Konoike Transport : Q&A Highlights, Financial Results Briefing for Q2, Fiscal Year Ending March 2023

9025 Konoike Transport Co., Ltd.

November 2022

Q&A Highlights, Financial Results Briefing for Q2, Fiscal Year Ending March 2023

This Q&A session is a summary of the main questions asked by attendees at the analyst and institutional investor meetings. Certain sections have been edited to facilitate understanding.

• Unit Price Revisions

Q1) To what extent did unit price revisions contribute to performance? (How much of the 10,161 million yen increase in net sales shown on page 10 is accounted for by unit price revisions?)

A1) This was just under 1,400 million yen out of 10,161 million yen. Our budget also anticipates a certain amount of unit price revision, and revisions contributed to 400 million yen more than in the budget.

Q2) How easy have unit price revisions been compared to previous years?

A2) It depends on each industry and each company's situation, and it is difficult to make blanket statements, but there are some sectors and locations that are not accepting the unit price levels we are asking for. However, we believe that customers have a certain level of understanding of the recent labor shortage and rising fuel costs. In this sense, the environment is relatively receptive to unit price revisions. In addition, there is also the 2024 problem in land transportation, and major shippers especially understand this.

• Steel-RelatedBusiness

Q3) Regarding the impact of the Steel-Related Business's blast furnace suspension in the Kashima area, you said that so far there has been no major change, but does this mean that there is no negative impact, or is there is any progress on the positive impact side?

A3) We have not received any new information regarding the banking at the end of fiscal 2024. First, in addition to maintaining the stable operation system that was in place until the furnace suspension, we are also promoting the cultivation of new businesses, including those outside the steelworks, by utilizing the skills we have cultivated within steelworks. In addition, we recognize that reducing CO2 emissions in the steel industry is an unavoidable issue in the medium- to long-term, and we are looking for ways to contribute to CO2 reduction. We are making preparations to do so.

• International Logistics Business

Q4) With regard to the International Logistics Business, please elaborate on the background behind its growth in addition to the impact of rising air cargo prices. You mentioned that you are increasing transaction volume at your Vietnam, India, and U.S. locations, but could you give us some specifics?

A4) In Vietnam, recovery from COVID-19 has been relatively faster than in Japan, and the Food-Related Business, which we handle, performed well. As for India, the automobile freight train operator (AFTO) business was sluggish last year due to a shortage of semiconductors, but this year it has recovered, and demand for the rail container transportation operator (CTO) business was also strong. As for the U.S., the subsiding of COVID-19 was quickly followed by an increase in transactions for imported frozen and chilled goods.

• Profit Improvement

Q5) Regarding the profit improvement mentioned on page 29 of the materials, you mentioned that the progress in the first half of the year was about 40%, which is less than half of the full year forecast. Tell us about the background of this and your efforts to recover in the second half.

A5)

Temperature-Controlled and Food: The Koshigaya Temperature Control Center will be completed in the second half of the year (February 2023). We intend to improve profitability by decentralizing and specializing the products and functions handled at each center here, in coordination with the three suburban centers, in order to maximize profit according to the characteristics of each warehouse.

Land Transportation: Fuel costs have soared compared to the time when the forecast was initially formulated, and this has had a significant impact. Although net sales are growing, it has not been enough to absorb the increase in fuel costs, and we are still persistently negotiating unit prices.

In addition, at the end of March of this year, we transferred our shares in Maekawa Transport, an affiliate.

International: We have recently acquired new shippers for warehouses in domestic port areas, which are showing an improvement trend. However, we recognize the issue that overseas warehouses are not showing the same level of improvement as domestic warehouses.

• Supply Chain Review

Q6) With the growing worldwide trend of reviewing supply chains and production locations, is there any indication of an increase in Konoike Transport's operations?

A6) China's Zero-COVID policy has become an obstacle to a certain extent in terms of logistics and production. We have heard that customer policies to handle this is to decentralize their locations and move some of them to Vietnam and India. Therefore, we are positive that in the future there will be more opportunities for us to enter plant transportation and logistics operations for raw materials and products in the ASEAN and India areas.

• Shareholder Returns

Q7) The current financial forecast falls short of the full-year dividend payout ratio target of 30%. What is your perception of this?

A7) Our basic policy is to pay stable and continuous dividends, and we fundamentally approach dividends on an annual basis. At present, there are many variable factors such as the recovery of international passenger flights and the outlook for marine and air cargo fares as well as soaring fuel costs, so we are not considering any revision at this time. However, in approaching the situation on an annual basis, we would like to make a decision at the end of the fiscal year, based on the situation at that time.