This document is a translated version of the Japanese original. In the event of any discrepancy
between this translated document and the Japanese original, the original shall prevail.

Taiheiyo Cement to Focus on Investment in North America and Southeast Asia while
Building a Stronger Domestic Business Structure through New Quarry Development,
Investment and Alliances with Other Company
The following is a transcript of Taiheiyo Cement Corporation's financial results briefing for thesecond quarter of the fiscal year ending March 31, 2023, which was released on November 11,
2022.
【Speakers】
Masafumi Fushihara, President and Representative Director, Taiheiyo Cement Corporation
Hideaki Asakura, Director and Senior Executive Officer, Taiheiyo Cement Corporation
Naoyuki Kira, Executive Officer, General Manager of Sales Department, Cement Business
Division, Taiheiyo Cement Corporation
Tsuyoshi Hara, Executive Officer, General Manager of Business Development Department,International Business Division, Taiheiyo Cement Corporation
Masahiro Ban, Executive Officer, General Manager of Accounting & Finance Department,
Taiheiyo Cement Corporation
Tomonori Yamamoto, General Manager of Corporate Planning Department, Taiheiyo Cement
Corporation

1

Management Overview and Management Policy
Mr. Masafumi Fushihara : I am Fushihara. Thank you very much for joining us today. Following
yesterday's announcement of our second-quarter results and outlook for the current fiscal year,
we will give you more detailed explanations today. First, I am going to give you an overview ofour business situation and future management policies, followed by detailed explanations of thefinancial results from the person in charge.
The first half showed a consolidated operating loss of approximately 300 million yen. We haven’t
seen this level of loss for 13 years or so. The primary reason for the slump was that securing theprice hikes in the domestic cement business were slightly slower than expected.
The loss was due to the higher price of coal for cement production and the cost of electricity. In
short, we were not able to keep up with coal prices rise through increases in cement prices.
Coal prices rose gradually from around September last year and coal, which had always beenaround $100, went up to about $200/t and showed no sign of coming down. This rise in coal prices
is expected to be linked to oil prices. If this situation continued, the cement business would be
difficult. Therefore, in October last year, we announced a price increase of 2,000 yen/t cement
starting from shipments on January 1st this year and began price negotiations with users.
However, Russia's invasion of Ukraine in February this year caused the price of coal, which had
already risen to $200, to soar to nearly $500. Although slightly lower now, it is still hovering
above $400. Since we could not keep up our business with the 2,000 yen price increase, we asked
users to accept a further increase of 3,000 yen starting with shipments in October this year. In thisway, we have been negotiating prices all through the first half.
For the first 2,000 yen price increase, we aimed to obtain the approval of all users by April 1.
Since 80% of our users are ready-mixed concrete companies, it was hard to get their approval
without a corresponding rise in ready-mixed concrete cooperative prices. Therefore, it took sometime, but negotiations for the 2,000 yen increase were completed by this October.
For the additional 3,000 yen increase, we are working to obtain customer approval as soon as
possible. We will negotiate the price to reach an understanding by the end of this year at theearliest, or by the end of March next year at the latest.
Although we are asking for an unprecedented price revision of 5,000 yen/t, users have shown acertain level of understanding. The ready-mixed concrete cooperatives around the country haveannounced significant increases in their prices. However, the timing of the price increase, such as
April next year or the beginning of the new year, does not mesh with our desired timing from
October this year and it has been difficult to gain their understanding so far.
It is true that for ready-mixed concrete companies, a 1,000 yen per ton increase in the cement
price will have a significant impact on their business, but we are negotiating with the hope theywould expedite the price revision.
2However, the majority of ready-mixed concrete cooperatives nationwide plan to raise their prices
by 3,000 yen or 4,000 yen between the beginning of next year and April. The revision of theready-mixed concrete price reflects the increase in cement prices, so it is unthinkable that they
won’t agree to the increase in cement prices.
Since we are cashing out daily against high coal prices, we are continuing to negotiate and hope
to confirm all users’ approval by March next year.
As for coal prices, we have been using Russian coal for nearly 60% of our production needs but,
according to government policy, we are required to refrain from purchasing from Russia as muchas possible. We will fulfill existing contracts as long as vessels can be arranged. However, wehave not yet negotiated next year's contracts.
Since we are not sure what the situation in Russia will be like in the next fiscal year, we areworking very hard to find new coal import sources. We will begin importing coal from Australia,
Indonesia, North America and other countries. Since Indonesian coal is nearly half the price of
today's Russian and Australian coal, our focus is on how to use such cheap coal.
There are many reasons why we have not previously imported from these countries, including
fineness of the coal and other properties such as susceptibility to stockpile ignition. However, wehave no choice other than to source imports through various measures. We have already delivered
coal samples to our plants and ran various tests to determine its suitability, and intend to increase
the import volume in earnest from now on.
As for Australian coal, Tohoku Electric Power Company negotiates an annual price for power
generation coal each year. Latest annual price has been set at $395. Although we may be dealing
with a slightly lower grade of coal, Australian coal is a kind of indicator of general coal. We don't
think the price will drop sharply in next fiscal year, so we are working hard to increase the imports
from Indonesia and North America.
In forecast for second half, we have only included certain import volume of lower price coal . If
the volume increases, variable costs may be slightly lower than expected.
The price of electricity has also risen steeply. As we do not generate all our own electricity weare inevitably having to pay more for that purchased from power companies and it is importantfor us to find ways to cover the increase.
On October 24, a waste heat power generation facility at the Saitama Plant started operation.
Therefore, we expect to see the benefit of reduced purchased electricity in the future. So, thesecond half depends on two things - the increase in cement prices as soon as possible and the
reduction of variable costs.
As for our overseas business, operating income of the first half deteriorated by about 4.6 billion
yen from the same period last year. The primary reason was the simultaneous need for repairs at3

three plants in the United States. It would have been nice if the repairs could have been
implemented with a little more balance but, partly due to the convenience of contractors, the work
was concentrated in the first half this year. Compared to the first half of last year, there were morethan 30 more days of plant shutdowns, which resulted in greater haulage distances from distant
plants and the usage of imported cement with a lower profit margin. As a result, profitability wasslightly lower in the first half of this year.
There was also a strike by the ready-mixed concrete workers' union in Washington State. As aresult of the interruption of ready-mixed concrete shipments until the strike was settled, our U.S.
business struggled a little in the first half.
However, the newly acquired Redding cement plant has been making a decent contribution, andanother plant is under review by the local authority corresponding to Japanese Fair Trade
Commission. Once we get the permit, the two new plants will be in full operation, which would
be a very exciting situation for the future.
With regard to our China business, we have decided to suspend operations of our cement plant in
Dalian. Since it became clear that the land lease could not be renewed, we must cease the businessthere after more than 30 years of operation.
We have already sold our subsidiary in Qinhuangdao to a local company the year before last andour subsidiary in Jiangnan is facing difficulty getting a new permit for mining. However, we havesome long-standing customers in Hong Kong and we have many other relationships there, so weneed to continue to think strategically about how we will interact with China.
In the future, we will concentrate our management resources on Southeast Asia, which is expected
to grow. Last year, we secured a 15 percent stake in a subsidiary of an Indonesian state-owned
company. Also, in August, the Philippines plant held the groundbreaking ceremony for a new
production line after the old one was dismantled and cleared. The new line will be completed in
two years. As for the plant in Vietnam, we will continue to invest in waste heat power generationand environmental projects focusing on recycling in order to make the plant contribute to theformation of a recycling-oriented society in the country.
For our domestic business, we will first work on the development of quarries. Actually, we havebeen developing quarries in sequence for a long time and, probably by the end of this year, we
will be able to start developing a new quarry at the Oita Plant.
Also, we will jointly develop the Myojo Cement quarry with Denka Company Limited.
(hereunder, Denka) , with whom we are entering into a business alliance. We have been able tostrengthen our relationship with Denka in various ways during the business transfer and hope tobegin construction there in the next year or so. Once it is done, we will be able to secure limestone
reserves in the quarries of each plant for the next 100 years or so, ensuring a very stable raw
material supply for the future.

4

As I have just informed you, Denka has transferred its cement business to us, and we have agreed
to sell it under our brand name from shipments starting April next year. For the next two years or
so, Denka will run its own plant and produce cement, and we will receive and sell it under the
Taiheiyo Cement brand.
The reason for this two-year time frame is that there are more than 200,000 tons of various wastes
generated from Denka's plants. After Denka’s cessation of cement production these wastes willbasically be received and processed by Myojo Cement.
In preparation for this, we must make various capital investments in Myojo Cement and develop
a system for two years. After the investments completed, instead of Denka we will supply users
from our group's plants with over 1 million tons of cement.
We undertook OEM from Hitachi Cement three years ago. This time, we will produce and sell
Denka's portion as well.
We are now serving as a recipient for companies that will discontinue cement production. We
have a very good balance of plants in Japan, with cement plants in each region from Hokkaido to
Kyushu and on both the Pacific and Sea of Japan sides. It is probably for this reason that we arean obvious partner for business alliances.
Since we were the first company to build a cement plant in Japan 141 years ago, we can say thatthe history of the cement industry in Japan is equal to the history of Taiheiyo Cement. Over thecourse of 141 years, cement production in Japan grew from 0 to 100 million tons. As a cementcompany with such a history, we believe we have an obligation to supply cement for the domestic
market and operate under such a corporate mission.
Therefore, since we have such obligation of supply, we may start to discuss what we can do if weare approached from other companies in the future. Most recently, the two companies I justmentioned told us they hoped to work with Taiheiyo Cement.
We are also committed to carbon neutrality and towards achieving this goal, we will complete thedevelopment of technology by 2030 and implement the technology and equipment in each plantand other facilities by 2050. We made this declaration, and are now steadily investing in facilities
and engaged in R&D to achieve carbon neutrality.
As part of our efforts we are working on the development of new calciner to efficiently capture
CO2. We have begun construction of a demonstration plant in Sanyo-Onoda City and, next year,
we will use the plant to develop more specific technologies, which will then be used to create
facilities that can be installed in each plant. If the equipment is too large, there will be no place toinstall it in the current plants. So, we are developing compact facilities which can be retrofitted tokilns to recover 100% of CO2 from the exhaust gas.

5

We are also exploring various methods for recovering and utilizing CO2 (CCU or Carbon Captureand Utilization), such as methanation. We are currently working on research and development in
partnership with other companies such as Tokyo Gas.
We have a dedicated project team in place and are making good progress toward carbon neutrality.
Demonstration equipment has already been installed in the Kumagaya Plant and, since the results
have been so successful, I would like you to come and see it for yourself.
So, that is an overview of the current situation of Taiheiyo Cement but our policy will be to neverstop growing, no matter what the circumstances. If we stop and say "It's tough now, so let's holdout for two or three years" we may miss out on opportunities.
Financially, it may be tough in many ways, but we have been working on the development ofquarries, acquired overseas plants and made investments. We will keep moving forward under
the policy of being a corporate group that never stops growing, with the spirit of “We have to do
it right at this moment”.
The results include the acquisition of plants in the U.S. and investments in Indonesia. We havealso begun construction of an export jetty in Indonesia and, once large vessels start to use it,logistics in the Pacific Rim will change considerably. We should see the results in two or three
years.
This is the end of the overview.

6

Explanation of Financial Results for the Second Quarter of the Fiscal Year Ending March
31, 2023 and Forecast for the Fiscal 2023
Mr. Hideaki Asakura: I am Asakura. Now I am going to provide an overview of the financial
results for the second quarter and the performance forecast for fiscal 2023.
1. Consolidated Financial Highlights

First, the consolidated financial highlights.
Net sales for the second quarter were about 375.9 billion yen, an increase of about 36.1 billion
yen from the same period last year. Operating income showed a loss of about 300 million yen,down about 26.1 billion yen from the same period last year, and ordinary income was a loss ofabout 80 million yen, down about 26.6 billion yen from the same period last year.
The quarterly profit attributable to owners of parent showed a loss of about 16.4 billion yen, adecrease of about 35.9 billion yen from the same period last year. The table at the bottom of theslide shows the capital adequacy ratio and other management indicators.

7

2. 2Q FY2023 Results (1) Consolidated Segment Information

By segment, net sales increased in all divisions except for “Other”. Total consolidated net sales
were about 375.9 billion yen, an increase of about 36.1 billion yen from the same period last year.
On the other hand, the Domestic Cement Division posted an operating loss of about 17.5 billion
yen, down about 19.1 billion yen from the same period last year, while the Overseas Cement
Division posted a profit of about 10.1 billion yen, down about 4.6 billion yen from the same period
last year, for a total operating loss of about 7.4 billion yen for both divisions.
Operating income in the Mineral Resources Division was about 2.7 billion yen, almost the samelevel as last year, while the Environmental Division recorded approximately 2.8 billion yen, adecrease of about 200 million yen from the same period last year. Operating income in theConstruction Materials Division was 60 million yen, down about 1 billion yen from the same
period last year. Operating income in the “Other” division is about 1.2 billion yen. This resulted
in a total operating loss of about 300 million yen.

8

2. 2Q FY2023 Results (1) Consolidated Segment Information

This is a breakdown of the Cement Division. The small table at the top of the slide shows cement
sales volumes. Cement sales in the second quarter was about 6.56 million tons, almost the sameas last year. Exports decreased by about 510,000 tons to about 1.41 million tons. The averageexchange rate was 123.1 yen.
In terms of net sales, both domestic and overseas divisions benefited from the price increase, with
an impact of about 6.5 billion yen on domestic sales. There is also a 4.4-billion-yen price increase
effect from exports and a revenue increase of $37 million in the U.S. in the Overseas Cement
Division.
Operating income, on the other hand, was significantly affected by the 23.3 billion yen increasein variable costs while being benefited from the price increase in Japan and the price increase inexports of 5.9 billion yen and 2.6 billion yen, respectively.
The Overseas Cement Division also had negative earnings, with minus $34 million in the U.S.,
minus $10 million in China, and minus $13 million in Asia, for a total decline of 4.6 billion yen.
As a result, the total domestic and overseas earnings resulted in an operating loss of about 7.4
billion yen.

9

2. 2Q FY2023 Results (1) Consolidated Segment Information

Now I am going to explain the situation of our non-cement segments. In the Mineral Resources
Division, the Aggregates Business in the Kanto and Chubu regions remained strong, and the pricepass-through progressed, resulting in an increase in both sales and profits. In the Environmental
Division, net sales increased about 5.6 billion yen due to strong sales of calcium carbonate fordesulfurization and fuels. On the other hand, operating income decreased by about 200 million
yen due to weak coal ash processing volumes.
Net sales in the Construction Materials Division increased due to strong sales of ALC. On theother hand, operating income decreased by about 1 billion yen due to soaring raw material prices.

102. 2Q FY2023 Results (2) Consolidated Statements of Income

This slide shows the items under operating income on the P/L. What I would like to draw yourattention to is the portion of income taxes. The amount shown here is due to a 10.2 billion yen
reversal of deferred tax assets in the second quarter.

11

2. 2Q FY2023 Results (3) Consolidated Balance Sheets

This is the Consolidated Balance Sheet. Current Assets totaled approximately 425.1 billion yen
as of the end of September, due mainly to an increase of about 38.5 billion yen in Inventories
caused by soaring coal prices and other factors. Fixed assets totaled approximately 1,272.4 billion
yen, an increase of about 84.8 billion yen due mainly to changes in U.S. lease accounting
standards and asset acquisitions.
The balance of interest-bearing debt, shown at the bottom right of the table, increased by about
103.0 billion yen from 270.0 billion yen at the end of March to 373.6 billion yen.
In shareholders' equity, the net loss of about 16.4 billion yen and dividends of about 4.1 billion
yen for the fiscal year under review reduced retained earnings by about 20.5 billion yen. The
increase in accumulated other comprehensive income of about 35.7 billion yen is due to theswelling of the foreign currency translation adjustment as a result of the significant depreciationof the yen in the current period. Accordingly, total net assets increased by about 18.4 billion yen
to about 563.2 billion yen.

12

2. 2Q FY2023 Results (4) Consolidated Statements of Cash Flows

Cash flows from operating activities were approximately minus 15 billion yen, cash flows frominvesting activities were about 57.5 billion yen expenditure and cash flows from financing
activities were about 91.6 billion yen.

13

3. Forecast for FY2023 (1) Consolidated Statements of Income

For the fiscal 2023 results, we forecast net sales of 844 billion yen, operating income of 13 billion
yen, ordinary income of 13 billion yen, and loss attributable to owners of parent of 16 billion yen.

14

3. Forecast for FY2023 (2) Consolidated Segment Information

This slide shows projected net sales and operating income by segment in units of 100 million yen.
For the full year of fiscal 2023, we expect an operating loss of 32.7 billion yen for domestic
cement and a profit of 27.0 billion yen for overseas cement.

15

3. Forecast for FY2023 (2) Consolidated Segment Information

This is a factor analysis of net sales and operating income in the Cement segment.
the slides for details.

16

Please see

4. Reference Materials

Various reference figures are given on this page and the following pages.
Q&A: Cement price increase(1)Q: I know you have been working hard to raise cement prices, but could you tell us what you haveachieved up to the end of September? Also, how far do you expect to get by next March?
The increase in the downstream price of ready-mixed concrete next year would be the best
opportunity for the next increase in cement prices. You mentioned earlier that each ready-mixed
concrete cooperative plans to raise prices considerably in early spring next year, but do you see
the price of ready-mixed concrete will go up enough nationwide for users to accept an additional
3,000-yen increase in the cement price?
A: First, let me give you an update on the current progress of the price increase. Regarding the
2,000-yen price increase that we put forth last year, although some of the figures were notrecorded during the first half, we had received the approval of almost all users as of October.
Maybe, a little short of the figures for the first half, but it would come into effect in the second
half.
As for the 3,000-yen price increase we announced this year, we initially presented it as a surcharge
and added it to the budget for the second half. Then, it was left to the customer’s choice, and mostof them chose the fixed price with the 3,000-yen increase.
17

Under the assumption that the price increase will be approved by all users by the end of this fiscal
year through conventional negotiations, we are budgeting the figure of increase in stages. It means,the total figure has not been included in the budget for the second half. The 45 percent or so would
come into effect.
Q: What do you mean by 45 percent?
A: It is the percentage of the estimated amount of money originally budgeted for the second half.
Q&A: Change in the contract type for ready-mixed concrete sales prices
Q: In relation to the case you just mentioned, there is a talk about the ready-mixed concrete
industry changing its prices from a contract basis to a shipment basis. I know there have beenreports of such talk in the Tokyo area and elsewhere, but how far do you think the story of thenationwide change to shipment basis is likely to go? If this were to happen, would it be possible
to review the cement prices every three months?
A: Currently, the Tokyo District Ready-mixed Concrete Cooperative Association is running a PR
campaign stating that they want to change from a contract basis to a shipment basis starting nextyear, but there are not many cooperatives in Japan that have put forward such a shipment-based
price revision.
However, since cooperatives in rural areas don’t have as many remaining contracts as those inlarge urban areas, the situation would change if cooperatives in large urban areas put forward theshipment-based price changes in the future. If such a groundwork can be laid nationwide, while
I’m not sure if price reviewing of every three months is a good idea, the introduction of variable
prices, such as the surcharge we recently proposed, would be easier to implement than at present.
Q&A: Surcharge on the price of coal
Q: You also explained that "the secondary increase of 3,000 yen practically has the same meaning
as a surcharge for about a year”. I understand that the movement toward surcharge did not gainmuch traction this time. Are you thinking about withdrawing it in the future? It would be the storyof the next year or beyond, but what is your policy?
A1: We do not specifically want to withdraw the surcharge. The timing we proposed coincidedwith the period when the price of coal was rising steadily. So, customers were very wary of thesurcharge. Partly because of it and due in part to the way the ready-mixed concrete industry sets
its prices, most customers have chosen a fixed price this time.
If the timing were when there were no extreme reasons, such as a spike in the price of coal, thissurcharge would be very highly regarded and easily accepted. We would like to work on it while
keeping an eye on how the shipping price of ready-mixed concrete will be determined in the future.

18

A2: I have a few additional points. In the past, no cement manufacturer has ever launched asystem like a surcharge. Ready-mixed concrete companies say “it's a new way of thinking” and“easy to understand”, but it's not easy for ready-mixed concrete cooperatives to revise prices every
two months.
However, just because ready-mixed concrete cooperatives revise the price basically once a year,
we do not consider our prices to be fixed. Our initial surcharge idea was that the price is revised
every two months based on indicators.
We have not given up the surcharge. We concluded that we must raise the price by as much as
5,000 yen this time based on the average price we worked out under the assumption that the priceis reviewed once a year instead of every two months to make it easier for ready-mix cooperatives
and users to pass it on to their prices.
In our industry, we have never seen such a situation before. This is a very painful situation, andthe best way to deal with it is to face the cement price. Until now, the cement pricing policy has
been based on the current price, but I believe the ideal pricing policy should be based on
production cost and the funds for necessary future investments.
In a situation that requires a major price change, the nature of price revision or the concept ofprice itself is changing. Surcharging is one of those ideas we have not had in the past hundredyears and more. We see it as an opportunity to rethink our future pricing policy.
It is not because other companies in the same business are not following suit, but because, as amanufacturer, we have the idea of “what product prices should be.” It will be a bit long but let me
explain the history of the cement industry in Japan as the background of what is happening now.
We are now in our 141st year of operation. We had been growing for all 110 years until the
bursting of the bubble economy. As a result, domestic cement production has increased from 0 to
100 million tons.
The volume increased every year, so we were able to be profitable even if being indifferent toprices. Then, for the 30 years after the bubble burst, the volume declined sharply to about 45% ofwhat it used to be. Probably, we should have thought more about the price when something that
had continued to grow for 110 years has decreased in 30 years or so.
By working hard to recycle waste materials, lowering costs and streamlining operations by
reducing the number of plants, we have managed to run the company without raising cement
prices too much. We regret very much that we have come to this point in our history without
having to think very seriously about prices.
In order to continue the cement business in Japan, it will take a lot of money to invest in various
ways, such as mine development and carbon neutrality. The newest kiln in our plants is 60 years
old, and we don’t know when it will break down. We must replace the basic equipment in turn.
Putting this in perspective and taking it as an opportunity, we should determine prices as money
will be spent on various portions of domestic plants.
19

Q&A: Relationship between cement price increase and the price of coal
Q: I would like to ask a little more about the price increase. I believe that the price of coal has
now dropped from its peak of $400 to about $300, and there has been some movement to lower
the price a bit.
You mentioned earlier that the 2,000-yen price increase has penetrated in the market, but I believe
the price of coal is a bit volatile now. Will you be able to complete the additional 3,000-yen
increase at this point? It wouldn’t be easy for you to improve earnings without raising the price.
How should we look at this?
A1: Although the price of coal is now falling slightly due to futures and other factors, we believethat the price increase of 3,000 yen is a must, as the domestic purchase price, including freight, isstill around $400.
A2: As for the price increase that we announced last year, many companies, including readymixed concrete cooperatives, incorporated it into their price revisions in June this year. Therefore,
it must be quite difficult to pass on the additional increase of 3,000 yen to the price from October.
The cooperative in each district has announced the timing of the price increase for ready-mixed
concrete, saying that it will start at the beginning of the year or in April next year. In ournegotiations to date, we found that the situation of cement manufacturers is well recognized, but
it is difficult to raise prices twice or three times a year. In fact, many cooperatives want to raise
3,000 yen at a good and convenient time, such as from the beginning of the year or from next
April.
However, as I mentioned earlier, we are trying very hard to negotiate with cutomers to get theirunderstanding as soon as possible, suggesting a slight hike at least a month or two before theready-mixed concrete price increase begins. It took us much longer than planned to gain theirunderstanding of the 2,000-yen price increase, but it means we could explain the detailed
circumstances.
Since everyone is aware of our situation, we do not have to start from scratch in negotiating an
additional 3,000-yen price increase. We should be careful about the timing only. The cooperatives
have been relatively understanding, proposing larger-than-ever increase in ready-mixed concrete
unit prices of 3,000, 4,000, or 5,000 yen. This price increase would be realized, but we arenegotiating hard to obtain as much agreement as possible from customers before that.
Questioner: Thank you. I understand you are working on the price increase faster than ever.
Q&A: Overseas situation and future outlook
Q: Let me ask you about overseas. With business confidence in the U.S. still cautious regarding
housing and other issues, please tell us about your outlook for demand. Also, earnings from Asia
seem to be getting a little tougher.
20

The situation seems to have changed a bit from the assumptions made in the first quarter due tothe lockdown in China and other events. The scope is huge with the U.S. and Asia, but please tell
us about the situations around there.
A: First, as for the U.S., I would like to focus on the current situation based on what we explainedin the August briefing for the first quarter.
As you know, the number of housing starts has declined in response to the decline in the numberof homes sold. However, the number of houses completed has not. The move to build up backlogs
and inventories, which we reported in the briefing for the first quarter results, has continued until
recently. We do not expect a significant decrease in these backlogs and inventories until the
middle of December at the earliest or the first quarter of next year.
Since the number of permits for construction starts is decreasing, the demand for housing would
also drop from around the second half of next year. However, the U.S. Democrats are fighting agood fight in the election, so we believe that there will certainly be spending by the Biden
administration on infrastructure investments starting around the second half of next year.
As for public investments, it has the nature of using very large amounts of cement per million
dollars. From the cement industry's point of view, public investment is very efficient. It has apositive effect on us, realizing cement usage at twice the level of housing investment. Of course,
we can expect a big spillover effect.
In terms of the current situation, I mentioned earlier that the number of construction starts has
decreased, but it is still at a high level with one million units, compared to 500,000 units at thetime of the 2008 global financial crisis. If this level continues, the demand would never decreasesignificantly.
As for Asia, as you have pointed out, China’s performance has been much worse than expected.
In particular, the zero-coronavirus policy, specifically the Shanghai lockdown, and more sporadic
regional “block-downs”, have had a considerable impact. Although it is difficult to generalize forthe first quarter as it includes the Chinese New Year, overall production volume in China declinedby 12 percent or so.
Initially, the production volume was expected to return in the second quarter with the end of theChinese New Year, but the impact of the Shanghai lockdown was significant, resulting in a
reduction of 17 percent. Also, the production volume has not recovered well in the third quarter,
when it was expected to do so, at minus 7 percent. We are beginning to see an economic recession
and a decline in the real estate market due in part to this. We need to keep a close watch on thesituation.
Furthermore, in terms of performance, the price of Chinese coal rose about $100 last year but
dropped earlier this year. The Chinese government has been working to increase production andimports of Russian coal. As of September, China's coal production has increased by 300 million
21

tons. The coal imports from Russia have increased more than 10% from last year and more than
80% from the year before.
Also, the price of coal fell from June to August, which was a bit of a relief for us, but then thebuying up in preparation for winter started, and the price has risen a bit again. Of course, it's lower
than the price at its peak, but it remains high. As for China, these two points are different fromthe assumptions we reported at the briefing for the first quarter.
Regarding Vietnam, there are two points. The indirect impact of the Shanghai lockdown
mentioned earlier has reduced Chinese cement demand, which led to a significant drop in exports
from Vietnam. There were no clinker exports from Vietnam to China in June for the first timesince the export began in April 2017. Since then, there have been few signs of improvement. As
a result, not only are exports to China declining, but the impact is bouncing back to the domestic
Vietnamese market, making competition tougher. This is the first point.
The second point is that the government raised the interest rate for the first time in 11 years in
September and again in October by 1 percent to curb the depreciation of the dong and priceincreases, which is quite an unusual situation. In addition, tighter loan restrictions for construction
and real estate have been imposed to keep prices down, which are temporarily delaying projects
and dampening demand.
As mentioned above, for Vietnam, the indirect impact from China and the interest rate hike inresponse to the strong dollar are two major differences from our assumption as of August.
Q: Am I correct in understanding that the forecast in the Overseas Division has been revised
because of some portions that are slightly different from your assumption?
A: You’re right. However, in the case of the U.S., as we reported earlier, demand has not yet
decreased at all. For example, demand in the five states through August has been positive.
The five-state figure of negative 0.6 percent for January through August is largely due to theimpact of the Washington State strike. The four states, excluding Washington State, are still strongon the ground, with January through August at positive 2.2 percent and July through August at
positive 2.2 percent. Our subsidiary, CalPortland Company (CPC), also has substantial sales.
Therefore, as I mentioned a little while ago, for the U.S., we are not in a situation at the moment
where it is reflected in the figures. I would like you to understand that the decrease in profit in the
U.S. is only due to the temporary effects of troubles or something else.
Q&A: Cement price increase(2)Q: Please allow me to confirm what you said about the price increase that everyone has been
asking about. The remark of cement companies at the briefing session, etc. that they "obtained
consent to the price increase" seems a bit ambiguous. Am I correct in understanding that thecurrent situation is that the price has gone up by 2,000 yen on a P/L basis since October 1?
22

A: Prices have been mostly up since October. Although some of the price increases will takeeffect in November, we expect it to come into effect from the beginning of the next period.
Q: So, you mean, the 2,000-yen increase will be included in the upcoming quarterly results?
A: Basically, we have negotiated with and sold to fixed accounts, or what we call customers,
which account for about 80% of our total sales. I think it will come into effect. As for theconstruction account, since there are contracts from the past, properties will be completed in turnand replaced by new ones under the new contract.
Q: It makes a lot of sense for us as a manufacturer to announce a 5,000-yen price increase andkeep this banner flying for a long time, but I wish ready-mixed concrete suppliers would alsochange their stances.
The ready- mixed concrete cooperative of Greater Osaka, which took the lead on the ready-mixed
concrete side this time, said they have agreed to a total price hike of up to 3,000 yen. Also, at a
recent briefing by a competitor, they said some of the additional 3,000-yen price increase has
been factored into the budget for this fiscal year, and the remainder is to be addressed in the next
fiscal year. This is a very realistic plan in terms of budget. Didn’t you have such an option?
In short, after such a large downward revision and after hearing what you just said, I cannot help
feeling the risk of another downward swing in domestic prices. I wonder if you have never thoughtof taking the stance of realistic budget.
A1: I think it depends on the budgetary approach. For us, this price increase of 5,000 yen isnecessary to make a profit in normal times with conventional price of coal. In our announcementin October, we did not assume that “we cannot achieve it during this term" or “we give up fromthe beginning”. We want to complete this price increase by the end of the fiscal year and reachthe same profit margin from the next fiscal year.
A2: I think this is a story of not in theory but in practice. Our concern is the domestic cementbusiness, especially on a non-consolidated basis. We were in the red last fiscal year and expected
to sink even more deeply this fiscal year. Normally, if a company has been in the red for two
consecutive years and cannot budget for the next year, it is subject to an impairment loss.
As a cement company, we must rebuild our core domestic cement business. Failure to do so would
be a betrayal to the shareholders. For example, if we say, “2,000 yen will do for now", we mustship and sell the product in deficit. It is like sticking a wad of cash on the product.
They say that a 5,000-yen price increase will bring "initial profit". However, considering thefuture investments and various other things I mentioned earlier, it would not be much of a profit.
It may be a reality, but if the price of coal stays around the current $400, a 5,000 yen price increaseis necessary. Otherwise, the period during which we betray our shareholders will get longer. The
management has such a sense of crisis. Please understand even a little about that.
23Q&A: The 2024 problem of logistics
Q: Although a little further down the road, I am concerned about the 2024 problem. The otherday, I asked a competitor about transportation costs. They did not give the amount but said they
expected a significant impact and would have to ask the customers for the price pass-through. Is
that correct for you as well?
A: We have a great sense of crisis about this. Of course, costs will rise considerably, and there isalso the fundamental question of whether the Group's transportation companies can maintain theircurrent structure. So, we will strive to save labor for the delivery system through the use of AI
and other technologies.
At the same time, there is the issue of hiring people. Although we have introduced a surcharge
system for freight paid to our group carriers, we would like to raise awareness of this issue amongcustomers who actually pay freight since our main sales system is based on pick-ups.
Q&A: Concentration of repairs in the U.S.
Q: Not too long ago, I had the impression that there were not many regular repairs in the U.S.,
but it seems to be done well this time. Moreover, probably for the convenience of the contractors,
repair works were concentrated during the same period.
Should we recognize this concentration as a risk for the next year and beyond? Or would you
keep the schedule for repair works dispersed on the plan and then leave it to the contractors?
A1: Basically, the schedule for repair works will be dispersed. Unlike other companies, we havefour plants, including one in Northern California. Our basic policy is to use this advantage tosuccessfully spread out the schedule for repair works.
This year, we renewed the raw material mill at the Mojave Plant and got the work done to restore
the production capacity. Since then, production capacity has recovered, resulting in increased
sales and profits. It was a large-scale construction project scheduled to be done a little earlier but
was delayed a bit due to the COVID-19 pandemic. This year, repairs were concentrated in thefirst half. We didn’t want to miss any chances for repairs when possible, which was acharacteristic of this year.
Since the COVID-19 pandemic is expected to subside from next year on, our basic stance is tospread out the schedule for repair works so as not to miss any sales opportunities.
A2: Basically, the equipment utilization rate of U.S. companies is low. At the time of acquisition,
it was 80 percent or so. Then it rose to 90-plus percent when Japanese technology was introduced.
The newly acquired Reading plant had a utilization rate of 70 percent or so, but our engineers
increased it by 20 percent to 90 percent. In this way, we continue to produce greater benefits after
the acquisition.

24

To this end, we need engineers who can play active roles overseas, and it is important that such
personnel has been trained well. Otherwise, we will end up just investing. I believe it is goingwell so far, especially in the U.S.
Also, as I mentioned earlier, the problem of logistics is very serious. We are addressing the
problem throughout our supply chain in a carbon-neutral manner. For example, each cement
manufacturer has a vessel for peak shipments in December. They also do run loading only one
way. However, I don't think we need to compete in logistics. We, as the industry, need to think
about how to improve the efficiency of logistics, especially the allocation of vessels, to reduce
CO2 emissions and how to secure employment for drivers.
The same is true on the ready-mixed concrete company side. There are few young drivers, andaging of drivers is underway. The era of unmanned driving may arrive someday, but it’s still along way ahead. As you say, the issue of personnel is very important. I believe we should work
hard on this issue from now on.
Q&A: Acquisition of Denka's cement sales business
Q: I would like to ask you about the acquisition of Denka's cement sales business. I think it is asales business of a little over 1 million tons. I imagine it is just large enough to make up for thedecrease of a little over 1 million tons in exports this year. Which plant will you use to produce
this quantity? I imagine that if it is from Hokuriku Plant centering on your Myojo Cement, you
would not be able to produce 1 million tons. Do you get it from other plants, such as Hokkaido
and Oita?
A: Denka operates mainly in Hokuriku, but also sells in Gunma, Nagano and Nagoya in the Chubu
region. It does not mean that everything comes from the Itoigawa Plant. As I mentioned, we havea very good arrangement of the plant locations. There is also Tsuruga Cement in Hokuriku.
Therefore, we are not so worried about it in terms of logistics because there is no extreme burden
placed on Myojo Cement.
As for exports, since we have raised prices considerably overseas, we can generate marginal
profits even in the current situation. Taiheiyo Cement has exported an average of 4 million tons
to date. It means we can develop various things in the future if domestic circumstances requirethem.
You mentioned “just 1 million tons to make up for exports,” but there is no need to reduce exports
to get 1 million tons. For example, if two Myojo Cement kilns were operated at full capacity, we
could increase our production by about 600,000 tons. The remainder can be collected from each
district SS and other plants. We are not talking about cutting exports for this purpose. The
decrease of 500,000 tons in export in the first half occurred because we refrained from shippingto those destinations where we had not been able to raise the price.
Q: Did you mean you will ship products basically from the two plants in Hokuriku? Have you
ever thought of increasing the utilization rate of other plants, such as the Oita Plant?
25

A: We will ship from the plants that have many SSs nearby. There are users of Denka in Nagoya
and Gifu. There may be cases where it is better to send the product out of the Fujiwara Plant.
Anyway, we will ship from where there are logistical benefits, which means it is not necessary to
get them out of Myojo Cement by any means.

26