Summary of Q&A on Financial Results Presentation Meetingfor the First Half of the Fiscal Year Ending March 31, 2024
(Held on November 7, 2023)
ORGANO CORPORATION
Please note that this Q&A summary was summarized for simplicity based on the Company’s
judgment.
Q.

What is the outlook for the electronics industry and the semiconductor market?

A.

Although market conditions remain sluggish especially for general purpose memory, supply anddemand are beginning to tighten for products including DRAM, logic semiconductors, and power
semiconductors, and demand is expected to grow over the long term. To seize these opportunities,
we will strive to increase the efficiency of our engineering structure and strengthen our resources
including our human resources.

Q.

Your full-year domestic order forecast has increased from ¥95 billion in the initial plan to ¥110billion. Is this increase due to the addition of new projects?

A.

As project construction periods continue to lengthen in line with longer delivery times for raw
materials, customers are continuing to bring forward their orders. In addition, the domestic order
forecast has been increased due to the continued presence of new investment projects insemiconductor areas in Japan.

Q.

The Service Solutions Division is performing strongly. Please could you share some of thebackground and the situation by region?

A.

We are seeing growth in operational support services, conservation, maintenance, anddevelopment for facilities that we have delivered, in addition to replacement of expendable items
such as functional materials. In addition, we are seeing growth also in new service solutions likethose that help customers save energy. Japan accounts for a large share of Service Solutions sale s.

Q.

You mention in relation to the Plant Division that the impact of cost reductions has been greaterthan expected, leading to improving profitability. Please provide your view on whether you
expect the same level of margins in the future or whether it is temporary?

A.

We expect the share of sales to the electronics industry, especially semiconductors, in the Plant
Division sales to remain high into the future. Although there continue to be concerns about
increases in raw materials prices, there are only a limited number of companies that can stably
provide the high level of ultrapure water demanded in this market, and the value of the Company
is highly regarded by our customers. Moving forward factoring those into our business to theextent possible, we believe we can expect the same level of margins in the future. Similarly, weare also expecting to be able to maintain the same level of margins in the pharmaceutical sector
because of the high level of technology demanded.
Q.

Please provide some of the background behind the slow progress on projects in China. In addition,please can you tell us about the risks of similar events occurring in China and elsewhere overseas
in the future, and also about the Company’s response to these?

A.

The main factors in the background are the impact of U.S. export restrictions on China and supply
chain disruptions due to residual effects of COVID-19 in the region at the beginning of this year.
In response to longer delivery times for raw materials and increases in raw materials prices due
to supply chain disruptions, generally including in China, we plan to strengthen our ability torespond with substitute materials and by diversifying our suppliers. Concerning China inparticular, we will consider and respond with the use of Chinese domestic products andmanufacturing in China among other considerations.

Q.

Has the review of processes around customers’ circumstances in China run its course, and isbusiness as usual possible from the third quarter onward?

A.

The business environment in China remains difficult in the third quarter and beyond. However,
we are focused on making progress on the order backlog from the previous fiscal year whereconstruction schedules are concentrated due to slow progress on projects.

Q.

Orders are strong at the moment, and also going forward the busy market, including alreadyvisible projects, looks set to continue for the time being. But what is the Company’s capacity inresponse to this situation? Please could you provide your views on factors including overall
capacity in terms of specific measures, the pace of growth in personnel, as well as the impact ofwork style reforms starting next year?

A.

We are considering increasing efficiency in engineering, reviewing the division of roles withpartner companies, and strengthening personnel. Concerning the increasing of efficiency inengineering, we are looking at adopting a framework suitable for large projects an d small andmedium-sized projects, working to automate some of the planning and design of water treatment
plants, and undertaking some significant man-hour reductions. Concerning the overtime caps
from April next year, we are working to increase efficiency especially at construction sites inadvance. It is a compliance issue and we must comply.

Q.

Orders received in the electronics industry were partially brought forward into the first half ofthe fiscal year. For the full year, will orders received be in line with the initial plan? Does thisalso mean that domestic orders will be higher than the initial plan while overseas orders will belower? That is, will higher domestic orders offset the impact of lower overseas orders? In addition,
while there is market sentiment that there will be few large orders in the next fiscal year, what isyour view of the market?
A.

Orders received in the electronics industry are as you suggest. Concerning the next fiscal year,
we expect that it will continue to be difficult to respond to all the numerous inquiries from theelectronics and general industries. We will be working on carefully monitoring the projectschedule.

Q.

Does the forecast for domestic orders include orders from foreign firms?

A.

Yes, they are included.

Q.

Concerning orders in Taiwan, the first half was almost in line with plan, but there were downward
revisions in the second half. Was there any change in customer trends that caused this? Or haveexpectations of a second half recovery weakened?

A.

Investment is being pushed back due to loose semiconductor supply and demand. On the otherhand, because there also reports that the performance of major semiconductor manufacturing
customers is trending towards recovery, we will expand proactively while watch ing that trend.

Q.

Please could you provide us with some specifics about the factors behind the improvement inprofit margin?

A.

Raw materials prices have been increasing for the past several years, and this is factored in whenworking on projects. However, the improvement in profit margin is due to factors including theoverall contribution from actual costs having been smaller than expected and general increases
in efficiency in construction.

Q.

Although the global semiconductor market is clearly entering a downcycle, orders received do
not appear to have come down so significantly. Is there a risk of something like the orders for the
next fiscal year being consumed ahead of time? Or are you expecting further expansion in thenext fiscal year, following the market? Please tell us to the extent that is possible.

A.

Overall, there is a trend towards customers bringing forward their orders, which could be said
that we are consuming the orders ahead of time. However, we are expecting investment insemiconductor areas to continue to remain active. We are also expecting demand for new andadditional work in the general industry and the electric power sector.

Forward-looking statements such as the forecasts in this document regarding business are based on
information available at the time of preparation and are therefore subject to risk and uncertainty. Actual
performance may differ from these projections.