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Financial Results Conference Call - Q&A Transcript

2nd Quarter Ended September 30, 2018

Date and Time: 6-7 p.m. Wednesday, October 31, 2018
Please note that this document is not a direct transcript of the Q&A session from the conference call, but is a simple summary including additions and corrections at the discretion of the company. The results and forecasts are forward-looking statements determined by the Company based on currently available information that may include risks and uncertainties. Please be aware that actual results may vary significantly due to various factors.

1. Please explain in comparison with the previous quarter (Q1 2018) the change in operating profit for Q2 2018.

Factors relating to changes in operating profit from Q1 2018 into Q2 2018 are,

-Price cuts are almost offset by streamlining
-Sales volume and products mix +3.5 billion yen
-Impact of foreign exchange +2 billion yen
-Fixed costs increased slightly
-Others -6 billion yen

This all combined to give a loss of 1.7 billion yen.

As a primary factor other than those listed above, Q1 2018 also saw the following one-time profits.
[1] Gains on evaluation of currency assets
[2] Transfer of FPC business

2. Please explain consolidated performance forecasts for the 2nd half of 2018 in comparison with the 1st half of 2018.

We are forecasting increased revenue in the 2nd half of 2018, compared to the 1st half. We forecast peak smartphone production in Q3 of 2018, and expect increased revenue in Information Fine Materials and Functional Base Products. We also anticipate less inventory buildup in the supply chain than last year. Accordingly, we do not forecast a major decline in performance from Q3 through Q4 of 2018, compared to 2017.

3. Did flood damage have any impact?

The impact on logistics from flood damage to Kansai International Airport caused profits to decline 400 million yen in Q2 2018.

4. Please explain the difference between the forecast and the performance of the 1st half of 2018 for “Optronics”.

The 1st half of 2018 lacked excitement over model changes in the smartphone market, and with supply chain inventories kept down and stable amounts used, events deviated from the forecast.

5. For “Industrial Tape”, compared to the 1st half of 2018, the operating profit of the 2nd half of 2018 is forecasted to be increasing, please explain the factors behind that.

We forecast stronger demand and increased profits in the 2nd half of 2018 for smartphone assembly applications, items for the electronic component industry, industrial filter materials, and automotive applications. We anticipate contributions via processing materials for electronic components as our new plant enters operation. In “transportation”, we are also advancing with productivity reforms at our plants in the Americas.

6. Please explain the status of “life science” in Q2 and its future forecast.

We are steadily increasing small-scale projects for oligonucleotide contracted manufacturing, but unable to cover the drug discovery costs. We do not expect that major progress will occur until after 2020.

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