Taiheiyo Cement : Summary of Explanation and Q&A on Financial Results Briefing Session for the Fiscal Year Ended March 31, 2023

This document is a translated version of the Japanese original. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail.

Taiheiyo Cement expects operating income to increase by 53,600 million yen YoY to 58,000 million yen in the fiscal year ending March 31, 2024, due to cement price revisions, etc.

The following is a transcription of Taiheiyo Cement Corporation's financial results presentation for the fiscal year ended March 31, 2023, which was given on May 12, 2023.

[Speakers]

Masafumi Fushihara, President and Representative Director, Taiheiyo Cement Corporation Naoyuki Kira, Managing Executive Officer, Senior General Manager of Cement Business Division and General Manager of Sales Department Cement Business Division, Taiheiyo Cement Corporation

Masahiro Ban, Managing Executive Officer, Taiheiyo Cement Corporation

Masao Osumi, General Manager of Business Development Department, International Business Division, Taiheiyo Cement Corporation

Tomonori Yamamoto, General Manager of Corporate Planning Department, Taiheiyo Cement Corporation

Hiroshi Onoue, General Manager of Accounting & Finance Department, Taiheiyo Cement Corporation

1

Management Overview and Management Policy

Masafumi Fushihara: I am Masafumi Fushihara. Yesterday, we announced our financial results for the previous fiscal year and our forecast for the current fiscal year. Regarding the financial results, the consolidated operating profit was 4,400 million yen, and the profit attributable to owners of parent was negative 33,200 million yen, a very difficult outcome. Details will be explained later by the staff in charge.

For the current fiscal year, we are forecasting an operating profit of 58,000 million yen and a profit attributable to owners of parent of 40,000 million yen. There are many ways to look at this, but the way we see it, these are the most solidly assumed figures.

We have been determined to make a V-shaped recovery this year. Since last year, we have been working hard to revise prices and secure coal, even in the face of difficult conditions, and this 58,000 million yen is the most rigorously calculated figure given the situation.

I think the most important key points to look at here are the prices and how price negotiations are proceeding. The details will be explained later by the staff in charge, but in my understanding, the price negotiations have basically already been completed.

Since some customers have requested that the price revision be made from this second half of the year or from July of this year, we still have some negotiations to do, such as asking that the price revision be made from April or at least within the first quarter. Still, all users have agreed to the 3,000 yen price increase.

We have spent sufficient time explaining the situation to our customers, and so far, we have gained understanding from most of our users. We see the negotiations as basically over, with only a few remaining regarding the start date.

The 58,000 million yen in the operating profit forecast for this fiscal year is based on customers' current requests, so we expect it to be a little higher if the start date is moved up.

Regarding coal procurement, the ratio of coal in the past was approximately 60% Russian, with the remaining 40% Australian, but due to government policy, we will reduce the amount of Russian coal to zero in FY2023. In addition to Australian coal, we now expect to be able to secure all the coal we need for the current fiscal year through the use of the Indonesian and North American coal that we began procuring during the last fiscal year. Now we just need to determine how to balance the weight of long-term and spot contracts while keeping an eye on prices.

Since the nearby Russian coal is no longer available, the coal will be brought in by large vessels. This is not a problem for our Oita plant, where large vessels can dock, but for our other plants, we will need to handle this in different ways, such as by unloading at two ports somewhere in Japan. However, if the coal is brought in by large vessels, we should be able to lower the cost of the coal through ship-to-ship transfers, so we will experiment with that this fiscal year.

2

In response to the various future concerns about Russian coal and the government's policy, we have succeeded in securing coal in FY2023 without any contracts for Russian coal.

In addition, we withdrew our application for the Tehachapi plant, the second plant we had planned to acquire through M&A in the US, due to a lack of prospects for approval by the Federal Trade Commission.

The first, the Redding plant in Northern California, had a capacity utilization rate of 70 percent at the time of acquisition, but in less than a year, it is now over 90 percent. We have the benefit of that increased production, and through proper port upgrades in the future, we will be able to distribute imported cement in even better ways than before. Accordingly, to make up for the Tehachapi plant that we were not able to acquire, we hope to be able to meet demand in this way.

There were many events in FY2022, but we were able to achieve most of our price negotiations. As for overseas projects, the acquisition in the US is, as I have just mentioned, and the renewal work at our plant in the Philippines is progressing smoothly according to schedule. We will be able to start operations in May of next year.

In the future, we plan to double our sales volume. It is easy to produce a lot, but we need to handle things well, so we are acquiring land on Luzon, the island where Manila is located, to build a service station and develop a distribution network.

In Indonesia, the construction of a pier at the plant of a company in which we invested the year before last is progressing almost according to schedule. When completed, the pier will enable the distribution of clinker and cement by large vessels. We have also been able to establish a cooperative relationship with our parent company, Semen Indonesia, which will be able to supply us with nearly 1 million tons from its plant. In this way, I feel that this was a year in which we were able to establish various logistics networks within the Pacific Rim.

Currently, there are not a lot of soil stabilizers available in Indonesia. Since it is a coal-producing country, it has a lot of peat soil similar to that of Hokkaido, Japan, and ordinary cement will not solidify. For this reason, we have provided our technology to Semen Indonesia for the development of soil stabilizers, and this is also progressing well.

Indonesia is undergoing a major construction project to relocate its capital, and we expect a considerable number of soil stabilizers will be produced in the future. In light of this situation, we are now able to work together on new projects, such as a soil stabilizer joint venture.

As for Vietnam, however, a struggle within their administration has been going on for more than a year, and the prime minister has resigned, which has caused some confusion. As a result, most construction work has been halted for about a year, with permission ungranted even after projects have been ordered and reported.

3

Vietnam is now the world's largest exporter and exports most of its products to China. However, exports had to stop due to China's COVID-19 countermeasures, which resulted in a market condition decline with excessive competition in the absence of properties due to cheap domestic sales.

The situation has been difficult since FY2020, combined with turmoil in the administration, but I do not think the economy will stagnate for two years again in the future, and the trends have been changing a bit recently. Therefore, I do not expect this year to turn out like last year.

This year is the year in which Taiheiyo Cement will formulate its new medium-term management plan, and we are now beginning that process. The premise for creating it is not to create only a plan for the next three years but to envision what kind of company we will be in the distant future, as we did 10 years ago when envisioning the mid-2020s, formulate three medium-term plans within that vision, and achieve those goals.

When creating our medium-term management plan 10 years ago, the keyword at the time was "the Pacific Rim." We have been working to become a corporate group with a meaningful presence in the Pacific Rim, and we are now in the final year of our third medium-term management plan. Our position within the Pacific Rim and the development of our various businesses have not deviated from what we originally envisioned. However, the figures for domestic demand, for example, are significantly off.

Accordingly, I would like for us to spend this year deciding what kind of company Taiheiyo Cement should be 10 years later, as well as various matters related to carbon neutrality toward 2030, which is the interim target for carbon neutrality six years from now, and announce a new medium-term plan around this time next year.

Last fiscal year, we took over Denka's cement business. We have been selling Denka's cement under the Taiheiyo brand since April of this year. That sales volume is approximately 1 million tons. Denka will produce the cement at its plant for two years, and during that time, we will be upgrading Myojo Cement's processing facilities to be able to accept all of Denka's waste.

In two years, if demand does not change from what it is today, we will need to increase production at our existing plants for the 1 million tons that Denka will produce. It is essential to know how to strengthen our plants in case domestic demand does not change and how to handle logistics, especially shipping issues.

In addition, the 2024 issue in logistics is coming up next year. Overtime work will be more restricted than now, and hiring new personnel will be difficult. In the midst of this situation, we are discussing with logistics companies ways to prevent logistics from becoming stagnant by suggesting things such as trying out joint car dispatch, for which efforts have been underway for the last two or three years.

I believe that we must carefully discuss the 2024 issue throughout the year and move forward with various matters so that we will not panic next year. Four years ago, Taiheiyo Cement

4

received 500,000 to 600,000 tons of OEM from Hitachi Cement. It will now receive 1 million tons from Denka in the form of a business transfer.

Taiheiyo Cement became the first private company to produce cement in Japan in 1881. The company was established 142 years ago under its basic philosophy of "making cement as a private company because it is necessary for Japan," not "making cement because it is profitable." Therefore, we want Taiheiyo Cement to supply cement to Japan as long as Japan needs it. The OEM from Hitachi Cement and the business transfer from Denka are part of this philosophy.

It remains to be seen how the cement business will be handled in the future restructuring of other cement manufacturers. I expect the situation to become clearer over the next few years, but under such circumstances, I would like for us to continue supplying the cement that Japan needs for as long as possible.

I have received various suggestions, such as, "What if we reduce our number of kilns like other companies?" or "Why don't we want to reduce them?" but I would like for us to wait and see how things turn out. However, we cannot afford to lose profits, so we will lower our costs and proceed proficiently. That is all for the overview.

5