Seiko Holdings Corporation
FY2020 Q1 Consolidated Results Presentation
Summary of Q&A

Date:

Wednesday, August 12, 2020, from 3:00-4:00 p.m.

Place:<Web conference>Respondent:

Shimesu Takizawa, Executive Director and CFO
Itsuko Akashi, General Manager, Finance & Corporate
Strategy Planning Department

Summary of Q&A :<Watches Business>
Q1. Can you please explain the status of Global Brands in the first quarter?
A1. Many overseas markets were driven by Grand Seiko (GS). Many GS
customers overseas are of the relatively younger generations, due to theeffect of digital marketing implemented through SNS and other media. InJapan, there are many senior customers as well. In the domestic market,
we feel that sales to these customers are recovering somewhat slower, andthe speed of the recovery in GS is close to that of the Watches Businessoverall.

Q2. When looking at monthly trends from March to June, are monthly decrease
rates improving compared to the same month of the previous fiscal year?
Are they recovering for June and July?
A2. In Japan, a state of emergency was declared in the first week of April andcontinued until May, mainly in metropolitan areas. Accordingly, thedecreases in April and May were greater than in March. The decrease
rates started to recover in June, and recovered further in July. For overseas,
although there were differences in each country, the rates first improved in
China from March. In Europe and the U.S., March and April were relatively
sluggish, but gradual recoveries were seen in May and June. There was no
deterioration from June to July. While some areas have clearly recovered,
there are some areas that have not changed much.

Q3. For the current fiscal year, you had a plan to expand sales in Europe basedon successful cases in the U.S. Is it possible to proceed with this plan evenduring the COVID-19 situation? Or will it be delayed?
1A3. We have been pushing forward with the opening of a Grand Seiko Boutiquein Place Vendôme, Paris, which was planned for launch in the spring, andthe establishment of Grand Seiko Europe, despite the opening of theboutique being delayed in June. Although there may be a delay in terms ofattracting large numbers of visitors to our stores to increase the number ofcustomers, we are promoting efforts to spread GS by distributing news,
such as the opening of GS Boutiques, directly to European consumers.

Q4. Please explain the first quarter and future outlook for China.
A4. Sales have grown favorably over the last three months in China. For GS,
sales increased from the same month of the previous fiscal year for allmonths. As expected, sales grew mainly through e-commerce. The factthat GS is being sold through directly managed e-commerce was very
effective at this time. In addition to GS, we also strengthened the digitalpromotion of Prospex. While there has been some improvisation due to theCOVID-19 situation, many digital promotions were carried out in China,
including those with a handmade feel.

Q5. How do you acknowledge the situation regarding distribution inventories ofthe Watches Business?
A5. We do not feel we are falling behind overseas. In Japan, since last year’s
sales were sluggish in the third quarter following a consumption tax hike,we believe that inventories were on the rise before the spread of theCOVID-19. While economic activities have returned since June, we thinkthat the pace is not quick and believe that there are some distribution
channels with increasing inventories.

Q6. The net sales forecast for the nine months following the second quarter isonly a slight decrease year on year. When assuming that net sales of thewatch movements business will decline significantly, completed watches
will be at the same level or higher year on year. This seems to be relatively
aggressive. What are your thoughts?
A6. In the fourth quarter of the previous fiscal year, net sales declined andprofits did not grow due to the impact of the novel coronavirus. Meanwhile,
net sales in the fourth quarter of the current fiscal year are expected toreturn to the level of the fiscal year before the previous fiscal year. We thinkthat the recovery in consumption among senior customers in Japan iscurrently slow and therefore believe a recovery may come a little later thanoverseas, as we target a wide range of Japanese users including many
senior customers. In the watch movements business, while we assume that2the recovery of analogue quartz movements will be particularly slow, webelieve that customer inventories will be adjusted by around Christmas,
and the market will recover after January 2021.

Q7. Regarding the watch movements business, please tell us about trends inthe demand for mechanical movements and the production for quartz
movements going forward.
A7. In the first quarter, there was enough demand for mechanical movements
to record the same level of sales as in the previous year. However, someproduction activities were still restricted due to the COVID-19. The
restrictions began to be lifted from July, and operations are improving. We
are not considering any particular changes to the production for analogue
quartz movements.

Q8. While next fiscal year will be the final year of the Seventh Mid-Term
Management Plan, achievement of the plan appears to be difficult due tothe impact of the COVID-19. I would like to know whether you are aiming toachieve the current Mid-Term Management Plan, even at a late stage, orwhether you need to change your current strategy to achieve it?
A8. There is no major change in the direction of the growth in Global Brands,
centered on GS and Prospex, in Japan and overseas, especially startingfrom the U.S., followed by China and Europe, and we need to accelerate
this growth further. We believe it is necessary to strengthen sales ofwatches that possess solid concepts and distinction. Meanwhile, it is also
necessary to accelerate the digitalization of marketing and sales methods,
such as Digital Transformation (DX). While we believe that some revisions
will be made in order to create products that match our Global Brands anddigital-marketing strategies, there is no major change in the basic direction.

<Systems Solutions Business>
Q9. Please tell us what kind of response you had during this COVID-19
situation in the Systems Solutions Business, which saw a strong
performance.
A9. In addition to the growth in the first quarter, we have grasped and realized
some new demands. For example, there was a need for cashless
payments in various industries, under which a contactless environment had
to be arranged. Meanwhile, in the stock business, we worked closely withour customers who were forced to suspend business to try to quickly
identify new demands that have arisen, and we worked together with them3

to create new environments with and then without the COVID-19. We
receive many inquiries from a wide range of customers, especially withregard to time stamps and digital contracts. We would like to propose
solutions that combine multiple functions, not just one.

<Other P/L-related inquiries)>
Q10. In the first quarter, you have cut a large amount of advertising andpromotion expenses. Given that the external environment is expected tonormalize to some extent, can you explain how you will use the expenses
during the current fiscal year?
A10. Considering the external environment, we believe that it is difficult for thefull-year advertising and promotion expenses to exceed those of theprevious fiscal year. There may be some costs in the future to strengthen
the growing DX, but we think this may be less expensive than traditional
investments.

Q11. What is the breakdown by segment of 3.0 billion yen of the “loss on thespread of infectious disease” posted as extraordinary losses in the firstquarter?
A11. The losses related to the Watches Business account for more than half ofthe losses. The rest occurred in the Electronic Devices Business, Others,and center-related businesses. No losses have occurred in the Systems
Solutions Business.

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