proceeds from the sale of property, plant and equipment.
(Net cash used in financing activities)
Financing activities used net cash of ¥547 million, compared to ¥3 million provided in the same
period of the previous fiscal year. The main sources of cash were proceeds from long-termloans payable of ¥1,244 million and net decrease in short-term loans payable of ¥378 million,
which were partially offset by the repayment of long-term loans payable of ¥1,194 million.

4(3) Description of Consolidated Business Forecasts and Other Forward-looking
Information
The consolidated business forecasts for the fiscal year ending March 31, 2019 have beenrevised from those announced on May 17, 2018 in the “Notice Concerning Revision ofConsolidated Business Forecasts.”
For details, please refer to the press release issued today (November 8, 2018) titled “NoticeConcerning Recording of Non-Operating Income, Difference between Consolidated Business
Forecasts and Actual Results for the Six Months Ended September 30, 2018, and Revision ofConsolidated Business Forecasts for the Fiscal Year Ending March 31, 2019. ”
Actual business and other results may differ substantially from projections due to various
factors.

5

2. Quarterly Consolidated Financial Statements and Key Notes(1) Consolidated Balance Sheets(Millions of yen)

Fiscal 2018
(As of March 31, 2018)
AssetsCurrent assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Other
Allowance for doubtful accounts
Total current assets
Noncurrent assets
Property, plant and equipment
Buildings and structures, net
Machinery, equipment and vehicles, net
Other, net
Total property, plant and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Other
Allowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets

6

2Q Fiscal 2019
(As of September 30, 2018)

1,626
8,966
5,152
1,240
2,944
338
(11)
20,256

1,467
9,137
5,492
1,441
3,180
550
(9)
21,261

3,621
4,809
3,819
12,251

4,036
4,847
3,198
12,082

384
395
780

386
379
766

3,451
1,174
(63)
4,563
17,59537,851

3,844
1,182
(67)
4,958
17,80739,068(Millions of yen)

Fiscal 2018
(As of March 31, 2018)
Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Current portion of long-term loans payable
Income taxes payable
Provision for bonuses
Other
Total current liabilities
Noncurrent liabilities
Long-term loans payable
Net defined benefit liability
Other
Total noncurrent liabilities
Total liabilities
Net Assets
Shareholders’ equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity
Accumulated other comprehensive income (loss)
Valuation difference on other available-for-salesecurities
Deferred losses on hedges
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Total accumulated other comprehensive income(loss)
Non-controlling interests
Total net assets
Total liabilities and net assets

7

2Q Fiscal 2019
(As of September 30, 2018)

4,159
2,504
2,497
95
249
2,550
12,056

4,233
2,183
2,562
270
197
2,521
11,969

4,684
2,709
1,203
8,597
20,654

4,740
2,511
1,309
8,561
20,531

3,144
2,966
9,206
(0)
15,317

3,144
2,966
10,349(0)
16,460

1,331

1,481

(43)
142
(1,558)(10)284(1,598)

(127)

156

2,008
17,19737,851

1,920
18,53739,068

(2) Consolidated Statements of Income and Consolidated Statements ofComprehensive Income
Consolidated Statements of Income(Six months ended September 30)(Millions of yen)

Six Months Ended
September 30, 2017
(From April 1, 2017
to September 30, 2017)18,62314,808Net sales
Cost of sales

Six Months Ended
September 30, 2018
(From April 1, 2018
to September 30, 2018)
18,01014,223Gross profit on sales

3,815

3,786

Selling, general and administrative expenses

3,285

3,357

Operating income

530

428

Non-operating income
Interest income
Dividend income
Foreign exchange gains
Equity in earnings of affiliates
Other

10
30
18
89
47

3
20
149
81
49

Total non-operating income

195

304

106
14

121
17

120

138

605

594

-

79
655
416

-

1,151

1
10

0
139

Non-operating expenses
Interest expenses
Other
Total non-operating expenses
Ordinary income
Extraordinary gains
Gain on sales of noncurrent assets
Transfer gain on business divestiture
Gain on change in equity
Total extraordinary gains
Extraordinary losses
Disposal costs for noncurrent assets
Loss on retirement of noncurrent assets
Total extraordinary losses

12

140

Income before provision of income taxes

593

1,606

Income taxes

230

339

Net income

362

1,266

Net income attributable to non-controlling interests

18

13

Net income attributable to owners of the parent

344

1,253

8

Consolidated Statements of Comprehensive Income(Six months ended September 30)(Millions of yen)

Six Months Ended
September 30, 2017
(From April 1, 2017 to
September 30, 2017
362

Net income
Other comprehensive income (loss)
Valuation difference on other available-for-salesecurities
Deferred gains or losses on hedges

Six Months Ended
September 30, 2018
(From April 1, 2018 toSeptember 30, 2018)
1,266

262

149

(67)

16

Foreign currency translation adjustments

119

116

Pension liability adjustment
Share of other comprehensive income of associates
accounted for using equity method
Total other comprehensive income

14

(39)

(14)

(33)

314

209

676

1,475

Owners of the parent

707

1,537

Non-controlling interests

(31)

(61)

Total comprehensive income
Comprehensive income (loss) attributable to:9(3) Consolidated Statements of Cash Flows(Millions of yen)

Six Months Ended
September 30, 2017
(From April 1, 2017
to September 30, 2017)
Cash flows from operating activities
Income before provision of income taxes
Depreciation and amortization
Amortization of goodwill
Increase (decrease) in allowance for doubtful
accounts
Decrease in provision for bonuses
Increase (decrease) in net defined benefit liability
Interest and dividend income
Interest expenses
Foreign exchange gains
Equity in earnings of affiliates
Loss (gain) on sales of property, plant and equipment
Loss on retirement of noncurrent assets
Transfer gain on business divestiture
Gain on change in equity
Increase in notes and accounts receivable-trade
Increase in inventories

Six Months Ended
September 30, 2018
(From April 1, 2018
to September 30, 2018)

593
805
22

1,606
768
23

(9)

2

(34)
76
(40)
106
(0)
(89)
1
10
(320)
(492)

(56)
(29)
(24)
121
(133)
(81)
(78)
139
(655)
(416)
(75)
(667)

Decrease in notes and accounts payable-trade

(4)

(35)

Decrease in accrued consumption taxes
Other, net

(72)
37

(115)
(74)

Subtotal

589

216

Interest and dividend income received
Interest paid
Income taxes paid
Net cash provided by operating activities

100
(104)
(439)

152
(121)
(123)

146

123

Cash flows from investing activities
Payment into time deposits
Proceeds from withdrawal of time deposits
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of intangible assets
Purchase of investment securities
Proceeds from the sale of investment securities
Purchase of insurance funds
Proceeds from surrender of insurance funds
Payments of loans receivableCollection of loans receivable
Proceeds from business divestiture
Payment of expenses related to business divesture
Other, net

(105)
109
(845)
1
(12)
(4)
(0)
(0)
0
-

Net cash provided by (used in) investing activities

(857)

(76)
67
(814)
472
(8)
(4)
0
41
(5)
0
887
(180)
(116)
263

10

(0)

(Millions of yen)

Cash flows from financing activities
Net increase (decrease) in short-term loans payable
Proceeds from long-term loans payable
Repayment of long-term loans payable
Proceeds from sale-and-leaseback transactions
Repayments of lease obligations
Cash dividends paid
Purchase of treasury stock
Cash dividends paid to non-controlling interests

Six Months Ended
September 30, 2017
(From April 1, 2017
to September 30, 2017)

Six Months Ended
September 30, 2018
(From April 1, 2018
to September 30, 2018)

263
1,200
(1,281)
84
(125)
(110)
(27)

(378)
1,244
(1,194)
34
(117)
(110)
(0)
(25)

3

(547)

23

(4)

Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash
equivalents
Net decrease in cash and cash equivalents

(683)

(164)

Cash and cash equivalents, beginning of period

2,550

1,538

Cash and cash equivalents, end of period

1,866

1,373

11

(4) Notes to Quarterly Consolidated Financial Statements(Note Concerning Going Concern Assumption)
None(Note Concerning Significant Changes in Shareholders’ Equity)
None(Additional Information)
Adoption of “Partial Amendments to Accounting Standard for Tax Effect Accounting, etc.”
The Company has adopted “Partial Amendments to Accounting Standard for Tax EffectAccounting, etc.” (Accounting Standards Board of Japan (ASBJ) Statement No. 28,
February 16, 2018) from the beginning of the first quarter of the fiscal year ending March 31,
2019. Accordingly, deferred tax assets have been presented under investments and otherassets and deferred tax liabilities have been presented under noncurrent liabilities.

12

(Segment Information)
I. Six months ended September 30, 2017 (From April 1, 2017 to September 30, 2017)
1. Information on net sales, income and loss by reporting segment(Millions of yen)
Reporting segment
Collagenmaterial
business
Net sales
Sales to third parties
Inter-segment sales andtransfers
Total
Segment income(Notes)Amounts in the
consolidated
income statement*2

Formulasolutionbusiness

Total

Adjustments*1

13,688

4,935

18,623－

18,623

837

4

841

(841)

－

14,526
648

4,939
564

19,465
1,213

(841)
(683)

18,623530

1. Adjustment for segment income of ¥(683) million comprises elimination ofintersegment transactions of ¥7 million and unallocated expenses of ¥(690) million.
2. Segment income is adjusted against the operating income recorded in the consolidated
income statement.

2. Information on impairment loss on noncurrent assets and goodwill by reporting segments
None
II. Six months ended September 30, 2018 (From April 1, 2018 to September 30, 2018)
1. Information on net sales, income and loss by reporting segment
The Nitta Gelatin Group’s collagen business has become the standalone reporting
segment, so information is omitted.
2. Information on impairment loss on noncurrent assets and goodwill by reporting segments
None
3. Matters Concerning Changes in Reporting Segments
The Nitta Gelatin Group’s reporting segments until now have been categorized into twobusinesses: collagen material business and formula solution business. To make intensive
investments to pursue its strategy for core businesses and new businesses according to its
new corporate vision, the Company conducted a reorganization centered on transforming
the production and sales management system and reviewed the allocation of Groupmanagement resources and the management system.
On August 1, 2018, the Company conducted a company split of the adhesive business(excluding manufacturing), which is included in the Formula Solutions Business. As theCompany shifted its business activities to integrated management of the Collagen Business,
the Company made the Collagen Business its standalone reporting segment from the second
quarter ended September 30, 2018.
As a result, disclosure of segment information for the six months ended September 30,
2018 is omitted since there is only a single segment.

13

(Business combinations)(Company split)
Pursuant to a resolution passed at a meeting of the board of directors held on May 17, 2018,
the Company conducted a company split on August 1, 2018, with the Company (Adhesive
Business (excluding manufacturing)) as the splitting company and Bostik-Nitta Co., Ltd. as
the succeeding company.
1. Outline of Business Divestiture(1) Name of company that succeeded the divested business
Bostik-Nitta Co., Ltd.
(2) Business description of divested business
Adhesive Business (excluding manufacturing)(3) Primary reason for business divestiture
In the Adhesive Business field, the business environment is changing at an accelerated
pace. In this environment, the Company is set to make intensive investments to pursue its
strategy for the core businesses and new businesses according to its new corporate vision.
With this in mind, the Company believes that it will be able to realize further growth in
the covered business by having Bostik-Nitta Co., Ltd., an equity-method affiliate of theCompany, succeed the covered business.
(4) Date of business divestiture
August 1, 2018(5) Outline of the transaction including legal format
An absorption-type split with only cash and equivalent assets provided as consideration
2. Outline of accounting treatment(1) Gain on transfer of business
655 million(2) Appropriate book values of assets and liabilities of business transferred and major
components
Noncurrent assets¥23 million
Total assets¥23 million
Current liabilities¥11 million
Noncurrent liabilities¥169 million
Total liabilities¥180 million

14(3) Accounting treatment
The Company recognizes the difference between the consideration for the transfer and an
amount equivalent to the shareholders’ equity corresponding to the transferred businessand net of advisory fees for the company split as a “Transfer gain on business divestiture”
in the consolidated statement of income for the six months ended September 30, 2018.
3. Reporting segment in which the divested business was included
Collagen business
4. Estimated net sales and operating income attributable to the divested business recorded on
the quarterly consolidated statement of income for the quarterly period under review
Net sales
1,482 million
Operating income
45 million
Note: The above amounts represent the net sales and operating income of the entire Adhesive
Business, as it is impractical to determine the net sales and operating income of the Adhesive
Business (excluding manufacturing).

5. Outline of continued involvement
The Company has entered into a business outsourcing agreement with Bostik-Nitta Co., Ltd.

15