The following is a summary of key questions and answers at the press conference and earnings briefing held on October 31, 2018.

Press Conference

What is the reason behind robust Engineering, Procurement, and Construction (EPC) works?

TLong-term project orders received from the fiscal year ended March 2016 to the fiscal year ended March 2018 have started to contribute to sales.

What is the progress of overseas business, which is positioned as a growth area in the Midterm Business Plan?

Aqua-Aerobic Systems, Inc., a US subsidiary of METAWATER and a key pillar of overseas business, has delivered solid performance. In the future, we will create further synergies including those from the sale of METAWATER products in the United States

Investor and Analyst Briefing

Do the revised financial forecasts reflect only a first-half surplus in full-year forecasts?

We have revised the financial forecasts based on full-year forecasts, which combine first-half results with second-half forecasts.

Please comment on the amendment of the Water Supply Act, which has been deliberated at an extraordinary Diet session.

The amendment of the Water Supply Act has been discussed based on the amendment of the Act on Promotion of Private Finance Initiative in 2011, which opened the way for a concession system. Given that Japan's water business is facing a revenue decline caused by population declines and aging facilities and equipment, it is not feasible to maintain the business through means other than Public Private Partnerships (PPPs) at the moment. From our understanding, the amendment is aimed at facilitating PPPs rather than paving the way for privatization.

Increasing damage has been caused by torrential rain throughout Japan. How will METAWATER contribute to such a situation?

Disaster control is one of the major issues facing water infrastructure. Our high-speed filtration equipment is designed to purify and return rainwater and wastewater from storms and other causes to rivers and the sea. Because we have made progress in introducing the equipment to municipalities in urban cities, we will accelerate efforts to make proposals to municipalities in small and medium-size cities.

Please comment on METAWATER's technological and competitive advantages.

Our mechanical and electric technologies are at the top level of the industry and we have a proven record of equipment deliveries to many sites. Our strengths lie in our abilities to quickly validate and verify new ideas in the ICT and AI fields using our facility data accumulated over the years.

What is the segment breakdown of the full-year forecast for net sales and operating profit?

With regards to the net sales forecast of JPY 120.0 billion, the Plant Engineering (PE) Business accounts for slightly less than 60% and the Service Solution (SS) Business accounts for over 40%. Regarding the operating profit forecast of JPY 7.2 billion, the PE Business accounts for a little under JPY 3.0 billion and the SS Business accounts for over JPY 4.0 billion.

Compared to the first half, when both sales and profits achieved significant year-on-year growth, a profit decline is expected in the second half based on a simple calculation. What is the reason for the decline?

It is due to differences in project composition and because we are not expecting any major loss-making projects in the second half. We will pursue the forecasts announced today as mandatory targets and strive to aim higher.

The water and environmental industry consists of many small and medium-size companies, and a large number of leading manufacturers have entered the market. Do you think industry reorganization will take place in the long run?

The water and environmental industry is an attractive market around the world. There are many companies that want to enter the market and it is not likely to easily fall into the state of an oligopoly. We also expect that more innovative technologies will be created and competition will continue to be intense in the future.