Watahan & Co., Ltd.
Financial Results Briefing for the Fiscal Year Ended March 2023
June 19, 2023

Event Summary[Company Name]

Watahan & Co., Ltd.

[Company ID]

3199-QCODE[Event Language]

JPN[Event Type]Earnings Announcement[Event Name]

Financial Results Briefing for the Fiscal Year Ended March 2023

[Fiscal Period]

FY2023 Annual[Date]

June 19, 2023

[Number of Pages]

35[Time]

15:00 – 15:16(Total: 16 minutes, Presentation: 16 minutes)[Venue]Webcast[Venue Size][Participants][Number of Speakers]

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1Isamu Nohara

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President & CEO

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Presentation
Nohara: Hello, everyone. I am Isamu Nohara, President & CEO of Watahan & Co., Ltd. I will now explain our
financial results for the fiscal year ended March 2023.
Thank you for your attention.

Today's presentation will begin with the financial results for the previous fiscal year ended March 31, 2023,
followed by the forecast for the current fiscal year ending March 31, 2024, and finally, the new medium-term
management plan.

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I will now provide an overview of our financial results for the fiscal year ended March 2023.
In this fiscal year, we have also operated under the management policy: being close to the community andcreating new value together with the community.

As a result, sales for the previous financial year ended March 31, 2023, were JPY134.2 billion, an increase of
17.3% compared to the previous year.

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Operating income increased by 4.1% to JPY3.05 billion.

As for sales by segment, retail, trading, and other businesses were at the same level as in the same period of
the previous year, while the construction business was up JPY17.7 billion, a significant growth.

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In terms of profit, the retail business posted a decrease of JPY1.05 billion due to heavy investment, while theconstruction business posted an increase of JPY1.04 billion. In addition, the trading business was a negative
JPY120 million, while other business ended the year with a positive JPY130 million, which was the same level
as in the previous year.

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Next are the details of performance by segment.
Firstly, in the retail business, our policy for the full year is to continue to promote new store openings, store
renovations, and the development of new business models, as well as to expand our distribution network andpursue the development of our original products. Last year, we opened Watahan Super Center Ueda Store inAugust and Watahan Super Center Gondo Store in September.

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In the six months since its opening, these stores have already undergone remodeling in February to meetcustomers' needs, making them even more convenient.

In addition, major remodeling of six stores has been carried out, and pharmaceutical sales areas have been
introduced successively in existing stores, with those introduced already expanded to 10 stores.

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In the area of fresh fish, which we have been focusing on, we have further expanded our procurement basesat the newly developed Maizuru Fishing Port in Kyoto.

In promoting the development of our original products, the ratio of private-label products, which was around
5% two years ago, has already risen to over 11% last month.

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8This is the monthly trend for the previous fiscal year.
Excluding the impact of a reactionary drop in demand in May from the stay-at-home measure and seasonal
factors such as warm weather in January, February and March, the figure remained stable at above 100%.

As a result, sales in the retail business amounted to JPY77.6 billion, up 1.4% from the previous year. Thissituation represents the effect of two store openings, Ueda and Gondo stores, and the introduction ofpharmaceutical sales areas in existing stores.

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9However, segment income, on the contrary, was JPY760 million, down 58% YoY, due to electricity cost hikes
and the initial costs of opening these two new stores.

Let me move onto the construction business.
In the construction business, we ended our last fiscal year with the following policies: the construction of awood processing and distribution network, the promotion of product development made from wood, and thefurther acceleration of factory automation in the steel frame field.

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10Our policy is to process and distribute locally produced lumber and this is an ongoing process.

In terms of product development made from wood, the Group's Science Home Co., Ltd. and Yume House Co.,
Ltd. have collaborated to launch a new brand, cotton1/2, as a housing brand finished in the shinkabe styleand using natural solid wood.
This new brand has surpassed 100 franchisees within three months after recruiting. When Science Home andYume House started recruiting for similar projects in the past, it took them three to five years to reach thatscale, so reaching 100 companies in three months is a very smooth start-up for the project.
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In addition, thanks to the further acceleration of factory automation in the steel frame field and increased
processing capacity, projects are becoming more and more large-scale.

As a result, sales in the previous fiscal year rose 55.8% YoY to JPY49.6 billion. This is the result of the largescale projects associated with new plant starting operations, as mentioned earlier, and the steady progress ofconstruction work.

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As a result, segment profit grew significantly by 2.2 times.

Order backlog is stable at JPY18.2 billion due to stable delivery times of materials and a decrease in pre-orders,leading us to a stable order backlog.

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Next is the trading business.
In the trading business, we set out measures to expand into the food field and then into the fertilizer and feed
fields in the current financial year.

To further accelerate the development of new natural raw materials in South America, we have formed acapital and business alliance with Casa Natural Corporation, which has strengths in food procurement in SouthAmerica, and thus we are expanding the range of food products in our shops.

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We are also expanding our imports of natural fertilizers and feeds.

As a result, sales amounted to JPY6 billion, up 3.2% YoY.

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Segment profits fell by 17.4% to JPY570 million due to time lag in price shifts, which has been progressing.

Finally, I will present the consolidated financial statements.
Current assets increased by JPY12.1 billion and total liabilities were plus JPY12.7 billion, which was due to anincrease in notes and accounts receivables from progress in the construction business and an increase ininventories for the new stores in the retail business, resulting in an increase in total assets.

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As for cash flow, operating cash flow was negative, but this was due to a negative cash flow from receivablesfrom large construction projects, which is expected to be eliminated in Q1.
Cash flow from investments has increased as investments in new stores were financed by borrowings.

Next, I would like to discuss the performance forecast summary for the fiscal year ending March 2024.
For the fiscal year ending March 31, 2024, we project net sales of JPY138 billion, up 2.8% YoY.

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17Ordinary income is projected to increase by 2% to JPY3.12 billion. This is because we plan to make this year
the year to build a foundation for our business, and we will be investing in human resources amounting to
JPY500 million and in capital investment totaling JPY5 billion.

We intend to invest JPY500 million as human capital investment for raising base pay and salaries, granting 100
percent incentives for an employee stock ownership plan, conducting training programs and improving thework environment.

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By segment, the retail business will see a significant increase in sales, while construction, trading, and otherbusinesses will be at the same level as in the previous year.

In terms of profits, the retail and trading businesses are expected to increase compared to the previous year,
while construction and other businesses are planned to remain at the same level as the previous year.

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Now, let me explain the forecast by segment, starting with the retail business.
The full-year measures for the retail business are the same as last year, including continued promotion of
store remodeling and development of new types of business, expansion of the distribution network anddevelopment of our original products with the shift to SPAs.

In the current financial year, the first step is to develop a new pet and drug store, Watahan Wellness Life
Garden. This is the process of evolving the existing Watahan Drug Saku Chuo store into a new business model,
which is scheduled to open at the end of June.
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In dispensing pharmacies, Watapy Pharmacy was already introduced in May at the Watahan Super Center
Gondo store, which is the first store of Watahan Home-Aid Co., Ltd.

Also, later this year, Iida Distribution Center is to be fully operational in order to expand our distribution
network.

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Our original products have already accounted for more than 11% of our sales this year, as mentioned earlier,
and we plan to further increase this to 15% in the current fiscal year, almost double the average of 8.8% in
the previous fiscal year.

In this context, we plan to produce and sell fresh flowers and expand our own farm as a means to develop
original products.

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As a result, net sales in the retail business are planned to increase by 3.6% to JPY80.4 billion. This figure is
projected by adding an inflation rate of 3% to the same-store sales.

Segment income is also expected to increase by 25.9% to JPY960 million.

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In the construction business, we will build a wood processing and distribution network, promote thedevelopment of products made from wood, and also build an overseas network in the steel frame field.

We would like to continue the processing and distribution of locally produced lumber as we did in the previous
fiscal year.

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In addition, we have recently started selling our own product, PREST WOOD, a system for wooden building,this fiscal year.

Also, to promote the development of products made from wood, the Group's Watahan Solutions Co., Ltd. and
Watahan Ringyo Co., Ltd. have begun jointly developing non-residential wooden buildings.

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In building an overseas network in the steel frame field, the Company is working with overseas fabricators tohandle large-scale projects. First, in order to increase design capacity, we plan to build a CAD center in Vietnam
in addition to the existing CAD centers in Myanmar and Dalian.
We will also deepen our cooperation with overseas fabricators to meet the increased demand for steel frames
and large-scale projects during the previous fiscal year.

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As a result, we plan a 0.4% increase in sales to JPY49.8 billion, a figure that exceeds the previous financial
year, even if we exclude the large projects of the previous year's car parks, which made a significant
contribution to sales. Segment income is also projected to be JPY1.89 billion, up 0.1%, exceeding the previous
year's figure.

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The trading business is continuing to expand into the food field and into the fertilizer and feed fields.

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We will further promote the expansion of the food sector with Casa Natural Corporation, with which we havesigned a contract this year, to develop new natural raw materials, and we also plan to promote the sixth
industrialization policy with our retail business as well as with direct procurement from overseas in the meat
sector.

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As a result, in the trading business, net sales are expected to increase by 2.3% to JPY6.13 billion, and segment
income is expected to increase by 27.3% to JPY0.73 billion, reflecting the effect of price shifts as well as thesemeasures.

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I would like to explain the new medium-term management plan.
Our group mission is to make a positive contribution to society through three pillars: goodwill, community,and environment.

We will continue to create new value, firstly by the continuation of trust and confidence, and then by thespirit of gassai, incorporating many different industries and carrying out mergers and acquisitions.

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We will also focus on the development of local communities and the creation of a recycling-oriented society.

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As a result, our new medium-term plan is expected to result in JPY150 billion in net sales in the year ending
March 2027, and JPY4.5 billion in ordinary income, with a 3% target for the ordinary income margin, although
the target value would be extended by one year.
This concludes my explanation of the financial results for the fiscal year ended March 31, 2023.
[END]______________
Document Notes
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