Background and Purpose of the Acquisition

Q: How did you come to start considering the acquisition?
A: We initiated consideration after LANXESS announced their plans to sell off the business in November 2023.

Q: Did you have an interest in the target business before the announcement of the sale, or did you come to decide after the announcement, taking into account the construction of a new plant in North America (DMC/EMC business)?
A: Although we did not start considering the acquisition until we heard about their plans, we have been doing business with the company and have found the target business very attractive.

Q: Are you positioning the C1 chemical chain as a core for the future growth?
A: The C1 chemical chain is one of the growth drivers in specialty chemicals, but we will continue to invest in polyimide, separation membranes, and ceramics as well in line with our growth strategy.

Q: What kind of synergies do you expect from this acquisition?
A: The target business is in the downstream and peripheral areas of UBE Group's PCD business, and we believe that by combining the technologies, human resources, markets, and customers of the two companies, we can expand together. The acquisition is also attractive because the target business focuses on the North American market, where we have limited resources.

Q: I understand that you have implemented your own expansion strategy for PCD and PUD. Do you expect the synergies have more effects?
A: That is true, while development period is necessary.

Q: What is the expected annual growth rate of sales of the target business?
A: Since the U.S. is the main market for the products and they are used for a wide range of applications, we expect it to grow at the slightly higher rate than the U.S. economy growth, or around 4-5% per year.

Q: In what applications are you particularly expecting growth?
A: Applications for semiconductor manufacturing equipment, etc.

Q: Is it correct to understand that the growth rate for "Chemical Industry", "Mobility", and "Food, Healthcare, and Consumer Goods" is high, while the growth rate for "Energy, Natural Resource, and Industrial" is low?
A: That is right. It is assumed that resource development will stagnate with the progress of decarbonization.

Q: Does the environmentally friendly grade have anything to do with the "Energy, Natural Resource, and Industrial" applications?
A: Environmentally friendly grades are those with minimal residual concentrations of isocyanate. It has nothing to do with the "Energy, Natural Resource, and Industrial" applications.

Q: You explained that the target business does not produce harmful isocyanates. May I understand that there is no risk of litigation regarding environmental issues?
A: We believe such risks are low.

Q: The EV market is slowing down in North America. Since PCD is downstream of DMC, is it correct to understand that this acquisition will be a hedge against the slowdown in EVs, regarding the construction of a new plant in North America (DMC/EMC business for electrolytes in lithium-ion batteries)?
A: While this acquisition may serve as a hedge against risk, it is not the purpose of the acquisition. In addition, we believe that we can secure a certain level of profitability in DMC business even if the EV market slows down because of its cost competitiveness.

Q: We understand that you will be integrating the businesses in the future. Do you have any road maps?
A: We would like to steadily proceed with the procedures of Post Merger Integration over the period of about two years.

Q: Is there any possibility that an increase in market share results in issues regarding competition law?
A: We do not believe this will be a problem at this point.

Performance and Finance

Q: I would like to know how sales and EBITDA have changed from the past and what is the outlook for the future.
A: Although past performance cannot be disclosed because the target business will be carved-out from LANXESS, it is expected to grow steadily at the same rate as the U.S. economy because its end-use applications cover a variety of industries.

Q: LANXESS has disclosed an EBITDA of €40 million for the last 12 months for the business, while UBE has stated an EBITDA of €50 million for the year ending December 31, 2024. What are the factors behind this assumption of significant year-on-year growth in the second half of the year?
A: Last year the chemical industry in Europe was in a difficult situation, but this year there is a recovery trend. Growth in areas such as for semiconductor manufacturing equipment is contributing to the recovery.

Q: What is the amount of intangible assets recorded and net asset value of the target business?
A: We are unable to answer for now.

Q: When do you expect to turn to profitable in the operating profit, given the amortization of goodwill?
A: We believe that the business can become profitable when the amortization starts in FY2025 after the acquisition is completed.

Q: The current medium-term management plan will have a large cash outflow due to investments related to the construction of a new plant in North America, etc. How do you see the change in your financial structure?
A: Although there will be a burden on our finances, we believe that we can make up for it with future profits and cash inflow generation in the span of about five years.

Q: Is there a possibility that you will proceed with the sale of your businesses to raise funds?
A: We have no such plans at this point.