Sumitomo Chemical’s Strategy

Business Strategy

Essential Chemicals & Plastics
Businesses

Polyolefin Business

Methyl Methacrylate (MMA) Business

Polyethylene, Polypropylene

MMA Monomer, MMA Polymer, MMA Sheet

Licensing and Catalysts BusinessWe will transform our business portfolio withGX in mind, accelerate the development andsocial implementation of technologies that
reduce environmental impact, and strengthen
the profitability of existing priority businesses.

Seiji Takeuchi
Representative Director & Senior Managing Executive Officer

Strengths of the Essential Chemicals & Plastics Sector
Our bases in Japan and Singapore develop high value-added products that
anticipate customer needs and provide a stable supply of high-quality
products. Our strength lies in the relationships of trust we have cultivated over
the years with our blue-chip customers in the Asian market. At our Saudi
Arabian base, we manufacture cost-competitive products by utilizing inexpensive raw materials and fuels.

Sales Revenues and Core Operating Income /Sales revenue of SSS designated products■ ■ Sales Revenue（left axis）
Core Operating Income（right axis）■ ■ Sales Revenue of SSS designated products（left axis）（Billions of yen）

900
750
600
450300
1500

757.5
61.6

72.0

656.9

589.3

14.5
80.6

Initiatives in FY2022

78.5

53.5

116.8

-12.0

In addition to the decision to install pilot facilities for the commercialization of’19/3

material recycling using waste plastics obtained from end-of-life vehicles, we

Invested Capital・ROI

also started operation of a demonstration facility for chemical recycling of acrylic（Billions of yen）

852.9

842.5

’20/3

’21/3

（Billions of yen） ■■ Invested Capital（left axis）’22/3

9075604530
135.1 150-15-34.2 -30-45’23/3

750

ROI（right axis） （%）
20

ed society. In addition, we established a flexible manufacturing and sales

600

16structure by launching a new MMA Division and centrally managing Japan and450

Singapore. At the same time, we are working to improve our business structure300

by withdrawing from the caprolactam business.

150

resin at our Ehime Works thereby promoting efforts to realize a recycling-orient-

9.2

127.7

84

0.9

00

Future Initiatives
We will transform our business portfolio with an awareness of green
transformation (GX) and develop carbon neutral technologies,
including material recycling and chemical recycling, to accelerate
their implementation in society. In addition, we will shift products
from existing businesses to high value-added products, optimize
production in Japan and Singapore, and engage in external
collaboration with a view to carbon neutrality. The Saudi Arabianbusiness will continue to be a cash cow, so to speak, and we will
strive to ensure stable operations.

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Sumitomo Chemical Annual Report 2023

’19/3

’20/3

-3.6
’21/3

-1.8
’22/3

-4

’23/3

Transition to dateDespite the suspension of ethylene production facilities at theChiba Works and efforts to lift the completion guarantee andstabilize operations for the second phase of the Rabigh project,
ROI has fluctuated widely due to volatile petrochemical marketconditions. As for invested capital, investments other thanbusiness maintenance are limited, but have increased since
FY2021 due to high raw material prices and other factors.

Future Measures and Issues

We will focus on licensing and the catalyst business, etc., toachieve high added value independent of market conditions,and promote integrated management of Japan and Singapore(product portfolio, optimization of polyolefin production),external collaboration, and business restructuring.

Corporate Business Plan Policy & Progress

Activities aimed at becoming Carbon Neutrality
We will make various efforts to become carbon neutral including collaborations with other companies and academia.

●●Expand material recycling business●

Pursue technology development in chemical recycling

Progress●●

Started a business alliance with REVER.
Completion of PMMA chemical recycling demonstration facility,
plans to begin providing samples in the fall of 2023Meguri® brand product certification

P.43 Contribute to Recycling Resources

Our Website : Circular System for Plastics Website

In accordance with the following three basic strategies, we aim to achieve both stable earnings and sustainable business expansion, while
contributing to the realization of carbon neutrality in society.
Basic strategy

Expand capacity to supply
catalysts●

Expand opportunities to contact
potential customers

Quickly establish technologies
that reduce environmental impact,
expand lineup in license● Diversify business models
through operational
support services●●Bolster competitivenessin processes●

Extend catalyst life andimprove costs

Progress●Start contacting potential licensees●Promote website renewal and marketing enhancements

Our Website :Technology Licensing Website

Bolster competitiveness via unified operations with Singapore

By combining the strengths of the two centers–Japan as the center of R&D and Singapore with its huge infrastructure and customer
network–we will further enhance the competitiveness of each business and accelerate the social implementation of carbon neutral technology.

Major Initiatives●●●

Review and evolution of MMA, polyolefin business, etc.

Progress●

Optimized production and sales balanceby establishing MMA Division
Started to study the optimization of polyolefin production

Direction of medium- and long-term initiatives in Japan and Singapore

CNSingapore

Accelerate development of technologies
that reduce environmental impact

Deploy technologies into society

Exit unprofitable businesses

Production optimization

After caprolactam, continue to study exiting or shrinking
low-profit businesses, focus on businesses that are notaffected by market conditions, such as licensing businesses.

Study production optimization in Japan andSingapore with the aim of maximizing earnings

Tri-party collaboration in Keiyo*1
Begin joint studies on fuel conversions and recycling
Collaboration

Corporate Data

Existingbusinesses

JapanManagement

Implementation of Japanese carbon neutral technology
using Singapore’s infrastructure

Sumitomo Chemical’s Strategy●Brush uptechnology

Expand portfolio

Introduction to Sumitomo Chemical

Secure stable revenues via licensing and catalyst business

Establish stablerevenue base

Introduction

Major Initiatives

Discussions with Singaporean government (EDB)
Accelerate technology studies at PDH and CCUS*2
with support from EDB

Keiyo Coastal Industrial Complex Council on Carbon Neutrality
Study how to realize a carbon neutral industrial
complex that is internationally competitive*1 Maruzen Petrochemical, Mitsui Chemicals and Sumitomo Chemical*2 PDH: Propane Dehydrogenation. CCUS: CO2 capture, utilization and storage

Sumitomo Chemical Annual Report 202364

Sumitomo Chemical’s Strategy

Business Strategy

Status of Global Expansion

Global Expansion Using the Strengths of Each Location
The Essential Chemicals & Plastics Sector has three major production locations: Japan, Singapore and Saudi Arabia.

■ Japan and Singapore
In addition to producing and selling products primarily aimed atcustomers in Japan, our facilities serve as centers for research anddevelopment, developing new technologies and high value-addedproducts while also undertaking initiatives aimed at reducing
environmental impact. In addition, as the core of our licensing
business, our facilities in Japan also handle not only technology
development, but also production, sales, and other duties relating
to catalysts.
On the other hand, the Singapore base produces ethylene andpropylene at PCS*1, polyethylene and polypropylene at TPC*2.
Sumitomo Chemical Asia produces MMA. We have developed
high value-added products and produced stable supplies ofhigh-quality products in Singapore for many years, buildingextremely strong relationships of trust with customers, while
creating high brand value in the Asian market.
By integrating the operation of these two bases, we will review
and evolve the structure of our business including MMA, polyolefin
and others. We will also utilize the Singapore base to put into
practice the carbon neutral technology developed in Japan.

■ Saudi Arabia
Petro Rabigh, a joint venture with Saudi Aramco, produces all
sorts of petrochemical products. The strength of the Rabighbusiness, as shown on the next page, is its cost advantage due toutilizing ethane. We are focusing on stable production in order tomaximize this advantage.
*1 PCS Pte. Ltd. (affiliated company)*2 The Polyolefin Company (Singapore) Pte. Ltd. (consolidated subsidiary)

Sales Revenue Ratio by Region●Japan62%●Asia (including India)

FY2022
Overseas Sales
Revenue Ratio●North America●Europe●Central and South America●Middle East and Africa●Oceania and Others

Q&A

Q : As the movement to reduce environmental impact expands,
what is the strategy of the Essential Chemicals & Plastics Sector?
A : We will promote GX-conscious transformation of our business portfolio and contribute not only to our own reduction of greenhouse gas(GHG) emissions but also to society’s reduction of GHG emissions through the development and commercialization of superior technologies
for reducing environmental impact. In addition, we aim to generate continuous profits through licensing of these technologies and related
catalyst business. Already in progress is a business alliance with REVER to commercialize material recycling and product certification for therecycled plastic brand Meguri®.
License / Catalyst

Technological Development■ Propylene Oxide (PO)-only ProcessThe PO-only process, developed by Sumitomo Chemical, is theworld’s first successfully commercialized cumene-based PO-only
production process, based on utilizing cumene recirculation. Theprocess produces no byproducts, and when combined with aproprietarily developed high-performance epoxidized catalyst,
provides high yields, reduced energy costs, and high operationalstability. This sort of technology license contributes to reducing
environmental impact even outside of Sumitomo Chemical’sfactories.

■ Material Recycling and Chemical Recycling
We are working to develop and commercialize material recycling
technology, which turns waste plastics and other wastes back into
resources that can then be used in new products, and chemical
recycling technology, which chemically converts trash and waste
plastics into the raw materials used for new plastics.

■ Catalyst Business
Sumitomo Chemical conducts development and sales forhigh-performance catalysts that maximize the effects of licensed
technologies and contribute to reducing environmental impact.
Because these catalysts can be expected to secure stable returns
in addition to reducing GHG emissions, we are focusing on
expanding this business.
65

Sumitomo Chemical Annual Report 2023P.43 Contribute to Recycling Resources■ Effective Use of CO2
Within our petrochemical complex in Singapore, we are considering combining propane dehydrogenation (PDH) technology, which
produces propylene from propane, with a CO2 fixation technologythat synthesizes methanol very efficiently, using CO2 as a raw
material, alongside the hydrogen produced as a byproduct of thePDH process. If this initiative succeeds, this could be a new
breakthrough that can both reduce environmental impact, byreducing the amount of CO2 emitted from chemical plants andother facilities, and also improve economic performance byincreasing the production of certain products.

Value Creation Model: Rabigh Business
Value Chain
Petro RabighSales
Companies

Customers

Sumitomo Chemical Asia
Saudi Aramco Group

Saudi Aramco

Consumers

Resin processing
manufacturers
Synthetics
manufacturers, etc.

Introduction

Supplier

People around the world

Petro Rabigh produces a variety of petroleum and petrochemical products using crude
oil and cost-competitive ethane from Saudi Aramco as its primary feedstocks.

Cost Difference of Petrochemical Feedstocks（US$/MMBTU）

Naphtha（Singapore）

25

Natural gas（U.S.A.）

Ethane（Middle East）

20151050181920212223 （year）

Major Processes Generating Competitive Advantages
Petro Rabigh produces a variety of petroleum and petrochemical products using crude oil supplied
by Saudi Aramco and cost-competitive ethane as main raw materials. The company makes products
such as PP, PE, and PO, using technology licenses from Sumitomo Chemical, which boasts
world-class technology. Moreover, the local staffs’ operational technique is improving by receiving
training at overseas facilities, particularly in Singapore. Moreover, Sumitomo Chemical Asia, whichhandles sales, has facilities throughout Asia, shortening delivery times and reducing logistics costs.

Sumitomo Chemical’s Strategy

Competitive Advantages of Rabigh Business
Procuring ethane from Saudi Aramco as the main
feedstock offers outstanding cost competitiveness, as raw
material prices can be fixed at lower levels compared tocompetitors using naphtha as feedstock, and margins will
expand as product prices increase, among other factors.
In addition, it is the world’s largest integrated complex,
which leads to competitive advantages due to lower unitcosts.

Introduction to Sumitomo ChemicalSystem for Providing Added Value

Work in progress at Petro RabighManagement

Providing Customer Value
Because there are risks of obstructions to procurement in the Middle East region of Asia, where logistics can be unstable, customers
have a strong desire for accurate and stable product delivery. By having inventory in locations close to customers, we can meet theseneeds by offering sales with more reliable and shorter delivery times than competitors, securing a high level of trust. In addition, while it
has the flexibility to change a certain volume of sales and customers according to market conditions in each region, by focusing more on
continued sales to core customers, the company further increases the reliability of its stable supply. Through these efforts, Sumitomo
Chemical Asia is working to build long-term relationships with customers.

Corporate Data

Added Value Provided to Society

Contributing to Reducing Environmental Impact
by Using Cutting-edge Technology in Plants
Petro Rabigh uses the breakthrough, environmentally friendly PO-only process to produce PO,
which, compared with conventional production processes, reduces CO2 emissions by 300
thousand tons of CO2 for an annual production volume of 200 thousand tons of PO. We not only
produce stable supplies of a product essential for society, we also use energy and resources
efficiently throughout the plant with this sort of cutting-edge technology, thereby contributing to
reducing environmental impact.

Sumitomo Chemical Annual Report 2023

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