Condensed Transcript of Q&A Session at MGC’s Medium-Term Management Plan Briefing
Date/time: May 17, 2024 (Friday) 3:00-4:25 pm (hybrid)
Presenter:
Masashi Fujii, President and Representative Director
Motoyasu Kitagawa, Director, Managing Executive Officer, responsible for Corporate Planning and in
charge of CSR & IR Division
Ryozo Yamaguchi, Director, Managing Executive Officer, in charge of Specialty Chemicals Business
Sector
Hideaki Akase, Managing Executive Officer, in charge of Green Energy & Chemicals Business Sector(Note about this transcript)
This document has been translated from the Japanese original for reference purpose only. In the event of any discrepancy between
this translated document and the Japanese original, the original shall prevail.
This transcript was edited for clarity and brevity at the Company’s discretion. Additionally, forward-looking statements, including
plans and targets, contained herein, like those in the briefing’s presentation materials, are judgments based on information in the
Company’s possession as of the briefing’s date and certain assumptions deemed reasonable by the Company. Forward-looking
statements involve uncertainty. Actual outcomes may differ substantially from such forward-looking statements as a result of various
factors.

Q1: You explained that the business portfolio reform is still halfway through. During the last medium-term
management plan period, I think that you broadly carried out all of your stated objectives. However, I feelthat the initial estimate regarding the xylene separators and derivatives business was slightly overoptimistic. Since this issue also affects the downstream chain, could you talk about what action you mighttake there?
A1: During the previous medium-term management plan period, we considered what would happen withregard to xylene separators and derivatives if we were to stop the purified isophthalic acid (PIA). As aresult, we decided to scale down the businesses in tandem with the growth of the meta-xylene (MX)derivative meta-xylenediamine (MXDA), rather than stopping the facility in a way that would cause a hardlanding . In other words, we recognized the overall benefit of the joint production process to make thisdecision.
To explain it again from the basics, the raw material, mixed xylene (RX) is separated into the isomers
paraxylene (PX), metaxylene (MX), orthoxylene (OX), and ethylbenzene (EB). In our case, weestablished a business in MX and MX derivatives. With MX derivatives, in particular, our operations
focused on not only PIA, which is a PET modifier also produced by other companies, but also highperformance products such as MXDA.
RX is fed into a xylene separator, and then the required MX is extracted. Then, xylene, which is rich inresidual PX, is fed into PX extraction equipment . This combination of the xylene separator and the PX
extraction equipment creates a system that can produce competitive MX and PX. Moreover, the xylene
separator has a partial overlap with the equipment for producing aromatic aldehydes, another highperformance product like MXDA. We therefore recognize that there is a benefit in these joint production
processes.
After conducting various case studies, we decided to stop OX and maintain the production of the MXbased PIA, while scaling down the business in step with the growth of other MX derivatives. OX is
extracted last after extracting MX and PX, but by isomerizing it and returning it to xylene, we decided that
we could increase the production efficiency of PX, and therefore to stop the chain from OX downward.
Q2: Is there no need to consider the risk that the graduated reduction of PIA will increase other fixed
expenses? MXDA and so forth will increase as PIA is reduced, so can we understand that you willaddress this once a target is established for that?
A2: Yes, that’s correct.
Q3: With regard to the polycarbonate (PC) chain, you have announced the withdrawal of MGC Filsheet
Osaka Plant; however, I think one of the original reasons for taking a 75% equity stake in Mitsubishi

1Engineering Plastics (MEP) was to improve the overall PC chain. Considering this, what is action are you
likely to take in the future?
A3: As you point out, the reason for taking a majority stake in MEP was naturally to do with making an
overall improvement in the PC business. In the current medium-term management plan, we also have to
move forward with this and the environment is now making this an imperative.
As has happened with many products, the market situation has reached a point that precludes exportingfrom Japan, even if we wanted to, because of the significant production capacities of neighboring
countries. And, although this is also related to the case of Filsheet, in Japan PC demand is not expected
to increase going forward, and is actually decreasing in some respects. Japan clearly has excessive PC
production capacity, and we have to achieve two objectives of right-sizing our production capacity overthe coming three years and figuring out how to put that capacity full use after right-sizing.
While we will eventually achieve these objectives, it will take time for the effect to materialize. We are notexpecting much benefit from the right-sizing under the current medium-term management plan. However,as we right-size our production capacity, we will of course deliver the effects that can be delivered quickly.
Last fiscal year we started concrete steps towards development of products that can benefit from added
value commensurate with our production capacity, and we plan to take the lead on launching suchproducts into the market.
Q4: I think it is MGC’s extremely high-levels of safety and control expertise that enable it to handle harshprocesses using phosgene in PC. That being the case, can we take it that your approach is naturally tofavor the effective utilization of this expertise, and to streamline by retreating from other nonspecialization fields? MEP’s joint venture partners also stated that they would focus on their specialized
fields, and I suppose that when both partners focus on their fields of expertise, a direction appears
naturally in due course. Is this basic idea correct?
A4: We will refine the phosgene method while carefully protecting the methods cultivated by the Company
to date at the Kashima Plant in Japan, TPCC in Thailand, and MGC ENGINEERING
PLASTICS(SHANGHAI) in China. However, we will consider right-sizing production capacity itself. As I
have mentioned, exports seem likely to become tougher going forward, and I suspect that we may haveto think about things in terms of our export-ready production capacity, although we would need to discuss
this with our partners.
Q5: Xylene separators and derivatives were left out of restructuring under the previous medium-term
management plan. This time, does it show that you have done various research and you are confident
that there are no businesses that will require restructuring at the end of the current medium-term
management plan?
A5: With regard to xylene separators and derivatives, to add to my explanation just before, during theprevious medium-term management plan, we initially planned to stop PIA, but with MXDA we had made asignificant investment to build a plant in Europe, and it was necessary to secure MX as a raw material for
it. Of course, we considered external procurement of MX, but any instability at that point would have an
impact on the entire chain, so our first priority was to secure raw materials. Naturally we are aiming forvertical start-up at the Europe plant. If we can achieve that as planned, and secure a reliable supply of
raw material, then we will of course be able to cut out the unprofitable parts. However, the timing isdelicate for determining whether a major decision can be made during the current medium-term
management plan.
With regard to MEP, the Company has taken leadership in dealing with this, and has built an extremely
capable R&D structure and sale structure. However, we aim to approach areas of excess from various
angles, slimming down some parts and right-sizing production, and so forth. Currently, at its base in
China, the Company is delivering high-value-added products such as highly transparent items forautomobiles, to both Japanese and Chinese manufacturers. We will continue to expand sales of theseand we will build a structure for PC that will reliably deliver profits, treating it as a strategic product. We
will avoid becoming embroiled in competition over general items, while focusing on different fields withunique items that have high earning potential. Since this will leave us with excess production capacity, we

2believe we will inevitably have to reduce capacity a little. We cannot state decisively that we will be able
make all operations profitable during the current medium-term management plan, but we intend to try.
Q6: Looking at page 23 of the presentation materials, if net sales for the three ICT businesses (electronicmaterials, electronic chemicals (EL chemicals), and optical materials) increase by 1.5 times over three
years as shown in the materials, that would mean annual growth of around 11%. Given the current
downturn in semiconductors, even a recovery from this would probably be enough to achieve the goal,
but could you tell us if there is any variation in the growth of the three businesses? Is this because, forexample, while electronic materials and EL chemicals will grow in step with the semiconductor market,
optical materials are mainly used for smartphone applications, so this three-year period is a preparation
period for the latter?
A6: As you have pointed out, our plan for optical materials (optical polymer) is not something like doublingsales by investment, but rather to confirm that demand has grown before proceeding. For EL chemicals,on the other hand, the semiconductor market is projected to grow steadily through to 2030, and we are
therefore planning to invest, primarily in North America. We are also encouraged by the expectation ofsubsidies in relation to the CHIPS Act. With strong trust from our customers, we also plan expand sales of
products such as super-pure hydrogen peroxide and super-pure ammonium hydroxide. For electronicmaterials also, we have decided to increase production in Thailand and construction is already underway. Beyond that, with regard to whether we will continue to increase production in Thailand or consider a
new location, our policy will be decided while observing demand growth.
Q7: In the MMA-related business, you are working in a niche field and we recognize that you have astrong competitive advantage. On the other hand, there are issues such as costs such as repair
expenses for the aging Niigata Plant. Your competitors are considering structural reforms such as
stopping MMA facilities. How does MGC position this business?
Also, in the energy resources and environmental business, you are making considerable investments in
iodine production. How much of a contribution do you expect this to make to earnings given theincreasing needs due to the current geopolitical risks?
A7: Compared with other companies, the scale of our MMA business is small; however, we use an inhouse process that is different from that of other companies, and we are focusing on developing ourbusiness in intermediates and derivatives. Generally, we are seen as selling MMA monomer externally,
but there are also hydrogen cyanide, which is a raw material for our electronic materials business, as wellas associated products used for various applications such as solvents for semiconductors, raw material
for agrochemicals, and raw material for coatings. These product groups have considerably high profit
margins. We will strive to increase the ratio of these products, while reducing costs in our processes inlight of the aging of our plant, as you have pointed out. While putting safety front and center, we would
like you to understand that we are currently examining further radical reductions in fixed expenses.
Regarding iodine, the market is buoyant as can be seen from general reports. Japan is the second largest
producer of iodine in the world, and as it is connected to national policy, we intend to continue steadily
increasing production as a strategic product. While there are various competitors in the market,
applications are also steadily expanding, and the Company intends to focus on iodine together withwater-soluble natural gas. In particular, one of the applications is perovskite solar cells, and we have R&D
currently looking at providing this material, which we are accelerating. We expect this business to become
even more exciting going forward.
Q8: With regard to the growth potential of electronic materials, could you confirm that you are expanding
your share in advanced BT materials and that OPE has growth potential?
A8: With respect to the growth potential of electronic materials, the semiconductor market has recently
experienced a major slump, but we do not anticipate such a slump during the three years of the current
medium-term management plan. We see a steady growth trend, and since the domains forsemiconductor use are themselves expanding we are certain that the market will grow naturally. It isdifficult to say which field will expand first; but to start with, we think there is a high certainty of growth insmartphones and PCs, although this is a conventional area, including the prospect of continued3

replacement purchase demand. With smartphones, in particular, we have seen an impact in recent years
as Chinese smartphones have started to use various semiconductors, which is partly due to the effect of
the number of these units.
Regarding OPE, we are certainly seeing expansion in demand. However, the market is still small. Even if
it were to double or treble in size, it would still be small overall. Furthermore, this is an area where various
technological innovations are taking place, and the market has yet to see the emergence of a de facto
standard. As such, we see an unpredictable element here, and we are currently following a plan tomaintain a certain solid base level while adding only reliable extras.
Q9: Estimating the depreciation and amortization for each business sector based on EBITDA from page
16 of the materials, it looks like depreciation and amortization is going to increase sharply for the Green
Energy & Chemicals Business Sector. Investments in this business sector are often large in scale, andthis is probably unavoidable to some extent. However, I would like to hear why you have increased
investment to this extent. Also, could you explain why it is necessary to make even larger investments inthe lead up to 2030?
A9: We have made significant investments in our strategic products, aromatic aldehydes and MXDA, andwe will therefore see a corresponding increase in depreciation and amortization. There is a strong
infrastructure component to the applications for these products. We cannot expect to recover theinvestments immediately, but we believe the products will enable stable recovery of the investments. We
intend to steadily recover our investments while expanding sales of downstream derivative products, 1,3BAC and MX nylon.
Looking at investments going forward, we recognize that we have secured the necessary production
capacity for aromatic aldehydes and MXDA for now. We have two production sites for MX nylon—Niigata
and MGC Advanced Polymers, Inc. in the United States, and we will examine further investments with theintention of strategically expanding sales.
Q10: Will the investment in MX nylon be a large-scale investment?
A10: This plant expansion makes use of shared facilities, so we do not expect the investment to be large.
Q11: My question is about capital investment. There is an extremely high level of investment in EL
chemicals, is this simply a coincidence of timing? Or are you actually seeing more demand than everbefore? Also, on page 25 of the materials, you have stated that you have a plan to increase production
capacity by 1.7 times over six years, which is an annual increase of around 9%. Can we assume a similar
increase in sales?
A11: The growth in sales will be around the same level as the increase in production capacity. We havestrong customer demand over the medium to long term, and our plan is to increase production capacity
accordingly.
Q12: My question is about the methanol business. Could you please explain your measures to increase
profitability and measures to stabilize earnings, including equity-method affiliates.
A12: In the methanol business, we recorded an impairment loss for CARIBBEAN GAS CHEMICALLIMITED (CGCL) in the previous fiscal year. However, we have not changed our basic structure for otherjoint ventures. CGCL is expected to show an improvement in profits going forward due to recording theimpairment loss. Since methanol demand is for basic chemicals, we expect it to recover gradually going
forward. On the supply side, we have plans to build two new plants at other companies this year ;however, there are no other plans during the medium-term management plan. In terms of the balance of
supply and demand, the market is picking up and we plan to see earnings improve as well.
Q13: For EL chemicals, how do you view the situation with respect to competitors increasing theirproduction facilities? Also, when you make an investment, could you explain what kind of consultation
process do you have with customers to reach the point of deciding to invest?

4

A13: Other companies have announced their plans to invest in South Korea. In North America, there
have been no announcements, so we have not been able to confirm. We have been invested in North
America for a long time, and construction expenses there have increased two- to three-fold overcompared with 10 years ago. We invested in North America at an early stage, and has already built abase there, which is a strong point for us. I think that having a base built up from before is what makes it
possible to increase our investment there. It would be difficult to enter North America for the first time
without an existing base.
As to our investment decision making process, this construction to expand the facility requires more
additional costs than 10 years ago. We negotiate with customers by asking them to help bear the cost inorder to make the investment decision.
Q14: Is some of the capacity in this facility expansion guaranteed with long-term contracts?
A14: We expect long-term contracts as a basic requirement.
Q15: Companies that abandon unprofitable businesses are also appearing in Japan. Last fiscal year you
invested 40.0 billion yen in the former Basic Chemicals (GEC) business sector, which has a low profit
margin. This would not increase ROE or ROIC. Don’t you think this is not an example of managementwith an awareness of the cost of capital and share price?
A15: With regard to GEC, we are sorting out our businesses in order, starting from where we can, and weare also proceeding with stoppages. On the other hand, within GEC there are also products that haveearning capability like MXDA, so we will continue to grow these. In addition, in the field of chemical
products that are environmentally friendly and in harmony with society, we believe that we can achieve
profitability using our unique characteristics. For example, as we work to realize CCS, we aim tosequester 1.5 million tonnes of other companies’ CO2 emissions per year in East-Niigata area.
Furthermore, shipping companies are seeing movement towards purchasing 1,000 USD green
methanol , and 260 methanol-powered vessels have been ordered worldwide. Since we can expect 260
methanol-powered vessels to begin operating around the world, demand for green methanol is likely toincrease. While this has been a basic chemical until now, we see potential for it to be transformed into ahigh-performance product. With a view to that kind of future, we will incorporate CCS as we make thenecessary investments to advance our preparations.
We are expecting steadily rising, linear growth in the semiconductor market through to 2030. Given thelarge number of data centers that are to be built, there is shortage of electricity. To provide clean
electricity, various hydrogen sources such as methanol and ammonia will be needed. We are also
working on technologies such as methanol fuel cells, and going forward we intend to develop ourbusiness while focusing on the changes in electricity demand.
Products such as EL chemicals and electronic materials are at the heart of the expanding semiconductor
market and can therefore be expected to grow significantly. We consider our plan to achieve net sales of
1.2 trillion yen by 2030 including GEC growth to be fully achievable, and we will work with determinationto achieve it.

5