June 10, 2024

Highlights of Major General Chemical Manufacturers’
Financial Results for Fiscal Year Ended March 2024
The following are Japan Credit Rating Agency, Ltd. (JCR)’s perception of the current status and highlights
for rating concerning the financial results for the fiscal year ended March 2024 (FY2023) and earnings
forecasts for FY2024 of Japan’s six general chemical manufacturers: ASAHI KASEI CORPORATION(“ASAHI KASEI”), Resonac Holdings Corporation (Resonac HD; with a January-December accounting
period), SUMITOMO CHEMICAL COMPANY, LIMITED (“SUMITOMO CHEMICAL”), TOSOHCORPORATION (“TOSOH”), Mitsui Chemicals, Inc. (“Mitsui Chemicals”), and Mitsubishi Chemical Group
Corporation (“Mitsubishi Chemical Group”).
1. Industry Trend
Regarding basic materials, the average utilization rate of domestic ethylene centers in FY2023 was 80.7%(average monthly utilization rate from April 2023 to March 2024, 84.7% in FY2022). Since April 2023, themonthly utilization rate has remained below 90%, which is considered the break-even point, and has been
below 80% for several months, remaining at a lower level than the previous year. This was against the
backdrop of a sluggish Chinese economy and weak consumer spending in Japan and overseas due to
inflationary pressures. Under these circumstances, new ethylene facilities in China, which had beenplanned for some time, began operations one after another. The global supply-demand balance forpetrochemical products worsened as the supply increased. The same was true for basic chemicals andraw materials for synthetic fibers, and overall demand for basic materials declined and margins slumped,
resulting in a major negative impact on business performance. With plans for new ethylene capacity
expansion in China expected to continue into the latter half of the ‘20s, and new investments underway
in South Korea and Southeast Asia, there are growing concerns that Asian petrochemicals will face asignificant supply glut in the future.
Regarding businesses and products in specialty areas, the situation in FY2023 was different for eachindividual field and company. With regard to major sectors, the shortage of semiconductors in theautomotive industry has finally been resolved, and production of finished vehicles has recovered. In
response, demand for high-performance materials for automotive interiors and exteriors also began torecover. However, the recovery in performance varied among individual companies due to differences in
the competitiveness of the products they handle. In electronics-related products, demands for related
high-purity chemicals, manufacturing process-related products, and functional films continued to be softdue to adjustments in the semiconductor and display markets. In healthcare, both pharmaceuticals andmedical peripherals secured solid profits in cases where they have leading products. However,
SUMITOMO CHEMICAL posted a large divisional loss due to the end of its exclusive sales period for
Latuda (atypical antipsychotic treatment) in North America (February 2023) and delays in expanding salesof post-Latuda products. In addition, inventory adjustments in the South American market were a negative
factor for agrochemicals.
2. Financial Results
EBITDA* for the six companies for FY2023 (ended December 2023 for Resonac HD) totaled
approximately 1 trillion yen, down more than 30% from FY2022 and the lowest level since the early '10s.
Although the weak yen, recovery in automotive-related materials, and solid performance in businesses
and products in which each company has strengths were positive factors, deteriorating profit of basic
materials and slow recovery in electronics-related businesses put downward pressure on performance.
In particular for basic materials, four of the five companies whose individual profit for this business canbe verified posted operating losses. In addition, SUMITOMO CHEMICAL was forced to post a large loss
due to the deteriorating profit of its joint venture in Saudi Arabia. Overall, the six companies’ performance
was difficult, including quarterly downward revisions made to its initial forecasts.
In terms of operating income by company (core operating income under IFRS), two companies,
ASAHI KASEI and TOSOH reported higher incomes, while the remaining four companies reported lower
incomes. Of the two companies that posted higher operating income, ASAHI KASEI posted an operating

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loss in basic materials, but this was offset by strong performance in homes and health care. TOSOH has
demonstrated structural stability in petrochemicals, and its performance was supported by the strong
performance of its subsidiary's engineering business, with the water treatment business as the core. For
the four companies with lower incomes, the slump in basic materials was a common negative factor, but
Mitsui Chemicals secured an increase in income in the three growth segments combined. Mitsubishi
Chemical Group reported a sharp decline in income in reaction to the one-time factor of the previous year,
but secured solid income thanks to the contribution of industrial gases and other factors. On the other
hand, Resonac HD and SUMITOMO CHEMICAL plunged into operating losses. Resonac HD was hit byan operating loss in its core semiconductor and electronic materials business. SUMITOMO CHEMICAL
posted a large core operating loss due to deteriorating performance in essential chemicals & plastics andpharmaceuticals, and also posted an impairment losses related to these two businesses, resulting in a
net loss of 311.8 billion yen, the largest loss in its history.
The total equity capital level of the six companies at the end of FY2023 was approximately 7 trillion
yen. Although simple comparisons are not possible due to changes in accounting standards and anincrease in foreign currency translation adjustments resulting from the yen's depreciation, the level has
more than doubled during the 10 fiscal years since it reached the 3 trillion yen level at the end of FY2013.
On the other hand, the total net interest-bearing debt of the six companies at the end of FY2023 wasapproximately 5 trillion yen, a record high following the end of the previous year, due to aggressive growthinvestments by each company in recent years and increased demand for working capital. Looking at theindustry as a whole, however, the current financial structure is at a relatively sound level. While the scale
and progress of M&As and other factors have led to differences in the financial conditions of individualcompanies, each company is strongly committed to financial discipline, and the balance between
investment for growth and financial soundness is generally well controlled. SUMITOMO CHEMICAL
suffered a significant loss of equity capital in FY2023, but maintained a certain level of financial
soundness at the end of the same period.
*Gross Profit - SG&A Expenses + Depreciation and Amortization under IFRS
3. Highlights for Rating
All six companies forecast an increase and return to profitability in operating income (core operating
income in case of IFRS) in their initial forecasts for FY2024. Overall, results for the first half of FY2024
remain challenging, but they expect a recovery in the second half. SUMITOMO CHEMICAL also forecastsa V-shaped recovery. Its essential chemicals & plastics remains unprofitable, but the loss has been
reduced. SUMITOMO CHEMICAL expects return to profitability for the pharmaceuticals, mainly due tothe effects of structural reforms. In addition, the health & crop sciences business is expected to return tocruising speed, which will boost performance.
In terms of performance for FY2024, the key focus will be on the improvement of profitability of basic
materials and whether the performance of electronics-related businesses such as those forsemiconductors can pick up. Regarding the basic materials, the business environment itself is unlikely to
see a major turnaround, as it is expected to continue to be affected by overproduction in China andinflation in Japan and overseas. The utilization rate of ethylene centers is also expected to remain at alow level. While downward pressure on performance is expected to continue, the companies will seek toimprove profitability mainly through self-help efforts, such as price hikes and fixed cost reductions. On
the other hand, in the semiconductor-related, generative AI has become a driving force, and mainly the
back-end semiconductor materials are on the recovery trend. On the business performance, Resonac
HD has revised its performance prospects for the first half of FY2024 upward in response to the recovery
in the semiconductor market. Although the smartphone and PC markets remain sluggish, if replacement
demand increases in the future, it will be a positive factor for semiconductor and display-related materials.
Outside the performance, JCR is focusing on two major points. The first point is to maintain financial
soundness. In recent years, there has been an increasing trend toward greater shareholder returns, partly
in response to demands from the stock market. On the other hand, the companies are also aggressively
investing for medium- and long-term growth, which puts a strain on their finances. They are required toachieve appropriate cash allocation through an expansion in cash inflow by selling businesses and assets
and improving working capital efficiency in addition to recovering business performance.
The second point is business structural reforms. In recent years, the companies have been
increasingly reorganizing their business structures in order to promote growth strategies anddecarbonization. Specifically, they have designated electronics, mobility, healthcare, and environment as
growth areas and are accelerating growth by allocating management resources intensively to these areas,

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while at the same time optimizing the capacity of petrochemicals and other basic materials and promoting
green chemicals. In particular, the restructuring of basic materials is an urgent issue for the industry as awhole, as the severe business environment is expected to continue for the time being. JCR will focus onwhether they can reduce performance volatility and return to a growth trajectory early through thesemeasures.
Shigenobu Tonomura, Takeshi Fujita(Chart 1) Total EBITDA of Six General Chemical Manufacturers
20,000EBITDA (JPY 100 mn)

18,00016,00014,00012,00010,000
8,000
6,000
4,000
2,000
0
FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023*EBITDA = Operating Income + Depreciation + Amortization of Goodwill (Gross Profit - SG&A Expenses + Depreciation and Amortization
under IFRS)(Chart 2) Consolidated Business/Financial Performance of Six General Chemical Manufacturers(JPY 100 mn, times)
Operating
IncomeOrdinary
IncomeNet
IncomeInterestbearing
Debt

EquityCapital

Total
AssetsNet D/E
Ratio

27,264
27,84829,12013,926
12,88813,60010,643
10,056
10,900

1,283
1,407
1,800
593
▲38
470
746
798
1,000

1,215
901
1,810
593
▲148
320
899
959
980

▲914
438
1,000
307
▲190
250
503
573
590

9,394
9,170
─
9,099
8,643
─
1,767
1,763
─

16,60918,133
─
6,877
6,903
─
7,388
7,945
─

34,54536,627
─
21,004
20,319─
11,942
12,899
─

0.41
0.32
─
1.05
0.98
─
0.08
0.03
─

48.1%
49.5%
─
32.7%
34.0%
─
61.9%
61.6%
─

Sales
RevenueCore
Operating
IncomeOperating
IncomeNet
IncomeInterestbearing
Debt

EquityAttrib. to
Owners of
the Parent

Total
AssetsNet D/E
Ratio

Ratio of
EquityAttrib. to
Owners of
the Parent

28,952
24,46826,70018,795
17,49718,50046,34543,872
46,230927▲1,490
1,000
1,139
962
1,250
3,255
2,081
2,500

▲310
▲4,889
700
1,289
741
1,130
1,827
2,618
2,100

69
▲3,118
200
829
499
730
960
1,195
520

13,363
14,384
─
7,382
7,567
─
22,43722,010─

12,961
10,907
─
7,868
8,628
─
15,643
17,634
─

41,65539,348
─
20,682
22,158
─
57,73961,045
─

0.80
1.12
─
0.70
0.63
─
1.24
1.08
─

31.1%
27.7%
─
38.0%
38.9%
─
27.1%
28.9%
─

Net
Sales

ASAHI
KASEI
(3407)
Resonac HD(4004)TOSOH(4042)SUMITOMOCHEMICAL(4005)
Mitsui
Chemicals(4183)FY2022
FY2023
FY2024F
FY2022
FY2023
FY2024F
FY2022
FY2023
FY2024F

FY2022
FY2023
FY2024F
FY2022
FY2023
FY2024F
FY2022
FY2023EquityRatio

Mitsubishi
ChemicalGroup
FY2024F(4188)*1 IFRS for SUMITOMO CHEMICAL, Mitsui Chemicals and Mitsubishi Chemical Group.
*2 Core operating income is obtained by excluding profit/loss of non-recurring items from operating income under IFRS.
*3 Net income is profit attributable to owners of parent (JGAAP) or net income attributable to owners of the parent (IFRS).
*4 Interest-bearing debt is the sum of borrowings, corporate bonds and CP. Equity content is considered in cases where there is hybrid
financing.
(Source: Prepared by JCR based on financial materials of above companies)

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<Reference>Issuer: ASAHI KASEI CORPORATION
Long-term Issuer Rating: AA

Outlook: Stable

Issuer: Resonac Holdings Corporation
Long-term Issuer Rating: A

Outlook: Stable

Issuer: SUMITOMO CHEMICAL COMPANY, LIMITEDLong-term Issuer Rating: A+

Outlook: Negative

Issuer: TOSOH CORPORATION
Long-term Issuer Rating: A+

Outlook: Positive

Issuer: Mitsui Chemicals, Inc.
Long-term Issuer Rating: A+

Outlook: Positive

Issuer: Mitsubishi Chemical Group Corporation
Long-term Issuer Rating: A+

Outlook: Stable

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