FYE March 2018
Second Quarter Financial Briefing
November 28, 2017

Copyright © 2017 NAGASE & CO., LTD.

Contents

 FYE March 2018 Second Quarter Results

P.3

 FYE March 2018 Earnings Projections

P.14

 Progress of Mid-Term Management Plan ACE-2020

P.21

 NAGASE Group Business in Greater China

P.24

 (Reference) Information by Segment

P.32

Copyright © 2017 NAGASE & CO., LTD.

FYE March 2018 Second Quarter
Results

Copyright © 2017 NAGASE & CO., LTD.

3

Consolidated Statements of Income
NAGASE achieved record highs for sales and all profit for the cumulative consolidated second quarter Net sales: Higher, mainly due to strong sales in all segments and the lower valuation of the yen Operating income: Higher, mainly due to operating profit growth and lower amortization of retirement
benefit accounting actuarial differences(100 millions of yen)
16/09

17/09

ChangeOrig. Forecast(full year)

Vs. PYNet sales

3,508

3,875

䠇366

110%

7,320

Gross profit

446

502

䠇55

112%

950

<GP ratio>

12.7䠂

13.0%

䠇0.2䠂

䠉

13.0%

SG&A expenses

374

376

䠇1

100%

759

Operating income

72

126

䠇53

174%

191

Ordinary income

74

138

䠇63

184%

209

Profit attributable toowners of the parent

46

87

䠇40

187%

125

US$ Exchange rate
(period average)@105.3@111.0@5.8devaluation@108

RMB Exchange rate
(period average)

@15.9

@16.4

@0.5devaluation@15.6(Foreign exchange rate impact on17/09 net sales and operating income results)
Net sales:䠇¥10 billion (approx.)
Operating income: 䠇¥280 million (approx.)

Copyright © 2017 NAGASE & CO., LTD.

(Per-yen exchange rate impact on net sales and operating income)
Impact of US$ /yen Impact of RMB/yen
Net sales¥1.5 billion (approx.) ¥7.4billion(approx.)
Operating income ¥20million (approx.) ¥250million(approx.)4

Net Sales by Region (Domestic, Overseas) Higher sales in Japan and every region overseas (overseas ratio of total sales 50.3%)
Domestic & Overseas Sales (100 millions of yen, %)Overseas Sales by Region (100 millions of yen, %)Greater China

Domestic(Left axis)

Overseas(Left axis)

Oversales Net sales
䠄Right axis䠅

Europe

49.0%

50.3%
50%
1,500

3,000

1,949

Other

99 (V:133%)
73 (V:140%)

1,718

3,500

74
52
140

170 (V:121%)

489(V:110%)

536

40%

1,718

(V:86%)

30%

2,000
1,500
1,000

Americas

1,949

4,000

2,500

ASEAN

2,000

1,000

20%

1,790

500

1,925

1,068

960

(V:111%)(V:88%)

10%(V:88%)

500
0

0%
16/09

0

17/09

16/09

17/09

V:Vs 16/09

Copyright © 2017 NAGASE & CO., LTD.

5

Net Sales: Two-Year Comparison (by Segment)
 Functional Materials: Higher sales, mainly due to improved sales of coating raw materials and urethane materials associated with higher productionof automobiles, improved sales of fluorochemicals for use in semiconductors, and the impact of our acquisition of Fitz Chem Corporation (U.S.
specialty chemicals distributor) and the addition of the company to our consolidated results
 Advanced Materials & Processing: Higher sales, mainly due to an increase of new business and improved sales of plastics in Japan and overseas
 Automotive & Energy: Higher sales, mainly due to increased sales of engineering plastics and car-electronics related products

Net Sales by Segment (100 millions of yen)
Functional Materials
Electronics
Life & Healthcare
4,000
3,500

3,508

Change in Operating Income by Segment (100 millions of yen)

Advanced Materials & Processing
Automotive & Energy
Others3,875Electronics
+31

421

412

Advanced
Materials &Processing

Automotive &+116

Energy627

3,000Functional
Materials

524
2,500

+8

+103

+106

657
625

3,875

2,000
1,500

OthersLife &-0
Healthcare

1,318
1,202

3,508

1,000
500

741

847

16/09

17/09

0

16/09

Copyright © 2017 NAGASE & CO., LTD.

17/09
6

Gross Profit: Two-Year Comparison (by Segment) Improved profit ratio (0.2% improvement), mainly due to increase in high-margin businesses in ourElectronics Segment and other businesses
Gross Profit by Segment(100 millions of yen)

600

Functional Materials
Electronics
Life & Healthcare

Change in Gross Profit by Segment(100 millions of yen)

Advanced Materials & Processing
Automotive & Energy
OthersLife &
Healthcare Others
+0
+3

502

Advanced
Materials &Processing
+12

446
110
400

Functional
Materials
+11

106
55

Automotive &Energy+11
Electronics
+16

43

1,510
128

1,565

502

1,400

112
1,230

200

1,110
114

446

126

67

78

16/09

17/09

0

1,000

16/09

17/09

Copyright © 2017 NAGASE & CO., LTD.

7

Operating income: Two-Year Comparison (by Segment) In addition to higher sales among all segments, growth of manufacturing subsidiaries in Electronics, Advanced
Materials & Processing, and other segments also had a positive impact.
 In addition to the preceding, lower amortization of retirement benefit accounting actuarial differences for the
Others/Corporate segment resulted in overall increase in operating income of ¥5.3 billion.
Change in Operating Income by Segment
Operating income by Segment (100 millions of yen)(100 millions of yen)
Functional Materials
Electronics
Life & Healthcare

Advanced Materials & Processing
Automotive & Energy
Others/Corporate

150

126

130

23

110
90

72
18
5

14

43

Others/Corporate+10

Automotive &Energy+9Electronics+11
Advanced
Functional Materials &Materials Processing+7+9Life &
Healthcare
+4

70

126

31
50
35
30

26

10

18

(10)
(30)

- 28
16/09

Copyright © 2017 NAGASE & CO., LTD.

26

72

- 17
17/09

16/09

17/09
8

Earnings at Major Consolidated Subsidiaries
 NAGASE & Co. recorded higher profits on a non-consolidated basis, mainly due to increased sales and a decrease inamortization of retirement benefit accounting actuarial differences Nagase Plastics Co., Ltd. recorded higher sales and profits, mainly due to the acquisition of new business and increased
sales of super engineering plastics to the electronics industry
Net Sales

Vs. PY

㻞㻘㻝㻥㻞

㻝㻜㻢䠂

㻞㻠

㻙䠂

Manufacturing
Companies

Hayashibara Co., Ltd.

㻝㻞㻝

㻝㻜㻞䠂

㻞㻢

㻝㻜㻣䠂

Nagase ChemteX Corporation

㻝㻞㻥

㻝㻜㻝䠂

㻝㻠

㻥㻜䠂

㻡㻝㻟

㻝㻝㻝䠂

㻡㻡

㻝㻞㻝䠂

Overseas Sales Domestic Sales(100 millions of yen)
Operating Income(Note 2)

Nagase Plastics Co., Ltd.

㻝㻣㻟

㻝㻝㻟䠂

㻠

㻝㻟㻟䠂

Nishinihon Nagase Co., Ltd.

㻟㻤

㻝㻜㻠䠂

㻝

㻢㻣䠂

Nagase Chemical Co., Ltd.

㻥㻝

㻝㻝㻤䠂

㻝

㻝㻜㻡䠂

㻠㻠㻢

㻝㻝㻝䠂

㻝㻞

㻝㻟㻣䠂

Nagase (Thailand) Co., Ltd.

㻝㻤㻟

㻝㻝㻣䠂

㻡

㻝㻠㻝䠂

Shanghai Hua Chang Trading Co., Ltd.

㻝㻥㻢

㻝㻝㻟䠂

㻡

㻥㻥䠂

Shanghai Nagase Trading Co., Ltd.

㻞㻝㻜

㻝㻞㻤䠂

㻠

㻝㻤㻥䠂

㻝㻘㻤㻠㻡

㻝㻝㻠䠂

48

㻝㻠㻠䠂

Company Name
ParentCompany

NAGASE & CO., LTD.

Companies

Total for manufacturing (Note 1)

Companies

Total for domestic sales (Note 1)

Total for overseas sales (Note 1)

Vs. PY*Note1: Totals for each category are simply the sums of each company. These sums do not equal consolidated figures.
*Note 2: Operating income does not reflect amortization of goodwill and depreciation of technology-based assets.

Copyright © 2017 NAGASE & CO., LTD.

9State of Two Major Manufacturing Subsidiaries
 Hayashibara: Higher sales and profits, despite decrease in AA2G™ sales, as the company recorded increased sales of TREHA™
in Europe. Newly introduced products made from high-function materials, including Hayashibara Hesperidin S and Fibryxa™,
also had a positive impact.
 Nagase ChemteX: Higher sales, despite sluggishness in certain businesses, as the company recorded strong sales in its
photolithography materials business. Operating income was slightly lower, mainly due to worsening product mix.

Hayashibara Co., Ltd.

Nagase ChemteX Corporation(100 millions of yen)

FYE09/16

FYE09/17

ChangeNet Sales

118

121

+2

102%

Operating
Income

24

26

+1

107%

FYE09/16

FYE09/17

Net Sales

127

129

+1

101%

Operating
Income

16

14

-1

90%

Vs. PY• Higher sales of TREHA™ due to improved sales in Europe andother overseas locations• Lower sales of AA2G™ due to lower performance overseas
although the sales increases to major customers achieved inJapan in response to the capture of inbound tourist demand, etc.
• Higher sales, supported by the introduction to the food industry
of products made from high-function materials, including
Hayashibara Hesperidin S and Fibryxa™
• Increased sales of pullulan for use in hard capsules and mouthrefreshing film for medical and health food uses

Copyright © 2017 NAGASE & CO., LTD.

(100 millions of yen)
ChangeVs. PY• Formulated Epoxy Resins Business recorded slightly lower sales.
While sales were strong to the heavy electrical and light electricalindustries, epoxy resin used for sealing electronic components
embedded in smartphones entered an inventory adjustment
period.
• Photolithography Materials Business recorded higher sales,
mainly due to new contracts, with associated market share gains,and improved customer capacity utilization• Performance Chemicals Business recorded lower sales, mainly
due to weak sales of conductive materials and other products for
the LCD industry• Bio Chemicals Business recorded level sales, mainly due to delays
in introducing new products
10Consolidated Balance Sheets Assets: Increase of ¥48.6 billion, mainly due to increases in accounts receivable and inventories, as well as rising investments in securities due togains in fair market prices
 Net assets: Increase of ¥13.9 billion, mainly due to profit attributable to owners of the parent of ¥8.7 billion and increase in net unrealized holding
gain on securities
 Shareholders’ Equity Ratio down 2.2 points to 52.5%
AssetsLiabilities and Net Assets (100 millions of yen)
17/03
Total current assets
Cash and time deposits

17/09

Change17/03

Change

3,212

3,577

䠇365

Total current liabilities

1,664

1,912

䠇247

398

442

䠇43

Notes and accounts payable

1,020

1,195

䠇174

Short-term loans andCurrent portion of bonds

416

473

䠇56

2,068

2,315

䠇247

Inventories

631

708

䠇77

Other

114

110

-3

Notes and accounts receivable

17/09

Other

227

244

䠇16

Total long-term liabilities

690

790

䠇99

2,095

2,217

䠇121

Long-term loans and Bonds

400

464

䠇63

Property, plant and equipment

676

684

䠇8

Net defined benefit liability

146

145

-1

Intangible fixed assets

407

434

䠇27

Other
(Deferred tax liabilities, etc.)

143

180

䠇36

1,011

1,098

䠇86

Total liabilities

2,355

2,702

䠇347

Investments in securities

945

1,034

䠇89

Total net assets

2,951

3,091

䠇139

Other

66

63

-3

Shareholders䇻equity

2,396

2,458

䠇61

Accumulated other comprehensive income

505

582

䠇76

Net unrealized holding gain on securities

476

538

䠇61

Total non-current assets

Investments, other assets

Total assets

5,307

䠇486

5,794

Translation adjustment

31

45

䠇14

Other

-2

-1

䠇1

Non-controlling interests

49

51

䠇1

Total liabilities and net assets

5,307

5,794

䠇486

Copyright © 2017 NAGASE & CO., LTD.

11

Consolidated Cash Flows Cash and cash equivalents up ¥4.0 billion, cash flows from operating activities of ¥6.5 billion (¥13.0 billion in profit before income taxes), frominvesting activities of ¥10.2 billion (¥6.0 billion in purchase of shares of subsidiaries resulting in a change in scope of consolidation), from financing
activities of ¥7.3 billion (increase of ¥13.2 billion in net borrowings, decrease of ¥10.0 billion in redemption of bonds), and the impact of translationdifferences
Cash Flows(100 millions of yen)
17/09

Net cash provided by (used in) operating activities

Net cash provided by (used in) investing activities

Main breakdown

16/09

Profit before income taxes 䠇130
Depreciation and amortization/amortization of goodwill䠇54
Working capital - 117
Income tax paid - 25

47

Purchases of property, plant and equipment - 34
Purchases of intangible fixed assets - 1-102 Purchases of investment in securities -3
Purchase of shares of subsidiaries resulting in change in scope of
consolidation - 60

- 52

65

Net cash provided by (used in) financing activities

Net increase in short-term loans payable䠇90
Net increase in commercial papers䠇70
73 Long-term loans(net payment/proceeds)䠇41
Redemption of bonds - 100
Cash dividends paid – 21

- 23

Effects of exchange rate changes on cash and cash
equivalents

4

- 20

Net increase (decrease) in cash and cash equivalents

40

- 48

Cash and cash equivalents at beginning of the year

397

Japan 254 ,Greater China 70 , ASEAN 35, Europe18 , Americas 5 ,Other 13429

Cash and cash equivalents, at end of the period

438Japan 262 ,Greater China 77, ASEAN 44 , Europe23 , Americas 11,
Other 13380

Copyright © 2017 NAGASE & CO., LTD.

12

Change in Working Capital Increase of ¥15 billion in working capital, mainly due to the impact of sales growth

Working Capital (100 millions of yen)
1,678

Accounts Receivable
2,068

1,829

Accounts Receivable
2,315㻵㼚㼢㼑㼚㼠㼛㼞㼕㼑㼟
631

㻵㼚㼢㼑㼚㼠㼛㼞㼕㼑㼟
708

Accounts Payable- 1,020

Accounts Payable- 1,195

17/03

17/09

Copyright © 2017 NAGASE & CO., LTD.

13FYE March 2018 Earnings
Projections

Copyright © 2017 NAGASE & CO., LTD.

14

FYE March 2018 Earnings Projections
Forecast calls for record high sales and profits Net sales: Higher, mainly due to overall continued strength, despite slowing expected in some businesses Operating income: Higher, mainly due to higher sales and an expectation of ¥300 million in amortization of retirement
benefit accounting actuarial differences (vs. income statement impact of +2.8 billion in the prior year).
(100 millions of yen)

17/03

18/03

Actual䠄䠄A䠅Previous Full Year
Forecast 䠄B䠅

Revised Full Year
Forecast䠄C䠅

Change䠄C-A䠅

Vs. PY䠄C/A䠅Net sales

7,223

7,320

7,710

䠇486

107%

Gross profit

915

950

1,000

䠇85

109%

<GP ratio>

12.7%

13.0%

13.0%

䠇0.3䠂

͸

SG&A expenses

764

759

765

䠇1

100%

Operating income

150

191

235

䠇84

156%

Ordinary income

163

209

255

䠇91

156%

Profit attributable toowners of the parent

103

125

160

䠇56

155%

US$ Exchange rate
(period average)@108.4@108.0@111.0@2.7

͸

RMB Exchange rate
(period average)

@16.1

@15.6

@16.4

devaluation

@0.3

͸

devaluation

Copyright © 2017 NAGASE & CO., LTD.

15

Net Sales Forecast (by Segment)Advanced Materials & Processing: Higher sales, mainly due to strong performance in plastics for the office equipment, game device, and electronics
industries, as we expand our business by working with new suppliers overseas and capture new business in Japan.
Automotive & Energy: Higher sales, mainly due to increased sales of engineering plastics through captured demand associated with theelectrification/electronification of automobiles, as well as strong sales of car electronics-related products

Net Sales by Segment (100 millions of yen)
Functional Materials
Electronics
Life & Healthcare

8,000

7,223

Change in Net Sales by Segment (100 millions of yen)

Advanced Materials & Processing
Automotive & Energy
OthersOthersAutomotive &-1
EnergyLife &+169
Healthcare
Electronics
-20
-53

7,710

Advanced
Materials &Processing+225
Functional
Materials
+165

829
849
6,000

1,299
1,129
1,224
1,277

4,000

2,426

2,652

2,000

7,710
7,223

1,535

1,701

17/03

03
18/03

0

Copyright © 2017 NAGASE & CO., LTD.

17/ 0318 /03(Forecast)

16

Operating Income Forecast (by Segment)
 Higher profit, mainly due to increased sales and an expected ¥300 million in amortization of retirement benefit accounting
actuarial differences (vs. income statement impact of ¥2.8 billion in the prior year).

Change in Operating Income by Segment(100 millions of yen)
Functional Materials
Electronics
Life & Healthcare

Change in Operating Income by Segment(100 millions of yen)

Advanced Materials & Processing
Automotive & Energy
Others/Corporate

Others/Corpor
ateLife &+12
Healthcare
Automotive & +6
Energy+14

235
40

Advanced
Materials &Processing
Functional+21
Materials
Electronics
+11
+18

240
30

150
190

33
82

15
140
63
90

235

72
50

40

150

41

53

-54

-42

17/03

18/03 (Forecast)

(10)
(60)

18/03(Forecast)

17/03

Copyright © 2017 NAGASE & CO., LTD.

17

Change in Operating Income(PY Actual vs. Initial Forecast vs. Revised Forecast)

We expect higher profits than initially forecast due a weak yen and strong demand in the electronics and automotive
industries. Further, we intend to create new businesses in our trading business under our ACE-2020 mid-term
management plan, while restructuring or withdrawing from unprofitable businesses to generate higher
manufacturing business profits.

Change in Operating Income by Segment (100 millions of yen)

Others/Corp
orate
Advanced Materials &Automotive &+18
Processing
Energy+13+6Functional
Electronics
Materials-5+2Life &
Healthcare+5

191

Others/Cor
Automotive &porateEnergy-6+8Advanced Materials &Processing
Life &+8 Electronics
Healthcare+24+1Functional
Materials
+9

180
139

148

188

184

235

156

150

17/03

Copyright © 2017 NAGASE & CO., LTD.

18/03
Previous Full Year Forecast

18/03
Revised Full Year Forecast
18Investment Results and Manufacturing Business Share

Investments and financing to bolster manufacturing function, R&D function, technical/information-related capacity, and global
networks will create proprietary/competitive advantages; improve business quality and corporate value.
Manufacturing Business Share (Net Sales)

14%(100 millions of yen)

Investment㻝㻘㻞㻜㻜㻌

㻻㼢㼑㼞㼟㼑㼍㼟㻌 㻹㼍㼚㼡㼒㼍㼏㼠㼡㼞㼕㼚㼓㻌㻯㼛㻚㻝㻘㻜㻜㻜㻌

㻹㼍㼚㼡㼒㼍㼏㼠㼡㼞㼕㼚㼓㻌㻮㼡㼟㼕㼚㼑㼟㼟㻌㻿㼔㼍㼞㼑㻝㻡㻑

Forecast㻰㼛㼙㼑㼟㼠㼕㼏㻌㻹㼍㼚㼡㼒㼍㼏㼠㼡㼞㼕㼚㼓㻌㻯㼛㻚

21.4billion

㻝㻜㻑

㻤㻜㻜㻌
㻢㻜㻜㻌

㻡㻑

㻠㻜㻜㻌

18/03Second
Half Forecast㻝㻜㻚㻥㼎㼕㼘㼘㼕㼛㼚㻞㻜㻜㻌㻜㻑
(Forecast)㻝㻤㻛㻜㻟㻔ண㻕

㻜㻌
㻜㻥㻛㻜㻟

㻝㻜㻛㻜㻟

㻝㻝㻛㻜㻟

㻝㻞㻛㻜㻟

㻝㻟㻛㻜㻟

㻝㻠㻛㻜㻟

㻝㻡㻛㻜㻟

㻝㻢㻛㻜㻟

㻝㻣㻛㻜㻟

32䠂

Manufacturing Business Share (Operating Income)(100 millions of yen)㻻㼢㼑㼞㼟㼑㼍㼟㻌 㻹㼍㼚㼡㼒㼍㼏㼠㼡㼞㼕㼚㼓㻌㻯㼛㻚

㻤㻜㻌
㻢㻜㻌

㻰㼛㼙㼑㼟㼠㼕㼏㻌㻹㼍㼚㼡㼒㼍㼏㼠㼡㼞㼕㼚㼓㻌㻯㼛㻚㻡㻜㻑㻹㼍㼚㼡㼒㼍㼏㼠㼡㼞㼕㼚㼓㻌㻮㼡㼟㼕㼚㼑㼟㼟㻌㻿㼔㼍㼞㼑

㻠㻜㻑
㻟㻜㻑

㻠㻜㻌

Actual㻝㻜㻚㻡㼎㼕㼘㼘㼕㼛㼚

㻞㻜㻑

㻞㻜㻌

㻝㻜㻑

㻜㻌
㻜㻥㻛㻜㻟

㻝㻜㻛㻜㻟

㻝㻝㻛㻜㻟

㻝㻞㻛㻜㻟

㻝㻟㻛㻜㻟

㻝㻠㻛㻜㻟

㻝㻡㻛㻜㻟

㻝㻢㻛㻜㻟

㻝㻣㻛㻜㻟

㻜㻑
(Forecast)㻝㻤㻛㻜㻟㻔ண㻕

18/03

Copyright © 2017 NAGASE & CO., LTD.

19

Dividends
 Projected eighth consecutive period of dividend increases
 Current period: Projected annual dividend of ¥35 per share (¥2 increase YoY), representing a ¥17 interim dividend andan ¥18 year-end dividend䠄䠂䠅䠄䠂, yen䠅

45

1.6

40

1.4

35

1.2

30

1.0

25
0.8
20
0.6

15
10

0.4

5

0.2

0
Dividend per Share(left axis)
Payout Ratio(left axis)
DOE (right axis)

09/03

10/03

11/03

12/03

13/03

14/03

15/03

16/03

17/03

18/03
(Forecast)
䠄ணᐃ䠅

16

16

22

24

26

28

30

32

33

35

35.4

27.3

22.1

36.0

23.4

30.5

33.7

33.0

40.4

27.6

1.07

1.08

1.42

1.52

1.52

1.50

1.44

1.46

1.48

1.47

0.0

*18/03 year-end dividend to be submitted for approval to general meeting of shareholders scheduled for June 2018

Copyright © 2017 NAGASE & CO., LTD.

20

Progress of Mid-Term Management Plan ACE-2020
Accountability / Commitment / Efficiency

Copyright © 2017 NAGASE & CO., LTD.

21

Progress of Mid-Term Management Plan ACE-2020
 Allocate management resources to focus areas and regions via asset replacement
 Implement measures toward mindset reform

Expand and Strengthen Revenue Base
Relationship with KPIs
Focus Area

GlobalManufacturingz

Established MIANYANG CHENGHONG ELECTRONIC CHEMICALS CO., LTD
Steady supply of chemicals to the Chinese electronics market

另

另

另

z

Acquired Fitz Chem Corporation
Expanded channels into the specialty chemicals markets in the Americas

另

另

z

Approved establishment of heat-resistant PI film manufacturing and sales
company with Toyobo Co., Ltd.
Building a stronger flexible display panel business

另

另

z

Acquired DAITAI KAKO CO., LTD.
Entry into the downstream coatings market, expand R&D functionsz

Opened Bases of Operations in Lyon and Izmir
Expand market in Europe and Middle East regions

另
另

另

另

Reform Corporate Culturez Launched Nagase Business Expert Co., Ltd.

їWƵƌƐƵĞĞĨĨŝĐŝĞŶĐŝĞƐ

z Implement new HR system (FY2018)

ї,ZƚƌĂŝŶŝŶŐ

Copyright © 2017 NAGASE & CO., LTD.

22

Progress of Mid-Term Management Plan ACE-2020
㻾㻻㻱

Consolidated Sales㻛㻻㼜㼑㼞㼍㼠㼕㼚㼓㻌㻵㼚㼏㼛㼙㼑
Normalize 1.0 Trillion Yen or more/
30 Billion Yen or more

Consolidated Sales(100 Million Yen)

Normalize Over 6٫ at early stage

Consolidated Operating Income‫ق‬100 Million Yen‫ك‬

10,000300

ROE 䠄䠂䠅
8.0%


6.0%



5.3%



5,000

4.4%



0

150

4.0%

0

0.0%

3.7%

Copyright © 2017 NAGASE & CO., LTD.

23

NAGASE Group Business in Greater China
Executive Officer
Greater China CEO
Katsuhisa Yamaguchi

Copyright © 2017 NAGASE & CO., LTD.

24

Operation Network
Sales(No. of Bases)
Manufacturing/Processing(No. of Bases)
Planning/Services(No. of Bases)
No. of Employees

North
China

East China

Inland
China

South
China

Taiwan

Total

5

6

5

6

6

28

Manufacturing/Processing

6

3

2

11

Planning/Services

2

2

59

443

34

327

Sales

4
600

1,463

Tianjin and Other Regions in North China

Chongqing, Wuhan and Other Regionsin Inland China

Shanghai and Other Regions in East China

Taiwan, Xiamen and Other Regionsin the Taiwan Area

Hong Kong, Guangdong and Other
Regions in South China*Number of bases includes branches and offices*Number of employees represents total employees of consolidated subsidiaries by operating
erating base

Copyright © 2017 NAGASE & CO., LTD.

25

Mid-Term Management Plan ACE-2020 Sales Targets(100 millions of yen)

3,000

1,500

0
2013
(100 millions of yen)

2014

Net Sales Trends by Segment

2015

2016

(plan)
2017ぢ㏻䛧

ACE-2020(FY)

Sales Composition Ratio by Segment (ACE-2020)

3,000
2%
Functional Materials

7%

2,000
16%

Advanced Materials &Processing

1,000Electronics
26%

0
(FY)

49%

Automotive & EnergyLife & Healthcare*Net sales are simple sums (by location); accordingly, these figures differ from by-region sales figures published in our financial results.
*For ease of comparison, we have used the same foreign exchange rate for all fiscal year figures.

Copyright © 2017 NAGASE & CO., LTD.

26

Achieving Our ACE-2020 Mid-Term Management Plan
Business: Achieve the ACE-2020 KPI G6000 by delving deeper into four focus areas (stronger manufacturing/processing functions,cooperation with local partners) and priority policies (China-originated business tailored to local regional characteristics)
Management Platform: Management Pursue localization, while promoting a platform capable of supporting HQ management
functions
Reform of Corporate Culture: Expand diversity by promoting national staff to management and hiring external employees
Build a flexible and adaptive compensation system

Focus Area
Automotive
Semiconductors
DisplaysEnvironment and Energy,Life & Healthcare*Priority Development Fields:
Develop non-Japanese OEM customers, car electronics, EV*Priority Development Fields:
Taiwan, continental China, wafer substrates, circuit formation, rewiring, packaging*Priority Development Fields:
Flexible displays (OLED), LCD, car multimedia*Priority Development Fields:
Environment and Energy: PV, VOC response (measure, recover, concentrate,
combust, aqueous printing ink), soil modification
Life & Healthcare: Food additives and food materials from Hayashibara products*G6000: Key Performance Indicator under the ACE-2020 mid-term management plan (overseas group company net sales of ¥600 billion)

Copyright © 2017 NAGASE & CO., LTD.

27

Action Plans for Achieving ACE-2020- Focus Area: Automotive  High-function materials, precision plastic components for growing new energy vehicles market (XEV)
Existing Materials Business
Polypropylene
Engineering plastics
Super engineering plastics
General Components Business
Decorative materials
Plastic components
Car Electronics BusinessInverter components
Heat dissipation materials
Epoxy resin
Other high-function materials

•
•
•
•

Existingg Markets• Interior/eexterior
Japanese• Electronicccomponents• Lighting componentst

Net sales(RMB millions)

N A G A S E A U TO M O TI V E
BUSINESS IN CHINA([LVWLQJ&DU(OHFWURQLFV





N Energy Vehicles
New
Ne
Vehi
Market• Power system• Lib components
compo• Displaycomponents

ChineseEU/Americas
JapaneseResins Business: Engineering plastics, super engineering plastics
Increasing sales -- +28% annual average growthHigh-Function Materials: Heat dissipation materials, insulating
materials, specialty adhesives, etc. -- Nagase ChemteX Corporation
New Energy Vehicles: Compliance with Chinese environmental
regulations -- More experience in Japan
Production Platform: Work with local Chinese partners -- Group
corporate technologies

















(Forecast) (Forecast) (Forecast) (Forecast)

New Energy Projections

2025
5 million units
2030
10 million units

Introduction of NEV Regulations
Chinese OEMs most active
Japanese OEMs adopt EV&PHEV
Active development in
EU/Americas

2 million units
5% per gov’t policy
Entry of related
component makers(Forecast)(Forecast)(Forecast)(Source: China 13th Five-Year Plan (2016-2020))

Copyright © 2017 NAGASE & CO., LTD.

28

Action Plans for Achieving ACE-2020- Focus Area: Semiconductors  Strengthen group development and production functions ahead of MIC2025

Pre-processing

Photolithography Materials Business

Wuxi Chenghong Electronic Chemicals Co., Ltd.: Stableproduction of photolithography materials
Steady start-up of MIANYANG CHENGHONG ELECTRONICCHEMICALS CO., LTD.
(Both companies mainly produce stripping agents for LCDs)••

Intermediate Processing

Equipment Business

Use Demo Centers (Taiwan, Shanghai)Work with SiChip to expand nonelectrolytic metal
plating business••Shanghai Demo Center(Photo of Pac Tech GmbH)

Post-processing

Formulated Epoxy Resins Business••

Strengthen
h R&D& functions
fiExpand sales of proven liquid sealants for semiconductors

Signing ceremony between Pac
Tech and SiChip

Nagase ChemteX (Wuxi)
ͤMIC2025㸸Made In China 2025

Copyright © 2017 NAGASE & CO., LTD.

29

Action Plans for Achieving ACE-2020- Focus Area: Displays  Group manufacturing/processing company business in China, where OLED and LCD panel production plants are
expanding rapidly
Group Manufacturing/Processing Companies

OLED/LCD Panel Production Capacity (Top: Small
Panels; Bottom: Large Panels)(U
it 1
000 2)(Units:1,000m25,00020,000Company Name: MIANYANG CHENGHONG ELECTRONICCHEMICALS CO., LTD
Capital:20 million yuan
Investment:
Wuxi Chenghong Electronic Chemicals
Co., Ltd. 90%
Mianyang Isaacs Electronic Materials Co.,
Ltd.10%Business:
Production of chemicals for LCDs,
semiconductors
Company Name: Wuxi Chenghong Electronic Chemicals
Co., Ltd.
Capital:40 million yuan
Investment:
NAGASE Group 39%
Jiangyin Chengxing Industrial Group Co.,
Ltd.61%Business:
Production of chemicals for LCDs,
semiconductors

15,00010,000
5,000
0
2016

(NAGASE estimate)

2017(Forecast)

2018(Forecast)2019(Forecast)

2020(Forecast)(Unit: 15” x million panels/M)

140
Under
construction(Mianyang)

120
100
80
60
40
20
0
2016
(NAGASE estimate)

2017(Forecast)

2018(Forecast)2019(Forecast)

Copyright © 2017 NAGASE & CO., LTD.

2020

(Forecast)Company Name: Nagase Electronics Technology (Xiamen)
Co., Ltd.
Capital:
USD21.0 million
Investment:
NAGASE Group 100%
Business:
Chemical etching of liquid crystal glass
panel units

30

Action Plans for Achieving ACE-2020- Focus Area: Environment and Energy, Life & Healthcare -э VOC became subject to regulations and monitoringEx.) Shanghai City Local standards related to paint andink manufacturers

National
Regulation
Name

Shanghai City

1. VOC Emissions
Reduction andMonitoring System

Air Emission
Standard forIntegrated Emission
Manufacture ofStandard of Air
Paint, Ink, and Allied
Pollutants
Products

Standard(Year
Promulgated)

GB16297(1996)

DB31/881(2015)

Benzene12

1

Toluene40

10

Xylene70

20(Unit: mg/m3)

2. Printing Ink
Solvent э Water-based

1. Exhaust Treatment

մJanuary 1, 2016 Promulgation of the Air Pollution Control Act (Revised)

Online VOC
Measurement
Equipment

2. Aqueous Printing Ink

 Formulate sound business schemes and business models in the environmental field (VOC, soil, water treatment),
contributing to a better society through a record of success in functional materials, equipment, and systems forJapanese manufacturers, as well as NAGASE Group products.

Proposal of aqueous printing ink in
preferential policies encouraging
aqueous printing inks on soft packaging

VOC recovery,liquefaction
equipment
VOC concentration + regenerative
combustor

Proposal of zero VOC emissions
through the adoption of aqueous inkjet
printing systems
Proposal of wastewater treatment
facilities to treat wastewater fromprinter equipment cleaning(Source: Chinese and Shanghai City regulations)

Copyright © 2017 NAGASE & CO., LTD.

31

(Reference) Information by
Segment

Copyright © 2017 NAGASE & CO., LTD.

32

Functional Materials Segment
FYE March 2018 Second Quarter Actual<Net Sales/Operating Income by Location>(100 millions of yen)
FYE 03/17

FYE 03/18

Operating income

Net salesInterim Year Actual

Interim

Year
Forecast

Vs. PY

Vs. PYNet sales¥84.7 billion (114%)

 The Performance Chemicals Business recorded higher sales, mainly due
to increased sales of coating raw materials and urethane materials
associated with higher production of automobiles, as well as the impactof the acquisition of Fitz Chem Corporation (U.S. Specialty chemicals
distributor) and the addition of the company to NAGASE consolidated
results.

Domestic

㻣㻝㻠

㻝㻘㻠㻢㻤

㻣㻤㻡

㻝㻝㻜㻑

㻝㻘㻡㻢㻞

㻝㻜㻢㻑

Overseas

㻞㻝㻝

㻠㻡㻝

㻞㻣㻡

㻝㻟㻜㻑

㻡㻡㻢

㻝㻞㻟㻑

Eliminations

㻙 㻝㻤㻡

㻙 㻟㻤㻠

㻙 㻞㻝㻟

㻙

㻙 㻠㻝㻣

㻙

Total

㻣㻠㻝

㻝㻘㻡㻟㻡

㻤㻠㻣

㻝㻝㻠㻑

㻝㻘㻣㻜㻝

㻝㻝㻝㻑

 The Speciality Chemicals Business recorded higher sales, mainly due toincreased sales of fluorochemicals, electronics chemicals, and raw
materials for industrial oil solutions for the semiconductor and otherelectronics industries.

Domestic

㻝㻡

㻟㻟

㻝㻥

㻝㻟㻜㻑

㻠㻞

㻝㻞㻤㻑

Operating income

Overseas

㻠

㻥

㻣

㻝㻤㻥㻑

㻝㻟

㻝㻡㻡㻑

Higher profits due to higher sales.

Eliminations

㻙㻜

㻙㻜

㻙㻜

㻙

㻙㻟

㻙

Total

㻝㻤

㻠㻝

㻞㻢

㻝㻠㻟㻑

㻡㻟

㻝㻞㻣㻑

¥2.6 billion (143%)

FYE March 2018 Outlook‫ۍ‬We project higher fiscal year revenues and profits, as coating raw
materials and urethane materials sales perform well, while sales of*Figures above are a combination of consolidated entities by location.
Inter-region eliminations not reflected; adjustments provided in the eliminations
column. (Includes amortization of goodwill)

fluorochemicals to semiconductor and other electronics industry
segments perform similarly well.

Copyright © 2017 NAGASE & CO., LTD.

33

Advanced Materials & Processing Segment
FYE March 2018 Second Quarter Actual<Net Sales/Operating Income by Location>(100 millions of yen)
FYE 03/17

FYE 03/18

Operating income

Net salesaaInterim

Year
Forecast

Vs. PY

Vs. PYNet sales¥131.8 billion (110%)

 The Colors & Advanced Processing business recorded higher sales,
driven by growth in plastic resins for industrial and packaging
applications, dyes/additives, and digital print processing materials inJapan. Overseas, strong sales of print-related business products
contributed to higher overall performance.

InterimYear Actual

Domestic

㻣㻡㻡

㻝㻘㻡㻟㻠

㻤㻝㻟

㻝㻜㻤㻑

㻝㻘㻢㻠㻟

㻝㻜㻣㻑

Overseas

㻣㻞㻟

㻝㻘㻠㻢㻢

㻤㻜㻥

㻝㻝㻞㻑

㻝㻘㻢㻝㻡

㻝㻝㻜㻑

Eliminations

㻙 㻞㻣㻢

㻙 㻡㻣㻠

㻙 㻟㻜㻠

㻙

㻙 㻢㻜㻢

㻙

Total

㻝㻘㻞㻜㻞

㻞㻘㻠㻞㻢

㻝㻘㻟㻝㻤

㻝㻝㻜㻑

㻞㻘㻢㻡㻞㻌

㻝㻜㻥㻑

Domestic

㻝㻠

㻞㻤

㻝㻥

㻝㻟㻥㻑

㻟㻤

㻝㻟㻢㻑

Operating income

Overseas

㻝㻞

㻞㻞

㻝㻢

㻝㻟㻤㻑

㻟㻟

㻝㻡㻜㻑

 Higher profits due to higher sales and improved profitability at
manufacturing subsidiaries.

Eliminations

㻗㻜

䠇㻜

㻙㻜

㻙

㻙㻜

㻙

Total

㻞㻢

㻡㻜

㻟㻡

㻝㻟㻡㻑

㻣㻞

㻝㻠㻝㻑

*Figures above are a combination of consolidated entities by location.
Inter-region eliminations not reflected; adjustments provided in the eliminations
column.

 Our business selling plastics to office equipment, appliance, and video
game device markets recorded strong sales of new business-related
products, as well as strong sales of resins to the officeequipment/appliance and electronics markets in Japan. Overseas, thebusiness recorded higher sales across all regions, owing in part to workwith new suppliers.

¥3.5 billion (135%)

FYE March 2018 Outlook‫ ۍ‬We project higher sales and profits for the fiscal year. Sales of resin to
office equipment/appliance and electronics markets and the electronics
market are expected to continue to be strong in Japan during the second
half, while business overseas is expected to grow through work with new
suppliers.

Copyright © 2017 NAGASE & CO., LTD.

34

Electronics Segment
FYE March 2018 Second Quarter Actual<Net Sales/Operating Income by Location>(100 millions of yen)

Operating income

Net sales

FYE 03/17

FYE 03/18
Interim

Year
Forecast

InterimYear Actual

Vs. PY

Vs. PY

Domestic

㻢㻟㻤

㻝㻘㻞㻥㻣

㻢㻡㻜

㻝㻜㻞㻑

㻝㻘㻞㻞㻥

㻥㻡㻑

Overseas

㻟㻡㻟

㻣㻝㻞

㻟㻤㻡

㻝㻜㻥㻑

㻣㻝㻢

㻝㻜㻝㻑

Eliminations

㻙 㻟㻢㻢

㻙 㻣㻟㻞

㻙 㻟㻣㻥

㻙

㻙 㻣㻞㻞

㻙

Total

㻢㻞㻡

㻝㻘㻞㻣㻣

㻢㻡㻣

㻝㻜㻡㻑

㻝㻘㻞㻞㻠

㻥㻢㻑

Domestic

㻝㻥

㻟㻥

㻞㻠

㻝㻞㻝㻑

㻠㻤

㻝㻞㻞㻑

Overseas

㻝㻝

㻞㻟

㻝㻥

㻝㻢㻡㻑

㻟㻡

㻝㻠㻤㻑

Eliminations

䠇㻜

㻙㻜

㻙㻜

㻙

㻙㻜

㻙

Total

㻟㻝

㻢㻟

㻠㻟

㻝㻟㻣㻑

㻤㻞

㻝㻞㻥㻑

Net sales¥65.7 billion (105%)

 The Electronic Chemicals Business recorded higher sales due to anincrease of new business, as well as growth in photolithography material
and equipment-related sales. The business also recorded strong
performance of formulated epoxy resins for the electric and electronics
industries.
 The Electronic Materials Business recorded lower sales, despite higher
sales of display-related products, as sales of processed materials fell due
to smartphone model changeovers.

Operating income¥4.3 billion (137%)

Higher profits due to higher sales.

FYE March 2018 Outlook‫ ۍ‬We project lower sales for the fiscal year. During the second half of the year, sales offlexible display panel-related products are expected to increase, while photolithographymaterial sales should increase in response to improved customer capacity utilization andnew business. Glass thin processing business in China should continue to perform well.
However, lower sales for certain electronic components and materials are expected todrive performance lower for the business as a whole.

*Figures above are a combination of consolidated entities by location.
Inter-region eliminations not reflected; adjustments provided in the eliminations
column. (Includes amortization of goodwill)‫ ۍ‬We project higher profits due to improved profits at our manufacturing businesses andimproved product mix.

Copyright © 2017 NAGASE & CO., LTD.

35

Automotive & Energy Segment
FYE March 2018 Second Quarter Actual<Net Sales/Operating Income by Location>(100 millions of yen)

Net sales

FYE 03/17

FYE 03/18
Interim

Year
Forecast

InterimYear Actual

Vs. PY

Vs. PY

Domestic

㻞㻢㻠

㻡㻤㻠

㻟㻝㻢

㻝㻞㻜㻑

㻢㻣㻟

㻝㻝㻡㻑

Overseas

㻟㻢㻜

㻣㻡㻢

㻠㻝㻢

㻝㻝㻢㻑

㻤㻠㻥

㻝㻝㻞㻑

Eliminations

㻙 㻝㻜㻜

㻙 㻞㻝㻝

㻙 㻝㻜㻢

㻙

㻙 㻞㻞㻠

㻙

Total

㻡㻞㻠

㻝㻘㻝㻞㻥

㻢㻞㻣

㻝㻞㻜㻑

㻝㻘㻞㻥㻥

㻝㻝㻡㻑

Domestic

㻙㻡

㻙㻠

㻞

㻙

㻡

㻙

Overseas

㻥

㻞㻜㻌

㻝㻞

㻝㻞㻢㻑

㻞㻠

㻝㻞㻟㻑

Eliminations

䠇㻜

㻙㻜

㻙㻜

㻙

㻙㻜

㻙

㻡

㻝㻡

㻝㻠

㻞㻣㻣㻑

㻟㻜

㻝㻥㻡㻑

Net sales¥62.7 billion (120%)

The Automotive Solutions Business recorded higher revenues
overall. Sales of engineering plastics were higher due tocaptured demand associated with theelectrification/electronification of automobiles. Sales of car
electronics-related products were likewise strong.

Operating income

Operating income

Total*Figures above are a combination of consolidated entities by location.
Inter-region eliminations not reflected; adjustments provided in the eliminations
column.

Copyright © 2017 NAGASE & CO., LTD.

¥1.4 billion (277%)

Higher profits due to higher sales and improved profitability at
manufacturing subsidiaries.

FYE March 2018 Outlook‫ ۍ‬We project higher sales and profits for the fiscal year, as
automobile production is expected to continue to be strong
throughout the second half of the year. Further, we expect tosee strong sales of engineering plastics, owing to the additionof new business.
36

Life & Healthcare Segment
FYE March 2018 Second Quarter Earnings<Net Sales/Operating Income by Location>(100 millions of yen)
FYE 03/17

Operating income

Net salesInterim

FYE 03/18

Year Actual

Interim

Year
Forecast

Vs. PY

Vs. PY

Domestic

㻠㻥㻣

㻝㻘㻜㻝㻤

㻠㻥㻣

㻝㻜㻜㻑

㻥㻥㻠

㻥㻤㻑

Overseas

㻡㻞

㻝㻝㻡

㻢㻠

㻝㻞㻠㻑

㻝㻝㻞

㻥㻣㻑

Eliminations

㻙 㻝㻟㻣

㻙 㻞㻤㻠

㻙 㻝㻠㻜

㻙

㻙 㻞㻣㻣

㻙

Total

㻠㻝㻞

㻤㻠㻥

㻠㻞㻝

㻝㻜㻞㻑

㻤㻞㻥

㻥㻤㻑

Domestic

㻟㻟

㻢㻞

㻟㻢

㻝㻜㻥㻑

㻢㻤

㻝㻜㻥㻑

Overseas

㻜

㻝

㻝

㻥㻠㻟㻑

㻞

㻞㻜㻥㻑

Eliminations

㻙 㻝㻡

㻙 㻟㻜

㻙 㻝㻡

㻙

㻙 㻟㻜

㻙

Total

㻝㻤

㻟㻟

㻞㻟

㻝㻞㻢㻑

㻠㻜

㻝㻞㻜㻑

Net sales¥42.1 billion (102%) Sales of TREHA™ and other products to food ingredient makers in our Life &Healthcare Products Business were level, while sales in Europe and otherregions overseas grew. Although the business recorded lower sales of
AA2G™ to major customers in the skin care and toiletries field overseas,
sales to major customers in Japan were higher. In the medical andpharmaceutical field, sales of pharmaceutical raw materials andintermediates and medical materials were level with the year-ago period,
while sales of pharmaceutical business products were lower, resulting inslightly higher sales for the Life & Healthcare Products Business.
 The Beauty Care Products business recorded lower sales, driven down due
to weak performance across all product categories.

Operating income¥2.3 billion (126%)

Higher profits due to higher sales.

FYE March 2018 Outlook‫ ۍ‬We project lower sales for the fiscal year. Sales of TREHA™ should be level with the first half of theyear, and sales of Fibryxa™, Hayashibara Hesperidin S, and other products using high-function*Figures above are a combination of consolidated entities by location.
Inter-region eliminations not reflected; adjustments provided in the eliminations
column. (Includes amortization of goodwill and technology-based assets)materials should be higher. However, declining sales of pharmaceutical raw materials andintermediates to the medical and pharmaceutical field should drive overall performance lower.
‫ ۍ‬We project higher profits due to improved product mix and other factors.

Copyright © 2017 NAGASE & CO., LTD.

37

https://www.nagase.co.jp/english

These presentation materials contain forward-looking projections based on assumptions, forecasts, andplans as of November 28, 2017. Actual earnings may differ from projections due to risks and uncertainties
in the future global economy, competitive landscape, currency exchange rates, etc.

Copyright © 2017 NAGASE & CO., LTD.