Change and Innovation

Current Priority
Management Issues andBusiness Strategy
May 26, 2015

Masakazu Tokura
PresidentChange and Innovation

Contents
Overview of FY2014 Performance and FY2015 Outlook
Overview of Corporate Business Plan FY2013 to FY2015
Progress on Major Projects
Toward Sustained Growth

Current Priority Management Issues and Business Strategy

2Overview of FY2014 Performance
目 次
and FY2015 Outlook

Current Priority Management Issues and Business Strategy

3

FY2014 Results
Change and Innovation(Billions of yen)

FY2013

FY2014

Change2,243.8

2,376.7+132.9Operating Income

100.8

127.3

+26.5

(Equity in
Earnings of Affiliates)

12.0

23.9

+11.9

111.1
37.0

157.4
52.2

+46.3
+15.2

6.5%

7.3%

Naphtha Price¥67,300/kl¥63,500/kl

Exchange Rate

¥100.17/$¥109.76/$

Net Sales

Ordinary Income
Net Income

ROE

Current Priority Management Issues and Business Strategy

4FY2014 Results: Operating Income by Sector
Change and Innovation(Billions of yen)

FY2013

FY2014

120.2

118.3

-1.8

Pharmaceuticals

34.9
38.2
47.1

32.4
56.9
29.0

-2.5
+18.7
-18.1

Bulk Chemicals

-5.9

20.8

+26.7

Basic Chemicals

-10.9
4.9

-0.4
21.2

+10.5
+16.3

-13.4
100.8

-11.8
127.3

+1.6
+26.5

Specialty Chemicals
IT-related Chemicals
Health & Crop Sciences

Petrochemicals & Plastics

Others
Total

Current Priority Management Issues and Business Strategy

Change5Outlook for FY2015
Change and Innovation(Billions of yen)

FY2014FY2015(Forecast)

Change2,376.7

2,250.0-126.7

Operating Income

127.3

145.0

+17.7

(Equity in
Earnings of Affiliates)

23.9

24.0

+0.1

157.4
52.2

160.0
80.0

+2.6
+27.8

7.3%

10.0%

Naphtha Price¥63,500/kl¥47,000/kl

Exchange Rate

¥109.76/$¥115.00/$

Net Sales

Ordinary Income

Net Income
ROE

Current Priority Management Issues and Business Strategy

6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

4.0
41.0
63.0
32.0

+3.2
+8.6
+6.9
+3.0

Bulk Chemicals

20.8

17.0

-3.8

20.8

17.0

-3.8

-11.8
127.3

-12.0
145.0

-0.2
+17.7

Specialty Chemicals
Energy & Functional Materials
IT-related Chemicals

Health & Crop Sciences

Petrochemicals & Plastics

OthersTotal* After reorganization of the business sectors
Current Priority Management Issues and Business Strategy

7Dividend Policy
Change and Innovation

We consider shareholder return as one of our priority management issues and have madeit a policy to maintain stable dividend payment, giving due consideration to our businessperformance and a dividend payout ratio for each fiscal period, the level of retained
earnings necessary for future growth, and other relevant factors.
Interim dividend(left axis)

Year-end dividend (left axis)

Commemorative dividend(left axis)

Net income(right axis)（Billions of Yen）

（Yen）

16

210

14

2

12

7

10

6

8

4
2

3

3

90.7

31.1
3 30.2 3
3

3

93.9

34.3
3

6

63.1

64.5

3

6

4

5

6

3

3

0

3

6

80.0

24.4 614.7 3

6

37.0

5.6

6

30

6

0
-51.1

-59.2
2002

2003

2004

2005

Current Priority Management Issues and Business Strategy

2006

2007

2008

2009

6

0

-30

-2
-4

90
60

52.2

6

0

2001

150
120

5

6

6

180

2010

2011

2012

2013

-60
2014

2015 （FY）(Forecast）
8

Overview of Corporate 目
Business
Plan
次
FY2013 to FY2015

Current Priority Management Issues and Business Strategy

9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

10

Where We Have Been Heading
Change and Innovation

Last 10 Years

2 to 3 Years

Next 10 to 20 Years

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 businesses
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

11Progress on Business Restructuring:
IT-related Chemicals and Health & Crop Sciences

IT-related Chemicals Sector

Change and Innovation

Health & Crop Sciences Sector

Expanded small and medium-sizedpolarizing film production capacity

Enhanced synergies from the alliance with
NufarmStarted mass production of next-generation
polarizing films

Extended the period of the collaboration
with Monsanto and expanded thecollaboration into Brazil and Argentina

Promoted a new polarizing film replacing aprotection film

Expanded Flumioxazin herbicide production
capacity

Increased on-cell touchscreen panel
production capacity

Expanded seed treatment business

Launched film touch sensors (UBT)

Expanded post-harvest business
Began operation of a new biorational plant

Expanded production capacity for
aramid coated Li-ion secondary battery
separators

Acquired a rice seed business to enter“total solution provider” business forrice farming

Accelerated the development of new active
ingredients for crop protection products
Current Priority Management Issues and Business Strategy

12Progress on Business Restructuring:
Pharmaceuticals and Bulk Chemicals

Pharmaceuticals Sectors
Additional indication approved in the U.S.
for use of atypical antipsychotic LATUDA intreating bipolar I depression
Increased LATUDA sales in the U.S.

Change and Innovation

Bulk Chemicals Sectors
Decided to close down liquid-phase processcaprolactam plant
Closed down P-MMA plant in Japan
Closed down ethylene plant at Chiba
Closed down PO/SM plant

APTIOM launched in the U.S. as a treatment for
epilepsy

Made progress on the development of
BBI608 and BBI503, anticancer drugs
targeting cancer stem cells
Made progress on the development ofregenerative medicine and cell therapy

Amended the terms of transactions between
Petro Rabigh and its founding shareholders

Maintain high-rate, stable operation of RabighPhase I Project facilities
Project finance agreement signed for
Rabigh Phase II Project; facilities to come on
stream in stages

Accepted orders for diesel particulate filters (DPFs)
Restructured North American operations

Expanded production capacity for high-purity
alumina and increased sales

Expanded S-SBR production capacity
Current Priority Management Issues and Business Strategy

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

FY2015(Target)

FY2015(Forecast)

Change2,400.0

2,250.0-150.0Operating Income

140.0

145.0

+5.0

(Equity in
Earnings of Affiliates)

25.0

24.0

-1.0

Net Income

150.0
90.0

160.0
80.0

+10.0
-10.0

Naphtha Price¥60,000/kl¥47,000/kl

Exchange Rate

¥80.00/$¥115.00/$

Net Sales

Ordinary Income

Current Priority Management Issues and Business Strategy

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

FY2015(Target)

FY2015(Forecast)

Change

129.0

140.0

+11.0

Pharmaceuticals

15.0
34.0
45.0
35.0

4.0
41.0
63.0
32.0

-11.0
+7.0
+18.0
-3.0

Bulk Chemicals

24.0

17.0

-7.0

24.0

17.0

-7.0

-13.0
140.0

-12.0
145.0

+1.0
+5.0

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

Petrochemicals & Plastics

OthersTotal* After reorganization of the business sectors
Current Priority Management Issues and Business Strategy

15

Change in Business Portfolio
Change and Innovation

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

Operating Income

145.0

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

27.9%
Specialty Chemicals

72.2%

Bulk Chemicals

27.9%

72.2%

’12/3

’13/3

’14/3

’15/3

’16/3

89.2%
10.8%

’16/3
（forecast）

10.8%

89.2%

Note: The composition of operating income excludes others sectors and adjustments.

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

16Current Status of Sumitomo Chemical
Change and Innovation

Specialty
Chemicals
Bulk Chemicals

71%

29%
FY2015Invested
capitalEnvironment and energyLife sciences

ICT

Bulk Chemicals

11%

Bulk Chemicals
33%
FY2015Net sales

FY2015Specialty
Chemicals

67%
Current Priority Management Issues and Business Strategy

OperatingincomeSpecialty
Chemicals

89%
17

Enhance Financial Strength
Change and Innovation

Improvefinancialstrength

Enhance financial strength
Improve asset
efficiency(Improve CCC)

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

Rigorously
selectinvestments

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

18

Cash Flow Projections
Change and Innovation(Billions of yen)

FY2010-FY2012

FY2013-FY2015(Target)

FY2013-FY2015(Forecast)

Cash flows
from operating activities

472.3

Around 540.0

715.2

260.0

Cash flows
from investing activities-445.7-301.8-110.0

413.4

150.0

26.6

Free cash flows*1

Below -400.0*2Over 200.0

FY2015(Forecast)(Note) *1: Including investment of 100 billion yen in Rabigh Phase II Project*2: Including decreases in cash and cash equivalents(Billions of yen)
End of FY2012

Interest-bearing
liabilities

1,060.6

End of FY2015(Target)*1

Below 900.0

End of FY2015(Forecast)End of
FY 2014

850.0

980.2

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

19Interest-Bearing Liabilities and D/E Ratio
Change and Innovation

Interest-bearing liabilities(left axis)

Debt to equity ratio(right axis)（Billions of yen ）（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）

Current Priority Management Issues and Business Strategy

20

目 次
Progress on Major Projects
IT-related Chemicals: Commercialization of
Flexible Display Materials and Components



Health & Crop Sciences: Expansion of Business Area

Pharmaceuticals: Development of Regenerative Medicine

Petrochemicals & Plastics: Expansion of Petro RabighBusiness Expansion in Niche Areas

Current Priority Management Issues and Business Strategy

21

IT-related Chemicals:Commercialization of Flexible Display Materials and Components

Change and Innovation

Flexible display panel project
Materials development capabilities
as a diversified chemical company,
including organic-inorganic hybrid technology

Structure of conventionalorganic EL display (example)
Flexible display materials
and components+
Product development capabilities and processing
technologies developed in display materials businessContributing to the development of
next-generation displays

Film-type touchscreen panels
Launched in February 2015 and now in mass production
Enables production of curved-surface organic EL displays

First step toward realizing flexible displays

Current Priority Management Issues and Business Strategy

In development

Cover glass
Polarizing film
ITO (xy)
Sealing glass

Coated polarizing film

OLED
Glass

In mass production

Window film

Barrier film

Film-type
touchscreen panels
Structure of organic EL display using Film-type
touch screen panel

Cover glass
Polarizing film
ITO (xy)
Film
Sealing glass
OLED
Glass
22

Health & Crop Sciences: Expansion of Business Area
Change and Innovation

Expansion of business area
Seeds
Seed

Seed
treatment
Seed treatment

Cultivation/
pest control/
fertilizer application

Seeds

Crop protection
chemicals

Crop protection
chemicals• Insecticides andfungicides• Insecticides, fungicides,
and herbicides• Sunflower• Rapeseed• Sorghum•(Rice)Rice

Product formulation
and application
technologies• Insecticides for seedtreatment• Plant growth
regulators for seedtreatment• Seed treatment
technology

Post-harvest

Year 2020

Products• Fungicides• Freshness
preservers

Biorational• Coating agents• Microbial pesticides• Plant growth
regulators•• Plant
Plant growth
growth regulators
regulators

Expansion oftarget business areas¥80 billion

Current
Sales of target
business areas¥37 billion

Rice¥0 billion
Seed treatment¥5 billion

Fertilizers

Services¥255• Coating fertilizers• Post-harvest
treatment

billion

Product formulation
technology• Pre-shipment
treatment• Microcapsule• Residue analysis

Biorational¥25 billion¥10 billion¥10 billion¥45 billion

Post-harvest
Total sales of crop
protection chemicals
business¥7 billion¥15 billion

Target business areasfor expansion

Current Priority Management Issues and Business Strategy

23

Pharmaceuticals: Development of Regenerative Medicine
Change and Innovation

Forecast for regenerative medicine market(trillions of yen)
40

2050

Japan

30

¥38 trillion

Worldwide

20

10
0
2012

2020

2030

2040

2050

Source: Ministry of Economy, Trade and Industry (FY2012; forecast by Seed Planning)

Development of regenerative medicine and cell therapy
Partner
連携先
Chronic-stage
cerebral
infarction

SanBioAge-related
maculardegeneration

Healios
RIKEN

Parkinson’s
diseaseRegion
地域

Cell
line
細胞種

North
America

Allogeneic
mesenchymal
stem cells

Timeline実用化に向けたスケジュール
to practical Implementation
2015
2015

2016
2016

2017
2017

2018
2018

2019
2019

2020
2020
Approval(target)

Ph2b
Ph3
Investigator-initiated clinical trials

Japan

Allogeneic
iPS cells

Center for iPS Cell
Research andApplication (CiRA),
Kyoto University

GlobalAllogeneic
iPS cells

Retinitis
pigmentosa

RIKEN

GlobalAllogeneic
iPS cells

Investigator-initiatedclinical trials

Spinal cord
injuryKeio University
Osaka National Hospital

GlobalAllogeneic
iPS cells

Clinical studies (allogeneic)

Current Priority Management Issues and Business Strategy

Clinical studies (autologous/allogeneic)

Approval(target)Investigator-initiated/company-sponsored clinical trials
Clinical studies (autologous)24

Petrochemicals & Plastics: Expansion of Petro RabighChange and Innovation

1. Rabigh Phase II Project(1) Outline of financing(billion USD)

Financed

Remarks

Borrowing

5.2

Project financing

Capital, etc.

2.9Bridge loans, etc.

Total

8.1

Our planned investment:¥100 billion(to be financed by free cash
flows and borrowing)2016 1H(2) Progress of the projectMar. 2015

May. 2012

Apr. 2009

Feasibility
confirmed

Project
Financing
Agreement
signedProduction
to start instagesMemorandum of Understanding
signed and feasibility study started

Current Priority Management Issues and Business Strategy

25

Petrochemicals & Plastics: Expansion of Petro RabighChange and Innovation

2. Petro Rabigh Complex(production capacity 1,000t/year)

Phase I
Crude oil,
etc.

Oil
refining
equipment

Phase II Project
Naphtha (2,900)(400,000 barrels/day)(900→1,100)
Propylene

Kerosene
Light oil
Heavy oil
Gasolinehomo PP (350)
block PP (350)
PO (200)

Paraxylene/benzene
Naphthareformer(1,300/400)

Nylon 6(75)

Phenol/acetone(250/150)

MMA/PMMA(1,200→1,600)(90/50)(1,300→1,600)

EthaneEthanecracker

Ethylene

LLDPE (600)
HDPE (300)
MEG (600)

EPDM/TPO (70/10)
EVA/LDPE (70/80)

Investment in acrylic acid, SAP, and polyol is under study.
Current Priority Management Issues and Business Strategy

26

Business Expansion in Niche Areas
Change and Innovation

1. Sumitomo Joint Electric Power Co., Ltd.

2. Nihon Medi-Physics Co., Ltd.

Company Overview

Company Overview

Net sales: approx.¥48 billion*1
Established: 1919 Employees: approx.180*2*1:FY2014*2:End of FY2014

Business Overview

Net sales: approx.¥32 billion*1
Established: 1973 Employees: approx. 800*2*1:FY2014*2:End of FY2014

Business Overview

Operation of power plants (3 thermal, 12 hydro, 1 biomass)Sale of power to Sumitomo Group companies, Shikoku ElectricPower, Japan Electric Power eXchange (JEPX), etc.

A leading nuclear medicine company in Japan(focus area: radiopharmaceuticals)Planning to build new power plants to supply more power tocustomers outside the Sumitomo Group

Sale of SPECT diagnostic and PET diagnostic agents, radioactive
seeds for cancer treatment, etc.

Working to expand the application of PET diagnostic

Change in power generation capacity(1,000kW)

New products (launched in 2014)

1,000
123

I-ioflupane (DaTscan intravenous injection)

800



600
400
200

SPECT diagnostic agent for Parkinson’s disease and Lewy bodydementia

Development pipeline

0(End of FY) 20102011 2012 2013 2014 2015 2016 2017 2018 201918

F-flutemetamol

Started Kawasaki
Biomass powerplant

To start Monbetsu
Biomass power
plant

Current Priority Management Issues and Business Strategy

To start
Niihamakita
thermal power plant(under study)

Under development as PET diagnostic agent for Alzheimer’s disease18

F-fluciclovine

Under development as PET diagnostic agent for brain tumors andprostate cancer

27

Business Expansion in Niche Areas
Change and Innovation

3. Valent BioSciences

4. SCIOCS

Company Overview

Company Overview

Net sales: approx.USD280 million*1
Established: 2000 Employees: approx. 180*2

Net sales: approx. ¥6 billion*1 Established: 2015
Employees: approx.160*2*1:FY2014 *2:End of FY2014*1:FY2014（forecast) *2:As of the end of April2015

Business Overview

Business OverviewA world leading biorational crop protection company

Started a new plant in July 2014

Acquired mycorrhizal fungi business in March 2015



Seeking to develop synergies with chemical crop protection business

600

Sales trends in biorational business

500

300

Sumitomo Chemical acquired compound semiconductor materials
business from Hitachi Metals and established SCIOCS in April 2015
- to expand share in gallium arsenide (GaAs) epiwafer market- to enter gallium nitride (GaN) substrate and epiwafer market(for use in power devices)

Aiming to become a leading compound semiconductor materials
company

Power device market(trillion yen)(million USD)

400



3.0
Microbial pesticides
Plant growth regulators

2.0
Develop into
a core businessof the sector

200

Estimated to
double

1.0

100

0.0

0
2009

2010

2011

2012

2013

Current Priority Management Issues and Business Strategy

2020

2013

2020
28

目 次
Toward Sustained Growth

Sumitomo Chemical:
100th Anniversary and Where We ArePriority Areas and Our Path ForwardStrengthening Corporate Governance andInitiatives to Achieve Sustained Growth

Current Priority Management Issues and Business Strategy

29

目 次
Toward Sustained Growth Sumitomo Chemical:

100th Anniversary and Where We ArePriority Areas and Our Path ForwardStrengthening Corporate Governance andInitiatives to Achieve Sustained Growth

Current Priority Management Issues and Business Strategy

30Sumitomo Chemical’s DNA
Change and Innovation

Sumitomo Values

The Sumitomo Family’s “Business Principles”
states that as we conduct business, we must
always value trust and integrity and mustclosely watch the changing of the times,
carefully weigh opportunities and risks, andseek long-term sustainable growth rather thanchasing short-term gains.

The origin of Sumitomo Chemical
Sumitomo Chemical’s history dates back to 1913. The company
got its start by producing fertilizer from harmful gas emitted incopper smelting operations. The business helped mitigate theenvironmental problem caused by the emissions, while also
contributing to increasing agricultural crop production.
WisdomTechnology

Sulfur dioxide
gas emissions

At Sumitomo Chemical we adhere to theprinciple that our business must not only
benefit our own interests but also society
at large.
Environmental problem

Current Priority Management Issues and Business Strategy

PassionSenseof
missionCalciumsuperphosphate
fertilizer

Increase in crop production31Sumitomo Chemical’s 100 Years:
Period of Expansion into New Business Areas
Change and Innovation

1915
Start of business

Sumitomo Fertilizer Manufacturing

1944
Merger with Japan Dyestuff Manufacturing Company

1953
Launch of Pinamin
household pesticide

1958
Completion of ethylene plant completed
Kasugade Works of Japan Dyestuff Manufacturing

Pinamin plant (Torishima)

Entry into agriculturalchemicals business

1984
Establishment of
Sumitomo Pharmaceuticals
Entry into
pharmaceuticals business

Ethylene plant (Ehime)

Entry into
petrochemicals andplastics business2001
Establishment of
IT-related Chemicals Sector
Entry into IT-related
chemicals business

Expanded into new business areas to respond to change in society
and meet evolving customer needs
Current Priority Management Issues and Business Strategy

32Sumitomo Chemical’s 100 Years:
Period of Expansion of Overseas Business and Globalization
Change and Innovation

2009
Start of
Petro Rabigh operations

1991
1991
Establishment of Dongwoo
Semiconductor Chemical(now Dongwoo Fine-Chem)

1988
1988
Establishment of
Valent U.S.A.

2011
Acquisition of
Sepracor(now Sunovion)

1984
1984
Start of operations at
Singapore petrochemicalcomplex

Sumitomo Chemical’s Globalization: Promotion of Globally Integrated Management
Building competitive businesses globally by optimizing operations across national borders
in view of technology, location, business partners, and human resource
Current Priority Management Issues and Business Strategy

33

Current Status of Sumitomo Chemical
Change and Innovation

Trends of Net Sales
Net sales¥2,250 billion (FY2015 forecast)

Net income¥80 billion (FY2015 forecast)

Net sales by region
Other 5%
Europe 4%
North America
11%

Total assets ¥2,880.4 billion (end of March 2015)
Employees

Asia 40%

31,039(end of March 2015)

Japan
40%
FY2014
Net sales¥2,376.7
billionNet sales
1916

1920

1930

1940

1950

1960

1970

1980

1990

2000

2010 2015* Up to 1977: Non-consolidated 1978 and after: Consolidated
Current Priority Management Issues and Business Strategy

34

Current Status of Sumitomo Chemical
Change and Innovation

Specialty
Chemicals
Bulk Chemicals

71%

29%
FY2015Invested
capitalEnvironment and energyLife sciences

ICT

Bulk Chemicals

11%

Bulk Chemicals
33%
FY2015Net sales

FY2015Specialty
Chemicals

67%
Current Priority Management Issues and Business Strategy

OperatingincomeSpecialty
Chemicals

89%
35

目 次
Toward Sustained Growth

Sumitomo Chemical:
100th Anniversary and Where We Are

 Priority Areas and Our Path ForwardStrengthening Corporate Governance andInitiatives to Achieve Sustained Growth

Current Priority Management Issues and Business Strategy

36

Investment in Three Growth Areas
Change and Innovation

Business areas with high growth prospects

Life sciences

Environment and energy

ICT

Creating Social Value

Creating Economic Value

Creating Shared Value
Current Priority Management Issues and Business Strategy

37Life Sciences: Health & Crop Sciences
Change and Innovation

TrendsGrowing global population
 Increasing demand for foodSocietal challenges and demands
Improvement of productivity of agriculture(limited availability of arable land and fresh water)

Solutions offered by the Sumitomo Chemical Group**including solutions under development

 Chemical and biorational crop protection solutions

 Crop stress management

 Seeds and seed treatment

 Total Solution Provider* Post-harvest* Support farmers’ operations, from production to sale, by drawing on awide range of agriculture-related supplies, technologies and know-how.

Current Priority Management Issues and Business Strategy

38

Life Sciences: Pharmaceuticals
Change and Innovation

Trends

Advances in healthcare technologies

Societal challenges and demands
Improvement of quality of life through newtechnologies, such as preventive diagnosis,
personalized medicine, and regenerative medicine

Solutions offered by the Sumitomo Chemical Group**including solutions under development

 Regenerative medicine
and cell therapy drugs
 Healthcare materials
Current Priority Management Issues and Business Strategy

 SPECT and PET diagnostic agents
 Drugs for the treatment of cancer andpsychiatric and neurological disorders
39

ICT
Change and Innovation

TrendsAdvances in communication technology
 Advances in computer technologies
 Spread of IoT (Internet of Things)
Societal challenges and demands
Improvement of convenience andproductivity by the IoT (Internet of Things)

Solutions offered by the Sumitomo Chemical Group**including solutions under development

 Display materials

 Semiconductor Materials

 Printed electronics products Organic EL

 Aluminum target Compound semiconductors

Current Priority Management Issues and Business Strategy

40

Environment and Energy
Change and Innovation

Trends

Increasing global effort to develop
a sustainable society

Societal challenges and demands
Development of products and processes that help
reduce GHG emissions
Development of technologies for energy saving,creation and storage

Solutions offered by the Sumitomo Chemical Group**including solutions under development

 Energy carrier technology

 Compound semiconductors

 Organic thin film solar cells

 CO2 separation materials

 Lighting materials

 Solar cell parts and materials

Current Priority Management Issues and Business Strategy

 Battery materials

41

Solutions In Three Growth Areas
Change and Innovation

ICT

Solutions across
ICT and Life Sciences• High-definition display sensors(IoT for health care and agriculture)• Compound semiconductors

Solutions acrossthree growth areas• Display materials• Semiconductor
process materials• Organic EL• Metal target• Printed electronics technology• Organic-inorganic hybrid
technology

Life
Sciences• Chemical and biorational
crop protection products• Seeds and seed treatment• Post-harvest• Total Solution Provider• Regenerative andcell therapy medicines• Healthcare materials• SPECT and
PET diagnostic agents• Drugs for the treatment of
Solutions across Life Sciences
cancer and psychiatric andneurologic al disorders
and Environment and Energy

Environment
and Energy• Energy carrier• CO2 separationmaterials• Lighting materials• Battery parts andmaterials• Organic thinfilm solar cells• Solar cell partsand materials

Solutions across ICT and
Environment and Energy• Compound semiconductors• Crop stress management• Light management materials• Water-related technology• Heat management materials

Current Priority Management Issues and Business Strategy

42

Bulk Chemicals
Change and Innovation

Saudi Arabia
FeatureOutstanding cost-competitiveness andhigh profitability, capitalizing on low
raw material and fuel costs

Japan
Feature“Mother plant”/”mother laboratory,”
developing innovative high value-added
products, technologies and know-how

Ethylene production capacity
by region(1,000 t)

Japan
404

Saudi Arabia
1,600

Singapore
FeatureStrong high value-added
product business anda robust customer base

Focus on establishing greater costadvantage and improving asset efficiency
Current Priority Management Issues and Business Strategy

Total
production
capacity

3,094

Singapore
1,090

Aim to achieve ROI
above cost of capital43

目 次
Toward Sustained Growth

Sumitomo Chemical:
100th Anniversary and Where We ArePriority Areas and Our Path Forward

 Strengthening Corporate Governance andInitiatives to Achieve Sustained Growth

Current Priority Management Issues and Business Strategy

44

Strengthening of Corporate Governance

Change and Innovation

Increased independent directors

Directors

Corporate
auditors

Category
Category

Name Name

Background
Background

Director

Kunio Ito

University professor

Koichi Ikeda

Corporate executive(beverage firm)

Hiroshi Tomono

Corporate executive(steel firm)

Shinichi Yokoyama

Corporate executive(life insurance company)

Mitsuhiro Aso

Public prosecutor andattorney

Yoshitaka Kato

Certified public
accountant

Independent
Internal

7

2

Independent

3

3

Total

10

5

Internal

96Corporate
auditor15

To draw more on independent directors’ broad expertiseto further invigorate the board of directors
Current Priority Management Issues and Business Strategy

45

Toward Sustained Growth
Change and Innovation

Shareholders
Dialog andengagement

Corporate Governance Code

Stewardship CodeSumitomo Chemical
Board of Directors and Corporate Auditors
Discussion with independent directors and independent corporate auditors
Formulation of corporate strategy

Oversight of the directors andthe business sectors(including review of business portfolio anddecision on resource allocation)

Medium- to long-term targets (continue to achieve the following)
ROE

Over 10%

ROI

Over 7%

D/E ratio

0.7 to 1.0x

Propose business plans

Payout ratio

Around 30%

Profit growthOver 7%
per year

Study and approve business plans
Oversee implementation

Business Sector
Specialty Chemicals

Bulk Chemicals

Entire company

Enhance competitiveness andexpand business

Establish greater cost advantage

Improve asset efficiency andstrive for further cost reduction

Current Priority Management Issues and Business Strategy

46

Initiatives for Enhancing Corporate Value
Change and Innovation

Initiatives for improving ROI/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
decision-making 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

47

Toward the Next 100 Years
Change and Innovation

Speedy and proactive management
Development of new coretechnologies and businesses

Timely and appropriate
allocation of resources

Promotion of globally
integrated management

Continue to observe our core values and business philosophy
Sumitomo Values
Sumitomo Chemical’s Business Philosophy
Commit ourselves to creating
new value by building on innovation

Work to contribute to society throughour business activities

Develop a vibrant corporate culture
and continue to be a company
that society can trust↓
Strive to achieve strong and sustained growth for the next 100 years
by providing solutions to the problems facing human society
Current Priority Management Issues and Business Strategy

48

Change and Innovation

Creative Hybrid Chemistry

Current Priority Management Issues and Business Strategy

49

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

50