#1kuraray 1H of FY2019 Earnings Presentation (Overview) KURARAY CO., LTD.#2Overview of 1H FY2019 Results (Billion yen) 1H FY2019 1H FY2018 Difference Net Sales 287.4 301.4 -14.0(-4.6%) Operating 27.9 36.3 -8.3(-23.0%) Income Ordinary 24.7 34.6 -9.9(-28.6%) Income Net Income*< 13.3 22.6 -9.3(-41.3%) *Net Income Attributable to Owners of the Parent. Reference JPY/USD 110 109 JPY/EUR 124 132 Domestic naptha 45 48 (JPY 1,000/kl) Note: Because the temporary accounting treatment for the business combination with Calgon Carbon Corporation was determined at the end of fiscal 2018, the effect of said determination has been applied to the figures for the corresponding period of the previous fiscal year. kuraray 2#3Outcomes of Main 1H FY2019 Initiatives Pursue competitive superiority Completed expansion of production line at the water-soluble PVA film plant in U.S. - - New U.S. plant scheduled to start operation in the first half of 2020 Considering new production sites in locations outside the U.S. 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 Operation start planned for the second half of 2020 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 Continue considering capacity increase to meet further increased demand of high-frequency printed circuit board materials for 5G technology, etc. 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 Enhance comprehensive strengths of the Kuraray Group Advance the synergy of integrating Calgon Carbon business Promote work-style reform Increased operational efficiency - Implement the No-Overtime Week system full scale kuraray 3#4Forecast for FY2019 * Revised from the public announcement on May 15, 2019 <Reference> FY2019 Forecast FY2019 FY2018 Difference Forecast Actual (Announced May 15, 2019 Net Sales 600.0 603.0 (3.0) 608.0 Operating 67.0 65.8 1.2 69.5 Income Ordinary 62.5 61.2 1.3 65.0 Income Net 38.0 33.6 4.4 40.0 Income* *Net Income Attributable to Owners of the Parent. Domestic naphtha ¥45 ¥51 (JPY1,000/kl) USD (average) \110 \110 EUR (average) ¥125 ¥130 kuraray ¥44 \110 ¥128 4#5FY2019 Shareholder Returns Returns on Profit during PROUD2020 Total return ratio: 35% or higher Dividends per share: ¥40 or higher FY2019 Interim dividends Interim dividend: ¥20/share (forecast at start of year: ¥20/share) ■FY2019 Year end dividends (forecast) Year end : ¥22/share (forecast at start of year: ¥22/share) * Full-year dividend forecast: ¥42/share (interim: ¥20; year-end: ¥22) ■Share Buyback - · Buyback period: February 14, 2019 to December 26, 2019 Maximum number of shares: Up to 5.0 million shares or up to ¥10.0 billion as maximum value. kuraray 50#6kuraray 1H FY2019 Earnings Results (Details) KURARAY CO., LTD.#7Vinyl Acetate Net Sales (Billion yen) 137.8 135.0 134.7 ☐ FY2018 1H FY2019 1H FY2019 1H Forecast Result Operating Income (Billion yen) 29.0 23.5 23.1 ■ PVA resin Sales volume decreased due to economic slow down. ■Optical-use poval film Although demand for large screen displays remained firm, the shipments were affected by the decline in operation on one of the production lines in the 1st quarter and inventory adjustment of polarizer film. ■Water-soluble PVA film Demand for unit-dose detergent packet grew and strong sales continued. ■PVB film Although demand for SentryGlas™ expanded, PVB film declined for commodity use due to economic slow down. ■EVAL™ Sales decreased for automotive gas tank application due to a decline in vehicle production numbers. The sales volume for food packaging applications fell due to delays in the recovery of sales. FY2018 1H FY2019 1H Forecast FY2019 1H Result kuraray 7#8Isoprene Net Sales (Billion yen) 28.9 28.0 ☐ ☐ FY2018 1H 27.4 ■Isoprene Although demand for SEPTON™ decreased mainly in China, isoprene chemicals remained firm. FY2019 1H FY2019 1H Forecast Result Operating Income (Billion yen) ■GENESTAR™ Although new adoption of connectors increased for automotive components, sales decreased for electric/electronic devices due to sluggish demand. 4.8 4.0 3.4 FY2018 1H FY2019 1H FY2019 1H Forecast Result kuraray 8#9Functional Materials Net Sales (Billion yen) 65.3 63.0 62.6 ■Methacrylic Resin Market conditions of MMA worsened and sales of PMMA resins stagnated. FY2018 1H FY2019 1H FY2019 1H Forecast Result Operating Income (Billion yen) 2.2 1.9 1.5 ■Medical Sales of esthetic restorative dentistry products remained firm. ■Carbon Materials & Calgon Carbon Although sales for high value-added products increased in Carbon Materials, Calgon Carbon was impacted by a decline in operations due to issues with the utility facility in the 1st quarter. FY2018 1H FY2019 1H FY2019 1H Forecast Result Note: Because the temporary accounting treatment for the business combination with Calgon Carbon Corporation was determined at the end of fiscal 2018, the effect of said determination has been applied to the figures for the corresponding period of the previous fiscal year. kuraray 9#10Fibers and Textiles Net Sales (Billion yen) 33.5 32.0 33.1 ■CLARINO™ Although sales continued to be performing well for luxury item applications, sales declined for use in shoes. FY2018 1H FY2019 1H FY2019 1H Forecast Result Operating Income (Billion yen) Fibers and Industrial Materials Although sales of KURALON™ increased for use in reinforcing rubber, exports of FRC application were affected by the economic slow-down. 3.3 3.0 3.0 FY2018 1H FY2019 1H FY2019 1H Forecast Result kuraray ■Consumer Goods and Materials Sales of KURAFLEX™ decreased for commodity use, though sales of high value-added products remained stable. 10#11Sales and Operating Income by Segment 1H FY2019 1H FY2018 (Billion yen) Difference Net Operating Net Operating Net Operating Sales Income Sales Income Sales Income Vinyl Acetate 134.7 23.1 137.8 29.0 (3.1) (5.9) Isoprene 27.4 3.4 28.9 4.8 (1.5) (1.4) Functional 62.6 2.2 65.3 1.9 (2.7) 0.3 Materials Fibers & 33.1 3.0 33.5 3.3 (0.4) (0.3) Textiles Trading 64.8 2.1 68.4 2.1 (3.6) 0 Others 26.0 0.4 29.2 0.7 (3.2) (0.3) Elimination & Corporate (61.2) (6.2) (61.8) (5.5) 0.6 (0.7) Total 287.4 27.9 301.4 36.3 (14.0) (8.3) Note: Because the temporary accounting treatment for the business combination with Calgon Carbon Corporation was determined at the end of fiscal 2018, the effect of said determination has been applied to the figures for the corresponding period of the previous fiscal year. kuraray 11#12Cash Flow for 1H FY2019 (Billion yen) 1H FY2019 1H FY2018 Difference Operating CF 37.4 30.8 6.6 Investing CF* (40.9) (31.3) (9.6) Free CF* (3.5) (0.5) (3.0) M&A 0.0 (119.8) 119.8 CAPEX(Acceptance basis) 44.8 27.5 17.3 Depreciation and Amortization(incl.amor tization of goodwill) R&D Expenses 28.4 27.3 1.1 10.6 10.3 0.3 *Cash flows from investing activities and free cash flow exclude net cash used in fund management and M&A. Note: Because the temporary accounting treatment for the business combination with Calgon Carbon Corporation was determined at the end of fiscal 2018, the effect of said determination has been applied to the figures for the corresponding period of the previous fiscal year. kuraray 12#13Factors Affecting the Change in Operating Income 40.0 0 35.0 (6.5) (0.5) 1.5 30.0 (1.0) (1.1) (0.8) 36.3 25.0 (Billion yen) 27.9 20.0 FY2018 1H Sales Volume Utilization Raw Materials and Selling Price, Foreign Product Mix Exchange Fuel (excl. Effect of Foreign Exchange) Depreciation Expenses and and Others Amortization FY2019 1H (incl. Amortization of Goodwill) FY2018 1H Domestic naphtha(JPY1,000/kl) USD (average) ¥48 ¥109 FY2019 1H ¥45 \110 EUR (average) \132 ¥124 Note: Because the temporary accounting treatment for the business combination with Calgon Carbon Corporation was determined at the end of fiscal 2018, the effect of said determination has been applied to the figures for the corresponding period of the previous fiscal year. kuraray 13#14Balance Sheet [1]: Assets (Billion yen) June 30, 2019 Dec. 31, 2018 Difference Current Assets 394.8 394.9 (0.1) Noncurrent Assets 569.8 552.2 17.6 Total Assets 964.6 947.1 17.5 kuraray Reference: Exchange rates at end of period June 30, 2019 JPY/USD 108 JPY/EUR 122 Dec. 31, 2018 111 127 14#15Balance Sheet [2]: Liabilities and Net Assets (Billion yen) June 30, 2019 Dec. 31, 2018 Difference Current Liabilities 153.7 144.8 8.9 Noncurrent 253.9 235.3 18.7 Liabilities Total Liabilities 407.7 380.1 27.6 Net Assets 556.9 567.0 (10.1) Total Liabilities 964.6 947.1 17.5 and Net Assets Reference: Exchange rates at end of period June 30, 2019 JPY/USD 108 JPY/EUR 122 kuraray Dec. 31, 2018 111 127 15#16Forecast for FY2019 (Billion yen) FY2019 FY2018 Full-Year Full-Year Difference Forecast Results Net Sales 600.0 603.0 (3.0) Operating Income 67.0 65.8 1.2 Ordinary Income 62.5 61.2 1.3 Net Income* 38.0 33.6 4.4 EPS Dividends per share ¥109.76 ¥96.05 ¥13.71 \42 ¥42 \0 CAPEX(Decision basis) 95.0 146.0 (51.0) CAPEX(Acceptance basis) 96.0 66.8 29.2 Depreciation and Amortization 58.0 56.7 1.3 (incl. amortization of goodwill) R&D Expenses 22.0 21.2 0.8 kuraray *Net Income Attributable to Owners of the Parent. 16#17Factors Affecting the Change in Operating Income 80.0 75.0 70.0 2.0 1.0 (3.0) 5.0 (1.0) (1.3) (1.5) (Billion yen) 65.0 67.0 65.8 60.0 FY2018 Actual Sales Volume Utilization Raw Materials and Selling Price, Foreign Product Mix Exchange Depreciation Expenses and Amortization and Others FY2019 Forecast kuraray Fuel (excl. Effect of Foreign Exchange) Domestic naphtha(JPY1,000/kl) USD (average) EUR (average) (incl. Amortization of Goodwill) FY2018 FY2019 ¥51 ¥45 \110 \110 ¥130 ¥125 17#18Forecast for FY2019 FY2019 Revised Forecast (August 8, 2019) FY2019 Original Forecast (Announced May 15, 2019) (Billion yen) Difference 1H 2H Full 1H 2H Full 1H 2H Full (Act) Net Sales 287.4 312.6 600.0 290.0 318.0 608.0 (2.6) (5.4) (8.0) Operating Income 27.9 39.1 67.0 29.0 40.5 69.5 (1.1) (1.4) (2.5) Ordinary 24.7 37.8 62.5 26.5 38.5 65.0 (1.8) (0.7) (2.5) Income Net Income* 13.3 24.7 38.0 16.0 24.0 40.0 (2.7) 0.7 (2.0) *Net Income Attributable to Owners of the Parent. kuraray 18#19Forecast for FY2019 FY2019 Revised Forecast (August 8, 2019) FY2018 Results (Billion yen) Difference 1H 2H Full 1H 2H Full 1H 2H Full (Act) Net Sales 287.4 312.6|600.0 301.4 301.6 603.0 (14.0) 11.0 (3.0) Operating Income Ordinary 27.9 39.1 67.0 36.3 29.5 65.8 (8.3) 9.6 1.2 24.7 37.8 62.5 34.6 26.6 61.2 (9.9) 11.2 1.3 Income Net Income* 13.3 24.7 38.0 22.6 11.0 33.6 (9.3) 13.7 4.4 *Net Income Attributable to Owners of the Parent. Note: Because the temporary accounting treatment for the business combination with Calgon Carbon Corporation was determined at the end of fiscal 2018, the effect of said determination has been applied to the figures for the corresponding period of the previous fiscal year. kuraray 19#20Net Sales by Segment FY2019 Revised Forecast FY2018 Results Difference (Billion yen) Difference from Original forecast (May 15, 2019) 1H 2H Full 1H 2H Full 1H 2H Full 1H 2H Full (Act) Vinyl Acetate 134.7 149.3 284.0 137.8 141.5 279.4 (3.1) 7.8 4.6 (0.3) 1.3 1.0 Isoprene 27.4 29.6 57.0 28.9 28.3 57.2 (1.5) 1.3 (0.2) (0.6) (0.4) (1.0) Functional 62.6 67.4 130.0 65.3 66.2 131.5 (2.7) 1.2 (1.5) (0.4) (2.6) (3.0) Materials Fibers & 33.1 34.9 68.0 33.5 31.3 64.7 (0.4) 3.6 3.3 1.1 0.9 2.0 Textiles Trading 64.8 75.2 140.0 68.4 70.4 138.8 (3.6) 4.8 1.2 (5.2) 0.2 (5.0) Others 26.0 26.0 52.0 29.2 28.8 58.0 (3.2) (2.8) (6.0) (2.0) (3.0) (5.0) Elimination & Corporate (61.2) (69.8) (131.0) (61.8) (65.0) (126.7) 0.6 (4.8) (4.3) 4.8 (1.8) 3.0 Total 287.4 312.6 600.0 301.4 301.6 603.0 (14.0) 11.0 (3.0) (2.6) (5.4) (8.0) kuraray 20 20#21Operating Income by Segment FY2019 Revised FY2018 Results Difference (Billion yen) Difference from Original forecast Forecast (August 8, 2019) (May 15, 2019) 1H 2H Full 1H 2H Full 1H 2H Full 1H 2H Full (Act) Vinyl 23.1 30.9 54.0 29.0 25.8 54.7 (5.9) 5.1 (0.7) (0.4) (2.1) (2.5) Acetate Isoprene 3.4 3.6 7.0 4.8 2.4 7.3 (1.4) 1.2 (0.3) (0.6) 0.1 (0.5) Functional 2.2 3.3 5.5 1.9 2.5 4.4 0.3 0.8 1.1 0.7 0.3 1.0 Materials Fibers & 3.0 4.0 7.0 3.3 3.0 6.3 (0.3) 1.0 0.7 0 0 0 Textiles Trading 2.1 2.4 4.5 2.1 2.1 4.2 0 0.3 0.3 (0.1) 0.1 0 Others 0.4 0.6 1.0 0.7 0.5 1.2 (0.3) 0.1 (0.2) (0.1) (0.4) (0.5) Elimination & (6.2) (5.8) (12.0) (5.5) (6.8) (12.3) (0.7) 1.0 0.3 (0.5) 0.5 0 Corporate Total 27.9 39.1 67.0 36.3 29.5 65.8 (8.3) 9.6 1.2 (1.1) (1.4) (2.5) Note: Because the temporary accounting treatment for the business combination with Calgon Carbon Corporation was determined at the end of fiscal 2018, the effect of said determination has been applied to the figures for the corresponding period of the previous fiscal year. kuraray 21#22kuraray 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.