SWCC Corporation
Meetings with institutional investors
Q&A Sessions (3Q FY3/24)
Date and time of implementation: Wednesday, February 7, 2024
Part I 14:30-15:30/Part II 16:00-17:00
Implementation site: Nihonbashi Kabutocho, Chuo-ku, Tokyo■Energy & Infrastructure Business
QA

Tell us about the future outlook for SICONEX®.
Due to high customer demand and the plant continuing to operate at full capacity, we decided to expand the plant 2 years ago.
The expansion was completed at the end of this fiscal year, and it is expected to start operation from April this year. Capacity
needs to be increased by 1.5 times, but production capacity is expected to double the 2023 facility. Demand for us is increasing
further as competing insulator component manufacturers have announced that they will withdraw some of their products.
Against this backdrop, it is already apparent that it is not possible to respond to strong demand simply by doubling production
capacity, and we are considering the possibility and necessity of further production increases in the future and intends to show
it in the rolling plan of the medium-term plan.

QRegarding the Energy and Infrastructure Business, 3Q performed well, but I would like to ask you whether there are anyfactors that will cause braking for 4Q and what you should consider as risks in the next fiscal year.

AThe main factor behind the strong 3Q performance was that in respect of electric power infrastructure, the increase inconstruction projects in the 2H raised the operating rate of the plants and improved profitability. It is not a 2Q backward or a
4Q forward. In the construction sector, the media also reported a shortage of wire, resulting in an overhang of demand for neworders. The factory was operating at full capacity to return the New Year holidays, and we continued to produce at a highcapacity utilization rate, resulting in improved profitability. Concerns regarding next fiscal year are that there are no major
fluctuations in electric power infrastructure, as revenue caps are thoroughly implemented by electric power companies.
However, there is a risk that inventories for construction will slow down. Observation of demand conditions and appropriate
control of production are important. In any case, since the collaboration with FURUKAWA ELECTRIC, the level of awarenessamong staff has improved, and the profit margin has also risen. If the utilization rate improves, the profitability naturallyimproves. This structure will remain unchanged in the next fiscal year. For construction, we expect to further improve
profitability by streamlining the copper wire drawing process from the Sendai Plant to the Ibaraki Plant next fiscal year.

Q

Regarding construction-related issues, are there any impacts of project delays due to labor shortages?

AThe shortage of workers will continue. In terms of demand, although there is a possibility of a temporary rebound, we expect
demand to remain at a high level in the future, and we do not believe that the impact on us of a labor shortage will besignificant.

Q
A

What were the projects that were highly profitable, and will we be able to receive orders continuously in the future?
Projects that were not initially planned have come in. Those added as additional construction at completion and special wire forplants are highly profitable. Such projects were sporadic in 3Q. However, we believe that improving profitability throughimproved plant utilization rates is a more significant factor behind the upside in 3Q.

QA

Will SICONEX not revise its prices in accordance with the supply-demand balance?
In the substation sector, SICONEX has a high market-share, and we have recently received orders to the extent that it has
insufficient capacity. Even if prices are revised according to the balance of supply and demand, I think that the advantages tocustomers will be greater. This is 1 reason why the profitability of the Energy and Infrastructure Business is rising, partly
because the profitability of the individual businesses is rising.

QA

Please tell us about the situation of the increase in the number of construction personnel.
It is feasible to produce goods by adding factories, but increasing the number of construction personnel is not easy.
Accordingly, in 2021 we established the Construction Personnel Development Center, which dispatches human resources frompartner companies nationwide to develop them. We have worked to resolve the shortage of installation personnel by having ourpartner companies take charge of construction work with a low level of the volatility class, and by allocating highly skilled
installation personnel from our abundant experience to construction work with a high level of the volatility class. This initiativeis getting on track, and the number of construction staff has increased by about 10% since 2021, and now it has increased by
1.5 times 3 years ago.

■Electrical Equipment and Components
Q Do you see the current market environment as a tailwind or a headwind than originally planned?
A The development of high value-added products is progressing, and our company plans to increase profit margins by expanding
sales of products such as heater wires and semiconductor products. However, the current market environment for automotive
products is difficult to predict, as hybrid vehicles are selling well while the shift to BEVs is expected to proceed at a rapid pace,
and there are also opinions that if Mr. Trump wins the presidential election, there will be a shift back to gasoline-powered
vehicles. However, our product lineup is capable of responding to either BEVs or hybrids. We will continue to make capital
investments so that we can increase sales and profits as the market changes.

Q Please tell us about the background of the switch from a wire harness to a bus bar.
A EV becomes more prevalent, batteries will account for the bulk of the floor, which will interfere with the bundle of wire
harnesses and make robotic installation more difficult. By using a bus bar with a flat wire, it can be easily installed even in arobot, and it can fit compactly without taking space for a battery. These are advantages, and the market expansion is expectedin the future.

Q

Please tell us about the background to the rising demand for heater lines.

A

It was anticipated that demand for heater lines would increase as EV became more widespread, but it was unexpected thatdemand for vehicles equipped with heater lines in the back seats, particularly in North America, was increasing. Especially in
new cars for cold districts in North America, the installation rate of heater wire in rear seats is increasing. About 2 years ago,
it increased the production capacity of the heater line by 50%, but the demand is increasing at a faster pace than that, and it isnecessary to consider whether to further increase the production facilities by FY2026, the final year of the medium-term
management plan. The heater wire mounted on the seat is important in flexibility and safety required during boarding andalighting. On the other hand, the heater wire mounted on the door is not required high specifications, the development of an
inexpensive product is advanced. In addition, bendability and waterproofing are emphasized for the heater wire for the floor.
Such elements will be a point for future development.

Q

Please tell us about the factors behind MiDIP®'s rising demand from 2026 to 2030.

A Compared to third-party products, MiDIP® has a higher advantage. The reason why MiDIP® must be chosen is that it is excellent
in heat resistance, conductance, and machinability, and can cope with high-voltage. With the popularization of BEV inparticular, it is important to reduce power consumption. MiDIP® has a business machine. Other companies can enter themarket, but it is difficult to offer thousands or tens of thousands of tons of products at this price point. By shifting to a portfolioof high-value-added products, we aim to achieve an operating profit margin of 10% or more in the future.

QHow will the slowdown in EV sector affect the electrical equipment and components business?

AIn the European market, inflation and the cancellation of subsidies have cooled down, but in China and North America they
have sold well without inflation. However, BEV seems to have run its course, and BEV is slowing due to increased sales ofhybrids and gasoline-powered vehicles. In Japan, the shortage of semiconductors has eased, and demand is recovering mainly
for hybrid vehicles, and we expect that this will serve as a tailwind for our products.

Q

When and to what extent will profitability improve in the Electrical Equipment and Components Business?

A

Because we will invest 6.6 billion yen during the medium-term plan, the depreciation burden will increase, and the prospects
for growth are poor. However, the profitability of the copper alloys business, centered on heater wires, is extremely high, andin earnest, it is expected to contribute to incomes ahead of 2026. What we worry about is the delay in BEV transition. This isbecause there is a possibility that there will be a delay in the business model for square windings that is currently being
developed. On the other hand, the number of hybrid vehicles sold is higher than expected, and our lineup of flat-angle
windings for hybrid vehicles is also considered to cover the negative portion. We will strive to exceed the operating profit
target of 2.6 billion yen, which is the minimum target for the period of the medium-term management plan.

Q

Which finished vehicle manufacturers are shipped?

A

MiDIP® is used for a considerable part of hybrid-car. Flat-angled status are mainly for Europe, and the market conditions arecurrently severe, but heater wires are extremely favorable for North America.

QIs the heater line a Japanese manufacturer with a base in North America?

AAs you recognize. It is assembled in North America by Japanese manufacturers.

■Communications and industrial devices business
Q

Please tell us about the trends in orders for high-speed communication cable for automotive, which was newly launched in
the current fiscal year, and the outlook for growth.

AIn August and September of this year, we expect high-speed communication cable for the automotive industry, which begandeliveries, to grow about 3 times in FY2024 compared to FY2023, and thereafter grow at an annual rate of about 10% toward2026. Currently, it is for domestic automobile manufacturers, but new inquiries seem to be coming, and we would like tofurther expand it in the future.

Q

Your company booked 300 million yen in restructuring charges. Is this 1-time?

AThe loss of 300 million was 1-time, and the portion that was scheduled to occur in the next fiscal year was also recordedtogether.

■Impact of copper prices
Q

Regarding the impact of copper prices, will the profit margin fall if copper prices rise?

AFluctuations in copper prices are reflected in sales prices and are slided. As a result, when copper prices rise, sales rise, butprofits do not change. The profit margin therefore falls.

■Capital Policy
QA

Please tell us about future capital policies.
Until now, we have promoted portfolio-based management by making decisions to survive, exit, or invest based on the spread
between WACC and capital policies and ROIC management. There is no plan to change this basic policy in the future. Whileclosely monitoring the balance sheet, we will appropriately secure cash using various means, such as reducing working capitaland selling strategic shareholdings, to maintain a balance between growth investment, non-business investment, andshareholder returns. In ROIC management, the control of WACC is important. Rather than simply accumulating incomes,
including managing dead capacity and controlling the debt-to-equity ratio, we will invest in the business, invest in humanresources, and return to stockholders in a balanced manner from the perspective of cash allocation.

■Growth strategy, structural reforms, and future outlook
QAre there any changes in the perception of the business environment and in the investment plan when implementing thegrowth strategy?

AOne point in changing the investment plan in implementing the growth strategy is to further strengthen existing strong
businesses and improve profitability. We think it is necessary to actively utilize the 31 billion yen investment limit for growthin order to move away from a company of "Electric Wire & Cable" and develop it into a company that can provide
comprehensive solutions including connected parts. Regarding the automotive market, there is not only the trend of shifting toBEV, but also the trend of unstable market of returning to the hybrid car, but it is necessary to identify and respond to them.
Over the past few years, our business conditions have stabilized, and the 3 pillars of our business have become solid. Rather
than jumping into entirely new business areas as future growth investments, our policy is to expand the scope of its 3 existingbusinesses.

Q Please tell us about specific measures to increase product margins.
AWe believe that there should always be a blue ocean area in the businesses in which we have strengths. We believe that it cansecure a certain level of profitability by developing and investing in this area with technological capabilities and strategies. To
this annual, we have been working to liquidate unprofitable businesses over the past 5 years. We will never run a company thatis returning to an unprofitable company in the past. Our approach to profits has permeated its employees, and it will continue topromote business development based on this approach.

QIn the past, I think the challenge is to transition to a phase of structural reform and to a growth phase in the future.
Please tell us about your future strategy.

ASince 2019 year, we have focused on ROIC management, exiting or divesting unprofitable businesses, investing capital inpromising businesses, and promoting restructuring to improve productivity and profitability. Our financial position has
improved and its profits are rising. However, as you have pointed out, it is still insufficient to be viewed as a growth company.
Therefore, going forward, it will be necessary to further strengthen the strong business, and just because the market is large, I
think it is important to consider a scenario with a success rate, rather than simply investing. FY 2024 will be the midpoint of
the medium-term management plan, so we would like to specifically show our growth strategy going forward, including therolling of the medium-term management plan.

Q

I would like to ask you to provide a review of the past as the president and the future prospects.

A

I was originally from a research field, and what I really wanted to do when I became president was to create something new.
By prioritizing efforts to improve its financial position, our company was able to improve to the level it had targeted. However,there is a sense of urgency that if the situation remains unchanged, it will return to its original state. We believe that the task
going forward will be to build the next system with a new stance that has further advanced the thinking that has been taken up
to now.