Small Meeting for Institutional Investors / Q&A Session
Date: Friday, 12 March, 2021 14:30～15:30 / 16:00～17:00
Location: Nihonbashi Kabutocho, Chuo-ku, Tokyo

Overall business
Q1.

Material inflation has been occurring in Europe and the U.S. due to the shortage ofcontainers, etc. Is there any impact on your business?

AOur overseas sales account for only about 8% of our total sales. Therefore, there is no significant
impact on us as other companies with a large overseas sales ratio.

Q2.

Copper prices have been rising. Is there any impact on your business performances?

AThe rise in copper prices is bigger than we expected, but we have been working to balance copper
prices by, for example, futures trading since several years ago.

Q3.

In terms of ROIC management, what do you think about controlling assets and capital?

AWe will utilize the ROIC tree and begin to control assets by reducing inventories and lower theamount of copper in stock. We are planning to utilize IoT as a means to realize this, and tocentralize the Construction/Electricity business from orders to logistics to manage inventory andproduction. It has been a year since we started using IoT and AI, and we believe that we havebeen controlling the asset to some extent through efficient inventory management..

Q4.
A

Regarding DX, your core system has been converted into cloud-based?
We have partially started cloud computing. The Digital Innovation Promotion department hasgathered engineers and utilizing the open system. We plan to form a team and start full-scale
efforts from the next fiscal year.

Q5.

Please tell us where there is a change from the mid-term point of this fiscal year in themarket outlook.

AConstruction in the Energy & Infrastructure Business has not yet recovered to the previous year’slevel, partly due to the impact of COVID-19. In the electric power business, demand is on anupward trend as electric power companies are making plans to address their facilities’ aging.
The market for the Communication & Industrial Device Business has not changed much. In theElectric Equipment & Component Business, demand for automobiles suddenly rose in the second
half of this fiscal year due to the accelerated shift to EV. We think it will be difficult for thegeneral-purpose winding wire business to recover due to a decrease in demand for thereplacement of general-purpose equipment caused by the COVID-19 disaster. There is no
particular point of concern, and we do not believe that the trend will change significantly in 3Q
and 4Q.

Structural Reforms
Q6.

What is the overall progress rate for structural reforms?

AHalf of the measures in the total have been decided. If the decisions are completed in FY2021, it
is expected to be achieved by about 60%.

Q7.

Please tell us if you have any medium to long-term plan for investment scales, schedules,areas.

AThe first one is the electric power business. The key point is whether to secure construction
personnel while increasing production and go to the next step without breaking down the businessmodel. The other is automobiles. Currently, we have begun to consider the scale and timing of
the investment, so we cannot disclose the specific figures. We would like to review them inconjunction with the redesign of the medium-term management plan and inform at theappropriate timing.

Q8.
A

When will the effects of structural reforms emerge?
We believe that the fact that we did not go into the red when sales did not increase due to theimpact of COVID-19 is one of the effects of the structural reform. We believe that the effects ofthe structural reforms are being emerged in the year after implementation and the year after that.

Q9.
A

What measures are currently most effective?
Efforts are being made to integrate companies and convert them to independent capital. Inaddition, revisions to procurement methods have been effective, such as the centralized
procurement of items that had been procured by individual companies before. In the next fiscal
year, we will reorganize the domestic bases of the Telecommunication cable business, and we
think that the effect of raising profitability will emerge from FY2022.

Q10. Could you please tell us about the room for structural reform, the target areas, and when
they will be tackled?
ARegarding the room for structural reform, the reforms related to core businesses will be largely
completed by the end of FY2021. After that, portfolio review remained, which will be decided in2021.

Q11. What are the specifics of a well-balanced portfolio?
ACurrently, 60-70% of our sales are for the infrastructure market. We think it will be difficult tokeep profits constant unless we increase the businesses such as EV which has different economic
cycles and rhythms from infrastructure. We intend to increase the ratio of automobiles andindustrial equipment, and in order to achieve this, we will also consider M&A.

Energy and Infrastructure operations
Q12. Regarding the decision of investment for SICONEX, how do you expect the demand will
be after investment?
AWe plan to increase production by 1.5 times compared to FY2017. In the future, there will be ademand of about 1.5 times in the aging of the electric power-related facilities. In addition, demand
for renewable energy and wind power will come in.

Q13. What are the key factors that led to the decision to invest in SICONEX to increase
production?
A

Currently, we have so many orders that cannot be produced and we are operating at almost full
capacity. It is a good time to invest, as it is expected that there will be three demands: anti-aging
measures, renewable energy, and disaster prevention.

Q14. How many years do you plan to achieve a production capacity of 1.5 times?
AConstruction is scheduled to be completed in April 2023.

Q15. Are other companies still working on porcelain products that will compete with yourSICONEX?
A

There are still some. There are companies that manufacture porcelain products, but powercompanies are gradually replacing them with our SICONEX when they become obsolete. Fromthe perspective of disaster prevention, we believe that this trend will increase further.

Q16. Will you be able to get a share of the porcelain product in the future?
ASince our product lineup also includes high-voltage products, the trend of replacing old ones withnon-porcelain is well established, and there are demands for renovations for aging facilities, webelieve that we can still increase our market share.

Q17. What are your plans to deal with the problem of manpower shortage in the replacementof older electric power equipment?

A

As for the shortage of construction manpower, it is necessary to consider how to allocate
resources, including collaboration, securing human resources, automation, and the use of drones
for monitoring. We are fully aware that this is an important issue.

Q18. Please tell us about the future outlook for the construction field of the Energy &Infrastructure Business.
AThe construction and electronics sales market is expected to decline at a certain rate amid adeclining population in Japan, and we have formulated a medium-term management plan.

Q19. Could you tell us about the situation of SFCC?
A

We had a difficult time in the first quarter due to the start of SFCC in the midst of the COVID19 disaster, but as we progressed in the second and third quarters, we are back on track.

Q20. Are there any double costs associated with the realignment of production systems in thenext fiscal year?
AAs for the overseas transfer, domestic and overseas production overlap temporarily until thecertification of overseas products is obtained. It is true that efficiency will decline temporarily,
but plans are in place to prevent profits from falling.

Q21. How much effect do you see from transferring production overseas?
ASince some products will be withdrawn due to structural reforms while continuing production,
relocation overseas may have a negative impact in FY2021. Profitability is expected to rise inFY2022, when the relocation is completed. Specific figures are not yet available, but we expect
ROIC to be higher than it is today.

Communication and Industrial device operations
Q22. Regarding structural reform of the shift to local production & local consumption, there
is a concern that you will be involved in local price competition, but how do you plan to add
value?
A

We have an advantage in that our wire harnesses for home appliances are used in high-grade
Japanese home appliances. We are adopting a strategy to expand our capacity by aiming toincrease sales in the high-end market.

Q23. Can we think that demand for “GIGA School” will continue in the next fiscal year?
A

We think it is approaching an end in the sense of the sales of our cable. We think that there arestill some demands for construction work.

Q24. How much weight do you plan to give to overseas operations in the medium to long term?
AThe overseas businesses we want to expand are currently concentrated in the Communication &Industrial Device. We have disclosed our overseas ratio plan as 32% for FY2022 and we expect
to exceed the plan since we are strengthening our wire harness plant in Jiaxing, China. Our sales
target is 1.5 times the current level.

Electric equipment and Components operations
Q25. What exactly are automotive windings used for?
AWe manufacture some of the windings used in motors and sub-motors for automobiles. We want
to expand this market, so we will be investing in it.

Q26. I understand that the current winding business is not profitable, but is the windingbusiness for automobiles different?
AThe low-profitability winding is the part of general-purpose winding used for heavy electricmachinery, etc., which is different from the winding for automobiles. We are narrowing down
the production of general-purpose winding wires and shifting from general-purpose products toautomotive products.

Q27. What do you expect from your relationship with the Futong Group regarding EVbusiness?
AWhat we expect most from the alliance with the Futong Group is that we can procure the wires
for our wire harnesses production from them. Another thing we have high hope is the copper
business, where we have DIP forming facilities in Zhejiang Province. China's shift to EV is evenmore advanced than Japan's, so we are modifying our furnaces to enable mass production.

Q28. Which do you prioritize, the investment in MiDIP or the investment in EV windings?
What will be the point of the decision and when will it be made?
AThe investment in MiDIP has been brought forward because we made some repairs during thefirst half of this fiscal year when the operating rate was lower. We would like to invest inincreasing production at Unimac in line with the launch of EV. We will determine the timing ofthe rise in demand for EV.

Q29. Is the capacity of the MiDIP sufficient since it was renovated in the first half of this fiscal
year?
A

We have managed to produce enough to meet the demand. But the demand is still higher. The
market is expected to grow further, so we believe that we still need to invest.

Q30. Is it necessary to make an early decision to invest in the wires?
AWe will comprehensively examine profitability, future growth of the market, and the amount ofinvestment.

Q31. Regarding the windings for general-purpose, how do you tackle the low rate of return?
Productivity, pricing, etc.?
AWe are negotiating appropriate prices with our customers for general-purpose products, but theirprofitability is low. In terms of manufacturing, we will convert the facilities for general-purpose
products to those for high-value-added products.

Q32. Regarding MiDIP, why is MiDIP superior to other oxygen-free copper products?
AThe manufacturing process is different from that of oxygen-free copper other than MiDIP.
Ordinary oxygen-free copper is made by making a certain amount of lump and removing oxygen
through separate processing. It is expensive and contains many impurities.

Q33. What is the competitive environment for oxygen-free copper in EV windings?
AWe are currently manufacturing products for high-end applications, but it will be necessary to
determine the level of oxygen-free copper required for middle-class applications. In this respect,
I think our strength is that our staff, who are well versed in the characteristics of oxygen-freecopper, are manufacturing windings.