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0:00:00.0 SEKISUI CHEMICAL CO., LTD. Presentation of Financial Results for FY2016 Teiji Koge President 27 April, 2017 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 0 0:00:06.7 Results for FY2016 and Plan for FY2017 FY2015 Results Forex Rate *Avg. rate for each term FY2016 Results \108/US$ \119/? FY2017 Plan \113/US$ \121/? \120/US$ \133/? Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 1 0:00:18.3 Overview of FY2016 ? Despite a decrease in net sales due mainly to movements in foreign currency exchange rates and the effects of business structural reform, reported record highs at each level of profit ? Fiscal year-end dividend increased 3 yen compared with plans (including 70th anniversary commemorative dividend of 1 yen per share) FY2016 Plan (Jan. 2017) FY2015 (Billions of yen) FY2016 Difference Difference Net Sales Operating Income Ordinary Income Net Income Attributable to Owners of Parent Dividend per Share (Yen) 1,096.3 89.8 81.2 56.7 30 1,065.8 96.5 91.5 60.9 35 -30.5 +6.7 +10.3 +4.2 +5 1,067.0 96.0 92.0 59.0 32 -1.2 +0.5 -0.5 +1.8 +3 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 2 0:01:02.3 FY2016 Results: Net Sales and Operating Income by Divisional Company ? Achieved an increase in profit at all three divisional companies; reported record high profits in the HPP and UIEP companies ? ? ? HPP: Offset the negative impact of movements in foreign currency exchange rates through an increase in sales volume and improvement in the product mix Housing: Secured increases in both 1H and 2H sales and profits; returned to a profit growth trajectory UIEP: Substantial increase in profit due mainly to successful efforts aimed at reforming the portfolio FY2015 Net Sales Operating Income FY2016 Net Sales Operating Income Difference Net Sales Operating Income FY2016 Plan (Jan. 2017) Net Sales Operating Income Difference Net Sales Operating Income (Billions of yen) HPP* Housing* UIEP* Others Eliminations or Unallocatable Accounts 378.6 473.4 226.3 38.3 -20.3 1,096.3 53.4 36.4 3.6 -3.1 -0.5 89.8 357.5 485.0 240.3 2.7 -19.8 1,065.8 54.5 37.5 12.8 -7.6 -0.8 96.5 -21.0 +11.5 +14.1 -35.6 +0.5 -30.5 +1.2 +1.2 +9.2 -4.6 -0.4 +6.7 356.0 486.0 242.0 3.0 -20.0 1,067.0 54.0 38.0 12.0 -7.0 -1.0 96.0 +1.5 -1.0 -1.7 -0.3 +0.2 -1.2 +0.5 -0.5 +0.8 -0.6 +0.2 +0.5 Total *HPP: High Performance Plastics Company, Housing: Housing Company, UIEP: Urban Infrastructure & Environmental Products Company Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 3 0:01:36.1 FY2016 Results: Analysis of Net Sales and Operating Income ? Completely offset the negative impact of movements in foreign currency exchange rates through successful efforts to expand sales volumes, improve the product mix, and increase the spread between selling prices and raw material costs Net Sales Impact of movements in foreign currency exchange rates (YoY): -30.1 bil. Yen; Impact of business structural reform (YoY) -23.2 bil. yen Foreign Exchange Analysis of Operating Income Sales Quantity & Composition (overseas) Sales Quantity & Composition (domestic) Selling Price Raw Materials & Housing Materials, and Cost Reduction Fixed Costs and Others -30.5 bil. yen (Jan. 2017) FY2016 Plan -9.0 +9.4 -4.5 -3.6 +9.9 +4.4 96.0 1,096.3 bil. yen 1,067.0 bil. yen 1,065.8 bil. yen +10.1 -8.9 -5.0 +4.1 -4.0 +10.3 96.5 bil. yen +6.7 bil. yen 89.8 bil. yen FY2015 FY2016 Plan (Jan. 2017) FY2016 FY2015 FY2016 ? Secured an increase in net sales after excluding the negative impacts of movements in foreign currency exchange rates and the effects of business structural reform Foreign Exchange 120 yen/$ 133 yen/? 108 yen/$ 119 yen/? 108 yen/$ 119 yen/? ? Increase in overseas sales volume and improvement in the product mix mainly in the four strategic fields* of the HPP Company ? Increase in the spread between selling prices and raw materials as well as cost reductions ? Reduction in fixed costs mainly through the effects of efforts aimed at reforming the portfolio in the UIEP Company *Four strategic fields; Electronics, Automobiles and Transportation, Building and Infrastructure, and Life Science fields Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 4 0:02:09.2 Overview of FY2017 Plan ? Working to achieve nine straight terms of operating income increase and record high profits for five straight terms and laying the foundation for achieving the operating income and operating income ratio targets of 120 billion yen and 10%, respectively, set out in the Medium-term Management Plan. Performance 12000 2200 FY2009-FY2013 GS21-SHINKA! FY2014-FY2016 SHINKA!-Advance 2016 FY2017-FY2019 SHIFT 2019―Fusion― 1,104.0 1,200.0 1,110.9 915.5 965.1 1,032.4 1,112.7 1,096.3 1,065.8 (Billions of yen) 10000 1700 858.5 Net Sales 8000 6.9% 4.2% 3.5% 5.4% 49.3 24.4 24.4 1.5 FY2010 03/2011 8.1% 7.8% 5.8% 59.6 23.2 36.3 1.8 FY2012 9.4% 7.4% 82.5 36.1 10.9% 10.9% 11.3% 9.1% 96.5 54.5 11.3% 9.2% 102.0 65.0 58.0 12.0% 10.0% 120.0 ROE Operating Income Ratio 1200 6000 7.7% 85.8 46.0 8.2% 89.8 53.4 5.7% 54.6 20.6 31.1 3.0 FY2011 4000 700 HPP* Housing* UIEP* 0 2000 200 36.0 19.2 19.4 41.1 6.5 FY2013 41.3 1.3 FY2014 2015 36.4 3.6 FY2015 2015 Drop in resource prices 37.5 12.8 FY2016 01/2016 Sharp yen appreciation 39.0 14.5 FY2017 (Plan) 01/2017 Inauguration of a new administration in the U.S. 50.0 18.0 FY2019 -2.4 Other -300 FY2009 10/2008 Lehman shock External Environment 09/2011 04/2014 (Medium-term Plan) 10/2019 Consumption tax raises from 8% to 10% Increasing Great East European financial Consumption tax concern of Japan Earthquake crisis worsens raises China economic slowdown from 5% to 8% Forex Rate* (Avg. rate for each term) FY2008 FY2009 FY2010 \87/US$ FY2011 \80/US$ FY2012 \83/US$ FY2013 FY2014 FY2015 FY2016 FY2017 *FY2017 Assumptions \103/US$ \94/US$ \100/US$ \110/US$ \120/US$ \108/US$ \113/US$ Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 5 0:02:48.6 FY2017 Plan: Net Sales and Operating Income by Divisional Company ? Target an increase in sales and profits in each of three divisional companies; aim for consecutive record high profits in the HPP and UIEP companies ? HPP: Continue to increase sales volume and accelerate the pace of improvement to the product mix as the means to drive Group-wide growth ? Housing: Increase in sales and profits; easing of period-end concentration owing to an upswing in orders ? UIEP: Target an increase in profit through improvements in marginal profits both in Japan and overseas FY2017 (Plan) Net Sales Operating Income FY2016 (Billions of yen) Net Sales Operating Income Difference Net Sales Operating Income HPP Housing UIEP Others Eliminations or Unallocatable Accounts 357.5 485.0 240.3 2.7 -19.8 1,065.8 54.5 37.5 12.8 -7.6 -0.8 96.5 375.0 500.0 243.0 6.0 -20.0 1,104.0 58.0 39.0 14.5 -8.5 -1.0 102.0 +17.5 +15.0 +2.7 +3.3 -0.2 +38.2 +3.5 +1.5 +1.7 -0.9 -0.2 +5.5 6 Total Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 0:02:57.6 FY2017 Plan: Analysis of Net Sales and Operating Income ? Minimize the negative impact attributable to high raw material costs; achieve a substantial increase in profit mainly by expanding sales volumes and improving the product mix Net Sales Analysis of Operating Income +38.2 bil. yen 1,104.0 bil. yen Foreign Exchange Sales Quantity & Composition (overseas) Sales Quantity & Composition (domestic) Selling Price Raw Materials & Housing Materials, and Cost Reduction Fixed Costs and Others 1,065.8 bil. yen +2.0 +9.3 +5.3 +2.6 Of which, raw Materials: -8.6 -5.4 -8.2 102.0 bil. yen 96.5 bil. yen +5.5 bil. yen FY2016 FY2017 (Plan) FY2016 FY2017 (Plan) Foreign Exchange 108 yen/$ 119 yen/? 113 yen/$ 121 yen/? ? Progress in expanding sales volumes and improving the product mix overseas mainly in the four strategic fields of the HPP Company ? Significant impact attributable to high raw material costs; while steps will be taken to offset this impact through increases in product prices and the effects of cost reduction, any benefits are expected to be delayed ? R&D expenditures are projected to increase Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 7 0:03:41.9 FY2017 Plan ? Target a substantial increase in net sales and consecutive record highs at each level of profit ? Plans to increase dividends for eight straight terms FY2016 (Billions of yen) FY2017 (Plan) Difference Net Sales Operating Income Ordinary Income Net Income Attributable to Owners of Parent Dividend per Share (Yen) 1,065.8 96.5 91.5 60.9 35 * 1,104.0 102.0 97.0 63.0 38 * +38.2 +5.5 +5.5 +2.2 +3 *Including 70th anniversary commemorative dividend of 1 yen per share. Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 8 0:04:06.1 Shareholders Return ?Acquisition of treasury stock: Up to 8,000,000 shares or a total acquisition cost of \16.0 billion (April 28, 2017 to March 30, 2018) ?Retirement of treasury stock: Plans to undertake the retirement of 10,000,000 shares of treasury stock on May 25, 2017 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 9 0:04:31.2 HPP Company: Overview of FY2016 ? Despite the adverse impact of movements in foreign currency exchange rates, increases in the spread between selling prices and raw material costs contributed to results in addition to successful efforts to substantially expand sales volumes and significantly improve the product mix mainly in the four strategic fields* of the HPP Company; reported record high profit in the HPP company Net Sales Impact of movements in foreign currency exchange rates (YoY): -26.8 bil. Yen; Impact of business structural reform (YoY) -8.6 bil. yen Analysis of Operating Income Consolidated -basis Change Selling Quantity & Composition Raw Materials and Cost Reduction Foreign Exchange Selling Price Fixed Costs -21.0 bil. yen 378.6 bil. yen 356.0 bil. yen 357.5 bil. yen (Jan. 2017) FY2016 Plan -1.0 -8.7 -8.6 +9.8 +10.8 -2.9 -3.0 +6.2 +6.1 -2.7 -3.0 54.0 -1.1 Increase in the spread 53.4 bil. yen FY2015 FY2016 Plan (Jan. 2017) FY2016 FY2015 +1.2 bil. yen 54.5 bil. yen FY2016 Marginal Profit: +13.9 bil. yen ? Secured an increase in net sales in real terms Foreign Exchange 120 yen/$ 133 yen/? 108 yen/$ 119 yen/? 108 yen/$ 119 yen/? *Four strategic fields; Electronics, Automobiles and Transportation, Building and Infrastructure, and Life Science fields Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 10 0:05:07.9 HPP Company: FY2017 Plan ? Target record high profit by substantially expanding sales volumes and significantly improving the product mix mainly in the four strategic fields of the HPP Company Net Sales Analysis of Operating Income +17.5 bil. yen 357.5 bil. yen 375.0 bil. yen Consolidated -basis Change Foreign Exchange Selling Quantity & Composition Selling Price Raw Materials and Cost Reduction Fixed Costs -0.1 +1.8 +8.3 +0.1 -2.3 -4.2 Raw Materials: -4.3 Cost Reduction: +2.0 54.5 bil. yen FY2016 FY2017 (Plan) 113 yen/$ 121 yen/? *FY2017 Assumptions +3.5 bil. yen 58.0 bil. yen FY2016 Marginal Profit: +6.1 bil. yen FY2017 (Plan) Foreign Exchange 108 yen/$ 119 yen/? ? Minimize the negative impact attributable to high raw material costs by maintaining product prices and promoting cost reductions ? Actively engage in strategic investments and further strengthen development Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 11 0:05:36.5 HPP Company: Four Strategic Fields ? Target growth that exceeds the market in each field focusing mainly on automobiles and transportation Net Sales in the Four Strategic Fields and Key Measures in FY2017 Electronics ? Conditions in the LCD market are bottoming out; firm trends in products for use in TVs; continued shift to organic LEDs in mobile devices ? Increase market share in mainstay products; focus on enhancement areas (semiconductors, OLEDs, car electronics) Automobiles and Transportation ? Accelerate growth in high-performance product demand with respect to car models and components ? Further expand sales of high-performance products; start of increase production of high-performance interlayer films in Mexico (2H FY2017) (Billions of yen) (Billions of yen) 53.7 FY2015 50.1 +5% 52.5 FY2016 FY2017 (Plan) 58.0 FY2019 (Medium-term Plan) 97.5 FY2015 95.7 +12% FY2016 107.5 106.0 FY2017 (Plan) FY2019 (Medium-term Plan) Building and Infrastructure ? CPVC: Middle East demand bottoming out; focus on increasing market share in India and the Americas ? Fire-resistant materials: Firm trends in existing domestic fields; promote the development of applications in areas other than existing fields; pursue business development overseas Life Science ? Expand the diagnostic market focusing mainly on China ? Expand the diagnostics business (reagents, equipment) worldwide; realize integration synergies with EIDIA (Billions of yen) (Billions of yen) 57.6 FY2015 56.8 +3% 58.6 FY2016 FY2017 (Plan) 63.0 FY2019 (Medium-term Plan) 71.8 FY2015 71.3 +4% FY2016 73.9 FY2017 (Plan) 86.0 FY2019 (Medium-term Plan) Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 12 0:06:51.3 HPP Company: Growth Enhancement Areas ? Position the expansion of growth enhancement areas as well as new products and new businesses as engines of growth Growth Enhancement Areas ? Increase increment in net sales: 8.0 billion yen Strategic Fields M&A Acquire the management rights of Polymatech Japan Co., Ltd. ? Business activities: Manufacture and sale of automobile- and electronic-related components ? Management acquisition scheme: Acquire 91% of the shares of Polymatech Japan Co., Ltd. (9%: Inabata & Co., Ltd.) ? Synergy effects: 1) Accelerate the pace of business development in the car electronics field 2) Technology fusion 3) Push forward collaboration from a marketing perspective Electronics ? Packaging and semiconductor materials ? OLED-related materials Automobiles and Transportation ? Interlayer films with new functions ? Automobile interior materials Building and Infrastructure Life Science Main Products ? Diagnostic reagents ? Overseas designed for Infrastructure overseas markets materials ? Assistance for ? High-performance overseas drug PVA development ? Thermal insulation+ ? Development of new noncombustible active pharmaceutical ingredients materials Push forward efforts to Push forward uniform cultivate customers global management Measures Promote the shift to Accelerate the pace of high-performance development and products; work to commercialization expand application parts New Products and New Businesses ? New products: Accelerate the pace of development and commercialization ? New businesses: Expand sales of implementation- / semiconductor-related materials Overseas Sales ? Work to strengthen marketing by field Americas Europe Asia Overseas Sales Ratio New Products* Sales *Definition of new product: up to 5 years after being placed on the market New Businesses Sales (Billions of yen) 62% (Billions of yen) 62% 234.7 105.2 59.1 70.3 FY2015 61% 219.4 102.7 53.1 63.6 FY2016 65% 242.0 116.6 57.4 67.9 FY2017 (Plan) 13 (Billions of yen) 232.2 107.6 33.9 FY2016 30.6 1.6 FY2017 (Plan) FY2016 2.1 FY2017 (Plan) 56.1 68.5 FY2014 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 0:07:21.5 Housing Company: Overview of FY2016 ? Housing: Increase in the balance of orders (Up 3% compared with the previous fiscal year); returned to a profit increase trajectory owing mainly to an increase in the number of houses sold ? Renovation: Decrease in the balance of orders due mainly to the impact of earthquake activity (Down 3% compared with the previous fiscal year); decrease in sales and profits ? Domestic and overseas frontier: Issues encountered regarding the pace of growth Net Sales Analysis of Operating Income Marginal Profit Factors Sales Factors Fixed Costs Marginal Profit Fixed Costs Marginal Profit Fixed Costs Marginal Profit Fixed Costs +11.5 bil. yen 486.0 bil. yen 485.0 bil. yen 473.4 bil. yen +2.5 +3.2 -4.5 Net Sales: -3.5 -0.9 +0.1 +0.9 -0.3 36.4 bil. yen FY2015 0 +0.2 37.5 bil. yen +1.2 bil. yen FY2016 Housing: +1.2 bil. yen FY2015 FY2016 Plan (Jan. 2017) FY2016 -0.8 bil. yen +0.6 bil. yen +0.2 bil. yen Renovation: Frontier (Domestic): Frontier (Overseas): Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 14 0:07:55.8 Housing Company: FY2017 Plan ? Housing: Target an increase in the number of houses sold; increase sales personnel and strengthen model home galleries focusing mainly on the three major metropolitan city zones ? Renovation: Maintain FY2016 results; Work to ease period-end concentration by securing a recovery in orders and reinforcing the work structure and systems ? Domestic and overseas frontier: Work to strengthen the structure and systems in order to secure growth Net Sales by Business Segment Frontier (Domestic and Overseas) Renovation Housing (Billions of yen) Analysis of Operating Income +15.0 bil. yen Sales: +350 units Sales Factors Marginal Profit Factors Fixed Costs Marginal Profit Fixed Costs Marginal Profit Fixed Costs Marginal Profit Fixed Costs 485.0 57.4 96.9 500.0 60.5 97.0 +4.3 -1.4 -1.8 0 0 +0.4 -0.2 +0.1 +0.1 37.5 bil. yen 330.7 342.5 FY2016 Of which, housing materials: -2.0 +1.5 bil. yen 39.0 bil. yen Housing: +1.1 bil. yen Renovation: even +0.2 bil. yen +0.2 bil. yen Frontier (Domestic): Frontier (Overseas): FY2017 (Plan) FY2016 FY2017 (Plan) 28.9→30.0 7.3→7.3 2.2→2.4 -0.8→-0.6 15 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 0:08:36.4 Housing Company: New Housing Order ? Target an increase in market share on the back of 70th anniversary commemorative products results, efforts to promote smart house sales, and bolstering land and subdivision housing strategies Market Environment Outlook ? No major changes in market trends; underpinned by a sense of higher interest rates ? Trends in built-for-sale housing demand firm on the back of first buyer interest ? Steady progress toward the shift to smart houses (ZEH to become the standard in FY2020) ? Increased in the number of visitors in the 4Q FY2016 (Up 5% YoY) on the back of various measures including renewal of model home galleries Housing Order Plans Housing Order (Units basis) FY2015 FY2016 FY2017 (Plan) October: -10%(YoY) November to March: +2%(YoY) (Substantial decrease in the number of visitors in September owing mainly to poor weather conditions) Full Year: +8% (Unit, YoY) -5% +4% +5% +5% even +10% FY2017 Initiatives Aimed at Securing Orders 1H 2H ? Progressively introduce 70th anniversary commemorative products Products Strategy ? Wood frame-based products: New products that are capable of capturing a share of the volume zone (less than \20 million price range) market ? Steel frame-based products: 2-story self-sufficient smart house-type products (exterior design innovation); 3-story urban-type products ? Common to both wood frame- and steel frame-based products: strengthen energy self-sufficiency proposals ? Number of real estate for sale subdivision lots: Up 29% (YoY) ? Ready-built housing contract plan: Up 40% (YoY) ? Increase sales personnel: Up 100 compared with the corresponding period of the previous fiscal year mainly in the three major metropolitan cities ? Model home galleries: Undertake 30 renewal projects mainly in the three major metropolitan cities Land and Subdivision Housing Strategies Resource expansion Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 16 0:09:56.1 Housing Company: Renovation and Frontier (Domestic and Overseas) Business Renovation Orders by Products (Billions of yen) Frontier (Domestic) Net Sales by Business Segment Rental Management Indicator Operating Income per unit (yen) 95.4 29.4 6.9 59.1 FY2016 102.0 36.9 111.0 54.3 6.0 50.7 FY2019 (Plan) Strategic Products* Solar power generation systems Maintenance (coatings, etc.) Real Estate Residential Services 50K (Billions of yen) 75.0 15.0 38K 42K +7.5 55.5 9.2 46.3 58.0 10.0 48.0 100K No. of dwelling units under management 6.2 58.9 60.0 42K 45K FY2017 (plan) FY2016 FY2017 (plan) FY2019 (Plan) FY2016 FY2017 (Plan) FY2019 (Plan) *Strategic products: for exterior areas, new external walls, bathrooms and kitchens, storage batteries, extensions ? Switch over to a composite proposal-type sales style ? Transition from proposals based on building age to proposals based in life stage ? Strengthen composite proposals ? Put forward energy self-sufficiency proposals as the Feed-in Tariff system comes to an end (implement various measures including efforts to strengthen storage cell variations) ? Integrate real estate companies in the three major metropolitan area → horizontally roll out the Company’s Tokyo area high-earnings model Overseas ? Full-fledged development of land and built-for-sale housing activities ? Sales channel diversification ? Cost reduction promotion (implement measures including the localization of specifications) No. of housing units sold through a joint venture in Thailand 400 134 200 ? Separate responsibilities between sales and after-care services FY2016 FY2017 (Plan) FY2019 (Plan) Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 17 0:10:49.9 UIEP Company: Overview of FY2016 ? Substantial increase in profit thanks to the effects of portfolio reform; reported record high divisional company profits ? Domestic: Substantial improvement in profitability due mainly to successful efforts aimed at improving costs by leveling shipments and securing a proper spread between selling prices and raw material costs ? Overseas: Carried out structural reforms at loss-making businesses Net Sales YoY Impact of Foreign Exchange (-3.0 bil. yen); Newly Added Businesses (+35.4 bil. yen); Structural Reform (-14.6 bil. yen) Analysis of Operating Income Selling Quantity & Compo- Selling sition Price Newly Cost Added Marginal Fixed Raw ReMaterials duction Costs Businesses Profit Fixed Foreign Costs Exchange +14.1 bil. yen 242.0 bil. yen 226.3 bil. yen 240.3 bil. yen (Jan. 2017) FY2016 Plan -1.6 +3.6 +0.1 +2.7 -0.4 +4.4 -0.3 +4.8 -0.3 +2.8 -0.7 12.0 +2.4 +0.2 -0.5 -1.0 +1.4 3.6 bil. yen FY2015 FY2016 Plan (Jan. 2017) FY2016 FY2015 Domestic: +5.4 bil. yen 12.8 bil. yen +9.2 bil. yen Overseas: +3.8 bil. yen FY2016 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 18 0:10:53.6 UIEP Company: FY2017 Plan ? Target record high divisional company profits focusing mainly on increasing marginal profit by expanding sales of high-value-added products both domestically and overseas ? Domestic: Offset the sharp rise in raw material costs through adjustments in product prices and improvements in the cost of sales; increase in sales volume and improvement in the product mix mainly in the prioritized products ? Overseas: Transition to a growth phase; increase marginal profit by expanding sales of high-value-added products Net Sales YoY Impact of Structural Reform: -5.7 bil. yen Analysis of Operating Income +2.7 bil. yen 240.3 bil. yen 243.0 bil. yen Foreign Exchange Selling Quantity & Composition Selling Price Raw Materials Cost Reduction Fixed Costs +0.2 +1.0 +2.5 -2.3 +1.1 -0.7 12.8 bil. yen FY2016 FY2017 (Plan) FY2016 +1.7 bil. yen 14.5 bil. yen Marginal Profit: +2.3 bil. yen FY2017 (Plan) Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 19 0:11:25.5 UIEP Company: Strategies by Business Fields ? Increase sales forecast across each of the three fields Net Sales by 3 each fields and FY2017 Major Initiatives Piping and Infrastructure ? Increase construction and plant sales volume; offset the sharp increase in raw material costs through adjustments in product price YoY Impact of Structural Reform: -4.2 bil. yen Advanced Materials ? Work to boost production capacity and increase sales of high-valueadded products (Billions of yen) (Billions of yen) 104.2 FY2016 105.2 FY2017 (Plan) 122.0 FY2019 (Medium-term Plan) 60.6 FY2016 65.6 FY2017 (Plan) 64.0 FY2019 (Medium-term Plan) (Reference: New Strategic Portfolio) Market Category Piping and Infrastructure Asia Building and Living Environment Interior decorative sheets Advanced Materials Aviation and Railroad Australia Europa Building and Living Environment Overseas New Field/ New Material High Grade Plastic Sheet Australia・Europe・US (SPR) Asia (Catch Basin/Fittings) ? Promote efforts to upgrade and expand high-value-added products and strengthen sales structures and systems Growth (Billions of yen) Industrial Piping RCP MIGUSA (Resin Tatami) Soundproof Material CFRTP To Domestic FFU (SEW etc.) Blow mold Container Plastic Plate Piping for Building (Metal substitute) Piping High grade Rain Gutter Pipeline Renewal Rain Gutter for Building Care Equipment 55.9 FY2016 56.7 FY2017 (Plan) 61.0 FY2019 (Medium-term Plan) Core Piping for Building PE pipe for Civil Eng. Panel Tank Rain Gutter for Housing Exterior FFU Rail Sleeper FFU (Water treatment) Food Tray Reform Engineering Unit Bath Agriculture Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 20 0:12:14.9 UIEP Company: Prioritized Products and Overseas Business Prioritized Products* * Prioritized products: Mainly products that are included in the “Growth” section of “New Strategic Portfolio” (page 20) ? Introduce high-value-added products that address needs ? ? Infrastructure development in the Tokyo metropolitan area: Introduce SEW and other products Metal substitutes: Introduce piping for building, rain gutter for building, and other products SEW Resin piping for hot and cold water Net Sales (Billions of yen) Domestic sales Prioritized product sales included in Domestic sales Ratio of prioritized product sales included in Domestic sales 213.2 213.1 215.0 13% 27.5 FY2016 16% 34.7 FY2017 (Plan) 19% 41.9 FY2019 (Medium-term Plan) Overseas Sales Net Sales (Billions of yen) ?Take steps to put in place a growth platform by increasing production of high-value-added products and strengthening relationships with partners Bolster production capacity of high-value-added products (Americas: Sheets) Aviation sheets ? Promote partner business strategies ? Europe: FFU ? Asia: Piping and Infrastructure ? Americas Europe Asia Australia 27.2 1.6 5.1 5.7 14.9 30.2 1.8 6.1 6.2 16.1 32.0 2.1 7.7 6.5 15.6 FY2019 (Medium-term Plan) FY2016 FY2017 (Plan) ?Complete structural reform of the water infrastructure business in China 21 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 0:13:02.0 Yoshiyuki Hirai, Results for FY2016 Director Managing Executive Officer Responsible for Corporate Finance & Accounting Department Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 22 0:13:12.8 Consolidated Companies Number of Consolidated Companies Mar. 31, 2016 Consolidated Subsidiaries Affiliates (Equity Method) Mar. 31, 2017 Difference Increased: 0 Subsidiaries Decreased: 12 Subsidiaries Increased: 1 Subsidiary Decreased: 1 Subsidiary 155 8 143 8 Influence of Change in the Number of Consolidated Companies FY2016 Net Sales Operating Income *1: Newly consolidated from 4Q FY2015 *2: Removed from consolidation from 4Q FY2015 *3: Removed from consolidation from 2Q FY2016 *4: Removed from consolidation from 3Q FY2016 *5: Removed from consolidation from 4Q FY2016 Difference ? EIDIA*1 ? Sekisui SPR Europe and etc.*2 ? Sekisui Film and etc.*3 ? YONGCHANG-SEKISUI COMPOSITES *4 ? Nippon No-Dig Technology and etc.*5 -18.6 bil. yen +0.8 bil. yen Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 23 0:13:49.1 Summary of Profit and Loss FY2015 1,096.3 345.8 31.5% 256.0 89.8 2.2 -10.8 81.2 10.8 14.0 78.0 20.2 1.1 56.7 120 yen 133 yen FY2016 1,065.8 353.5 33.2% 257.0 96.5 2.5 -7.4 91.5 6.9 15.6 82.9 21.0 1.1 60.9 108 yen 119 yen Difference -30.5 +7.7 +1.6% +1.1 +6.7 +0.3 +3.4 +10.3 -3.8 +1.6 +4.9 +0.7 0 +4.2 -12 yen -14 yen 24 (Billions of yen) Net Sales Gross Profit Gross Profit Rate Selling, Gen. and Admin. Expenses Operating Income Equity in Earnings of Affiliates Other Non-operating Income and Expenses Foreign exchange gain 2.3 bil. yen Gain on sales of securities Ordinary Income Extraordinary Income Extraordinary Loss Income before Income Taxes Corporate Income Tax, etc. Net Income Attributable to Non-controlling Interests Net Income Attributable to Owners of Parent Foreign Exchange (Avg. rate) Loss on transfer of business, loss on devaluation of investment in securities and etc. 1US$ 1? Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 0:14:45.9 Balance Sheets (Assets) (Billions of yen) Mar. 31, 2016 Mar. 31, 2017 Difference Cash and Deposits Account Receivable on Sales Inventories Other Current Assets Tangible Non-Current Assets Intangible Non-Current Assets Investments in Securities Investments & Other Assets Total Assets 68.0 176.0 150.8 39.7 270.0 43.7 168.3 19.6 936.0 109.9 164.1 153.6 38.6 261.8 39.6 156.9 19.3 943.6 +41.9 -11.9 +2.8 -1.2 -8.2 -4.1 -11.3 -0.3 +7.6 Foreign exchange Sales, At fair value, and etc. -6.9 bil. yen Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 25 0:15:11.6 Balance Sheets (Liabilities & Net Assets) (Billions of yen) Mar. 31, 2016 Mar. 31, 2017 Difference Non-Interest-Bearing Liabilities Interest-Bearing Liabilities Total Liabilities Capital Stock etc. Retained Earning Treasury Stock Unrealized Holding Gain on Securities Non-controlling Interests Other Net Assets Total Net Assets Total Liabilities, Net Assets 339.5 52.3 391.9 209.2 295.7 -26.0 40.1 20.6 4.6 544.2 936.0 329.4 43.7 373.1 209.2 341.0 -41.0 39.5 20.8 1.1 570.5 943.6 -10.2 Net income -8.6 -18.8 0 +45.4 -15.0 -0.6 +0.2 -3.6 +26.4 +7.6 60.9 bil. yen Dividends paid -15.5 bil. yen Purchases of treasury stock, and etc. Foreign currency translation adjustment -4.9 bil. yen Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 26 0:15:46.8 Consolidated Cash Flows (Billions of yen) FY2015 FY2016 Operating Activities Cash Flows Investing Activities Cash Flows Financing Activities Cash Flows Net Increase in Cash and Cash Equivalents Cash and Cash Equivalents at the End of Term Free Cash Flow =Operating Activities Cash Flows+Investing Activities Cash Flows Dividends Paid 71.4 -23.7 -41.7 3.1 67.1 33.4 108.2 -44.1 -39.6 22.8 89.9 48.1 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 27 0:16:07.7 Depreciation and Capital Expenditures Depreciation FY2015 FY2016 Difference FY2015 Capital Expenditures FY2016 Difference (Billions of yen) Housing UIEP HPP Others Eliminations or Unallocatable Accounts 8.0 6.4 18.1 1.3 0.9 34.7 8.9 6.4 17.7 0.8 1.0 34.8 +0.9 0 -0.4 -0.5 0 +0.1 14.4 8.5 23.5 2.5 1.0 49.7 13.5 6.7 20.8 2.1 1.0 43.9 -0.9 -1.8 -2.7 -0.4 0 -5.8 Total Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 28 0:16:27.7 Depreciation, Capital Expenditures, Research and Development Expenditure (Billions of yen) FY2016 FY2017 (Plan) Difference Depreciation 34.8 43.9 34.2 36.0 52.0 38.0 +1.2 +8.1 +3.8 Capital Expenditures Research and Development Expenditure Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 29 0:16:56.1 FY2017 Plan FY2016 (Billions of yen) FY2017 (Plan) Difference Net Sales 1,065.8 96.5 91.5 60.9 35* 1,104.0 102.0 97.0 63.0 38* +38.2 +5.5 +5.5 +2.2 +3 Operating Income Ordinary Income Net Income Attributable to Owners of Parent Dividend per Share (Yen) *Including 70th anniversary commemorative dividend of 1 yen per share Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 30 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 31 This slide presentation may contain forward-looking statements. Such forward-looking statements are based on current expectations and beliefs and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements due to changes in global economic, business, competitive market and regulatory factors. Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 32 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 33 Housing Company Results and Plan 1. Main data in Housing business FY2016 1H 2H 247.3 169.3 48.6 28.3 23.6 4.7 1.0 7,000 4,820 3,980 840 2,180 30.8 826 123.0 ‐ ‐ 30% 34% Full Year 485.0 330.7 96.9 55.5 46.3 9.2 1.9 13,620 9,560 7,770 1,790 4,060 30.6 822 122.9 414 2,370 30% 35% 1H 233.9 156.0 50.2 25.8 21.2 4.6 1.8 6,480 4,630 3,660 970 1,850 30.6 805 125.4 425 2,503 26% 39% FY2015 2H 239.6 162.5 50.2 26.0 21.6 4.4 0.9 6,900 4,780 3,800 980 2,120 30.1 809 122.8 ‐ ‐ 28% 37% Full Year 473.4 318.5 100.4 51.8 42.8 9.0 2.7 13,380 9,410 7,460 1,950 3,970 30.3 806 124.1 413 2,395 27% 38% 34 Net Sales (Billions of yen) 237.7 161.4 48.3 27.2 CONSOLIDATED OTHERS Housing Renovation Frontier (Domestic) Real estate Residential Services 22.7 4.4 0.8 6,620 4,740 3,790 950 1,880 30.4 818 122.7 412 2,522 30% 37% Overseas 1. Number of houses sold (Housing units) Detached houses Heim Two-U Apartments (housing complex) 2. Main data Prices <Sales subsidiaries: Detached houses>/ Unit (Millions of yen) Prices <Sales subsidiaries: Detached houses>/ Tsubo (3.3 Square meter)(Thousands of yen) Floor space (Square meter) Exhibition places (Units) Sales staff (Number of person) Rebuilding ratio (%)* Referral sales ratio (%)* * Rebuilding ratio and Referral sales ratio are based on time of orders-received. Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. President" , "Director, Managing Executive Officer Responsible for Corporate Finance & Accounting Dept. Teiji Koge" , "Yoshiyuki Hirai