Notice Regarding Recording of Non-Operating Income (Derivative Valuation Gains)

Regarding the Recording of Non-Operating Income (Derivative Valuation Gains)

During the first quarter cumulative consolidated period of fiscal 2026 ending November (December 1, 2025 to February 28, 2026), due to fluctuations in exchange rates, Sala Corporation recorded derivative valuation gains of 313 million yen related to forward exchange contracts as non-operating income. This relates to the mark-to-market valuation of forward exchange contracts concluded by consolidated subsidiary Sala e-Power Co., Ltd., associated with purchase contracts for foreign currency-denominated imported materials. These forward exchange contracts are long-term, spanning from 2017 to 2039, and are managed with the objective of reducing cost volatility risks in its stable electricity sales business utilizing the Feed-in Tariff (FIT) system.

Treatment of Valuation Gains/Losses on Forward Exchange Contracts and Dividend Policy

Derivative valuation gains and losses represent the mark-to-market valuation of unsettled contract balances at period end, with reversal of prior period valuation amounts and recognition of the current period valuation. In the first quarter of fiscal 2026, valuation gains of 313 million yen were recorded; however, since these gains and losses are fully offset in profit and loss, the cumulative balance is zero yen. The basic dividend policy aims to maintain dividend levels at least equal to the previous period while targeting a consolidated payout ratio of 40% or more excluding the impact of derivative valuation gains and losses related to forward exchange contracts.