Current Management
Priority Issues andBusiness Strategy
目 次

Masakazu Tokura
President
June 5, 2014
Current Management Priority Issues and Business Strategy

1

Contents

目 次

1. Overview of FY2013 Performance and FY2014 Outlook
2. Overview of Corporate Business Plan FY2013 - FY2015
3. Progress on Corporate Business Plan
(1) Restructure Businesses① Expand Specialty Chemicals Business② Restructure Bulk Chemicals Business(2) Enhance Financial Strength(3) Develop Next-Generation Businesses
4. Shareholder Return

Current Management Priority Issues and Business Strategy

2Overview of FY2013 Performance目次and FY2014 Outlook

Current Management Priority Issues and Business Strategy

3

目 次

FY2013 Results(Billions of yen)

FY2012FY2013

Change1,952.5

2,243.8+291.3Operating Income

45.0

100.8

+55.8

(Equity in Earnings ofAffiliates)

5.4

12.0

+6.6

Ordinary Income

50.3

111.1

+60.9

Net Income

-51.1

37.0

+88.1

Naphtha Price¥57,500/kl¥67,300/kl

Exchange Rate

¥82.91/$¥100.17/$

Sales

Current Management Priority Issues and Business Strategy

4

目 次

Outlook for FY2014(Billions of yen)

FY2013

FY2014(Forecast)

Change2,243.8

2,320.0+76.2

Operating Income

100.8

105.0

+4.2

(Equity in Earnings ofAffiliates)

12.0

23.0

+11.0

Ordinary Income

111.1

120.0

+8.9

Net Income

37.0

45.0

+8.0

Naphtha Price¥67,300/kl¥70,000/kl

Exchange Rate

¥100.17/$¥100.00/$

Sales

Current Management Priority Issues and Business Strategy

5目 次Operating Income by Sector(Billions of yen)

FY2012FY2013

FY2014(Forecast)Specialty Chemicals

68.8

120.2

108.0

IT-related Chemicals

Pharmaceuticals

11.7
26.3
30.9

34.9
38.2
47.1

37.0
45.0
26.0

Bulk Chemicals

-9.6

-5.9

4.0

Basic Chemicals

-6.4
-3.2

-10.9
4.9

-6.0
10.0

-14.2
45.0

-13.4
100.8

-7.0
105.0

Health & Crop Sciences

Petrochemicals & Plastics

Others
Total

Current Management Priority Issues and Business Strategy

6Overview of Corporate Business Plan
FY2013 - FY2015 目 次

Current Management Priority Issues and Business Strategy

7

Priority Management Issues & Business
Strategy目
次Since the Beginning of the Century

Priority
Issues

Major

Radically improve
competitiveness of
petrochemicals
business

Implementation of
Rabigh Project(includes ¥100.0 bn investment in phase 2)

Projects

Results:
Sales Increase
FY2000 vs. FY2012

Approx. ¥266.0 bn

Gain critical massin pharmaceuticals
business to achievestrong growth

Developnew businesses
with potential to
become corebusinesses

Launch ofDainippon Sumitomo Pharma& Acquisition of
Sepracor (Sunovion) in US

Establishment and expansionof
IT-related Chemicals Sector

Approx. ¥249.0 bn

Approx. ¥440.0 bn(equity investment and lending)(increased shareholding and acquisition)(cumulative capital expendituresin 12 years since inception)

Petrochemicals & Plastics
SectorPharmaceuticals
SectorIT-related Chemicals
Sector(¥375.5 bn ⇒ ¥693.9 bn)(¥156.7 bn ⇒ ¥378.6 bn)(¥60.2 bn ⇒ ¥300.0 bn)

Approx.

1.7 times

Current Management Priority Issues and Business Strategy

Approx.

2.3 times

Approx.

5.0 times

8目 次
Where We Have Been Heading
Last 10 Years

2 to 3 Years

Next 10 to 20 Years

Enhance financial strength
Pave the way for future growth

Improve
profitability

Rigorously
selectinvestments

Improveasset
efficiency(Tackle three priority management issues)

Implemented Rabigh Project
Launched DSP and
acquired Sepracor/BBI
Established and expanded ITrelated Chemicals Sector

Globalization

Restructure businesses
Exit
underperforming
businesses

Improvebusiness
portfolio

Develop new businesses
Environment
and Energy

Life
Sciences

ICT

Promote globally integrated management

Ensure full and strict compliance and maintain safe and stable operations
Current Management Priority Issues and Business Strategy

9Performance Targets

目 次Targets for FY2015
Sales¥2,400 Billion

Operating Income¥140 Billion

Ordinary Income¥150 Billion(Equity in Earnings of Affiliates)¥25 Billion

Net Income¥90 Billion

Interest-Bearing Liabilities

Below ¥900 Billion【Assumptions】
Exchange Rate
Naphtha Price

Current Management Priority Issues and Business Strategy¥80 /$US¥60,000 /kl

10Cash Flow Targets

目 次
FY2010 – FY2012

FY2013 – FY2015

Corporate
Business Plan

Corporate
Business Plan
(Target)Cash flows
from operating activities¥472.3 billion¥540 billion

Cash flows
from investing activities- ¥445.7 billion

Below - ¥400 billion（注）¥26.6 billion

Free cash flows*1

Over ¥200 billion（注）現預金等の減少を含む。

Note *1: Includes decreases in cash and cash equivalents

End of FY2012

End of FY2015(Target)Interest-bearing liabilities

Current Management Priority Issues and Business Strategy¥1,060.6 billion

Below ¥900 billion

11Progress on Corporate
目 次 Business Plan

Current Management Priority Issues and Business Strategy

12Restructure Businesses
目 次Current Management Priority Issues and Business Strategy

13

次
Restructure Businesses：Expand目
specialty
chemicals business

ExpandRestructure

specialty chemicals
businessbulk chemicals
business

Improve business portfolio
Current Management Priority Issues and Business Strategy

14

IT-related Chemicals Sector

目 次

Features and advantages• Major products: display materials• Swiftly meeting customer needs*

Trends in Sales and Operating Income（Billions of Yen）

Sales (left axis)

500.0
400.0
300.0

Operating Income (right axis)

445.0
322.3
26.1

200.0

362.3
293.1

300.0

11.0

11.7

2011

2012

100.0

*Established production, sales and research bases
in major customers’ locations, such as South Korea
and Taiwan

Future growth drivers• Increase in sales of polarizing films andtouchscreen panels• Cost reduction of polarizing films for
televisions• Development and launch of next-generation
flexible panel materials and components

0.0
2010

（※） Assumed exchange rate: ¥80.0/$（Billions of Yen）

435.0 60.0
50.0
34.0 （※）

40.0
30.0
37.0
34.9
20.0
10.0
0.0
2013
2014
2015 （FY）（Forecast） （Target）

Smartphone and Tablet PC Demand(Million Units)

Smartphone (left axis)

Tablet PC (right axis) (Million units)

2,000
1,500

500

1,000
500
0

0
2012

2013

2014

2015

2016

2017

Production Capacity of Touchscreen
Panels for OLED Panels
Production capacity
×1.7

Production capacity
×1.9

2012.2Q 2012.3Q 2012.4Q 2013.1Q 2013.2Q 2013.3Q 2013.4Q
Current Management Priority Issues and Business Strategy

15

IT-related Chemicals Sector

Business area

Polarizing films

Touch sensors

Progress目
and次
Next Steps
Progress

Next steps

Expanded small and medium-sizedpolarizing film production capacity

 Mass-produce next-generation polarizingNext-generation polarizing films:
achieved substantial progress indevelopment and completed preparations
for commercial productionIncreased share in polarizing films usedin smartphonesStarted mass production of a newpolarizing film that replaces a protection
film (modified existing production
facilities to manufacture the new film)Increased on-cell touch sensor
production capacity

Built manufacturing plant for cover-glass
integrated touch sensors

Expanded production capacity for heatresistant separators

Other

films

 Expand share in polarizing films used intablet PCs

 Promote the new polarizing film that
replaces a protection film

 Promote on-cell touch sensor sales
 Mass-produce cover glass-integrated touch
sensors

 Develop and launch film touch sensors
 Further expand production capacity forheat-resistant separators

 Develop and commercialize flexible display
components and materials

Current Management Priority Issues and Business Strategy

16

目 次

IT-related Chemicals Sector

Expand Lithium-ion Secondary Battery Separator Business
Reference: EV market forecast

Features and advantages• Separator with increased high heat•

resistance*
Demand is growing for use in EVs

Larger-capacity
batteries to increase
driving range

High energy
capacity during
charge anddischarge

Sumitomo Chemical’s separators

1,000

0

Demand for batteries and materials for EVs
Characteristics oflarge-capacity
batteries

1,500

500

*Heat resistance separator made of a polyolefin baselaminated with an aramid layer or a ceramic (highpurity alumina) layer, helping to improve safety ofbatteries

User needs(1,000 vehicles)

Demand formaterials

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Source: Techno Systems Research Co., Ltd.

Reference: Separator production capacity(10 million m2/year)

15
10
5

Ensure safety02006 2007 2008 2009 2010 2011 2012 2013 2014
Note: Total capacity for aramid and ceramic coated separator.

Panasonic’s secondary batteries

Current Management Priority Issues and Business Strategy

Tesla Motors’ Model S17

IT-related Chemicals Sector

目 次Commercialize Flexible Display Materials and Components
Current structure of organic LED• Our strong material development capacity
as a diversified chemicals manufacturer• Our product development capacity andprocessing technologies for display
materials

Laminated
type
Polarizing
film

Replace glass with plastics• Slash thickness and weight• Improve durability

To bereplacedby:

Cover glass
Polarizing film
ITO (xy)
Sealing glass

To bereplaced
by:

OLED
Glass

Film-type touch sensors

New film to replace glass• Lighter, more durable and less expensive• Samples of the prototype are undergoing performance• Lighter, more durable (unbreakable) and flexible• Material design and development is on track; started

evaluation before the start of mass production• To be launched in the first half of FY2014
To be launched for use in rigid
displays in FY2014
Current Management Priority Issues and Business Strategy

the development of production technology• To be launched in FY2015
Stepping stone towards realizing
flexible displays
18

目 次

Health & Crop Sciences Sector

Trends in Sales and Operating Income

Features and advantages(Billions of Yen)

• Strong R&D capabilities and robust product pipeline• Product lines differentiated from major competitors• Products with largest market share in Japan* and1with large global market shares*2• Global sales network

Sales（left axis）

Operating Income（right axis）

400.0
300.0

327.0
250.8

264.1

350.0

45.0

45.0

（※）

38.2

200.0
23.3

26.5

26.3

2010

2011

2012

100.0

60.0
50.0
40.0
30.0

2013

（※） Assumed exchange rate: ¥80.0/$

20.0
2014
2015 (FY)(Forecast) (Target)

Flumioxazin Herbicide Production Capacity
Production
capacity
×2.0*2 Household insecticide, methionine and others

Future growth drivers• Achieve greater synergy*• Expand into new business areas• Enhance business in niche areas• Continuously launch new products

355.0

262.6

0.0

*1 Crop protection chemicals, pharmaceutical chemicals
and others(Billions of Yen)

Production capacity
×1.2
Production capacity
×1.2

1*1 Expand alliance with Monsanto and other partners andachieve greater synergy with Nufarm

2011

2012

2014

2015

Number of Countries in which Sumitomo
Chemical has formed Sales Alliance with Nufarm(Countries)

25
20
15
10
5
0
2010

Current Management Priority Issues and Business Strategy

2013

2011

2012

2013

19

Health & Crop Sciences Sector

Business area

目 and
次 Next Steps
Progress
Progress

Next steps

 Formed sales alliance with Nufarm

 Seek to create more synergies fromfor crop protection chemicals for
professional turf, ornamental andaquatics uses in the U.S.

Crop protection
chemicals Expanded the collaboration with

Monsanto into Brazil and Argentina

the alliance with Nufarm

 Expand seed treatment business Respond to changes in the Japanesecrop protection chemicals market

 Decided to expand Flumioxazin
herbicide production capacity

 Acquired Pace International toenter post-harvest business Acquired shares in U.S.-based
Environmental
healthMcLaughlin Gormley King Company
to make it a wholly-owned subsidiary Integrated distribution channels in Expand into new areas
 Commercialize animal health products
and pharmaceuticals

North America

 Commercialize active pharmaceutical
OthersCurrent Management Priority Issues and Business Strategy

ingredients of nucleic acid
pharmaceuticals

20

目 次

Health & Crop Sciences Sector

Responding to Changes in Japan’s Agriculture Market
Features of Agriculture in Japan•

Stringent quality control (rigorous
safety and quality assurance
measures)• Large consumer market

Agricultural Policy

Our Business Opportunities and Plans

Structural reform to makeJapan’s agriculture
attractive and competitive

Strengthen marketing capabilities in Japan• Enhance technical support• Integrate the sales organizations for crop
protection chemicals and fertilizers in order
to be better able to offer comprehensive
proposals

Abolish acreage
reduction policy
Issues for Agriculture in Japan•

Aging farm workers; lack ofsuccessors- Average age of farmers: 66(2013)- 30% decrease in the number offarm workers between 2005
and 2013• High-cost social infrastructure
built on the premise that smallscale agricultural producers are
the major players in Japan’s
agricultural industry

Encourage the merger ofsmall farms into larger,
integrated farmOffer a labor-saving fertilizer application andcrop protection system• Enhance product portfolio for paddy ricecultivation• Seed treatment

Promote the use of newtechnologies

Promote “total solution provider” business“Industrialize” Japan’s
agriculture and expand
the scope of agricultural
producers’ business toinclude food processing,marketing, sales andservices• In addition to selling crop protection
chemicals, fertilizers and agricultural
supplies, provide related services, including
farm management consulting and assistanceservices, agriculture business management
support systems, and agricultural produce
sales support• Managing “Sumika Farm” agricultural
corporations

Support agricultural producers with our broad
product portfolio and advanced technologies
Current Management Priority Issues and Business Strategy

Enhance agricultural producers’ competitivenessand help their efforts to improve product safety
and quality
21

目 次

Health & Crop Sciences Sector

Offering a labor-saving fertilizer application and crop protection system
Our products contributing to labor-saving and the improvement of
production efficiency in paddy rice cultivation
Cultivation
cycle

Rice seeds

Seeding andraising of
seedlings,
Seed coating

Seedling
planting andseed sowing in
paddies

SproutingSeeddisinfectants

Insecticides
and fungicides

Insecticides,
fungicides,
herbicides andfertilizers

Insecticides,
fungicides andanti-lodging
agentsRipening

Transplanting
Direct sowing

Our products

Provide products that contribute to making farm work more efficient
Reduce labor

Streamline/ replace work
processes

Increase yield

Help increase the competitiveness of paddy rice cultivation
Current Management Priority Issues and Business Strategy

22

Pharmaceuticals Sector

Features and advantages• Drug discovery platform in the areas of

目 次
Trends in Sales and Operating Income(Billions of Yen)

Operating Income（right axis）

380.5

418.8
47.1

(Billions of Yen)

500.0

psychiatry & neurology and oncology

400.0• New drug development capabilities and300.0

sales network in the U.S.

Sales（left axis）

60.0
410.6

378.6

385.0

385.0
35.0

30.9

40.0

26.0

20.9

200.0

28.7

20.0

100.0
0.0

0.0
2010

2011

2012

2013

2014

2015

(FY)

(Forecast) (Target)

Future growth drivers• Increase sales of LATUDA by adding new
indications and expanding sales territories• Enhance product pipeline in the areas of

Atypical Antipsychotic LATUDA Sales Projections(Millions of US Dollars)

1,000

by using cell technologies

Current Management Priority Issues and Business Strategy

Europe

Japan

Asia

Others

610
421

500

psychiatry & neurology and oncology• Regenerative medicine and drug discovery

North America

86

202

0
2011

2012

2013

2014

2015

(Forecast) (Target)

2017 (FY)(Target)Note: Data for sales of our business partners in Europe (except U.K.) are our estimates.

23

Pharmaceuticals Sector

Business area

目Next
次 Steps
Progress andProgress Additional indication approved in the Increase LATUDA sales in the U.S. and

U.S. for use of atypical antipsychotic
LATUDA in treating bipolar I
depression

 Obtain approval for LATUDA in Japan Atypical antipsychotic LATUDA
approved in Europe as a treatment
for schizophrenia

Prescription
pharmaceuticals

Next steps

 APTIOM launched in the U.S. as atreatment for epilepsy

 Established drug discovery team andsales force for anticancer drugs

Alliance with Healios in regenerative
medicine and cell therapy business Restructured North American
operations

Europe Increase APTIOM sales
 Develop and launch BBI608 and BBI503,
anticancer drugs targeting cancer stemcells

 Commercialize cell therapy drug SB623 forstroke recovery

 Commercialize cell therapy drug HLS001
for eye diseases, such as age-related
macular degeneration

 Develop first-of-a-kind therapies• EPI-743 for mitochondrial diseases• DSP-1747 for non-alcoholicsteatohepatitis

Current Management Priority Issues and Business Strategy

24

目 次

Pharmaceuticals Sector

Development Pipeline in Cancer Field
Brand name/Product code

Generic
name

CALSED®
(Brand name in Japan)

amrubicinhydrochloride

BBI608TBD

WT4869

WT2725

BBI 503

TBD

TBD

TBD

Proposed indication

Development
location

Small cell lung cancer

China

Colorectal cancer (Monotherapy)(Global clinical trial）

U.S./Canada/Japan, etc.

Gastric cancer (Combination therapy)(Global clinical trial）

U.S.

Colorectal cancer(Combination therapy)

U.S./Canada

Solid cancer(Combination therapy)

U.S./Canada

Gastrointestinal cancer(Combination therapy)

U.S./Canada

Gastric cancer(Combination therapy)

Japan

Myelodysplastic syndromes

Japan

Solid cancer

Japan

Solid cancer, Hematologic cancer

U.S.

Solid cancer

Japan

Solid cancer (Monotherapy)

U.S./Canada

Phase
I

Phase
II

Phase
III

Submitted

Closed further
accrual ofpatients※1※2※1 Phase ll of Phase I/II study, ※2 Phase I of Phase I/II study

Current Management Priority Issues and Business Strategy

25

Pharmaceuticals Sector
目 次Developing New Drugs in the Fields of Regenerative Medicine and Cell Therapy
Cell therapy drug derived frommesenchymal stem cells

Cell therapy drug derived from iPS cells
1. Background

1. Background

Concluded joint-development agreement with Healios

Secured an option from SanBio• Drug name：• Therapeutic field：• Area：

HLS001• Drug name：• Therapeutic field： Eye diseases such as age-

SB623
Strokerelated macular degeneration

U.S., Canada• Area：2. Development status• Current status ：Phase 1/2 clinical trials

2. Development status• Planned launch：

under way in U.S.

• Planned launch：Japan

FY2018 at the earliest(targeting conditional approval)

FY2017
Treatment of age-related macular degeneration by HLS001

Stroke treatment by SB623
Production method

Treatment

SB623 is derived fromgenetically engineeredbone marrow stromalcells obtained fromhealthy adult donors

Administer SB623 to
the area damaged bystroke in thepatient’s brain

Expected benefits

Production method

Promote theregeneration ofcentral nerves in
the area damaged
by stroke

Cultivate iPS cellderived differentiatedretinal pigmented
epithelium (RPE) cells

Treatment

Expected benefits

Implant iPSderived RPE cells
in the macula ofthe patient

Repairretinalfunctions

Medium- to long-term target: develop a regenerative medicine and cell therapy business of more than 150 billion yen

Current Management Priority Issues and Business Strategy

26

目 次bulk chemicals businessRestructure Businesses: Restructure

ExpandRestructure

specialty chemicals
businessbulk chemicals
business

Improve business portfolio
Current Management Priority Issues and Business Strategy

27

Restructure Caprolactam Business:
目 次

Decided to Close Down Liquid-Phase Process Plant
Restructuring measures

Vapor-phase process technology• Close down aging liquid-phase process plant by the• Developed and commercialized by Sumitomo Chemicalend of 2015

for the first time in the world• Continue caprolactam business by further improving• The world's highest level of quality (low impurity, best

our competitive vapor-phase process technology andpressing forward with rationalization efforts

suited for high-speed spinning)• No ammonium sulfate byproduct; free from the risks of• Keep the optimal size of caprolactam business andprofitability fluctuations due to ammonium sulfate
market conditions

maintain the supply to key customers by using thecapacity of the vapor-phase process plant andprocuring caprolactam from a third party as needed• Low maintenance cost because the facilities are stillnew

Caprolactam Production
Capacity

Production of ammonium sulfate(byproduct of caprolactam)(Thousand tons
per year)(Thousand tons
per year)

Liquid-phase process plant

100

Vapor-phase process plant
Reduceproduction
capacity by
95
half

50

85

200
150

250

0

Liquid-phase process plant($/t)

Vapor-phase process plant

1000

150
219

Reducedto zeroAfter
restructuring

Urea

600
400

50

200

0
Beforerestructuring

Ammonium sulfate

800

200
100

85

Ammonium sulfate market prices

BeforerestructuringAfter
restructuring

0
2001

2003

2005

2007

2009

2011

2013

Note: The liquid-phase process plant began operation in 1965, and the gas-phase process plant in 2003

Current Management Priority Issues and Business Strategy

28

Restructure MMA Business目 次
Launched business restructuring measures

Initiatives to restore competitivenessAttractiveness of MMA business1. Growing demand for MMA polymer• Excellent properties such as transparency, weather
resistance and hardness• Potential demand for a wide range of uses

ProductionSales

2. Limited MMA monomer capacity• Technically highly challenging production process• Limited availability of raw materials
Continue to position MMA business as core

Launched
initiatives
toContinue
to position
MMA businessas a core business
restore competitiveness• Closed down MMA polymer production facilities in
Ehime in December 2013*• Shifted major part of MMA operations to Singapore* Our global production capacity decreased from 195,000 tons to
150,000 tons.
Current Management Priority Issues and Business Strategy

Research

MMA monomer

MMA polymer

Rationalization
Rabigh Phase II Project
In-house production of raw
materials

Rationalization
Rabigh Phase II ProjectPrice increases
Sales expansion

Price increases
Development of new applications
and sales expansion

Development of highperformance catalysts
Development of new
manufacturing processes

Development of new applications
Development of improved
manufacturing processes

Note : The initiatives shown in red are those expected to produce effects during thecurrent Corporate Business Plan period.
The initiatives shown in blue are those for which a decision will be madeduring the current Corporate Business Plan period.

MMA polymer sales by application (automobiles and new applications)
25%
20%
15%
10%
5%
0%

New products and new applications

2013

2014

Automobiles

2015

Increase sales volumes by application development andsales promotion
29

Petro Rabigh: Earnings

目 次
Significant
improvement in
performance due
to high-rate, stable
operation（US$ millions）
18,000（US$ millions）
200

15,000150
12,000

9,000

100

6,000
50
3,000

0

0

FY2010FY2011FY2012FY20132014.1Q(Full year)(Full year)(Full year)(Full year)(Three months)

Sales（right axis）

Current Management Priority Issues and Business Strategy

Net profit（left axis）

30

次
Overview of Rabigh Phase 目
II Project
Overview of Rabigh Phase II Project
1. Total investment$ 7 billion

1. Schedule

2. Feedstock

Ethane (approx. 400,000 tons/year)
Naphtha (approx. 3 million tons/year)

3. Products

Paraxylene/benzene
Ethylene vinyl acetate/low-density
polyethylene (EVA/LDPE)
Ethylene propylene rubber/thermoplastic
polyolefin (EPDM/TPO)
Phenol/acetone
Methyl methacrylate/polymethyl
Methacrylate (MMA/PMMA)

4. Start of operation

First half of 2016

Cmparison of petrochemical feedstock prices($/mmbtu)

Natural gas

Ethane gas

5Ethane gas is a lowcost feedstock withstable prices,compared withnatural gas
produced in the U.S.

4
3
2
1
0

Progress of the project

11/1 11/7 12/1 12/7 13/1 13/7 14/1

Started feasibility study in April 2009
Completed feasibility study in May 2012
Signed engineering, procurement andconstruction (EPC) contracts between 2012 and2013
Complete project financing in the second halfof 2014 (planned)
Start operation in the first half of 2016
(planned)
2. Current status① Engineering: Mostly completed② Procurement: More than half completed(placed orders for equipment)① Construction: Began plant construction inearly 2014

(Note) Natural gas: Henry hub prices

Current Management Priority Issues and Business Strategy

31

目 次 and Next Steps
Bulk Chemicals Business: Progress
Business area

Progress Decided to close down liquid-phase processcaprolactam plantBasicchemicalsPetrochemicals

Petro Rabigh Closed down P-MMA plant Completed construction of DPF production facilities
 Expanded production capacity for high-purity alumina

Next steps
 Improve competitiveness of caprolactam business Restructure MMA business Promote DPF
 Increase sales of high-purity alumina

 Decided to close down ethylene plant at Chiba
 Decided to close down PO/SM plant Expanded S-SBR production capacity

 Restructure Chiba Works Develop and expand sales of high value-added, Strengthened support from founding shareholders
 New arrangements with founding shareholders
 Secured compensation from utilities supplier Realize high-rate, stable operation of Rabighdifferentiated products

Phase I project facilities

 Execute Rabigh Phase II projectCurrent Management Priority Issues and Business Strategy

32Become a More Resilient Sumitomo
Chemical目
次through Business Restructuring
Sales

Operating Margin

Return on Investment（Billions of Yen）
1,200

1,108

1,155

1,170
1,079

1,000
800
600
400
200
0

2013

2015
（Target）

Specialty

2013

12%
10%
8%
6%
4%
2%
0%
-2%

2015 （FY）（Target）

Bulk

10.8% 9.7%

3.4%

-0.5%

2013

2015
（Target）

Specialty

2013

2015 （FY）（Target）

12%
10%
8%
6%
4%
2%
0%
-2%
-4%

Bulk

7.0% 7.3%

7.0%

-2.8%

2013

2015
（Target）

Specialty

2013

2015 （FY）（Target）

Bulk

・ Expand specialty businesses
・ Restructure underperforming
businesses
・ Quickly maximize returns on

Improvebusiness portfolio

Establish robust
businessfoundations

major investments

Current Management Priority Issues and Business Strategy

33

Enhance Financial目Strength
次

Current Management Priority Issues and Business Strategy

34

Enhance Financial Strength目 次

Improvefinancialstrength

Improve asset
efficiency(Improve CCC)

Rigorously
selectinvestments

Enhance financial strength
Target:Interest-bearing liability balance
below ¥900 billion at the end of FY2015

Secure greater strategic freedom toaggressively pursue growth opportunities
Current Management Priority Issues and Business Strategy

35

目 次
CCC Improvement Initiatives
Sumitomo Chemical’s CCC

CCC Improvement Initiatives
SectorInitiatives

Basic Chemicals- Shorten accounts receivable
terms- Optimize inventory levels

Petrochemicals& Plastics

IT-related
Chemicals

Health & Crop
Sciences

Pharmaceuticals- Shorten accounts receivable
terms for polymer business inJapan- Optimize inventory levels- Shorten accounts receivable
terms- Reduce inventories by globally
standardizing the grades andspecifications of products- Reduce the number of crop
protection chemicals- Optimize inventory levels- Production at appropriate time
- Shorten accounts receivableterms

Accounts receivable

Accounts payable

Inventory

CCC(Days)

200
180

160

56
76

140

57

56

120

73

73

58
77

68

58
65

57

65 60
40

100

55

80
60
40

126
104 106
87

108
92

114
95

103

93

84

92

83 88

84
69

20
0

2008 2009 2010 2011 2012 2013 2014 2015 (FY)
(Forecast) (Target)- Optimize inventory levels

Current Management Priority Issues and Business Strategy

36

目 次

Cash Flow Projections(billions of yen)

Corporate
Business
Plan
FY2010-FY2012(Result)

New Corporate
Business Plan
FY2013-FY2015(Target)

FY2013(Result)

FY2014(Forecast)

Cash flows fromoperating activities

472.3

540.0

194.4

235.0

Cash flows frominvesting activities- 445.7

Below - 400.0- 135.2

-95.0

59.2

140.0

26.6

Free cash flows*1

Over 200.0

Note *1: Includes decreases in cash and cash equivalents

Interest-bearing
liabilities(billions of yen)

End of FY2012

End of FY2015(Result)(Target)1,060.6

900.0

End of FY2013(Result)

End of FY2014(Forecast)

1,074.6980.0

Note : Rabigh Phase II advance payments: 24 bn yen at end of FY2012, 75 bn yen at end of FY2013
Current Management Priority Issues and Business Strategy

37Interest-Bearing Liabilities 目
and次
D/E Ratio(Billions of Yen)

Interest-bearing liabilities (left axis)

Debt to equity ratio (right axis)(Times)

1,600

1.6

1,400

1.4

1,200

1.2

1,000

1.0

800

0.8

600

0.6

400

0.4

200

0.2

0

0.0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

(FY)

(Forecast) (Target)

Current Management Priority Issues and Business Strategy

38

Develop Next-Generation
Businesses
目 次Current Management Priority Issues and Business Strategy

39

目 次
Develop Next-Generation Businesses
LaunchEnvironment

2011

2015

2020-

Silicon solar cells (HEVA, electrode paste, etc.)
Organic thin-film photovoltaics
Lithium-ion secondary batteries (separators)
Lithium-ion secondaryLED lighting applications (sapphire substrates and alumina, etc.) batteries (Cathode materials)
PLED lighting

and Energy

Power semiconductors (epitaxial wafers)
High heat-resistant and high thermal-conductive resin
Diesel particulate filters
CO2 separation
PLED (light emitting materials)

Organic semiconductors

Next-generation polarizing films
Encapsulation materials for optical use
Flexible display materials and components

ICTDrug for schizophrenia (LATUDA)
Life Sciences

Crop stressmanagement

Anticancer drugs targetingcancer stem cells
Cell therapy
 Safety evaluation and drug discovery
using ES and iPS cells

Regenerative
medicine Commercialized/ready to be commercialized
Current Management Priority Issues and Business Strategy

40

目 Lighting
次 Panels (Dual/Mono)
PLED Lighting: Launched Color PLED
Features of color PLED lighting• A wide range of light colors• Easy-to-view light wavelength• Thin lighting panels; surface light emission• Can be manufactured with a single printing

Launched dual-color PLED lighting panels• Established production technology that enables two colors tobe printed on a single panel• Launched in April 2014, targeting a market of decorative
lighting
Step 1Enter the decorative lighting segment of lighting market

step for multiple colors

OLED COSMOS at Light + Building 2014*

Development efforts to enter the general lighting
market also under way• Developing a roll-to-roll process• Developing high-efficiency long-life materials• Plan to launch PLED lighting panels for general lighting market
in FY2015
Step 2Enter general lighting market and expand business

Dual-color PLED lighting
panels

Projected scale of lighting panel business:
100 billion yen in 2020
*Light + Building 2014：
World’s largest lighting and building technology trade fair, held inMarch 2014

Current Management Priority Issues and Business Strategy

Reference:
Estimated size of global market for lighting in 2020: 16.3 trillion yen(light sources: 3.3 trillion yen; lighting devices: 13.0 trillion yen)41

Development of Next-Generation
Businesses:
目 次
Promotion of open innovation
Environment and energy
UCLA
Organic thin film
photovoltaic materials

HOLST Center
PLED lighting devices

ICT

RIKEN
Next-generation catalyst
technology,
next-generation energyrelated technologies

Sumitomo Chemical GroupJAPERA*
Materials for printed
electronics devices

CEREBA*

Dainippon Sumitomo Pharma*Japan Advanced Printed Electronics Technology
Research Association*Chemical Materials Evaluation and Research BaseLife sciences
RIKEN
New applications of ES/iPS
technologies

Evaluation technologies fornext-generation
advanced materials*Research Center Network for Realization ofRegenerative Medicine

Kyoto University
New anticancer drugs
New cancer treatments

Crop protection chemicals

Osaka University
New drugs forneuropsychiatric disorders

Kyoto University,
RIKEN,
Keio University, etc.*
Drug discovery andRegenerative medicine
using iPS cells, etc.

Accelerate the development of next-generation businesses by merging in-house and third-party expertise
Current Management Priority Issues and Business Strategy

42

Shareholder Return
目 次

Current Management Priority Issues and Business Strategy

43Performance Targets(Billons of Yen)

目 次

Sales (left axis)

Operating income (right axis)

Ordinary income (right axis)

Net income (right axis)(Billions of Yen)

2,500

250

2,000

200

1,500

150

1,000

100

500

50

0

0

-500
-1,000-50

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Current Management Priority Issues and Business Strategy-1002012 2013 2014 2015 (FY)
(Forecast) (Target)

44

目 次

Dividend Policy

We consider shareholder return as one of our priority management issues and havemade it a policy to maintain stable dividend payment, giving due consideration to ourbusiness performance and a dividend payout ratio for each fiscal period, the level ofretained earnings necessary for future growth, and other relevant factors.
(Yen)
16

(Billions of Yen)
210.0

14

180.0

Interim dividend (left axis)

Year-end dividend (left axis)

Net income (right axis)

12
7

150.0

6

10

120.0

6
8

3

93.9
5

6
3

3

2
3

30.2

31.1
3

3

3

60.0

6
5

3

3

63.1

4
34.3

3

90.0

90.7
64.5

3

6

90.0

6

14.7
0

4

0

24.4 6

6

6

30.0

5.6

3

45.0

37.0
6

6

0.0
-30.0

-2

-51.1

-4
2001

2002

2003

2004

2005

Current Management Priority Issues and Business Strategy

2006

2007

-59.2
2008 2009

2010

2011

2012

-60.0
2013 2014 2015 （FY）
(Forecast) (Target)

45

Creative Hybrid
目 次 Chemistry

Current Management Priority Issues and Business Strategy

46

Cautionary Statement
Statements made in this document with respect to Sumitomo Chemical’s current plans,estimates, strategies and beliefs that are not historical facts are forward-looking

目 次statements about the future performance of Sumitomo Chemical. These statements are
based on management’s assumptions and beliefs in light of the information currently
available to it, and involve risks and uncertainties.
The important factors that could cause actual results to differ materially from those
discussed in the forward-looking statements include, but are not limited to, general
economic conditions in Sumitomo Chemical’s markets; demand for, and competitive
pricing pressure on, Sumitomo Chemical’s products in the marketplace; Sumitomo
Chemical’s ability to continue to win acceptance for its products in these highly
competitive markets; and movements of currency exchange rates.

Current Management Priority Issues and Business Strategy

47