Mitsubishi Chemical : New Medium-Term Management Plan APTSIS 25 Step1 (Feb.25.2021)

Disclaimer

This presentation material contains forward-looking statements that reflect Mitsubishi Chemical Holdings Corporation's assumptions and beliefs based on currently available information. Actual results may differ materially from forecasts due to various risks and factors, and uncertainties. These include, but are not limited to, demand in Japan and overseas, exchange rate, price and procurement volume of crude oil and naphtha, market trends, technological innovation, National Health Insurance drug price revisions, product liabilities, lawsuits, laws and regulations, as the Mitsubishi Chemical Holdings Group is engaged in a wide range of businesses, including information, electronics and displays, advanced moldings and composites, advanced polymers, MMA, petrochemicals, carbon products, industrial gases, and pharmaceuticals.

List of Abbreviations

MCHC: Mitsubishi Chemical Holdings Corporation MCC: Mitsubishi Chemical Corporation

MTPC: Mitsubishi Tanabe Pharma Corporation LSII: Life Science Institute, Inc.

NSHD: Nippon Sanso Holdings Corporation TNSC: Taiyo Nippon Sanso Corporation carboNXT: carboNXT GmbH

CFK Valley State Recycling : CFK Valley State Recycling GmbH & Co. KG C.P.C.: C.P.C. Srl

DEV: Diamond Edge Ventures, Inc. Gelest: Gelest, Inc.

JPP: Japan Polychem Corporation LSIM: LSI Medience Corporation

MCAT: Mitsubishi Chemical Analytech Co., Ltd. Medicago: Medicago, Inc.

SIC: Science and Innovation Center Shinryo: Shinryo Corporation

UMBM: Changshu UM Battery Materials Co., Ltd.

AIST: National Institute of Advanced Industrial Science and Technology

ARPChem: Japan Technological Research Association of Artificial Photosynthetic Chemical Process Audi: Audi AG aveni: aveni S.A. BIKEN: BIKEN Co., Ltd. ENEOS: ENEOS Corporation

HySUT: The Association of Hydrogen Supply and Utilization Technology JH2A: Japan Hydrogen Association

JST: Japan Science and Technology Agency Kashima Oil: Kashima Oil Co., Ltd.

Kirin Holdings: Kirin Holdings Company, Limited Lenovo: Lenovo Corporation

LIBTEC: Consortium for Lithium Ion Battery Technology and Evaluation Center Linde: Linde AG

Mazda: Mazda Motor Corporation

NEDO: New Energy and Industrial Technology Development Organization NTT: Nippon Telegraph and Telephone Corporation

PHCHD: PHC Holdings Corporation

Praxair: Praxair, Inc.

Refinverse: Refinverse, Inc.

SABIC: Saudi Basic Industries Corporation Toyota: Toyota Motor Corporation

Ube Industries: Ube Industries, Ltd.

ABS: acrylonitrile butadiene styrene AI: artificial intelligence

ALS: amyotrophic lateral sclerosis ArF: argon fluoride

CCC: cash conversion cycle

CFRP: carbon fiber reinforced plastic

CF-SMC: carbon fiber-sheet molding compound CVC: corporate venture capital

DX: digital transformation

EB: electron beam

EUV: extreme ultraviolet EV: electric vehicle GaN: gallium nitride GHG: greenhouse gas GX: green transformation

ICT: information and communication technology IOWN: Innovative Optical and Wireless Network KV30: KAITEKI Vision 30

LCA: life cycle assessment Li: lithium

LIB: lithium-ion battery MAA: methacrylic acid MI: materials informatics MMA: methyl methacrylate MOE: Management of Economy MOS: Management of Sustainability MOT: Management of Technology

Muse cell: Multilineage-differentiating stress enduring cell PBS: poly butylene succinate

PCM: prepreg compression molding PCR: post consumer recycling

PE: polyethylene

PET: polyethylene terephthalate PIR: post industrial recycling PMMA: polymethyl methacrylate PoC: proof of concept

PVOH: polyvinyl alcohol RNA: ribonucleic acid

RPA: robotic process automation

SCAAT: super critical acidic ammonia technology SCM: supply chain management

SGDs: Sustainable Development Goals Si: silicon

VLP: virus-like particle

Agenda

• 1. APTSIS 20 Review

• 2. APTSIS 25 in View of Environmental Stance and Pandemic

• 3. APTSIS 25 Step 1

  • 3-1 Measures to Bolster Foundations

    • 3-1-1 Measures to Bolster Management Foundations

    • 3-1-2 DX Strategies

    • 3-1-3 Measures to Bolster Business Foundations: Business Model Reforms

    • 3-1-4 Measures to Bolster Business Foundations: R&D Initiatives for Next-generation Businesses and CVC Strategies

  • 3-2 Basic Portfolio Reform Policies

  • 3-3 Overhaul Key Businesses

  • 3-4 Strategies for Growth Business Areas

  • 3-5 Financial Strategies

  • 3-6 Sustainability Management

Agenda

1. APTSIS 20 Review

2.

3. APTSIS 25 Step 1

• 3-1 Measures to Bolster Foundations

  • 3-1-1 Measures to Bolster Management Foundations

  • 3-1-2 DX Strategies

  • 3-1-3 Measures to Bolster Business Foundations: Business Model Reforms

  • 3-1-4 Measures to Bolster Business Foundations: R&D Initiatives for Next-generation Businesses and CVC Strategies

• 3-2 Basic Portfolio Reform Policies

• 3-3 Overhaul Key Businesses

• 3-4 Strategies for Growth Business Areas

• 3-5 Financial Strategies

• 3-6 Sustainability Management

1. Operating Results

• ◼ After reaching initial 380 billion yen target in fiscal 2017, earnings worsened from fiscal 2018 owing to absence of Gilenya™ royalties, economic slowdown, US-China trade friction, impact of COVID-19 pandemic, and other factors

• ◼ Special factors in the Health Care segment lowered net income in fiscal 2019 and 2020

APTSIS 20

Sales revenue (Billions of yen)

Earnings (Billions of yen)

Operating income （Core operating income）Net sales (Sales revenue)

3,8800.5

Net income (Net income attributable to owners of the parent)

280.0

3,0077.5

3,1144.1

00-1-010,000

2013

2014

2015

2016

2017

2018

2019

2020

(Forecasts)

Extraordinary loss* ROE (%)

17.3 3.7

56.3 6.4

110.6 4.8

32.1 15.1

27.3 17.8

37.8 12.7

66.0 4.2

92.4 (1st Half)

-

*Since there is no classification for extraordinary gains and losses under IFRS (fiscal 2016-), impairment loss, loss on sale and disposal of fixed assets, loss on sale of shares in affiliates, provision for loss on liquidation of business, environmental expenses, and provision for loss on litigation were aggregated in a simplified manner.

1. Investment and Loan Plans

• ◼ Performance Products: 140 billion yen in capital expenditures for growth and 120 billion yen in investments and loans

• ◼ Industrial Gases: 1.1 trillion yen in investments and loans over five years, primarily through major acquisitions

• ◼ Health Care: 140 billion yen in investments and loans against limit of 300 billion yen

Resource allocation plan

(Billions of yen)

1,400

2016-2020 Progress

1,200

1,000

800

600

400

200

0

2016-2020

Performance ProductsChemicalsIndustrial GasesHealth CareOthers

1,400

Plan

(FY)

1,200

1,000

800

600

400

200

0

2016-2020 Progress

1,400

2016-2020

Plan

(FY)

1,200

1,000

800

600

400

200

0

2016-2020 Progress

2016-2020

Plan

(FY)

1. Priority Management Measures under APTSIS 20

Generate integration benefits and synergies from new MCC

Reinforce business foundations ⚫ MMA, Industrial gases:

Maintain and expand global share ⚫ Petrochemicals:

Shift to high-performance materials and optimize productivity

Ethical pharmaceuticals ⚫ Cultivate healthcare and medical ICT businesses ⚫ Strengthen pipeline

Life science ⚫ Commercialize regenerative medicine ⚫ Cultivate healthcare and medical ICT businesses

Strengthen global market access and marketing (including by setting up regional headquarters)Swiftly commercialize next-generation businesses (through R&D, open innovation, and DX)Deepen KAITEKI Management and reform work styles

Reinforce Foundations

Health Care

1. APTSIS 20 Review: Performance Products

• ◼ Made 260 billion yen in capital expenditures and growth investments and loans

• ◼ Demand for automotive applications dwindled amid economic slowdown and US-China trade friction

• ◼ Failed to expand sales of semiconductor materials

  Accelerating portfolio transformation

  ⚫ Implemented structural reforms in ABS resins, recording media, polymer flocculants, and light metal products

  Driving growth strategies in priority markets

• ⚫ Implemented growth strategy for polymer compounds

• ⚫ Reinforced battery material business foundations

  • • Established JV with Ube Industries

  • • Developing new natural graphite-based anode materials

• ⚫ Acquired European semiconductor gas business to strengthen semiconductor precision cleaning operations

  Growth strategy impacts

• ⚫ Demand sluggish for lighter and battery-related materials owing to sluggish automobile sales and EV penetration delays

• ⚫ Overseas expansion of packaging materials slowed owing to circular economy

  Synergies and growth through three chemical operating companies

• ⚫ Generated 25 billion yen against target of 35 billion yen

• ⚫ Invested to expand production facilities and boost capacity in optical films and polyester films

• ⚫ Secured advanced technologies from Gelest in silicon chemicals and realization of a semiconductor manufacturing process in advanced technology node

• ⚫ Building business model for luxury vehicle carbon fiber composite materials

• ⚫ Unable to build biomedical application business

• ⚫ Failed to expand sales of semiconductor materials

1. APTSIS 20 Review: Industrial Materials

• ◼ Structurally reformed carbon chemical business to reinforce underpinnings

• ◼ Accelerated global development of industrial gas business

• ◼ Constructed an Alpha technology-based MMA plant in Saudi Arabia, with world-leading annual capacity of 250k metric tons

  Business impacts of environmental changes

  • ⚫ Spreads contracted owing to supply and demand imbalances

    MMA and carbon chemicals

  • ⚫ Domestic market shrank from demand structure changes

    Carbon (metallurgical coke)

    Structural reforms

  • ⚫ Withdrew from Indian and Chinese terephthalic acid businesses

  • ⚫ Unification of ethylene production facilities

  • ⚫ Sophistication of product mix by increasing PE performance

  • ⚫ Expanding wide-area cooperation in utilities

    Global market share expansion

  • ⚫ MMA: Constructed an Alpha technology-based plant through JV with SABIC

  • ⚫ Industrial gases: Expanded US and European businesses through Linde, Plaxair, and other acquisitions

1. APTSIS 20 Review: Health Care

• ◼ Absence of Gilenya™ royalties owing to ongoing arbitration proceedings

• ◼ Launched Radicava™ in the US

• ◼ Delay in development of MT-2271 (VLP vaccine for seasonal influenza prevention) and ND0612

• ◼ Progress in clinical trials on a Muse cell-based formulation (CL2020)

Pipeline reinforcement

⚫ Obtained POC in 10 late-stage products (4 internationally and 6 domestically)

US developments

• ⚫ Launched Radicava™, but sales did not grow

• ⚫ Recorded an impairment loss owing to development delays for MT-2271 and ND0612

  VLP vaccine for COVID-19 (MT-2766)

• ⚫ Received development funding from Canadian Government and initiated 2/3 phase clinical trials of VLP vaccine candidate for COVID-19 prevention in North America

⚫ Conducting clinical trials on CL2020 for ischemic stroke, acute myocardial infarction, epidermolysis bullosa, and spinal cord injury ⚫ Established Tonomachi CPC (cell processing center) and created mass cell culture techniques

1. APTSIS 20 Review: Reinforce Foundations

• ◼ Exceeded targets in structural reforms, subsidiary and affiliate reductions, and corporate rationalization

• ◼ Established global management system

• ◼ Launched CVC activities

  • ⚫ Implemented 320 billion yen in business structural reforms

  • ⚫ Saved 22 billion yen from corporate rationalizations

  • ⚫ Cut 240 subsidiaries and affiliates

  • ⚫ Established RHQs to build global management system

  • ⚫ Constructing SIC research buildings

  • ⚫ Created structure to digitize processes, apply MI at worksites, and digitally optimize SCM

⚫

Established DEV and launched CVC activities

Biodegradable and water-soluble polymer derived from milk protein (casein)

Accelerating global expansion by leveraging MCC's manufacturing technologies and market channels to tackle global waste plastic issues

Invested in February 2020

Sales of liquidated or divested businesses

Including to reform metallurgical coke business structure, close MMA Beaumont site, and divest flocculant business, light metal business, and MCAT

(FY)

2017

2018

Business structural reforms (FY2017 - FY2020)

2019

2020

Photorealistic images of interior and exterior of SIC research buildings

Agenda

1. APTSIS 20 Review

2. APTSIS 25 in View of Environmental Stance and Pandemic

3. APTSIS 25 Step 1

• 3-1 Measures to Bolster Foundations

  • 3-1-1 Measures to Bolster Management Foundations

  • 3-1-2 DX Strategies

  • 3-1-3 Measures to Bolster Business Foundations: Business Model Reforms

  • 3-1-4 Measures to Bolster Business Foundations: R&D Initiatives for Next-generation Businesses and CVC Strategies

• 3-2 Basic Portfolio Reform Policies

• 3-3 Overhaul Key Businesses

• 3-4 Strategies for Growth Business Areas

• 3-5 Financial Strategies

• 3-6 Sustainability Management

2. Major Global Socioeconomic Changes

◼ US-China friction and COVID-19 have transformed landscape

Politics and diplomacy

Economy and business

• ⚫ Conflict between totalitarianism and democracy

• ⚫ Nationalism rising and international cooperation fraying

• ⚫ Growing geopolitical risks from fragmentation

• ⚫ Swifter setting of carbon neutral targets and tighter regulations

• ⚫ Diversifying supply networks to hedge risks

• ⚫ Switching to remote interactions through e-commerce

• ⚫ Mass progress in reforming work styles and boosting operational efficiency

• ⚫ Accelerating GX and DX

Individuals and society

2. Global Economic Growth Outlook

World economy

Varying recovery paces to pre-COVID-19 levels

• • China: Has already recovered

• • US: Should recover by end-2021 through additional economic and other measures

• • EU and Japan: Relatively cautious outlook for consumption and investment, with recovery possible after 2022

Medium-term management plan stance on operating climate

Although upbeat on prospects for turnarounds in some industries and start of vaccinations, markets also note spread of infections through COVID-19 variants, so outlook remains uncertain.

Overall prospects likely to remain unclear

Crude oil (Brent): 55.0 US$/bbl

Naphtha (domestic standard): ¥40,000/kl

While supply-demand balance should gradually improve, with crude oil prices rising, higher US shale oil production presents downside risks

Real GDP growth (2019 = 100)

2019

2020

2021

2022

(Based on Bloomberg consensus forecasts)

Automobiles: Semiconductors:Chinese market driving recovery

Shifts to new work practices and lifestyles boosting communications equipment demand

Food packaging:

While demand for eating out has fallen sharply, more people are eating at home

Steel: Healthcare:

Domestic demand has peaked

Ongoing post-pandemic growth from aging population and medical technology progress

2. APTSIS 25 in View of COVID-19

◼ Dual-step approach

Start

Impact analysis

Planning perspectives

Reinforce business foundations

（streamline operations and overhaul human resources system reforms)

Business strategies

• • Accelerate reorganization and restructuring of at-risk businesses

• • Growth strategies in light of the impact of COVID-19

2. Principle Management Measures in APTSIS 25 Step 1

Agenda

1.

APTSIS 20 Review

2. APTSIS 25 in View of Environmental Stance and Pandemic

3. APTSIS 25 Step 1

3-1 Measures to Bolster Foundations

3-1-1 Measures to Bolster Management Foundations

• 3-1-2 DX Strategies

• 3-1-3 Measures to Bolster Business Foundations: Business Model Reforms

• 3-1-4 Measures to Bolster Business Foundations: R&D Initiatives for Next-generation Businesses and CVC Strategies

• 3-2 Basic Portfolio Reform Policies

• 3-3 Overhaul Key Businesses

• 3-4 Strategies for Growth Business Areas

• 3-5 Financial Strategies

• 3-6 Sustainability Management

Rationalize and Reform Work Styles

◼ Save 22 billion yen by rationalizing and 180 billion yen overall by paring assets

◼ Embrace new world of work

⚫ Save 22 billion yen by rationalizing business infrastructure ⚫ Pare assets by 180 billion yen through asset efficiency measures

Rationalize and

pare assets

• • Lower cross-shareholdings: 65 billion yen

• • Improve CCC: 40 billion yen

• • Reduce assets: 75 billion yen

• ⚫ Consolidate decentralized offices around Nihombashi and Osaki at Palace Building (saving around 15 billion yen over 10 years)

• ⚫ Design office layout for maximum attendance rate of 60% (in fiscal 2021)

• ⚫ Eliminate approval seals and paper from business processes so employees do not need to go to office

• ⚫ Expand satellite offices so employees can work where and when they want

• ⚫ Enhance productivity and overhaul operations

  • • Reform business model by emphasizing customer-centric digital supply chain

  • • Automate production, deploy robots, and digitize facilities management to create smart factories

  • • Accelerate R&D with materials informatics, optimization prediction, and other digital technologies

1) MCC Business Process and Human Resources System Reforms

◼ Save more than 5 billion yen, mainly by streamlining back-office processes and supply chain

◼ Attract diverse talent through job-specific and performance-based pay

• ⚫ Logistics and supply chain: Cut delivery costs substantially by integrating logistics sites and using digital technology

• ⚫ Back-office processes: Consolidate and streamline operations at head office and other sites, shift to sharedoperations, and automate back-office processes for manufacturing

• ⚫ Leveraging external assessments in stepping up facilities management: Pursue more selective capital investments and optimize repair costs and facilities procurement

• ⚫ Optimize plant purchasing in terms of auxiliary materials costs and general production materials

• ⚫ Allocate personnel optimally to streamline production

• ⚫ Create corporate culture in which all unite in quest for growth selection

• ⚫ Shift to job-based setup offering better treatment and remuneration transparency

• ⚫ Bolster human resources by identifying and developing talented employees worldwide

• ⚫ Individualize support through self-directed career development and one-on-one and career design interviews

• ⚫ Safeguard mental well-being, step up recruitment, and build human resources networks to secure and retain diverse workforce

2) Reorganize MCC

◼ Build organizational structure matching KV30 drive to address social issues

DomainsBasic MaterialsDivisions

Sectors

MMA

（Mitsubishi Chemical Methacrylates）

• (Asia, Europe, USA)

Polymers & Compounds

• • Acetyl Polymers

• • Industrial Films

• • Advanced Materials

• • Performance Polymers

• • Sustainable Polymers

• • Coating Materials

• • Additives & Fine

• • Packaging

• • Polyester Films

• • Carbon Fiber

• • Alumina & Fiber

• • Aqua & Infrastructure

• • Life Solutions

• • Semiconductor

• • Electronics

• • Battery Materials

Major related growth business areas

21

3) Reform Global Management at MCC

• ◼ Consolidate companies* within same countries and regions and maintain measures to bolster MCC brand

• ◼ Enhance efficiency by sharing and consolidating resources to reinforce overall business capabilities

• ◼ Ensure consistent and transparent internal controls and governance and foster synergies and communication → Build regional headquarters-based management structure that drives global growth

* Integrated Group companies in Thailand and Singapore in 2020 and in the US, UK, Germany, and Taiwan in April 2021

Regionally

Formulate and execute strategies

Support business and profit growth

Strengthen marketing in priority fields

Systematically allocate, train,

and recruit human resources

etc.

4) Strengthen Global Management at NSHD

◼ Build prominent position in industrial gas industry

◼ Initiatives

• ⚫ Accelerate decision-making by delegating authority and better allocating business resources to growth regions and markets

• ⚫ Clarify business execution responsibilities and results and set up global governance system

• ⚫ Reinforce groupwide capabilities by sharing regional strengths and accelerate synergies

Agenda

1.

APTSIS 20 Review

3.

APTSIS 25 Step 1

• 3-1 Measures to Bolster Foundations

  3-1-1 Measures to Bolster Management Foundations 3-1-2 DX Strategies

  • 3-1-3 Measures to Bolster Business Foundations: Business Model Reforms

  • 3-1-4 Measures to Bolster Business Foundations: R&D Initiatives for Next-generation Businesses and CVC Strategies

• 3-2 Basic Portfolio Reform Policies

• 3-3 Overhaul Key Businesses

• 3-4 Strategies for Growth Business Areas

• 3-5 Financial Strategies

• 3-6 Sustainability Management

3-1-2 DX Strategies

Grand Design for DX

◼ Grand design aims to materialize KV30

KV30

DX vision

• • A compass to promote companywide measures

Transformation for new value creation toward a sustainable future through collaboration between humans and digital technology

Be top runner in materials and healthcare innovation

KAITEKI Vision 30

Create new customer value through solutions

Design and spread value of sustainabilityExemplify human creativity

• • Number of projects, etc.

34

147

29

15

• • Swiftly identify end-to-end environmental and social value

• • Develop infrastructure to support data-driven management

DX infrastructure

• • Common infra-structure for synergy creation

Agenda

1.

APTSIS 20 Review

• 2. APTSIS 25 Medium-term Management Plan in View of Environmental Stance and Pandemic

3.

APTSIS 25 Step 1

• 3-1 Measures to Bolster Foundations

  • 3-1-1 Measures to Bolster Management Foundations

  • 3-1-2 DX Strategies

  3-1-3 Measures to Bolster Business Foundations: Business Model Reforms

  3-1-4 Measures to Bolster Business Foundations: R&D Initiatives for Next-generation Businesses and CVC Strategies

• 3-2 Basic Portfolio Reform Policies

• 3-3 Overhaul Key Businesses

• 3-4 Strategies for Growth Business Areas

• 3-5 Financial Strategies

• 3-6 Sustainability Management

1) Strengthen Solution Provision Structure

◼ Further expand carbon fiber composite materials business in mobility field and provide total solutions including in chemical materials recycling

Strengthen carbon fiber composite materials business (Step 1)

⚫ Strengthen business centered on prepreg compression and CF-SMC

⚫

Set up CF-SMC site adjacent to Italian subsidiary C.P.C. to build structure for providing integrated solutions for parts design, molding, painting, and assembly

Left: Toyota's GR Yaris employs CF-SMC

Photo courtesy of Audi

Right: Roof of Audi RS 5 Coupe incorporates carbon fiber-reinforced plastic

Build recycling business model (Step 2)

⚫ Cultivate technologies of Shinryo, CFK Valley Stade Recycling, carboNXT, and

Minger Group, all now part of Group, to build recycling business model for carbon fiber composite materials and engineering plastics that help lower CO2 emissions

Photo courtesy of Toyota

2) Chemical and Material Recycling

◼ Help create circular economy for plastics by managing supply chain with customers and consumers

Engage in post-industrial and post-consumer recycling

• ⚫ Reduce environmental impact through chemical and material recycling technologies

• ⚫ Strengthen collaboration with ENEOS to build chemical refinery

• ⚫ Leverage capital and business alliance with Refinverse to create waste plastics collection system

  Design and supply easily recyclable products

• ⚫ Use materials informatics to develop new resins

• ⚫ Develop advanced monomaterial films

• ⚫ Apply compatibilizing agent and other multilayer separation techniques

Biaxially oriented polyester film

Heat-shrinkable film

RawmaterialsCustomers and consumers

Develop chemical recycling technology

• ⚫ Draw on joint project with Kirin Holdings to chemically recycle PET bottles

• ⚫ Seek innovative startup partners for corporate venture capital activities

3) Intelligent Gas Supply System (IGSS)

◼ Develop system that materializes smart factories

◼ Cultivate diverse applications through customization and packaged services

Drive DX among customers and through production sites and logistics

• ⚫ Build IGSS that integrates cylinder transportation and management, routine inspections, and monitoring system

• ⚫ Drive DX to run plants remotely and optimize operations to

  cut costs by improving efficiency and saving labor

• ⚫ Streamline and save labor by ordering online

Agenda

1.

APTSIS 20 Review

3.

APTSIS 25 Step 1

• 3-1 Measures to Bolster Foundations

  • 3-1-1 Measures to Bolster Management Foundations

  • 3-1-2 DX Strategies

  • 3-1-3 Measures to Bolster Business Foundations: Business Model Reforms

  3-1-4 Measures to Bolster Business Foundations: R&D Initiatives for Next-generation Businesses and CVC Strategies

• 3-2 Basic Portfolio Reform Policies

• 3-3 Overhaul Key Businesses

• 3-4 Strategies for Growth Business Areas

• 3-5 Financial Strategies

• 3-6 Sustainability Management

R&D Initiatives for Next-generation Businesses

◼ Noteworthy R&D focuses that could deliver value in Step 2 growth businesses and next-generation businesses

Growth business areas

Solutions

• • Lighter mobility

• • Electrification solutions

• • Distributed energy management

Examples of R&D themes

• • Strong, lightweight materials

• • Next-generation battery materials

• • Thermal management materials

Technologies and products (Images)

Lightweight materials for mobility

• • Bioplastic solutions

• • Chemical and material recycling

• • CO2 capture and utilization

• • Hydrogen society

• • Decentralized food and water systems

• • Alternative food and taste solutions

• • Next-generation high-speed communication solutions

• • Semiconductor solutions

• • Next-generation display solutions

• • Symbiosis of human and robot solutions

• • Regenerative medicine

• • Preventive carae

• • Precision medicine

• • Biomass plastics

• • Plastic recycling technology

• • Artificial photosynthesis

• • Carbon-free hydrogen stations

• • High-performance packaging materials

• • Food preservation gas

• • Next generation communication related materials

• • Advanced semiconductor materials

• • Next-generation display materials

• • Antibacterial and antiviral materials

• • Non-contact materials

• • Muse cells

• • Cell culture materials

• • VLP vaccine

• • Genetic medicine

• • Phenotype medicine

Carbon-free hydrogen station

High-performance packaging materials

Muse cells

VLP vaccine

(Photo courtesy of Dr. Mari Dezawa)

Streamlining R&D with Digital Technology and Open Innovation

◼ Streamline R&D by leveraging digitized R&D including material design that utilize MI, further promotion of open innovation and by employing quantum computing

Initiatives to strengthen R＆D

• • Participate in University of Tokyo Quantum Innovation Initiative Council

• • Help implement quantum technologies, including quantum computers, in society

3-1-4 Measures to Bolster Business Foundations

CVC Strategy

◼ Plan MCHC Group-wide 10-year, $200 million fund, expanding to explore new fields

◼ Starting Frontier Fund along with Platform Fund and Therapeutics Fund, to comprehensively cover MCHC Group areas of interest

Duration

Purpose Investment area

MCHC Current Markets

Platform Fund

Extension of current fund

Business Expansion

Current and adjacent fields to realize KV30

Investment to support expansion of current business via startup engagement

New revenue for current Bus

US$150 million (10 years)FY2021 - FY2030

MCHC New Markets

Frontier Fund

New fund

Pioneer New Fields

Frontier fields to expand KV30

Investment to cultivate new fields for creation of future business pipeline

New revenue for future MCHC

US$50 million (10 years)

Agenda

1.

APTSIS 20 Review

3.

APTSIS 25 Step 1

3-1 Measures to Bolster Foundations

• 3-1-1 Measures to Bolster Management Foundations

• 3-1-2 DX Strategies

• 3-1-3 Measures to Bolster Business Foundations: Business Model Reforms

• 3-1-4 Measures to Bolster Business Foundations: R&D Initiatives for Next-generation Businesses and CVC Strategies

3-2 Basic Portfolio Reform Policies

• 3-3 Overhaul Key Businesses

• 3-4 Strategies for Growth Business Areas

• 3-5 Financial Strategies

• 3-6 Sustainability Management

3-2 Basic Portfolio Reform Policies

◼ Shift to quadrant portfolio management based on three-axis* evaluation

◼ Implement Portfolio management based on changes in social needs and future business risks

*MOS, MOT, and MOT

Three-axis evaluation

Identify businesses that will contribute to medium-term growth by switching from the conventional evaluation centering on MOE to the aggregate assessments encompassing sustainability contributions and innovation scope

Evaluate each business field

Businesses to be restructured

Examine portfolio balance from perspectives of:

• ⚫ Ambidexterity

• ⚫ Risks and opportunities

• ⚫ Ownership excellence

Check time axis and change axis

Agenda

1.

APTSIS 20 Review

3.

APTSIS 25 Step 1

• 3-1 Measures to Bolster Foundations

  • 3-1-1 Measures to Bolster Management Foundations

  • 3-1-2 DX Strategies

  • 3-1-3 Measures to Bolster Business Foundations: Business Model Reforms

  • 3-1-4 Measures to Bolster Business Foundations: R&D Initiatives for Next-generation Businesses and CVC Strategies

• 3-2 Basic Portfolio Reform Policies

3-3 Overhaul Key Businesses

• 3-4 Strategies for Growth Business Areas

• 3-5 Financial Strategies

• 3-6 Sustainability Management

Carbon Chemicals (Strengthen Petroleum Refinery Alliances)

• ◼ Strengthen competitiveness by optimizing Kashima Oil and MCC's Ibaraki operations

• ◼ Realize chemical recycling of waste plastics by using naphtha crackers and other refinery and petrochemical facilities

• ◼ Formed capital and business alliance with Refinverse to create waste plastic collection system

Integrate and optimize operations

Explore chemical recycling of waste plastics

• • Crack butane and other fuels to create petrochemical raw materials

  • • Set up plastic liquefaction facilities for waste plastics

• • Optimize naphtha quality and explore exchanges of utilities and infrastructure

• • Invested in Refinverse to get waste plastics as raw materials

Crude oil

Alliance with Kashima Oil Plastic liquefaction facilityPetroleum refiningCracker Chemical derivatives Gasoline

Primary processing Waste plastics PolymerProcessing Plastic products

3-3 Overhaul Key Businesses

Coke

◼ Shift from domestic to overseas focus

Domestic steel industry consolidation

Coke business reforms

Reduce domestic blast furnace capacity

Cease operations at five of 25 blast furnaces by 2023 → 9 million metric tons reduction in annual crude steel production → 4 million metric tons decrease in annual coke demand

• • Reduce number of coke ovens at Kagawa Plant from 323 to 250 to optimize operations

• • Double export shipping lines to two

  Global expansion

• • Market Sakaide Coke on strength of high regard among overseas customers for quality and supply stability

MMA

◼ Digitize processes and relocate headquarters functions to globalize business infrastructure

◼ Looking to build US plant that would be world's largest to produce MMA employing proprietary Alpha technology

Strengthen global management

• ⚫ Maintain global supply chain management system using mathematical optimization technology

• ⚫ Consolidate relevant headquarter functions in Singapore and rename major subsidiaries as Mitsubishi Chemical Methacrylates to unify MMA operations, effective April 2021

  Push ahead with US project

• ⚫ Acquired property in Geismar, Louisiana, to construct third Alpha technology-based MMA monomer plant

• ⚫ To be world's largest such facility, with annual capacity of 350k metric tons

⚫

Looking to finalize investment decision in mid-2022 and start operations in 2025

Beaumont site -135kMulling US plant to add capacity of 350k

Agenda

1.

APTSIS 20 Review

3.

APTSIS 25 Step 1

• 3-1 Measures to Bolster Foundations

  • 3-1-1 Measures to Bolster Management Foundations

  • 3-1-2 DX Strategies

  • 3-1-3 Measures to Bolster Business Foundations: Business Model Reforms

  • 3-1-4 Measures to Bolster Business Foundations: R&D Initiatives for Next-generation Businesses and CVC Strategies

• 3-2 Basic Portfolio Reform Policies

• 3-3 Overhaul Key Businesses

3-4 Strategies for Growth Business Areas

• 3-5 Financial Strategies

• 3-6 Sustainability Management

3-4 Growth Business Areas under KV30

• ◼ Anticipating demand expansion in growth business areas specified under KV30 during and after COVID-19 pandemic

• ◼ Accelerate innovations to commercialize businesses

• ◼ Strengthen businesses during Step 1 and commercialize during Step 2

Growth business areas

Step 1

Lighter mobility Advancement of LIBs

Bio-based polymersChemical and material recyclingFood packaging materialsSemiconductor cleaning

Preventive care (including vaccines)

Advanced semiconductor materials

Symbiosis of human and robot solutions (Non-contact and antimicrobial materials)

Decentralized food and water systems

Regenerative medicine

: Fields where demand expands due to COVID-19

Next-generation high-speed communication solutions

Decentralized energy managementNext-generation batteries

■ Expand portfolio by combining central nervous system and immuno-inflammation research infrastructure and modalities ■ Increase precision medicine R&D spending and launch more products after fiscal 2025

Research infrastructure and modalities

Precision medicine launchesCentral nervous system

Modalities

100% 20

Immuno-inflammation

◼ Advance development and commercialization of Muse cell-based regenerative medicine products, aiming to file in fiscal 2021 and obtain approval in fiscal 2022

Initiatives for multiple indications

Linkage for commercialization

⚫ Looking to start clinical trials for amyotrophic lateral sclerosis, as well as acute myocardial infarction, ischemic stroke, epidermolysis bullosa, and spinal cord injury

⚫ Establish collaborative structure to drive commercialization through proprietary cell manufacturing technologies and alliances with companies below and research institutions

Utilization of human resources and know-how in the development, manufacture, and sales of pharmaceuticals

Projected number of patients receiving Muse cell treatment

Muse細胞製品の事業化に向けた連携

Overseas expansion

三M菱ケCミCカル

Production of cell scaffolding materials and other culture peripheral materials, and development of mass culture equipment 大T陽N日S酸C

Establishing a cold chain 田M辺三T菱P製C薬 for frozen storage ofMuse cells

⚫ Start consultations with US authorities to prepare for clinical trials ⚫ At the same time, seek development and other partners (consider such licensing approaches such as licensing to megapharmas and joint development and marketing)

3-4 Strategies for Growth Business Areas

Progress in Vaccine Business

• ◼ Help prevent infectious diseases by developing VLP vaccines and adjuvants

• ◼ Continue efforts to prevent infectious diseases in children and adults and maintain stable vaccine supplies in Japan

• ◼ Generate more than 100 billion yen in vaccine business sales by fiscal 2025

Collaboration with BIKEN Group

Enhancing productivity reinforcement of BIKEN

Varicella vaccine

Raise awareness of shingles

3-4 Performance Products and Health Care Growth Business Expansion Goals

◼ Targets based on strategy of social needs and Health Care growth challenges

Agenda

1.

APTSIS 20 Review

3.

APTSIS 25 Step 1

• 3-1 Measures to Bolster Foundations

  • 3-1-1 Measures to Bolster Management Foundations

  • 3-1-2 DX Strategies

  • 3-1-3 Measures to Bolster Business Foundations: Business Model Reforms

  • 3-1-4 Measures to Bolster Business Foundations: R&D Initiatives for Next-generation Businesses and CVC Strategies

• 3-2 Basic Portfolio Reform Policies

• 3-3 Overhaul Key Businesses

• 3-4 Strategies for Growth Business Areas

3-5 Financial Strategies

3-6 Sustainability Management

3-5 Financial Strategies

• ◼ Increase corporate value by balancing shareholder returns, financial position improvements, and growth business investments

• ◼ Pursue ROE of at least 8% under Step 1 ⚫ Shareholder returns: Annual cash dividends of 24 yen per share consistent with basic policy (medium-term consolidated dividend payout ratio of 30%)

  ⚫ Allocate one-third of net income to growth investments

Operating cash flow

Shareholder returns

Depreciation

Debt reduction

Streamline assets

Investments

• ⚫ Unwind cross-shareholdings

• ⚫ Improve CCC

• ⚫ Reduce cash and deposits

3-5 Measures to Improve Financial Position

Keep improving financial position and aim to swiftly restore net debt-to-equity ratio to 1x level

◼

Steadily reduce interest-bearing debt

• • NSHD: Repay hybrid bonds in line with repayment terms, for adjusted net debt-to-equity ratio* of around 1x (as of end of March 2023)

• • Other than NSHD: Keep improving asset efficiency (including by enhancing cash conversion cycle and reducing cross-shareholdings)

◼ Undertake 180 billion yen in financial structural reforms over two years of APTSIS 25 Step 1 through measures to improve asset efficiency

■ Steadily reduce interest-bearing debt

2210/231E

2220/232E

2230/233E

Net interest-bearing debt

MCC and others

NSHD

∙∙∙∙・・・ (Fiscal year end)

*Adjusted net debt-to-equity ratio = Net debt after adjusting for equity component of hybrid funded debt / (Equity attributable to owners of the parent + equity debt)

■ Details of measures to improve asset efficiency

(Billions of yen)

Reduce cross-shareholdings

Improve CCC

Lower cash and deposits and sell assets, etc.

Total asset efficiency improvements

Forecast

Cumulative total for FY2020

APTSIS 25

Step 1

3-5 Financial Target

◼ Endeavor to generate 250 billion yen in core operating income amid uncertainty owing to prolonged impact of pandemic

Industrial Gases

(Billions of yen)

産業ガス

ヘルスケア

その他

ProductsPerformance 機能商品

Chemicals ケミカルズ

Health CareOthers

3-5 Resource Allocation Policy

• ◼ Capital expenditures: Maximize within depreciation and amortization scope

• ◼ Investments and loans: Prioritize areas with growth acceleration prospects

• ◼ R&D: Strengthen Performance Products and Health Care R&D

Agenda

1.

APTSIS 20 Review

3.

APTSIS 25 Step 1

• 3-1 Measures to Bolster Foundations

  • 3-1-1 Measures to Bolster Management Foundations

  • 3-1-2 DX Strategies

  • 3-1-3 Measures to Bolster Business Foundations: Business Model Reforms

  • 3-1-4 Measures to Bolster Business Foundations: R&D Initiatives for Next-generation Businesses and CVC Strategies

• 3-2 Basic Portfolio Reform Policies

• 3-3 Overhaul Key Businesses

• 3-4 Strategies for Growth Business Areas

• 3-5 Financial Strategies

3-6 Sustainability Management

3-6 Strengthen Sustainability Management to Achieve KV30 Targets

• ◼ Push ahead with circular economy efforts as MOE and MOS crossover

• ◼ Deploy in-house carbon pricing

• ◼ Endeavor under government Carbon Neutral 2050 policy to build foundations for environmental impact neutrality

⚫ Reduce emissions and harness CO2

• ✓ Reduce emissions from manufacturing

  • • Rationalize processes

    Circular Economy Promotion Committee initiatives

  • • Switch fuels on in-house generators and shift to purchased electricity

  • • Use renewable energy and credits

• ✓ Mull expanding avoided emissions

• ✓ Accelerate CO2 usage R&D

  • • Develop artificial photosynthesis technology

  • • Produce photocatalytic hydrogen

  • • Recycle CO2

LCA tool evolution

Evolving to advanced levels in chemical industry by 2025

⚫ Develop evaluation method and deployment structure

3-6 Initiatives to Cut GHG Emissions by Fiscal 2030

◼ Seek to lower emissions in line with national and regional government targets

Domestic reduction efforts

Emissions reductions from manufacturing

• ⚫ Switch fuels on in-house generators and boiler facilities

• ⚫ Rationalize processes, including by DX and conserving energy

• ⚫ Use renewable energy and credits

• ⚫ Improvement CO2 emissions factor for purchased electricity

Emissions reduction contributions across entire value chain

⚫ Implement chemical recycling ⚫ Expand deployment of biomass plastics

Accelerate R&D to recycle CO2

⚫ Develop artificial photosynthesis technology:

Large-scale verification tests in 2030 and social implementation in 2040

＊MCC participates in NEDO's Artificial Photosynthesis Project and is member of ARPChem

3-6 Identification of Materiality

◼ Pursue targets by identifying material issues to address under APTSIS 25

Material business portfolio strategy issues

• • GHG reductions

• • Sustainable resource management

• • Supply food and water sustainably

• • Healthy and vibrant lifestyles

• • Safe, secure, and comfortable lives

• • Telecommunications and digital processing technology advances

Driving force/Acceleration/Improving productivity

Material business foundation issues

• • Business model transformation

• • Product stewardship

• • DX

• • Improving working environment and managing health and productivity

• • Cultivating human resources

• • Diversity and inclusion

• • Stakeholder engagement

Key existential issues

Consider reflecting in portfolio transformation

Identify and address risks

⚫ Process safety

⚫ Compliance

⚫ Corporate governance

Material environmental and social impact issues

• • Environmental impact reductions

• • Circular economy

• • LCAs

• • Community contributions

• • Conserve biodiversity conservation

3-6 Maintaining and Enhancing Corporate ESG Assessment

◼ Monitoring progress with KAITEKI Management through corporate ESG assessments

◼ Selected for the Dow Jones Sustainability World Index for four consecutive years

KAITEKI Report 2020 (Integrated report)

Runner-up in Grand Prix of NIKKEI Annual Report Awards 2020

Silver in WICI Japan Award 2020 for Excellence in Integrated Reporting

*The inclusion of MCHC in any MSCI Index, and the use of MSCI logos, trademarks, service marks or index names herein, do not constitute a sponsorship, endorsement or promotion of Mitsubishi Chemical Holdings Corporation by MSCI or any its affiliates. The MSCI Indexes are the exclusive property of MSCI. MSCI and the MSCI index names and logos are trademarks or service marks of MSCI or its affiliates.

Reference

Strategies for Growth Business Areas

◼ Evolve LIB materials and develop next-generation battery materials to help popularize EVs and expand adoption of renewable energy

LIB materials (Step 1)

Next-generation battery materials (Step 2)

Joint electrolyte venture in Japan with Ube Industries ⚫ Sharpening technological edge by integrating additive technologies

Boost capabilities in high-capacity LIBs (nickel-rich cathode and Si anode materials)

Expanding sales of new anode materials

⚫ Build sales of new natural graphite-based anode materials with outstanding LCA scores

Excellent output and low expansion helping extend battery lives

Mass production plant for new anode materials (Completed in 2020)

Accelerate development through open innovation ⚫ Collaborate with LIBTEC, universities, and public research institutes

Design and develop electrolytes and active materials

⚫ Developing materials for all-solid-state batteries and Li-air and other advanced batteries

CO2 emissions during manufactures

100

50

0

A

A: General artificial graphite-based anode materials

(normalized to 100)

B: New natural graphite-based anode materials

B

◼ Help materialize low-environmental impact cycles through biomass and biodegradable polymers

Focus on biomass and biodegradable polymers (Step 1 and Step 2)

• • Expand biomass polymer products for consumer durables

• • Focus on biomass and biodegradability for medical and single-use tableware applications requiring plastics

Medical items not recyclable for hygiene reasons

• • Expand biomass polymer product line

Single use tableware and bottles

• • Expand biomass and biodegradable polymer lines

Consumer durables

• • Develop recyclable biomass polymers

◼ Help reach beyond-zero emissions targets by developing artificial photosynthesis technology that harnesses CO2

Artificial photosynthesis (Next-generation)

Utilized as "Green Hydrogen"

Sunlight

Note: MCC participates in NEDO's Artificial Photosynthesis Project and is member of ARPChem

Photocatalysts

Capture from plants, power stations, and other sources

Green plastics raw materials and synthetic fuels

CO2 utilization catalysts

• • Develop photocatalysts whose CO2 LCAs in hydrogen production are superior to those of combinations of renewable energy and water electrolysis

• • Schedule

  Large-scale verification tests in 2030 Social implementation in 2040

Water splitting with 3cm2 photocatalytic sheet

• • Studying energy saving in CO2 resource recovery reaction process

• • Pilot testing new methanol synthesis technique with ceramic membranes used as reaction membranes

Membrane reactor of methanol synthesis

(Pilot test)

◼ Providing hydrogen stations as key social infrastructure

Building hydrogen supply chain (Step 2 to Next-generation)

Production

Storage and transportation

Produce hydrogen withphotocatalysts

⚫ Expand hydrogen station sales ⚫ Expand sales of CFRP for accumulators

Hydrogen stations (Step 2)

Developed on-site CO2-free hydrogen filling system whose design taps solar power in integrating hydrogen production through supply

Hydrogen station in Kawasaki

Supply

Utilization

Develop green plastics raw materials and synthetic fuels

Help popularize hydrogen

Noteworthy organizations in which Group companies participate

The Council for a Strategy for Hydrogen and Fuel Cells:	MCC
JH2A:	MCC, TNSC
Hydrogen Utilization Study Group in Chubu:	MCC
HySUT:	TNSC

◼

Help cut food losses by creating highly functional food packaging materials

◼ Contribute to circular economy through biomass and recycling and reduction technologies

Cater to increased demand (Step 1)

• • Pandemic driving demand rising (providing high-barrier, light, easy peel, and other high-performance products）

• • Looking to expand production capacity of Soarnol™ and BioPBS™

Boost recycling and reduction technologies (Step 2)

• • Contribute to long-term food storage and carbon neutrality by enhancing material recycling, chemical recycling, and organic recycling technologies, as well as raw material conversion, processing and molding technologies.

Products employing Soarnol™ high-performance polymer with excellent gas barrier properties

DIAMIRON™

Co-extrusion multilayer filmPaper cups and coffee capsules using BioPBS™ biodegradable polymer

TECHBARRIER™ Siox vacuum coated high gas barrier film

◼ Expand the semiconductor-related solutions business by combining advanced materials development and environmental impact reduction services

Acquired Gelest-a company with expertise in the design and synthesis of metal compounds for use in semiconductor precursors-to apply its hybrid chemical technology in advanced semiconductor materials

Initiated joint research with this developer of thin-film deposition materials and processes for 3D memory manufacturing

◼ Providing high-performance materials for 5G and advanced communications

Step 1

Step 2

Next-generation

Substrates for high-frequency power devices

Advanced photonics materials

• • Applied SCAATTM liquid phase growth method to generate seed crystal substrates for GaN single crystals

• • Collaborated with Tohoku University and the Japan Steel Works, Ltd., in successfully developing low-pressure acidic ammonothermal method for liquid phase growth under low pressure conditions

• • Undertaking NEDO-supported project to pursue advances in mass production of large-diameter and high-purity GaN single crystal substrates by combining two methods

  2-inch low defect GaN crystal Seed crystal: SCAATTM Growth: Low-pressure acidic ammonothermal method

  • • Develop high-purity synthetic quartz and new resins for advanced fiber-optic materials

  Synthetic quartz

  Plastic optical fiber

  High-purity special gas

• • Develop high-purity special gases and supply systems underpinning device and materials development and production

Special gas plant in Japan

Help build tomorrow's information and communication infrastructure

• • First materials manufacturer to participate in organization seeking to standardize and materialize NTT's IOWN concept

• • Develop new materials

◼ Enhance comfort with materials that improve safety and convenience

Step 1

Step 2

Next-generation

Functional materials and antimicrobial agents for healthcare

⚫ Contribute to comfort with biomaterials and antibacterial and antiviral agents

●High-performance contact lens materials

●Medical materials

(bone cement and artificial joints)

●Pharmaceutical intermediates

●Next-generation pharmaceutical capsules

●Antiviral and antimicrobial agents

●Dental 3DP materials

●Low protein adsorbent material

●Novel high-performance biocompatible polymers

●Regenerative medicine and cell culture components

●High-performance transdermal drug delivery

Mobility Materials ⚫ Meet growing need for high-frequency isolation, vibration and noise suppression and match heightened demand for hygiene in light of pandemic

●Damping and soundproofing materials

●Electromagnetic wave control materials

●Materials for automotive displays

●EV fire protection components

●Anti-viral and anti-bacterial interior materials

3-4 Strategies for Growth Business Areas

Group Synergies

◼ Integrating Group technology platform and expertise

◼ Accelerate growth of existing businesses and create new healthcare businesses that encompass health maintenance and treatment

Business synergy initiatives

Initiatives for microbiome

Combine drug discovery expertise with food ingredients and lactobacillus businesses

Build infrastructure combining technologies of each company

Microbiome data

Data analytics

Intervention techniques

Draw on data to develop healthcare business encompassing medicine and food

• • Ready-made meals

• • Processed foods

• • Food for long-term care and hospitals

• • Provide healthcare information

Healthcare

• • Use in drug target discovery

• • Provide precision medicine through biomarkers and patient stratification

• • Prevention, pre-disease, and prognostic interventions