Nov. 6th, 2023
Pacific Industrial Co., Ltd.
Briefing for Fiscal Year 2023 Second Quarter Q & A《Q2 Financial Results》
Q1：In the stamping and plastic molding business, profitability has increased with anoperating profit margin of 8.5% in 2Q; from July to September. How do you see Q2
results? Were there any temporary factors that will push up profits?
A1: There were no temporary factors. In the second quarter, Toyota's production volume
recovered to a high level, mainly in Japan and the United States, and we were able
to minimize losses and maintain in our Japanese and overseas steady manufacturing
operations. In addition, due to the change in the durable years of stamping
equipment in the United States from 7 years to 15 years starting this fiscal year,
depreciation expenses decreased by 0.8 billion yen in the first half of the year
compared to the previous year. These two factors led to a steady profit growth.
《Forecast for the second half》
Q2：The profit level and profit margin are expected to decline significantly in the second
half compared to the first half. What are the factors? Also, I would like to know theactual value of how much profit margins can actually increase.
A2：A new plant at the Higashi-Ogaki area will begin operation in the second half of theyear. As a result, we are expecting approximately 0.7 billion yen in depreciation costs
for buildings and equipment, and approximately 0.4 billion yen in production
preparation expenses and expenses related to land and buildings, which will be afactor in lower profits in the second half. Additionally, there are several hundred
million yen in expenses that were originally scheduled for the first half but have been
postponed to the second half. This is also a factor in reducing profits in the second
half. Regarding ordinary income, while the first half includes foreign exchange gains,
the second half is calculated without foreign exchange gains. There is a possibility
that profits will increase due to the continued depreciation of the yen. However,regardless of exchange rate trends, we are working to minimize losses and maximize
profits both domestically and internationally, so that we can achieve results thatexceed the announced figures.

Q3：What is the Toyota's Japanese production volume assumptions for the second half
forecast? This seems like a conservative. Is it correct to understand that if
production continues at the same level as the first half, profits will rise in tandemwith the increase in production volume, other than the factors contributing to thedifference between the first half and the second half?
A3：Basically, Toyota's production volume assumptions have not changed significantly
from the 1Q announced figures. For the United States, we are forecasting anannual increase of around 3%, and for China we are forecasting a slight decrease.
If the number of units produced increases, the marginal profit will be added to theprofit.
Ｑ4：How are labor costs, expenses, and sales prices factored into the second-halfforecast? In addition, with regard to depreciation costs, an increase in depreciation
costs at the Higashi-Ogaki Plant in Japan was offset by a decrease in depreciation
costs as a result of changing the depreciation period in the United States. Is it okay
to understand that it is plus or minus zero in terms of increase/decrease factoranalysis?
A4：Labor costs are expected to increase compared to the previous forecast, assuming
higher wage rates in countries such as the United States. Sales prices areunchanged from the 1Q forecast, but in the stamping and plastic molding business,
we plan to periodically revise prices, and in the valve business, we are aiming toreduce price reductions while passing on rising material prices to sales prices. As
you understand, the depreciation expense is plus or minus zero.
Q5：Material prices continue to have a negative impact on profits, but will profits berecovered in the next fiscal year?
A5：The biggest factor is the IC price of the TPMS business. Since purchases are madefrom overseas in euros, purchase prices are expected to continue to rise amid thecurrent situation of strong euros and weak yen, which is expected to have anegative impact on profits. Next, regarding the unit price of scrap in the stamping
business, the sales price of scrap is on a downward trend, so we have reflected this
impact in our forecast. These are the differences from last time.
Brass prices in the valve business also remain high. As for passing on prices tocustomers, we have achieved some results this fiscal year, so we will continue tonegotiate with customers so that we can pass on the increase in material prices
into next fiscal year.

《About mid to long-term initiatives》
Q6：Please tell us about the progress in developing and promoting sales of electric
expansion valves for Europe and the United States.
A6：As battery EVs continue to grow, we believe that electric expansion valves will be
an extremely important product for our company. At the same time as we begindeliveries to Japanese manufacturers, we are proceeding with development andexpand sales in cooperation with sales and development members at our Frenchand American base. During development, we have a backup system of Japanesedevelopment members, who communicate well and share information as we move
forward. Although we have not yet begun deliveries, our technology has beenhighly evaluated by our customers and recipients. The thermal management
system uses not only the electric expansion valve that we have started producing,but also multiple other electric expansion valves, so the entire group is workinghard to receive additional orders.
Q7：Looking at your outlook for next fiscal year, when and how much profit
contribution do you plan to make from the launch of the new stamping plant andelectric expansion valves?
If you have any stories about how sales and profits will increase due to factors
other than Toyota production volume and exchange rate fluctuations, please tell us.
A7：Regarding the start-up of the new stamping plant, we plan to install a total of six
presses, but only a portion of them will be fully operational next fiscal year. Next
fiscal year, as not all equipment will be operating at full capacity, we still expect thecontribution to earnings to be negative.
Regarding valves and electric expansion valves, production has begun in thisterm and is still small. It will still be a small in 2024, and it is assumed that theamount will gradually increase from 2025 onwards. Regarding other factors, weare also expanding sales of TPMS, and I think we will see results from next year
onwards. Regarding the valve business, since our products are not dependent on
specific customers, the biggest impact on our company is how the market,including Europe and the US, expands. I think this is the bottom, and I lookforward to next year and beyond.
Looking at the current situation by region, in the Chinese market, Japanesemanufacturers are struggling to hold on, and we predict that the difficult situation
will continue from next year onwards. The Thai market is down about 20% fromthe 1Q forecast, making it difficult to predict the future. If we can increase thenumber of units produced by our customers in Japan and the United States, which
account for 70% of our sales profit, and increase profits, we will be able to report
good consolidated earnings. We will continue to build a solid business foundation.

Q8: Regarding Gigacast, at the time of the 1Q results, you said that you would beclosely monitoring the impact going forward. Did Toyota share any information
with suppliers after that? If Gigacast is adopted, please tell us about the impact onbusiness.
A8：No new information has been released. We are continuing to monitor trends basedon information obtained during daily business activities and official information
dissemination. Gigacast targets parts for the front and rear parts of a vehicle'sunderbody. Since we have almost no ordered parts in that area, we believe thatGigacast will not have much of an impact on our company. Although there will be
no direct impact, we believe that competition may intensify as parts suppliers in
the Gigacast field continue to aggressively expand sales of remaining stampedparts. I don't think we will introduce Gigacast. There are still many areas in which
our specialty areas, including ultra-high tensile strength and aluminum stamping
products, can contribute to the need for weight reduction, so we will further
strengthen our efforts.
Q9：Local Chinese auto manufacturers are also increasing their numbers considerably.
Please tell us about the direction of sales expansion, including whether you willdevelop Chinese manufacturers.
A9：Basically, we are thinking about expanding sales mainly to Japanesemanufacturers, but for some products, we are also conducting sales expansion
activities to local Chinese manufacturers.