Sekisui Chemical Co

Thank you very much for taking the time to join us today despite your busy schedule. My name is Shimizu, and I assumed the position of President and CEO in March this year. Let me express my sincere appreciation for your continued support. On page one, I will begin by uplining today's main points, focusing in particular on the messages we would like to emphasize. First, the results for FY2025. In FY25, net sales increased about 11.5 billion yen, reaching 1,309.3 billion yen. Operating profit was significantly impacted by weak market conditions both in Japan and overseas, resulting in 106.5 billion yen. However, we continued our efforts to shift toward high-value added products and made steady progress. Ordinary profit increased to 117.2 billion yen, supported largely by FX gains, and net profit was 75.2 billion yen, primarily due to impairment losses. ROE marked 9.1%. Regarding approved sky solar cell business, which I will explain in more detail later, preparations for future growth are progressing steadily. For FY2026, we are projecting growth for both net sales and operating profit. While the market environment remains challenging, we set the OP target at 115 billion yen, striving to achieve this goal one year behind our original timeline in the mid-term plan. We will continue to shift toward high-value-added products and accelerate growth. We forecast net profit of 76 billion yen and ROE of 9%. The impact of the Middle East situation has not been factored into our plan, and we will explain our approach later. Turning to shareholder returns, as announced in January, we set the year-end dividend at 40 yen per share, delivering an annual dividend of 80 yen per share. For FR26, we plan to increase the annual dividend by 1 yen to 81 yen per share, marking the 17th consecutive year of dividend hikes. On share buybacks, we conducted an additional buyback in the second half of FY25, repurchasing 14 million shares. As a result, the total return ratio reached 92%. For FY26, we have set a buyback program of 4 million shares or up to 12 billion yen. Page 2 illustrates our track record of shareholder returns as well as our plan for FY26, so please have a closer look at your convenient time. As we define our shareholder return policy for each midterm plan, we will explain the new policy in May together with the announcement of the new midterm management plan. In FY26, we will remain committed to both profit growth and dividend hikes, and we aim to achieve 17th consecutive year of dividend growth. We will continue our proactive shareholder returns. Turning to page 3, I would also like to mention our perovskite solar cell business, which is positioned as a key growth opportunity. We recently announced the launch of this business, having established the manufacturing technology for one meter wide panels using existing production equipment, as well as the installation specifications tailored for metal rooftops. We have begun concrete discussions with municipalities and business operators listed here regarding product supply. While production will be capacity, we will prioritize expanding supply capacity through the launch of a 100 megawatts production line in FY2027. That concludes my presentation. Thank you very much. Yes, my name is Nishida. I will now explain the results for FY25 and the plan for FY26. The actual foreign exchange rates were as shown on page 4. Page 5 shows an overview of FR25 results. As Mr. Simmons explained earlier, both net sales and ordinary profit reached record highs. Operating profit was 106.5 billion yen, slightly below both the previous year and their January forecast. Ordinary profit increased due largely to FX gains, while net income declined due to the impairment losses. Both profit items exceeded the forecast, mainly due to higher FX gains. Page 6 shows net sales and operating profit by segment. Housing and UIEP recorded profit growth, but this was not sufficient to offset declines in HPP and medical, resulting in growth in net sales but a decline in profit on a consolidated basis. Compared with your January forecast, the impact of sluggish market hit hard, particularly on the industrial field of HPP, resulting in shortfall vis-a-vis the guidance on a group-wide basis. I'll explain the details of each segment later. In another segment, as shown in the breakdown, we continue to invest in next-generation businesses such as perovskite solar cells. Page 7 shows the first half and the second half results by segment. In the second half, all segments achieved OPU growth compared to the first half. On a year-on-year basis, the housing segment made a significant contribution to profit growth with record high profit. Next, page 8 shows the FY25 results analysis. On the left, net sales increased by 11.5 billion yen year-on-year. On the right, OP was significantly impacted by volume and mix falling well below the forecast, which could not be fully offset by fixed cost reductions, resulting in a decrease of 1.5 billion yen year-on-year. In the second half, we secured profit growth owing to improved spreads between selling prices and raw material costs. Page 9 shows a plan for FY26. The FX assumptions are as stated. The FY26 plan does not reflect the impact of the worsening Middle East situation, and I will explain this impact separately later. Page 10 illustrates the earnings guidance and shareholder returns for FY26. As mentioned earlier, the plan calls for growth in net sales and OPs. Ordinary profit is expected to decline due to the absence of FX gains recorded in the previous year. We plan to raise the annual dividend by 1 yen to 81 yen per share, marking the 17th consecutive year of dividend hike. We have also set a share buyback program of 4 million shares and will cancel 25 million shares of Treasury stocks to minimize the holding of Treasury stocks. Page 11 explains the impact of deteriorating situation in the Middle East. In terms of challenges for procuring raw materials and components, we expect the impact in the first quarter to be minimal. Regarding rising prices of raw materials and components, we estimate an impact of approximately 14 billion yen in the first half, but in principle, we will fully pass on these costs through pricing. The status of selling price pass-through initiatives is shown on the right. In sum, the business plan we present today does not reflect the impact of the worsening Middle East situation, and we will update your outlook on the impact on a quarterly basis going forward.

Page 12 shows the outlook for market conditions. The global automobile production volume in the upper left trended slightly below our expectations in the fourth quarter of FY25. For FY26, we expect the volume to be at the same level as the previous year. The smartphone shipment at the bottom left was slightly below the previous year's level in the Q4 of FY25 as expected. We believe this continues through FY26. Regarding the number of visitors who hold housing at the top right, in the second half of FY25, it fell below the previous year. For the full year of FY26, we assume it will be flat to the previous year. Below that is new housing starts. We expect a slight recovery in FY26 YOY, but the long-term gradual downward trend is unlikely to change. For the domestic next up price at the bottom right, our plan assumes 65,000 yen without factoring in the impact of the projected rise due to the worsening condition in the Middle East. We will pass through cost if raw material procurement prices rise. Page 13 shows the FI26 plan by segment. The OP is set at 115 billion yen with all four segments expected to achieve higher sales and profit aiming for record high profits. At the company-wide level, as well as in the HPP and UIEP segment, we will launch the ProvoSkyte solar cells business and will focus on development for further growth. Page 14 shows FI26 blind buy segment, first half and second half. We aim to achieve higher sales and profit across all segments and company-wide in both first half and second half, with all segments to reach record high profit in the second half. Page 15 shows FI26 plan analysis. Net sales are planned at ¥1,408.4 billion, up by ¥91.1 billion. The right is OP. We aim to secure profit growth through sales volume and product mix, mainly in HPP and housing. While we anticipate increase in fixed costs such as labor, we plan for an 8.5 billion yen increase in OP by securing spread, cost reduction, and favorable forex. Page 16 shows trend in consolidated performance. In FY26, we return to an OP growth trend and reach record high. For EBITDA, we expect to reach a record high in FI26 following the record set in FI25. ROE for FI26, we expect it to remain flat due to the worsening of non-operating income and expenses such as forex gains and losses, but we will continue to work on improving capital efficiency. Next, I will explain FI25 financial results. Page 18 shows the changes in consolidated subsidiaries and their impact on financial figures. Regarding a consolidated P&L on page 19, I will explain items from ordinary profit downwards. Ordinary profit was 117.2 billion yen, up by 6.3 billion yen. The result was stronger year-on-year than operating profit, mainly due to improvements in equity earnings and forex gains from the weaker yen. The year-on-year difference in FX gains and losses was due to the yen weakening by about 10 yen against the U.S. dollar from the beginning to the end of FY25. In both fiscal years, we recorded over 14 billion yen in losses. gain on sale of investment securities as extraordinary income following the reduction of strategic shareholders. Major extraordinary losses in FY25 included ¥14.9 billion related to the completion of the demonstration and withdrawal of Sekisui Bio Refinery and ¥6.3 billion due to the revision of future plans for the diagnostics business in the U.S. and the pharmaceutical enzyme business in the U.K. and net income decreased by 6.8 billion yen to 75.2 billion yen. Next is the balance sheet on page 20. Total assets grew by 97.1 billion yen, but excluding impacts from forex and new consolidations, the increase was 35.7 billion yen. Inventories increased by 40.1 billion yen, with a 30.5 billion yen increase in the housing segment. On actual basis, excluding new consolidations, the increase was 19.3 billion yen due to the expansion of land inventory for sale and the progress of the town and community development business. Inventories other than housing remained almost flat, excluding FX impact. The breakdown of 58.7 billion yen increase in property, plant and equipment is as shown, including a 34.2 billion yen increase at 6 solar film where the Sakai plant is under construction. Now moving on to page 21. Net interest bearing liability grew by 79.3 billion yen to 47.6 billion yen. The combined increase in retained earnings and treasury shares was a slight 4.8 billion yen, but net asset increased by 45.8 billion yen due to other factors. The 29.9 billion yen increase in forex translation adjustment was due to the increase in the yen-based net asset of overseas subsidiary as yen weakened. The 12.7 billion yen increase in remeasurements of the defined benefit plans was due to an improvement in the net defined benefit asset liability driven by a higher discount rate following rising interest rates as well as improved pension investment yields. ROE equity to asset ratio and DE ratio are shown here. ROE dropped by 1.2 points due to the decline in profit and increase in net sales mentioned earlier. Page 22 shows the consolidated cash flow. Cash flows from operating activities was 78.3 billion yen down by 40.9 billion yen year on year. While cashing from profit increased slightly, there was an increase in working capital due to the rise in inventory in the housing business, a decrease in advances received and shorter payment terms. In investing activities, CapEx payments were 112.9 billion yen, while there was 17.1 billion yen in proceeds from sale of investment securities and 21.6 billion yen in proceeds from subsidies for capital expenditures. Free cash flow, including dividend payment, was a cash outflow of 26.4 billion yen. This combined with a 36.4 billion yen outflow for share buybacks led to an increase in net interest-bearing debt. Page 23 shows depreciation capex and EBITDA bisegment. We are taking an active approach to capital expenditures, which in FY25 reached about 1.6 times the amount of depreciation. EBITDA, the source of funds, increased by 2.9 billion yen to reach a record high. Page 24 shows plans for depreciation capital expenditures R&D expenses. We plan for capex of 110 billion yen in FY26, up by nearly 20%, including continued investment in the solar film Sakai plant.

That's all from me. Yes, my name is Asano from High Performance Plastics Company. This page illustrates the performance trends of our company since FY2016. For the mobility field in FY25, despite the slowdown in the auto market impacted by the weak EV growth, net sales increased year-on-year driven by steady growth in high-performance interlayer films and securing business on the back of strong semiconductor-related demand. However, profit was down due to the one-off costs related to raw materials. In FY26, while considerable uncertainty will remain in the global market, we will continue to focus on expanding sales of high-performance products in each strategic field, aiming for growth in net sales and profit and renew the previous record highs. Next, on page 27, the analysis of the FY25 results. Although EV growth slowed in the automotive market, interlayer films for head-up display applications remained firm, and together with strong demand growth in aircraft and semiconductor-related applications, volume and mix in mobility and electronics increased year on year. On the other hand, for general-purpose products both in Japan and overseas, weak global market conditions led to volume decline, particularly for consumer-related products. Furthermore, despite the greater fixed cost reduction against the January forecast, companies posted sales growth but profit decline year-on-year. Such as development initiatives have weighed on, resulting in higher net sales but lower profit worldwide. However, excluding the one-off costs related to raw materials in practice, we achieved our near-profit growth, which leads us to believe that the underlying business is growing steadily. Next on page 28, the plan for FY26. Global market conditions are expected to remain highly uncertain this year. That said, we will continue to focus on expanding sales of high-performance and strategic products across each strategic field to improve volume and mix across all segments, while offsetting higher fixed costs through CR initiatives and FX gains, thereby aiming for higher net sales and profit year-on-year and achieving new record highs. Lastly, I will explain the status of the three strategic fields using page 29. In electronics, the smartphone production units is expected to decline due to the shortage of memory. But for the display market, given the shift to larger screen sizes, we expect the market to be firm. And for the chip market, we expect the market to expand further, driven particularly by strong demand for AI servers. We will accelerate our efforts to acquire new customers and expand the applications in this field. In mobility, although the auto market is expected to remain sluggish, the number of vehicles adopting head-up displays continues to increase, and we will strive to steadily capture the associated demand growth while also expanding into new areas such as recovering aircraft demand and growing drone markets. In the industrial segment, while demand for consumer-related products is expected to recover from the second half onward, we will particularly focus on expanding strategic products such as sensor businesses addressing labor shortages and care materials with antibacterial and anti-allergy functions, as well as further promote labor-saving and environmentally friendly products. This concludes my part on HPP. Thank you very much.

I am Yoshida from Housing Company. Now, please refer to page 31. Let me start with the review of our business performance. In FY25, although the slump in new housing market continued due to rising prices and interest rates, urban areas remained relatively steady, leading to growth in apartment buildings and high-end detached houses. Orders in the renovation business expanded, resulting in net sales of 536.2 billion yen and OP of 37.2 billion yen for the entire company, achieving an increase in net sales and a substantial increase in OP. We believe profitability has improved, allowing us to return to a stable growth trajectory. For FI26, while we do not expect a recovery in new housing market conditions, we aim for a P of 40 billion yen, marking the third consecutive year of profit growth by strengthening our product strategy to increase sales volume and through growth in the renovation and residential businesses. Next, please see page 32 for the FI25 result analysis. Regarding the net sales in the graph on the left, we achieved sales growth in the housing renovation and residential segments, resulting in a total increase of 12.2 billion yen for the housing company. Next on the right is the analysis of OP. In the housing business, although the number of units sold decreased by 265 units YOY, OP increased by 2.2 billion yen as unit prices rose through expanded sales of high-value added products. In the renovation business, marginal profit increased due to strengthened sales capabilities, leading to a 2.6 billion yen profit increase. Next, let's look at the FI26 plan on page 33. Regarding net sales to the left, we are planning a 45.8 billion yen increase for the entire housing company with continued sales growth across all segments, housing renovation and residential. In the housing business, we expect to see contributions from architect planning, which will be consolidated starting this fiscal year. Next on the right is Opie. In the housing business, despite anticipated impacts from rising components prices and higher fixed cost for strengthening our structure, we plan for 1.7 billion yen profit increase offset by higher sales volume and an improved product mix, particularly in the second half, alongside the effect of new consolidation. The renovation and residential businesses are also planned to achieve profit increase by offsetting fixed cost growth with marginal profit. The other decrease of 0.5 billion yen is due to the impact of establishing a new company in Canada. For the entire housing company, we plan an OP of 40 billion yen, an increase of 2.8 billion yen. Finally, page 34 for the status of each business. To the left, top-hand side, is new housing orders. In FY25, both order value and number of units slightly exceeded the January forecast, with the order value growing to 104% in the second half. As shown in the type of construction breakdown in the middle, apartment buildings remained steady in both units and value, contributing to the increase in unit prices. In FI26, while we do not anticipate a market recovery, we plan to increase order value by targeting a recovery in detached houses, particularly in rural areas. One of the measures for this is the product strategy described on the right. To meet the needs of each area, we'll strengthen our product lineup across a wide range of price points. Following the launch of the high-end Elvia last October, we launched a ground-to-you FR this month, our lowest-priced two-story product. We aim to increase the number of orders by expanding sales, particularly for subdivision lots in rural areas. Next, regarding the new renovation business at the bottom left, orders expanded in FY25 due to growth in the large-scale renovation projects. In FY26, we'll continue to aim for further growth by expanding internal sales renovation based on periodic inspections and strengthening the structure for external sales renovation. To the right is the residential business. In the real estate business, the number of rental units under management increased steadily, and the purchase and resale business also grew. The effects of consolidating Ben House since January are emerging and will accelerate growth in FY26. Lastly, in the town and community development business, although net sales decreased in FI25 due to a gap between condominium completions, we expect a substantial increase in FI26 as the number of completed projects rises. We'll also proactively continue to prepare for new projects. That concludes my presentation for the housing company.

Yes, my name is Hirai from UIEP. I will start my presentation. Page 36 shows the performance trends. In FY25, net sales were 240.4 billion yen, with OP of 23.2 billion and operating margin of 9.7%. While weak market conditions persisted, net sales remained flat over the last year, and we secured profit growth by maintaining spreads, achieving a fourth consecutive year of record high OP. For FY26, we are projecting net sales of 255.4 billion yen and operating profit of 25 billion, driven by growth in overseas sales, expansion of prioritized products, and continued spread management. Page 37 shows the analysis of performance in FY25. Net sales were in line with the previous year, and OP increased by 0.3 billion yen. Looking closely at the analysis of OP on the right, volume and mix factor had significant negative impact compared to the previous year. While positive growth derived from pipeline renewal and performance material, shortages of labor and strict overtime regulations in the construction industry extended project timelines and declines in CPVC in India impacted negatively. However, this was offset by spread expansion mainly in domestic operations. On the other hand, the expected recovery in the Indian market did not materialize in Q4, and results unfortunately fell below the January forecast. Page 38 shows the FY26 plan. We are guiding for net sales growth of 15 billion and OP growth of 1.8 billion yen. Referring to the OP analysis on the right, the expected fixed cost increase due to investments in human capital and capacity expansion will be offset by significant increases in volume and mix, mainly in pipeline renewal and performance materials, as well as by securing margins focusing on piping materials. We aim to achieve fifth consecutive year of record high profits. Currently, due to the worsening situation in the Middle East, we are hearing supply concerns and price hike requests from suppliers. Regarding supply, we are evaluating alternative raw materials in case procurement of existing materials becomes unstable. To deal with price hikes, we will pass them on promptly without delay. Page 39 outlines the status of the three strategic fields. First, the pipe systems at upper left. The plan calls for growth in net sales in both the first and the second halves. Market conditions for pipe products are expected to remain intact and will focus on expanding prioritized products and securing margins. For CPVC, we'll focus on expanding new compound products and broadening sales areas. Next, the building and infrastructure composite materials at upper right. We also project sales growth in both the first and the second halves. For fire-resistant and non-flammable materials, we'll accelerate sales growth by expanding applications, and for FFU, we will strive to expand adoption not only in Europe but also in the U.S. The lower left shows infrastructure renovation, where we also plan for growth in both halves. and aqua systems sales decline will be covered by pipe renewal. For pipe renewal business in Japan, we will capture renewal demand based on the nationwide surveys, and overseas we will focus on acquiring new orders through strengthening marketing. For aqua systems, although sales is expected to decline due to delay in large plant capex, we will step up the effort to grow the sales of water storage panel tanks and capture renewal demand. In the growth areas indicated at lower right, we will expand sales of prioritized products, particularly fire-resistant materials in pipe renewal. For overseas sales by region, we will drive solid growth in each area focusing on CPVC, pipeline renewal, and FFU. Sales and growth driving businesses were somewhat sluggish in FY25, but will return to a growth trajectory in FY26. This concludes my presentation. Thank you very much.

I am Yamashita. I will now explain the medical business. I will begin with the review of business performance on page 41. In FY25, due to a decrease in the demand for infectious disease testing kits in the U.S. and the impact of the market slump in China, net sales were 93.7 billion yen and OP was 11.1 billion yen. resulting in a decrease in both sales and profit. For FY26, while we anticipate a difficult market condition for overseas diagnostics to continue, we plan to increase net sales to 97.3 billion yen and OP to 12 billion yen by strengthening new customer acquisition in domestic diagnostics and the pharmaceutical science businesses, as well as improving profitability. Next is page 42 for FI25 result analysis. As shown in the bar chart on the left, net sales were 93.7 billion yen, a decrease of 5.5 billion yen year-on-year. Furthermore, as indicated in parentheses, net sales excluding infectious disease kit decreased by 1.7 billion yen, OP on the right was 11.1 billion yen, a decrease of 1.7 billion yen from the previous year. In the overseas diagnostics business in the U.S., the early end of the infectious disease outbreak led to a significant drop in demand for testing kits, while the market slump in China caused by medical cost containment measures also continued. Despite substantial and earlier than planned fixed cost reductions, including the consolidations of operations in the U.S. and China, results fell short of the January forecast, ending in a drop in both sales and profit. Next, I'll explain the overview of the FI26 plan on page 43, as shown in the bar chart on the left. We are planning for net sales of 97.3 billion yen, including forex impact, which is an increase of 3.6 billion yen from the previous year. OP on the right is planned at 12 billion yen, up by 0.9 billion yen from the previous year. While difficult market conditions will persist in overseas diagnostics, especially in China, we aim to increase both sales and profit by expanding our market share through new product sales in domestic diagnostics, securing new projects in the pharmaceutical sciences business, and continuing to drive profitability improvement. Finally, page 44 shows the status of each business. First, for the domestic diagnostic business at the top left, we successfully captured immunology testing demand in FY25 and work to increase our market share. FY26 will expand our market share by promoting the sales of new product. For overseas domestic diagnostic on the right, net sales decreased significantly FY25 due to the drop in infectious disease demand in the U.S. and ongoing impact of China's medical cost containment measures. Although difficult market conditions will continue in FY26 will promote sales of Chinese blood coagulation devices launched in China in the second half of FY25. Regarding the pharmaceutical science business, at the bottom left, the drug development solutions business performed steadily in FY25, will continue to focus on securing orders for new projects in FY26. Lastly, at the bottom right is the sales trend for infectious disease testing kit. In FI25, demand decreased significantly due to the early end of the infectious disease outbreak. We expect demand to remain difficult in FI26 to be flat with FI25, but we plan to increase sales through the sales of new genetic testing kits. That's all from me.