Quarterly Financial Summary
1st Quarter, Ended June 30, 2020

August 12, 2020

Kaneka Corporation

ContentsSummary

１

Net Sales , Operating Income by Segments

２

Business Performance by Segments

３

Consolidated Balance Sheet

７

Performance Forecasts

8

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)

FY2020 1Q

FY2019 1Q

Operating income

7.0

Ordinary income

5.5

Net income attributable to owners of parent

3.5

126.6
2.0
0.8
0.4

¥53.53¥6.70

Net sales

Net income per share

148.8

Difference
Amount%△ 22.2△14.9%△ 5.0△71.0%△ 4.7△85.0%△ 3.1△87.5%➢ In topics for the quarter under review (April – June 2020), the most prominent is the COVID-19 pandemic. The COVID-19 threat has spreadaround the world, causing an unprecedented situation in which economic activity across all industries has been hit reversely, almost to thepoint of stopping. Unfathomable shocks continue to rock the global economy.
➢ Crude oil briefly dipped to negative $37.63. U.S. GDP growth dropped to negative 32.9% year on year, the steepest decline on record. GDP in
Japan was also recorded negative 27%, the largest fall since World War II. The scars of an extremely deep, serious depression are spreading
across the globe.
➢ In this business environment, the Kaneka Group’s business performance for the first quarter (April 1, 2020 to June 30, 2020) was as follows.
Consolidated net sales amounted to ¥126,644 million (down 14.9% year on year), operating income was ¥2,029 million (down 71.0% year onyear). Ordinary income was ¥823 million (down 85.0% year on year). Net income attributable to owners of parent was ¥437 million (down87.5% year on year).

ⓒ2020 Kaneka Group All rights reserved.

1

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

Net sales
FY2019 1Q➢➢%

FY2019 1Q

FY2020 1QDifference
Amount%48,894△ 11,281△18.7%

5,5902,855△ 2,734△48.9%

Quality of Life Solutions Unit

38,46829,738△ 8,729△22.7%

3,728

1,236

△ 2,492△66.8%

Health Care Solutions Unit

10,949

11,698

748

6.8%

1,905

2,298

393

20.6%

Nutrition Solutions Unit

38,90835,938△ 2,969

△7.6%

1,200

827

△ 373

△31.1%

320

373

53

16.8%

180

248

67

37.7%

----

△5,600△5,436

163-

148,822

126,644△ 22,178△14.9%

7,004

2,029

△ 4,975△71.0%

Total➢

Amount60,176

Adjustment➢

Difference

FY2020 1Q

Material Solutions UnitOthers➢

Operating incomeThe first feature is that the leading-edge business group (E & I ・PV ・Medical・Pharma・Supplement・Agricultural production support ) which has been the priority forinvestment of R&B resources, has continued to record year on year growth in sales and profits, despite the severe downturn of the global economy due to the COVID-19 crisis.
The second feature is that core business group belonging to the Material and Quality of Life Solutions Units (Vinyls ・MOD・MS・Foam ・Fibers ) experienced a sharp
decrease in demand which caused a drop in production as a result of the COVID-19 pandemic. This is the largest factor behind the significant decrease in sales and profits inthe first quarter.
According to recent announcements by the American Chemistry Council and business sentiment surveys of the global manufacturing industry, the global chemical sector has
seen a contraction in production during the COVID-19 crisis in the same way as other manufacturing industries, but the production decrease is reported to have bottomed outin March, with a contraction in April and May , before production began to increase in June.
Incidentally, the Company’s core business group belonging to the Material and Quality of Life Solutions Units, which had seen production drop, began to improve and increase
production from June after hitting bottom in May.
While production is not likely to return to pre-COVID-19 levels right away, production in the core business group is expected to improve at a gradual pace in the third andfourth quarters, with earnings increasing through the year thanks to production increases.
Furthermore, the Company has taken the paradigm change during the COVID-19 crisis as an opportunity to implement measures to boost productivity by strengthening backoffice functions. These include applying “select and concentrate” of R&B initiatives and introducing a new work culture, exemplified by remote working. (Cost cuts: ¥500
million in the first quarter)ⓒ2020 Kaneka Group All rights reserved.

2

Business Performance by Segments
Material

Net Sales

Solutions Unit

Operating Income¥ 48.9 billion 【year-on-year △18.7％】¥ 2.9 billion 【year-on-year △48.9％】

Composition
ratio of sales

Net Sales(Billions of yen)

Vinyls and Chlor-Alkali➢ PVC resins and caustic soda: Sales and profits decreased due to a lockdown in India.

Performance Polymers（MOD）

Operating Income

Performance Polymers（MS）➢ MOD and MS: Sales and profits decreased due to a drop in demand in Europe and the U.S.
➢ Epoxy masterbatch: Application development continued and facilities for boosting capacity
operated as planned.

(Billions of yen)

New Business➢ Kaneka Biodegradable Polymer PHBH: Joint development continued steadily with a large number ofbrand holders in Japan and overseas. The conclusive works for productivity increases and cost
reductions are proceeding toward a decision on constructing a plant with a 20,000 t production
capacity.

ⓒ2020 Kaneka Group All rights reserved.

3Business Performance by Segments
Quality of LifeNet Sales

Solutions Unit

Operating IncomeNet Sales(Billions of yen)¥ 29.7 billion 【year-on-year △22.7％】¥ 1.2 billion 【year-on-year △66.8％】

Composition
ratio of sales

Performance Fibers➢ Performance Fibers: Demand for hair accessories fell sharply due to lockdowns in Africa. Demand forpile and flame retardance materials is also sluggish due to the COVID-19 crisis.
The newly established Product Development Center in Ghana will be used to achieve an earlyrecovery in sales.
Foam & Residential Techs➢ Foam & Residential Techs: Expandable polystyrene resin and extruded polystyrene foam boards
slumped due to a decrease in fishing coolers and construction and civil engineering activity. Polyolefin
foam demand was heavily impacted by the global decrease in automobile production.
PV & Energy management

Operating Income(Billions of yen)

➢ PV & Energy management: High-efficiency photovoltaic module products for residential use saw firmsales.
Proceeded with joint development of wall surface and see-through photovoltaic modules for buildings
and automobiles.
E & I Technology➢ E & I Technology: Polyimide films and graphite sheets saw a gradual recovery in the smartphonemarket. Sales is strong. The Group bolstered development of original products for OLEDs and 5Gapplications.
ⓒ2020 Kaneka Group All rights reserved.

4

Business Performance by Segments
Health CareNet Sales

Solutions Unit

Operating Income¥ 11.7 billion 【year-on-year 6.8％】¥ 2.3 billion 【year-on-year 20.6％】

Composition
ratio of sales

Net Sales(Billions of yen)

Medical➢ Medical: Sales of catheters are increasing after a temporary halt due to the COVID-19 crisis.
Embolism coils performed well, and the Group plans to sell them in the U.S.
The Group decided to triple the current production capacity at its Vietnam plant.
The Group is proactively advancing technology and capital alliances in new therapeutic fields.
The Group started breast reconstruction treatment that uses culture adipose derived from stem cells.

PharmaOperating Income(Billions of yen)

➢ Pharma: Capacity expansion at Osaka Synthetic Chemical Laboratories, Inc. and Kaneka
Eurogentec S.A. contributed to sales. The Group started supplying active pharmaceutical ingredientsfor Avigan® Tablet and reagents, both for COVID-19.
The Group is engaged in contracted production of vaccine intermediates for AnGes, Inc. using
leading-edge advanced technology such as plasmid DNA.
➢ The Group started an infection research team to focus on the infectious diseases domain.

ⓒ2020 Kaneka Group All rights reserved.

5

Business Performance by Segments
Nutrition

Net Sales

Solutions Unit

Operating Income¥ 35.9billion 【year-on-year △7.6％】¥ 0.8 billion 【year-on-year △31.1％】

Composition
ratio of sales

Net Sales
Foods & Agris(Billions of yen)

➢ Foods & Agris: Demand for bread and confectionery slumped due to a downturn in restaurant diningand inbound tourism. An increase in people eating meals at home drove favorable performance atKaneka Sun Spice Corporation. Dairy product sales were firm, and the Group commenced organic
dairy farming. The Group established a dairy farming agricultural production company in Betsukai,
Hokkaido Prefecture.

Operating Income(Billions of yen)Supplemental Nutrition➢ Supplemental Nutrition: Reduced form of coenzyme Q10 performed strongly in the U.S. due toincreased awareness of preventative care.
Sales of probiotics were favorable in Europe and the Group started sales in the U.S.
The Group will strengthen dissemination of scientific information and develop its brand strategy
through diverse supplements.

ⓒ2020 Kaneka Group All rights reserved.

6

Consolidated Balance Sheet(Billions of yen)March 31,
2020
AssetsCurrent Assets
Noncurrent Asssets
Total assets
Liabilities
Interest bearing debt
OthersTotal liabilities
Net assets
Shareholders' equity
OthersTotal net assets
Total liabilities and net assets
Shareholders' equity ratio
Net assets per share

June 30,
2020

Difference

306.9
346.4
653.3

299.3
351.3
650.6

△ 7.6
4.9
△ 2.6

130.8
168.3
299.2

138.5158.0
296.5

7.6
△ 10.3
△ 2.7

331.5
22.6
354.1
653.3

331.3
22.9
354.2
650.6

△ 0.2
0.20.1
△ 2.6

50.7%

50.9%

¥5,082.08¥5,079.53* Shareholders' equity ： Net assets deducting Noncontrolling interests and Subscription rights to shares➢ Total assets decreased due to a decrease in notes and accounts receivable-trade.
➢ Liabilities decreased due to a decrease in notes and accounts payable-trade.

➢ Net assets increased due to an increase in valuation difference on available-for-sale securities.
ⓒ2020 Kaneka Group All rights reserved.

7Performance Forecasts①World Economic Outlook

The impact of COVID-19 is expected to have peaked during the firstquarter, with business performance to begin gradually improving from thesecond quarter, making a full recovery from the second half of the fiscal
year ending March 31, 2022.

②Forecast for Consolidated Business Performance for the Fiscal Year Ending March 31, 2021

(Billions of yen)

FY2019 result
Net sales

601.5

Operating income

26.0

Ordinary income

20.2

Net income attributable to owners of parent

14.0

FY2020 forecast

560.0
21.0
16.4
10.0

ChangeAmount％△ 41.5

△6.9%

△ 5.0

△19.3%△ 3.8△18.7%△ 4.0△28.6%* The forecasts are based on exchange rates of ¥108 to the U.S. dollar, ¥120 to the euro and a domestic naphtha price of ¥28,000 per kiloliter.

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.
ⓒ2020 Kaneka Group All rights reserved.

8Forecast for Consolidated Business Performance by segments for the Fiscal Year Ending March 31, 2021
(Billions of yen)

Net Sales

Operating Income

FY2020FY2019result

FY2019resultChangeforecast

FY2020forecast

ChangeMaterial Solutions Unit

241.8

215.5

△ 26.3

20.6

15.5

△ 5.1

Quality of Life Solutions Unit

154.8

136.6

△ 18.2

14.2

9.4

△ 4.8

Health Care Solutions Unit

46.4

52.5

6.1

8.9

11.5

2.6

Nutrition Solutions Unit

157.4

154.4

△ 3.05.6

5.3△ 0.31.1

1.0

△ 0.1

0.5

0.6

0.1---△ 23.9△ 21.3

2.6

601.5

560.0

△ 41.5

26.0

21.0

△ 5.0

OthersAdjustment
Total➢ The core business group (Vinyls and Chlor-Alkali・MOD・MS・Foam & Residential Techs・Performance Fibers) stopped production in theCOVID-19 crisis, but production is now expected to improve at gradual pace in the third and fourth quarters, with revitalized production to drive animprovement in earnings for the year.
➢ The leading-edge business group (E & I ・PV・Medical・ Pharma・Supplement・Agricultural production support), a driving force for growth isexpected to continue a strong earnings growth trend.
➢ Furthermore, the Company will engage in high productivity business management, such as strengthening back office functions. These include
applying “select and concentrate” of R&B initiatives and introducing a new work culture, exemplified by remote working. (Cost cuts: ¥3,000 million)③Dividends forecasts for the Fiscal Year Ending March 31, 2021
➢ Based on the above performance forecasts for the fiscal year ending March 31, 2021 and a basic policy of continuing to make stable profit
returns, the Company has maintained its annual dividend of ¥100 (interim ¥50, year-end ¥50).
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.
ⓒ2020 Kaneka Group All rights reserved.

9④Growth toward the fiscal year ending March 31, 2023
➢ From the second half of the fiscal year ending March 31, 2022, the Company expects to see production activities surpass to pre-COVID-19levels. The performance recovery is expected to be delayed by 1 year.
Net sales¥700 billion
Operating income ¥53 billion➢ Amid a rapid paradigm shift in society sparked by the COVID-19 crisis, the Company will bolster the competitiveness of the leading-edgebusiness group (E & I ・Medical・Pharma・PV ・Supplement, etc.).
The Company will invest resources intensively in its focal new large-scale business group, such as Kaneka Biodegradable Polymer PHBH,and accelerate reaping the fruits of its R&B initiatives.

➢ The Company will hone the unique business characteristics of its core business group (Vinyls ・MOD・MS・Foam・Fibers・Foods & Agris), andbuild them into a strong platform supporting management as a business base.
➢ New large-scale business Kaneka Biodegradable Polymer PHBH:
This is the large-scale business opportunity of the group in its history. Amid a multitude of new business groups, this project will receive
a prioritized investment of management resources.
The Company will expedite the development of technology for uniquely combining its two technology sources (yeast fermentation technology andhigh molecule polymer technology) to realize large scale commercial operations at an early stage.
➢ Expedite management digital transformation
The Company will convert to a robust corporate structure by making efficient investments of management resources.
ⓒ2020 Kaneka Group All rights reserved.

10

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