Marubeni : Q&A of briefing on Financial Results for Q1 of FYE 3/2023 has been uploaded.

Condensed Transcript of Question and Answer Session

Briefing on Consolidated Results for the Q1 of the Fiscal Year Ending March 31, 2023

Date:	August 5, 2022 (Friday)
Format:	Conference Call
Those Present:	Takayuki Furuya,	Managing Executive Officer, CFO
	Hideyoshi Iwane,	Executive Officer,
		General Manager, Corporate Accounting Dept.

Disclaimer Regarding Forward Looking Statements and Original Language

This material contains forward‐looking statements about the future performance, events or management plans of Marubeni Corporation and its Group companies (the Company) based on the available information, certain assumptions and expectations at the point of disclosure, of which many are beyond the Company's control. These are subject to a number of risks, uncertainties and factors, including, but not limited to, economic and financial conditions, factors that may affect the level of demand and financial performances of the major industries and customers we serve, interest rates and currency fluctuations, availability and cost of funding, fluctuations in commodity and materials prices, political turmoil in certain countries and regions, litigation claims, changes in laws, regulations and tax rules, and other factors. Actual results, performances and achievements may differ materially from those described explicitly or implicitly in the relevant forward‐looking statements.

The Company has no responsibility for any possible damages arising from the use of information on this material, nor does the Company have any obligation to update these statements, information, future events or otherwise.

This material is an English language translation of the materials originally written in Japanese. In case of discrepancies, the Japanese version is authoritative and universally valid.

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<1st questioner>

Context of Helena's strong results and sustainability of that performance

CFO Furuya: In Q1 of FYE 3/2023, Helena's sales expanded not only in fertilizers, but also crop protection, Helena products and seeds. While high profit margins are a hallmark of Helena's business model and these were maintained as such, the increase in sales volume and rising commodity prices also contributed to results.

With grain prices staying at a high level, continued brisk demand for agri-inputs at farms in the U.S. coincided with a seasonal sales peak at Helena, resulting in strong sales growth. These good conditions have continued for about two years, and we believe that a favorable operating environment has arrived.

Q2 is traditionally a period of lower demand, but in the second half and beyond, we think that robust demand will continue, including demand for autumn fertilizer. The reason behind this is sustained/increasing demand from farms in the U.S. While it is possible that a natural disaster or other event could affect planting, recent such events have been localized, and the impacts have been minor, which has also contributed to the favorable environment.

I think Helena will show favorable performance for this year and for the next several years.

Assuming strong results continue through FYE 3/2023, there is the view that a change in business conditions could erode those gains and result in a drop in profit and dividends in FYE 3/2024. Considering that, what are the conditions for raising the current payout ratio (25% or more)?

CFO Furuya: Volatility in the business environment is extremely high, so first-off we want to do what we can to maintain strong performance through the end of FYE 3/2023.

As explained at previous briefings, our dividend policy is to aim for increases in line with profit growth. In addition to that, we have set ¥60 per share as the minimum annual dividend for the three years starting FYE 3/2023. Changing the payout ratio would require further improvement in our profitability and financial position, and we are in the process of evaluating our progress toward that goal. We constantly review the thinking behind our shareholder return policy, so we will consider enhancing returns as we go forward. Shareholder returns obviously require a mid- to long-term perspective, but we will think about what to do in the near term in that context.

<2nd questioner>

About the Metals segment (specifically coking coal, copper, and iron ore)

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CFO Furuya: Coking coal posted solid results as prices soared and, despite weather factors, production increased slightly from the same period of the previous year. There were cost increases, but we were able to absorb them because of solid prices and production output.

In copper, prices were essentially flat compared with the same period a year earlier, but profit declined as the production decreased as we assumed in the FYE 3/2023 forecast, and some costs increased.

In iron ore, prices fell compared with the same period a year earlier, and production was steady. The price decline was the main factor in the decrease in profit. There were also tax-related factors.

Matters of concern and outlook for Gavilon's fertilizer business, Nowlake business and other businesses.

CFO Furuya: Q2 began in July, and although we have no specific concerns at this time, metal prices have been falling, and this will pressure profits from Q2 onward.

Gavilon's fertilizer business secured a certain level of profit in Q1, although it was down from the same period a year earlier. Fertilizer prices have been settling back to normal from June. The fall in the price of liquid nitrogen fertilizer preceded this trend, so we have been seeing the effects since June. On the other hand, Helena is in a position to secure margins because of its competitive advantages, and that is likely to continue. As we move into Q3, we have high second-half expectations for Helena.

As for Nowlake, there are concerns that the bad debt ratio may increase due to deteriorating market conditions amid rising U.S. interest rates, but recently Nowlake has been building up quality financial assets and profit has increased. Used car demand in the U.S. has been steady, which has supported the ongoing high price of used cars and thereby contributed to a favorable environment for Nowlake. While the situation bears close monitoring, there are not currently any signs of concern.

<3rd questioner>

Context of strong performance of Marubeni-Itochu Steel Inc., and sustainability in Q2 and after

CFO Furuya: Construction materials and related businesses have continued to perform well since last year, mainly in the U.S. For a time, there were concerns that the market had passed its peak, but conditions remain strong even now. In addition, rising oil prices led to high demand for tubular products for shale oil in the U.S. and others, and substantial profit growth. Sectors other than

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construction materials and tubular products were also up slightly from last year, with tubular products being the main driver of the year-on-year improvement.

Regarding our ability to sustain performance, while we should be careful in making any judgments, we expect to see reasonable profits even as conditions return to normal. There are no significant changes in the situation at this time.

Factors contributing to profit growth of LNG business and future outlook

CFO Furuya: Our agreement for Qatar LNG project terminated in Q3 of FYE 3/2022, but we have LNG interests in Papua New Guinea, Peru, Equatorial Guinea. Profits from these interests were positive thanks to improvement in LNG market conditions, which more than offset the end of the agreement for Qatar LNG project.

In LNG trading, we are engaged in trade for sale to Japan and third-country trade globally, which contributed to earnings in Q1.

<4th questioner>

Timing of returns on Horizon 1 and 2 growth investments

CFO Furuya: For Horizon 1 and 2, we think there is room to expand profitability through investment, so we need to move forward on that. Helena has plenty of growth investment opportunities. It has a clear strategy of making growth investments, selling its competitive own label products and services to farmers, and broadening its customer base, and will acquire the necessary logistics bases and customer networks to increase its share in the U.S. Creekstone Farms is making further CAPEX to reach its target of the processing capacity. The more efficient its factory is, the more cost-competitive it will be, so we think there is still room for improvement. We will therefore plan and execute relevant investments. The cycle for returns on growth investments in Helena and Creekstone Farms now leads to generation of profit and cash flow in the following year or so, rather than in two- or three-years' time. In this way, we want to make growth investments in our operating businesses. There is no change in our policy, and we intend to allocate capital in a focused and strategic manner.

Allocation of free cash and shareholder return policy in GC2024 in light of recent strong cash flow

CFO Furuya: We will make decisions for allocation of free cash not on an annual basis, but for the three years of GC2024 (FYE 3/2023-FYE 3/2025). GC2024 is focused on putting strategies into action, so this is a time to build up a certain level of growth investments. I believe there is still room to

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strengthen existing businesses, so we will allocate capital in a focused manner, and make Horizon 3 investments as well.

Our plan is to make growth investments of ¥350 billion in FYE 3/2023. So far, we invested ¥126 billion in Q1. We intend to continue managing our progress, including the investment pipeline.

If the sale of Gavilon's grain business is completed during FYE 3/2023, the divestment proceeds of about ¥300-400 billion will be added to the amount we projected at the start of the period, so we will consider cash allocation with that in mind over the period of GC2024. As mentioned when we announced the result of FYE 3/2022, we will not decide on the use of the proceeds from the Gavilon grain business divestment just in this fiscal year. We will focus on making steady progress on this year's growth investments of ¥350 billion first.

<5th questioner>

Containerboard manufacturing and sales business in Vietnam and hygiene products manufacturing and sales business in Brazil

CFO Furuya: Kraft of Asia Paperboard & Packaging Co., Ltd. posted a net loss of ¥0.8 billion in Q1. The reason for the loss was that sales were lower than expected, partly because of a delay in the recovery of the containerboard market in Vietnam after the pandemic and the impact of pandemic-related restrictions in China. We think the market recovery will take a little more time. Since operations have already started, we want to strengthen sales in anticipation of a market recovery, but given that other manufacturers in the industry are in the same situation, we think it will take a little more time for the market to recover.

At Santher in Brazil, sales are growing, but not quickly enough to cover the increase in costs from rising pulp, raw material and energy prices, and the impact of the weakening Brazilian real, resulting in a Q1 net loss of ¥0.4 billion. In sales, Santher is raising product prices in stages to reflect increased costs. In addition, since Marubeni participated in the business, improvements have been made including those relating to material procurement routes in conjunction with Daio Paper, which have helped to reduce costs, and monthly profitability is now in sight. At a time of severe increases in manufacturing costs and raw material prices, Santher will focus on improving its competitiveness.

Conditions and outlook at Aircastle

CFO Furuya: It has now been more than two years since we raised our stake in Aircastle, but conditions have finally been stabilizing, including with regard to Russia, as we have dealt with the credit risk problems of airlines in the pandemic. Lease revenue also bottomed out in the middle of last

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