Note: This document has been translated from the Japanese original for reference purposes only. In the event of any
discrepancy between this translated document and the Japanese original, the original shall prevail.

July 12, 2024

Consolidated Financial Results
for the Six Months Ended May 31, 2024
(Under Japanese GAAP)
Company name: Lacto Japan Co., Ltd.
Listing:
Tokyo Stock Exchange
Securities code: 3139
URL:
https://www.lactojapan.com/en/
Representative: Motohisa Miura, President
Inquiries:
Kenji Bundo, Executive Vice-President
Scheduled date to file quarterly securities report:
July 12, 2024
Scheduled date to commence dividend payments:
August 26, 2024
Preparation of supplementary material on quarterly financial results: Yes
Holding of quarterly financial results briefing:
Yes (For securities analysts andinstitutional investors)(Yen amounts are rounded down to millions, unless otherwise noted.)

1. Consolidated financial results for the six months ended May 31, 2024 (from December 1,
2023 to May 31, 2024)(1) Consolidated operating results (cumulative)
Net sales
Six months ended(Percentages indicate year-on-year changes.)

Operating profit

Profit attributable toowners of parent

Ordinary profit

Millions of yen%

Millions of yen%

Millions of yen%

Millions of yen%

May 31, 2024

84,560

5.1

2,432

42.6

2,260

68.1

1,654

79.3

May 31, 2023

80,450

15.3

1,705

(8.7)

1,344

(19.2)

922(23.6)

Note: Comprehensive income For the three months ended May 31, 2024:
For the three months ended May 31, 2023:
Earnings
per share¥ 2,596 million¥ 1,537 million[68.9%][(41.5)%]

Diluted earnings
per share

Six months ended

Yen

Yen

May 31, 2024

165.97165.14

May 31, 2023

93.17

92.17

(2) Consolidated financial position
Total assets
As of

Net assets

Equity-to-asset ratio

Millions of yen

Millions of yen

May 31, 2024

78,253

26,96934.4

November 30, 2023

72,03824,724

34.2

Reference: Equity
As of May 31, 2024:
As of November 30, 2023:¥ 26,936 million¥ 24,655 million

1%2. Cash dividends
Annual dividends per share

Fiscal year ended
November 30, 2023
Fiscal year ending
November 30, 2024

First quarter-end

Second quarterend

Third quarter-end

Fiscal year-end

Yen

Yen

Yen

Yen

Yen

-

24.00

48.00

-

45.00

76.00

-

24.00

-

31.00

Fiscal year ending
November 30, 2024
(Forecast)

Total

Note: Revisions to the forecast of cash dividends most recently announced: Yes

3. Forecast of Financial Results for Fiscal Year Ending November 30, 2024
(December 1, 2023 through November 30, 2024)
Net sales
Million yen

Net income attributable toowners of parent

Ordinary income%

Million yen%

Fiscal year ended
164,000
3.6
4,100
44.0
November 30, 2024
Note: Revisions to the forecast of financial results most recently announced: Yes

2

Earnings per share

Million yen

%

Yen

3,000

46.4

301.13

* Notes(1) Changes in significant subsidiaries during the period (changes in specified subsidiaries resulting in
the change in scope of consolidation): None
(2) Adoption of accounting treatment specific to the preparation of quarterly consolidated financial
statements: Yes(3) Changes in accounting policies, changes in accounting estimates, and restatement:(i) Changes in accounting policies due to revisions to accounting standards and other regulations:None(ii) Changes in accounting policies due to other reasons: None(iii) Changes in accounting estimates: None(iv) Restatement: None
(4) Number of issued shares (common shares)
(i)

(ii)

Total number of issued shares at the end of the period (including treasury shares)
As of May 31, 2024

10,021,600 shares

As of November 30, 2023

9,961,200 shares

Number of treasury shares at the end of the period
As of May 31, 2024

63,255 shares

As of November 30, 2023

5,052 shares(iii) Average number of shares outstanding during the period (cumulative from the beginning of the
fiscal year)
Six months ended May 31, 2024

9,966,042 shares

Six months ended May 31, 2023

9,903,268 shares* Quarterly financial results reports are exempt from quarterly review conducted by certified public
accountants or an audit corporation.
* Proper use of earnings forecasts, and other special matters(Cautionary Statement)
The consolidated business results forecasts contained in this report are based on information available
at the present time and certain premises thought to be reasonable. Accordingly, the final results maychange substantially due to various factors.
(How to obtain supplementary materials for financial results)
Supplementary materials for financial results will be posted on our website.
(https://www.lactojapan.com/en/ir)(Changes to monetary unit)
Previously, the monetary unit used for items and other matters contained in the Company's quarterly
consolidated financial statements were recorded in thousands of yen. However, the monetary unit has
been changed to be shown in millions of yen from the current second quarter consolidated accounting
and cumulative period. For ease of comparison, figures for the previous consolidated fiscal year andcumulative second quarter have also been changed to units of millions of yen.

3

Table of Contents of Attachment
1. Qualitative Information on Quarterly Financial Results ........................................................................ 5(1) Operating Results ........................................................................................................................... 5(2) Financial Position ........................................................................................................................... 6(3) Consolidated Earnings and Other Forecasts .................................................................................. 7
2. Quarterly Consolidated Financial Statements and Significant Notes ................................................... 8(1) Quarterly Consolidated Balance Sheet ........................................................................................... 8(2) Quarterly Consolidated Income Statements ................................................................................. 10
Consolidated Statement of Income ................................................................................................ 10
Second Quarter Consolidated Cumulative Period ...................................................................... 10
Consolidated Statement of Comprehensive Income ....................................................................... 11
Second Quarter Consolidated Cumulative Period ....................................................................... 11(3) Consolidated Statements of Cash-Flow ....................................................................................... 12(4) Notes on Quarterly Consolidated Financial Statements ............................................................... 14(Going Concern Assumption) ......................................................................................................... 14(Significant Changes in Shareholder’s Equity) ............................................................................... 14(Adoption of Accounting Treatment Specific to Preparation of the Quarterly Consolidated Financial
Statements) .................................................................................................................................... 14

4

Qualitative Information on Quarterly Financial Results(1) Operating Results
During the current second quarter consolidated cumulative period (the “second quarter”), despite the impact of rising prices,Japan’s economy has been on a moderate recovery trend, with many companies improving their business results and theemployment and income environment gradually improving. On the other hand, the future outlook remains uncertain due tofactors such as the rapid depreciation of the yen, soaring raw material and energy prices driven by prolonged conflicts inEastern Europe and the Middle East, and continued economic stagnation in China.
In the domestic food industry, consumers doubled down on their efforts to save money owing to price increases across awide range of food products, leading to stagnant demand for home-cooked meals and individual consumption. However,demand for commercial use, such as in the food service industry, remained steady, supported by an increase in inboundtourism consumption. In the dairy industry, while raw milk production volume showed an increasing trend compared to thesame months of the previous year, the excess inventory of domestically produced skim milk powder has been adjusted,leading to a stable situation.
Under these circumstances, the Lacto Japan Group has promoted various measures with the aim of achieving its Corporate
Business Plan titled, NEXT-LJ 2025. In the second quarter, although sales of some raw materials were sluggish due to theimpact of price increases on final products, domestic business sales volume increased with sales exceeding expectations.
This was due to increased calls for imported raw materials thanks to a recovery in demand for commercial use, and steadysales of raw materials related to the rapidly expanding protein product market. In terms of profits, consolidated profit
significantly exceeded forecasts, driven primarily by increased sales volume of high-margin products in the domestic dairy
ingredients and cheese business division, as well as improved profit margins in both the dairy ingredients sales divisionand cheese manufacturing & sales division in the Asian business compared to the first quarter.
As a result, net sales for the second quarter were 84,560 million yen (up 5.1% year on year). Operating income was 2,432
million yen (up 42.6% year on year), ordinary income was 2,260 million yen (up 68.1% year on year), and net income
attributable to owners of parent was 1,654 million yen (up 79.3% year on year).
Performance by division is as follows:(Dairy Ingredients and Cheese Business Division)
In the sale of dairy ingredients, despite consumers' increasing tendency to save money due to the impact of price increases
on final products, the demand for commercial food recovered as the food service and leisure industries thrived, driven by
the increase in inbound tourism demand. In particular, sales of ingredients for food gifts, ice cream, and chocolate werestrong. Additionally, as domestic inventory adjustments for skim milk powder progressed, demand for imported products
began to recover, and despite the continued depreciation of the yen, sales of dairy ingredients exceeded initial expectations.
Cheese sales also performed well. As prices of final products continued to rise, there was a noticeable tendency for
consumers to refrain from purchasing, and retail cheese ingredients were sluggish. However, demand for commercial
cheese, particularly for the food service industry, was strong and both sales and sales volume exceeded initial expectations
and those for the same period last year.
As a result, second quarter sales volume for the Dairy Ingredients and Cheese Business Division was 91,099 tons (up6.8% year on year) with net sales of 58,932 million yen (up 3.8% year on year).
(Meat and Ingredients Division)
In the Meat and Ingredients Division, sales of both meat and processed meat products were steady. Pork sales benefited
from the increased demand for U.S.-sourced products due to the surge in European market prices, which was favorable
for us given that the U.S. is a major supply source. Sales of frozen pork, primarily used as ingredients for processed foods
like ham and sausages, grew significantly. Additionally, the rising prices of beef and pork led to increased demand forchicken, resulting in higher sales volumes for chicken products, an area we have been focusing on in recent years. Salesof processed chicken products, which we are also actively promoting, performed well. Sales volumes for products intended
for supermarket deli sections and food court menus increased compared to the previous period.

5

As a result, second quarter sales volume for the Meat and Ingredients Division was 15,843 tons (up 14.2% year on year)with net sales of 10,538 million yen (up 17.1% year on year).
(Functional Food Ingredients Division)
In the Functional Food Ingredients Division, sales of milk proteins, which serve as ingredients for protein products,
continued to progress well. The growth of the protein-related market has been remarkable, fueled by the ongoing boom inthe sports-related sector due to increased health awareness, and by the broader trend of “high protein” becoming a key
development theme for food products. Lacto Japan has accumulated extensive knowledge and expertise in high-protein
ingredients derived from milk through years of importing and selling dairy products. This expertise has attracted numerous
customer inquiries and led to a growing number of accounts. Until now, we have focused our resources on sales activities
for milk protein, which has strong demand, causing sales of other functional food ingredients to fall below projections.
Going forward, we will strive to expand our business by enhancing our offerings with a wider range of proposals thatcombine various functional ingredients.
As a result, second quarter sales volume for the Functional Food Ingredients Division was 1,267 tons (up 12.0% year onyear) with net sales of 1,608 million yen (up 1.4% year on year).
(Asian Business, Others)
In the Asian Dairy Ingredients Sales Division (trading company), both sales and sales volume in the second quarter werelower than the same period of the previous year, primarily due to a notable decline in business associated with skim milk
powder exports, undertaken as part of the industry's initiative to reduce excess inventory in Japan. However, amid risingdomestic demand for dairy products and a reduction of excess inventory, sales of powdered milk mixture ingredients for
the Japanese market increased compared to the same quarter of the previous year. Sales of dairy ingredients to Japanesefood manufacturers operating in Asia also performed well, and sales activities at our sales base in Indonesia began to gain
traction. These developments will undoubtedly help to grow the business going forward, and as such, we look forward toa recovery in business performance.
As a result, second quarter sales volume was 18,518 tons (down 12.2% year on year) with net sales of 9,731 million yen(down 7.9% year on year).
In the Asian Cheese Manufacturing & Sales Division (manufacturer), sales to China decreased due to the economic
downturn. Additionally, in Thailand and Malaysia, sales to processed food manufacturers were sluggish due to the impactof the strong dollar against their currencies. However, sales of products for restaurants were strong thanks to the recovery
in the restaurant industry in Singapore and Malaysia and the expansion of Japanese restaurant chains in Southeast Asia.
As a result, second quarter sales volume was 2,536 tons (up 7.1% year on year) with net sales of 2,679 million yen (up19.3% year on year).
As a result, sales in the Asian and Others Business for the second quarter amounted to 13,479 million yen (up 3.1% year
on year).

(2) Financial Positioni)

Assets, liabilities and net assets

Total assets at the end of the second quarter increased by 6,215 million yen from the end of the previous consolidated
fiscal year to 78,253 million yen.
(Current assets)
The balance of current assets at the end of the second quarter was 73,373 million yen, an increase of 6,304 million yen
compared to the end of the previous consolidated fiscal year. This was due to increases of 2,944 million yen in notes andaccounts receivable, 1,770 million yen in merchandise and finished goods, and 1,125 million yen in cash and deposits.

6

(Non-current assets)
The balance of non-current assets at the end of the second quarter was 4,880 million yen, a decrease of 89 million yen
compared to the end of the previous consolidated fiscal year. This was due to an increase of 257 million yen in property,
plant and equipment and an increase of 70 million yen in intangible assets, while investments and other assets decreased
by 417 million yen.
(Current liabilities)
The balance of current liabilities at the end of the second quarter was 39,843 million yen, an increase of 2,810 million yen
compared to the end of the previous consolidated fiscal year. This was due to an increase in short-term borrowings of 906
million yen due to an increase in working capital, an increase of 590 million yen in the current portion of long-termborrowings, and an increase of 1,082 million yen in accounts payable.
(Non-current liabilities)
The balance of non-current liabilities at the end of the second quarter was 11,440 million yen, an increase of 1,159 million
yen compared to the end of the previous consolidated fiscal year. The was due to an increase of 1,199 million yen in longterm borrowings.
(Net assets)
The balance of net assets at the end of the second quarter was 26,969 million yen, an increase of 2,245 million yen
compared to the end of the previous consolidated fiscal year. This was due to increases of 1,415 million yen in retained
earnings, 299 million yen in deferred gains or losses on hedges, and 575 million yen in foreign currency translation
adjustments.
ii)

Cash flows

Cash and cash equivalents (hereinafter, “net cash”) for the second quarter amounted to 8,408 million yen, an increase of
1,125 million yen compared to the end of the previous consolidated fiscal year. Cash flows for each activity are as follows:(Cash flow from operating activities)
Net cash provided by operating activities was 1,590 million yen. This was due to an increase in trade receivables of 2,614
million yen and an increase in inventories of 1,804 million yen, while income before income taxes was recorded at 2,260
million yen.
(Cash flow from investing activities)
Net cash used in investing activities totaled 295 million yen. This was due to expenditures of 73 million yen for the purchaseof intangible assets, 38 million yen for the purchase of property, plant and equipment, and 14 million yen for the purchaseof investment securities. However, this was offset by income of 437 million yen from the refund of insurance reserves.
(Cash flow from financing activities)
Net cash used in financing activities was 2,195 million yen. This was due to an increase of 897 million yen in short-termborrowings and 4,200 million yen in proceeds from long-term borrowings, despite 2,411 million yen in the repayment oflong-term borrowings.

(3) Consolidated Earnings and Other Forecasts
Based on our performance for the second quarter and the current business environment surrounding Lacto Japan, net
sales, ordinary income, and net income attributable to owners of parent in the consolidated earnings forecast for the
fiscal year ending November 30, 2024 have been revised. For details, please see the “Notice Regarding Difference
Between Consolidated Earnings Forecast and Actual Results for the First Half of the Fiscal Year Ending November 2024
and Revisions to the Full-year Consolidated Earnings and Dividend Forecast” released on July 12, 2024.

7

Consolidated Financial Statements(1) Consolidated Balance Sheet(Millions of yen)
FY2023

2nd Quarter of FY2024
As of May 31, 2024

As of November 30, 2023

AssetsCurrent assets
Cash and deposits

7,779

8,905

Notes and accounts receivable

18,70021,644Merchandise and finished goods

38,79840,568Raw materials and supplies

1,008

1,159

Other

783

1,097

Allowance for doubtful accounts

(1)

(2)

67,06873,373

2,185

2,442

73

144

2,731

2,315

Allowance for doubtful accounts

(21)

(21)

Total investments and other assets

2,710

2,293

4,969

4,880

72,03878,253

Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Investments and other assets
Other

Total non-current assets
Total assets

8Consolidated Balance Sheet(Millions of yen)
FY2023

2nd Quarter of FY2024
As of May 31, 2024

As of November 30, 2023

Liabilities
Current liabilities
Accounts payable
Short-term borrowings

14,033
14,38015,116
15,287

Commercial papers
Current portion of long-term borrowings

3,000
4,402

3,000
4,992

Income taxes payable
Other

252
964

622
825

Total current liabilities

37,03339,843

Non-current liabilities
Long-term borrowings

9,125

10,324Retirement benefit liability
Asset retirement obligations

432
55

458
65

Other

667

591

10,281

11,44047,314

51,284

Share capital
Capital surplus

1,178
1,179

1,209
1,209

Retained earnings
Treasury shares

20,066(14)

21,481(152)

Total shareholders' equity

22,40923,747

276

344

(56)
2,025

243
2,601

2,245

3,188

Total non-current liabilities
Total liabilities
Net assets
Shareholders' equity

Accumulated other comprehensive income
Valuation difference on available-for-salesecurities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Total accumulated other comprehensive income
Share acquisition rights
Total net assets
Total liabilities and net assets

9

68

33

24,72426,96972,03878,253

(2) Quarterly Consolidated Income Statements
Consolidated Statement of Income
Second Quarter Consolidated Cumulative Period(Millions of yen)Six months ended
May 31, 2023

Six months ended
May 31, 2024

Net sales
Cost of sales

80,45076,44784,56079,486Gross profit

4,002

5,073

Selling, general and administrative expenses

2,296

2,640

Operating income

1,705

2,432

Interest income
Dividend income

6
7

42
7

Share of profit of entities accounted for using equity method
Foreign exchange gains

6
-

12
28

Insurance return
Miscellaneous income

8
21

5
15

Total non-operating income

50

111

Interest expenses
Commission expenses

102
112

138
118

Foreign exchange losses
Miscellaneous losses

189
7

26

Total non-operating expenses

411

283

Ordinary income

1,344

2,260

Income before income taxes

1,344

2,260

Non-operating income

Non-operating expenses

Income taxes

422

606

Net income

922

1,654

Net income attributable to owners of parent

922

1,654

10

Consolidated Statement of Comprehensive Income
Second Quarter Consolidated Cumulative Period(Millions of yen)Six months ended
May 31, 2023

Six months ended
May 31, 2024

922

1,654

Valuation difference on available-for-sale securities
Deferred gains or losses on hedges

17
441

67
299

Foreign currency translation adjustment
Share of other comprehensive income of entities accounted forusing equity method
Total other comprehensive income

146

573

8

2

614

942

Comprehensive income

1,537

2,596

(Breakdown)Comprehensive income attributable to owners of parent

1,537

2,596

-

-

Net income
Other comprehensive income

Comprehensive income attributable to non-controlling interests11(3) Consolidated Statements of Cash-Flow(Millions of yen)Six months ended
May 31, 2023

Six months ended
May 31, 2024

Cash flows from operating activities
Income before income taxes

1,344

2,260

Depreciation

171

207

Increase (decrease) in allowance for doubtful accounts

(18)

1

Increase (decrease) in retirement benefit liability

(0)

25

Interest and dividend income

(13)

(50)

Interest expenses

102

138

Decrease (increase) in trade receivables(1,070)(2,614)

Decrease (increase) in inventories(4,178)(1,804)

Increase (decrease) in trade payables(1,714)

886

372

(348)

(5,007)(1,297)13

50Interest paid

(117)

(143)

Income taxes paid

(729)

(200)

(5,839)(1,590)Decrease (increase) in time deposits

(0)

(0)

Purchase of investment securities

(153)

(14)

Purchase of property, plant and equipment

(69)

(38)

-

4

(19)

(73)

Proceeds from maturity of insurance funds

27

437

Purchase of insurance funds

(7)

(7)

Other, net

(4)

(13)

(227)

295

Other, net
SubtotalInterest and dividends received

Net cash provided by (used in) operating activities
Cash flows from investing activities

Proceeds from sale of property, plant and equipment
Purchase of intangible assets

Net cash provided by (used in) investing activities

12Consolidated Statements of Cash-Flow(Millions of yen)Six months ended
May 31, 2023

Six months ended
May 31, 2024

Cash flows from financing activities
Increase (decrease) in short-term borrowings

6,678

897

Increase (decrease) in commercial papers

1,000

-

Proceeds from long-term borrowings

3,100

4,200

Repayments of long-term borrowings(2,167)(2,411)

Purchase of treasury shares

(0)

(166)

Proceeds from issuance of shares resulting from exercise of shareacquisition rights

13

25

Repayments of lease obligations

(94)

(112)

Dividends paid

(395)

(238)

Net cash provided by (used in) financing activities

8,133

2,195

141

224

Net increase (decrease) in cash and cash equivalents

2,207

1,125

Cash and cash equivalents at beginning of period

5,883

7,282

Cash and cash equivalents at end of period

8,091

8,408

Effect of exchange rate change on cash and cash equivalents13(4) Notes on Quarterly Consolidated Financial Statements(Going Concern Assumption)
Not applicable(Significant Changes in Shareholder’s Equity)
Not applicable(Adoption of Accounting Treatment Specific to Preparation of the Quarterly Consolidated Financial Statements)
Tax expenses are calculated by reasonably estimating the effective tax rate after the application of tax effectaccounting on net income before taxes for the consolidated fiscal year (that includes the second quarter underreview) and by multiplying quarterly net income before taxes by the estimated effective tax rate.

14