April 30, 2021
Pacific Industrial co., ltd.

Summary of Questions & Answers for Financial Results Briefingfor Year Ending March 2021

《Results for FY2020》
Q：Please tell us the points of change from the previously announced values in the
Q4 results for FY2020.
A：As for Q4, profit from the previously announced value is positive due to anincrease in sales volume of 700 million yen, an additional 200 million yen forimprovement, and a decrease in depreciation cost of 400 million yen due toinvestment restraint.
Q：Q4 and Q3 of the last fiscal year saw almost the same level of sales andprofits. Operating profit margin is 6% to 7% as the result of the stamping
business, but can we consider that is actual ability?
A：If there is a certain amount of product volume, the fixed cost gets diluted andprofit margin will be high. The increased production volume of Toyota, our main
customer, led to a decrease in fixed cost ratio, and in addition to that, we madesignificant improvements. Those resulted in a 7% of profit margin.
《Plan for FY2021》
Q：For the plan of FY2021, both sales and profits look very bearish because there
are some deviations between the second half of FY2020. I would like to know
more about each of these assumptions and the background.
A：This assumption is based on Toyota's production volume of 3.2 million units
per year. We have made a slightly conservative assumption, considering theimpact on current semiconductors and the impact on material suppliers.
For selling price, although there were almost no price revisions on Toyota's
part in the first half of the previous fiscal year, this is because we haveassumed that there will be annual price revisions as usual this fiscal year anddue to the influence of scrap prices. In the previous fiscal year, the portion of
the price revision that was recorded as positive due to the influence of scrap
prices became negative in this fiscal year, so the difference in selling prices islarge.
Expenses have increased by 2 billion yen, but the breakdown is thatdevelopment costs are about 300 million yen, equipment maintenance costs

that were suppressed in the previous fiscal year are about 600 million yen, andexpenses increase due to physical quantity increase is about 800 million yen.
Depreciation expenses are expected to increase by 1.5 billion yen because weare investing more than depreciation. As a way of spending money, we would
like to spend money on preventive maintenance and safety measures to createa workplace where employees can work safely and securely, in addition tomaking effective investments and recording development costs for the future
by stabilizing current production more.
If it were not for the impact of automobile production and semiconductors
from COVID-19, we believe that the volume of goods would be a little higher.
Q：The level of operating profit margin is 6% both in the result of previous year
and the plan for this term as an annual average, but it fluctuates from 5% in
the first half to 7% in the second half. Considering the current COVID-19
pandemic, what level do you consider to be your company's level ofcompetence?
A：As for operating profit 6% for FY2021, as I mentioned earlier, expenses anddepreciation will be added this fiscal year, so we think it may be a little higher.
things that our company should strive to do basically is to minimize theincrease in expenses as much as possible and to reduce the increase in laborcosts. We are now planning for a cost improvement of JPY2.8 billion, which isalmost the same level of improvement as in FY2020. With that cost
improvement plus more, we will strive to control expenses and labor costs.
Q：In the market environment of the current fiscal year ending March 31, 2022,
there is a global shortage of semiconductors and supply becoming tight. Also, I
think the resin material has been dragging on for a long time, partly due to theseries of cold spells in Texas during the winter. How much of a risk do you
evaluate this? I believe that the price increase of materials will also have animpact on your performance.
A：Currently, our products are not affected by the shortage of semiconductors. I
think the impact on future production for Toyota will be limited. For material
procurement, at this point we don’t consider any impact on our company. We will
be looking into the supply chain and alternatives, and we are going to preparefor stable procurement.
We have included a negative figure of JPY0.8 billion in material prices. This isdue to the increase in the price of resin materials, brass and copper.
Q：When looking at the market environment for automobiles, I think that Toyota,

your major customer, continues to perform well and will be pulled up to someextent by that. How do you see this?
A ： In terms of the global automotive market, Toyota, our main customer, iscontinuing to produce at a very stable and high level not only in Japan but alsoin China, the US and other countries. We believe that the stamping and moldingbusiness will be on an upward trend in 2021.
On the other hand, in the valve products business, since we have a lot ofbusiness outside Toyota, when we look at the data on the future production
outlook on a global scale, we expect a slight decline. Due to the impact ofsemiconductors and other factors, and European manufacturers are seeing adownward trend in production. However, I have heard that supply and demand
will recover after this summer, so I believe that things will recover in the second
half of the year.
《Work for ultra-high tensile》
Q：As for mass-producing parts for the 1.5 giga of high-tensile materials in coldstamp, are you actually at the stage of mass production?
A：The 1.5 giga, or 1470 MPa material, which will be used in the mass productionof the car models that will be launched this year, is going to be adapted.
Therefore, we have completed the planning of the facilities and technology
related to this project.
Q：From the perspective of LCA (Life Cycle Assessment), is the trend in the world
shifting from hot stamping to cold high-tensile steel?
A： From the perspective of LCA, hot stamping uses a lot of energy, of course, so
it is well known that cold stamping is superior. LCA discussions have been rising
recently, and customers feel that they are shifting from hot to cold faster thanever before.
However, since hot stamping is superior to specific parts such as securing theshape, we have established a hot stamping line with the minimum investment
required in Japan and the United States, and will proceed strategicallydeveloping technology centered on cold ultra-high tensile strength steel.
Q：Technically for the 1.5 giga materials, you say that your company is clearing
the issue, but is the situation similar in other companies? Also, are there anychanges in the way you collaborate within the group?
A：The 1.5 giga material will be used for the first time in the customer's vehicle,
but I don't think we will be able to fully deploy the 1.5 giga material yet.
Whether 1.5 giga material is adopted depends on the idea of the body shell of

the car type, but we think that 980 MPa material and 1180 MPa material will bemainly adopted, and 1.5 giga material will be adopted depending on the part.
For specific parts, by using 1.5 giga material and thinning the material cancontribute to weight reduction. The flow of using cold ultra-high-tensile steel
where it is needed will speed up.
In terms of collaboration with customers, we have an additional server thatcan perform collision analysis and we are establishing evaluation methods
within our company that allow us to take on the kind of work that ourcustomers have been doing so far and satisfy them with components that areeasier to make and perform better. In that sense, I think we can contributemore than ever to the future development of vehicles.
《Valve development》
Q：Please tell us how much the control valve business for heat pump type car airconditioners is contributing to sales and profits.
A ： We have been doing a lot of development with car air-conditioning parts
manufacturers that we have been doing business with not only in Japan but alsoin Europe and the United States. Right now, we are working on specific part
design, functional evaluation, and performance evaluation. I think it will takeabout 3 years before it contributes to sales and profits.