Sekisui Chemical Co

This is Keita Kato. Thank you for taking time out of your busy schedule to join us today. On page 1, I would like to highlight the main points in the key message of today's presentation. First, I'd like to draw your attention to the table, the columns for FY23 results and FY24 plan. For FY23, we achieved a 14-billion-yen growth in sales and 2.7-billion-yen growth in OP. Although market conditions remained sluggish in general, including the domestic housing market, we were able to secure margins by improving and maintaining the sales price. Net sales and OP were almost in line with the January forecast, while ordinary profit and net profit both reached record highs. These exceeded the January forecast, mainly due to foreign exchange gains. ROE was 10.4%, indicating improved capital efficiency. Next, the business plan for FY24. Market conditions are expected to recover moderately. We'll continue to focus on expanding sales of high-performance products and maintaining margins whilst keeping the momentum for consolidated sales and OP growth by executing measures for augmenting profitability in the housing company. We'll strive to achieve a record high OP of 102 billion yen. Following our shareholder return policy and based on the net profit of 77.9 billion yen for FY23, we raised the year-end dividend by 3 yen from the January forecast to 39 yen per share for a total annual dividend of 74 yen per share. For FY24, we plan to raise the annual dividend by 1 yen to 75 yen per share, which would mark the 15th consecutive term of dividend hike. We have also set a share buyback program of up to 4 million shares and plan to retire 4 million shares. Page 2 illustrates the progress of the midterm plan. First, I'd like to touch upon the progress of our investment plan, which totaled 66 billion yen in FY23 on approved basis. Although some deals were carried over to FY24 and beyond due to the sluggish market, we see more growth investment opportunities, such as capacity expansion in the HPP company, UIEP, and medical business. We continue to search for M&A opportunities focusing on growth areas. Regarding strategic innovation at the bottom left, we are accelerating development of perovskite solar cells, which have been increasingly covered in the media, to establish production technology to expand the width from the current three centimeters to one meter, and they are making progress in line with the commercialization plan targeted for FY25. In addition, infrastructure materials business overseas is progressing steadily, as evidenced by the launch of the synthetic wood FFU plant in the Netherlands last fiscal year. In reference to reinforce the ESG management platform shown at bottom right, the ratio of product sales that enhance sustainability has steadily increased to 75%. For GHG reduction, we promoted renewable energy at our overseas site and achieved the midterm plan target of 33% reduction two years ahead of schedule. On initiatives around human capital, we raised wages by more than 4% in FY23 and are planning to invest in human capital at a higher level in FY24 compared to the previous year. On page three, this slide illustrates our track record of shareholder return or policy and the plan for FY24. We will continue to be active in our shareholder return initiatives in FY24. With that, I'd like to conclude my part. Thank you for your attention.

I am Kamiwaki. Thank you for this opportunity. I will report FI2023 results in an overview of FI2024 plan. Page 4 shows Forex results and we had gains from the weaker yen as stated. Page 5 shows the overview of FY2023. This is as explained by President Cato at the outset. Please look at this at your leisure. Page 6 shows the results by segment. High-performance plastics companies saw a substantial increase in net sales and operating profit, mainly in the mobility field. Housing companies saw a decrease in net sales and operating profit owing to the prolonged slump in the new housing market conditions and a surge in component costs. Urban infrastructure and environmental products companies saw an increase in net sales and operating profit on the back of a thoroughgoing efforts to secure margins and growth in prioritized product sales. Medical business saw a decrease in operating profit due to substantial impact of the decline in sales of COVID-19 diagnostics kit in the U.S. And for other business domains, upfront investment in major themes progressed steadily, as stated. Page 7 shows the first half and the second half results by segment. Please look at the second half results in particular. Mobility field drove the second half results with HPP posting a substantial increase in operating profit. On the other hand, profit in housing field dropped due to a significant impact from reduced orders in the first half while we made progress with its profitability enhancement measures. Other and corporate expenses were as stated. Page 8 shows FY20-23 resource analysis. Please look at the right-hand side for the analysis of operating profit. Sales volumes and product mix were particularly impacted from decreased demand compared to the January forecast, but it was covered by selling price and raw material margins. We were able to control fixed costs better than the forecast, posting a total profit increase of 2.7 billion yen, more or less in line with January forecasts. From page 9, FY2024 plan, our forex assumptions are as stated. Page 10 shows FY2024 plan P&L overview and returns to shareholders. These are as explained by President Kato at the outset. Please look at this at your leisure. Page 11 shows outlook for market conditions. The global automobile production volume in the upper left was slightly lower than expected in Q4 FI2023. In FI2024, we expected to be more or less flattish year on year. In the lower left, smartphone shipments were in line with expectations in Q4 FI2023, and FI2024 outlook is flattish year on year. Housing visitors in the upper right over all visitors in the second half of FY2023 recovered to the same level as the previous year and we expect exhibition visitors to recover in FY2024. We expect new housing stats shown below that to gradually recover after the trough in the second half of FY2023. Domestic NAFTA placed in the bottom right saw a slight surge compared with forecast in Q4 FY2023. Our assumption for FY2024 is to remain at the high level. Page 12 shows FY2024 plan by segment. All segments plan for both net sales and operating profit to increase with record operating profit in all segments except in the housing company. For high-performance plastics company, we forecast growth in the mobility field and recovery in electronics-related demand. Focusing on semiconductors, we plan for substantial increase in net sales and operating profit. For housing company, we anticipate a modest recovery in new housing construction market conditions and we plan for substantial increase in net sales and operating profit on the back of measures to strengthen housing business profitability and renovation business growth. For UIEP, we anticipate a gradual market recovery in the second half. We will focus on expanding sales of prioritized products, increasing overseas sales and improving selling prices. For medical business, we will make sure to capture diagnostics demand in Japan and overseas. We plan to expand the sales of broad coagulation devices and reagents in Japan and China and new products in the U.S. For other, we will continue to aggressively pursue large-scale themes as we did in FY2023. Page 13 shows the first half and the second half FY2024 plans by segment. We plan for operating profit growth both in the first half and in the second half. In the first half in particular, HPP will continue to drive the group as a whole. We plan for an increase in net sales and operating profit across all segments in the second half. In the housing company, despite plans for a decrease in net sales in the first half due to a drop in orders received in FY2023, we forecast an increase in the full-year operating profit by promoting measures to strengthen profitability. Page 14 shows FY2024 plan analysis. Please look at the analysis of operating profit in the right. Regarding sales volumes and product mix, we plan for significant growth on the back of our expectation for gradual recovery in global market and in the Japanese housing market, where we are expecting a large positive numbers. Regarding fixed costs, we are exceeding a certain increase mainly driven by human capital investment. We plan for operating profit to increase by 7.6 billion yen by securing the same level of margin from the previous year and with foreign exchange gains. Page 15 is the last page which shows consolidated performance. We will be aiming for another record operating profit in FY 2024 exceeding 100 billion mark for the first time. We also forecast to renew EBITDA record of FY2023 again in FY2024. We also stated ROE and other matrix for your reference. This ends my presentation.

Yes, I am Nishida. I will now explain the financial results for FY2023. Starting on page 17, the number of consolidated subsidiaries decreased by five companies to 143. The number of equity method affiliates decreased by one as a result of reviewing our ownership in Seki Suijose Corporation. On page 18, I will walk you through the items below the ordinary profit line. Ordinary profit was 105.9 billion yen, up by 1.7 billion yen year-on-year, and marked a new high thanks to higher OP and Forex gains of 7 billion yen, resulting from weaker yen than the previous year. Extra ordinary profit included a gain on the sale of shares in Sekisei House as we divested our holdings. Extraordinary losses included impairment losses on fixed assets related to lithium-ion battery business and the loss on valuation of shares in Volocopter, a mobility-related venture company. Net profit increased 8.7 billion yen to 77.9 billion yen, reaching a new high. Next, the balance sheet on page 19. Total assets increased 95.1 billion yen, partially due to weaker yen, and so the underlying increase was 52.1 billion yen. Since most of the interest-bearing debt is long-term financing, the strong cash flow has led to the increase in cash and deposits. Inventories increased by 11.4 billion yen, out of which 7.7 billion yen in non-housing related business was due to an increase in overseas inventories triggered by the weaker yen. Therefore, the inventory level was essentially flat over last year. Investment securities decreased by 41.7 billion due to sales that was offset by 34.1 billion yen because of the rise in the market value. Page 20, please. Net interest-bearing debt decreased 37.2 billion yen, which turned the company to be virtually debt-free. Most of that was due to an increase in cash on hand. Retained earnings were up due to net income and down due to shareholder returns. We conducted share buyback of 8 million shares and retired the same share accounts during the year. The increase in the market value of stock holdings and the depreciation of the yen have the effect of increasing net assets and unrealized gains on marketable securities and foreign currency translation adjustments. ROIC, ROE, equity-to-asset ratio, and debt-to-equity ratio are indicated on the table. Although net profit increased significantly, ROE only improved by a mere 0.4% due to the impact of the higher shareholder equity base resulting from investment securities and foreign currency translation, as just mentioned. Next is the consolidated cash flow on page 21. Cash flow from operating activity was $106.6 billion, a $35.1 billion improvement from the previous year. On top of the improved profits, a decrease in tax payments and improved working capital requirement contributed. Lower tax payment was due to higher than normal tax payments in FY22, mainly due to the sale of investment securities in FY21. For the cash flow from investing activities, while capex spending increased by 4 billion yen year-on-year, cash inflow of 38.1 billion yen from the sales of investment securities and other activities contributed to significant improvement. Free cash flow, including dividend payments, was a net cash inflow of 59 billion yen, and net cash outflow of 16.2 billion yen was booked for share repurchases, resulting in an increase in cash on hand. Depreciation and amortization, CapEx and EBITDA by segment are shown on page 22. Depreciation and CapEx are rising, with capital expenditures of about 1.2 times the D&A this fiscal year. EBITDA, a pool of funds for these fundings, increased by 5 billion yen and reached a new record high. Plan for depreciation CapEx narrative expenses is shown on page 23. We intend to increase capital expenditures in FY24 for capacity expansion and DX related investments. That will be all from me. Thank you very much for your attention.