Nichirei Corporation

President’s Investor Meeting – Q&A Session
Date and time: December 8, 2022 (Thursday), 15:00-16:10
Venue:
Online format
Presenters: Kenya Okushi, Representative Director & President,Kenji Suzuki, Director, Executive Officer
Yasunori Sato, General Manager, Business Management

Progress during the second half
Q. What is the status of price revisions in Processed Foods? Also, what are the factors thathave allowed price revisions to be implemented so quickly, and the difference fromprevious circumstances?
A. Price revisions are being implemented as planned for both household-use andcommercial-use products. The difference now is that a process has been established for
decision-making regarding price revisions. Along with the rapid fluctuations in exchange
rates and rising prices for food material, we continue to face a wide range of cost
increases, including power and fuel costs. On the premise that further price revisions will
be necessary going forward, we have incorporated a review process that frees us fromhaving to respond to each new development. This is a major difference.
Q. What is the status of the electricity fee surcharge in the Logistics Business?
A. Electricity costs in Japan have risen 50-60% overall. Since we are unable to absorb theentire amount on our own, in October we began applying a surcharge with the aim ofmaintaining logistics quality and ensuring stable business operations. With understanding
from customers, the surcharge is being implemented as planned. We are also pursuingmeasures for expanded cargo collections and greater operational efficiency, and expect tomeet our full-year earnings forecasts.

Thinking regarding FY24/3 business results
Q. What is your thinking regarding FY24/3 business results for the mainstay businesses ofProcessed Foods and Logistics?
A. We are formulating a strategy to achieve the initial figures for operating profit in thesecond year of the medium-term business plan, and are currently holding discussions
internally for next year’s budget.
In Processed Foods, the main factors weighing on earnings will be the same as thisyear, including the impact from the weak yen, rising food material and procurement costs,and increases in power, fuel, and logistics expenditures. The yen has depreciated by morethan 20 yen to the U.S. dollar since the start of the year, while costs for food material suchas cooking oil and meat are expected to continue to rise from the second half. The impact
from these factors is likely to persist in FY24/3. In addition to these negative factors
1stemming from the business environment, we are also anticipating an increase indepreciation expense for the new rice products plant scheduled to begin operations inApril 2023. Nevertheless, we are aiming for an earnings gain from the continued effectfrom price revisions implemented in the previous fiscal year, along with an increase insales, improved productivity, and greater profitability from North American business
operations.
For the Logistics Business, we anticipate the main factors for earnings decline to be anincrease in depreciation expense for the new Kobe Rokko Distribution Center (provisionalname) scheduled to begin operations in January 2024, along with greater expenditures forenvironmental measures, and the rollout of systems for operational reform. The main
positive factors for earnings will be expanded handling volume for frozen foods, including
third-party logistics, and imports.
We expect electricity costs to rise further both in Japan and overseas during the next
fiscal year, but since the effect of surcharges will be realized throughout the period, weanticipate the impact from the year-on-year cost increase to narrow.
The operating profit figures for the second year of the business plan factored in anexpectation of higher costs from the beginning, but we will take into account positive
factors, and adjust our profit planning.

Longer term growth strategy
Q. Regarding resource allocation for ROIC management, what is your timeline forallocating resources in the Marine Products, Meat and Poultry, and Biosciencebusinesses, which have lower capital efficiency compared to mainstay businesses?
A. ROIC (return on invested capital) is one of the management indices we use to determine
future business continuity. We have set targets in the medium-term management plan,and should we fail to meet those targets, or judge that we are likely to fall short of thosetargets in the future, it becomes necessary to make a determination regarding business
continuity. However, from a long-term perspective, considering that food material
procurement risk continues to grow, along with capital efficiency, we consider it necessary
to also give serious consideration to the business synergy aspect. For example,
considering the procurement risk for chicken in the Processed Foods business, the ability
to utilize the highly reliable suppliers in the Meat and Poultry business, both in Japan andoverseas, becomes an important factor. This is a somewhat different discussion than thebusiness portfolio, but even if we withdraw from areas where capital efficiency is not
rising, if we determine that synergies can be expected, then we want to utilize thatbusiness as a corporate group, and will take such factors into account along with capitalefficiency.

Q. What is your assessment of the current state of the source of competitiveness in theProcessed Foods business, and outlook for the future?
A. For mainstay processed chicken and rice items, along with such factors as productdevelopment capabilities, production capacity, and sales channels, we consider our firm2

hold on the mass-market segment to be a strength. In addition, in the relatively new fieldof “personal use” (individual meals), Nichirei’s strengths lie in development of “items thatshould be available but aren’t” as well as marketing capabilities to open new sales
channels.
Going forward, we think that one of the factors consumers will consider when
deciding which items to purchase will be the extent to which a product reflects theconcepts of sustainability. We will need to consider how well this is incorporated into
products, and the extent to which consumers recognize it. As such, we feel that marketingand design will be key resources to prevail over the competition.
Q. What business opportunities do you envision as a result of the labor shortage?
A. It’s our understanding that the strain on business operations due to the labor shortage isparticularly severe in the restaurant industry, as well as meal service and elderly carefacilities. The particulars vary depending on the scale of the customer, but there isdemand for products and meal kits to accommodate any number of people, including
servings for one, two, or three people. We consider this to be a business opportunity.
Q. Please explain the course for improving profitability in the North American business.
A. InnovAsian Cuisine is a sales and marketing company, but with the recent acquisition of aproduction company for rice products, we aim to expand revenue and earnings forproduction and sales overall. There are companies in this industry with operating profit
margins of 10% or higher, so this is the business model we aim to achieve.
Q. Will Nichirei be able to take advantage of the new work regulations taking effect in thelogistics business in 2024 to create business opportunities?
A. We think that from 2024 there will be a definite risk of companies being unable totransport items, and that some operators that will be unable to adapt, including on price.
We consider it important to take advantage of these opportunities. There are many
comparatively small companies in the temperature-controlled warehouse and transportindustry, and we anticipate that they will struggle to renovate aging facilities and adapt tothe labor shortage. We plan to make the most of these industry trends to achieve growth.
Q. Despite the continued growth of the frozen foods market, no corporate brands seem tohave really emerged. What is your current view regarding corporate branding?
A. We feel that while recognition of the Nichirei brand is still somewhat weak in theJapanese market, in terms of such aspects as new business deals and recruiting, we havean appropriate level of brand awareness. I think that brand building is an important point,
and we have begun to consider the status of the brand going forward.
EndNote: This document is not a complete record of the Q&A session, and has been edited byNichirei Corporation.
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