FY2010 – FY2012

Corporate Business Plan

February 2010

Hiroshi Hirose
President
FY2010-FY2012 Corporate Business Plan

1

Contents
Results of Corporate Business Plan FY2007 - FY2009

p3-5

Long-Term Business Environment Outlook and Corporate Vision

p6-16

Global Economy & Business Environment Outlook
Corporate Vision
Overview of Corporate Business Plan FY2010 - FY2012

p17-31

Priority Initiatives
Performance Targets
Reference

p32-40

Basic Policy by Sector
Net Sales and Operating Income by Sector

FY2010-FY2012 Corporate Business Plan

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Results of Corporate Business Plan
FY2007 - FY2009

FY2010-FY2012 Corporate Business Plan

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Results of Corporate Business Plan FY2007 - FY2009
Timely and effective measures implemented in priority areas to pave the way for further growth
Basic Chemicals

 MMA capacity expanded in Korea (2007) and in Singapore (Ph 3) (2008)

Petrochemicals &Plastics

 The Rabigh complex completed and started (2009) Logistics & marketing network for Rabigh petrochemicals built in Asia & Europe(2009)
 PP compound operations established in UK & France (2007), Thailand (2009)
and US (2009); expanded in China (2009)
Fine Chemicals

 Resorcinol capacity expansion in Chiba (2007) and in Oita (start up in 2010)

IT-related
Chemicals Polarizing film production capacity expanded in Korea (2008) and Ehime (2009) Color filter production capacity expanded in Korea (2007 & 2008)
 ArF photoresist production capacity expanded (2009)

Agricultural
Chemicals Integrated crop protection chemicals JV Sumitomo Chemical Takeda Agro (2007)
 Invested in Australian crop protection chemicals company Nufarm (2009)
 OLYSET Net anti-malarial insecticidal bed net capacity expanded (2007-2009) DL-methionine production capacity expansion in Ehime (start up in 2010)

Pharmaceuticals

 Global Ph 3 clinical trials of lurasidone, with targeted launch in US in 2011
 Acquired US pharmaceutical company Sepracor Inc. (2009)

Others Acquired UK PLED venture Cambridge Display Technology (2007)

Major investments implemented overseas to pursue our globalization initiatives
FY2010-FY2012 Corporate Business Plan

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Results of Corporate Business Plan FY2007 - FY2009
Net Sales and Net Income

Interest-Bearing Liabilities & D/E Ratio(Billion Yen)

(Billion Yen)

2,500

250

2,000

1,790

1,897

1,620

1,557
1,500
1,000

200

1,788

150

1,296
91

94

(Times)(Billion Yen)

1,200

2.4
1,000

1,000

2.0
795

800
641

100

65

579

600

500

63

10

1.0

1.2

471

50

400
0

1.6
1.3

674

0

0.7

0.6

0.6

0.7

0.8

-59
-500

-50

-1,000-100
FY2004 FY2005

FY2006 FY2007 FY2008 FY2009
Forecast

Net Sales (left axis)
Net Income (right axis)

FY2010-FY2012 Corporate Business Plan

200

0.4

0

0.0
FY2004 FY2005 FY2006 FY2007 FY2008 FY2009
Forecast

Interest-Bearing Liabilities (left axis)
D/E Ratio (right axis)

5Long-Term Business Environment Outlook
andCorporate Vision

FY2010-FY2012 Corporate Business Plan

6

Global Economy & Business Environment in the Next 20 Years
Global economy to double by 2030
● Global economy will grow at approx. 3% per year through 2030.

Global economy will almost double by 2030.
● World population will increase from 6.7 billion in 2008 to over 8.0 billion in 2030.
Sustainable development will become an even more pressing global issue.

Emerging markets: new growth engine for global economy● China and India: significant population increase and remarkable economic growth.

Commodity-product, mass-consumption markets will expand rapidly.
● China: Markets will become increasingly polarized as high-end markets will also expand.
● Emerging economies will take the place of developed economies as an engine of growth.

Developed markets: more diversified● US: Solid economic growth with a continued increase of immigrants and its large young

adult & adult populations; will continue to be the “innovation center” of the world.
● EU & Japan: Diversified, lower-volume consumption markets will grow as populations
decrease and age, consumer tastes become more diversified.
FY2010-FY2012 Corporate Business Plan

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Global Economy & Business Environment in the Next 20 YearsBusiness areas with high growth potential
Environment and Energy● Demand for renewable energy, advanced power storage technologies and resource-saving technologies will grow both in developed countries and emerging countries, alongwith population increase and economic growth.
● Chemical products will be used more broadly in energy and environmental applications,such as lightweight automobile components and insulation materials.

Life Sciences● Demand for pharmaceuticals and medical treatments for major diseases afflicting elderly

patients will expand in developed countries; in emerging countries demand forpharmaceuticals and medical care in general will grow along with rising income levels.
● Food production will need to be increased as the world population grows steadily.

ICT (Information & Communication Technology)● ICT will play a key role in providing innovative solutions to customer needs for greater

comfort and convenience in developed countries; in emerging economies, it will help topromote industrial development and improve living standards.
FY2010-FY2012 Corporate Business Plan

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Corporate VisionI.

Achieve sustainable strong growth as a stronger,
more innovative global company

II.

Help meet pressing global challenges, such asenergy and food security, and contribute tosustainable development of the global community

III.

Continuously enhance the value of the company

FY2010-FY2012 Corporate Business Plan

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Corporate VisionI.

Achieve sustainable strong growth as a stronger,
more innovative global company● Accelerate the globalization of business● Meet the evolving needs of both developed markets
and emerging markets around the world by building
on strong R&D capabilities

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Corporate VisionII.

Help meet pressing global challenges, such asenergy and food security, and contribute tosustainable development of the global community
Meet pressing global challenges by making
the best use of the power of chemistry● Improve people’s health and living standards● Enhance energy and food security● Build a low-carbon society
FY2010-FY2012 Corporate Business Plan

11

Corporate Vision

III.

Continuously enhance the value of the company

Meet shareholders’ expectations● Build on our financial strengths● Achieve sustainable earnings growth

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Corporate Vision
Technology Strategy
1. Focus R&D resources on the three high-growth areas
2. Continue Creative Hybrid Chemistry
3. Pursue Green Sustainable Chemistry
4. Accelerate R&D in downstream applications
5. Strengthen basic research

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Corporate Vision
Technology Strategy: Major Initiatives● Accelerate the development of materials for fuel cells, photovoltaic cells, next-generation
batteries, and new lighting devices, as well as research on next-generation energy
sources, such as hydrogen● Intensify efforts to develop innovative catalysts that enable process innovation for CO2
emissions reduction and energy conservation● Develop novel lightweight materials and insulation materials via Creative Hybrid
Chemistry● Reap the benefits of genomic research in the areas of pharmaceuticals and crop
protection chemicals● Strengthen chemical safety assessment technology and utilize state-of-the-art
technologies, such as ES cell and iPS cell
● Develop applications and markets for polymer organic light emitting diodes (PLEDs)● Develop innovative materials, devices, and processes that enable the commercializationof next-generation printable electronics
FY2010-FY2012 Corporate Business Plan

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Corporate Vision
Climate Change Strategy
Basic Policy
Help solve pressing global issues of resources, energy and the environment

Priority Climate Change Initiatives● Achieve the world’s highest level of energy efficiency● Develop products and technologies that will contribute to CO2 emissions reduction

CO2 Emissions Reduction Measures
Enhance carbon management and implement proactive, effective andcoordinated measures throughout the Sumitomo Chemical GroupFY2010-FY2012 Corporate Business Plan

15

Corporate Vision
Business Portfolio Strategy
Target Business Portfolio in FY2020
Investments by Sector through FY2020 for new plants,
capacity expansions, and M&As
Life Sciences
40%

Others

20%
Bulk

40%
ICT, Battery Materials & Fine

FY2009 Forecast

FY2020 Target

7%

Others Basic
Pharma 7% 12%
16%
Petro
Agro
31%
50%
13%
IT Fine16% 5%FY2010-FY2012 Corporate Business Plan

Sales by Sector
43%

Refinery &Others10%
Pharma & Agro(Life Sciences)
30%

30%
Petro
& Basic(Bulk)

ICT, Battery
Materials & Fine
30%

16

Overview ofCorporate Business Plan
FY2010 - FY2012

FY2010-FY2012 Corporate Business Plan

17

Business Environment
Increasingawareness ofCorporate Social
Responsibility

Globaleconomy ontrack forrecovery

Large-scale
petrochemicalplants coming
on stream in
Middle East &China

Medical carecost reduction
under healthcare
reformIntensifying
competition withgeneric crop
protection
chemicals
FY2010-FY2012 Corporate Business Plan

Strong growthin China &other Asianmarkets

Growing competitionin Li-ion battery,
photovoltaic & otherenergy technologies

Continued
growth of flat
panel display
markets

18

Corporate Business Plan FY2010 – FY2012
Priority Initiatives
1. Quickly maximize profits & cash flows from major investments
2. Enhance financial strength
3. Strengthen cost competitiveness of core & commodity businesses
4. Accelerate business growth
5. Implement Climate Change Strategy
6. Strengthen global management system
7. Ensure full & strict compliance; maintain safe & stable operations
FY2010-FY2012 Corporate Business Plan

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Corporate Business Plan FY2010 – FY2012
1. Quickly maximize profits & cash flows from major investments
Maximize profits from the Rabigh Project
Successfully launch US sales of lurasidone upon FDA approvaland maximize the value of lurasidone, leveraging Sepracor’s
strengths
Establish competitive position in LCD materials business bybuilding on economies of scale and technological innovation
Achieve full operation of new resorcinol and DL-methionine plants
immediately after completion of the facilities
Increase sales of battery materials and ArF photoresist

FY2010-FY2012 Corporate Business Plan

20

Corporate Business Plan FY2010 – FY2012
2. Enhance financial strength
Enhance financial strength by strengthening cash flow
management, while implementing investments for future growth
Build a business structure that is more resilient to currency
exchange rate fluctuations

FY2010-FY2012 Corporate Business Plan

21

Corporate Business Plan FY2010 – FY2012
3. Strengthen cost competitiveness of core & commodity businesses
Establish optimal global production and sales operations as soon
as possible
Strengthen cost competitiveness through thoroughrationalization to build a greater presence in emerging markets,
where competition is intensifying

FY2010-FY2012 Corporate Business Plan

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Corporate Business Plan FY2010 – FY2012
4. Accelerate business growth
Develop new businesses in the three high-growth areas:
Environment and Energy, Life Sciences, and ICT
Promote cross-sectoral projects within the Sumitomo ChemicalGroup for development of new products & businesses
Expansion of product line in high-growth areas
Environment and Energy:
Diesel particle filter, LED light, lightweight automotive materials, insulation materials, Li-ion
secondary battery materials, PLED light, fuel cell, polymer photovoltaic cell, high-performance
catalysts

Life Sciences:
Materials for medical and agricultural applications, pharmaceutical active ingredients andintermediates, off-patent products, environmental stress management, new drug development,
medical care, omics technology, ES cell, iPS cell
ICT: Inorganic materials for ICT applications, PLED materials and devices, printable electronics
FY2010-FY2012 Corporate Business Plan

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Corporate Business Plan FY2010 – FY2012
5. Implement Climate Change Strategy

6. Strengthen global management system
Reengineer work processes globally and upgrade management
information system
Develop human resources to drive the globalization of business

7. Ensure full & strict compliance; maintain safe & stable operations

FY2010-FY2012 Corporate Business Plan

24

Corporate Business Plan FY2010 – FY2012
FY2012
Performance Targets(consolidated)

Net Sales
Operating Income
Ordinary Income(including Equity inearnings of affiliates
Net Income

2.4 Trillion Yen
190 Billion Yen
220 Billion Yen
40 Billion Yen)
140 Billion Yen

Assumptions:Exchange Rate: 90 Yen/US$; Naphtha: 50,000 Yen/KL; Crude Oil: US$85/bbl

Net Sales by Sector(Billion Yen)

Operating Income by Sector(Billion Yen)

3,000

250

2,500

200
150

2,000

Others100

1,500

Pharma

50

1,000

Agro

0

500

-50

0

-100

FY2008FY2009Forecast

FY2010-FY2012 Corporate Business Plan

FY2012
TargetIT Chemicals
Fine
Petro

FY2008FY2009Forecast

FY2012
TargetBasic

25

Corporate Business Plan FY2010 – FY2012
FY2012 Target Operating Income: 155 Billion Yen Increase
From FY2009 Projected Operating Income(Billion Yen)
250

Volumes& others
+315

200

190

150
100
50

35

Margins-125

Fixed cost
-125

0
-50
-100

Rationalization
+90

-150
FY2009Forecast
FY2010-FY2012 Corporate Business Plan

FY2012
Target26

Corporate Business Plan FY2010 – FY2012
Net Sales and Net Income(Billion Yen)

2,500
2,000
1,500
1,000
500
0
-500
-1,000Net Income (right axis)

2,400
1,296

1,557

1,790

1,897

1,788

1,620

140

63
91

65

FY200410

94-59

FY2005

FY2006

FY2007

FY2008FY2009FY2012
Target

250
200
150
100
50
0
-50
-100

(Billion Yen)

Net Sales (left axis)

Return on Equity

(%)

ROE

30.0
25.0
20.0
15.0
10.0
5.0
0.0
-5.0
-10.0

20.8
14.1

12.0

12.4
8.1
1.8
-9.0

FY2004

FY2005FY2010-FY2012 Corporate Business Plan

FY2006

FY2007

FY2008FY2009Forecast

FY2012
Target27

Corporate Business Plan FY2010 – FY2012
Interest-Bearing Liabilities & D/E Ratio
1,200
1,000
800
600
400
200
0

1,000
641

674

471
0.7

579
0.6

0.6

0.7

FY2004

FY2005

FY2006

FY2007FY2010-FY2012 Corporate Business Plan795

D/E Ratio (right axis)

1,020

1.3

1.0

1.0

2.4
2.0
1.6
1.2
0.8
0.4
0.0

FY2008FY2009Forecast(Times)(Billion Yen)

Interest-Bearing Liabilities (left axis)

FY2012
Target28

Corporate Business Plan FY2010 – FY2012
Cash Flows(Billion Yen)
Corporate Business Plan Corporate Business Plan
FY2010-2012 (Target)
FY2007-2009 （Forecast）

Cash flows from operating activities

340

510

Cash flows from investing activities

-690

-510

Free cash flows

-350

0

Hold new cash investments to within the level of operating cash flows(Billion Yen)
End of FY2009(Forecast)Interest-bearing liabilities
FY2010-FY2012 Corporate Business Plan

1,000

End of FY2012(Target)1,020
29

Dividend Policy

We consider shareholder return as one of our priority
management issues and have made it a policy to maintainstable dividend payment, giving due consideration to ourbusiness performance and a dividend payout ratio for eachfiscal period, the level of retained earnings necessary for
future growth, and other relevant factors.
We will use our retained earnings for investment to increase
the competitiveness of our core businesses and expand ouroverseas businesses, and thereby seek to enhance our
profitability.
Dividends are paid twice a year in principle, after closing thefirst half of each fiscal year and each full fiscal year. Under our
Articles of Incorporation, in order to implement the
distribution of profits and retained earnings to shareholders ina timely manner, the Board of Directors is authorized to decide
the level of dividends paid.

FY2010-FY2012 Corporate Business Plan

30

Forward-Looking Statements
Statements made in this material with respect to Sumitomo Chemical’s plans,
projections, strategies, beliefs, and future performance that are not historicalfacts are forward-looking statements that are based on information available atthe time of the preparation of this material and include risks and uncertainties.
Factors that could materially affect actual results of Sumitomo Chemical’s future
performance include, but are not limited to, economic conditions in the areas of
Sumitomo Chemical’s business, demand for Sumitomo Chemical’s products inmarkets, downward price pressure on Sumitomo Chemical’s products resulting
from intensifying competition, Sumitomo Chemical’s ability to continue toprovide products that are accepted by customers in highly-competitive markets,and movements of currency exchange rates.

FY2010-FY2012 Corporate Business Plan

31

Supplement

FY2010-FY2012 Corporate Business Plan

32

Basic Chemicals Sector
Basic Policy
Reform business structure, strengthen
profitability, and build the foundation for future
growthSales (left axis)

Operating Income (right axis)(Billion Yen)
30
270

3,000
300
240
195

2,000
200

17

20

Priority Initiatives
1. Strengthen core businesses
2. Accelerate R&D and commercialization of
new products and technologies
3. Implement measures for improving
profitability and streamlining of existing
businesses

100
1,000

10

-15

00

FY2008

4. Implement effective pricing to quickly meetthe fluctuations in raw material prices

FY2010-FY2012 Corporate Business Plan

-60

FY2009Forecast

FY2012
Target

FY2012 Target
Sales

270 Billion Yen

Operating income

17 Billion Yen

33

Petrochemicals & Plastics Sector
Basic Policy
Achieve sustainable profitability by
establishing global operations

Priority Initiatives
1. Establish global operations●Establish worldwide marketing operations
built on globally standardized products●Achieve sustained profitability of Petro
Rabigh
2. Strengthen the profitability of operations inJapan
3. Accelerate R&D to further enhance highvalue-added businesses

FY2010-FY2012 Corporate Business Plan

Sales (left axis)

Operating Income (right axis)(Billion Yen)
45
785

900
9,000
750
7,500
600
6,000

30

553

500

30

450
4,500
15

300
3,000
150
1,500
-30

00

FY2008-90

FY2012
Target

FY2009Forecast

FY2012 Target
Sales

785 Billion Yen

Operating income

30 Billion Yen

34

Fine Chemicals Sector
Basic Policy
Develop sustainable new businesses byfurther pursuing the total solution provider
business model

Sales (left axis)

Operating Income (right axis)(Billion Yen)
135

140
1,400

16

120
1,200

15

100
1,000

Priority Initiatives

80
800

1. Strengthen and expand rubber chemicalbusiness

60600

2. Enhance high-function resin business andperformance chemical business

20200

3. Reinforce the pharmaceutical chemicals
business to achieve sustainable highprofitability

12

81
70

9
6

40
400

00

2

3

3
FY2012
Target

FY2008 FY2009
Forecast

0

FY2012 Target

FY2010-FY2012 Corporate Business Plan

Sales

135 Billion Yen

Operating income

16 Billion Yen

35

IT-related Chemicals Sector
Basic Policy
Establish the foundation for sustainableprofitability through technological innovation

Sales (left axis)

Operating Income (right axis)(Billion Yen)

500
5,000

44
395

400
4,000

Priority Initiatives

300
3,000

50
40

307
275

30

1. Strengthen existing businesses●Establish a more competitive position in
LCD-related material business

200
2,000

20

100
1,000

10
3

●Strengthen photoresist business●Enhance overseas operations-100

FY2008

2. Expand business scope and develop new
businesses

FY2010-FY2012 Corporate Business Plan

0
FY2012
Target

FY2009Forecast

FY2012 Target
Sales

395 Billion Yen

Operating income

44 Billion Yen

36

Agricultural Chemicals Sector
Basic Policy
Aggressively pursue strategic investments to
expand business globally, strengthen highprofitability businesses, and contribute toenhancing food security and improving publichealth and hygiene and the environment

Sales (left axis)

Operating Income (right axis)(Billion Yen)

300
3,000
250
2,500

270

60
48

50

222

210

200
2,000

40

150
1,500

Priority Initiatives

30

26

24

1,000
100

20

50
500

10

1. Develop differentiated businesses
2. Develop new businesses in downstream
and related areas00

FY2008

3. Build new business models
4. Strengthen and expand sales channels
5. Pursue innovation in R&D and all aspectsof business activities

FY2010-FY2012 Corporate Business Plan

FY2012
Target

FY2009Forecast

0

FY2012 Target
Sales

270 Billion Yen

Operating income

48 Billion Yen

37

Pharmaceuticals Sector
Basic Policy
Aggressively invest resources and expand
global operations

Sales (left axis)

Operating Income (right axis)(Billion Yen)
390

400
4,000

300
3,000
236

Priority Initiatives
1. Further strengthen revenue base indomestic business
2. Enrich product pipeline to achievesustained development of new products
3. Expand overseas operations
4. Enhance the profitability of diagnostic
radiopharmaceutical business and expand
therapeutic radiopharmaceutical business

FY2010-FY2012 Corporate Business Plan

60

38

235

45

32

200
2,000

30
23

15

100
1,000

00

FY2008 FY2009
Forecast

FY2012
Target0

FY2012 Target
Sales

390 Billion Yen

Operating income

38 Billion Yen

38

Net Sales by Sector(Billion Yen)
FY2004

FY2005

FY2006

FY2007

FY2008FY2009Forecast

FY2012
Target

Basic

226

252

314

315

240

195

270

Petro

413

486

539

603

553

500

785

Fine

84

79

91

93

81

70

135

IT

175

229

266

298

307

275

395

Agro

172

186

198

200

222

210

270

Pharma

171

233

235

238

236

235

390

Others

57

91

147

150

150

135

155

Total

1,296

1,557

1,790

1,897

1,788

1,620

2,400

FY2010-FY2012 Corporate Business Plan

39

Operating Income by Sector(Billion Yen)
FY2004

FY2005

FY2006

FY2007

FY2008FY2009Forecast

FY2012
Target

Basic

5

10

14

11

-15

-6

17

Petro

15

18

24

5

-30

-9

30

Fine

12

10

13

11

2

3

16

IT

19

22

4

6

-1

3

44

Agro

15

17

23

21

24

26

48

Pharma

34

38

56

47

32

23

38

Others

5

7

7

2

-10

-4

-3

Total

105

121

140

102

2

35

190

FY2010-FY2012 Corporate Business Plan

40