Summary of Q&A for Results Briefing of the 2nd Quarter of Fiscal Year 2023 held on November 10, 2023

We believe we can achieve our plan in FY23 despite the fish price slumping and cost increases. We prospect the fish price conservatively, but it could go upwards. In addition, the chilled business is expected to exceed the profit plan.

There is enough chance to achieve the medium-term business plan. As fish prices stabilize, the Marine products business will perform well with mitigated expenses generated by falling fish prices and increasing demand. The Food product business is expected to be positive due to the cost down of marine raw materials. In particular, the fine chemicals business is likely to recover since we could resume exporting goods in the second half of FY24. There is a risk of an economic downturn other than fish price fluctuation. We are concerned that sales of our high-quality products may decline when consumer spending on food decreases.

Overall, we do not expect fish prices to continue to decline. In the products for the Japanese market, we have concerns about exchange rate fluctuations. It is not easy to make a general statement because the situation differs depending on the fish species, but fish prices have been adjusted due to the high price in the past two years. Price adjustments may occur on the surimi. The prices of Chilean salmon and trout are expected to be stable. Still, the exchange rate impact will affect coho salmon since the sales volume in Japan of coho salmon is significant.

To address the challenge of improving UniSea's profitability, we consider increasing the production of fillets and reducing the production of surimi. We are currently renovating the production line of fillets. Since fillet is an international product with lower volatility than surimi, increasing the output of fillet is one of the measures to increase profitability. The market for surimi is still significant in Japan, and we would like to increase the production ratio of fillets and international sales ratio to reduce volatility. We will also implement initiatives to reduce fixed costs and maximize plant operation efficiency. A slight increase in Pollack's catch quota will be a plus next year.

Although Alaskan Pollack's catch quota has been fixed, we can still gradually increase our catch quota within the limited catch quota.

The trading business will steadily expand through acquiring a fishing company in New Zealand, increasing yellowtails in domestic aquaculture, and expanding coho salmon cultivation bases. In addition, the trading business will be positive by increasing the profit margin through high-value-added products in the South American salmon and trout farming business and continuing purchasing and inventory management.

Besides the exchange rate being more positive than expected until the second quarter, the procurement price of surimi was also reasonable. It resulted in higher profits than the initial plan. In FY23, we successfully managed gains by "thorough profit management of an individual product," so we established the operation methods achieving a certain profit level in the face of raw material prices hiking. The reason for the success is the price increase raised three times since last year and the management of items. Regarding "thorough profit management of an individual product," we reviewed each item's cost in response to the rapid cost increase from FY21. We thoroughly managed the profits generated each of manufacturing and sales. Even after the price increase, those judged unprofitable in manufacturing and sales were cut. We will continue this initiative.

The effect of "thorough profit management of a single product" is about 5 billion yen, including the impact of price increases. We will enhance the accuracy of this initiative to secure profits through manufacturing and sales.

We will carefully consider price increases while monitoring the market, considering various cost inflation factors such as the yen depreciation and logistics costs. Still, we will consider cutting items that will not be profitable even if the price is raised.

We will try to keep the price. However, we might do a price down to respond to the market and competitor's situations.

In FY23, the business integration with Gourmet Delica will increase our sales and profits. The sales of convenience stores are growing, so we do not predict a decrease in volume. We will establish a product development system to increase profits. Sales are expected to reach 90 billion yen in FY23 and 100 billion yen in FY24.

We cannot disclose the specific figures. The sales scale in Europe and the United States is expected to be the same as in Japan in about two years. We are also considering the Chinese market beyond.

I did not expect inflation in Europe and the United States to reach this level. The economic momentum has changed since the middle of the year. The sales volume of high-priced seafood materials (cod, salmon, trout) is declining. We will develop strategies to mitigate the decrease in sales volume by implementing an affordable product mix, such as smaller packaging. The sales volume of processed seafood products with flour decreased due to price hikes, but demand has been steady. We will continue to maintain the scale of sales to avoid price competition. I believe the sales volume will return when the economy recovers.