ASANUMA CORPORATION
Q2 Financial Results Briefing for the Fiscal Year Ending March 2021
November 20, 2020

Event Summary[Company Name]ASANUMA CORPORATION[Company ID]

1852-QCODE[Event Language]

JPN[Event Type]Earnings Announcement[Event Name]

Q2 Financial Results Briefing for the Fiscal Year Ending March 2021

[Fiscal Period]

FY2020 Q2[Date]

November 20, 2020

[Number of Pages]

23[Time]

15:30 – 16:19(Total: 49 minutes, Presentation: 37 minutes, Q&A: 12 minutes)[Venue]Kabutocho Heiwa Building 3F
3-3 Kabutocho Nihonbashi, Chuo-ku, Tokyo 103-0026 (Hosted by The
Securities Analysts Association of Japan)[Venue Size]

145 m2[Participants][Number of Speakers]

4
Makoto Asanuma
Morio Yamakoshi

Yoshimichi Yagi

Representative Director and CEO
Representative Director Senior
Managing Officer
Executive Officer, General Manager ofTechnical Research InstituteExecutive Officer

Satoru Matsuhashi

Strategic Capital, Inc.

Seiichiro Ishihara[Analyst Names]**Analysts that SCRIPTS Asia was able to identify from the audio who spoke during Q&A.

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Presentation
Moderator: Now it’s time to start. From now on, we will hold the Q2 Financial Results Briefing for the Fiscal
Year Ending March 2021 of ASANUMA CORPORATION.
First of all, I would like to introduce you to four people from the Company. First of all, Representative Director,
CEO, Mr. Makoto Asanuma.
Asanuma: I’m Asanuma. Thank you very much.
Moderator: Following this, Representative Director Senior Managing Officer, Mr. Morio Yamakoshi.
Yamakoshi: I’m Yamakoshi. Thank you very much.
Moderator: Executive Officer, General Manager of Technical Research Institute, Mr. Seiichiro Ishihara.
Ishihara: I’m Ishihara. Thank you very much.
Moderator: Following this, Executive Officer, Mr. Yoshimichi Yagi.
Yagi: I’m Yagi. Thank you very much.
Moderator: Today, President, Mr. Asanuma and Senior Managing Officer, Mr. Yamakoshi will give us
presentation, and following that, we will have a question and answer session. We appreciate your cooperation.
Then, I will have Mr. Asanuma to start first.
Asanuma: I’m Makoto Asanuma, the President, who was just introduced. Thank you for your participation.
Today, I will explain the business environment surrounding the construction industry first, followed by anoverview of the Financial Results of the Second Quarter for the Fiscal Year Ending in March 2021 and, theprogress of the Three-Year Medium-Term Plan, return to shareholders, corporate governance, and social
contributions.

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Please refer to page three. Due to the impact of COVID-19, private-sector construction investment has been
discontinued or postponed due to declining demand for housing and other factors as a result of thedisappearance of inbound tourists and sluggish consumer spending. On the other hand, capital investment,such as logistics facilities, remained firm in response to changes in lifestyles.
Public construction investment remained firm as a countermeasure against repeated natural disasters due tothe national land resilience policy, including recovery, disaster prevention, disaster mitigation, and measuresagainst aging infrastructure.
If the COVID-19 crisis should continue for a prolonged period in the future, there are concerns that
construction investment will decrease due to such factors as the postponement or restraint of capital
investment associated with this crisis.
The graph below represents the most recent construction investment. Until fiscal 2019, investment had been
rising steadily. However, due to the impact of the COVID-19 crisis, private-sector investment is expected to
decline in particular, and competition for orders is expected to increase in the future. Therefore, we believethat we should pay sufficient attention to the deterioration in the profitability of construction work.

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Following on, Mr. Yamakoshi will provide an overview of the financial results of the second quarter for the
fiscal year ending March 2021.
Yamakoshi: This is Yamakoshi. Thank you.
Please refer to page four. First, let me explain the interim results. Actual results are shown in the third columnof the table, painted in green. The right is the YoY change, and the right is the change against the plan.
As you can see, orders received, net sales, and profits all declined YoY. Compared to the plan, orders received
were lower, but net sales and profits were higher.
By item, order received shown on the top was JPY56.3 billion, which is down JPY13.6 billion from the previous
fiscal year. Full-year orders received are planned to decrease by JPY22.2 billion YoY, so the progress rate as of
the interim period against the full-year forecast is 44.6%, which is not so bad. However, compared to the plan,orders received underperformed by JPY6.7 billion since orders were cancelled or postponed due to the impact
of COVID-19.
The net sales in the second row was JPY63.4 billion. Compared to the previous fiscal year, completion
construction amount declined by JPY5.3 billion. On the other hand, we exceeded our plan by JPY6.8 billion,
partly due to progress in construction work that exceeded expectations.
The operating income was JPY2.2 billion, or 3.4%. Completion construction amount declined by JPY5.3 billion.
On the other hand, we exceeded our plan by JPY6.8 billion, partly due to progress , which I mentioned earlier,and the gross margin on completed construction contracts was 9.5%, which is not stated in the slide, anddecreased by 0.8 % points from the previous fiscal year.

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As a result, gross profit on completed construction contracts decreased by JPY1 billion. In addition, selling,
general and administrative expenses increased by JPY200 million due to system-related expenses, et cetera,
resulting in a decrease of JPY1.2 billion in operating income.
As I mentioned earlier, operating income exceeded the plan by JPY900 million, partly because ompleted
construction contracts exceeded the plan by JPY6.8 billion.
At the bottom, net income was JPY1.2 billion. This represents a YoY decrease of JPY900 million and a YoY
increase of JPY500 million over the plan.

Please refer to page five. Page five shows the progress of the results the Three-Year Medium-Term Planconsisting of the current fiscal year, the previous fiscal year, and the fiscal year before the previous fiscal year.
The far left of the table is the plan for the year ending March 2019 in the medium-term plan, the column to
its right is its results, and the right next to it the plan for the year ending March 2020 in the medium-termplan , and the column to its right is its results.
In the past two fiscal years, as you can see, the results for all items exceeded the targets in the medium-term
plan. The column slightly to the right of the middle is the plan in the medium-term plan for the fiscal year
ending March 2021, or this fiscal year. Orange-colored column right next to it is the plan for the current fiscal
year. Considering the impact of COVID-19, we have set the plan for the current fiscal year below that of themedium-term plan. At this stage, we expect to achieve this plan for the current fiscal year.
For reference, the right two columns show the average of the three-year medium-term plan and the averageof the results of the past two fiscal years and the results of this fiscal year assuming the plan is achieved. We
expect orders received, net sales, and profits to exceed the figures in the medium-term plan on average.
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5However, operating income is expected to be lower on average than the figures in the medium-term plan.

Please refer to page six. Page six also shows the progress of the three-year medium-term plan in regard to
management indicators. We are aiming for an operating income of 5% or more for the current fiscal year,
which is the final year. We also seek to raise ROE to at least 10% and equity ratio to the 40% level. Furthermore,in terms of return on invested capital, ROIC, we have set an indicator by seeking to exceed the cost of capitalfor all three years.
On the other hand, the following table shows the results and forecasts. The third column from right is theplanned value for the current fiscal year. We believe that we can achieve this plan as well. In addition, the far
right is the average of the actual results for the past two fiscal years and the plan for the current fiscal year,
which I mentioned earlier. Regarding operating income at the top, we had planned to reach 3.9% for thecurrent fiscal year, and in the far right, the average of the past results and the plan for the current fiscal yearof 4.3%, and exceed 5% for the final fiscal year, but we do not expect to reach this target.
ROE in the second column is expected to be 10% in the current fiscal year. With an average rate of 11.4%, we
expect to achieve the 10% level.
In addition, below that, equity ratio is 43% in the plan and 40.5% on average, so we can secure the 40% level.
ROIC and below that WACC are shown. As you can see, we expect ROIC to exceed WACC in the fiscal year
ended March 2019, the fiscal year ended March 2020 and the current fiscal year.
With regard to operating profits, we are struggling with the amount or rate I mentioned earlier.

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Please refer to page seven.
We planned to invest JPY20 billion in this three-year plan. As shown in the table, in the second column fromright, JPY5 billion for technology and system-related and JPY5 billion for new fields. Additionally, JPY10 billion
for switching to cash for payments for the purpose of building stronger ties with partner companies. The total
is JPY20 billion.
Regarding the actual investment of funds at present, JPY2 billion will be spent on technology and systems,
and as I will explain later, the extension and renovation of the Technical Research Institute will cost JPY700
million. Then, JPY250 million by developing a new system called Ai-MAP SYSTEM. Then, JPY250 million for BIM
and CIM, and other developments. In addition, we invested JPY800 million in the development of a coresystem.
We anticipate that Ai-MAP SYSTEM will become more sophisticated or that other new systems will be
developed in the next fiscal year or later.
In addition, with regard to new fields, we expect JPY1.5 billion compared to our plan of JPY5 billion. As I will
explain later, it will be JPY500 million for M&A and then JPY1 billion for renewing the brand.
Although we are still considering M&A, the impact of COVID-19 makes it difficult for us to move forward,
resulting in this expected scale of investment.
In addition, for switching to cash for payments, the plan is JPY10 billion. We have already implemented this,and as a result, the investment was JPY14.5 billion, which is an increase of JPY4.5 billion. At the time of theplan, we had planned to raise the cashing ratio of payments to partner companies from 60% to 90%. At

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7present, however, we have already made the entire amount 100% cash, so the investment increased by JPY4.5
billion more than planned.

Please refer to page eight. As part of the investments in technology and systems, we expanded and renovated
the Technical Research Institute. As I mentioned earlier, we have invested JPY700 million in the past three
years. Not only that, In the past, we invested JPY400 million, so we have invested a total of JPY1.1 billion inextension and renovation.
We have three points to mention here. We have increased the number of training areas for young employees
and technicians from partner companies. We have also sophisticated our seismic isolation and vibration
control technologies by upgrading our seismic monitoring systems and testing equipment. In addition, we
have established a multi-purpose laboratory space and are now conducting a variety of experiments.

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Please refer to page nine. This is also one of the investments we have made in the technical system, and weare developing our own system called Ai-MAP SYSTEM.
The purpose of this system is to pass on the skills of seasoned workers and improve productivity through thissystem, as shown in the top of the table.
There are details, features, and effects stated in here, and one of the details is skill motion analysis, in which
GPS cameras or sensors are attached to a skilled technician, and then, the motion, action, and sound areconverted into data. This means that the analysis works out for transfer of skills.
Next, in terms of infrastructure and communications management, this is to implement production
management and improve efficiency at the site from a remote point. It means that monitoring on-site
conditions even from a remote location will lead to an improvement in productivity.
This technology has been adopted by Ministry of Land, Infrastructure, Transport and Tourism (MILT) in a
project to introduce and utilize innovative technologies to dramatically improve the productivity of
construction sites.
We spent JPY250 million on this system, but the majority of the amount is subsidized by MILT.

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Please refer to page 10, which also refers to one of the investments in the technologies and systems. This is
the utilization of BIM and CIM.
This is a system that makes planes three-dimensional in order to improve the efficiency of operations, and we
use this system for design, construction planning, or construction management.
We have two separate rows with pictures, and the upper row shows the renovation of the hall. The building
has a complex ceiling. We are using BIM to verify the construction procedures for renovations and thefeasibility of the renovations.
The lower row shows the construction of the bridge leg of the civil engineering works. In this as well, weconvert the data from a 3D scanner to images to use grasp the situation in the ground or to manage theprocess.

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10Please refer to page 11. This is one of the investments in our technologies and systems, and we haverestructured our core systems.
As you can see in the picture, we have made the sales, integration and design system, accounting system, andpersonnel salary system fully cloud-based. We restructured its business management infrastructure in thecloud. This means that we can improve the efficiency of our operations.
In fact, we have used the system since 20 years ago, but it has become quite old, so we have been working to
replace it with a new system during this three-year medium-term plan. This fiscal year, we will complete theproject.
We happened to need to stay at home due to the impact of COVID-19, and thanks to this system, we wereable to make it smooth to stay at home. Naturally, so far, we have used our own server, but it will not benecessary, so we will be able to reduce costs.

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Please refer to page 12. This is a new field in which we made a new investment. We have acquired a subsidiaryin order to strengthen our overseas business.
We merged and acquired a company that provides exterior wall painting in Singapore at about JPY500 million.
We have hoped to renew our business in ASEAN region, and this was the first initiative of doing that. We willcontinue to consider M&A of this type of business. I have already told you this as well, but amid things haven’t
been moving forward.
And, below, we are working on the maintenance business for aging expressways and bridges in Thailand. Thisis one of our renewal projects, and we are currently working to repair expressways and bridges with textile
sheets used for reinforcement and maintenance. As part of our efforts to expand our renewal business in
ASEAN region, we are now moving forward.

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Please refer to page 13, referring to branding the renewal business.
The upper one describes a new renewal brand that emphasizes people and the environment. We plan toannounce a new brand in April next year that focuses on human health, or energy conservation through theuse of natural materials or the use of renewable energy.
At the same time, as described below, we are working on improving the renewal service and unifying thereception desks. In addition to launching a brand, we will also establish a sales system by unifying our service
counters to deal with diverse inquiries.
On the right, there is a chart the reception judges whether the inquiries relate to renewal, or maintenanceand management. Then, in response to this, we develop a business plan that indicate how it should be done,
and after conducting research, design, and construction, we receive an order. Then finally we commence onrenovation work. This is how we are going to go through this cycle.
As I mentioned earlier, in order to get the actual customer to see, we are currently proceeding with renovation
under this brand, and accordingly we will invest JPY1 billion.

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Please refer to page 14. Returns to shareholders.
Regarding returns, we consider the dividend payout ratio to be the most important policy.
There are three bar charts above, and the left-hand side shows the details as of May 2018 when we announced
our current three-year medium-term plan. The chart in the middle shows the plan announced in May 2019,one year after the announcement of the three-year medium-term plan. As you can see, the dividend payout
ratio has increased since May 2018, and naturally, the dividend has also increased.
Incidentally, at that point of time, the figure for fiscal 2018 is reflecting the actual result, which is JPY153, andthis means that we have increased the dividend by JPY53 from the initial announcement.
The far right is the chart when two years passed after the announcement of the three-year medium-term plan.
The dividend payout ratio has not changed. However, in the middle bar, the actual result for fiscal 2019 was
JPY216, meaning we have increased the figure by JPY8 from the planned figure in May 2019.
However, as for this fiscal year, or the third year of the plan, due to the impact of COVID-19, we will revise theplanned final profits downward, and as a result, the dividend payment will be JPY250, a JPY42 decrease from
JPY292 of the plan.
In addition, the details of the repurchase and retirement of treasury stock we conducted are described in thelower left. The upper part explains the repurchase of treasury stock equivalent to approximately JPY1 billion,
and this has been done since November 2018. And as stated below that, we retired 430,000 shares of treasury
stock, which we did in May 2019. Currently, the Company owns almost no treasury stock.

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Please refer to page 15. This describes the corporate governance system.
From the top, Outside Directors account for one third of the Board of Directors. There is one female Outside
Director.
Outside Auditors make up three quarters of the Board of Auditors. Three out of four are Outside Auditors.
In addition, regarding the analysis and evaluation of the effectiveness of the Board of Directors, this has been
done by an external organization since the previous fiscal year. In the previous fiscal year, we received a ratingof slightly higher than the average. We have been doing this this year as well, and will have the evaluation
result next month.
The Nomination and Compensation Committees are chaired by Outside Directors and the majority of themare Outside Directors. The number of meetings held is as described there.
In addition, aiming to strengthen IR, the Company makes a point of holding a briefing for institutional investors
twice a year, and is doing so. And as for a briefing for individual investors, we held a meeting for the first timein February of this year, and we intend to hold it twice a year in the future.
At the bottom, in terms of stock holding, we consider the benefits of dividends and construction profits as thecriteria for deciding whether to hold listed stocks. Currently, we in principle make a point of selling stocks if
the benefits are less than cost of capital.
The third one from the bottom in the box, at the end of March 2020, the overall yield was 16% and the costof capital was 8%. However, although the overall yield, is exceeding the cost of capital, some are below the

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cost of capital individually. As I mentioned earlier, we sell, in principle, those items that are below the cost ofcapital.
At the bottom in red colored text, we are reducing strategic shareholdings to less than 10% of consolidated
net assets by the end of the next fiscal year, and this has already been announced as our policy.

Next, the President Mr. Asanuma will explain about our social contribution activities.
Asanuma: Please refer to page 16 of the document. We, ASANUMA CORPORATION, are promoting social
contribution activities in various fields under the basic policy of social contribution. This year, a variety ofactivities were restricted due to the COVID-19 pandemic, and the tournament and other events werecancelled in each sport, so I would like to explain the activities taken in last year, instead.
We have been sponsoring the Japan Dream Baseball League and the Japan Blind Tennis Federation, sports
organizations for the disabled. In baseball for the physically handicapped, a nationwide selection competition
was held in Toyooka, Hyogo Prefecture, and a heated battle was held. The report shows the tournament lastNovember. Blind tennis is a sport originating in Japan and is now being played around the world. A world
tournament was held in Spain, with Ohno winning the B1 class men’s category.
Next, the “Nara Dotto FM” is an FM station limited to a small area in Nara City. FM stations play an importantrole, such as building local communities in the event of a disaster. Among them, this station airs a program
called “Okamoto Akio no Nara, Oku no Oku”, where Professor, Mr. Akio Okamoto, the former shinto priest of
Kasuga-taisha shrine, serves as the main personality. I hope that this will help to communicate the history andculture of Nara and help in local disaster prevention activities.

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Next, please refer to page 17. We co-sponsor and cooperate with workshops for student majoring inarchitecture. Since 2016, several people have accompanied this activity from our design department. The
photographs show the workshop at Todaiji, a temple, which took place from September 15 to 21, 2020.
In the future, as a member of society, we intend to continue to engage in a variety of activities.

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Next, please refer to page 18. The picture is a building that won the Awards of Excellence of the Public BuildingAward.
This award is given every other year to buildings with a high public profile, used by national agencies and local
governments. The award is comprehensively evaluated not only from the perspective of building excellence
but also from the perspective of contributing to local communities, facility management, and conservation.
This building is a complex in Kounosu City, Saitama Prefecture that consolidates the functions of branches,
libraries, museums, children’s halls, and public halls. The building was highly evaluated for its improved andmore efficient and convenient residential services.
We put the newspaper articles as our recent topics, which are featuring the Company, so I would be grateful
if you could take a look at it.
Now, I would like to conclude the Second Quarter Financial Results Briefing. Thank you very much for yourattention.
Moderator: Thank you for your explanation.

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Question & Answer
Moderator: Then, I would like to start the question and answer session.
If you have any questions, I would like you to raise your hand and make a statement. When speaking, I willbring you a microphone, so please speak with a microphone.
The full text of this briefing, including the question and answer section, is scheduled to be transcribed andmade available to the public. Therefore, if you mention your company name or your name at the time of thequestion, it will be open to the public as it is. I kindly ask for your understanding. If you wish to anonymity, do
not say your name when you ask a question.
So, is there anyone who have a question?
Matsuhashi: I am Matsuhashi of Strategic Capital. I would like to ask about page seven of the slides.
According to your explanation of the fund investment plan, the Company is continuing to reduce its net cash.
You explained that due to the impact of COVID-19 and other factors, the conversion of JPY10 billion to cashfor payments to partner companies amounted to JPY14.5 billion.
My question is if you intend to continue to do so in the future? I would like to ask whether net cash will
decrease down the road. I think that a 100% cashing ratio means it is impossible to further increase the ratio.
Please tell us your image of the future trend in net cash.
Yamakoshi: As you said now, 100% of the payment is made in cash, so there is no mor room to increase theratio of cash payment. In terms of net cash, we believe that we maintain net cash equivalent to two monthsof monthly sales, which is the level generally deemed adequate in the case of deposit balance.
On the other hand, we have about JPY11 billion of borrowing on a consolidated basis and JPY8 billion on an
individual basis. We do not plan to increase this amount at this stage. This is all.
Matsuhashi: Let me continue to ask questions. This concerns shareholding written in page 15, with a red star.
It says shareholding will be reduced to less than 10% of the consolidated net assets. I think that the annual
average will be just under JPY2 billion or perhaps about that, but I would like you to use the proceeds fromthe sale to return profits to shareholders.
Will the proceeds of the sale of this shareholding be used for shareholder returns, for example, as a special
dividend?
Yamagishi: I cannot say anything about this topic here. We will take it as your opinion. This is all.
Moderator: Thank you very much. Does anybody have any other questions?
Nakayama: My name is Nakayama of Daiwa Asset. Thank you. I also have several questions.
Firstly, I feel bad if this sounds too early, but before developing the idea of the next medium-term plan, in thecurrent medium-term plan, your Company has set a target for the equity ratio, partly due to your Company’s
intention to strengthen its financial strength. I’m understanding so.

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19Thanks in part to the results of efforts so far, the Company will achieve the target of its equity ratio in therange of 40% this year. This 40% level is already higher than that of SHIMIZU CORPORATION. What kind of
approach will you take about the capital equity ratio when you consider it again in the medium term in the
future?
Please tell us your current basic thinking on whether you think that you have already secured enoughsoundness, or whether you still have the desire to enhance its financial soundness. First of all, this is the firstquestion.
Yamakoshi: As you have said, we expect to almost achieve an equity ratio in the 40% range under thismedium-term plan. The following medium-term management plan will begin on April 1 next year, and I would
like to announce the approach we will take regarding capital equity ratio.
I think the ratio of 40% is, generally speaking, an acceptable figure as soundness. This is all.
Nakayama: Thank you very much. We use WACC in our calculations of whether your Company is creating
corporate value or not. Therefore, if you intend to further enhance soundness from here on, it is possible thatthe method of calculating the target stock price will change slightly, and after including this point, I hope that
I can hear a good message from you in the next medium-term plan.
Second, I would like to ask you about how to use funds in the next medium-term plan.
In order for your Company to be much highly evaluated, I think that shareholders return is of course an
extremely important theme. There is a considerably high expectation that taking advantaging of the funds
that have been invested or will be invested in the future, your Company’s growth rate and rate of return willproduce output that will eventually outperform in the industry.
Looking back at the funds invested in the current medium-term plan, what do you think the results eventuallymean to your Company? And based on that, what is the ideas of investing funds like in the next medium-term
plan? What do you intend to change to drive mainly their growth, and to improve the accuracy of theinvestment of funds in relation to business efficiency? I would appreciate it if you could give me some hints
as far as possible about that as well.
Yamakoshi: As I have explained, under this medium-term plan we have not been able to invest funds intechnology systems or new fields as targeted. In the next medium-term plan, we will continue to introduce
the technology systems and new fields that I mentioned earlier.
Regarding WACC, I would like you to check the new plan announced in and after April next year. I think there
are various perspectives when evaluating its effects. For example, how much will the investment increase
operating income after tax? This is a concept similar to the so-called ROIC, and will it exceed the cost ofcapital? With such perspectives in mind, we will continue to invest capital, particularly in the areas I have justmentioned. This is all.
Nakayama: Thank you very much. The fact that the planned funds were not used is not entirely a negative
factor from my point of view. Your failure to achieve the target despite of the fact that you closely watched
ROIC means that the indicators are working very well. We are evaluating that way.
On the other hand, if possible, to the extent possible, if you see any kind of signs of success due to suchinvestment, I would appreciate if you could give us some disclosure or explanation making me possible toexpect or monitor the fruits, even if it’s a small scale, it will be easier for us to positively support yourCompany’s investment of these funds. I would appreciate it if you could possibly consider such disclosure aswell in the future.
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20This is the third question. This is rather a request than a question, but, as you are aware, in this investment
industry, it has recently become clearer that an increasing amount of funds are poured into ESG investments.
Perhaps your Company also has such an idea.
To get into this universe of ESG investments, you need to have a more sophisticated philosophy of ESG, andif possible, you need an ESG strategy that will lead to business opportunity.
In the current situation, looking at disclosure information about your Company’s ESG, I understand that there
are some aspects of that, but I also believe that a great deal of them is still an extension of CSR as before.
Therefore, in the midst of a drastically changing investment environment surrounding your Company, before
the industry starts to aggressively move, I would like your Company to take a lead by disclosing information
attracting ESG investments money and contributing to enhancement of corporate value, as well as developinga strategic initiative in the next medium-term plan. Then it will be easier for us to take a positive view of yourCompany. If possible, I would like to ask you to draw up a medium-term plan that includes those perspectives.
This is all.
Moderator: Does anybody have any other questions? No more questions?
Then, we now conclude today’s financial results briefing. Thank you for joining us. Thank you very much.
[END]______________
Document Notes
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