FY2019 Financial Results Conference Call
Q&A Session Summary
Date: Friday, May 15, 2020: 3:15 p.m. to 4:30 p.m.
Presenter: MIYAZAKI Junichi, Director, Senior Executive Vice President & CFO
Presentation materials: https://www.nissanchem.co.jp/ir_info/archive/cf/s2020_05_15.pdf■ Overall
Q1: You stated that the forecasts of financial results for this year (FY2020) do notinclude the impact of COVID-19. Did it have an effect on last year's results (FY2019)?
Also, would you tell us about what affects you expect it to have on this year, bothpositive and negative?
A1: COVID-19 had very little impact on last year's results. Since it is likely to impact economic
activities as a whole this year, we expect it to have a negative effect on Chemicals. For
Performance Materials, it is unclear whether the impact on products, such as displays andsemiconductors, will be positive or negative, since although demand for personal
computers is increasing because of the increased use of teleworking and other factors, atthe same time, sales of smartphones and other products are said to be down. While we donot expect much of an impact on the domestic market for Agrochemicals, it is having anegative effect on some exports. We do not expect it to have much of an impact on
Pharmaceuticals.

Q2: Since forecasts for this year do not incorporate the impact of COVID-19, there isa risk that actual results could be worse than expected. Are you certain that you
would be able to increase dividends even in such a case?
A2: Since dividends are based on the payout ratio, they could be revised downward
depending on business results. However, we consider last year's annual dividend figure of
90 yen to be one benchmark. In terms of the total return ratio, while under current
assumptions we plan to repurchase additional shares, this will depend on future businessresults.

Q3: A look at past trends in share repurchase on page 73 of the financial resultsmaterials shows that you put off the share repurchase at times, such as after the2008 global financial crisis and the Great East Japan Earthquake. But at this time,
you have announced plans to repurchase more shares. Does this mean that you
consider the negative impact of COVID-19 on earnings to be less than the impactsof those events? Please describe the background to your decision to continue torepurchase shares even as the external environment changes because of the effectsof the virus.
A3: Our Company's financial soundness at this time is at a completely different level than it
was in 2009 or 2011. While at those times LIVALO was performing well, we did not have
Fluralaner or SUNEVER for photo IPS use. In contrast, this year, the profitability of ourproducts as a whole is very high, even if sales of Fluralaner decrease. In addition, we havecalculated a target balance of cash and deposits, and the current balance of JPY 30 billion
gives us considerable leeway. This differs completely from our situation in the past. Also,
we have no intention of skimping on capital investment or R&D in order to pay returns toshareholders. In the Agrochemicals Segment, we have established a joint venture on thescale of several billion yen in India, as well as acquiring the QUINTEC business, and wewould like to engage in further M&A activities as well should a good opportunity arise.

Q4: On page 59 of the financial results materials, you show an increase of 16% in sales
in FY2023. What kind of an increase do you expect in operating profit?
A4: We have not yet prepared profit figures. The message we intended to convey byannouncing sales estimates for FY2023 was that we have a scenario for sales growth
overall moving toward FY2023, even if sales were to fall for Fluralaner and level off for
SUNEVER for photo IPS use.

Q5: Fluralaner and SUNEVER for photo IPS use have high profit margins. If their sales
were not to grow through FY2023, wouldn't your overall profit margin decrease?
A5: Although we cannot comment specifically on profit margins because we have notestimated them, since we expect new Performance Materials and other products planned
for introduction to have high profit margins, we do not expect much of a change in ouroverall profit margin.
■ Chemicals Segment
Q6: Your forecasts of financial results for this year show the greatest increase inprofits in the Chemicals Segment, but last year, too, you projected a major increasein profits in this segment, although ultimately they fell far short of your forecasts.
What are the assumptions on which your forecasts for the Chemicals Segment forthis year are based?
A6: Our forecasts for the Chemicals Segment this year assume that the conditions of last
year's 4Q (January–March) will continue throughout the year. In the 4Q last year, althoughconditions for melamine were difficult, high-purity sulfuric acid and TEPIC were inrecovering trends. In addition, this year, we expect to see additional growth in profits in thesecond half as a result of increased capacity for isocyanuric acid, as well as capturing
additional market share from a competitor that plans to withdraw from the market for nitricacid products.

Q7: Will the recent collapse in oil prices have a positive effect by lowering raw-material
prices?
A7: Low oil prices could have a positive effect. However, since we actually use natural gas
as a raw material, there is a time lag of about four months before we will enjoy any benefits.
■ Performance Materials Segment
Q8: Last year's performance of SUNEVER overall was higher than planned, and you
project an increase of 4% overall for SUNEVER this year as well. Please tell us about
the background behind this growth.
A8: Last year's better than expected performance of SUNEVER was due chiefly to photo IPS
and VA applications. Sales for photo IPS were higher than expected mainly forsmartphones, while non-smartphone applications were also strong. Sales for VA use fortelevisions also grew more than expected. In the average year, the 4Q (January–March)
is a time of inventory adjustments, but last year, we recorded better than expected results
because we did not need to make any large-scale adjustments, and utilization bycustomers was strong as well. Since we expect further growth in photo IPS for nonsmartphone applications and in VA for television applications to continue this year, too, we
foresee growth in SUNEVER.

Q9: Would it be correct to understand this as a case of steady sales growth rather thanbuildup of inventories on the customer side?
A9: Yes, it would. Since customer utilization is strong, we see inventories as being at
appropriate levels.

Q10: You project growth in SUNEVER for photo IPS applications this year. Could you
summarize your projections divided into smartphone and non-smartphone
applications? Also, your estimates of sales for FY2023 on page 61 show decreased
sales for smartphone applications and increased non-smartphone sales. Please
describe the background of these forecasts.
A10: We expect sales for smartphone applications to remain largely unchanged this yearwith the increase coming from sales for non-smartphone applications. Non-smartphoneapplications have been strong recently, and we expect their growth to continue evenbeyond this year. In FY2023, we expect about 30% of tablets and 50% of laptops (on avolume basis) to shift to photo IPS, and we expect large-scale growth for non-smartphone
applications. On the other hand, we also project considerable decreases in smartphone
applications.

Q11: You project a major increase of 35% in other semiconductor materials this year.
What is behind this projection?
A11: The main reason for this increase is increased use due to increased production volumeson the part of customers. Also, we expect some a little growth in our share for multi-layer
process materials in Asia and other markets as well.
■ Agrochemicals Segment
Q12: On page 47 of the financial results materials, you project a decrease in sales of
Fluralaner through FY2022. Is this due to the effect of competing drugs?
A12: We do not see competing drugs as having that large of an impact. The decrease
through FY2022 is due to inventory adjustments.

Q13: On page 47 of the financial results materials, you describe growth in BRAVECTO.
Growth in BRAVECTO could be expected to lead to an increase in Nissan Chemical's
income from royalties as well. Would it be correct to understand the decrease inprofits through FY2022 to mean that the decrease in revenues from active
pharmaceutical ingredients would exceed the increase in royalties?
A13: Yes, it would. Despite increased royalties, we expect revenues for Fluralaner as a wholeto continue to decrease because of the scale of the decrease in revenues from active
pharmaceutical ingredients.