Transcript ofFinancial Results Conference
for Fiscal 2019,held on May 12, 2020

Asahi Kasei Corporation
Note: The forecasts and estimates mentioned inthis document are dependent on a variety ofassumptions and economic conditions. Plans andfigures depicting the future do not imply aguarantee of actual outcomes.
Reasonable efforts have been made to ensure theaccuracy of the transcription, but no representation
or guarantee is made with respect to the presenceof any errors or omissions.

Participants
Yutaka Shibata
CFO
Yozo Sato
General Manager, Corporate Accounting & Control
Takuya Takahashi
Senior General Manager, Planning & Coordination, Basic Materials SBU
Yukifumi Kuwaba
Senior General Manager, Planning & Coordination, Performance Products SBU
Hiroaki Sugiyama
Senior General Manager, Planning & Coordination, Specialty Solutions SBU
Akira Fukuda
Separator Administration, Specialty Solutions SBU
Izumi Kawata
Vice President, Corporate Administration & Planning, Asahi Kasei Microdevices Corp.
Kensuke Sakai
General Manager, Accounting & Control Dept., Asahi Kasei Homes Corp.
Masato Kashiwagi
Senior General Manager, Corporate Planning & Coordination Div., Asahi Kasei Pharma Corp.
Futoshi Hamamoto
General Manager, Investor Relations

Presentation
Hamamoto: Good afternoon, ladies and gentlemen. Thank you for joining us in the earnings briefing
conference call of Asahi Kasei Corporation. I am Futoshi Hamamoto from Investor Relations, serving
as the MC.
Attending this conference call are: Yutaka Shibata, CFO; Yozo Sato, from Corporate
Accounting & Control; Takuya Takahashi, from Basic Materials Strategic Business Unit, or SBU;
Yukifumi Kuwaba, from Performance Products SBU; Hiroaki Sugiyama, from Specialty Solutions
SBU; Akira Fukuda, also from Separator Administration, Specialty Solutions SBU; Izumi Kawata,from Asahi Kasei Microdevices Corp.; Kensuke Sakai, from Asahi Kasei Homes Corp.; and Masato
Kashiwagi, from Asahi Kasei Pharma Corp.
Without further ado, earnings presentation by CFO Shibata.
Shibata: Good afternoon, I am Shibata from Asahi Kasei. As always, I will explain using financial
results presentation deck.
P. 3 Focus of FY 2019 results
Please turn to slide 3. First, as is noted in red, please be advised that the audit of FY 2019
results by Independent Auditors is not yet completed, and that any revision shall be promptly disclosed
if necessary, after receipt of the audit report. Your understanding is appreciated.
First, the operating results for FY 2019. Net sales were ¥2,151.6 billion, about the same asin the previous year. By segment, Material posted lower sales, while Homes and Health Care recorded
higher sales. While the acquisitions of Sage Automotive Interiors, Erickson Framing, Cardiac Scienceand others, served to increase sales through the new consolidation, sales for the Material segment1

decreased due to the slowing down of the growth of the Chinese market, the US-China trade friction,
deterioration of the global economic environment, slowing down of the automobile market, and some
impact of COVID-19 felt in February and March.
Operating income was ¥177.3 billion, a decrease of ¥32.3 billion, year-on-year. Comparedwith the revised full-year forecast released in February, it was ¥1.2 billion lower. The total was almost
as forecasted in February, but segment-wise, it was ¥1.6 billion lower for Material, ¥300 million lower
for Homes, and ¥1 billion higher for Health Care.
Results by segment, starting with Homes. Homes posted an increase of ¥4.5 billion, yearon-year. Towards the end of the fiscal year, unit homes operation felt the impact of COVID-19 in termsof a delay in the procurement of housing fixtures, and some of the deliveries were shifted to FY 2020.
Still, segment profit increased coming from firm performance of real estate.
In Health Care, profit increased by ¥1.7 billion, year-on-year. Profit expanded steadily,
centering on Critical Care. Despite some impact of COVID-19 felt in February and March, segment
profit increased
Next is Material. Profit for Material decreased by ¥37.2 billion. This decline was a result of
the slowdown in the Chinese market, slowing down of the automobile market, falling petrochemicalmarket prices, and the impact of COVID-19 felt from Q4. Some additional comments on thesubsegments of the Material Segment. Please turn to slide 22 for details. I will just hit main points ofincrease and decrease.
Basic Materials had some negative factors, resulting in significant decline in profit. There
was a maintenance shutdown of naphtha cracker in May last year, and a maintenance turnaround ofderivatives plants. Furthermore, there was a stoppage of naphtha cracker due to a facility malfunctionin January. In addition, there was a large inventory valuation loss by the gross average method due todecreased feedstock prices such as naphtha. Moreover, the terms of trade for each product deteriorated
rapidly. In addition, South Korean Tongsuh Petrochemical, which produces acrylonitrile, AN, wasaffected by the weakening of the won, impacting the currency conversion. As a result of the above,
profits of Basic Materials fell significantly.
In Performance Products, one positive factor was the consolidation of Sage, which wasrecorded on a full-year basis in FY 2019, and contributed positively to operating income even after
amortization of goodwill. The negative factor was a decline in profit for synthetic rubber for tires due
to lower operating rate, decreased shipments and deteriorated terms of trade. In addition, decreased
shipments of fiber products, decreased shipments of engineering plastics, and increased fixed costs ineach business, resulted in the decrease in the overall subsegment profit.
In Specialty Solutions, the overall trend was similar to the previous year. This subsegment
weathered this business environment better than others. As a positive factor, Hipore wet-process LIB,
lithium ion battery, separator for eco-friendly vehicles, or electric vehicles in general, presented steady
expansion. Negative factors included the impact of fires of ESS, energy storage system, in Korea on
Celgard dry-process LIB separator, and the stronger yen.
Net Income was ¥103.9 billion, down ¥43.6 billion, year-on-year. As will be explained later,
the decline in net income was larger than the decline in operating income as a result of recording of
impairment of noncurrent assets and business structure improvement expenses.
The annual dividend is unchanged from the February guidance, and is planned to be ¥34 pershare with year-end dividend of ¥16.
P. 8 Summary of financial result
Next, let me go over the FY 2019 operating results first. Please turn to slide 8, which showsmajor financial results. The figures I explained at the beginning are shown here, so I will skip the
explanation of this slide, and instead, I would like to hit the key points of income statements, balance
sheets, and cash flows starting on slide 9.
P. 9 Statements of income
First, slide 9, statements of income. Net sales were ¥2,151.6 billion, a year-on-year decreaseof ¥18.8 billion. Gross profit was ¥675 billion, and gross profit margin was almost the same as in theprevious year, but due to an increase in SG&A expenses operating income decreased, year-on-year.

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SG&A expenses increased by ¥18.8 billion, year-on-year. The main reason was the increasein outsourcing costs related to IT investment. With the strong promotion of the use of IT, the relevant
outsourcing costs increased. Another factor was the increase in goodwill amortization and labor costs
associated with the acquisitions of Sage, Cardiac Science, and others.
Operating income was ¥177.3 billion, down ¥32.3 billion, year-on-year. Non-operating
income and loss was positive ¥6.7 billion, which was ¥3.6 billion worse than in the previous year. Thiswas mainly due to the deterioration in equity in earnings of affiliated companies, mainly coming fromthe deterioration in the operating results of PTT Asahi Chemical, PTTAC, in Thailand.
Net extraordinary income and loss was minus ¥28.1 billion, ¥18.5 billion worse than in theprevious year. As extraordinary income, we recorded a larger gain on sale of investment securities thanin the previous year, with the promotion of the sale of strategic share holdings. The main reason for
extraordinary loss was the recording of an impairment loss on the manufacturing facility of Asahi
Kasei Synthetic Rubber Singapore, amounting to approximately ¥17.4 billion.
Income before taxes was ¥155.9 billion, down ¥54.5 billion, year-on-year. Income tax was¥50.2 billion, and net income was ¥103.9 billion.
P. 10 Balance sheets
Please take a look at page 10. The highlight of the balance sheet is that total assets increasedby ¥222.8 billion. This is primarily because the acquisition of Veloxis Pharmaceuticals resulted in an
increase of more than ¥160 billion in noncurrent assets. The transaction was closed in March, but in
FY 2019, Veloxis was consolidated only on the balance sheet as of the end of March, and would be
consolidated on P&L in FY 2020. In addition, continued aggressive capital investment also pushed up
the noncurrent assets, while the inventories also increased in accordance with the expansion of thebusiness.
Over to the right, the biggest reason for the increase in liabilities is a ¥279.4-billion rise ininterest-bearing debts. Net assets decreased by ¥19.3 billion.
All the way to the bottom, the D/E ratio went up by 0.21 percentage points to 0.52. On theother hand, cash and deposits totaled ¥208 billion as shown in the table above. So, if you deduct thisamount from the numerator, you can get the net D/E ratio of 0.36.
P. 11 Cash flows
Please see page 11, which shows the consolidated cash flow statement. The net cash inflow
from operating activities was ¥124.5 billion, down slightly less than ¥90 billion, year-on-year, mainly
due to the decline in income before income taxes and a slight increase in working capital as a result of
an decrease in accounts payable.
Cashflow from financial activities ended with net cash outflow of ¥318.2 billion, primarily
driven by the cash spending on the acquisition of Veloxis among others and capital investments.
These resulted in a negative free cashflow of ¥193.7 billion. By funding the cash outflow
through borrowings and other financing measures, the total balance of cash and cash equivalents stoodat ¥204.8 billion as of the end of FY 2019.
P. 12 Sales and operating income increase by segment
Next, let me turn to page 12, sales and operating income by segment. On the far right you
can see the difference from the forecast announced in February, which is what I discussed at the outset.
In terms of the operating income, Material and Homes fell slightly short of the forecast, while HealthCare beat the forecast.
P. 13 Sales and operating income increase/decrease by segment
Page 13, sales and operating income increase and decrease by segment was alreadyexplained at the beginning, and so I would like to skip this page. And that concludes the overview ofthe financial results.
P. 4 FY 2020 forecast (i)Now, please go back to page 4. I would like to end my presentation by discussing the forecast3for FY 2020. At this earnings report, we have left the forecast undecided, and let me give you thebackground and thoughts behind that.
First of all, I want to share with you our perspective on the management of the businessunder the impact of novel coronavirus. Although some information on the current status, future outlook,and various other situations is becoming available, we are engaged in diverse areas of businesses, anddifferent businesses and geographic regions are being affected differently at different timings. In thatsense, we believe it will be extremely difficult for us to foresee the future under a single unified
scenario, as we expect both positive and negative factors in each of the businesses.
Therefore, since we have diverse businesses, we should try to enhance what we believe will
prove to be positive factors flexibly and on a timely basis. From this perspective, we would like tomake it our policy for the time being to make business decisions as appropriate, while closely
monitoring changes as they evolve in the global economy and the operating environment of the Asahi
Kasei Group.
In particular, until visibility of the market climate improves, focus will be placed on
appropriate cash management to ensure liquidity through curtailment of capex, retaining cash on hand,and leveraging dynamic means of fundraising.
Furthermore, what is most important is to place highest priority on safety of customers,
suppliers, and employees; to work to minimize impact on operations of customers and suppliers, aswell as on our own, while contributing to prevention and treatment of infection through our businesses.
Thus, the current opaque environment precludes rational forecast of FY 2020 performance,
and therefore we have left the consolidated forecast undecided for now. Presumed impacts on eachbusiness are being described as far as possible on the following pages. We will promptly disclosequantitative forecast when it becomes possible.
P. 5 FY 2020 forecast (ii)Page 5 and the following few slides describes what we believe will be the impacts on andforecast for each of the business segments albeit on a highly qualitative basis.
First on Material segment. We are witnessing impacts of generally depressed economic
activity in automotive, electronics, and apparel markets, and petrochemical market prices are sharply
falling or fluctuating due to low crude oil prices. Therefore, we believe results are likely to fall shortof what we achieved in FY 2019.
In particular, the commodity business has a very long supply chain. Most recently, customers
who produce various final products are struggling to adjust their production. We will need to keep aclose eye on when and at what stage and how the impact will manifest itself.
Despite such severe operating climate, there are businesses which are benefiting fromincreased demand or expect demand to pick up after the outbreak of novel coronavirus subsides. Those
include electronic materials and devices for 5G and tablet PCs, and LIB separators for electric-drive
vehicles, and we would like to be fully prepared to meet those demands. Thus, it is our policy inMaterial segment to minimize the impact of novel coronavirus through those efforts.
Next on Homes. Under the emergency declaration, closures of model homes and stay-home
restrictions are having an impact especially on customer traffic and receipt of new orders in the orderbuilt homes business, and, going forward, the impact could also extend to peripheral businesses suchas the real estate and remodeling.
In that sense, we will closely monitor how the increase in the number of cases infected withnovel coronavirus will be curbed, and how the behavior and social life will be changing in new life
styles, so that we can take most appropriate measures to respond, and yet the results are likely to fallshort of FY 2019.
The operating environment is challenging in this segment as well, but our policy is tominimize the impact of novel coronavirus by leveraging IT for digital marketing, productivity
improvement, and cost reduction.
P. 6 FY 2020 forecast (iii)
Please turn to page 6, on Health Care. Health Care segment could be affected by stay-home
restrictions, and by the pandemic, depending on the situations at the frontlines of medical institutions

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in each of the countries. In Japan, since February and March, we have seen some impacts due to therestrictions on patient visits to hospitals and clinics.
However, demand actually increased during the pandemic for some devices, such as
ventilators, defibrillators, blood purification products, and virus removal filters for plasma derivatives.
Therefore, while being affected by negative factors, it is our policy in this segment that,
where there is increased medical needs, we will work to fulfill supply obligations through stableproduction and capacity increases, contributing to efforts to end the crisis and support post-crisis care.
Last but not least, we have described our policy for shareholder returns. Currently, it isextremely difficult to forecast impact of novel coronavirus, but basic policy for stable dividends andcontinuously increased dividends remains unchanged. It is our policy to make appropriate judgment
based on results at the end of the fiscal year.
That is all from me. Thank you for your attention.
Question and Answer Session
Hamamoto: We will now take questions.
Mr. Watabe: Watabe from Morgan Stanley MUFG Securities. I have two questions. The firstquestion is on the impact of COVID-19. You have described a qualitative aspect of the impact, but can
you give us the size of the economic impact on the FY 2019 results, centering on the Material
Segment? Could you also talk about the current situation, changes in operating status and sales?
Takahashi: Takahashi from Basic Materials. Regarding FY 2019, Basic Materials saw downstream
demand for derivatives decline considerably beginning in March, and sales began to decline in March.
Despite the impact of the decline in market prices, and despite all these factors, we believe there wereno significant financial impact felt in FY 2019.
Kuwaba: Kuwaba from Performance Products. First on the impact of COVID-19 on Q4, last fiscal
year. Impact was felt in China after the Chinese New Year holidays, and in Europe and the US after
mid-March. In particular, impact of a decrease in the number of automobile production was felt in Q4,
particularly in March. The current situation is that, as you know, most European and US automakers
are still trying to figure out the right time for production recovery and the level of operation. Japan is
also affected, so shipments in Q1 are expected to decrease year-on-year.
Sugiyama: Sugiyama from Specialty Solutions. We believe the impact on Specialty Solutions was
relatively minor. Qualitatively, products for automotive applications, coating material, dry-process
LIB separator, and lead-acid battery separator were slightly affected, but the amount was not that large.
In the meantime, demand for mobile devices, information and communication devices, PCs and tablets
increased, so overall, we believe that there was almost no impact in fiscal 2019.
Mr. Watabe: So, do I understand correctly that Basic Materials was affected mainly in terms offalling market prices, while Performance Products suffered in terms of shipments, and that continues
to date?
Kuwaba: Yes, that would be correct.
Mr. Watabe: My second question is on Critical Care, ZOLL. ZOLL has announced a major increasein ventilator production and is among the companies that the US government has announced to havesigned a contract to respond to COVID-19, and I think the value of the contract has also been disclosed.
But there is a considerable gap between the announced volume and ZOLL’s capacity. Can youcomment on that? Furthermore, is there enough demand for monthly production of 10,000 units? Can
you also tell us about the unit price, as I hear many different estimates?
Shibata: This is Shibata speaking. First, regarding the first question on quantity. This is procurement5

by the US government, and the delivery has already started. In any case, ZOLL is currently taking
measures such as procurement of parts and components, so as to increase the production capacity from
400 units per month to 10,000 units, a 25-fold increase, to respond to demand. Achieving the capacity
expansion is what ZOLL is currently focusing on.
Hamamoto: This is Hamamoto from Investor Relations. Regarding the unit price, I think that you
can check the number of units and the value of the contract from the disclosed information. So, if you
do the math, you can get the approximate unit price. Please note, though, that this unit price includes
accessories.
Mr. Watabe: Do you expect the demand to exceed 18,900 units, which is the disclosed figure?
Shibata: It will depend on the situation of COVID-19, and in fact there are not enough ventilators
not only in the US, but around the world. In that sense, there are various variables, including the
production structure of ZOLL, the situation of infection in the US and elsewhere in the world. And
given that various manufacturers are increasing production now, I think it will all depend on the global
balance at the time. So, currently we are giving priority to meeting the current demands from the US
government, rather than trying to formulate a medium- to long-term plan.
Mr. Watabe: Is it fair to assume that the workforce to respond to production increase will be adjusted
as part of variable cost, once the current pandemic subsides and demand decreases?
Shibata: Currently, the arrangement for workforce to deal with increased production is made mainly
by internal reassignment as the situation does not allow hiring people easily right now. Since this is an
assembly business, we can make it work as long as we can procure parts and materials. So, the total
headcount for production has not increased significantly.
Mr. Watabe: I see. Thank you.
Mr. Yamada: Yamada from Mizuho Securities. My first question is on Homes. The value of neworders for order-build homes in April was down 60% compared to the previous year. Considering thatthe time lag from order to delivery is about one year, can we presume that there won’t be significant
impact on the full-year sales for the order-built homes in FY 2020?
Also, I think remodeling and others are in a difficult situation right now. But should thecorona impact subside to some extent in the latter half of FY 2020, can you secure sufficient capacity
for construction without problem?
In addition, I expect the price of steel to drop significantly going forward. Hebel Haus unit
homes use 10 tons or more of steel per building. I think lower cost of various materials would bepositive for Homes. How does it look like? Please tell us about the current situation and future outlookof Homes to the extent possible.
Sakai: Sakai from Homes. First, I would like to talk about the relationship between the current statusof orders as of April and the full-year profit and loss. True, we have a certain level of order backlog.
But it’s not necessarily the case that orders received first are delivered first, so some orders from thisApril through H1 will be delivered in H2. Therefore, it’s not that there will be no impact in FY 2020.
Regarding remodeling, order situation is rather tough right now. But when the orders recoverin the future, we will have the same construction capacity retained as before. But we do expect thatthe full-year profit and loss will be affected.
Regarding the question about the price of steel, of course, we are using various materials,
including steel and autoclaved aerated concrete panels. The cost of logistics has also risen significantly
recently, so if we are to focus only on steel, it may work positively in FY 2020. However, we believethat the cost will be decided as a whole, although it is hard to predict what will happen to othermaterials or logistics costs due to the effect of COVID-19.

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Mr. Yamada: I see. I just want to check the penalty condition. Would there be a penalty if theconstruction is not completed and the delivery cannot be made as per the contract? And what do you
mean by digital marketing? Those are follow-up questions.
Sakai: Whether there will be penalties for delays in deliveries, of course, depend on reasons. A
penalty will be imposed if the delay was due to our factors, but basically depending on thecircumstances, there may or may not be a penalty.
Mr. Yamada: Should we assume that with COVID-19, there wouldn’t be many penalty cases?
Sakai: Yes, for instance, some units scheduled for March delivery had been delayed due to theshortage of some materials, but in principle no penalty would be imposed on those.
Mr. Yamada: I see. And what does digital marketing mean?
Sakai: Digital marketing, as was explained earlier, involves using the web or IT, to interface withand attract customers via video monitors or the internet in lieu of conventional methods of face-toface interaction at showrooms and others.
Mr. Yamada: I see, thank you. One last question for clarification. I think almost all of goodwill
increments are in relation to Veloxis. Veloxis has a small amount of property, plant and equipment astangible noncurrent assets and intangible noncurrent assets of about ¥150 billion. Do I understandcorrectly that this full amount is included in goodwill because PPA has yet to be fixed?
Sato: This is Sato speaking. Yes, that will be correct.
Mr. Yamada: Thank you. When will it be fixed?
Sato: We are thinking of by the time we close the books for Q1.
Mr. Yamada: I see. It is to be fixed at the time of Q1 settlement, so there will be no provisionalamortization of goodwill, correct?
Sato: Yes, we are working along that line.
Mr. Yamada: I see. Thank you.
Mr. Umebayashi: Umebayashi from Daiwa Securities. My first question is on the quantity of LIB
separator, changes in sales volume on half-year basis using the usual index. How did FY 2019 do yearon-year? And, if possible, can you also comment on the tone of the market for wet-process LIB
separator and dry-process LIB separator respectively?
Fukuda: Fukuda for separators. The sales volume of LIB separator as a whole in H2 of FY 2019
decreased year-on-year. As previously reported, the index was 311 in H2 of FY 2018 and 303 in H1
of FY 2019. In H2 of FY 2019, it was 301. YoY in H2, the volume of wet-process separator increased
by a little less than 20% thanks to the capacity expansion, but as mentioned earlier, volume of dryprocess separator was reduced by almost half due to the effects of ESS fires, and that rendered a bigger
impact.
Mr. Umebayashi: I see, thank you. A related question. Slide 21 shows major investments. Among
LIB separator facilities listed as “Under construction” are capacity increase in dry-process separator,and for wet-process separator, in addition to ongoing construction, a capacity increase is listed. Do
you plan to continue with these projects? Especially, given that the dry-process separator has seen
significant drop in sales for some time, I wonder what the plans are. There could a postponement or,7

in the worst case, even a risk of impairment, I’m afraid. Can you comment on this matter?
Fukuda: First, regarding capital investment, for wet-process separator facilities, construction workand the launch of newly completed lines are proceeding steadily as planned. On the other hand, forthe dry-process separator, we started commercial operation as planned in FY 2018 and gradually
increased capacity, but due to the influence of ESS fires, demand has not ramped up as we hadoriginally expected. In light of this delay, we are adjusting the startup and operation of the facilities inaccordance with demand. But we are not in a situation requiring discussion on impairment.
Mr. Umebayashi I see. My second question is on inventory. As of the end of March, the inventory
for the entire company increased rather significantly year-on-year, although it was lower compared tothe end of December. Can you explain the reason for the year-on-year increase? Was it partly in relation
to delays in deliveries in Homes perhaps?
And at the same time, I think there were many products whose market prices had fallen, but
I don’t see a big decline in the inventory value compared to the end of December. What factors
accounted for that? Are there any products that require larger reduction in production than the actual
demand decline because of the current higher inventory level?
Sato: Sato from Corporate Accounting & Control. An increase of ¥50.5 billion in inventories
includes about ¥34 billion in Homes business. One of the reasons is, as was explained at the outset,that the deliveries of unit homes have been slightly delayed and carried over to FY 2020 due to theimpact of novel coronavirus. And in the real estate business, condominiums under construction
increased. These led to the increase in inventories in the Homes segment, which was a major factor.
Moreover, there was some increases in inventories in Material segment. But it is ourunderstanding that there are no particular items where there are excessive inventories.
Mr. Umebayashi: I see. Then, it is not the case that in some products, inventories have increased somuch so that a significant reduction in production would be necessary, is it?
Sato: Though I am not informed of all the products, my understanding is that there are no suchproducts with particularly large inventories.
Mr. Umebayashi: Thank you.
Mr. Takeuchi: Takeuchi from SMBC Nikko Securities. My first question is about Basic Materials.
On page 34, in the table of quarterly operating income by segment, Basic Materials decreased by ¥5.7
billion from Q3 to Q4. Could you share with us the reasons for this, together with the market prices
and spread of AN?
Takahashi: Takahashi from Basic Materials. One of the reasons for the ¥5.7 billion decline from Q3
to Q4 of FY 2019 was, as we said last time, is the stoppage of a naphtha cracker due to malfunctionof the facility in January, which had an impact of over ¥1 billion. In addition, terms of trade for AN
deteriorated and the overall shipments decreased. All these factors together resulted in a drop of ¥5.7
billion.
To answer your second question on the spread of AN, in the Q4, its market price was $1,386
per ton, and the price of propylene was $790 per ton, which gives you a spread of $596 per ton. This
represents a decline from the spread of $675 per ton in Q3, which we mentioned last time.
Mr. Takeuchi: Could you tell us the status of operation in Q4, changes, if any, at present, and yourtake on future supply demand balance for now, though it must be difficult to foresee the demand?
Takahashi: Takahashi from Basic Materials again. In H1 of FY 2019, the capacity utilization rate
was strong at 85–90%. But in H2, the demand started to decline, pushing down the rate to about 80%
in Q4. Most recently, in April, weak acrylic fiber business in China and lockdown in place in India has

8led to general uncertainty for demand, and we have gone one step further in reducing the production
volume. Going forward, with such uncertainty for demand, we will be closely watching the supply
demand trend to figure out the level of operations and overall supply volume.
Mr. Takeuchi: Is your production site in Thailand currently in operation?
Takahashi: I must tell you this. Last week, PTTAC, our joint venture in Thailand, suspended its
operation due to some disruptions. Details on the restart of the operation are under investigation. Under
such an uncertain prospect for demand, we will be watching the trend of the demand and decide thelevel of operation of PTTAC in the context of our total production capacity.
Mr. Takeuchi: I see. My second question is about synthetic rubber. Could you explain more about
the background behind the impairment loss recognized at a subsidiary in Singapore, how much dropin the volume for S-SBR, solution-polymerized styrene-butadiene rubber, you saw in FY 2019, andwhether it is possible for you to change the positioning and investment plans in the future. I am
interested to know the status of synthetic rubber, especially S-SBR.
Kuwaba: Kuwaba from Performance Products SBU. Synthetic rubber for tires dropped by around
5% in terms of volume from FY 2018 to 2019. In addition, more intense competition associated withdeclining demand affected prices, eroding margins, especially in general-purpose grade. Thus, wewere put in a very challenging position in terms of profitability particularly for those for tires. That is
the overall trend.
Mr. Takeuchi: Could you elaborate more on the competitive landscape in the high-end area, which
you focus on, including whether there will not be any significant changes in the strategic positioningof S-SBR going forward?
Kuwaba: We expect the high-end market to remain challenging for some time, as the number of newvehicles produced is falling, but the demand itself for high-performance, fuel-efficient tires to continue
to grow. Given that, as needs of customers are becoming increasingly diversified, we are in the processof capturing such needs and further developing the S-SBR technologies that we have. This willprobably take one year or so, but our current strategy is to aim for a recovery through such efforts.
Mr. Takeuchi: Could you comment on the year-on-year changes of S-SBR alone in the volume in
FY 2019?
Kuwaba: The total growth rate of synthetic rubber for tires, as I said, slowed down from FY 2018 to
2019, to about 5%. In that sense, in FY 2017, 2018, and 2019, we have been experiencing a severe
situation in terms of volume.
Mr. Takeuchi: I see. Thank you.
Mr. Miyamoto: Miyamoto from UBS Securities Japan. My first question is about separators. In theslides, it was mentioned that you would focus on applications for electric-drive vehicles. I would
assume the current situation must not allow you to be optimistic, but do you think you can get backon a growth trajectory in H2?
Furthermore, ESS business was tough last year, but listening to the earnings calls bydownstream manufactures, I felt there was some progress made in enhancing safety measures. If you
can give us some updates on your forecast for this fiscal year, that would be appreciated.
Fukuda: Fukuda for separators. With regard to LIB separators, we believe supply chains in China
and South Korea have recovered to the pre-COVID-19 level. Especially, demand is strong for what is
considered to be such end uses as mobile devices and information and communication equipment.
On the other hand, in the automotive use, we have been affected by suspension of operations9

in factories in the US by multiple auto manufacturers more recently. In addition, we want to continue
to keep an eye on any possible specific impacts by launching plans of new EV models in Europe thisyear, sales trends after their launches, and any delays in development plans.
As you said, domestic demand for ESS in Korea has not picked up yet, but demand fromregions other than Korea has been coming back steadily. The volume seems to have been recovering
gradually from Q3 to Q4.
Mr. Miyamoto: I know you have not disclosed your plan for FY 2020, but am I correct to understandthat you will be back on a slight recovery path from the drop you saw last fiscal year?
Fukuda: Yes, you are correct.
Mr. Miyamoto: From a mid-term perspective, some suggest that crude oil price drops and economic
recessions caused by the outbreak of COVID-19 could delay the rate of increase in the penetration of
EVs in Europe. Could you give us your take on this?
Fukuda: As you said, some say the crude oil price drops or the stagnation of the automobile industry
itself might affect the demand for EVs. However, the impact seems to be milder than that on ICE(internal combustion engine), or gasoline vehicles. In fact, in some cases, this has become an
opportunity to accelerate the shift toward EVs. We are not sure what the overall picture would be like,but we want to closely monitor the situation.
Mr. Miyamoto: I see. My second question is about the ventilators of ZOLL. In terms of price, thebusiness does not seem to be bad at all. But in terms of profitability, since this is sort of like anemergency increase in production, procurement costs could go up to some extent. I wonder if that
could eat into the business profitability of ZOLL. So could you discuss profitability again?
Shibata: Shibata speaking. The ventilators of ZOLL are originated from a small niche company thatit acquired. Due to the outbreak of COVID-19, it is trying to increase the production by 25 times allof a sudden. Of course, we need to ensure profitability as a viable business, but for now, in the frontline,
we are back to the basics of medicine to meet the requirement from the US government, and to fulfill
the social and supply responsibility. Thus, we are not in a position to discuss plans for profitability.
My understanding is that this will not be a significant drag on the overall profitability of ZOLL.
Mr. Miyamoto: I see. You also said that demand for defibrillators is increasing as well. Could you
give us more details on defibrillators as to how large the contribution in sales can be? Is it, for instance,
to the order of several billions of yen?
Shibata: As you said, needs for defibrillators is increasing from emergency medical services such as
ICU and ER. As you know, the defibrillators ZOLL offers are for hospitals, and so, it is possible thatdemand from hospitals will increase together with that for AEDs.
However, this product requires upfront capital investments, and therefore, there is a question
on the financial positions of the hospitals. Under the current circumstances where the clinical sites are
struggling to keep up with responses to COVID-19 patients, it is extremely hard to predict how needs
will arise and then lead to procurement of equipment by hospitals as part of their business management.
But, since ZOLL acquired Cardiac Science, we are hoping that the product will contribute to realizing
more growth than in FY 2018, or 2019.
Mr. Miyamoto: I see. Thank you.
Mr. Okazaki: Okazaki from Nomura Securities. On page 33 and 34, Specialty Solutions shows
significant increases in sales and profit in Q4 in FY 2019, year-on-year. Could you give us factors
behind this more-than-expected upside, including the increased demand for telecommunication andtrends of separators, mentioned earlier?

10Sugiyama: Thank you for your question. Sugiyama from Specialty Solutions. If you compare theresult to the year before, as you saw on page 17, Specialty Solutions has suffered a ¥2.6-billion dropin the operating income, but there was a negative impact of ¥3.6 billion from the appreciation of theyen. Therefore, if you exclude that impact, it has been performing well.
One of the major factors for the strong performance was the considerable growth in wetprocess LIB separators, while there was a big negative impact from fires in ESS on dry-process LIB
separators. In addition, as you said, electronic materials and other products showed steady growth,
helping us manage to achieve the figures we achieved.
On page 33, if you look at the result by quarter, in any typical year, Specialty Solutions tends
to perform well in Q2 and Q3, and deteriorate in Q4 partly due to the Chinese New Year. In FY 2019,
in Q1, the sluggish performance in Q4 of FY 2018 was carried over, leading to an extremely slow start.
But adjustments were made during Q1, and in Q2 we saw a sharp increase. But after that surge which
went too far, the business went into a correction phase, resulting in a slight drop. However, in Q4, theperformance turned out to be better than expected. Where exactly was it better? In Q4, as you said,
wet-process separators did do well, but electronic materials were supported by strong performance of
5G, portable devices, mobile PCs, and tablets. All these factors together resulted in the relative strength
vis-a-vis the previous year with Q4 not experiencing that much quarter-on-quarter drop.
Hamamoto: We have used up our time. This concludes today’s conference call. Thank you for yourattendance.

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