Financial Summary
Fiscal Year Ended March 31, 2020

May 14, 2020

Kaneka Corporation

Contents

Summary

１

Net Sales , Operating Income by Segments

２

Business Performance by Segments

３

Consolidated Balance Sheet

７

Consolidated Cash Flow

８

Consolidated Business Forecasts

９

The operating results forecasts and certain other statements contained in this document are forward-looking statements, which are rationally determinedbased on information currently available to the company. For a variety of reasons, actual performance may differ substantially from these projections. They
do not constitute a guarantee that the Company will achieve these forecasts or other forward-looking statements.

Summary(Billions of yen)

FY2018Net sales
Operating income
Ordinary income
Net income attributable to owners of parent
Net income per share
Dividend per share
ROE
•

➢

Difference

FY2019

621.0
36.0
31.3
22.2

601.5
26.0
20.2
14.0

¥339.15¥100
6.7%¥214.70

Amount%△ 19.5△3.1%△ 10.0△27.8%△ 11.1△35.5%△ 8.2△37.0%¥100

4.2%

The Company conducted a consolidation of shares of common stock at the ratio of five shares to one share on October 1, 2018 . However, net income per sharehas been calculated as though the share consolidation took place on April 1, 2018

In the fiscal year ended March 31, 2020 (fiscal 2019), the global economy entered a period of historic turmoil. For the first ten months or so of the fiscal year, global economic conditions weresluggish due to intensified U.S.-China trade friction, the U.K.’s exit from the E.U., and heightened geopolitical risk in the Middle East. From January 2020 onward, the outbreak of the coronavirus
disease 2019 (COVID-19) pandemic has triggered an almost full shutdown of economic activity around the world. The movement of people and goods has been almost completely severed. Thisdisruption has had a direct impact on the mobility field, including automobiles, air travel and railways, as it has had on the tourism and lodging, restaurant, and retail and department store industries.
Businesses of all kinds that are connected globally over networks and supply chains have suffered a huge impact. In addition, these trends have given rise to a historic drop in crude oil prices.

➢

In this business environment, the Kaneka Group’s business performance for the fiscal year under review (April 1, 2019 to March 31, 2020) was marked by lower earnings on lower sales, as follows.
Consolidated net sales amounted to ¥601,514 million (down 3.1% year on year), operating income was ¥26,014 million (down 27.8% year on year). Ordinary income was ¥20,166 million (down
35.5% year on year). Net income attributable to owners of parent was ¥14,003 million (down 37.0% year on year).

➢

The impact of the COVID-19 issue acted as a negative factor that reduced profit by approximately ¥3 billion.
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1

Net Sales, Operating Income by Segments(Millions of yen)

Net sales
FY2018Operating income
Difference

FY2019Amount%

FY2018Difference

FY2019Amount%Material Solutions Unit

255,918

241,795△ 14,122△5.5%

25,961

20,625

Quality of Life Solutions Unit

156,674

154,837△ 1,837△1.2%

15,092

14,189Health Care Solutions Unit

47,442

46,352△ 1,090△2.3%

10,583

8,917

Nutrition Solutions Unit

158,968

157,431△ 1,536

△1.0%

5,930

5,647

2,040

1,097

△ 943 △46.2%

1,464

547

-

-

-

-

△ 22,992△ 23,912△ 920-

621,043

601,514△ 19,529△3.1%

36,041

26,014△ 10,026△27.8%

OthersAdjustment
Total➢△ 5,335 △20.6%
△ 903

△6.0%

△ 1,666 △15.7%
△ 283

△4.8%

△ 917 △62.6%

On a quarterly basis, business performance was strongly affected by sluggish demand in the automotive and electronics fields till the 3rd quarter. In the 4th quarter, themomentum turned in favor of a recovery in business performance owing to volume growth in the Group’s main businesses. However, the outbreak of COVID-19 temporarily
cancelled out that momentum.

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2

Business Performance by Segments
Material

Net Sales

Solutions Unit

Operating Income¥ 20.6 billion 【year-on-year △20.6％】

Composition
ratio of sales

Vinyls and Chlor-Alkali

Net Sales(Billions of yen)

¥ 241.8 billion 【year-on-year △5.5％】•

In PVC resins and specialty PVC resins, sales increased steadily because of strong demand from overseas markets, primarily Asia, amid mostly flat shipment volume in Japan
compared with the previous year. However, exports stagnated following the COVID-19 outbreak. This impact is expected to continue in the 1st quarter of fiscal 2020.
Caustic soda had a significant impact on business performance, due to persistently lackluster market conditions in Asia, against the backdrop of the slowdown in the Chinese economy.

•

Performance Polymers（MOD）••

Operating Income(Billions of yen)

Amid the impact of the global economic slowdown, modifiers saw progress on measures to create a new high-value-added market, such as measures to expand sales for non-PVC
applications and develop and launch new, large-scale products. However, a decline in sales could not be avoided due to the COVID-19 issue. In the 1st quarter of fiscal 2020, demand is
expected to continue to decrease temporarily.
With epoxy masterbatch, progress has been made on the development of applications that meet cutting-edge market needs, such as structural adhesive for automobiles and electronics
applications. As a result, full production and full sales have continued. The Group will meet vigorous demand by launching production facilities that will double the production capacity at the
Takasago Manufacturing Site, as planned. The new production facilities will start operations in July 2020. The Group will also implement the next phase of production facility expansion at
the earliest opportunity.

Performance Polymers（MS）••

In modified silicone polymers, sales increased steadily, supported in part by a contribution from enhanced production capacity in Belgium.
The Group has been steadily pioneering the new frontier that is the Asian market. In the 4th quarter, shipments to China were stagnant due to the COVID-19 issue.

New Business••••

Kaneka Biodegradable Polymer PHBH has been taken up as a major topic by numerous international bodies and exhibitions, such as the G20, and by major overseas news media,
such as the BBC and CNN.
There has been a flood of inquiries from major brand holders in Japan and overseas with a high interest in the issue of microplastics and environmental issues. A large number of joint
development projects have started.
The completion of a 5,000-ton plant at the Takasago Manufacturing Site has spurred steady progress on adoption by global brand holders such as major convenience store chains,food manufacturers, and cosmetics manufacturers.
The Group will accelerate preparations for the construction of a full-scale mass production plant with a capacity of 20,000 tons as it intensively allocates management resources to thisarea, with the aim of expanding business as early as possible.
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3

Business Performance by Segments
Quality of LifeNet Sales

Solutions Unit

Operating Income

Net Sales(Billions of yen)

¥ 154.8 billion 【year-on-year △1.2％】¥ 14.2 billion 【year-on-year △6.0％】

Composition
ratio of sales

Performance Fibers•••

The Group has set up a Product Development Center in Ghana, with the goal of stimulating new demand in the African market.
The Group will work on high-performance, high-value-added products, such as water-repellant fibers, for which there is surging demand, as it seeks to strengthen sales in close touchwith the market.
In the 4th quarter, the Group faced temporary restrictions on operations of its Malaysian plant and was forced to reduce shipments to Africa due to the COVID-19 issue. This impact is
expected to continue in the 1st quarter of fiscal 2020.

Foam & Residential Techs••

Earnings from expandable polystyrene resin and extruded polystyrene foam board increased, as new products with high insulation, high expansion ratio, and other features werelaunched and progress was made on the rationalization of logistics.
In polyolefin foam, earnings were lackluster because of the impact of reduced global automobile production due to the COVID-19 issue. The impact of the lower global automobile
production is expected to continue in the 1st quarter of fiscal 2020.

PV & Energy management

Operating Income(Billions of yen)••

Earnings improved substantially owing to steady growth in sales to major homebuilders as the Group’s high-efficiency photovoltaic module products received strong reviews in the market.
Solar power systems are attracting attention once again as the most promising solution for renewable energy. The Group will ramp up its supply capacity of high-efficiency products in atimely fashion. Concurrently, the Group will address growth in demand by pursuing the development of a net zero energy management system for houses and buildings with a major
construction firm. It will also jointly develop see-through photovoltaic module products for automotive use with a major automaker.

E & I Technology••

Polyimide films and graphite sheets were strongly affected by a slowdown in the smartphone market. In the 4th quarter, the Group was impacted by stagnation of supply chains inareas such as China and restrictions on operations of its Malaysian plant due to the COVID-19 issue. A similar impact is expected to continue in the 1st quarter of fiscal 2020.
The Group will accelerate R&D activities for unique new products that will support digital transformation—products that have attracted high expectations for the Group’s innovativetechnologies. Among these products are organic electroluminescent displays and 5G smartphones, and sensor materials for autonomous driving systems, for which demand is
expected to grow going forward.

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4

Business Performance by Segments
Health CareNet Sales

Solutions Unit

Operating Income¥ 46.4 billion 【year-on-year △2.3％】¥ 8.9 billion 【year-on-year △15.7％】

Composition
ratio of sales

Net Sales
Medical Devices(Billions of yen)•

Sales of catheters increased as new products such as an embolization coil launched in November 2019 were rated highly by customers. Sales of this embolization coil began in
the U.S. in spring 2020.

•

The Group will expand production facilities at its Vietnam plant, and aggressively expand its business in new therapeutic fields such as drug-coated balloon catheters andfractional flow reserve products. In addition, the Group will strive to achieve rapid business expansion through technical and capital alliances with U.S. and European medical
equipment companies.

•

COVID-19-related clinical Study on Lixelle has started. The Company will enlarge its research fields so that it can apply its blood purification technology to infectious diseases.

•

A planned agreement on the licensing out of technology has been postponed to the 1st quarter of fiscal 2020.

PharmaOperating Income(Billions of yen)•

A bulk shipment of small molecule pharmaceuticals expected in the 4th quarter was postponed to the 1st quarter of fiscal 2020 onward.

•

In the next fiscal year, increased production capacity for active pharmaceutical ingredients at Osaka Synthetic Chemical Laboratories, Inc. and biopharmaceuticals at Kaneka
Eurogentec S.A. will come online and are expected to drive earnings growth.

•

Kaneka Eurogentec has begun supplying reagents for COVID-19 based on the urgent request of the Belgian government. In addition, the Company has reached an agreementwith FUJIFILM Corporation to supply active pharmaceutical ingredients for Avigan® Tablet.

•

The Company has also formed an intensive research team focusing on contracted manufacturing of vaccines and the development of antiviral drugs using cutting-edge advanced
technologies such as mRNA and plasmid DNA.

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5

Business Performance by Segments
Nutrition

Net Sales

Solutions Unit

Operating Income¥ 157.4 billion 【year-on-year △1.0％】¥ 5.6 billion 【year-on-year △4.8％】

Composition
ratio of sales

Net Sales
Foods & Agris(Billions of yen)•

Sales were favorable to the bread sector, but were negatively impacted by sluggish conditions in the confectionery bread and convenience store sectors.

•

In the 4th quarter, the environment came under pressure from factors brought about by the COVID-19 issue, such as a deterioration in the markets for inbound tourism and souvenirs,
along with a decline in demand for school lunches due to temporary school closures. Meanwhile, with more and more people eating meals at home, demand for products such asfrozen food and instant noodles increased. As a result, Kaneka Sun Spice Corporation achieved record-high business results. Overall, the Foods & Agris Solutions Vehicle posted
business results that were mostly unchanged from the previous year.

•

In the dairy product business, sales of the “Milk for bread lovers” series increased dramatically, supported by a positive reception of this series in the market. Going forward, theGroup will move quickly to construct a full-scale dairy product plant.

•

The Group is constructing a new plant in Indonesia as part of efforts to transplant Japan’s bread culture to overseas markets. The new Indonesia plant is scheduled to start
operations as early as this summer, and the Group believes that the new plant will add further momentum to its business expansion in Asia.

Operating Income(Billions of yen)Supplemental Nutrition•

There were timing differences in shipments to a major U.S. brand holder of the Group’s reduced form of coenzyme Q10.

•

The Group began sales of Probiotics from AB-Biotics, S.A. located in Spain, which became a subsidiary last year, in the U.S. and Japan, following on from Europe, where sales arefavorable.

•

The Group will accelerate its brand strategy for a wide range of supplements by conducting a reorganization to strengthen the dissemination of scientific data about their healtheffects. Also, in response to rising consumer health awareness, the Group will strengthen the development of foods such as yoghurt that offer both tastiness and health benefits,

which will create synergies with the diary product business in Foods.

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6

Consolidated Balance sheet(Billions of yen)March 31,
2019
AssetsMarch 31,2020

Difference

Current Assets
Noncurrent Asssets
Total assets

314.2
345.3
659.6

306.9
346.4
653.3

△ 7.4
1.1
△ 6.3

Interest bearing debt
OthersTotal liabilities

120.5
178.3
298.9

130.8
168.3
299.2

10.3
△ 10.00.3

Shareholders' equity
OthersTotal net assets

Total liabilities and net assets

337.0
23.7
360.7
659.6

331.5
22.6
354.1
653.3

△ 5.5
△ 1.1
△ 6.6
△ 6.3

Shareholders' equity ratio

51.1%

50.7%

¥5,166.88¥5,082.08

Liabilities

Net assets

Net assets per share* Shareholders' equity ： Net assets deducting Noncontrolling interests and Subscription rights to shares➢

Total assets decreased due to decreases in notes and accounts receivable-trade and investment securities.

➢

Liabilities increased due to an increase in loans payable.

➢

Net assets decreased due to decreases in valuation difference on available-for-sale securities and foreign currency translation adjustment.

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7

Consolidated Cash Flow
(Billions of yen)

FY2018FY2019Cash flows from operating activities

41.1

Cash flows from investing activities△ 47.2

Free cash flow

△ 6.1

40.0
△ 41.8△ 1.8

Cash flows from financing activities

△ 1.0

△ 0.5

Net increase (decrease) in cash and cash equivalents (*)

△ 7.4

△ 2.4

Cash and cash equivalents at end of period

40.0

37.6

* Including Effect of exchange rate change on cash and cash equivalents and Increase (decrease) in cash andcash equivalents resulting from change of scope of consolidation➢

Net cash provided by operating activities was ¥40.0 billion, mainly due to income before income taxes and depreciation and amortization.

➢

Net cash used in investing activities amounted to ¥41.8 billion, mainly owing to the purchase of property, plant and equipment.

➢

Net cash used in financing activities came to ¥0.5 billion, mainly owing to cash dividends paid.

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8

Consolidated Business Forecasts➢

It is generally believed that the worldwide spread of COVID-19 has put the global economy at risk of contraction. It remains to be seen whether COVID-19 infections can be contained at an
early stage. According to the IMF’s publication in April, for example, the global economy is projected to contract sharply by –3 percent in 2020. This reduction reflects the marked economic
downturn observed in the first half of the year. The mainstream outlook is for the global economy, after bottoming out in the April–June period, to return to a recovery path from the latter half ofthe year.

➢

Under these conditions, various countries have been working in earnest to take maximum economic measures to support their economies. However, considering the uncertainty in when the
pandemic will come to an end, it is not possible to clearly determine the timing of the economic recovery at this time. The Group’s business fields cover a wide range of areas both in Japan andoverseas. It is difficult to estimate the environmental factors, such as recovery in demand, normalization of crude oil prices, and exchange rate trends, that are needed to determine business
forecasts in each business field.

➢

Accordingly, given that it is difficult to rationally determine business forecasts at this time, the Group has decided to leave its consolidated business forecasts for the fiscal year ending March 31,
2021 as undetermined. The Group will promptly announce its business forecasts when it is possible to disclose them.

The operating results forecasts and certain other statements contained in this document are forward-looking statements, which are rationally determined based on information
currently available to the company. For a variety of reasons, actual performance may differ substantially from these projections. They do not constitute a guarantee that theCompany will achieve these forecasts or other forward-looking statements.
©Kaneka Corporation ALL rights reserved.

9

KANEKA CORPORATION
https://www.kaneka.co.jp/en/