DIC : Transcript of FY2023 First Half Consolidated Financial Results Presentation and Q&A

DIC Corporation

Q2 Financial Results Briefing for the Fiscal Year Ending December 2023

August 10, 2023

Event Summary

[Company Name]	DIC Corporation
[Event Name]	Q2 Financial Results Briefing for the Fiscal Year Ending December 2023
[Date]	August 10, 2023
[Venue]	Webcast
[Number of Speakers]	5
	Kaoru Ino	Representative Director, President and CEO
	Toshifumi Tamaki	Representative Director, Executive Vice
		President
	Takeshi Asai	Director, Managing Executive Officer, Head
		of Corporate Strategy Unit
	Shuji Furuta	Director, Managing Executive Officer, CFO,
		Head of Finance and Accounting Unit
	Hirotaka Komine	General Manager, Corporate
		Communications Department

1

Presentation

Ino: Good morning, everyone. My name is Ino of DIC Corporation. We thank you for your continued support.

The financial results for H1 of the fiscal year have been compiled. As usual, I will give an outline of the full-year forecast, including the dividend forecast, and CFO Furuta will explain the details. During the remainder of the presentation, Asai, Head of Corporate Strategy Unit, will introduce some recent topics of our initiatives to bolster corporate value.

Now, let's talk about the financial results. Please see page two and three.

As stated in the document, the results were very severe. Net sales were JPY515.3 billion, down 1.2% from the previous year, and operating income was JPY10.0 billion, down 58.4% from the previous year.

This is due to a significant decrease in shipments of high value-added products, which are our flagship products in the functional products segment, against a backdrop of prolonged market weakness in electrical and electronics equipment, semiconductor, display, and automotive industries. Also, there were a decline in capacity utilization and marginal profit due to a significant decrease in the volume zone for pigments, mainly general purpose products (pigments for coatings and for plastics), as the European economy entered a recession.

With exceptions of pigments for color filters which the market is recovering and automobile related, which have already been seen gradual markets recovery, it is difficult to forecast a recovery in demand for our products in H2 of the year, due to market conditions for electrical and electronics equipment and semiconductors, for example, or a slowdown in the European economy. Therefore, we have no choice but to say that the recovery may be seen in the latter H2 of the year, or in FY2024 and beyond.

2

Therefore, we, as the Company, regret to say that we have to revise our full-year business results downward at the time of this first-half financial report.

As a result, for the full year. Please see page 11. As shown in the PL, we forecast sales of JPY1,060 billion, operating income of JPY25 billion, and net income of JPY4 billion.

In addition to the decrease in the operating income, the increase in the effective tax rate has also led to a decrease in net income for the current fiscal year. Regarding dividends, although we will maintain the interim dividend of JPY50, we have decided to revise down a year-end dividend forecast to JPY30, which is extremely regrettable. The Company made a prudent decision based on comprehensive consideration of consolidated performance trends, dividend payout ratio, as well as on its policy of providing continuous and stable dividends.

The decline in the Company's business performance is in the pigment business in particular, which is highly dependent on the European economy, as the impact on chemical industry in general is becoming more pronounced. In essence, this is not in any way associated with a decline in corporate value, and we will strive to minimize the impact of H2 of the year while preparing for a rapid recovery in demand from the next fiscal year and increasing dividends.

As for the concerned pigments business in Europe, we expect the business to be in the red this fiscal year, but we are eliminating high priced inventories by the end of the year with temporary plant shutdowns and reducing fixed costs by voluntarily implementing restructuring measures. Therefore, we expect to return to the stage where the original synergy effects of acquisitions will be realized in the next fiscal year, as demand recovers in earnest. In the medium term, we are also planning to implement the optimization plan of pigments ahead of schedule, for highly efficient production.

We will also reap the fruits of several acquisitions other than C&E, which were made as upfront investments. In this way, we will accelerate the transformation of our business portfolio that we have been pursuing.

Progress in the transformation of this portfolio includes, for example, the acquisition of PCAS of Canada, which is announced recently, as a part of the expansion of related businesses in the semiconductor fabrication front-

3

end process, or the development of PFAS-free surfactants. We are not only focusing on investment alone, but are also closing additional plants in the domestic ink business, or liquidating additional low-profit downstream businesses.

We have devoted several pages to this area, and Asai, Head of Corporate Strategy Unit, will explain the details later on.

As for the financial situation, inventories, mainly of pigments, have been building up, against the backdrop of such a shrinking demand. However, we will continue to maintain our financial soundness, including our debt- to-equity ratio, within this year, by optimizing this inventory, anticipating the effects of working capital reduction, or proceeding with the sale of businesses based on the criteria business withdrawing.

Lastly, the increase in the effective tax rate, which is one of the reasons for the decrease in net income, is also temporary, stems from the provision of deferred tax assets due to the decrease in taxable income caused by the economic slowdown in Europe. We believe that this problem will be resolved as demand recovers in line with the recovery of the European economy.

This is the overall situation that I have to say.

From here, I will pass to Furuta.

Furuta: President Ino has already explained the general situation, now

I would like to start with the details.

Please see page three.

4