Change and Innovation

Contents

Overview of FY2015 Outlook
Framework for Next Corporate
Business Plan
Progress on Major Projects
Toward Sustained Growth

Current Priority Management Issues and Business Strategy

1目 次
Overview of FY2015 Outlook

Current Priority Management Issues and Business Strategy

2

FY2015 First Half Results
Change and Innovation(Billions of yen)

Net Sales
Operating Income

FY2014.1H

FY2015.1H

Change1,128.4
36.2

1,075.9
74.2

-52.6
+38.1

13.8

28.6

+14.8

52.8
22.6

100.4
60.9

+47.6
+38.3

¥70,400/kl¥103.01/$¥48,200/kl¥121.87/$（Equity in
Earnings of Affiliates）

Ordinary Income
Net Income
Naphtha Price
Exchange Rate

Current Priority Management Issues and Business Strategy

3

FY2015 First Half Results: Operating Income by Sector

Change and Innovation(Billions of yen)

FY2014.1H

FY2015.1H

Change

40.6

64.8

+24.2

Pharmaceuticals

-0.7
14.5
11.4
15.4

-0.3
18.7
27.1
19.4

+0.4
+4.2
+15.6
+3.9

Bulk Chemicals

1.3

13.4

+12.0

Petrochemicals & Plastics

1.3

13.4

+12.0

Total

-5.7
36.2

-3.9
74.2

+1.8
+38.1

Equity in Earning of Affiliates

13.8

28.6

+14.8

Specialty Chemicals
Energy & Functional Materials
IT-related Chemicals

Health & Crop Sciences

OthersCurrent Priority Management Issues and Business Strategy

4Outlook for FY2015
Change and Innovation(Billions of yen)

FY2014FY2015(Forecast)

Change2,376.7

2,250.0-126.7

Operating Income

127.3

155.0

+27.7

(Equity in
Earnings of Affiliates)

23.9

24.0

+0.1

157.4
52.2

170.0
80.0

+12.6
+27.8

7.3%

10.0%

Naphtha Price¥63,500/kl¥49,100/kl

Exchange Rate

¥109.76/$¥121.0/$Net Sales

Ordinary Income
Net Income

ROE

Current Priority Management Issues and Business Strategy

5Outlook for FY2015: Operating Income by Sector
Change and Innovation(Billions of yen)

FY2014FY2015(Forecast)

Change

118.3

140.0

21.7

Pharmaceuticals

0.8
32.4
56.1
29.0

1.0
30.0
75.0
34.0

0.2
-2.4
18.9
5.0

Bulk Chemicals

20.8

25.0

4.2

20.8

25.0

4.2

-11.8
127.3

-10.0
155.0

1.8
27.7

23.9

24.0

0.1

Specialty Chemicals
Energy & Functional Materials
IT-related Chemicals
Health & Crop Sciences

Petrochemicals & Plastics

Others
Total
Equity in Earning of Affiliates
Current Priority Management Issues and Business Strategy

6

Framework for Next Corporate
目 次Business Plan

Current Priority Management Issues and Business Strategy

7

Priority Management Issues and Business Strategy
Since the Beginning of the Century

Priority

重点課題

Issues

Major
Projects

Results:
Sales Increase
FY2000 vs.
FY2012

Radically improve
competitiveness of
petrochemicals
business

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

Change and Innovation

Gain critical mass in
ライフサイエンス事業
pharmaceuticalsのクリティカルマスのbusiness to achieve
確保growthstrongDevelopnew businesses withpotential to becomecore businesses

Launch ofEstablishment and expansionof
IT-related Chemicals Sector

大日本住友製薬の発足
Dainippon
Sumitomo Pharma
セプラコール社（現サノビオン社）& Acquisition of
BBI社買収Approx. ¥266.0 bn

Sepracor (Sunovion) in US
約2,490億円
Approx.
¥249.0 bn(equity investment and lending)(increased（株式買増・買収）
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 Priority Management Issues and Business Strategy

Approx.

2.3 times

Approx. ¥440.0 bn

Approx.

5.0 times

8

Where We Have Been Heading
Change and Innovation

Last 10 Years

Where We Are

Where We Are Going

Enhance financial strength
Pave the way for
future growth(Tackle three priority management issues)

Implemented Rabigh Project
Launched DSP and
acquired Sepracor/BBI
Established and expanded
IT-related Chemicals Sector

Globalization

Improve
profitability

Rigorously
selectinvestments

Improveasset
efficiency

Restructure business
Exit
underperforming
businesses

Improvebusiness
portfolio

Develop new businesses
Environment
andEnergyLife Sciences

ＩＣＴ

Promote globally integrated management

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

9Progress on Corporate Business Plan: Enhance Financial Strength
Change and Innovation(Billions of yen)
FY2010-FY2012

Cash flows
from operating activities

472.3

FY2013-FY2015(Target)

FY2013-FY2015(Forecast)

Around 540.0

715.2

260.0

-301.8-110.0

413.4

150.0

*1

Cash flows
From investing activities-445.7
26.6

Free cash flows

Below -400.0*2Over 200.0(Note) *1: Including investment of 100 billion yen in Rabigh Phase II Project*2: Including decreases in cash and cash equivalents

End of FY2012

Interest-bearing
liabilities

FY2015(Forecast)

1,060.6(Billions of yen)

End of FY2015(Target)*1

Below 900.0

End of FY2015(Forecast)End of
FY2015.1H

850.0

938.9

(Note) *1: After spending 100 billion yen for investment in Rabigh Phase II ProjectCurrent Priority Management Issues and Business Strategy

10Progress on Corporate Business Plan: Enhance Financial Strength
Change and Innovation（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 2015

（FY）（1H） （Forecast）

Current Priority Management Issues and Business Strategy

11Progress on Corporate Business Plan: Business Restructuring
Change and Innovation

Specialty chemicals business

Enhanced touchscreen panel product line

Business
expansion
ProgressExpanded production capacity for
touchscreen panels and enhanced
the product line
Increased overseas sales of crop
protection chemicals
Increased LATUDA sales

Glass-type touchscreen panel(million
USD)

Overseas sales of crop
protection chemicals

Film-type touchscreen panel(million
USD)

1,600

1,400

1,400

1,200

1,200
1,000

LATUDA sales
1,200～1,300

1,000
800

800
600
400

600
400

200

200

0

0

(FY) 2009 2010 2011 2012 2013 2014

(FY)

2011 2012 2013 2014 2015 2017
(Result) (Forecast)

Improving business portfolio
Current Priority Management Issues and Business Strategy

12Progress on Corporate Business Plan: Business Restructuring
Change and Innovation

Optimize Global Petrochemical Operations(Ethylene production capacity by area)

Bulk chemicals business(1,000t)
2,000

Restructuring

Saudi Arabia
1,300(1,000t)
2,000

1,600

1,500

1,500

1,000

1,000

500

500

0

0

Japan

607
Over
400

ProgressClosed down ethylene plant and
PO/SM plant at Chiba

Closed down liquid-phase processcaprolactam plant

Petro Rabigh
Chiba
Works

Singapore(1,000t)
2,000
1,500

Making progress on Rabigh Phase II
Project

1,090

1,090

1,000
500
0
Singapore petrochemical complex

Improving business portfolio
Current Priority Management Issues and Business Strategy

13

Progress on Corporate Business Plan: Change in Business Portfolio
Change and Innovation

Change in operating income and its composition(Billions of yen)
200

Operating Income

155.0

150

139.6

100
50

Expected to reacha new highAll-time high
0

’06/3

’07/3

’08/3

’09/3

’10/3

’11/3

’07/3

28%
Specialty Chemicals

72%

Bulk Chemicals

28%

72%

’12/3

’13/3

’14/3

’16/3

’15/3

’16/3
（forecast）

15%

85%
15%

85%

Note: The composition of operating income excludes the “Others” segment and adjustments.

Significant increase in profitability of specialty chemicals
Current Priority Management Issues and Business Strategy

14

Progress on Corporate Business Plan: Develop Next-Generation Businesses
Change and Innovation

LaunchEnvironment

2011

2015

2020-

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

Anticancer drugs
targetingcancer stem cells

 Safety evaluation and drug discovery
using ES and iPS cells

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

15

Framework for Next Corporate Business Plan
Change and Innovation

Last 10 Years

Where We Are

Where We Are Going

Enhance financial strength
Pave the way for
future growth(Tackle three priority
management issues)

Implemented Rabigh Project
Launched DSP and
acquired Sepracor/BBI

Improve
profitability

Rigorously
selectinvestments

Improveasset
efficiency

Restructure businesses
Exit
underperforming
businesses

Improvebusiness
portfolio

Further improvebusiness portfolio
Identify areas ofstrength

Allocateresources toprioritized areas

Generate more cash flow
Increase
profitabove costof capital

Make
disciplined
investments

Streamline
balancesheet

Develop next-generation businesses

Established and expanded
IT-related Chemicals Sector(Use outside resources and accelerate commercialization)
Environment
andEnergyGlobalization

Life Sciences

ICT

Crossover areas

Promote globally integrated management

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

16

Framework for Next Corporate Business Plan: Further Improve Business Portfolio
Change and Innovation

Identify strengths and distinctive competitive advantages
Areas for aggressive
investment and expansion• Where we havetechnological advantages

Areas for efficiency improvement• Where it is difficult to achieve
technological differentiation• Where we have market accessadvantages• Where demand significantly
fluctuates Focus resources on these areas

 Enhance cost competitiveness and(including M&A)
Expand businesses that constantly
yield profit above the cost of capital

pursue asset efficiency
Achieve profit above the cost of capital
Maximize return on investment

Further improve business portfolio
Current Priority Management Issues and Business Strategy

17

Framework for Next Corporate Business Plan: Generate More Cash Flow
Change and Innovation

Enhance financial strength
Improve
profitability

Rigorously
selectinvestments

Improveasset
efficiency

Generate more cash flow
Increase profit above
the cost of capitalStrengthen
competitiveness Reduce costs

Make active anddisciplined investment


Identify areas for aggressive
expansion
 Identify investment risks

Streamline
balance sheetContinuously improve
cash conversion cycle
 Sell non-operating, nonstrategic assets

Build stronger earnings power to constantly generatea high level of cash flow, so that we can take advantage oflarge-scale investment opportunities when they arise
Current Priority Management Issues and Business Strategy

18

Framework for Next Corporate Business Plan: Develop Next-Generation
Businesses
Change and Innovation

ICT

Life Sciences

Crop protection chemicals

Biorational crop protection products

Post-harvest

Regenerative and cell therapy
medicinesAnti-cancer stem cell drugs



SPECT and PET diagnostic agents

Display materials

Flexible display materials



Semiconductor processmaterials



Polymer OLED

Compound semiconductors

Environment
and Energy(for power amp and others)Energy carrier

CO2 separation materials

Polymer OLED light

Secondary battery parts andmaterials



Organic thin-film photovoltaics

Healthcare materials

Provide various solutions in areas with strong growth potential
Current Priority Management Issues and Business Strategy

19

Framework for Next Corporate Business Plan: Develop Next-Generation Businesses
Change and Innovation

 Open innovation

 Technologies

In-house
resources Leverage external

resources where needed Manufacturing andsales expertise

Deep business/market knowledge andinsight in the three growth areas

Alliances
Identify new business opportunities
in the crossover areas

Serve as “New Business Developer,”making full use of both in-house andexternal resources Acquire technologies

M&A Leverage external

resources where
neededAccelerate the commercialization of new solutionsin the crossover areas
Current Priority Management Issues and Business Strategy

20

Framework for Next Corporate Business Plan: Develop Next-Generation Businesses
Change and Innovation

Solutions in the
ICT/Life Sciences/Environmental and Energy
crossover area

Solutions in the
ICT/Life Sciences
crossover area

 Flexible devices

 Biosensors

ICT Precision agriculture Next-generation batteries Personal care

Solutions in the Life Sciences/Environment and Energy
crossover area

Life
Sciences

Environment
and Energy

Solutions in the ICT/
Environment and Energy
crossover area
 Compound semiconductors

 Crop stress management(for power semiconductors)

 Genomic analysis of Light management materials

microorganisms

Next-Generation Core Technologies• Printed electronics technology • Organic-inorganic hybrid technology • Stem cells and genome technologies
Current Priority Management Issues and Business Strategy

21

Framework for Next Corporate Business Plan
Change and Innovation

Last 10 Years

Where We Are

Where We Are Going

Enhance financial strength
Pave the way for
future growth(Tackle three priority
management issues)

Implemented Rabigh Project
Launched DSP and
acquired Sepracor/BBI

Improve
profitability

Rigorously
selectinvestments

Improveasset
efficiency

Restructure businesses
Exit
underperforming
businesses

Improvebusiness
portfolio

Further improvebusiness portfolio
Identify areas ofstrength

Allocateresources toprioritized areas

Generate more cash flow
Increase
profitabove costof capital

Make
disciplined
investments

Streamline
balancesheet

Develop next-generation businesses

Established and expanded
IT-related Chemicals Sector(Use outside resources and accelerate commercialization)
Environment
andEnergyGlobalization

Life Sciences

ICT

Crossover areas

Promote globally integrated management

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

22

Framework for Next Corporate Business Plan: Toward Sustained
GrowthChange and Innovation

Medium- to long-term targets
Targets
Constantly achieve
the following targets:

ROE

10%

ROI

7%

D/E ratio
Dividend payout ratio
Profit growth

0.7 times
30%
7% per year

Become a more resilient Sumitomo Chemical that continues to grow
Current Priority Management Issues and Business Strategy

23

Initiatives for Enhancing Enterprise Value
Change and Innovation

Initiatives for improving ROI and ROE
Improve ROE
Improve ROI

Leverage

Improve profitability

Improve asset turnover

Expansion

Restructuring

Cost reduction

 Environment
and Energy Closure anddownsizing ofunderperforming
business Reduction of
Head Officeoverhead cost

 Life Sciences
 ICT

 Cost reduction
in businesssectors

Selective
investment
 More rigorous
investment
decisionmaking andmanagement
processes

Cash conversion
cycle
improvement
 Shortening
accounts
receivableterms
 Reducing thenumber of
product lines

Asset sales
 Sale of equity
securities
 Sale of nonoperating realestate Optimizing
inventory levels

Main initiatives
Current Priority Management Issues and Business Strategy

24

目 次
Progress on Major Projects
 ICT
 Life Sciences
 Environment and Energy Bulk Chemicals

Current Priority Management Issues and Business Strategy

25

ICT: Expand Product Portfolio and High Growth Businesses
Change and Innovation

Product portfolio
Flat panel display Electronic parts
materials
and materials

Semiconductormaterials

Batterymaterials

LCD/OLED

Super
engineering
plastics

Semiconductormaterials

・LCP

・Aluminum target

Lithium-ion
secondarybatterymaterials

・Polarizing films
・Touchscreen
panels・PES・Color filters

・Photoresists
・Chemicals

・Color resists

overPresent

High grow businesses:(billion yen)

Color resists
Photoresists

2020

・Separators

Compoundsemiconductors
・MO epiwafers
GaN substrates

・Processchemicals

Scale of High Growth Businesses

Super engineering plastics
MO epiwafers/GaN substrates

100 billion yen

High GrowthBusinesses

65 billion yen

70
60
50

Sales

40

445.0
billion yen

30
20
10
0
2012

2013

2014

Current Priority Management Issues and Business Strategy

2015

IT-related
Chemicals Sector
26

ICT: Develop High Growth Businesses
Change and Innovation

Color resists

Photoresists

Advantages and features

Advantages and features

 Differentiate color property with

 High-resolution ArF immersion resists

new dyes and pigment hybrid resists
 Set up development basesin the vicinity of global customers

Future strategy
 Brighter, clearer color

reproduction with dye resists
 Strengthen operations in the growing Chinese market

Super engineering plastics

Future strategy
 Develop and expand sales of ArF

immersion photoresists for 1xnm-5nm generation
 Expand the business of i-line photoresists for thick film
 Study the feasibility of mass production of post-ArF

photoresists

MO Epiwafers and GaN substrates

Advantages and features

Advantages and features

 Product development for aircraft Compound semiconductor lineup (GaAs, GaN)

composite materials and automotive use High quality GaN substrates

Future strategy

Future strategy

 Expand business in automotive field,

 Accelerate commercialization ofincluding use for body structures

GaN-on-Si products to meet risingdemand for power devices
 Further improve productivity and quality for GaN substrates

Become a global leader by leveraging
proprietary technologies
Current Priority Management Issues and Business Strategy

Continuing high growth expected27

Next-Generation Blockbusters:
Pipeline of New Crop Protection and Household and Public Hygiene Insecticide
Products
Change and Innovation
Time oflaunchNew
products
underdevelopment2013 to 20152016 to 20192020 and after

Agricultural
fungicide:
2 compounds(Ethaboxam and
Mandestrobin)

Mainly new
mixtures2020

After 2020

Agricultural
insecticide:
1 compound

Agricultural insecticide:
1 compound

Householdinsecticide:
1 compound(Sumifreeze[Momfluorothrin])

Herbicide for ricecultivation:
2 new mixtures
Insecticide foruse in riceseedling boxes:
4 new mixtures
Insecticide forcrop farming andgardening:
2 new products

Agricultural
fungicide:
3 compounds

Agricultural herbicide:
2 compounds
Plant growth regulator
and biorational:
4 compounds
Household and publichygiene insecticide:
4 compounds

Expected to grow into blockbusters
 Working to shorten the development period by up to one year Future consolidated sales of the 2020 active ingredients and formulations estimatedat over 100 billion yen
Current Priority Management Issues and Business Strategy

28Life Sciences: Expansion of Methionine BusinessChange and Innovation

Meat production forecasts

Methionine demand-supply balance (to 2020)

Production volume of pork and poultry meat is steadily
increasing, with poultry leading the growth(KT)24%140,000
133,785
increase

(KMT)

Beef

Pork

Supply outlook

Supply volume has been
lower than expected

Poultry

1,200

100,000

800

107,638

Well balanced

Capacity
expansions
planned bycompetitors

400

80,00060,000Total supply volume (our estimates)

1,600

120,000

Demand outlook

Average
2012–1402015 2016 2017 2018 2019 2020 2021 2022 2023 2024

2013

2014

2015

2016

2017

2018

2019

2020

Source: OECD-FAO Agricultural Outlook 2015

Growth rate of methionine demand to exceed 6%

Supply shortfall anticipated in 2018 and after

Features and strengths of our methionine

Future business strategy

 Integrated production, from intermediates Optimize volume allocation and step up costthrough finished product High cost competitiveness Available in both powder and liquid forms

rationalization efforts
 Increase production capacity by 10% in 2016 bydebottlenecking
 Consider further business expansion—aim for

global share of 20%

Safe & stable operations; low cost; powder & liquid
Current Priority Management Issues and Business Strategy

Strengthen its position as a global player
29Life Sciences: Development of Rice BusinessChange and Innovation

Objectives of rice business

Three varieties currently cultivated Solve the problems facing the agricultural sector

Tsukuba SD1

in Japan Consolidate our Total Solution Provider business Develop high-yield, tasty rice varieties

Hikari no Sumika
Tsukuba SD2
Low-amylose rice

Tsukuba SDHD
Late-ripening rice

Help strengthen Japan’s agricultural sector

Development of new varieties
 3 varieties registered and2 varieties applied for registration
 To develop more varieties to expand therice business nationwide and to meetvarious customer needs for rice properties

Current: Focusing on sales tolarge-scale rice businesses

2018
2015
1,100
tons

2016

6,300
tons

27,600tons

Current Priority Management Issues and Business Strategy

60,000tons

Prospective customers
Prospective customers

SD1

Major restaurant chain (franchises)(Hikari no Major noodle-shop chain
Sumika)Major delicatessen company
Major bento (boxed meals) supplier

Future: Expand sales to a wider range ofcustomers, including consumers and sakemanufacturers, and also increase export sales

2020

SD2

Under
negotiation

Major family
restaurants(2 chains)

Major convenience store chain(lowamylose)30

Environment and Energy: Expansion of Separator Production Capacity
Change and Innovation

Separator production facilities
South Korea (Daegu) plant
Production capacity: 70 million m2/year
Items produced:
Aramid separators
Start of operation:
Fall of 2016
Separators

Separator production capacity(million m2)

400
350
300
250

Under
study

200
150
100

Ehime Works (Oe)Production capacity:
140 million m2/year
Items produced:
Aramid separators, etc.
Current Priority Management Issues and Business Strategy

5002012 2013 2014 2015 2016 2017(End of year)31

Environment and Energy: CO2 Separation Membrane
Change and Innovation

The CO2 selective membrane system, installed upstream of CO2 chemical
absorption plant, removes approx. 50% of the CO2 contained in the source gas,
reducing the steam cost incurred in the absorption plant
Source gas

CO2 chemical absorption plant

H2
CO2

Remove approx. 50%of the CO2 in source gas
CO2 selective
membrane system

CO2

H2

H2 + CO2

H2 + CO2

Absorbingtower

CO2 absorbent

Regeneration
tower

Halve steam
consumption
Steam
H2O

CO2

Current Priority Management Issues and Business Strategy

32

Environment and Energy: CO2 Separation Membrane
Change and Innovation

CO2 Separation Market（CY2030 Forecast）
Hydrogen production

Natural gas(refinary and chemical plants）

Market :600 million tons

Market :520 million tons

Coal gasification combined
power generation

Market Size
2.6 billion tons

Market :500 million tons

Coal to liquid
Market :200 million tons

Power generation andiron manufacture(CCS/EOR)

Market：500 and 300 million tons
Current Priority Management Issues and Business Strategy

Hydrogen station
Market : unknown：Separation of H2 and CO2：Separation of CH4 and CO2：Separation of N2 and CO2

33

Bulk Chemicals: Petro RabighChange and Innovation

Status of regular maintenance Started regular shutdown maintenanceon October 11, 2015
 Planned maintenance period: 50 days

Progress of Phase II Project
Petro Rabigh Phase I Project Olefin Plant

Ethane cracker expansion to becompleted first

The facilities scheduled to come into
operation in stages starting 2016

Current Priority Management Issues and Business Strategy

Overview of construction cost and financeTotal construction cost

8.1 billion USD

Project financing

5.2 billion USD

Capital, etc.

2.9 billion USD

34

目 次
Toward Sustained Growth

Current Priority Management Issues and Business Strategy

35

Strengthening of Corporate Governance
Change and Innovation

Corporate Governance Code
 Comply with all general principles, principles, and supplementary principles
Increased the number of outside directors
 Increased from one to three 40 percent of the directors, including corporate
auditors, are now outside directors

Established non-mandatorycommittees
 Set up a nomination committee anda remuneration committee(The majority of the committee
members are outside directors.)

Strengthening Strengthened the oversight functions of
the Board of Directors
the governance Strengthened outside directors’
systemmonitoring and advisory functions
 Assess effectiveness of the Board
through discussions at outside directors
meetings and other means

Further enhance the effectiveness of governanceby making full use of this reinforced system
Current Priority Management Issues and Business Strategy

36

Toward Sustained Growth
Change and Innovation

Shareholders
Dialog andengagement

Corporate Governance Code

Stewardship CodeSumitomo Chemical
Business Philosophy

Business Strategy

Commit ourselves tocreating
new value by building on
innovation

Develop next-generation
businesses
Further improvebusiness portfolio

Generate morecash flow

Work to contribute to society
through our businessactivities
Develop a vibrant corporate
culture and continue to be acompany that society
can trust

Promote globally integrated management
Ensure full and strict complianceand maintain safe and stable operations

Current Priority Management Issues and Business Strategy

Medium- to long-term targets
Constantly achieve
the following targets:
ROE

10％

ROI

7％

D/E ratio

0.7 times

Dividend payout

30％

Profit growth

7％ per year37

Performance Targets
Change and Innovation

Net Sales （left axis）
Ordinary Income （right axis）（Billions of yen ）Operating 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

-50

-1,000

-100

2001

2002

2003

2004

2005

Current Priority Management Issues and Business Strategy

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015 （FY）（Forecast）

38

Dividend Policy
Change and Innovation

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）

Interim of dividend (left axis)

Year-end dividend (left axis)

Commemorative dividend （left axis）

Net income(right axis)（Billions of Yen ）

16

210

14

2

12

7

10

6

8

4
2

3

3

31.1
3 30.2 3
3

3

93.9

64.5

3
34.3
3

6
6

63.1
4

5

6

3

3

0

3

6
24.4 614.7 3

6
5.6

6
-51.1

-59.2
2003

2004

2005

Current Priority Management Issues and Business Strategy

2006

2007

2008

2009

30

6

6

0
-30

-2
2002

90
60

37.0

0

-4

80.0
52.2

6

0

2001

150
120

90.7

5

6

6

180

2010

2011

2012

2013

-60
2014 2015 （FY）
(Forecast)

39

Change and Innovation

Creative Hybrid Chemistry

Current Priority Management Issues and Business Strategy

40Change and Innovation

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
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 Priority Management Issues and Business Strategy

41