Sekisui Chemical Co

This is Keita Kato, President and CEO. Thank you for taking time out of your busy schedule to join us today. On page one, I'd like to highlight the main points in the key message of today's presentation. The upper table is a snapshot of the first half results for FY24 and the forecast for the second half, as well as a revised plan for the full year. For the first six months of FY24, we achieved a 17.8 billion yen growth in net sales and 7.6 billion yen growth in OP. Despite the sluggish domestic housing market, all segments, including the housing company, which steadily implemented measures to strengthen profitability, achieved profit growth. In particular, the high-performance plastic company, or HPP, drove the performance, and the OPA reached 48.7 billion yen, overachieving the July forecast by 3.9 billion yen. Next, let's look at the revised plan for the second half. Although the domestic housing market remains stagnant, we expect a gradual recovery in the non-residential and global markets. We set the currency assumption at 145 yen against the dollar and factored in a certain level of exchange rate risk. We'll continue to focus on expanding sales of high-performance products and maintaining the margin, whilst anticipating the impact of measures to strengthen profitability in the housing business, with the aim of achieving increased sales and profits in all segments. We also revised our port OP outlook for the full year by ¥3 billion from the July forecast to ¥105 billion. We will accelerate our shift towards growth as a lead-up to the next fiscal year, which is the final year of the current meter management plan. As for shareholder returns, we bought back and canceled 4 million shares during the first half. As for dividends, we plan to hike the dividend by 1 yen at 275 yen per share for the full year, as announced in July. Last topic from me will be about perovskite solar cells, which we position as our most important growth theme. In September, we were selected by NIDO for its Green Innovation Fund to carry out demonstration project for mass production. We'll continue to accelerate development and verification with the support of the Japanese government, the Ministry of Economy, Trade and Industry, and other related organizations with the aim of commercialization in FY25. This concludes my explanation. Thank you for your attention. I am Futoshi Kamiwaki, Head of Business Strategy Department. I'll go through the company's first half performance and the second half outlook. Page 2 indicates the exchange rate for the first half. The yen trend did significantly weaker than the previous year at 153 yen against the dollar and 166 yen against the euro. Page 3 is the overview of the first half results. Net sales grew with substantial increase in profit. All profit lines exceeded the July forecast, with OP reaching 48.7 billion yen, ordinary profit achieving 48.1 billion yen, and net profit, which was partially boosted by the sales gain of CrossShare Holdings, reaching 42.9 billion yen. Interim dividend was raised by 2 yen to 37 yen per share as forecasted. Next, page 4 shows the first-half results by segment. Net sales increased in all three segments except for housing. We achieved OP growth in all segments in excess of July forecast, and the consolidated OP and OP for the three segments achieved record high first-half profits. I'll explain each segment in more details later. In the other segment, we continue to invest in the next key businesses, such as Perovskite solar cells and biorefinery business, newly on track with the plan. Next, page 5 illustrates the results for Q1 and Q2 respectively. As was the case in Q1, we continue to deliver OP growth in Q2 on a consolidated basis as well as for all the segments. Next on page 6 is the analysis of the first half results. The left graph illustrates the EO1 year sales growth of 17.8 billion to 629.1 billion yen. Next on the right is the analysis of the operating profit. First, the benefit of the weaker yen was significant, with a positive impact of 3.9 billion yen. The sales volume in product mix also had a substantial positive impact of 7 billion, mainly driven by the sales growth of HPP. In addition, we were able to secure a margin that was higher than the July expectation. On the other hand, fixed costs increased by approximately 5.4 billion yen year-on-year, mainly due to investment in human capital. In sum, we achieved the annual profit growth of 7.6 billion yen, outperforming the July guidance by 3.9 billion yen.

Page 7 explains the revised plan for the second half of the year. First FX assumption. The dollar is assumed to be 149 yen in the third quarter, 140 yen in the fourth quarter, and 145 yen in the second half of the fiscal year. Second half expects higher yen than the initial expectation. stronger yen compared to the initial expectation for the second half. Page 8 are the assumptions for the market condition. The first top left, global automobile production, we expect the third quarter to be slightly below the April assumption, but from the fourth quarter onward, we expect the recovery to be in line with the April forecast. next smartphone shipment second quarter shipment are to be were to be in line with the july forecast and the third quarter shipment are slightly below the april forecast but to recover to the same level as the previous year through fourth quarter next on the upper right housing and visitors although exhibition visitors are lower than the previous year but this will be offset by web channel and the total is expected to exceed the previous year's level. As for the new housing starts, we expect the demand to be low in the second half of FY2024, almost the same as the previous year. Regarding domestic NAFTA, although the second quarter results were slightly lower than the July forecast, we expect the second half results to be slightly higher than the April assumption and the high price of raw materials will have an impact. Next, page 9 is the revised plan for the second half by segment. As you can see at the very bottom of the page, we plan net sales of 679.6 billion yen and OP of 56.3 billion yen for the second half. Up by 3 billion yen in profit year on year and all four segments are expected to increase their profit. As in the bottom right-hand corner, we forecast a negative 2.9 billion yen versus the April plan, but this mainly reflects the impact of exchange rate fluctuations and some housing projects moved up in the first half. Segment information is as described respectively. In the other segment, we continue to invest as planned in the second half in large themes such as perovskite and biorefinery project. Page 10 is the second half revised plan analysis. Net sales increased by 34.4 billion yen. And OP analysis is as follows. FX is negative 0.3 billion yen, factoring in the impact of yen appreciation in the fourth quarter. Sales volume and product mix are up significantly by 11.7 billion yen year on year, driven especially by HPP and the medical business. In addition, we'll maintain a better spread of selling prices in raw materials than April forecast, covering higher fixed cost. On the fixed cost side, investment stay focused on mainly human resources and R&D. In total, we expect an increase of ¥3 billion from the previous year, a slight shortfall from the April plan, but an increase in both sales and income. Next, on page 11, 4-year forecast. As shown at the bottom, we forecast net sales of 1,308.7 billion yen, an OP of 105 billion yen, up by 10.6 billion yen from the previous year, and an upward revision of 3 billion yen in OP from the July forecast to 105 billion yen. All segments have been revised upward from the July forecast. Page 12 is a summary of the revised plan for the full year. Net sales and OPE have already been explained. Ordinary income 102.5 billion yen, net income 78 billion yen and a dividend of 75 yen per share. We expect an increase in net sales and upward revision of P. The bottom line to hit a new record high as per our July forecast. And the bottom line is expected to reach a new record high. We plan to raise the annual dividend by ¥1 per share to ¥75 per share, as forecasted in July. We maintain dividend increase for 15 consecutive years. Finally, page 13 for the consolidated financial result. Achievement of this revised plan will result in ROIC of 8%, significant increase from the previous year, and ROE of 10.2%, maintaining above 10% level. EBITDA is to reach 160 billion yen, continuing to be significantly higher than the previous year's record high. OP forecast for FI24 is 105 billion yen. We are on track to achieve the 115 billion yen target of the FI2025 mid-term plan. And this is all for me. Thank you very much.

I'm Ikusuke Shimizu, company president of the High Performance Plastics Company, or HPP. First, the trend of business performance on page 15. In the first half of FY24, demand recovered in electronics, mainly driven by semiconductors, as well as in construction and consumer goods in the U.S. and Japan. Continued sales growth of high-performance products and efforts including fixed cost reduction helped us achieve net sales of 221.1 billion and OP of 29.9 billion yen. Both sales and profit grew with a record high first-half profit. Furthermore, we decided to invest to ramp up the capacity for three areas of growth, the interlayer film plant in Thailand for software production, the tape used for chip manufacturing processes, and for conductive protocols. For the second half of FY24, we project sales and profit growth in all three strategic fields, assuming a certain market recovery. In addition to improving the sales volume and product mix, we'll also focus on securing the margin and aim to achieve record high profits for two consecutive years for the second half as well as for the full year. Next on page 16 is the analysis of the first half results. The bar graph on the left shows that net sales for the first half of FY24 grew by 20.8 billion yuan a year to 221.1 billion yuan. The waterfall chart on the right is the analysis of OP, which achieved significant growth year-on-year of 6.9 billion yuan. Demand recovery in electronics, as well as construction and consumer goods mainly in North America and Japan, and the steady performance in mobility field delivered big jump in sales volume and product mix. As the table below indicates, improvement in the selling price mainly in the industry field also started to contribute from Q2, and the results exceeded the July forecast. Next, page 17 shows the revised plan for the second half of FY24. As indicated by the bar graph on the left, we expect demand to remain strong, and we now guide for net sales to grow by 11.3 billion yen a year to 223.9 billion yen. The factors behind the change in OPE are shown on the right. We project an OPE growth of ¥1.2 billion year-on-year on the back of better sales volume and product mix driven by factors such as the increase in new products mainly for non-LCD applications in electronics field and the expansion of NHPP owing to capturing the opportunity for new models in the mobility field as well as securing margin and promoting CR activities. Although we will not quite reach the April plan due to the impact of FX losses, we plan to achieve two consecutive years of record high profits for the second half of the year and for the full year. Page 18 summarizes the trend of net sales and KPI for the three strategic fields. First, in the electronics field at upper left, the smartphone market was strong in the first half of 2024, and the semiconductor market recovered from the second quarter with year-on-year growth. As you can see by the graph at bottom left, sales of chip processing materials SOFA and MLCC binder resins increased, among others, and bio-tape products were adopted for new smartphone models, contributing to sales growth mainly in the non-LCD applications, ultimately achieving sales and profit growth for the electronics field. In the second half, on the back of strong demand for semi-related products and your augmented efforts to get your products adopted in new products, we'll aim to renew the previous record high full-year profit for the electronics field. In addition, we decided in the first half of FY24 to invest approximately 2 billion yen to ramp up our capacity of conductive protocols, and the operation is slated for the first half of FY28. Next, the mobility field presented in the middle of the slide. The sales of interlay film for head-up displays in China decreased in the first half due partly to the sluggish market and market share decline. However, as you can see by the line graph below, we were able to expand NHPP sales as planned in regions other than China and we were able to achieve year-on-year growth on a global basis. In the second half, we'll continue to expand NHPP by acquiring new model deals for color and design films particularly in the fourth quarter and increasing market share for HUDs. For price hikes, our focus will mainly be on the non-NHPP products for margin enhancement. In addition, we aim to turn aerospace into a profit-making business in the second half by reforming its portfolio, improving sales prices, and increasing productivity. Although it's not slated here, the mobility segment is expected to achieve a year-on-year increase in both sales and profits in the first and second halves of the year and to set a new record high profit for two consecutive years. Finally, the industrial field at top rate. In addition to the demand recovery for construction and consumer goods in the U.S. and Japan, the improved sales prices also contributed to higher sales and profits in the first half. In the second half, we plan to achieve sales and profit growth with improved sales prices and by managing fixed costs. As you can see in the graph below, sales of labor-saving and grain products such as insulation materials, long-length craft tape through packaging machines, and blow-multiproducts have also been growing year-on-year since the fourth quarter of FY23 and will continue to focus on expanding sales of these products. NFY24 will continue to drive the entire company forward with the OP target of 59.1 billion yen, renewing the record high profit for two consecutive years. Thank you for your attention.

Yes, this is Yoshida speaking. Let me give you the overview of the housing company. First, on page 20, this is a summary of the first half and revised plan for the second half. In the first half, sales declined due to a drop in number of houses sold. However, OP increased due to the measures to enhance profitability and expansion of the stock and town and community development business, surpassing the July forecast. Now, our second half plan. The number of houses sold is expected to remain unchanged from the previous year, and OP is expected to grow due to measures to enhance profitability and expansion of the stock business and town and community development business. Next is page 21, analysis of our first half performance. As shown in the lower left, Net sales increased in the renovation business by strengthening the sales force, however declined in the housing business, resulting in an overall decrease of 11.2 billion yen in net sales. On the right side, change in operating income. For the housing business, the impact of the drop in the number of houses sold was offset by improving the product mix and cost reduction, including fixed cost and higher unit price, resulting in an increase of 1.2 billion yen. the number of houses sold decreased by 405 units year on year. However, this was due to the impact of lower orders in the second half of last year, as well as the avoidance of a concentration of completions and sales at the end of the fiscal year and securing of an optimal construction period. This resulted in a better than expected increase in income as a result of loss cost containment. In addition, as I will explain later, we've secured order backlog for the second half and beyond. In the renovation business, income exceeded the forecast and overall income was 14.6 billion yen, which is 1.1 billion yen higher than the July forecast. Slide 22. Next is the analysis of the second half performance. The bottom left, net sales. Housing business plans to maintain the number of houses sold at the same level as the previous year. And renovation and other segment expect an increase in the sales and plan an overall increase of 8.1 billion yen year on year to 273 billion yen. Operating income on the right. is expected to increase by 1.7 billion yen to 16.5 billion yen which with higher income in each segment by business segment the housing business plans to increase op by 400 million yen by improving the product mix and cost reduction and by reducing fixed cost through measures to enhance profitability despite sharp rise in the price of materials the renovation business we plan to increase op by 600 million yen by enhancing periodic diagnosis and strengthening proposals in another business. We expect increased income by 700 million yen by expanding the town and community development business. Page 23, the status of each business segment. Now, in the first half of the year, new housing orders were firm in urban areas but struggled in rural areas, and the number of houses built was flat to the previous year. On the other hand, the order was 107% to the previous year's level due to an improvement in the product mix. In the second half, we expect market condition to be on par with the first half, and we plan to achieve the same growth rate as in the first half of the year. Following table shows year-on-year changes in order value and number of houses by building type. The detached housing business, the number of ready-built houses is decreasing, but the number and amount of orders are being covered by the housing and rebuilding. The housing complex business continues to be strong. Below is the balance of orders at the end of the fiscal year. As I explained earlier, the first half saw order increase, efforts were made to optimize the construction period, and we didn't force ourselves to book sales at the end of September. As a result, it increased by ¥18 billion year-on-year in the first half. In the second half of the year, we'll continue to increase the order backlog for the following year to achieve our profit plan and lead into the next fiscal year. In the renovation business to the right, we'll continue to strengthen our sales structure and enhance periodic diagnosis in order to increase orders. As we announced in a press release on October 21st, we acquired renovation company in Hokkaido. Through these measures, we intend to accelerate the enforcement of external renovation sales. In the real estate business to the bottom left-hand side, we'll continue to expand our rental management brokerage business, which is our foundation, while strengthening the buyback and resale and the asset utilization business. Lastly, with regard to the measures to enhance profitability, the effect of shifting personnel to gross areas have been well realized, and the results are generally in line with our goals. In the future, we'll continue to strategically develop and introduce new products, which will also have a positive effect on marginal profit. This concludes my presentation of the housing company.

I am Yoshio Kihirai, Company President of Urban Infrastructure and Environmental Products Company, or UIEP. I'd like to start on page 25 with a summary of the first half results and the revised plan for the second half. In the first half, the housing market was sluggish, but the non-residential market was on a recovery trend. The increase in total costs, including raw materials, logistics, and wages, were offset by price hikes and fixed cost cuts, and we were able to achieve higher sales and profits, with net sales of 113.4 billion and OP of 8.5 billion yen. In the second half, we do not expect any material changes in the market, and hence will continue to focus on dealing with rising total costs, as we did in the first half, projecting sales and profit growth, with net sales of 132.8 billion an OP of 15.9 billion yen. If we deliver, the full-year OP would be 24.4 billion yen, marking the third consecutive year of record high profit, with an operating margin of 9.9%. However, we'll continue to strive towards achieving 10% until the very end of the year. Next on page 26 is the analysis of the first half results. As indicated on the left, net sales were up by 3.8 billion yen a year to 113.4 billion yen. In Japan, sales of prioritized products grew significantly, mainly in the non-residential field. Overseas, sales of piping materials for plants struggled due to weaker capex demand in China and South Korea, but sales of pipeline renewal and FFU were solid. On the right is the analysis of LP, which grew year-on-year by 0.4 billion to 8.5 billion yen. The chart indicates a negative 0.2 billion yen impact from sales volume and product mix, but this reflects 0.6 billion yen rise in logistics, so the actual volume and mix impact was positive 0.4 billion yen. Price-like requests mainly for the PVC products were made in Q1, and by the end of the first half, we had largely completed the price negotiations and price revisions. That, and with control over fixed costs, we exceeded the July guidance for the first half as a whole. Next on page 27 is the analysis on the second half outlook. As shown by the left graph, we projected growth in net sales by 7.5 billion yen year-on-year to 132.8 billion yen. In Japan, we expect the recovery trend from the first half in the non-residential market to continue. However, there is a risk of delays in construction projects due to a chronic shortage of manpower. We expect a slowdown in the housing market compared to our April plan, but aim to offset this by growing sales of our prioritized products and by keeping the revised sales process achieved in the first half. Overseas, we expect a continued stagnation in the capex demand related to plant piping, particularly in China, but will focus on acquiring new orders for CPVC, pipeline renewal, and FFU business. Next, the analysis of OP is shown on the right. Despite the challenging environment in the housing and overseas plant piping business, we project a positive impact of 0.9 billion yen from volume and mix, and we plan to cover the increase in total costs, including raw materials, which has continued since the first half, by maintaining the improved prices. The OP is expected to go up by 1.8 billion to 15.9 billion yen, Lastly, on page 28, I'll cover the three strategic fields. For the pipe system shown at the top left, sales have been growing each quarter. For the piping materials business, as housing related money sluggish, we'll focus on expanding sales of priority products in the non-residential market, which is on a recovery trend, as well as on securing margins. For CPVC, the recovery in our main market, India, was slow in the first half, but we expect improvement from the third quarter. Sales of building and infrastructure composite materials shown at top right have also been on the rise since Q2. For the fire-resistant and non-flammable materials, we focus on expanding new product sales and developing new applications overseas. For the FWU business, we will strive to improve the productivity at our European plant and aim to expand the adoption overseas as well by sleepers. For the fabricated buff, we'll aim to capture the nursing care-related demand, which was strong in the first half, and renovation demand, including high-end specifications. Infrastructure renovation, as shown in the lower left, is showing trend of sales growth each quarter. A resistive demand for pipeline renewal will make up for the decline in domestic demand. and in the aquasystem business, in addition to large-scale order for plant equipment facilities, sales of water storage panel tanks are also expected to remain strong thanks to improvement in selling prices and capturing of new renewable demand. The growth opportunities are illustrated at bottom right. We expect to see significant growth in our prioritized product sales, driven by fire-resistant materials, PE pipes and other functional construction piping materials that contribute to labor-saving installment and improve seismic resistance among others. We also expect sales growth overseas, mainly of CPVC and pipeline renewal in Asia and FFU in Europe. The sales of the gross driving business are also indicated on the slide. That concludes my explanation. Thank you very much for your attention.

I am Takahashi, President of Sekisui Medical. I would like to take you through our medical business. Page 30 shows business performance. The medical business achieved the record profit in FY2022. However, last year, FY2023, OP declined from the previous year to 11 billion yen due to the significant impact of lower sales of infectious disease testing kit caused by the special factors in the US and other factors. For the current fiscal year, we are forecasting OP of 12.6 billion yen, the highest ever record. In the first half, sales expansion of infectious disease testing kit, including COVID-19 test kit in the U.S., where sales had been delayed, led to 47.9 billion yen revenue result and OP of 6 billion yen, a record high for the first half of a year and exceeding the July forecast as well. As for the revised plan for the second half, we'll continue to capture the demand for testing including infectious disease both in Japan and overseas. And we aim to achieve net sales of 55 billion yen and OP of 7.3 billion yen by focusing on sales of new APIs. By doing so, we aim to realize record high operating profit of 13.3 billion yen which is higher than the initial plan. Next, page 31, analysis of the first half result. To the left, you see sales. Sales was 47.9 billion yen, an increase of 4.2 billion yen year-on-year, and OP increased by 0.8 billion yen to 6 billion yen. In the diagnostics business, despite the impact of lower demand for testing due to the national policies in China, sales of COVID-19 test kit which had been delayed in the US expanded and sales of influenza test kit remained strong as the stagnation of shipment due to a cyber attack on the influential distributor was resolved. Sales and profit increased year on year, partly due to fixed cost reductions, and the profit turned out to be better than the July forecast. I'll now explain the revised plan for the second half on page 32. To the left, sales. We are forecasting net sales of 55 billion yen up by 6 billion yen from the previous year, OP of 7.3 billion yen up by 1.5 billion yen. Although we expect a postponement of development costs from the first half, and an increase in fixed costs mainly due to increased production of infectious disease test kits in the U.S., we'll continue to focus on expanding sales of infectious disease test kits in the U.S. and Europe, and to steadily capture domestic and overseas testing demand and expand sales of new APIs, aiming to achieve record high income for the full fiscal year. Page 33 explains status of each business. First of all, left top hand side, let's look at the domestic diagnostic business. In the first half, we steadily captured strong demand for testing. In the second half, we continued to capture testing demand mainly for immunology and infectious disease testing. Next is the overseas diagnostics business in the upper right corner. Although the first half saw a decline in demand for testing in China, sales of influenza test kits remained strong due to the expanded sales of COVID-19 test kits in the U.S., as well as the elimination of shipment stagnation caused by cyber attacks on leading distributors. In the second half, we expect sales of COVID-19 test kits to major pharmacies in the U.S. to contribute to our business performance and will continue to expand the sales of infectious disease testing kit and implement initiatives such as getting sales back on track in China. Finally, to the left bottom-hand side, medical business. In the first half, the contract manufacturing of API was affected by production adjustment of mainstay products, but contract testing for drug discovery support remained strong, and sales of reagent expanded due to the public funding of expanded newborn mass screening. In the second half, we'll continue to focus on capturing new orders. In addition, we've been making preparations for CDMO business expansion at our plant in the UK, including construction of a new purification room, which is scheduled to start operation in March 2025. With this, we are able to establish production system fully compliant with GMP. Thank you very much. That's all for medical business.