Sumitomo Chemical Company, Limited

It is now the scheduled time to start, so we would like to start the conference call regarding the financial results for fiscal year 2026, second quarter. Thank you for your participation. Today, Yamauchi, Managing Executive Officer, will explain the financial results for fiscal year 2026, second quarter. Later on, joined by Mr. Matsuo, General Manager, Accounting Department, will open the floor to Q&A later. We schedule to end at 4.50 p.m. Without further ado, Mr. Yamauchi, please go ahead.

Good afternoon. I'm Yamauchi from Sumitomo Chemical. Thank you very much for attending our conference call despite your busy schedule. I'd like to thank investors and analysts for your daily understanding and support to our management. Thank you very much for that. Now let me start with the briefing of financial results for fiscal year 2026 second quarter. Please look at slide page 4. Before explaining the details of financial results, I would like to give a brief update on the status of profit and loss of the second quarter. Core operating income was 144.5 billion yen. Net income attributable to owners of a parent was 82.9 billion yen, both increasing significantly compared to the same period of the previous year and exceeded the forecast announced in August. The first half results were its second highest first half results on record. Regarding the primary factors behind the year-on-year increase in cooperating income, first ICT and mobility solutions, although shipments of display-related materials decreased with semiconductor shortages, shipments of semiconductor processing materials increased. Agro and Life Solutions Business conditions for crop protection products outside Japan have been slow to recover. Shipments of crop protection products in Japan have remained steady and profit margins for feed additives improved. Essential green materials Petro-Arabic's financial results improved due to the situation in the Middle East, while temporary inventory valuation gains also significantly boosted core operating income. Performance is solid. and with Sumitomo Pharma's capital increase, the E ratio improved significantly to 0.73 times. Consolidated financial results of the second quarter for FI2026, sales revenue was ¥1,172.8 billion, up ¥77.4 billion year-on-year. Core operating income expressing recurring earnings power was 144.5 billion yen up 35.8 billion yen year on year. Non-recurring items not included in core operating income was a loss in total of 6.5 billion yen, worsening by 1.4 billion yen compared to the previous year. As a result, operating income was a profit of 138.1 billion yen up 34.4 billion yen year-on-year. Finance income was a loss of 16.1 billion yen, worsening of 300 million yen year-on-year. Gain or loss on foreign currency transactions included the finance income or expenses was a loss of 9.4 billion yen, worsening of 3 billion yen year on year. Income tax expenses was 16.3 billion yen compared to the same period of a previous year when tax burden was reduced due to the write-off deferred tax liabilities tax burden increased by 19.3 billion yen. Net income loss attributable to non-consolidated interests was a loss of ¥22.8 billion. As a result, net income attributable to owners of a parent for the second quarter was a profit of ¥82.9 billion, improvement of ¥43.2 billion year-on-year. Exchange rate announced a price which impacted our performance. The average dollar rate during the term was 159.49 yen to a dollar and NAFSA price was 107,500 yen per kiloliter. Yen weakened and feedstock price increased year on year. Next, sales revenue by reporting segment. Please move to page 6. Total sales revenue was up 77.4 billion yen year on year. By segment, sales revenue increased in all segments except essential and green materials where reseal of petro-arabic products concluded. As for year on year changes of sales revenue by factor, Sales price increased by 84 billion yen. Volume decreased by 64.7 billion yen. Foreign exchange transaction variance of foreign subsidiary sales revenue increased by 58.1 billion yen. Next is page 7. Total core operating income increased by 35.8 billion yen year-on-year. Analyzing by factor, price was plus 17.5 billion yen, cost minus 4.5 billion yen. Volume variance including changes in equity earnings of affiliates was plus 22.8 billion yen. Next, performance by segment. Please move to page 8. Agro and Life Solutions Segment Core operating income was a profit of ¥20.8 billion up ¥9.6 billion year-on-year. Income of crop protection products dropped slightly because of slow recovery in business environment outside of Japan. Regarding the feed additives, while rising market prices have led customers to become more cautious in their purchasing decisions, the same market upturn has improved our profit margins, resulting in an increase in income. Next page. ICT and mobility solution segment. Co-operative income was a profit of 31.9 billion yen, down 1.2 billion yen year-on-year. For display-related products, absence of prior year gain on the sale of a large LCD polarizing film business, decline in mobile-related shipments due to shortage of semiconductors, and decline in the selling prices of polarizing films led to decline in income. in semiconductors-related products. Though there was increase in fixed costs due to capacity expansion, shipments and profit increased due to growing demand for semiconductors. For mobility-related products, increase in shipments of super-engineering plastics led to increasing income. Next page. Advanced medical solution segment. Core operating income was a loss of 3.7 billion yen. Down 2.3 billion yen year on year. Income dropped as a result of difference in sales mix of active pharmaceutical ingredients and intermediates and decline in profit margin at affiliated company due to situation Middle East. Next page. Extension green material segment. Co-operating income was a profit of 62.1 billion yen, increase of 80.7 billion yen year on year. Income increased as a result of inventory valuation gains in Japan and Singapore, accompanying increased feedstock and product market prices. Further, at Petro-Arabic Saudi Arabia, impact of prior year periodic plant maintenance and improvement of refining margins improved for equity method investment profit leading to improved income. Next page.

In Tsumitomo Pharma segment, core operating income was 43.6 billion yen down 53.8 billion yen year on year. Shipments increased thanks to growth in sales of Orgovix, a therapeutic agent for advanced prostate cancer, and Gemtisa, a treatment for overactive bladder. On the other hand, there was an absence of the gain on the sale of the Asian business in the prior year, as well as the impact of lower shipments resulting from that sale. This concludes the overview of results by segment. On the next slide, I will explain the consolidated statement of financial position. Total assets as of the end of September 2026 was 3,626.1 billion yen, an increase of 221 billion yen from the end of the previous fiscal year. The main factors were a temporary increase in working capital such as trade receivables and inventories in current assets owing to the restart of the Chiba plant following the schedule maintenance carried out in January through March 2026 and the surge in NAFSA prices. and an increase in investment securities in non-current assets. Interest-bearing liabilities were ¥1,087.4 billion, a decrease of ¥64.1 billion from the end of the previous fiscal year. Equity was ¥1,482.6 billion, an increase of ¥246 billion from the end of the previous fiscal year. This was mainly due to net income attributable to owners of the parent and Sumitomo Farmer's capital increase through a public offering. As a result of this, equity ratio and DE ratio significantly improved to 32.1% and 0.73 times respectively. Next, I will explain about the consolidated statement of cash flows. Please look at page 14. Cash flows from operating activities were an inflow of 66.6 billion yen, an increase of 8.9 billion yen year on year. The increase was due mainly to improved profit. Thank you very much. and others. As a result, free cash flows were an outflow of 18.3 billion yen, a deterioration of 59.3 billion yen compared with an inflow of 41 billion yen in the same period of the prior year. Cash flows from financing activities were an inflow of 16 billion yen due mainly to Sumitomo Farmer's capital increase of the Republic offering, an increase of inflow of 130.8 billion yen year on year. Next, I will explain our financial forecast for FY2026. Please turn to slide 16. Let me begin with the business environment surrounding the company. As for economic conditions, although growth in the field of technology is firmly supporting the global economy, the outlook remains uncertain due to geopolitical risks, including tensions in the Middle East. In the business environment section, we show our main business areas and our assessment of their business environment using weather icons. Starting from the top, for crop protection, the recovery of crop protection products outside Japan has been delayed. For feed additives, the temporary supply shortage caused by the Middle East situation has been resolved and the current supply-demand balance has been settling down. Although profit margin improved in the first half, the outlook for the second half and beyond remains uncertain. For displays, the mobile device market has become sluggish due to worsening procurement conditions for memory chips and other components. Silicon semiconductors remain solid, mainly driven by AI-related areas. For petrochemicals and raw materials, we have secured enough raw materials to meet current production plans, but the impact of high raw material prices continues. This concludes the business environment. I will now give an overview of our financial forecast. Please turn to slide 17. This is a summary of our financial forecast for FY26. We have revised the previous forecast announced in May to reflect recent business trends. Core operating income for FY26 is projected to be 270 billion yen, an upward revision of 55 billion yen from the previous forecast of 250 billion yen. As a result, core operating income is expected to reach a new record high. By a segment, Core Income and ICT Mobility Solutions, Essential and Green Materials, and Semitomo Farmer 3 segments were revised upwards. The details will be explained in later slides. The net income attributable owners of the paradigm projected to be 90 billion yen upward revision of 20 billion yen from the previous forecast of 70 billion yen. The year-end dividend is revised upward to 9 yen with a 1 yen increase. As a result, annual dividend is projected to be 17 yen, 1 yen higher than last projected. Please go to page 18. For FY2026, we forecast the following. Sales revenue is 2 trillion 490 billion yen, up 130 billion yen from the previous forecast. Core operating income of 270 billion yen, as mentioned in the previous slide. Net income attributable to owners of the parent being 90 billion yen. For our exchange rate and NASA price assumptions, we assume an exchange rate of 150 yen to the dollar for the second half or 157 yen for the full year and 99,000 yen per kiloliter for the full year. Next, I'll explain slide 19, sales, revenue, and core operating income by reporting segment. Looking at the full year forecast by segment for agro and life solutions, although a profit margin Formethionine has improved the recovering sales of crop protection products outside Japan has been delayed, so we have left the previous forecast unchanged. For ICT and mobility solutions, we expect an increase from 55 billion to 60 billion due to increased shipments of semiconductor processing materials. For essential and green materials, we expect a large increase in profit from ¥20 billion to ¥75 billion due to the improvement in petrol rock big profit and loss that has been impacted by the Middle East situation and temporary inventory valuation gains. For Sumitomo Farmer, we expect an increase in profit from ¥94 billion to ¥108 billion due to strong sales of Gem Tessa. Please note that the lower profit in the others segment compared with the previous forecast is because we have factored in certain levels of risks. This concludes our explanation of the financial results and forecasts. We will now like to open to the floor and receive your questions.