Watahan & Co., Ltd.
Q2 Financial Results Briefing for the Fiscal Year Ending March 2021
November 24, 2020

Event Summary[Company Name]

Watahan & Co., Ltd.

[Company ID]

3199-QCODE[Event Language]

JPN[Event Type]Earnings Announcement[Event Name]

Q2 Financial Results Briefing for the Fiscal Year Ending March 2021

[Fiscal Period]

FY2020 Q2[Date]

November 24, 2020

[Number of Pages]

31[Time]

17:00 – 17:20(Total: 20 minutes, Presentation: 20 minutes)[Venue]Webcast[Venue Size][Participants][Number of Speakers]

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1Isamu Nohara

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Presentation
Nohara: Hello everyone. I am Nohara, Watahan & Co., Ltd.’s, President and CEO of the Board of Directors.
We will now explain the Results for the Fiscal Year Ended March 31, 2021, and the Second Quarter.
I would like to start with an overview of the Company and its medium-term management policy, followed byan overview of the Financial Results for the Second Quarter. Finally, we will explain our Full-Year Forecasts for
the Fiscal Year Ending March 2021.

First, the corporate profile. The Company name, Watahan & Co., Ltd., was established in 1949, and theCompany was founded in 1598. In the previous fiscal year, net sales were JPY120.1 billion, and the number of
employees was 4,499 people. As shown below, the Company has eight retail businesses centered on Cotton
Semi Holdings, as well as one construction business and one trade business, for a total of 12 companies.

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Regarding the history of the Group, the Company was founded in Iida, Nagano Prefecture, with a cotton shop,
which celebrated its 420-year anniversary in 2018. From there, with the Meiji Restoration, it was converted
to a hardware merchant in 1868. The Group has been divided into hardware, retail, construction, and tradebusinesses, and has continued to this day while changing the Group's core businesses.

The Group's management philosophy is the spirit of rational use of talent, to work with consideration of thetalents of each. In addition, our basic philosophy is, management that contributes to trust. Our businessphilosophy is, the constant transformation of lifestyles.

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3Our management policy is, to create a stable and growth-oriented business structure that is not affected by
the economy. We have been implementing the same management policy for the past decade or so.

Now, let me now explain the financial results for the second quarter.
In the second quarter of the year ending March 2021, sales were JPY58.89 billion, a slight increase of 0.1%
from the previous year.

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4However, ordinary income was JPY2.43 billion, up 2.4 times from the previous year.

Looking at this by segments, net sales in the Retail Business and the Trading Business were JPY1.42 billion and
JPY420 million, respectively, while those in the Construction Business were JPY1.8 billion.

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Looking at this on a profit basis, retail sales were JPY850 million, construction sales were JPY450 million, andtrade sales were JPY60 million. Profits increased in all fields.

Then, I would like to explain more detailed business results by segment.
First is the retail business.
In the retail business, during the fiscal year under review, amid the coronavirus crisis, in April 200 restaurants
began selling take-out at our Group's restaurants in support of local restaurant takeout product sales.
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At the same time, the Company also supports the purchasing of food producers nationwide, and thenimplements the purchasing of the requested producers and sells them at the stores.

We focused our efforts on supporting local residents, local retailers, and everyone in the business. In April
and May, when the infectious disease spread, we spent time on sanitizing our stores, which prompted us toclose the stores and sanitize them.

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In addition, we added the number of self-checkout machines. We installed self-checkout machines at stores
where store staff and customers had the greatest contact with each other so that customers could shop withpeace of mind as much as possible.

We have set three measures for the full fiscal year. We will continue to renovate stores and open new ones.
We will then proceed with M&A that is not restricted to conventional industries. In addition, it was statedthat the promotion of cashless operations would be promoted.

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As a result, the retail business was JPY40.8 billion this year, an increase of 3.6% from JPY39.4 billion in theprevious year.

Profit was JPY1.72 billion, an increase of 96.9% from JPY870 million in the previous year.

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Looking at this in detail within our segments, we basically saw a consumption tax hike last year, so the reaction
to the consumption tax hike was around JPY600 million. Among them, the existing stores were positive at
JPY650 million. In addition, the renovated store is performing well again, resulting in a positive JPY720 million.
Conversely, EC was negative by about JPY370 million in April and May due to the reduction of distribution
centers in central Tokyo. In addition, the newly added Watahan-Mihara Shoten and Science Home contributed
to sales for the full year, resulting in a positive JPY1.18 billion.

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On a profit basis, the reactionary decline following the consumption tax hike was around JPY150 million, but
the increase in existing stores was offset by a JPY970 million increase. Renovations also rose JPY160 million.
In addition, EC sales were tough, but on a profit basis it increased by JPY40 million. As a result, we achieved
an increase of 330 million in M&A, an increase in earnings in all segments.

Among these existing stores, a reduction in printed advertisements led to savings. This is 81% lessadvertisements than the previous year due to the impact of the coronavirus crisis. In addition, we are nolonger able to make business trips, so travel expenses are also reduced by 71%. This is also contributing topositive ordinary income.
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11Even amid the coronavirus crisis, we continued to renovate stores and open new ones. To this end, we haveestablished a dedicated store renovation department within the Group, whose members move each store
and renovate new or older stores each month.

In addition, we have been promoting the use of cashless cards for another year. And we have started charging
electronic money card, goca, of which equipment installations were partially delayed due to the effects of thecoronavirus disaster. As a result, it was in October that we equipped the last store, yet we equipped all storesas soon as possible. Our card is in the form of a cashless card that offers a 2% discount every time a purchaseis made. It is responsible for part of the cashless payment amid the coronavirus crisis.
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12This is followed by the Construction Business.
In the Construction Business, the head office in Tokyo was closed in April due to the coronavirus disaster, andpublic transportation was prohibited. Therefore, we have completely worked from home. Within the Group,
we made a free address two years ago and adopted a system for telecommuting. However, we have beenworking from home from about one day a week, and we made it possible to work from home five days a weekat once.

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In fact, as a full-year measure for the Construction Business, the Olympic Games were originally scheduled totake place. We anticipated a decline in the market associated with it and considered implementing a reviewof the type of business for the construction industry as a whole this fiscal year.

Among these, sales were JPY14.6 billion, which is almost the same as the previous year.

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Conversely, in segment Profit, although there were many properties with low profit margins in the first halfof the previous fiscal year, conversely in the current fiscal year, there were many properties with high profit
margins, and profits grew while sales declined.

However, due in part to the problem that sales activities were not advanced due to the coronavirus crisis, theorder backlog was almost halved to JPY11.1 billion compared to JPY21.7 billion for the second quarter of theprevious fiscal year.

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15This is followed by the Trading Business.
As a response to the coronavirus crisis, we are also promoting telecommuting in our Trading Business. Evenat this stage we are working from home four days a week.

In the trade business, the policy for this fiscal year was to secure overseas purchasing routes.

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Front-loading orders to secure inventories by customers were the impact of the coronavirus crisis, resulting
in net sales of JPY3.24 billion, up 15% from the previous year.

Segment Profit also increased, rising both sales and profits to JPY590 million.

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17This is followed by the consolidated financial statements.
As construction progress in the construction business is stable, and orders continue to be low, total current
assets have decreased by JPY1.82 billion. Fixed assets are also down by JPY450 million. The bill payable is also
down, so the liability is also down JPY3.59 billion. Compared with this, net assets were positive JPY1.31 billion
because of the high level of profits.

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Net cash provided by operating activities was JPY1.53 billion. Since we are investing more aggressively thanthat, it is about JPY600 million. At the same time, the remaining portion will be used for repayment, atapproximately JPY1 billion, while striking a balance between operating cash flow and financial cash flow frominvesting activities.

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We will continue to report progress by segment for the year ending March 2021.
In the Retail Business, we are further promoting direct purchasing by increasing the value of the existence ofbrick-and-mortar stores. By purchasing fresh fish from Nagoya and fresh fish from Toyosu, we have greatly
expanded our purchasing routes from our previous purchasing routes in the Nagano market alone. This has
greatly changed our freshness and the variety of fish species.
Until now, our main supplier of fruits and vegetables has been the Nagano market, but we have also switched
to a system in which staff are placed in each region's markets. We are implementing measures to significantly
improve freshness.

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At the same time, all of the stores in the fresh market supermarkets have been renovated in the past six
months. Furthermore, we are introducing food products at the home center of the former J-Mart and areincorporating a variety of new measures, along with improving product freshness in the form of inspiring sales
areas and handmade prepared foods made by chefs.

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In addition, the Company aims to expand its purchasing network and products handled in this fiscal year byconducting M&A that is not restricted to conventional industries. First, we welcomed Rigna, a company thatmainly handles furniture through mail-order sales into the Group.
Then, from Saku, we would like to share our procurement of Hoshiman Drug Stores. We intend to expand
sales of products in a new manner by incorporating the drug stores into the Group.

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In response to the coronavirus crisis, we began developing a program in October through a tie-up between
Watahan Home Aid and Watahan.com. This program allows customers to receive orders via the internet andat stores.

Regarding the retail business, compared to the initial plan, we are in the process of renovations at the moment,
so we are planning a 1.6% decrease in sales to JPY80.6 billion.

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23However, segment Profit was JPY2.45 billion, a 46% increase compared to the forecast, due to positive
demand for home improvement and a large decrease in SG&A expenses.

This is followed by Construction.
In the Construction Business, we are continuing to review our business structure. We intend to continue todevelop a system that can respond to future recessions.

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Unfortunately, we are currently reading that the impact of the first quarter and the coronavirus crisis, in which
our sales activities have not progressed, and our order backlog has lagged somewhat, will occur in the fourth
quarter. That is because of the delay in the construction period due to the coronavirus crisis and the
postponement of orders themselves. Net sales decreased 14.2% compared to the initial plan to JPY27.6 billion.

Segment Profit is also expected to be JPY810 million, down 33% from the initial plan.

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In the Trading Business, we are making steady purchases of products because we are making progress insecuring overseas purchasing routes while we are unable to make overseas business trips due to the comingof coronavirus.

Net sales were JPY6.4 billion, up 11.9% according to the initial plan.

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Segment Income is also forecast to increase 7.2% compared to the initial plan to JPY980 million.

For the fiscal year ending March 2020, the Company forecasts overall sales of JPY115 billion, down 3.6% fromthe initial forecast. In addition to promoting the renovation of stores mentioned earlier, delays in construction
progress in the Construction Business have also had an impact.

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In comparison, ordinary income is expected to increase 17.5% compared to the initial plan, to JPY3.35 billion.

As our business performance has been steady for the past six years, we have also announced a year-end
dividend of JPY17 to JPY18, which is the first half of the fiscal year. We intend to continue to pay a stabledividend by increasing the annual dividend by JPY1.

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Looking at historical trends, Medium-term Business Plan, MTBP, is also aiming to create a stable and growthoriented business structure. The next fiscal year is the third year of the medium-term management plan, andwe are targeting net sales of JPY120 billion and ordinary income of JPY3.2 billion.
As we always explain, our benchmark has come to be rather based on the concept of the ordinary income
margin. This year, we are seeing a slight impact from extraordinary demand. However, we plan to steadily
expand this portion and achieve 2.9% in the fiscal year ending March 31, 2021.
This is the end of the second quarter of the current fiscal year. Thank you very much for your attention.
[END]______________
Document Notes
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