FYE March 2021 Second
Quarter Financial Briefing
NAGASE & CO., LTD
November 26, 2020

Copyright © 2020 NAGASE & CO., LTD.

Summary■ FYE March 2021 Second Quarter Results- The COVID-19 pandemic drove a degradation in the world economy, with particularly significant
impact on automotive and cosmetics-related markets- In other regions, while the situation has returned to pre-pandemic levels in Greater China, economic
activity is slow in other regions- The Prinova Group has contributed significantly to profits. However, costs have increased due tofactors such as investment toward sustainable growth (e.g. DX promotion)- Continuation of sale of strategic shareholdings from last year

■FYE March 2021 Earnings Projections- We see the COVID-19 pandemic continuing to grow worldwide, so we anticipate that the shift to fullfledged recovery will be in the fiscal year ending March 2022 or thereafter- We project lower sales and profits overall for the full year

■Progress of Mid-Term Management Plan ACE-2020- Released TABRASA, a materials informatics platform as one element of DX promoted by the
NAGASE Group- Established the Sustainability Committee
Copyright © 2020 NAGASE & CO., LTD.

2

ContentsFYE March 2021 Second Quarter Results

P. 4

FYE March 2021 Earnings Projections

P. 16

Progress of Mid-Term Management Plan ACE-2020 P. 22
Materials Informatics

P. 28(Reference) Information by Segment

P. 47

Copyright © 2020 NAGASE & CO., LTD.

3

FYE March 2021 Second Quarter Results

Copyright © 2020 NAGASE & CO., LTD.

4

Consolidated Statements of Income■ Net sales: Sales declined because of the impact of the growth of the COVID-19 pandemic■ Operating income: Income declined mainly due to increased costs incurred to promote DX as an investment for sustained growth,though gross profit increased due to the high profitability of Prinova Group■ Profit attributable to owners of the parent: Profit increased, mainly due to the recording of profits stemming from the sale of certain
shares owned by the Company[Foreign exchange rate impact on 20/09 net sales and operating income results]
Net sales: ¥(3.5) billion (approx.);Operating income: ¥(0.1) billion

Copyright © 2020 NAGASE & CO., LTD.

[Per-yen exchange rate impact on net sales and operating income (full year)]
Impact of US$ /yenImpact of RMB/yen
Net sales¥1.0 billion (approx.) ¥8.1 billion (approx.)
Operating income¥0.0 billion (approx.) ¥0.4 billion (approx.)5

Net Sales by Region (Domestic, Overseas)■ Sales in particular in Japan and ASEAN decreased due to the impact of the growing COVID 19 pandemic, though sales in
Europe and America increased sharply due to the addition of sales from the Prinova Group (overseas ratio of total sales: 56.4%)

Copyright © 2020 NAGASE & CO., LTD.

6

Net Sales: Two Year Comparison (by Segment)■ Mobility & Energy: Sales declined due to a decrease in the sales of car electronics-related products in Japan and in the resins
business in all regions except Greater China, mainly caused by lower automotive production in all regions except Greater China■ Life & Healthcare: Sales increased mainly due to increased sales of pharmaceutical raw materials/intermediates and medical
materials and of hygiene products-related materials , and due to the addition of sales from the Prinova Group, factors thatcompensated for the decline in the sales of TREHA™ and other food materials (except for Prinova Group) and AA2G™ and othercosmetics-related materials. The decline was mainly due to a lower demand*V: Vs 19/09

Copyright © 2020 NAGASE & CO., LTD.

7

Gross Profit: Two-Year Comparison (by Segment)■ Profit increased as a result of the high profitability of the Prinova Group exceeding the impact of theCompany's sales decrease

Gross Profit by Segment(100 millions of yen)

Change in Gross Profit by Segment(100 millions of yen)

600
508
113

537

187

(V:165%)

Processing
(11)

400
53
113

35

(V:67%)

112(V:98%)

200
139

128

(V:92%)

86

72(V:84%)

19/09

20/09

0
*V: Vs 19/09

Copyright © 2020 NAGASE & CO., LTD.

Others(0)

Functional
Materials Advanced(13)
Materials &

508

19/09

507

506

Electronics(1)

Life &
Healthcare
+74

510

Mobility &Energy
(17)

506

505

537

505

20/09
8

Operating income: Two Year Comparison (by Segment)■ Advanced Materials & Processing: Lower profits due to declining sales and degraded market conditions in the digital print
processing materials business■ Electronics: Despite reduced sales, increased profitability in certain manufacturing subsidiaries led to higher profit*V: Vs 19/09

Copyright © 2020 NAGASE & CO., LTD.

9

Earnings at Major Consolidated Subsidiaries■ Nagase Plastics Co., Ltd.: Sales and profits declined due to impact from the COVID-19 pandemic driving down sales of resins
for the office equipment, appliance, and electronics industry■ Shanghai Nagase Trading Co., Ltd.: Sales and profits increased as Greater China overall shook off the impact of the COVID-19
pandemic at an early stage, with electronics-related and other businesses, primarily semiconductors, trending strongly(100 millions of yen)

Net sales

Vs. PY

Operating Income

Vs. PY

114

89％

21

80％

120

92％

14

108％

466

89％

45

77％

Nagase Plastics Co., Ltd.

151

80％

3

56％

Nagase Chemical Co., Ltd.

77

80％

1

77％

Nishinihon Nagase Co., Ltd.

25

60％

0

45％

376

80％

10

71％

Prinova Group, LLC

444

-

25

-

Shanghai Nagase Trading Co., Ltd.

218

101％

6

187％

Shanghai Hua Chang Trading Co., Ltd.

192

97％

6

120％

Total for overseas sales (Note 1)

2,128

115％

66

169％

Company Name
HAYASHIBARA CO., LTD.
Manufacturing
Nagase ChemteX Corporation
Companies
Total for manufacturing (Note 1)

Domestic
Sales
Companies

Total for domestic sales (Note 1)

Overseas
Sales
Companies(Note 2)

Note 1: Totals for each category are the simple sums of each company in the category. These sums do not equal consolidated figures.
Note 2: Operating income does not reflect amortization of goodwill and depreciation of technology-based assets.

Copyright © 2020 NAGASE & CO., LTD.

10

State of Two Major Manufacturing Subsidiaries■ Hayashibara Co., Ltd.: Recorded lower sales and profits. Though sales increased for pullulan, a product for the medical and health foodindustry, and for Fibryxa™, a high-function material for the food industry, impact from the spread of the COVID-19 pandemic led to falling
sales in Japan and overseas of TREHA™, a product for the food industry, and AA2G™, a product for the cosmetics industry■ Nagase ChemteX: Recorded higher profits. Despite a decrease in sales, particularly in the Performance Chemicals Business driven by factors
such as impact from the spread of the COVID-19 pandemic, operating income rose thanks to improved product mix, cost reductions, andother factors

Hayashibara Co., Ltd.

Nagase ChemteX Corporation(100 millions of yen)(100 millions of yen)

19/09

20/09

ChangeVs. PY

19/09

20/09

ChangeVs. PYNet sales

129

114

(14)

89%

Net sales

131

120

(10)

92%

Operatingincome

26

21

(5)

80%

Operatingincome

13

14

＋1

108%

・TREHA™ continued to perform well for some food products due
to increased stay-at-home demand, but overall performance wassluggish due to a decrease in demand for souvenirs and the foodservice industry
・AA2G™ performance remained sluggish due to a decrease indemand in the cosmetics industry
・Fibryxa™ performed strongly with new adoptions of the productin the food industry
・Performance was strong for pullulan used in hard capsules for
medical and health food products⇒ New wing completed in September, increasing manufacturing
capacity

Copyright © 2020 NAGASE & CO., LTD.

・Though the Epoxy Resin Business showed sluggish performance inlight electrical applications, primarily for automotives, it showedstrong performance in electronic components used for mobile
devices
・In the Photolithography Materials Business, though impact fromCOVID-19 led to temporary reduction in capacity utilization, it isshowing gradual recovery
・The Performance Chemicals Business showed sluggish
performance in epichlorohydrin conductors for automotive
applications and the conductive materials business for the LCD
industry
・The Bio Chemicals Business showed strong performance
・Profit was higher due to factors such as improved product mix andcost reductions

11

Prinova Group Performance■ Though the Armada Business for the sports nutrition market showed sluggish performance because of

impact from the COVID-19 pandemic, sales grew for vitamins and other food materials, leading to strong
performance overall
FYE March 2021

First Half
(January-June performance)*Reference
FYE December 2019 (full year)(excluding special M&A-related expenses)

Prinova Group net sales¥44.4 billion

Approx. ¥82.0 billion

Prinova Group operating
income¥2.5 billion

Approx. ¥4.0 billion

Amortization of goodwill
and other intangible assets¥0.9 billion(Reference)FYE March 2020: ¥0.8 billion in amortization
over five consecutive months

・The Ingredients Distribution Business and the Solutions (formulating/processing) Business showedstrong performance with increased health maintenance consciousness due to the COVID-19 pandemic
and recovery in market conditions, leading to increased sales in vitamins and other food materialsrelated areas
・However, the Armada Business (contract manufacturing) showed sluggish performance, with demandfalling due to COVID-19 pandemic-driven sports gym closures, sports event cancellations, and so on
Copyright © 2020 NAGASE & CO., LTD.

12

Consolidated Balance Sheets■ Assets decreased ¥9.3 billion due to decreases in cash and deposits, accounts receivable, etc.
■ Liabilities decreased ¥26.5 billion due to decreased commercial paper and accounts payable■ Shareholders’ equity ratio rose 3.7 points to 53.6%

Copyright © 2020 NAGASE & CO., LTD.

13

Consolidated Cash Flows

Copyright © 2020 NAGASE & CO., LTD.

14

Working Capital and Investments■ Working Capital: Continued thoroughgoing management to adjust inventory, inventories were in decline■ Investments: Made investments primarily related to focus areas Life & Health Care and Electronics
Completed P Wing at Hayashibara Co., Ltd., where enzymes and pullulan are manufactured

Investment (100 millions of yen)
2,085

Accounts
Receivable

2,211
売掛金
2,304

2,059
Accounts
Receivable

売掛金
2,094
2,211

820

Prinova631

170
Second Half

Inventories

在庫
956
810

Accounts
Payable
買掛金

1,172
1,082
20/03

Copyright © 2020 NAGASE & CO., LTD.

Inventories

在庫94995676

Others189

First Half

20/03
Actual21/03
Forecast

94

Accounts
Payable
買掛金

1,082
984

20/09

15

■ FYE March 2021 Earnings Projections

Copyright © 2020 NAGASE & CO., LTD.

16

FYE March 2021 Earnings Projections■ In the first half, earnings were better than our previously announced forecasts, in part because economic activity resumed faster than expectedin Greater China and there was a temporary increase in demand caused by supply uncertainty attributable to the spread of the COVID-19
pandemic■ On the other hand, we see the COVID-19 pandemic continuing to grow worldwide, so we anticipate that the shift to full-fledged recovery will bein the fiscal year ending March 2022 or thereafter⇒We have selected a more conservative macroeconomics in the second half

■ Furthermore, in the second half, we anticipate that costs for sustained growth, including investment, will be greater than in the first half
■ Based on the above, we forecast lower sales and profits overall (there are no changes to the earnings forecasts released in May 2020)

Copyright © 2020 NAGASE & CO., LTD.

17

Revised Earnings Projections (by Segment)■ Revised our earnings forecasts for each segment due to variation in market sentiment and current conditions vs. initial expectations■ As expected, the automotive-related market was in a difficult situation in the first half, but the electronics-related market was stronger than expected
However, the Life & Healthcare market (e.g. cosmetics) was sluggish

Net Sales Forecast by Segment (100 millions of yen)
3,000

80
2,430

2,500

60

2,410

40

2,000
1,500

1,750
1,4801,425
845

1,000

1,025

1,655

43 42

56 54

68

62
48

56

11 11

20
0
△ 20

1,030 1,020

△ 40
△ 60

500
0

Operating Income Forecast by Segment (100 millions of yen)

△ 80
Functional
機能素材
Materials

Advanced
加工材料
Materials &Processing

Electronics
電子

Initial
当初見通し
Forecast

Mobility &モビリティ・
Energyエネルギー

Revised
修正見通し
Forecast

Life &
生活関連
Healthcare

△ 100

△ 75
△ 76
Functional
機能素材
Materials

Advanced
加工材料
Materials &Processing

Electronics
Mobility &電子
モビリティ・
Energyエネルギー

Initial
当初見通し
Forecast

Life &
生活関連
Healthcare

Others/
その他・
Corporate
全社共通

Revised
修正見通し
Forecast

Electronics

In our environment, demand is rising beyond expectations for notebook PCs, TVs, and other products. Further, thesemiconductor market is trending strongly

Life & Healthcare

Demand for souvenirs and cosmetics is falling beyond expectations as people's movements are being restricted
and inbound demand falls*There are no changes in the forecast for net sales in Others.

Copyright © 2020 NAGASE & CO., LTD.

18

Net Sales Forecast (by Segment)■ Functional Materials: Though sales are to recover gradually and end higher versus the first half in coating raw materials and urethanematerials thanks to recovery in automotive production in the second half, we forecast a decrease in net sales over the full year

■ Electronics: Though sales for formulated epoxy resins used in areas such as mobile devices and heavy electrical applications are to
trend level versus the first half, given the uncertainty in the market ahead we forecast decreasing sales in display-related products,
with net sales down in the second half versus the first, and down for the full year

■ Life & Healthcare: In the second half, sales of AA2G™ for the cosmetics market and TREHA™ for the food market are expected toremain sluggish and sales are expected to fall versus the first half, we forecast an increase in sales over the full year due to thesignificant contribution of the Prinova Group consolidation

Net Sales by Segment (100 millions of yen)

8,000

7,995
1,215

6,000

1,260
1,151

4,000
2,670

0
*V: Vs 19/09

Functional
Materials
(268)

1,655

(V:136%)

1,020(V:81%)

1,025(V:89%)(V:90%)

1,693

1,425

(V:84%)

20/03 (Actual)

21/03 (Forecast)

Copyright © 2020 NAGASE & CO., LTD.

Advanced
Materials &Processing
(260)

7,540

2,410

2,000

Change in Net Sales by Segment (100 millions of yen)

7,995Life &
Healthcare Others＋439＋0Electronics(126)
Mobility &Energy
(240)

7,540

20/03
(Actual)21/03(Forecast)

19

Operating Income Forecast (by Segment)■ Advanced Materials & Processing: Lower profits mainly due to degraded profitability driven by declining sales anddegraded market conditions in digital print processing materials■ Life & Healthcare: Higher profits mainly due to contributions throughout the fiscal year from the Prinova Group■ Other/Corporate: Higher costs due to promotion of DX for medium- to long-term growth and acceleration of investment inleading-edge technology

Operating Income by Segment (100 millions of yen)
機能素材

250

加工材料

電子

モビリティ・エネルギー

150
100

その他・全社共通

191
39

200

生活関連

150

18

56

(V:141%)53

11(V:58%)

62(V:115%)85

Functional
Materials Advanced(11)
Materials &Processing(31)
Electronics+8

Life &
Healthcare+16

Mobility &Energy(7)

Others/Corporate
(15)

191
54

(V:63%)

53

42(V:78%)

(59)

(75)

20/03
(Actual)
20/03実績

21/03(Forecast)
21/03見通し50

Change in Operating Income by Segment (100 millions of yen)

150

0
△(50)
50
*V: Vs 19/09

Copyright © 2020 NAGASE & CO., LTD.

20/03(Actual)
20/03実績

21/03(Forecast)
21/03見通し20

Dividends■ Expecting to pay dividends of ¥44 per share for the full year, consisting of a ¥22 per share interim
dividend and a ¥22 per share year-end dividend*1 FYE March 2018 dividends include a special dividend of ¥5 per share.
*2 21/03 yearend dividend to be submitted for approval to the 106th general meeting of shareholders scheduled for June 2021.

Copyright © 2020 NAGASE & CO., LTD.

21

Progress of Mid-Term Management Plan ACE-2020
Accountability / Commitment / Efficiency
Investment
R&D

Logistics

Business

GlobalNetworkBusiness
Business
Designer
Designer
Designer
Trading
Manufacturing

NAGASE Transforms from Shosha/Trading to Business Designer

Copyright © 2020 NAGASE & CO., LTD.

22

Positioning of ACE-2020
To achieve our goal by 2032, the last year of Long-Term Management Policy, we divide 17 years of its
term into 3and start stage 1 as the beginning of the Mid-Term management Plan ACE-2020.
In FY2020 we will continue the fourth year of ACE-2020 and continue reforming the business aiming forsignificant growth.
*Our goal: Normalization of the profit more than tripled.

Long-Term Management Policy
Environmental
Adaptability

FY2020Stage1｢Reformof Profit structure｣｢Reform ofcorporate culture｣【Reform】
2016～2020

Change-S 2014
Copyright © 2020 NAGASE & CO., LTD.

ACE-2020

Stage3

Stage2The stage that
two reforms permeated
and accelerated thegrowthThe stage that rapidly
growing towards to thegoal【Growth】
2021～2025【Jump】
2026～2032

Time
23

ACE-2020 Basic Policy
NAGASE Transforms from “Shosha/Trading”
to “Business Designer”.

Investment

NAGASE strings all the groups together to create and provide newvalue to the world through 6 key functions.

Logistics

Leverage Group functions to achieve the quantitativeand qualitative targets.

GlobalNetwork

R&D

Business
Designer
Trading
Manufacturing

Reform Profit Structure

Reform Corporate Culture

Portfolio Optimization

MindsetCategorization of business and execution ofstrategy that matches with the area

Breed independence and responsibility

Replacement of asset and reallocation of
resources

Share the management’s message

Acceleration in investment that creates corebusiness of group

Thorough monitoring and PDCA

Expand and Strengthen Revenue BaseStrengthen Management Platform

Accelerate globalization ” G6000”

Pursue efficiency

Improve manufacturing profitability

HR development

Copyright © 2020 NAGASE & CO., LTD.

【6 Functions】

24

Progress of Mid-Term Management Plan ACE-2020 KGIs
Consolidated Sales/Operating Income

ROE

1.0 Trillion Yen/30 Billion Yen or more

Normalize Over 6％ at early stage

Sales(100 millions of yen)
10,000Consolidated operating Income(100 millions of yen)
300

ROE (%)
8.0%

6.6%
252
241

5.8%

4.9%

191
4.4%

180

4.0%

FY2020FY2019FY2018FY2017FY2016FY2015

Copyright © 2020 NAGASE & CO., LTD.

2015年度 2016年度 2017年度 2018年度 2019年度 2020年度

FY20200.0%

2015年度 2016年度 2017年度 2018年度 2019年度 2020年度

FY201900FY20184.0%

FY2017150 150

FY2016150

FY2015

5,000

3.7%

25

Progress of Mid-Term Management Plan ACE-2020
Reform of Profit Structure

Expansion of sales of flavor and fragrance ingredients in Southeast Asia

Overseas
Distribution

Trading Prinova nominated as sales partner of Emerald Kalama Chemical

Overseas

Second overseas expansion after Xiamen, China - acceleration of overseas expansion in the food materials field

Investment

 Established the Regional Innovation Center, a food materials lab in Singapore.

Manufacturing

Focus Area

 Named a Zero-Emission Challenge Company by the Ministry of Economy, Trade and Industry
For development of bio-derived product production technology and high-function product production technology
using living organisms

Base Area Launched the Chemical Outsourcing Coordination website and an online customer
platform offering antifoaming agent solutions

Distribution

Reduces energy costs in the organic solvent reuse process to less than 1%

Investment

Manufacturing Manufacturing Jointly-proposed separation membrane process with Unitika Ltd. selected for NEDO subsidy

Trading

AI analysis data of COVID-19 therapeutic drug candidates is provided free of charge to all players in industry,
academia, or government

Investment

 Established business alliance with Karydo TherapeutiX, using AI to predict efficacy andside effects with high accuracy

Investment

Features analytics and cognitive capabilities to explore new materials more efficiently

Investment

 Launch provision of SaaS services on the TABRASA new material search platform

Manufacturing Manufacturing

Growth Area

Reform of Corporate Culture Established the Sustainability Committee Established Nagase & Co. official social media accounts (on Twitter & Facebook)
Copyright © 2020 NAGASE & CO., LTD.

26

Positioning of the Next Mid-Term Management Plan
Positioning change: from a growth period to Pursuit of Quality
In recognition of the dramatic degradation of the external environment occurring in the final year of Stage 1, we havechanged the positioning in Stage 2 from a growth period to pursuit of quality
We have positioned this period as one where we create value for our stakeholders in a tangible form (businesses,
mechanisms, culture) looking ahead to 2032, and we are working to formulate plans that revolve around improvementof social and environmental value, leveraging of advanced technology, and improvement of capital efficiency
Environmental
adaptability

Shift toward diverse
work styles

Stage3Re-evaluation of a societyof mass production & massconsumption[Growth]↓[Reform][Pursuit of Quality]
2021 - 2025

ACE-2020

Next Mid-Term
Management Plan

2016 - 2020Engagement requirements(as an ESG issue)

Concerns about long-term
entrenchment of COVID-19

Stage2
Stage1

Calls for safety, security,and health

Penetration of digitaltransformation[Jump]

Re-evaluation of traditionalsales and sales activities

2026 - 2032
A stage of rapid
growth toward goals

Re-evaluation of global
supply chain[Reform of Profit Structure][Reform of Corporate Culture]Time

Re-evaluation of financial strategy(stability/leverage)
Copyright © 2020 NAGASE & CO., LTD.

Long-term stagnation in crude oiland petrochemical prices
27

Materials Informatics
SaaS Services
Yasumitsu Orii
Ph.D., Engineering
Executive Officer and General Manager of
the New Value Creation Office
Copyright © 2020 NAGASE & CO., LTD.

28

NAGASE's Digital Transformation (DX) Strategy
NAGASE DX
Shift to digital in core businesses

Digital marketing:
Project Ascend

Innovation in value provided

Solutions leveraging NAGASE's
Solutionsstrengths:
leveraging NAGASE's
strengths:
Informatics,
MaterialsMaterials
Informatics
Customer
Blockchain,etc.
Blockchain
Experience
etc.
(CX)

NVC Office(New Value Creation
Office)Est. April 1st, 2017

Web, CRM, MA, SNS, ERP, ...
Systems underpinning and supporting DX

Copyright © 2020 NAGASE & CO., LTD.

29

NAGASE Materials Informatics Platform
Leading-edge materials development technology fusing dataprocessing technology with materials science

Materials Informatics
While attention is being gathered on this technology because of its ability tosignificantly shorten R&D times, development costs
and securing specialized human resources are issues

NAGASE Materials Informatics allows users to utilize cutting-edge MI(materials informatics) services without making initial investments
and only incurring running costs
As an industry-standard R&D platform,
this will contribute to value creation for our customers

Copyright © 2020 NAGASE & CO., LTD.

30

known materials

1,000,000,000
910

unknown materials

62

10

Reference : Kirkpatrick R.S, C.McMartin W.C Guida Chemical Space,
Nature.432(7019):823-865, 2004
Drafted by Takeda, IBM Research - Tokyo, IBM Japan

Copyright © 2020 NAGASE & CO., LTD.

31

Background of Materials Informatics System Development
Service Launch (Nov. 18)
2016

2017

2018

2019

IBM Research Frontiers Institute

2020

2021

Joint Development Agreement(JDA)

SaaS system construction
Nagase & Co., participation
Six RFI founding members: Nagase, Canon,
Samsung electronics, JSR, Hitachi Metals,
Honda R&D
Established a JDA with IBM on one of the 10
development themes, Accelerated Material
Discovery

Copyright © 2020 NAGASE & CO., LTD.

Phase1

Phase2Phase32019 (Jan-Dec)

2020 (Jan-Dec)

2021 (Jan-Dec)

System development: System development:
Hayashibara
Hayashibara
Co., Ltd.
Co., Ltd.
Overview
Nagase ChemteX
Nagase ChemteX
Corporation
Corporation

Predictive model
development

32

The "SaaS" (Software as a Service) Business Model
The SaaS business model is capable of generating benefits for both customer and operator so long as
the operator can continue to provide a high level of service.

IBM

Benefits to the customer

Enginedevelopment
Analytics/Cognitive

IBM-developed engine
Customers continue to enjoy cutting-edge
technology
Cloud-based software
Customers can design their own solution without
disclosing important customer data to us
Graphical user interface
Enables MI launch without the usual enormous
investments (e.g. hiring data scientists)
SaaS usable under a subscription model
Removes need for large-scale systems
investment

Subscription

Benefits to Nagase
Provides outlook for continuous, stablebusiness revenue
CustomerA

Copyright © 2020 NAGASE & CO., LTD.

Customer
B

CustomerC

Rapid achievement of a multi-billion yen business(Annual usage fee × no. of customers)
33

Two Approaches to Realizing MI

The NAGASE MI Platform

We provide a development platform offering a comprehensive set of peripheralservices, contributing to value creation for our customers
Core Engine (Analytics, Cognitive)

Cognitive approach

Analytics approach
Analytics
Small molecule structure andphysical property values
Mathematical calculation,
machine learning
Chemical structural formula
Copyright © 2020 NAGASE & CO., LTD.

Approach
Input
MethodOutputCognitive
Documents (papers/technicalmaterials)
Language processing, data
structuring
New knowledge
34

Sample Use Case for Analytics
A daily issue at Hayashibara:
We would like sugar with XX properties
What sort of chemical structure
would we need to do this?

Customer firm

Hayashibara researcher

Since sugars have many structural variations (theoretically, more than 10 billion), it isvery difficult to pinpoint sugars with specific physical property values.
OH
HO

OH
HO

O

OH ・Skeleton types:

OH
O

O

Types of sugar structures:・Permutations of up/down orientation of OH groups:
25 x 25 x 25 = 215

O O HOHO HO

Minimum of 8 types per ring
For 3 rings, 83

・Bonding position between rings:
OH groups: 5 positions x 5 positions x 5 positions = 53

HO HO
Sample sugar structure (trisaccharide)
Copyright © 2020 NAGASE & CO., LTD.

Structural variations:
215 x 83 x 53 = over 10 billion possibilities
35

Designing Sugar with Analytics

Data set

R2 = 0.71

・153 data points (monosaccharides,
disaccharides, trisaccharides)
・Physical property value: Melting point
Basic sugar skeleton

6

4

6
5

3

GlucoseCopyright © 2020 NAGASE & CO., LTD.

1
1
2

4

5

3

5

1 2
2

3

4

6

Sucrose36

Example Sugar Design
Analytics output(a) 100℃(b) 150℃(c) 200℃

No. of sugar structures discoverable via analytics: 10 per day(30 times faster than a highly-skilled researcher)

Copyright © 2020 NAGASE & CO., LTD.

37

Overview of the Cognitive Approach
Reorganizing
recording media
into data withdigital structure

Extracting
specialized datafrom information

Converting
specialized data
into knowledge

Using knowledge
to draw
inferences,
create insights

Parse PDFs/documents

Natural language processing

Knowledge graph search

Supposition model

Big data
Analysis

Copyright © 2020 NAGASE & CO., LTD.

Extracting
New insights
knowledge Forecasting38

Characteristics of the Cognitive Approach
World-class AI: State-of-the-art technology drives all processes from knowledge to reasoningNewmaterials
forecasting

Knowledge
expression

IBM
Accelerated
Discovery

Document
digitization

Knowledge
extraction

Drafted by IBM Research - Zurich
Copyright © 2020 NAGASE & CO., LTD.

39

Sample Use Case for Cognitive
Is it possible to search for an enzyme that reacts with lactose from AIgenerated knowledge of enzymes?
Lactose is a disaccharide commonly found in milk
and dairy products

Enzyme knowledge graph

People whose stomachs
don't rumble
LactasePeople whose stomachs
rumbleGlucose

Lactase

Cause of rumbling
stomachs

Copyright © 2020 NAGASE & CO., LTD.

Galactose

Poor efficacy
This contains data from one book and seven public databases.
These represent more than 11,000,000 data points.

40

Knowledge Graph Evaluation
Searching for an enzyme that reacts with lactase

Experts search enzyme DB

Enzymes*The KG does not include Expasy

Enzyme producing ketones from the reducing end of lactose(1.1.99.13)

〇
〇

〇
〇

〇

Copyright © 2020 NAGASE & CO., LTD.

Discovery of new
knowledge〇〇

Enzyme synthesizing lactose(2.4.1.22)〇

Enzyme producing phosphoric acid from lactose(2.7.1.207)
Enzyme breaking down lactose(3.2.1.23)〇

Enzyme breaking down lactose(3.2.1.108)

LactaseEnzyme hydrolyzing the non-reducing ends ofoligosaccharides(3.2.1.140)

41

Press release November 18, 2020

Copyright © 2020 NAGASE & CO., LTD.

42

NAGASE Materials Informatics Trademark

Tabula rasa is Latin for "a blank slate."
Like with the blank slate, we will engrave letters in the form ofstructuring, accumulating, and leveraging an abundance ofknowledge to help generate new value for our customers. Thusly, we
have named our product TABRASA.

Copyright © 2020 NAGASE & CO., LTD.

43

Promotion Video

Please click the link below to access our
promotional video (only in Japanese)
https://www.youtube.com/watch?v=i_jlfMO_ipw

Copyright © 2020 NAGASE & CO., LTD.

44

Nagase & Co., Ltd. strives toalways be listening for the voices ofthe future, using TABRASA as aconduit to contribute to its
customers' business success andinnovation.

Customer Success !!
Powered by

Copyright © 2020 NAGASE & CO., LTD.

45

Please access the following website for any
inquiries about TABRASA (Japanese only).

https://tabrasa.jp/

Copyright © 2020 NAGASE & CO., LTD.

46

(Reference) Information by Segment

Copyright © 2020 NAGASE & CO., LTD.

47

Functional Materials Segment
FYE March 2021 Second Quarter Results<Net Sales/Operating Income by Location>(100 millions of yen)

Operating income

Net sales

FYE 03/20

FYE 03/21
Interim

Year
Forecast

Interim

Full-Year

Vs. PY

Vs. PY

Domestic

807

1,577

655

81%

1,379

87%

Overseas

288

558

238

83%

473

85%

Eliminations

(223)

(442)

(191)

-

(427)

-

Total

872

1,693

702

80%

1,425

84%

Domestic

20

40

16

80%

33

83%

Overseas

8

14

5

59%

10

73%

Eliminations

(0)

(1)

(1)

-

(1)

-

Total

28

53

20

72%

42

78%

*Figures above are a combination of consolidated entities by location.
Inter-region eliminates are not reflected; adjusted provided in the eliminations column.
(Includes amortization of goodwill and technology-based assets)

Copyright © 2020 NAGASE & CO., LTD.

NetNetsales
sales¥70.2 billion (80%)◆ The Performance Chemicals Business recorded lower sales due tolower sales in coating raw materials and urethane materials as aresult of lower automotive production◆ The Specialty Chemicals Business recorded lower sales overall due
to falling sales of processed industrial oil solutions and plastic
materials resulting mainly from lower automotive production, despite
strong performance of the filter business mainly due to growing
demand for TVs/monitors

Operating income¥2.0 billion (72%)◆ Lower profits, mainly due to lower sales.

FYE March 2021 Outlook◇ In the second half, sales are to increase for products likecoating raw materials, urethane materials, and processedindustrial oil solutions mainly due to recovery in automotive
production, and we forecast an increase in sales versus the first
half◇ For the full year, impact is to grow from the COVID-19
pandemic, with forecasted decreases in both sales and profit48

Advanced Materials & Processing Segment
FYE March 2021 Second Quarter Results<Net Sales/Operating Income by Location>(100 millions of yen)

Net sales

FYE 03/20

FYE 03/21
Interim

Year
Forecast

Interim

Full-Year

Vs. PY

Vs. PY

Domestic

891

1,749

717

80%

1,485

85%

Overseas

863

1,653

819

95%

1,571

95%

Eliminations

(378)

(731)

(293)

-

(646)

-

Total

1,377

2,670

1,243

90%

2,410

90%

Net sales◆ The Colors & Advanced Processing Business recorded
lower sales overall, mainly due to decreased sales of dyes
and additives, digital print processing materials, and plastic
resins for industrial and packaging applications andconductive materials in Japan◆ The Polymer Global Account Business recorded lower
sales overall due to decreasing sales in Japan and ASEAN,
while sales were slightly down for plastics in Greater China

Operating income

Operating income
Domestic

28

54

17

63%

27

50%

Overseas

17

30

18

105%

31

103%

Eliminations

(1)

1

(1)

-

(4)

-

Total

44

85

34

78%

54

63%

*Figures above are a combination of consolidated entities by location.
Inter-region eliminates are not reflected; adjusted provided in the eliminations column.
(Includes amortization of goodwill and technology-based assets)

Copyright © 2020 NAGASE & CO., LTD.

¥124.3 billion (90%)¥3.4 billion (78%)◆ Lower profits due to declining sales and degraded market
conditions in the digital print processing materials businessFYE March 2021 Outlook◇ In the second half, although sales of dyes and plastics
are expected to gradually recover, sales of digital print
processing materials are expected to decrease due to
COVID-19, with this impact forecasted to lead to falling
sales and lower sales versus the first half
◇ We project lower sales and profits for the full year49Electronics Segment
FYE March 2021 Second Quarter Results<Net Sales/Operating Income by Location>(100 millions of yen)

Net sales

FYE 03/20
Interim

Year
Forecast

Interim

Full-Year

Domestic

583

1,174

557

96%

1,126

96%

Overseas

325

661

338

104%

615

93%

Eliminations

(336)

(684)

(351)

-

(716)

-

573

1,151

544

95%

1,025

89%

Total

Operating income

FYE 03/21
Vs. PY

Vs. PY

Domestic

20

39

22

110%

42

107%

Overseas

9

17

14

147%

23

133%

Eliminations

+0

(3)

(1)

-

(3)

-

Total

31

53

35

113%

62

115%

*Figures above are a combination of consolidated entities by location.
Inter-region eliminates are not reflected; adjusted provided in the eliminations column.
(Includes amortization of goodwill and technology-based assets)

Copyright © 2020 NAGASE & CO., LTD.

Net sales¥54.4 billion (95%)◆ Although sales of abrasive-related products forintermediate semiconductor processes and materials fornotebook PCs were strong, sales of photolithographymaterials, formulated epoxy resins, and equipment-related
products decreased, resulting in a decrease in sales as awholeOperating income¥3.5 billion (113%)◆ Despite reduced sales, increased profitability in certain
manufacturing subsidiaries led to higher profit

FYE March 2021 Outlook◇ In the second half, formulated epoxy resins are to recover in onboard applications and remain strong in electronic components used
for mobile devices, leading to increased sales versus the first half.
However, in our business for notebook PCs and other products,
given the uncertainty in the display-related market ahead we forecast
lower sales versus the first half, and lower sales in the segment
overall versus the first half
◇ For the full year, despite reduced sales, impact from improved profit
and loss in certain manufacturing subsidiaries and other factors are
expected to lead to higher profit
50

Mobility & Energy Segment
FYE March 2021 Second Quarter Results<Net Sales/Operating Income by Location>(100 millions of yen)

Net sales

FYE 03/20

FYE 03/21
Interim

Year
Forecast

Interim

Full-Year

Vs. PY

Vs. PY

Domestic

387

764

251

65%

611

80%

Overseas

384

723

291

76%

627

87%

Eliminations

(116)

(227)

(82)

-

(218)

-

Net sales◆ In the Mobility Solutions Business, sales declined due toreduction in the resins business in all regions other thanGreater China, mainly caused by lower automotive
production in the aforementioned regions

Operating income
656

1,260

460

70%

1,020

81%

Domestic

5

10

(1)

-

3

37%

Overseas

5

8

2

46%

8

102%

Operating income

Total

Eliminations

+0

+0

+0

-

+0

-

Total

11

18

1

10%

11

58%

*Figures above are a combination of consolidated entities by location.
Inter-region eliminates are not reflected; adjusted provided in the eliminations column.
(Includes amortization of goodwill and technology-based assets)

Copyright © 2020 NAGASE & CO., LTD.

¥46.0 billion (70%)¥0.1 billion (10%)◆ Lower profits, mainly due to lower sales.

FYE March 2021 Outlook◇ In the second half, automobile production is to recover, resin
sales in Japan and overseas are to increase compared to thefirst half, and sales of materials and parts related to car
electronics are to remain strong mainly due to the launch of
new businesses, leading to a forecast of increased sales
versus the first half
◇ For the full year, impact is to grow from the COVID-19
pandemic, with forecasted decreases in both sales and profit
51

Life & Healthcare Segment
FYE March 2021 Second Quarter Results<Net Sales/Operating Income by Location>(100 millions of yen)

Operating income

Net sales

FYE 03/20

FYE 03/21
Interim

Year
Forecast

Interim

Full-Year

Vs. PY

Vs. PY

Domestic

508

1,044

495

97%

1,002

96%

Overseas

73

468

512

695%

986

210%

Eliminations

(145)

(298)

(148)

-

(333)

-

Total

437

1,215

859

196%

1,655

136%

Domestic

32

67

30

95%

58

86%

Overseas

3

19

28

721%

53

271%

Eliminations

(16)

(47)

(29)

-

(55)

-

Total

19

39

30

152%

56

141%

*Figures above are a combination of consolidated entities by location.
Inter-region eliminates are not reflected; adjusted provided in the eliminations column.
(Includes amortization of goodwill and technology-based assets)

Copyright © 2020 NAGASE & CO., LTD.

Net sales¥85.9 billion (196%)◆ Sales increased mainly due to increased sales ofpharmaceutical raw materials/intermediates and medical
materials and of hygiene products-related materials, anddue to the addition of sales from the Prinova Group, factorsthat compensated for the decline in the sales of TREHA™
and other food materials (other than Prinova Group) andAA2G™ and other cosmetics-related materials
Operating income¥3.0 billion (152%)◆ Higher profits, mainly due to higher sales.

FYE March 2021 Outlook◇ In the second half, sales of Prinova will continue to be strong, withsales at similar levels to those in the first half, and sales ofpharmaceutical raw materials and intermediates, as well as medical
materials, are expected to remain strong. However, we presume that
there will be continued impact from the COVID-19 pandemic andinbound demand will not recover, with sales of Hayashibara Co., Ltd.
products like TREHA™ and AA2G™ to be lower versus the first half,leading to a forecasted decrease in sales overall for the segment
versus the first half
◇ For the full year, impact is to grow from Prinova consolidation, with
forecasted increases in both sales and profit

52

For Inquiries

Please use the following contact information to reach us in the event of
any inquiry regarding today's presentation or regarding these materials.
Contact:
Commercial Legal / IR Team, Planning Management Office, Corporate Planning Headquarters

Phone: +81-3-3665-3028
Inquiry Form: https://www.nagase.co.jp/english/contact/* Please click the above URL, select the "For inquiries about our financial information and other IR related
topics" button, and fill out the form on the following page to contact us.

Copyright © 2020 NAGASE & CO., LTD.

53

https://www.nagase.co.jp/english/

These presentation materials contain forward-looking statements based on assumptions,forecasts, and plans as of November 26, 2020. Actual earnings may differ from projections
due to risks and uncertainties in the future global economy, competitive landscape, currency
exchange rates, etc.
Copyright © 2020 NAGASE & CO., LTD.