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2025 Fiscal Year Financial Achievements

• Operating profit and recurring profit reached record highs since K&O Energy Group's establishment; net income attributable to parent shareholders hit a record high excluding special factors in the 2014 founding year
• ROE reached 8.3%, a record high excluding the 2014 founding year, and remained above the increased 7% cost of equity capital
• The company maintains its commitment to capital management focused on cost of capital and shareholder value, with no changes to core strategy. It continues to implement the "Medium-Term Plan 2027" covering 2025 to 2027, which balances strengthening stable revenue foundations and growth-focused investment to drive sustainable corporate value improvement.

Iodine Production Capacity Expansion

• The company's subsidiary K&O Iodine holds 5% global iodine market share. Global iodine demand grows steadily at 2-3% annually, aligned with the company's incremental expansion strategy.
• New iodine refining (late-stage process) facilities were completed and started operation in 2025, with depreciation beginning in the period. The Chiba Plant has been upgraded to handle enough brine to support a 2,000 ton annual production target.
• Wellhead iodine adsorption facilities, which allow iodine extraction from previously unused brine sources near existing gas wells, are being expanded incrementally. These small-scale facilities add production gradually with low per-unit capital expenditure.
• The company targets increasing annual iodine production from under 1,800 tons to 2,000 tons by the 2030s, aligned with Medium-Term Plan 2027.

Geothermal Business Value Chain Enhancement

• The company acquired a 33.4% stake in Mitsui Kinzoku Resource Development, a 100% subsidiary of Mitsui Kinzoku that specializes in early-stage geothermal exploration, surveying, and test drilling.
• This acquisition completes the full geothermal business value chain in-house, adding the early-stage expertise the group previously lacked, enabling more efficient geothermal development. The company now counts as one of the few domestic firms capable of covering the entire geothermal value chain from initial survey to commercial operation.
• Geothermal development is a long-term process requiring a minimum of 10 years from initial survey to commercial operation, and the group expects this capability to support domestic and future international geothermal business growth.

Shareholder Return

• The company has a progressive dividend policy, targeting continuous stable dividend increases to enhance shareholder return. It also commits to timely transparent disclosure and active engagement with shareholders and investors.
• Total annual dividend per share for 2025 was increased from the previously announced 50 yen to 54 yen, a 12 yen increase year-over-year.

• For 2026 fiscal year, consolidated revenue is expected to decrease 4.8% year-over-year to 87 billion yen, driven by lower gas selling prices from declining import energy prices that offset expected iodine sales volume growth
• Consolidated operating profit is expected to decrease 13.2% year-over-year to 9.2 billion yen, due to higher geothermal survey costs and increased depreciation from new iodine production facilities
• Consolidated recurring profit is expected to decrease 12.0% year-over-year to 10.3 billion yen
• Net income attributable to parent shareholders is expected to decrease 24.8% year-over-year to 6.3 billion yen, due to the lap of 2025's special compensation gain and lower operating profit
  • Gas Business: Sales volume expected to decrease 1.1% year-over-year to 899 million cubic meters; revenue expected to decrease 7.8% year-over-year to 62.4 billion yen; segment operating profit expected to be nearly flat year-over-year at 5 billion yen (a 0.033 billion yen increase)
  • Iodine Business: Production volume expected to increase 2.7% year-over-year to 1,803 tons; sales volume expected to increase 2.8% year-over-year to 1,850 tons; revenue expected to increase 3.4% year-over-year to 15.6 billion yen (on stable selling prices matching 2025 levels); segment operating profit expected to decrease 0.768 billion yen year-over-year to 8 billion yen due to higher depreciation from expanded production facilities
  • Other Businesses: Revenue expected to increase 5.0% year-over-year to 9 billion yen; segment operating profit expected to decrease 0.089 billion yen year-over-year to 0.7 billion yen
  • Capital expenditure: Total planned capital expenditure for 2026 is 8.05 billion yen, a 0.5 billion yen increase year-over-year. Investment in iodine refining facilities will decrease, while investment in gas and iodine brine production development (classified as Gas & Iodine Development) will increase to 3 billion yen, with continued investment in new wellhead adsorption facilities
• Annual dividend per share for 2026 is planned to increase 6 yen year-over-year to 60 yen, despite the expected decrease in full year profit

For the full year 2025 fiscal year ended December 2025:

1. Gas Business:

• Revenue: 67.692 billion yen, a 6.2% decrease year-over-year, accounting for 74.1% of total consolidated revenue
• Sales volume: 909 million cubic meters, a 3.2% decrease year-over-year
• Segment operating profit: 4.966 billion yen, a 0.124 billion yen decrease year-over-year

1. Iodine Business:

• Revenue: 15.092 billion yen, an 11.6% increase year-over-year, accounting for 16.5% of total consolidated revenue
• Production volume: 1,755 tons, a 6.9% increase year-over-year
• Sales volume (including iodine and potassium iodide): 1,800 tons, a 4.5% increase year-over-year
• Segment operating profit: 8.768 billion yen, a 1.212 billion yen increase year-over-year

1. Other Businesses (including construction, appliance sales, power):

• Revenue: 8.569 billion yen, a 26.9% increase year-over-year, accounting for 9.4% of total consolidated revenue
• Segment operating profit: 0.789 billion yen, a 0.339 billion yen increase year-over-year

1. Consolidated:

• Total revenue: 91.354 billion yen, a 1.2% decrease year-over-year
• Total operating profit: 10.594 billion yen, a 20.1% increase year-over-year
• Recurring profit: 11.699 billion yen, a 19.0% increase year-over-year
• Net income attributable to parent shareholders: 8.379 billion yen, a 35.9% increase year-over-year

• Accurate forecasting of foreign exchange rates is challenging, and unexpected currency fluctuations can lead to deviations between actual results and initial guidance, which the company notes it struggles to predict accurately
• While iodine demand is expected to grow steadily at 2-3% annually, sudden large supply increases in Chile (the world's largest iodine producer) could create a loose supply-demand balance, though management views this risk as low due to the long lead time required for large-scale production expansion
• A small portion of iodine demand (primarily certain disinfection applications like cattle teat dips) could see substitution with alternative products if iodine prices remain at current elevated levels, though this is expected to only impact a small share of total demand
• Geothermal development is inherently a long-term process that requires a minimum of 10 years to reach commercial operation, leading to extended periods of capital expenditure before revenue generation
• There is currently no formal bilateral carbon credit agreement between Japan and the U.S. that allows North American forest carbon credits to be used in Japan, creating uncertainty around the value of the company's investment in a North American forest investment firm
• Although the company manages gas well drilling to minimize land subsidence risk by selecting low-impact drilling locations and offsetting declining production from existing wells rather than increasing total water extraction, increased long-term production expansion could still create subsidence risk if not carefully managed

Q: What impact has Air Water's accounting fraud had on K&O Energy Group, and are there any expected changes to synergies or shareholding related to Air Water or Godo Shigen?

A: K&O Energy Group has not received any inquiries or requests for cooperation from Air Water's investigation committee, and does not have sufficient detailed information on the issue. K&O is an independent listed company with its own separate governance structure; while it holds an equity stake accounted for under the equity method, K&O's operations, accounting, and governance are fully independent. The company has confirmed no issues with its own accounting, and is not involved in Air Water's improper accounting. There are no expected major changes to existing synergies in iodine customer collaboration and small-scale joint projects at this time, and no changes to the company's shareholding position, though future developments may change this. The company expects to continue advancing collaboration with Godo Shigen to increase synergies as before.

Q: What is your iodine price outlook for 2026?

A: We expect iodine prices in 2026 to be roughly the same as 2025 levels, with foreign exchange rates and export contract prices expected to remain at similar levels to 2025.

Q: Can you explain your 2026 capital expenditure plan, specifically what additional investments are planned beyond already announced iodine capacity expansion projects?

A: The large-scale late-stage iodine refining capacity expansion announced last year is already completed, and that project's depreciation will be reflected in full-year results in 2026, driving higher depreciation expense. Additional planned investment is focused on Gas & Iodine Development: this category covers drilling new wells and expanding production capacity from existing wells to increase brine supply (the core raw material for iodine and gas). Investment in this category will increase from 1.4 billion yen in 2025 to 3 billion yen in 2026. Additional small-scale wellhead adsorption facility investment is not classified as a large separate capital project in 2026 after last year's large investment.

Q: Has your stance on iodine investment changed from previous commentary that investments are for medium- to long-term production growth rather than near-term gains? Can you confirm your expected 2026 production growth rate?

A: There has been no change to our stance: new late-stage refining capacity is built to support medium- to long-term growth to the 2,000 ton 2030 production target, and we will continue increasing production gradually via incremental wellhead adsorption facility additions, as rapid large brine volume increases are not feasible. 2026 production growth is guided at 2.7% year-over-year, which is just under 3% annual growth, consistent with our gradual expansion approach. Minor timing differences between production and sales volumes can occur across fiscal years.

Q: K&O Energy has beaten initial operating profit guidance by more than 2 billion yen in the last two years. Is the 2026 guidance intentionally conservative?

A: The guidance is not intentionally conservative built on overstating risk. The company develops guidance based on the most likely outcome after considering all assumptions for temperature, foreign exchange, prices, and other key variables. Management notes that foreign exchange in particular has been a major source of deviations between initial guidance and actual results in recent years, and accurate forecasting of foreign exchange remains challenging for the company.

Q: What is the rationale for your investment in a Sojitz forest investment company? Is it related to sustainable iodine production, or purely corporate social responsibility for climate change?

A: The investment targets North American forests, where the investment generates returns via cash flow or carbon credits from sustainable forest management. K&O Energy produces natural gas alongside iodine, and is working to achieve carbon neutrality for its gas production. This investment is part of that carbon neutrality effort: the company plans to use carbon credits from forest conservation to support carbon neutrality for its gas and iodine production operations. The company is exploring carbon credit acquisition opportunities globally beyond North America. There is currently no clear policy allowing North American carbon credits to be used for compliance in Japan, as no bilateral agreement is in place, but the company expects the situation may change in the future, and the investment also allows the company to learn carbon credit development know-how.

Q: What has driven the recent increase in iodine prices, and is a future loosening of the supply-demand balance likely?

A: The exact drivers of recent international price increases are not entirely clear, but global iodine demand has grown steadily at 2-3% per year for several years. The largest demand segment for iodine is medical contrast agents for CT scans, and demand continues to grow as usage increases in both developed and developing countries. Large sudden increases in global supply are unlikely: Japanese producers cannot rapidly scale up production, and while Chile has potential for expansion, large-scale production increases cannot be achieved quickly. As a result, the risk of a sudden sharp loosening of supply-demand is low.

Q: Why does your 2026 iodine price forecast differ from the trend visible in Ministry of Finance trade statistics, which show December 2025 prices are 6% higher than full-year 2025 prices, implying your forecast expects a price decline?

A: We still forecast 2026 iodine prices to be roughly flat year-over-year matching 2025 levels after accounting for foreign exchange and contract prices. The discrepancy with trade statistics arises because trade statistics aggregate all iodine exports regardless of product type (iodine vs potassium iodide, export vs domestic, different product grades) and the mix of products sold changes year over year. As a result, the unit price calculated from aggregate trade statistics will not always match the company's actual average selling price.

Q: Is 30 billion yen of annual investment in Gas & Iodine Development (brine supply) required continuously to reach the 2,000 ton iodine production target, or will additional investment beyond this be needed? What is the scale of this investment relative to the target?

A: Gas & Iodine Development investment covers drilling new gas wells to increase brine supply. A 30 billion yen annual investment level will not continue indefinitely. Large capital expenditure is only required for projects that include drilling multiple wells and building new collection facilities and pipelines; drilling just 2 new wells only requires small-scale investment. To reach the 2,000 ton target, the company will incrementally add brine supply by drilling new wells to offset declining production from existing wells, and add small-scale wellhead adsorption facilities to existing wells that were not previously used for iodine extraction. Each wellhead adsorption facility addition costs less than 100 million yen, so the company will gradually increase production via multiple small incremental investments rather than large continuous annual spending.

Q: Can gas well development continue to expand beyond 2,000 tons of iodine to 3,000 tons, considering the risk of land subsidence?

A: The company has 90 years of experience operating gas wells in the region, and has long used the approach of selecting drilling locations with low subsidence risk and continuously monitoring ground conditions. The company only drills new wells to offset declining production from existing mature wells, so total brine extraction volume has not increased overall. The company balances extraction across wells with different gas-to-water ratios to maintain stable total production without increasing total water extraction. Land subsidence is not an inevitable result of brine extraction for gas and iodine production, so the company can continue incremental expansion while monitoring subsidence risk beyond 2030. The company will also use carbon credits to support carbon neutrality for its gas production as it expands.

Q: Why does K&O Energy forecast increasing iodine demand while another major domestic listed iodine producer forecasts declining demand this year? What explains the difference in outlook?

A: The other major domestic producer has a different customer base than K&O Energy. K&O Energy expects global iodine demand will not decline sharply, and continues to forecast 2% annual global demand growth. While some sources note potential production declines in some regions this year, it is unclear where these declines will occur at this point. K&O Energy continues to produce steadily, and has built a strong reputation for reliable supply among global customers, which supports stable demand for the company's output.

Q: Which iodine end-use segments could see weak demand?

A: The main segment at risk of weak demand from substitution is disinfection applications: some disinfection uses can be replaced with alternative products, and high iodine prices may drive some users to switch, for example iodine-based cattle teat dips in the U.S. can be replaced with equally effective non-iodine products. This only affects a small share of total demand, and will not lead to a large total decline. Major segments including liquid crystal displays, X-ray contrast agents, and industrial catalysts have no widely available alternatives at this time, so large demand declines are not expected for these core segments.

Q: What is K&O Energy's approach to perovskite solar cell-related iodine demand, and how large an impact could this segment have on your production?

A: K&O Energy only produces potassium iodide as an iodine-based compound product, and does not produce other iodine compounds like lead iodide that are used in perovskite solar cells. Currently, lead iodide production volume for perovskite is very small, and the major domestic lead iodine producer has no difficulty sourcing enough iodine from existing markets. At this stage, the market size for perovskite-related iodine demand is very small, and the impact on overall annual iodine demand will not be large in the near term. If the market scales up significantly globally in the future the situation may change, but K&O Energy has no plans to enter this specific market segment at this time.