HIROSE ELECTRIC CO., LTD.
Q2 Financial Results Briefing for the Fiscal Year Ending March 2020
November 5, 2019

Event Summary[Company Name]HIROSE ELECTRIC CO., LTD.

[Event Type]Earnings Announcement[Event Name]

Q2 Financial Results Briefing for the Fiscal Year Ending March 2020

[Fiscal Period]

FY2019 Q2[Date]

November 5, 2019

[Time]

10:30 – 11:38(Total: 68 minutes, Presentation: 38 minutes, Q&A: 30 minutes)[Venue]6F, 602, Sapia Tower, 1‐7‐12 Marunouchi, Chiyoda‐ku, Tokyo 100‐0005[Venue Size]

309 m2[Number of Speakers]

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Kazunori Ishii
Hiroshi Fukumoto
Hideo Suzaki

President and Representative Director
Corporate Board Director, Group President
Administration GroupManager, Investor Relations Office
Administration Group

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Presentation
Suzaki: Good morning. We will now start HIROSE ELECTRIC’S Q2 Financial Results Briefing for the Fiscal YearEnding March 2020.
We would like to thank you for taking the time to participate. This is Suzaki, from the Investor Relations Office.
I will oversee the progression.
First, I would like to confirm the materials we distributed at the entrance. Please check the contents of thefile that we have handed to you. The first are the materials for the Financial Results Briefing, as shown on thisslide. Below that, there is a slightly thin A4 pamphlet on the progress of our medium‐to long‐term growthstrategy. Last, our financial summary and revisions to our earnings forecasts, which were announced on theTokyo Stock Exchange last Friday, November 1. These are the four components.
Now, we will start. Today, I will explain our financial results in accordance with the materials. Next, I will handover to Fukumoto, head of the Administration Group, who will walk you through the earnings forecasts. Then,
President Ishii will explain the progress of the 2019 Medium and Long‐Term Growth Strategy. We are planning
to receive questions in the remaining time. The closing is scheduled at 11:30.

First, please go to page three. This is a business overview for the first six months of the fiscal year under review.
Orders received were 62.33 billion yen, a YoY decrease of 7.8%. Sales decreased by 2.7% YoY to 60.27 billion
yen. Operating profit was 11.53 billion yen, and the profit margin was 19.1%, down 4.1% YoY.

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There is a deterioration in business sentiment due to trade friction between the United States and China, andparticularly the slowdown in the Chinese economy. In addition, sluggish sales of automobiles in the US, Europe,and China caused the sense of stagnation to remain, resulting in a decline in sales and profits.
Looking at trends by each of the three fields, sales from the industrial market continued to decline from thesecond half of the previous fiscal year, and although there was a halt in the Q2 from the first, it has decreased
by 20% YoY.
Sales for smartphones increased 13% YoY, reflecting an increase in demand for Q2 in China and South Korea,
as is normally the case.
In automotive applications, sales of existing products declined due to sluggish sales of automobiles, but wealso launched new products, resulting in a YoY increase of 2%.

We have prepared a graph showing the trends. First, I would like to talk about the overall orders and sales.
This is a graph where the previous year’s results are shown as 100. Q2 has a figure of 103 for both orders andsales. Orders have begun to recover, and we believe that sales have bottomed out as well.

3This is sales for smartphones. Sales in China and South Korea are performing well, and the index is 123, which
is a high level on a YoY basis.

4For automotive. The decline in sales of existing products is due to a decline in automobile sales. However,there are signs of a recovery in overall sales in automotive applications.

5Finally, this is for industrial equipment. Although there is still a sense of stagnation, the figures show that thetrend has bottomed out. We recognize that the delay in the recovery of industrial machinery is greater than
we had anticipated. The outlook for the current fiscal year will be explained on another slide.

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This is the income statement for the end of the first half. Sales decreased 1.7 billion yen, or 2.7%, YoY to 60.27
billion yen. Operating profit was 11.53 billion yen, the operating profit margin was 19.1%. The decreaseamounted to 490 million yen, or 4.1%. This resulted in earnings before income taxes of 12.09 billion yen anda net profit of 8.57 billion yen.
As I will explain the balance sheet later, the balance of total assets is 343.45 billion yen. Our shareholders'equity ratio was 89.2%, and net profit per share was 235.12 yen.

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This is the factor of main changes. Sales declined 1.7 billion yen YoY. non‐consolidated sales declined 2.18
billion yen, while the subsidiary's sales increased 480 million yen. This was due to strong sales mainly for South
Korea.
The cost of sales ratio worsened by 1.5 percentage points. The ratio of purchasing COGS deteriorated by 0.5
percentage points, but the main factor behind this was a 1.9‐percentage‐point deterioration in the ratio ofdepreciation expenses.
The ratio of SG&A expenses to sales remained unchanged from the previous fiscal year at 25%. The amountdecreased by 430 million yen in this fiscal year.
Finally, financial income and expenses worsened by 460 million yen. This is mainly because the impact offoreign exchange was negative 60 million yen in the current fiscal year, from positive 510 million yen in theprevious fiscal year.

8This is a slide that goes further with YoY variation analysis. The impact of the exchange rate was negative 1.75
billion yen on sales and negative 470 million yen on operating profit. This was mentioned earlier.
Impact on depreciation cost increase continued this fiscal year and operating profit were negative 1.06 billion
yen. We have made up‐front investments in automobile and industrial machinery segments, particularly
automotive. So, these are in line with our plan.

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This slide describes the impact of exchange rates: dollar, euro, and won. The yen has been appreciating for all
those currencies in the fiscal year under review. This resulted in a negative impact of 1.75 billion yen on sales,
470 million yen on operating profit, and 1.06 billion yen on earnings before income taxes. We can say thatsales were on par with the previous fiscal year when excluding the impact of the exchange rate.

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Next, are quarterly changes in sales and profits. For Q2, we achieved sales of 32 billion yen, an operating profitof 6.2 billion yen, and an operating profit margin of 19.3%. We are moving in a positive direction from Q1.

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This is the balance sheet. The balance of total assets is 343.45 billion yen, as I just mentioned. Inventories
declined slightly due to strong sales in smartphones.
As I explained in Q1, since IFRS16 for leasing has been adopted from this fiscal year, the right to use the leased
property is recorded as assets. This amounts to 4.6 billion yen.

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Liabilities and net assets. Likewise, on the liability side, 4.6 billion yen has been booked due to lease accounting.

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Next, is a more detailed look at the aforementioned three fields. Sales to general industrial were down 20%
from the previous year, as already explained. Sales for smartphones and mobile phones are up 13%, andautomotive is up 2%.
Although figures for digital home appliances have not been released, they have shown a YoY increase. This isdue to capturing demand from new products, such as wearable devices and AI speakers.

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The charts show the composition of the business segments. The ratio of general industrial machinery is now
slightly lower than last year, at 29%, from 36% last year. the percentage of smartphone and mobile phonesales has risen from 23% last year to 26%. Automotive sales are flat at 20%.

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This is the overseas ratio. The upper line shows the overseas sales ratio and the lower line shows the overseas
production ratio. In the first half of the fiscal year under review, these figures rose two points from theprevious fiscal year. The overseas sales ratio has risen to 74% and the overseas production ratio to 44%. Thiswas due to sales for smartphones and mobile phones being relatively strong in the fiscal year under review,
while sales for general industrial were down. The increase in the production ratio is attributable to an increase
in South Korea's production for smartphones .

16Capital investment and depreciation. In the first half, capital investment was 8.8 billion yen, and depreciation
costs were 6.9 billion yen.
As for the annual forecasts, there are no changes in capital investment of 17.5 billion yen and depreciation of
14 billion yen.

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This is the change in the number of employees. The total number of employees was 4,793, down by 43 fromthe end of March to the end of September. Breaking this down, the number of overseas employees has
decreased, due to the slight reduction at plants in Malaysia, Indonesia, and China in proportion withproduction.

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This is the distribution of shareholders. Foreign corporations accounted for 45.38%, which is slightly less than
the figure at the end of March, but this is also the biggest figure. Treasury stocks have been canceled, so theratio has fallen to 5%. The number of shareholders was 3,234, which is a slight decrease.

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From here on, I will talk about the annual forecast. This is an update to the forecast growth rate for generalindustrial, smartphone / mobile, and automotive applications. In the forecast at the beginning of the fiscal
year, we forecasted general industrial to be down 3%, but we have revised it downward to a negative 12%.
This is due to the delay in the recovery. Our internal plans assume that this segment will recover around theend of the fiscal year.
For smartphone / mobile, we provided forecast at the beginning of the year at 0%, but this has been revised
to plus 7%. Demand for advanced 5G smartphones are starting up faster than expected. In addition, China,
South Korea, and other countries performed slightly better than our assumptions.
We had provided guidance at the beginning of the year that the automotive market will be up 18%, but wehave changed this to 10%. The net increase in the number of newly adopted products is proceeding as planned,
but the decrease in automobile unit sales in regions like China, Europe and the U.S. has had an impact on our
existing products, which has undermined the increase. We are proceeding according to plan regarding what
we can increase, so we believe that we can secure double‐digit growth on a full‐year basis.

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The results forecasts are summarized as follows. From here, I will hand it over to Fukumoto.
Fukumoto: Good morning. This is Fukumoto from the Administration Group.
I'm not very pleased that I have to explain just this page, but last Friday we issued a notice regarding therevision of our earnings forecast. The published figures for May 2019 are shown in the middle of this table.
Unfortunately, sales are revised down to 125 billion yen from 130 billion yen. As Suzaki explained earlier, thesmartphone segment is expected to slightly overshoot. However, as the numbers of general industrial andautomotive are likely to fall more than anticipated in April and May, we will cut the announced sales forecast
by about 5 billion yen.
In accordance, operating profit is revised to 22 billion yen from 25 billion yen. The profit margin is 17.6%. We
have revised operating profit down by 3 billion yen compared to the previously announced figures.
Earnings before income tax is down 3 billion yen, and the net profit is forecast at 17.5 billion yen, down 1billion yen from the previously announced amount.
As described here, the exchange rates for FY2019 are estimated at 108.50 yen to the dollar, 120.60 yen to theeuro, and 9.24 yen to 100 won.
The annual dividend will not be revised this time, so it will be 240 yen per share. We intend to pursue a
dividend payout ratio of 50%.
There are still many uncertainties, but these are the minimum figures we are planning to achieve.
That was a short explanation, but that’s all from me.

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Suzaki: President Ishii will continue to explain the progress of the 2019 Medium and Long‐Term Growth
Strategies.
Ishii: Good morning. Again, I’m Ishii from HIROSE Electric. Thank you very much for gathering.
I would like to report on the Company's growth strategy. There has been almost no change in the overall
direction, so I would like to focus on the points that are revised or strengthened this time.

This is a bar chart we show you all the time. The figures are as explained by Fukumoto and Suzaki. I am sorry
to say that the outlook for the current fiscal year is something we are not proud of. We had to revise theannounced value of 130 billion yen to 125 billion yen.
Last time, I explained to you our plan for the recovery from 2019. Unfortunately, with the current revision to
the plan, we must delay the timeline by one year. The next FY2020 is going to be a starting point for us toensure our growth path. To this end, we have reviewed the current situation and plans from this second half
onward.

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This is also the usual pie chart; the latest pie chart of the percentage of sales broken down by product category.
In the first half of 2019, there are three main points. Smartphones were stronger than expected. Although we
struggled a lot in Q1, we can say that the figures for Q2 have been more solid than expected.
There are wearable devices, AI speakers, smart watches, smart glasses, and so on, which we classify as new
information devices. Together with the continuing strength in new applications, including wireless earphones,
we can have fairly high expectations from the second half of this fiscal year toward the next fiscal year in thisfield. We really must capture opportunities in this field.
5G‐related activities have also begun, although they are not yet linked to business performance.
The third point is the more‐than‐expected slowdown in the industrial market. We have just reported a 20%
YoY reduction. Our mid‐term plan is at least 20% increase annually for some new products in general industrial.
If it may not reach 20%, but we think we can reach at least about 10% YoY. Therefore, we believe that the net
30% gap leads to this first half result.
Regarding the pie chart for 2022, it is roughly the same as the previous ratio. As we have always said, we
regard that strengthening initiatives for the three pillars of medium‐term growth are the focus point of 2020.
In any event, in the medium term, we will not change our policy of aiming for stable and sustained growthfrom a well‐balanced business structure.

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From this slide, this is a situation that we are compelled to share regarding our recent business conditions.
The Koriyama Factory was damaged by a large typhoon in October. The damage in the initial stage was as
described here (upper left), but things were mostly sorted out within 10 days, and the recovery is due to becomplete this week. As of last week, the elevator breakdown was the most critical situation, but we havemanaged moving things by using temporary lifts.
We are posting the situation on our website from time to time. We believe that the damage to our customers
is minimal. However, some of the employees and workers have been affected by the disaster, so we intend
to manage the situation with robust care.
We recognize the need to take measures based on the assumption that the extreme weather conditions are
not unusual, and I believe addressing the risks of climate change is one focal point from the second half
onwards. That was just a quick report on the situation.
We have received many words of sympathy and encouragement from various people. I would like to take thisopportunity to express my gratitude.

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Last month, we held the HIROSE Technology Exhibition. It was held for two days at Tokyo Prince Hotel on
October 17 and 18. The event has been a success exceeding our expectations. More than 4,100 people, mainly
engineers, attended the event. Regardless of the number of visitors, many of the comments and feedback
from our customers have been extremely favorable.
We will hold the same exhibition in Osaka in November. With these two events, we would like to accelerate
the development of our next product based on customer feedback.

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This is our usual slide to share our concept of the medium‐term strategy. Although there have been no majorchanges, I would like to share how we have made some changes in the way HIROSE competes.
The three pillars based on change and growth remain unchanged over the medium to long term: Consumer,
Industry, and Automotive. And then, there are four key technologies for these markets: High speed, Highfrequency, High power, and Smaller/downsizing. These trends are becoming more common across sectors.
For example, as you know, the trend of consumerization is advancing greatly in the automotive sector.
Consequently, there are a number of technologies that need to be developed, such as miniaturization andhigh‐speed technologies that are compatible with automotive applications. Similarly, the trend toward high‐speed and high‐frequency consumer electronics is emerging, as is the case with 5G.
We have been envisioning our path of growth by capturing these four key technologies against these threepillars. The EMC Office at the Yokohama Center is taking steps to make this possible. This was launched in
April two years ago. The anechoic chamber room and shielded room are now very active.
Looking at the right‐hand side, the new test center in Ichinoseki started in April of last year. I believe the test
capacity is nearly doubled The lead time is now about to be reduced by 50%, and the performance is beginning
to appear.
Accordingly, I would like to report that we are capturing the four key technologies for each of the three pillars
and adding HIROSE’s strength of analytical and capabilities. We are heading towards strengthening our ability
to propose products across fields and differentiating ourselves from competitors.

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This is the last slide. Our initiatives have not changed over the past year or two. We are working to strengthen
and evolve these three areas: manufacturing capabilities, technology developmental capabilities, and global
responsiveness. Huge market changes are currently taking place. At the same time, while we emphasize thedevelopment of the three pillars, delays in these areas are conspicuous. However, I recognize that we arebuilding a foundation with a considerable sense of speed.
I believe that there is no major mistake in our direction for what we do from the second half onwards.
Accelerating the pace of action is an extremely important issue. In any case, I believe that we must accelerateon two fronts, the immediate and mid‐to‐long term, from the second half of the fiscal year.
That’s my report on the progress. Thank you for your attention.

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Disclaimer

In this material, there are descriptions based on current estimation by Hirose Electric.
Hirose cautions you that a number of important risks, uncertainties and others could cause actual results todiffer materially from those discussed in the *forward‐looking statements. Thank you for your understanding.

*Forward‐looking statements include, but are not limited to, those statements using words such as “believe,”“expect,” “plans,” “strategy,” “prospects,” “forecast,” “estimate,” “project,” “anticipate,” “aim,” “may” or“might” and words of similar meaning in connection with a discussion of future operations, financial
performance, events or conditions. These statements are based on management’s assumptions and beliefs inlight of the information currently available to it.

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