Fiscal 2016 - Apr 1, 2016 to Mar 31, 2017-

Presentation for IR Meeting
April 28, 2017

CONTENTS
1 Financial Results for FY2016
2 Performance Forecasts for FY2017
3 Progress under the Medium-Term Management Plan
4 Business Strategies

5 Supplementary Data2

1 Financial Results for FY2016

1. Financial Highlights
2. Net Sales / Operating Income
by Business Segment

3

1

Financial Results for FY2016

1. Financial Highlights Consolidated (year-on-year change)
FY2015Net sales
Operating income
Ordinary income
Profit (loss)

attributable to owners of parent
Basic earnings per share (yen)Exchange rate (¥/$)
Domestic naphtha price (¥/kl)

FY2016

Difference
Amount

%

307.1
23.0
17.7

299.1
39.7
33.9

(8.0)
+16.6
+16.2

(3)
+72
+92

(100.5)52.1+152.7-(289.10)120
42,800147.78108
34,700Qualitative information(Net sales) ¥299.1 billion, down 3%
Plus:
increased sales volume of polycrystalline silicon for both semiconductor and solar-cells
Minus: weak selling prices of petro chemicals on the back of downturn in domestic naphtha prices(Operating income) ¥39.7 billion, up 72%
Pluses: operating rate improvement and decreased depreciation expenses at Tokuyama Malaysia;
downturn in production costs as a result of the drop in raw material and fuel prices
4(Billions of yen)

1Financial Results for FY2016

1. Financial Highlights Consolidated (year-on-year change)
FY2015Net sales
Operating income
Ordinary income
Profit (loss)

attributable to owners of parent
Basic earnings per share (yen)Exchange rate (¥/$)
Domestic naphtha price (¥/kl)

FY2016

Difference
Amount

%

307.1
23.0
17.7

299.1
39.7
33.9

(8.0)
+16.6
+16.2

(3)
+72
+92

(100.5)52.1+152.7-(289.10)120
42,800147.78108
34,700Qualitative information(Ordinary income) ¥33.9 billion, up 92%
Plus:
increased operating income
Minus:
increased trial production expenses at Tokuyama Malaysia(Profit attributable to owners of parent) ¥52.1 billion (back into the black)
Pluses:increased ordinary income;
improved extraordinary income//losses;
decreased income taxes owing to the decision on the business transfer of Tokuyama Malaysia
5(Billions of yen)

1Financial Results for FY2016

1. Financial Highlights Consolidated (compared with the previous fiscal year-end)(Billions of yen, except Shareholders’ equity ratio and D/E ratio)

Total assets
Shareholders’ equity
Shareholders’ equity ratio
Interest-bearing debt
D/E ratio
Net D/E ratio*
Net assets per share (yen)Qualitative information(Total assets)
Increase factors:

As of Mar 31, 2016

As of Mar 31, 2017

401.3
51.4
12.8%
244.1
4.74

424.4
127.0
29.9%
213.9
1.68

+23.0
+75.5
+17.1Pts(30.1)(3.06)

2.38

0.73(1.66)

147.98305.49*Net D/E ratio: (Interest-bearing debt – Cash and deposits, Cash equivalents, Money in trust)/Shareholders’ equity

increase in deferred tax assets, notes and accounts receivable – trade, and investment securities(Shareholders’ equity)
Increase factors: increase in shareholders' equity as a result of issuance of class shares;
increase in retained earnings as a result of posting profit attributable to owners of parent(Interest-bearing debt)
Decrease factors: decrease in bonds, long-term loans payable and short-term loans payable
6

Changes

1

Financial Results for FY2016

2. Net Sales/Operating Income by Business Segment(Year-on-year change)(Billions of yen)

FY2015FY2016

Difference

Net sales

OperatingincomeNet sales

OperatingincomeNet sales

OperatingincomeChemicals

87.8

8.9

83.3

13.1

(4.4)

(5)

+4.2

+48

Specialty Products

60.9

(1.1)

67.7

9.6

+6.8

+11

+10.8

-

Cement

85.4

5.8

82.9

7.8

(2.4)

(3)

+2.0

+35

Life & Amenity

57.6

6.5

50.7

5.6

(6.9)

(12)

(0.9)

(15)

Others

53.6

5.6

52.1

5.9

(1.5)

(3)

+0.2

+5

Total

345.5

25.8

336.9

42.3

(8.5)

(2)

+16.4

+64

Inter-segment eliminations
and corporate-wide
expenses(38.4)(2.7)(37.8)

(2.5)

+0.5

-

+0.1

-

Consolidated results

307.1

23.0

299.1

39.7

(8.0)

(3)

+16.6

+72

+5.0

+57

+8.6

%

%

(Note) Sales and operating income in each segment shown above include inter-segment transactions.

(Reference)

Tokuyama Malaysia
7

8.8(10.2)

13.9

(1.6)

-

2 Performance Forecasts for FY2017

1. Future Business Environment andCountermeasures
2. Performance Forecasts
3. Performance Forecasts
by Business Segment82Performance Forecasts for FY2017

1. Future Business Environment and Countermeasures
Chemicals◆Earnings are expected to remain volatile for an extended period. This largely reflects the upward trend in petrochemical product as well asother raw material and fuel costs due to increases in the market prices of crude oil and coal.
・Tokuyama will endeavor to adjusting product prices and strengthen its cost competitiveness, thereby securing stable earnings.

Specialty Products◆Demand for semiconductors for use in electronics equipment is forecast to remain robust. With the growing trend toward miniaturization,customers’ requirements for higher quality and stable supply are also increasing.
・In working to expand earnings, Tokuyama will work diligently to reduce costs while ramping up efforts to establish a production structurethat is capable of meeting these calls for higher quality and demand for semiconductor-related products including semiconductor-grade
polycrystalline silicon. At the same time, we will look to expand earnings by increasing sales of high-value-added products.

Cement◆Private-sector demand in Japan is expected to exhibit signs of a modest recovery. This largely reflects Olympic-related constructionin the Tokyo area. In contrast, public-sector demand appears to be declining as a result of such factors as the downturn in public
investment and lengthening of construction periods. Based on the aforementioned, total demand in Japan is forecast to edge up
slightly year on year.
・We will strive to secure earnings through a variety of initiatives including efforts to expand the volume of exports, accept a higher
volume of waste, and thoroughly reduce manufacturing costs.

Life & Amenity◆The domestic market is expected to remain on a modest recovery path. Turning to overseas markets, however, uncertainty
surrounding the international situation as well as the trade policies of each country is increasing. There are also concerns of an
economic slowdown in emerging nations.
・Tokuyama will work to boost earnings by focusing on developing and marketing products that meet customer needs and changes in
the market.
92

Performance Forecasts for FY2017

2. Performance Forecasts

Consolidated(Year-on-year change based on FY2017 forecasts)(Billions of yen)

FY2016 Results

FY2017 Forecasts

299.1
39.7
33.9

300.0
36.0
32.0

Profitattributable to owners of parent

52.1

13.0

Basic earnings per share (yen)Exchange rate (¥/$)
Domestic naphtha price (¥/kl)

147.78108
34,70036.72
10540,000Net sales
Operating income

Ordinary income

Difference
Amount

+0.8
(3.7)
(1.9)
(39.1)

%

+0
(9)
(6)
(75)

Qualitative information(Net sales)
Pluses: increased sales volumes of VCM and cement;
price revision of petrochemicals(Operating income)
Plus :
increased sales volumes
Minus:
increase in fuel and raw material cost,
maintenance cost and other costs
10(Ordinary income)
Minus: decrease in operating income(Profit attributable to owners of parent)
Minuses posting extraordinary loss in connection with thebusiness transfer of Tokuyama Malaysia;
increased tax expenses due to absence of thedeferred tax asset posted in the previous fiscal year

2

Performance Forecasts for FY2017

3. Performance Forecasts by Business Segment(Year-on-year change based on FY2017 forecasts)
FY2016 Results(Billions of yen)

Difference

FY2017 Forecasts

Net sales

OperatingincomeNet sales

OperatingincomeNet sales

83.3

13.1

89.0

13.0

+5.6

+7

(0.1)

(1)

67.7

9.6

56.0

9.5

(11.7)

(17)

(0.1)

(2)

82.9

7.8

86.0

5.5

+3.0

+4

(2.3)

(30)

50.7

5.6

54.0

4.0

+3.2

+6

(1.6)

(29)

52.1

5.9

52.0

5.5

(0.1)

(0)

(0.4)

(8)

336.9

42.3

337.0

37.5

+0.0

+0

(4.8)

(11)

Inter-segment eliminations
and corporate-wide
expenses(37.8)(2.5)(37.0)

(1.5)

+0.8

-

+1.0

-

Consolidated Results(299.1)

39.7

300.0

36.0

+0.8

+0

(3.7)

(9)

(0.5)

(12.2)

(88)

+1.0

-

Chemicals
Specialty Products
CementLife & Amenity
Others
Total

Operatingincome%%(Note) Sales and operating income in each segment shown above include inter-segment transactions.
(Reference)

Tokuyama Malaysia

13.9

(1.6)

1.7

(Note) FY2017 forecast for Tokuyama Malaysia factors in profit and loss for two months until business transfer scheduled on end of May

11

3 Progress under the

Medium-Term Management Plan
1. Progress in Achieving
Numerical Targets
2. Transfer of Tokuyama Malaysia
3. Redemption of Preferred Stock andResumption of dividends
4. Results after Addressing Priority
Issues and Future Measures123

Progress under the Medium-Term Management Plan

1. Progress in Achieving Numerical Targets

Substantial increase in profit in FY2016 due to an improvement in earnings from Tokuyama Malaysia. While thetransfer of Tokuyama Malaysia will have a certain impact on each indicator from FY2017, we will work toward an
improvement in excess of numerical targets through the reallocation of management resources.
FY2015FY2016FY2020TargetNet sales¥307.1 billion¥299.1 billion¥335.0 billion

Increase in sales volume on the back ofa recovery in economic conditions

Operating income¥23.0 billion¥39.7 billion¥36.0 billion

5.7%

9.4%

10%

Decrease in net sales owing mainly toa drop in unit selling prices in line with the downturnin raw material costs and the strong yen

7.5%

13.3%

10%

ROA
OperatingmarginComments (FY2016 results)

Increase in earnings as a result of improvementin Tokuyama Malaysia and drop in raw material
and fuel costs

0.77 times

0.70 times

1.0 times

ROA was increased due to improved
operating margin

CCC

69 days68 days

55 days

CCC was improved owing to reduce inventories

D/E ratio

4.7

1.7

1.0

D/E ratio was improved by building up profits
and issuing preferred stock

Exchange rate (¥/US$)

120

108

Domestic naphtha price (¥/kl)

42,80034,700110
58,000Financial indicators

Total asset
turnover13

Note : Cash Conversion Cycle (CCC): Accounts receivable turnover period + Inventory turnover period – Accounts payable turnover period;
ROA: Operating income / Total assets

3

Progress under the Medium-Term Management Plan

1. Progress in Achieving Numerical Targets
Achieved an increase in earnings that exceeded the Medium-Term Management Plan’s final fiscal year target. Amid
the ongoing positive flow-on effects of cutbacks in raw material and fuel costs attributable to the drop in resource
prices, this was largely due to continued progress in improving TMSB* earnings, rationalizing the soda ash business,and implementing various other Medium-Term Management Plan measures.
Operating income changes by factors (FY2016 results)(Billions of yen)

Improved operation at
TMSB
Drop in raw material andfuel cost*TMSB: Tokuyama Malysia+3.7(10.5)
+7.3

+8.6

+7.4
Chemicals (-)
Specialty Products (+)
Cement (+)
Life and Amenity (+)

23.0

FY201514

Raw material
and fuel price

TMSB

Sales volume

Price
Adjustment

Cost reduction
and others

Selling price Fixed costs andothers39.7

FY2016

3

Progress under the Medium-Term Management Plan

1. Progress in Achieving Numerical Targets
Offset the increase in costs attributable to the upswing resource prices and increased repair costs through suchmeasures as an increase in sales volume to maintain Medium-Term Plan final fiscal year profit target levels.

Operating income changes by factors (FY2017forecasts)*TMSB: Tokuyama Malysia(Billions of yen)
Drop in raw material andfuel cost

(7.3)

+5.2

+0.1

(2.5)

+1.0

39.7
Improve as a result oftransfer of TMSBFY201615

Raw material
and fuel priceChemicals (+)
Specialty Products (+)
Cement (+)
Life and Amenity (+)

TMSB

Sales volume

Increase expenses
in repairs, personnel
and others

36.0

Selling price Fixed costs andothers

FY2017
Forecast3

Progress under the Medium-Term Management Plan

2. Transfer of Tokuyama Malaysia
Received the necessary approvals from the competition authorities of each country in connection with thetransfer of Tokuyama Malaysia shares. The transfer of all shares to OCI Company Ltd. is scheduled to takeplace on May 31, 2017 (revised from the initial transfer date of March 31, 2017).

Progress of transfer

Results and
Plans

16

FY2016 (17/3)

FY2017 (18/3)

Sep 28 Resolution relating to the transferof shares to OCI

Apr 26 Formal resolution by OCI to acquire theshares of Tokuyama Malaysia by way oftransfer

Oct 7

May 31 Third-party allotment (Second allotment)(Planned) Transfer of all shares to OCI

Third-party allotment (First allotment)(Tokuyama’s equity interest: 83.5%)

3Progress under the Medium-Term Management Plan

3. Redemption of Preferred Stock and Resumption of dividends
About the redemption of preferred stock
Tokuyama has obtained the necessary approvals to transfer shares in Tokuyama Malaysia from therelevant agencies and authorities. At the same time, the Company is confident in its ability to secure
not only a recovery, but also growth in its net assets based on results for the fiscal year under review
and forecasts for the following fiscal year. Taking each of the aforementioned into consideration,
Tokuyama has decided to acquire (the consideration for which is cash) and cancel all of the preferredstock (total paid-in amount: 20 billion yen) issued to Japan Industrial Solutions.

Dividends on common shares (plan)
Tokuyama plans to resume the payment of dividends in fiscal 2017. In specific terms, the Company isprojecting the payment of an interim and period-end dividend of ¥2 per share each. This takes into
account that profit will progress in line with the medium-term management plan on and after the fiscal
year ending March 31, 2018.

17

3

Progress under the Medium-Term Management Plan

4. Results after Addressing Priority Issues and Future Measures
Current Understanding of Condition
External Environment
 Increase in demand for materials generally on the back of a recovery in worldwide economic
conditions
 Control of a surge in raw material and fuel prices thanks largely to the growing acceptance of shale
gas /oil Increase in demand for cutting-edge electronic components in line with efforts aimed at promoting
the widespread use of next-generation ICT encompassing high-speed, large-capacity communication

 Increase in demand for high-performance medical equipment amid advances in medical treatment
and prevention as well as growing awareness toward the importance of improved healthInternal Requirements
 Need to bolster the Company’s financial platform which has suffered under the weight of impairment
losses in Malaysia
 Vital that Company creates a new driving force that is capable of generating profit growth Issues pending include a review and upgrade of the Company’s corporate governance structure andsystems18

3Progress under the Medium-Term Management Plan

4. Results after Addressing Priority Issues and Future Measures【FY2016 Results】
 Implemented activities aimed at increasing awareness toward and(1) Change the Group’s
organizational culture and acceptance of the Company’s vision (president’s caravan, etc.)
 Revised personnel systems for key positions
structure Nurtured human resources using lectures conducted by outside experts■ Review personnel evaluation systems■ Exchange of human resources
between Group companies■ Vigorous introduction of outside
personnel

19【Future Measures】
 Continue to implement activities aimed at increasing awareness toward
and acceptance of the Company’s vision
 Revise comprehensive personnel systems
 Reform human resource development systems; actively recruit outside
personnel

3Progress under the Medium-Term Management Plan

4. Results after Addressing Priority Issues and Future Measures(2) Rebuild the Group’sbusiness strategies■ Growth Businesses
Become a global leader inadvanced materials
Thoroughly understand customers’
needs, and meet requirements
through unique technologies■ Traditional Businesses

Become a leader in Japanthrough strengthening
competitivenessBecome an entity that maintains athirst for increased efficiency toovercome competition in thegeneral-purpose products market
20【FY2016 Results】
 Operations recommenced at a semiconductor-grade polysilicon plant; increase in production ofaluminum nitride
 Sale of interest in the solar-grade polysilicon and gas sensor businesses
 Positive steps to rationalize the soda ash and vinyl chloride businesses; improvement in profitabilityon the back of full electrolysis operations
 Improvement in operating rates as a result of the upswing in exports of cement
 Launched the BRIGHT-II initiative at Tokuyama factory in an effort to reduce major costs across all
divisions Adhered strictly to a policy of PDCA control in connection with financial indicators and priority issues【Future Measures】
 Take steps to increase production of unique, high quality products in line with growing
semiconductor-grade polycrystalline miniaturization
 Expand capacity of high-purity liquid chemicals for electronics manufacturing (IPA, developer) Expand the lineup of heat dissipation material products and increase capacity
 Accelerate the pace of healthcare-related product overseas business development
 Strengthen the Group’s competitive advantage through alliances and M&As
 Expand business domains by rebuilding the research and development structure and promoting
open innovation
 Enhance business and plant operating efficiency through the use of IoT and AI
 Review existing investment criteria; optimize the allocation of management resources by introducing
withdrawal standards

3Progress under the Medium-Term Management Plan

4. Results after Addressing Priority Issues and Future Measures(3) Strengthen Groupmanagement■ Business Subsidiaries:
Contribute to theGroup’s growth strategies•Strong support from a human resource
perspective•Flexible capital policy■Functional Subsidiaries:
Contribute to the Groupthrough the reduction of costs【FY2016 Results】
 Reverified positioning and significance within each business Sold shares of Figaro Engineering Inc.
 Resolved to transfer Tokuyama Malaysia
 Implemented a scrap and build approach at Sun・Tox Co., Ltd.; expanded
plant facilities at A&T Corporation【Future Measures】
 Promote integrated management with business subsidiaries (capital, human resources) Improve profitability at the two microporous film companies and China as well as
Excel Shanon Corporation•Cost reduction activities in unison with
Complete the transfer of Tokuyama Malaysia
Tokuyama Factory21

3Progress under the Medium-Term Management Plan

4. Results after Addressing Priority Issues and Future Measures(4) Improve the Company’s
financial position
Restore shareholders’ equity through theaccumulation of profits
Quickly stabilize the Company’s financial
platform
Take the necessary preparatory steps toensure that the Company is well
positioned to capitalize on M&A andother opportunities with a view toaccelerating future growth22【FY2016 Results】
 Strengthened the Company’s financial platform through the issuance of preferredstock Reduced interest-bearing debt 30.1 billion yen; improved the D/E ratio 3.06
percentage points【Future Measures】
 Further reduce interest-bearing debt; decrease the Company’s interest burden Increase capital through the accumulation of business earnings
 Redeem preferred stock in line with a review of Medium-Term Management Plan
performance

3

Progress under the Medium-Term Management Plan

4. Results after Addressing Priority Issues and Future Measures
Tokuyama decided to undertake the redemption of preferred stock totaling ¥20 billion yen in fiscal 2017 and is
endeavoring to achieve its financial targets by accumulating profits.
Shareholders’ Equity and Financial Index Trend
Shareholders’
D/E equity
ratio ratio
5.0 50%Share-holders’ equity(Billions of yen)
D/E ratio
4.7

300.0
250.0
200.0

4.5

40%

Shareholders’ equity ratio

229.6

150.0

127.0

162.5
1.7

100.0

Loss due toimpairment

1.0

3.0
Redemption ofPreferred Stock

140.0

+55.6
13%

51.4

+20.0

ProfitPreferred
Stock

FY2014FY20151.0
0.9

FY2016

30%

20%

1.5

1.7

FY2020
Plan

10%

0.5
0.0

FY 2013

40%

2.5
2.0

0.0

23

4.0
3.5

30%

29%

50.0

37%

0%

3

Progress under the Medium-Term Management Plan

4. Results after Addressing Priority Issues and Future Measures
CAPEX

Breakdown of CAPEX

R&D, others
23%

Rationalization,
infrastructure
12%

R&D, others
17%

Expansion of capacity
and sales
36%

Rationalization,
infrastructure
12%

FY2016
Results¥17.3 billion

Maintenance and renewal
29%

Major Growth Investments

Introduced the latest polyolefin film facilities (Sun・Tox)

Expansion of capacity
and sales
38%

FY2017Plan¥20.7 billion

Maintenance and renewal
33%

Investments aimed at increasing the quality ofsemiconductor-related materials
Increase production of aluminum nitride powder

Introduce the latest polyolefin film facilities (Sun・Tox)
Expand A&T Corporation’s Esashi Factory (A&T)
Expansion of the yard (Shunan Bulk Terminal)24

3Progress under the Medium-Term Management Plan

4. Results after Addressing Priority Issues and Future Measures
R&D

Research and Development Activity Results and Plans
FY2016 Results (¥7.5 billion)

New Businesses

FY2017 Plan (¥9.0 billion)

Deep ultraviolet LED
Transfer related technologies and facilities to Stanley Electric Co., Ltd.
⇒ Focus on the development and improvement of single crystal aluminum nitride substrate materials
Scintillator for use in the detection of neutrons
Undertake the evaluation of customers and improve manufacturing processes

GrowthBusinesses
Specialty ProductsLife & Amenity

Traditional
Businesses
Chemicals
Cement25•Develop boron nitride and other new heat dissipation materials using enhanced reduction-nitridation
processes•Develop organic and inorganic hybrid products (electronic materials and the healthcare field)•Improve existing product processes; develop various grades•Develop waste gypsum board and other recycling technologies•Develop a variety of infrastructure reinforcement and maintenance materials

4 Business Strategies

1. Chemicals Segment
2. Specialty Products Segment
3. Cement Segment
4. Life & Amenity Segment
5. Tokuyama Factory27

4

Business Strategies

1. Chemicals Segment
Basic Policy
Contribute to the development of customers’ businesses by delivering high-quality, cost competitive basic
chemical materials and services that accurately reflect customers’ needs while helping to ensure the Company’s
stable and continuous earnings growth as a core business segment

Measures<Soda Ash and Calcium Chloride Business>Ensure stable supply and maintain quality as a single
domestic manufacturer
Increase production of granular calcium chloride for use in
the melting of snow
<Chlor-Alkali and Vinyl Chloride Business>
Strengthen the competitiveness of in-house power
generation and electrolytic chlor-alkali production with the aimof further reducing the cost of caustic soda and chlorine
Expand VCM exports and maintain plant operations at full
capacity
Strengthen profitability in the chlorine derivatives business(vinyl chloride, propylene oxide, chloromethane, etc.)
Increase the value of hydrogen by expanding liquidhydrogen plant capacity
28

Net sales

Operating income(Billions of yen)

13.1

86.4

91.9

13.0

87.8
8.9 83.3

89.0

2015

2017
Forecasts

5.0

2.2

FY2013

2014

2016

4

Business Strategies

1. Chemicals Segment
Activities aimed at restructuring businesses and reinforcing competitivenessIntegrating the soda ash and calcium
chloride businesses
Ensure stable supply, maintain quality, andestablish an optimal distribution structure as asingle domestic manufacturer
Increase production of granular calcium chloridePO
EDC VCM PVC

Cl2（Chlorine)

Soda Ash andCalcium Chloride

Chloromethane
Polysilicon

Electrolysis

H2(Hydrogen)

Power
StationCaustic Soda

Strengthening the competitiveness of in-house power
generation and electrolytic chlor-alkali production
29

Expand VCM exports

Chloride

Tokuyama Factory
Soda and electrolytic
chlor-alkali chain

Crude salt

Consolidate PVC production

Expand the production capacity of liquidhydrogen to twofold

4

Business Strategies

2. Specialty Products Segment
Basic Policy
Expand business activities and earnings by supplying products and putting forward development productproposals that are consistently preferred by customers

Measures<Semiconductor-grade Polycrystalline Silicon Business>
Accurately grasp the quality requirements of customers beginningwith the latest products; realize world-leading quality while
minimizing costs<Fumed Silica Business>
On top of silicone- and CMP-related products, upgrade andexpand highly functional products
Promote cost reductions and high added value at Tokuyama
Chemicals (Zhejiang) Co., Ltd.
<IC Chemicals Business>Pursue increased quality and expand sales of products that target
the advanced semiconductor field<Thermal Management Material Business>
Increase aluminum nitride powder production capacity(480→600 tons/year; operation to commence in April 2018)
Commercialize boron nitride and aluminum nitride filler activities
30

Net sales

Operating income(Billions of yen)

9.6
6.0
52.4

55.4

60.9

9.5

67.7
56.0

4.1

FY2013

2014

(1.1)
2015

2016

2017
Forecasts

4

Business Strategies

2. Specialty Products Segment
Tokuyama’s Semiconductor-Related Products that Underpin Advances in ICT
Semiconductor-grade polycrystalline silicon
20% global market share

Polycrystalline
siliconSiliconwafer

Tokuyama’s unique technologies
that help create advanced material
CVD
Lithography

Aluminum nitride for heat dissipation materials

Etching

CMP#1 in the world

Cleaning
Photoresist developer TMAH

Tip
Package

Fumed silica for CMP#1 in the Asia

31

High-purity IPA for cleaning

Final
Products

4

Business Strategies

2. Specialty Products Segment
Tokuyama’s Semiconductor-Related Products that Underpin Advances in ICT

32Advances in the miniaturization and 3D application ofsemiconductors in line with the growing trend toward
increased capacity and compact devices

Surge in demand for heat dissipation materials on the backof the growing shift toward high output, compact automotive,
industrial machinery, and electric railway power devices

Providing ultra-high purity materials that reduce
impurities that cause yield deterioration
and residue to an absolute minimum

Providing heat dissipation materials with impurities thatexhibit extremely low high thermal conductivity using theCompany’s proprietary reduction-nitridation process

・Semiconductor-grade high-purity polycrystalline silicon・High-purity chemicals for electronic manufacturing(high-purity IPA and TMAH)

・Aluminum nitride powder and fillers
・Aluminum nitride ceramics
・Boron nitride

4

Business Strategies

3. Cement Segment
Basic Policy
Upgrade and build optimal production, sales, and distribution systems that are capable of flexibly addressingchanges in the business environment, while maximizing waste disposal earnings by increasing exports and working
to strengthen competitive advantage by reducing costs

Measures<Cement Business>Improve production efficiency as well as unit consumption
while reducing costs focusing mainly on efforts to increase theuse/intake of waste
Secure earnings by expanding exports that maximize the useof the No.4 kiln
Upgrade and expand the infrastructure maintenance andreinforcement business through Tokuyama Mtech Corp.
<Recycling and Environment Business>
Optimize the application of raw materials and promote the useof combustible waste and optimize the fuel plant businessPromote stable operations in existing recycling businesses
including the recycling of waste gypsum boards; create newrecycling businesses
33

Net sales

78.9

81.2

85.4

Operating income(Billions of yen)

82.9
7.8

86.0

6.6
5.8

5.5

4.4

FY2013

2014

2015

2016

2017
Forecasts

4

Business Strategies

3. Cement Segment
Expand Cement Clinker Exports
Acquired in June 2013, Tokuyama Nouvelle Calédonie S.A. is in the process of recording substantial profits withfour consecutive fiscal periods of operating income and cash flow growth; also, contributing to improvements inearnings in the Cement Segment as an importer of cement clinker

Unable to avoid contraction in domestic demand owing to the decline in the population over the medium to longterm; consider and promote the development of overseas pulverization plants in addition to Tokuyama Nouvelle
Calédonie in a bid to maintain operating rates at cement factories by securing stable export destinations

Clinker ship loader (Tokuyama Factory)
34

Tokuyama Nouvelle Calédonie S.A.

4

Business Strategies

4. Life & Amenity Segment
Basic PolicySecure a position of advantage in markets both in Japan and overseas, pursue business expansion, andcontribute to improving people’s quality of life by establishing and strengthening a customer-oriented development,
manufacturing, and sales structure

Measures<Microporous Film Business>Rebuild the China business<Fine Chemicals Business>
Expand the Company’s share of photochromic dye materials
market; cultivate new applications<Dental Materials Business (Tokuyama Dental Corporation)>
Accelerate the pace of overseas business development focusing
mainly on aesthetic filling materials (composite resins)

Net sales

Operating income(Billions of yen)

57.0
4.8

58.4

6.5
57.6

5.1

5.6
50.7

54.0
4.0

<Medical Diagnosis System Business (A&T Corporation)>
Strengthen the production structure and systems by expanding theEsashi Factory (from September 2017)
<Polyolefin Film Business (Sun・Tox Co., Ltd.)>
Improve productivity by implementing a scrap and build approach
toward manufacturing facilities (Oct 2017~)<Ion Exchange Membranes Business (ASTOM Corp.)
Push forward measures aimed at large-scale overseas projects<Plastic Sash Business (Excel Shanon Corp.)
Expand Zero Energy House-related sales
35

FY2013

2014

2015

2016

2017
Forecasts

4

Business Strategies

4. Life & Amenity Segment
Photochromic Dye Materials
In addition to applications in the sportswear and drive-wear fields, use of photochromic materials is increasing.
Amid growing awareness toward the dangers of ultraviolet rays, applications are expanding into the seniors’
market as a result of the growing incidence of glaucoma and related afflictions•Work to increase market share by fine-tuning the Company’s response to customers’ requirements regarding
product specification, and upgrading and expanding the product lineup•Cultivate new applications that harness the unique features of photochromic materials including visibility （百万個）
improvement and UV-shielding
Photochromic Dye Materials
Photochromic dye materials are clear resins that change color to either gray or
brown when exposed to the sun's ultraviolet rays, and return to their colorless state
when no longer exposed

Features of Our Products
・Offers a number of color variations and can be colored with the three
primary colors of red, blue, and yellow
・Quickly changes between transparent and colored・Allows users to see fully vivid colors even on hot summer days

Photochromatic lens36

・Highly durable
・Blocks over 99% of ultraviolet rays

4

Business Strategies

5. Tokuyama Factory
Progress in Reducing Costs
Numerical Targets
under the Medium-Term Management Plan
Compared with FY2015

Expansionof portfacilities

Reduce coal stock expenses throughan increase in the amount of coalhandled as a result of large-scale
expansion¥1.1

Repairefficiency

Put in place a project team andpromote activities that utilize external
expertise¥1.0

Unit material
consumption
reduction

Also consider undertaking strategic
renewal investments, continue toimprove the unit consumption of raw
materials and fuels¥0.6

Distribution
cost saving

Strengthen efforts aimed at
optimizing the logistics function as awhole, spearheaded by the
Tokuyama Factory general manager¥0.5

OthersIncrease the selling of electric powerby shortening the periods of periodic
maintenance and reduce other costs

¥0.8

Total

Target amount of Group-wide cost
reduction in fiscal 2020

37

FY2016 results(compared with FY2015)
Commence work to expand the capacity of shipping facilities
Increase in expenses in line with investments(¥0.1)

Utilize external expertise, review operating flows, and look tovisualize repairs and maintenance expenses¥0.8

Continuously improve unit material consumption by plantContinue to consider a cross-departmental approach¥0.4

Commence the construction of warehouse facilities on idle
land within sites, work toward reducing storage expenses,
and continue to evaluate appropriate inventory levels

¥0.1
¥1.1

billion

Shorten the periods of periodic maintenance, increase thesale of electric power by actively promoting the use of LED
lighting, and reduce other costs¥4.0

Amount of cost reduction and profit improvement in FY2016

billionbillionbillionbillionbillionbillionbillionbillionbillionbillion¥2.3
billion5 Supplementary Data
1. Consolidated Financial Statements
2. Cash Flows
3. Changes in Operating Income
4. Non-Operating Income/Expenses
5. Extraordinary Gains/Losses
6. Net Sales/Operating Income by Business
Segment
7. Principal Indicators
8. Performance Trend
9. Price Trend of Main Raw Material and Fuel
10. CAPEX and Depreciation Trend
11. Interest-bearing Debts Trend
12. Free Cash Flow Trend
13. Polysilicon Market
14. Scheme for Transferring Tokuyama Malaysia
Shares38

5Supplementary Data

1. Consolidated Financial Statements Income Statements(Billions of yen)
FY2015

Amount

%

307.1

299.1

(8.0)

(3)

Cost of sales

220.6

201.3

(19.3)(9)

Selling, general andadministrative expenses

63.4

58.0

(5.3)

(8)

23.0

39.7

+16.6

+72

(5.3)

(5.7)

(0.3)

-

17.7

33.9

+16.2

+92

(104.2)

4.5+108.7-(86.5)

38.5+125.0-

Income taxes

13.0(14.8)(27.8)-

Non-controlling interests

1.0

1.2

+0.1

+18

(100.5)52.1+152.7-

Net sales

Operating income
Non-operating income/expenses

Ordinary income
Extraordinary income/expenses

Income/loss before income taxes

Profit attributable to owners of parent

39

Difference

FY2016

5

Supplementary Data

1. Consolidated Financial Statements Balance Sheets (Billions of yen)
3/31/2016

Amount

%

401.3

424.4

+23.0

+6

Current assets

243.7

246.6

+2.8

+1

Tangible fixed assets

119.7

119.2

(0.5)

+0

Intangible fixed assets

6.3

4.7

(1.6)

(25)

Investments and otherassets

31.4

53.7

+22.3

+71

Total assets

3/31/201640

Changes

3/31/2017

Changes

3/31/2017

Amount%Total liabilities

341.1

288.4

(52.6)(15)

Current liabilities

113.2

79.1

(34.0)(30)

Long-term liabilities

227.9

209.3

(18.6)(8)

Total net assets

60.2

135.9

+75.7

+59

5

Supplementary Data

2. Cash Flows

Consolidated (year-on-year change)(Billions of yen)

FY2015FY2016

Cash flows from operating activities (1)

30.0

20.0

Cash flows from investing activities (2)13.4(10.0)

Free cash flows (3) ((1)+(2)）

43.4

9.9

Cash flows from financing activities (4)(37.6)(11.9)

Effect of exchange rate changes on cash and cash equivalents (5)

(0.7)

(0.3)

Net increase (decrease) in cash and cash equivalents (6)((3)+(4)+(5))

5.0

(2.3)

Cash and cash equivalents at beginning of the year (7)

116.1

121.1

0.0

-

121.1

118.8

Increase (decrease) in cash and cash equivalents due to changesof scope of consolidation and change in fiscal period of
consolidated subsidiaries (8)Cash and cash equivalents at end of the year (9) ((6)+(7)+(8))

415Supplementary Data

3. Changes in Operating Income
By Segment(Year-on-year change)(Billions of yen)

•Drop in raw material and fuel costs (+)•Accepted higher volume of waste (+)•Downturn in domestic sales (-)•Operating rate improvement anddecreased depreciation expenses
at Tokuyama Malaysia (+)

39.7
+2.0

•Price revision of soda ash and calcium
chloride (+)•Rationalization of PVC business(+)•Drop in raw material and fuel costs (+)

+3.8

42

23.0

+4.2

FY2015Chemicals

△0.9

+0.4
+2.1

+10.8

•Deconsolidation of subsidiary (-)•Decreased sales volume of active
pharmaceutical ingredient andmicroporous film (-)

Specialty
Products

CementLife &
Amenity

Corporate
and others

FY2016

5

Supplementary Data

3. Changes in Operating Income (Year-on-year change based on FY2016 forecasts)(Billions of yen)

By Segment

39.7•Tokuyama Malaysia (+)•Higher sales volume (+)•Lower selling price (-)

(0.1)

(0.1)
(2.3)

•Higher sales volume (+)•Increase in repair and other expenses (-)•Increase in depreciation andother costs (-)

(1.6)

36.0
+0.6

•Rise in raw material and fuel cost (-)•Increase in repair and other expenses (-)

FY201643

Chemicals

Specialty
Products

CementLife &
Amenity

Corporate
and others

FY2017
forecast

5

Supplementary Data

4. Non-Operating Income/Expenses Consolidated (year-on-year change)(Billions of yen)

FY2015

Changes

Notes

Non-operating income
Non-operating
expenses

Interest and dividend income

0.5

0.3

(0.2)

Other income

2.7

2.8

+0.0

Total

3.3

3.1

(0.1)

Interest expenses

4.6

4.2

+0.4

Other expenses

4.0

4.6

(0.6) Decreased borrowing cost

Total

8.6

8.8

(0.1)

(5.3)

(5.7)

(0.3)

Non-operating income/expenses

44

FY2016

Increased trial production expense

(1.2)
+0.3

5

Supplementary Data

5. Extraordinary Gains/Losses

Consolidated (year-on-year change)(Billions of yen)

FY2015FY2016

Changes

Decreased gain on non-current assets(14.1)
Decreased gain on sales of investment securities (6.1)
Subsidy income+2.2
Gain on sales of shares of subsidiaries
and associates+1.9

Extraordinary gains

21.4

7.3

Extraordinary losses

125.7

2.7 +122.9 Decreased impairment loss

Extraordinary gains/losses(104.2)

4.5 +108.7

45(14.1)

Notes+123.05

Supplementary Data

6. Net Sales/Operating Income by Business Segment(Year-on-year change)

ChemicalsHigher earnings on lower sales
Net Sales

Operating Income(Billions of yen)

13.1
87.8 8.9

FY201583.3

FY2016

Qualitative information(Caustic soda)•Net sales decreased due to weak trends in selling prices, while
domestic sales volumes were steady(Vinyl chloride monomer (VCM))•Net sales were down due to weak trends in selling prices as aresult of the drop in domestic naphtha prices, despite increased
export volume for Asian market(Vinyl chloride resin)•Improved earnings due to the suspension of operations at the
Chiba factory(Soda ash and calcium chloride)•Net sales were flat owing to the fact that the efforts to revise
selling price were offset by decreased sales volume46

5

Supplementary Data

6. Net Sales/Operating Income by Business Segment(Year-on-year change)

Specialty Products

Higher earnings on higher sales

Net Sales

Operating Income(Billions of yen)

9.6
60.9

67.7

(Semiconductor-grade polycrystalline silicon)•Increased sales volume, reflecting the growing trend to highly
functional mobile devices including smartphones(Solar-grade polycrystalline silicon)•Higher sales volume, reflecting the operating rate improvement at
Tokuyama Malaysia(Fumed silica)
Higher sales volume to of such applications as a polishing material
for semiconductors(1.1)

FY2015

Qualitative information

FY2016(High-purity chemicals for electronics manufacturing)•Net sales were down due to appreciated yen, despite of robust
sales volume of product used for semiconductor manufacturing(Aluminum nitride)•Higher sales volume of such applications used for semiconductor
manufacturing equipment47

5Supplementary Data

6. Net Sales/Operating Income by Business Segment(Year-on-year change)

CementHigher earnings on lower sales
Net Sales

Operating Income(Billions of yen)

85.4

82.9 7.8
5.8

FY201548

FY2016

Qualitative information(Cement)•Net sales were down due to downturn in domestic sales
volumes attributable to weak public- and private-sector demandin Japan and weak trends in export prices as a result of weaker
yen, despite of an increase in the volume of exports on the backof robust demand in the Asia region•Consolidated subsidiary net sales declined, reflecting
corrections to robust shipping targeting large-scale projects in thecorresponding period of the previous fiscal year
(Recycling and environment-related business)•The Company accepted higher volume of waste including coalash

5Supplementary Data

6. Net Sales/Operating Income by Business Segment(Year-on-year change)

Life & Amenity

Lower earnings on lower sales
Net Sales

6.5
57.6

Qualitative information(Active pharmaceutical ingredient)(Billions of yen) •Decreased sales volume, reflecting corrections to favorable
shipments in the corresponding period of the previous fiscal year

Operating Income

50.7

5.6

(Plastic lens-related materials)•Net sales increased on the back of steady sales volume(Microporous film)•Lower sales volume of products mainly for disposable at oversea
consolidated subsidiaries

FY201549

FY2016(Polyolefin film)•Increased sales volume of products mainly for convenience stores•Weak trends in selling price on the back of the decline in domestic
naphtha price(Dental materials and equipment)•Net sales increased due to higher sales volumes of new products andincreased export volume(Medical diagnosis system)•Increase sales volume of products for blood testing(Gas sensor)•Deconsolidation of Figaro Engineering Inc. from Q2 FY2016 due tothe sales of shares in the company

5Supplementary Data

7. Principal Indicators(year-on-year change)
Capital expenditures
Depreciation and amortization
R&D expenses
Financial income and expenses

FY2015
Billionsof yenBillionsof yenBillionsof yenBillionsof yen(compared withthe previous fiscal year-end)(Billions of yen)

FY2016

Changes

13.9

17.3

+3.4

20.0

14.2

(5.8)

8.5

7.5

(1.0)

(4.1)

(3.9)

+0.1

3/31/2016

3/31/2017

ChangesInterest-bearing debts

Billionsof yen

244.1

213.9

(30.1)

Number of employees

Persons

5,759

5,464

(295)

(year-on-year change
based on FY17 forecasts)
Capital expenditures
Depreciation and amortization
R&D expenses

50

Consolidated

FY2016 Results
Billionsof yenBillionsof yenBillionsof yen

17.3
14.2
7.5

FY2017 Forecast

20.7
14.6
9.0

Changes

+3.4
+0.4
+1.4

5

Supplementary Data

8. Performance Trend

Consolidated (Annual)
Income (Billions of yen)

Net sales (Billions of yen)
350

300

120.0
302.0

300.9

289.7

307.1

299.1

287.3

282.3

52.1

258.6
250

200

150

39.7
16.4

20.1

15.3

17.3
9.7

7.4

13.7
11.5
9.3

20.2
6.7
3.2

14.9
10.2

100.0
80.0

273.1

22.7
20.3

300.0

19.5
12.9

23.0
33.9
17.7

60.0
36.0
40.0
32.0
20.0
13.0

0.0
(20.0)(5.5)(40.0)(37.9)

100(60.0)(80.0)(65.3)

50(100.0)(100.5)0(120.0)
FY08
Net sales

51

09

10

11

Operating income

12

13

14

Ordinary income

15

16 17 Forecast
Profitattributable to owners of parent

5

Supplementary Data

8. Performance Trend(Quarter)

Consolidated(Billions of yen)

11.11
10.13
73.7

75.3

4.60

77.5

80.4

10.57

9.53

8.49
73.1

69.4

75.5

81.0

5.39

2.93

Q1/FY15 Q2/FY15 Q3/FY15 Q4/FY15 Q1/FY16 Q2/FY16 Q3/FY16 Q4/FY16
Net Sales
52

Operating Income

5Supplementary Data

8. Performance Trend(Quarter)

Chemicals(Billions of yen)

3.76
3.27

2.90
22.8

22.0
21.1
21.6
2.01
2.11

20.2

3.35

3.15

18.7

21.0

23.3

1.49

Q1/FY15 Q2/FY15 Q3/FY15 Q4/FY15 Q1/FY16 Q2/FY16 Q3/FY16 Q4/FY16
Net Sales
53

Operating Income

5Supplementary Data

8. Performance Trend(Quarter)Specialty Products(Billions of yen)

4.16

2.62
20.0
13.0

13.6

(1.52) (1.45)

14.0

2.10
2.10 20.3
16.1
15.7
15.5
1.27

(0.80)

Q1/FY15 Q2/FY15 Q3/FY15 Q4/FY15 Q1/FY16 Q2/FY16 Q3/FY16 Q4/FY16
Net Sales
54

Operating Income

5Supplementary Data

8. Performance Trend(Quarter)Cement20.4(Billions of yen)

22.1

22.4
20.4
1.84

1.70

19.4

2.36
2.23 21.8
21.6
20.1

1.66

1.60

1.34
0.94

Q1/FY15 Q2/FY15 Q3/FY15 Q4/FY15 Q1/FY16 Q2/FY16 Q3/FY16 Q4/FY16
Net Sales
55

Operating Income

5Supplementary Data

8. Performance Trend(Quarter)

Life & Amenity(Billions of yen)

1.88
1.71
14.2

14.6

1.82
1.61
14.3
14.3
13.8
1.38

1.52
11.8
1.07

12.6
12.4
1.20

Q1/FY15 Q2/FY15 Q3/FY15 Q4/FY15 Q1/FY16 Q2/FY16 Q3/FY16 Q4/FY16
Net Sales
56

Operating Income

5Supplementary Data

9. Price Trend of Main Raw Material and Fuel
Domestic naphtha price(¥/KL)

Australian thermal
coal spot price ($/t)

80,000110
100

Domestic naphtha

70,000Australian thermal coal

60,00090
80
70

50,00060
50

40,00040
30,00030
FY201457

FY2015FY2016

5

Supplementary Data

10. CAPEX and Depreciation Trend(Billions of yen)

CAPEX

Consolidated

Depreciation

97.5

100.0
90.0

77.6

80.0

70.0

61.0

60.0

52.5

50.0

40.0

37.0

37.6

35.8

26.5

30.0

31.4

20.0

21.4

28.4

25.3

23.2

13.9

16.7

22.9

18.8

10.0

17.3

20.7

20.0
14.2

14.6

17/3

18/3
(forecasts)

0.0
08/3

58

09/3

10/3

11/3

12/3

13/3

14/3

15/3

16/3

5

Supplementary Data

11. Interest-Bearing Debts Trend Consolidated(Billions of yen)

Short-term debt

Long-term debt

Unsecured bonds

D/E ratio

400.0

4.74

350.0
283.1

300.0
250.0
0.32

0.52

0.42

0.52

0.60

148.6

150.0

50.0

0.0

59

240.7

1.74

50.0

244.1
213.9

1.05

187.7

200.0

100.0

0.86

1.68

50.0

44.4

34.4

50.0

126.2

192.5

50.0

95.9

100.0

64.2

20.0

15.1

25.0
17.0
22.2

58.8

68.3

68.6

73.7

17.0

16.5

22.5

24.9

35.3

25.5

40.6

26.6

17.8

08/3

09/3

10/3

11/3

12/3

13/3

14/3

15/3

16/3

17/3

35.1

173.0

165.2
102.3

161.6

5

Supplementary Data

12. Free Cash Flow Trend(Billions of yen)
60.0

47.6

42.4

40.0

37.0

29.3

22.0

43.4
34.1

27.0

30.7

30.0

17.0

20.0

5.2

13.4

20.0
9.9

0.0

(14.0)(20.0)(7.0)(10.0)(25.6)(36.4)(60.0)(30.2)(25.5)(30.6)(40.0)(43.6)(51.4)(56.5)(57.6)(60.6)(64.4)

FY11

FY12

FY13

(80.0)(88.5)(100.0)
FY07

FY08

FY09

FY10

Operating Cash Flow
60

Investing Cash Flow

FY14

FY15

Free Cash Flow

FY16

5

Supplementary Data

13. Polysilicon Market
Solar-cell grade Polysilicon Spot Price Trend(US$/KG)

25
24
23
22
21

100
90
80
70
60
50
40
30
20
10
2009/7/1

2011/7/1

2013/7/1

2015/7/1

20
19
18
17
16
15
14
13
12
11
10

2013/1/2

2013/7/2

2014/1/2

2014/7/2

2015/1/2

2015/7/2

2016/1/2

2016/7/2

2017/1/2

Source：PV insights

61

5

Supplementary Data

14. Scheme for Transferring Tokuyama Malaysia Shares
OCI Share

Tokuyama Share
TMSB
252 million shares (100%)

October 7, 2016

After the first allotment of newly
issued shares
50 million shares (Approx. 17%)After the issuance of new shares
252 million shares(Approx. 83%)

(Initial plan)
March 31, 2017

After the second allotment of
newly issued shares
260 million shares (Approx. 51%)

After the second allotment of
newly issued shares
252 million shares (Approx. 49%)

After the transfer if TMSB
512 million shares (100%)After TMSB receives payment for thesecond third-party allotment from OCI,
Tokuyama will transfer all of its shares in
TMSB to OCI(New plan)
May 31, 2017

*TMSB: Tokuyama Malysia

62

Disclaimer
This material is supplied to provide information of Tokuyama and its Group
companies, and is not intended as a solicitation for investment or other actions.

This material has been prepared based on the information currently available andinvolves uncertainties. Tokuyama and its Group companies accept no liability inrelation to the accuracy and completeness of the information contained in thismaterial.
Tokuyama and its Group companies assume no responsibility whatever for any
losses or deficits resulting from investment decisions based entirely on projections,numerical targets and other information contained in this material.
Accordingly, the information on this material may not be used, reproduced, altered,
distributed, sold, reprinted or published without the prior approval of the Company.