Investors’ Meeting for Current Management Priority Issues and Business Strategy
Q&A Summary
Thursday, November 27, 2014; 10:00–11:15 a.m.
Masakazu Tokura, President and COO
Entire Company
Q. The net income target for FY2015 is ¥90 billion. Does that mean theextraordinary losses will all end with FY2014?
A. We have been posting extraordinary losses of around ¥10 billion, and we hope tokeep the FY2015 extraordinary losses within that range. While large
extraordinary losses were posted in FY2013 and FY2014 because of variousfactors, the posting of losses from business restructuring will not be carried into
FY2015, and we want to aim at achieving the ¥90 billion net income target.
Q. Your company expects to post around ¥30 billion in extraordinary losses in thesecond half of FY2014. Will you be announcing business restructuring plans?
A. While no major extraordinary loss items are expected, one priority item under
the current Corporate Business Plan is not to carry any problematic businesses
into the next Corporate Business Plan. So we will dispose of these as much as
possible within the current fiscal year.
Q. FY2015 is the final year of the present Corporate Business Plan. If the target ofless than ¥900 billion in interest-bearing liabilities is achieved, will the next
Corporate Business Plan focus on stepping up new investment, or continue toemphasize improved financial health?
A. Our approach is to maintain a DE ratio of around 0.8 times. While this will
depend on how we project operating cash flow, we expect there will be leeway for
new investment under the next Corporate Business Plan. Regardless, the ¥400
billion which we are investing over three years under the current plan, evenafter reducing investment, is still considered large compared with othercompanies, and we want to continue making well-balanced investments. Under
the next Corporate Business Plan, we want to actively and boldly advance thespecialty chemicals business, where the pace of technological innovation isaccelerating, to avoid missing business opportunities.
Q. Do you think a DE ratio of around 0.8 to 1.0 times is optimal under the businessstructure of your company?
A. If the DE ratio improves to around 0.8 times, we want to actively makeinvestments for growth while maintaining that level.

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Q. We understand that you are considering increased investment in the separator
business. What sort of profit contribution do you expect from the separator
business through 2020?
A. Sales of electric vehicles are projected to greatly increase. For that reason, thedemand for lithium-ion secondary batteries is also projected to increase. Our
separator business faced difficulties for around the first ten years, but thebusiness is now on track following its transfer to the IT-related Chemicals Sectorand efforts to boost productivity. Our separators are highly evaluated bycustomers for their performance, and we expect they will make large profit
contributions in the future.
Q. What are the competitive conditions of polarizing film for mobile display
applications?
A. In high-end and middle markets, the market share is divided among Sumitomo
Chemical and another Japanese company. The market share changes after
smartphone model changes, and at the moment our competitor has a slightly
larger share. The gap versus our competitor is not that great, and we expect theshare in the middle and high-end markets will remain basically split between
the two for the time being.
Q. It seems your company conducts a lot of business with Samsung. I would like to
ask about the outlook for future sales.
A. While our company’s polarizing film has a high share at Samsung, we also havetransactions with a wide range of display manufacturers, and our sales toSamsung are not so large in our total sales of polarizing film. As for touchscreen
panels, we only sell these to Samsung, so we are directly affected by Samsung’ssales trends. Several companies other than Samsung have now announced
investments in OLEDs, and we are considering business opportunities toexpand our customer base.
Q. You explained about next-generation coated polarizing film for use in flexible
OLEDs. What is the current development status of coated polarizing film for
LCDs?
A. There are two types of ultra-thin polarizing film: the coated type and the film
type. They both have the same thickness, but the coated type is superior inhaving a low shrinking property, while the film type is superior in having hightransparency, so they are adopted by users according to their needs. We hope tolaunch the coated type soon.

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Q. You gave some explanation about next-generation displays. Are you notconsidering the development of products integrating next-generationcoated-type polarizing films with film-type touchscreen panels and window film?
Also I think the share for LCD materials and components could be greatly
expanded with products with a similar concept. What are your thoughts about
these points?
A. We think these ideas have possibilities.
Q. In the crop protection chemicals business, it seems there were inventoryadjustments in the US and Brazil. Do you have a sense that demand is now
returning? Structurally I think this is a growth market, but amid the present
decline in the grain market, what are your projections about future demand?
A. We think the impact of inventory adjustments from inclement weather is
temporary and demand will recover. However, in South America prices arelower for bioethanol crops, so we need to watch future trends. Meanwhile, crop
acreage in South America is anticipated to increase, and the market is expectedto grow. As announced the other day, we have expanded our strategic
partnership for flumioxazin with Monsanto to Latin America and we have also
extended the termination date of the strategic partnership agreement withMonsanto in the United States from September 2017 to August 2020. Against
this backdrop, we are moving ahead with strengthening flumioxazin production
capacity as planned.
Bulk Chemicals
Q. The Basic Chemicals Sector continues to post operating losses. Are any efforts
being made toward radical business restructuring in the MMA business?
A. Our MMA business is operated centered on our Singapore base, which has threemonomer plant lines and three polymer plant lines. We are developing ahigh-performance catalyst that is expected to have a large rationalization effect,and we are examining a scheme for low-cost procurement of the main raw
material MTBE.

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Q. Your company is engaged in the petrochemicals business in Japan, Singapore,and Saudi Arabia. I would like to ask about the effect of crude oil prices on theSumitomo Chemical Group overall.
A. I think higher crude oil prices provide a tailwind to our company’s performance.
While we use naphtha as a raw material in Japan and Singapore, because theprices of both naphtha and petrochemical products change in line with changes
in crude oil prices, the effect of changes in the price of crude oil on the profit isneutral. However, Petro Rabigh in Saudi Arabia uses fixed-price ethane, rather
than naphtha, as one of the main raw materials, so at Petro Rabigh higher
crude oil prices boost the relative cost competitiveness of petrochemical products
using ethylene as a material. Meanwhile, lower crude oil prices offer us costbenefits by decreasing fuel costs as well as raw material costs for the feed
additive methionine and other products whose selling prices do not move in linewith crude oil prices.
Q. What is your global strategy for polyolefins?
A. In Japan, we have many high value-added differentiated products, so we will
not lose much share even if many commodity products enter from China and theMiddle East. We are producing high value-added products in Singapore as well.
The issue is the same at every location: how to maintain competitiveness, suchas by shifting towards higher value-added products. In Japan, based on theindustrial competitiveness policy announced the other day by the Ministry ofEconomy, Trade and Industry, we must consider the infrastructurecompetitiveness of petrochemical complexes for all Japan. Our company isconducting operations with some segregation and division of roles between
Japan and overseas, including the suspension of operations at the Chiba
ethylene plant and integration of the ethylene procurement from Keiyo
Ethylene Co.
Q. The income from Petro Rabigh stabilized this term. Do you expect furtherimprovements over the next one to two years? And to roughly what extent will
Phase II contribute to income?
A. Under the Corporate Business Plan, in FY2015 the majority of the ¥25 billion in
equity in earnings of affiliates is expected to be from Petro Rabigh. We thinkachieving that target is entirely possible if the current high operating ratio is
maintained and the refinery margin remains stable. Phase II will begin
operations sequentially in the first half of 2016, but the full-scale performance
contribution is expected to begin from 2017. Given the great difficulties
experienced in launching Phase I, we will approach the launch of Phase II basedon lessons learned from those experiences.

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Q. When Phase II is fully contributing, about how much will Phase II add onto thenet income from Phase I?
A. I would like to refrain from giving numerical figures at this time.
Q. Do you have plans for further upgrades of the Petro Rabigh petroleum refining
facilities?
A. Further improving the refining facilities and increasing production of lighter
products would improve profits, but that would require large investments. Once
Phase I is stabilized and Phase II is on track, upgrading the refining facilities
should be one of the issues to study.

Cautionary Statement
Statements made in this document with respect to Sumitomo Chemical’s current
plans, estimates, strategies, and beliefs that are not historical facts areforward-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 fromthose discussed in the forward-looking statements include, but are not limited to,
general economic conditions in Sumitomo Chemical’s markets; demand for, andcompetitive pricing pressure on, Sumitomo Chemical’s products in themarketplace; Sumitomo Chemical’s ability to continue to win acceptance for its
products in these highly competitive markets; and movements of currency
exchange rates.

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