Creative Hybrid Chemistry
For a Better Tomorrow
目 次

Masakazu Tokura
President
December 20131

Contents

目 次

1. Overview of FY2013 Performance
2. Overview of Corporate Business Plan FY2013 - FY2015
3. Progress on Corporate Business Plan
(1) Restructure Business① Expand Specialty Chemicals Business② Restructure Bulk Chemicals Business(2) Enhance Financial Strength(3) Develop Next-Generation Business(4) Promote Globally Integrated Management(5) Ensure Full and Strict Compliance and Maintain Safeand Stable Operations

4. Shareholder Return2

Overview of FY2013
目 次 Performance3

FY2013 First Half Results目 次(Billions of yen)

FY2012.1H

FY2013.1H

Change961.4

1,050.8+89.4

Operating Income

24.5

46.3

+21.8

(Equity in Earnings ofAffiliates)

1.4

-1.3

-2.7

Ordinary Income

18.9

44.3

+25.4

Net Income

-13.1

12.5

+25.6

Naphtha Price¥55,200/kl¥64,800/kl

Exchange Rate

¥79.41/$¥98.86/$Sales

4

Outlook for FY2013

目 次(Billions of yen)

FY2012FY2013(Forecast)

Change1,952.5

2,230.0+277.5

Operating Income

45.0

105.0

+60.0

(Equity in Earnings ofAffiliates)

5.4

3.0

-2.4

Ordinary Income

50.3

100.0

+49.7

Net Income

-51.1

30.0

+81.1

Naphtha Price¥57,500/kl¥64,900/kl

Exchange Rate

¥82.91/$¥97.00/$Sales

5Overview of Corporate Business Plan
FY2013 - FY2015 目 次

6Priority Management Issues & Business Strategy
目 次
Since the Beginning of the Century

Priority
Issues

Major

Radically improve
competitiveness of
petrochemicals
business

Implementation of
Rabigh Project(includes ¥100.0 bn investment in phase 2)

Projects

Results:
Sales Increase
FY2000 vs. FY2012

Approx. ¥266.0 bn

Gain critical massin pharmaceuticals
business to achievestrong growth

Developnew businesses
with potential to
become corebusinesses

Launch ofDainippon Sumitomo Pharma& Acquisition of
Sepracor (Sunovion) in US

Establishment and expansionof
IT-related Chemicals Sector

Approx. ¥249.0 bn

Approx. ¥440.0 bn(equity investment and lending)(increased shareholding and acquisition)(cumulative capital expendituresin 12 years since inception)

Petrochemicals & Plastics
SectorPharmaceuticals
SectorIT-related Chemicals
Sector(¥375.5 bn ⇒ ¥693.9 bn)(¥156.7 bn ⇒ ¥378.6 bn)(¥60.2 bn ⇒ ¥300.0 bn)

Approx.

1.7 times

Approx.

2.3 times

Approx.

5.0 times7

目 次
Where We Have Been Heading
Last 10 Years

2 to 3 Years

Next 10 to 20 Years

Enhance financial strength
Pave the way for future growth

Improve
profitability

Rigorously
selectinvestments

Improveasset
efficiency(Tackle three priority management issues)

Restructure businesses
Implemented Rabigh Project

Launched DSP and
acquired Sepracor/BBI
Established and expanded ITrelated Chemicals Sector

Globalization

Exit
underperforming
businesses

Improvebusiness
portfolio

Develop new business
Environment
and EnergyLife Sciences

ICT

Promote globally integrated management

Ensure full and strict compliance and maintain safe and stable operations
8Performance Targets

目 次Targets for FY2015
Sales¥2,400 Billion

Operating Income¥140 Billion

Ordinary Income¥150 Billion(Equity in Earnings of Affiliates)¥25 Billion

Net Income¥90 Billion

Interest-Bearing Liabilities

Below ¥900 Billion【Assumptions】
Exchange Rate
Naphtha Price¥80 /$US¥60,000 /kl

Sensitivity of operating income to currency fluctuations is approximately ¥2.5 billion per year
for each one-yen change in the exchange rate of the yen against US$
9Cash Flow Targets

目 次
FY2010 – FY2012

FY2013 – FY2015

Corporate
Business Plan

New Corporate
Business Plan

(Result)(Target)Cash flows
from operating activities¥472.3 billion¥540 billion

Cash flows
from investing activities- ¥445.7 billion

Below - ¥400 billion（注）¥26.6 billion

Free cash flows*1

Over ¥200 billion（注）現預金等の減少を含む。

Note *1: Includes decreases in cash and cash equivalents

Interest-bearing liabilities

End of FY2012

End of FY2015(Result)(Target)¥1,060.6 billion¥900 billion

10Progress on Corporate
目 次 Business Plan

11

Restructure Businesses
目 次

12Restructure Businesses 目 次

ExpandRestructure

specialty chemicals
businessbulk chemicals
business

Improve business portfolio
13

目 次Characteristics by Business
Area
Specialty chemicals

Bulk chemicals

Product typeLow-volume; high-performance

High-volume; standardized

Competitive
advantage

Differentiation (originality)

Cost (economies of scale andfeedstock cost advantage)

Characteristics

High profitability; short life-cycle (ITrelated Chemicals); Large R&D
investment

Large markets; susceptible to change
in economic conditions

Growth potential

High

StableOperating Margin

Sales

Return on Investment（Billions of Yen）
1,200
1,000
800
600
400
200
0

1,110 1,170

1,155
1,070

2013 20152013 2015 （FY）
（Forecast）（Target）（Forecast）（Target）

Specialty

Bulk

12%
10%
8%
6%
4%
2%
0%
-2%

10.6%

9.7%

3.4%

-0.1%

2013 20152013 2015 （FY）
（Forecast）（Target） （Forecast）（Target）

Specialty

Bulk

12%
10%
8%
6%
4%
2%
0%
-2%
-4%

7.6% 7.3%

7.0%

-2.8%

2013 20152013 2015 （FY）
（Forecast）（Target） （Forecast）（Target）

Specialty

Bulk

14

次specialty chemicals businessRestructure Businesses：目
ExpandExpandRestructure

specialty chemicals
businessbulk chemicals
business

Improve business portfolio
15

目 Business
次
Three Specialty Chemicals
Sectors

Total of Three Business Sectors
Sales

IT-related Chemicals
SectorSales¥380.0 bn

Operating Income¥39.5 bn

Operating Margin

10.4%

Note: Forecasts for fiscal 2013

¥1,110.0 bn

Operating Income¥118.0 bn

Operating Margin

10.6%

Health & Crop Sciences
Sector
Sales¥320.0 bn

Operating Income¥37.5 bn

Operating Margin

11.7%

Pharmaceuticals
Sector
Sales¥410.0 bn

Operating Income¥41.0 bn

Operating Margin

10.0%

Further expand these sectors as main growth drivers16

目 次
IT-related Chemicals Sector
Features and advantages•

Major products: display materials such as polarizing
films, color filters and touchscreen panels•

Swiftly meeting customer needs by establishingproduction, sales and research bases in the places
where our major customers are located, such as
South Korea and Taiwan

Future growth drivers•

Increase in sales of polarizing films and touch
screen panels for small- and medium-sized displayson the back of strong growth in smartphone andtablet PC sales•

Improvement in profitability on polarizing films for
televisions by reducing costs

Trends in Sales and Operating Income（Billions of Yen）

Sales (left axis)

500.0

Operating Income (right axis)

300.0

435.0

380.0

400.0
322.3

Trends in Operating Margin（Billions of Yen）

293.1

300.0

39.5

34.0

26.1

60.0

50.0

*1

40.0

10.4%

30.0

7.8%

200.0
11.0

20.0

11.7

100.0

10.0

0.0
2010
Exchangerate¥85.74/$2011¥79.08$2012¥82.91/$

*2

2013

0.0
2015 （FY）（Forecast）（Target）¥97.0/$¥80.0/$

3.9%

2013（Forecast）

2012

2015
（Target）*1: Assumed exchange rate: ¥97.0/$*2: Assumed exchange rate: ¥80.0/$17Expand Sales of Polarizing Films
for Small- And目
次Medium- Sized Displays
Business strategy
Target market: high-performance displays

Smartphone and Tablet PC Demand(Million units)

2,000

Product strategy
Offer high-performance products to meetcustomer needs●Leading-edge panels→Offer products with higher performance(lightweight; thin; sturdy; wide viewing angle)●High-end and mid-range panels→Offer high-performance products at lower cost

1,800

Smartphone

Tablet PC

1,600

1,400
1,200
1,000

800
600
400

The growing demand for smartphones
and tablet PCs, which require highperformance polarizing films, offers us
great opportunity.

200
02012 2013 2014 2015 2016 2017
(Source: Display Search 2013/7)
18

目 次
Develop Touchscreen Panel
Business
Touch sensors for OLED panels
Capacitive on-cell touch sensor



Mainly used in smartphonesMay 2012
June 2013
Dec. 2013

Production capacity for touch sensors for OLED panels
Production capacity
×1.7

Production capacity
×1.9

Started production
Increased production capacity
Start a new production line
2012.2Q 2012.3Q 2012.4Q 2013.1Q 2013.2Q 2013.3Q 2013.4Q

Touch sensors for LCDs
 Capacitive, cover glass-integrated touch sensor
 Dec. 2013

Start production

 Initially supply touch sensors for tablet PCs
Touch sensor for the OLED panel

Develop the touchscreen panel business into the
IT-related Chemicals Sector’s new core business19

目 次
Health & Crop Sciences Sector
Features and advantages
•

•
•
•
•

Future growth drivers

Strong R&D capabilities and robust productpipeline
Product lines differentiated from major competitors
Global sales network built on the combination of
our own sales channels and alliances
Holding the largest market share in Japanese crop
protection chemicals, pharmaceutical chemicals
and other markets
Holding large shares in the global household
insecticide and methionine markets•

Achieve greater synergy with Nufarm and expand
alliance with major overseas players•

Expand into seed treatment and post-harvest
businesses•

Continuously launch new productsTrends in Sales and Operating Income（Billions of Yen）

Sales（left axis）

400.0

Operating Income（right axis）
320.0

300.0

250.8

264.1

262.6

350.0
45.0

37.5

200.0
100.0
23.3

26.5

26.3

2010

2011

2012

¥85.74/$¥79.08$¥82.91/$

60.0

2013

*1

11.7%

40.0

20.0
2015 (FY)(Forecast)(Target)¥97.0/$¥80.0/$

*2

12.9%

50.0

30.0

0.0

Exchange
rate

Trends in Operating Margin(Billions of Yen)

10.0%
2013
(Forecast)2015(Target)2012*1：Assumed exchange rate: ¥97.0/$*2：Assumed exchange rate: ¥80.0/$20

目 次Herbicide
Expand Sales of Flumioxazin
Expand collaboration with Monsanto
2010: Started collaboration in U.S.

World Soybean Production (2012/2013)
Others
20%

U.S.
31%

2013: Expanding collaboration in Brazil and Argentina
Production
Volumes
270 million tons

Expanding the collaboration inthese three markets, which produce
80% of the world soybean output

Argentina
18%

Brazil31%

Source: USDA

Decided to expand Flumioxazin production capacity


Increase Flumioxazin production capacity by
about 50% in stages from FY2014 to FY2015



Production capacity to triple by the end of
FY2015 from FY2011 year-end level

Flumioxazin Production Capacity
Production capacity
×2.0

End of
FY2011

Production capacity
×1.2
Production capacity
×1.2

End of
FY2012End of
FY2013End of
FY2014(Forecast） (Forecast)End of
FY2015(Target)21

Expand Crop Sciences Business
into Downstream
目 次
and Related Areas(New Business Areas)Seedtreatment(Existing Business Areas)

Cultivation, Pest control,
Fertilization

Post-harvest

Market size

Market size

US$4.5 bn (as of 2013), growing 10% per year

US$0.4-0.5 bn (as of 2013), growing 10% per year

Business

Business

Provide crop protection chemicals for seedcoating that improve crop yields (seedgermination rates) and help make farm work
more efficient

Provide products and services that are used
after harvest to help maintain the quality ofcrops

Initiative to expand business scope
Planning to expand sales area from North
America into other regions

Initiative to expand business scope
Acquired Pace International, a U.S. post-harvest
solution company, in December 2012

Expand into seed treatment and post-harvest businesses
22

Expand into Niche Areas

目 次(Plant Growth Regulators and Biological Pesticides)
Plant Growth Regulators

Overview of Valent BioSciences
Established:
Business:

In 2000 (acquired from Abbott Laboratories)
Production and sales of biological pesticides
and plant growth regulators

Shareholding: 100％ (subsidiary of Valent USA)
Headquarters: Illinois, USA
Sales regions: Over 90 countries worldwide

Market Size
US$800 Million
Business
Provide crop protection chemicals that
improve crop yields and quality
Initiatives to expand business scope
Expand into new areas such as rice andpasture grass; explore the expansion
into crop stress management

Biological Pesticides
Market Size
US$400 Million
Business
Provide natural, microbially-derived
pesticides that can be used in organic
farming
Initiatives to expand business scope
Constructing a plant to produce active
ingredients for biological pesticides (tobe operational in 2014)

Plant Growth Regulator

ProToneBiological Pesticide

Osage Plant

DiPel(Rendering)23

目 次 Chemicals
Pipeline of New Crop Protection
Launch year

2010-20122013-20152016-

Agricultural Insecticide

Agricultural Fungicide
2 A.I.s
Household Insecticide
1 A.I.

Agricultural Insecticide
1 A.I.
Agricultural Fungicide
3 A.I.s
Plant Growth Regulator
1 A.I.
Household Insecticide
2 A.I.s
Animal Health Product
2 A.I.s

1 A.I. (spinetoram)
Agricultural Fungicide

Products
launched/
to be launched

2 A.I.s(isotianil, fenpyrazamine)
Agricultural Herbicide
1 A.I.
(propyrisulfuron)(Note) A.I.: Active Ingredient

Trends in Sales of New Products(Billions of Yen)
40
30
20
10
0

2010

2011

2012

2013
2014
2015
(FY)
(Forecast)(Forecast)(Target)(Note) Sales of new products: Sales of crop protection chemicals and household insecticides launched (including new applications) within the past five years

24Pharmaceuticals Sector 目 次
Features and advantages•

Future growth drivers

Drug discovery platform in the areas of psychiatry &neurology and oncology, where there are significant
unmet medical needs•

New drug development capabilities and sales
network in the United States, the world's largest
pharmaceutical market•

Maximize earnings and realize further growth inoverseas business•

Enhance the product pipeline globally

Trends in Sales and Operating Income(Billions of Yen)
500.0

Sales（left axis）
Operating Income（right axis）

Sales of DSP（left axis）
Operating Income of DSP（right axis） 100.0

450.0

410.6
400.0

Trends in Operating Margin(Billions of Yen)

410.0

378.6
379.5 380.5
347.7
350.4

381.0

385.0

80.0

350.0

80.0

10.0%

70.0

300.0

(9.2%)

60.0
41.0

200.0

30.9

31.0

100.0

-%

90.0

28.7

35.0

20.9
25.0

50.0

35.0

40.0

30.0

20.4

30.0

8.2%

20.0

(7.2%)

10.0
0.0

0.0
2010

2011

2012

2013

2015

(Forecast)(Target)2017 (FY)(Target)2013(Forecast)(17.8%)

9.1%(8.6%)

2017(Target)2015(Target)2012
The figures in parentheses are the operating
margin of Dainippon Sumitomo Pharma
25

LATUDA:目
次
Obtained approval for additional indications for bipolar I disorder
Sales promotion for LATUDA
as bipolar disorder treatment

June 2013

Obtained approval for additional indications forbipolar I disorderJuly 2013

Started promotion

Sept. 2013

Launched full-scale promotion using sales promotion

2014.1Q(Millionsof US
dollars)

North America
Japan
OthersEuropeAsia

1,000materials



LATUDA Sales Projections

Start advertising including TV commercials

U.S. Market for Atypical Antipsychotic Agent (2012)(Billions of Yen)

5

500

364

4
202

3
86

2
1

0

2011

0
Bipolar disorder

Schizophrenia

Others

2012

2013

2015

2017

(Forecast) (Target)(Target)(FY)

Note: Data for sales of our business partners in Europe (exceptU.K.) are our estimate.

Source: 2013 IMS Health MIDAS. All rights reserved.
26

目Cell次 Drugs
Develop Anti-cancer Stem
Advantages of BBI608/503
BBI608 and BBI503, targeting both cancer
cells and cancer stem cells, are expected tohave an effect on drug resistance,
recurrence or metastasis of cancer

BBI608/503 Sales Projections（Millions of US dollars）

1,000

BBI503（Japan）

BBI503（North America）
BBI608（Japan）

Target Launch Year for BBI608

500

BBI608（North America）

U.S. & Canada: FY2015 (applications to be filed
in FY2014 at the earliest)

0
Japan:FY20162015

2017(Target)(Target)(FY)

Clinical Development
Product

BBI608BBI503

Target Indication

Phase 1

Colorectal (monotherapy)(international joint clinical trial)

U.S., Canada,
Japan and others

Colorectal (combo)

U.S. and Canada

Solid tumor (combo with Paclitaxel)

U.S. and Canada

Solid tumor (monotherapy)

U.S. and Canada

Phase 2Phase 3

Application** in Phase 2 of Phase 1/2 study27

次 bulk chemicals businessRestructure Businesses: 目
Restructure

ExpandRestructure

specialty chemicals
businessbulk chemicals
business

Improve business portfolio
28

目 次 Operations
Global Petrochemical
Ethylene production capacity by area
(Thousand tons)(Thousand tons)

2,000

Saudi Arabia
1,600

1,500

1,300

RabighPhase II
Project*

2,000
1,500
1,000

1,000

Japan
Restructure
domestic
operations
607

500

500
（Thousand tons）

0* Planning the
production of higher
value-added
petrochemicals using
3 million tons of
naphtha and 400
thousand tons of
ethane2,000Singapore0

Location

Japan

Advantage“Mother plant/laboratory,” leading the effort todevelop high value-added new technologies,
products and know-how

Priority

Restructure domestic operations (exitunderperforming businesses and restructure
production operations)

MeasuresShut down Sumitomo Chemical’s ethylene plantand procure ethylene from Keiyo Ethylene
Downsize/exit underperforming businesses

Ｏｖｅｒ
404

1,500
1,090

1,090

1,000
500
0

Location

Saudi Arabia

Advantage

Robust cost competitiveness, taking advantage of
low-cost feedstocks and fuels

Priority

Maximize Petro Rabigh’s profitability (achieve
more stable operations)

Location

Singapore

Advantage

A solid customer base and high-value added
products meeting the needs of key customers
in Asian markets

PriorityStrengthen competitiveness by enhancing
higher value-added petrochemicals business29

Restructuring of Chiba Works:
目 次

Shut down ethylene plant and procure ethylene from Keiyo Ethylene

Reduce our ethylene production capacity in Japan (by May 2015)
Our ethylene production capacity in Japan(Thousand tons per year)

Keiyo Ethylene

700
600
500
400
300
200
100
0

Sumitomo Chemical* Reduce production
capacity to two-thirds

415
192

Over
400

Present

After restructuringStart-up of
operation

Annual production
capacity

Keiyo
Ethylene

1994

768,000 tons*

Sumitomo
Chemical1970

415,000 tons

* Includes 192,000 tons of allotment to Sumitomo Chemical

Keiyo Ethylene’s plant is the newest and largest
ethylene production facility in Japan.



Sumitomo Chemical’s ethylene plant came on
stream more than 40 years ago.

Keiyo Ethylene: Allotment and Equity Share Holding
Allotment

Shareholdings

Allotment

Shareholdings

Maruzen Petrochemical

50.0%

55.0%

40.6%

55.0%

Sumitomo Chemical

25.0%

22.5%

59.4%

45.0%

30

Restructuring of Chiba Works:
目 次

Downsize/exit underperforming businesses
Export sales have significantly fluctuated, only generating
lower-than-expected profits>>> Decided to exit businesses with a high export ratio

Sales volume of major products: domestic vs. export sales (FY 2012)(Thousand tons)

Domestic sales

Export sales

500
400
300
200
100
0
Export Styrene monomer (SM)40%
ratio:

Propylene oxide (PO)40%

Polyethylene (PE)Polypropylene (PP)
10%

20%

Products and Production Capacity

Exit businesses with a high export ratio
April 2012

By May 2015

Dissolved joint venture with Chiba
Styrene Monomer
Stop SM and PO production at Nihon
Oxirane**Planning to assume a 100% ownership stake in Nihon Oxirane in
December 2013

Products

Production
capacity

Chiba Styrene Monomer

SM

108,000 tons*

Nihon OxiraneSM425,000 tons

PO

181,000 tons

PO

200,000 tons**

Sumitomo Chemical*Allotment to Sumitomo Chemical **Continue production after restructuring31

次 after Restructuring
Petrochemical Business in目Japan
Sales of major products: domestic vs. export sales
Exportsales

Exportsales
Monomer

Lower export
sales ratio

Resin

MonomerResin

Sales volume
Resin

Sales volume

1.7

1.1

million tons
Monomermillion tons

Resin

Shift toward higher
value-added products

Monomer

Domestic
sales

Domestic
sales

Before restructuring

After restructuring

Revitalize and maintain petrochemical business in Japanby optimizing production operations
32

目 Operations
次
Efforts to Achieve More Stable
at Petro RabighEarnings of Petro Rabigh
Net profit（left axis）

Shutdownof HOFCC

Power outage

Periodic maintenancePower outage

Sales（right axis）
ECR Power
repair outage(US$millions)（US$ millions）

500

5,000

400

4,000

300

3,000

200

2,000

100

1,000

0

0

-100
-200
10.1Q 10.2Q 10.3Q 10.4Q 11.1Q 11.2Q 11.3Q 11.4Q 12.1Q 12.2Q 12.3Q 12.4Q 13.1Q 13.2Q 13.3Q

33

目 of
次Basic Chemicals Sector
Restructure Core Businesses
MMA Business

Caprolactam BusinessCurrent state

Current state

Increase in demand in China and other Asian
countries
Sharp decline in the demand for use in lightguide plates, the major application of PMMA

Restructuring measures under consideration

Change in the supply-demand structure
due to large increases in supply in China

Restructuring measures under consideration• Shift production, sales and research bases• Measures to improve competitivenessto Singapore- Drastically reduce raw material costs- Stop PMMA production in Ehime in December 2013

- Build business alliance with upstream and down-• Develop new applications(Optimize product portfolio)

stream players• Optimize production operations• Develop an innovative production process

Radically improve the competitiveness and profitability of Basic Chemicals Sector34

目 次 underperforming businesses)
Business Restructuring (Downsize/exit
SectorBusiness

Timeframe

Basic Chemicals Sector

Rubber antioxidant ANTIGENE® 6C

Stopped production in March 2012

Petrochemicals &Plastics Sector

PP (United States)

Stopped production in January 2012

Styrene monomer manufacturing joint
venture (Japan)

Dissolved in April 2012

Ethylene (Japan)

Stop production in May 2015

PO/SM plant (Japan)

Stop production in May 2015

Light-guide plates (Japan)

Stopped production in March 2012

Polarizing films/ light-guide plates (Poland)

Stopped production and sales inJune/December 2012

Metal organics (trimethylindium)

Stopped production in June 2013

Optimize sales operations (North America)

FY2011-2013

IT-related Chemicals
SectorPharmaceuticals
SectorRestructure underperforming businesses in all business areas
35

Become a More Resilient Sumitomo
Chemical目
次through Business Restructuring
Sales
Specialty (ICT and Life Sciences)

Operating Income
Bulk Chemicals

Others(Billions of Yen)
3,000

Specialty (ICT and Life Sciences)

Bulk Chemicals

Others(Billions of Yen)
160

2,500
120

2,000

80

1,500

40

1,000
500

0

0

-40

2009

Exchangerate¥92.89/$2012¥82.91/$

2013

2015

(Forecast)(Target)¥97.0/$

2009

（FY）

¥80.0/$

Exchangerate¥92.89/$・Expand specialty businesses
・Restructure underperforming businesses
・Quickly maximize returns on

Improvebusiness portfolio

2012¥82.91/$20132015 （FY）(Forecast)(Target)¥97.0/$¥80.0/$

Establish robust
businessfoundations

major investments36Enhance Financial目Strength
次

37

目 次
Enhance Financial Strength

Improvefinancialstrength

Improve asset
efficiency(Improve CCC)

Rigorously
selectinvestments

Enhance financial strength
Target:Interest-bearing liability balance
below ¥900 billion at the end of FY2015

Secure greater strategic freedom toaggressively pursue growth opportunities
38目 次
Initiatives to Improve Profitability
Rationalization Initiatives under Corporate Business Plan: Targets and Progress
Item

Target for
FY2015*

Target for
FY2013Major initiatives

Variablemanufacturingcosts¥57 billion

Procure at lower cost; improveyields (IT-related Chemicals);
restructure Chiba Works(Petrochemicals & Plastics)¥30 billion

Fixedmanufacturing
costs¥8 billion

Restructure Chiba Works(Petrochemicals & Plastics);
streamline production processes(IT-related Chemicals)¥7 billion

SG&A
expenses¥15 billion

Reduce selling expenses(Pharmaceuticals)¥7 billion

Total¥80 billion*Comparison with FY2012

Progress
Solid progress on lower-costprocurement and improvement ofyieldsSolid progress on the restructuringof pharmaceuticals sales
operations (U.S.) and the reductionof head-office overhead costs¥44 billion
Accelerating rationalization efforts, mainly in the Basic Chemicals
Sector, faced with a tougher than expected business environment

Making good progress towards the targets
39

目 次 Investments
Initiatives to Rigorously SelectInvestment Target under
Corporate Business Plan

Initiatives to
Rigorously Select Investments
Strictly control total investment
within the limit

Limit investment cash flow
for FY2013 to FY2015 to
below 400 billion yen

Conditions for making investments
not planned in the budget
1. Review the planned projects tocontrol the total investment
amount under budget
2. Take steps to avoid additional
cash requirements (e.g.: asset
sales and working capital
reduction)
Quarterly reviews of the investment
plan for FY2013 to FY2015

40

目 次
CCC Improvement Initiatives
CCC Improvement Initiatives
SectorBasic Chemicals
Petrochemicals& Plastics
IT-related
Chemicals

Health & Crop
Sciences

Pharmaceuticals

Sumitomo Chemical’s CCC

Initiatives- Shorten accounts receivable terms- Optimize inventory levels- Shorten accounts receivable terms
for polymer business in Japan- Optimize inventory levels- Shorten accounts receivable terms- Reduce inventories by globally
standardizing the grades andspecifications of products- Reduce the number of crop
protection chemicals- Optimize inventory levels- Production at appropriate time
- Shorten accounts receivable terms- Optimize inventory levels

Accounts receivable

Accounts payable

Inventory

CCC(Days)

200
180
160

56
76

140
120

57
73

56
73

58
77

58
68
55
64
40
55

100

80
60
40

126
104 106
87

108
92

114
95

103

93

83

92

84
69

20
0

2008

2009

2010

2011

2012

2015 (FY)2013(Forecast) (Target)

41

目 次

Cash Flow Projections

Corporate
Business Plan

New Corporate Business Plan

FY2010-FY2012(Result)

FY2013-FY2015(Target)

FY2013.1H(Forecast)

Cash flows
from operating activities¥472.3 billion¥540 billion¥100.8 billion

Cash flows
from investing activities- ¥445.7 billion

Below - ¥400 billion- ¥80.0 billion

Free cash flows¥26.6 billion*1Over ¥200 billion¥20.9 billion

Note *1: Includes decreases in cash and cash equivalents

Interest-bearing liabilities

End of FY2012

End of FY2015(Result)(Target)End of FY2013.1H(Forecast)¥1,060.6 billion

Below ¥900 billion¥1,095.7 billion

Note : Rabigh Phase II advance payments: 24 bn yen at end of FY2012, 45 bn yen at end of FY2013.1H

42

目and
次 D/E Ratio
Interest-Bearing Liabilities(Billionsof Yen)Interest-bearing liabilities (left axis)

Debt to equity ratio (right axis)(Times)

1,600

1.6

1,400

1.4

1,200

1.2

1,000

1

800

0.8

600

0.6

400

0.4

200

0.2

0

0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
1H

2015 (FY)(Target)43

Develop Next-Generation
Businesses
目 次

44

次
Develop Next-Generation目
Businesses
LaunchEnvironment

2011

2015

2020-

Silicon solar cells (HEVA, electrode paste, etc.)
Organic thin-film photovoltaics
Lithium-ion secondary batteries (separators)
Lithium-ion secondaryLED lighting applications (sapphire substrates and alumina, etc.) batteries (Cathode materials)
PLED lighting

and Energy

Power semiconductors (epitaxial wafers)
High heat-resistant and high thermal-conductive resin
Diesel particulate filters
CO2 separation
PLED (light emitting materials)

Organic semiconductors

Next-generation polarizing films
Encapsulation materials for optical use

ICTFlexible display materials and components

Drug for Schizophrenia (LATUDA)
Life Sciences

Crop stressmanagement

Anticancer drugs targetingcancer stem cells
Cellular medicine
 Safety evaluation and drug discovery
using ES and iPS cells

Regenerative
treatment Commercialized/ready to be commercialized45

Development of Next-Generation
Flexible Display Material
目 次and Component Business
Next-Generation Display Road Map
Current

Next

After Next

FutureRigid Display
Bended Display

Unbreakable
Display

Bendable Display

Foldable Display
Rollable Display

Substrate＝Glass

Substrate＝Plastic

Plastic-based Next-Generation Displays: Thin, lightweight, strong, flexible
Greater flexibility in device designs and more convenience for consumers
Creating Next-Generation Displays
Sumitomo Chemical's Strengths
Outstanding material development
capabilities as a diversified chemicalcompany

Strong product development capabilities andadvanced processing technologies developedin the display materials business46

Promote Globally Integrated
Management
目 次

47

目 次
Promote Globally Integrated
Management
Overseas
FY2015
Sales

Overseas
FY2015
Production

FY2012FY2012

55%

40%

58%

43%

Basic Chemicals
Korea
 High-purity alumina production
Poland DPF production

Health and Crop Science
Australia
 Comprehensive business alliancewith Nufarm
US Collaboration with MonsantoPetrochemicals & Plastics
Singapore S-SBR production
Saudi Arabia Rabigh Phase II Project

Pharmaceuticals
US Expansion of LATUDA’s indications
 Development of anti-cancer stem
cell drugs
Europe Joint development and launch of
LATUDA with Takeda
Pharmaceuticals

IT-related Chemicals
Korea
 Expansion of touchscreen panel
production capacity
China Expansion and strengthening of
supply chain

OthersEstablishment of regional headquarters
 China：Sumitomo Chemical (China) Asia：Sumitomo Chemical (Asia Pacific)
 America：Sumitomo Chemical America
 Europe：Sumitomo Chemical Europe

48

Ensure Full and Strict Compliance andMaintain Safe and目Stable
Operations
次49

Ensure Full and Strict Compliance
目 次andMaintain Safe and Stable Operations

Ensure full and strict compliance Strengthen compliance systems across the Sumitomo
Chemical Group, including subsidiaries and affiliates athome and abroad

Maintain safe and stable operations

 Ensure safe and stable operations by enhancing our cultureof safety and increasing safety assurance capabilities

50

Shareholder Return
目 次

51Performance Targets

目 次

Sales (left axis)
Ordinary income (right axis)(Billons of Yen)

Operating income (right axis)
Net income (right axis)(Billions of Yen)

2,500

250

2,000

200

1,500

150

1,000

100

500

50

0

0

-500

-50

-1,000

-100
2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013
(Forecast)2015 (FY)(Target)52

目 次

Dividend Policy

We consider shareholder return as one of our priority management issues and havemade it a policy to maintain stable dividend payment, giving due consideration to ourbusiness performance and a dividend payout ratio for each fiscal period, the level ofretained earnings necessary for future growth, and other relevant factors.
Interim dividend (left axis)

(Yen)
16

Year-end dividend (left axis)

Net income (right axis)(Billions of Yen)
210

14

180

12

7

150

6

10

120

6
8
6

3

3

3

2

3

30.2

31.1
3
3

90.7

6

34.3

5
3

6

3

3

90

63.1

64.5

4

0

3

93.9

5

90.0

6

4

6
14.7
0

60
24.4 6

3

6

30.0

5.6

6

30
0

-30

-2
-4
2001

2002

2003

2004

2005

2006

2007

-59.2
2008 2009

-51.1
2010

2011

2012

2013
(Forecast)-60
2015 （FY）(Target)53

Creative Hybrid
目 次 Chemistry54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

目 次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 the forward-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.

55