New Mid-term Management Plan

ZEON CORPORATION
Kimiaki Tanaka
President
October 31, 2017

Phase III

Contents

1. 2Q of FY2017 Results and Business Environment
2. Business Topics

2©ZEON CORPORATION. All rights reserved.

Consolidated Result
Earnings forecast for FY2017 revised upward (Specialty Materials Business expands)
Net sales
JPY (Billions)

Consolidated Results by Segment

Operating income
JPY (Billions)

Net sales: Others
Net sales: Elastomers

178.9

168.0

166.2

189.0

Operating income:Elastomers

188.8
98.4

Operating income:Specialty materials

82.0
70.9
2014Result

Net sales: Specialtymaterials71.0
2014
Result75.0
2014
Result36.0

43.1

1H/2017
InitialForecast

1H/2017
Result77.0

85.0

2017
InitialForecast

2017
RevisedForecast©ZEON CORPORATION. All rights reserved.

Operating income: Total

3

Business Environment Outlook
Butadiene prices fall from highs at the end of FY2016 and synthetic rubber
follows decline
Natural Rubber, Synthetic Rubber and BD Markets
Crude oil price(USD/Barrel)

BD price(USD/t)Natural rubber

NBR market inSoutheast Asia (ICIS)
Butadiene
ブタジエン
Crude Oil Brent (ICE)
April
2015

October
2015

April
2016

October
2016

April2017

September
2017

原油

Natural rubber market: Singapore Commodity Exchange contract price for RSS #3 grade rubber (source: Monthly Statistics Report for Synthetic Rubber)
NBR market: CFR Southeast Asia (source: ICIS)
Spot BD: CFR Southeast Asia (source: IHS)
Crude oil (ICE Brent) (source: IHS)

4©ZEON CORPORATION. All rights reserved.

SZ-20 Phase III: Groupwide Strategy

SZ-20 Phase III: Groupwide Strategy

Growth

1. Reinforce the combined strengths of the Zeon Group.
Explore ways of going beyond boundaries and collaboratingwith external players to provide solutions globally as acontribution to society.
2. Accelerate the pace of new business creation and productdevelopment in key development areas: the global
environment, smart devices, and health and living.

Culture3. Cultivate a corporate culture that places value on taking
proactive action by harnessing diverse ideas and trying them.

5©ZEON CORPORATION. All rights reserved.

Phase III: Strategy by Business Segment
Strategy by Business Segment
Elastomer Business• Reinforce competitive businesses by responding globally togrowth markets and raising cost effectiveness.
• Explore new opportunities and achieve growth based on thetrust built in the market and relationships with customers.

Specialty Materials Business• Expand business in step with the speed of market growth andtechnological progress through focused investment ofresources and stronger collaboration with outside players.

6©ZEON CORPORATION. All rights reserved.

Phase III: Strategy by Business Segment
Strategy by Business Segment
ElastomerBusinessエラストマー素材事業•・成長市場へのグローバルな対応とコスト競争力強化によって、Reinforce competitive businesses by responding globally togrowthmarkets and raising cost effectiveness.
強みを発揮できる事業を更に深化させる。
•・蓄積してきた市場からの信頼とお客様との関係を活かして、
Explore new opportunities and achieve growth based on the
新たな可能性を探索し、成長に繋げる。
trustbuilt in the market and relationships with customers.

Specialty Materials Business• Expand business in step with the speed of market growth andtechnological progress through focused investment ofresources and stronger collaboration with outside players.

7©ZEON CORPORATION. All rights reserved.

SSBR: Completed Construction of Oil Extension Facility

ExploreBusiness to be expanded while production allocation being optimized
 Production transfer of oil-extended rubbers in sales volume zone is in process.
The advanced S-SBR products range meets the customers’ requirement for safe andfuel efficiency driving in the growing tire industry.
 Basic function
 Tokuyama Plant: Manufacture proprietary products and develop new products.
 Singapore Plant: Few varieties mass production.

SSBR Sales Forecast

148

153

128
100
Ceremony for safe operations(Zeon Chemicals Singapore Pte. Ltd. / Aug. 21 2017)

2017

Index: Figures are based on a scale
where the FY2017 forecast is 100.

2018

2019

2020
8

©ZEON CORPORATION. All rights reserved.

Asia Technical Support Laboratory (ATSL)

Solution

Technical Service for our customers in the fast-growing ASEAN region
 Full-featured laboratory offering compound design and testing assistance Opened in August 2017
 Provides technical support aligned with the specific needs of local automotive supply base Expands Zeon’s global footprint of technical centers to 5
Projected Annual Production of 4-Wheeled Vehicles(Millions of units)

4030

内燃機関

■ Internal combustion engine vehicles:
FY2015■ Internal combustion engine vehicles:
FY2022 (forecast)

EuropeU.S.A.
China

20

Japan

Singapore

100(Source: Marklines | 2015 | Edited by Zeon)

9©ZEON CORPORATION. All rights reserved.

Hydrocarbon Resin : Start Operation of Hydrogenation Facility

Reinforce

Respond to increase of market demand for odor reduction
Odor Launch low-odor grade applying hydrogenation system
 Diversify applications that require low-odor, low-VOC
properties (Sanitary products and Specialized tape,such as Insulation tape for automobiles)

800

Productivity

Adhesion/Compatibility

VOC

Heat stability
Competition:fullyhydrogenatedCompetition:
partiallyhydrogenatedZeon: nonhydrogenatedZeon:hydrogenatedQuality level for sanitary adhesive tapes
on a scale where partially hydrogenated resins are 3400100
2017

Index: Figures are based on a scale
where the FY2017 forecast is 100.

2018

2019

Sales plan for hydrogenated hydrocarbon resin (to 2019)

Hydrogenation facility based on proprietary technology(Operation begins in September 2017, Mizushima Plant)
10©ZEON CORPORATION. All rights reserved.

SIS: Business Expansion

Reinforce

Seek to expand the scope of business of Asymmetric SIS
 Properties of Asymmetric SIS
With ideal balance between excellent elasticity and the superior strength derived from thehigh-styrene structure, it makes possible to achieve a film thinness reduction (max. 50%)
compared to the conventional products.

648

408
248
100
2017

Index: Figures are based on a scale
where the FY2017 forecast is 100.

2018

2019

2020

Sales plan for Asymmetric SIS (2017–2020)
11©ZEON CORPORATION. All rights reserved.

Powder Slush Compounds

Solution

Completed first phase of construction at the Mexico Plant
Building a global production network in response to expanding markets
Powder slush compounds (PSC)

Global Production
 Japan 2,000 t
 China 2,400 t
 Mexico Phase 1: 1,200 t(production starts in June 2017)
Phase 2: 1,200 t (production to begin in2020 or later)• PVC-based powder compounds for slush molding• Superior design, moldability, and low-temperature
properties

PSC application: Automobile interior skins

PSC Sales Plan (Global)
181
145
125
100
2017

Index: Figures are based on a scale
where the FY2017 forecast is 100.

2018

2019

2020
©ZEON CORPORATION. All rights reserved.

Zeon Kasei plant opening ceremony in Mexico (June 6)
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Phase III: Strategy by Business Segment
Strategy by Business Segment
Elastomer Business• Reinforce competitive businesses by responding globally togrowth markets and raising cost effectiveness.
• Explore new opportunities and achieve growth based on thetrust built in the market and relationships with customers.

Specialty Materials Business• Expand business in step with the speed of market growth andtechnological progress through focused investment ofresources and stronger collaboration with outside players.

13©ZEON CORPORATION. All rights reserved.

Zeon Specialty Materials, Inc.

ExploreEstablishing a US base for specialty materials business in Silicon Valley
Responding with greater speed to market needs by setting up
a base in the center of the IT industry
 Business areas
1. Specialty Plastics (Cyclo Olefin Polymer)
2. Specialty Components (optical film)
3. Battery Materials (binders for Li-ion batteries)
4. Electronic Materials (insulators, resists, and etching gas)

 Opened in October 2017, to begin operations in January 2018

ZSM

14
©ZEON CORPORATION. All rights reserved.

COP Prototype Production ServiceSolution

Diversifying COP applications for medicine and biotechnology
 Launched a prototype production service formicrofluidic chips and other products

Microfluidic chip

A one-stop service offering everything from flat plate molding tomicrochannel cutting and bonding, allowing for low-cost, quick
delivery and small-lot sample production Adopting the concept of kotozukuri, the development ofadded value that goes beyond manufacturing
Low autofluorescence

Low protein
adsorption

Launched website for the Prototype Production
ServiceSuperior opticalproperties

High-transparency thermoplastic resin
Cyclo Olefin Polymer (COP)

Low water vapor
transmission

Low water
absorption

High purity
Low leaching

Precision molding

High heat
resistanceHigh chemical
resistance
15

High strength©ZEON CORPORATION. All rights reserved.

COP: New Grade for Optical Lens

Reinforce

Seeking expanded sales in the market for ADAS* Launched sales of ZEONEX®T62R, a new product for highly heat-resistant opticallens
T62R is a new grade with improved in deformation and yellowing properties for hightemperatures designed automotive sensing cameras.
Superior Heat Resistance

Forecast for Automotive Camera Module Market

T62R is less prone to thermal deformation and change in color tone

Number of automotive camera modules (1,000 units)

Glass-transition temperature

Sensing
Viewing

2015

New grade T62R

Conventional product
ZEONEX®E48R

Conventional product
ZEONEX®F52R

Color change after heat resistance test (125C, 1,000 hours)20162017

2018

2019

2020

Source: Fuji Chimera Imaging data, forecast for 2020 based on Zeon projections*ADAS= Advanced Driver
Assistance System16©ZEON CORPORATION. All rights reserved.

New Production Line of Retardation Film for LCD TV

Reinforce

To meet the rising demand due to increased TV size and resolution
LCD panel market expansion continues in terms of square meterage
Panel size
(Millions ofm2)

250

LCD Panel Shipments(by panel size in square meterage)(Millions of m2)

250

200

200

150

150

100

10050

Production Capacity* forRetardation Film for LCD TV
Sixth line begins operation

5002014 2015 2016 2017 2018 2019 2020
LCD TV
Notebook PC
Smartphone

0Desktop Monitor
Automobile Monitor
Smart Watch

2007200820092011

2015

2017

* Optes Inc.’s Himi Plant (nominal value)(Source: 30th and 31st IHS Display Japan Forum, January 2016) © 2016 IHS
17©ZEON CORPORATION. All rights reserved.

ZeonorFilm®: Developing for the OLED Markets

Reinforce

Entering the OLED market with a lineup of new materials
 Addressing the expected growth in the OLED marketby developing new retardation films (ZA, LC coating) expand sales of touch sensors and sunglass
readable materials developing the materials for foldable applications

Shipment(Millions of m2)

OLED Shipments

141210

OLED Schematic
ZF

Polarizer

ZD-U
PVA
λ/4 platePosi-C
Encapsulation/barrier film

OLED

Five New Materials
Film sensor material(also to be applied
under the polarizer)

Sunglass readable

864

Antireflection
Viewing angle
compensation

Retardation
film

Encapsulation material andbase film for barrier material

Three new materials (film sensor, sunglass readable, and barrierfilm) were adopted for use in products in FY2017.

202014

2015201620172018

2019

2020

OLED TVSmartphone
Head Mount Display(Source: IHS Display Japan Forum, July 2016)

Tablet18©ZEON CORPORATION. All rights reserved.

Specialty Materials for Li-ion Battery

Solution

Expanding business with wider product lineups
Salesof Zeon Battery Materials
ゼオンの電池材料売上

Zeon Products for Lithium-ion Batteries
GasketCathode active
material

Phase III Target

Net sales (index)

Sealant

targetAnode active
material

Conductive
additive
Anode

CathodeResultAnode binder

Cathode binder

Result+Estimate

ResultResultLithium-ion battery
sales amountCopper
foil

Al foilAluminumfoil(FY)

Active materialLayer

Separator

Binder for functional layer

Index: Figures are based on a scale where FY2013 is 100.
Source for market data: Report by B3, Inc., December 2016

Active materialLayer
Functional layer(heat-resistance separator)

19©ZEON CORPORATION. All rights reserved.

Specialty Materials for Li-ion Battery

Solution

Steadily increasing applications for the automotive industry
Electrification Policy of Major Automakers
VOLVO: All models will
be EV/HEV from 2019
Plans to electrify 25%of global sales by 2025

Five Key Cell Properties and Zeon Proposals
Binder for better
lithium-ion conductivity

Binder for longer
life batteries

Morecapacity
Plans to sell 25 modelsof EVs by 2025

Sets up JV tospeed up EVdevelopment

High rate

Longcycle life

Plans toelectrify 60%of global sales
by 2030

Plans to sell 13 models
of EVs by 2023
Compiled by Zeon based on※ 公開情報を基に当社作成
published information

SafetyPlans to sell more than
20 models of EV andFCV by 2023
Plans to electrify 30% ofglobal sales by 2022

Low cost

Binder which support
suppressing lithium deposition
20©ZEON CORPORATION. All rights reserved.

Accelerate new business creationand product development

Medical Devices

Growing sales of optical sensor-based FFR devices

 Zeon’s original FFR devices with optical fiber sensors are highly recognized forreliable blood pressure readings
 Targeting a 30% share of the Japanese market by FY2020
FFR market in Japan
and Zeon’s share16030%

140
120

10%

17%

100

Zeon products

8060

Products of othercompanies

402002016

2017

Left: OptoWire®, a guide wire with a vascularpressure measurement sensor
Right: OptoMonitor®, a monitor for invasive
intravascular pressure measurement

2020

Index: Figures are based on a scale where the FY2016 is 100.
Source: Catheter & Tube and IVR Market 2016 (Yano ResearchInstitute) and Zeon data.
21©ZEON CORPORATION. All rights reserved.

Accelerate new business creationand product development

Carbon Nanotube

Applications of ZEONANO™ SG101 and rubber compound
Results of R&D at the Zeon Sunarrow AIST CNT Composite Material Research Center(press released in Japanese by AIST in June 2017)
1. Developed a durable and highly safe O-ring
capable of maintaining its shape under hightemperatures
 Promising applications which require high thermal
resistance and durability in harsh environments(automobiles and chemical plants)

2. Electromagnetic shield created by applying acarbon nanotube-based coating Promising applications for electromagnetic
shielding required in diverse areas(automotive wire harnesses and robots, etc.)

Comparison between a new O-ringand a commercial product
SGCNT after high temperature heating(Electron microscopic image)
Heatedat 420°C for 3 hours (in420℃、3時間加熱(窒素ガス雰囲気）
N2 gas atmosphere)

左(開発品)、右(市販品)
Left: developed product

Right: commercial product

熱界面材料外観(SGCNT after sublimation of fluorine

Film covered in a water-based coating using anew SGCNT and shaped into a polyimide sheet

rubber in N2 gas atmosphere)
22©ZEON CORPORATION. All rights reserved.

Strengthening CompetitivenessProduction Innovation*

Continuing efforts forInnovation and Improvement

Intelligent manufacturing system
Operation Standardizations
Field Load Down
Unified Wording
Corporate Culture Reform*Production Innovation:
Daicel Production Innovation

Top-down approachZΣ Activities - monetary effect
JPY (Billions)ZΣ活動 効果額

Strengthening costcompetitiveness
Developing human resources
Reforming corporate culture
Bottom-up approachＺΣ Activities⋆ Cost reduction activities⋆ Small group activities

23©ZEON CORPORATION. All rights reserved.

SZ-20 Phase III

Enterprise Blueprint for 2020
Zeon makes the Future Today
through the Power of Chemistry.
Zeon will continue to contribute to the realization of customer dreams
and a prosperous society through employees’ individual growth.

Targeting consolidated net sales ofover 500 billion yen in FY2020
24©ZEON CORPORATION. All rights reserved.

SpeedDialogueSocialContribution
Mutual trust and confidence among Zeon members
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ZEON CORPORATION
Zeon’s plans, forecasts, and other data appearing in this presentation were calculated
based on information which was currently available and therefore includes risks anduncertainties. Actual results may differ depending on various factors.
Dept. of Corporate Communications, CSR Division
1-6-2 Marunouchi, Chiyoda-ku, Tokyo 100-8246, Japan
Tel: +81-3-3216-2747, Fax: +81-3-3216-0501
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