4Q FY2018 Tokuyama Corporation Investor Meeting
Q&A (Excerpts)

Date and time: April 26, 2019 (Friday) 12:00 – 13:00
Participants:
Hiroshi Yokota, President and Representative Director
Akihiro Hamada, Director

1.

Question regarding FY2018 operating profit.

Q1:

Your operating profit was lower than the Company’s forecasts. Please tell me the reasons behind nothaving achieved your forecasts for operating profit in Specialty Products and Chemicals, as well as
for the overall slowdown in the 4Q.

A1:

Overall, there were unforeseen problems at power generation plants and other factors, andproduction volume of products fell companywide. At the start of the fiscal year we had planned forabout a 10% increase in Specialty Products’ polycrystalline silicon volumes compared to theprevious fiscal year. Actually, though, we could not get there. Having been impacted by the device
slowdown in the January to March period, delivery of high-purity chemicals for electronic
manufacturing did not rise to expectations. In Chemicals, the mild winter was behind sales volumeof calcium chloride, a mainstay product in the second half, significantly underperforming againstexpectations.

2.

Questions regarding FY2019 operating profit forecasts

Q2:

Isn’t your operating profit on the low side? Aren’t you being conservative in setting your sales prices
and raw materials and fuel costs?

A2:

Export prices in FY2018 for caustic soda fell dramatically on the impact of India’s importregulations for chemical products, but as the certification process between the Indian authorities andJapan’s makers is proceeding, we see a recovery within the first half. Demand continues to be strong,and going forward we see a recovery to about the $450/ton range. The price of caustic soda in Japanis basically holding steady at the previous fiscal year’s level. Despite gaining the acceptance of pricehikes for last year’s top product, unfortunately, we were not able to sufficiently reflect that increasefor polycrystalline silicon prices to earnings due to higher costs that resulted from higher metalsilicon prices and the trouble at power generation plants. In FY2019 we plan for that price rise
portion to contribute to earnings, but the range won’t be a dramatic increase, such as with wafers.
As for the setting of raw materials and fuel prices, we set the price for naphtha at ¥44,000. The
bottom of the coal market has fallen out, but from FY2018 we are setting coal at a high price.
Moreover, raw salt is rising in FY2019 compared to last year.

Q3:

Please tell me about the increases in operating profit for each division.

A3: In Chemicals, we see several hundreds of millions of yen with calcium chloride, and having madetweaks to the chlor-alkali products it should be an increase to the ¥1 billion range, providing we canreturn to running at full capacity. In Specialty Products, we project it to be positive given silica andthermal management materials, and these two areas should account for 70% to 80% of ¥1 billion inincreased profit. The Life & Amenity segment contributes 75% of the healthcare-related (plastic
lens-related materials, pharmaceutical ingredients and intermediates, dental materials, and medical
diagnostic systems) sales increase. In terms of revenue, for healthcare-related products and films usedto package foods (Sun・Tox Co., Ltd.), we have a good feeling to revise selling prices and increase
volumes, and these are being factored in.

Q4:

Why is it that recovery in the Others segment has slowed in FY2019?

A4:

Given that plants are kept running at full capacity, we see that electricity sales volumes do not grow.
Figures for electricity sales are projected to be on par with the previous fiscal year.

3.

Questions regarding polycrystalline silicon

Q5: Please tell me about the current demand situation.
A5:

As it is right now it hasn’t changed significantly from a half year ago. However, demand will tighten
when 5G gets rolling. Although semiconductor wafer makers are treading water, their stance is very
positive, and they are listening to what we have to say. It is for reasons such as these that going
forward, we think that demand will tighten.

Q6:

Please tell me about your FY2019 plans for polysilicon shipping volumes.

A6:

We plan for an increase of sales that is roughly 10% higher than FY2018 levels. (Figure is notdisclosed.)Q7: Given Tokuyama’s investments for polycrystalline silicon quality, to what extent can Tokuyama’squality go beyond that of other companies in the same industry?
Q7: Well, that doesn’t mean we are going to jump far out ahead. There are makers in Germany that are also
striving to raise quality through very aggressive investments. Our investments into quality will notnecessarily widen the difference, and we are aware that we are competing against other companies.
Consequently, there is the possibility that if we stopped making investments into quality, we would
fall behind other companies. First, so as not to lose, our understanding is that this is a situation offierce competition.

Q8:Including this fiscal year, what is the trend with the amount of investment into quality?

A8:

I am not sure if it goes into the billions of yen every year, but we see that it will be necessary to makeannual investments in the range of hundreds of millions of yen.

Q9:

You haven’t mentioned investments to boost production, but is that because your price hikes wereinsufficient?

A9:

We foresee that demand will grow. While making gaining the understanding of our customers about
pricing as a prerequisite, basically we are considering expansion, but have not yet made any
decisions.

4.

Questions regarding the Life & Amenity segment

Q10: Net sales of healthcare products (eye glasses, pharmaceutical ingredients and intermediates, dentalmaterials, and medical diagnostics) are currently at ¥23 billion, but to what extent do you see that
expanding by in FY2025? And within that, please tell me your thoughts on your sense of scale withregard to new products for dental materials.
A10:

In FY2025 we would like to aim for a ¥60 billion figure. It is still in the future, so there is risk, butbecause we have been able to obtain a ground-breaking product relating to dental materials, wereceived top accolades a recent exhibition in America. Every week we receive an increasing volumeof orders, and the situation is such that production can’t keep up and we run out of stock. The supplyof raw materials is falling behind so we are currently this fiscal year making investments into theKashima Factory, and we have also started to consider a second round of investments. Regarding
dental materials, we are thinking that we would like to triple scale in the near future. For other fields,
particularly pharmaceutical ingredients and intermediate peripherals, we have focused on generics,
but going forward we would like to bring the business to the ¥10 billion level with drug discovery

and development of supplements, animal-related products and others.

Q11:

You’ve said that pharmaceutical ingredients and intermediates would enter fields such as drug
discovery, supplements, cosmetics and others, but would these be with your company on astand-alone basis? Or would they be expanded upon while leveraging external capabilities gainedthrough business tie-ups, M&As or other means?

A11: Basically, we are considering a variety of steps, including tie-ups with external partners. There is one
possibility in particular to consider, and that is supplements, the making of combinations with products
from fields of technology that we don’t possess. There’s also manufacturing. As we will shortly be at
maximum production capacity at the Kashima Factory, when we take into consideration enhancing
GMP facilities in accordance with production capacity and lineups, we believe it will be necessary for
us to move forward on considerations with an eye toward collaborating with other companies.

5.

Question regarding the cement segment

Q12: Please let me know about your FY2018 results with regard to the cement price hike, andyour outlook for the future.
A12: We were dissatisfied with our push for an over ¥1,000 per ton price increase. Actually, it turned out tobe nothing more than a few ¥100 coins. The situation is that we continue to petition for a more
substantial additional rise in the future. The budget hardly factors in any price hike, so if we canachieve that it will be a positive factor.

END