Q&A Summary from the President's Small Group Meeting Held on April 15, 2025

Under Recipe2, we aim for a ROE of 10% and a total return ratio of 40% across the three years. In Recipe3, we intend to focus on profit growth and enhancing shareholder returns.

The current ROE level is improved from a previously low capital adequacy ratio. The 10% target is based on careful risk estimation.

Factors like high volatility due to market fluctuations in marine products and exposure to global risks by our high overseas sales ratio are restraining market evaluations.

Expansion of the aquaculture business and inventory increases in the Fine Chemicals Business have raised working capital, limiting CCC improvement company-wide. However, efforts like short-cycle farming of bluefin tuna are progressing on-site.

The ROIC concept became well-rooted during Recipe1. In the future, we will perform gap analysis for portfolio optimization and consider using ROIC more strategically.

While investments are planned with a 5-10-year outlook, we recognize the need for better communication on specifics and returns. We will work on clearer, more concrete explanations about the investment background and contribution to capital efficiency.

We are entering a full-scale investment phase under Recipe2, with continued investments in Recipe3. The investment peak is projected to be concentrated within Recipe2 and 3.

The North American processing business may see positive effects, while exports via China could be negatively affected. We plan to use our global network to explore alternative sales options for affected products.

We aim to build a sustainable company, both environmentally and culturally, ensuring a work environment where employees feel motivated and valued. We want to contribute globally through safe and delicious food.

We host monthly seafood procurement meetings led by headquarters to control buying. We also manage risk through monthly inventory investment meetings, checking inventories over three months. We have specialized teams for species forecasting and sharing information on fish prices to enable agile responses. In aquaculture, reducing production costs is key since volume adjustment is difficult. To reduce volatility, we plan to integrate the system from feed production to aquaculture and processing to help offset market fluctuations and shorten farming periods.

The most significant profit driver will be increasing harvest volumes from the South American aquaculture business (30,000 MT in FY2024 → 50,000 MT in FY2030). In Japan, we aim to expand aquaculture further and contribute to regional economies. Challenges include improving profitability in the North American processing and South American fishery businesses.

The expanding South American aquaculture business will continue to sell in the U.S. market. To diversify risks amid trade environment shifts, we are preparing to flexibly pivot using global sales networks, including Brazil and Asia. Domestically, by expanding the juvenile-rearing facility, we plan to increase the coho salmon harvest to 5,700 MT in 2027 (currently 3,000 MT). This increase in domestic and overseas harvest volumes improves our confidence in achieving the targets. We will continue enhancing technology and disaster risk management to boost certainty further.

We can add more value to products like fish oil within the Group. Strengthening breeding and processing technologies is a key issue in aquaculture, and we will continue to improve them. Certifications (e.g., ASC, MSC) are essential in global markets. In Japan, interest is growing, especially among younger consumers, and we expect future market shifts.

We are considering expanding our domestic coho salmon aquaculture bases to higher latitudes to address global warming risks.

The business continues struggling due to rising labor and energy costs. We aim to improve profitability by strengthening ties with fishery groups and increasing the ratio of fillet products. In FY2025, productivity is expected to enhance as fish sizes also recover.

Aging production plants are a key issue; we must invest to boost productivity. While the domestic market is shrinking, it is still large, and growth investments can help keep and expand competitiveness.

Adopting a fabless model in food production is difficult, so keeping and enhancing our plants is vital. We currently focus production on four core company-owned plants, concentrating on products with high competitiveness, profitability, and technical ability. We will invest not only in upgrades to aging plants but also in strategic growth. The new plant investment is part of a scrap-and-build approach to reduce depreciation and expand the company's ability.

Even amid a declining population, consumption of frozen food for individuals, convenience, and health categories has room to grow. Also, products using surimi are highly profitable, and we aim to scale up. Based on growth or ROIC, we will consider consolidations or withdrawals for less promising fields.

The ROIC drop forecasted for FY2027 reflects temporary cost increases due to new warehouse launches. Overall, we expect profitability contributions. Although this investment is recorded as financing, its long-term nature makes it effectively like a capital investment. We will carefully assess large-scale investments that directly increase assets. Owning in-house logistics functions, such as warehouses and trucks, is considered adequate for cost reduction through internalization. However, considering the future decline in the domestic population, we will further pursue efficiency improvements through alliances with other companies.