TRUSCO Nakayama Corporation
Q2 Financial Results Briefing for the Fiscal Year Ending December 2023
August 10, 2023

Event Summary[Company Name]

TRUSCO Nakayama Corporation[Company ID]

9830-QCODE[Event Language]

JPN[Event Type]Earnings Announcement[Event Name]

Q2 Financial Results Briefing for the Fiscal Year Ending December 2023

[Fiscal Period]

FY2023 Q2[Date]

August 10, 2023

[Number of Pages]

33[Time]

15:30 – 16:41(Total: 71 minutes, Presentation: 51 minutes, Q&A: 20 minutes)[Venue]Webcast[Venue Size][Participants][Number of Speakers]

6
Tetsuya Nakayama
Atsushi Kazumi

Tetsuhiro Mori
Atsushi Shimozu
Kyoko Yoshimi
Mika Takahashi

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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 Accounting
Department
Manager of the Corporate Planning
Department
Manager of Public Relations & Investor
Relations, Corporate Planning Department
Public Relations & Investor Relations Section,
Corporate Planning Department

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1[Analyst Names]*

Tomoki Komiya

Mitsubishi UFJ Morgan Stanley Securities*Analysts that SCRIPTS Asia was able to identify from the audio who spoke during Q&A or
whose questions were read by moderator/company representatives.

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Presentation
Takahashi: Thank you very much for your patience. We will now begin TRUSCO Nakayama Corporation's
financial results briefing for Q2 of the financial year ending December 2023. Thank you for taking time out ofyour busy schedules to join us today. My name is Mika Takahashi of the Public Relations and Investor Relations
Section, and I will be your moderator today.
Today's briefing is an onsite–online hybrid. First, I would like to introduce today's attendees. Mr. Tetsuya
Nakayama, President.
Nakayama: Thank you.
Takahashi: Atsushi Kazumi, Director, General Manager of the Business Management Department, andGeneral Manager of the Digital Service Strategy Department.
Kazumi: Yes, I am Kazumi. Thank you.
Takahashi: Tetsuhiro Mori, General Manager of the Accounting Department.
Mori: I am Mori. Welcome to our briefing today. Thank you.
Takahashi: Atsushi Shimozu, Manager of the Corporate Planning Department.
Shimozu: I am Shimozu. Thank you.
Takahashi: Kyoko Yoshimi, Manager of Public Relations & Investor Relations.
Yoshimi: I am Yoshimi. Thank you.
Takahashi: I would like to continue with a brief introduction to today's program. First, I, Takahashi, will provide
an overview of the financial results, followed by an explanation of the Company's initiatives by President
Nakayama.
After the explanation, there will be time for a Q&A session. The briefing will end when the Q&A session isover. Please allow approximately one hour for this briefing.
For this Q&A session, questions will be answered in the following order: We will first answer the pre-sessionalquestions followed by the ones from the on-site participants, and then ones from online participants.
Information on how to ask questions will be provided during the Q&A session.
The video of today's briefing will be posted on our official YouTube channel at a later date.
I would now like to explain the financial results.
Please refer to the financial results presentation material. We would appreciate it if you could take a look at
the other documents when you have time later. We will project the materials on the screen, but they are alsoavailable for download on our website.

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First, let me explain the financial performance. Please refer to page three.
Consolidated sales for Q2 of the 61st fiscal year totaled JPY131,390 million, up 8.9% YoY and up 0.7% fromthe budget. Gross profit was JPY28,188 million, up 11.1% YoY and up 4.3% from the budget.
SG&A expenses were JPY19,031 million, down 2.1% YoY and down 4.5% from the budget, including JPY3,158
million in depreciation and amortization, down 5.8% YoY and down 0.2% from the budget.
Operating income was JPY9,156 million, up 54.3% YoY and up 28.8% from the budget. Ordinary income was
JPY9,269 million, up 50.8% YoY and up 28.4% from the budget.
Net income attributable to shareholders of the parent company was JPY6,066 million, up 42.7% YoY and up
23% from the budget. Net income per share was JPY91.99, up JPY27.53 YoY and up JPY17.20 from the budget.
The dividend per share was JPY23, up JPY6.5 YoY and up JPY4 from the budget.
Sales of private brand products totaled JPY24,338 million yen, up 6.6% YoY. Capital expenditures totaled
JPY5,125 million.

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Let's move on to page four. The budget for H2 will be as shown here.
We are announcing an upward revision today, and in light of the uncertain outlook, we are planning a solid
7% YoY increase in sales for H2. We will explain the details later.

Next, please refer to page five. This is the overview of the financial results.
Sales increased 8.9% because of the commercial rights were integrated into our Company, which is a result of
our abundant inventory of approximately 570,000 items and measures to improve customer convenience andSupportJapan
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reduce environmental impact, such as package consolidation using state-of-the-art logistics equipment anddirect delivery to users.
Gross profit increased 0.5 percentage points from the previous fiscal year, mainly due to the following factors:(1) many suppliers requested price increases due to inflation, (2) profit margins increased on sales of inventory
purchased at previous prices before the price increases after the price revisions, and (3) progress was madein transferring prices to sales prices through certain channels where price transfers had been delayed.
As for SG&A expenses, freight and packing expenses increased by approximately JPY300 million, in line with
the increase in sales. Salaries and bonuses increased due to a change in the number of months for bonus
payments to logistics employees engaged in logistics operations beginning this fiscal year, but salaries andbonuses decreased due to a reactionary decline from the provision of temporary bonuses for living support
that was made earlier in the previous fiscal year. Depreciation and commissions paid also decreased, resulting
in a YoY decrease of minus 2.1%.
As a result, net income attributable to owners of the parent company increased 42.7% YoY due to an increasein the gross profit margin and a decrease in selling, and SG&A expenses, including salaries and bonuses, mainly
due to the impact of a larger profit margin on inventory purchased at the old price before the price increase.

Next, please see page six. This section explains results by segment.
Sales in the factory route business were JPY89,593 million, up 6.4% and down 0.6% from the budget.
Sales in the e-business route business were JPY28,911 million, up 14.5% YoY and up 3.3% from the budget.
Sales in the home center route were JPY11,704 million, up 14.7% YoY and up 4.8% from the budget.
Sales on the overseas route business totaled JPY1.18 billion, up 17.4% YoY and up 1.8% from the budget.
Each route has seen sales growth due to the convenience of our comprehensive capabilities, including
Niawase (cargo assortment), U-choku (direct delivery to users), and MRO Stocker. Improvement is also
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6underway in the delayed price pass-through of some price increases in the e-business and home center routebusinesses.

Please refer to page seven. The H2 budget by segment is shown in the table below.

Next, on page eight, we explain SG&A expenses.

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The H1 result was JPY19,031 million, down 2.1% YoY. Freight and packing costs increased by an additional
JPY300 million YoY due to an increase in shipping volume, including direct shipments to users, in line withhigher sales and higher transportation costs.
The amount for salaries and bonuses, depreciation and amortization, and commissions paid decreased due tothe impact of the payment of extra bonuses to all employees in the previous fiscal year, which were made inadvance to support the livelihood of employees in light of soaring prices and other social conditions, resulting
in a decrease of JPY413 million YoY.

Next, on page nine, we explain capital investment.
For a detailed breakdown, please see the document at hand. The H1 results totaled JPY5,125 million due tothe logistics center Planet Aichi, scheduled to be operational in 2026, a new automated pallet warehousebuilding at Planet Higashi-Kanto, and a new Sakai Stock Center for the purpose of inventory expansion.
Operating income is projected at JPY8,576 million for H2.

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8Next, on page 10, we will explain the recent business performance.
This is a summary of the factors for the ups and downs in gross profit and SG&A expenses from last year tothis fiscal year.
In H1 of the previous fiscal year, net sales increased 7.1% YoY, but net income decreased 19.1% YoY due tohigher SG&A expenses resulting from the provision of a total of approximately JPY500 million in temporary
bonuses for living expenses in response to rising prices.
For H2 of the previous fiscal year, the gross profit margin was up 0.9 percentage points YoY due to the impactof sales of inventory purchased at the old price before the price increase after the price revision, and net
income was up 0.5% YoY due to the curbing of SG&A expenses, as the price of products was raised from H2of last year.
Next, I would like to discuss the results for H1. In H1, the effect of sales of inventory purchased at the old pricebefore the price increase after the price revision boosted profits by approximately JPY1.4 billion. For thebudget for H2, we expect the impact of the price revision to boost profits by approximately JPY500 million.

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9Next, on page 11, I will explain the earnings forecast for this fiscal year, which was announced today.
Consolidated net sales for the 61st fiscal year were JPY266,080 million. The change from the initial budget
created at the beginning of the period was plus JPY990 million, up 8% YoY.
Gross profit was JPY56.97 billion, up 9.2% YoY and up JPY1.62 billion from the initial budget.
SG&A expenses were JPY39.04 billion, down JPY610 million from the initial budget and up 4.1% YoY.
Operating income was JPY17.93 billion, up 22.2% YoY and up JPY2.23 billion from the initial budget. Ordinary
income was JPY18.22 billion, up 20.9% YoY, up JPY2.25 billion from the initial budget.
Net income attributable to shareholders of the parent company was JPY12,190 million, an increase of
JPY1,270 million from the initial budget, an increase of 14.7% YoY, and the dividend per share was JPY46.50,
an increase of JPY5 from the initial budget and an increase of JPY6.5. That is all for the financial results.
We have revised net sales upward by adding approximately JPY1 billion to the initial budget, which was raisedin the previous fiscal year. Regarding gross profit, SG&A expenses were changed based on the actual resultsof H1, taking into account the impact of an increase in the profit margin of approximately JPY500 million due
to a change in selling prices of inventory purchased at the previous price.
Next, Nakayama, President, will explain the Company's initiatives.
President Nakayama, please.
Nakayama: Once again, hello, everyone. Thank you very much for joining us today. We hope those of you
joining us via webinar will enjoy the presentation too. Thank you in advance for watching.
The numbers are as Takahashi just mentioned. I would like to talk a little about various measures.

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10Page 13. I hope you can see it. In summarizing our business performance, I have listed several possible factorsthat contributed to the increase in sales.
The first is the increase in the number of manufacturers we handle, and we have been working diligently toincrease the number of manufacturers to more than 100 per year. Compared to five years ago, the numberof companies has increased by almost 1,000, or 946 companies. The increase in the number of cargos handledmeans cargo assortment, which I will explain later. One reason is that it is very advantageous for cargoassortment, which means sending a variety of products in one box as much as possible.
Also, from the customer's point of view, having a relationship with one company, TRUSCO Nakayama, gives
them access to products from 3,423 manufacturers, which is very convenient for them.
Secondly, the number of inventory items has increased from 370,000 in 2018 to 570,000, which is an increaseof approximately 200,000 items.
We are aiming to have one million items in stock by 2030, and this expansion of stock items will also contributeto our efforts for cargo assortment or to send packages together as much as possible.
Thirdly, the number of items registered with a product number has increased considerably, from 2.52 million
to 5.93 million, regardless of whether the product is in stock or not.
The more this increases, the more business opportunities will expand, so to speak. The expansion of thenumber of items registered with a product number will lead to "Wow, TRUSCO handles such a thing," andgreater efficiency by streamlining the exchange of paperwork, such as orders received and orders placed.

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Then the next page explains the fourth factor about the expansion of Niawase & U-Choku services. Niawase
is rather an uncommon word, and it may sound like nimono (food cooked by boiling) to you.
As you can see in this pile of boxes, I ordered five items to wash my car on Amazon, and what a surprise, I
received these four boxes one after another. It was very inconvenient and time-consuming to receive them.
And it's a waste of boxes. And having a truck come and go four times is very unreasonable. For your reference,
when I tried to put all five items that I received into this single largest box, they all fit.
We are now working very hard on this Niawase because we know it's not good to waste things like this.
As for this U-choku service, although we are a wholesaler, we basically deliver the order directly to thecustomer who placed the order when we receive an order from a customer online. It is a very unusual casefor a wholesaler to send directly to the user, but this is one of the very popular services, and I think it is fair tosay that there are basically no companies like ours in the world that offer direct delivery to users on a large
scale.
First of all, from the point of view of online shopping customers, a president of a company told us that if we
could ship everything directly to them, he would buy everything he could.
Also, general factory customers have a shortage of manpower and transportation problems. So they want us
to send them this and that together if we can send the products directly to them or deliver additional products,
so to speak. This is, in fact, an unexpected purchase. "I was going to ask another company, but TRUSCO, nowthat you are going to send one to us, send these all together." This is a very popular service that also induces
customers to buy something on the side.
By the way, last year saw a large amount of cargo, with 3.55 million packages sent directly to users, and wehave already sent 2.18 million packages this year. We are looking at 4.4 million packages for the full year, but
I think this may still become a little higher.

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The fifth factor is that we are expanding the installation of MRO stockers at our production sites, which is atool equivalent to Okigusuri (drugs stored at home). In 2020, only 47 were installed, but as of Q2, there werealready 974, indicating that installation is progressing at a very high pace.
The number of sales is still not that large, but basically, the users have already specified what to place. They
asked us to place specific products, so there is no way they are not going to be purchased. Therefore, wewould like to work on those areas to enhance such convenience, including the designated products plus extra.

The sixth factor on the next page is a partial lifting of the professional tools limitation on products handled. In
the past, we used to be a jack-of-all-trades, selling everything, but we realized that it was not good to handle
everything, so we decided to limit our business to professional tools as one of the strategies to stop such sales.
When sales were around JPY100 billion, we made a very rough treatment by stopping sales of nonprofessional products, which amounted to about JPY10 billion. While we were doing so, as you can see here,
IRIS OHYAMA is the easiest to imagine, for example. Originally, we sold their plastic storage cases in the Pro
Tools line, but then they released more and more electrical appliances.
From the customer's point of view, this was a source of confusion in the sales field, as they wondered if wewere also handling air conditioners and refrigerators if we have Iris's products. I think one of the major reasonsfor this was that we were trying to expand the range of products we handled for not all but somemanufacturers.
The seventh and final factor is the opening of Planet Saitama, which has become a major force in expanding
our business performance. Whether we are selling inventory, shipping directly to users, or doing anything else,
we need a large distribution center, and if we had not built Planet Saitama, we would not be in the position
we are in today.
There was a discussion about cost-effectiveness, but I don't think cost-effectiveness should be considered ornecessary for management strategy. We would like to continue to aggressively construct new centers in the
future, as these large-scale logistics centers support our business strategy.

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We will turn to page 16.
As for the factors behind the increase in profits, as Takahashi explained earlier, I think some of you may beunsure about the idea of hoarding or stocking up on inventory. Basically, we have told our staff to reflect theprice increase immediately if there is a request for it.
Instead, we have also told them to ask for purchases of as many items as possible at the old price before theprice increase. In this context, the advantage of having an inventory is still very significant during this priceincrease phase.
We procured a large amount of inventory at the old price before the price increase, and this had the effect ofboosting profits on sales after the revision, which we estimated to have added about JPY1.4 billion to profitsin H1. In H2, it is difficult to calculate, but we estimate that there will be a boost effect of approximately
JPY500 million.

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Next, the situation of other companies in the same industry is shown in a separate table on an A4 sheet in
addition to this table. We have prepared a few documents on the status of the financial results of othercompanies in the same industry.
The table at the top represents this half of the year. As you can see, for example, just in the period from April
to June, we grew by 9.9% in these three months while Yamazen's performance was down by 5.4%, Yuasa
Trading's performance was up 1.3%, Nichiden's performance was down 2.3%, Sugimoto's performance wasup 7.1%, and NaITO's performance was up 1.3%.
I believe that we have entered an era in which the industry can no longer be categorized into one thing, as it
once was. In the past, if there was a 10% increase in sales in one company, every company would have a 10%
increase in sales, but we can see that this is no longer the case.
It was more of a management effort than a sales effort, such as the logistics center and the Niawase and Uchoku services, as I mentioned. It is important to create more and more services that customers findconvenient, and unfortunately, they do not pay for courage, perseverance, effort, and enthusiasm. We are insuch an era. And I will continue to implement measures that will make people say that TRUSCO is convenient.
I believe that all companies are making the same effort in sales and marketing, but the results differ greatly
depending on whether or not they have such a system in place. I believe that we have entered such an era
and that once one moves toward convenience, there is no going back to inconvenience. So, we should not belazy about such things, and instead, we will continue to take such measures to improve convenience for ourcustomers.

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On the next page, we present the sales forecast for the full year.
Our sales forecast is JPY266 billion, and we will continue all expansion strategies to achieve sustainable growth
regardless of business conditions. We will continue to focus on the expansion of the Niawase and U-choku
services, and we hope to increase our market share in the future.
The ordinary income forecast is JPY18.2 billion, which is a little lower than H1, but we will not know until wetry it. But we are working towards our target of JPY18.2 billion.

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As for the financial forecast for the full year, we are considering a dividend of JPY46.5, which is an increase of
JPY6.5.
As I mentioned in the news release, starting this year, we are going to establish a system called the TRUSCO
Zentaku Dividend System.
For a long time now, aggressive capital investment has undoubtedly led to an increase in depreciation, which
in turn reduces the resources available for dividend payments. Some of our shareholders told us that capital
investment was fine, but they didn't want to see a reduction in dividends, and we were wondering if there
was a better way.
It would be uninteresting to simply increase the dividend payout ratio, and we came up with this idea. Capital
expenditures are made, and depreciation increases. However, we came up with an idea to incorporate 10%of depreciation expenses into the dividend resource in the unlikely event that the amount of the dividend islower than the previous year.
This fiscal year, we will be increasing the dividend compared to last year, so this rule will not apply to thisfiscal year. But we would like to resolve the conflicting issues of dividends and capital investment as much as
possible in the future.

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Next, I would like to discuss future capital investment plans.
The first plan is the construction of a logistics center, Planet Aichi. The groundbreaking ceremony has recently
been completed, and the construction work has already started.
The center will have an area almost double the size of the current one in Saitama, which can store one million
items in inventory. And we will store one million items.
Then, as I mentioned earlier, we will focus on enforcing the function of the Niawase+U-choku services. Let me
give you a brief explanation of Niawase for a moment: it is absolutely impossible to pack the packages in one
box by swarming tactics. To give you an idea of what we do, imagine a distribution center that actually has anapartment room inside. Once the picking is done, the container will quickly flow all the way to that apartment
room. Then, when the order is given to ship Mr. Nakayama's goods, the goods in containers are conveyedfrom the apartment room to the shipping space, where they are packed together and shipped in one box,
which is absolutely impossible by swarming tactics.
Then, after that, the so-called packing is done at high-speed using an automatic packing and shipping line, andthis automatic packing and shipping line is quite excellent, packing about 720 packages per hour, which is alsoa bit too much for human labor to keep up with, so without such equipment, the Niawase and U-choku
services would not be possible.
This is because we have a lot of inventory and large distribution centers, and we use state-of-the-art logistics
equipment. And another reason is digitalization. We are the only company in the industry that is currently
offering this service on a large scale because it is not possible without digital capabilities.
The total investment is about JPY30 billion, which is very expensive, but we would like to complete the projectsomehow to make it more convenient and to expand its use throughout the world. This one will open in 2026.
Okay. Here is a little 3D image of Planet Aichi, which I would like you to take a look at.

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The building is still only in this CG image, so I can only give you an idea of what it will look like, but we areconstructing the building.

The second capital investment plan is another logistics center, Planet Niigata.
Preparations are underway for this one, also scheduled to open in 2026. We aim to strengthen distribution tohome centers, mainly in the Kanto region and northward.
We would also like Niigata Planet to function as a stockyard for imported goods using a shipping route from
China or Korea via the Sea of Japan. These goods are currently unloaded in Yokohama, which is such a detour,
and we would like to unload them in Niigata to reduce ocean freight costs and speed up the process. It will
also serve as a base for sales and logistics for factory-oriented businesses.
The total investment is about JPY18 billion, and although I had hoped that it would be within JPY10 billion,
now that construction costs have skyrocketed, I am not sure what to do, but we are going ahead with the
project.
There is an interesting phenomenon in logistics for home centers. For example, a manufacturer of safety shoes,
which makes sports shoes, has been very well received and is selling like hotcakes. However, this company
has an unusual ordering system: they only accept orders twice a year. Normally, when a company runs out of
inventory, you can still order again, which is the norm in business. But that company does not receive orders
until they have inventory for the next orders.
This makes them one of those manufacturers with whom it is very difficult for us to do business. We havetaken advantage of this situation and decided that we should purchase a large quantity so that we would not
run out of stock.
Of course, we need a logistics center to store them, but this is convenient for home centers because it's not
ideal if they run out of the products and cannot reorder for another six months after they start handling them

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to add to their lineups. Such home centers and online retailers mainly make orders with us because we havea stable inventory. The very secure purchase is an advantage for us.

Continuing on, I would like to talk a little bit about the 2024 issue of logistics.
It is said that an era will come when it will be impossible to transport goods, but first of all, we have two major
logistics systems for our customers. As for the Factory Route, we have basically established a system of about
300 trucks nationwide that do our own logistics with our own trucks. This is what we call fixed-cost logistics,
and it is also the root of our profits.
Also we also have the U-choku services, which are shipped via fixed routes. Although the freight is paid by thecustomer, the freight discount system based on the annual transaction amount has been well received, andfor such logistics and e-business, we offer a chartered delivery service to customers who place their inventorywith us.
As for U-choku, the online shopping company uses a route delivery service designated by the customer, andwe are not involved in this process. Therefore, Amazon and Monotaro are in direct contact with the shipping
companies, so although they come to pick up the goods, the freight charges are all billed to them.
For the Home Center Route, we ship to customers' distribution centers via route delivery or chartered delivery.
This is not a solution to a particular problem but rather just the situation as it stands right now.

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The next page addresses the 2024 issue.
As we expand the Niawase and U-choku services, we reduce the overall logistics volume. I have mentioned
Niawase and U-choku, but to put it simply, for example, we used to send our products packed in TRUSCO's
boxes to Amazon. They used to pick up the products in the boxes in the truck and then pack them in Amazon's
boxes to ship them, which was a chain of waste. By sending the goods directly, we can cut both freight andtransportation time in half, thereby reducing overall logistics, social problems, and the burden on logistics
companies.
The average salary of a 50-year-old logistics employee, for example, is about JPY6.7 million, which includes
overtime pay. The annual income level is not inferior to that of other logistics positions, and benefits are thesame for both career and area positions. The number of job leavers is limited, or almost none, and we do nothave a shortage of truck drivers at this time, and it will remain stable in the future.
What is more, the drivers of transportation companies in the town even ask us to hire them. In this aspect, itmeans that we can run our own logistics without worrying.
Thirdly, we are also working on labor-saving and automated receiving and shipping processes and are actuallytrying to make our customers hassle-free from the perspective of logistics companies. For example, Yamato
and Sagawa come to this building, but they don't have to go to each floor as we have a designated place fordelivery and pick-ups on the seventh floor, so the drivers are satisfied as they can deliver and pick up packages
on the same seventh floor.
I have this faint hope, though, that one of these days, President Nagao of Yamato Transport will give me acertificate of commendation. I think we need to take proper measures to deal with this kind of situation.

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Then the sixth point addresses the issue of female board members.
It has been 25 years since I first wanted to have a female board member, and I still haven't solved anything.
It is one of the issues that I have not been able to accomplish, and I have been reflecting on that. When I was
thinking about how to deal with it, I came up with this idea called the Apprentice Executive Officer System.
We haven't decided yet whether the term of office will be six months or one year. This system is on duty, andthe apprentices usually do their regular job. And they are asked to join the monthly management meeting.
Then, at the management meeting, we let them make suggestions on how we can improve or streamline thework we are currently doing by doing this or that. Through these efforts, we will first raise awareness of theneed for participation in management and create the groundwork for the creation of female directors in the
future.
There would be roughly 3 to 5 members. We are working out the details of allowances, etc., but they would
wear a badge and come to the monthly management meeting to make some suggestions.

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22So, if you look at the next page, this used to be the case.
The women's career track started about 25 years ago. Back then, one of our directors said something like that
she was not doing a good job for a female career-track employee. Here's how I responded to him: "If so, canmale career-track workers do the job?" He fell silent. I started this system because I thought that we have tochange the way we think or the idea that we take for granted that women career-track workers are capableof doing the job.
I think it will come up if it is that female board member this time. I do expect the future executive officer orboard member to do a job that people would say is as good as it gets, of course. But I think it's not right totake it for granted.
Looking back, we were having a management meeting in this conference room on the third floor, and if you
look closely, you can see that inside there are men sitting there who generally don't talk or make suggestions.
If there are a bunch of guys who don't talk or make suggestions, I think it would be more interesting to havefemale employees come out, get lively, make various suggestions, and discuss them, whether it's good or bad.
In any case, I believe that we will not be able to nurture women unless we start by changing the way we view
women. I would like to do my best so that one day we will be able to nurture such female directors andexecutive officers.

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23And this is the pay gap issue that is so prevalent these days.
The wage gap between men and women that the government is showing is too wide, with women receiving
a little more than 60% or less than 70% of what males gain. However, the calculation was not quite right, so I
checked what would happen if they were the same age, in the same position, in the same grade, or in thesame evaluation, according to the company rules, then in our company's case, there isn't a yen difference.
So I have been very uncomfortable with the idea that there was some kind of gender disparity, but when we
did it properly, assuming they work in the same condition, male and female employees receive the sameamount of money without any difference.
However, number two. There are no female internal officers. Outside the company, we currently have Ms.
Suzuki, the chairperson of ST Corporation as our executive officer, but internally there are none. Also, there
are no female department heads, and I believe this situation must be changed.
Currently, the ratio of men to women in managerial positions such as branch managers, center managers, andsection managers is 129 to 10, so we still need to work on these issues.

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Now, let's move on to the pre-sessional questions.
"After H1, have there been any gaps compared to the assumptions made at the beginning of the fiscal year?"

I guess this question is about whether there was a gap between business forecasts and actual performance in
H1. Our company does not have to discuss business conditions at all, as we do not perform better because of
a booming economy or worse because of a bad economy. It's just a question of what kind of measures wetake and what kind of services we add.

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I would venture to say that what I have felt since the end of this six-month period is that I have once again
realized the usefulness and advantageousness of holding inventory.
In addition, our improved logistics and digital capabilities have enabled us to create a business model that noother company can match, such as the Niawase and U-choku services. I think you have given us numerous
advantages, not only in terms of business advantages but also in terms of environmental issues, social issues
such as logistics, and usability improvements that are typified by in shorter delivery times.
Rather than being happy or sad about the business climate, we want to increase convenience for users,
dealers, and society as a whole and thereby lead to growth.
We hope that this rare business model of direct delivery by wholesalers to users will spread throughout
society and lead to a reduction of environmental burdens.
Let me explain U-choku using a simple analogy. If we were a wholesaler of medicines, we would not send
medicines to hospitals or pharmacies but would deliver them directly to patients. Please understand that Uchoku is such an idea.
Now that I have finished my explanation, I would like to answer your questions.
Takahashi: President Nakayama, thank you.

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Question & Answer

Takahashi [M]: We will now move on to the question-and-answer session. As explained at the beginning of
this presentation, we will be taking questions and answers from those in the audience and those online, inthat order.
First, if anyone in the audience has a question, please raise your hand and state the name of your company,
your name, and then your question. Now, please raise your hands.
Mr.Hiramatsu [Q]: Thank you very much for your explanation. Mr. President, I was expecting you to talk about
the DX Platinum Award. I was expecting you to talk about it because you received the DX Platinum GrandAward. It's really good as it's like an Eisei-Meijin (a title in shogi). However, I was more surprised when I readabout the Niigata center on the right side of the newspaper. Why is it in Niigata?
You already have the East Japan Distribution Center, and there is also the land you bought in Kariki, Hokkaido.
Or would there be more business opportunities in the Chugoku and Kyushu regions. In Hokkaido, there is also
[inaudible]. Why Niigata? I was interested because you are building two of them for 2026 despite the risingcost of construction. Is there some kind of strategy? If you could tell us.
Nakayama [A]: Why Niigata? First of all, the East Japan Distribution Center for HC is still located in Sanjo,
Niigata. Historically, the center has been in operation for almost 30 years, and it is quite old. However, we feltthat we did not have enough capacity, considering aging and such, so we decided to replace it somewhere
else, and Sanjo in Niigata was one of our choices.
Also, as you probably know, Niigata is home to many manufacturers of working tools and hardware, so it isclose to the production center.
Also, I am not sure about the recent situation, but in the past, the fares for shipments departing from Niigata
were actually cheaper. Freight rates shipping from Niigata were said to be the cheapest in the country.
Considering the various employment issues for part-time workers and other factors, I think Niigata was themost appropriate location for the project.
We have already secured a site for a distribution center in Hokkaido, but we still have plenty of capacity at
our previously opened distribution center in Sendai. So, Sendai is covering Hokkaido at the moment.
Also, as I mentioned earlier, I think Niigata is very convenient in terms of receiving maritime routes across the
Sea of Japan. We chose Niigata for such reasons. Does that answer your question?
Mr.Hiramatsu [Q]: Yes. Thank you very much.
Regarding the e-business route, your company is growing steadily, but the MRO business has been slowing
down, both at MISUMI and Monotaro, and I am a little concerned. Your company's facilities are also being
evaluated, but I'm wondering if we don't need to worry about that anymore. Are you optimistic about that
because there are other partners that are growing more with your company? How do you see it?
Nakayama [A]: There are Monotaro, MISUMI, and various other vendors, but I am not too worried about theirperformance, as I think it is just temporary.
On the other hand, people often worry that if Monotaro builds some kind of large distribution center,
TRUSCO's sales will decrease. But I am afraid that is a big amateur idea. If you compare the two companies'
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systems, we believe that buying from us is the most convenient, fastest, and hassle-free way to buy from us.
So, there are many places that are very dependent on us in such a situation.
In addition, we also have business with an online electronics retail company. I also hear that they will be
putting a lot of effort into online shopping at home centers in the future. Also, a major machine tool
manufacturer, whose name I can't reveal too much about yet, wants to use our direct-to-customer delivery
system to sell not only machines but also cutting tools, tooling tools, and measuring tools along with themachines through their online store.
They can't handle warehousing, sales, or delivery at their place, so they will leave that to us, TRUSCO. They
just ask us to take care of the products they pass on from their online shops. We believe that this will be an
unprecedented business flow, and if machine tool makers can sell not only machines but also cutting tools
and consumables, it will be a very interesting development for us.
In any case, we will not be able to respond to such requests unless we have a proper framework for logistics.
We will continue to develop this kind of capability.
Mr.Hiramatsu [Q]: Thank you very much. Also, one last small question. I saw a glimpse of the word "montbell." Do they use your services, too? Do you do outdoor activities, Mr. President?
Nakayama [A]: It's not that I do mountain climbing as a hobby. In fact, our headquarters in Osaka is next door
and across the street from mont-bell's headquarters. We are actually moving our headquarters building to
Hommachi, and after we move out, mont-bell will purchase the building with such a connection.
So, I asked them to let us sell mont-bell products if we had such an opportunity, and they said yes. I think they
are mostly direct sellers, but I don't think you can find any other distributors for mont-bell.
In fact, we are not going to sell their products under the category of mountaineering equipment, but in fact,
mountaineering equipment which can be used for disaster relief supplies, such as one-person tents forreconstruction, evacuation, protection from cold, medical care, and many other purposes besides
mountaineering. So we handle such products, and they have been very popular among our customers. Montbell, their brand is very strong, as I expected. We also keep an inventory.
Mr.Hiramatsu [M]: Thank you very much. Sorry, I am Hiramatsu from Tokio Marine.
Nakayama[M]: Thank you very much for all your questions.
Takahashi [M]: This is going to be the last question from the audience. Does anyone have any questions?
Thank you very much.
If there are none, we will move on to the questions from those attending online. After I nominate your name,please tell us your company name, your name, and your question.
Now, Mr. Komiya, please.
Mr.Komiya [M]: Thank you. I am Komiya of Mitsubishi UFJ Morgan Stanley Securities. Thank you.
Nakayama [M]: Thank you very much.
Mr.Komiya[Q]: In your earlier comment about H2, you said that the price increase would be plus JPY500
million in H2. I think you meant the price difference from the inventory you hold, but it is also stated in the
document that it is difficult to predict. It may be inappropriate to say that it went too well, but what went
better than expected that led to the JPY1.4 billion in H1? As you say, H2 is uncertain; I feel from the outside
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that there was some uncertainty that turned out to be good in H1. It's a bit confusing, so if you have any
specific examples, such as a place where it was surprisingly easy to get a price increase approved, we'd like tohear about it.
In the next fiscal year, the difference will disappear because the purchase price itself will go up, or will thiscontinue for a while? It would be helpful if you could tell us the nuance of it.
Nakayama [A]: Thank you. Frankly speaking, it is true that the JPY1.4 billion in H1 was also a bit unexpected.
Although we have not yet been able to carefully examine the details of the price increases, there were pricehikes by a considerable number of manufacturers, so it is difficult to specifically mention such products orsuch products. If we had a better understanding of the situation, we might be able to see H2 a little moreclearly. However, we will not know until we try what kind of products will actually sell and at what price, so
we will continue to watch H2 with some caution.
As for the next fiscal year and beyond, the current situation is that price increases are still continuing, so I
think there will be some impact on the next fiscal year as well. We do not think that it is a good idea to rely
too much on this, so we are just trying to understand how profits are made in the normal course of business,and if there is an extra factor, it would be just an extra factor.
Mr.Komiya [Q]: Okay. Thank you very much. Factors that reduced SG&A expenses in H1 and I'm justwondering what you think of the assumption that there will be an increase in H2.
Takahashi [A]: Regarding the reduction of SG&A expenses, as of this quarter's plan, it is freight and packing
costs. The decrease is due to the fact that the increase in direct shipment to users was budgeted to match theincrease in direct shipment to users, but the amount of increase was slightly less than expected.
For H2, some adjustments were made based on the H1 results, and some repairs that were scheduled to be
implemented in H1 have been moved to H2.
Mr.Komiya [M]: I understand. Thank you.
Nakayama [M]: Thank you very much.
Takahashi [M]: Thank you. Next, Mr. Watanabe, please.
Mr.Watanabe [Q]: I am Watanabe of Mito Securities. Thank you for your support. I just have one question,and I'm sorry that I ask this all the time. But the past five years have seen average sales growth of around 5.4%
or 5.5%, and it was more than 20% in total, and the operating income ratio this time is 6.7%, and it was also
6.7% five years ago, or five years ahead of the current plan. Your company has invested in Planet Saitama andvarious facilities, and the operating profit margin bottomed out at 5.2, but it is now rising again.
As for the next five years, as you mentioned earlier, there are various measures to increase sales. The
president's concept is to further increase the profit margin compared to the past five years, and since you
mentioned earlier that you will be investing in facilities in Aichi Prefecture, there are various unit prices andother unknown factors, so the profit margin is still uncertain. Is it difficult to say what the profit margin willbe, but is the idea to increase the top line? Or do you envision doing it over the next five years with somedegree of profit margin in mind as well?
Nakayama [A]: Yes. Of course, we are not completely unmindful of the need to improve profits in addition toraising the top line. However, when we make various aggressive capital investments, depreciation increases
and appears to be a drag on earnings, but I am thinking in terms of depreciation gain, not depreciation expense.

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29So, I think it is a little unusual for us to go out of our way to include depreciation in our earnings
announcements, but that is the way we would like to raise it one after another.
I don't know how long it will take to improve profitability, but for example, we are currently charging ouronline customers for freight but not for packing fees for direct shipment. So, in the future, we would like tocharge a fee, I don't know whether it's JPY200 or JPY300 per piece for packing, but we would like to take this
into consideration as this is quite a lot of money for five million packages.
When we mentioned that it was time for us to start charging packing fees to our major online shopping
customers, they replied that they had noticed. In light of this, I would like to improve our earnings every stepof the way.
However, as I showed the financial results of other companies in the industry earlier, we are clearly not in anindustry that is expanding as a whole. So, in a zero-sum situation, we are sucking up more and more sales
from other companies, though it is a bit of a misnomer to say that we are sucking up more and more sales,
but every year we are making enough sales to make one new business that is equivalent to a medium-sized
trading company. I think this will continue to progress.
Therefore, to put it bluntly, the days of competing with each other in sales, salesmen, and sales efforts arelong gone, and only companies that focus on the original purchasing aspect of how to procure goods
conveniently and cheaply will survive. Nowadays, our Niawase and U-choku are hardly mentioned or even in
the back of their minds because that is the current situation in this industry.
If this is the case, we believe that there is ample room for further expansion, and although it remains to be
seen how far we can go in five years, we would like to improve not only our sales but also the content of our
products.
Mr.Watanabe [Q]: I understand. I understood that while you have ideas for sales, you will also work together
to come up with ideas to increase profits.
Also, it is a bit obvious, but the slight deflation is turning into inflation. If inflation continues for your company,
you will be able to make great use of that inventory that you have in the form of this quarter. In that sense,
although it may be a bit obvious, will it be easier for sales and profits to increase if inflation continues? Should
I understand it that way?
Nakayama [A]: I think that will be the result, but we do not think that we will buy up all of the products
because of the price increase and do something after that. In such an inflationary environment, I believe thattaking risks, building distribution centers, and placing inventory, as we have done, will be well rewarded.
Mr.Watanabe [Q]: I understand. That's all from me. Thank you very much.
Takahashi [M]: Thank you very much. The next question will be the last one online. Does anyone have any
questions?
Since there seem to be no further questions, we will end the question-and-answer session.
If anyone has any other questions, please contact us by e-mail, or if you prefer, we accept interview requests
when appropriate.
This concludes the presentation of the financial results for the fiscal year ending December 31, 2023. Thankyou very much for joining us today.

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Nakayama [M]: Thank you very much.
[END]______________
Document Notes
1.
2.
3.
4.

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TollfreePortions of the document where the audio is unclear are marked with [Inaudible].
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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