Sumitomo Chem Co Ltd Ord

As it is now the scheduled time, we will begin. My name is Yamauchi, and I will be serving as today's moderator. We appreciate your taking the time out of your busy schedules to attend our investors' meeting for FY 2025 financial results, management priorities, and business strategies. Today's session will begin with a presentation by our President Mito, followed by a Q&A session, and we are scheduled to conclude at 5.45 p.m. With that, Mr. Ito, the floor is yours.

I would like to start the investors meeting for FI 2025 financial results, management priorities and business strategies. Thank you very much for attending despite your very busy schedule. Let me start. This is the agenda for today. And here is the summary for today. First, the FI 2025 results. We had very strong results. Even looking at underlying results, stripping out our gains and business dispositions, we had good results. And for guidance for FY2036 underlying business performance, call for solid growth in earnings power. And the driver for that is number one, agro and life solutions. And another is ICT and mobility solutions. For AGL, this time in the U.S., two companies were integrated to build a new company and centralize that company by rational business will be further expanded. For ICPM, in terms of figures, it is a little slow but with Strategic upfront investments in entering new materials markets will strengthen the foundation to support future earnings growth. In particular, the rapid shift to AI in the society and to respond to that, we will steadily expand our business. We are starting to establish an organization capable of doing that. As for the reconstruction of a PNP business, we will Thank you very much. repeatedly being mentioned that this is an important issue so we implement measures through rigorous investment discipline and also focus allocation into strategic capital and also strengthen our organization and thereby implementing those measures we will improve the capital efficiency and we will coordinate efforts across business and corporate divisions to enhance enterprise value. So this is the summary of what I'm going to discuss today. Next page. First, the financial results. Sales revenue was $2,328,000,000 reduction of about $278,000,000. For P&P ICT business, because of the diversity of these businesses, core operating income was $208.4 billion, an increase of $68 billion net income. up 22.4 billion to 60.9 billion, and ROE, ROIC, both 6.4% and 5.6% respectively. In February this year, we revised upwards our forecast, and it is further higher compared to the results of 2024. We are seeing a great improvement. This breakdown by sector, corporate income by sector, Agro and Life Solutions is at a similar level as the previous year. There's a slight increase compared to the previous year. It is even higher compared to the forecast for February. For ICTM, there is a large reduction compared to the previous year. The factors, there are two factors. One is in 2025, early 2025, Because of the Trump tariff, there was quite a lot of sales carried in advance in 2024, about 10 billion yen in terms of co-operating income. Another point is the recent AI semiconductor boom. So general purpose semiconductors are in shortage. So shipments into the low and the middle and the smartphones declined and together with that there was a decline of shipments of our display materials. So from these factors this led to a decline compared to previous year. Essential green materials, major factor is the sale of petro-arabic shares leading to a large increase in income. One highlight This year is symptom of farmers' performance. Disposition of Asian business, 49 billions included, and there was expanded sales of the three key products leading to a large increase in income. So in total, cooperating income, 208.4 billion yen, up 67.9 billion yen. Before talking about the forecast for 2036, let me talk about the current Middle East situation. For raw materials procurement, the whole company is working hard towards stable supply. In general, we are able to have visibility of requirements up to June, and for others, we are We have a variety of products, so there are risks here and there, but we are able to secure requirements for the current production plan. For utilization trends, Japan PNP, environment of raw materials procurement, inventory situation, considering that operations are continued. For Singapore, unfortunately, in March of this year, fourth major declaration was made There are potential supply constraints, so we are closely monitoring the impact. And for others, of course, there are risks, but at the moment, there are no major impediments of operations. So, from an overall perspective, for raw material procurement, it is settling down, and in terms of procurement, risk is gradually declining, but rather, Price is getting higher, so how are we going to respond and absorb the price hike through our own efforts of rationalization and efficiencies, and if it's not possible to absorb through those efforts? We would like to consult with our clients about reflecting the cost height. So it's now at a phase of higher prices for raw materials. But for demand, we have not seen at the moment any major decline in demand because of rising prices. This is the forecast for 2026 sales revenue. Increase of 31.5 billion to 2,360 billion. Co-operating income up 6.60 billion is expected. On the underlying performance basis, it's a large increase. I will explain about it in the following slides. And net income up 9.1 billion. And with that, are we 6.8%. including the 0.4 percentage points and ROIC down 0.1 percentage points. Symptoms of farmers increasing capital, so denominator slightly increased. Compared to 2025, ROIC is slightly lower. This is the forecast for 2026 by sector. Agro and Life Solutions, 8.7 billion increase is forecasted. Over the hand for ICTM, as I mentioned earlier, semiconductor shortage is a factor leading to reduction of shipment of display materials and fixed costs, in particular in semiconductor sector, there were There is an impact of investments made in advance, but we expect increased shipments of semiconductor materials. Essential green materials, $5.6 billion increase is expected. At the moment, the refinery margin of petro-rabi has greatly improved, which is included in these results. For semi-tomo pharma, compared to the previous year, It is a reduction of 14.4 billion. As you know, in 2025, there is 49 billion yen from a disposition of Asia business, excluding that this is a large increase. So in total, 215 billion cooperating income is forecasted. Next page.

And this is showing our 24, 25, 26 core income on underlying performance basis and how they've transitioned. If you look at the 2025 actual, the underlying performance compared to the previous year, we had an increase by 50 billion yen. And also for 2026, we are not expecting capital gains on business dispositions, so the forecast is An increase of about 80 billion yen in income. So on the underlying performance basis, this is going to be a significant increase in income that we hope to achieve. Next please. And in line with this, our financial standing has significantly improved. If you look at the DE ratio in 2023, it was 1.3, but at the end of 2025, it became in the range of 0.9. And furthermore, the capital increase of Semitomo Pharma also contributed to the DE ratio decreasing to 0.8. So financial standing has seen much improvement. Next, please. And this here, based on the results I've covered so far, This is for FY2026 dividend forecast. We forecast an increase in the annual dividend to ¥16 per share. However, having said that, we do not believe this to be at the appropriate level. So, in the future, we hope to achieve an annual dividend of ¥24 per share at an early stage in the future. Next, please. and from here I will go into sector strategies. Next please. But before I go into this topic, I would like to cover the status of our business portfolio. Back in fiscal 2017, we had a core operating income of 262.7 billion yen. The growth drivers that we've identified We had health, agriculture, and information electronics. They did not account for 30% of the total of the income. They were less than 30%. Most of the income came from the PNP business. However, if we look at the portfolio today, almost 60% of the cooperating income came from Agro and Life and ICTM. For FY2026, or that is a forecast, so income coming from a PNP has been reduced significantly. And for others, pharmaceuticals, related businesses, if you look at the breakdown, If you look at the profit structure, we have advanced semiconductors and life sciences accounting for much of the earnings of semi-thermal chemical as of today. Going forward, we will concentrate our investments into the growth drivers so that we can further advance our business portfolio. Next please. And first, I will cover the agro and life solution sector and its strategies. I've had several occasions to talk about the strategies, but for the crop protection chemicals, we are confident in our ability for a drug discovery. So from 2024 to 2027, 2020, 2020-2024, there were 35 new active ingredients launched to the market. Five of them came from our company, and three of the five are expected to become blockbusters. For Rapidofil and Pavecto, we will fully start to register these going forward. So at present, we will focus on how to expand the indifilin sales. Next, please. And when it comes to indifilin, as was announced before, in the Central and South Americas, this is used for the rust disease for soybeans, used as a fungicide. When we first developed this product, it was a single market, still had a scale of 300 billion, so it was a very attractive and large market. Since then, the market has further expanded and in 2029, it is expected to become 4 billion or 600 billion yen in size. Therefore, this is a highly attractive market for us. So the market that we are addressing is expanding, but at the same time, competition is becoming more intense, intensified. On the other hand, in gasoline has a high performance compared to competitive products. So, Thank you very much. We have established a local entity called Sumika Paraguay so that we will also promote the sales expansion in the neighboring countries. And also, the major target indication is for soybean rust, but this endophylline has an effect on various other efficacies. So as you see in this graph, Various countries and targeting various crops that we will continue to expand our indications so that the sales will further grow in areas besides soybean. Next please. And next on biorationals. Conventionally, we had VBS that focused on biorationals and MGK, they mostly focus on botanicals or plant derived materials. So these were the businesses that were our focus in the bio-rational area. But by consolidating the two companies, we hope to concentrate the knowledge and experience into this new organization and pursue synergies to further grow the business. And another aspect is that since there were two separate companies that have been operating, so by consolidating, we can also rationalize the indirect expenses. We can realize a lean and efficient business operation structure that eliminates redundancies going forward. So biorational sales currently is somewhere between 70 to 80 billion yen, but by early 2030s we hope to double this sales size. Next, please. And in order to achieve that goal, these are the specific measures that we are considering. especially in the South America, biorationals are gaining traction and further growing. As seen here, it has increased by 2.5 times over the past five years. So we will identify, we have identified the South America as one of the focus area. And as for North America, biostimulants are gaining much attention. So the FE Sciences that we've acquired, their product lineup will be introduced in order to grow the North America business. And as for Europe, if you look at the third row on the right-hand side from the top, this shows the number of new product registration in Europe since 2018 for both biorationals and chemical crop protection. And as the graph shows, since 2020 up to 2025, there has been zero chemical crop protection registered. Finally, in 2026, there is one. Herbicide registered. But what this shows is that gaining registrations in Europe has become very difficult. However, biorationals are growing its registrations year after year. So we do have capabilities, world top class biorational capabilities. So this presents us with massive opportunities and we will be focusing on Europe as well. And as for the portfolio, we have pipeline development. for biorationals, close to 40 in the pipeline, and for botanicals as well. In the beginning, it was only the pyrethrins, but in addition to this, we are working on the launch for two more products. And not just the chemical crop protection, in the animal nutrition area, we hope to launch two products in this area, and we are currently making preparations for that. So in addition to agriculture, feed, Next is ICTM.