Message from the President

I would like to express my sincere appreciation for our shareholders’ continued patronage. Asahi Yukizai Corporation released today the business results for the second quarter of the fiscal year ending March 2021 as well as the business performance by business segment. We would like to report its summary as follows.

• ▼1. Consolidated business performance for the second quarter of the Fiscal Year 2020 ending March 2021
• ▼2. Business performance by business segment

1. Consolidated business performance for the first quarter of the Fiscal Year 2020 ending March 2021

Sales	23.87 billion yen	A decline of 2.58 billion yen year-on-year (down 9.8%)
Operating profit	0.81 billion yen	A decline of 0.93 billion yen year-on-year (down 53.3%)
Ordinary profit	0.80 billion yen	A decline of 0.91 billion yen year-on-year (down 53.1%)
Quarterly net profit attributable to owners of parent	0.62 billion yen	A decline of 0.68 billion yen year-on-year (down 52.4%)

Business performance for the second quarter of the current fiscal year is summarized as follows:

	1）	As for our business environment, the business activities in general have been on the way back to normal after the lifting of the voluntary restraint on business activities including that on the movement of persons, to prevent the spread of the novel coronavirus infection. The production adjustment for automobiles seems to have been eased to some extent, however, the production level did not recover to that of an average year. In terms of capital investment, although the projects which had already started have been executed as planned, demand for upcoming periodical maintenance works has started to decline due to their postponement or their scale-down. On the other hand, in the semiconductor business, demand remains strong for semiconductors used for 5G products and data centers, etc. and, at the same time, investment in semiconductor manufacturing equipment stayed strong without being affected by the novel coronavirus infection.
	2）	As for business activities in our group companies, most of the sales activities have been made through telephone calls, e-mails and web applications and, furthermore, we have gradually re-introduced face-to-face sales activities to make up for the lack of direct communication with our customers. Also, at our head office and sales offices, we encouraged our employees to work from home and as for our factories and warehouses, we strongly requested outsiders to refrain from visiting those places and we continued our business operations by taking preventive measures, in order not to have infected employees, including wearing masks, washing hands and gargling.
	3）	Though we made our best efforts in the sales activities under the above-mentioned business environment, sales decreased year-on-year, unable to cover the declining demand. Operating profit also decreased, affected by lower profit derived from lower sales and by increase of labor costs due to decline in pension assets caused by flagging stock prices.

2. Business performance by business segment

Business performance by business segment is summarized as follows:

	1）	In the Valve and Piping Systems segment, we continue our sales activities to promote the thermoplastic valves, which are our main products, by solving corrosion-resistance problem and by product development pursuing a functionality for thermoplastic piping materials, having a basic strategy to expand the market for thermoplastic piping materials, focusing on the expansion of the area of their usage in Japan and overseas and better services to our customers. Domestic sales of main products including the thermoplastic valves decreased year-on-year, as in the first quarter, due to the postponement and the scale-down of the maintenance works originally scheduled during the second quarter, though we continuously managed to take large-scale projects including plant construction. As for Dymatrix products for semiconductor manufacturing equipment, we continuously managed to secure a reasonable amount of orders during the second quarter, though the prospect for the future capital investment might not be promising, apparently affected by the US-China trade conflicts. As for overseas businesses, sales in the US decreased year-on-year, as orders relating to infrastructure development, which remained strong, and a gradual demand increase relating to semiconductor business segment could not make up for the demand decrease relating to the resource industry including the mining. Sales in China also decreased year-on-year, as we could not have a substantial demand recovery due to investment control, etc. resulted from the US-China trade conflicts in spite of the gradual lifting of restraint on the business activities. Profit also decreased year-on-year due to lower sales and increase of labor costs.
	2）	In the Resin Business segment, sales of our products for foundry materials decreased year-on-year, as automobile production did not recover from the decline due to the novel coronavirus infection, though we took such countermeasures as making proposals to improve our customers’ product quality and enhancing our sales activities to develop new customers in Japan, and making a capital investment to respond to future demand increase overseas. As for foaming materials, sales of on-the-spot heat insulation materials with our CFC-free system increased by focusing on promoting its easy handling, the construction quality of the undiluted solution system and the spraying machine, which resulted in increase of new customers. Sales of solidification materials used for ground and soil reinforcement in tunneling recorded a steady growth owing to the continuous demand increase for high value-added products which require high solidification strength or high waterproof performance. At the same time, orders increased steadily at Rand Wick Co., Ltd., who undertakes spraying of heat insulation materials. Sales of functional resins, mainly used for electronics materials, increased owing to good sales of low metal content products to major Japanese photoresist manufacturers working on miniaturization of semiconductors. Overseas demand for products used in small and medium-sized liquid crystal display panels remained strong in China and Taiwan. The Resin Business segment recorded a profit, though it decreased year-on-year due to decrease of sales for foundry materials usage.
	3）	Sales of the water treatment business in the Water Treatment & Natural Resources Exploitation Business segment decreased year-on-year due to the postponement of the construction and the delay of the construction works affected by the novel coronavirus infection, though we have secured orders for industrial waste water treatment facilities in the private sector as well as orders for public waterworks and sewage facilities which were the governmental bidding matters. Sales of the natural resources exploitation business increased year-on-year owing to orders for hot spring facilities construction as well as for geothermal well drilling. Sales of the prevention of environmental pollution and purification business achieved the same level as the previous year, though the business activities were restricted due to the novel coronavirus infection. Sales of the maintenance and management services business decreased year-on-year due to reduced operation of waste water treatment facilities at offices and tourist facilities and suspension of construction projects. The Water Treatment and Natural Resources Exploitation Business segment recorded a rise in deficit year-on-year due to increase in the fixed cost, in addition to the delay in some of the contract works.

Now, all of us are starting to gradually resume our usual business activities after the forced voluntary restraint on business activities to prevent the spread of the novel coronavirus infection, however, it would take more time to properly control the novel coronavirus infection.
We would take this as a turning point and we shall enhance our business activities for the sustainable growth of our group companies and, at the same time, we shall shift to more IT-enhanced business processes for more efficient business operations.
We would highly appreciate if our shareholders continue to believe in the growth of Asahi Yukizai Group and extend a continuous support and guidance to us.

October 30, 2020
Kazuya Nakano,
President & Representative Director

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