TRUSCO Nakayama Corporation
Financial Results Briefing for the Second Quarter of the 60th Term
August 9, 2022

Event Summary[Company Name]

TRUSCO Nakayama Corporation[Company ID]

9830-QCODE[Event Language]

JPN[Event Type]Earnings Announcement[Event Name]

Financial Results Briefing for the Second Quarter of the 60th Term

[Fiscal Period]

FY2022 Semi-annual[Date]

August 9, 2022

[Number of Pages]

29[Time]

14:00 – 14:54(Total: 54 minutes, Presentation: 44 minutes, Q&A: 10 minutes)[Venue]Webcast[Venue Size][Participants][Number of Speakers]

5
Tetsuya Nakayama
Atsushi Kazumi

Atsushi Shimozu
Miki Fujitani

Minori Naito[Analyst Names]*

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Tomoki Komiya

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President
Director, General Manager of the Business
Management Department and General
Manager of the Digital Service Strategy
Department
General Manager of the Corporate Planning
Division
Corporate Planning Division Section Chief ofPublic Relations & Investor Relations
Department
Corporate Planning Division Public Relations& Investor Relations Department
Mitsubishi UFJ Morgan Stanley Securities
Co., Ltd.

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1*Analysts that SCRIPTS Asia was able to identify from the audio who spoke during Q&A.

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Presentation
Naito: We will now begin the presentation of the financial results of TRUSCO Nakayama Corporation for Q2
of FY2022. Thank you for taking time out of your busy schedules to join us.
I’m Naito, Public Relations & Investor Relations Department, and I will be your moderator. Today, we will holda hybrid on-site and online event. We would like to thank everyone who visited the venue for theircooperation in wearing masks, taking temperatures, and disinfecting with alcohol.
When holding the financial statements briefing, we strive to keep a sufficient distance between visitors toprevent infection. In addition, all staff members participating in the briefing today have been tested for
antigens prior to the meeting and have been confirmed negative. The speakers will take off their masks to
speak, but we will keep a sufficient distance from the audience, and splash prevention panels have beenplaced in front of the podium.
Let me begin by introducing the attendees. Mr. Tetsuya Nakayama, President. Mr. Atsushi Kazumi, Director,
General Manager of the Business Management Department and General Manager of the Digital Service
Strategy Department. Mr. Atsushi Shimozu, General Manager of the Corporate Planning Division. Ms. Miki
Fujitani, Corporate Planning Division Section Chief of Public Relations & Investor Relations Department.
I will continue with a brief explanation of today's proceedings. First, Ms. Fujitani of the Public Relations &Investor Relations Department will provide an overview of the financial results, followed by an explanation of
initiatives by President Nakayama. After the explanation, there will be time for Q&A. The briefing will end
when the Q&A session is over. We expect the time to be approximately one hour.
Q&A will be answered in the order of those attending on-site and those attending online. We will tell you how
to ask questions during the Q&A session. The video of this briefing will be shown on our official YouTube
channel at a later date.
Ms. Fujitani of the Public Relations & Investor Relations Department will now give an overview of the financial
results. We will also project the materials on the screen, but they are also available for download on our
website.

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Fujitani: I’m Fujitani from the Public Relations & Investor Relations Department.
Let me begin by explaining our operating results. Please refer to page three of the financial resultspresentation.
Q2 consolidated sales for the 60th business year were JPY120.683 billion, up 7.1% YoY, and the budget change
is up 7.3% YoY.
Gross profit was JPY25.379 billion, up 4.2% YoY, and the budget change is up 8.5% YoY.
SG&A expenses were JPY19.445 billion, up 14% YoY, and the budget change is up 8.1% YoY. Of which,depreciation and amortization was JPY3.351 billion, down 1.9% YoY, and the budget change is down 1.1% YoY.
Operating income was JPY5.933 billion, down 18.8% YoY, and the budget change is up 9.6% YoY.
Ordinary income was JPY6.147 billion, down 20.3% YoY, and the budget change is up 7.7% YoY.
Net income attributable to owners of the parent was JPY4.25 billion, down 19.1% YoY, and the budget change
is down 14.1% YoY.
Net income per share was JPY64.46, and dividend per share was JPY16.50.
Private brand sales were JPY22.824 billion, up 3.4% YoY, and the full-year forecast is up 7.3% YoY. Capital
expenditures totaled JPY2.656 billion.

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4Next, I will explain the details of the financial results.
A temporary drop in the number of COVID-19 cases eased behavioral restrictions, and the non-manufacturingsector recovered. In the manufacturing sector, however, business confidence deteriorated due to higher
resource prices, higher costs resulting from the yen's depreciation, and difficulties in procuring materials,
which resulted in manufacturing supply stoppages.
The Company intends to expand the number of items in stock increased by 520,000 by the end of June of thisfiscal year to 1 million 2030. By stocking a wide range of products, even if one manufacturer is out of stock,
we can propose alternative products. We carried out sales activities utilizing our abundant inventory
capabilities.
By product category, demand for infection prevention products such as masks and gloves slowed, but sales of
products related to capital investment and so-called safety belts, the crash-restraint equipment required forwork at heights, increased with the full enforcement of the revised law.
Although these factors resulted in sales exceeding budgets, both operating income and ordinary income fell
short of the budgets due to an increase in SG&A expenses resulting from the provision of approximately
JPY500 million in temporary bonuses to support the daily lives of all employees due to soaring prices, andhigher utilities and other costs.
As shown in the table above right, a YoY comparison of sales with other companies in the same industry forthe most recent three years shows that both Company A and Company C posted double-digit YoY sales growthin their most recent fiscal years, but sales were down approximately 10% for the two consecutive fiscal years
ended March 2020 and March 2021.
The Company recorded a YoY increase in the fiscal year ended December 2019, and a decrease of only about
3% in the fiscal year ended December 2020, when COVID-19 began to spread, and maintained a YoY increaseof 7% or more in the last fiscal year ended December 2021.

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As for the outlook for H2, we will conduct company-wide activities to reduce expenses in order to curb SG&A
expenses. Cost-reduction measures will be explained later. Therefore, we will not revise our budget for thefull year and will continue to expand our inventory and improve convenience for our customers in order toachieve our budget.
As a result of the above, net income per share for the quarter was JPY64.46, lower than the forecast, and thedividend was JPY16.50, with a dividend payout ratio of 25%. The dividend was JPY1.50 less than the budgeted
dividend announced at the financial results for the fiscal year ended December 2021, but is expected to be
JPY21.50 in H2, resulting in an annual dividend of JPY38 per share.

Next, please refer to page five. This section discusses results by segment.
Factory route sales were JPY84.22 billion, up 4.3% YoY, and the budget change is up 5.8% YoY.
E-Business route sales were JPY25.253 billion, up 14.3% YoY, and the budget change is up 12.8% YoY.
Home center route sales were JPY10.203 billion, up 13.7% YoY, and the budget change is up 5.9% YoY.
Overseas route sales were JPY1.005 billion, up 22.2% YoY, and the budget change is up 27.7% YoY.

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Next, please refer to page six.
Capital expenditures are planned at JPY4.338 billion for the current fiscal year, and the H1 result was JPY2.275
billion.
First, in the digital-related business, we plan to spend about JPY300 million this fiscal year for the renewal of
the product database Sterra, which will be able to register data on more than 10 million items. The totalplanned investment is approximately JPY1.33 billion, JPY68 million in H1 and approximately JPY300 million for
the full year.
Next, we will revamp POLARIO, our business collaboration site with suppliers. The total planned investment
is approximately JPY140 million, JPY53 million in H1 and JPY140 million for the full year.
Then, in land and buildings, the total investment will be JPY2.55 billion, about JPY800 million in H1 and about
JPY1.3 billion for the full year, mainly for the expansion of the No. 2 pallet automatic warehouse at Planet
Higashi-Kanto.
This will be followed by the construction of a new distribution center, Sakai Stock Center, near Planet Osaka.
The total amount is expected to be approximately JPY1.9 billion, JPY406 million in H1 and JPY850 million for
the full year.
Finally, the purchase of land for the relocation of the HC East Japan Logistics Center will amount toapproximately JPY400 million this fiscal year, for a total of approximately JPY8.5 billion.
These and other investments are expected to total approximately JPY1.3 billion in the digital-related business,
JPY2.8 billion in land and buildings, and JPY200 million in facilities in the current fiscal year.

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SG&A expenses are explained below.
H1 was above the planned amount. The main reason for the increase was the payment of temporary bonuses,
totaling approximately JPY500 million, to all employees on May 13 to support their daily lives in the light ofrecent price hikes and other social conditions.
Refer to the table on the right for details on the payment of temporary bonuses. Employees who have beenwith the Company for less than one year received JPY30,000, those for 15 years or more received JPY300,000,
and part-time employees have also received up to JPY100,000.

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In addition, salaries and bonuses increased by JPY688 million due to a switch from telecommuting to coming
to work as well as an increase in the number of part-time employees and hourly wages.
Next, fees paid totaled approximately JPY400 million, including JPY141 million for the HAKOBUne project and
JPY70 million for maintenance and inspection fees.
Freight and packing expenses increased by a total of JPY330 million, due to an increase in the number of units
shipped as a result of higher sales and increased demand for user direct shipment. Of this amount, JPY178
million was for the increase in user direct shipment. The cost of direct route delivery by users is also included
in net sales and is borne by the customer.
Others increased by approximately JPY200 million, of which JPY55 million came from higher electricity costs
and JPY16 million came from travel and transportation expenses.
Future measures include reducing employee overtime costs through regular work hours, reduction of parttime labor costs by discontinuing part-time employment, reduction of electricity costs through power
conservation, and reduction of the number of business trips by utilizing online and other means. In addition,
by reducing sales promotion, repair and meeting expenses, we will work to reduce the cost by approximately
JPY1 billion in total.
By reviewing costs and improving profits to achieve full-year results, we expect net income attributable toowners of the parent of JPY9,960 million, as forecast. Therefore, the year-end dividend is expected to be
JPY21.50 per share, JPY1.50 higher than the announced JPY20 per share. Based on the above, the annual
dividend is JPY38 per share at this time.
This concludes my explanation of the financial summary.
Naito: Next, President Nakayama will explain our initiatives.
Nakayama: Hello, everyone. And to those of you watching online, thank you very much for joining us today.
I’m Nakayama.
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Today, I would like to talk about a number of things, and today, Nikkei Shimbun wrote a very prominent article
about us. The stock price has already reacted quickly.
I just looked at it at exactly 2:00 PM, and it was JPY1,889, down JPY68, with a volume of 204,600 shares. It
seems that the market has been sold off quite a bit, but I would like to do my best to get the market to buyback in the course of what I am about to say, so please listen to me.

I would like to start from page nine, and rather than presenting the financial results, I would like you to learn
a little bit about how we are managing our business.
First of all, we believe that the most important value we should provide to our customers and the market isimproved convenience. We are working day and night on various measures to raise the convenience.
Convenience may not ring a bell for some of you, but the market's demand, which has not changed in 100
years, is to be able to buy things conveniently. I believe this will not change, whether it be 100 years or 1,000
years.
Also, I think the final deciding factor is material procurement, or whether or not things can be purchased
conveniently. Some of you may say, "No, no, after all, old relationships and face-to-face communication areimportant."
Be that as it may, the overwhelming majority considers such convenience.
I wrote the ideal image the Company is aiming for. You might say I am a little strange. I think the ideal company
is one about which people will say, "I wouldn't buy from TRUSCO if I could, but I have no choice."
No president has ever said this. I think most of them would tell you that you should be liked, adored, andloved by your customers.

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10However, if you think about it, talking about being loved and adored, the only things that come to mind arethings like paying a compliment, polishing the apple, or flattering. The other side of being loved is that nothing
like a strategy is created.
But if you try to get them to say, "I have no choice but to buy," you actually have to develop various strategies
and do various things. We would like you to understand that we are developing and accumulating a variety ofmeasures to compel them to buy our products on a daily basis.
As for the outcome of the battle of "flattery vs. strategy," we will continue to enhance our functions, believingthat accumulation of strategy will prevail.

I will now explain what kind of enhancements we are currently working on. Load assorting plus user direct
shipment service.
What do we mean by "load assorting"? As you can see, we call the matching of cargoes "load assorting," andwe provide direct shipment service to the users.
First of all, let me explain the user direct shipment service.
In general, wholesalers like us are not supposed to send things to users. We send products to our own direct
customers, but we don't send them to users beyond that.
However, by providing this service, the delivery time, which used to take one day to the customer and one
day from the customer to the user, for a total of two days, can be reduced to one day by sending the productdirectly to the user. Also, the fare, which used to cost double, is now charged only once. Packing materials arealso halved.
For example, we send it to an online retailer in TRUSCO boxes. Online retailers are sweating over thecompletely meaningless task of taking products out of TRUSCO boxes, repackaging them in their own boxes,and sending them out again.

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11But now the cycle happens only once. That is why the environmental impact is also reduced by half. I believethat it is absolutely necessary for wholesalers to send products to users in the future, and if all wholesalers in
the world do so, it will have great social significance. If possible, we would like to do our best to make it sowidespread in the professional tools industry that user direct shipment becomes a common sight and a matterof course.
Incidentally, we estimate that we will send nearly 4 million packages to users this year. Four million is asignificant number, and we are sending more than 10,000 packages to users every day.
When wholesalers in any industry are asked if they can send the product to the users, they generally say, "Oh,that's fine," as if they can do it. They can send two or three a day, but to send tens of thousands a day isimpossible unless they have the right equipment.
To put it a little more clearly, let me use an analogy with the pharmaceutical industry. For example, Mediceo,
Alfresa, Suzuken, and Toho Pharmaceutical. It is very easy to understand if you imagine that thesepharmaceutical wholesalers do not send medicines to hospitals or pharmacies, but directly to patients.

Then refer to the next page.
So, what we do, instead of just sending it, is that we pack the entire order into one box as much as possible
and then send it to the user. We do this kind of work, day and night.
When you buy something from a variety of online retailers, you may have experienced that the order arrives
today, tomorrow, the day after tomorrow in several separate boxes, even though you placed the order all at
once. That is written in various ways in the attached document, so I hope you will take a look.
Instead of having multiple packages coming in, if we sort out the load, the time and effort required to receive
the packages will be reduced by half.

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12Like, you only have to pick up the mail order package once rather than every time the call bell rings. It is usually
the husbands' standard job to dispose of cardboard boxes, and I am sure everyone does it at home, but it also
cuts in half the time and effort.
Then the shipping hassle will be cut in half. They say, "Why do I get two or three courier services when I haveplaced an order with one?” If there is such a time to talk about logistics collapse or the last mile, online
shopping companies should do more load sorting and send it in one shot. And wholesalers should definitely
send it directly. I believe that we should definitely do this kind of work.
The environmental impact is accordingly reduced by half. Cardboard materials are also halved. Also, only one
fare is required instead of three. I believe that this is a very good solution to the social problem.
However, while this is easy to say, there are very high hurdles to make this happen. As noted here, a wide
variety and large amount of inventory is required, and wholesalers who do not keep a large inventory cannot
perform this task.
Then you also need to own a large distribution center to do this work. High-density inventory storage
equipment is also necessary. There are a variety of new equipment, but if they are stocked on ordinary shelves,
it is not possible to store much inventory.
Then there is high-speed load sorting equipment. We have a warehouse that is like a so-called productapartment. If you order five items, the five packages will be stored once in that apartment as we make theshipment. Then, at the shipping stage, there's a load sorting equipment that comes out with containers, packs
them together, and ships them. Such things are also needed.
Moreover, if we have to open and cover the cardboard boxes by hand, it is already nightfall. For this purpose,
we have a high-speed automatic packing and shipping line, which we call I Pack. This machine can pack andship 720 pieces per hour, and we have six lines of these machines. Such a line is also necessary.
And finally, we still need large-scale digital processing power. We can't do it just by shouting. So it can process
such orders and various other processes.

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Next page. This is a logistics modification that does not exist in the world, the enhancement of user direct
shipment service by wholesalers. This does not exist yet. We would like to create a business model that noone else can imitate by modifying logistics in such a way as to solve many social problems while expanding
our own business.
I have had enough of the power struggle and competition. It was simply exhausting. My hope is to wrestle ina different ring, preferably in a contest of wits. We would like to create such a new business model.
As I wrote in a sarcastic tone, our stock price has also been sluggish. Today, when there is a slight decrease inprofits, there is a flurry of selloffs. I would like to point out that it is a big mistake to judge a company by its
P&L alone.
We need to look at the B/S, what kind of business they are doing, and what kind of business model they areusing. I think it is a bit wrong to simply look at sales and profit and to buy and sell stocks or invest in them. I
would like you to take a look at our B/S as well as the details of our business model, as I am explaining it toyou.

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Then on the next page, we will answer some frequently asked questions. This is what we explain to
institutional investors when they come to our office.
About 99 out of 100 customers are of the opinion that if online retailers build a large distribution center,
TRUSCO's role will be reduced and sales will decrease.
I will answer about that forecast. In conclusion, I would like to say that this is a simple and amateurish ideathat anyone can predict. Even these growing Internet companies face a variety of problems and challenges. I
would like to touch on the challenges.

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The first is cost reduction. When we think of cost, we often think of the issue of just the price of the product,such as how much to buy this product. It is no good if we do not look at the total procurement cost, including
logistics, and not just the unit price of the product.
They say that direct transactions with manufacturers and a large distribution center would reduce TRUSCO's
sales. This seems to be a generally accepted equation, but even if they deal directly with the manufacturer, it
does not mean that they can stock all of the products handled by the manufacturer.
Some parts have been put on the shelf because there are parts that can be done by themselves. However, it
is not only the products they have on the shelf that users order, but also many other products. When suchorders come to them, they are in trouble, and in fact, we are receiving orders from them.
Then, the manufacturer will not ship the product in pieces. It means that they basically can't accept a request
to share three bottles of a box of 10.
Then, as I mentioned earlier, when they would like the manufacturer to send it to the user, to be clear, themanufacturer cannot respond to this. They can't accept it like, "I'm sorry, we will send it to your company,and you have to send it to the user."Also, there are many cases where freight is paid on delivery, so we would like you to know that directtransactions with manufacturers are not always advantageous.

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Next page. We want you to know that dealing directly with manufacturers seems cheap and advantageous,
but it's not that easy.
The ironclad rule of cost reduction is to complete the business without touching the product as much as
possible. I believe this is the most important ironclad rule for online retailers.
If we were to procure the goods ourselves, there would first be an ordering process with the manufacturer.
This is hard work too. I rambled about this in a casual manner, though.
Reception of incoming shipments means that the shipping company arrives, and a dozen packages arrive first.
It's a lot of work to cut the strings, open the packages, and take the goods out.
Then actually, we also have a tough job to do. We have to inspect the goods to make sure that they are thesame as on the invoice. Then comes the task of sorting them according to where they are to be stocked.
Next, once we sort them, we have to do the storing process to see where we can put them in the warehouse.
Then, when an order comes in, we go to where the ordered goods are stored and pick up the goods. Then we
have to sort them according to shipment.
Then comes the packing process. We call it packing, and after that kind of thing, we do the final shipping to
the shipping company.
Again, it doesn't end there. It's already a mountain of human work, with bills coming in and payments to be
made, and all sorts of other things.
Packing and unpacking is all done by manpower, and we are having a hard time doing it, so we decided tocome up with a way to avoid bringing cardboard boxes into the distribution center.
We are even thinking of opening all the packages and unpacking them at one time. Once they are put inside,
they have to be taken out again, and this process of taking them out can amount to hundreds of kilograms aday, even for cardboard boxes. We are trying to stop that kind of work.
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I'm sorry. I rambled on a bit, but anyway, it is taking a lot of very hard work for us to do it ourselves.

Next page. If there is a supplier like TRUSCO that sorts the load and ships directly to the user, the online
shopping business operator can simply transfer the order data to TRUSCO once the order is received. And
transferring is automatic. So, once the site is open and the order is placed, TRUSCO will pack it up and send it
to the user on its own. The Company does such useful work.
The president of an online shopping company, I won't say who, but the other day I was talking with him andhe said, "If TRUSCO handled all the load sorting and user direct shipment, we would order all the products
handled by TRUSCO. We built a new distribution center, but it didn't matter, we would just get it all out.”
He said at that time, "Of the data we are receiving now, we can buy 20% of the products from TRUSCO. But
we can only get 7% out now. If TRUSCO could have everything shipped directly to the user, we would orderall 20% of it from TRUSCO.”
We are grateful to hear such a story. User direct shipment is a good service for online retailers, more so than
you might think.

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Next page. Although we have received such requests, we have not yet done enough. The measures to betaken in the future include a full line of inventory at major distribution centers.
I mentioned 520,000 items earlier, and we will have an inventory of 520,000 items. Then we will install loadsorting equipment and a high-speed automated packing and shipping line. We have to deal with this kind ofthing. This means that considerable investment will be required in the future.
The Planet Aichi Logistics Center is currently under design, and its construction must be expedited. No otherprofessional tool supplier can meet these demands.
I may be a bit exaggerating to call it a blue ocean business model, but I would venture to call it blue ocean at
this stage, because no other company can provide the same kind of service. We intend to make this one ofthe pillars of our future growth, by expanding our load sorting and user direct shipment services.
Also, we have started lifting the restriction of professional tools for products we handle from this fiscal year.
I think this will also encourage people to use it very much. We used to say that we would not sell anythingother than professional tools used in factories, but we are now looking to broaden the scope of our business.
To give a simple example, we used to handle storage products from IRIS OHYAMA Inc., but as you know, they
are becoming more and more like an appliance manufacturer. There was some talk about whether appliances
would be included or not. It was too much of a hassle, so we decided to handle all the IRIS OHYAMA products.

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Next page.
In conclusion, what will help online retailers grow is a wide selection of products and a large inventory, ability
to sort the load and ship directly to the user, and the digital environment being in place. We believe it is apartnership with a wholesaler that has these functions.
We would like you to know that although dealing directly with manufacturers may seem advantageous at firstglance, it is not. If a company with such capabilities can be controlled and used properly, it will lead to the
expansion of the online retailer's business.

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Next page. On a different note, we are now working on something called MRO stockers. Please see theattached brochure for more information.
It is a tool version of a business model that has been popular in Japan for many years: okigusuri, or "use-firstpay-later medicine". They have a permanent supply of emergency equipment that can be used for emergency
repairs in the event of a broken pump or bearing, etc. We would like to think of this as a substitute service for
this.
These are MRO products specified by the user, or regular supply of factory equipment. This is not for us todecide, but for the user to decide. This is stocked in the MRO stocker and the customer is billed only for theamount used. The advantage is that there is no need to place an order.
Zero delivery time. It's the ultimate instant delivery. If you go to the stocker to pick it up, it will be there. All
management and inventory will be done by our distributors, so there is no need for such management.
Also, the delivery work has been greatly reduced, which will lead to a reduction in environmental impact.
Every time they wanted something or asked for something, trucks were used to deliver by dealers. This will
not be reduced to zero but will be greatly reduced. Then, there is no cost to install this stocker. You are only
required to provide the location of the installation.
This may seem like a service that anyone can provide, but in fact, we need to have a large amount of inventory.
We have to make the logistics system work properly. Digital is also very important.
The tool version of use-first, pay-later medicine is very difficult to operate. We intend to make this anotherpillar of our future growth.

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Next page.
Currently, we have received nearly 500 installations. We are currently under business negotiations for about
258 installations, and we hope to reach about 1,409 installations by the end of the current fiscal year.
We would be grateful if we receive orders of roughly JPY300,000 per month. Currently, some of the sales
results per case are JPY1.7 million per month, while others are still stagnant at around JPY100,000 per month.
We would like to increase the figure and gradually upgrade this to a level where an MRO stocker can beclassified as a new business route, such as a factory or e-business.
We wrote our company's merits at the end. As a wholesaler, basically we do not have direct contact with ourcustomers.
We are a 100% wholesale company and have no direct dealings with users, so we believe that being able todirectly send, collect, and listen to users' opinions is a positive thing.
By placing products that we want to promote directly to users on the stocker, we believe it will be possible
for them to see and touch them with their own eyes and hands.
We also hope to reduce the frequency of order delivery, and thereby reduce costs and environmental impact
throughout the supply chain as much as possible.
I think it is important to be able to reduce the environmental burden on society, rather than just increase
sales.
Lastly, I mentioned social issues, and we handed out a booklet called the TRUSCO Book to everyone. Thesedays, I am fed up with the situation of WASH SDG, sustainable WASH. If you look up the word "wash," you will
see what I mean. All talk, but no reality is called "wash."SupportJapan
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There are many good words used to describe various aspects of society, such as "staying close," and "theSDGs," but I think it is important to consider what the actual situation is.
We do not wear badges or overtly campaign for the SDGs at our company, but we do encourage each
employee to be mindful of his or her own lifestyle, as the primary cause of environmental destruction is theindividual. Although the Company as a whole does not wear a badge, I would like you to know that we areworking on such environmental issues as well.
I would like to end my explanation now.
Thank you very much for your attention.

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Question & Answer

Naito [Q]: We will move on to the Q&A session. First of all, we will answer two questions received in advance.

First, how much, on average, has the unit price per shipment increased as a result of the price increase?
President Nakayama will answer this question.
Nakayama [A]: As I wrote my answer here, we receive many requests for price increases from our suppliers.
Basically, if a price increase is requested to be accepted promptly, we will accept that price increase
immediately. Instead, we ask them to give us priority in the supply of goods.
Also, with regard to selling prices, basically, any price increase requested will be passed on to the price on aset date. We follow what comes that way. We have no particular problems with this.
Right now, the average price increase is from 8% to 59%, from about 1,300 suppliers out of 3,000. It is not thesame for each company.
Since there is a wide range of items in stock and items handled at the moment, the situation is not so difficult
due to noticeable price hikes, and the increase in average unit price is minor. That is how we perceive it.

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Naito [Q]: The second preliminary question. Is the decrease in volume due to the price increase less than orequal to the price increase?
Nakayama [A]: We have also checked the quantity base of products subject to the price increase, and there
has not been much of a decrease.
Unlike general daily necessities, for consumables used at manufacturing sites like ours, we are not likely to
reduce the amount of consumables we use or buy because of a price increase. We are aware that there has
been no particular decrease in volume, and that there has been no reluctance to buy.
Naito [M]: Thank you very much. As explained at the beginning of this presentation, we will accept questionsin the order of those participating on-site and those participating online.
If those participating on-site have any questions, please raise your hand and tell us the name of your company,
your name, and the content of your question. So, if you have any questions, please raise your hand.
Nakayama [M]: Anything is fine.
Nagai [Q]: I'm Nagai of the Kankisangyo Shimbun.
Nakayama [M]: Please go ahead.
Nagai [Q]: You may have mentioned earlier that sales are going up briskly, and the profit side is negative.
What are the main reasons for this?
Nakayama [A]: Yes. As explained earlier, the Company has offered so-called temporary bonuses for
employees in H1. That is for the full year, but since it was paid in H1, it was recorded in H1. It means that the
profit was reduced by more than JPY500 million for that amount than expected. There was also the issue ofraising prices and so on. The increase in costs in these areas had some impact.

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As you can see in the forecast for the full year, the bias toward H1 will be evened out for the full year. In thisarea, we are proceeding with a decrease in profits and, conversely, a projected increase in profits in the end.
Also, as I explained earlier, considerable investment is required for load sorting and user direct shipment.
Basically, we are a company that is not too conscious of P&L but rather, we make all the necessary investments
in order to increase convenience.
If we are too conscious of P&L, we may neglect necessary investments, or it may be too late. The downside issignificant. We have a policy of being aggressive and doing what is necessary there.
Therefore, I think it is more important to check whether the sales growth is in line with the policy or not,rather than whether the half-yearly earnings have declined significantly or not. I hope you will take a look intothat.
Naito [M]: Thank you very much. Does anyone have any other questions? Since there seem to be no otherquestions, we will move on to questions from the online participants.
If you wish to ask your question online, I will unmute you after I indicate your name, so please tell us yourcompany name, your name, and state your question.
Nakayama [M]: Please do not hesitate to ask questions if you like.
Naito [M]: Mr. Komiya of Mitsubishi UFJ Morgan Stanley Securities Co., Ltd. Please wait a moment while we
unmute you.
Komiya [M]: I'm Komiya of Mitsubishi UFJ Morgan Stanley.
Nakayama [M]: Please go ahead.
Komiya [Q]: Thank you very much. Just one question. I would like to mention the temporary bonuses for
employees. I think the background is that prices are going up. However, there is not any sense of prices going
down as they are. If that is the case, will you include that in the salary increase portion next year? Or are you
thinking of a similar bonus next year? Are you paying extra this time and leaving the rest to them? What are
your thoughts on management as a feeling?
Nakayama [A]: We paid this temporary bonus in May of this year, but even before that, we had actually been
considering revising the level of our salary system. We had been considering revising salaries for the next fiscal
year, but the price of commodities suddenly became an issue, so we made a decision in May, relatively earlyin the year, to pay the salary for now.
Therefore, next year, rather than a temporary bonus, we would like to take a proper step toward revising thesalary structure. The extent to which the salary base will be increased is still under consideration, so I will
refrain from answering that question. It is possible to increase salaries in a slightly different way next year.
Komiya [M]: Thank you for your kind explanation. That is all.
Nakayama [M]: Thank you.
Naito [M]: Thank you very much. Does anyone have any other questions? Since there seem to be no further
questions, I will conclude the Q&A session.
If you have any further questions, please contact us by e-mail or as appropriate for interview requests.

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This concludes the financial results briefing for Q2 of FY2022. After the webinar, participants will be taken toa short survey regarding this information session. Please respond if you would like.
Thank you very much for attending today.
Nakayama [M]: Thank you very much. Please excuse me.
[END]______________
Document Notes
1.
2.
3.
4.

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Portions of the document where the audio is obscured by technical difficulty are marked with [TD].
Speaker speech is classified based on whether it [Q] asks a question to the Company, [A] provides ananswer from the Company, or [M] neither asks nor answers a question.
This document has been translated by SCRIPTS Asia.

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