Mitsubishi Gas Chemical : About Grow UP 2026, the New Medium-Term Management Plan

May 10, 2024

Company name: Mitsubishi Gas Chemical Company, Inc. Representative: Masashi Fujii, Representative Director & President Securities code: 4182 (The Prime Market of the Tokyo Stock Exchange) Contact: Satoshi Takizawa, General Manager, CSR&IR Division TEL: [phone]

Notice regarding the Medium-Term Management Plan

The MGC Group announced that it has formulated a medium-term management plan covering the three years from fiscal 2024 (ending March 31, 2025) to fiscal 2026 (ending March 31, 2027), which was approved by a meeting of the Board of Directors held today.

The medium-term management plan is a sequel to the previous medium-term management plan and is to serve as a guideline for realizing the Vision for MGC in 2030. With the new objectives of strengthening the resiliency of its business portfolio and promoting sustainability management, the MGC Group will promote three strategies for each objective to realize them.

1. Review of Previous Medium-Term Management Plan

Of the management indicators targeted for the final fiscal year of the previous medium-term management plan, the MGC Group achieved its target for net sales, but missed its targets for operating profit, ordinary profit, ROIC, and ROE.

During the period of the previous medium-term management plan, the methanol business and energy resources and environment business were shifted to differentiating businesses, and the MGC Group achieved its target of reaching a percentage of net sales from differentiating businesses of over 40%. On the other hand, although the Group advanced its plan for large-scale investment in differentiating businesses (including new plants and plant expansion for electronic chemicals in Japan and overseas, expansion of its electronic materials plant in Thailand, and a new meta-xylenediamine plant in Europe), it saw a decrease in profitability and capital efficiency, mainly due to a general sales volume decrease following a semiconductor market slump and the economic slowdown in China, and also cost increases. In addition, new business creation was delayed despite aggressive investment of R&D resources. In reevaluating and rebuilding unprofitable businesses, the Group concentrated its formalin production sites, and decided to withdraw from the orthoxylene-phthalate-plasticizer chain, and others. However, there are still businesses facing challenges. As described above, the Group is currently mid-way through shifting

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to a profit structure resilient to changes in the business environment. Under the new plan, it will work on strengthening the resiliency of its business portfolio.

Initiatives to balance social and economic value proceeded broadly in line with the previous medium-term management plan. Under the new medium-term management plan, the Group will continue to promote sustainability management.

*1. ROIC = Ordinary profit/invested capital

2. Overview of the Medium-Term Management Plan - "Growing," "Winning," and "Sustainable"

Under this plan, the differentiating businesses category has been renamed "Uniqueness & Presence (U&P) businesses," and redefined as businesses that excel from the perspectives of being "growing," "winning," and "sustainable" (= business potential, economic value, and social value), with the potential to grow sustainably while delivering both social and economic value.

Objective 1 is to strengthen the resiliency of MGC's business portfolio. As Strategy 1 to realize this objective, the MGC Group will focus on Uniqueness & Presence. The Group will prioritize allocation of management resources to U&P businesses, and reap the benefits of large-scale investments. Furthermore, the Group will work to maintain added value by passing on costs to prices and also to strengthen management based on capital efficiency using the ROIC tree.

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Strategy 2 is to build new value through innovation. Here, the MGC Group will focus particularly on the three target areas of ICT, mobility, and medical/food, while promoting R&D that contributes to solutions for climate change issues.

For Strategy 3, which is to restructure businesses requiring intensive management, the MGC Group will position PC-related products and xylene separators/derivatives as businesses requiring intensive management and promote cost reduction, balance-sheet streamlining, and other measures.

Objective 2 is to promote sustainability management. As one of its strategies for this objective, the MGC Group is promoting initiatives for realizing carbon neutrality. Specifically, the Group will accelerate the circular carbon methanol concept leveraging our technology and initiatives to reduce GHG emissions. In addition, the MGC Group's environment-friendly products for reducing society's environmental impact have been newly designated as Sharebeing products, and the Group will further expand products that contribute to the environment. The Group will continue to focus on developing and utilizing human resources as its most important management resource and enhance its human capital management.

The MGC Group's shareholder return policy is to lift the medium-term guideline for total payout ratio from 40% under the previous medium-term management plan to 50%, and to adopt a progressive dividend policy that aims to progressively increase dividends while avoiding dividend decreases to the extent that it does not impair the Group's financial soundness.

3. Target management indicators (final fiscal year of the medium-term management plan)

*2: EBITDA = Ordinary profit + interest paid + depreciation and amortization

*3: ROIC = (operating profit - income taxes + equity in earnings of affiliates)/invested capital (Definitions have been revised for the new medium-term management plan)

(Assumptions) Exchange rate: ¥135/$; Crude oil price (Dubai): $80/bbl 3

Notes:

1. Please refer to the attachment for details about the medium-term management plan.
2. This document contains performance forecasts and other statements concerning the future. These forward-looking statements are based on information available at the time. These materials were prepared and on certain premises judged to be reasonable. None of these forward-looking statements are intended to be guarantees of future performance. Various factors may cause actual performance to differ significantly from forecasts.

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Medium-Term Management Plan

Grow UP 2026

Uniqueness & Presence - Becoming an excellent company with uniqueness and presence

TSE Prime

M a r k e t

May 10, 2024	4 1 8 2

Contents

Review of Grow UP 2023

New Medium-Term Management Plan Grow UP 2026

• Basic concept and numerical targets
• Objective 1 Strengthen the resiliency of our business portfolio
• Objective 2 Promote sustainability management
• Investment and financing plan, capital policy, and shareholder return policy
• Action to Implement Management that is Conscious of Cost of Capital and Stock Price
• Reference materials

03

11

12

17

41

48

52

57

©MITSUBISHI GAS CHEMICAL COMPANY, INC.		2

Review of Grow UP 2023

FY2021-FY2023

©MITSUBISHI GAS CHEMICAL COMPANY, INC.		3

Review of Previous Medium-Term Management Plan (Grow UP 2023) (1)

Operating Performance

• Although the net sales target was achieved, operating profit, ordinary profit, ROIC, and ROE were all below target
• Decrease in profit margins and increase in investment contributed to lower ROIC
• • We recognize our priority is to improve profit margins and capital efficiency

	FY2020	FY2023	FY2023
	result	result	target
Net sales	¥595.7	¥813.4	¥730.0
billion	billion	billion
Operating	¥44.5	¥47.3	¥70.0
profit	billion	billion	billion
Operating	7.5%	5.8%	ー
profit margin
Ordinary	¥50.2	¥46.0	¥80.0
profit	billion	billion	billion
ＲＯＩＣ*	7.7%	5.4%	10% or higher
ROE	7.1%	6.1%	9% or higher

*ROIC = Ordinary profit / Invested capital

• Operating profit, ROIC, and ROE for the past two medium-term management plan periods

	MGC Advance 2020					Grow UP 2023
		55.3		(billions of yen)
							49.0	47.3
		44.5
41.3
11.3%	34.2
		10.4%
							8.8%
10.9%	7.7%
		8.8%	8.3%	6.1%
		4.9%
		7.1%
								5.4%
		4.3%

FY2018	FY2019	FY2020	FY2021	FY2022	FY2023
				Operating profit		ROIC		ROE			4
©MITSUBISHI GAS CHEMICAL COMPANY, INC.

Review of Previous Medium-Term Management Plan (Grow UP 2023) (2)

Operating Performance by Business Sector

• Basic Chemicals* and Specialty Chemicals both missed operating profit and ordinary profit targets, mainly due to lower sales volumes and higher fuel and raw material costs

*Currently, Green Energy & Chemicals (GEC)
	FY2023	FY2023
	result	target
Net sales
Basic Chemicals (GEC)	¥412.8	¥410.0
billion	billion
Specialty Chemicals	¥409.2	¥330.0
billion	billion
Operating profit
Basic Chemicals (GEC)	¥17.7	¥25.0
billion	billion
Specialty Chemicals	¥33.0	¥49.0
billion	billion
Ordinary profit
Basic Chemicals (GEC)	¥10.1	¥31.0
billion	billion
Specialty Chemicals	¥38.6	¥53.0
billion	billion

• Difference analysis (ordinary profit)

Basic (GEC): Missed the target despite achieving targets in "energy resources and environment", mainly due to generally lower sales volume and higher fuel and raw material costs in other products

Specialty: Missed the target due to optical materials demand falling below expectations, lower sales volumes for EL chemicals*, and sluggish performance in PC products, despite achieving targets for polyacetal (POM) and electronic materials

*Electronic chemicals

Equity method affiliates, etc.: Equity in earnings of affiliates missed the target mainly due to impairment losses recorded at methanol associates

80.0

-7.3

-16.046.0

-10.7

FY2023		Basic Chemicals	Specialty	Equity method	FY2023
target		(GEC)	Chemicals	affiliates, etc.	result
		operating profit	operating profit

* This slide does not include businesses outside these segments and adjustments	©MITSUBISHI GAS CHEMICAL COMPANY, INC.	5

©MITSUBISHI GAS CHEMICAL COMPANY, INC.

Review of Previous Medium-Term Management Plan (Grow UP 2023) (3) Operating profit of Differentiating Businesses

• Operating profit of differentiating businesses* has been growing steadily over the long term; however, growth faltered during Grow UP 2023

(billions of yen)FY2009-FY2014

			MGC Will
100
80		Operating profit (		Differentiating businesses

FY2015-FY2020

MGC Advance

Other businesses (including head office expenses, etc. that cannot be ) attributed to Basic or Specialty business sectors)

FY2021-FY2023

Grow UP 2023

Growth faltered during

Grow UP 2023

60

40

20

0

-20

FY2009

FY2010

FY2011

FY2012

FY2013

FY2014

FY2015

FY2016

FY2017

FY2018

FY2019

FY2020

FY2021

FY2022

FY2023

*Electronic materials, Electronic chemicals (EL chemicals), Optical materials, Polyacetal (POM), Meta-xylenediamine (MXDA)/Aromatic aldehydes, Polymer materials, Methanol, Energy resources and environment (Methanol and Energy resources and environment shifted to differentiating businesses in FY2023)

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