July 27th, 2022
Pacific Industrial co., ltd.

Summary of Questions & Answers for Financial Results Briefing
for Q1 Year Ending March 2023

《Results for Q1》
Q1：Are there any one-time expenses incurred in 1Q? Especially in Europe and theU.S., where profits declined in the previous year's QonQ, what are the factors
behind this?
A1：There were no special one-time expenses incurred in 1Q.
As for business performances in Europe and the U.S., sales increased due tothe effect of exchange rate with the yen’s depreciation, but the production
volume decreased.
In addition, the production fluctuations of our customers have been significant,and the increase in their labor costs and expenses has been a factor in the decline
in profits.
Q2：Until the Q4, I think you have successfully controlled costs in response toproduction fluctuations. In this Q1, repeated production fluctuations caused
profitability to decline because fixed costs were beyond the limit of control. Is it
correct to understand？
A2：Your understanding is correct; the business environment from Q4 FY21 to Q1
FY22 was very challenging due to several production fluctuations and thefurther impact of material and energy prices hike. In this Q1, we have focusedon cost control not only in Japan but also in overseas companies, and wecontinue our efforts in Q2, especially in July and August, as the same situation
continues.
Q3：I understand that for the stamping business, the burden of raw material pricefluctuations does not arise, and for the valve business, are you able to pass onmaterial price fluctuations to selling prices?
A3：As you understand, there is no burden for stamping business, because theraw material price is linked to the selling price. As for valves, we have been
persistently negotiating with each customer since last year, and theaccumulated efforts are gradually becoming apparent.
《Forecast for FY2022》
Q4：Regarding the assumptions for the Q2 forecast, please let us know how youhave factored in the current situation. Both sales and operating income are notexpected to change significantly from Q1.
Is it correct to understand that the forecast is based on the following
assumptions?
Due to fluctuations in Toyota's production levels, the environment in Q2 will notchange significantly from Q1. Therefore, earnings will not move much from Q1
to Q2. Recovery will start in the second half of the year.
A4：In Q1, production was on a downward trend, especially in Japan; in Q2,production is on an upward from Q1, but has not recovered as much as initiallyexpected. For the second half of the year, we are assuming a production
volume close to the initially planned figure.
In addition, the financial results of Chinese companies are delayed by threemonths, so the impact of the suspension of Toyota's production in China due tothe Shanghai lockdown will be included in the Q2 results. Although Japan andNorth America are on the road to recovery, we expect Q2 performance todecline for the Asian segment, especially China.
Q5：There have been reports that Toyota will not be making regular price-cut
request for the second half of the year; have these been factored into yourforecast?
A5：No. We have not incorporated the assumption of that. If no price-cut request,
we believe there would be a slight positive impact.
Q6：Could you give me your impression on the certainty of a production recoveryafter September, whether it should be viewed as firm or whether there is still arisk of a slight shift? Should we expect to move into a phase of more-than-normal
production, such as a recovery production phase, around the end of the period?
A6：Although our judgment is based on the information we now have, we do notbelieve that production will return to normal levels all at once, but rather that it
will recover gradually from September onward. What we need to do is to makesure that we can demonstrate the effects of the improvements we have made so
far when production volume recovers, and since we secured personnel in Japanand overseas based on the assumption that production would recover in the Q1,we will closely monitor trends so that we can operate our business with theappropriate number of personnel when production recovers.
Although we do not have definite information on recovery production, weexpect that production will be at normal levels or even higher in the second halfof the year or later. We will continue to prepare our production system based on
the assumption that production will recover, and we will continue to implement
cost controls etc. to ensure that we can withstand production fluctuations.

Q7：This time, operating income for valves has been reduced for the full year.
What is the background and how do you see the second half of the year?
A7：We are forecasting a decrease of more than 1 billion yen for the full year fromthe previous forecast. As for global automobile production, we are assuming adecrease compared to the previous forecast. The biggest factor behind thedecrease in profit is the production volume down due to this.
Other factors include the impact of material price hike, it's higher-than-expected,
which is a factor in the decrease in profit, although there is some positive effectof exchange rates due to the yen's depreciation.
Q8：Comparing the factors for the increase/decrease with those at the beginningof the term, we understand that there has been no major change. Is it correct
to assume that this is due to the large impact of marginal profit accompanying
the decrease in sales volume and that profits will increase steadily once theproduction volume returns with continued cost control?
A8：The largest factor in the decrease in profit from the initial forecast is the impactof the production volume down. Although sales have not been revised, theexchange rate assumption has been changed from 120 yen to 130 yen from Q2
onward, and the exchange rate difference due to the weaker yen alone is anincrease of over 5 billion yen. Almost the same amount is due to the sales volume
down. Since this decrease in volume is the main reason for the decline in profits
compared to the initial forecast, profits will also increase if volume recovers.
Q9：Please explain the background behind the 1 billion drop in the operating income
forecast for the second half of the year compared to the previous forecast.
A9：We have factored into our current forecast a decrease in profits due to higher
material prices and an expected increase in expenses due to higher energy costs.
These effects are larger than planned at the beginning of the period.
Q10 ： Looking at the annual forecast, it appears that you have lowered yourassumptions for automobile production. I would like to confirm whether this isdue to Toyota's unofficial announcement or your company's assumption.
A10：We have not received any information from Toyota for the full year, but only
for the near term, so we have made our forecast from that point forward, notbased on the assumption of 9.7 million units, but on our assumptions based on
Q1 results, current conditions, and future prospects. In terms of domestic
automobiles volume, our forecast for the second half of the year is based on our
initial plan, and we will revise it according to the information we receive from ourcustomers.