Sumitomo Chem Co Ltd Ord

Thank you for your participation. Mr. Sasaki, Managing Executive Officer, will give a briefing on the financial results for fiscal year 2023 and outlook for FY 2024. Later, he will be joined by Mr. Yamauchi, Executive Officer and General Manager of Accounting Department, to take questions. We will conclude the call at 5.20. Mr. Sasaki, over to you. Thank you. I'm Sasaki from Sumitomo Chemical. Thank you very much for attending our conference call despite your busy schedule. I'd like to thank the investors and analysts for your daily understanding and support to our management. Thank you very much for that. Now, let me start with explanation of financial results for fiscal year 2023. Please turn to slide page 4. Consolidated financial results for FY2023. Sales revenue was ¥2,446.9 billion down ¥448.4 billion year over year. Core operating income expressing recurring earnings power. Thank you very much. and our Chiba Plant Essential Chemicals Manufacturing Facilities and Ehime Plant Misayuni Manufacturing Facilities and the Singapore subsidiary MMA Manufacturing Facilities totaling 269.4 billion yen. In addition, restructuring costs of minus 48.4 billion yen including reorganization of Simitomo Pharma's North American subsidiary Sumitomo Pharma Co Ltd Keigo Sasaki, Hirokazu Murata, Koichi Ogino, Juan Ferreira and income reduction of 457.8 billion yen year on year. Finance income was 26 billion yen, a worsening of 5.2 billion yen year on year. Out of this, there was a gain on foreign currency transactions of 32.5 billion yen because of a weakening of the yen. A worsening by ¥3.3 billion year-on-year Income tax expenses was ¥2.7 billion down ¥44.4 billion year-on-year As a result, net income attributable to owners of a parent posted a loss of ¥311.8 billion The exchange rate and NAFSA price which affects our performance, the average US dollar rate during the term was 144.59 yen to a dollar and NAFSA price was 69,100 yen per kiloliter. Yen weakened and feedstock price decreased compared to the previous year. Next is the sales revenue by business segment. Sales revenue in total decreased by 448.4 billion yen year-on-year. Looking at the situation by segment, sales revenue declined in all segments. As for the year-on-year change of sales revenue, analyzing by factors, sales price went down by 143 billion yen and volume dropped 395.9 billion yen. Foreign exchange transaction variance of foreign subsidiary sales revenue increased by 90.5 billion yen. The total core operating income decreased by 241.8 billion yen year on year. Analyzing these changes by factor in terms of price, this was minus 76 billion yen in cost plus 119.5 billion yen on voucher hand. Volume variance including changes in equity in earnings of affiliates was minus 285.3 billion yen. Next, let me talk about the performance by segment. Essential chemicals and plastic segment. Core operating income was minus 90.7 billion yen, down 56.5 billion yen year-on-year. For price variance, profit margins deteriorated mainly due to declining overseas market prices of synthetic resins. In volume variance, there was a deterioration in the performance of PetroRabic, an equity method affiliate, due to deteriorating refining margins and worsening profit margins for petrochemical products. Next is energy and functional materials segment. Core operating income was 7.8 billion yen, down 7.4 billion yen year on year. Demand declined mainly for automotive applications and shipments of resource null and separators declined. IT-related chemical segment, core operating income was ¥44 billion, down ¥3.6 billion year-on-year. Price variance in displays-related materials, selling prices fell for polarizing films. For volume variants, shipments for photoresists and processing chemicals declined with a drop in semiconductor demand. On the other hand, shipments for polarizing films and touchscreen panels increased. Next page. Health and crop sciences segment. Core operating income was 30.9 billion yen. Down 26.4 billion yen year on year. Price variance. In addition to decline in the selling prices for generic products, post-pattern products in South America, profit margins deteriorated due to decline in market prices of methionine. For volume variance, there was an increase in methionine shipments. Next page. Pharmaceutical segment. Corporate income was minus 133 billion yen, down 149.2 billion yen year-on-year. Price variance. Sales prices declined due to the impact of National Health Insurance drug price revisions in Japan. Cost variance. Selling costs and SG&A expenses decreased due to the reorganization and rationalization of Sumitomo Pharma's North American subsidiaries. Volume variance shipments decreased due to the expiration of exclusive marketing period of Latuda, which was larger than the This is all for the performance by business segment. Next page is consolidated statement of financial position.

Page 12, please. Total assets at the end of March 2024 were 3,934.8 billion yen, a decrease of 230.7 billion yen from the end of the previous year. The main reasons were a decrease in cash and cash equivalents, reduction in inventories to improve working capital, and decrease in PPE and goodwill and intangible fixed assets due to impairment losses. Interest-bearing debt is ¥1,563.5 billion, The equity was ¥1,164.4 billion, down by ¥324.8 billion from the previous year. Next, I will explain consolidated cash flows. Operating cash flow was ¥-¥51.3 billion, This is mainly due to the increase in loans to Petro Arabic. As a result, free cash flow was negative 163.6 billion yen, down by 255.8 billion yen from the positive 92.2 billion yen in the previous year. Financing cash flow was 49.2 billion yen, a 227.7 billion yen increase from the previous year. Next, I will explain the revised full-year forecast for FY24. First, I will explain the business environment surrounding our company that is the premise for our full year forecast for FY24. This is page 15. Regarding economic conditions, inflation is expected to slow down worldwide and the global economy is expected to stabilize. but low growth rate is expected. I will only mention some distinctive points of FY24 forecast compared to FY23 actuals. First, Regarding the petrochemicals and raw materials at the top, we believe petrochemical market bottomed out in FY23 and will gradually recover toward FY24. But the extent of the recovery is limited and the low margin will continue. Next, regarding the semiconductors, fourth from the top, the demand is headed for a gradual recovery and full-scale recovery is expected towards the second half of the year. As for the crop protection, third from the bottom, overseas distribution inventories are being eliminated and, as a result, We expect the recovery of sales volume, especially in South America. This has been the main business environment for FY24. Next, I will explain consolidated business forecast on page 16. For FY24, Our focus has not changed from what we announced on April 30th. Sales revenue will be 2 trillion 670 billion yen up by 223.1 billion yen from the previous year. Co-operating profit will be 100 billion yen, up by 249 billion yen from the previous year. Operating income will be 70 billion yen, up by 558.8 billion yen from the previous year. Net income attributable to owners of the parent will be 20 billion yen, up by 331.8 billion yen. Thus, we expect increase in sales and profits. The assumptions for exchange rates and NAFTA prices are as shown on the slide. We will make utmost efforts to achieve a V-shaped recovery in FY24. I will discuss the sales revenue and core operating income by segment from the next page. We expect increase in operating income and net income attributable to owners of the parent thanks to the improvement of core operating income as well as the reduction in impairment losses and expenses for business restructuring. As for the dividend for the current year, We will pay an interim dividend of ¥3 and year-end dividend of ¥6 per share. Thus, the annual dividend will be ¥9, the same as the previous year. Next, I will explain the sales revenue and core operating income by business segment on pages 17 and 18. Revenue focus for FY24 is 2 trillion 670 billion yen, up by 223.1 billion yen from FY23. By segment, we focus to increase in revenue in all segments except energy and functional materials and IT-related chemicals. Looking at the analysis of Ariath, Sales price is plus ¥79.5 billion, volume is plus ¥168 billion, and foreign exchange for the sales revenue of overseas subsidiaries is minus ¥24.7 billion. Please turn to page 18. Focus for core operating income is ¥100 billion, up by... 249 billion yen from FY23. We expect increase in profits in all segments. By variance analysis, positive 19 billion yen for price, positive 141 billion yen for cost difference, and positive 89 billion yen for volume, etc., including changes in equity in earnings of affiliates. Let me now explain the consolidated cash flows. Focus for operating cash flow is 160 billion yen increased by 211.3 billion yen from FY23. Investment cash flow will be 110 billion yen up by 222.2 billion yen over FY23 due to the short-term intensive business improvement measures. This will result in positive 270 billion yen in free cash flow. Interest-bearing debt balance at the end of FY24 is expected to be 1 trillion 320 billion yen. That is all regarding the forecast. And for the first half, We decided not to disclose that at the focus because it is difficult to expect. And so we will make company-wide efforts to achieve a V-shaped recovery. Because this is the top priority items and that will include the restructuring or the rationalization. But it is difficult to expect the timing or it is not appropriate to actually disclose the timing. So we decided not to disclose the interim forecast. And thank you for your understanding. And as for the FY24, the performance, we will still see the loss in the first quarter. But after that, towards the end of the fiscal year, we expect the gradual improvement. And that is all I have to say on business report. I would like to take your questions now. Thank you.

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