Earnings Call: Q1 2022

May 12, 2021

Good afternoon, everyone. This is Keiji Taga of Kreare. Thank you for taking time out of your busy schedule to participate in our conference call. Let me begin the presentation of the financial results for the Q1 of FY 2021. This is Page 2. In the Q1 of FY 2021, sales expanded due to recovery from the global economic stagnation caused by the spread of COVID-nineteen. As shown on the slide, the business results for the Q1 were as follows: net sales increased by 5.5% year on year to 144,400,000,000 yen Operating income increased by 40.2 percent to 16,800,000,000 yen Ordinary income increased by 43.9 percent to 16,300,000,000 yen and net income decreased by 21.2% to 5,300,000,000 yen The decrease in net income was due to booking some extraordinary losses, including a litigation related loss of 3,100,000,000 yen tied to a fire accident in the U. S. And a disaster loss of 3,000,000,000 yen coming from the impact of the cold wave hit the U. S. Back in February. Next is Page 3. I will now explain the status of our business by segment. The first is the Vinyl Acetate segment. This segment achieved higher sales and profits compared to the previous year. Please refer to the comments at the top right of this page for the sales status of each business. Operating income increased by 5,000,000,000 yen from the previous year. The reasons for this are as follows: the volume difference resulted in giving an increase of 6,700,000,000 yen due to increased sales in all businesses Selling price and product mix was a negative impact because of the product mix. Raw materials, fuel and foreign exchange was affected by the sharp rise in raw materials and fuel prices, mainly due to the cold wave of the United States and resulted in being a negative impact of 1,200,000,000 yen to profit. Others gave a negative impact of 200,000,000 yen with an increase in logistics costs. With all these, sales and profits increased in the Q1 compared with the same period of the previous year. Please go to Page 4. Next, in the ISO trends segment, sales increased and profits decreased slightly in the Q1 compared to the same period of the previous fiscal year. Please refer to the comments on this page for the status of sales in each business. Operating income decreased by 1000000000. Volume difference provided an increase of 700,000,000 yen to profit due to increases in sales volume. Selling price and product mix gave a negative impact of 200,000,000 yen to profit due to product mix change. Raw materials, fuel and exchange rates gave a decrease of 300,000,000 yen due to higher raw material and fuel prices. Others had a negative impact of 300,000,000 yen to profit, mainly due to an increase in logistics costs. Please go to Page 5. In the Q1 of the Functional Materials segment, sales and profits decreased compared to the same period of the previous fiscal year. The status of sales in each business is as shown in the comments on the upper right. Operating income decreased by 200,000,000 yen Volume difference gave a positive impact of 100,000,000 yen mainly due to increased sales of medical products. Operating income decreased by 300,000,000 yen due to the impact of higher raw material and a few prices. In terms of others, goodwill amortization was decreased, but logistic cost was increased, and there was no net impact given by others as a whole. Page 6. In the Fibers and Textiles segment, sales and profits decreased in the Q1 compared to the same period of the previous year. Please refer to the comments listed for the status of sales in each business. Operating income decreased by 500,000,000 yen In terms of volume, sales of Clarino increased, but as other businesses decreased, volume gave a negative impact of 100,000,000 yen Selling price product mix gave a 200,000,000 yen negative impact to profit due to product mix change. Raw materials, fuel and exchange rates gave a negative impact of 100,000,000 yen due to the impact of higher raw material and fuel prices in each business segment. Others gave a negative impact of 1000000000 yen due to the logistics costs rise. Please turn to Page 7. This slide shows the Q1 results of net sales and operating income for each segment compared to the same period of the previous year. This is just for your reference. Page 8. This slide shows a company wide summary of the factors affected the operating income. This is also for your reference. This is Page 9. This slide shows the assets section of the balance sheet compared to the end of last year. Notes and accounts receivable trade increased by approximately 5,000,000,000 yen due to the increase in sales, but as cash and cash deposits decreased by approximately 30,000,000,000 yen due to the redemption of commercial paper, current assets decreased by 23,000,000,000 yen in total. Fixed assets increased by 20,100,000,000 yen due to the increase in the valuation of fixed assets of overseas subsidiaries and goodwill due to the depreciation of the yen. This is Page 10. This slide shows the liabilities and the net assets section of the balance sheet. Current liabilities decreased by 27,200,000,000 yen This is mainly due to the redemption of commercial paper and the payment of a settlement due to the progress of a lawsuit involving a fire accident at the U. S. Subsidiary. Total net assets increased by 22,800,000,000 yen mainly due to an increase in a foreign currency translation adjustments. As a result, the equity ratio increased by 2.2% from the end of FY 2020 and has become to be 49.6%. Page 11. This slide shows the revised forecast for FY 2021 being compared to the initial forecast. In the Q1, sales volume increased in many businesses due to continued strong demand for displays and electronic devices as well as a recovery in demand for automotive applications. This trend is expected to continue in the second quarter, and we have hence revised our first half earnings forecast. As mentioned at the beginning of this report, in the Q1, we booked extraordinary losses of 3,100,000,000 yen related to litigation in the U. S. And 3,000,000,000 yen due to the cold wave in the U. S, respectively, but we have not changed our forecast for net income. No revision has been made to the full year earnings forecast at this point. Please turn to Page 12. This slide shows a comparison between the revised forecast for FY 2021 and the actual results of FY 2020. This is another page for your reference. Page 13. We are here comparing the sales and operating income by segment of the revised forecast for the first half of FY twenty twenty one with the initial forecast. Now this is Page 14. Again, for your reference, here the revised forecast of net sales and operating income by segment for the first half of FY2021 is compared with those of the previous fiscal year. This concludes the presentation. Thank you.