Nissan Chemical Corporation
2Q FY2022 Financial Results Briefing
Presenter:
DAIMON Hideki Director, Managing Executive Officer & CFO
November 11, 2022

Daimon: Thank you very much for joining us today. I am Daimon of Nissan Chemical Corporation.
I will now report the consolidated financial results for 2Q of the FY2022.
Please see page four of the presentation materials.
First of all, we show a financial summary for 1H of FY2022. The upper part is a comparison with the yearbefore results.
Net sales increased JPY17.7 billion, or 19%, YoY, and operating profit increased JPY6.9 billion, or 32%. In
addition, non-operating income increased due to the weaker yen, resulting in a 45% YoY increase in net
income, or an increase of JPY7.4 billion.
As a result, operating profit, ordinary income, and net income reached record highs for 1H of a fiscal year forthe second consecutive year.
This middle part shows a comparison with the outlook for the 1H announced in August. Net sales increased
JPY4.1 billion, operating profit increased JPY0.6 billion, and net income increased JPY2.5 billion, including the
upswing in non-operating income as I mentioned earlier.
As for shareholder returns, the interim dividend for 1H will be JPY70 per share. This is a YoY increase of JPY20,
and the figure is unchanged from the announcement in August.
In addition, the Company has already repurchased JPY5.0 billion’s worth of its own shares by June 2022, during
1H.

1I will explain our full-year earnings outlook later.

Please turn to page five. These are the 1H financial figures.
This table shows the YoY changes for 1H, separating the 1Q and 2Q results. From the top, the figures in blue
show operating profit of JPY28.2 billion and non-operating income of JPY3.8 billion, a significant YoY increaseof JPY2.8 billion. This was mainly due to a gain on foreign currency translations.
Ordinary income was JPY32.0 billion and net income was JPY23.7 billion.
As for the foreign exchange rate for 1H, the US dollar was JPY134, which was about JPY24 higher from theyear-before level.
Though we did not state here, the exchange rate at the end of March 2022 was JPY122. At the end of
September, it was JPY145, a rise of about JPY23.
In addition, the crude oil price, Japan Crude Cocktail, was USD112 per barrel for 1H. Compared to the same
period of the previous year, the price was up over USD40.

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Next, please see page six. This shows a comparison to the outlook for 1H. As I mentioned earlier, the gray areashows the outlook in August, so in effect, as shown in the far right column, the comparison with the 2Q outlook
equals the comparison with the 1H outlook.
Net sales increased JPY4.1 billion from the outlook, operating profit increased JPY0.6 billion from the outlook,and net income increased JPY2.5 billion from the outlook.
As for the foreign exchange rate, as shown in the lower line, the US dollar was JPY115 for 1H in the August
outlook, but actually it was JPY134.
Also, the crude oil price was actually USD112 per barrel, compared to the outlook of USD88 per barrel.

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Next, please see page seven. This shows an analysis of changes in operating profit by segment. We showed
the YoY changes and the differences from the outlook in August.
First, in Chemicals, operating profit decreased slightly YoY by JPY0.1 billion. The decrease was due to surges
in feedstock and raw material cost, shipping cost and fixed cost.
On the other hand, operating profit was also down JPY0.4 billion from the outlook. Similarly, there was a
downward swing in profit due to the high feedstock and fuel costs.
In Performance Materials, operating profit increased JPY0.8 billion YoY. An increase in sales of Semis Materials
was a major contributor, more than offsetting a decrease in sales of Display Materials.
Against the outlook, the result was down slightly with a decrease of JPY0.3 billion, and this was due to thedownturn in Display Materials.
Next is Agrochemicals, which recorded a significant YoY increase of JPY5.2 billion. Sales of major products
were strong, and although the shipment of some products was shifted, overall sales were strong for almost
all components.
Against the outlook, there was an upswing of JPY1.5 billion for the same reason.
In Healthcare, there was a YoY increase of JPY0.1 billion and an increase of approximately JPY0.2 billion fromthe outlook.

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Next, I would like to explain our earnings outlook for the current fiscal year. Please see page nine.
We have revised upward the full-year outlook. We now forecast operating profit of JPY55.5 billion for FY2022.
This revision was made based on the result of 1H and the forecast for 2H.
First of all, sales will increase JPY26.2 billion, or 13%, YoY. Operating profit will increase JPY4.5 billion, or 9%
YoY. Net income is expected to increase JPY3.3 billion, or 9% YoY. As a result, we expect operating profit andordinary income to reach record highs for the ninth consecutive year, and net income for the 10th consecutive
year.
Regarding ROE, the mid-term plan target announced in May was over 18%, but this time we assumed thatROE will be 19.7% for FY2022.
In the middle, we showed a comparison with the outlook in August. The new sales outlook is JPY10.9 billion
above the August outlook and operating profit and net income showed an upward revision of JPY0.4 billion,
respectively.
In addition, there are a few comments on 2H, in comparison with the outlook in August. While net sales are
JPY6.8 billion higher, operating profit is down JPY0.2 billion, and net income is down JPY2.1 billion.
This is mainly due to a downward swing of JPY1.3 billion for 2H, mainly stemming from foreign exchange rate
differences in non-operating income/expenses, which are expected to affect the expense side.
Regarding shareholder returns, in accordance with our mid-term plan, we aim for a total payout ratio of 75%
and a dividend payout ratio of 55%. These remain unchanged from the announcement in May.

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Accordingly, shown in blue, in accordance with the upward revision of net income, the annual dividend, will
be increased from the previous JPY162 per share to JPY164. This represents an increase of JPY2 from theforecast for the year-end dividend.
The breakdown is JPY70 in interim dividend and JPY94 in term-end dividend. Compared to the previous year,
the annual dividend will increase JPY42, of which JPY20 for interim dividend and JPY22 for term-end dividend.
We showed the total payout ratio target at the bottom. The dividend of JPY164 corresponds to 55%, so
together with the share repurchase of JPY5.0 billion that was completed in June, the total payout ratio will be
66.8%.

Next, page 10, shows the specific figures of the financial summary. This disclosure includes the forecasts for3Q and 4Q.
First, let us look at YoY comparisons. The blue columns in the middle show the new outlook made in thisNovember.
Looking at the figures from above, for the full year, operating profit will be JPY55.5 billion. With non-operating
income of JPY2.8 billion, ordinary income and net income will be JPY58.3 billion and JPY42.1 billion,
respectively.
As shown below, we assume that the US dollar will be JPY135 for 2H.
As for the JCC for crude oil, we expect USD110 per barrel, almost unchanged from 1H.

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Page 11 shows the differences from the previous outlook announced in August. Please note that this is not acomparison with the initial outlook announced in May.
As shown in the second column from the right, operating profit is down JPY0.2 billion and non-operating
income/expenses are worse JPY1.3 billion compared to the outlook, resulting in a JPY1.5 billion decline inordinary income.
In 2H, we reexamined our extraordinary income/loss forecast, and found that there will be no extraordinary
income, resulting in a decrease of JPY0.5 billion. As a result, net income in 2H will be down JPY2.1 billion incomparison with the previous outlook.

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See page 12 for segment information. First, there are figures for 2H in the upper part. This part shows YoY
comparisons and changes from the outlook.
As for Chemicals, we expect a decrease in profit of JPY1.2 billion YoY. Profit will decrease due to high-cost offeedstock and raw materials, rising transportation cost, and increasing fixed cost. In addition, the market formelamine was very favorable in 2H of FY2021, while sales of melamine are nearing the end in 2H of the current
fiscal year.
The outlook for profit is JPY0.6 billion higher than the previous outlook as profit will be higher due to anincrease in selling prices.
Next is Performance Materials. There will be a YoY increase of JPY1.9 billon in 2H. This is mainly due to anincrease in Semis Material sales.
In addition, there will also be an increase in fixed cost worth JPY1.5 billion on the expense side. Against theoutlook, profit will be JPY0.4 billion higher.
In Agrochemicals, we expect a YoY decrease of JPY1.4 billion in profit. As you can see in the comment here,
the JPY1.0 billion increase in fixed cost will have an impact.
The figure is JPY0.2 billion lower than the previous outlook, due to an upward swing of the fixed cost.
In Healthcare, profit will incur a slight YoY decrease, but it is up JPY0.3 billion against the previous outlook.
In the lower part, there are the full-year outlook figures in comparison with the previous year’s results.

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In Chemicals, for the full year, profit will decrease JPY1.3 billion YoY and that in Performance Materials will
increase JPY2.7 billion YoY. In Performance Materials, a decrease in profit from Display Materials will be offset
by an increase in profit from Semis Materials.
Profit in Agrochemicals will see a significant YoY increase of JPY3.8 billion, and Healthcare will be flat.

Next, I will explain about the breakdown of non-operating income/expenses and extraordinary income/loss
on pages 13 and 14.
First of all, on page 13, these figures are YoY comparisons.
The figures are for 1H and the full year. There are no figures for 2H only, but if you subtract the 1H resultsfrom the full year figures, you will get the 2H figures. There are foreign exchange gains on the third line fromthe top. We assume that this figure will be losses worth JPY2.0 billion in 2H.
As I mentioned earlier, there were large gains in 1H due to the sharp depreciation of the yen against the US
dollar. Meanwhile, we forecast that the dollar will be JPY135 on average for 2H, a fall from JPY145 at the endof September, resulting in the foreign exchange losses of JPY2.0 billion.
We took the current extremely volatile foreign exchange market into account.

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On page 14, you will find the figures as compared to the outlook in August.
As I mentioned earlier, there will be a decrease of JPY0.5 billion in extraordinary income for the full year
compared to the previous outlook, as shown at the bottom right.

10Page 15 shows cash flows. The middle part in blue shows the 1H results and the outlook for the full year.
The 1H results were almost unchanged YoY. For the full year, free cash flow will decrease slightly YoY, as aresult of a slight increase of capital expenditures in cash outflows.
On the other hand, as for the balance of cash and cash equivalents at the bottom, we estimate the balance atthe end of the year at JPY35.0 billion, which is a sufficient amount as in the past.
In addition, the figures here are almost unchanged from the annual outlook in May, which are on therightmost side.

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Page 16 shows the balance sheets.
Simply put, total assets at the end of September on the left side remained almost unchanged from the end of
March, but there was a remarkable decrease in accounts receivable. As in previous years, this reflects thecollection of agrochemical-related accounts receivable in 1H.
In line with the move, the amount of borrowings on the right side of the table shows that loans have been
repaid.
The equity ratio remained very high at 77.2%, as shown in the bottom right.
As for investment securities, as shown on the lower left, there was almost no change from the end of March.
The ratio of strategic shareholdings on net assets on a non-consolidated basis remained unchanged from theend of March at 9.5%, less than 10%.

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Next, on page 17, there are capital expenditures by segment.
The figures are almost unchanged from those announced in May.
The rightmost column shows total R&D expenses outlook of JPY16.8 billion, or 7.2% of net sales.

13Page 18 shows main capex items. Please take a look at them later.

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From page 20 onward, we showed the 1H financial results by segment. Let me give a few comments on them.
Pages 20 to 24 show the figures by segment and I will not go into details.
Page 23 shows the FY2022 financial outlook compared to the previous outlook in August.
The figures in the yellow box on the far right show the YoY comparison for the full-year figures.

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Page 24 shows the financial outlook in comparison with the initial outlook in May. Please check this later.

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Let me begin my comments on page 26, the Chemicals segment.
Here you will find YoY sales growth rates for our main products. The gray columns in the middle of this table
are as of the August announcement. As noted in one below, the figures for 1H and the full-year were notdisclosed in August and we disclosed them this time.
Also, please note that the figures for 2H were not changed in August since the announcement in May, so
please assume that they have already been disclosed.
As shown in the comment above, sales of Fine Chemicals increased 23% YoY in 1H, but they were slightly
lower than the outlook. For the full year, we forecast a 24% increase in sales.
In addition, sales of Basic Chemicals increased 11% in 1H, and also exceeded the outlook. For the full year, we
expect that sales will increase 7% YoY. Sales of total Basic Chemicals excluding melamine, as noted in thelower right corner of the table, are the figures in parentheses and we expect a 19% YoY increase in full-yearsales.

Page 27 shows the summaries of the YoY 1H results for Fine Chemicals and Basic Chemicals.
The overall segment sales were up JPY2.7 billion YoY. Sales of Fine Chemicals and Basic Chemicals increased
JPY1.5 billion and JPY1.2 billion, respectively. Operating profit in the segment decreased slightly by JPY0.1
billion YoY.
As commented in the below, Fine Chemicals enjoyed increases in sales and profit, while Basic Chemicals saw
a rise in sales and a fall in profit.

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In 1H, as noted below, there was also a decrease in sales due to nitric acid plant troubles. In addition, there
were the negative factors that contributed to the decline in profit of higher feedstock and fuel prices, as well
as a JPY0.2 billion increase in the fixed cost.

Next, page 28 shows the 1H results in comparison with the outlook, and in effect, as I mentioned earlier, it
shows comparisons with the full-year outlook in 2Q.
As you can see from the figures, sales are up JPY0.3 billion, but operating profit is down JPY0.4 billion.
In particular, as shown in the lower right corner, operating profit in Basic Chemicals will show a downward
swing. The reason for this is the high feedstock and fuel costs.

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Page 29 shows the YoY changes in the financial outlook.
On an annual basis, sales will increase JPY4.8 billion. On the other hand, operating profit will decrease JPY1.3
billion. The numbers are shown in the rightmost yellow box.
In particular, Basic Chemicals on the right will incur a fall in operating
As I mentioned earlier, this is partly a reaction to the strong melanin market in 2H of FY2021.

profit.

In addition, the feedstock and raw material cost up, and fixed cost will increase JPY0.4 billion, slashing the
profit amount on the expense side.

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Page 30 shows the FY2022 financial outlook compared to the outlook in August. The comments focus on 2H.
The numbers are in the yellow box on the right.
In Fine Chemicals, sales will increase, but operating profit will decrease. The feedstock and raw material cost,soaring transportation cost, and fixed cost will contribute to the decrease in profit.
As for Basic Chemicals, both sales and operating profit are expected to be higher than the previous outlook.
Though there is a rise in feedstock and raw material prices, there will be a price hike effect.
The table on the far right shows the numbers on an annual basis. Profit is up JPY0.2 billion from the previous
outlook.
These are the details for the Chemicals segment.

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Next, please move on to page 34 for Performance Materials. The bar graph in the middle here shows the past
results and the outlook for the current fiscal year, including the breakdown of each sub-segment.

Please move on to page 35.This shows the sales growth of main products.
As for Display Materials, as commented in the upper row, sales in 1H of FY2022 decreased 13% YoY and werealso lower than the outlook.
We forecast a 2% YoY decline for 2H and a 7% decrease for the full year.
In 1H, especially in 2Q, Display Materials incurred a downturn on panel makers' inventory adjustments and aslowdown of the market, but we expect a gradual recovery from 2H.
For Semis Materials, sales increased 26% in 1H and exceeded the outlook. For the full year, we expect thesame 26% YoY increase in sales.
Sales of Inorganic Materials increased 9% YoY in 1H, up from the outlook, and are expected to rise 13% YoY
for the full year.

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On page 36, we show sales of SUNEVER by mode in displays.
As shown in the table below the page, sales of the VA mode declined YoY in 1H. Sales of the IPS mode,
including Photo IPS and rubbing, also showed a YoY decline.
However, the decrease in sales of Photo IPS was in the lower half area of the single-digit range.
As a result, total SUNEVER sales decreased 12% YoY in 1H FY2022, as shown on P35. Sales of VA and IPS
downward than the outlook as well. As shown on the right, we expect a decrease in sales for the full year, anda 7% decrease for SUNEVER as a whole.

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Page 37 shows YoY comparisons for the 1H results.
Operating profit in the Performance Material segment increased JPY0.8 billion, but Display Materials saw
declines in sales and profit. In particular, Photo IPS sales declined only slightly, while rubbing and VA sales
declined by over 10%.
On the other hand, Semis Materials on the right side increased significantly insales and profit. Sales of ARC and other materials, including multi layer materials and EUV materials, also
increased sharply. This is a result of the strong performance of the market in general.
Inorganic Material sales and profit also increased.
In the 1H, the fixed cost in total increased JPY0.4 billion YoY.

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Next, page 38 shows the 1H financial results compared to the outlook.
As I mentioned earlier, operating profit was down JPY0.3 billion from the outlook. There was a downswing in
Display Materials.
On the other hand, there was an upturn in Semis Materials.

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Page 39 shows the YoY changes in the FY2022 financial outlook.
In terms of the full year, we expect a significant increase in profit of JPY2.7 billion in the Performance Material
segment.
While sales and profit in the Display Materials are expected to decrease, we expect sales and profit in the
Photo IPS business to remain flat YoY throughout the year. We expect a gradual recovery from 2H.
On the other hand, we expect sales and profit to increase in Semis Materials and Inorganic Materials,
respectively.
In addition, there is an increase of JPY1.9 billion in the segment fixed cost throughout the year.

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Page 40 shows comparisons of the FY2022 financial outlook with the 1H results. This shows comments on 2H.
As I mentioned earlier, as for Display Materials, we expect a certain downward swing in sales, but only a slight
downturn in operating profit, as shown on the lower left.
As for Semis Materials, both sales and profit are up YoY.
We expect a slight downward swing in operating profit for Inorganic Materials.
As a result, operating profit in total for 2H will see an increase of JPY0.4 billion from the previous outlook,including a JPY0.6 billion increase in the fixed cost.

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Page 42 shows the sales growth rates of main agrochemical products.
As you can see, the 1H actual result at the bottom line showed sales growth of 43%, higher than the outlook
in August. We expect a full-year growth rate of 20%.
Most items show positive growth rates, but only QUINTEC shows a slight full-year decline. As for the product,
there was the postponement of shipment from 2H FY2020 to FY2021, so the FY2022 growth rate will beslightly lower than the FY2021 results.

Page 43 shows YoY changes in the 1H FY2022 results. As I said earlier, most of the items show YoY rises, leading
to the overall YoY increase in operating profit of JPY5.2 billion.
There was an increase in the fixed cost of JPY0.7 billion. Meanwhile, the inventory adjustment cost from 2H
FY2021 to 1H FY2022 was down JPY1.0 billion due to the general cost increase, boosting profit.
Sales of Fluralaner (animal health product) increased YoY. As commented, the increase was due to theshipment shifted from FY2021, the end of inventory adjustment at Merck, and strong royalty revenue.

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Page 44 shows the 1H FY2022 results compared to the outlook.
As I mentioned earlier, operating profit was up JPY1.5 billion from the outlook.

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Page 45 shows YoY changes in the FY2022 financial outlook.
We expect full-year operating profit will increase JPY3.8 billion YoY. The fixed cost will rise JPY1.7 billion, andthe inventory adjustment cost will be down JPY1.5 billion due to the afore-mentioned factor. This positive
factor will mostly offset by negative factors.
While most of the main products will enjoy annual sales growth, only QUINTEC will incur a full-year decline.

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Page 46 shows the FY2022 financial outlook compared to the outlook as of August.
As commented on 2H, the outlook for operating profit is down JPY0.2 billion from the previous outlook. Thereis a negative factor of an upswing of the fixed cost by JPY0.5 billion.

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Page 49 shows the sales trend of Fluralaner. In the graph on the left side, there was an addition to the FY2022
outlook in November. Please check this later.
In addition, there was no change since May in the FY2019 to FY2024 Fluralaner pro-forma sales image on theright side.

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Finally, we discuss the Healthcare Segment. Please see page 52.
This shows OP margin sharply rose in FY2021. As we said in the previous briefing, the Healthcare segment
underwent an organizational change on April 1, 2022. The segment information for FY2021, the year prior tothe organizational change, has been revised retroactively to the current year's classification method and isdisclosed here.

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Next, page 55 shows the 1H figures in comparison with the year-before results.
There was an increase in sales, mainly those of LIVALO, and the segment showed YoY increases in sales andoperating profit in 1H. Meanwhile, Custom Chemicals incurred a slight YoY decline in profit.

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Please move on to page 57.
The FY2022 financial outlook is almost flat YoY.

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Please see page 58, comparisons against the previous outlook in August. In the blue part on the right, bothsales and profit increased about JPY0.6 billion from the previous outlook. This reflects the forecast thatoverseas demand for LIVALO will be better than expected. Moreover, we estimate there will be more demand
for Custom Chemicals than initially expected.

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Page 60 shows our ESG initiatives, which are largely the same as in August. The only one point to add is that
we published Integrated Report 2022 in September.
The following pages for ESG related indexes are the same as in the previous briefing.

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The following is for reference.This concludes my presentation.

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Question & Answer<Questioner 1>
Q: The first one is about the Performance Materials segment. Unfortunately, sales of your Photo IPS declined.
While operating profit decreased around JPY6.0 billion in 2Q, the Performance Materials are likely to see sharp
recovery in 3Q and 4Q.
Furthermore, operating profit in Performance Materials will turn better YoY for both quarters. While therecent environment for displays are worse and sales of semiconductor materials, mainly memories, have beenfalling, what is the background to this forecast, including the recent trends? This is my first question.
A: As for the recent situation of display materials, panel manufacturers were conducting large-scale
production adjustments in 1H due to a slowdown of demand and inventory adjustments facing excessive
components and panel inventories. In 2H, we expect that the business will turn into a recovery trend as
inventory consumption will make progress.
During the recovery, in particular, we forecast that Photo IPS will turn better as the shift from other modes
will accelerate.
As for semiconductors, we recognize that the decline in memory prices is a risk. However, as there is no
decrease in our customers’ short-term forecasts and there is no definitive information, we assume that there
will be no major production adjustments.
Q: Are you saying that there is no abnormal change in materials for logic devices and they are keeping good
performance?
A: That’s right.
Q: Next question is about the Agrochemicals segment. The business is continuing performing very well and I
wonder if there will be a specific change in the environment. I think that the price of glyphosate has beenfalling in China. What is your outlook for Agrochemicals in the next fiscal year, including the direction of thebusiness? Thank you.
A: First of all, regarding glyphosate, it is true that the prices of Chinese-made generic products have beenfalling recently. However, their levels still keep considerably higher than previously. We don’t believe that ourglyphosate-based Roundup herbicide products face the threat as you mentioned yet.
As for the situation of Agrochemicals for the next fiscal year, though it is difficult to foresee at this moment,from the global perspective, we expect active demand for grains to continue and the global agrochemicalmarket to be in an expanding trend though there may be a slight slowdown.

<Questioner 2>
Q: The first one is that I would like to know sales by product in the Performance Materials segment from 1H
to 2H. Please provide us the figures of each mode for SUNEVER, and for Semis Materials, the figures for ARC
and other materials.

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A: I think you are mentioning half-on-half, HoH figures, first of all, regarding Display Materials. As for SUNEVER,
we expect that all modes in 2H will increase. Of that, rubbing IPS will mark the highest growth rate, followedby Photo IPS and VA. As for Semis Materials, sales of ARC, multi layer materials, and other new materials willrise around 10% each from 1H. In addition, Display Materials are assumed to have a higher growth rate thanSemis Materials.
Q: What is the background to the large growth of rubbing IPS?
A: As rubbing IPS incurred a sharp downswing in 1H, the recovery from there will show so large a growth ratethough the amount of increase will not be so large.
Q: You are in the second month of H2. As for LCD applications, have orders received or sales already been
showing signs of recovery recently?
A: The performance has turned into recovery from 1H since this October.
Q: The second question, you estimated a lot more fixed cost for 2H than the outlook in August. You raised thefixed cost for Performance Materials by JPY0.6 billion and for Agrochemicals by JPY0.5 million for 2H. What istheir background?
A: As for Performance Materials, at the business division, for example, there will be an increase in depreciation
expenses by introducing various types of equipment. In addition, on the factory side, there will be a buildup
of capital investments as the fixed cost.
As it is a total of very fine amounts. We don’t assume that there will be a specific postponement from 1H to
2H.
As for Agrochemicals, a major factor is that we expect travel and transport expenses, advertising andpromotion expenses, and so on to gradually increase more than estimated in 2H.
Furthermore, our Indian subsidiary, Nissan Bharat Rasayan Private Limited, is under constructing. Such
relating cost will increase slightly.

<Questioner 3>
Q: The first one is about the outlook for the Agrochemicals segment for 2H on page 46. For Fluralaner, youhave revised upward the sales target. However, hearing from what was said in a recent conference of Zoetis,
as for flea and tick medicines, they said that challenges in the supply chain are a constraint. On the other hand,
as Merck’s financial results looked solid, I would like to confirm if there is no particular constraint problem inyour supply chain.
As for Agrochemicals, three months ago, you said that the price hike negotiations in Japan will take longer
than in a normal year. However, as the new prices are expected to be in effect around December, pleasecomment on your expectations and inclusion into the revised outlook.
A: Regarding Fluralaner, as Merck’s performance has been faring well, we expect that sales of Fluralaner will
also remain strong, although there may be various external factors.
Regarding the price increases, we, including other companies, have provided sessions of a detailed
explanation about the situation and reasons for the rises in all kinds of costs, such as APIs, intermediates, andfeedstocks.

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In fact, for the planned prices of our products from December, we believe that we have managed to pass thesurges in costs onto customers to a certain extent, and the expected effects have been factored into theoutlook for 2H.
Q: The second question is about the Adjustment amount on page 80. Looking at the details of the revision tothe outlook, the full-year Adjustment amount was a negative JPY3.7 billion in the August outlook, but it rose
to a negative JPY5.8 billion in the new outlook, leading to a downward revision of JPY2.1 billion. Please provide
the details about this.
A: It was true that there were changes in figures in areas other than the main four segments. One of thoseareas was the Planning and Development Division. In addition, we have refined the outlook for some areas
because there were consolidated eliminations and other amounts, which had not been easily foreseen at theinitial budget at the beginning of the fiscal year. As a result, we are presenting these figures.
Q: Compared to three months ago, is there a strategic decision to increase expenses, or is there some change
in management strategy? Please comment on that.
A: We have not made any major policy changes there. Please understand that the figures we have shown are
the results of our calculations.

<Questioner 4>
Q: The first question is about the outlook for Fluralaner for 2H. In the new outlook, both API and royalty figuresincreased from the previous outlook. I would like to confirm whether there was also a revision from theprevious forecast on a volume basis, even if the foreign exchange rate effects are excluded.
A: I think your question is about the matter in comparison with the outlook for 2H. We assume that the volumeof API shipment will increase slightly from our previous outlook for the sales volume and we have factoredsome benefits from foreign exchange rate differences though their impact will not be so large.
Q: I believe that you cannot deny the probability that the pet drug market will slow down a little. Particularly,
pharmaceuticals for pets will enter an off-demand season in winter. Moreover, I imagine that Merck is taking
a cautious approach to inventory management due to their inventory adjustment issues in the past. What do
you think is the reason for the increase in their demands?
A: Regarding your question, of course we are making reasonable assumptions based on our communication
with the Merck side. I hope you understand, based on the figures on their side, we have also included ourown estimates and come up with the new outlook.
Q: As for inventories, is it alright that they will not increase too much and will remain at appropriate levels?
A: That’s what as you said.
Q: The second question is about the outlook for Semis Materials for 2H. Was there an overall revision to theassumption on volume from the previous outlook to the current one? If possible, I would like to know thefigures per product.
A: Regarding the volume of Semis Materials compared to the initial outlook, the volume of ARC will be linewith the initial outlook, though there may be a slight decrease in a very marginal range. We expect a slightincrease in multi-layer materials.

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We expect that EUV-UL volume will increase more than 10% from the initial outlook for 2H.
Q: Thank you very much. As for the slight downswing of ARC’s volume, have you seen the recent trends in thesemiconductor industry and factored some risks in the new outlook? Or is there an actual downswing ininquiries from your customers? Please comment on the situation.
A: In 2H, we assume that our customers’ current operating assumptions will decline a little from the initial
outlook. That’s not a situation where there will be major production adjustments, but the utilization ratio in
China will not rise as we expected due to the impact of COVID-19.
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