CHUDENKO CORPORATION
Q2 Financial Results Briefing for the Fiscal Year Ending March 2024
December 6, 2023

Event Summary[Company Name]CHUDENKO CORPORATION[Company ID]

1941-QCODE[Event Language]

JPN[Event Type]Earnings Announcement[Event Name]

Q2 Financial Results Briefing for the Fiscal Year Ending March 2024

[Fiscal Period]

FY2024 Q2[Date]

December 6, 2023

[Number of Pages]

31[Time]

10:00 – 10:53(Total: 53 minutes, Presentation: 33 minutes, Q&A: 20 minutes)[Venue]Webcast[Venue Size][Participants][Number of Speakers]

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Takafumi Shigeto

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Presentation
Moderator: Now the time has come, and we will begin the briefing on the financial results of Chudenko
Corporation.
Thank you very much for taking time out of your busy schedule to attend today's financial results briefing.
Mr. Takafumi Shigeto, Representative Director and President, will now report on the financial results for Q2
of FY2023.
Shigeto: Yes. Hello everyone. I am Shigeto, President of Chudenko.
Thank you very much for your participation in the financial results briefing for Q2 of FY2023.
Today, I will first explain our business results for Q2 of FY2023, followed by the forecast for FY2023, then theMedium-Term Management Plan 2024, and finally the Chudenko Group 2030 Vision. Thank you very muchfor your cooperation.

First, here are the results for Q2 of FY2023.
First, let me give you an overview of the business environment and our group in FY2023. In the constructionindustry, public capital investment remained firm and private capital investment picked up, but the industry

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faced difficult conditions as energy and raw material prices remained high due to the prolonged situation in
Ukraine and exchange rate fluctuations.
Under these circumstances, the Group shifted from a company with a Board of Corporate Auditors to acompany with an Audit Committee in order to further enhance corporate governance, such as strengthening
the supervisory function of the Board of Directors, while enabling prompt and decisive decision-making andbusiness execution through the transfer of authority from the Board of Directors to the Directors.
In addition, we have decided to withdraw from the offshore wind power generation business in Taiwan, which
posted a large loss at the end of the fiscal year and caused concern to everyone and are now proceeding withthe procedures.

As for the results for Q2 of FY2023, net sales increased by JPY1.9 billion YoY for Chudenko on a nonconsolidated basis. Consolidated subsidiaries also increased by JPY1.2 billion, resulting in a YoY increase of
JPY3.1 billion to JPY82.6 billion.
Next, operating income increased JPY300 million YoY due to the increase in gross profit, which was due in partto the increase in net sales, as well as the effects of thorough cost control and more efficient construction.
On the other hand, despite a JPY300 million increase in operating income, ordinary income decreased by
JPY900 million from the previous year due to a decrease in the absence of foreign exchange gains recorded in
the previous year and foreign exchange losses.
Net income for the quarter will also decrease by JPY700 million due to the decrease in ordinary income.

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3This is a comparison of the Q1 and Q2 results for each period. Although we have been able to steadily increase
sales, we have seen a decline in profits in FY2022, and both the first and second quarters were below theprevious year's levels.
This situation did not improve in Q1 of the current fiscal year, but improved profits were seen in Q2 of the
fiscal year. In H2, we are firmly committed to the various measures in our Medium-Term Management Plan
to continue and establish this improving trend.

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I will continue with an explanation of the main items. First, the breakdown of the JPY3.1 billion increase in net
sales from the same period last year is as follows: In the case of Chudenko on a non-consolidated basis,
although sales of air-conditioning pipes decreased, sales of indoor electric appliances and other departments
increased, resulting in a YoY increase of JPY1.9 billion. Consolidated subsidiaries increased by JPY1.2 billion
from the previous year due to increases in the Chugoku region and overseas. As a result of the above,
consolidated net sales totaled JPY82.6 billion.

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As for the breakdown of the JPY300 million increase in operating income from the same period last year, ona non-consolidated basis, the general division saw an increase of JPY700 million due to increased sales andimproved profitability of construction work, while the electric power division maintained a stable profit level,
resulting in a JPY700 million increase in overall operating income.
As for the consolidated financial processing, profitability at consolidated subsidiaries declined slightly,
resulting in a JPY0.3 billion decrease in profit. As a result, consolidated operating income was JPY1.4 billion.

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Next, for the breakdown of the JPY300 million increase in operating income and the JPY900 million decreasein ordinary income, the non-operating income has decreased JPY1.3 billion, and I will explain the detail.
First, here is a breakdown of the JPY500 million decrease in non-operating income from the previous year. In
the previous fiscal year, foreign exchange gains were recorded due to the sale of foreign bonds held by theCompany, the market value of which increased due to the weakening of the yen.
Next is a breakdown of the JPY700 million increase in non-operating expenses from the previous year. At theend of the previous year, the Company recorded a loss to guarantee obligations with respect to investments
in foreign operations. Since that debt guarantee was denominated in a foreign currency, the exchange rate
subsequently depreciated against the yen, and the loss was recorded as a foreign exchange loss.

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Next is the balance sheet. Total assets decreased by JPY13.1 billion to JPY259.4 billion, mainly due to adecrease in accounts receivable from completed construction contracts. Total net assets increased JPY1.8
billion to JPY203.9 billion due to a JPY4 billion increase in valuation difference on available-for-sale securities,
which offset a JPY2.2 billion decrease in retained earnings.
The equity ratio increased 4.4 percentage points to 77.6% from 73.2% at the end of the previous fiscal year
due to an increase in equity capital and a decrease in total assets.

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8Next, I would like to show you Chudenko's non-consolidated orders and sales by division. Orders received on
the left side of the graph were strong, exceeding the previous year's level by a very high JPY23.7 billion.
Particularly large growth was seen in indoor electricity, with construction related to distribution warehouses
and schools, and in air conditioning pipes, with construction related to factories and condominiums, with theoverall total reaching a record JPY104.2 billion.
On the right side, sales of air-conditioning pipes decreased for hotels and distribution warehouses, but
increased for indoor electric for factories and distribution warehouses, resulting in overall sales of JPY63.1
billion, an increase of JPY1.9 billion from the previous year.

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9This figure represents the amount carried forward by individual Chudenko. In line with the increase in orders
received, the amount carried forward has continued to increase, especially in Q2, with a sharp increase of
JPY41.3 billion, or 36%, from the previous year.
Orders for indoor electric and air-conditioning pipes, which showed significant growth in Q2, exceeded thoseof the previous year by a wide margin, and the respective carried forward amounts are JPY92.8 billion forindoor electric, up JPY17.8 billion, and JPY38 billion for air-conditioning pipes, up JPY13.2 billion.

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10Next is the forecast for the full year.
There is no change in the consolidated results for 2023 from the forecast explained in May. As initiallyforecasted, both sales and income are expected to increase. Net sales are expected to increase byapproximately JPY10.7 billion for Chudenko on a non-consolidated basis and JPY5.2 billion for consolidated
subsidiaries, for a total forecast of JPY205 billion.
Operating income is also expected to increase by JPY2.1 billion YoY to JPY10.5 billion due to the increase insales, etc. Ordinary income is also expected to improve significantly due to the increase in operating income
and the absence of losses related to overseas business investment projects recorded in the previous fiscal
year, resulting in an increase of JPY14 billion to JPY12.1 billion and net income of JPY14.5 billion to JPY7.6
billion.

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11Next are orders and sales by individual corporate sector. Orders on the left side are expected to be JPY168
billion, an increase of JPY0.2 billion from the previous year, mainly due to an increase in air-conditioning pipes.
Net sales on the right side are expected to be JPY159 billion, up approximately JPY10.7 billion from theprevious year, mainly due to an increase in indoor electricity.
Based on strong orders received through Q2, we now forecast an increase in orders received of JPY8 billion
from our initial forecast. On the other hand, we have not changed our initial forecast for net sales, assumingthat the increasing number of ordered properties will lead to sales from next year onward.

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12Next is the trend of individual orders, sales, and carried forward. As shown in the line graph, orders received
for the current fiscal year are expected to exceed those of the previous year by JPY168 billion. Sales are also
expected to exceed the previous year's level, reaching JPY159 billion, the highest in the last five years.
While orders received increased significantly, the amount carried forward also continued to increase. In
particular, the level is very high from the previous year, and is expected to increase both in the metropolitan
area and in the Chugoku region, and is projected to increase by JPY8.9 billion from the previous year to JPY125
billion.
We believe that the abundant carried forward will contribute to increased sales in FY2024, the final year of
the Medium-Term Management Plan, and beyond.
We believe that ensuring our construction work organization will contribute to achieve the profit target.

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Next are orders and sales by individual region. As a growth strategy, we have been maintaining sales in the
Chugoku region and expanding in urban areas.
Orders and sales in the Chugoku region, shown in blue, will be maintained at a solid JPY120 to 130 billion. The
Orange metro area is expected to generate JPY27.6 billion in sales in FY2023, down JPY2.7 billion from theprevious year, but as a percentage of sales is expected to increase steadily to 17%, up from 11% three years
ago. We will continue to maintain orders in the Chugoku region and expand in the metropolitan area.

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Next are the main management indicators. In FY2023, we expect a recovery from FY2022, when performance
declined.
Green operating income increased by JPY2.1 billion from the previous year to approximately JPY10.5 billion,
partly due to increased revenue. The operating income margin is expected to be 5.1% as a result of efforts toimprove construction efficiency and reduce costs. Yellow net income is expected to V-shaped recover fromFY2022, and ROE is also expected to improve significantly by 7.2 percentage points to 3.8% due to the increasein net income.

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I will continue by explaining the Medium-Term Management Plan 2024, based on the current status of ourefforts.
The Medium-Term Management Plan, which started in FY2021, is a four-year plan for further growth,targeting FY2024, the 80th anniversary of the Company's founding.
The theme is "Change and Growth" with two sub-themes. The first is to "strengthen the sales and construction
work organization and increase profits," and the second is to "promote DX and decarbonization.

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Next are the five major measures to achieve the mid-term plan.
In the first category, "Expansion of Orders and Strengthening of Construction System," we are working tostrengthen relationships with major design firms and local general contractors, and this is yielding results inthe form of increased orders.
In the second area, "securing and expanding profits and strengthening competitiveness," in order to secureand expand profits from large-scale construction projects, we are striving for thorough cost management bystrengthening review meetings prior to receiving orders, etc.
Third, in the area of "strengthening human resource development and promoting work style reforms," theCompany was awarded a two-star rating as of September 8, 2023, under the Eruboshi System, in which the
Minister of Health, Labor and Welfare certifies excellent companies in their efforts to promote women's
activities.
Fourth, "Quality Improvement," to contribute to a stable supply of electric power, we are strengthening
cooperation with the Chugoku Electric Power network and working to respond promptly to emergencies. In
addition to the workmanship of the installed equipment, we are also striving to improve quality to ensure
customer satisfaction by strengthening our checking functions at each step of the construction process.
Fifth, "business expansion through growth investments," we are considering investments in M&A, renewableenergy, and other areas. We will continue to promote environment-related businesses such as selfconsumption solar power generation PPA projects and ZEB conversion to support decarbonization for ourcustomers.

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Next is the numerical targets of the Medium-Term Management Plan. For FY2024, the final year of the plan,
we target consolidated net sales of JPY210 billion, consolidated operating income of JPY12 billion, andconsolidated operating margin of 5.7%.
In FY2022, the second year of the Medium-Term Management Plan, delays in construction progress andsoaring energy and raw material prices caused us to revise our forecasts frequently, resulting in a decrease in
net sales and operating income from the previous year.
We believe that FY2023, the year immediately preceding the final year, is a very important year in terms ofpromoting the recovery of our business performance and achieving the goals of the final year of our MediumTerm Management Plan. Therefore, the entire group is working together to focus on the recovery of ourbusiness performance, and we believe that the situation through Q2 is showing improvement, as I explained
earlier.
In particular, we believe that we will enter FY2024 with an abundance of carried forward due in part to strong
orders received by Chudenko on a non-consolidated basis. We will strive to achieve our goals by maintaining
our technological and construction capabilities and further improving our business performance.

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Next, I will explain our human resource strategy, which is indispensable to achieving the goals of our MediumTerm Management Plan.
We have traditionally positioned people as the source of our corporate value, and based on the recognition
that they are our most important asset, we have systematically worked on everything from recruitment totraining.
In order to continue our sustainable growth in the rapidly changing social and business environment, we havedefined the type of person we are looking for as "a person who is flexible to accept changes in society andtakes the initiative to take on the challenges of change”. Through our human resource development policy
and internal environment improvement policy, we will create an environment where people with diverse
personalities and values can work together toward a common goal, think independently and willingly take on
the challenge of change in order to create new value.

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I would like to continue by explaining the status of our recruitment and training efforts. Although recruiting
has been challenging in recent years, the Company has continued to hire about 130 people and plans to hire
140 regular employees in FY2024.
In order to be responsible for the future of Chudenko, we have traditionally put a lot of effort into recruitment
activities, but starting next April 1, we will establish a scholarship return support system and focus on
attracting excellent human resources.
As you can see from the pie chart, young people under 30 years old account for less than 30% of the total,
and we believe that the development of such young people will lead to the strengthening of our construction
capabilities. For this reason, we are striving to quickly train and empower our younger workforce, and we areespecially promoting the acquisition of the necessary electrical and plumbing qualifications.
These efforts have led to an increase in the number of qualified personnel, which, along with improved
technical and construction capabilities, has been a driving force behind the increase in sales.

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Next, regarding specific measures for capital policy, we have established a JPY40 billion investment quota toinvest for sustainable growth.
Specifically, we are expanding our business, starting with mergers and acquisitions, investing in renewableenergy, decarbonizing our own operations, and working on PPA projects to help our customers decarbonize
their operations.
With respect to shareholder returns, the Company places emphasis on providing sustainable and stabledividends, and will continue to target a consolidated DOE ratio of 2.7%.
In addition, the Company will repurchase its own shares as necessary, taking into consideration the overallbusiness environment and other factors.
However, in light of the request from the TSE in March 2023 to take action to realize management that is
conscious of the cost of capital and stock prices, we would like to advance our internal discussions once again
and present to you the direction we intend to take in the future.

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Next are the actual and projected shareholder returns. Based on the policy explained earlier, we expect to
pay an annual dividend of JPY104 per share for FY2023. DOE is 2.89%, payout ratio is 74.6%, and since theCompany repurchased its own shares on November 30, total return ratio is expected to be 93.7%.
Despite the net loss in the last fiscal year, we were able to pay a stable dividend to our shareholders as weuse DOE for dividend payments. The Company also repurchased its own shares every year during the MediumTerm Management Plan period, and over the three-year period, the number of shares repurchased was 1.6
million shares and the amount was JPY3.6 billion.

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The following is a summary of dividends and dividend payout ratio. The blue bar graph shows dividends per
share and the red line graph shows the dividend payout ratio. We adopted a DOE in FY 2014 and havecontinued to increase the rate from about 2% to 2.7% in FY 2018, and we project another JPY104 per shareper year in FY 2023. We have already paid an interim dividend of JPY52, half of which has already been paid.

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Finally, I would like to explain the Chudenko Group 2030 Vision, which we have discussed at past briefings.
The vision we have formulated this time represents the ideal state of our group toward the FY2030.
The theme was reiterated as "Change and Growth," as it is essential for the Group to continue to take on thechallenge of change in response to change in order to continue to grow amidst an uncertain future outlook.
The three images of the group we are aiming for are "achieving sustainable growth and contributing to therealization of a sustainable society," "challenging change with pride and joy for everyone who works for us,"and "meeting the diverse needs of society with advanced technology and quality.”

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The first is the performance target for the final year, FY2030. We are targeting consolidated net sales of JPY250
billion, operating income of JPY17 billion, and ROE of at least 5%.
Second, to become carbon neutral, we are committed to reducing CO2 emissions by at least 46% from thefiscal 2013 level.
Third, we will work to create an environment that enables diverse human resources to play an active role anddiverse work styles to be realized.
We will work as a unified group to realize this vision and strive to enhance our corporate value so that we canearn even greater trust and appreciation from all stakeholders.
This concludes our explanation.
The following materials are for reference only and are omitted from the explanation.
Thank you for watching.

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Question & Answer
Moderator [M]: We will now move on to the question-and-answer session.
Participant [Q]: I will read your first question. There seems to be a shortage of equipment construction
companies, especially in urban areas, and we are wondering to what extent your company's profitability at
the time of receiving orders has increased.
Mr. President, please respond.
Shigeto [A]: Yes. As per your question, we believe that orders continue to be very strong with respect to urban
areas. In spite of this, we are striving to be very conscious of the profit margin when we receive orders, andwe believe that the profit margin is increasing by several percent compared to the previous fiscal year.
Moderator [M]: Thank you very much. Now for my next question.
Participant [Q]: I think there will be a specific requirement in the future for management to be aware of thecost of capital and other factors. Taking into account a ROE of at least 5% in the 2030 vision and a total return
ratio or dividend payout ratio of around 100% without aiming for a more substantial accumulation of equity
capital, we are looking to raise DOE to around 5%. Is a significant increase from the current 2.7% an option,or is investment in growth a priority?
Mr. President, please respond.
Shigeto [A]: Yes. As you mentioned in your question, we consider each numerical value and target to be avery important management issue, and we are currently studying them for the next fiscal year and would liketo explain these aspects again.
Moderator [M]: Thank you very much. The questions received through Q&A function has been answered, but
now we would like to answer to the questions we receive from investors on a daily basis.
Participant [Q]: First question. Please tell us your assessment of the current financial results.
Mr. President, please respond.
Shigeto [A]: Regarding the Q2 results, net sales increased, and operating income increased over the same
period last year. We also believe that our financial results were satisfactory, with non-consolidated orders
significantly higher than in the same period of the previous year and a high level of orders carried over to thenext fiscal year, which also exceeded those of the same period of the previous year.
We believe that these results represent the manifestation of the results of the Group's concerted efforts toimplement the various measures set forth in the Medium-Term Management Plan 2024, and we will closely
monitor developments in H2 of the fiscal year with expectations.
Participant [Q]: Yes, next question. The question would be how you see the environment of the orders.
Mr. President, please respond.
Shigeto [A]: Yes. In the construction industry, public capital investment remained firm and private capital
investment also showed signs of picking up.
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As I explained earlier, orders received by Chudenko on a non-consolidated basis also increased significantly inQ2 over the same period of the previous year, and we believe that the level of orders received is very high.
On the other hand, the carried forward amount has increased significantly in line with the increase in orders
received, and we believe that securing the construction work organization and construction management
efforts will become extremely important in securing sales and profits in the future.
As a response to these challenges, the Group will make concerted efforts to implement each measure tosecure and expand profits and strengthen competitiveness as stated in the Medium-Term Management Plan.
Participant [Q]: Thank you very much. Now for the next question. Are the performance targets for FY2023
achievable?
Mr. President, please respond.
Shigeto [A]: Yes. In FY2023, we saw an increase in revenue and a decrease in operating income in Q1, causing
some concerns that the difficult conditions of the previous year were continuing, but in Q2 we saw an increase
in revenue and an increase in operating income, and we believe that the trend is turning positive.
Furthermore, orders received by Chudenko on a non-consolidated basis have increased significantly, and theamount of work carried forward, which is work in hand as of Q2, has also increased significantly, and webelieve that we are on the right footing to achieve our performance targets.
Therefore, toward the end of H2 of the fiscal year, we believe that we will be able to achieve our operating
income target and other profit targets by conducting thorough construction management, including theprevention of construction errors.
Participant [Q]: Thank you very much. Now for the next question. The question is to provide an outlook on
our overseas business investments, which incurred a large loss in the last fiscal year's financial results.
Mr. President, please respond.
Shigeto [A]: Yes. We apologize for the great concern we have caused everyone, but we have proceeded with
our deliberations from the perspective of what is the best option to prevent further losses from occurring.
In conclusion, we have decided to withdraw from Taiwan offshore wind power. Currently, we are proceedingwith the procedures for the transfer of shares to Sojitz Corporation, but the timing of the transfer is undecided
at this time due to the approval and licensing procedures of the Taiwanese government and other factors.
Participant [Q]: Thank you very much. Now for the next question. The question is why we have changed to acompany with an Audit Committee.
Mr. President, please respond.
Shigeto [A]: Yes. By transitioning to a company with an Audit Committee, important business execution
decisions that must be made by the Board of Directors can be delegated to executive directors.
We believe this will speed up decision-making and enhance deliberations by the Board of Directors.
In addition, the Audit Committee has the right to express its opinion on the appointment and compensationof directors other than Audit Committee members, and Audit Committee members have voting rights atmeetings of the Board of Directors, which we believe will strengthen the supervisory function.

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Four other electrical companies in the same industry have adopted the system: Yurtec, Yondenko, Toenec,
and Kyudenko.
Participant [Q]: Thank you very much. Now for the next question. The question is what your thoughts are on
the 1x PBR that has been discussed on the TSE.
Mr. President, please respond.
Shigeto [A]: Yes, we are fully aware that our P/B ratio is below 1x and that the TSE requires management tobe aware of the cost of capital and stock price as a challenge, and we intend to address this challenge byincreasing our corporate value.
Specifically, we will improve our business performance through business expansion and growth investment
as stated in our Medium-Term Management Plan 2024, maintain the dividend level, purchase treasury stock
as necessary, and actively engage in IR・SR activities, etc. We will deepen discussions at management andboard meetings and present the direction we are aiming for to you at the announcement of financial resultsin April 2024.
Participant [Q]: Thank you very much. Now for the next question. How is the track record of the JPY40 billion
investment?
Mr. President, please respond.
Shigeto [A]: Yes. In FY2021, we are investing in Samaiden Group Berhad, which is engaged in solar power
installation and other businesses in Malaysia, and we hope to advance renewable energy projects incollaboration with our consolidated subsidiary, Chudenko Malaysia.
In FY2022, we invested in JFCO SV7 Fund, which is expected to find new investment collaboration partners,
acquire investment knowledge and know-how, and generate new profits. In addition, the Company acquired
four operational solar power plants.
We will continue to make investments related to renewable energy, projects that will lead to businessexpansion, M&A related to air conditioning and pipe installation, and grouping of companies that will
strengthen our business structure, without being limited to the JPY40 billion limit.
Participant [Q]: Thank you very much. Now for the next question. The question is: are the target figures set
forth in the vision feasible?
Mr. President, please respond.
Shigeto [A]: Yes. As I explained earlier, the numerical targets for the final year of the Medium-Term
Management Plan 2024 are consolidated net sales of JPY210 billion and consolidated operating income of
JPY12 billion.
In contrast, the new vision calls for an increase in net sales of JPY40 billion and operating income of JPY5
billion, and a higher ROE of 5.0% or more, which is a high target for our equity capital situation.
In order to achieve this high goal, we must first consider what we must do. To repeat, we believe that it isimportant to steadily implement the various measures of the Medium-Term Management Plan and achieve
the goals for the final year of the Medium-Term Management Plan.

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To this end, we are determined to achieve our performance targets for FY2023 and to show the results of thevarious measures we have taken in the form of improved performance.
ROE will also be improved by the effects of improved business performance, as well as by the continuationand continuation of the dividend policy.
The Company intends to achieve its goal for FY2030 by steadily taking steps from YtoY, while looking to the
future.
Participant [Q]: Thank you very much. Now, the next and final question will be.
Chugoku Electric Power has seen a significant improvement in its performance, but we are wondering if there
is any impact on your company.
Mr. President, please respond.
Shigeto [A]: Yes. We are aware of Chugoku Electric Power's significant improvement in its Q2 performance,
as evidenced by its earnings announcements and newspaper articles.
Basically, we do not believe that any improvement or deterioration in Chugoku Electric Power's performance
will directly affect our business performance. For example, although Chugoku Electric Power Company's
business performance deteriorated significantly in the last fiscal year, the maintenance and renewal of thepower transmission and distribution facilities that were built during the period of high economic growthcontinued, so there was no significant reduction in orders and sales for power distribution line work andunderground power line work for power transmission and distribution.
The Chugoku Electric Power Network is expected to continue to maintain and renew its power facilities on atransitional basis. As a member of the Chugoku Electric Power Group, we will continue to contribute to thestable supply of electric power.
Moderator [M]: Thank you very much. Well, that's all for the questions I received. That concludes the briefing
on the financial results for Q2 of FY2023 of Chudenko Corporation.
Shigeto [M]: Thank you very much for attending Chudenko's earnings presentation today.
Moderator [M]: Thank you very much for joining us today.
[END]______________
Document Notes
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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.
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