#1kuraray FY2019 Earnings Presentation (Overview) KURARAY CO., LTD.#2Overview of FY2019 Results (Billion yen) FY2019 FY2018 Difference Net Sales 575.8 603.0 -27.2 (-4.5%) Operating 54.2 65.8 -11.6(-17.7%) Income Ordinary Income 48.3 61.2 -12.9(-21.1%) Net Income* (2.0) 33.6 -35.5 (-%) Reference JPY/USD 109 110 JPY/EUR 122 130 43 51 Domestic naphtha (JPY 1,000/kl) *Net Income Attributable to Owners of the Parent kuraray 2#3Factors Affecting the Change in Net Income* FY2018 Operating Income U.S. Litigation-related loss U.S. Insurance income Others Total income taxes FY2019 (Billion yen) 33.6 (11.6) (50.6) (35.5) + 1 0.4 + 4.7 + 1 1.6 (2.0) FY2018 FY2019 Domestic naphtha USD (average) ¥51 ¥43 (JPY1,000/kl) \110 ¥109 EUR (average) ¥130 ¥122 *Net Income Attributable to Owners of the Parent kuraray 3#4Outcomes of Main FY2019 Initiatives Pursue competitive superiority ◆Optical-use poval film: Finished expansion of wide-width film lines at Kurashiki Plant Water-soluble PVA film -New production lines at existing US plant went into operation -A new US plant is expected to go into operation in the first half of 2020 Ionomer interlayer for glass lamination SentryGlas™ production started in Czech plant in July ◆ Decided to increase production capacity in Kuraray Kuraflex Okayama Plant for melt-blown nonwoven fabric Strengthened quality improvement and production efficiency using IoT Expand new business fields Install production equipment for Flexible Copper Clad Laminates VECSTAR™ FCCL in Kashima Plant Business expansion of PLANTIC™ biomass-based gas barrier material - Participated in the “G20 Innovation Exhibition" hosted by the Ministry of Economy, Trade and Industry and the Ministry of the Environment ♦Corporate Marketing Group: Promoted organization-wide cross-divisional activities to develop new applications Promoted integration and synergy with the Calgon Carbon business Promoted work-style reforms Introduced full-scale No Overtime Week system • Introduced teleworking and flexible working Enhance comprehensive strengths of the Kuraray Group kuraray • 4#5Forecast for FY2020 (Billion yen) FY2020 FY2019 Difference Net Sales 590.0 575.8 14.2 Operating 60.0 54.2 5.8 Income Ordinary 56.0 48.3 7.7 Income Net Income* 35.0 (2.0) Domestic naphtha (JPY1,000/kl) ¥43 ¥43 USD (average) ¥105 ¥109 EUR (average) ¥120 ¥122 *Net Income Attributable to Owners of the Parent kuraray 37.0 5#6Key Initiatives for FY2020 Pursue competitive superiority Water-soluble POVAL Film: Decided to build a new plant in Poland ◆ EVAL™: Establish a new plant ♦Calgon Carbon: Consider building a new plant in US ◆ Isoprene chemicals: Steadily proceed with the project in Thailand ◆ Promote digitalization for production efficiency and improving product quality Expand new business fields LCP film VECSTART: Consider accelerating sales and introducing mass production facilities in anticipation of the popularization of 5G PLANTIC™: Begin resin production and supply in the US Enhance comprehensive strengths of the Kuraray Group Realize further synergy effects through integration with the Calgon Carbon business Prepare to establish the new training institute for improving human resources development and passing on skills ◆ Promote work-style reforms kuraray 6#7Corporate Marketing Group Actions to create customer-centric business and culture 1. Organization-wide activities across divisions (6 main topics) Auto- motive Agriculture Oil & gas excavation k 3D printers Sustain- ability Sports & outdoors Start from FY2018 Start from FY2019 Comprehensive presentations to potential customers Matching (100+ times in 2019) Exhibitions organized by Corporate Marketing Group (5 times in 2019) 2. Launch projects to strengthen our global brand 3. Promote "Kuraray PRIDE" training system for business creation 4. Build shared company-wide global CRM system infrastructure kuraray 7#8EBITDA Trend (Billion yen) Operating Income 140.0 Depreciation & Amortization Acquisition of business 120.0 (Year & Business) 100.0 FY2012 MonoSol FY2015 Plantic FY2014 Vinyl acetate-related business of DuPont 80.0 33.5 30.7 35.0 31.0 60.0 35.7 FY2018 Calgon Carbon Corporation 43.0 56.7 61.1 44.1 41.6 58.2 40.0 75.1 66.1 67.8 65.8 60.0 53.1 54.7 54.2 49.2 49.5 20.0 40.3 0.0 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 Forecast *FY2014 = 9 months kuraray 8#9Dividends Medium-Term Management Plan “PROUD 2020" Total payout ratio: 35% or higher Annual dividends per share: ¥40 or higher FY2019: ¥42 per share scheduled (interim: ¥20, year-end: ¥22) ■Share Buyback Fiscal 2019 results (February 14, 2019 to September 20, 2019) → Total shares acquired: 5,000,000; Total value of shares acquired: ¥6,613,929,553 kuraray FY2020: ¥42 per share scheduled (interim: ¥21, year-end: ¥21) 6#10kuraray FY2019 Results (Details) KURARAY CO., LTD.#11Vinyl Acetate Net Sales (Billion yen) 279.4 FY2018 266.1 FY2019 Operating Income (Billion yen) 54.7 47.4 ■PVA resin Sales volume declined due to decelerating economic conditions. ■Optical-use poval film Shipments decreased due to a LCD panel inventory adjustment. We completed an expansion of facilities at Kurashiki Plant in the fourth quarter. Water-soluble PVA film <MonoSol> Sales expanded thanks to growing demand for products for use in unit dose detergent packets. ■PVB film Sales struggled in Auto market despite demand grew for Ionomer interlayer for glass lamination SentryGlas™ EVAL™M Gas tank applications was affected by decline in the production number of vehicles. Sales volume for food packaging applications declined despite a gradual recovery in sales from the third quarter onward. FY2018 FY2019 kuraray 11#12Isoprene Net Sales (Billion yen) 57.2 53.3 FY2018 FY2019 Operating Income (Billion yen) ■Isoprene Sales volume of SEPTON™ thermoplastic elastomer declined due to economic deceleration. ■GENESTAR™M Demand for connectors for automotive devices grew though sales fell due to sluggish demand for electric and electronic devices. 7.3 4.2 FY2018 FY2019 kuraray 12#13Functional Materials Net Sales (Billion yen) 131.5 FY2018 126.0 FY2019 Operating Income (Billion yen) ■Methacrylic Resin Sales of methacrylic resin decreased and also affected by worsening market conditions. ■Medical Sales were steady, especially for esthetic and restorative dentistry products. ■Carbon Materials & Calgon Carbon Demand held steady in North America, whereas sales in Europe were sluggish due to stagnant demand. In the Carbon Materials business, sales of high value-added products increased. 4.4 3.8 FY2018 FY2019 kuraray 13#14Fibers and Textiles Net Sales (Billion yen) 64.7 FY2018 64.5 FY2019 Operating Income (Billion yen) 6.3 5.7 ■CLARINO™ Sales for luxury product applications remained stable though sales struggled for use in shoes. ■Fibers and Industrial Materials KURALON™ for cement reinforcement use remained weak and sales for reinforcing rubber were negatively affected by a decline in vehicle production. However, VECTRAN™M were firm mainly in exports. ■Consumer Goods and Materials Sales for commodity use decreased though sales of high-value-added products increased. FY2018 FY2019 kuraray 14#15Sales and Operating Income by Segment FY2019 FY2018 (Billion yen) Difference Net Operating Net Operating Net Operating Sales Income Sales Income Sales Income Vinyl Acetate 266.1 47.4 279.4 54.7 (13.3) (7.4) Isoprene 53.3 4.2 57.2 7.3 (3.9) (3.0) Functional 126.0 3.8 131.5 4.4 (5.6) (0.6) Materials Fibers & 64.5 5.7 64.7 6.3 (0.2) (0.6) Textiles Trading 130.9 4.2 138.8 4.2 (7.9) 0 Other Business 51.1 0.6 58.0 1.2 (6.9) (0.5) Elimination & Corporate Total (116.1) (11.8) (126.7) 575.8 (12.3) 10.6 0.5 54.2 603.0 65.8 (27.2) (27.2) (11.6) kuraray 15#16Cash Flow for FY2019 FY2019 FY2018 (Billion yen) Difference Operating CF 95.6 75.2 20.4 Investing CF* (88.6) (67.6) (21.0) Free CF* 7.0 7.6 (0.6) M&A 0 (119.8) 119.8 EPS (¥5.66) ¥96.05 (\101.71) BPS ¥1,527.79 ¥1,592.96 (\65.17) CAPEX(Decision basis) 51.4 146.0 (94.6) CAPEX(Acceptance basis) 97.4 66.8 30.6 Depreciation and Amortization 58.2 56.7 1.5 (incl. amortization of goodwill) R&D Expenses 21.2 21.2 0 * Cash flows from investing activities and free cash flow exclude net cash used in fund management and M&A. kuraray 16#17Factors Affecting the Change in Operating Income [1] 70.0 0.5- 60.0 50.0 65.8 (9.5) (2.0) 6.5 (1.5) (4.5) (1.1) (Billion yen) 54.2 Foreign Depreciation Expenses FY2019 and Amortization (incl. Amortization of Goodwill) and Others 40.0 FY2018 Sales Utilization Selling Price, Volume Product Mix Raw Materials and Fuel (excl. Effect of Foreign Exchange) Exchange FY2018 Domestic naphtha(JPY1,000/kl) ¥51 kuraray USD (average) EUR (average) \110 ¥130 FY2019 ¥43 ¥109 \122 17#18Balance Sheet [1]: Assets (Billion yen) Dec. 31, 2019 Dec. 31, 2018 Difference Current 394.7 394.9 (0.2) Assets Noncurrent 596.4 552.2 44.2 Assets Total Assets 991.1 947.1 44.1 Reference: Exchange rates at end of period kuraray Dec. 31, 2019 JPY/USD JPY/EUR 110 123 Dec. 31, 2018 111 127 Note: Kuraray has adopted the Partial Amendments to Accounting Standard for Tax Effect Accounting. The figures of previous fiscal years have been retroactively adjusted to reflect the change. 18#19Balance Sheet [2]: Liabilities and Net Assets (Billion yen) Dec. 31, 2019 Dec. 31, 2018 Difference Current Liabilities 201.7 144.8 56.9 Noncurrent 250.9 235.3 15.7 Liabilities Total Liabilities 452.6 380.1 72.5 Net Assets 538.5 567.0 (28.5) Total Liabilities 991.1 947.1 44.1 and Net Assets Equity Ratio 53.0% 58.6% (5.7%) Reference: Exchange rates at end of period Dec. 31, 2019 Dec. 31, 2018 JPY/USD JPY/EUR 110 123 111 127 kuraray Note: Kuraray has adopted the Partial Amendments to Accounting Standard for Tax Effect Accounting. The figures of previous fiscal years have been retroactively adjusted to reflect the change. 19#20Forecast for FY2020 FY2020 FY2019 Full-Year Full-Year (Billion yen) Difference Forecast Results Net Sales 590.0 575.8 14.2 Operating Income 60.0 54.2 5.8 Ordinary Income 56.0 48.3 7.7 Net Income 35.0 (2.0) 37.0 EPS Dividends per share ¥101.82 (\5.66) ¥107.48 ¥42 ¥42 \0 CAPEX(Decision basis) 95.0 51.4 43.6 CAPEX(Acceptance basis) 100.0 97.4 2.6 Depreciation and Amortization 61.1 58.2 2.9 (incl. amortization of goodwill) R&D Expenses 22.0 21.2 0.8 kuraray 20 20#21Factors Affecting the Change in Operating Income [2] 70.0 60.0 50.0 54.2 2.0 0 0 0 -(0.5) (2.8) 8.5 (1.4) 40.0 FY2019 Sales Utilization Selling Price, Volume Product Mix kuraray Domestic naphtha(JPY1,000/kl) USD (average) EUR (average) (Billion yen) 60.0 Raw Materials and Fuel (excl. Effect of Foreign Exchange) Foreign Depreciation Expenses FY2020 Exchange and Amortization (incl. Amortization of Goodwill) and Others FY2019 ¥43 ¥109 \122 FY2020 ¥43 ¥105 ¥120 21#22(Ref.) Forecast for FY2020 FY2020 FY2019 (Billion yen) Difference Full-Year Forecast Full-Year Results 1H 2H 1H 2H 1H 2H Net Sales 290.0 300.0 287.4 288.4 2.6 11.6 Operating 28.0 32.0 27.9 26.3 0.1 5.7 Income Ordinary 26.0 30.0 24.7 23.6 1.3 6.4 Income Net 16.0 19.0 Income* 13.3 (15.2) 2.7 34.2 *Net Income Attributable to Owners of the Parent kuraray 22#23Net Sales by Segment FY2020 Full-Year FY2019 Full-Year Forecast Results (Billion yen) Difference Net Sales Operating Income Net Sales Operating Income Net Operating Sales Income Vinyl Acetate 278.0 50.5 266.1 47.4 11.9 3.1 Isoprene 55.0 5.0 53.3 4.2 1.7 0.8 Functional 131.0 5.0 126.0 3.8 5.0 1.2 Materials Fibers & 67.0 6.0 64.5 5.7 2.5 0.3 Textiles Trading 135.0 4.5 130.9 4.2 4.1 0.3 Other Business 51.0 1.0 51.1 0.6 (0.1) 0.4 Elimination & (127.0) (12.0) (116.1) (11.8) (10.9) (0.2) Corporate Total 590.0 60.0 575.8 54.2 14.2 5.8 kuraray 23#24(Ref.) FY2020 Forecast by Segment Net Sales (Billion yen) Operating Income 1H 2H Full Year 1H 2H Full Year Vinyl Acetate 138.0 140.0 278.0 24.5 26.0 50.5 Isoprene 27.0 28.0 55.0 2.0 3.0 5.0 Functional 64.0 67.0 131.0 2.0 3.0 5.0 Materials Fibers & 33.0 34.0 67.0 3.0 3.0 6.0 Textiles Trading 65.0 70.0 135.0 2.2 2.3 4.5 Other Business 25.0 26.0 51.0 0.3 0.7 1.0 Elimination & (62.0) (65.0) (127.0) (6.0) (6.0) (12.0) Corporate Total 290.0 300.0 590.0 28.0 32.0 60.0 kuraray 24#25(Ref.) Net Sales by Segment FY2020 Full-Year FY2019 Full-Year (Billion yen) Difference Forecast Results 1H 2H 1H 2H 1H 2H Vinyl Acetate 138.0 140.0 134.7 131.4 3.3 8.6 Isoprene 27.0 28.0 27.4 25.9 (0.4) 2.1 Functional 64.0 67.0 62.6 63.4 1.4 3.6 Materials Fibers & 33.0 34.0 33.1 31.4 (0.1) 2.6 Textiles Trading 65.0 70.0 64.8 66.1 0.2 3.9 Other Business 25.0 26.0 26.0 25.1 (1.0) 0.9 Elimination & Corporate Total (62.0) (65.0) (61.2) (54.9) 290.0 300.0 287.4 288.4 (0.8) (10.1) 2.6 11.6 kuraray 25#26(Ref.) Operating Income by Segment FY2020 Full-Year FY2019 Full-Year (Billion yen) Difference Forecast Results 1H 2H 1H 2H 1H 2H Vinyl Acetate 24.5 26.0 23.1 24.3 1.4 1.7 Isoprene 2.0 3.0 3.4 0.8 (1.4) 2.2 Functional 2.0 3.0 2.2 1.6 (0.2) 1.4 Materials Fibers & 3.0 3.0 3.0 2.7 0 0.3 Textiles Trading 2.2 2.3 2.1 2.1 0.1 0.2 Other Business 0.3 0.7 0.4 0.2 (0.1) 0.5 Elimination & (6.0) (6.0) (6.2) (5.6) 0.2 (0.4) Corporate Total 28.0 32.0 27.9 26.3 0.1 5.7 kuraray 26#27kuraray All figures are rounded to the nearest hundred million yen. This presentation contains various forward-looking statements which are based on the current expectations and assumptions of future events. All figures and statements with respect to the future performance, projections, and business plans of Kuraray and its group companies constitute forward-looking statements. Although Kuraray believes that its expectations and assumptions are reasonable, actual results and trends of Kuraray's performance could differ materially from those expressed or implied by such figures or statements due to risks and uncertainties in the future business circumstances. The factors which may cause such difference include, without limitation: (1) general market and economic conditions in Asia including Japan, the U.S., Europe and other regions; (2) fluctuations of currency exchange rates, especially between the Japanese yen and the U.S. dollar and other foreign currencies; (3) changes in raw material and fuel costs; (4) industrial competition and price fluctuations in Japan and international markets; (5) advance or delay in the construction of new plants and production lines; (6) successful development of new products and technologies; and (7) changes in laws and regulations (including tax and environmental) and legal proceedings.#28kuraray Cease and desist orders from the Fair Trade Commission KURARAY CO., LTD.#29Timeline to the Japan Fair Trade Commission ruling Textile product (KURALON™) Competitive bidding for textile products ordered by the Acquisition, Technology & Logistics Agency Leniency application Mar 2016 On-site inspection 2016 Activated Carbon Manufacture and sales of activated carbon used in water purification facilities, waste incineration facilities, etc. Mar 2017 Cease and desist order penalty waived by leniency application Apr 2017 Officers' compensation voluntarily returned kuraray 2017 2018 2019 Jan 2017 Merged with Kuraray Chemical Feb 2017 On-site inspection Leniency application Mar 2018 Acquired Calgon Carbon Nov 2019 Cease and desist order and penalty issued to Kuraray and CCJ Amount: approximately 70 million JPY (reduced by 30%) Dec 2019 Officers' compensation Voluntarily returned CCJ = Calgon Carbon Japan 29#30Measures to prevent re-occurance Start period 2016 Jun Mar 2016 Top Message (Intranet, internal newsletter) Categories Rule revision, strengthen organization Jul Internal training Jul-Sept Internal investigation 2017 May Rule revision, strengthen organization May Rule revision, strengthen organization Jul-Aug Internal training Aug-Oct Internal investigation 2018 Apr-Jun 2019 Jun Internal investigation Internal investigation Dec Internal investigation Measures taken Revision of Antimonopoly Act Compliance Guidelines Antitrust seminars Internal hearing on Antimonopoly Act compliance Create Antitrust Guideline for Meeting with Competitors Starting the operation of Antitrust Compliance System Group sessions for sales staff Internal leniency on Antimonopoly Act Regular audit for tender by Legal Dept. Regular audit for tender by Legal Dept. Widen the scope of regular audit and internal hearing by Legal Dept. Initiatives Expanding the scope of rotation system for managers, who are at (Rule revision, strengthen organization) scheduled in 2020 Frequency, target, content Enriched content on cartels and bid-rigging, and listed many specific cases Regularly held Lectured by outside counsel Hearing of each business unit and group companies Stricter regulation about get in contact with competitors Advance approval for transactions and meeting with competitors and control for bid participation information Regularly held Training for sales dept. employees by using case studies Conducted for each business unit and affiliated company Annually Audit on the deal specifics, justification for tender pricing, sales channel, etc. Annually Audit on the deal specifics, justification for tender pricing, sales channel, etc. Start preparation for audit to overseas group companies and for hearing to group companies in Japan same job for a certain period of time Revision of Antimonopoly Act Compliance Guidelines (Rule revision, strengthen organization) *Internal hearing by legal department for each business unit and group companies (Int. investigation) ⚫Ongoing seminars for executives by external legal counsel and sales department employees (Int. training) kuraray Internal leniency conducted by survey for sales department employees (Int. investigation) 30 50#31kuraray Litigation in U.S. caused by fire incident and initiatives for safety KURARAY CO., LTD.#32Timeline of fire incident at US subsidiary Impact to business Incident investigation begins FY2018 Litigation related May: Fire occurred at U.S. EVAL plant 2Q: No impact to business due to inventory Modification to safety facilities 3Q: Sales adjustment for food application in Americas Sep/Late: Main production lines resumed 4Q: Supply gradually recovered Nov/End: Affected production line resumed Production resumed to normal condition FY2019 Cost of facility repair and safety measures: Facility repair costs: minimal (several million JPY) Safety measures costs: approximately 300 million JPY Review of safety design and horizontal deployment: approximately 70 million JPY Civil lawsuit raised Plaintiff: Over 160 outside contractors Claim Damages for physical and psychological injury Oct: Settled with partial plaintiffs and reported extraordinary loss Settlement: approximately 10 billion JPY (92 million USD); Reported 14 billion JPY extraordinary loss including above settlement Nov: Reported additional extraordinary loss Reported 34 billion JPY loss (over 140 plaintiffs). FY2020 Jan: Settled with partial plaintiffs Settlement: approximately 28.9 billion JPY (265 million USD). Settlement negotiations ongoing kuraray 32#33Initiatives for safety and preventing re-occurrence of incidents Corporate Statement: "Safety is the cornerstone of everything we do" ✔ Guiding principles on ensuring safety: "Safety is the cornerstone of everything we do" ✓ Action courses on ensuring safety (FY 2020): 1. Ensuring Safety first, production second 2. Ensuring a risk prediction and a check before and after taking action 3. All Employees must act proactively to ensure safety Main areas reviewed by FY2019 overseas plant safety inspections (1) Improvement of the management system ⚫ Revise concrete methods for change management and ensure post-change confirmation. • Clarify the authority in writing to grant permission and approval for specific work a case of concrete situation. (2) Enhancement of training • Enhance training provided for higher risk items at plants. • Revise and improve the emergency response manual, and ensure that employees are completely familiar with its contents. (3) Expansion of risk assessment ⚫ Introduce HAZOP(discovering and responding to sources of danger) to non-regular (start-up, shut-down) work. . Reduce the number of work operations that have not been standardized in writing to zero. kuraray 33#34CAPEX for maintaining safety (Billion yen) 8 7 6 5 3 2 1 Investment for safety (Japan) Investment for safety (Overseas) Ratio of investment for safety 0 50 2002 03 04 05 kuraray 30.0% 25.0% 20.0% 15.0% 10.0% Average ratio (2010-2019) 7.5% 5.0% 0.0% 06 07 08 09 10 11 12 13 14 15 16 17 18 19 34