Transcript ofFinancial Results Conference
for Q1 Fiscal 2021,
held on August 6, 2021

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
Koshiro Kudo
CFO
Yozo Sato
General Manager, Corporate Accounting & Control
Takuya Takahashi
Senior General Manager, Planning & Coordination, Basic Materials SBU
Nobuhiro Yamaguchi
Senior General Manager, Planning & Coordination, Performance Products SBU
Hiroaki Sugiyama
Senior General Manager, Planning & Coordination, Specialty Solutions SBU
Eiji Ishikawa
Senior General Manager, 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.
Ryuji Kibe
General Manager, Business Strategy & Planning, Asahi Kasei Pharma Corp.
Futoshi Hamamoto
General Manager, Investor Relations

Presentation
Hamamoto: Good afternoon. Thank you very much for joining the conference call on Asahi Kasei
Corporation’s earnings for Q1 FY 2021. This is Futoshi Hamamoto from Investor Relations. We will
begin with a presentation from Koshiro Kudo, CFO. After that, we will take questions.
Other participants from Asahi Kasei are: Yozo Sato, Corporate Accounting & Control;
Takuya Takahashi, Basic Materials Strategic Business Unit, or SBU; Nobuhiro Yamaguchi,
Performance Products SBU; Hiroaki Sugiyama, Specialty Solutions SBU; Eiji Ishikawa, Specialty
Solutions SBU, for separators; Izumi Kawata, Asahi Kasei Microdevices Corp., Kensuke Sakai, Asahi
Kasei Homes Corp.; and Ryuji Kibe, Asahi Kasei Pharma Corp.
I will give the floor to Mr. Kudo now.
Kudo:

Good afternoon and thank you very much for joining us for this earnings briefing.

P. 4

Summary of financial results
Let us begin with slide 4. In Q1 of FY 2021, net sales came to ¥583.4 billion, operating
income was ¥60.5 billion, ordinary income ¥65.2 billion, and net income attributable to owners of theparent came to ¥46.4 billion. All these figures are the highest ever for a Q1. In Q1 last year, earnings
were significantly hit by COVID-19. This time, all 3 segments, and especially Material, posted yearon-year growth for both sales and operating income.
Starting from FY 2021, we are applying the Accounting Standard for Revenue Recognition,
which means that the criteria used for recognition of net sales and cost of sales are now different forsome transactions. Later, we will explain this more in detail by segment. For total consolidated results,
however, the impact of this change is minor for both net sales and operating income.

1

P. 5 Sales and operating income by segment
Moving on to slide 5. This shows quarterly sales and operating income by segment.
In Q1 FY 2021, for the Material segment, there was recovery in automotive-related markets.
In addition, market prices for petrochemical products rose rapidly on the back of demand recovery,
which resulted in inventory valuation gain by the gross average method. Sales and operating income
both increased considerably.
The Homes segment benefitted from the consolidation of McDonald Jones Homes Pty Ltd.,etc. and strong performance of other overseas businesses. The change in the method of revenue
recognition also pushed up net sales and operating income related to order-built homes. As a result,both sales and operating income increased for the segment. In the footnotes, we describe the impactof the new revenue recognition method by segment. It pushed up operating income for the Homes
segment by ¥1,751 million.
For Health Care, in Critical Care, ventilator sales are down, but the mainstay defibrillator
business was strong. Pharmaceuticals and medical devices also had solid performance. As a result,both sales and operating income increased from the same period last year.
P. 6

Statements of income
Slide 6 shows the statements of income.
Net sales for the quarter came to ¥583.4 billion, up ¥128.3 billion from the same quarter
previous year. Gross profit came to ¥195.4 billion, and gross margin improved by 0.6 percentage points
to 33.5%. SG&A came to ¥134.9 billion, which is an increase of ¥15.1 billion. There was an effect of
newly consolidated companies such as McDonald Jones, and increased expenses for R&D andlogistics.
Operating income came in at ¥60.5 billion, up ¥30.4 billion from, or almost double, the yearbefore figure. Operating margin came to 10.4%, up 3.8 percentage points from the same periodprevious year.
The net of non-operating income and expenses came to an income of ¥4.7 billion. That’s up¥4.5 billion from the same period previous year. Net equity in earnings or losses of affiliates improvedby ¥3.8 billion thanks to improved performance at PTT Asahi Chemical Company Ltd. which produces
AN, acrylonitrile, in Thailand.
The net of extraordinary income and loss came to an income of ¥3.2 billion. That’s animprovement year-on-year by ¥8 billion. On the extraordinary income side, there was gain on sale ofinvestment securities after unloading some strategic shareholdings, and gain on step acquisitions
related to McDonald Jones. We entered a capital alliance with McDonald Jones, which is a company
in Australia, back in 2017 and had since owned a 40% stake. This time we acquired an additional 40%
and made it a consolidated subsidiary. Among extraordinary losses, we booked business structure
improvement expenses, which is mostly related to starting up alternative production capacity after thatfire at our semiconductor plant.
Income before income taxes came to ¥68.4 billion. That’s up ¥42.9 billion year-on-year.
Income taxes amounted to ¥21.6 billion, up ¥10.5 billion as corporate income taxes increased
commensurate to pre-tax income.
Net income attributable to owners of the parent came to ¥46.4 billion, up ¥32.8 billion yearon-year.
P. 7 Balance sheets
Slide 7 shows the consolidated balance sheets.
Total assets increased from the end of March to end of June by ¥56.8 billion. Goodwill, etc.
was recorded on acquisitions including that of Respicardia, Inc. in Health Care. Property, plant andequipment increased with capex. Application of the Accounting Standard for Revenue Recognition
resulted in an increase in contract assets and a decrease in inventories.
Liabilities increased from the end of March by ¥27.3 billion. Interest-bearing debt increasedby ¥40.9 billion.
Net assets increased by ¥29.5 billion. Retained earnings increased thanks to net income
attributable to owners of the parent of ¥46.4 billion, which more than offset the ¥23.6 billion in2

dividend payout. The debt-to-equity ratio came to 0.47, up 0.02 points, which is within our targetedrange of around 0.5.
P. 8

Cash flows
Slide 8 shows cash flows.
Cash flow from operating activities was a net inflow of ¥30.2 billion. Inflows included
income before income taxes of ¥68.4 billion and depreciation of ¥28.7 billion. Outflows included
accrued expenses coming down by ¥20.3 billion. Compared with the same period previous year, while
income before income taxes increased, working capital such as trade receivables also increased as
sales recovered, and the net cash inflow decreased.
The investment cash flow was a net outflow of ¥39.7 billion. Outflows included capex andacquisition of Respicardia. Compared with the same period previous year, cash outflow increased inrelation to acquisitions including that of Respicardia.
Cash flow from financing activities was a net cash inflow of ¥11.6 billion. There was cash
outflow due to dividend payment, but that was more than offset by the inflow from fundraising. As aresult, cash and cash equivalents at the end of June came to ¥219.7 billion.
That is all for Q1 results.
P. 10

Consolidated operating performance forecast
Moving on to page 10, operating performance forecast for H1 of FY 2021.
The forecast for net sales is ¥1,198 billion and for operating income ¥106 billion, both ofwhich are higher than H1 of FY 2019, pre-COVID-19 level, to achieve the highest ever H1 results.
We expect increased sales and profit year-on-year, on the recovery in the Material segment.
From the previous forecast announced in May, we have made upward revisions to sales andoperating income forecast in all 3 segments, especially the Material segment, reflecting the strong Q1
results and changes made to the exchange rate assumptions for Q2 reflecting the depreciation of theyen.
Net income attributable to owners of the parent is expected to be ¥72 billion, a downward
revision of ¥15 billion from the previous forecast in May, at which time we expected tax expenses tobe reduced by about ¥24 billion this fiscal year in relation to the organizational reconfiguration at
Veloxis Pharmaceuticals Inc., but due to administrative work of the Danish authorities, we rescheduled
the timing of recognizing the lower tax expenses from H1 to H2, thus the downward revision. If we
exclude the impact of this rescheduling, we believe that the progress of net income is also strong.
Interim dividend is forecasted to be ¥17 per share.
P. 11

Sales and operating income forecast by segment
Next, page 11, net sales and operating income forecast by segment.
I will explain the upward revision made to the previous H1 forecast by segment. In Material,
we’ve made upward revision in light of the strong performance in Q1, market prices of petrochemical
products having risen more than expected, and firm sales expected for lithium-ion battery, or LIB,
separator.
Forecast for Homes has also been revised upward, as overseas business expects firm
performance.
Health Care forecast has also been revised upward with firm performance expected in thecore businesses of Critical Care such as conventional defibrillators and LifeVest wearable defibrillator.
In terms of year-on-year comparison of operating income, Material expects a significant
recovery, while Homes is projected to maintain the same level as in the previous year despite difficult
business environment, and Health Care expects decreased profit compared to the same period of theprevious year when there was special demand for ventilators, but mainstay businesses are projected toperform firmly.
P. 13

Sales and operating income increase/decrease by segment
Page 13, breakdown of changes in net sales and operating income by segment.
The largest factor was sales volume, which contributed to an increase of ¥21.4 billion. Sales
prices contributed to an increase of ¥20.6 billion, due to the rise in the petrochemical market prices,3

including foreign exchange rates. Others include rising feedstock prices and changes in inventory
valuation gain. In summary, sales price was positive ¥20.6 billion and others was negative ¥11.6 billion,
indicating improvements in terms of trade.
P. 16

Overseas sales
Page 16, overseas sales.
Net sales in Q1 were, as mentioned earlier, ¥583.4 billion, of which overseas sales totaled¥293 billion. The overseas sales ratio was 50.2%, exceeding 50%. Last year it was 41%. While theratio had been around 40% in recent years, it went over 50% this year.
Of this amount, about 80% is sales at overseas subsidiaries, and the remaining 20% plus isexports from Japan. As we are proceeding with overseas M&A activities, overseas sales are increasingalong with the growth of the acquired companies. We expect this trend to continue, with some possible
fluctuations in the overseas sales ratio from Q1 level of over 50%.
P. 19

Operating income forecast by business category
Page 19, operating income forecast by business category.
Operating income is projected to decrease from ¥60.5 billion in Q1 to ¥45.5 billion in Q2.
During Q1 there was a profit in Basic Materials in relation to inventory valuation gain, as well as anonrecurring gain on the accounting treatment related to the acquisition of Respicardia in Critical Care.
In Q2, we are expecting a temporary increase in fixed costs and incurring of in-licensing
costs in pharmaceuticals. We thus project operating profit to decline by ¥15 billion quarter-on-quarter.
But there are no concerns about demand or the business environment, including economic trends andoverseas market conditions, and we consider the forecasted amount of ¥45.5 billion to be achievable.
Also, as stated in the financial statements, we have not changed the full-year forecast at thistime. Toward H2, we do not have concerns regarding our business, although there are someuncertainties such as foreign exchange, the impact of COVID-19, and semiconductor shortages. We
believe that currently the progress is generally in line with the May forecast.
That concludes my presentation. Thank you for your kind attention.
Question and Answer Session
Hamamoto: Let us now take questions.
Mr. Watabe: Watabe from Morgan Stanley MUFG Securities. My first question is about the Material
segment. Can you provide more detail on the quarter-on-quarter difference between Q4 FY 2020 and
Q1 FY 2021 for the 3 business categories, and between Q1 and Q2, please? Can you also tell us how
large the inventory valuation gain impact is?
Takahashi: Takahashi speaking for Basic Materials. Could we look at slide 28, please? Quarterly
operating income for Basic Materials was ¥10.1 billion in Q1, almost unchanged from ¥9.8 billion in
Q4. In fact, there were a number of factors pushing operating income both upwards and downwards.
In general, demand is strong and market prices have been solid. In Q1, however, there wasa maintenance turnaround at Mizushima Works which had a negative impact. On the other hand,market prices for the mainstay AN remained rather high. In addition, feedstock prices rose which
resulted in inventory valuation gain. The impact of the maintenance turnaround was for about ¥3 to 4
billion, but the inventory valuation gain more than offset that.
Yamaguchi: Yamaguchi for Performance Products. Demand has been firm from Q4 FY 2020 to Q1
FY 2021 and into Q2. For automotive applications, in particular, shipments have been strong, despitesome regions such as North America being affected by the shortage of semiconductors.
The improvement in operating income from Q4 to Q1 was mostly driven by terms of trade.
Feedstock prices rose in Q4, but those higher prices are only reflected in sales prices with a delay.
Terms of trade were therefore squeezed in Q4 but improved in Q1.
Between Q1 and Q2, terms of trade would be squeezed in Q2 as some feedstock prices arestill rising quite rapidly. This is one reason for the expected decrease in operating income. In addition,
4

more fixed expenses are to be booked in Q2, towards the end of H1. Capacity utilization will also be
lower in Q2 due to maintenance turnaround. Market-wise, demand is strong for both automotive andnon-automotive applications.
Sugiyama: Sugiyama for Specialty Solutions. Compared with Q4 FY 2020, Q1 net sales was downby ¥4 billion, whereas operating income was up by ¥3.3 billion. In reality, business remains firm.
With regard to net sales, separators and electronic devices were both firm and slightly up
quarter-on-quarter. There were, however, one-time factors around a number of products among former
performance materials. For example, we booked rather large sales for membrane-process chlor-alkali
plants in Q4, but not quite so in Q1.
Thankfully, performance was firm for other products, separators in particular. And fixed
costs were higher in Q4 as it was the final quarter of the financial year. Those factors drove the ¥3.3
billion quarter-on-quarter increase in operating income.
Mr. Watabe: Thank you. My next question is about business structure improvement. At the
management initiative briefing in May, it was explained that 15 businesses were identified as strategy
reformulation businesses. Recently you announced restructuring your spandex operations in Europe,and I believe that was the first among a series of announcements to come. Do you plan for most ofsuch strategy reformulation for the Material segment within FY 2021? If so, are the associatedexpenses already budgeted?
Kudo: This is Kudo speaking. The discontinuation of production in Europe is part of therestructuring of spandex business. Among the 15 strategy reformulation businesses, for some, we may
restrategize and reinforce, some we may withdraw from, and for some we may form an alliance witha partner. The time horizons, therefore, may vary. We do expect to make announcements on somebusinesses during the current financial year, but it may take more time for others.
Now, our next medium-term management initiative is due to start in FY 2022. When weannounce the new initiative, we may provide an update with more detail.
Mr. Watabe:Thank you very much.

Mr. Yamada: Yamada from Mizuho Securities. My first question is about Health Care. Q1 results for
Critical Care came in strong. Last year, from Q1 through Q3, ventilators provided a boost for earnings.
How does it look like on a comparable basis, excluding that impact? What about the impact of theacquisition? Can you also explain why you expect net sales and operating income to decline from Q1
to Q2, please?
Kudo: This is Kudo speaking. With regard to Critical Care, shipments of ventilators peaked in Q2
last year, but have come down to normal levels. For Q1 this year, gain on accounting treatment related
to the acquisition of Respicardia pushed up operating income. Even excluding that effect, on acomparable basis, the business is performing pretty strong, with recovery in conventional defibrillatorssuch as AEDs and defibrillators for professional use, and LifeVest.
Now with regard to Q2, our operating income forecast is ¥7.1 billion, down from Q1. The
acquisition-related accounting gain will be absent. Orders for LifeVest tend to be slow in summer. In
addition, given the resurgence of COVID-19 cases, we are staying on the conservative side. Having
said so, judging from results up to July, business performance is stable, and we expect the growth trend
to continue for Critical Care.
Mr. Yamada: Can you tell us more about that accounting gain related to the Respicardia acquisition?
Kudo: ZOLL had extended a loan to Respicardia prior to the acquisition, and it became part of theacquisition payment. In that process, there was valuation gain.
Mr. Yamada:Is that reflected in operating income?

5

Sato: This is Sato from accounting. According to the US accounting standard which ZOLL uses,
such valuation gain is treated as part of operating income.
Yamada: Thank you. My next question is about Homes. Back in FY 2020, Q1 and Q2 orders werevery slow. Despite that, Q1 performance this year was firm. Can you tell us why? And total orders
from April to July are significantly up from the same period last year. Is this better than expected?
Sakai: Sakai for Homes. In Q1, adoption of the new Accounting Standard for Revenue Recognition
artificially pushed up figures. But even excluding that effect, performance was solid, partly as theaverage unit price rose for order-built homes with the increase in larger homes. The upward revision
for H1 also reflects firm performance of overseas operations.
The value of orders received in Q1 recovered to almost the same level as Q1 FY 2019. The
July figures were actually higher. This is generally as expected.
Mr. Yamada: Was the ¥2.4 billion operating income for overseas business also as expected? And
could you explain the ¥5.7 billion operating income for order-built homes? I would not expect the new
accounting standard to have such a significant impact, or did it?
Sakai: Overseas businesses did outperform expectations, particularly in North America. The impactof the change in revenue recognition was slightly higher than expected. As written in Slide 13, it
pushed up Homes net sales by ¥7.9 billion and operating income by ¥1.8 billion.
Yamada: Does it mean you have a solid profit margin for order-built homes, in a way that allows
you to stay profitable even against higher material prices?
Sakai: Yes.
Yamada:Thank you.

Mr. Miyamoto: Miyamoto from SMBC Nikko Securities. I have 2 questions. First on Specialty
Solutions. You have upward revised the H1 forecast by ¥5 billion for operating income. I understandthat the foreign exchange rate has a significant impact on this business category, and suspect it to be afactor, but can you tell us more about the revision?
Can you also give us an update on the separator business, which you also upward revised?
On the downstream side, it appears that electric vehicles are doing very well in Europe. How does that
affect you?
Sugiyama: Sugiyama speaking for Specialty Solutions. We have upward revised the net sales
forecast for H1 by ¥9 billion and the operating income forecast by ¥5 billion. Basically, we expect thesame factors that led to strong Q1 earnings to continue. The separator business is strong. The former
performance materials businesses are also firm. In particular, with COVID-19, stay-at-home demandfor IT devices have been strong, and associated demand for our products remain firm. Semiconductorrelated products are doing well, too.
The foreign exchange rate also has a large impact and accounts for about half of the ¥5billion upward revision for operating income.
Ishikawa: Ishikawa speaking for separators. We have upward revised the forecast for both net sales
and operating income this time. The major driver is the wet-process separator for LIB. Demand has
been strong for consumer electronics applications particularly in Q1 and continuing through H1. The
same can be said for automotive-related demand, including that for Europe, too.
After that high shipment volume in Q4, we were worried that production capacity may fallshort of demand, and that was reflected in our initial forecast. However, with new capacity
commissioned ahead of schedule, among other things, we have now upward revised the H1 forecast.
Mr. Miyamoto:

In July, a new policy was announced in Europe, recommending phasing out of6

internal combustion engine vehicles. Given this, do you expect further increase in LIB separator
demand?
Ishikawa: This is Ishikawa for separators. We expect demand in Europe to continue to growsignificantly going forward, and accordingly we feel we should consider how best to deal with it.
Mr. Miyamoto: I see, thank you. My next question is on sales of pharmaceuticals on page 25. You
said previously that sales of Envarsus XR immunosuppressant drug exhibited sluggish growth in Q4
due to some temporary factors. In Q1, sales increased 26% year-on-year, indicating steady growth. Is
it fair to say that the temporary factors have been resolved and Envarsus XR’s sales are back on thegrowth trajectory? Also, do you expect the high growth to continue into Q2?
Hamamoto: Hamamoto of IR will take that question. As you have correctly indicated, the temporary
factors mentioned in the briefing in May have subsided. Envarsus XR had been growing at a highgrowth rate until Fiscal 2020 when the impact of COVID-19 dealt a blow in the US. MR activities
were restricted, which affected hospitals’ adoption of Envarsus XR into new protocols. Also,
conversion from other treatments remained below the previous year’s level. However, since Q1 thisyear, the overall number of new kidney transplants has been increasing again, and the number ofpatients on Envarsus XR is steadily increasing as well. So, we expect steady growth in the medium tolong term.
Mr. Miyamoto:I see. Can we expect high sales growth to continue toward Q2?

Hamamoto: Yes, you can expect that.
Mr. Umebayashi: Umebayashi from Daiwa Securities. I would like to ask about trends inautomotive-related products, which should be mainly be the Performance Products. I see that Q1
recorded a significant increase year-on-year, but how did it compare to Q4?
I believe automotive OEMs had to cut down production due to semiconductor shortages, but
it appears that auto parts and component material suppliers, including your competitors, are notaffected much, looking at the level of shipments. Now, you are expecting a slight decline in profit of
the Performance Products for Q2. So, I’m wondering whether this means you are expecting areactionary decline in Q2 following a slight oversell in Q1. Can you comment on the trends ofautomotive-related products from Q4 to Q1, and then into Q2?
Yamaguchi: Yamaguchi from Performance Products. Yes, global automobile production is now
projected to be slightly lower than previously forecasted. Our projection is for production to decline
in H1 and then recover in H2.
However, demand from Japanese OEMs and the Asian market is very strong, to the extent
that production cannot keep up with it. Therefore, while there might be some impact of the reduction
in automobile production due to semiconductor shortages, we do not foresee a decline in sales volume
of our mainstay automobile-related products such as engineering plastics and Lamous artificial suede.
In the meantime, US automakers seem to be struggling in procuring semiconductors, which is slightly
affecting our business in North America.
So, true, operating income is expected to decline from Q1 to Q2, but this is due to suchfactors as worsening terms of trade and an increase in fixed costs. We do not expect market factors toadversely affect our sales volume from Q4 to Q1 and Q2. In fact, there’s an upside potential, should
the business in North America recover.
Mr. Umebayashi:

I see. In other words, there was no advance shipments in Q1, am I correct?

Yamaguchi: Yes, that is correct. Now there is a possibility that order inquiries are outpacing thestrong performance of the automotive market, and we are paying close attention to whether or not the
distribution inventory is building up. For the time being, though, we do not anticipate a reactionary
decrease in volume.
7Mr. Umebayashi: I see, thank you. My next question is somewhat similar in nature, about separators,
specifically demand for consumer electronics applications. Following a very strong Q4, you were notexpecting sales volume to grow that much in Q1, including the fact that production would not catchup. But it actually turned out that demand continued to be strong, especially in comparison to thedemand and production levels of final products. So, I’m wondering whether or not we should worry
about the possibility of this being advanced shipments, to be followed by a reactionary decline going
forward.
Ishikawa: Ishikawa for separators. For consumer electronics applications, demand for smartphones
in China was very strong in Q4 and Q1, but we anticipate that demand will decline slightly going
forward due to a glut in distribution inventories. But as far as automotive applications are concerned,
demand is expected to be very strong, including in Europe as mentioned earlier.
Mr. Umebayashi:

I see. That’s all from me. Thank you.

Mr. Okazaki: Okazaki from Nomura Securities. First on Homes. You said that the application of the
Accounting Standard for Revenue Recognition pushed up operating income in Q1 by ¥1.8 billion. Do
I understand correctly that it will not be repeated in Q2 onward? Also, page 22 shows that the operating
income from overseas businesses, etc. increased year-on-year. I take it that this was due to theacquisition of McDonald Jones. Will you describe the organic growth of McDonald Jones itself andthe trend in the Australian housing market?
Sakai: This is Sakai of Homes. The positive impact of applying the Accounting Standard for
Revenue Recognition in Q1 was greater than anticipated. And we expect that this factor will slightly
push up operating income in Q2 as well, but the amount will not be as large as in Q1.
The Australian business is currently doing very well, and progressing well along the planassumed in the May forecast.
Mr. Okazaki: I see. Was the application of this accounting standard already incorporated in theprevious forecast? Also, are there any concerns about the COVID-19 impact on the Australianbusiness?
Sakai: The application of this accounting standard was factored in in the May forecast. Regarding
the COVID-19 impact on the Australian business, we are a bit concerned about some suspension of
construction work at the moment, but we do not expect much long-term impact.
Mr. Okazaki: I see. Thank you. My next question is on Critical Care. Could you kindly comment on
the year-on-year growth rate of defibrillators for professional use and LifeVest in Q1? Qualitative
response would suffice. Could you also share your outlook for Q2?
Hamamoto: Hamamoto from IR. I’m afraid I’ll have to refrain from giving the exact growth rate. In
FY 2020, the full-year sales in Critical Care increased by about ¥49 billion year-on-year, majority ofwhich was contributed by ventilators. More than half of the ¥49 billion increase was recorded in H1of the fiscal year, but in Q1, the ventilator contribution was not so large. So, in Q1 of this fiscal year,
the growth of defibrillators and LifeVest more than made up for a year-on year decrease in sales ofventilators.
As for Q2, we expect defibrillators and LifeVest to continue to grow, but not enough to makeup for the year-on-year drop in ventilator sales given that in the previous fiscal year, ventilator
shipment peaked in Q2. And thus Critical Care expects lower sales and lower profit year-on-year for
Q2.
Mr. Okazaki:
to that level?

I see. I believe the pre-COVID-19 growth rate was around 10%. Can we expect a return8

Hamamoto: Yes. Defibrillators and LifeVest were affected by COVID-19, but demand is firmly
returning at the moment, and so we expect the growth rate to return to the pre-COVID-19 level.
Mr. Okazaki:

I see. That’s all. Thank you.

Mr. Omura: Omura of UBS Securities. My first question is on Homes. I think the businessenvironment surrounding order-built multi-dwelling homes has changed over the last few years, things
turning in favor of this particular business. What is your take on the environment surrounding orders
for multi-dwelling homes? Also, in light of this steady growth, what kind of growth rate do you expect
for the coming few years?
Sakai: Sakai from Homes. The environment for orders for multi-dwelling homes is generally
favorable. And we are taking actions to grow the multi-dwelling homes. In particular, we are working
to increase large-scale properties such as value-added rental housing, and the average unit price isrising accordingly.
The number of housing starts is expected to decrease going forward in line with Japan’s
demographic change, and we recognize that multi-dwelling homes are in a similar environment, but
we believe that there still is room to increase our market share for both unit homes and multi-dwelling
homes. And we are taking actions accordingly.
Mr. Omura: I see. Are you seeing any changes in the order environment or demand trends due to
COVID-19 impact?
Sakai: There has been no major change in demand trends, but the means of attracting customer traffic
has changed significantly. In the past, we mainly resorted to attracting customer traffic physically tomodel homes, but now it is done virtually, attracting customer traffic online through websites and thelike. But the basic trends seem to remain the same.
Mr. Omura: I see, thank you.
Mr. Okazaki: Okazaki from Nomura Securities again. Can you give us the market prices and pricespreads of AN as always, the Q1 actuals and assumptions for Q2, as well as your future outlook on
supply and demand.
Takahashi: Takahashi from Basic Materials. Market prices and spreads in Q1 were AN $2,709 per
ton and propylene $1,069, for a spread of $1,640, which was slightly higher than previously forecasted.
As for Q2, we originally assumed that supply and demand balance would gradually relax.
Prices are assumed to be on average, AN $2,100 and propylene $1,000, for a spread of $1,100.
Spreads in Q1 were at a high level due to the impact of cold waves in the US, but have
gradually declined since. Still, they remain slightly higher than expected due to maintenanceturnaround campaigns and production disruptions.
Toward H2, demand is expected to basically remain strong, but with additional supply fromthe completion of maintenance turnaround as well as a possibility of new capacities coming online inChina, we expect supply and demand balance to steady rather than relax. Our plants are expected tobasically be on full operation excluding the impact of maintenance turnaround.
Mr. Okazaki:

Can you elaborate on what you mean by new capacities in China?

Takahashi: It’s not certain at all, but there’s a possibility that some new capacities scheduled for next
fiscal year might start operating earlier in light of the current market situation. So, we will be watching
the development closely. But as mentioned earlier, demand is strong, so we believe the supply-demandbalance to remain stable.
Mr. Okazaki:

I see, thank you.

9Mr. Watabe: Watabe from Morgan Stanley MUFG Securities again. Regarding the Basic Materials
business, it was explained that the increase in profits due to inventory valuation gain in Q1 exceeded
the decrease of ¥3–4 billion due to maintenance turnaround. How much was the impact of inventory
valuation gain? Can you also comment on the year-on-year change?
Takahashi: Takahashi from Basic Materials. While the difference in inventory valuation gainincreased profits, it is difficult to give an exact amount, partly given that there’s a delay in transferring
the difference to sales prices. Last fiscal year, market prices fell sharply in Q1, so you might want tolook at the impact of inventories this year as the reversal of what happened last year.
Mr. Watabe: So, in that respect, if we assume that impact of inventory valuation gain pushed up
profit by about ¥10 billion year-on-year, it seems that there wasn’t much increase coming from otherfactors, despite a gain in relation to AN. Would that be a fair statement?
Takahashi: Yes, in that there was an impact of maintenance turnaround as well as the effect of adecrease in sales volume.
Mr. Watabe: I see. Do I understand correctly that there was no impact of inventory valuation gain on
Performance Products?
Yamaguchi: Yamaguchi from Performance Products. I wouldn’t go as far as to say no impact, but
nothing major that you should be concerned about.
Mr. Watabe:

I see thank you.

Hamamoto: Thank you. This concludes the conference call. Thank you for your participation.

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