Investors’ Meeting for Current Priority Management Issues and Business Strategy
Q&A Summary
Date and time:
Presenter:

Wednesday, December 2, 10:00 to 11:15 a.m.
Masakazu Tokura, President

Entire company
Q. In the current Three-Year Corporate Business Plan for fiscal 2013 to 2015,
you have achieved significant results in enhancing the company’s financial
strength and have also made progress in business restructuring. In therestructuring of your methyl methacrylate (MMA) business and thedevelopment of next-generation businesses, however, challenges still seemto remain. What do you think of this?
A. Regarding business restructuring, two issues remain in the bulk chemicals
area. In our caprolactam business, we closed our liquid-phase process plant,
but we have continued operations at our plant that uses our proprietaryenvironmentally-friendly vapor-phase process technology. While thebusiness environment for caprolactam remains tough, we expect inquiries
from customers who want to introduce our unique vapor-phase processtechnology. We are working to improve this technology further.
As for our MMA business, the competitiveness of MMA monomer isimportant. Our isobutylene direct oxidation method is cost-competitive
when using isobutylene as raw material. In the Rabigh Phase II Project, aplant using this technology is now under construction. Sumitomo ChemicalSingapore produces MMA monomer by using MTBE as raw material, but arise in MTBE prices has reduced its cost competitiveness. Because of this,we continue to seek means to secure MTBE at low cost. We are also working
on the development of new applications for MMA, which is a material withexcellent properties.
As for the development of next-generation businesses, the large-screentelevision market, a main target market for our polymer OLED technology,
has been slow to take off. Our polymer OLED technology is a very
important basic technology that has a broad range of possible applications,such as lighting, solar cells, biosensors and organic semiconductors. We willcontinue to improve our polymer OLED technology, aiming forcommercialization of various related businesses.

Q. You said your company will continue to be very selective about yourinvestment for the next Three-Year Corporate Business Plan. Do you plan
to take more risk through M&A?
A. We have rigorously selected investment opportunities, and will continue todo so. We would like to limit our normal investment to levels slightly
exceeding depreciation costs. Separately from normal investment, we wantto make strategic investments, and will consider M&A for suchinvestments.
For the development of next-generation businesses, we intend to carry out
small and medium-scale M&A to supplement our own technologies andother resources in order to accelerate the commercialization process.
We will also aggressively pursue opportunities for large-scale M&A in orderto significantly expand our business in the life sciences field, where we havestrengths. At present, no investment has been decided yet.
To make large-scale investments flexibly, we will continue to enhance ourfinancial strength.
Q. Your operating income and ordinary income for the current business year
are both expected to exceed your estimates announced earlier. What are
your earnings forecasts for the next fiscal year? What are your predictions
for trends in your main businesses for the next fiscal year?
A. In fiscal 2015, the business environment has been good not only for us but
also for the entire petrochemical industry. Profit margins on petrochemical
products have declined in Asia since September and October, but we don’t
think that margins will drop to the levels experienced around 2012. Pricesof methionine were higher during the first half of fiscal 2015 and areexpected to stabilize at slightly lower levels. In the specialty chemicals field,
sales of IT-related chemicals, crop protection chemicals, andpharmaceuticals are expected to expand. The business environment for
fiscal 2016, the first year of the next Three-Year Corporate Business Plan,needs to be carefully watched.
Q. As you will complete business restructuring in the current fiscal year, there
will be no extraordinary losses related to restructuring from the next fiscal
year, and net income is expected to increase. You said you are targeting adividend payout ratio of 30%. Can we expect a larger dividend for the next
fiscal year?
A. Based on stable dividend payments, we would like to return profits
appropriately to shareholders and other stakeholders.

OLED-related Specialty Chemicals
Q. The use of OLED displays is expected to spread. How will it affect yourtouchscreen panels and polarizing film businesses? When do you plan tobegin commercialization of polymer OLED?
A. As for OLED displays, which are often in the news these days, the businessenvironment differs by application, such as uses in smartphones andtelevisions.
The global smartphone market is estimated at 1.4 billion to 1.5 billion units,of which more than 200 million units use OLED displays. Our touchscreen
panels, both glass-type and film-type products, have benefited fromincreasing demand for OLED displays. A major smartphone manufacturer
is reported to adopt OLED displays, but supply is limited, so production
capacity needs to be increased to meet the manufacturer’s demand.
We supply glass-type touchscreen panels to an OLED display manufacturer,
and we expect this business will grow further. As OLED displays are inlimited supply, the major smartphone manufacturer may adopt
higher-value-added flexible displays. In that case, demand for our film-type
touchscreen panels is expected to rise.
We also supply anti-reflection circular polarizing films for OLED displays,
so demand for our circular polarizing films is also anticipated to grow. For
flexible displays, we produce touchscreen panels, and we are also developing
window film and barrier film.
As OLED is a new technology that is high in added value, including
OLED-related components, an increase in the use of OLED displays for
smartphones will benefit us.
We will further focus on the development of our polymer OLED technology,
which is expected to be used for medium-sized OLED displays for tablet andnotebook PCs as well as large-sized OLED displays for televisions.
As anticipated, production of liquid crystal displays (LCDs) is increasing inChina, which is expected to become the world's largest manufacturer ofLCDs. Amid the increase in LCD production in China, display
manufacturers are accelerating their shift toward OLED technology. We
have a wide range of OLED-related businesses. such as polymer OLED,touchscreen panels, window films and barrier films. We view the expansionof the OLED display market as a good opportunity.

Q. What components do you aim to supply for flexible displays? Are you
developing four films--two barrier films, one touchscreen panel and one
window film?
A. We have been developing all of them, and we have already launched ourflexible touchscreen panel. To commercialize flexible display materials, weneed to develop new materials, such as a film with high barrier properties.
Organic-inorganic hybrid technology is a basic technology for developing
new materials. We think flexible display materials are an area where wehave our strengths as a materials manufacturer. We want to expand thisbusiness by offering a set of components.
Other Specialty Chemicals
Q. What is the projected scale of the CO2 separation membrane business inthe future?
A. It depends on whether we will sell our CO2 selective membrane system or
only lease the CO2 separation membrane. Assuming that we sell the CO2
selective membrane system to domestic chemical plants, the scale of thebusiness is estimated at 10 billion yen. After the full-fledged takeoff of thecarbon capture and storage (CCS) market, the scale of this business isexpected to be larger.
Q. Slide 30 of the presentation material shows methionine demand-supplybalance. We are concerned that an increase in supply may be larger thanthat shown in the slide, amid news reports on capacity expansion plans bycompetitors. Will you increase your production capacity, as alreadyreported?
A. It was reported that we plan to build a new plant, but it was not ourannouncement. The dotted line in slide 30 indicates supply capacity
expected earlier. Actual supply situations are shown by a bar graph, andsupply growth has been lower than expected. Competitors are reported tobe planning to increase their production capacity from 2017 to 2020. If all
their plans are realized, supply-demand conditions are expected to soften
temporarily. Demand for methionine is expected to grow sharply, andsuppliers are limited due to a complicated manufacturing process. We havea competitive manufacturing process, and we want to consider significantly
increasing our capacity by taking advantage of that strength.
Q. When do you plan to decide on a new methionine plant?
A. When boosting production capacity, we want to decide quickly due to a longconstruction period.

Q. A South Korean manufacturer is reported to supply lithium-ion secondary
batteries to a U.S. maker of electric cars. Do all the lithium-ion secondary
batteries supplied to the U.S. maker use your separators?
A. Regarding this news, we think it will have no influence on our separator
business and Gigafactory-related business. As cost competitiveness isimportant in this field, we will continue to work diligently on technology
development.
Q. What is the current status regarding your businesses of diesel particulate
filters (DPF), solution styrene-butadiene rubber (S-SBR), and high-purityalumina? Demand for high-purity alumina for use in sapphire glass isexpected to grow strongly for the next fiscal year. What is your opinion?
A. Our DPF has been adopted by a European carmaker, and shipments havealready started. We don’t think the diesel car market will shrink sharply,
but we must closely watch how the diesel emissions scandal affects themarket. New technologies will be required in the future, and we, as a
newcomer in the DPF business, want to turn the current crisis into anopportunity.
As for S-SBR, we worked with a major customer on the development ofS-SBR, and started a manufacturing plant with an annual production
capacity of 40,000 tons. We already began supplying S-SBR to the major
customer, but we have made slow progress in acquiring new customers. We
are placing emphasis on finding new customers, and aim to bring the plantto full operation as soon as possible.
Regarding high-purity alumina, we doubled the production capacity of ourEhime Works and also built a new plant in South Korea. Demand forhigh-purity alumina used in coatings for battery materials and in LEDsapphire substrates is expanding. With the increasing range of uses,
demand for high-purity alumina is anticipated to grow steadily, and weexpect our plants will operate at full capacity in two to three years.

Bulk Chemicals
Q. In the Petrochemicals & Plastics Sector, do you aim to increase licensing
revenues?
A. So far, we have used our technologies for our Group’s operations. From now
on, we will license our technologies to other companies if it will not affectour businesses. We recently licensed our technologies of manufacturing
polypropylene (PP) and propylene oxide (PO) to S-OIL Corp. of South Korea,
and we believe it will not affect our operations. Our PO production
technology is based on a PO-only process, where PO alone is manufactured
without generating coproduct of styrene monomer. As our proprietary
PO-only production technology is environmentally friendly, we havereceived many inquiries from companies other than S-OIL.
Q. Petro Rabigh’s earnings are expected to be low in fiscal 2015 due to theinfluence of periodic plant maintenance and inventory valuation losses. Do
you expect earnings to recover in fiscal 2016?
A. Petro Rabigh posted a large amount of inventory valuation losses in fiscal
2015 due to a sharp fall in crude oil prices. In fiscal 2016, if oil prices
stabilize, there will be no valuation loss. Margins on ethane declined due toa drop in oil prices, but refining margins are high. In the Rabigh Phase IIProject, plants are expected to start operations one after another from fiscal
2016, and expenses are anticipated to exceed revenues at the beginning. Itis difficult to forecast Petro Rabigh’s earnings because it is not clear yet howinvestments will be capitalized or expensed.

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 Sumitomo
Chemical’s markets; demand for, and competitive pricing pressure on, Sumitomo Chemical’s
products in the marketplace; Sumitomo Chemical’s ability to continue to win acceptance for its
products in these highly competitive markets; and movements of currency exchange rates.