Kamigumi : consolidated financial results briefing for the year ended March 31, 2024 Key questions and answers (summary)

Kamigumi Co., Ltd. consolidated financial results briefing

for the year ended March 31, 2024

Key questions and answers (summary)

Q1: It appears you were unsuccessful in improving results since 4Q of last year (the year ended March 31, 2024). Could you provide a review of the movement of cargo, like containers and vehicles, and give us your projections for this year (the year ending March 31, 2025)?

A1: We believe the main reasons for the weakness in cargo movement last year were lower volumes of grains (due to avian flu) and fruits and vegetables (due to produce blight), lower imports due to yen depreciation, and a dramatic decline in import cargo associated with the economic slowdown in China.

Our outlook for this year is bearish for several reasons, including the weak yen and the economic slowdown in China.

Q2: You cited accelerating environmental investments and rising labor and fuel costs as reasons for anticipating lower profits, despite higher anticipated sales this year. Can you tell us how you plan to reflect these costs in prices and in your plans?

A2: We're projecting that we'll additionally invest roughly 500 million yen in environmental measures and the same increase for labor costs. We haven't determined the final fuel cost figures yet, but we expect power costs to be higher than last year, given factors like the end of subsidies to electricity companies. While we don't expect to cover all these cost increases through price revisions during the period, we will engage in price negotiations as needed and gradually mitigate the impact of cost increases.

Q3: Why didn't you announce purchases of treasury stock at the start of the year? What are your thoughts on capital policies and returns for the next medium-term management plan, given expectations for higher cash on hand, lower ROE than expected, and a higher than anticipated equity ratio in the final year of the medium-term management plan?

A3: We didn't announce purchases of treasury stock at the start of the year, but we are

1/3

considering the right timing and scale of such purchases to achieve both our targets for business results and capital policies.

With regard to capital policies and returns, we plan to continue positioning ROE as a key KPI in the next medium-term management plan. Room remains to improve our financial leverage, and we plan to give full consideration to the optimal capital structure and provide you with the related information.

Q4: Can you say more about last year's price increases and anticipated environmental costs?

A4: Basically, the price increases involved revisions to harbor and port unit rates. Last year's price increases brought in about 1.7 billion yen. We plan to continue pursuing aggressive negotiations to win appropriate rates in the future as well.

Regarding environmental costs, the amounts invested toward 2030 and an overall sense of the costs are described on page 37 of the supplementary materials. We have announced plans to reduce CO2 emissions in 2030 by 46% compared to 2013, and expect to address any shortfall by purchasing environmental value.

Q5: Given the shrinking domestic population and slowing growth in China, in what fields and regions do you see growth potential in the years covered by the next medium-term management plan?

A5: We expect depopulation to lead to a decrease in the overall volume of port cargo. But we believe we can capture a greater share in our core business area by leveraging our strengths in ports and harbors.

Furthermore, just as we do in Japan, we aim to acquire logistics assets in order to promote overseas business. At present we're identifying target areas, and intend to reflect these in the next medium-term management plan.

With respect to new energy, we have established a new business division to enhance our specialty for heavy cargo transport functions for wind power and renewable energy, both of which are expected to grow. We plan to link these to future growth strategies.

2/3

Q6: On the subject of M&As, it's conceivable M&A activities might actually reduce Kamigumi's high profit margins. What are your thoughts?

A6: As you point out, there are concerns about lower profit margins, but we believe achieving expanded scale through M&A activities is essential if we plan to raise the top line.

Q7: What are your thoughts on returns on environmental investments and the scale of purchases of environmental value?

A7: I think we should look at environmental investments as both defensive and essential measures for responding to environmental regulations. While I don't think this will increase sales per se, if our approach proves unsuccessful, we're less likely to become a company of choice. It will also be impossible to maintain the status quo if we don't carry this out. On the other hand, we plan to establish an ESG Working Group as part of the process of considering the next medium-term management plan, to discuss the theme of raising the top line through ESG and environmental measures. In this way, we plan to approach ESG proactively, not passively.

Our current expectations regarding purchasing environmental value is on the order of tens of millions of yen annually.

Q8: What do you consider the percentage of Kamigumi's capital costs?

A8: At the time the medium-term management plan was formulated, we were debt free, so we considered shareholder capital cost (WACC) to be about 6.2% and set an ROE target of 6.5% with a slight equity spread added. Later, we raised 30.0 billion yen through debt financing, so we consider the current WACC to be 5% or slightly lower.

3/3