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0:00:00.0 SHIFT 2019 ?Fusion? SEKISUI CHEMICAL CO., LTD. Presentation of Financial Results for the Third Quarter of Fiscal Year 2017, which ended March 31, 2018 Yoshiyuki Hirai, Director Managing Executive Officer Responsible for Corporate Finance & Accounting Department Head of Business Strategy Department 30 January, 2018 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 0 0:00:11.9 Results for 3Q FY2017 and Forecasts for FY2017 FY2016 Forex Rate FY2017 2H \109/US$ \113/? \111/US$ \119/? 3Q \110/US$ \130/? \113/US$ \133/? 4Q \113/US$ \133/? ‐ 2H \112/US$ \132/? ‐ 3Q \101/US$ \113/? \109/US$ \118/? 4Q \117/US$ \113/? \114/US$ \121/? Assumption Results (Avg. rate for each term) Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 1 0:00:25.6 Overview of 3Q FY2017 Results ? Substantial increase in net sales also on the back of contributions from newly consolidated companies (newly consolidated subsidiaries (YoY): +9.9 bil. yen) ? Secured an increase at each level of profit; extraordinary loss attributable to structural reform measures implemented during the previous fiscal year eliminated during this fiscal year; as a result, the bottom line increased substantially. ? Operating income and the bottom line reported record high earnings First 9 months of FY2016 First 9 months of FY2017 Difference (Billions of yen) Net Sales Operating Income Ordinary Income Net Income Attributable to Owners of the Parent 766.2 61.5 63.7 39.9 791.6 62.4 64.3 44.3 +25.4 +0.9 +0.6 +4.4 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 2 0:00:52.3 3Q FY2017 Results: Net Sales and Operating Income by Divisional Company ? Steady increase in profit at the HPP and UIEP companies (record high earnings in 3Q and 1Q-3Q); secured an increase in Group-wide profit up to the 3Q on a cumulative basis, despite a downturn in earnings in the Housing Company due to delays in construction as a result of poor weather conditions 3Q FY2016 (Oct.?Dec.) (Billions of yen) Net Sales Operating Income 3Q FY2017 (Oct.?Dec.) Net Sales Operating Income Difference Net Sales Operating Income First 9 months of FY2016 (Apr.?Dec.) Net Sales Operating Income First 9 months of FY2017 (Apr.?Dec.) Net Sales Operating Income Difference Net Sales Operating Income HPP* Housing* UIEP* Others Eliminations or Unallocatable Accounts 90.1 103.5 58.7 0.6 -4.5 248.4 14.1 2.4 3.5 -2.0 -0.2 17.9 100.1 101.3 59.8 1.3 -5.1 257.5 15.1 0 4.1 -2.3 -0.5 16.4 +10.0 -2.2 +1.1 +0.7 -0.5 +9.1 +1.0 -2.5 +0.6 -0.3 -0.3 -1.4 266.8 341.2 170.7 1.9 -14.4 766.2 41.6 19.6 6.7 -5.8 -0.6 61.5 285.6 345.7 171.8 4.1 -15.6 791.6 43.9 17.8 8.9 -7.1 -1.1 62.4 +18.8 +4.5 +1.1 +2.1 -1.2 +25.4 +2.3 -1.8 +2.2 -1.3 -0.5 +0.9 Total *HPP: High Performance Plastics Company, Housing: Housing Company, UIEP: Urban Infrastructure & Environmental Products Company Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 3 0:01:37.4 FY2017 Earnings Forecasts ? Plans for a substantial increase in net sales also on the back of contributions from newly consolidated companies (newly consolidated subsidiaries (YoY): +18.1 bil. yen) ? Plans for record high profits at each of the operating income, ordinary income and bottom line levels (Billions of yen) FY2016 FY2017 (Forecasts) Difference FY2017 Plan (Oct. 2017) Difference Net Sales 1,065.8 96.5 91.5 60.9 1,114.0 102.0 101.0 67.0 +48.2 +5.5 +9.5 +6.1 1,114.0 102.0 101.0 67.0 0 0 0 0 Operating Income Ordinary Income Net Income Attributable to Owners of the Parent Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 4 0:02:00.2 FY2017 Forecasts: Net Sales and Operating Income by Divisional Company ? Plans to achieve increases in net sales and profit at all three divisional companies; increases driven by the HPP and UIEP companies (plans for record high profits at these two companies) ? Housing Company forecasts for the full fiscal year revised downward owing mainly to delays in construction as a result of poor weather conditions in the 3Q. Group-wide forecasts project to come in line with plans ? Ramp up research and development investments Group-wide FY2016 (Billions of yen) Net Sales Operating Income FY2017 (Forecasts) Net Sales Operating Income Difference Net Sales Operating Income FY2017 Plan (Oct. 2017) 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 -0.8 388.0 497.5 241.0 6.0 -18.5 59.0 38.0 15.0 -9.0 -1.0 102.0 +30.5 +12.5 +0.7 +3.3 +1.3 +48.2 +4.5 +0.5 +2.2 -1.4 -0.2 +5.5 388.0 500.0 241.0 6.0 -21.0 1,114.0 59.0 39.0 15.0 -9.5 -1.5 102.0 0 -2.5 0 0 +2.5 0 0 -1.0 0 +0.5 +0.5 0 Total 96.5 1,114.0 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 5 0:02:37.6 2H FY2017 Forecasts: Net Sales and Operating Income by Divisional Company ? Substantial increase in profit at the HPP Company; Group-wide operating income projected to come in line with plans, despite the downward revision of forecasts for the Housing Company 2H FY2016 (Billions of yen) Net Sales Operating Income 2H FY2017 Forecasts Net Sales Operating Income Difference Net Sales Operating Income 2H FY2017 Plan (Oct. 2017) Net Sales Operating Income Difference Net Sales Operating Income HPP Housing UIEP Others Eliminations or Unallocatable Accounts 180.8 247.3 128.3 1.4 -9.9 547.9 27.0 20.4 9.6 -3.8 -0.5 52.8 202.5 253.1 128.9 3.3 -7.9 579.9 30.2 20.2 10.2 -4.2 -0.4 56.0 +21.7 +5.8 +0.6 +1.8 +2.0 +31.9 +3.2 -0.2 +0.5 -0.4 +0.1 +3.2 202.5 255.6 128.9 3.3 -10.4 579.9 30.2 21.2 10.2 -4.7 -0.9 56.0 0 -2.5 0 0 +2.5 0 0 -1.0 0 +0.5 +0.5 0 Total Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 6 0:02:55.5 2H FY2017 Forecasts: Analysis of Net Sales and Operating Income ? In 2H, plans for a substantial increase in sales volume and improvement in the product mix mainly in the HPP Company ? Compared to the plan, the quantity decreased and we could not improve the product mix. In addition, the raw materials were also high, but we hedged by cost reduction and fixed cost restraint ? In 4Q, plans for an increase in sales volume and improvement in the product mix mainly in the HPP and Housing Company Net Sales Impact of newly consolidated subsidiaries (YoY): +15.0 bil. yen Analysis of Operating Income Sales ConsolidQuantity ated & Foreign Compo-basis Change Exchange sition Raw Materials Cost Selling & Housing Reduction Price Materials and etc. Fixed Cost +31.9 bil. yen 547.9 bil. yen 579.9 bil. yen 2H Plan (Oct. 2017) +0.7 +0.3 +0.4 +0.9 +0.9 +1.1 +8.9 +0.7 -0.6 +0.4 -3.9 -2.2 -4.4 +2.0 +1.0 +2.2 -6.0 -1.5 -4.5 56.0 16.4 3Q FY2017 579.9 bil. yen (3Q FY2016: 17.9) +7.7 +0.7 52.8 bil. yen 2H FY2016 2H FY2017 Plan (Oct. 2017) 2H FY2017 Forecasts +3.2 bil yen 56.0 bil yen 2H FY2016 2H FY2017 Forecasts ? Increased by 16.9 billion yen on the actual basis excluding the impact of newly consolidated subsidiaries. Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 7 0:03:53.6 Progress of major measures of Medium-term Management Plan “SHIFT 2019 -Fusion-” ? Forward-looking investments and structural reforms progressing steadily. “Fusion” initiatives aimed at accelerating growth moving forward ■HPP ■Housing ■UIEP ■Corporate Headquarters :Begin realizing benefits :Realize benefits in earnest Main Initiatives ? Increase production of high-performance interlayer films in Mexico ? Expand the Life Science Business (integrate EIDIA; establish a new diagnostic reagent company in China) ? Newly establish a Tochigi Plant for molded products (development for car electronics parts business) Strategic ? Decision made to invest in increasing production of high-performance Investments interlayer films and PVB resin in Europe ? Establish a new foam plant at Wuxi City in China (The Automobiles and Transportation field) ? Establish a 2nd foam plant in Thailand (The Building and Infrastructure field) ? Increase sheet for aircrafts and FFU production ? Develop and introduce new products (luminous PVB films, products for OLEDs, other) ? New 70th anniversary commemorative products (SPS GR, GRAND TO YOU V, and DESIO Urban) ? Introduce prioritized products (32 items) ? Consolidate foam business plants (Europe, US) Maturation Period (Image) FY2017 FY2018 FY2019~ Forwardlooking Investment New Products Constant Structural Reform ? Improve efficiency of housing production plants (unify operations of production companies in the three major metropolitan areas, other) ? Reorganize plant production items ? Made Sekisui Polymatech Co., Ltd. a consolidated subsidiary ? Made Sekisui SoflanWiz Co., Ltd. a consolidated subsidiary Fusion and M&A ? Participate in PeptiStar Inc. ? Take up an equity interest in TP Group, a major pipe manufacturers in Vietnam ? Urban development project 8 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 9 0:04:11.5 2H FY2017 Forecasts: Analysis of Net Sales and Operating Income HPP Company ? Plans to increase sales volumes and improve the product mix; offset the greater than expected high level of raw material costs through efforts to fixed costs control and costs reduction; projected to achieve 2H operating income plans Net Sales ( )=3Q Results (Billions of yen) Analysis of Operating Income Selling Quantity Consoli& dated Foreign Compo-basis Exchange sition Change (Billions of yen) Impact of newly consolidated subsidiaries (YoY): +13.4 bil. yen 新規連結 +134億円 Selling Price Cost Raw Reduction Materials and etc. Fixed Cost 2H Plan (Oct. 2017) (3Q FY2016: 14.1) +0.5 +0.9 +4.3 +0.2 +3.8 -0.3 -0.1 -0.3 -1.8 -1.3 -2.6 +1.0 +1.1 +2.2 -1.4 -0.1 -1.1 30.2 15.1 +21.7 bil. yen 202.5 bil. yen 3Q FY2017 +0.3 +0.9 180.8 bil. yen 202.5 bil. yen (100.1) +0.2 +1.1 (90.1) 202.5 180.8 30.2 bil yen +3.2 bil yen 27.0 bil. yen 2H FY2016 2H FY2017 Plan (Oct. 2017) 2H FY2017 Forecasts 2H FY2016 Marginal profit: +3.1 2H FY2017 Forecasts ? Plan to increase by 8.3 billion yen on the actual basis excluding the impact of newly consolidated subsidiaries. Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 10 0:04:57.8 Four Strategic Fields HPP Company ? Failure to achieve plans in the Electronics field owing mainly to the deterioration in market conditions offset by a recovery in the Automobiles and Transportation field Trends of Sales and 2H Overview in the Four Strategic Fields *The increase owing to M&A is marked in red Automobiles and Transportation ? Stagnant conditions in North America; stable market conditions in other areas ? Steady progress in expanding sales of high-performance products globally; start-up of a new interlayer film production line in Mexico in line with plans; decision made to invest in increasing production capacity in Europe ? In the process of reinforcing activities in the heat release materials field (promoting synergies with Sekisui Polymatech Co., Ltd. ) (Billions of yen) Electronics ? Slowdown in the demand for smartphones in China; 4Q demand projected to come in at around the level recorded in the 3Q ? Firm demand for large-scale LCDs; steady progress in development efforts in each of the OLED as well as packaging/semiconductor fields (Billions of yen) 14.9 1.3 16.5 4.0 15.8 2.9 26.1 0.6 29.0 2.2 31.3 1.8 13.4 12.1 13.1 13.6 12.5 12.9 23.9 25.3 24.9 25.5 26.9 29.5 3Q FY16 4Q FY16 1Q FY17 2Q FY17 3Q FY17 4Q FY17 Forecasts 3Q FY16 4Q FY16 1Q FY17 2Q FY17 3Q FY17 4Q FY17 Forecasts Building and Infrastructure ? CPVC: conditions in the Middle East are exhibiting a recovery trend; the Americas steadily expanding ? Fire-resistant materials: steady expansion in the non-combustible urethane business; Made Sekisui SoflanWiz Co., Ltd. a consolidated subsidiary ? Decision made to increase production of polyolefin film for construction use in Thailand (Billions of yen) Life Science ? Firm diagnostics business in Japan; business expanding in China ? Integration synergies with EIDIA Co., Ltd. materializing steadily from a sales and other perspectives 17.8 2.5 (Billions of yen) 14.0 14.4 14.6 13.7 14.0 15.3 18.6 17.3 17.3 18.6 18.9 19.2 3Q FY16 4Q FY16 1Q FY17 2Q FY17 3Q FY17 4Q FY17 Forecasts 3Q FY16 4Q FY16 1Q FY17 2Q FY17 3Q FY17 4Q FY17 Forecasts 11 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 0:07:51.9 2H FY2017 Forecasts: Analysis of Net Sales and Operating Income Housing Company ? 2H operating income plans revised downward due to delays in construction as a result of poor weather conditions in the 3Q ? Delays in construction in each of the Housing and Renovation business as a result of poor weather conditions from September to October ? Housing Business: plans for an increase in the number of houses sold mainly in the 4Q; period-end construction structure and system put in place ? Renovation Business: plans for an improvement in the gross profit margin in the 4Q owing mainly to a higher share of strategic products in 3Q orders Net Sales by Business (Billions of yen) Analysis of Operating Income Marginal Profit Factors (Billions of yen) Frontier (Domestic and Overseas) Renovation Housing ( )=3Q Results Sales Factors Fixed Costs Marginal Profit Fixed Costs Marginal Profit Fixed Costs Marginal Profit Fixed Costs +5.8 bil. yen 247.3 (103.5) 29.4 48.6 (13.8) (22.3) 2H Plan (Oct. 2017) +2.1 -1.1 -0.7 +0.6 -0.1 +0.3 -0.2 -0.7 -0.2 +0.1 -0.1 ±0 ±0 ±0 +0.1 21.2 0 255.6 31.1 49.9 253.1 (101.3) 31.1 (14.3) 48.6 (21.0) 3Q FY2017 (3Q FY2016: 2.4) -0.6 -1.0 -0.2 Downward revised sales plan: +120 units (As of Oct. 2017: +170 units) +1.4 -1.1 -0.6 +0.2 -0.1 +0.3 -0.2 ±0 ±0 169.3 (67.4) 174.6 173.4 (66.0) 20.4 bil. yen Of which, housing materials: -0.7 -0.2 bil. yen Frontier (Domestic): Frontier (Overseas): 20.2 bil. yen 2H FY2017 Forecasts 2H FY2016 2H FY2017 Plan (Oct. 2017) 2H FY2017 Forecasts 2H FY2016 Housing: -0.4 bil. yen Renovation: +0.1 bil. yen +0.1 bil. yen ±0 bil. yen Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 12 0:09:24.2 New Housing Orders Housing Company ? Work to achieve 4Q plans by realizing in earnest the effects of measures aimed at securing plan in the 2H; level out sales in FY2018 Overview of 3Q Results ? Despite falling short of plans, maintaining their recovery trend ? Detached houses grew centered on wood-frame houses (+2% YoY) ? Substantial growth in subdivision housing according to plans (+20% YoY) 2H Housing Order Plan (Revised plan) Housing Oder (Unit, YoY) Plan (Oct.2017): +5% Decrease in the number of visitors in October mainly in East Japan owing to poor weather conditions 2H Revised Plan: +3% Plan (Oct.2017): +5% ? Substantial decline in housing complexes (-10% YoY) ? No major changes in 4Q market trends compared with the 3Q +1% FY2017 FY2015 FY2016 +5% FY2017 FY2015 FY2016 Measure to acquire Orders in 2H 3Q 70th Anniversary Commemorative Product Strategies Land and Subdivision Housing Strategies Customer Traffic and Increase in Customer Prospects 3Q 4Q 4Q Put in place a structure and systems that are capable of addressing a decline in structural demand ?Strong Grand To You V start (3Q orders: more than 400 orders; increase from month to month) ?Smart Power Station GR robust (3Q orders: roughly 200 orders; captures customers with different exterior tastes) ?Robust sales of large-scale subdivision, Smart Heim City (3Q subdivision orders: +20% YoY; purchase of land targeting the 4Q and beyond also steady) ?Substantial increase in the number of visitors thanks to a variety of factors including successful efforts to diversify promotion tools aimed at attracting customers (3Q: +11% YoY; Nov.-Dec.: +21%) ?Despite failing to achieve plans; positive turnaround in YoY orders (+1%) Despite a substantial decline in solar power generation systems, growth in strategic products* (+13%) *Strategic products: for exterior areas, new external walls, bathrooms and kitchens, extensions, and etc. ?Work to accelerate the pace of Grand To You V and Smart Power Station GR sales ?The 3-story urban-type DESIO Urban released (January 2nd, 2018) ?Further reinforce subdivision housing orders; increase stock for sale for FY2018 ?Reinforce the ability to attract visitors (expand model home galleries and open houses mainly Tokyo, Nagoya and Osaka) ?Accelerate the switch over to a composite proposal-type sales style ?Put forward proposals focusing on prominent products (new exterior tiled-wall Ecochante and other products) Renovation Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 13 0:12:06.0 2H FY2017 Forecasts: Analysis of Net Sales and Operating Income ?Steady progress in each measures; projected to achieve 2H plans ? Growth strategy: expand sales of prioritized products* against the backdrop of such conditions as Tokyo metropolitan area infrastructure-related demand ? Platform Efficiency:continue with efforts aimed at securing a spread between selling prices and raw material costs; promote the optimization of production capacity ? Overseas Strategy: recovery in demand for aircraft sheets from the 4Q; progress in investments aimed at increasing production (sheets, FFU) ( )=3Q Results UIEP Company ? Prioritized products: High-value-added products with the potential for market growth and substitutability Net Sales Analysis of Operating Income Selling Quantity & Composition Cost Raw Selling Reduction Fixed Marginal Fixed Profit Price Materials and etc. Costs Costs Foreign Exchange Impact of business structural reform (YoY): -2.2 bil. yen +0.6 bil. yen 128.3 bil. yen (58.7) 128.9 bil. yen 2H Plan (Oct. 2017) +0.7 +1.0 +0.4 -1.1 +0.5 ±0 -0.6 +0.5 -0.4 +0.2 +0.2 -0.2 ±0 ±0 ±0 10.2 4.1 3Q FY2017 +0.5 -0.5 -1.1 128.9 bil. yen (59.8) (3Q FY2016: 3.5) +0.8 +1.0 +0.1 -0.4 +0.5 -0.3 10.2 bil yen 2H FY2016 2H FY2017 Plan (Oct. 2017) 2H FY2017 (Revised Plan) 9.6 bil. yen 2H FY2016 +0.6 bil yen Domestic: +0.4 bil. yen Overseas: +0.2 bil. yen ? Increased by 2.8 billion yen on the actual basis excluding the impact of business structural reform. 2H FY2017 Forecasts 14 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 0:13:58.1 Three Strategic Fields and Prioritized Products UIEP Company ? Progress essentially in line with plans in each of the Three Strategic Fields ? Steady progress in strategic investments as well as the introduction of new products; progress also in improving the product mix Sales Trends and 2H Progress in the Three Strategic Fields Piping and Infrastructure ? Increase in the number of pipeline rehabilitation orders that employ the SPR method received from local governments in Japan ? Completed equity investment in the TP Group; work to develop the Group’s ASEAN business in earnest from the next fiscal period (Billions of yen) Advanced Materials ? Sheet Business: despite the incidence of gaps in the delivery periods of aircraft sheets, progress in cultivating other fields ? FFU Business: progress essentially in line with plans against the backdrop of growing overseas demand (Billions of yen) 56.6 30.1 26.5 2H FY2016 57.6 30.8 26.8 2H FY2017 Forecasts 31.9 17.2 14.7 2H FY2016 32.7 17.3 15.4 2H FY2017 Forecasts Business structural reform (YoY): -2.2 bil. yen 4Q Forecasts 3Q Results 4Q Forecasts 3Q Results Prioritized Product Sales ? Steady growth; plans to secure an increase of 1.4 billion yen in the 2H ? Progress in the introduction of new products essentially in line with plans (plans to introduce 14 items in the 2H) Domestic Sales (Billions of yen) of which, Prioritized products sales Building and Living Environment ? Progress in introducing new products (designer rain gutters, etc.) ? Expand the capacity of prioritized product supply (functional flooring, etc.) (Billions of yen) 29.0 15.2 13.8 2H FY2016 28.7 14.7 14.0 2H FY2017 Forecasts 4Q Forecasts 3Q Results 115.1 15% 113.6 17% Prioritized Product Sales/Domestic Sales 17.5 2H FY2016 18.9 2H FY2017 Forecasts 15 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 0:15:45.6 Results for 3Q FY2017 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 16 0:15:50.1 Consolidated Companies Number of Consolidated Companies Mar. 31, 2017 Consolidated Subsidiaries Affiliates (Equity Method) Dec. 31, 2017 Difference Increased: 17 Subsidiaries*1 Decreased: 8 Subsidiaries*2 Increased: 0 Subsidiaries Decreased: 0 Subsidiaries 143 8 152 8 *1: ENAX,INCwith Sekisui Polymatech Co., Ltd., Sekisui SoflanWiz Co., Ltd., and etc. *2: Includes the integration of three Sekisui Heim Real Estate companies into a single company and four Sekisui Heim Industry companies into a separate single company. Influence of Change in the Number of Consolidated Companies First 9 months of FY2017 Net Sales Operating Income *3: Removed from consolidation from 2Q FY2016 *?: Removed from consolidation from 4Q FY2016 *?: Newly Consolidated from 2Q FY2017 Difference ? Sekisui Film*3 ? Nippon No-Dig Technology*? ? SEKISUI KNT(HEBEI) ENVIRONMENTAL TECHNOLOGY*? ? Polymatech Japan Co., Ltd. *5 and etc. +2.4 bil. yen +0.7 bil. yen Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 17 0:15:59.2 Summary of Profit and Loss First 9 months of FY2016 First 9 months of FY2017 Difference (Billions of yen) Net Sales Gross Profit Gross Profit Rate Selling, Gen. and Admin. Expenses 766.2 253.9 33.1% 192.4 61.5 1.7 0.5 63.7 6.9 11.0 59.6 18.2 1.4 39.9 . 791.6 258.2 32.6% 195.8 62.4 1.3 0.6 64.3 2.5 1.2 65.6 18.5 2.8 44.3 112 yen 129 yen +25.4 +4.3 -0.5% +3.4 +0.9 -0.4 0 +0.6 -4.4 -9.9 +6.0 +0.3 +1.4 +4.4 Loss on devaluation of investments in securities and impact of business structural reform (FY2016) 18 Operating Income Equity in Earnings of Affiliates Other Non-operating Income and Expenses Ordinary Income Extraordinary Income Extraordinary Loss Gain on sales of investments in securities (FY2016) Income before Income Taxes Corporate Income Tax, etc. Net Income Attributable to Non-controlling Interests Net Income Attributable to Owners of the Parent Foreign Exchange (Avg. rate) 1US$ 1? 107 yen 118 yen Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 0:16:29.5 Balance Sheets (Assets) (Billions of yen) Mar. 31, 2017 Dec. 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 109.9 164.1 153.6 38.6 261.8 39.6 156.9 19.3 943.6 95.6 177.1 185.8 51.9 277.9 53.1 180.4 18.4 1,040.2 -14.3 +13.0 +32.3 +13.3 +16.1 +13.5 +23.4 -0.8 +96.6 Increase of land for sale and work in progress of housing Capital investment and M&A Purchases and investment in securities, at fair value, and etc. Influence of Change of Consolidated Companies +27.4 bil. yen Foreign exchange +13.3 bil. yen Actual basis; +55.9 bil. yen Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 19 0:17:12.3 Balance Sheets (Liabilities & Net Assets) Net income (Billions of yen) Mar. 31, 2017 Dec. 31, 2017 Difference 44.3 bil. yen Dividends paid -18.1 bil. yen Retirement of treasury stock -12.9 bil. yen 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 329.4 43.7 373.1 209.2 341.0 -41.0 39.5 20.8 1.1 570.5 943.6 345.2 83.8 429.0 209.2 355.0 -40.0 51.8 25.6 9.7 611.3 1,040.2 +15.8 +40.1 +55.9 0 +14.0 +1.0 +12.3 +4.8 +8.6 +40.7 +96.6 Purchases of treasury stock -13.3 bil. yen Retirement of treasury stock +12.9 bil. yen Translation adjustments +9.9 bil. yen 20 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 0:17:36.0 Consolidated Cash Flows (Billions of yen) First 9 months of FY2016 First 9 months of FY2017 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 59.0 -14.8 -37.6 6.2 73.3 28.2 39.0 -43.3 5.6 3.7 94.2 -23.2 Working Capital and Increase in corporate tax payment, and etc. Purchases of investments in securities and etc. Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 21 0:18:16.2 Depreciation and Capital Expenditures (Billions of yen) First 9 months First 9 months of FY2016 of FY2017 Difference FY2016 FY2017 Forecasts Difference Depreciation Capital Expenditures 25.7 30.2 26.8 37.0 +1.1 +6.8 34.8 43.9 37.0 56.0 +2.2 +12.1 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 22 0:18:23.9 FY2017 Forecasts FY2016 (Billions of yen) FY2017 Forecasts Difference FY2017 Plan (Oct. 2017) Net Sales Operating Income Ordinary Income Net Income Attributable to Owners of the Parent Dividend per Share (Yen) 1,065.8 96.5 91.5 60.9 35* 1,114.0 102.0 101.0 67.0 38* +48.2 +5.5 +9.5 +6.1 +3 1,114.0 102.0 101.0 67.0 38* *Including 70th anniversary commemorative dividend of 1 yen per share. Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 23 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. *For charts and graphs in this presentation material denominated in billions of yen, numbers below a billion are rounded up or down to the nearest hundred million. Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 24 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 25 Housing Company Results and Plan 1. Main data in Housing business FY2017 1H 3Q 101.3 66.0 21.0 13.9 11.7 2.2 0.4 2,380 1,950 1,590 360 430 31.2 838 122.8 419 2,432 28% 33% 2H (plan) 253.1 173.4 48.6 30.2 25.2 5.1 0.9 7,140 5,050 4,070 980 2,090 30% 32% Annual (plan) 497.5 340.7 96.0 58.9 49.1 9.8 1.9 13,990 9,970 8,250 1,720 4,020 419 2,375 29% 32% 1H 237.7 161.4 48.3 27.2 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% FY2016 3Q 103.5 67.4 22.3 13.3 11.2 2.1 0.4 2,470 2,030 1,630 400 440 31.0 828 123.5 416 2,431 30% 35% 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% Annual 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% FY2015 Annual 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% 26 Net Sales (Billions of yen) 244.4 167.3 47.4 28.7 23.9 4.7 1.0 6,850 4,920 4,180 740 1,930 31.0 832 123.0 416 2,495 28% 32% CONSOLIDATED OTHERS Housing Renovation Frontier (Domestic) Real estate Residential Services 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. Housing Company Results and Plan 2. Housing orders (Millions of yen) Year-start Backlog Growth Rate New Orders Growth Rate Sales of Housing/Renovation Growth Rate Balance at the end Growth Rate FY2017 1H 3Q 2H (plan) Annual (plan) 1H 3Q FY2016 2H Annual 1H FY2015 2H Annual 206,000 207,800 207,800 - 205,500 207,500 207,500 - 204,300 205,500 +1% +1% -12% -8% ±0% ±0% +1% ±0% 202,957 92,818 209,217 412,174 202,457 93,917 207,529 409,987 199,914 204,391 404,304 -1% +1% +1% +1% -4% +2% +1% -5% +5% ±0% ±0% 201,157 80,618 207,517 408,674 200,457 85,217 209,029 409,487 198,714 204,391 403,104 +2% -9% -4% - 205,500 205,500 -8% +1% FY2016 Annual (plan) 1H 3Q 2H Annual -5% -1% ±0% 207,800 220,000 209,500 +2% +2% ±0% +1% +2% ±0% ±0% - 207,500 216,200 206,000 +1% -1% ±0% -7% FY2015 Annual 3. Housing starts (Units) Housing starts* Privately-owned houses* (included in above) =A Sales by our company Detached house sales by our company=B Our share in Detached houses=B/A FY2017 1H 3Q 2H (plan) 496,840 148,266 6,850 4,920 3.3% 239,500 72,500 2,380 1,950 2.7% 453,000 142,000 7,140 5,050 3.6% 950,000 290,000 13,990 9,970 3.4% 500,151 152,836 6,620 4,740 3.1% 250,696 75,929 2,470 2,030 2.7% 473,986 138,947 7,000 4,820 3.5% 974,137 291,783 13,620 9,560 3.3% 920,537 284,441 13,380 9,410 3.3% FY2015 *“The housing starts” and “Privately-owned houses” after 1H of FY2017 are based on forecasts. 4.The ratio of the houses equipped with the high-performance specifications Solar power generation systems installed Tiled exterior walls (Heim type JX) Storage battery installed Comfortable Air System FY2017 1H 3Q 2H (plan) Annual (plan) FY2016 1H 3Q 2H Annual Annual 75% 71% 21% 75% 72% 70% 19% 73% 73% 72% 20% 74% 74% 72% 21% 75% 77% 67% 21% 73% 78% 68% 24% 74% 78% 68% 27% 77% 78% 67% 24% 75% 79% 66% 25% 70% 27 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. Director, Managing Executive Officer Yoshiyuki Hirai 0:00:00.0 SHIFT 2019 ?Fusion? SEKISUI CHEMICAL CO., LTD. Presentation of Financial Results for the Third Quarter of Fiscal Year 2017, which ended March 31, 2018 Yoshiyuki Hirai, Director Managing Executive Officer Responsible for Corporate Finance & Accounting Department Head of Business Strategy Department 30 January, 2018 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 0 0:00:11.9 Results for 3Q FY2017 and Forecasts for FY2017 FY2016 Forex Rate FY2017 2H \109/US$ \113/? \111/US$ \119/? 3Q \110/US$ \130/? \113/US$ \133/? 4Q \113/US$ \133/? ‐ 2H \112/US$ \132/? ‐ 3Q \101/US$ \113/? \109/US$ \118/? 4Q \117/US$ \113/? \114/US$ \121/? Assumption Results (Avg. rate for each term) Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 1 0:00:25.6 Overview of 3Q FY2017 Results ? Substantial increase in net sales also on the back of contributions from newly consolidated companies (newly consolidated subsidiaries (YoY): +9.9 bil. yen) ? Secured an increase at each level of profit; extraordinary loss attributable to structural reform measures implemented during the previous fiscal year eliminated during this fiscal year; as a result, the bottom line increased substantially. ? Operating income and the bottom line reported record high earnings First 9 months of FY2016 First 9 months of FY2017 Difference (Billions of yen) Net Sales Operating Income Ordinary Income Net Income Attributable to Owners of the Parent 766.2 61.5 63.7 39.9 791.6 62.4 64.3 44.3 +25.4 +0.9 +0.6 +4.4 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 2 0:00:52.3 3Q FY2017 Results: Net Sales and Operating Income by Divisional Company ? Steady increase in profit at the HPP and UIEP companies (record high earnings in 3Q and 1Q-3Q); secured an increase in Group-wide profit up to the 3Q on a cumulative basis, despite a downturn in earnings in the Housing Company due to delays in construction as a result of poor weather conditions 3Q FY2016 (Oct.?Dec.) (Billions of yen) Net Sales Operating Income 3Q FY2017 (Oct.?Dec.) Net Sales Operating Income Difference Net Sales Operating Income First 9 months of FY2016 (Apr.?Dec.) Net Sales Operating Income First 9 months of FY2017 (Apr.?Dec.) Net Sales Operating Income Difference Net Sales Operating Income HPP* Housing* UIEP* Others Eliminations or Unallocatable Accounts 90.1 103.5 58.7 0.6 -4.5 248.4 14.1 2.4 3.5 -2.0 -0.2 17.9 100.1 101.3 59.8 1.3 -5.1 257.5 15.1 0 4.1 -2.3 -0.5 16.4 +10.0 -2.2 +1.1 +0.7 -0.5 +9.1 +1.0 -2.5 +0.6 -0.3 -0.3 -1.4 266.8 341.2 170.7 1.9 -14.4 766.2 41.6 19.6 6.7 -5.8 -0.6 61.5 285.6 345.7 171.8 4.1 -15.6 791.6 43.9 17.8 8.9 -7.1 -1.1 62.4 +18.8 +4.5 +1.1 +2.1 -1.2 +25.4 +2.3 -1.8 +2.2 -1.3 -0.5 +0.9 Total *HPP: High Performance Plastics Company, Housing: Housing Company, UIEP: Urban Infrastructure & Environmental Products Company Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 3 0:01:37.4 FY2017 Earnings Forecasts ? Plans for a substantial increase in net sales also on the back of contributions from newly consolidated companies (newly consolidated subsidiaries (YoY): +18.1 bil. yen) ? Plans for record high profits at each of the operating income, ordinary income and bottom line levels (Billions of yen) FY2016 FY2017 (Forecasts) Difference FY2017 Plan (Oct. 2017) Difference Net Sales 1,065.8 96.5 91.5 60.9 1,114.0 102.0 101.0 67.0 +48.2 +5.5 +9.5 +6.1 1,114.0 102.0 101.0 67.0 0 0 0 0 Operating Income Ordinary Income Net Income Attributable to Owners of the Parent Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 4 0:02:00.2 FY2017 Forecasts: Net Sales and Operating Income by Divisional Company ? Plans to achieve increases in net sales and profit at all three divisional companies; increases driven by the HPP and UIEP companies (plans for record high profits at these two companies) ? Housing Company forecasts for the full fiscal year revised downward owing mainly to delays in construction as a result of poor weather conditions in the 3Q. Group-wide forecasts project to come in line with plans ? Ramp up research and development investments Group-wide FY2016 (Billions of yen) Net Sales Operating Income FY2017 (Forecasts) Net Sales Operating Income Difference Net Sales Operating Income FY2017 Plan (Oct. 2017) 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 -0.8 388.0 497.5 241.0 6.0 -18.5 59.0 38.0 15.0 -9.0 -1.0 102.0 +30.5 +12.5 +0.7 +3.3 +1.3 +48.2 +4.5 +0.5 +2.2 -1.4 -0.2 +5.5 388.0 500.0 241.0 6.0 -21.0 1,114.0 59.0 39.0 15.0 -9.5 -1.5 102.0 0 -2.5 0 0 +2.5 0 0 -1.0 0 +0.5 +0.5 0 Total 96.5 1,114.0 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 5 0:02:37.6 2H FY2017 Forecasts: Net Sales and Operating Income by Divisional Company ? Substantial increase in profit at the HPP Company; Group-wide operating income projected to come in line with plans, despite the downward revision of forecasts for the Housing Company 2H FY2016 (Billions of yen) Net Sales Operating Income 2H FY2017 Forecasts Net Sales Operating Income Difference Net Sales Operating Income 2H FY2017 Plan (Oct. 2017) Net Sales Operating Income Difference Net Sales Operating Income HPP Housing UIEP Others Eliminations or Unallocatable Accounts 180.8 247.3 128.3 1.4 -9.9 547.9 27.0 20.4 9.6 -3.8 -0.5 52.8 202.5 253.1 128.9 3.3 -7.9 579.9 30.2 20.2 10.2 -4.2 -0.4 56.0 +21.7 +5.8 +0.6 +1.8 +2.0 +31.9 +3.2 -0.2 +0.5 -0.4 +0.1 +3.2 202.5 255.6 128.9 3.3 -10.4 579.9 30.2 21.2 10.2 -4.7 -0.9 56.0 0 -2.5 0 0 +2.5 0 0 -1.0 0 +0.5 +0.5 0 Total Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 6 0:02:55.5 2H FY2017 Forecasts: Analysis of Net Sales and Operating Income ? In 2H, plans for a substantial increase in sales volume and improvement in the product mix mainly in the HPP Company ? Compared to the plan, the quantity decreased and we could not improve the product mix. In addition, the raw materials were also high, but we hedged by cost reduction and fixed cost restraint ? In 4Q, plans for an increase in sales volume and improvement in the product mix mainly in the HPP and Housing Company Net Sales Impact of newly consolidated subsidiaries (YoY): +15.0 bil. yen Analysis of Operating Income Sales ConsolidQuantity ated & Foreign Compo-basis Change Exchange sition Raw Materials Cost Selling & Housing Reduction Price Materials and etc. Fixed Cost +31.9 bil. yen 547.9 bil. yen 579.9 bil. yen 2H Plan (Oct. 2017) +0.7 +0.3 +0.4 +0.9 +0.9 +1.1 +8.9 +0.7 -0.6 +0.4 -3.9 -2.2 -4.4 +2.0 +1.0 +2.2 -6.0 -1.5 -4.5 56.0 16.4 3Q FY2017 579.9 bil. yen (3Q FY2016: 17.9) +7.7 +0.7 52.8 bil. yen 2H FY2016 2H FY2017 Plan (Oct. 2017) 2H FY2017 Forecasts +3.2 bil yen 56.0 bil yen 2H FY2016 2H FY2017 Forecasts ? Increased by 16.9 billion yen on the actual basis excluding the impact of newly consolidated subsidiaries. Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 7 0:03:53.6 Progress of major measures of Medium-term Management Plan “SHIFT 2019 -Fusion-” ? Forward-looking investments and structural reforms progressing steadily. “Fusion” initiatives aimed at accelerating growth moving forward ■HPP ■Housing ■UIEP ■Corporate Headquarters :Begin realizing benefits :Realize benefits in earnest Main Initiatives ? Increase production of high-performance interlayer films in Mexico ? Expand the Life Science Business (integrate EIDIA; establish a new diagnostic reagent company in China) ? Newly establish a Tochigi Plant for molded products (development for car electronics parts business) Strategic ? Decision made to invest in increasing production of high-performance Investments interlayer films and PVB resin in Europe ? Establish a new foam plant at Wuxi City in China (The Automobiles and Transportation field) ? Establish a 2nd foam plant in Thailand (The Building and Infrastructure field) ? Increase sheet for aircrafts and FFU production ? Develop and introduce new products (luminous PVB films, products for OLEDs, other) ? New 70th anniversary commemorative products (SPS GR, GRAND TO YOU V, and DESIO Urban) ? Introduce prioritized products (32 items) ? Consolidate foam business plants (Europe, US) Maturation Period (Image) FY2017 FY2018 FY2019~ Forwardlooking Investment New Products Constant Structural Reform ? Improve efficiency of housing production plants (unify operations of production companies in the three major metropolitan areas, other) ? Reorganize plant production items ? Made Sekisui Polymatech Co., Ltd. a consolidated subsidiary ? Made Sekisui SoflanWiz Co., Ltd. a consolidated subsidiary Fusion and M&A ? Participate in PeptiStar Inc. ? Take up an equity interest in TP Group, a major pipe manufacturers in Vietnam ? Urban development project 8 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 9 0:04:11.5 2H FY2017 Forecasts: Analysis of Net Sales and Operating Income HPP Company ? Plans to increase sales volumes and improve the product mix; offset the greater than expected high level of raw material costs through efforts to fixed costs control and costs reduction; projected to achieve 2H operating income plans Net Sales ( )=3Q Results (Billions of yen) Analysis of Operating Income Selling Quantity Consoli& dated Foreign Compo-basis Exchange sition Change (Billions of yen) Impact of newly consolidated subsidiaries (YoY): +13.4 bil. yen 新規連結 +134億円 Selling Price Cost Raw Reduction Materials and etc. Fixed Cost 2H Plan (Oct. 2017) (3Q FY2016: 14.1) +0.5 +0.9 +4.3 +0.2 +3.8 -0.3 -0.1 -0.3 -1.8 -1.3 -2.6 +1.0 +1.1 +2.2 -1.4 -0.1 -1.1 30.2 15.1 +21.7 bil. yen 202.5 bil. yen 3Q FY2017 +0.3 +0.9 180.8 bil. yen 202.5 bil. yen (100.1) +0.2 +1.1 (90.1) 202.5 180.8 30.2 bil yen +3.2 bil yen 27.0 bil. yen 2H FY2016 2H FY2017 Plan (Oct. 2017) 2H FY2017 Forecasts 2H FY2016 Marginal profit: +3.1 2H FY2017 Forecasts ? Plan to increase by 8.3 billion yen on the actual basis excluding the impact of newly consolidated subsidiaries. Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 10 0:04:57.8 Four Strategic Fields HPP Company ? Failure to achieve plans in the Electronics field owing mainly to the deterioration in market conditions offset by a recovery in the Automobiles and Transportation field Trends of Sales and 2H Overview in the Four Strategic Fields *The increase owing to M&A is marked in red Automobiles and Transportation ? Stagnant conditions in North America; stable market conditions in other areas ? Steady progress in expanding sales of high-performance products globally; start-up of a new interlayer film production line in Mexico in line with plans; decision made to invest in increasing production capacity in Europe ? In the process of reinforcing activities in the heat release materials field (promoting synergies with Sekisui Polymatech Co., Ltd. ) (Billions of yen) Electronics ? Slowdown in the demand for smartphones in China; 4Q demand projected to come in at around the level recorded in the 3Q ? Firm demand for large-scale LCDs; steady progress in development efforts in each of the OLED as well as packaging/semiconductor fields (Billions of yen) 14.9 1.3 16.5 4.0 15.8 2.9 26.1 0.6 29.0 2.2 31.3 1.8 13.4 12.1 13.1 13.6 12.5 12.9 23.9 25.3 24.9 25.5 26.9 29.5 3Q FY16 4Q FY16 1Q FY17 2Q FY17 3Q FY17 4Q FY17 Forecasts 3Q FY16 4Q FY16 1Q FY17 2Q FY17 3Q FY17 4Q FY17 Forecasts Building and Infrastructure ? CPVC: conditions in the Middle East are exhibiting a recovery trend; the Americas steadily expanding ? Fire-resistant materials: steady expansion in the non-combustible urethane business; Made Sekisui SoflanWiz Co., Ltd. a consolidated subsidiary ? Decision made to increase production of polyolefin film for construction use in Thailand (Billions of yen) Life Science ? Firm diagnostics business in Japan; business expanding in China ? Integration synergies with EIDIA Co., Ltd. materializing steadily from a sales and other perspectives 17.8 2.5 (Billions of yen) 14.0 14.4 14.6 13.7 14.0 15.3 18.6 17.3 17.3 18.6 18.9 19.2 3Q FY16 4Q FY16 1Q FY17 2Q FY17 3Q FY17 4Q FY17 Forecasts 3Q FY16 4Q FY16 1Q FY17 2Q FY17 3Q FY17 4Q FY17 Forecasts 11 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 0:07:51.9 2H FY2017 Forecasts: Analysis of Net Sales and Operating Income Housing Company ? 2H operating income plans revised downward due to delays in construction as a result of poor weather conditions in the 3Q ? Delays in construction in each of the Housing and Renovation business as a result of poor weather conditions from September to October ? Housing Business: plans for an increase in the number of houses sold mainly in the 4Q; period-end construction structure and system put in place ? Renovation Business: plans for an improvement in the gross profit margin in the 4Q owing mainly to a higher share of strategic products in 3Q orders Net Sales by Business (Billions of yen) Analysis of Operating Income Marginal Profit Factors (Billions of yen) Frontier (Domestic and Overseas) Renovation Housing ( )=3Q Results Sales Factors Fixed Costs Marginal Profit Fixed Costs Marginal Profit Fixed Costs Marginal Profit Fixed Costs +5.8 bil. yen 247.3 (103.5) 29.4 48.6 (13.8) (22.3) 2H Plan (Oct. 2017) +2.1 -1.1 -0.7 +0.6 -0.1 +0.3 -0.2 -0.7 -0.2 +0.1 -0.1 ±0 ±0 ±0 +0.1 21.2 0 255.6 31.1 49.9 253.1 (101.3) 31.1 (14.3) 48.6 (21.0) 3Q FY2017 (3Q FY2016: 2.4) -0.6 -1.0 -0.2 Downward revised sales plan: +120 units (As of Oct. 2017: +170 units) +1.4 -1.1 -0.6 +0.2 -0.1 +0.3 -0.2 ±0 ±0 169.3 (67.4) 174.6 173.4 (66.0) 20.4 bil. yen Of which, housing materials: -0.7 -0.2 bil. yen Frontier (Domestic): Frontier (Overseas): 20.2 bil. yen 2H FY2017 Forecasts 2H FY2016 2H FY2017 Plan (Oct. 2017) 2H FY2017 Forecasts 2H FY2016 Housing: -0.4 bil. yen Renovation: +0.1 bil. yen +0.1 bil. yen ±0 bil. yen Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 12 0:09:24.2 New Housing Orders Housing Company ? Work to achieve 4Q plans by realizing in earnest the effects of measures aimed at securing plan in the 2H; level out sales in FY2018 Overview of 3Q Results ? Despite falling short of plans, maintaining their recovery trend ? Detached houses grew centered on wood-frame houses (+2% YoY) ? Substantial growth in subdivision housing according to plans (+20% YoY) 2H Housing Order Plan (Revised plan) Housing Oder (Unit, YoY) Plan (Oct.2017): +5% Decrease in the number of visitors in October mainly in East Japan owing to poor weather conditions 2H Revised Plan: +3% Plan (Oct.2017): +5% ? Substantial decline in housing complexes (-10% YoY) ? No major changes in 4Q market trends compared with the 3Q +1% FY2017 FY2015 FY2016 +5% FY2017 FY2015 FY2016 Measure to acquire Orders in 2H 3Q 70th Anniversary Commemorative Product Strategies Land and Subdivision Housing Strategies Customer Traffic and Increase in Customer Prospects 3Q 4Q 4Q Put in place a structure and systems that are capable of addressing a decline in structural demand ?Strong Grand To You V start (3Q orders: more than 400 orders; increase from month to month) ?Smart Power Station GR robust (3Q orders: roughly 200 orders; captures customers with different exterior tastes) ?Robust sales of large-scale subdivision, Smart Heim City (3Q subdivision orders: +20% YoY; purchase of land targeting the 4Q and beyond also steady) ?Substantial increase in the number of visitors thanks to a variety of factors including successful efforts to diversify promotion tools aimed at attracting customers (3Q: +11% YoY; Nov.-Dec.: +21%) ?Despite failing to achieve plans; positive turnaround in YoY orders (+1%) Despite a substantial decline in solar power generation systems, growth in strategic products* (+13%) *Strategic products: for exterior areas, new external walls, bathrooms and kitchens, extensions, and etc. ?Work to accelerate the pace of Grand To You V and Smart Power Station GR sales ?The 3-story urban-type DESIO Urban released (January 2nd, 2018) ?Further reinforce subdivision housing orders; increase stock for sale for FY2018 ?Reinforce the ability to attract visitors (expand model home galleries and open houses mainly Tokyo, Nagoya and Osaka) ?Accelerate the switch over to a composite proposal-type sales style ?Put forward proposals focusing on prominent products (new exterior tiled-wall Ecochante and other products) Renovation Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 13 0:12:06.0 2H FY2017 Forecasts: Analysis of Net Sales and Operating Income ?Steady progress in each measures; projected to achieve 2H plans ? Growth strategy: expand sales of prioritized products* against the backdrop of such conditions as Tokyo metropolitan area infrastructure-related demand ? Platform Efficiency:continue with efforts aimed at securing a spread between selling prices and raw material costs; promote the optimization of production capacity ? Overseas Strategy: recovery in demand for aircraft sheets from the 4Q; progress in investments aimed at increasing production (sheets, FFU) ( )=3Q Results UIEP Company ? Prioritized products: High-value-added products with the potential for market growth and substitutability Net Sales Analysis of Operating Income Selling Quantity & Composition Cost Raw Selling Reduction Fixed Marginal Fixed Profit Price Materials and etc. Costs Costs Foreign Exchange Impact of business structural reform (YoY): -2.2 bil. yen +0.6 bil. yen 128.3 bil. yen (58.7) 128.9 bil. yen 2H Plan (Oct. 2017) +0.7 +1.0 +0.4 -1.1 +0.5 ±0 -0.6 +0.5 -0.4 +0.2 +0.2 -0.2 ±0 ±0 ±0 10.2 4.1 3Q FY2017 +0.5 -0.5 -1.1 128.9 bil. yen (59.8) (3Q FY2016: 3.5) +0.8 +1.0 +0.1 -0.4 +0.5 -0.3 10.2 bil yen 2H FY2016 2H FY2017 Plan (Oct. 2017) 2H FY2017 (Revised Plan) 9.6 bil. yen 2H FY2016 +0.6 bil yen Domestic: +0.4 bil. yen Overseas: +0.2 bil. yen ? Increased by 2.8 billion yen on the actual basis excluding the impact of business structural reform. 2H FY2017 Forecasts 14 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 0:13:58.1 Three Strategic Fields and Prioritized Products UIEP Company ? Progress essentially in line with plans in each of the Three Strategic Fields ? Steady progress in strategic investments as well as the introduction of new products; progress also in improving the product mix Sales Trends and 2H Progress in the Three Strategic Fields Piping and Infrastructure ? Increase in the number of pipeline rehabilitation orders that employ the SPR method received from local governments in Japan ? Completed equity investment in the TP Group; work to develop the Group’s ASEAN business in earnest from the next fiscal period (Billions of yen) Advanced Materials ? Sheet Business: despite the incidence of gaps in the delivery periods of aircraft sheets, progress in cultivating other fields ? FFU Business: progress essentially in line with plans against the backdrop of growing overseas demand (Billions of yen) 56.6 30.1 26.5 2H FY2016 57.6 30.8 26.8 2H FY2017 Forecasts 31.9 17.2 14.7 2H FY2016 32.7 17.3 15.4 2H FY2017 Forecasts Business structural reform (YoY): -2.2 bil. yen 4Q Forecasts 3Q Results 4Q Forecasts 3Q Results Prioritized Product Sales ? Steady growth; plans to secure an increase of 1.4 billion yen in the 2H ? Progress in the introduction of new products essentially in line with plans (plans to introduce 14 items in the 2H) Domestic Sales (Billions of yen) of which, Prioritized products sales Building and Living Environment ? Progress in introducing new products (designer rain gutters, etc.) ? Expand the capacity of prioritized product supply (functional flooring, etc.) (Billions of yen) 29.0 15.2 13.8 2H FY2016 28.7 14.7 14.0 2H FY2017 Forecasts 4Q Forecasts 3Q Results 115.1 15% 113.6 17% Prioritized Product Sales/Domestic Sales 17.5 2H FY2016 18.9 2H FY2017 Forecasts 15 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 0:15:45.6 Results for 3Q FY2017 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 16 0:15:50.1 Consolidated Companies Number of Consolidated Companies Mar. 31, 2017 Consolidated Subsidiaries Affiliates (Equity Method) Dec. 31, 2017 Difference Increased: 17 Subsidiaries*1 Decreased: 8 Subsidiaries*2 Increased: 0 Subsidiaries Decreased: 0 Subsidiaries 143 8 152 8 *1: ENAX,INCwith Sekisui Polymatech Co., Ltd., Sekisui SoflanWiz Co., Ltd., and etc. *2: Includes the integration of three Sekisui Heim Real Estate companies into a single company and four Sekisui Heim Industry companies into a separate single company. Influence of Change in the Number of Consolidated Companies First 9 months of FY2017 Net Sales Operating Income *3: Removed from consolidation from 2Q FY2016 *?: Removed from consolidation from 4Q FY2016 *?: Newly Consolidated from 2Q FY2017 Difference ? Sekisui Film*3 ? Nippon No-Dig Technology*? ? SEKISUI KNT(HEBEI) ENVIRONMENTAL TECHNOLOGY*? ? Polymatech Japan Co., Ltd. *5 and etc. +2.4 bil. yen +0.7 bil. yen Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 17 0:15:59.2 Summary of Profit and Loss First 9 months of FY2016 First 9 months of FY2017 Difference (Billions of yen) Net Sales Gross Profit Gross Profit Rate Selling, Gen. and Admin. Expenses 766.2 253.9 33.1% 192.4 61.5 1.7 0.5 63.7 6.9 11.0 59.6 18.2 1.4 39.9 . 791.6 258.2 32.6% 195.8 62.4 1.3 0.6 64.3 2.5 1.2 65.6 18.5 2.8 44.3 112 yen 129 yen +25.4 +4.3 -0.5% +3.4 +0.9 -0.4 0 +0.6 -4.4 -9.9 +6.0 +0.3 +1.4 +4.4 Loss on devaluation of investments in securities and impact of business structural reform (FY2016) 18 Operating Income Equity in Earnings of Affiliates Other Non-operating Income and Expenses Ordinary Income Extraordinary Income Extraordinary Loss Gain on sales of investments in securities (FY2016) Income before Income Taxes Corporate Income Tax, etc. Net Income Attributable to Non-controlling Interests Net Income Attributable to Owners of the Parent Foreign Exchange (Avg. rate) 1US$ 1? 107 yen 118 yen Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 0:16:29.5 Balance Sheets (Assets) (Billions of yen) Mar. 31, 2017 Dec. 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 109.9 164.1 153.6 38.6 261.8 39.6 156.9 19.3 943.6 95.6 177.1 185.8 51.9 277.9 53.1 180.4 18.4 1,040.2 -14.3 +13.0 +32.3 +13.3 +16.1 +13.5 +23.4 -0.8 +96.6 Increase of land for sale and work in progress of housing Capital investment and M&A Purchases and investment in securities, at fair value, and etc. Influence of Change of Consolidated Companies +27.4 bil. yen Foreign exchange +13.3 bil. yen Actual basis; +55.9 bil. yen Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 19 0:17:12.3 Balance Sheets (Liabilities & Net Assets) Net income (Billions of yen) Mar. 31, 2017 Dec. 31, 2017 Difference 44.3 bil. yen Dividends paid -18.1 bil. yen Retirement of treasury stock -12.9 bil. yen 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 329.4 43.7 373.1 209.2 341.0 -41.0 39.5 20.8 1.1 570.5 943.6 345.2 83.8 429.0 209.2 355.0 -40.0 51.8 25.6 9.7 611.3 1,040.2 +15.8 +40.1 +55.9 0 +14.0 +1.0 +12.3 +4.8 +8.6 +40.7 +96.6 Purchases of treasury stock -13.3 bil. yen Retirement of treasury stock +12.9 bil. yen Translation adjustments +9.9 bil. yen 20 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 0:17:36.0 Consolidated Cash Flows (Billions of yen) First 9 months of FY2016 First 9 months of FY2017 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 59.0 -14.8 -37.6 6.2 73.3 28.2 39.0 -43.3 5.6 3.7 94.2 -23.2 Working Capital and Increase in corporate tax payment, and etc. Purchases of investments in securities and etc. Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 21 0:18:16.2 Depreciation and Capital Expenditures (Billions of yen) First 9 months First 9 months of FY2016 of FY2017 Difference FY2016 FY2017 Forecasts Difference Depreciation Capital Expenditures 25.7 30.2 26.8 37.0 +1.1 +6.8 34.8 43.9 37.0 56.0 +2.2 +12.1 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 22 0:18:23.9 FY2017 Forecasts FY2016 (Billions of yen) FY2017 Forecasts Difference FY2017 Plan (Oct. 2017) Net Sales Operating Income Ordinary Income Net Income Attributable to Owners of the Parent Dividend per Share (Yen) 1,065.8 96.5 91.5 60.9 35* 1,114.0 102.0 101.0 67.0 38* +48.2 +5.5 +9.5 +6.1 +3 1,114.0 102.0 101.0 67.0 38* *Including 70th anniversary commemorative dividend of 1 yen per share. Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 23 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. *For charts and graphs in this presentation material denominated in billions of yen, numbers below a billion are rounded up or down to the nearest hundred million. Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 24 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 25 Housing Company Results and Plan 1. Main data in Housing business FY2017 1H 3Q 101.3 66.0 21.0 13.9 11.7 2.2 0.4 2,380 1,950 1,590 360 430 31.2 838 122.8 419 2,432 28% 33% 2H (plan) 253.1 173.4 48.6 30.2 25.2 5.1 0.9 7,140 5,050 4,070 980 2,090 30% 32% Annual (plan) 497.5 340.7 96.0 58.9 49.1 9.8 1.9 13,990 9,970 8,250 1,720 4,020 419 2,375 29% 32% 1H 237.7 161.4 48.3 27.2 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% FY2016 3Q 103.5 67.4 22.3 13.3 11.2 2.1 0.4 2,470 2,030 1,630 400 440 31.0 828 123.5 416 2,431 30% 35% 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% Annual 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% FY2015 Annual 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% 26 Net Sales (Billions of yen) 244.4 167.3 47.4 28.7 23.9 4.7 1.0 6,850 4,920 4,180 740 1,930 31.0 832 123.0 416 2,495 28% 32% CONSOLIDATED OTHERS Housing Renovation Frontier (Domestic) Real estate Residential Services 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. Housing Company Results and Plan 2. Housing orders (Millions of yen) Year-start Backlog Growth Rate New Orders Growth Rate Sales of Housing/Renovation Growth Rate Balance at the end Growth Rate FY2017 1H 3Q 2H (plan) Annual (plan) 1H 3Q FY2016 2H Annual 1H FY2015 2H Annual 206,000 207,800 207,800 - 205,500 207,500 207,500 - 204,300 205,500 +1% +1% -12% -8% ±0% ±0% +1% ±0% 202,957 92,818 209,217 412,174 202,457 93,917 207,529 409,987 199,914 204,391 404,304 -1% +1% +1% +1% -4% +2% +1% -5% +5% ±0% ±0% 201,157 80,618 207,517 408,674 200,457 85,217 209,029 409,487 198,714 204,391 403,104 +2% -9% -4% - 205,500 205,500 -8% +1% FY2016 Annual (plan) 1H 3Q 2H Annual -5% -1% ±0% 207,800 220,000 209,500 +2% +2% ±0% +1% +2% ±0% ±0% - 207,500 216,200 206,000 +1% -1% ±0% -7% FY2015 Annual 3. Housing starts (Units) Housing starts* Privately-owned houses* (included in above) =A Sales by our company Detached house sales by our company=B Our share in Detached houses=B/A FY2017 1H 3Q 2H (plan) 496,840 148,266 6,850 4,920 3.3% 239,500 72,500 2,380 1,950 2.7% 453,000 142,000 7,140 5,050 3.6% 950,000 290,000 13,990 9,970 3.4% 500,151 152,836 6,620 4,740 3.1% 250,696 75,929 2,470 2,030 2.7% 473,986 138,947 7,000 4,820 3.5% 974,137 291,783 13,620 9,560 3.3% 920,537 284,441 13,380 9,410 3.3% FY2015 *“The housing starts” and “Privately-owned houses” after 1H of FY2017 are based on forecasts. 4.The ratio of the houses equipped with the high-performance specifications Solar power generation systems installed Tiled exterior walls (Heim type JX) Storage battery installed Comfortable Air System FY2017 1H 3Q 2H (plan) Annual (plan) FY2016 1H 3Q 2H Annual Annual 75% 71% 21% 75% 72% 70% 19% 73% 73% 72% 20% 74% 74% 72% 21% 75% 77% 67% 21% 73% 78% 68% 24% 74% 78% 68% 27% 77% 78% 67% 24% 75% 79% 66% 25% 70% 27 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. Director, Managing Executive Officer Yoshiyuki Hirai 0:00:00.0 SHIFT 2019 ?Fusion? SEKISUI CHEMICAL CO., LTD. Presentation of Financial Results for the Third Quarter of Fiscal Year 2017, which ended March 31, 2018 Yoshiyuki Hirai, Director Managing Executive Officer Responsible for Corporate Finance & Accounting Department Head of Business Strategy Department 30 January, 2018 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 0 0:00:11.9 Results for 3Q FY2017 and Forecasts for FY2017 FY2016 Forex Rate FY2017 2H \109/US$ \113/? \111/US$ \119/? 3Q \110/US$ \130/? \113/US$ \133/? 4Q \113/US$ \133/? ‐ 2H \112/US$ \132/? ‐ 3Q \101/US$ \113/? \109/US$ \118/? 4Q \117/US$ \113/? \114/US$ \121/? Assumption Results (Avg. rate for each term) Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 1 0:00:25.6 Overview of 3Q FY2017 Results ? Substantial increase in net sales also on the back of contributions from newly consolidated companies (newly consolidated subsidiaries (YoY): +9.9 bil. yen) ? Secured an increase at each level of profit; extraordinary loss attributable to structural reform measures implemented during the previous fiscal year eliminated during this fiscal year; as a result, the bottom line increased substantially. ? Operating income and the bottom line reported record high earnings First 9 months of FY2016 First 9 months of FY2017 Difference (Billions of yen) Net Sales Operating Income Ordinary Income Net Income Attributable to Owners of the Parent 766.2 61.5 63.7 39.9 791.6 62.4 64.3 44.3 +25.4 +0.9 +0.6 +4.4 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 2 0:00:52.3 3Q FY2017 Results: Net Sales and Operating Income by Divisional Company ? Steady increase in profit at the HPP and UIEP companies (record high earnings in 3Q and 1Q-3Q); secured an increase in Group-wide profit up to the 3Q on a cumulative basis, despite a downturn in earnings in the Housing Company due to delays in construction as a result of poor weather conditions 3Q FY2016 (Oct.?Dec.) (Billions of yen) Net Sales Operating Income 3Q FY2017 (Oct.?Dec.) Net Sales Operating Income Difference Net Sales Operating Income First 9 months of FY2016 (Apr.?Dec.) Net Sales Operating Income First 9 months of FY2017 (Apr.?Dec.) Net Sales Operating Income Difference Net Sales Operating Income HPP* Housing* UIEP* Others Eliminations or Unallocatable Accounts 90.1 103.5 58.7 0.6 -4.5 248.4 14.1 2.4 3.5 -2.0 -0.2 17.9 100.1 101.3 59.8 1.3 -5.1 257.5 15.1 0 4.1 -2.3 -0.5 16.4 +10.0 -2.2 +1.1 +0.7 -0.5 +9.1 +1.0 -2.5 +0.6 -0.3 -0.3 -1.4 266.8 341.2 170.7 1.9 -14.4 766.2 41.6 19.6 6.7 -5.8 -0.6 61.5 285.6 345.7 171.8 4.1 -15.6 791.6 43.9 17.8 8.9 -7.1 -1.1 62.4 +18.8 +4.5 +1.1 +2.1 -1.2 +25.4 +2.3 -1.8 +2.2 -1.3 -0.5 +0.9 Total *HPP: High Performance Plastics Company, Housing: Housing Company, UIEP: Urban Infrastructure & Environmental Products Company Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 3 0:01:37.4 FY2017 Earnings Forecasts ? Plans for a substantial increase in net sales also on the back of contributions from newly consolidated companies (newly consolidated subsidiaries (YoY): +18.1 bil. yen) ? Plans for record high profits at each of the operating income, ordinary income and bottom line levels (Billions of yen) FY2016 FY2017 (Forecasts) Difference FY2017 Plan (Oct. 2017) Difference Net Sales 1,065.8 96.5 91.5 60.9 1,114.0 102.0 101.0 67.0 +48.2 +5.5 +9.5 +6.1 1,114.0 102.0 101.0 67.0 0 0 0 0 Operating Income Ordinary Income Net Income Attributable to Owners of the Parent Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 4 0:02:00.2 FY2017 Forecasts: Net Sales and Operating Income by Divisional Company ? Plans to achieve increases in net sales and profit at all three divisional companies; increases driven by the HPP and UIEP companies (plans for record high profits at these two companies) ? Housing Company forecasts for the full fiscal year revised downward owing mainly to delays in construction as a result of poor weather conditions in the 3Q. Group-wide forecasts project to come in line with plans ? Ramp up research and development investments Group-wide FY2016 (Billions of yen) Net Sales Operating Income FY2017 (Forecasts) Net Sales Operating Income Difference Net Sales Operating Income FY2017 Plan (Oct. 2017) 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 -0.8 388.0 497.5 241.0 6.0 -18.5 59.0 38.0 15.0 -9.0 -1.0 102.0 +30.5 +12.5 +0.7 +3.3 +1.3 +48.2 +4.5 +0.5 +2.2 -1.4 -0.2 +5.5 388.0 500.0 241.0 6.0 -21.0 1,114.0 59.0 39.0 15.0 -9.5 -1.5 102.0 0 -2.5 0 0 +2.5 0 0 -1.0 0 +0.5 +0.5 0 Total 96.5 1,114.0 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 5 0:02:37.6 2H FY2017 Forecasts: Net Sales and Operating Income by Divisional Company ? Substantial increase in profit at the HPP Company; Group-wide operating income projected to come in line with plans, despite the downward revision of forecasts for the Housing Company 2H FY2016 (Billions of yen) Net Sales Operating Income 2H FY2017 Forecasts Net Sales Operating Income Difference Net Sales Operating Income 2H FY2017 Plan (Oct. 2017) Net Sales Operating Income Difference Net Sales Operating Income HPP Housing UIEP Others Eliminations or Unallocatable Accounts 180.8 247.3 128.3 1.4 -9.9 547.9 27.0 20.4 9.6 -3.8 -0.5 52.8 202.5 253.1 128.9 3.3 -7.9 579.9 30.2 20.2 10.2 -4.2 -0.4 56.0 +21.7 +5.8 +0.6 +1.8 +2.0 +31.9 +3.2 -0.2 +0.5 -0.4 +0.1 +3.2 202.5 255.6 128.9 3.3 -10.4 579.9 30.2 21.2 10.2 -4.7 -0.9 56.0 0 -2.5 0 0 +2.5 0 0 -1.0 0 +0.5 +0.5 0 Total Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 6 0:02:55.5 2H FY2017 Forecasts: Analysis of Net Sales and Operating Income ? In 2H, plans for a substantial increase in sales volume and improvement in the product mix mainly in the HPP Company ? Compared to the plan, the quantity decreased and we could not improve the product mix. In addition, the raw materials were also high, but we hedged by cost reduction and fixed cost restraint ? In 4Q, plans for an increase in sales volume and improvement in the product mix mainly in the HPP and Housing Company Net Sales Impact of newly consolidated subsidiaries (YoY): +15.0 bil. yen Analysis of Operating Income Sales ConsolidQuantity ated & Foreign Compo-basis Change Exchange sition Raw Materials Cost Selling & Housing Reduction Price Materials and etc. Fixed Cost +31.9 bil. yen 547.9 bil. yen 579.9 bil. yen 2H Plan (Oct. 2017) +0.7 +0.3 +0.4 +0.9 +0.9 +1.1 +8.9 +0.7 -0.6 +0.4 -3.9 -2.2 -4.4 +2.0 +1.0 +2.2 -6.0 -1.5 -4.5 56.0 16.4 3Q FY2017 579.9 bil. yen (3Q FY2016: 17.9) +7.7 +0.7 52.8 bil. yen 2H FY2016 2H FY2017 Plan (Oct. 2017) 2H FY2017 Forecasts +3.2 bil yen 56.0 bil yen 2H FY2016 2H FY2017 Forecasts ? Increased by 16.9 billion yen on the actual basis excluding the impact of newly consolidated subsidiaries. Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 7 0:03:53.6 Progress of major measures of Medium-term Management Plan “SHIFT 2019 -Fusion-” ? Forward-looking investments and structural reforms progressing steadily. “Fusion” initiatives aimed at accelerating growth moving forward ■HPP ■Housing ■UIEP ■Corporate Headquarters :Begin realizing benefits :Realize benefits in earnest Main Initiatives ? Increase production of high-performance interlayer films in Mexico ? Expand the Life Science Business (integrate EIDIA; establish a new diagnostic reagent company in China) ? Newly establish a Tochigi Plant for molded products (development for car electronics parts business) Strategic ? Decision made to invest in increasing production of high-performance Investments interlayer films and PVB resin in Europe ? Establish a new foam plant at Wuxi City in China (The Automobiles and Transportation field) ? Establish a 2nd foam plant in Thailand (The Building and Infrastructure field) ? Increase sheet for aircrafts and FFU production ? Develop and introduce new products (luminous PVB films, products for OLEDs, other) ? New 70th anniversary commemorative products (SPS GR, GRAND TO YOU V, and DESIO Urban) ? Introduce prioritized products (32 items) ? Consolidate foam business plants (Europe, US) Maturation Period (Image) FY2017 FY2018 FY2019~ Forwardlooking Investment New Products Constant Structural Reform ? Improve efficiency of housing production plants (unify operations of production companies in the three major metropolitan areas, other) ? Reorganize plant production items ? Made Sekisui Polymatech Co., Ltd. a consolidated subsidiary ? Made Sekisui SoflanWiz Co., Ltd. a consolidated subsidiary Fusion and M&A ? Participate in PeptiStar Inc. ? Take up an equity interest in TP Group, a major pipe manufacturers in Vietnam ? Urban development project 8 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 9 0:04:11.5 2H FY2017 Forecasts: Analysis of Net Sales and Operating Income HPP Company ? Plans to increase sales volumes and improve the product mix; offset the greater than expected high level of raw material costs through efforts to fixed costs control and costs reduction; projected to achieve 2H operating income plans Net Sales ( )=3Q Results (Billions of yen) Analysis of Operating Income Selling Quantity Consoli& dated Foreign Compo-basis Exchange sition Change (Billions of yen) Impact of newly consolidated subsidiaries (YoY): +13.4 bil. yen 新規連結 +134億円 Selling Price Cost Raw Reduction Materials and etc. Fixed Cost 2H Plan (Oct. 2017) (3Q FY2016: 14.1) +0.5 +0.9 +4.3 +0.2 +3.8 -0.3 -0.1 -0.3 -1.8 -1.3 -2.6 +1.0 +1.1 +2.2 -1.4 -0.1 -1.1 30.2 15.1 +21.7 bil. yen 202.5 bil. yen 3Q FY2017 +0.3 +0.9 180.8 bil. yen 202.5 bil. yen (100.1) +0.2 +1.1 (90.1) 202.5 180.8 30.2 bil yen +3.2 bil yen 27.0 bil. yen 2H FY2016 2H FY2017 Plan (Oct. 2017) 2H FY2017 Forecasts 2H FY2016 Marginal profit: +3.1 2H FY2017 Forecasts ? Plan to increase by 8.3 billion yen on the actual basis excluding the impact of newly consolidated subsidiaries. Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 10 0:04:57.8 Four Strategic Fields HPP Company ? Failure to achieve plans in the Electronics field owing mainly to the deterioration in market conditions offset by a recovery in the Automobiles and Transportation field Trends of Sales and 2H Overview in the Four Strategic Fields *The increase owing to M&A is marked in red Automobiles and Transportation ? Stagnant conditions in North America; stable market conditions in other areas ? Steady progress in expanding sales of high-performance products globally; start-up of a new interlayer film production line in Mexico in line with plans; decision made to invest in increasing production capacity in Europe ? In the process of reinforcing activities in the heat release materials field (promoting synergies with Sekisui Polymatech Co., Ltd. ) (Billions of yen) Electronics ? Slowdown in the demand for smartphones in China; 4Q demand projected to come in at around the level recorded in the 3Q ? Firm demand for large-scale LCDs; steady progress in development efforts in each of the OLED as well as packaging/semiconductor fields (Billions of yen) 14.9 1.3 16.5 4.0 15.8 2.9 26.1 0.6 29.0 2.2 31.3 1.8 13.4 12.1 13.1 13.6 12.5 12.9 23.9 25.3 24.9 25.5 26.9 29.5 3Q FY16 4Q FY16 1Q FY17 2Q FY17 3Q FY17 4Q FY17 Forecasts 3Q FY16 4Q FY16 1Q FY17 2Q FY17 3Q FY17 4Q FY17 Forecasts Building and Infrastructure ? CPVC: conditions in the Middle East are exhibiting a recovery trend; the Americas steadily expanding ? Fire-resistant materials: steady expansion in the non-combustible urethane business; Made Sekisui SoflanWiz Co., Ltd. a consolidated subsidiary ? Decision made to increase production of polyolefin film for construction use in Thailand (Billions of yen) Life Science ? Firm diagnostics business in Japan; business expanding in China ? Integration synergies with EIDIA Co., Ltd. materializing steadily from a sales and other perspectives 17.8 2.5 (Billions of yen) 14.0 14.4 14.6 13.7 14.0 15.3 18.6 17.3 17.3 18.6 18.9 19.2 3Q FY16 4Q FY16 1Q FY17 2Q FY17 3Q FY17 4Q FY17 Forecasts 3Q FY16 4Q FY16 1Q FY17 2Q FY17 3Q FY17 4Q FY17 Forecasts 11 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 0:07:51.9 2H FY2017 Forecasts: Analysis of Net Sales and Operating Income Housing Company ? 2H operating income plans revised downward due to delays in construction as a result of poor weather conditions in the 3Q ? Delays in construction in each of the Housing and Renovation business as a result of poor weather conditions from September to October ? Housing Business: plans for an increase in the number of houses sold mainly in the 4Q; period-end construction structure and system put in place ? Renovation Business: plans for an improvement in the gross profit margin in the 4Q owing mainly to a higher share of strategic products in 3Q orders Net Sales by Business (Billions of yen) Analysis of Operating Income Marginal Profit Factors (Billions of yen) Frontier (Domestic and Overseas) Renovation Housing ( )=3Q Results Sales Factors Fixed Costs Marginal Profit Fixed Costs Marginal Profit Fixed Costs Marginal Profit Fixed Costs +5.8 bil. yen 247.3 (103.5) 29.4 48.6 (13.8) (22.3) 2H Plan (Oct. 2017) +2.1 -1.1 -0.7 +0.6 -0.1 +0.3 -0.2 -0.7 -0.2 +0.1 -0.1 ±0 ±0 ±0 +0.1 21.2 0 255.6 31.1 49.9 253.1 (101.3) 31.1 (14.3) 48.6 (21.0) 3Q FY2017 (3Q FY2016: 2.4) -0.6 -1.0 -0.2 Downward revised sales plan: +120 units (As of Oct. 2017: +170 units) +1.4 -1.1 -0.6 +0.2 -0.1 +0.3 -0.2 ±0 ±0 169.3 (67.4) 174.6 173.4 (66.0) 20.4 bil. yen Of which, housing materials: -0.7 -0.2 bil. yen Frontier (Domestic): Frontier (Overseas): 20.2 bil. yen 2H FY2017 Forecasts 2H FY2016 2H FY2017 Plan (Oct. 2017) 2H FY2017 Forecasts 2H FY2016 Housing: -0.4 bil. yen Renovation: +0.1 bil. yen +0.1 bil. yen ±0 bil. yen Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 12 0:09:24.2 New Housing Orders Housing Company ? Work to achieve 4Q plans by realizing in earnest the effects of measures aimed at securing plan in the 2H; level out sales in FY2018 Overview of 3Q Results ? Despite falling short of plans, maintaining their recovery trend ? Detached houses grew centered on wood-frame houses (+2% YoY) ? Substantial growth in subdivision housing according to plans (+20% YoY) 2H Housing Order Plan (Revised plan) Housing Oder (Unit, YoY) Plan (Oct.2017): +5% Decrease in the number of visitors in October mainly in East Japan owing to poor weather conditions 2H Revised Plan: +3% Plan (Oct.2017): +5% ? Substantial decline in housing complexes (-10% YoY) ? No major changes in 4Q market trends compared with the 3Q +1% FY2017 FY2015 FY2016 +5% FY2017 FY2015 FY2016 Measure to acquire Orders in 2H 3Q 70th Anniversary Commemorative Product Strategies Land and Subdivision Housing Strategies Customer Traffic and Increase in Customer Prospects 3Q 4Q 4Q Put in place a structure and systems that are capable of addressing a decline in structural demand ?Strong Grand To You V start (3Q orders: more than 400 orders; increase from month to month) ?Smart Power Station GR robust (3Q orders: roughly 200 orders; captures customers with different exterior tastes) ?Robust sales of large-scale subdivision, Smart Heim City (3Q subdivision orders: +20% YoY; purchase of land targeting the 4Q and beyond also steady) ?Substantial increase in the number of visitors thanks to a variety of factors including successful efforts to diversify promotion tools aimed at attracting customers (3Q: +11% YoY; Nov.-Dec.: +21%) ?Despite failing to achieve plans; positive turnaround in YoY orders (+1%) Despite a substantial decline in solar power generation systems, growth in strategic products* (+13%) *Strategic products: for exterior areas, new external walls, bathrooms and kitchens, extensions, and etc. ?Work to accelerate the pace of Grand To You V and Smart Power Station GR sales ?The 3-story urban-type DESIO Urban released (January 2nd, 2018) ?Further reinforce subdivision housing orders; increase stock for sale for FY2018 ?Reinforce the ability to attract visitors (expand model home galleries and open houses mainly Tokyo, Nagoya and Osaka) ?Accelerate the switch over to a composite proposal-type sales style ?Put forward proposals focusing on prominent products (new exterior tiled-wall Ecochante and other products) Renovation Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 13 0:12:06.0 2H FY2017 Forecasts: Analysis of Net Sales and Operating Income ?Steady progress in each measures; projected to achieve 2H plans ? Growth strategy: expand sales of prioritized products* against the backdrop of such conditions as Tokyo metropolitan area infrastructure-related demand ? Platform Efficiency:continue with efforts aimed at securing a spread between selling prices and raw material costs; promote the optimization of production capacity ? Overseas Strategy: recovery in demand for aircraft sheets from the 4Q; progress in investments aimed at increasing production (sheets, FFU) ( )=3Q Results UIEP Company ? Prioritized products: High-value-added products with the potential for market growth and substitutability Net Sales Analysis of Operating Income Selling Quantity & Composition Cost Raw Selling Reduction Fixed Marginal Fixed Profit Price Materials and etc. Costs Costs Foreign Exchange Impact of business structural reform (YoY): -2.2 bil. yen +0.6 bil. yen 128.3 bil. yen (58.7) 128.9 bil. yen 2H Plan (Oct. 2017) +0.7 +1.0 +0.4 -1.1 +0.5 ±0 -0.6 +0.5 -0.4 +0.2 +0.2 -0.2 ±0 ±0 ±0 10.2 4.1 3Q FY2017 +0.5 -0.5 -1.1 128.9 bil. yen (59.8) (3Q FY2016: 3.5) +0.8 +1.0 +0.1 -0.4 +0.5 -0.3 10.2 bil yen 2H FY2016 2H FY2017 Plan (Oct. 2017) 2H FY2017 (Revised Plan) 9.6 bil. yen 2H FY2016 +0.6 bil yen Domestic: +0.4 bil. yen Overseas: +0.2 bil. yen ? Increased by 2.8 billion yen on the actual basis excluding the impact of business structural reform. 2H FY2017 Forecasts 14 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 0:13:58.1 Three Strategic Fields and Prioritized Products UIEP Company ? Progress essentially in line with plans in each of the Three Strategic Fields ? Steady progress in strategic investments as well as the introduction of new products; progress also in improving the product mix Sales Trends and 2H Progress in the Three Strategic Fields Piping and Infrastructure ? Increase in the number of pipeline rehabilitation orders that employ the SPR method received from local governments in Japan ? Completed equity investment in the TP Group; work to develop the Group’s ASEAN business in earnest from the next fiscal period (Billions of yen) Advanced Materials ? Sheet Business: despite the incidence of gaps in the delivery periods of aircraft sheets, progress in cultivating other fields ? FFU Business: progress essentially in line with plans against the backdrop of growing overseas demand (Billions of yen) 56.6 30.1 26.5 2H FY2016 57.6 30.8 26.8 2H FY2017 Forecasts 31.9 17.2 14.7 2H FY2016 32.7 17.3 15.4 2H FY2017 Forecasts Business structural reform (YoY): -2.2 bil. yen 4Q Forecasts 3Q Results 4Q Forecasts 3Q Results Prioritized Product Sales ? Steady growth; plans to secure an increase of 1.4 billion yen in the 2H ? Progress in the introduction of new products essentially in line with plans (plans to introduce 14 items in the 2H) Domestic Sales (Billions of yen) of which, Prioritized products sales Building and Living Environment ? Progress in introducing new products (designer rain gutters, etc.) ? Expand the capacity of prioritized product supply (functional flooring, etc.) (Billions of yen) 29.0 15.2 13.8 2H FY2016 28.7 14.7 14.0 2H FY2017 Forecasts 4Q Forecasts 3Q Results 115.1 15% 113.6 17% Prioritized Product Sales/Domestic Sales 17.5 2H FY2016 18.9 2H FY2017 Forecasts 15 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 0:15:45.6 Results for 3Q FY2017 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 16 0:15:50.1 Consolidated Companies Number of Consolidated Companies Mar. 31, 2017 Consolidated Subsidiaries Affiliates (Equity Method) Dec. 31, 2017 Difference Increased: 17 Subsidiaries*1 Decreased: 8 Subsidiaries*2 Increased: 0 Subsidiaries Decreased: 0 Subsidiaries 143 8 152 8 *1: ENAX,INCwith Sekisui Polymatech Co., Ltd., Sekisui SoflanWiz Co., Ltd., and etc. *2: Includes the integration of three Sekisui Heim Real Estate companies into a single company and four Sekisui Heim Industry companies into a separate single company. Influence of Change in the Number of Consolidated Companies First 9 months of FY2017 Net Sales Operating Income *3: Removed from consolidation from 2Q FY2016 *?: Removed from consolidation from 4Q FY2016 *?: Newly Consolidated from 2Q FY2017 Difference ? Sekisui Film*3 ? Nippon No-Dig Technology*? ? SEKISUI KNT(HEBEI) ENVIRONMENTAL TECHNOLOGY*? ? Polymatech Japan Co., Ltd. *5 and etc. +2.4 bil. yen +0.7 bil. yen Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 17 0:15:59.2 Summary of Profit and Loss First 9 months of FY2016 First 9 months of FY2017 Difference (Billions of yen) Net Sales Gross Profit Gross Profit Rate Selling, Gen. and Admin. Expenses 766.2 253.9 33.1% 192.4 61.5 1.7 0.5 63.7 6.9 11.0 59.6 18.2 1.4 39.9 . 791.6 258.2 32.6% 195.8 62.4 1.3 0.6 64.3 2.5 1.2 65.6 18.5 2.8 44.3 112 yen 129 yen +25.4 +4.3 -0.5% +3.4 +0.9 -0.4 0 +0.6 -4.4 -9.9 +6.0 +0.3 +1.4 +4.4 Loss on devaluation of investments in securities and impact of business structural reform (FY2016) 18 Operating Income Equity in Earnings of Affiliates Other Non-operating Income and Expenses Ordinary Income Extraordinary Income Extraordinary Loss Gain on sales of investments in securities (FY2016) Income before Income Taxes Corporate Income Tax, etc. Net Income Attributable to Non-controlling Interests Net Income Attributable to Owners of the Parent Foreign Exchange (Avg. rate) 1US$ 1? 107 yen 118 yen Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 0:16:29.5 Balance Sheets (Assets) (Billions of yen) Mar. 31, 2017 Dec. 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 109.9 164.1 153.6 38.6 261.8 39.6 156.9 19.3 943.6 95.6 177.1 185.8 51.9 277.9 53.1 180.4 18.4 1,040.2 -14.3 +13.0 +32.3 +13.3 +16.1 +13.5 +23.4 -0.8 +96.6 Increase of land for sale and work in progress of housing Capital investment and M&A Purchases and investment in securities, at fair value, and etc. Influence of Change of Consolidated Companies +27.4 bil. yen Foreign exchange +13.3 bil. yen Actual basis; +55.9 bil. yen Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 19 0:17:12.3 Balance Sheets (Liabilities & Net Assets) Net income (Billions of yen) Mar. 31, 2017 Dec. 31, 2017 Difference 44.3 bil. yen Dividends paid -18.1 bil. yen Retirement of treasury stock -12.9 bil. yen 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 329.4 43.7 373.1 209.2 341.0 -41.0 39.5 20.8 1.1 570.5 943.6 345.2 83.8 429.0 209.2 355.0 -40.0 51.8 25.6 9.7 611.3 1,040.2 +15.8 +40.1 +55.9 0 +14.0 +1.0 +12.3 +4.8 +8.6 +40.7 +96.6 Purchases of treasury stock -13.3 bil. yen Retirement of treasury stock +12.9 bil. yen Translation adjustments +9.9 bil. yen 20 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 0:17:36.0 Consolidated Cash Flows (Billions of yen) First 9 months of FY2016 First 9 months of FY2017 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 59.0 -14.8 -37.6 6.2 73.3 28.2 39.0 -43.3 5.6 3.7 94.2 -23.2 Working Capital and Increase in corporate tax payment, and etc. Purchases of investments in securities and etc. Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 21 0:18:16.2 Depreciation and Capital Expenditures (Billions of yen) First 9 months First 9 months of FY2016 of FY2017 Difference FY2016 FY2017 Forecasts Difference Depreciation Capital Expenditures 25.7 30.2 26.8 37.0 +1.1 +6.8 34.8 43.9 37.0 56.0 +2.2 +12.1 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 22 0:18:23.9 FY2017 Forecasts FY2016 (Billions of yen) FY2017 Forecasts Difference FY2017 Plan (Oct. 2017) Net Sales Operating Income Ordinary Income Net Income Attributable to Owners of the Parent Dividend per Share (Yen) 1,065.8 96.5 91.5 60.9 35* 1,114.0 102.0 101.0 67.0 38* +48.2 +5.5 +9.5 +6.1 +3 1,114.0 102.0 101.0 67.0 38* *Including 70th anniversary commemorative dividend of 1 yen per share. Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 23 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. *For charts and graphs in this presentation material denominated in billions of yen, numbers below a billion are rounded up or down to the nearest hundred million. Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 24 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 25 Housing Company Results and Plan 1. Main data in Housing business FY2017 1H 3Q 101.3 66.0 21.0 13.9 11.7 2.2 0.4 2,380 1,950 1,590 360 430 31.2 838 122.8 419 2,432 28% 33% 2H (plan) 253.1 173.4 48.6 30.2 25.2 5.1 0.9 7,140 5,050 4,070 980 2,090 30% 32% Annual (plan) 497.5 340.7 96.0 58.9 49.1 9.8 1.9 13,990 9,970 8,250 1,720 4,020 419 2,375 29% 32% 1H 237.7 161.4 48.3 27.2 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% FY2016 3Q 103.5 67.4 22.3 13.3 11.2 2.1 0.4 2,470 2,030 1,630 400 440 31.0 828 123.5 416 2,431 30% 35% 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% Annual 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% FY2015 Annual 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% 26 Net Sales (Billions of yen) 244.4 167.3 47.4 28.7 23.9 4.7 1.0 6,850 4,920 4,180 740 1,930 31.0 832 123.0 416 2,495 28% 32% CONSOLIDATED OTHERS Housing Renovation Frontier (Domestic) Real estate Residential Services 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. Housing Company Results and Plan 2. Housing orders (Millions of yen) Year-start Backlog Growth Rate New Orders Growth Rate Sales of Housing/Renovation Growth Rate Balance at the end Growth Rate FY2017 1H 3Q 2H (plan) Annual (plan) 1H 3Q FY2016 2H Annual 1H FY2015 2H Annual 206,000 207,800 207,800 - 205,500 207,500 207,500 - 204,300 205,500 +1% +1% -12% -8% ±0% ±0% +1% ±0% 202,957 92,818 209,217 412,174 202,457 93,917 207,529 409,987 199,914 204,391 404,304 -1% +1% +1% +1% -4% +2% +1% -5% +5% ±0% ±0% 201,157 80,618 207,517 408,674 200,457 85,217 209,029 409,487 198,714 204,391 403,104 +2% -9% -4% - 205,500 205,500 -8% +1% FY2016 Annual (plan) 1H 3Q 2H Annual -5% -1% ±0% 207,800 220,000 209,500 +2% +2% ±0% +1% +2% ±0% ±0% - 207,500 216,200 206,000 +1% -1% ±0% -7% FY2015 Annual 3. Housing starts (Units) Housing starts* Privately-owned houses* (included in above) =A Sales by our company Detached house sales by our company=B Our share in Detached houses=B/A FY2017 1H 3Q 2H (plan) 496,840 148,266 6,850 4,920 3.3% 239,500 72,500 2,380 1,950 2.7% 453,000 142,000 7,140 5,050 3.6% 950,000 290,000 13,990 9,970 3.4% 500,151 152,836 6,620 4,740 3.1% 250,696 75,929 2,470 2,030 2.7% 473,986 138,947 7,000 4,820 3.5% 974,137 291,783 13,620 9,560 3.3% 920,537 284,441 13,380 9,410 3.3% FY2015 *“The housing starts” and “Privately-owned houses” after 1H of FY2017 are based on forecasts. 4.The ratio of the houses equipped with the high-performance specifications Solar power generation systems installed Tiled exterior walls (Heim type JX) Storage battery installed Comfortable Air System FY2017 1H 3Q 2H (plan) Annual (plan) FY2016 1H 3Q 2H Annual Annual 75% 71% 21% 75% 72% 70% 19% 73% 73% 72% 20% 74% 74% 72% 21% 75% 77% 67% 21% 73% 78% 68% 24% 74% 78% 68% 27% 77% 78% 67% 24% 75% 79% 66% 25% 70% 27 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. Director, Managing Executive Officer Yoshiyuki Hirai 0:00:00.0 SHIFT 2019 ?Fusion? SEKISUI CHEMICAL CO., LTD. Presentation of Financial Results for the Third Quarter of Fiscal Year 2017, which ended March 31, 2018 Yoshiyuki Hirai, Director Managing Executive Officer Responsible for Corporate Finance & Accounting Department Head of Business Strategy Department 30 January, 2018 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 0 0:00:11.9 Results for 3Q FY2017 and Forecasts for FY2017 FY2016 Forex Rate FY2017 2H \109/US$ \113/? \111/US$ \119/? 3Q \110/US$ \130/? \113/US$ \133/? 4Q \113/US$ \133/? ‐ 2H \112/US$ \132/? ‐ 3Q \101/US$ \113/? \109/US$ \118/? 4Q \117/US$ \113/? \114/US$ \121/? Assumption Results (Avg. rate for each term) Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 1 0:00:25.6 Overview of 3Q FY2017 Results ? Substantial increase in net sales also on the back of contributions from newly consolidated companies (newly consolidated subsidiaries (YoY): +9.9 bil. yen) ? Secured an increase at each level of profit; extraordinary loss attributable to structural reform measures implemented during the previous fiscal year eliminated during this fiscal year; as a result, the bottom line increased substantially. ? Operating income and the bottom line reported record high earnings First 9 months of FY2016 First 9 months of FY2017 Difference (Billions of yen) Net Sales Operating Income Ordinary Income Net Income Attributable to Owners of the Parent 766.2 61.5 63.7 39.9 791.6 62.4 64.3 44.3 +25.4 +0.9 +0.6 +4.4 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 2 0:00:52.3 3Q FY2017 Results: Net Sales and Operating Income by Divisional Company ? Steady increase in profit at the HPP and UIEP companies (record high earnings in 3Q and 1Q-3Q); secured an increase in Group-wide profit up to the 3Q on a cumulative basis, despite a downturn in earnings in the Housing Company due to delays in construction as a result of poor weather conditions 3Q FY2016 (Oct.?Dec.) (Billions of yen) Net Sales Operating Income 3Q FY2017 (Oct.?Dec.) Net Sales Operating Income Difference Net Sales Operating Income First 9 months of FY2016 (Apr.?Dec.) Net Sales Operating Income First 9 months of FY2017 (Apr.?Dec.) Net Sales Operating Income Difference Net Sales Operating Income HPP* Housing* UIEP* Others Eliminations or Unallocatable Accounts 90.1 103.5 58.7 0.6 -4.5 248.4 14.1 2.4 3.5 -2.0 -0.2 17.9 100.1 101.3 59.8 1.3 -5.1 257.5 15.1 0 4.1 -2.3 -0.5 16.4 +10.0 -2.2 +1.1 +0.7 -0.5 +9.1 +1.0 -2.5 +0.6 -0.3 -0.3 -1.4 266.8 341.2 170.7 1.9 -14.4 766.2 41.6 19.6 6.7 -5.8 -0.6 61.5 285.6 345.7 171.8 4.1 -15.6 791.6 43.9 17.8 8.9 -7.1 -1.1 62.4 +18.8 +4.5 +1.1 +2.1 -1.2 +25.4 +2.3 -1.8 +2.2 -1.3 -0.5 +0.9 Total *HPP: High Performance Plastics Company, Housing: Housing Company, UIEP: Urban Infrastructure & Environmental Products Company Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 3 0:01:37.4 FY2017 Earnings Forecasts ? Plans for a substantial increase in net sales also on the back of contributions from newly consolidated companies (newly consolidated subsidiaries (YoY): +18.1 bil. yen) ? Plans for record high profits at each of the operating income, ordinary income and bottom line levels (Billions of yen) FY2016 FY2017 (Forecasts) Difference FY2017 Plan (Oct. 2017) Difference Net Sales 1,065.8 96.5 91.5 60.9 1,114.0 102.0 101.0 67.0 +48.2 +5.5 +9.5 +6.1 1,114.0 102.0 101.0 67.0 0 0 0 0 Operating Income Ordinary Income Net Income Attributable to Owners of the Parent Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 4 0:02:00.2 FY2017 Forecasts: Net Sales and Operating Income by Divisional Company ? Plans to achieve increases in net sales and profit at all three divisional companies; increases driven by the HPP and UIEP companies (plans for record high profits at these two companies) ? Housing Company forecasts for the full fiscal year revised downward owing mainly to delays in construction as a result of poor weather conditions in the 3Q. Group-wide forecasts project to come in line with plans ? Ramp up research and development investments Group-wide FY2016 (Billions of yen) Net Sales Operating Income FY2017 (Forecasts) Net Sales Operating Income Difference Net Sales Operating Income FY2017 Plan (Oct. 2017) 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 -0.8 388.0 497.5 241.0 6.0 -18.5 59.0 38.0 15.0 -9.0 -1.0 102.0 +30.5 +12.5 +0.7 +3.3 +1.3 +48.2 +4.5 +0.5 +2.2 -1.4 -0.2 +5.5 388.0 500.0 241.0 6.0 -21.0 1,114.0 59.0 39.0 15.0 -9.5 -1.5 102.0 0 -2.5 0 0 +2.5 0 0 -1.0 0 +0.5 +0.5 0 Total 96.5 1,114.0 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 5 0:02:37.6 2H FY2017 Forecasts: Net Sales and Operating Income by Divisional Company ? Substantial increase in profit at the HPP Company; Group-wide operating income projected to come in line with plans, despite the downward revision of forecasts for the Housing Company 2H FY2016 (Billions of yen) Net Sales Operating Income 2H FY2017 Forecasts Net Sales Operating Income Difference Net Sales Operating Income 2H FY2017 Plan (Oct. 2017) Net Sales Operating Income Difference Net Sales Operating Income HPP Housing UIEP Others Eliminations or Unallocatable Accounts 180.8 247.3 128.3 1.4 -9.9 547.9 27.0 20.4 9.6 -3.8 -0.5 52.8 202.5 253.1 128.9 3.3 -7.9 579.9 30.2 20.2 10.2 -4.2 -0.4 56.0 +21.7 +5.8 +0.6 +1.8 +2.0 +31.9 +3.2 -0.2 +0.5 -0.4 +0.1 +3.2 202.5 255.6 128.9 3.3 -10.4 579.9 30.2 21.2 10.2 -4.7 -0.9 56.0 0 -2.5 0 0 +2.5 0 0 -1.0 0 +0.5 +0.5 0 Total Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 6 0:02:55.5 2H FY2017 Forecasts: Analysis of Net Sales and Operating Income ? In 2H, plans for a substantial increase in sales volume and improvement in the product mix mainly in the HPP Company ? Compared to the plan, the quantity decreased and we could not improve the product mix. In addition, the raw materials were also high, but we hedged by cost reduction and fixed cost restraint ? In 4Q, plans for an increase in sales volume and improvement in the product mix mainly in the HPP and Housing Company Net Sales Impact of newly consolidated subsidiaries (YoY): +15.0 bil. yen Analysis of Operating Income Sales ConsolidQuantity ated & Foreign Compo-basis Change Exchange sition Raw Materials Cost Selling & Housing Reduction Price Materials and etc. Fixed Cost +31.9 bil. yen 547.9 bil. yen 579.9 bil. yen 2H Plan (Oct. 2017) +0.7 +0.3 +0.4 +0.9 +0.9 +1.1 +8.9 +0.7 -0.6 +0.4 -3.9 -2.2 -4.4 +2.0 +1.0 +2.2 -6.0 -1.5 -4.5 56.0 16.4 3Q FY2017 579.9 bil. yen (3Q FY2016: 17.9) +7.7 +0.7 52.8 bil. yen 2H FY2016 2H FY2017 Plan (Oct. 2017) 2H FY2017 Forecasts +3.2 bil yen 56.0 bil yen 2H FY2016 2H FY2017 Forecasts ? Increased by 16.9 billion yen on the actual basis excluding the impact of newly consolidated subsidiaries. Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 7 0:03:53.6 Progress of major measures of Medium-term Management Plan “SHIFT 2019 -Fusion-” ? Forward-looking investments and structural reforms progressing steadily. “Fusion” initiatives aimed at accelerating growth moving forward ■HPP ■Housing ■UIEP ■Corporate Headquarters :Begin realizing benefits :Realize benefits in earnest Main Initiatives ? Increase production of high-performance interlayer films in Mexico ? Expand the Life Science Business (integrate EIDIA; establish a new diagnostic reagent company in China) ? Newly establish a Tochigi Plant for molded products (development for car electronics parts business) Strategic ? Decision made to invest in increasing production of high-performance Investments interlayer films and PVB resin in Europe ? Establish a new foam plant at Wuxi City in China (The Automobiles and Transportation field) ? Establish a 2nd foam plant in Thailand (The Building and Infrastructure field) ? Increase sheet for aircrafts and FFU production ? Develop and introduce new products (luminous PVB films, products for OLEDs, other) ? New 70th anniversary commemorative products (SPS GR, GRAND TO YOU V, and DESIO Urban) ? Introduce prioritized products (32 items) ? Consolidate foam business plants (Europe, US) Maturation Period (Image) FY2017 FY2018 FY2019~ Forwardlooking Investment New Products Constant Structural Reform ? Improve efficiency of housing production plants (unify operations of production companies in the three major metropolitan areas, other) ? Reorganize plant production items ? Made Sekisui Polymatech Co., Ltd. a consolidated subsidiary ? Made Sekisui SoflanWiz Co., Ltd. a consolidated subsidiary Fusion and M&A ? Participate in PeptiStar Inc. ? Take up an equity interest in TP Group, a major pipe manufacturers in Vietnam ? Urban development project 8 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 9 0:04:11.5 2H FY2017 Forecasts: Analysis of Net Sales and Operating Income HPP Company ? Plans to increase sales volumes and improve the product mix; offset the greater than expected high level of raw material costs through efforts to fixed costs control and costs reduction; projected to achieve 2H operating income plans Net Sales ( )=3Q Results (Billions of yen) Analysis of Operating Income Selling Quantity Consoli& dated Foreign Compo-basis Exchange sition Change (Billions of yen) Impact of newly consolidated subsidiaries (YoY): +13.4 bil. yen 新規連結 +134億円 Selling Price Cost Raw Reduction Materials and etc. Fixed Cost 2H Plan (Oct. 2017) (3Q FY2016: 14.1) +0.5 +0.9 +4.3 +0.2 +3.8 -0.3 -0.1 -0.3 -1.8 -1.3 -2.6 +1.0 +1.1 +2.2 -1.4 -0.1 -1.1 30.2 15.1 +21.7 bil. yen 202.5 bil. yen 3Q FY2017 +0.3 +0.9 180.8 bil. yen 202.5 bil. yen (100.1) +0.2 +1.1 (90.1) 202.5 180.8 30.2 bil yen +3.2 bil yen 27.0 bil. yen 2H FY2016 2H FY2017 Plan (Oct. 2017) 2H FY2017 Forecasts 2H FY2016 Marginal profit: +3.1 2H FY2017 Forecasts ? Plan to increase by 8.3 billion yen on the actual basis excluding the impact of newly consolidated subsidiaries. Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 10 0:04:57.8 Four Strategic Fields HPP Company ? Failure to achieve plans in the Electronics field owing mainly to the deterioration in market conditions offset by a recovery in the Automobiles and Transportation field Trends of Sales and 2H Overview in the Four Strategic Fields *The increase owing to M&A is marked in red Automobiles and Transportation ? Stagnant conditions in North America; stable market conditions in other areas ? Steady progress in expanding sales of high-performance products globally; start-up of a new interlayer film production line in Mexico in line with plans; decision made to invest in increasing production capacity in Europe ? In the process of reinforcing activities in the heat release materials field (promoting synergies with Sekisui Polymatech Co., Ltd. ) (Billions of yen) Electronics ? Slowdown in the demand for smartphones in China; 4Q demand projected to come in at around the level recorded in the 3Q ? Firm demand for large-scale LCDs; steady progress in development efforts in each of the OLED as well as packaging/semiconductor fields (Billions of yen) 14.9 1.3 16.5 4.0 15.8 2.9 26.1 0.6 29.0 2.2 31.3 1.8 13.4 12.1 13.1 13.6 12.5 12.9 23.9 25.3 24.9 25.5 26.9 29.5 3Q FY16 4Q FY16 1Q FY17 2Q FY17 3Q FY17 4Q FY17 Forecasts 3Q FY16 4Q FY16 1Q FY17 2Q FY17 3Q FY17 4Q FY17 Forecasts Building and Infrastructure ? CPVC: conditions in the Middle East are exhibiting a recovery trend; the Americas steadily expanding ? Fire-resistant materials: steady expansion in the non-combustible urethane business; Made Sekisui SoflanWiz Co., Ltd. a consolidated subsidiary ? Decision made to increase production of polyolefin film for construction use in Thailand (Billions of yen) Life Science ? Firm diagnostics business in Japan; business expanding in China ? Integration synergies with EIDIA Co., Ltd. materializing steadily from a sales and other perspectives 17.8 2.5 (Billions of yen) 14.0 14.4 14.6 13.7 14.0 15.3 18.6 17.3 17.3 18.6 18.9 19.2 3Q FY16 4Q FY16 1Q FY17 2Q FY17 3Q FY17 4Q FY17 Forecasts 3Q FY16 4Q FY16 1Q FY17 2Q FY17 3Q FY17 4Q FY17 Forecasts 11 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 0:07:51.9 2H FY2017 Forecasts: Analysis of Net Sales and Operating Income Housing Company ? 2H operating income plans revised downward due to delays in construction as a result of poor weather conditions in the 3Q ? Delays in construction in each of the Housing and Renovation business as a result of poor weather conditions from September to October ? Housing Business: plans for an increase in the number of houses sold mainly in the 4Q; period-end construction structure and system put in place ? Renovation Business: plans for an improvement in the gross profit margin in the 4Q owing mainly to a higher share of strategic products in 3Q orders Net Sales by Business (Billions of yen) Analysis of Operating Income Marginal Profit Factors (Billions of yen) Frontier (Domestic and Overseas) Renovation Housing ( )=3Q Results Sales Factors Fixed Costs Marginal Profit Fixed Costs Marginal Profit Fixed Costs Marginal Profit Fixed Costs +5.8 bil. yen 247.3 (103.5) 29.4 48.6 (13.8) (22.3) 2H Plan (Oct. 2017) +2.1 -1.1 -0.7 +0.6 -0.1 +0.3 -0.2 -0.7 -0.2 +0.1 -0.1 ±0 ±0 ±0 +0.1 21.2 0 255.6 31.1 49.9 253.1 (101.3) 31.1 (14.3) 48.6 (21.0) 3Q FY2017 (3Q FY2016: 2.4) -0.6 -1.0 -0.2 Downward revised sales plan: +120 units (As of Oct. 2017: +170 units) +1.4 -1.1 -0.6 +0.2 -0.1 +0.3 -0.2 ±0 ±0 169.3 (67.4) 174.6 173.4 (66.0) 20.4 bil. yen Of which, housing materials: -0.7 -0.2 bil. yen Frontier (Domestic): Frontier (Overseas): 20.2 bil. yen 2H FY2017 Forecasts 2H FY2016 2H FY2017 Plan (Oct. 2017) 2H FY2017 Forecasts 2H FY2016 Housing: -0.4 bil. yen Renovation: +0.1 bil. yen +0.1 bil. yen ±0 bil. yen Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 12 0:09:24.2 New Housing Orders Housing Company ? Work to achieve 4Q plans by realizing in earnest the effects of measures aimed at securing plan in the 2H; level out sales in FY2018 Overview of 3Q Results ? Despite falling short of plans, maintaining their recovery trend ? Detached houses grew centered on wood-frame houses (+2% YoY) ? Substantial growth in subdivision housing according to plans (+20% YoY) 2H Housing Order Plan (Revised plan) Housing Oder (Unit, YoY) Plan (Oct.2017): +5% Decrease in the number of visitors in October mainly in East Japan owing to poor weather conditions 2H Revised Plan: +3% Plan (Oct.2017): +5% ? Substantial decline in housing complexes (-10% YoY) ? No major changes in 4Q market trends compared with the 3Q +1% FY2017 FY2015 FY2016 +5% FY2017 FY2015 FY2016 Measure to acquire Orders in 2H 3Q 70th Anniversary Commemorative Product Strategies Land and Subdivision Housing Strategies Customer Traffic and Increase in Customer Prospects 3Q 4Q 4Q Put in place a structure and systems that are capable of addressing a decline in structural demand ?Strong Grand To You V start (3Q orders: more than 400 orders; increase from month to month) ?Smart Power Station GR robust (3Q orders: roughly 200 orders; captures customers with different exterior tastes) ?Robust sales of large-scale subdivision, Smart Heim City (3Q subdivision orders: +20% YoY; purchase of land targeting the 4Q and beyond also steady) ?Substantial increase in the number of visitors thanks to a variety of factors including successful efforts to diversify promotion tools aimed at attracting customers (3Q: +11% YoY; Nov.-Dec.: +21%) ?Despite failing to achieve plans; positive turnaround in YoY orders (+1%) Despite a substantial decline in solar power generation systems, growth in strategic products* (+13%) *Strategic products: for exterior areas, new external walls, bathrooms and kitchens, extensions, and etc. ?Work to accelerate the pace of Grand To You V and Smart Power Station GR sales ?The 3-story urban-type DESIO Urban released (January 2nd, 2018) ?Further reinforce subdivision housing orders; increase stock for sale for FY2018 ?Reinforce the ability to attract visitors (expand model home galleries and open houses mainly Tokyo, Nagoya and Osaka) ?Accelerate the switch over to a composite proposal-type sales style ?Put forward proposals focusing on prominent products (new exterior tiled-wall Ecochante and other products) Renovation Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 13 0:12:06.0 2H FY2017 Forecasts: Analysis of Net Sales and Operating Income ?Steady progress in each measures; projected to achieve 2H plans ? Growth strategy: expand sales of prioritized products* against the backdrop of such conditions as Tokyo metropolitan area infrastructure-related demand ? Platform Efficiency:continue with efforts aimed at securing a spread between selling prices and raw material costs; promote the optimization of production capacity ? Overseas Strategy: recovery in demand for aircraft sheets from the 4Q; progress in investments aimed at increasing production (sheets, FFU) ( )=3Q Results UIEP Company ? Prioritized products: High-value-added products with the potential for market growth and substitutability Net Sales Analysis of Operating Income Selling Quantity & Composition Cost Raw Selling Reduction Fixed Marginal Fixed Profit Price Materials and etc. Costs Costs Foreign Exchange Impact of business structural reform (YoY): -2.2 bil. yen +0.6 bil. yen 128.3 bil. yen (58.7) 128.9 bil. yen 2H Plan (Oct. 2017) +0.7 +1.0 +0.4 -1.1 +0.5 ±0 -0.6 +0.5 -0.4 +0.2 +0.2 -0.2 ±0 ±0 ±0 10.2 4.1 3Q FY2017 +0.5 -0.5 -1.1 128.9 bil. yen (59.8) (3Q FY2016: 3.5) +0.8 +1.0 +0.1 -0.4 +0.5 -0.3 10.2 bil yen 2H FY2016 2H FY2017 Plan (Oct. 2017) 2H FY2017 (Revised Plan) 9.6 bil. yen 2H FY2016 +0.6 bil yen Domestic: +0.4 bil. yen Overseas: +0.2 bil. yen ? Increased by 2.8 billion yen on the actual basis excluding the impact of business structural reform. 2H FY2017 Forecasts 14 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 0:13:58.1 Three Strategic Fields and Prioritized Products UIEP Company ? Progress essentially in line with plans in each of the Three Strategic Fields ? Steady progress in strategic investments as well as the introduction of new products; progress also in improving the product mix Sales Trends and 2H Progress in the Three Strategic Fields Piping and Infrastructure ? Increase in the number of pipeline rehabilitation orders that employ the SPR method received from local governments in Japan ? Completed equity investment in the TP Group; work to develop the Group’s ASEAN business in earnest from the next fiscal period (Billions of yen) Advanced Materials ? Sheet Business: despite the incidence of gaps in the delivery periods of aircraft sheets, progress in cultivating other fields ? FFU Business: progress essentially in line with plans against the backdrop of growing overseas demand (Billions of yen) 56.6 30.1 26.5 2H FY2016 57.6 30.8 26.8 2H FY2017 Forecasts 31.9 17.2 14.7 2H FY2016 32.7 17.3 15.4 2H FY2017 Forecasts Business structural reform (YoY): -2.2 bil. yen 4Q Forecasts 3Q Results 4Q Forecasts 3Q Results Prioritized Product Sales ? Steady growth; plans to secure an increase of 1.4 billion yen in the 2H ? Progress in the introduction of new products essentially in line with plans (plans to introduce 14 items in the 2H) Domestic Sales (Billions of yen) of which, Prioritized products sales Building and Living Environment ? Progress in introducing new products (designer rain gutters, etc.) ? Expand the capacity of prioritized product supply (functional flooring, etc.) (Billions of yen) 29.0 15.2 13.8 2H FY2016 28.7 14.7 14.0 2H FY2017 Forecasts 4Q Forecasts 3Q Results 115.1 15% 113.6 17% Prioritized Product Sales/Domestic Sales 17.5 2H FY2016 18.9 2H FY2017 Forecasts 15 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 0:15:45.6 Results for 3Q FY2017 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 16 0:15:50.1 Consolidated Companies Number of Consolidated Companies Mar. 31, 2017 Consolidated Subsidiaries Affiliates (Equity Method) Dec. 31, 2017 Difference Increased: 17 Subsidiaries*1 Decreased: 8 Subsidiaries*2 Increased: 0 Subsidiaries Decreased: 0 Subsidiaries 143 8 152 8 *1: ENAX,INCwith Sekisui Polymatech Co., Ltd., Sekisui SoflanWiz Co., Ltd., and etc. *2: Includes the integration of three Sekisui Heim Real Estate companies into a single company and four Sekisui Heim Industry companies into a separate single company. Influence of Change in the Number of Consolidated Companies First 9 months of FY2017 Net Sales Operating Income *3: Removed from consolidation from 2Q FY2016 *?: Removed from consolidation from 4Q FY2016 *?: Newly Consolidated from 2Q FY2017 Difference ? Sekisui Film*3 ? Nippon No-Dig Technology*? ? SEKISUI KNT(HEBEI) ENVIRONMENTAL TECHNOLOGY*? ? Polymatech Japan Co., Ltd. *5 and etc. +2.4 bil. yen +0.7 bil. yen Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 17 0:15:59.2 Summary of Profit and Loss First 9 months of FY2016 First 9 months of FY2017 Difference (Billions of yen) Net Sales Gross Profit Gross Profit Rate Selling, Gen. and Admin. Expenses 766.2 253.9 33.1% 192.4 61.5 1.7 0.5 63.7 6.9 11.0 59.6 18.2 1.4 39.9 . 791.6 258.2 32.6% 195.8 62.4 1.3 0.6 64.3 2.5 1.2 65.6 18.5 2.8 44.3 112 yen 129 yen +25.4 +4.3 -0.5% +3.4 +0.9 -0.4 0 +0.6 -4.4 -9.9 +6.0 +0.3 +1.4 +4.4 Loss on devaluation of investments in securities and impact of business structural reform (FY2016) 18 Operating Income Equity in Earnings of Affiliates Other Non-operating Income and Expenses Ordinary Income Extraordinary Income Extraordinary Loss Gain on sales of investments in securities (FY2016) Income before Income Taxes Corporate Income Tax, etc. Net Income Attributable to Non-controlling Interests Net Income Attributable to Owners of the Parent Foreign Exchange (Avg. rate) 1US$ 1? 107 yen 118 yen Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 0:16:29.5 Balance Sheets (Assets) (Billions of yen) Mar. 31, 2017 Dec. 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 109.9 164.1 153.6 38.6 261.8 39.6 156.9 19.3 943.6 95.6 177.1 185.8 51.9 277.9 53.1 180.4 18.4 1,040.2 -14.3 +13.0 +32.3 +13.3 +16.1 +13.5 +23.4 -0.8 +96.6 Increase of land for sale and work in progress of housing Capital investment and M&A Purchases and investment in securities, at fair value, and etc. Influence of Change of Consolidated Companies +27.4 bil. yen Foreign exchange +13.3 bil. yen Actual basis; +55.9 bil. yen Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 19 0:17:12.3 Balance Sheets (Liabilities & Net Assets) Net income (Billions of yen) Mar. 31, 2017 Dec. 31, 2017 Difference 44.3 bil. yen Dividends paid -18.1 bil. yen Retirement of treasury stock -12.9 bil. yen 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 329.4 43.7 373.1 209.2 341.0 -41.0 39.5 20.8 1.1 570.5 943.6 345.2 83.8 429.0 209.2 355.0 -40.0 51.8 25.6 9.7 611.3 1,040.2 +15.8 +40.1 +55.9 0 +14.0 +1.0 +12.3 +4.8 +8.6 +40.7 +96.6 Purchases of treasury stock -13.3 bil. yen Retirement of treasury stock +12.9 bil. yen Translation adjustments +9.9 bil. yen 20 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 0:17:36.0 Consolidated Cash Flows (Billions of yen) First 9 months of FY2016 First 9 months of FY2017 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 59.0 -14.8 -37.6 6.2 73.3 28.2 39.0 -43.3 5.6 3.7 94.2 -23.2 Working Capital and Increase in corporate tax payment, and etc. Purchases of investments in securities and etc. Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 21 0:18:16.2 Depreciation and Capital Expenditures (Billions of yen) First 9 months First 9 months of FY2016 of FY2017 Difference FY2016 FY2017 Forecasts Difference Depreciation Capital Expenditures 25.7 30.2 26.8 37.0 +1.1 +6.8 34.8 43.9 37.0 56.0 +2.2 +12.1 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 22 0:18:23.9 FY2017 Forecasts FY2016 (Billions of yen) FY2017 Forecasts Difference FY2017 Plan (Oct. 2017) Net Sales Operating Income Ordinary Income Net Income Attributable to Owners of the Parent Dividend per Share (Yen) 1,065.8 96.5 91.5 60.9 35* 1,114.0 102.0 101.0 67.0 38* +48.2 +5.5 +9.5 +6.1 +3 1,114.0 102.0 101.0 67.0 38* *Including 70th anniversary commemorative dividend of 1 yen per share. Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 23 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. *For charts and graphs in this presentation material denominated in billions of yen, numbers below a billion are rounded up or down to the nearest hundred million. Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 24 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 25 Housing Company Results and Plan 1. Main data in Housing business FY2017 1H 3Q 101.3 66.0 21.0 13.9 11.7 2.2 0.4 2,380 1,950 1,590 360 430 31.2 838 122.8 419 2,432 28% 33% 2H (plan) 253.1 173.4 48.6 30.2 25.2 5.1 0.9 7,140 5,050 4,070 980 2,090 30% 32% Annual (plan) 497.5 340.7 96.0 58.9 49.1 9.8 1.9 13,990 9,970 8,250 1,720 4,020 419 2,375 29% 32% 1H 237.7 161.4 48.3 27.2 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% FY2016 3Q 103.5 67.4 22.3 13.3 11.2 2.1 0.4 2,470 2,030 1,630 400 440 31.0 828 123.5 416 2,431 30% 35% 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% Annual 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% FY2015 Annual 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% 26 Net Sales (Billions of yen) 244.4 167.3 47.4 28.7 23.9 4.7 1.0 6,850 4,920 4,180 740 1,930 31.0 832 123.0 416 2,495 28% 32% CONSOLIDATED OTHERS Housing Renovation Frontier (Domestic) Real estate Residential Services 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. Housing Company Results and Plan 2. Housing orders (Millions of yen) Year-start Backlog Growth Rate New Orders Growth Rate Sales of Housing/Renovation Growth Rate Balance at the end Growth Rate FY2017 1H 3Q 2H (plan) Annual (plan) 1H 3Q FY2016 2H Annual 1H FY2015 2H Annual 206,000 207,800 207,800 - 205,500 207,500 207,500 - 204,300 205,500 +1% +1% -12% -8% ±0% ±0% +1% ±0% 202,957 92,818 209,217 412,174 202,457 93,917 207,529 409,987 199,914 204,391 404,304 -1% +1% +1% +1% -4% +2% +1% -5% +5% ±0% ±0% 201,157 80,618 207,517 408,674 200,457 85,217 209,029 409,487 198,714 204,391 403,104 +2% -9% -4% - 205,500 205,500 -8% +1% FY2016 Annual (plan) 1H 3Q 2H Annual -5% -1% ±0% 207,800 220,000 209,500 +2% +2% ±0% +1% +2% ±0% ±0% - 207,500 216,200 206,000 +1% -1% ±0% -7% FY2015 Annual 3. Housing starts (Units) Housing starts* Privately-owned houses* (included in above) =A Sales by our company Detached house sales by our company=B Our share in Detached houses=B/A FY2017 1H 3Q 2H (plan) 496,840 148,266 6,850 4,920 3.3% 239,500 72,500 2,380 1,950 2.7% 453,000 142,000 7,140 5,050 3.6% 950,000 290,000 13,990 9,970 3.4% 500,151 152,836 6,620 4,740 3.1% 250,696 75,929 2,470 2,030 2.7% 473,986 138,947 7,000 4,820 3.5% 974,137 291,783 13,620 9,560 3.3% 920,537 284,441 13,380 9,410 3.3% FY2015 *“The housing starts” and “Privately-owned houses” after 1H of FY2017 are based on forecasts. 4.The ratio of the houses equipped with the high-performance specifications Solar power generation systems installed Tiled exterior walls (Heim type JX) Storage battery installed Comfortable Air System FY2017 1H 3Q 2H (plan) Annual (plan) FY2016 1H 3Q 2H Annual Annual 75% 71% 21% 75% 72% 70% 19% 73% 73% 72% 20% 74% 74% 72% 21% 75% 77% 67% 21% 73% 78% 68% 24% 74% 78% 68% 27% 77% 78% 67% 24% 75% 79% 66% 25% 70% 27 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. Director, Managing Executive Officer Yoshiyuki Hirai 0:00:00.0 SHIFT 2019 ?Fusion? SEKISUI CHEMICAL CO., LTD. Presentation of Financial Results for the Third Quarter of Fiscal Year 2017, which ended March 31, 2018 Yoshiyuki Hirai, Director Managing Executive Officer Responsible for Corporate Finance & Accounting Department Head of Business Strategy Department 30 January, 2018 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 0 0:00:11.9 Results for 3Q FY2017 and Forecasts for FY2017 FY2016 Forex Rate FY2017 2H \109/US$ \113/? \111/US$ \119/? 3Q \110/US$ \130/? \113/US$ \133/? 4Q \113/US$ \133/? ‐ 2H \112/US$ \132/? ‐ 3Q \101/US$ \113/? \109/US$ \118/? 4Q \117/US$ \113/? \114/US$ \121/? Assumption Results (Avg. rate for each term) Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 1 0:00:25.6 Overview of 3Q FY2017 Results ? Substantial increase in net sales also on the back of contributions from newly consolidated companies (newly consolidated subsidiaries (YoY): +9.9 bil. yen) ? Secured an increase at each level of profit; extraordinary loss attributable to structural reform measures implemented during the previous fiscal year eliminated during this fiscal year; as a result, the bottom line increased substantially. ? Operating income and the bottom line reported record high earnings First 9 months of FY2016 First 9 months of FY2017 Difference (Billions of yen) Net Sales Operating Income Ordinary Income Net Income Attributable to Owners of the Parent 766.2 61.5 63.7 39.9 791.6 62.4 64.3 44.3 +25.4 +0.9 +0.6 +4.4 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 2 0:00:52.3 3Q FY2017 Results: Net Sales and Operating Income by Divisional Company ? Steady increase in profit at the HPP and UIEP companies (record high earnings in 3Q and 1Q-3Q); secured an increase in Group-wide profit up to the 3Q on a cumulative basis, despite a downturn in earnings in the Housing Company due to delays in construction as a result of poor weather conditions 3Q FY2016 (Oct.?Dec.) (Billions of yen) Net Sales Operating Income 3Q FY2017 (Oct.?Dec.) Net Sales Operating Income Difference Net Sales Operating Income First 9 months of FY2016 (Apr.?Dec.) Net Sales Operating Income First 9 months of FY2017 (Apr.?Dec.) Net Sales Operating Income Difference Net Sales Operating Income HPP* Housing* UIEP* Others Eliminations or Unallocatable Accounts 90.1 103.5 58.7 0.6 -4.5 248.4 14.1 2.4 3.5 -2.0 -0.2 17.9 100.1 101.3 59.8 1.3 -5.1 257.5 15.1 0 4.1 -2.3 -0.5 16.4 +10.0 -2.2 +1.1 +0.7 -0.5 +9.1 +1.0 -2.5 +0.6 -0.3 -0.3 -1.4 266.8 341.2 170.7 1.9 -14.4 766.2 41.6 19.6 6.7 -5.8 -0.6 61.5 285.6 345.7 171.8 4.1 -15.6 791.6 43.9 17.8 8.9 -7.1 -1.1 62.4 +18.8 +4.5 +1.1 +2.1 -1.2 +25.4 +2.3 -1.8 +2.2 -1.3 -0.5 +0.9 Total *HPP: High Performance Plastics Company, Housing: Housing Company, UIEP: Urban Infrastructure & Environmental Products Company Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 3 0:01:37.4 FY2017 Earnings Forecasts ? Plans for a substantial increase in net sales also on the back of contributions from newly consolidated companies (newly consolidated subsidiaries (YoY): +18.1 bil. yen) ? Plans for record high profits at each of the operating income, ordinary income and bottom line levels (Billions of yen) FY2016 FY2017 (Forecasts) Difference FY2017 Plan (Oct. 2017) Difference Net Sales 1,065.8 96.5 91.5 60.9 1,114.0 102.0 101.0 67.0 +48.2 +5.5 +9.5 +6.1 1,114.0 102.0 101.0 67.0 0 0 0 0 Operating Income Ordinary Income Net Income Attributable to Owners of the Parent Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 4 0:02:00.2 FY2017 Forecasts: Net Sales and Operating Income by Divisional Company ? Plans to achieve increases in net sales and profit at all three divisional companies; increases driven by the HPP and UIEP companies (plans for record high profits at these two companies) ? Housing Company forecasts for the full fiscal year revised downward owing mainly to delays in construction as a result of poor weather conditions in the 3Q. Group-wide forecasts project to come in line with plans ? Ramp up research and development investments Group-wide FY2016 (Billions of yen) Net Sales Operating Income FY2017 (Forecasts) Net Sales Operating Income Difference Net Sales Operating Income FY2017 Plan (Oct. 2017) 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 -0.8 388.0 497.5 241.0 6.0 -18.5 59.0 38.0 15.0 -9.0 -1.0 102.0 +30.5 +12.5 +0.7 +3.3 +1.3 +48.2 +4.5 +0.5 +2.2 -1.4 -0.2 +5.5 388.0 500.0 241.0 6.0 -21.0 1,114.0 59.0 39.0 15.0 -9.5 -1.5 102.0 0 -2.5 0 0 +2.5 0 0 -1.0 0 +0.5 +0.5 0 Total 96.5 1,114.0 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 5 0:02:37.6 2H FY2017 Forecasts: Net Sales and Operating Income by Divisional Company ? Substantial increase in profit at the HPP Company; Group-wide operating income projected to come in line with plans, despite the downward revision of forecasts for the Housing Company 2H FY2016 (Billions of yen) Net Sales Operating Income 2H FY2017 Forecasts Net Sales Operating Income Difference Net Sales Operating Income 2H FY2017 Plan (Oct. 2017) Net Sales Operating Income Difference Net Sales Operating Income HPP Housing UIEP Others Eliminations or Unallocatable Accounts 180.8 247.3 128.3 1.4 -9.9 547.9 27.0 20.4 9.6 -3.8 -0.5 52.8 202.5 253.1 128.9 3.3 -7.9 579.9 30.2 20.2 10.2 -4.2 -0.4 56.0 +21.7 +5.8 +0.6 +1.8 +2.0 +31.9 +3.2 -0.2 +0.5 -0.4 +0.1 +3.2 202.5 255.6 128.9 3.3 -10.4 579.9 30.2 21.2 10.2 -4.7 -0.9 56.0 0 -2.5 0 0 +2.5 0 0 -1.0 0 +0.5 +0.5 0 Total Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 6 0:02:55.5 2H FY2017 Forecasts: Analysis of Net Sales and Operating Income ? In 2H, plans for a substantial increase in sales volume and improvement in the product mix mainly in the HPP Company ? Compared to the plan, the quantity decreased and we could not improve the product mix. In addition, the raw materials were also high, but we hedged by cost reduction and fixed cost restraint ? In 4Q, plans for an increase in sales volume and improvement in the product mix mainly in the HPP and Housing Company Net Sales Impact of newly consolidated subsidiaries (YoY): +15.0 bil. yen Analysis of Operating Income Sales ConsolidQuantity ated & Foreign Compo-basis Change Exchange sition Raw Materials Cost Selling & Housing Reduction Price Materials and etc. Fixed Cost +31.9 bil. yen 547.9 bil. yen 579.9 bil. yen 2H Plan (Oct. 2017) +0.7 +0.3 +0.4 +0.9 +0.9 +1.1 +8.9 +0.7 -0.6 +0.4 -3.9 -2.2 -4.4 +2.0 +1.0 +2.2 -6.0 -1.5 -4.5 56.0 16.4 3Q FY2017 579.9 bil. yen (3Q FY2016: 17.9) +7.7 +0.7 52.8 bil. yen 2H FY2016 2H FY2017 Plan (Oct. 2017) 2H FY2017 Forecasts +3.2 bil yen 56.0 bil yen 2H FY2016 2H FY2017 Forecasts ? Increased by 16.9 billion yen on the actual basis excluding the impact of newly consolidated subsidiaries. Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 7 0:03:53.6 Progress of major measures of Medium-term Management Plan “SHIFT 2019 -Fusion-” ? Forward-looking investments and structural reforms progressing steadily. “Fusion” initiatives aimed at accelerating growth moving forward ■HPP ■Housing ■UIEP ■Corporate Headquarters :Begin realizing benefits :Realize benefits in earnest Main Initiatives ? Increase production of high-performance interlayer films in Mexico ? Expand the Life Science Business (integrate EIDIA; establish a new diagnostic reagent company in China) ? Newly establish a Tochigi Plant for molded products (development for car electronics parts business) Strategic ? Decision made to invest in increasing production of high-performance Investments interlayer films and PVB resin in Europe ? Establish a new foam plant at Wuxi City in China (The Automobiles and Transportation field) ? Establish a 2nd foam plant in Thailand (The Building and Infrastructure field) ? Increase sheet for aircrafts and FFU production ? Develop and introduce new products (luminous PVB films, products for OLEDs, other) ? New 70th anniversary commemorative products (SPS GR, GRAND TO YOU V, and DESIO Urban) ? Introduce prioritized products (32 items) ? Consolidate foam business plants (Europe, US) Maturation Period (Image) FY2017 FY2018 FY2019~ Forwardlooking Investment New Products Constant Structural Reform ? Improve efficiency of housing production plants (unify operations of production companies in the three major metropolitan areas, other) ? Reorganize plant production items ? Made Sekisui Polymatech Co., Ltd. a consolidated subsidiary ? Made Sekisui SoflanWiz Co., Ltd. a consolidated subsidiary Fusion and M&A ? Participate in PeptiStar Inc. ? Take up an equity interest in TP Group, a major pipe manufacturers in Vietnam ? Urban development project 8 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 9 0:04:11.5 2H FY2017 Forecasts: Analysis of Net Sales and Operating Income HPP Company ? Plans to increase sales volumes and improve the product mix; offset the greater than expected high level of raw material costs through efforts to fixed costs control and costs reduction; projected to achieve 2H operating income plans Net Sales ( )=3Q Results (Billions of yen) Analysis of Operating Income Selling Quantity Consoli& dated Foreign Compo-basis Exchange sition Change (Billions of yen) Impact of newly consolidated subsidiaries (YoY): +13.4 bil. yen 新規連結 +134億円 Selling Price Cost Raw Reduction Materials and etc. Fixed Cost 2H Plan (Oct. 2017) (3Q FY2016: 14.1) +0.5 +0.9 +4.3 +0.2 +3.8 -0.3 -0.1 -0.3 -1.8 -1.3 -2.6 +1.0 +1.1 +2.2 -1.4 -0.1 -1.1 30.2 15.1 +21.7 bil. yen 202.5 bil. yen 3Q FY2017 +0.3 +0.9 180.8 bil. yen 202.5 bil. yen (100.1) +0.2 +1.1 (90.1) 202.5 180.8 30.2 bil yen +3.2 bil yen 27.0 bil. yen 2H FY2016 2H FY2017 Plan (Oct. 2017) 2H FY2017 Forecasts 2H FY2016 Marginal profit: +3.1 2H FY2017 Forecasts ? Plan to increase by 8.3 billion yen on the actual basis excluding the impact of newly consolidated subsidiaries. Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 10 0:04:57.8 Four Strategic Fields HPP Company ? Failure to achieve plans in the Electronics field owing mainly to the deterioration in market conditions offset by a recovery in the Automobiles and Transportation field Trends of Sales and 2H Overview in the Four Strategic Fields *The increase owing to M&A is marked in red Automobiles and Transportation ? Stagnant conditions in North America; stable market conditions in other areas ? Steady progress in expanding sales of high-performance products globally; start-up of a new interlayer film production line in Mexico in line with plans; decision made to invest in increasing production capacity in Europe ? In the process of reinforcing activities in the heat release materials field (promoting synergies with Sekisui Polymatech Co., Ltd. ) (Billions of yen) Electronics ? Slowdown in the demand for smartphones in China; 4Q demand projected to come in at around the level recorded in the 3Q ? Firm demand for large-scale LCDs; steady progress in development efforts in each of the OLED as well as packaging/semiconductor fields (Billions of yen) 14.9 1.3 16.5 4.0 15.8 2.9 26.1 0.6 29.0 2.2 31.3 1.8 13.4 12.1 13.1 13.6 12.5 12.9 23.9 25.3 24.9 25.5 26.9 29.5 3Q FY16 4Q FY16 1Q FY17 2Q FY17 3Q FY17 4Q FY17 Forecasts 3Q FY16 4Q FY16 1Q FY17 2Q FY17 3Q FY17 4Q FY17 Forecasts Building and Infrastructure ? CPVC: conditions in the Middle East are exhibiting a recovery trend; the Americas steadily expanding ? Fire-resistant materials: steady expansion in the non-combustible urethane business; Made Sekisui SoflanWiz Co., Ltd. a consolidated subsidiary ? Decision made to increase production of polyolefin film for construction use in Thailand (Billions of yen) Life Science ? Firm diagnostics business in Japan; business expanding in China ? Integration synergies with EIDIA Co., Ltd. materializing steadily from a sales and other perspectives 17.8 2.5 (Billions of yen) 14.0 14.4 14.6 13.7 14.0 15.3 18.6 17.3 17.3 18.6 18.9 19.2 3Q FY16 4Q FY16 1Q FY17 2Q FY17 3Q FY17 4Q FY17 Forecasts 3Q FY16 4Q FY16 1Q FY17 2Q FY17 3Q FY17 4Q FY17 Forecasts 11 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 0:07:51.9 2H FY2017 Forecasts: Analysis of Net Sales and Operating Income Housing Company ? 2H operating income plans revised downward due to delays in construction as a result of poor weather conditions in the 3Q ? Delays in construction in each of the Housing and Renovation business as a result of poor weather conditions from September to October ? Housing Business: plans for an increase in the number of houses sold mainly in the 4Q; period-end construction structure and system put in place ? Renovation Business: plans for an improvement in the gross profit margin in the 4Q owing mainly to a higher share of strategic products in 3Q orders Net Sales by Business (Billions of yen) Analysis of Operating Income Marginal Profit Factors (Billions of yen) Frontier (Domestic and Overseas) Renovation Housing ( )=3Q Results Sales Factors Fixed Costs Marginal Profit Fixed Costs Marginal Profit Fixed Costs Marginal Profit Fixed Costs +5.8 bil. yen 247.3 (103.5) 29.4 48.6 (13.8) (22.3) 2H Plan (Oct. 2017) +2.1 -1.1 -0.7 +0.6 -0.1 +0.3 -0.2 -0.7 -0.2 +0.1 -0.1 ±0 ±0 ±0 +0.1 21.2 0 255.6 31.1 49.9 253.1 (101.3) 31.1 (14.3) 48.6 (21.0) 3Q FY2017 (3Q FY2016: 2.4) -0.6 -1.0 -0.2 Downward revised sales plan: +120 units (As of Oct. 2017: +170 units) +1.4 -1.1 -0.6 +0.2 -0.1 +0.3 -0.2 ±0 ±0 169.3 (67.4) 174.6 173.4 (66.0) 20.4 bil. yen Of which, housing materials: -0.7 -0.2 bil. yen Frontier (Domestic): Frontier (Overseas): 20.2 bil. yen 2H FY2017 Forecasts 2H FY2016 2H FY2017 Plan (Oct. 2017) 2H FY2017 Forecasts 2H FY2016 Housing: -0.4 bil. yen Renovation: +0.1 bil. yen +0.1 bil. yen ±0 bil. yen Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 12 0:09:24.2 New Housing Orders Housing Company ? Work to achieve 4Q plans by realizing in earnest the effects of measures aimed at securing plan in the 2H; level out sales in FY2018 Overview of 3Q Results ? Despite falling short of plans, maintaining their recovery trend ? Detached houses grew centered on wood-frame houses (+2% YoY) ? Substantial growth in subdivision housing according to plans (+20% YoY) 2H Housing Order Plan (Revised plan) Housing Oder (Unit, YoY) Plan (Oct.2017): +5% Decrease in the number of visitors in October mainly in East Japan owing to poor weather conditions 2H Revised Plan: +3% Plan (Oct.2017): +5% ? Substantial decline in housing complexes (-10% YoY) ? No major changes in 4Q market trends compared with the 3Q +1% FY2017 FY2015 FY2016 +5% FY2017 FY2015 FY2016 Measure to acquire Orders in 2H 3Q 70th Anniversary Commemorative Product Strategies Land and Subdivision Housing Strategies Customer Traffic and Increase in Customer Prospects 3Q 4Q 4Q Put in place a structure and systems that are capable of addressing a decline in structural demand ?Strong Grand To You V start (3Q orders: more than 400 orders; increase from month to month) ?Smart Power Station GR robust (3Q orders: roughly 200 orders; captures customers with different exterior tastes) ?Robust sales of large-scale subdivision, Smart Heim City (3Q subdivision orders: +20% YoY; purchase of land targeting the 4Q and beyond also steady) ?Substantial increase in the number of visitors thanks to a variety of factors including successful efforts to diversify promotion tools aimed at attracting customers (3Q: +11% YoY; Nov.-Dec.: +21%) ?Despite failing to achieve plans; positive turnaround in YoY orders (+1%) Despite a substantial decline in solar power generation systems, growth in strategic products* (+13%) *Strategic products: for exterior areas, new external walls, bathrooms and kitchens, extensions, and etc. ?Work to accelerate the pace of Grand To You V and Smart Power Station GR sales ?The 3-story urban-type DESIO Urban released (January 2nd, 2018) ?Further reinforce subdivision housing orders; increase stock for sale for FY2018 ?Reinforce the ability to attract visitors (expand model home galleries and open houses mainly Tokyo, Nagoya and Osaka) ?Accelerate the switch over to a composite proposal-type sales style ?Put forward proposals focusing on prominent products (new exterior tiled-wall Ecochante and other products) Renovation Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 13 0:12:06.0 2H FY2017 Forecasts: Analysis of Net Sales and Operating Income ?Steady progress in each measures; projected to achieve 2H plans ? Growth strategy: expand sales of prioritized products* against the backdrop of such conditions as Tokyo metropolitan area infrastructure-related demand ? Platform Efficiency:continue with efforts aimed at securing a spread between selling prices and raw material costs; promote the optimization of production capacity ? Overseas Strategy: recovery in demand for aircraft sheets from the 4Q; progress in investments aimed at increasing production (sheets, FFU) ( )=3Q Results UIEP Company ? Prioritized products: High-value-added products with the potential for market growth and substitutability Net Sales Analysis of Operating Income Selling Quantity & Composition Cost Raw Selling Reduction Fixed Marginal Fixed Profit Price Materials and etc. Costs Costs Foreign Exchange Impact of business structural reform (YoY): -2.2 bil. yen +0.6 bil. yen 128.3 bil. yen (58.7) 128.9 bil. yen 2H Plan (Oct. 2017) +0.7 +1.0 +0.4 -1.1 +0.5 ±0 -0.6 +0.5 -0.4 +0.2 +0.2 -0.2 ±0 ±0 ±0 10.2 4.1 3Q FY2017 +0.5 -0.5 -1.1 128.9 bil. yen (59.8) (3Q FY2016: 3.5) +0.8 +1.0 +0.1 -0.4 +0.5 -0.3 10.2 bil yen 2H FY2016 2H FY2017 Plan (Oct. 2017) 2H FY2017 (Revised Plan) 9.6 bil. yen 2H FY2016 +0.6 bil yen Domestic: +0.4 bil. yen Overseas: +0.2 bil. yen ? Increased by 2.8 billion yen on the actual basis excluding the impact of business structural reform. 2H FY2017 Forecasts 14 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 0:13:58.1 Three Strategic Fields and Prioritized Products UIEP Company ? Progress essentially in line with plans in each of the Three Strategic Fields ? Steady progress in strategic investments as well as the introduction of new products; progress also in improving the product mix Sales Trends and 2H Progress in the Three Strategic Fields Piping and Infrastructure ? Increase in the number of pipeline rehabilitation orders that employ the SPR method received from local governments in Japan ? Completed equity investment in the TP Group; work to develop the Group’s ASEAN business in earnest from the next fiscal period (Billions of yen) Advanced Materials ? Sheet Business: despite the incidence of gaps in the delivery periods of aircraft sheets, progress in cultivating other fields ? FFU Business: progress essentially in line with plans against the backdrop of growing overseas demand (Billions of yen) 56.6 30.1 26.5 2H FY2016 57.6 30.8 26.8 2H FY2017 Forecasts 31.9 17.2 14.7 2H FY2016 32.7 17.3 15.4 2H FY2017 Forecasts Business structural reform (YoY): -2.2 bil. yen 4Q Forecasts 3Q Results 4Q Forecasts 3Q Results Prioritized Product Sales ? Steady growth; plans to secure an increase of 1.4 billion yen in the 2H ? Progress in the introduction of new products essentially in line with plans (plans to introduce 14 items in the 2H) Domestic Sales (Billions of yen) of which, Prioritized products sales Building and Living Environment ? Progress in introducing new products (designer rain gutters, etc.) ? Expand the capacity of prioritized product supply (functional flooring, etc.) (Billions of yen) 29.0 15.2 13.8 2H FY2016 28.7 14.7 14.0 2H FY2017 Forecasts 4Q Forecasts 3Q Results 115.1 15% 113.6 17% Prioritized Product Sales/Domestic Sales 17.5 2H FY2016 18.9 2H FY2017 Forecasts 15 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 0:15:45.6 Results for 3Q FY2017 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 16 0:15:50.1 Consolidated Companies Number of Consolidated Companies Mar. 31, 2017 Consolidated Subsidiaries Affiliates (Equity Method) Dec. 31, 2017 Difference Increased: 17 Subsidiaries*1 Decreased: 8 Subsidiaries*2 Increased: 0 Subsidiaries Decreased: 0 Subsidiaries 143 8 152 8 *1: ENAX,INCwith Sekisui Polymatech Co., Ltd., Sekisui SoflanWiz Co., Ltd., and etc. *2: Includes the integration of three Sekisui Heim Real Estate companies into a single company and four Sekisui Heim Industry companies into a separate single company. Influence of Change in the Number of Consolidated Companies First 9 months of FY2017 Net Sales Operating Income *3: Removed from consolidation from 2Q FY2016 *?: Removed from consolidation from 4Q FY2016 *?: Newly Consolidated from 2Q FY2017 Difference ? Sekisui Film*3 ? Nippon No-Dig Technology*? ? SEKISUI KNT(HEBEI) ENVIRONMENTAL TECHNOLOGY*? ? Polymatech Japan Co., Ltd. *5 and etc. +2.4 bil. yen +0.7 bil. yen Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 17 0:15:59.2 Summary of Profit and Loss First 9 months of FY2016 First 9 months of FY2017 Difference (Billions of yen) Net Sales Gross Profit Gross Profit Rate Selling, Gen. and Admin. Expenses 766.2 253.9 33.1% 192.4 61.5 1.7 0.5 63.7 6.9 11.0 59.6 18.2 1.4 39.9 . 791.6 258.2 32.6% 195.8 62.4 1.3 0.6 64.3 2.5 1.2 65.6 18.5 2.8 44.3 112 yen 129 yen +25.4 +4.3 -0.5% +3.4 +0.9 -0.4 0 +0.6 -4.4 -9.9 +6.0 +0.3 +1.4 +4.4 Loss on devaluation of investments in securities and impact of business structural reform (FY2016) 18 Operating Income Equity in Earnings of Affiliates Other Non-operating Income and Expenses Ordinary Income Extraordinary Income Extraordinary Loss Gain on sales of investments in securities (FY2016) Income before Income Taxes Corporate Income Tax, etc. Net Income Attributable to Non-controlling Interests Net Income Attributable to Owners of the Parent Foreign Exchange (Avg. rate) 1US$ 1? 107 yen 118 yen Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 0:16:29.5 Balance Sheets (Assets) (Billions of yen) Mar. 31, 2017 Dec. 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 109.9 164.1 153.6 38.6 261.8 39.6 156.9 19.3 943.6 95.6 177.1 185.8 51.9 277.9 53.1 180.4 18.4 1,040.2 -14.3 +13.0 +32.3 +13.3 +16.1 +13.5 +23.4 -0.8 +96.6 Increase of land for sale and work in progress of housing Capital investment and M&A Purchases and investment in securities, at fair value, and etc. Influence of Change of Consolidated Companies +27.4 bil. yen Foreign exchange +13.3 bil. yen Actual basis; +55.9 bil. yen Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 19 0:17:12.3 Balance Sheets (Liabilities & Net Assets) Net income (Billions of yen) Mar. 31, 2017 Dec. 31, 2017 Difference 44.3 bil. yen Dividends paid -18.1 bil. yen Retirement of treasury stock -12.9 bil. yen 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 329.4 43.7 373.1 209.2 341.0 -41.0 39.5 20.8 1.1 570.5 943.6 345.2 83.8 429.0 209.2 355.0 -40.0 51.8 25.6 9.7 611.3 1,040.2 +15.8 +40.1 +55.9 0 +14.0 +1.0 +12.3 +4.8 +8.6 +40.7 +96.6 Purchases of treasury stock -13.3 bil. yen Retirement of treasury stock +12.9 bil. yen Translation adjustments +9.9 bil. yen 20 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 0:17:36.0 Consolidated Cash Flows (Billions of yen) First 9 months of FY2016 First 9 months of FY2017 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 59.0 -14.8 -37.6 6.2 73.3 28.2 39.0 -43.3 5.6 3.7 94.2 -23.2 Working Capital and Increase in corporate tax payment, and etc. Purchases of investments in securities and etc. Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 21 0:18:16.2 Depreciation and Capital Expenditures (Billions of yen) First 9 months First 9 months of FY2016 of FY2017 Difference FY2016 FY2017 Forecasts Difference Depreciation Capital Expenditures 25.7 30.2 26.8 37.0 +1.1 +6.8 34.8 43.9 37.0 56.0 +2.2 +12.1 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 22 0:18:23.9 FY2017 Forecasts FY2016 (Billions of yen) FY2017 Forecasts Difference FY2017 Plan (Oct. 2017) Net Sales Operating Income Ordinary Income Net Income Attributable to Owners of the Parent Dividend per Share (Yen) 1,065.8 96.5 91.5 60.9 35* 1,114.0 102.0 101.0 67.0 38* +48.2 +5.5 +9.5 +6.1 +3 1,114.0 102.0 101.0 67.0 38* *Including 70th anniversary commemorative dividend of 1 yen per share. Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 23 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. *For charts and graphs in this presentation material denominated in billions of yen, numbers below a billion are rounded up or down to the nearest hundred million. Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 24 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. 25 Housing Company Results and Plan 1. Main data in Housing business FY2017 1H 3Q 101.3 66.0 21.0 13.9 11.7 2.2 0.4 2,380 1,950 1,590 360 430 31.2 838 122.8 419 2,432 28% 33% 2H (plan) 253.1 173.4 48.6 30.2 25.2 5.1 0.9 7,140 5,050 4,070 980 2,090 30% 32% Annual (plan) 497.5 340.7 96.0 58.9 49.1 9.8 1.9 13,990 9,970 8,250 1,720 4,020 419 2,375 29% 32% 1H 237.7 161.4 48.3 27.2 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% FY2016 3Q 103.5 67.4 22.3 13.3 11.2 2.1 0.4 2,470 2,030 1,630 400 440 31.0 828 123.5 416 2,431 30% 35% 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% Annual 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% FY2015 Annual 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% 26 Net Sales (Billions of yen) 244.4 167.3 47.4 28.7 23.9 4.7 1.0 6,850 4,920 4,180 740 1,930 31.0 832 123.0 416 2,495 28% 32% CONSOLIDATED OTHERS Housing Renovation Frontier (Domestic) Real estate Residential Services 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. Housing Company Results and Plan 2. Housing orders (Millions of yen) Year-start Backlog Growth Rate New Orders Growth Rate Sales of Housing/Renovation Growth Rate Balance at the end Growth Rate FY2017 1H 3Q 2H (plan) Annual (plan) 1H 3Q FY2016 2H Annual 1H FY2015 2H Annual 206,000 207,800 207,800 - 205,500 207,500 207,500 - 204,300 205,500 +1% +1% -12% -8% ±0% ±0% +1% ±0% 202,957 92,818 209,217 412,174 202,457 93,917 207,529 409,987 199,914 204,391 404,304 -1% +1% +1% +1% -4% +2% +1% -5% +5% ±0% ±0% 201,157 80,618 207,517 408,674 200,457 85,217 209,029 409,487 198,714 204,391 403,104 +2% -9% -4% - 205,500 205,500 -8% +1% FY2016 Annual (plan) 1H 3Q 2H Annual -5% -1% ±0% 207,800 220,000 209,500 +2% +2% ±0% +1% +2% ±0% ±0% - 207,500 216,200 206,000 +1% -1% ±0% -7% FY2015 Annual 3. Housing starts (Units) Housing starts* Privately-owned houses* (included in above) =A Sales by our company Detached house sales by our company=B Our share in Detached houses=B/A FY2017 1H 3Q 2H (plan) 496,840 148,266 6,850 4,920 3.3% 239,500 72,500 2,380 1,950 2.7% 453,000 142,000 7,140 5,050 3.6% 950,000 290,000 13,990 9,970 3.4% 500,151 152,836 6,620 4,740 3.1% 250,696 75,929 2,470 2,030 2.7% 473,986 138,947 7,000 4,820 3.5% 974,137 291,783 13,620 9,560 3.3% 920,537 284,441 13,380 9,410 3.3% FY2015 *“The housing starts” and “Privately-owned houses” after 1H of FY2017 are based on forecasts. 4.The ratio of the houses equipped with the high-performance specifications Solar power generation systems installed Tiled exterior walls (Heim type JX) Storage battery installed Comfortable Air System FY2017 1H 3Q 2H (plan) Annual (plan) FY2016 1H 3Q 2H Annual Annual 75% 71% 21% 75% 72% 70% 19% 73% 73% 72% 20% 74% 74% 72% 21% 75% 77% 67% 21% 73% 78% 68% 24% 74% 78% 68% 27% 77% 78% 67% 24% 75% 79% 66% 25% 70% 27 Copyrightc SEKISUI CHEMICAL CO., LTD. All Rights Reserved. Director, Managing Executive Officer Yoshiyuki Hirai