Condensed Transcript of Q&A Session at MGC’s FY2023 3Q Results Briefing
Date/time: February 9, 2024 (Friday) 18:00-19:00 am (webcast)
Presenter:
Motoyasu Kitagawa, Director, Managing Executive Officer, responsible for Corporate Planning and in charge ofCSR & IR Division(Note about this transcript)
This document has been translated from the Japanese original for reference purpose only. In the event of any discrepancy between
this translated document and the Japanese original, the original shall prevail.
This transcript was edited for clarity and brevity at the Company’s discretion. Additionally, forward-looking statements, including
plans and targets, contained herein, like those in the briefing’s presentation materials, are judgments based on information in theCompany’s possession as of the briefing’s date and certain assumptions deemed reasonable by the Company. Forward-looking
statements involve uncertainty. Actual outcomes may differ substantially from such forward-looking statements as a result of variousfactors.

Q1: With regard to the full-year forecast (P13), please explain your view with regard to 4Q for electronic
chemicals, BT materials, and optical resin/polymer within Specialty Chemicals. If BT materials areforecast to see increased sales on a QoQ basis while electronic chemicals are to remain level, does thatmean that the semiconductor market is expected to remain level but BT materials are to grow due tosome special factor? Please explain the background to this. Also, is there any other reason for thedecrease in sales of optical resign/polymer apart from seasonal factors such as Chinese New Year?
A1: Regarding electronic chemicals, although we have seen an upturn on the profit front compared to theprevious forecast, mainly due to cost improvements and the sales mix, demand itself continues to slump.
Adoption for use on new production lines of major customers has made steady progress, but currently
orders are weak and we expect 4Q sales to be level with 3Q. Customers for electronic chemicals arethemselves major semiconductor manufacturers, while there is some variation between customers,
demand has been weak for customers across the board, including customers in North America as well as
in South Korea and Taiwan, where demand had been relatively strong. In the front-end process washing
field, demand recovery is likely to be postponed until FY2024. Meanwhile, BT materials show somevariation in demand by application, and compared to the previous forecast, there is still weakness indemand for general-purpose materials used in home appliances and automotive and in low-warpmaterials for data center memory. Meanwhile, demand is strong for low-warp materials and others for
smartphones, which make up the majority of sales. Furthermore, BT materials for certain FC-BGA
substrates, which have seen increasing uptake over the past few years, have also started to show a clear
recovery right now. Although there is some variation by application, overall demand is recovering on aQoQ basis, and we have remained firmly on course with our initial forecast for BT materials. Opticalmaterials have been driven mainly by Chinese smartphones and middle-grade materials for developing
countries in 2Q and 3Q. Furthermore, adoption of periscope cameras and other trends towards higher
resolution are driving increased demand for high grade materials, which is also leading to improvementsin the sales mix. Nevertheless, profits are expected to decrease from 3Q to 4Q due to an inevitable
fallback following advance demand for Chinese New Year, which happens every year.
Q2: Regarding the profit-and-loss picture for BT in next fiscal year, can we assume it would be something
like the second half of this year multiplied by two?
A2: They are our mainstay product, and as such we are aiming for the second half multiplied by two, plus
a little more.
Q3: Regarding the former Aromatic Chemicals segment, why are net sales forecast to decrease with thedeconsolidation of JSP while the operating profit forecast has not changed? Are we to understand thatwith 4Q being a period of low demand, JSP would also not generate much profit, so that its exclusion
would make little overall difference at the operating profit level? Also, I had thought that the difference due
to schedule maintenance in 4Q would be around \3.0 billion; can you reconfirm that it is only \2.0 billion?

1A3: JSP’s previously disclosed forecast had full-year operating profit at \6.3 billion, but 3Q performancehas been exceedingly good, so that the cumulative 3Q progress rate for operating profit was basically
100% at \6.4 billion. For that reason, there was no factor for numerical change versus the previousforecast. Moreover, JSP has revised its full-year forecast for operating profit upward to \7.5 billion, and if
JSP were to remain a consolidated subsidiary of the Company, our operating profit forecast would also
have been about \1.1 billion higher. The difference of \2.0 billion due to scheduled maintenance is correct.
Q4: I understand that the former Information and Advanced Materials segment 4Q operating profit cameto near record-high levels, but could you give us an idea of the contribution to earnings of OPE and others
as well as BT, and also annual net sales growth and next year’s expected sales?
A4: OPE’s presence in the former Information and Advanced Materials segment has been increasing.
Sales volumes have grown beyond the initial forecast, and they have reached the point where it is large
enough to be discussed as an item on its own in IR. They are used for high-end printed circuit boards that
require low dielectric properties, and this is connected to use in generative AI servers and so forth. Thevalue chain for generative AI is long, and while we are far from the end user as a supplier of resin, ourproducts have been adopted by customers who are CCL manufacturers with strong positions in this field,
and we recognize that they we have grown through collaboration with them. The growth of OPE has been
extremely welcome from a perspective of diversification of our portfolio in the electronic materials
business overall. However, there are a lot of uncertainties, such as the outlook for AI server-related
demand going forward, and this has made it quite difficult to prepare figures for next year onward. We are
currently examining them.
Q5: Could you give a rough idea based on 1Q of the scale by 4Q in terms of how many times larger it will
have become? Also, can we understand that you have not seen many risks at this stage such as theemergence of a substitute product and so forth?
A5: Compared to the start of the year, it has grown by something like 1.4 to 1.5 times, and the growth hasbeen faster than we initially expected. At this point I can only say that sales have reached the scale that
we can present in our IR. We have heard that the Company’s materials are extremely highly rated, andwe do not believe there is any risk of their being substituted. We will reliably provide a stable supply.
Q6: Among the four former segments, with regard to the Specialty Chemicals segment, could you explain
about changes from 2Q to 3Q, and whether any special factors have been reflected in 3Q and 4Q? Inaddition, can you also tell us whether any profit has emerged from your Shanghai base for polycarbonate
resin, and whether such profits are sustainable.
A6: First, operating profit changed from \7.2 billion in 2Q to \6.3 billion in 3Q, but the decrease reflectedaccounting factors such as deductions for application of the lower-of-cost-or-market method, despite
positive factors such as a recovery in demand for optical materials and improvement in the profitability ofpolycarbonate resin. Net sales were almost the same in 2Q and 3Q, with the sales situation being flat.
From 3Q to 4Q, sales and profits are expected to decrease. One factor for optical materials is Chinese
New Year, and other factors include a decrease in sales of polycarbonate and an increase in one-timecosts (such as impacts of the financial closing for the fiscal year-end and application of the lower-of-costor -market method). At our Shanghai base we are seeing a clear improvement in profit each quarter. Oneof the factors is widespread adoption among local Chinese EV manufacturers in applications for car
headlights. Also, on the cost side, we are making improvements, particularly for raw materials, and forgeneral purpose products also, we are becoming able to sell them without making a loss. We are
narrowing down production volumes, and even if the volume is slightly less, we are investing into highadded-value products. We will continue to increase the ratio of high-value-added products and aim tosurvive as an entity with characteristic strengths.
Q7: On page 12 of the materials, you have “Others + 3.0” among the increase and decrease factors
versus the previous forecast. Is “Electronic chemicals” here referring to a cost reduction? Will you be able
to continue to increase volume while keeping costs down to a certain extent next fiscal year also?

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A7: With ongoing weakness in demand for electronic chemicals, as a result of efforts by all bases, we seea cost improvement for electronic chemicals of approximately \1.0 billion in SG&A expenses and fixedcosts.
Q8: Is methanol-related equity in earnings of affiliates for 3Q to 4Q based on market price trends? Are
other factors such as foreign exchange rates included?
A8: The market price trend was 1Q USD 308, 2Q USD 285, 3Q USD 319, and in 4Q it is forecast at USD
340. So, the market prices for methanol in the first half went below USD 300, on top of which there wasalso a foreign exchange loss on a loan at Japan Saudi Arabia Methanol Company, Inc. due to the yen’s
depreciation that led to an overall loss on methanol-related equity in earnings of affiliates. However, in thesecond half we expect to make enough profit to offset the loss of the first half. Also, production is moving
steadily at all bases.
Q9: The MXDA base in the Netherlands was planning to incur start-up expenses and so forth during thisfiscal year, but it seems they are now expected to be booked next fiscal year. Will its actual operations
start next fiscal year? I would also like to hear about the end customers in wind power generation.
A9: First of all, the construction has been delayed from our initial plans, partly due to the situation inEurope, and we hope to start operations next fiscal year. Demand from wind power generation is not yetthat big, so it will not have such a large impact on plant capacity utilization. Most of the applications for
MXDA is as a curing agent for epoxy resin, for example flooring applications as a coating material and soforth. It is also used for nylon in Europe and North America. Currently, demand for Europe is still weak,
but we will set up the new plant and begin production. In terms of the balance with our two plants inJapan, the Japanese plants will shift their production to meet growing demand for the MXDA derivative
1,3-BAC and steadily growing demand for nylon.
Q10: 3Q profits give an extremely positive impression, with an increase of \0.7 billion from 2Q. Do you
have the impression that 3Q performance exceeded your plans?
A10: Our impression for 3Q is that we produced good numerical results.
Q11: Regarding the factors for a decrease in profits in Basic Chemicals going from 3Q to 4Q, could youtell us of any factors other than the deconsolidation of JSP and the repair expenses for Mizushima Plant?
A11: With regard to aromatic chemicals, one factor was a deterioration in spread due to the slump in
market prices for PIA.
Q12: In Specialty Chemicals, you have mentioned a decrease in profits in electronics chemicals, PC, andoptical materials. Could you give an idea of the breakdown between them?
A12: The decreases in profits from 3Q to 4Q were something like just over \1.0 billion for inorganic
chemicals, mainly super-pure hydrogen peroxide, and just over \2.0 billion for engineering plastics andoptical materials.
Q13: What is the approximate impact of decreasing profits for POM for the year? Are you expecting any
improvement in revenue next year?
A13: In terms of absolute amounts, we are generating a profit this year also, but compared to theprevious fiscal year, it is minus around \10.0 billion. Next fiscal year, we expect market prices anddemand to recover, and we think the results will not be as bad as this fiscal year. However, we think it
would be difficult to return to the levels seen up to FY2021 and FY2022.
Q14: With regard to OPE, do you have sufficient supply capacity to meet demand? Is there any risk thatyou would reach full capacity early and be unable to provide supply going forward? Also, could you tell uswhat you can about your thoughts on increasing capacity next fiscal year and the fiscal year after that?
3A14: There are currently no issues with production capacity. Consideration from a future BCP perspective
is a separate matter, but for now, from this year to around next year, we believe that our present
production capacity will be ample to respond to demand.

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