Seiko Holdings Corporation
FY2019 2nd Quarter Consolidated Results Presentation
Summary of Q&A

Date:

Wednesday, November 13, 2019, from 3:00-4:00 p.m.

Place:Seiko Holdings Corporation, Head OfficeSummary of Q&A :Q1. To what extent has a surge in demand before a consumption-tax hikeaugmented net sales and profits?
A1. Net sales are estimated to have risen by around 2.0 billion yen, with growth
mainly from the Watches and Wako businesses. We estimate that profit
gained by an amount roughly equal to the amount of increased sales
multiplied by the profit ratio.
Q2. What is the situation of the Watches Business, not counting the demandsurge?
A2. The 2nd quarter saw strong domestic and overseas trends in Global Brands,
as in the 1st quarter. We believe Global Brands would have performed
strongly even if there had been no consumption-tax hike in Japan. The shift
to high-end products has proceeded, so in conjunction with product-mix
improvements, profitability was better. Profitability also benefited frommechanical-watch production increases and ongoing manufacturing-cost
reduction, among other measures.
Q3. Which watch brands saw noticeable growth overseas and which were weak?
A3. Overall, growth centered on Global Brands. In Europe, growth was seen in
France, Germany and other countries. Asia was led by a good growth inChina.
Q4. In the Electronic Devices Business, what products do you see recovering inthe second half and the ones not recovering? Also, what countermeasures
will you take against the weak market environment?
A4. We feel that quartz and batteries have embarked upon a near-term recovery

trend, while automobile components and hard disk-related products are stillfacing a tough environment. Nor do we see much strength in printer-related
products.
As a countermeasure, we will strive to cut costs as much as possible until
the market environment recovers. Going forward, we will go ahead withpreparing inventories according to detailed plans aimed at not missing themarket’s recovery.
Q5. For the first half, you increased advertising and promotion investment asplanned, while simultaneously pursuing improvement in the overall profit
ratio. At present, what are your views about profitability directions in the next
fiscal year and beyond? Do you plan to substantially increase investment in
the current fiscal year and see the next fiscal year and beyond as a period
when the beneficial consequences will be reflected in your business results?
A5. As explained in the 7th Mid-Term Management Plan, policy calls for arenewed shift to more advertising and promotion investment over thesethree years. The shift has not quite yet yielded results in the current fiscal
year, which is the plan’s first year, but we are confident that this fiscal years
investment will be linked to results in the second and third years.
We will continue to build up investment in and after the next fiscal year andexpect to see the effects in parallel with that.
Q6. How much of an effect did the surge in demand before the consumption-tax
hike have on the Watches and Wako Businesses?
A6. Please allow us to withhold comments on specific numbers concerning theeffect on the Watches and Wako Businesses. Nevertheless, we can say thatgrowth in “Others,” which includes the Wako Business, includes an effect ofabout 500 million to 600 million yen in conjunction with changes in thecommercial distribution of clocks in the U.S. In addition, we see this year as
one of very high demand for sports-related investment, as it is the year
before the Tokyo Olympics and Paralympics, with higher net sales in theTime Systems Business included in "Others." The effect you mentioned wasan increase in earnings within the range excluding the above positive factors
and excluding the demand surge. This time, the surge appeared in the latter
half of September and subsided sooner than the previous time the tax washiked. We made substantial investments in advertising, including innewspapers, in September, and we believe that the results have finallyarrived.
Q7. Will advertising and promotion investment in the second half maintain thelevel of the initial forecast? Or, will it increase from the initial plan in line withthe first half’s strong performance?
A7. The forecast for advertising and promotion investment in the second half willbe the level as initially planned.
Q8. The 2nd quarter performance in watch movements was sluggish. How is theearnings situation changing? Despite lower net sales, is the slight
improvement trend in earnings continuing? And will this continue in thefuture as well?
A8. The situation that lasted until the 1st quarter has continued in the 2ndquarter as well. We think that countermeasures will be necessary in thesecond half as the market environment is poor.
Q9. Regarding net sales growth for watches, please comment separately onsales volume and unit price.
A9. In Japan, unit prices rose in the three months of the 2nd quarter. GlobalBrands, in particular, posted large unit-price gains, and sales volume also
increased. In Japan as a whole, it was broadly flat year on year, and higher
unit prices led to higher net sales. In overseas as well, a higher proportion ofGlobal Brands pushed up unit prices.
Q10. In advance of the consumption-tax hike, what specific measures weretaken to capture the demand surge?
A10. New products centering on Grand Seiko and other high-end products werelaunched earlier than in normal years. Also, advertising and promotion
including TV commercials, which are usually concentrated before Christmas,
were implemented earlier.
Q11. What is the situation with watches in China?
A11. The Chinese market environment in the same period of the previous fiscal
year was not that strong, and compared to it, net sales rose by a double-digit
percentage.
Q12. What are your thoughts on the decision of not participating in Baselworld

2020?
A12. We made this judgement because Baselworld 2020 had been postponed
from the usual end-of-March to end-of-April, meaning that our timing forrolling out new products would have been delayed, raising concerns about
having a weaker impact. Details are undecided, but in light of Baselworld’s
usual scheduling, we are considering launching our principal new products.
Q13. The forecast for capital investment has been revised downward from 12billion yen to 10 billion yen. Will the difference in the amount be used torepay borrowings?
A13. The lower capital investment amount is not because we have discontinued
any plans but because of deferred investment timing due to alater-than-expected recovery of the market environment for electronic
devices and other products and delays in goods deliveries.
Q14. How are various countries reacting to the relaunch of Seiko 5 Sports?
A14. The new Seiko 5 Sports is highly rated in various countries.
Q15. In Global Brand overseas deployment, measures taken in the U.S. seem tobe successful. Will you be launching similar measures in other regions? Andin those other regions, are there synergies with the U.S. or any differences?
What kind of awareness of the issues do you have?
A15. Our measures in the U.S. are successful, and Global Brands, especially
Grand Seiko, have achieved good ratings. Naturally, we are hoping toachieve the same results for other regions as well, but there are multiple
countries in other regions, each with distinctive market characteristics.
Therefore, we do not think we can make exactly the same progress as in theU.S. While taking the U.S.s successful experience into account, we will
move ahead with measures to expand Global Brands in other regions aswell.
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