Summary of Q&A for Results Briefing of the 3rd Quarter of Fiscal Year 2023 held on February 6, 2024

We plan to incorporate factors such as fish market prices, exchange rate fluctuations, and progress in exporting our Fine Chemicals business overseas into our target of 32-billion-yen operating profit. In the Marine Products business, we expect to recover profits from our evaluation loss of caged fish stock in the next term in our South American trout salmon aquaculture business. We can improve our profitability by increasing the ratio of aquaculture in Japan.

The medium-term management plan targets a dividend payout ratio of 30%, which we are nearing. There may be better options, and we have yet to decide on specific numbers for the future. Therefore, we will continue to consider them.

The main reasons for the decline in profits are our South American trout salmon aquaculture and North American processing business. In Japan, the seafood market has entered a phase of adjustment, such as in frozen tuna, and the processing business has been struggling.

Almost all expected risks are incorporated, but we are concerned about the huge impact of exchange rate fluctuations.

In the South American trout salmon aquaculture business, we expect to recover profits from our evaluation loss of caged fish stock in the next term. We also anticipate that trout salmon prices will bottom out, so we predict that the losses from the fish assessment in the pond will not increase in the fourth quarter compared to the third quarter. The profitability of tuna is expected to improve after the fourth quarter as stock disposal progresses and prices stabilize. Domestic aquaculture is expected to improve profitability due to the good results and expansion. Still, the North American processing business is expected to continue to struggle due to falling surimi prices.

It will take more work to make a significant recovery in profits. The fishing quota for Alaska pollock will remain the same next term, and the fishing quota for Russian pollock will increase, so the surimi and fillet market is expected to continue to be weak. In addition, the high labor costs are causing a challenging situation. We will implement various measures but do not anticipate a quick recovery from the deficit.

The surimi market has fallen to a certain level, so we believe the market will rebound over time.

The reasons include the more significant than expected impact of price increases and our ability to procure raw materials such as surimi and rice at lower-than-expected prices. In addition, they include our success in reducing operational costs by eliminating unprofitable products through implementing revenue and expenditure management on an item-by-item basis.

The cost-reduction effect of white fish fillets is significant because we manage many fried fish overseas. In addition, the sales quantity did not decrease due to price increases, as consumers recognize the value of seafood. In Europe, the expansion of sales areas contributed. In North America, the excellent performance of frozen foods for commercial use contributed. In Japan, the operating profit margin improved due to the penetration of price increases and increased sales in the chilled food business.

We expect the improved profit margin of frozen foods for home use in North America due to the fall in white fish raw material prices. We are concerned about the rising costs of factors such as logistics and exchange rates in Japan. On the other hand, we optimize the chilled food business through management integration with Gourmet Delica. We aim to improve the profit margin by strengthening product development capabilities and reorganizing the supply area.

The reason for the delay in the application is that the standards differ in the United States and the EU, and it took time to prepare for the analysis and application. We plan to apply within the fiscal year 2023 and expect to ship in the second half of FY2024.

Currently, the scale of exports is not significant. There is room for further expansion of the sales network as a European marine product company joined the group in December last year. Asia is also an attractive market, so we want to expand further.