JALUX Inc.
Financial Results Briefing for the Fiscal Year Ended March 2021
June 1, 2021

Event Summary[Company Name]JALUX Inc.

[Company ID]

2729-QCODE[Event Language]

JPN[Event Type]Earnings Announcement[Event Name]

Financial Results Briefing for the Fiscal Year Ended March 2021

[Fiscal Period]

FY2020 Annual[Date]

June 1, 2021

[Number of Pages]

32[Time]

11:00 – 11:23(Total: 23 minutes, Presentation: 23 minutes)[Venue]Webcast[Venue Size][Participants][Number of Speakers]

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Masashi Shinohara

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Presentation
Shinohara: My name is Masashi Shinohara, President of JALUX Inc. Thank you for joining us. Today, under
the Declaration of a State of Emergency, we are holding an online meeting. I am going to explain ourconsolidated financial results for FY2020 and the outlook for fiscal 2021.

Please look at page 4. This is a summary of the FY2020 ended March 2021. In the year, our businessperformance was severely affected by the spread of COVID-19. The impact was far greater than we had
anticipated.
At the start of fiscal 2020, we established 3 basic policies after considering a possible impact of COVID-19.
The first was to focus on defensive management. The second was to aim for a well-balanced profit structure.
The third was to further improve corporate governance. We made steady progress in the above 3 initiatives.

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Next is the consolidated profit/loss situation.
Net sales were JPY80.3 billion, a YoY decrease of JPY64.3 billion. We saw operating loss of JPY2.9 billion,
down JPY6.9 billion YoY. Ordinary loss was JPY2.4 billion, down JPY7.1 billion YoY. Net loss attributable toowners of parent was JPY2.3 billion, down JPY5.4 billion YoY. We incurred the harsh results as you see.
The main reasons were significant declines in sales in aircraft engine parts, sales at airport shops, and thoseat duty-free shops.

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Next is a comparison with the earnings forecasts announced on October 30, 2020.
Net loss was JPY2.3 billion, worse than the forecast of loss of JPY2.1 billion. This was due to the second Stateof Emergency Declaration issued in Q4, and the reporting of restructuring costs in anticipation of the postCOVID-19 period.

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4Next is the breakdown of SG&A expenses.
There was a total of JPY15.4 billion as a result of every possible cost reduction effort. The amount was down
JPY6.4 billion YoY.

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Next is the consolidated balance sheet.
Net assets attributable to owners of parent totaled JPY23.5 billion, a YoY decrease of JPY2.9 billion. This wasdue to the net loss of JPY2.3 billion for fiscal 2020 and dividend payment of JPY600 million.

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Next is the financial status.
As a result of our defense-oriented management, we saw a capital adequacy ratio of 44.9%, interest-bearing
debt of JPY13.9 billion, and a NetDER of 0.23x. We believe that we have maintained a certain degree offinancial soundness.

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Next are consolidated cash flows.
Cash flow from operating activities was a positive JPY3.8 billion. Cash flow from investing activities was anegative JPY592 million. As a result, free cash flows were a positive JPY3.2 billion. Cash flow from financing
activities was a negative JPY917 million due to a decrease in borrowings. That is all.

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8Next, you can see our business performance trends for the 9 fiscal years from FY2012 to FY2020. This graphshows how severe fiscal 2020 was for our company.

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9Next, you can see the changes in ROE, ROA, and dividends.
Due to the net loss of JPY2.3 billion for fiscal 2020, we have decided not to pay a dividend for the year.

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10Next, I will explain the results by business segment.
Net sales for each segment are shown.

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The composition of segment sales is also as shown here.

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12Next, I will explain the results for each segment.
First, in the aviation & airport segment, ordinary loss was JPY618 million, down JPY2 billion YoY. This wasdue to the weakness in the aircraft engine parts business, a write-down of aircraft parts inventories, and aslowdown in the overseas airport operations business.

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Next is the Life Service segment.
Ordinary profit was JPY902 million, representing a YoY increase. This was due to strong performance in thereal estate and insurance services businesses, as well as one-time dividend income and sales of anti-COVID19 hygiene products.

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In the retail segment, ordinary loss was JPY2.3 billion. It was a significant YoY decrease of JPY4.2 billion. Thiswas due to the struggling performance of the airport store business "BLUE SKY", the duty-free store
business "JAL DUTYFREE", and duty-free wholesale sales amid the significant restrictions on human
movement and contact due to the spread of COVID-19.
On the other hand, "JAL Shopping", a mail-order service, and gift food products at department stores
performed well due to the increased preference for shopping at home.

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Finally, the food & beverage segment.
Operating loss was JPY533 million. It was down JPY88 million YoY. The spread of COVID-19 affected areas
where there is a large amount of human movement and contact such as restaurants and hotels. And as aresult, it had a significant impact on or business areas of marine products, agricultural products, wine, andprocessed food and food manufacturing.

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Next, in the medium-term management plan that ended in FY2020, we had targeted ordinary profit of JPY8
billion for the final year. However, due to the peak out of inbound demand and the failure to conductbusiness investment as planned, our forecast for ordinary profit for FY2020 would have been JPY6.2 billion
even if there had been no impact of COVID-19. Actually, the COVID-19 impact was a negative JPY8.6 billion,
resulting in the ordinary loss of JPY2.4 billion in FY2020.

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Next, I will explain our consolidated earnings forecasts for fiscal 2021.
Please refer to the matrix that analyzes and organizes the COVID-19 impact on the JALUX Group.
As the spread of COVID-19 infections greatly restricted the movement and contact of people, it had a major
impact on the aviation and airport businesses. It also had a significant impact on the non-aviation and nonairport businesses, such as seafood and wine, which have large transactions with restaurants and hotels aswell as confectionery and boxed lunches for transportation-related retailers.
On the other hand, the business areas where the COVID-19 impact was small or, conversely, it had a positive
impact are the D areas circled in red on the slide. First is the wholesale business for the retail industry. Next
is the e-commerce business. These are all due to the increase in at-home demand. We believe that thepotential for sustainable growth and enhancement of our corporate value lies in these business areas, andwe implemented various strategies in these areas in fiscal 2020.
At the same time, we have been promoting a market expansion strategy for our businesses of restaurants,
bars, and hotels into the new markets such as the retail market and the e-commerce market.
And in the e-commerce business, with an eye on the post-COVID-19 era, we are working to expand the scaleof our business through digital transformation.

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On the next page, I will explain what we think about the 2 businesses that contributed greatly to the Group's
earnings, although they have been forced to struggle due to the significant impact of COVID-19.
First is "BLUE SKY" airport store business.
Although the business used to generate large profits, competition from other companies has become fierce.
Therefore, as our strategy for the post-COVID-19 era, we are working firstly on a fundamental businessstructure reform and secondly on gaining a competitive advantage. Specifically, by flattening theorganization we are trying to share important data such as those on purchases, sales, and product mix andimprove our performance by rotating the PDCA cycle in a timely and speedy manner.
We will optimize the following 3 items by utilizing the critical data. First, we will increase customer
satisfaction by optimizing products. Next, we will reduce food losses by optimizing purchasing. Thirdly, we
will increase productivity by optimizing staffing and shifts.
And as part of our rationalization efforts, we will scrap some stores.

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Next, I would like to talk about the "JAL DUTYFREE" store business.
This business also used to realize significant revenues with the increase in inbound tourism. However, inshort, I believe that now is the time for patience for this business. This is because it is said that it will take aconsiderable amount of time for global passenger demand in aviation to recover. In July 2020, IATA
announced that a recovery to pre-COVID-19 levels is expected in 2024. Therefore, we will continue ourefforts to reduce costs.
Meanwhile, our main customer base is in East Asia. We believe that the recovery of inbound tourism from
East Asia will be faster than the worldwide recovery, so we will steadily prepare for the early recovery in theregion.

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I will add some more explanation about our efforts in the non-aviation and non-airport business areas.
The aim of these initiatives is to reduce concentration risk and to work towards our growth strategy. The
first is the project for regional development and the so-called sixth-order industrialization; revitalize theprimary industry by leveraging the secondary, or manufacturing, industry and the tertiary, or service,industry. We have decided to focus on the food business, where we have abundant management resources
since our group has built them up over the years. We will work on a multifaceted approach to sustainablelocal economic development and businesses directly related to sustainability through food, using apartnership strategy with local governments and retailers.
The growth strategy for this project is to multiply the product lineup and the retail shop lineup. First, in
terms of expanding our product lineup, we are pursuing a partnership strategy with local governments.
Secondly, for the expansion of our retail shop lineup, we are proceeding with a partnership strategy withretailers.
The next step is to strengthen the retail e-commerce business by introducing DX, digital transformation. We
will proactively introduce digital technology to e-commerce sites such as "JAL Shopping", a mail-orderbusiness, and "JAL Furusato Nozei", a hometown tax service. By a more sophisticated understanding andanalysis of consumer trends, we aim to increase the added value we provide to our customers and quickly
expand the scale of our business.

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I will explain our business forecasts for fiscal 2021.
First of all, as a premise for the business forecasts, we assume that the severe business environment willremain unchanged as the spread of the COVID-19 continues. Next, regarding vaccination, which is the key toending COVID-19, the first thing to note is that securing the quantity of vaccine is progressing. Second, we
assume that the progress of vaccination will move from confusion to expediting and that there will be arecovery trend toward the end of the fiscal year. Furthermore, passengers on domestic flights will begin to
recover from Q2 onward, while the trend of international passenger traffic is highly uncertain.
We forecast net sales at JPY110 billion, operating profit at JPY300 million, ordinary profit at JPY200 million,
and profit attributable to owners of parent at JPY100 million. For the current fiscal year, we expect to turninto the black. It will depend on how quickly vaccination progresses in the future, but we will continue toaim for even higher levels.

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The forecasts for segment sales are shown in the table here, and I will explain the details of each segment
later.

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First, the aviation and airport segment.
We expected ordinary profit of JPY100 million. This is due to a recovery in the aircraft engine parts sales
business and an increase in profit from the absence of a one-time loss from the write-down of aircraft partsin the previous fiscal year. Meanwhile, equity in earnings of affiliates from the overseas airport operation
business is not expected to recover significantly.

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Next is the life service segment.
We forecast ordinary profit of JPY600 million. This is because the real estate business and the insurance
service business will be flat YoY, there will be a rise in sales and rationalization in the road-related materials
and equipment business, and a decrease in profit in reaction to the one-time dividend income and businessgenerated in the previous fiscal year.

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Next is the retail segment.
We expected ordinary loss of JPY1 billion. This is because, first of all, passenger recovery on international
flights will take time so the business environment for "JAL DUTYFREE" shops will remain difficult. On theother hand, due to the recovery in domestic passenger traffic, the "BLUE SKY" domestic airport store
business is expected to get out of the red ink. In "JAL Shopping", we will expand products to meet increasing
demand for home shopping and expect an increase in profit. We also expect a profit increase due tobusiness expansion and growth of the "JAL Furusato Nozei" hometown tax service. This is what we expect
for the retail segment.

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Finally, the food & beverage segment.
We expected ordinary profit of JPY200 million. We expect that demand from restaurants, bars, and hotels
will gradually recover from Q2 onward. We will strengthen wholesale sales to supermarkets, a non-aviationand non-airport business area. By promoting the regional development and the sixth-order industrialization
project, we expect to discover, develop, and expand sales of local products. This is what we expect for theretail segment.

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Lastly, I will explain our approach to sustainable growth.
Our basic policy is to position the promotion of innovation and sustainability as the 2 drivers of ourmanagement strategy: aiming for both a short-term recovery in business performance and sustainablegrowth over the medium to long term.
First, in terms of promoting innovation, we will accelerate our efforts in areas that are derived from existing
businesses and those that have merged with existing businesses. We will actively introduce and utilize
digital technology to grow businesses such as "JAL Shopping" and "JAL Furusato Nozei". We will also
promote the challenge of open innovation.
Next, with regard to the promotion of sustainability, we will work to solve environmental and social issues,
aiming for sustainable growth of the Group, and promote sustainability management to realize a prosperous
future.
This time, we have identified 5 materialities, key issues. As part of the materiality identification process, we
conducted a number of internal and external interviews and have analyzed, discussed, and passed
resolutions for relevant issues from the perspective of stakeholder expectations and requests and theimpact on the Group.

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The two pages are the detailed explanation posted on our website on May 25.

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That is all for my explanation. Thank you very much for your kind attention.
[END]______________
Document Notes
1.
2.
3.

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This document has been translated by SCRIPTS Asia.

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