Sumitomo Chem Co Ltd Ord

As it is time to start, we will now begin the conference call for the presentation of the financial results for fiscal year 2025 first quarter. Thank you very much for your participation. Today, Mr. Yamauchi, Executive Officer and General Manager of Accounting Department, will give a briefing of the financial results for fiscal year 2025 first quarter, and he will later take questions. We will conclude the call at 4.50 p.m. Mr. Yamauchi, over to you. Good afternoon. I am Yamaguchi, responsible for the accounting department. Thank you very much for attending our conference call today despite your busy schedule. I would 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 a briefing of the financial results for FI 2025 first quarter. Please turn to the slide, page 4. Before explaining the details of the financial results, I'd like to give a brief update on the status of profit and loss for the first quarter. On the left, the core operating income. In 2023, 2024, 2025, for five years you can see the figures. In FY2023, we had a large loss ever since the start of the company. We faced a very difficult situation from the first quarter. For FY2034, we achieved a V-shaped recovery and were able to secure profitability in the first quarter. And this fiscal year, first quarter, the profit we made last year was further expanded. For the first quarter, Simitomo Pharma performed well and Ascension Green Materials improved its profitability and in addition, shipments of Agro and Life Solutions and ICT and Mobility Solutions were strong. On the right, you can see the net income attributable to owners of the parent for the quarter for the three years. With appreciation of the yen in this, A quarter, we had a slight loss. For each term, there was a big impact from foreign currency, as you can see in parentheses. Excluding the impact of foreign currency transactions, just like the core operating income, we were able to achieve steady improvements. Now, next, please turn to page 5. Let me begin by explaining the business environments around our company in the first quarter of FY2025. With regards to economic situation, although the global economy is continuing to show signs of gradual recovery, uncertainty is high due to such factors as policy management, and because of this, the future continues to remain uncertain. And below are our perceptions of the business environment in our major The first one, crop protection. Although Q1 is an off-season for demand, there was solid growth in India. The methionine market bottomed out at the end of the last fiscal year and currently shows signs of recovery. For this place, there is still no impact from the backlash of the shipments brought forward because of the tariffs. and there was solid growth in mobile device-related components. In semiconductors, demand for semiconductors varied by field, but there are signs of gradual recovery. Petrochemicals and raw materials, the market continues to have low margins. So next is the outline of the consolidated financial results, page 6. Sales revenue was 526.1 billion yen down 86 billion yen year on year. Core operating income expressing recurring earnings power was a profit of 27.7 billion yen up 22 billion yen year on year. Non-recurring items not included in core operating income was a loss in total of 2.2 billion yen. In the same quarter of the previous year, there was 10.1 billion yen gain on sales of fixed assets from the sale of land for dormitories and company housing, leading to a total profit of 5.8 billion yen compared to the same quarter of the previous year, No recurring items worsened by 8.1 billion yen. As a result, operating income was a profit of 25.5 billion yen, up 14 billion yen year on year. Finance income had a loss of 19.6 billion yen, down 45.6 billion yen year on year. Gain or loss on foreign currency transactions included in finance income or expenses had a loss of 16.4 billion yen because of a strengthening of a yen worsening by 45.4 billion yen year on year. Income tax expenses had a loss of 1.9 billion yen down 1.7 billion yen year on year. As a result, the net income attributable to owners of a parent for the quarter was a loss of ¥4.5 billion down ¥28.9 billion year-on-year. Exchange rate and NAFSA price which impact our performance average Rate of US dollars during the term was ¥144.59 to a dollar and NAFSA price was ¥65,500 per kiloliter. Yen appreciated and feedstock price declined compared to the same period of previous year. Next, sales revenue by business segment. Page 7. Total sales revenue was down ¥86 billion year-on-year. By segment, sales revenue decreased in all segments except Sumitomo Pharma. As for year-on-year changes of sales revenue by factor, sales price decreased by 12.5 billion yen, volume decreased by 47.6 billion yen, Foreign exchange transaction variance of foreign subsidiary sales revenue decreased by 25.9 billion yen. Total core operating income increased by 22 billion yen year-on-year. Price was ¥500 million plus ¥9.5 billion. Volume of variance including changes in equity in earnings of affiliates was plus ¥13 billion. Next is performance by segment. Page 9. Agro and Life Solutions Segment. Co-operative income was a profit of 2.2 billion yen down 2.7 billion yen year on year. Price variance, profit margin deteriorated as the methionine market price dropped. Volume variance, there were lower income from exports due to stronger yen centered on overseas crop protection products and stronger yen effect. Next page. SAT and Mobility Solutions, cooperating income was a profit of 18.4 billion yen, down 2.8 billion yen year on year. Price variance? Selling prices of polarizing films dropped. Volume variance? There was a one-time gain on the sale of the large LCD polarizing film business, but lower income from exports due to stronger yen, Offset the gain. Next page please.

As for the advanced medical solution segment, core operating income was a loss of ¥1 billion, a decrease of ¥1.5 billion year on year. Shipments decreased due to a change in the shipping timing of some active pharmaceutical ingredients and intermediates compared to the same quarter of the previous fiscal year. Please go to the next page. With regards to essential and green material segment, core operating income was a loss of 5.5 billion yen and improvement of 14.1 billion yen year-on-year. As for the price variance, profit margins improved in synthetic resins due to the drop in price of main ingredient NAFSA. As for the volume, variance, etc., there was an improvement in refining margins at Petro Rabig, an equity method affiliate, resulting in an improvement in profitability in investments accounted for using the equity method. As for the semi-tomo pharma segment, core operating income was ¥21 billion, an increase of ¥20.1 billion year-on-year. With regards to price variance, sales prices decreased due to NHI drug price revisions in Japan. As for the cost variance, due to the progress of operational streamlining, SG&A expenses decreased. With regards to volume variance, shipments increased due to the expansion of sales of Orgovix, a therapeutic agent for advanced prostate cancer, and Gemtesa, a treatment for overactive bladder. This concludes the overview of the business performance by business segment. On the next page, I will explain the consolidated statement of financial position. Total assets at the end of June 2025 amounted to 3 trillion 329.5 billion yen, a decrease of 110.2 billion yen year-on-year. Decrease in cash and cash equivalents due to repayment of interest-bearing debt Seasonal factors affecting the crop protection chemicals and a decline in sales due to the impact of scheduled maintenance at Petrolropic were the main factors behind the decrease in notes and accounts receivables. Interest-bearing debt amounted to ¥1,248,000,000,000. This was a decrease of ¥38,000,000,000 year-on-year. Equity was 1 trillion 61.4 billion yen down by 13 billion yen compared to the end of the previous fiscal year. Next, I will explain the consolidated statement of cash flows. Please go to page 15. Cash flows from operating activities resulted in a positive inflow of 24 billion yen up by 36.3 billion yen year on year. Mainly due to an increase in collections of accounts receivable for crop protection chemicals caused by seasonal factors and a decrease in sales associated with scheduled maintenance as petro-robic accounts receivables decreased, resulting in an improvement in working capital. Cash flows from investing activities resulted in a negative 45.9 billion yen, a decrease of 128.4 billion yen year-on-year. During the same quarter of the previous fiscal year, there were incomes from the sale of investment securities and fixed assets. As a result, free cash flows was negative 21.9 billion yen, a deterioration of 92.2 billion yen compared to the 70.2 billion yen positive in the same quarter of the previous fiscal year. Cash flows from finance activities resulted in a negative 49.2 billion yen due to repayment of borrowings, a decrease of 13.8 billion yen spending year on year. Next, I will explain the outlook for fiscal year 2025 first half. Please go to page 17. At the time of the previous financial results announcement on May 14, the impact of tariffs was highly uncertain. Therefore, we only disclosed full-year forecast for fiscal year 2025 and did not disclose forecast for the first half. At this time, newly, we are going to disclose the first half forecast. And as for the full-year financial forecast for fiscal year 2025 announced on May 14th, For the first half of FY2025, the forecast is sales revenue ¥1 trillion, ¥100 billion down, ¥141.4 billion year-on-year. Core operating income ¥90 billion, up by ¥60.5 billion year-on-year. Operating income 85 billion yen down by 36.2 billion yen. Net income for the quarter attributable to owners of the parent 25 billion yen up by 31.5 billion yen year on year. These are the forecasts. As for the exchange rate and NASA price assumptions, they are as listed on the slide. I will explain the core operating income in the next slide by business segments. Please go to page 18. For the first half performance, if you look at the segment, Sumitomo Farmer sold the business and Orgo Bix milestone income will be recorded. So on an year-on-year basis, we are forecasting a large increase. And for the other segments, Essential and green materials is expected to see an increase in operating income year-on-year due to the improved profitability of petro-robbing and improved profit margins for synthetic resins. With regards to ICT and mobility, the impact of a decrease in export earnings due to the strong yen and a decline in profit due to the conversion of overseas subsidiary profits into Japanese yen will be significant Profits are expected to decline compared to the same period of the previous year, which was extremely strong. Agro and lessor solutions will be affected by the strong yen. However, we expect profits to remain at the same level as last year due to an increase in shipments. Furthermore, for the other segments, Experiencing decrease in profit year on year is due to the recording of significant profits associated with the sales of business in the first half of fiscal year 2024. Next page, page 19. This will be the last slide. This will be the summary of the performance forecast. Regarding the outlook for the first half of the fiscal year, as I have explained, agro and life solutions and ICT and mobility solution segments They will remain strong in shipments in the second quarter. In addition, we expect the gain from selling semi-terminal farmer business will also contribute. And therefore, against the first half forecast, it is a 60% progress. What is in the parentheses? And the outlook excluding gains on the sales business, We are making progress towards improvement compared to fiscal year 2024. The net income attributable to owners of the parent company, despite the adverse impact of foreign exchange losses, remains positive and is progressing steadily towards the achievement of the annual forecast. That concludes my explanation.

Thank you very much. Now we would like to go into a questions and answers session. Then, the first question is from Mr. Watabe from Morgan Stanley MUFG Securities. Thank you, I'm Watabe from Morgan Stanley MUFG Securities. So, I have one question, but from the first quarter to the second quarter, for each segment, what is your way of thinking, excluding Semitomo Pharma and Agro ICT Essential Chemicals, in particular in these places, what is the movement, in particular for essential chemicals, deterioration expected because of rabies periodic plant maintenance, and the glyphosate market in China is getting better, and what is your situation in South America as well? Thank you for your question. So let me answer one by one. First, for agri-life solutions, From the first to the second quarter, we expect a large increase in profit. In the first quarter, it is an off-season and profit tends to be lower. In our company, The first quarter is advancing steadily as planned. Shipments is expected to be firm in the second quarter, and from Q1 to Q2 we expect large increase in profits. For ICT and mobility solutions from the first to the second quarter, slight decline in profit is projected. I cannot mention the concrete figures, but with the restructuring, One time gains from sales is included in the first quarter and as risks that we expected, tariff related risks. Last year there was increase in shipments towards the end and we expected some backlash from that which were risks but that didn't happen that much and things are progressing relatively steadily. For essential and green materials, from the first to the second quarter, loss is increasing under the current situation. As you have mentioned, Mr. Watabe, second quarter, from April to June, in case of petro-rabic, there is a periodic plant maintenance where Profit will drop, and we plan to post that in the second quarter. That is one factor included. That is all. Thank you very much. For confirmation, South America recovery and the ratio of investments into RABIG, what is the percentage that you are using, calculating in Q1 and the first half for South America? The inventory is gradually moving towards improvement, but to a certain extent there is still some level of inventory. So we will watch the situation with caution. In Petro-Arabic, the ratio percentage is 37.5%. For the second quarter, sales of shares, when will that happen? It depends on that. After selling, it will be 15%. Before that, 37.5%. It takes time for the procedures, so compared to our Projections, the timing of sales is being delayed slightly, but the price of selling remains unchanged from the price we announced last year, 37.5%. Based on that, the income loss in terms of equity affiliates gets large, but the sales price Thank you very much.