Sekisui Chemical Co

Yes, thank you for taking time out of your busy schedule to join us today. Also, I will begin my presentation. Page 1 shows the currency assumption. In Q3, the yen was 6 yen weaker than expected at 154 yen against the dollar. For Q4, the revised October plan called for 148 yen, but we revised the assumption to 156 yen in the current forecast. As stated, the sensitivity to FX is an uplift of 500 million yen in OP for every 1 yen depreciation against the U.S. dollar. On page 2, the left half of the table shows the Q3 results. Net sales increased to 330.1 billion yen, reaching a new record high. The blue asterisks indicate record highs. Operating profit was 27.5 billion yen, and ordinary profit was 31.8 billion yen, both declining year on year. Although we do not disclose the plan by quarter, The results were generally in line with our internal plan. Net profit decreased partly due to the impairment loss of 14.9 billion yen. This was booked in the biorefinery business for the dismantling of the Kuji plant in Iwate after completing the demonstration experiments as scheduled. We set up an additional share buyback program of 10 million shares for 30 billion yen for the second half of this fiscal year. As of Q3, we made progress as described on the page and will continue in order to complete the 14 million share buyback for the full year. Next, page 3 shows the results by segment. The left table illustrates that the Q3 net sales and OP grew in HPP and housing out of the four segments. We do not disclose the quarterly plans, but the two segments are performing slightly better than planned. However, it was not enough to offset the decline in UREP, medical, and other segments, and resulted in sales growth but profit decline on consolidated basis. The right table shows the results from Q1 to Q3. In HPP, the impact of the one-time charge of roughly 2 billion yen recorded in the first half remained. The breakdown of the other segment is also shared on the slide. The perovskite solar cell business is progressing as planned. Page 4 is the market outlook. The automobile production in Q3 was slightly higher than expected, but remained below the previous year. We expect similar trending Q4 and year-on-year decline. Bottom left, smartphone shipments were slightly above the forecast in Q3, but are expected to slow down year on year in Q4. Top right is the trend of visitors for housing. The exhibition visitors have dropped significantly, and overall customer traffic was also below last year's level. We expect Q4 to be sluggish as well. Below that is the new housing starts, which are expected to remain weak. Bottom right, domestic NAFTA price is generally in line with the October forecast and is expected to remain unchanged in Q4. Page 5 is the forecast for the second half. As shown at the bottom of the table, we are guiding for consolidated net sales of 698.1 bn yen up 29.4 bn euro on-year, an operating profit of 64.6 billion yen, up 5.3 billion from the previous year. By segment, we expect sales to grow in all segments except for medical, and OP to increase in all segments. The right side of the table shows the comparison with the October plan. Sales are expected to exceed the plan, but OP will be in line. With UIEP being slightly challenged by the sluggish domestic and overseas market, we plan to offset that with other segments on a consolidated basis. Page six is a guidance breakdown by quarter. In Q4, as indicated on the right, we expect growth in net sales and OP in all four segments and on consolidated basis. Compared against the bi-segment forecast, we expect Q4 to be generally in line with the October plan on a consolidated basis, despite some shipment timing issues, some being pushed forward from Q4 to Q3, and vice versa. Page 7 is the forecast analysis for the second half. On the left, net sales are expected to be 698.1 billion yen, up by 29.4 billion year-on-year. On the right is the OP waterfall chart. We expect a 6.4 billion yen year-on-year improvement stemming from the volume and mix factor. However, due to the weakness in the domestic and overseas markets, the positive impact will be smaller than the October forecast. With better raw material prices, fixed cost savings, and positive FX benefit, we expect an year-on-year OP growth of 5.3 billion yen in total. Page 8 shows the full-year forecast for FY25 by segment. As you can see in the middle column, we expect growth in both sales and OP in the three segments excluding medical as well as on a group-wide basis. Net sales are expected to grow by 30.1 billion yen on year to 1,327.9 billion yen, with OP of 110 billion up by 2 billion yen from the previous year. Both sales and OP are expected to reach new record highs. By segment, we expect a significant profit growth in housing. As explained earlier, we revised the October forecast for UIEP to reflect the impact of market conditions, yet we still expect the profit to grow year over year. Page 9 is the earnings forecast and dividend outlook for FY25. We predict net sales to grow to 1,327.9 billion yen. Both operating and ordinary profits are expected to increase to 110 billion and 112 billion yen respectively. Net sales, OP, and ordinary profit would all reach new record highs. Net profit is expected to be 72 billion yen, also in line with the October plan. We plan to pay an annual dividend of 80 yen per share up by 1 yen from last fiscal year to achieve 16th consecutive year of dividend hike. Page 10 illustrates the consolidated performance. EBITDA shown at the top is projected to reach 168.6 billion yen for FY25, which would also be a fresh new high. As noted in the comments, we have achieved steady growth despite changes in the external environment. Although we would be short of the targets of the medium-term plan, we are making steady progress in preparing for the next medium-term plan starting next fiscal year. From page 11 onward, I will go through the segment details. First, the analysis of the second half outlook for HPP. As indicated on the left, net sales is expected to grow by 17.8 billion yen or near to 244.1 billion yen. Looking at the OP waterfall chart on the right, the volume and mix factor will have a positive impact of 4.5 billion yen from last year, and despite being smaller than planned, we would still enjoy year-on-year improvement. The improvement in raw material prices and lower fixed costs also contribute to the OP growth of 2.1 billion yen as planned. As shown in the bar graph below, we aim to achieve a second half LP of 33.4 billion yen and to renew the previous record highs for the second half and the full year.

Next, on page 12, the status of three strategic fields. First, electronics. In Q3, the LCD saw steady progress in both smartphone market and panel demand for TVs and other applications. For the Q4, we anticipate a slowdown in the Chinese smartphone market. However, we'll offset this through steady growth in non-LCD primarily focused on high-performance semiconductors. Moving on to the middle section, the mobility. While the design film remains sluggish due to the partial stagnation in the EV market, we are achieving steady growth, particularly in HUD application, head-up display applications. Additionally, Sekisu Aerospace Corporation is seeing a robust production rate for aircraft and steady progress in expanding into non-aerospace applications, making better contribution to earnings. On the right, market stagnation persists, particularly in Europe and the U.S. However, we are making steady progress in securing new orders for sensors and care material products. We continue to focus on expanding sales of labor-saving, environmentally-friendly products. Page 13 is housing. On the left side, net sales is projected at 280.8 billion yen up by 10.4 billion yen year on year. Right side is the analysis of operating profit. In the housing business, although the number of houses sold is decreasing, we anticipate increased profit due to improved mix. The renovation business is also steadily expanding its order intake. For the company total show on the far right, we project a significant increase of 3.8 billion yen in OP as planned, resulting in an OP of 20.7 billion yen. Furthermore, OP by business segment is as detailed in each respective section. Next, on page 14, the upper left shows the status of new housing orders. Due to the prolonged slump in market conditions, the number of units, particularly in regional areas, has struggled to grow. As shown in the bar graph, growth in the number of units was 95% in both third quarter and fourth quarter. On the other hand, regarding order value, driven by the expansion of high-priced detached houses and apartment buildings in urban areas as shown in the graph, we anticipate a 3% increase in both Q3 and Q4 in line with our plan. Regarding building types in the middle section, apartment buildings have shown significant growth in both the number of units and order value. Below that is the balance of orders as of the end of the period. We anticipate entering the next FY with an order backlog of 160 billion yen, same as the previous year. The renovation orders in the upper right is showing success with comprehensive proposals centered on periodic diagnostics leading to large-scale orders. Regarding the real estate business in the lower left, it's progressing steadily. Notably, Ben House, whose shares we acquired last year, will be newly consolidated starting this fourth quarter, contributing to sales and profit. In the town and community development business in the middle, we'll make steady sales of currently available inventory while further expanding purchasing routes to support new projects. The bottom right outlines the major M&A and investment announced thus far, aiming at further growth in the housing segment. While each investment is not large, we'll continue to strengthen investment in growth areas. Page 15 is UIEP Company. The bar graph on the left shows net sales at 130.5 billion yen projected to increase by 3.5 billion yen from the previous year. Next, please refer to the analysis of OP on the right. Regarding the volume mix, pipe systems has fallen significantly below October plan. This is due to continued weak domestic housing market, extended non-residential construction periods, and impact of the weak Indian market. As a result, we are revising our OP forecast from the October plan. However, we expect an increase of 1.5 billion yen year-on-year to achieve a record high OP of 15.9 billion yen. Next, page 16, three strategic fields. Top left, pipe systems is facing some challenges. Domestically, construction site delays due to labor shortage have become the norm. In India, the market downturn persists and CPVC prices are declining. And so, therefore, we are slightly struggling. And regarding CPBC, we'll continue to focus on expanding sales, including in regions outside India. Top right building and infrastructure composite materials, fire resistant and non-flammable materials are expanding new applications and performing well. FFU sleepers are also expanding, driven by increased adoption in Europe. Bottom left is infrastructure renovation. We are seeing increase in larger diameter pipeline renewal projects based on the result of nationwide surveys on aging sewer pipes. While subject to municipal budget, we aim to expand orders. Bottom right shows KPIs. Prioritized product sales are steadily expanding. For overseas sales, while India faces challenges, will drive solid growth in Europe and North America. Sales for growth-driving businesses are as stated. Page 17, finally, is the medical business. The bar graph on the left shows net sales of 50.2 billion yen with a projected year-on-year decrease of 1.1 billion yen. While challenging conditions persist in the U.S. and China for overseas diagnostics, we have accelerated profitability improvement measures, achieving greater-than-planned progress in fixed cost reduction. As shown on the far right of the table, OP is expected to increase by 100 million yen as planned, reaching 6.9 billion yen as indicated in the bar graph below. Page 18 is overview by business. Top left is diagnostics in Japan. In the third quarter, the early spread of infectious disease has driven performance to exceed plans, though this is not disclosed. In the fourth quarter, we'll continue capturing testing demand, focusing on immunology. top right, diagnostics overseas. In the third quarter, in addition to delays in the outbreak of infectious disease in the U.S., growing impact of efforts to curb healthcare costs in China affected performance. We expect market conditions in China to remain weak in the fourth quarter, but we'll focus on capturing infectious disease testing demand in the U.S. Lower left is pharmaceutical sciences. In the third quarter, our pharmaceuticals and drug development solutions made steady progress. In the fourth quarter, we'll ensure steady shipment of existing orders. Lower right is infectious disease testing kits. For the second half of this fiscal year, we expect performance to be largely in line with plans and on par with the previous year. That is all from myself. Thank you very much.