Nikko Co., Ltd.
Fiscal Year 2023 (Ended March 31, 2024) Financial Results Briefing Session
June 17, 2024

[Company name]

Nikko Co., Ltd.

[Company ID]

6306[Language for the event]

JPN[Event type]

Financial results briefing session[Event name]
SessionFiscal Year 2023 (Ended March 31, 2024) Financial Results Briefing[Date]

June 17, 2024

[Number of pages]

36[Speakers]

Masaru Tsuji, Representative Director and President(hereinafterreferred to as “Tsuji”)
Hiroshi Fujii, Representative Director and Vice President/General
Manager of Administrative Division (hereinafter referred to as “Fujii”)[Company website] https://www.nikko-net.co.jp/[URL of video] https://www.youtube.com/watch?v=21zfORuqpZ0[Integrated report] https://www.nikko-net.co.jp/

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Tsuji: I am Tsuji, and I would like to report on the progress in the Medium-Term Management Plan.
The plan and results of the Medium-Term Management Plan are shown in there graphs here.
In the previous fiscal year, business performance of Nikko Shanghai, our Chinese subsidiary,worsened sharply due to soaring raw material prices and stalling of the local economy. While delaysin the start-up of the Thai business also was a negative factor in terms of figures, orders have been
firm and are showing a rising trend. In the three years of the previous Medium-Term Management
Plan, the impact of Covid-19 was the largest negative factor, but we gradually expanded thebusiness size. In the first year of the Medium-Term Management Plan, Russia’s invasion of Ukraine
and the Israel-Palestinian conflict caused material prices to soar.
The sales plan for the previous fiscal year was 48.0 billion yen but the actual sales were 44.0 billion
yen and we could not achieve the target. Nevertheless, our consolidated sales exceeded 40 billion
yen for the first time and we feel that we were able to break down one wall. There is a major
discrepancy in terms of profits. Improving profits is an issue also in the current fiscal year andonwards.
For the current fiscal year, we are expecting 48.0 billion yen compared with the 50.0 billion yen
target, and 2.6 billion yen in profits compared with the 3.0 billion yen target, and both are expected
to fall short of the targets. We will strive towards achieving the targets without giving up.

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I am going to explain the sales trend of main business items.
Asphalt plants, shown in the blue graph, fell significantly short of the target. Sales were about 18.0
billion yen compared with the 23.0 billion yen target. Profits were weak, but in the current fiscal
year, we are expecting 20.0 billion yen in sales and 1.2 billion yen in operating income. There was
the impact from curbing of capital investment due to the soaring raw material prices in the previous
fiscal year, but it is showing a recovery trend in the current fiscal year.
In particular, the sudden slowdown in China and delays in the progress of the business in Thailand
were negative factors. However, the business in Japan is showing a certain level of recovery.
The BP-related business has been successful in passing on the cost increases to product prices
and both sales and profits were satisfactory. We can see a rising trend also in the current fiscal
year.
There is no major improvement in the environment- and conveyor-related business, which has been
focusing on development of recycling technology.
The other business has been thriving. The main factor is the great leap made by the mobile crusher
and mobile plant businesses and another factor is the steady growth of the waterproof board
business of a group company. It is expected to continue to grow significantly this term too due tothese two main factors.

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2024 All rights reserved4In the current Medium-Term Management Plan, we are highlighting internal investment items andworking on them as growth investment.
For human resource enhancement, we plan to add 145 employees for business expansion andgrowth. There was an increase of 69 people in the previous plan. This time we are adding 86
people. We will move closer to the target including hiring of new graduates, mid-career hires, etc.
In research and development, we have invested 1.19 billion yen for new product introduction in theprevious plan. We are planning 2.5 billion yen this time, but so far our investment has been limited
to 1.18 billion yen. There are many joint development projects and there are delays, but we will
accelerate the progress by working together with customers.
For capital investment, we allotted 6.3 billion yen in the previous plan and are planning 6.0 billion
yen in the current plan. We have spent 4.5 billion yen so far. We will continue with capital
investment and improve the structure.

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These tables show the themes and goals of businesses and internal functions.
The current Medium-Term Management Plan from 2022 to 2024 is in progress and in the internal
investment phase. Sales were 38.8 billion yen in 2021 and 44.0 billion yen in the previous fiscal
year. The target for the current fiscal year is 48.0 billion yen. We will pursue the initial target of 50.0
billion yen without giving up. We set forth a sales target of 50.0 billion yen in 2030 when welaunched the previous Medium-Term Management Plan during which we celebrated the 100th
anniversary, but we revised it upwards to 60.0 billion yen at the start of the current Medium-Term
Management Plan.
As the target for the current fiscal year is 50.0 billion yen, we need to revise the 2030 target further
upward.
This year, which is the final year of the Medium-Term Management Plan, is the year in which wedraft the next Medium-Term Management Plan, and we are considering revising the 2030 targets
upwards.

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I am going to explain M&As we carried out recently outside the existing businesses.
We acquired Ube Kohki in March 2022 and Matsuda Kiko in July last year. Both companies areengaged in manufacture and assembly for plants and they are continuing with their respective
businesses and making capital investments.
Going forward, we would like to implement initiatives that generate synergies for the Nikko Group.
Our in-house manufacturing ratio is high and we are striving to strengthen our production structureeven in this situation where we cannot find a company to outsource so as to maintain superiority
over competitors.

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7Here I will explain internal enhancement.
The Nikko Group set forth the new Mission, Vision, Value, and Spirit in FY 2022 in a bid to establish
its corporate identity and it has gradually been succeeding in it.
In human capital enhancement, we are striving to reduce the turnover rate of employees and to
improve the stability of their daily lives and engagement. We carried out pay increases for threeconsecutive years: 30,000 yen increase across the board in FY 2022 and 5% pay raise in 2023 and2024. Moreover, we are granting our shares to new employees and high-achieving employees. We
plan to grant 100 shares each to all employees to commemorate the achievement of 44.0 billion
yen this year.
We also introduced a new personnel system, with which we are strengthening meritocracy andperformance-oriented approach to promote autonomous career choices.

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2024 All rights reserved8This is the report on shareholder returns. We realized a dividend payout ratio of 60% in themedium-term plan. While the payout ratio is rising due to stagnant profit growth, we established a
60% payout ratio with the aim of maintaining dividend of 30 yen per share. In the 2024 plan, wewere aiming to increase the dividend, but it remained at 30 yen per share because the profits fell
short of the plan. We will continue to promote business activities to increase dividends.

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To achieve the next target, we will focus on expansion of the business scale and aim for 60.0 billion
yen in sales and 6.0 billion yen in operating income by 2030.

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10This describes the basic policy of the Medium-Term Management Plan.
Please go through it later at your convenience.

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11This is also a similar graph. This is a graph that shows how we complete the internal investment
phase and then transition to the business expansion phase. We have formulated the Management
Philosophy and are close to establishing it. We launched the new personnel system and arestrengthening activities to generate synergies with companies that joined the group. We will
strengthen the service divisions, which are the source of revenue, and implement activities to raise
operational efficiency and revenues.
The number of employees has increased from 861 in April 2021 to 1,117 in March 2024. We arepromoting a plan to further increase the number of employees and are enhancing education of new
employees.
In terms of technology, the standardization rate of VP series improved from below 30% to morethan 70%. We will build a base for improving quality and reducing complaints throughstandardization. We have started seeing clear-cut improvement in quality in figures. We willcontinue to focus our efforts in this direction.

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12This slide explains asphalt plants and decarbonization.
We received orders for 40 units of foamed equipment and sold 19 units in FY 2022, and sales
increased to 55 units in FY 2023. This equipment is part of decarbonization through retrofit. It
maintains asphalt in a condition suitable for work by mixing small amount of water and foaming it toimprove bearing effect. It has been able to contribute to sales as one of the starting equipment for
decarbonization activities.
Currently the mainstream fuel is heavy oil and we are developing equipment that can burn
alternative fuels such as hydrogen, ammonia, recycled oil, and pulverized coal.

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13This is the case of an asphalt plant, where subsidies from the Ministry of Economy, Trade andIndustry to introduce new equipment are being used substantially. We are hoping that this will be a
trigger for investment.

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14Next is remote and automated support.
As a countermeasure to labor shortage, we have been successful with a system that remotely
controls multiple mixture silos. Also, subscription-based maintenance and asset management has
been producing results as business reforms that improve efficiency while reducing costs.

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15This is concrete plant-related business.
We are offering a system that helps customers through subscription contracts also in BP. We
currently have 28 contracts, and we plan to shift all contracts to subscription and annual
maintenance contracts.

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Mobile BP has been utilized in areas where the number of plants has declined and in areas with
supply difficulties. It is highly adaptable at a wide range of locations.
We have been studying the technology to sequester CO2 using concrete for 15 years. We are close
to introducing it in actual plants and I am looking forward to that.

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17This shows the areas we are planning to develop, and those where we plan to expand business.
In addition to China, we will focus on the ASEAN region shown in blue and strive to make it arevenue base.

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18This is about the Thai business.
Its progress had been delayed due to Covid-19 and other reasons since the fiscal year before theprevious one, but it has been slowly transitioning towards a revenue-making structure. Orders
increase from four units in FY 2022 to 10 units in FY 2023, our outlook for the current fiscal year isorders for 17 units and sales of 21 units and they are growing rapidly. Production has not caught up
after more than two years since the start-up of the factory and we are working on reinforcing the
manufacturing structure.

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2024 All rights reserved19Currently we are developing and introducing plants for the ASEAN region. We introduced newtechnologies to global standard products, and initiatives for business growth and turning thebusiness profitable are making progress.
We will continue to expand it and aim to increase revenue.

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Fujii: The outlook for FY 2024 is 48.0 billion yen in sales and 2.6 billion yen in operating income. If
we can steadily deliver the order backlog, we are sure to achieve the targets. We could possibly
achieve 50.0 billion yen in sales and 3.0 billion yen in operating income. There are almost no
negative factors that would cause us to underperform the previous fiscal year in any segment.
Particularly, revenue in Japan is improving, road pavement companies are making capital
investment, and our order backlog is also rising.
In China, sales and profits worsened. In the current fiscal year, it is expected to slightly improve.
However, the outlook is unclear and it is a cause for concern.
The BP-related business is expected to continue with high sales and orders. It can achieve thebudgeted figures if it completes delivery of the initial order backlog.
Although sales of crushers are likely to decline by about 800 to 900 million yen as the special
Ukraine-related demand declines, this can be complemented by strengthening the base in Japan.
We are expecting they will contribute to profits in the future as the sales volume increases andmaintenance sales rise.
The contract-based manufacturing business has had a steady start with two companies joining thegroup through M&As. The business is expected to see increases in both sales and profits again in
the current fiscal year.

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I am going to explain the forecast figures in the current fiscal year.
The sales forecast for FY 2024 is as follows: full-year sales forecast is 48.0 billion yen with 23.0
billion yen for the first half and 25.0 billion yen for the second half. As sales will be leveled, we areforecasting the same amounts of operating income and ordinary income for the first half and second
half.

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22This is forecast by segment.
The AP-related business is expecting 20.0 billion yen in sales and 1.2 billion yen in operating
income, showing increases for both sales and profits. The business in Japan is particularly strong.
The Thai business had a loss exceeding 0.5 billion yen and is expecting a small loss again in thecurrent fiscal year, but it is showing a recovering trend.
The forecast for the BP-related business is based on the initial order backlog.
Profit ratio of the environment- and conveyor-related business is expected to decline this year.
The other business is expected to post 12.2 billion yen in sales and 1.57 billion yen in operating
income.

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2024 All rights reserved23In others, we categorized crushers and contract-based manufacturing as new separate segmentsfrom the previous year. We have projected good figures for these two segments too for the current
fiscal year.

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24This is the analysis of the factors contributing to the changes in ordinary income for FY 2023, theterm that ended.
Ordinary income for FY 2023 was 2,144 million yen, up about 900 million yen year on year.
Main factors for the increase in profits are increased sales (4,400 million yen) and an increase of
more than 2,000 million yen in profit from improvement in cost-of-sales ratio.
At the same time, labor costs went up by 760 million yen due to increases in number of employees
and wages.
Moreover, there were also various SG&A expenses such as R&D expenses, SG&A expenses of
newly consolidated subsidiaries, a rise in share acquisition-related expenses, and increased postpandemic sales activities.

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2024 All rights reserved25This is the forecast of the analysis of the factors contributing to the changes in ordinary income for
FY 2024, the current fiscal year.
The full-year forecast for ordinary income for FY 2024 is 2,600 million yen, up 456 million yen year
on year.
We expect ordinary income to get a boost of 1,175 million yen from higher sales.
Cost-of-sales ratio is about the same level as last year, while personnel costs will rise by about 600
million yen.
Ordinary income is expected to increase by 456 million yen year on year due to R&D expenses andbusiness combinations.

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2024 All rights reserved26June 17, 2024
Tokyo Stock Exchange Code: 6306
Nikko Co., Ltd.

FY 2023 Results Briefing: Gist of Questions and Answers Session
MC [M]: We would like to start the question and answer session now.
Questioner [Q]: What is behind the order recovery in Thailand? Please explain, chronologically, whether it
would continue into the future and also what kind of profitability they have.
Tsuji [A]: The plant has been operating for more than two years and orders are increasing. Thailand set fortha national policy to use recycled materials for road pavement, and construction projects are now being
awarded to companies with recycling facilities.
Currently, of the orders for about 20 plants, half are for recycling plants, and our technology has been giving
us great advantage. Japan’s recycling technology is the best in the world, and we will continue to aim for the
top share in the market.
Questioner [Q]: In page 8, what synergies do you expect to have respectively with Ube Kohki and Matsuda
Kiko?
Tsuji [A]: Matsuda Kiko and Ube Kohki possess high level of expertise and are contributing to our businessexpansion. Plans are underway for capital investment and plant expansion.
The next sentence has been shortened while retaining the figures:
When we think of pursuing efficiency in monozukuri of our products, outsourcing some of it is also efficientfrom the management perspective to enable efficient production in our factories. Ideally, we would like toassemble some of Nikko products at Matsuda Kiko and Ube Kohki at some point of time. Further, we are also
thinking of collaborating with Nikko’s Shanghai Factory and Thai Factory to build a production structure thatwould contribute to production efficiency and profitability.
Questioner [Q]: In page 5 of the material, you have decrease in both sales and profits for environment- andconveyor-related businesses. What are the factors?
Fujii [A]: We foresee a slight decline in sales this fiscal year compared to the previous fiscal year. Main
factor is the low profit margin of environment-related products, and it is being affected by projects that are in
red. At the same time, there is also the rebound from the strong sales of soil processing products related to theWorld Expo in Osaka we had in the previous fiscal year.
Questioner [Q]: How certain are you about achieving the projected operating income for the first half for the
AP-related business? On the other hand, I feel you are being conservative about the projected operating
income for the BP-related business for the second half. Please explain that too.
Tsuji [A]: In the asphalt plant business, our Thai business is reducing its losses and has taken a positive turntowards profitability.
China had rapidly slowed down last year but now we have scope for securing business scale there.

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In particular, in domestic road-related business, price rise in raw materials will be reflected in selling prices
and the slowdown in capital investment will be over. The subsidies from the government is expected topromote purchase and replacement of plants.
2030 is the first hurdle that companies have to clear with focus on CO2 reduction and halving of emissions,and investments for that are increasing. We are also carrying out efficient sales activities for securing staff
and profits.
As for BP, the market conditions are good and earnings are improving, so companies are also making capital
investments, and we have expectations on securing profits in batcher plants as well as business expansion.
Questioner [Q]: What are your thoughts on shareholder return measures such as share buyback, sharedisposal, or dividend increase to address the issue of PBR being below 1?
Fujii [A]: We have to increase profits to raise the PBR to more than 1. While sales have been increasing fromFY 2023, there is still room for improvement in profit margin. The profit margin for FY 2024 is projected to
improve significantly compared to previous year. Capital investment, human resources investment, andsuccess of M&As are behind this improvement.
As for whether to maintain net assets or improve ROE with share buyback/disposal, in the next medium-term
plan, our policy is to actively continue with growth investment. However, if we feel that it has come a fullcircle, we will consider those as means for improving capital efficiency and ROE.
If the profits exceed the projections, we will consider returns corresponding to the pledged payout ratio.
Questioner [Q]: Please tell us about your balance sheet. In page 45, cash and deposits and interest-bearing
liabilities increased by approximately the same amount in the previous year. On the other hand, net assets
have increased by more than 10 billion yen. What is the significance of this?
Fujii [A]: The balance sheet at the end of March is somewhat disproportionate compared to the previous
year. There may be operations where the increased portion of loans remains as cash. Currently, amid
significant rise in sales, we are generating increased working capital. We are also planning on capital
investment, and as a result of increasing the loan balance at the end of the period after taking into accountpayment of taxes and bonuses, we expect cash and deposits to gradually decline from April onwards.
As of the end of March, total net assets have increased, of which 5.0 billion yen are loans and cash anddeposits that have increased by the same amount. We are in the process of transferring it into capital
investment and working capital, and hope to resolve it in April or later.
Questioner [Q]: There was a comment that operating income could be 3.0 billion yen this fiscal year. Where
do you see upside factors?
Fujii [A]: Overseas business, especially the business in Thailand, is expected to post a loss this term. The
start-up of the factory was delayed compared to the plan, and we do not foresee any reduction in production
cost. We are aiming for recovery through plant sales. Right now, it is about 100 million yen in red, but once
things turn around, we can aim for breakeven.
The second point is China. We are expecting sales to increase by more than a billion yen and operating
income to break even.
In the environment- and conveyor-related business, the difference in profit of the environmental products is amajor factor, and we are pursuing price rise in conveyors, in particular. If price rise spreads, there ispossibility of rise in profits too.

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2024 All rights reserved28Based on these three points, there may be a possibility of some more upsides versus the operating income
forecast of 2.6 billion yen, which was the reason for that comment.
Thank you very much for attending the briefing today.
[End]

Note: This script was created in part to provide information to those who did not attend the results briefing. Please note that parts of the text have beenedited to improve clarity and enhance understanding.

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