Nissan Chemical Corporation
1Q FY2021 Financial Results Briefing
Presenter:
MIYAZAKI Junichi Director, Senior Executive Vice President, CFO
August 10, 2021

Miyazaki: I am Miyazaki, Vice President. Thank you. Now, please look at page 2 of the presentation material.
As for the change in accounting policy, this page is for confirming the points that we explained in May.
There are 3 major changes.
As stated in 1, the deduction of the adjustment amount based on the agent transactions.
As stated in 2, quarterly recording of revenues related to royalties from Fluralaner.
The third point is to accurately record the amount of discount by quarter, mainly in Agrochemicals, as variableconsideration.

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We will continue on to page 3. These are the highlights of the first-quarter results.
The first item is the YoY comparison. As you can see in the red, operating profit was JPY11.9 billion comparedto JPY9.8 billion in the previous year, an increase of JPY2.1 billion or 21%.
I would like to make a few comments on these figures. Our annual operating profit has been the highest forthe past 7 consecutive years. This increase in quarterly income is on top of that was the result of our businesscreation backed by the strong physical strength we have cultivated over the years, and not just the results for
3 months.
Now let us go back to the material. Regarding the operating profit I just mentioned. Looking at each segment,with the exception of Pharmaceuticals, Chemicals, Performance Materials, and Agrochemicals, all reported
higher income.
Net income was JPY8.8 billion compared to JPY7.6 billion in the same period last year, an increase of JPY1.2
billion or 16%.
Operating profit, ordinary income, and net income were the highest on record since the first quarter of FY2018.
The second item is the comparison to the outlook. Operating profit was JPY11.9 billion, JPY2.1 billion higher
than the original outlook of JPY9.8 billion. Chemicals finished in line with outlook, but other segments,
Performance Materials, Agrochemicals, and Pharmaceuticals, all exceeded the outlook. The outlook for net
income was JPY7.5 billion, so we achieved JPY8.8 billion, JPY1.3 billion higher.
Third, there will be no revision to the earnings outlook, as this is the first quarter. The outlook for the second
quarter and full year are as announced on May 14.

2Finally, we have completed share repurchase. The acquisition of 1.262 million shares for JPY7 billion wascompleted on July 21.

Page 4 shows the actual figures for the first quarter.

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We will continue on to page 5.
Compared to the same period last year, sales decreased by JPY2.8 billion. This includes a decrease of JPY3.5
billion in sales due to the change in accounting policy. Operating profit increased by JPY2.1 billion, which
includes an increase of JPY1.2 billion due to changes in accounting policies.
Regarding the breakdown, this figure is the sum of the increase in income due to the increase in royalty
income from Fluralaner and the decrease in income due to the increase in sales discount costs forAgrochemicals.
The EPS has increased by JPY9.35.
Next, compared to the outlook as of May 2021, sales were higher by JPY6.5 billion. However, JPY5.5 billion ofthis amount was due to the fact that the elimination of sales resulting from the change in accounting policy
was small, as noted here, and this resulted in an increase in sales of JPY5.5 billion.

4Let us go to page 6.
Non-operating income/expenses and extraordinary income/loss; nothing special here. There are no
extraordinary income or loss for this first quarter.

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The next page, page 7, is about the cash flow.
As for the continued ample cash flow, in the first quarter we paid dividends and conducted share repurchase.
In the cash flow from finance activities in the table, share repurchase is included as JPY4.8 billion as Payout toshareholders. This is the amount actually spent, and of the JPY7 billion, the remaining JPY2.2 billion is included
2 lines below, in Others.
This was the case for the first quarter of last year as well. We resolved to repurchase JPY7 billion of our own
shares, but JPY4.1 billion was recorded as executed, the remaining JPY2.9 billion was included in the Others
category.
As for the balance of cash and cash equivalents, the last line shows that it was JPY16.6 billion for the same
period last year and JPY17.1 billion for this period.

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Please refer to the balance sheet on page 8.
In the case of our company, sales of Agrochemicals peak in March and April, and from April onward, we start
to collect receivables. Therefore, accounts receivable peaked at JPY73.9 billion in March 2021, and have been
decreasing since then, with account receivable of JPY63 billion in June last year and JPY66.4 billion this period.
Cash and cash equivalents decreased by JPY15.3 billion compared to March, including repayment ofborrowings, due to dividends and share repurchase. The equity ratio, which is noted outside the column inthis table, was 77.9%.
In the area of investment securities, in this first quarter, there were no sales of listed shares, but the amount
has decreased because of the decrease in valuation.

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Please continue on to page 9.
Here are the figures for sales by segment, from FY2020 to the first quarter of FY2021.

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Next, on page 10, operating profit by segment.
Please see Change (B) - (A) of the results for FY2021 actual. Overall, operating profit increased by JPY2.1 billion,
and by segment, Chemicals saw an increase of JPY0.6 billion, Performance Materials an increase of JPY1.7
billion, Agrochemicals an increase of JPY0.1 billion, and Pharmaceuticals a decrease of JPY0.1 billion.
Comparing these figures with the first-quarter outlook announced in May, you can see in the column to theright that the figure for Chemicals was JPY1.3 billion, so the result was in line with our outlook.
Operating profit of Performance Materials was JPY7 billion against the outlook of JPY5.5 billion.
Agrochemicals landed at JPY4.1 billion against the outlook of JPY3.8 billion.
Pharmaceuticals posted a loss of JPY0.2 billion against the outlook of a loss of JPY0.3 billion.
Overall, the outlook was JPY9.8 billion, so the result was higher by JPY2.1 billion.

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Next, I will explain the status of each segment.
First, in the Chemicals segment, I would like to explain the restructuring of the Chemicals business due to thetermination of melamine production, on page 13, which was announced in the press release today.
The first item explains the structure of our Chemicals business. In our disclosure, we have basic chemicals andfine chemicals categories, but in terms of production flow or material flow, there are ammonia-related
products, sulfuric acid–related products, and others.

10For more information on this, please see the material flow diagram on page 12.
Ammonia-related products include ammonia, urea, AdBlue, high-purity ammonia, melamine, nitric acid,isocyanuric acid, HI-LITE, TEPIC, melamine cyanurate, et cetera.
The detailed product applications of each of these products are summarized in the back of this document on
page 47, so please refer to it later.
Sulfuric acid–related products include sulfuric acid, purified sulfuric acid, and high-purity sulfuric acid. For
others, we have FINEOXOCOL.

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Number 2 on page 13 shows the 3-year total figures for sales and operating profit for this Chemicals division.
In terms of sales, ammonia-related products accounted for about 66%, and sulfuric acid–related and othersaccounted for 34%, but in terms of profit, ammonia-related accounted for 12%, and sulfuric acid–related andothers accounted for 88%.
As you can see from the arrow on the right side of the page, melamine has the highest sales among ammoniarelated products, but it itself was in the red. As for ammonia-related products other than melamine, the total
profit is in the black. Therefore, the profit of ammonia-based products is being reduced by melamine.
Next, I would like to talk about number 3, the current status and prospects of melamine. Based on thefollowing 3 points, we have determined that it will be difficult to secure stable profits from this product in themedium to long term, and that we cannot expect to expand profit even through new investments.
This is because the world's production capacity is now twice the demand. In addition, the domestic production
capacity of only 2 companies, including us, is 3 times higher than the demand. In terms of prices, we are
currently seeing a recovery trend, but the unstable situation is expected to remain unchanged for a long time,
as it is greatly affected by the trend of cheaper Chinese products, which basically account for 70% of theworld's capacity.
Next, number 4, I would like to talk about actions to be taken. First of all, we will permanently stop the
production of melamine in June 2022, and we will end sales when inventory is eliminated.
2. We will expand sales of chemical products by concentrating resources on high value-added products andproducts with high share in the Chemicals segment to offset the decrease in sales.
3. We will reassign the melamine production operators within the Toyama Plant.

12Number 5, as for estimated effects of these actions on earnings, first, there will be expenses related tomelamine, such as disposal and removal costs, which are still being calculated, but in the end, we plan tocover them with profits from the sale of investment securities, so the net impact is expected to be negligible.
The impact of the termination of melamine production was not factored into the earnings outlook announced
in May.
2. As for the earnings image for the Chemicals segment after the termination of melamine production, for
FY2021, our sales outlook is JPY34.6 billion and operating profit JPY2.4 billion; while for FY2023, the first year
after the termination of melamine production, we expect sales of JPY36.2 billion and operating profit of JPY3.4
billion.
Last, as for ESG impact, this is a positive impact, and it is estimated that the CO2 emissions will be reduced by
26,000 tons due to the termination of melamine production. This is equivalent to about 7% of the actual
363,000 tons for FY2018. We have set and announced a long-term goal of reducing CO2 emissions by 30%
from FY2018 by FY 2030, and we calculate that 7% of this will come from here.

The following is an overview of the Chemicals segment. Please see page 14.
The table of main products is on the left. As you can see, sales increased YoY for most of our products, andwith the exception of environmental related products, the figures exceeded or were in line with our outlook.
Sales for fine chemicals increased 18% YoY, and sales for basic chemicals increased 20%.
In fine chemicals, sales of TEPIC for general applications increased due to recovery in exports. Sales of TEPIC
for electronic materials for automotive applications also recovered. Sales also increased for environmentrelated products due to the expanded capacity for isocyanuric acid. Therefore, both sales and profit increased
for fine chemicals.

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Next, as for basic, there was a recovery in demand for melamine both in exports and in Japan. As for exports,
prices also recovered. There was a recovery in demand for nitric-acid products, urea/AdBlue, and high-purity
sulfuric acid. Therefore, both sales and profit increased for basic chemicals as well, and in total, sales increasedby JPY1.4 billion and profit increased by JPY0.6 billion.
As for the comparison with outlook, for fine chemicals, TEPIC for general applications was above, but TEPIC
for electronic materials, for automotive printed circuit boards was below due to a shortage of semiconductors
among customers. Environmental related products ware below, as there was a downward swing in domestic
demand for swimming pools. For fine chemicals, sales were almost in line with expectations, but operating
profit was slightly lower than expected.
On the other hand, for basic chemicals, sales were above target for melamine (export) and nitric acid products.
For high-purity sulfuric acid, urea/AdBlue, sales were mostly in line. Sales were below target for melamine(domestic), as residential demand was lower than expected. In terms of the overall basic chemicals, sales wereabove and operating profit was slightly above. In total, sales were higher by JPY0.4 billion and operating profit
was in line with our outlook.

Next, we will move on to Performance Materials. Please see page 16.
There is a bar chart for the first quarter for the 3 sub segments of Performance Materials: Display Materials,
Semis Materials, and inorganic Materials.

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Next, please see page 17.
This shows the trend of major products in the Performance Materials segment.
First, sales of SUNEVER increased by 9% YoY, which was above the plan.
Sales for Semis Materials were also above the plan, as sales for ARC, and others increased 19% and 37%,
respectively, and 24% overall.
Next, for inorganic materials, such as SNOWTEX and Organo/Monomer Sol, sales increased and were also
above the plan. Sales for overall inorganic materials also increased 25%, which was also above the plan.

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Next, regarding the situation of SUNEVER, please see page 18.
As for TN, there was a slight decrease YoY. VA declined slightly as well. IPS, the sum of rubbing and photo, saw
a significant increase in sales.
Of these, TN and IPS were above the plan, while VA was slightly below the plan. The overall sales were above
the plan.

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Next is the earnings trend of the Performance Materials. Please see page 19.
As for the YoY comparison on the left, sales and profit of Display increased. Sales of Photo IPS for smartphones
and non-smartphones were strong. Those for rubbing IPS decreased due to transfer to Photo. Those for VA
decreased, partly due to a decrease in lines at customers. There was an increase in fixed costs of JPY0.2 billion,
but even including that, Display saw an increase in both sales and profit.
Next, for Semis Materials, sales and profit also increased. Sales of ARC and other materials both increased,
and this more than offset by JPY0.2 billion increase in fixed costs, resulting in a considerable increase in profits.
For Inorganic, sales and profit increased as well. SNOWTEX for general purpose and for polishing bothincreased. As for Organo/Monomer Sol, there is nothing particularly noteworthy, but there was a generalincrease in sales. Oilfield materials also saw a small increase in sales.
For the segment as a whole, sales increased JPY2.9 billion and operating profit increased JPY1.7 billion, despite
a JPY0.6 billion increase in fixed costs.
Next, the comparison with the outlook is on to the right side. For Display, sales and profit were above target.
For Photo IPS, both smartphones and non-smartphones were above target. Rubbing IPS was also above target.
As for VA, it was below target due to the downsizing of production lines at customers' facilities and the
downward swing in production caused by the shortage of glass.
For Semis, sales and profit were both above target. Both ARC and other products have been performing very
well.

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Sales and profit for Inorganic were also above target. SNOWTEX and Organo/Monomer Sol were above target.
Oilfield materials were slightly below target.
Overall, sales were higher by JPY1.4 billion and profit was higher by JPY1.5 billion.

Next, we will move on to the Agrochemicals segment. Please see page 22.
There are some major products, and these are measured at pre-discounted figures.
First, compared to the same period last year, sales of Agrochemicals were decreased by 1% before discount.
Compared to the outlook, sales are below target.
As for the breakdown, ROUNDUP recorded 0%, so this was below the plan. Sales for Fluralaner increased 45%
YoY. This was due to a change in accounting policy, which resulted in royalties being recorded in the firstquarter, and the royalties themselves were higher than expected.
Sales for ALTAIR were below the plan, decreasing 36% YoY. Sales of TARGA decreased 27%, but this was above
the plan. Sales for GRACIA decreased. Then, for PERMIT, sales were in line with the forecast. Those for LEIMAY
were also mostly in line with the forecast. QUINTEC is on the upswing. Sales for DITHANE were in line with theforecast.
Here, I would like to give a brief explanation of GRACIA, as shown in the bar graph on the right. In early spring,
we had very good weather, and the spring cabbage harvest started early, so it proceeded without pest control.
In addition, the market for leafy greens in general has been declining, which has led to a shift to low-priced
insecticides, and now, inventory clearance in GRACIA is not progressing as expected.

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Please continue on page 23.
This is copied from the material from May, which shows the details of the acquisition of QUINTEC andDITHANE.

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Page 24, Fluralaner. There is no new information here either.

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Page 25 shows the quarterly sales for Fluralaner.
As you can see, sales for first quarter are a little larger than last year and then our forecast due to the recordingof royalties.

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Next, the earnings trend of the Agrochemicals segment. Please see page 26.
There are products with increased sales, flat sales, and decreased sales. The first product with an increase insales is Fluralaner. As mentioned earlier, royalties were recorded in the first quarter. Also, sales of DITHANE
started in the fourth quarter of last fiscal year, so in terms of YoY sales, this was zero last year, so sales weredirectly reflected as the increase.
In the case of QUINTEC, there was a cutback in production at Corteva in the second half of FY2020, and thishas led to a reactionary increase in the first quarter of FY2021. As for LEIMAY, sales were strong for India andAustralia. As for PERMIT, sales for India came in ahead of schedule.
As for ROUNDUP MAXLOAD sales decreased, but AL sales increased steadily. For ROUNDUP, the declarationof the state of emergency resulted in reduced activities of customers, as well as the early start of the rainyseason had an impact.
Then, for those that saw a decreased in sales, GRACIA was as explained earlier. For ALTAIR, looking at
production from FY2019, it decreased in FY2019 due to a shortage of raw materials, but increased significantly
in FY2020 as a reaction to it. In FY2021, the situation returned to normal, with a YoY decrease in sales. As for
TARGA, the demand for rapeseed in Europe decreased.
In this segment, there was an increase of JPY0.1 billion in fixed costs, but there was a positive effect of JPY0.3
billion due to inventory adjustment factors. As a result, sales decreased by JPY1.2 billion and operating profit
increased by JPY0.1 billion. However, this includes a net increase in sales and a net increase in operating profitof JPY1.2 billion each, due to changes in accounting policies, so without these changes, operating profit would
have been decreased by JPY1.1 billion.

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Next, on the right side is the outlook. First, products with sales that were above target. As for Fluralaner, as I
mentioned earlier, sales were above target due to the royalty income, which was linked to the strong sales
for companion animals at Merck in the first quarter. Sales for QUINTEC were also above target, which was
due to the shift in production from FY2020 and the current year as mentioned earlier. Sales for TARGA wereabove target partially due to the uptick in Europe.
Those with sales below target. ROUNDUP MAXLOAD, as mentioned earlier, was affected by the declaration of
the state of emergency and the rainy season. GRACIA was as already explained. As for ALTAIR, there was someshipment ahead of schedule in the fourth quarter of FY2020, so it was recorded as the portion below target.
Compared to the outlook, fixed costs were below expectations by JPY0.3 billion, mainly due to R&D. In
addition, inventory adjustment had a positive impact of JPY0.4 billion due to downward swing in shipments.
As a result, sales were lower by JPY1.1 billion, and profit was higher by JPY0.3 billion.

Next, let us move on to Pharmaceuticals. Please see page 28.
First of all, sales for LIVALO declined by 18% YoY. Though declined, sales were higher than expected. Sales forcustom chemicals decreased 42% but were also above the plan as the decline was smaller than originally
expected.
On the left side of this page, you can see the YoY comparison of sales and profit. In drug discovery, domestic
sales increased, while export sales decreased. Sales of LIVALO itself decreased by JPY0.11 billion in sales and
by JPY0.07 billion in operating profit.

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Sales for custom chemicals decreased, but the inventory valuation loss that was recorded last year was
eliminated, so this had a positive impact of JPY0.1 billion. Therefore, the result was a decrease of JPY0.32
billion in sales and a decrease of JPY0.05 billion in profit.
In total, sales decreased JPY0.43 billion and operating profit decreased JPY0.12 billion.
Next, the comparison with the outlook. Let us move on to the right side. In drug discovery, both domestic andoverseas sales of LIVALO were above target, with sales being higher by JPY0.14 billion and profit by JPY0.11
billion. Sales for custom chemicals were also above target, with sales being higher by JPY0.04 billion and profit
by JPY0.03 billion.
In total, sales were higher by JPY0.18 billion and operating profit by JPY0.14 billion.

Next, on page 29, ESG initiatives. Here I would like to mention the 3 points shown in red.
First, in July 2021, we were selected for the FTSE4Good Index Series and the FTSE Blossom Japan Index for thesecond consecutive year.
Also, as I mentioned earlier, in June 2022, we will stop producing melamine, which is expected to reduce CO2
emissions by 26,000 tons.
In the area of governance, we have appointed 1 female director in June. As a result, the Board of Directors
includes 4 outside Directors out of 10 Directors.

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The pages after that include quarterly trends and so on, and from page 39, you will see the characteristics of
our company, such as operating profit margin, ROE, to net sales, ROE, shareholders return policy, and so on,just to introduce the titles.

As for the share repurchase on page 43, we completed a share repurchase of JPY7 billion between May 17
and July 21, 2021, for 1.262 million shares.
Also, on May 10, we cancelled 1 million shares.

27This is the end of the explanation of the financial results.

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Question & Answer<Questioner 1>
Q: First, Agrochemicals. In the lower left-hand corner of page 26 of the material, actual sales decreased by
JPY2.4 billion and operating profit decreased by JPY1.1 billion. In addition to these 3 products, which haveseen a decline in sales, the decline in sales of active ingredients for Fluralaner also had an impact, resulting ina decline in real profit. However, with the change in accounting policy, the apparent profit has increased,
especially because of the positive impact of royalty. I would like to know if this is the correct explanation.
A: The view on sales and profit, you are right.
Q: Thank you. Next, I would like to ask you about the current environment for agrochemicals, both in Japanand overseas.
A: First, regarding the situation of the overseas agrochemicals market, as you know, especially for the EU andthe Americas, the agrochemicals market is expanding due to the extremely favorable grain market conditions,especially in the Americas. This is our understanding as a business division. We expect this trend to continue
for some time.
On the other hand, if we look at Japan, we can see the strong influence of COVID-19. Demand for high-priced
foodstuffs for the food-service industry and for events has been very low, and the production sentiment ofvegetable and fruit farmers in particular has dropped considerably.
As for the market as a whole, our understanding is that it will continue to decline slightly, not expand, forsome time to come.
Q: I see. Also, I would like to know if there is still any movement in inventory adjustment of Fluralaner, suchas the early settlement of that.
A: We understand that Merck's sales are currently strong, but we have not heard of any new movements ininventory adjustment.
Q: Thank you very much. As for Agrochemicals, is it correct to say that it is in line with the annual forecast?
A: It may be difficult to make up for the current situation for GRACIA, even in terms of the full year.
Q: That is about it, just that the first quarter was above target as a whole.
A: That is right.
Q: I see. Also, for SUNEVER in Performance Materials, Photo IPS has been performing quite well, but could
you give us a brief overview of the impact of the current shortage of semiconductors in smartphones, andhow you see SUNEVER performing for the July to September period?
A: As for Photo IPS, we continue to see strong demand for IT applications, and within that demand, the ratioof Photo IPS is further increasing, and we are making steady progress. At this point, we have not heard of any
impact on production due to the IC shortage.

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<Questioner 2>
Q: First, regarding Agrochemicals, the change in accounting policy resulted in a JPY1.2 billion increase in sales
and a JPY1.2 billion increase in operating profit. Regarding this, if possible, can you give us a little more detail,how it worked for Fluralaner and also for the agrochemicals?
A: I cannot give you much detail, but in short, the positive factor is the recording of royalties for Fluralaner. A
negative factor is the recording of discounts for agrochemicals. It will be distributed properly to the quarters
compared to the past.
In the past, there was deviation due to cash-based accounting, but if we were to properly account for it
according to sales, we would see an increase in costs due to discounts, or the impact of discounts on sales.
The total net of these positive and negative factors was a positive JPY1.2 billion.
Q: So, the royalties from Fluralaner that were recorded as a positive factor this time were more than JPY1.2
billion.
A: That is right.
Q: For Fluralaner, did sales of API grow in the first quarter?
A: Shipments of the API fell YoY, and the royalties had a positive effect.
Q: I see. Also, you mentioned that full-year forecast for the current fiscal year for GRACIA is an increase of
20%, but I feel that the first quarter was a little tough to get off to a good start, so could you give us yourperspective on the second quarter and beyond?
A: As for GRACIA, as explained earlier, the situation of distribution inventory, especially in Japan, continues tobe very poor.
Also, the torrential rains that covered the whole of Japan this time, or rather the heavy rains, came at a very
important time, just before the fall cropping season, and we expect that this will have a negative impact on
the leafy vegetables for fall cropping.
As a result, it has been a little difficult to achieve the target quantity and amount.
Q: I see. One more thing from me. This time, you decided to stop the production of melamine. On page 12, inthe flow section, I wondered if the balance would not be upset by stopping using melamine this time.
For example, the production of isocyanuric acid has been increased recently, but is this done in considerationof the termination of melamine production to some extent? Or will there be a separate system to cover theloss of melamine products? Please tell us about the balance.
A: As you can see in the flow chart on page 12, urea is roughly used for AdBlue, melamine, and isocyanuric
acid, and there is no doubt that the amount of isocyanuric acid used has increased significantly.
On the other hand, the use of AdBlue for purifying exhaust gas from diesel trucks is also increasing, so I think
we can judge that the number of applications for urea absorption has been expanding in general.
Q: Is there a possibility of selling urea externally?
A: Of course. It is true that there is a move to expand sales of urea to customers.

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Q: I see. Basically, it means that termination of melamine will not upset the balance.
A: Yes, of course. We have made this decision because we are confident that the production flow will beproperly balanced. This was the background.

<Questioner 3>
Q: First, the Semis Materials is growing strongly in this first quarter. Could you give us some background on
this?
A: First, ARC is growing overall, with Korea and China being particularly strong compared to the previous year.
In the field of other semiconductor materials, we were able to increase our share of multi layer materials in
Korea, and overall growth was also seen in Taiwan.
Q: What is the growth rate for EUV-related products?
A: The sales of EUV-related materials tripled YoY.
Q: There does not seem to be any particular movement to reduce unit requirement at customers, looking at
this growth.
A: That is right. We are not in that situation.
Q: I see. Thank you. The second question is about the movement of fixed costs. In the 1Q results, I think you
mentioned that those for Performance Materials were JPY0.2 billion less than the plan, and those forAgrochemicals were JPY0.3 billion less than the plan.
In terms of the breakdown, is it correct to say that the expenses for activities decreased? If the situation in
the world continues, such as with the Delta variant, is it likely that fixed costs will continue to fall short of theplan in 2Q and beyond? Can you tell me your feeling about this area?
A: In both segments, the testing costs are still getting smaller, so I think there is a big possibility that in thesecond quarter and beyond they will be smaller in that sense, since it will be difficult to take actions in thecurrent situation.

<Questioner 4>
Q: The first point is that the operating profit margin for Performance Materials is very high in the first quarter,
but could you give us some more details about the background to this?
I would also appreciate it if you could tell us how we should think about the continuity of this operating marginlevel in the future from the perspective of product mix and the way fixed costs are generated. Thank you.
A: First, regarding the point that the weight of Photo IPS is increasing. While the weight of others such as TN
and rubbing IPS is decreasing, as you know, Photo IPS is more profitable, so this has a large impact on theoverall performance.

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Also, for semiconductor, the increase in volume has basically led to an increase in profit directly. As new-grade
products are released, they replace the older-grade ones, and this has helped to keep the prices relatively
high. I think this is a major factor. We believe that the profit margin will remain at a high level in the future.
Q: I see. I understood. For example, based on the current demand and inquiries, do you feel that you will beable to increase profits from the first quarter to the second quarter?
A: We continue to see strong demand for both displays and semiconductors, so we expect strong figures forthe second quarter.
Q: I see. Thank you. Second, regarding your explanation about inventory adjustment of Fluralaner. As for the
possibility of early completion, you have mentioned there are no new developments so far, but for example,
many new pets bought after COVID-19 are small indoor pets, so the consumption of Fluralaner is actually low,or there is a possibility that the planned launch timing of the BRAVECTO trio products may be delayed fromwhat was originally expected. Is there something about that that you can comment on, though it may belimited?
A: As for the size of the dogs, we do not really know that much.
As for the status of Trio, for BRAVECTO, I heard that the development at Merck has been progressing well.
Q: I see. By the way, what is the lead time for the production of Fluralaner? How long is the lead time between
receiving an order from Merck and being able to ship it? Also, is it possible to flexibly expand production when
there is a sudden increase in orders?
A: Excuse me. As for the lead time of production, we cannot answer at the moment. As for the flexibility of
production, we have 3 manufacturing plants, 1 of our own and 2 of outsourced, so we can be quite flexible
and respond to any increase.
Q: I see. In that sense, from Merck's standpoint, there is not really much need to tell your company in advancethat inventory adjustment is likely to end early?
A: I think that is probably true.

[END]

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