TRUSCO Nakayama Corporation
Q2 Financial Results Briefing for the Fiscal Year Ending December 2024
August 26, 2024

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 2024

[Fiscal Period]

FY2024 Q2[Date]

August 26, 2024

[Number of Pages]

29[Time]

15:30 – 16:28(Total: 58 minutes, Presentation: 34 minutes, Q&A: 24 minutes)[Venue]Webcast[Venue Size][Participants][Number of Speakers]

6
Tetsuya Nakayama
Atsushi Kazumi

Mayumi Takada
Atsushi Shimozu
Kyoko Yoshimi
Mika Takahashi[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 and Orange Book Department
Manager of Corporate PlanningManager of Accounting Department
Manager of Public Relations & Investor
Relations, Corporate Planning
Public Relations & Investor Relations Section,
Corporate Planning Department
SBI SECURITIES

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1*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: We will now begin TRUSCO Nakayama Corporation’s financial results briefing for H1 of the fiscal
year ending December 2024 (the 62nd business year). Thank you for joining us today despite your busy
schedule. I’m Mika Takahashi from Public Relations and Investor Relations Section, Corporate Planning
Department, and I will be your moderator today. Today’s event will be held in a hybrid format of onsite andonline sessions.
First of all, I would like to introduce our attendees. Tetsuya Nakayama, Representative Director and President;
Atsushi Kazumi, Director, General Manager of Business Administration Division, Digital Strategy Division, andOrange Book Division; Mayumi Takada, Manager of the Corporate Planning Department; Atsushi Shimozu,
Manager of the Accounting Department; Kyoko Yoshimi, Manager of Public Relations and Investor Relations,
Corporate Planning Department.
Takahashi: Let me briefly explain about today’s proceedings. First, I, Takahashi, will provide an overview ofour financial results. Then, President Nakayama will present our initiatives. After that, there will be time for a
Q&A session. The financial results briefing will end when the Q&A session is over. The briefing is planned totake approximately one hour.
For the Q&A session, questions will be answered in the following order: questions posted in advance,questions from onsite participants, and the ones from online participants. We will tell you how to ask
questions in the Q&A session. The video of the briefing will be available on our official YouTube channel at alater date.
I will now explain the financial results. Please have the presentation material ready. We will be projecting iton the screen as well, but you can also download the material from our website as necessary.

First, let me explain our business performance. Please see page three.
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Consolidated sales for H1 of the 62nd business year was JPY143,461 million, up 9.2% YoY, up 3.4% from initialbudget. Gross profit was JPY30,201 million, up 7.1% YoY and 2.9% from initial budget. Selling, general, andadministrative expenses were JPY20,348 million, up 6.9% YoY and up 0% from initial budget. Of this amount,depreciation and amortization totaled JPY2,926 million, down 7.3% YoY and 3.6% from initial budget.
Operating income was JPY9,852 million, up 7.6% YoY and 9.3% from initial budget. Ordinary income was
JPY9,953 million, up 7.4% YoY and 9.3% from initial budget. Profit attributable to owners of the parent for H1
was JPY6,745 million, up 11.2% YoY and 8.3% from initial budget.
Net income per share for the interim period was JPY102.30, up JPY10.31 YoY and up JPY7.87 from initialbudget. Dividend per share was JPY26, up JPY3 YoY and up JPY2 from initial budget.
Private brand sales were JPY25,270 million, up 3.8% YoY. Capital expenditures totaled JPY9,868 million.

Next, please see page four for financial highlights.
Net sales increased 9.2% YoY, driven by the consolidation of distribution flow, which is a result of ourabundant inventory of approximately 600,000 items, “Niawase + Yuchoku” (package assortment and direct
delivery to users) with state-of-the-art logistics equipment, and other measures to improve customer
convenience and reduce environmental impact.
Gross profit was boosted by approximately JPY700 million in inventory valuation gains due to higher productprices. In addition, we have made a progress in passing through the higher purchase prices to selling prices insome sales routes in which we had delay in catching up.
As for selling, general, and administrative expenses, salaries and bonuses increased approximately JPY500
million YoY due to monthly achievement incentive to employees and an increase in the number of part-timers
and their hourly wages. In addition, freight and packing expenses increased approximately JPY400 million YoY
due to increased sales.

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4Depreciation expenses decreased approximately JPY200 million YoY mainly due to the expiration of softwareamortization period. Due to these factors, SGA increased 6.9% YoY and almost in line with the budget plan.
We recorded an extraordinary loss of approximately JPY200 million due to the revaluation of shares of
Cinnamon Inc., with whom we entered into a capital and business alliance in 2021. As a result, profit
attributable to owners of parent for H1 was up 11.2% YoY.

Please turn to page five. On August 9, we announced an upward revision of the budget plan for H2. I will
explain the details later.

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Next, please see page six for the business performance by sales route.
Sales for the factory route were JPY96,534 million, up 7.7% YoY and 2.5% from initial budget. At our 28 logistics
centers and 29 inventory storage branches nationwide, we expanded our inventory in line with market needs
and increased sales by enhancing convenience for our customers through enhanced inventory and logistics
capabilities.
Sales for the e-Business route were JPY32,833 million, up 13.6% YoY and 6% from initial budget. This is due tologistics processing tailored to client needs, support for Niawase + Yuchoku, development of a productdatabase with approximately 4.57 million items, and enhanced system integration with clients.
Sales for the home center route were JPY12,631 million, up 7.9% YoY and 3.1% from initial budget. As home
center operators strengthened their EC businesses, sales increased at their specialty stores and through theconsolidation of commercial distribution flow with coordinated efforts between stores and EC, taking
advantage of product databases and inventories.
Sales for the overseas route were JPY1,461 million, up 23.7% YoY and 4.9% from initial budget. Sales increased
due to a review of inventory to meet local needs and the development of suppliers.

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Next, please see page seven. The H2 budget plan by sales route is as stated.

Please turn to page eight for selling, general, and administrative expenses.
SGA totaled JPY20,348 million, up 6.9% YoY. The main reasons for the increase include 7.2% YoY increase insalaries and bonuses due to the payment of monthly achievement incentives and an increase in part-timer
headcount and hourly wages; 9.2% YoY increase in freight and packing expenses due to higher shipment
volume and transportation costs associated with sales growth. Depreciation expenses decreased 7.3% YoY
mainly due to the expiration of software amortization period.
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Next, please see page nine for capital expenditures. For a detailed breakdown, please see the handout.
Capital expenditures for the period totaled JPY9,868 million, mainly for Planet Aichi, which is scheduled to be
operational in 2026, and enhancements to the product database Sterra.
This concludes the review of business results for the interim period of the 62nd business year.

Next, please see page 10 for the details of an upward revision of the full-year earnings forecast for the current
fiscal year announced on August 9.
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The revised budget plan for the 62nd business year include consolidated net sales of JPY290 billion, up 8.1%
YoY; gross profit of JPY60,269 million, up 4.8% YoY; SGA of JPY41,157 million, up 5.5% YoY; operating incomeof JPY19,120 million, up 3.2% YoY; ordinary income of JPY19,364 million, up 3.7% YoY; profit attributed toshareholders of the parent company of JPY15,032 million, up 22.5% YoY; dividend per share of JPY50, up
JPY3.5 YoY.
The full-year budget for net sales has been revised to reflect the upside in H1. As for gross profit, we expect a
valuation gain of approximately JPY300 million in H2 on inventory items due to higher product prices. The
increase in cost of sales reflects an increase of approximately JPY750 million due to the change from a 5- to
12-volume version of the pro-tool general catalog “Trusco Orange Book,” which was designed to improve
convenience for customers.
From now, President Nakayama will explain our initiatives.
Nakayama: Hello again, I am Nakayama. Thank you for participating in today’s briefing at the venue and via
online. We sincerely appreciate your visit despite such a hot temperature. Although it is getting cooler
compared to the past few weeks, we hope you take care of yourselves and thrive in your businesses.

Let me start by explaining the information on page 12. This is a benchmark of our performance with our peers.
In talking with various people, I am often asked how business is going, including an overall trend of theindustry. My wife also asks that question from time to time. On this page, we have aggregated and listed theperformance of our peers for the cumulative period from January to June, regardless of their accounting
closing month, be it December or March, or another month. The results for the company who closed the bookin February are for November through May, which is not completely aligned.
In that comparison, our sales grew 9.2% YoY. You can see that the performance varies by company. My point
is, unlike in the past, it is difficult to sum up the overall industry trend in one word.

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9Therefore, we do not consider, for example, a 9.2% topline increase to be a great performance. Some of ourpeers suffered from a 7.4% YoY decrease, and they may say that the business is sluggish. Accordingly, it
depends on the effort or creativity of each company that distinguish the performance.
To give you some drivers behind our performance, the first factor is that we own large logistics centers. We
have been enhancing our logistics capabilities in the past 30 years. Some people have argued that such a big
investment into logistics facilities might not be justifiable. However, I can say that our current performance isdefinitely thanks to those investments. This is where we are.
The other driver is that we have established a system of immediate delivery with a large inventory of wide
variety of items. When I was a student, I was taught to minimize the inventory, but that was from the seller’s
perspective. From the buyer’s perspective, it is definitely better to have a large assortment of products andabundant stock. This is how we have been increasing the number of items, which has led to strengthening our
immediate delivery system. I think it is one of the reasons why we have been valued and appreciated by ourcustomers and users.
In fact, thanks to our merchandise, our overtime work has been drastically reduced, as I mentioned before.
We used to be called an employee-unfriendly company or toxic workplace, but now it is totally opposite. Thisis thanks to the wide assortment of items.
Because of that, we can fully take advantage of order intake via online, which can save the manual labor.
Currently, the online order ratio is about 86%. No outage means no back orders, thus requiring less manpower.
Having large assortment leads to efficiency improvement.
Next, please see the last bullet Niawase + Yuchoku. This may not be a word you are familiar with. Niawasemeans assortment, or packing as much of your order as possible in one box. When you shop online, you may
have experienced that you receive several boxes for a single order, but we try to bundle the shipment as muchas possible.
It also cuts the delivery time in half by sending it directly to the user, not to the customer who ordered it. This
is Yuchoku. We can also cut the freight costs by half. This service is now very popular because it also reduces
the environmental impact by half.
The service is a big driver behind our YoY sales growth, I believe. Simply put, it prompts customers toconsolidate all orders into TRUSCO by taking advantage of our direct delivery to the users instead of placing
separate orders to other wholesalers. I think this is why we are winning more orders.

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10Please move on to page 13. This is how the orders are flowing to the companies who offer convenience. WhenI first started working in this industry, I was often told to have guts, diligence, and perseverance. It was an eraof sales rep’s effort to compete for order wins, but now it is different. Customers put the priority on theconvenience and how they can source the necessary items.
As shown here, each party, such as manufacturer, customer, and user, has its own issues. As written here,
TRUSCO can provide solutions to such issues and has a system and framework that can provide such services.
We have logistics centers and inventory storage branches across the nation. We also offer various services tosolve the issues of each of those parties.
For your information, Niawase + Yuchoku service is something that only TRUSCO can provide in the industry.
Even outside our industry, this kind of service is basically impossible, which is the direct shipment to users
from wholesaler, in this case, TRUSCO.
As I always explain, if we are a wholesaler of medicines, we do not send the medicines to hospitals or
pharmacies but directly to patients. I think this is a service that matches the trend, but it may not havereceived a favorable evaluation in the stock market. I hope you get a better sense of our proprietary service
today.

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11Page 14 describes how we have been enhancing the Niawase + Yuchoku service. We had shipped 2.18 million
packages in Q2 last year. In Q2 this year, we shipped 2.84 million packages, an increase of more than 30%
versus last year.
Full-year forecast is about 6.2 million packages. To give you a better idea about how big it is, you need aconsiderably large logistics equipment to do this. This is not something that the wholesaler can manage aspart of the daily business.
I mentioned about Niawase, the assortment. If you rely on manual labor by mobilizing staff for that work, you
can never finish it. What we are doing is to secure a space with a size of a studio apartment in our logistics
center. Let’s say, we receive a purchase order statement with five lines. The inventory of each of the five lines
is dispersed throughout various places in different sites. Once they are shipped, they are put in to thecontainer, or a so-called studio apartment.
When the shipment of that order is approved, the boxes stored in that container are all released and thenaggregated. They will be then packed and delivered. This is the kind of system we have in place, which can’t
be possibly done with a manual labor.
That is why this service has been very well received. Especially in light of the so-called logistics 2024 issue, ourcustomers highly appreciate our Niawase + Yuchoku service.

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12Page 15 is about the review of Trusco Orange Book to its previous format, which will be done in next year.
The renewal had some benefits of cost reduction and environmental preservation, but too much focus on
these factors resulted in a much reduced number of items listed in the catalog. Despite the stock andavailability, some items are excluded from it.
We had thought that the customers can alternatively search them online, but this proved to be wrong. For
some brands, they suffered sales decrease by not exposing their items to the catalog. My guess is that theopportunity loss of unlisted items may total JPY5 billion or JPY6 billion, give or take. Anyway, the reduction in
the pages of catalog affected the sales performance.
We sincerely regret the impact it caused on our customers’ and suppliers’ sales, not to mention our own. Ourpolicy is to ensure inventory for every item we merchandise. As long as we have stock, we make sure to put
them in the Orange Book, our catalog. This is our basic policy, and we would like to go back to the basics.
This year’s edition, the 2024 edition, has a total of 8,208 pages. Next year's edition will have almost double
the number of pages, 17,400, and is heavy, weighing about 20 kg. Again, we will put it back to the originalstate. However, we aim to be a little more creative in terms of the environmental preservation.

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Next, please see page 16 for some background of catalog review. Why do we need a paper catalog in theInternet era? In the manufacturing industry, there are some stringent rules to prohibit staff from bringing
smartphones or connecting their PCs online. When they select MROs, it is still common that they use paper
catalogs. Therefore, the paper catalog plays a significant role.
As stated here, we have product data on approximately 6.3 million items, and to showcase those items, we
use different media such as the paper version of the Orange Book, the electronic version of the Digital Orange
Book, and the web version of the OrangeBook.Com.
However, it is up to the dealers or users to choose the media they like. Our job is to sort the items nicely andoffer a convenient way for their selection.

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On the next page, we have listed some of the feedback. There were positive comments. However, we also
received negative feedback such as “the renewed catalog led to redundant work,” as the inquiries from users
to dealers increased via phone or e-mail. We feel sorry for the inconvenience it caused for dealers. Also, some
say that they can’t complete the whole process on the Orange Book any longer and it became cumbersome.
It is not shown here, but we also got much harsher opinions such as “we will never order another Orange
Book.*” Again, we sincerely regret the trouble it caused, and plan to redo the catalog.
* The Trusco Orange Book is not distributed free of charge, but is available for purchase.

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Please move on to page 18. We are now in an era where CO2 emission and other factors should be considered
upon procuring goods and supplies. We already started to disclose those factors with a simple label on ourcatalog. At this point, we don’t cover all the items, but as many items based on the information available.
From next year, we will put those labels for approximately 75,300 items.
Another point is about the listing criteria of catalog. When I visited one manufacturer the other day, I realizedthat until now we have always been selling, cataloging, and stocking products from our own perspective basedon the likelihood of sales volume.
Even among the items offered by the same brand, sales performance varies. We have been selecting the items
for catalog based on the estimated sales volume and excluding ones that will likely not sell well. However,from the user’s perspective, since we carry items for a particular brand, we should think about their necessity
rather than our own sales opportunity. Therefore, in 2026, we plan to list more items manufactured by thebrands we merchandise.
I am not sure if it can contribute to the sales of that brand. It may end up with customers mistakenly placing
orders with us rather than the manufacturer, but we intend to make our catalog more user-friendly.

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Please move on to page 19. I am pleased to report that we are making progress on the construction of Planet
Aichi.
We are currently constructing a large-scale logistics center in Kitanagoya City. For your information, it isexactly twice the size of Planet Saitama, and I believe it will be the largest toolbox in Japan, both in name andcapability. We plan to make it a facility that can accommodate one million items. We are also trying tostrengthen logistics from Tokai area to all of western Japan and to enhance the function of Niawase + Yuchoku.
We aim to make our proprietary service of Niawase + Yuchoku a de facto industry standard for MRO
procurement. We do something that others don’t, and we are determined to pursue that effort.
The building will be completed in January of next year, followed by the installation of distribution equipment
and deploying inventory. Shipments will start in July 2026. Although the project is still almost two years away,
we would like to expedite it as much as possible.

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Planet Niigata is also now under construction. The main focus there is to strengthen the delivery system forhome centers. We also plan to make it a stock center where we can store a large quantity of inventory forrelevant items.
In addition, the Niigata site is conveniently located for import from overseas, especially from South Korea andChina via the Sea of Japan. The shipping route can be shortened, and costs can be lowered. Planet Niigata canalso serve as a stockyard for import.
I don’t mean to be rude, but only those who have warehouses succeed in the wholesale industry. Those who
don’t will not be able to survive. That is how it is in our business. We aim to keep investing in logistics facilities
for the growth.

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Page 21 is our newly launched initiative for new graduate recruitment, which is called TRUSCO Retry System.
What it does is that we give opportunities for the students who failed during the job interview process.
I was told that about 70 students were disqualified during the hiring process this year, which is a shame. I
used to joke with the staff that I wondered if you guys had made the right decision. It led to an idea of the
Retry System. However, we decided to go with something like an internship instead of another job interview.
We would ask them to work at our logistics centers for three days.
We had 10 applicants this year, and considering their aptitude in cargo handling, comprehension, and various
other factors, we hired four of them. We don’t know how this will turn out, but we would like to continue ourrecruitment activities in a variety of ways.
83 people joined the Company in 2024, and we plan to have 150 in 2025. At this point, we have 102 university
graduates who have accepted the job offers, which is 50 more than last year, and we are very grateful for that.

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19Question & Answer

Nakayama [M]: Please see page 23 for the question we received in advance.
Participant [Q]: Your company’s stable profit growth has been in contrast with your peers who suffer toplineand profit decrease. How do you see the biggest driver to distinguish your performance? What risks, external
factors, etc., do you see that could make a big difference in the future depending on how they are handled?

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Nakayama [A]: We have written our answer on the next page, page 24. This is a bit old story which dates back
30 years ago when I became the president. At that time, I said that TRUSCO would become the infrastructurein the industry such as to supply essential things like water, electricity, and gas.
We have strived to be viewed as indispensable infrastructure based on that policy, and have invested in thearea of logistics, the core part of the business.
Logistics became something that people talk about nowadays, but nobody cared about or paid attention to it
30 years ago. We have persistently continued our effort since then.
I don’t know if you are aware of this, but all of our new employees, including women, are assigned to a
distribution center for one year and two months, and all of them would master the logistics business there.
Of course, it is an intensive period to learn the basics, but through that, they would be equipped with the skills
to operate those facilities on their own. Today, people have the option to use outside distribution warehouses.
Even if you don’t have staff, you can rely on 3PL providers. However, prices are expensive everywhere, andresources are scarce. Instead of relying on external capacity, we have something on our own. This is one of
our strengths, so to speak.
Therefore, the so-called logistics 2024 issue is a tailwind for us, and we are not affected at all. We have beenswitching the delivery vehicles back to our own fleet, currently around 40% level. Drivers are also our own
staff. We pay decent amount of salary, with no worry for them to be headhunted or leaving us. There is no
turnover or transfer to another company. This is another advantage.
I like the phrase “not to use people with cheap salary.” If you cut the labor costs, they may praise you as askilled manager, but every one of the employees has his or her own living. To lead a comfortable life, theyneed a pay that they deserve. I don’t have any intention to cut the labor costs. The reason we enjoy good
retention and suffer no big issue is partly because of our compensation scheme, I believe.
Also, IT system expenses tend to be higher, which is inevitable. Competition based on manual labor doesn’t
scale. I think it is important to leverage a digital technology and system. It is like building a stonewall aroundSupportJapan
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21the castle. We have to do that. We are going to do what we can and move forward, including the investment
into IT systems and distribution facilities.
We also work to minimize damage from all possible disasters. Since many of the items we carry are used fordisaster recovery, we consider it our mission to supply products immediately after a disaster strikes. Therefore,
I believe that after the disaster, the gap between our performance and that of our peers will widen. Regardlessof the severity or magnitude of disaster, we are ready to immediately ship the items from the day a disasterstrikes. This is our big advantage, I think.
The next question on page 25 is about the Orange Book, which I have already explained, so I will skip theanswer.

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Participant [Q]: What about the impact of the logistics industry’s 2024 issue?

Nakayama [A]: As mentioned on page 28, we have a fixed-cost based logistics system, which you can imagine
like the Yamanote Line. The circular Yamanote Line goes round and round every day, and whether it carries
many or few passengers, there are certain costs involved. In the logistics business, we are making every effort
to run with a full load of goods so that we can deliver with full capacity, and freight rates will not increase

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even if the number of goods for delivery increases. I think such a system is something that also differentiatesus.
The breakdown shows the delivery to dealers as 63.8%, consolidated shipment to dealers as 17.6%, andYuchoku as 17.7%. That is the current situation, but we aim to expand Yuchoku further to offer conveniencein the industry.
Some manufacturers are being affected by the logistics 2024 issue, such as delay in picking by one day, or
requirement of package consolidation. Under the circumstance, they try to switch to the wholesalers that canproperly stock and sell their products, and they are counting on us. That is how we capture more orders fromthem.
Dealers are also shifting away from a wholesaler who can’t commit a delivery to the one that ensures proper
turnaround. We are attracting their demand as well.
Excuse me if my statement has been unclear. That’s all the answers for the pre-received questions. Thank you
for your attention.
Moderator [M]: Thank you, President Nakayama. We will now move on to the Q&A session with participants.
If anyone in the audience has questions, please raise your hand and tell us your name, affiliation, and question.
Mr.Komiya [Q]: My name is Komiya.
Since Mr. Nakayama is here, let me take this opportunity to ask something. My first question is about thedetails of the effect of price hike. You mentioned that it was conservatively estimated due to the lack ofvisibility, but how much effect did it bring in H1? You only forecast JPY300 million in H2, but is it due to theuncertainty, or is it a probable estimate based on the actual progress of the price hike after one or two years?
I appreciate the assumption of your estimate, and how you see it in H2.
Nakayama [A]: In terms of valuation gains from inventory, I can only estimate, I am sorry. What I can say is, it
has been a while since the price hike, so the effect is pretty much subsided or materialized, we think.
Our forecast for H2 is around JPY300 million, but it may be a bit above, or below that. Again, we can only
speculate.
Mr.Komiya [Q]: JPY300 million in H2 compared to JPY700 million in H1, is that right?
Nakayama [A]: That’s right.
Mr.Komiya [M]: Thank you.
Nakayama [A]: For your information, it was JPY2.3 billion in full-year last year. Our H1 estimate of JPY700
million is much smaller, and we see a dwindling trend in H2 with JPY300 billion. This is just a rough estimate.
Mr.Komiya [Q]: H1 last year was somewhere around JPY1.4 billion, I guess. Last year, JPY1.4 billion in H1 and
JPY 0.9 billion in H2.
Next question is about page 14. I found the Niawase + Yuchoku quite an interesting or amazing service. If I
simply calculate the sales per package, it is about JPY6,000. I just divided JPY35.6 billion by 6.2 million units.
You mentioned about the various advantages of TRUSCO. In the future, as you capture more orders
consolidated into you, do you think that the sales per package will go up? Do you expect volume growth with

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no major increase in per-unit sales? Which scenario do you think would be better for your profitability or foryour business growth?
Nakayama [A]: First of all, there is an issue of freight costs. Basically, it is borne by customers. In the case of
direct shipment to users from e-commerce companies, it is paid by the EC operator. In the case of generaldealers, they bear the freight costs. However, we pay the costs tentatively on behalf of them, and charge
them afterward when we send the bill. It is like adding a packing cost in the invoice, but we ensure therecovery of that portion. Therefore, the burden of freights for Yuchoku is not so relevant to us.
An ideal scenario for us is to see the growth in both the amount per package and number of items. The key
factor for that is to enrich our merchandising assortment. We already have enough items we carry, but thatwill lead to the economy of scale, I think.
For users, highly appreciate such a bundled delivery. With one order, one delivery, they can get all they need.
This is exactly the service they want. We are confident that this service will continue to grow.
Mr.Komiya [M]: Thank you for the detailed answer.
Moderator [M]: Thank you. Does anyone have any other questions?
Mr.Hiramatsu [Q]: My name is Hiramatsu. My first question is the consolidation of sales route. At first, youseemed to struggle to drive the profitability, but it is improving in the e-business route and the home centerroute. I assume the price pass-through is being penetrated. Meanwhile, the factory route is still suffering low
margin. Do you think its gross profit margin will improve over time?
Nakayama [A]: First of all, the most challenging channel of these three routes is the F-route. The old-fashioned
practice still remains in sourcing activities, such as from whom to purchase. It will take time for various reasons.
However, as our customers see the management succession to a new generation, their mindset is becoming
more open.
They choose the most reasonable source. Recently I haven’t heard many stories like retired managers
influencing the procurement decisions. It became a lot easier for us to do business. We were the last comerin the industry, and still are. Because of less history compared to our peers, we had suffered a lot.
【supplement】
While some of the impact is due to the consolidation of trading areas, the main reason for the decline in the
gross profit margin of the factory route in the first half of the current fiscal year is the decrease in inventory
valuation gains.
In particular, last year there were many price revisions of products due to inflation, and the valuation gains
on inventory purchased at the old prices had been increasing,
However, inventory valuation gains declined as the number of price revisions settled down, and the company
as a whole saw a year-on-year decline of 0.7 billion yen in the first half of 2024,
In contrast to the factory route, where price pass-through has been proceeding steadily since immediately
after the price revision,the e-business route and home center route, which had experienced price pass-on
delays until last year, have gradually passed on prices, resulting in an improvement in gross profit margins.

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Mr.Hiramatsu [Q]: I understand. Thank you. Another question, which may be a bit technical, is that I had
thought you would implement a free location method from Planet Saitama, but the document says you
already have nine facilities with that method. I was surprised to see that. Is this something you would convert
while doing your day-to-day operation?
Nakayama [A]: Not all of the nine logistics centers have been fully converted to that method yet, but certain
a floor or section of each facility is being converted. It takes time to physically move them, so we areproceeding the work on holidays or other occasions to implement that method.
It has a lot of benefits. Fixed location method has many gaps in space. The key is to minimize such a deadspace. We will drive our effort for conversion.
Mr.Hiramatsu [M]: I see, thank you.
Nakayama [M]: Thank you for your question.
Moderator [M]: Thank you. Does anyone have any other questions? Since there seem to be no questions, wewill now move on to the Q&A session from the online participants.
If you would like to ask a question, please press the “raise your hand” button. I will unmute the person who
raised hand. Please then tell your name, affiliation, and question.
Mr. Watanabe, please go ahead.
Mr.Watanabe [Q]: I am Watanabe. I have two questions.
First question is about the 2024 issues in logistics industry, something you partly answered in the pre-received
question. Sorry for my ignorance, but since your peers have to raise the freight fees due to the lack of drivers
and constraints, you can demonstrate your competitiveness in that regard. Is it correct?
Your competitors have no other option to raise the logistics service fees due to the 2024 issues, but you don’t
have to do that. Does it create your price advantage and attract more orders? Customers with limited budget
will have to rely on you since other wholesalers are too expensive. Is there such a possibility?
Nakayama [A]: I think there are cases like that, but first of all, there are various degrees of obstacles to thislogistics problem, such as the fact that the person who used to deliver the goods has quit and there is no one
to replace him, that the freight is too expensive to send the goods, or that the delivery staff does not come topick up the goods.
We believe that our ability to provide consistent deliveries is a great strength, and we would like to expand
our business by focusing on delivering products to customers who are in need of them.
Mr.Watanabe [Q]: I see. The second question is also related to this. Earlier, you mentioned that your sales
are growing, while others suffer a declining trend, and the situation varies per company. In that, do you thinkthat the 2024 issue served as a catalyst to boost your share significantly?
Nakayama [A]: The 9.2% sales growth includes the contribution of Niawase + Yuchoku, although it is hard toquantify. I guess some of the growth was driven by the 2024 issue.
Watanabe [Q]: The issue materialized from April, and you felt some tangible effect. That also triggered anincrease of your market share to some extent.

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Nakayama [A]: Unfortunately, we don’t feel the impact of the 2024 issue, so I can’t give you a definite answer.
Of course, there are some requests of freight rate increase, but there is nothing that we are concerned about.
Therefore, we do not know how our peers have been affected.
Watanabe [M]: I see. Thank you.
Nakayama [M]: Thank you.
Moderator [M]: Thank you very much. If you have any other questions online, please let us know using the“raise your hand” button.
As there are no further questions, we will now conclude the Q&A session.
Nakayama [M]: Any questions from the new graduates? See you later then.
Moderator [M]: Thank you. If anyone has any further questions, please feel free to contact us by e-mail or, as
appropriate, for interview requests.
We have one announcement to make. The movie Last Mile, in which our logistics facilities, Planet Saitama
and Planet Kita-Kanto, were used as filming locations, has been on the roadshow at nationwide theaters since
Friday, August 23. It features some hot topics such as online shopping and logistics issues. Please see it at thetheater if you like.
This concludes the presentation of the interim financial results of Nakayama Corporation for the 62nd
business year ending December 31, 2024.
Webinar participants will be taken to a short survey regarding this session after watching. We appreciate yourfeedback.
Thank you very much for your kind attention to the end.
[END]______________
Document Notes
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