SANIX INCORPORATED Summary of Consolidated Financial Statements For the First Half Ended September 30, 2020 [Japanese Standards] The financial figures in this document are based on Japanese Accounting Standards and accompanying laws. Amounts are rounded off to 1 decimal place. This document is an English translation of the Japanese-language original.

SANIX INCORPORATED

1. Business Results – Operating results for the First Half ended September 30, 2020 (April 1, 2020 to September 30, 2020) (1) Consolidated Operating Results
(2) Consolidated Financial Position

3. Forecasts for Consolidated Business Results (April 1, 2020 to March 31, 2021)
* Notes

(1) Changes in significant subsidiaries during the period (Change in scope of consolidations resulting from change in subsidiaries): None - Number of subsidiaries newly consolidated Name of subsidiaries newly consolidated Number of subsidiaries excluded from consolidation Name of subsidiaries excluded from consolidation - (2) Adoption of special quarterly accounting methods: None (3) Changes in accounting policies and accounting estimates retrospective restatement i ) Changes in accounting policies based on revisions of accounting standard: None ii ) Changes in accounting policies other than ones based on revisions of accounting standard: None iii) Changes in accounting estimates: None iv) Retrospective restatement: None (4) Number of Issued and Outstanding Shares (Common Stock)
* This summary of financial statements is exempt from auditprocedure required by Financial instruments and Exchange Act. * Note to ensure appropriate use of f orecasts: Forecasts in this document are based on assumptions, prospects and plans as of the date of this document. Actual results may differ significantly from these forecasts, due to various factors affecting the Company’s business performance, such as change in economical conditions. For details of these assumptions, prospects and plans, and for notes appropriate use of forecasts for the business results, please see page 2 of the Attachment.
Index of the attachment
1. Qualitative Information for the First Half ended September 30, 2020 .......................
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1. Qualitative Information for the First Half ended September 30, 2020
(1) Information of Consolidated Business Results
In the first half of the fiscal year ending March 31, 2021 (April 1, 2020 to September 30, 2020), the Japanese economy faced a significantly stagnated situation due to the spread of COVID-19. Although there are signs of a recovery in current economic trends as economic activity resumes, the outlook is expected to remain bleak due to the effects of the curbing of capital expenditure, deterioration in employment and income conditions, and a decline in consumer spending. In this social situation, the Group continued its business, prioritizing the prevention of the spread of COVID-19. Sales decreased in the Solar Engineering (SE) Division, reflecting the delayed installation of solar electric power systems caused by the delayed marketing of new systems due to the spread of COVID-19. Sales in the Energy Business (EB) Division fell chiefly due to a decrease in power supply per high-voltage power supply destination and a decline in wholesale electric power. Sales in the Home Sanitation (HS) Division were on par with those in the same period of the previous year, although the Division voluntarily refrained from starting new operations during the state of emergency. Sales rose year on year in the Establishment Sanitation (ES) Division and the Environmental Resources Development (ERD) Division. As a result, net sales in the entire Group stood at ¥23,947 million (down 2.4% year on year). Profit increased in the ERD Division, reflecting the increase in sales. Profit fell in the SE and EB Divisions, where sales dropped. Profit also declined in the HS and ES Divisions due to an increase in cost resulting chiefly from a rise in the number of personnel. For the entire Group, operating income came to ¥1,664 million (up 7.3% year on year) and ordinary income was ¥1,562 million (up 9.3% year on year). Net income attributable to owners of the parent company stood at ¥1,410 million (up 23.7% year on year). Consolidated results of individual divisions for the first quarter were as follows:
a. SE (Solar Engineering) Division
Sales from solar electric power systems fell, reflecting the delayed marketing of new systems due mainly to the spread of COVID-19, despite steady progress in the installation of those systems with land, which is an ongoing project from the previous term. Net sales in this segment decreased to ¥5,399 million (down 3.7% year on year). The segment posted operating income of ¥233 million (down 21.7% year on year) primarily due to the decrease in sales despite restraints on selling, general and administrative expenses.
b. HS (Home Sanitation) Division
In the HS Division, the Group voluntarily refrained from starting new operations during the state of emergency following the spread of COVID-19 and limited operations to answering inquiries from customers. After the state of emergency was lifted, the Group returned to normal business while implementing infection prevention measures. As a result, termite eradication service fell 3.0% year on year and foundation repairing/home reinforcement system decreased 12.8% year on year, but under-roof/roof ventilation system increased 28.1% year on year. The division’s sales were ¥5,886 million (up 0.0% year on year). Operating income stood at ¥1,168 million (down 5.4% year on year) because of a rise in personnel and other expenses due to an increase in staff.
c. ES (Establishment Sanitation) Division
ES Division strengthened its relationships with the owners of buildings and condominiums and partner companies, including management companies, for years, actively increasing personnel and opening offices. Sales of anti-rust equipment installation (brand name: Daelman Shock), our main product, rose 2.5% year on year and sales of repair of building water-works rose 32.9% year on year, while sales of building waterproof paint repair fell 41.9% year on year. The division’s net sales rose to ¥1,132 million (up 2.8% year on year). Operating income fell to ¥118 million (down 13.6% year on year) due to an increase in costs, such as a rise in personnel expenses associated with an increase in staff, which more than offset the effect of the increase in sales.
d. Environmental Resources Development (ERD) Division
Plastic fuel sales increased 9.4% year on year due to the thorough acceptance inspection of waste plastic articles, though the acceptance volume declined. Power plant sales dropped 4.5% year on year, and organic waste water recycle fell 4.2% year on year, reflecting a decrease in the acceptance volume. Final disposal decreased 18.3% year on year. Net sales in this division stood at ¥8,296 million (up 3.1% year on year). Operating income stood at ¥1,974 million (up 19.3% year on year), chiefly reflecting an increase in profitability attributable to the thorough acceptance inspection of waste plastic, among other factors.
e. Energy Business Division
Net sales stood at ¥4,402 million (down 12.7% year on year), chiefly reflecting a decline in retail sales of high-voltage power due to a decrease in the number of contracts in the new electricity business and a drop in wholesale supply to the electricity market as a result of cancellation of part of procurement through negotiations. An operating loss of ¥33 million (an operating loss of ¥30 million in the same period of the previous fiscal year) was posted due to the significant effect of the increase in personnel and other costs as a result of a rise in those promoting the third-party owned solar electric power model for detached houses that the EB Division has been working on with other companies, although the profitability of its new electricity business improved due to the partial cancellation of relative procurement.
(2) Information of Consolidated Financial Position
a. Information on the status of Assets, of Liabilities, and of Net Assets
Total assets as of the end of the first half under review amounted to ¥30,938 million, a decrease of ¥1,576 million from the end of the previous fiscal year, which was caused chiefly by a decrease in cash and deposits of ¥1,446 million, a drop in notes and accounts receivable-trade of ¥872 million, and a decline in raw materials and supplies of ¥323 million, despite a rise in property, plant and equipment of ¥1,142 million. Total liabilities stood at ¥23,456 million, a decline of ¥3,001 million from the end of the previous fiscal year, which was attributable largely to decreases in notes and accounts payable-trade of ¥1,196 million, accounts payable-other of ¥922 million, and short-term loans payable of ¥873 million. Net assets totaled ¥7,482 million, an increase of ¥1,425 million from the end of the previous fiscal year. The key contributions to the increase included the posting of net income attributable to the owners of the parent company of ¥1,410 million. Consequently, the capital-to-asset ratio for the first half of the fiscal year under review came to 24.1%, an increase from 18.5% at the end of the previous fiscal year.
b. Information on Consolidated Cash Flows
Cash and cash equivalents (hereinafter “cash”) as of September 30, 2020 totaled ¥4,142 million, a decrease of ¥1,116 million from March 31, 2020, due to net cash used in investing activities and financing activities of ¥1,318 million and ¥424 million, respectively, despite cash provided by operating activities of ¥619 million. Cash flows and the reasons for changes in cash flows during the first half of the fiscal year under review are described below.
(Net Cash Provided by Operating Activities)
Net cash provided by operating activities totaled ¥619 million (compared with net cash provided of ¥819 million in the same period last year). This was mainly due to a drop in trade payable of ¥1,268 million and a decrease in accounts payable-other of ¥1,004 million, while income before income taxes of ¥1,562 million and a depreciation of ¥511 million as a non-cash expenditure item was posted and trade receivables decreased by ¥872 million.
(Net Cash Provided by Investment Activities)
Net cash used in investing activities totaled ¥1,318 million (compared with net cash used of ¥1,753 million in the same period of the previous year). This was mainly due to the payment of ¥1,436 million for the purchase of property, plant and equipment.
(Net Cash Provided by Financing Activities)
Net cash used in financing activities amounted to ¥424 million (compared with net cash provided of ¥523 million in the same period of the previous year). The major causes included a decrease of ¥873 million in short-term loans payable.
(3) Information on the Future Outlook, Including the Forecasts of Consolidated Business
Results
The Company revised its forecasts for the consolidated business results for the fiscal year ending March 31, 2021 on November 12, 2020, as described below, taking into account the results for the first half of the fiscal year. Net sales are expected to fall below the previous forecast due to a decrease in net sales in the Energy Business Division. Operating income, ordinary income, and net income attributable to owners of the parent company are expected to remain unchanged from the initial forecasts based on the review for each business division, despite net sales falling short of the forecast. The forecast of Consolidated Business Results for the full fiscal year ending March 31, 2021 (From April 1, 2020 to March 31, 2021)
(4) Notes regarding the Quarterly Consolidated Financial Statements (Notes to the Assumption of a Going Concern) : None (Notes to Remarkable Changes in the amount of Shareholders’ Equity) : None
Negative ¥1,744 million for adjustments of Operating income (loss) represents corporate expenses not allocated to reportable segments. Corporate expenses are mainly general and administrative expenses note attributable to reportable segments. (note 2) Operating income (loss) is adjusted to operating loss of quarterly consolidated statements of income.
II  The first half (From April 1, 2020 to September 30, 2020)
l ) Information concerning the Amount of Net Sales and Operating Income (loss) by
Negative ¥1,798 million for adjustments of Operating income (loss) represents corporate expenses not allocated to reportable segments. Corporate expenses are mainly general and administrative expenses note attributable to reportable segments. (note 2) Operating income (loss) is adjusted to operating loss of quarterly consolidated statements of income.
3. Other
Consolidated Net Sales by Division