Toray IR Day Medium-term Management Program “AP-G 2022” Fibers & Textiles Business June 5, 2020 Mitsuo Ohya Senior Vice President, General Manager, Fibers & Textiles Division Toray Industries, Inc. Copyright © 2020 Toray Industries, Inc. 0 Contents Ⅰ. Outline of Toray Group Fibers & Textiles Business Ⅱ. Business Environment Ⅲ. Fibers & Textiles Mid-term Management Program “AP-G 2022” Ⅳ. Future Direction of Toray Group Fibers & Textiles Business 1 Copyright © 2020 Toray Industries, Inc.. Positioning of the Fibers & Textiles Segment (Mar/2020) Net Sales Operating Profit Segments Major Products Billion Yen Billion Yen Fibers & Textiles 883.1 60.7 (40%) (39%) Performance 770.8 58.7 Chemicals (35%) (37%) Carbon Fiber 236.9 21.0 Composite Materials (11%) (13%) Environment & 252.3 11.2 Engineering (11%) (7%) 53.3 1.6 Life Science (2%) (1%) Others 18.2 3.4 Adjustment ▲25.5 TOTAL 2214.6 131.2 Copyright © 2020 Toray Industries, Inc. 2 Long-term Performance of the Fibers & Textiles Segment Net Sales(Billion Yen) Operating Income (Billion Yen) 1,000 80 E D A O ( P c o r s l o e a i i t a G l n c - z c n e o a S l o o s m h c A m b s u o i c i a o c r c b l c 900 r n o b e R u k r u n c e b d 70 a b c c b u y e b l e s s l c e e s r b i d i o b s u n i u b r s s r 800 y s t t t h e 60 s t r o n 700 g Y e n ) Rapid growth in China Emergence of Operating Income 50 600 Korea/Taiwan Net Sales: overseas 500 40 400 Strengthening of Advanced Materials Development 30 Strengthening of Industrial Materials Applications Net Sales: Japan 300 Establishment of 20 Shift to “Shingosen” Chinese Bases Domestic Production Expansion outside Japan 200 New Synthetic Demand in JPN Fiber Boom Business Expansion in (business Growth Regions & fields restructuring) Expansion of Global Operations 10 100 Differentiation of product lineup between Japan and overseas TC-II → TC-III Thorough rationalization through APS Strengthening business structure 0 (Action Program for Survival) as a Core Growth Driving Business 0 85 90 95 2000 05 10 15 19 Copyright © 2020 Toray Industries, Inc. 3 Business Results of the Fibers & Textiles Segment under Vision 2020 (Consolidated Net Sales： Billion Yen) (Consolidated Operating Income: Billion Yen) 1,200 140 CAGR 6% CAGR 4% 1,000 974.3 120 892.0 913.6 856.7 856.1 883.1 100 800 755.5 638.4 632.2 80 600 72.4 72.9 68.9 66.8 60 60.7 400 52.9 55.6 40 45.3 43.2 200 20 0 0 (FY) 2011 2012 2013 2014 2015 2016 2017 2018 2019 “AP-G 2013” “AP-G 2016” “AP-G 2019” Long-term Corporate Vision “AP-Growth TORAY 2020” (VISION 2020) Copyright © 2020 Toray Industries, Inc. 4 Review of the Previous Medium-term Management Program “AP-G 2019” Main Issues Main Activities (Progress) Strengthened business structure : Maintained domestic production base through total cost 1. Structural & reduction and strengthened activities of the “Toray Synthetic Textile Cluster” competitiveness Strengthen competitiveness : Invested strategically in priority development themes, pursued improvement production process innovation, etc. 2. Expansion in GR Business: Expansion in energy conservation, low environmental impact fields growth fields LI Business: Expansion in nonwoven fabric, etc. Growth regions and markets: Advancement of business in Chinese subsidiaries, 3. Expansion and increased capacity and production sites of airbags, nonwoven fabric, nonwoven material advancement of created using ultra-fine fibers in an “islands in the sea” configuration global business Global brand strategy：pursued 2-brand strategy of the nonwoven material created using ultra-fine fibers in an “islands in the sea” configuration business 4. Strategic creation Nonwoven business：Strengthened cooperation with global customers by promoting of new business comprehensive development of materials in the TORAY Group through establishment of the business framework covering spunbond and staple fiber nonwoven fabric Extension and diversification of the global supply chain: Enhanced capability to respond to global customers through cooperation within Toray Group overseas bases, and cultivation of new supply sources including alliances Apparel applications: Strengthened cooperation with end customers, enhanced knit production and 5. Advancement of sales base (by the capital investment in PTHL) business model Non-apparel applications: Strengthened the integrated business structure from fibers to textiles of the airbags/expanded supply chain (by the acquisition of Alva) Reinforced organization in response to the expansion of business domain and enhancement of 6. Organization and global operation (Established Performance Nonwoven Products Dept., strengthened HQ functions Human Resources of the airbag business, strengthened functions of the staff organization, etc.) Optimized headcount, secured headcount, and strengthened development of human resources Copyright © 2020 Toray Industries, Inc. 5 Our Strength： World’s only Three Dimensional Business Model North Africa South Asia Global Business Network Americas Global Assets Europe & ASEAN Global Operation Korea Technological Development China & Japan Fibers Textiles Garments Variety of Nylon Vertical Products Polyester Wide Range of Acrylic Business Areas Integration & in Supply Chain Industrial FY Human Network Advanced Materials PPS PTFE PLA Material Variety PTT Nano & Nonwoven Innovative Products Microfiber* SB * Nonwoven material created using ultra-fine fibers in an "Islands in the Sea" configuration Copyright © 2020 Toray Industries, Inc. 6 Long-term Technological Development and Variety of Products Plant-based PLA Fibers Fibers PTT(3GT) Fibers Nonwovens Nonwoven material created using ultra-fine Microfibers fibers in an “islands in the sea” configuration Nanofibers High- PTFE (Flurofiber) PPS functional (Polyphenylene Sulfide) Fibers Aramid Fibers Acrylic Fibers Recycled PET Fibers Recycled Fibers Recycled Nylon Fibers Polyester Fibers Partially plant - PlBainotm-baasssed based PET 100% plant - FFiibbeerrss N66 Fibers based PET Nylon 610 N6 Fibers 1950 60 70 80 90 2000 2010 2020 Copyright © 2020 Toray Industries, Inc. 7 Business Expansion through the Pursuit of High Value-added Fibers Technologies 1958: Start of production of 1960 1970 1980 1990 2000 2010 2015 2020 TETORONTM Development Imitate the Imitate the feel and Pursuing the unique feel and Superiority of natural concept of structure of fibers, environmental- synthetic fibers natural fibers texture of natural fibers texture of synthetic fibers friendliness The Pursuit of Silk Modified cross-section Conjugated fiber of Specialty modified Polymer-alloy Orientation control Polymer-alloy NANODESIGN® different shrinkage cross-section ® SILLOOK FEMINOS® SILLOOKDUET™ SILLOOK™SOUBI Kinari ™ SILLOOK SILDEW SILLOOK ('63) ('89) ROYAL® S ('89) ('98) ('03) ('13) ('19) Development of Technology Composite spinning Composite spinning Composite spinning Innovative composite spinning technology NANODESIGN® Composite spinning Blended spinning OHS®('91) UT-S®('91) OHSⅡ®('99) Primeflex™('02) uts-FIT™ ('16) Composite spinning Cross-section MIX PAREL™ ('77) SUBIL® ('67) LUANA®('87) CEO αTM ('93) Nanofiber diameter 300nm ('13) Creating new products and technologies by studying polymerization and spinning of polyester fibers Copyright © 2020 Toray Industries, Inc. 8 Continuous Promotion of Marketing Innovation: Supply Chain Innovation Key Industry Trends Toray’s Actions Dawning of the Fabric Trading Fiber Whole- Market Toray Merchant Firm Distri- saler bution ↓ Spinning / converter Introduction of Synthetic fibers TM TM Materials Material Brand Marketing (Toray Nylon , TETORON ) 1960s-70s Toray Establishment of the Integrated Business Ready-made From Yarn to Textile Wholesaler Clothing Market Retail Weaver (establishment of PT Apparel ↓ outsourced processing Response to the Brand Knitter Dyer CHOP system) Apparel Market PT (Production Team) 1990s- Distribution Revolution Toray ↓ Response to the Established an Integrated Appa- Expansion of Fast Weaving Companies Fashion and SPA Overseas Trading Companies/ Business from fibers to rel Dyeing Companies Garment Making Market Knitting Companies textiles to final products SPA Filament Yarns/ Garment Staple Fibers Weaving, Knitting - Dyeing making Around 2015- DX ↓ “AP-G 2019” The Cockpit System Advancement of All production-related Value Chains information listed on time DX: Digital Transformation Copyright © 2020 Toray Industries, Inc. 9 Long-term Overseas Investment and Expansion of Global Business Response to Industrial Development Programs in the Developing Countries: Established local production to maintain the export markets Established Country Company Name Business Established Country Company Name Business P/R, P/C spinning, weaving, 1970 ISTEM, CTX TTTM P/R spinning, weaving, dyeing dyeing (later knits) 1963 Thailand (now TTT) 1971 Indonesia ITS N-FY, P-FY, P-SF TNT (now TTS) N-FY (later P-FY) 1973 ACTEM A spinning Response to the Strong Yen after the Nixon Shock and Export Regulations of Fibers & Textiles to the US: Established local production bases in ASEAN P/C spinning, weaving, P-FY weaving, dyeing 1972 Thailand LTX (now TTT) 1988 LTX (now TTT) dyeing Thailand *increased capacity PFR P-SF 1991 TFL (now TTS) P-FY Malaysia P/C spinning, weaving, 1973 PAB Response to the Strong Yen after the Plaza Agreement and the Economic Bloc in Europe dyeing and the US: Established local operational bases (Europe and US market) Indonesia ETX P/C spinning, weaving 1989 England TTEL FY weaving, dyeing Nonwoven material created using Response to the Opening of the Chinese Market ultra-fine