Summary of Q&A session of IR Day for institutional investors and analysts
Time and date: 13:30 to 17:20, Monday, November 30, 2020
Answered by:
Keiichi Iwata, Representative Director & President
Noriaki Takeshita, Representative Director & Senior Managing Executive Officer
Kingo Akahori, Representative Director & Managing Executive Officer
Masaki Matsui, Representative Director & Managing Executive Officer
Nobuaki Mito, Representative Director & Managing Executive Officer
Takashi Shigemori, Director & Senior Managing Executive Officer<Current Priority Management Issues and Business Strategy>
Q. You have listed improving your business portfolio as one of your priority
initiatives for this fiscal year, but has it had any effect? Also, your involvement inPetro Rabigh is becoming a drag on the stock price of your company, so I would
like to ask for your thoughts on improving your business portfolio in light of thispoint.
A. Slide 22 shows our forecasts by Sector for fiscal 2020 and our targets for some point
later in the decade, listed as 202X, but if possible, we would like to achieve the core
operating income levels shown on the slide by 2024 or 2025.
For example, if we look at the performance forecasts for the Energy & Functional
Materials and IT-related Chemicals Sectors, their future shape is coming into view tosome degree. As for how we add to that, the heads of the Sectors will explain thattoday, and we are already making steady progress.
The Health & Crop Sciences Sector’s performance in fiscal 2019 was fairly sluggish,but in fiscal 2020, we expect a recovery in performance, and the sense I get is that weare proceeding along the correct path to reach our target of core operating income of 80
billion yen, particularly because we have secured bases in India and Brazil.
In our Pharmaceuticals Sector, there were some parts of the strategic collaboration with
Roivant that caused some concern, but because the alliance has had an extremelysmooth start, we are seeing a very strong response, and the contribution to earnings iscoming into view.
Moreover, while there are concerns about Petro Rabigh, with the nature of Saudi
Arabia, and with our capital contribution ratio of 37.5%, we are not directly involved inits business. We set up the Rabigh business by investing a significant amount ofmanagement funds over many pears, but we expect that the time is finally coming when
it will become a cash cow that contributes to our earnings. In particular, because thePhase I loans will mature at the end of fiscal 2021, we expect that, from then on, bothPhase I and Phase II will be able to employ their full strength.

Q. Your company has led the industry in digital transformation (DX) efforts,
including expanding your number of data scientists, but what stage is yourtransformation at now?
Also, I think that making progress in DX has become easier for some companies
with the spread of COVID-19, but how has this affected your company?
A. We started discussing digital transformation around 2018 as one of the major policies in
our Corporate Business Plan, and we started this process slightly earlier than the global
trend. We began with the goal of improving productivity, and we have gained a variety
of insights into the production side of this process, as with a great many of the items weintroduced to you today, and we are proceeding with implementation. Moreover, while
we did not touch on R&D in our explanations today, we have had a number of cases
where digital transformation has been applied, such as in the improvement of ourorganization, and we are making steady progress here as well. Recently, we held an
online event to announce some of our efforts in this area, including both successful andunsuccessful examples of company-wide DX, with 12 teams from various laboratories
and plants presenting their efforts. We are making progress in sharing these sorts ofexperiences and insights, extending them horizontally throughout the company. This
recent DX presentation event was only for Sumitomo Chemical proper, but we would
like to expand future events to Group companies as well, to make DX promotion asingle unified movement across the Sumitomo Chemical Group as a whole.
Q. It is being seen as certain that the next US president will be the Democratic
candidate, Joe Biden, so I think many things about the next four years will change
compared to the last four, from a variety of perspectives, such as the evaluation ofenvironment-related efforts, but what are the positives and negatives from theperspective of your company’s performance?
A. While it is difficult to say to what degree our company’s performance is connected with
the US presidency, Mr. Biden has positioned the four issues of the coronavirus
response, rebuilding the economy, racial issues, and climate change as areas he wants tofocus on, and we feel that these are truly essential for the current moment. If his
administration is able to restore and grow the US economy, this will lead to a positive
situation for the global economy, and our company’s results would also move in apositive direction. In that sense, we feel that we would be extremely grateful if the US
were able to fulfill its leadership role in rebuilding the international order, and thatwould also create favorable conditions for our company. At the same time, it seems thateven with the change in the president, the fundamental stance on the divisions between
the US and China will not change, so we will need to take continued caution withregard to this point as we move forward with our business operations.
Q. With regard to US-China relations, do you not feel that the future is perhaps
easier to forecast under a President Biden than under his predecessor?
A. That may be true, but at the same time, he may be stricter with regard to issues such as
human rights problems and unfair trade practices. This is unclear at the moment, so wecannot take an optimistic view.

Q. With regard to subsidiaries publicly listed on stock exchanges and other relatedcompanies, while many of your competitors are working to clarify and simplify
their structures, my understanding is that you feel that, as long as your corporate
governance is functional, there is no problem. I think that with regard to this andother issues, such as ensuring that digital transformation penetrates the entire
structure, you would make progress more efficiently and easily if you completely
integrated your organization, so I would once again like to ask for your thoughtson this issue.
A. Speaking as the management of Sumitomo Chemical, we feel that the question ofwhether having both a subsidiary and the parent company publicly listed is a problem ornot, so long as the autonomy of the subsidiary and the rights of the minority
shareholders are protected, is a question that must be judged on a case-by-case basis
and cannot be generalized. From the perspective of improving the business value ofboth companies, we feel that this is something that must be judged on the basis of
specific examples, in light of the timing and the economic circumstances. As we
explained in our presentation, with regard to Urovant, a subsidiary of a subsidiary, we
decided to do away with the listing by bringing it under 100% ownership. In this way,
when we determine that such a move is desirable from a business perspective, we willtake such a move without hesitation. We expect that we will continue to make this sortof individual determination going forward.
Q. While I feel the sense of uncertainty was particularly strong in 2020, due to factors
such as COVID-19 and the US-China trade conflict, as this uncertainty resolves
going forward, will it become easier to take this sort of action (delisting
subsidiaries)?
A. I think that one of the major factors in the uncertainty has been the economic
environment, but we feel that it is rather the circumstances of the individual businessthat is the more important basis for making that determination.
Q. You have set forth creating a resilient financial structure as one of the initiatives inyour Corporate Business Plan, and I think this has taken a step forward with theresolution of the completion guarantee for Petro Rabigh. I would like to ask about
your thoughts on creating a resilient financial structure going forward.
A. The fact that we were able to take on contingent liabilities was an extremely major
factor, and contingent liabilities are not part of the interest-bearing liabilities or D/E
ratio measurements that we take as standards for our company. There has been nochange to our intentions to reduce interest-bearing liabilities through repeated
implementation of measures such as strengthening our cashflow generation capabilities
and exercising strict judgement in the selection of investments, and we intend toachieve a D/E ratio of 0.7 by around 2024.

Q. Looking at the facts on the ground, including factors such as extremely long-term
liabilities, I think you have made progress in making your finances more resilient,but what are your thoughts?
A. The fact that we were able to issue 250 billion yen of subordinated, or hybrid bonds,
shortly before the COVID-19 pandemic has been extremely helpful in strengthening ourcompany’s financial structure. Moreover, while we had to secure cash-on-hand during
the COVID-19 pandemic, we were able to raise this immediately beforehand, so we did
not have to scramble.
Q. You have said that your growth strategies are proceeding smoothly in yourvarious businesses, so I would like to ask what you feel is the largest issue facing
your company at the moment.
A. While we have largely focused our remarks on the positive side today, we are awarethat there are also numerous issues that must be resolved for our businesses to further
take off. For example, in the methionine business, where market conditions have notrecovered in a uniform way, there is an issue of whether or not we will be able to add
some technical special feature unique to Sumitomo Chemical, or some sort of quality or
performance special feature that will allow us to not be so highly impacted by market
conditions, and this is something that we are wracking our brains working with thebusiness sectors to resolve. Beyond that, we have any number of items where we needto take action, and where there is a great deal of potential. I would appreciate it if theheads of the various Sectors would delve into this issue in their explanations today.

<Petrochemicals & Plastics>
Ｑ. I recognize that market conditions have a considerable impact on earnings in this
sector. I think the current market is probably better than the conditions you
talked about on page 6, but why is it so good under these circumstances? Also, I
would like to know your views on the next fiscal year. Tell us about the market
sentiment and your ideas for the next fiscal year, including the situation ofaromatic hydrocarbons, which are mostly made in PRC Phase 2.
Ａ. The figures on page 6 show conditions through October, and some of them are evenbetter currently. Furthermore, this weekend, some other manufacturers are scheduled tostop production at their crackers due to problems. The current high margins are areflection of these factors, so I assume that these figures will not last for too long.
Starting next year, I don't expect the figures to fall as extremely as in the beginning of
this year, but I personally think that it would be impossible to expect margins as high as$500 or $400 against the backdrop of increased production capacity in polyolefin
production facilities, especially in China. Still, I would like to make a move in
Singapore so that we can ensure steady earnings regardless of the circumstances.
As for aromatic hydrocarbons, the para-xylene market is very bad, but this is probably
because of over-supply. Although the benzene market was also bad, we are currently
seeing a sharp rebound, which I find a bit too extreme. Volatility is extremely high,which is not very desirable. My personal opinion is that market conditions for Rabigh’s
aromatic hydrocarbons will not be as bad going forward as those of this year, but will
not be strong enough to make us feel totally optimistic.
Ｑ. Does that mean it will be difficult to turn a profit?
Ａ. I'm sorry, but I can't answer that because it's about a listed company.

Ｑ. I think that many domestic petrochemical facilities have been aging anddeteriorated considerably over time, and would like to know once again about
their positioning. In the future, mega plants such as Crude oil-to-Chemicals will be
constructed, and market conditions will become extremely volatile. Is the domestic
aromatic hydrocarbons business going to withstand that?
Ａ. We would like to maintain the current position of our domestic business (in the tripolarsystem of Japan, Singapore, and Saudi Arabia) as a facility for the development of highvalue-added products and as a mother plant and mother laboratory for our plants outside
Japan. Even if there are temporary losses due to delays in reflecting higher naphtha
prices in our selling prices , the Company will continue to strengthen the financial
structure of its petrochemicals business so that this business as a whole will not be in
the red. Regarding resins, it is desirable to make high-value-added products and monomaterial products as soon as possible, although it may not be possible this year.
Regarding aging facilities, I think the key is the state of the six affiliated polyethylene
plants using the high pressure method at a relatively small scale. However, since theseplants are important consumers of ethylene, it is important to consider how we survive
with high-value-added products and how far their adaptability will be utilized. We
would like to pursue low fish-eye products to the limit, and expand our margins throughapplications such as dry resist film. My personal opinion is that Crude oil-to-Chemicals
will not pay at this stage because it would require too much capital investment.
Ｑ. In past examples, market conditions were undermined by an unreasonable
number of plants constructed in China without consideration of profitability.
What is your take on this?
Ａ. What is currently under construction in China is a regular refinery. The product coming
out of the refinery is connected to crackers to be integrated, so I think it is a little
different from Crude oil-to-Chemicals. As you say, the oil refining margin will beconsiderably tighter because huge plants are being built one after another. The
operation of such old plants, including those in Europe and the U.S., will be gradually
halted. Shell, Exxon, and others are moving ahead to halt the operation of old plants,
and I think this trend will continue. There may be more suspensions of old plants inJapan.

Ｑ. In connection with page 5, I would like to ask you about Singapore. As theoperating rate is high and efforts to increase added value are steadily progressing,you say that you must consider increasing production capacity. Is that realistic?
Alternatively, is it possible to manufacture high-value-added products at Rabighby adjusting your equipment there and then send them to Singapore?
Ａ. At present, there are changes resulting from the coronavirus, and the situation differs
depending on the product. The use of our products for food packaging applications has
been increasing for hygienic reasons, amid demand for retort pouch in Southeast Asia.
We believe that this demand will definitely increase in the future, and we haveestablished good relationships with excellent customers who can meet such increased
demand. On the other hand, the primary key is how to secure propylene as a raw
material. In Singapore as a whole, propylene is in a slightly short position; to produce
new polypropylene, manufacturing must start from propylene in upstream. In theadjacent Johor Bahru, RAPID is coming online, and propylene is now in a position of
surplus, but there is no assurance that it will remain in this position in the future. I
would like to come up with a great idea for securing propylene.
Rabigh is a large facility, capable of producing 350,000 tons of polypropylene in one
line, and basically operates with an emphasis on efficiency. There, switchover of
production grades is avoided as much as possible because it ends up in losses. The
policy at Rabigh is to efficiently manufacture polypropylene of a certain volume as one
grade (base powder). Therefore, we feel it would be difficult to shift the manufacturing
focus to high-value-added products just because we want to.
Ｑ. If propylene were available, would you rather eager to increase polypropylene
production?
Ａ. That is the case.
Ｑ. In terms of capital investment, are there any plans to increase in-house productionof propylene from upstream? You say that there is demand, but can you securesufficient profitability? If you are going to increase production, could you sharewith us your idea on the size of your investment?
Ａ. It is difficult to increase upstream production of propylene because it will come to aconsiderable amount of money. I think it would be possible to work with othercompanies, for example, to have offtake rights. There is no doubt that the demand will
grow, and it will grow at a rate of 4% or more. However, we don't intend to pursue
general-purpose products, but rather only manufacture products that are profitable, withthe main focus on film-based random and terpolymers. As for scale, a rough image isthat the production size would be about 0.3 million tons according to recent models.

Ｑ. In the past, the production of high-end products was influenced by the sluggish
market conditions of low-end products. To what extent do you emphasize on
investment discipline with regard to feasibility studies for an investment, or evenin earlier stages?
Ａ. I am afraid that I cannot give any specific figures now, but in the case of TPC, Shell,
our partner, is also involved, and I think that no agreement can be reached on the basisof half-hearted performance figures.
<Energy & Functional Materials>
Q. Sales revenue is shown on page 5. Could you kindly give us a breakdown of sector
specific core operating income for fiscal 2019 or fiscal 2020?
A. I cannot provide you with specific figures, but for fiscal 2019, resorcinol and alumina,
namely the fundamental businesses for stable earnings, accounted for more than a halfof all operating income. With regards to super engineering plastics and battery
materials, the operating income of battery materials suffered slightly in 2019. The restof the items did fairly well, as our subsidiaries, including Taoka Chemical and Koei
Chemical, contributed a great deal to the results.
Q. Which sector are you going to focus on developing going forward with the aim ofachieving 30 billion yen?
A. For battery components, including cathode materials from Tanaka Chemical,
manufacturing facilities are ready to produce them. Joint development with ourcustomers is also under way concurrently. Considerable growth is expected in the futurein this area. We also aim to double the sales of super engineering plastics.
Q. Currently, resorcinol, your breadwinner, seems to be affected by reorganizations
that have reduced the number of players. Are you factoring in the risk of otherplayers entering in this area?
A. The operating rates of Chinese manufacturers dropped temporarily as a result ofenvironmental problems. This has made global supply and demand extremely tight,
forcing some customers to reduce the use of resorcinol or opt for using newtechnologies or using resorcinol in new ways. With their environmental problems
settling down, Chinese manufactures have resumed producing a relatively stable supply,
and this is likely to cause more slack in supply and demand in the future. Our company,
however, has strengths such as having extremely long-term relationships of trust withleading global companies. We are also working on exploring new uses of resorcinol,and beefing up our product portfolio.

Q. About battery materials, I think that your company’s high-capacity typeseparators for nickel batteries are extremely strong, but there has been a return to
LFP in some cases. In the wake of ignition accidents with the NCM811 andNCM622 batteries, I wonder how that will impact your separator business. Rumor
has it that a leading EV manufacturer is set to make the cell size of their 46800
battery larger, with a tabless structure. Could you elaborate on your roadmap
regarding cathode materials and the separator businesses?
A. Various types of cathode materials are used in batteries, including LFP, NCM, andNCA. LFP has been conventionally used in buses in China, and a leading EV
manufacturer has recently announced the use of LFP. However, its future growthpotential is limited in view of the cruising distance it allows.
As for the recent EV fire accidents, a definitive cause has not been identified as towhether the accident resulted from the battery management system (BMS) or wascaused by the cells. Our separators have been supplied to leading Japanese battery
manufacturers. For automotive use alone, we have already sold sufficient separators tocover an area of a billion square meters, and fortunately there have been no reports offire accidents caused by the cells. For batteries, it is not only the performance of thecomponent materials alone but also their quality control and BMS that are critical. I
know it will take time to achieve stable production, but I expect that our aramid
separators with strong safety features will be in the limelight soon, especially as highcapacity batteries are becoming mainstream.
As for 46800 batteries (46 mm in diameter, 800 mm in height), we can cut costs byusing the high-nickel cathode materials used in the current 21700 batteries as theirbases. As for separators, there is no denying the fact that, as a whole, ceramic separators
are more widely used, but battery capacities are expected to continue to increase, so wewill continue to meet the needs of many users by bolstering our cost competitivenessthrough process improvement, on the basis of trust backed by our achievements inaramid-coated separators thus far.
Q. Ceramic separators may relate to your high purity alumina business, so is itcorrect to say that there will be business opportunities in either the case of aramidcoated or ceramic-coated separators?
A. Yes, it is. In the case of ceramic-coated separators, shipments of our alumina will
increase.
Q. As for LCP, do you mean that you have started shipping it for RF front-end
modules for smartphones, using its low permittivity as a selling point?
A. Exactly.

Q. As companies that can even create full modules are competing on their overall
strengths, and not only their flexibility performance, do you intend to continue tocompete on the performance of a single item, or enter in the field as a customer ofmodule manufacturers?
A. For our product, materials are the first priority. Our customers include module
manufacturers.
Q. In that case, I believe the final product will be fairly complex, equipped with avariety of components. Rather than continue selling simple flexible substratematerials as you have done until now, might in not be necessary for you to proceedwith development, or address a variety of performance requirements, in close
communication with your customers, on the assumption that the product will be
used as a part of a module?
A. I agree that simply supplying our samples to our customers would not work. It isnecessary for us to be in close contact with module manufacturers.
<IT-related Chemicals>Q. Your target is to bring the sales of your semiconductor materials business to alevel of around 100 billion yen. Will it be possible to achieve that with the current
business portfolio?
A. We deemed this target attainable with our current business portfolio, and we think it
will not be long before we achieve this target.
Q. In describing your progress in EUV resists on slide 27, it states that the company
earned a good evaluation in a competition geared toward mass production from2023 onwards. Does that mean that your company’s sales will rapidly increase
from 2023?
A. Paid shipments of EUV resists have started this year, and are on the right track togradually increase over the course of the next year and year after. The question ofwhich EUV resists the various foundries will adopt for mass production has mainly
been settled, at least up to around 2022, based on the overall results in pastcompetitions. Ongoing or upcoming competitions are mainly focused on use after 2023.
In that sense, for us, the real competition will come in 2023 onward. Our vision is todramatically increase the sales from then on.
Q. Could you tell us more about how you are structuring your development hub tohandle increased sales of EUV resists?
A. Our Osaka facility is set to start the development and evaluation of cutting-edge EUV
resists in the first half of fiscal 2022, which I think is great timing.

Q. With regard to the scale of your future sales, what percentage does the resist
business represent in the 100 billion yen of sales in your semiconductor materials
business?
A. Our semiconductor materials business includes photoresists, high purity chemicals forsemiconductor processes, and compound semiconductors. The compound
semiconductor business is relatively small scale, while photoresists and high purity
chemicals for semiconductor processes are our main businesses. As for the breakdownof the 100 billion yen in sales, compound semiconductors account for a larger ratio thanphotoresists.
Q. You explained that shipments of EUV resists started this year. Are you talking
about DRAM, for use in the 1Z nm process, for example? For logic circuits, as ofnow, your competitors’ products have been adopted for 5nm process nodes, butdoes this mean that your company has had a good response with 3nm process
nodes?
A. I am afraid I cannot share the details, but in the semiconductor industry, the applicationof EUV technology was first made for logic circuits, while in our company, thedevelopment of products for memory applications is more advanced. We are going tocatch up in logic circuit applications in next-generation processes.
Q. With regard to logic circuit applications, you must be at the stage of offering paid
samples. Do you mean that mass production of these samples will start from 2023
onward?
A. For some EUV resists that are in an advanced evaluation stage, production volumes will
start increasing a bit earlier than that.
Q. If that is the case, won’t sales start increasing a bit earlier than 2023? Do you
mean that the products set to start mass production from 2023 onward will be
used in a completely new process?
A. As explained in slides, we started production slightly later than our competitors did.
This year, we finally managed to start paid shipments. Currently, we are aiming to haveour products adopted in processes further down the line. In consideration of the timingof mass production using these processes, our sales will dramatically increase around2023. That is what I meant.
Q. Is this process “further down the line” the latest process shown on slide 27?
A. Yes, exactly.

Q. I would like to clarify what you mean when you say that “antenna on display”(AoD), your product, cannot be developed by your company alone but by using
existing technologies that may complement your technologies. On the left of slide
25, you show “antenna in package” (AIP) as the existing technology. Do you mean
that, since AIP cannot be completely replaced, you have developed the product bycomplementing your technology with this existing technology? Or do you meanthat your company must partner with a different company because it is fairly
difficult to embed an antenna into a display using only your technology andproduction facilities?
A. The former is the answer. We expect that, rather than going about it with ourtechnology (AoD) alone, combining our technology with existing technology (AIP) willbring better communication performance. Instead of competing with players in theantenna field, we opted to install the antenna alongside AIP because we thought thatwould raise overall functionality and broaden the market. That is what I mean.
Q. That means that your target is not display manufacturers but rather end
customers (manufacturers of assembled products and telecom carriers). It seems
that your approach is to propose the benefits of using your product concurrently
with the existing ones so that they adopt your product eventually. Is it correct tounderstand that this can be done as an extension of your existing technology forincorporating touch sensors into displays?
A. Yes, it is. In addition, as we will make efficient use of our existing plants in South
Korea, the capital investment is unlikely to be huge.
Q. How do you see the trends in market share over the medium term for OLED
polarizers?
A. In view of the past changes in market share, it is extremely difficult for any particularcompany to keep hold of a large market share. Since the OLED smartphone market is
expected to continue to grow, we are continuing to expand our distribution channels tosecure a large share.
Q. Your company remains in a superior position in the market for circularpolarizers. Provided that the ratio of OLED displays in the overall mobile market
will increase, is it safe to say that this will be a benefit for your company’s market
share?
A. Yes, it is.

Q. You presented several technologies for next generation displays on slide 16. It
remains to be seen which ones will become mainstream. Could you tell us how you
allocate your focus between the various technologies? Are there any LED-relatedareas where your company’s materials are involved?
A. I predict that each of the listed technologies will be used in a certain volume ofmarketed products. To the question of which ones will become mainstream, it is indeed
difficult to say. Especially now, supply and demand for LCDs is extremely tight. So, alittle delay is expected in the start of mass production of next generation displays. In
such circumstances, we are doing everything we can to make our products compatible
with any technology. Incidentally, for LED itself, there is no area in which ourmaterials are involved.
Q. As for printed OLEDs, there was some talk about collaborating with a Chinese
manufacturer and JOLED. When do you see is the timing of mass production?
A. Because it has not been long since the collaboration with a Chinese manufacturer and
JOLED was announced in June of this year, I assume that mass production might startaround 2023, provided that everything goes as scheduled. On the other hand, theadoption of the product will be decided a bit earlier. So, we see the critical period as thetime leading up to a year from now, and we are proceeding with a plan to heavily invest
our resources to develop the product.
Q. For organic electroluminescent materials from your company and competitors, I
expect that optimization is being taken into account, including with regard tomaterials used in combination. If materials from different companies are used foreach color in an RGB diode, the number of materials outside of luminescentmaterials increases, and the manufacturing process may become extremely
cumbersome. Isn’t there a risk that this will naturally prompt the procurement of
all RGB luminescent materials from the same manufacturer, so that the samematerials are used as much as possible? Is it all right to see the situation basicallyas winner-take-all?
A. Yes, it is.

<Health & Crop Sciences>
Q. You keep saying that an operating income of 80 billion yen is an extremely hightarget, but I wonder why you regard it as so high despite the fact that an operating
income over 75 billion yen was once recorded in fiscal 2015. The president said awhile ago that the company would like to explore a pricing scheme that is notdictated by the methionine market, but what is your take on this?
A. Let me start with the first question. The reason that we regard 80 billion yen as a hightarget is because of a drastic change in the market environment surrounding crop
protection products. Ongoing consolidation among leading overseas players isreinforcing their strengths as our competitors. We currently expect to launch a numberof new agents in our A2020 (after 2020) and B2020 (before 2020) projects.
Contributions from these new agents to our earnings will be reflected in a few years inNorth America, where flagship products, including Flumioxazine, are getting older andlosing their competitive edge, compared with back in 2015. In addition, the world is
rapidly moving towards sustainability. As more regulatory and social pressures overcrop protection products are expected earlier than we had presumed, our chemical crop
protection product business is expected to face headwinds. Meanwhile, we havestrengths in the biorationals business, so by steadily growing this business, I hope thatthe company will manage to reach our target operating income of 80 billion yen.
Now I will answer the second question. The methionine market is not set to pick up in
the short term, since our competitors, mainly Chinese manufacturers, have several plans
to increase methionine production, while Singaporean manufacturers are alreadyincreasing production. Meanwhile, the demand for chicken meat has been expanding
year after year, and the demand for methionine will increase at an annualized rate of
6%. As both the methionine manufacturing process itself and stable operations with theprocess are said to be extremely difficult, it remains to be seen whether the current
plans to increase production will proceed as scheduled. If the increased production does
not proceed as scheduled, I assume that market conditions may recover in the future.

Q. I have the impression that the post-merger integration of South American
subsidiaries is at an advanced stage, and the target of 80 billion yen seems to beachievable. What is your take on synergy between regions going forward, and thepenetration of your products in South America?
A. There are two keys to business expansion in South America. One is early expansion ofIndifilin sales, and the other is expansion of sales of biorational products by thesustainable solutions unit, which has been newly established. Indifilin is set to belaunched in autumn, the timing of which is predicted on the time required forregistration of approval in past applications. In view of the scale of the contribution ofbiorationals to agriculture in Brazil, we had anticipated before the coronavirus
pandemic that the timing could be a bit front-loaded. In such case, the launch would
have significantly contributed to our earnings in fiscal 2021. We are continuing tomonitor market conditions, because the timing of Indiflin approval will determine thetiming of its contribution to our earnings. In expanding sales of biorationals, boosting
demand on the part of agricultural producers is vital, in addition to the strategy ofpushing the product in our supply channels. The former Nufarm sales force has
conventionally sold crop protection products, especially generics. Thus, it may takesome time to build a sales structure to create demand for technology-based products,
our specialty. Currently, VBC is providing training for the South American salesforce,hoping to deliver results in 2 to 3 years. With regards to synergy between regions, I
think the use of the formulation plant in Fortaleza is extremely important. In addition, I
believe that we can create synergy by expanding and reinforcing the manufacturing
structure of the ECC active pharmaceutical ingredient (API) plant in India, and thenmanufacturing APIs in India and exporting them to geographical areas where we intend
to increase our footprint, such as South America, instead of sourcing them from third
parties as we have conventionally done.
Q. On page 12, it says that almost half of the milestones have been achieved. It
appears that the Nufarm sales force that specialized in generics is now becoming
capable of selling the more sophisticated new products of Sumitomo Chemical. If
Indifilin is launched in 2021, sales may reach their peak around 2025 to 2027.
Therefore, the launch can significantly contribute to the income of 80 billion yen in
fiscal 20XX. Am I expecting too much?
A. I would like us to do whatever it takes to make that vision come true.

<Pharmaceuticals>
Q. Regarding contract development and manufacturing for regenerative medicine
and cell therapy on slide 14 and 15, I see it as a very promising market, but several
competitors are ahead of you in this business. I have also heard that this businessis difficult without a facility of a certain scale. Could you give us your view on theextent of its potential growth, including the point I mentioned, and specific actions
to the extent possible?
A. We are now in the process of constructing a relatively small production line using a partof DSP’s Esaka Laboratory under the name S-RACMO. What is important for contractdevelopment and manufacturing for regenerative and cellular medicine is how muchfuture experience and achievement we can accumulate. First, we would like to steadilybuild up our experience using the small facility under construction while making use of
DSP’s network relating to regenerative and cellular medicine. In doing so, we would
like to expand the scale of our future business.
Q. It may depend on the scale, but for example, how long does it take after thedecision is made to the start of actual construction of a plant? Are you saying thatyou can increase production capacity if a possible increase in order sizes is
expected?
A. Yes, exactly. If the plant is to be expanded, we consider that one or two years will be
sufficient.
Q. As for your approach to universal vaccines, do you intend to make them withvirus-like particles or nucleic acids that can be chemically synthesized, or do you
intend to make adjuvants universal? I would also like to know your view on thecontribution Sumitomo Chemical can make, not DSP.
A. Vaccines usually consist of antigens and adjuvants, which serve as activators. Vaccineswith the optimal combination of these two are commercialized. There are a wide varietyof antigens and adjuvants, some of which have universal characteristics. Taking accountof the points you made in your question, we will continue to pursue various possibilities
in terms of antigens. As for Sumitomo Chemical’s contribution, since adjuvants are low
molecular weight compounds, we can contribute through contract manufacturing, justas with active pharmaceutical ingredients (APIs) for small molecule drugs.
Q. You have many candidate drugs in your pharmaceutical pipeline on slide 6. They
may or may not be successful in the end. Does Sumitomo Chemical have a say inthe financial decisions of DSP, such as to what extent the pipeline is expanded
through M&A?
A. As part of the Sumitomo Chemical Group, DSP is moving forward in alignment withthe rest of Sumitomo Chemical so as to prevent a divergence in our management
directions, and this includes an understanding of our constraints, including our financial
constraints. So, it is very unlikely that DSP will suddenly come up with an idea to makea trillion yen acquisition, for example. For the time being, our first priority is to makethe major acquisitions from last year contribute to our performance as early as possible.

Q. Do you intend to compete in the market with the current pipeline through around2024 or 2025?
A. Yes. That is exactly the vision we would like to pursue. In drug development, there is atime lag between the purchase of a drug candidate and its launch as a product, not tomention any setbacks we face in the process. How much we can earn with the current
pipeline and how much our financial position improves will determine any changes in
our future M&A strategy.
Q. What sort of scale of business do you have in mind for theranostics in Japan,
specifically? To undertake nuclear medicine, the point of shipment and the site ofits use must be in a close proximity owing to the properties of radioactivity. Is a
global development possible? What is your take on this?
A. As Nihon Medi-Physics is a joint venture, any decisions about plans for funding andinvestment for global development will be made in agreement with GE, our partner.
Our basic approach as Sumitomo Chemical is to start theranostics first in Japan, andthen license out the results of our development efforts overseas. Since out-licensing is
our premise, global development is feasible. We expect it to have a certain market sizefor diagnostics and therapeutics in Japan.
Q. Taking that into account, and in view of the proximity to the production siteneeded in nuclear medicine, I presume that the sales will not decrease even after
the expiration of the market exclusivity period of FDG-PET. What is your take on
this?
A. It depends on how competitors will go about sales after the expiration. For instance, if
competitors do not set up sites to cover local areas, our sales may not decrease so much.

（END）

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 theforward-looking statements include, but are not limited to, general economic conditions in
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Chemical’s products in the marketplace; Sumitomo Chemical’s ability to continue to win
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