FYE March 2018
Financial Briefing
May 25, 2018

Copyright © 2018 NAGASE & CO., LTD.

ContentsFYE March 2018 Results

P.3

FYE March 2019 Earnings Projections

P.15

Progress of Mid-Term Management Plan ACE-2020

P.21

NAGASE Group Businesses in the Americas

P.30(Reference) Information by Segment

P.40

Copyright © 2018 NAGASE & CO., LTD.

FYE March 2018 Results

Copyright © 2018 NAGASE & CO., LTD.

3

Consolidated Statements of Income✔ Record highs for net sales and all profit measures Net sales: Growth driven by Base Area businesses (Functional Materials, Advanced Materials & Processing Segment),
revenue growth across all segments
 Operating income: Higher, due to favorable market conditions, contribution of mid-term management plan policies
Higher profits due to lower amortization (¥2.8 billion) of retirement benefit accounting actuarial differences (100 millions of yen)

17/03

18/03

ChangePublished Forecast
Achievement(Published 11/2)

Vs. PYNet sales

7,223

7,839

+615

109%

7,710

102%

Gross profit

915

1,026

+111

112%

1,000

103%

<GP ratio>

12.7%

13.1%

+0.4%

－

13.0%

－

SG&A expenses

764

785

+20

103%

765

－

Operating income

150

241

+90

160%

235

103%

Ordinary income

163

259

+96

159%

255

102%

Profit attributableto owners of theparent

103

171

+68

166%

160

107%

US$ Exchange rate
(period average)@108.4@110.9@¥2.5 devaluation@111.0－RMB Exchange rate
(period average)

@16.1

@16.7

@¥0.6 devaluation

@16.4

－

(Foreign exchange rate impact on 18/03 net sales and operating income results)
Net sales: +¥15.7 billion (approx.)
Operating income: +¥570 million (approx.)

Copyright © 2018 NAGASE & CO., LTD.

(Per-yen exchange rate impact on net sales and operating income)
Impact of US$ /yenImpact of RMB/yen
Net sales¥1.4 billion (approx.)¥7.2 billion (approx.)
Operating income¥20 million (approx.)¥240 million (approx.)4

Net Sales by Region (Domestic, Overseas)■Higher revenues in Japan and every region overseas (ratio of overseas net sales 49.6%)
Domestic & Overseas Sales (100 millions of yen, %)Domestic（Left axis）

Overseas（Left axis）

8,000

Overseas Sales by Region (100 millions of yen, %)Greater China

Overseas Net sales ratio（Right axis）

4,000

49.6%
48.9%

50%

7,000

3,500

3,000

6,000

3,885

2,500

5,000

Americas

Europe

Other

3,885
3,530
156
119
295

40%

3,530

1,019

199
141

(V:118%)365(V:124%)(V:127%)

1,103(V:108%)(V:86%)

30% 2,000

4,000
3,000
2,000

ASEAN

20%
3,693

1,500

1,000

3,954

1,937

10%
1,000

2,074
(V:88%)(V:107%)(V:88%)

500

0

0%
17/03

Copyright © 2018 NAGASE & CO., LTD.

18/03

0

17/03

18/03
5

Net Sales: Two-Year Comparison (by Segment)
 Functional Materials: Higher sales, mainly due to improved sales of coating raw materials and urethane materials associatedwith strong production of automobiles, as well as increased sales of electronics chemicals; acquisition of U.S. Specialty
chemicals distributor Fitz Chem Corporation also had positive impact
 Advanced Materials & Processing: Higher sales, mainly due to acquisition of new trade rights and increase in sales of plastics inJapan and overseas
Change in Net Sales by Segment
Net Sales by Segment (100 millions of yen)(100 millions of yen)
Electronics
+16

7,839
8,000
7,000
6,000
5,000

Advanced
Materials &Processing

7,223

+202

853
849

Functional
Materials
+225

1,297
1,129
1,277

Life &
Healthcare
+4
Other
-0

Automotive &Energy
+167

1,293
7,839

4,000
3,000

2,426

2,628

2,000
1,000

7,223

1,535

1,760

17/03

18/03

0

Copyright © 2018 NAGASE & CO., LTD.

17/03

18/03

6

Gross Profit: Two-Year Comparison (by Segment)
 Higher profits, mainly due to the impact of increased revenues
 Profit ratio improved 0.4%, mainly due to product mix improvements resulting from strong performance among
manufacturing subsidiaries

Gross Profit by Segment(100 millions of yen)

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

Advanced
Materials &Functional
Processing
Materials
+24

1,026
1,000

Life &
Healthcare

+37

+7

+28

915
800

Electronics

Other
Automotive &Energy

-0

+14

221

213
110

600

95
267
230

915

400

200

230

1,089 1,103 1,110 1,026

254

141

169

17/03

18/03

0

Copyright © 2018 NAGASE & CO., LTD.

1,000

1,028 1,052

17/03

18/03
7

Operating Income: Two-Year Comparison (by Segment) In addition to higher sales among all segments, increased revenues among electronics component production equipment
manufacturing subsidiaries also had a positive impact
 Lower amortization of retirement benefit accounting actuarial differences for the Others/Corporate segment resulted inoverall increase in operating income of ¥9.0 billion
Operating Income by Segment
Change in Operating Income by Segment(100 millions of yen)(100 millions of yen)

Other/Corporate

241
270
240
210
180
150
120

30
0
(30)

Automotive &EnergyElectronics
+8

42

150

24

15

+21

+8

+25

33

Functional
Materials

89

Advanced
Materials &Processing

+16

+9

63

90
60

Life &
Healthcare

50

241
67

41

51

-54

-33

17/03

18/03

(60)

Copyright © 2018 NAGASE & CO., LTD.

150

17/03

18/03
8

Earnings at Major Consolidated Subsidiaries
 Nagase Plastics Co., Ltd. recorded higher sales and profits, mainly driven by the acquisition of new trade rights and increased
sales of super engineering plastics to the electronics industry
 Shanghai Nagase Trading Co., Ltd. recorded higher sales and profits as the photolithography materials manufacturing subsidiaryestablished in the prior year (Wuxi Chenghong Electronic Chemicals; equity-method affiliate) began full operations, which led tostrong sales of photolithography materials to display manufacturers in China and components for displays by Wuxi Chenghong(100 millions of yen)

Net Sales

Vs. PY

Operating Income(Note 2)

Vs. PY

Hayashibara Co., Ltd.

243

102%

50

109%

Nagase ChemteX Corporation

259

101%

29

100%

107

111%

114

126%

Nagase Plastics Co., Ltd.

361

113%

9

133%

Nishinihon Nagase Co., Ltd.

80

102%

3

70%

Nagase Chemical Co., Ltd.

185

117%

3

111%

913

110%

25

128%

Nagase (Thailand) Co., Ltd.

378

113%

11

134%

Shanghai Hua Chang Trading Co., Ltd.

383

111%

8

90%

Shanghai Nagase Trading Co., Ltd.

409

123%

7

168%

Nagase Vietnam Co., Ltd.

140

122%

3

152%

3,336

110%

88

135%

Overseas Sales
Companies

Domestic Sales
Companies

Manufacturing
Companies

Company Name

Total for manufacturing (Note 1)

Total for domestic sales (Note 1)

Total for overseas sales (Note 1)*Note 1: Totals for each category are the simple sums of each company in the category. These sums do not equal consolidated figures.
*Note 2: Operating income does not reflect amortization of goodwill and depreciation of technology-based assets.

Copyright © 2018 NAGASE & CO., LTD.

9

State of Hayashibara (Major Manufacturing Subsidiary) Hayashibara: Strong sales of TREHA™ and AA2G™; new adoptions of Fibryxa™, Hayashibara Hesperidin S, and other highfunction materials contributed to sales growth; profits higher, due in part to stable low raw materials costs

Hayashibara Co., Ltd.

<Increased Sales of High-Function Materials>(100 millions of yen)

FYE03/17 FYE03/18

ChangeVs. PYNet sales

238

243

+5

102%

Operatingincome

46

50

+3

109%

• TREHA™ sales higher, mainly driven by sales in Europe and otheroverseas markets• Sales of AA2G™ were higher, despite lower sales overseas;
capture of domestic inbound tourist demand led to higher overall
performance• New applications in the food industry led to higher sales ofFibryxa™, Hayashibara Hesperidin S, and other high-function
materials• Higher sales of pullulan for use in hard capsules for medical andhealth food and mouth-refreshing film

Soluble Dietary Fiber Fibryxa™
• First new product since Hayashibara joined the
NAGASE Group• Also improves gut flora• Increasing use in Foods With Function Claims sincemarket introduction in 2015
• Confirmed mechanism to suppress rise in blood
sugar levels• Accelerating application development

Hayashibara Hesperidin S, Glycosyltransferase-delivered Hesperidin• Glycoltransferase-delivered hesperidin alsofunctions to reduce neutral lipids in blood• Increasing adoption for Foods With Function
Claims• Marketing initiatives in Asia, Europe, and the U.S.

=> New core product to follow TREHA™, AA2G™
Copyright © 2018 NAGASE & CO., LTD.

10

State of Nagase ChemteX Corporation(Major Manufacturing Subsidiary) Despite lower sales of conductive materials to the LCD industry, sales in our Photolithography Materials Business were strong,
driven by new business and improved customer operating rates

Nagase ChemteX Corporation

INKRON LIMITED

Chemicals for Photolithography(100 millions of yen)

FYE03/17 FYE03/18

ChangeVs. PYNet sales

256

259

+3

101%

Operatingincome

29

29

+0

100%

• Epoxy Resin Business experienced flat sales; strong sales forsemiconductor applications and heavy electrical/lightelectrical• Photolithography Materials Business recorded higher sales,
mainly due to new business and improved customer
operating rates• Performance Chemicals Business sales down due to weaksales of conductive materials and other products to the LCD
industry

Wuxi Chenghong Electronic Chemicals Co., Ltd.
Mianyang Chenghong Electronic Chemicals Co., Ltd.

Engineered Materials Systems, Inc.
Epoxy Resin

Nagase ChemteX (Wuxi) Corporation
Epoxy Resin

Taiwan Branch
Chemicals for Photolithography*Consolidated Subsidiaries: Nagase ChemteX (Wuxi) Corporation Engineered Materials Systems, Inc., INKRON LIMITED
Equity-Method Affiliates: Wuxi Chenghong Electronic Chemicals Co., Ltd.
Affiliates: Mianyang Chenghong Electronic Chemicals Co., Ltd.

Copyright © 2018 NAGASE & CO., LTD.

11

Consolidated Balance Sheets■Assets: Increase of ¥40.6 billion, mainly due to increases in accounts receivable, inventories, and rising investments in securities due to gains in fairmarket prices■Liabilities: Increase of ¥27 billion due to increases in accounts payable and short-term loans■Net assets: Increase of ¥13.6 billion, mainly due to profit attributable to owners of the parent of ¥17.1 billion and increase in net unrealized holding
gain on securities■Shareholders’ Equity Ratio down 1.6 points to 53.1%

Assets
17/03

Liabilities and Net Assets
18/03

Change

17/03

Total c urrent as s ets

3,212

3,561

+ 348

Total c urrent liabilities

Cash and time deposits

398

433

+ 34

Notes and accounts payable

2,068

2,259

+ 191

Inventories

631

736

+ 105

Other

114

131

+ 17

Total non-c urrent as s ets

2,095

2,153

Property, plant and equipment

676

Intangible fixed assets( 100 millions of y en)

Change

18/03

1,664

1,930

+ 265

1,020

1,180

+ 159

Short-term loans and current portion of CP

416

480

+ 63

Other

227

270

+ 42

Total long-term liabilities

690

696

+5

+ 57

Long-term loans and Bonds

400

379

21

672

3

Net defined benefit liability

146

145

1

407

410

+3

Other

143

171

+ 27

Investments, other assets

1,011

1,070

+ 58

Total liabilities

2,355

2,626

+ 270

Investments in securities

945

1,004

+ 58

Total net as s ets

2,951

3,088

+ 136

Other

66

66

+0

Shareholders’equity

2,396

2,502

+ 106

Accumulated other comprehensive income

505

533

+ 28

Net unrealized holding gain on securities

476

507

+ 30

Translation adjustment

31

29

2

Other

2

3

+0

Non-controlling interests

49

51

+1

5,307

5,714

+ 406

Notes and accounts receivable

Total assets

5,307

Copyright © 2018 NAGASE & CO., LTD.

5,714

+ 406

(Deferred tax liabilities, etc.)

Total liabilities and net assets

12Consolidated Cash Flows■Cash and cash equivalents up ¥3.1 billion. Cash flows from operating activities of ¥21.0 billion (¥24 billion in profit before income taxes), cash used ininvesting activities of ¥14.4 billion (¥7.2 billion used in purchases of tangible and intangible fixed assets, ¥5.9 billion used in purchase of shares ofsubsidiaries resulting in a change in scope of consolidation), cash used in financing activities of ¥3.1 billion (¥10 billion used in redemption of bonds),
and the impact of translation differences
Cash Flows
主な内訳

18/03

Net cash provided by (used in) operating activities

Net cash provided by (used in) investing activities

Net cash provided by (used in) financing activities

Effec ts of ex c hange rate c hanges on c as h andc as h equiv alents
Net increase (decrease) in cash and cash
equivalents

Profit before income taxes ＋240
Depreciation and amortization/amortization of goodwill ＋110
210
Working capital ▲119
Income tax paid ▲48
Purchases of property, plant and equipment ▲66
Purchase of shares of subsidiaries resulting in change in scope of▲ 144 consolidation ▲59
Purchases of investment in securities ▲16
Purchases of intangible fixed assets included in other assets ▲5Proceeds from and Repayments of long-term loans payable ＋51
Net increase (decrease) in commercial papers ＋50▲ 31 Net increase (decrease) in short-term loans payable ＋36
Redemption of bonds ▲100
Cash dividends paid ▲42

17/03

145

▲ 65

▲ 105

▲1

▲5

32

▲ 31

Cash and cash equivalents at beginning of the year397

Dec reas e in c as h and c as h equiv alents res ulting
from ex c lus ion of s ubs idiaries from c ons olidation▲1

Cash an d c ash e qu ivale n ts, at e n d of th e pe riod

428

Copyright © 2018 NAGASE & CO., LTD.

(100 millions of yen)Japan 254 、Greater China 70 、 , ASEAN 35 、 Europe 18 、Americas 5 、 Other 13429－

Japan 226 、Greater China 105 、ASEAN 46 、Europe 30 、Americas 4 、Other 12

397

13

Change in Working Capital Increase in working capital resulting from sales growth and planned accumulation of inventories to easeongoing supply in response to tight supply conditions in certain industries.
Working Capital (100 millions of yen)
1,816
1,678

Accounts Receivable
2,068

Accounts Receivable
2,259

Inventories
631

Inventories
736

Accounts Payable- 1,020

Accounts Payable- 1,180

17/03

18/03

Copyright © 2018 NAGASE & CO., LTD.

14

FYE March 2019 Earnings
Projections

Copyright © 2018 NAGASE & CO., LTD.

15

FYE March 2019 Earnings Projections
 Sales and profit growth overall; sales growth in every segment (excluding Electronics), mainly due toincreased sales of synthetic plastics in Advanced Materials & Processing

Electronics forecast calls for level YoY sales as we transfer the car electronics-related business to the Automotive & Energy
segment. Eliminating the relevant impact of the move, both sales and profits should be level with prior year
(100 millions of yen)

18/03 Actual

19/03 Forecast

ChangeVs. PYNet sales

7,839

8,280

+440

106%

Gross profit

1,026

1,073

+46

105%

<GP ratio>

13.1%

13.0%

-0.1%

―

SG&A expenses

785

818

+32

104%

Operating income

241

255

+13

106%

Ordinary income

259

275

+15

106%

Profit attributable to owners of
the parent

171

186

+14

108%

US$ Exchange rate
(period average)@110.9@105@¥5.9revaluation―

RMB Exchange rate
(period average)

@16.7

@16.5

@¥0.2
revaluation―

Copyright © 2018 NAGASE & CO., LTD.

16

Set Sales Forecast (by Segment)Advanced Materials & Processing: Higher sales, mainly due to expanded trade rights (new areas, new suppliers initiated in the prior year), as well as
strong performance in plastics for office equipment, appliance, game device, and electronic equipment markets in Greater China, ASEAN, and otherregions. Strength in the digital print-related business will also contribute to increased sales
Automotive & Energy: Higher sales, mainly due to strong performance in high-function materials and car electronics-related products (both Japan andoverseas), driven by electrification and electronification of automobiles

Net Sales by Segment (100 millions of yen)

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

8,280
8,000

Advanced
Materials &

7,839

+32
Other
+0

(Note)

Processing Electronics

886

+261

853

- 58

1,425
6,000

(Note)

1,297

1,293

Automotive &Energy+127

1,235
Functional
Materials

8,280

+76

4,000
2,628

2,890

2,000

7,839
1,760

1,837

18/03

(Forecast)
19/03見通し0

Copyright © 2018 NAGASE & CO., LTD.

18/03

19/03 (Forecast)(Note): The company has moved the car electronics-related business from the Electronics segment to the Automotive & Energy
segment. Electronics performance should be level with the prior year when eliminating the relevant impact of the move.

17

Operating Income Forecast (by Segment) We forecast an increase of ¥1.3 billion in operating income compared to the prior fiscal year. While
Electronics segment performance should be level with prior year (after eliminating the business move), allother segments should record higher profits
Change in Operating Income by Segment(100 millions of yen)

Operating Income by Segment (100 millions of yen)
機能素材

加工材料

電子

自動車・エネルギー

241

生活関連

255

その他・
全社共通
(Note)

Automotive &Energy

43
250

42

+11

35

Advanced
Materials &Processing

24
200

+13

Life &
Healthcare＋1(Note)

Electronics

-4

84
150

Other/Corporate

89

100
67

- 11

Functional
Materials
+3

80

255

50
51

55

- 33

- 44

18/03

(Forecast)
19/03見通し

241

0

(50)

Copyright © 2018 NAGASE & CO., LTD.

18/03

19/03 (Forecast)(Note): The company has moved the car-electronics related business from the Electronics segment to the Automotive & Energy
segment. Electronics performance should be level with the prior year when eliminating the relevant impact of the move.

18

Manufacturing Business Share and Investment Results■Investments and financing to bolster manufacturing function, R&D function, technical/information-related capacity, andglobal networks will create proprietary/competitive advantages; improve business quality and corporate value.
(100 millions of yen)
1,200

14%

Manufacturing Business Share (Net Sales)

Overseas Manufacturing Co.

Investment
15%

Domestic Manufacturing Co.
1,000

13%

Manufacturing Business Share

11%
800

9%

600

7%
5%

400

3%
200

1%

0
11/03

12/03

13/03

80

14/03

15/03

16/03

17/03

18/03

19/03
forecast

Manufacturing Business Share (Operating Income)(100 millions of yen)

100

Overseas Manufacturing Co.
Domestic Manufacturing Co.
Manufacturing Business Share

60
40
20
0

18.6
billion
yen

about
20.0
billionyen

18/03
Actual19/03
Forecast

-1%
10/03

10/03

11/03

12/03

13/03

Copyright © 2018 NAGASE & CO., LTD.

14/03

15/03

16/03

17/03

18/03

19/03
forecast

34％

45%
40%
35%
30%
25%
20%
15%
10%
5%
0%

19

Dividends■Current period: Total annual dividend of ¥40 per common share (¥17 interim dividend, ¥18 year-end dividend, ¥5 special year-end dividend)■Next period: Total annual dividend of ¥37, including interim dividend of ¥18 and year-end dividend of ¥19 (¥2 per common share increase)（％、yen）

Special Dividend

（％）

45

1.8

40

1.6

35

1.4

30

1.2

25

1.0

20

0.8

15

0.6

10

0.4

5

0.2

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

2018/03（ 2019/03（
Forecast) Forecast)

10/03

11/03

12/03

13/03

14/03

15/03

16/03

17/03

16

22

24

26

28

30

32

33

40

37

27.3

22.1

36.0

23.4

30.5

33.7

33.0

40.4

29.3

24.9

1.08

1.42

1.52

1.52

1.50

1.44

1.46

1.48

1.69

1.49

0.0

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

Copyright © 2018 NAGASE & CO., LTD.

20

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

Copyright © 2018 NAGASE & CO., LTD.

21

Positioning of ACE-2020
To achieve our goal by 2032, the last year of Long-Term Management Policy,
we divide 17 years of its term into 3 and start stage 1 as the beginning of the Mid-Term management
Plan ACE-2020.
* Our goal: Normalization of the profit more than tripled.

Long-Term Management Policy
Environmental
Adaptability

FY2018

Stage1｢Reformof Profit structure｣｢Reform ofcorporate culture｣【Reform】
2016～2020

Change-S 2014
Copyright © 2018 NAGASE & CO., LTD.

ACE-2020

Stage3

Stage2The stage that
two reforms permeated
and accelerated thegrowthThe stage that rapidly
growing towards to thegoal【Growth】
2021～2025【Jump】
2026～2032

Time
22

ACE-2020 Basic Policy
NAGASE Transforms from “Shosha/Trading”
to “Business Designer”.

Investment

NAGASE strings all the groups together to create and provide new value
to the world through 6 key functions.

Logistics

Leverage Group functions to achieve the quantitativeand qualitative targets.

GlobalNetwork

R&D

Business
Designer
Trading
Manufacturing

Reform Profit Structure

Reform Corporate Culture

Portfolio Optimization

MindsetCategorization of business and executionof strategy that matches with the area
Replacement of asset and reallocationof resources
Acceleration in investment that createscore business of group

Breed independence and responsibility

Expand and Strengthen Revenue
Base

Accelerate globalization ” G6000”
Improve manufacturing profitability
Copyright © 2018 NAGASE & CO., LTD.

【6 Functions】

Share the management’s message
Thorough monitoring and PDCA

Strengthen Management Platform
Pursue efficiency
HR development
23

Reform Profit Structure:
Portfolio Optimization
Categorization of business and execution of strategy that matches with the area / replacement of assets and reallocation of resources
Divide into four areas (Growth, Focus, Base, Improvement) to gain maximum efficiency of management resources and expand business.
Accelerate withdrawal from unprofitable businesses; solidify management resources that can be reallocated; conduct aggressive growthinvestment (asset replacement)

Focus

Expected further increase in profit

Electronics
oEstablished joint venture (polyimide film manufacturing andsales) with TOYOBO CO., LTD.
oInvested in OLED venture with Kyulux
oWuxi Chenghong Electronic Chemicals established a company inMianyang, Sichuan ProvinceoEstablished the Semiconductor Materials and Processing
Department; formed global strategy for semiconductors
Life & Healthcare
oOpened Lyon branch aiming to expand cosmetics business in
EuropeoInvested in PeptiStar, Inc., developing next-generation
pharmaceuticals
oIntegrated food materials business with Hayashibara;strengthened manufacturing strategy functions

Base

Contributes to stable increase of corporate value

oAcquired U.S. Specialty chemicals distributor Fitz Chem LLC
oAcquired Daitai Kako Co., Ltd.
oDeveloped Pat!naLock™-Σ, an effective reactive coating against acidic corrosive
environments
oImproved profitability through sales promotions in resin sales business, highfunction resins

Copyright © 2018 NAGASE & CO., LTD.

Growth/Emerging

Transform to Focus Area in 3 years

oEstablished joint venture in Huizhou, China, aiming to
expand car electronics-related products in China
oMade follow-on investment in joint venture with
Indian auto components maker; strengthened
partnerships in growth markets
oResearch into brain-inspired devices, applied
technologies for biomimetics

Improvement

Businesses requiring immediate drastic
improvement in profit structure

oSold shares of LAUDi Co., Ltd.
oSold shares of Kawai Hiryo CorporationoWithdrew from unprofitable businesses
oImproved profitability of unprofitable manufacturing businesses

Replace Non-Operating Assets
oSold idle assets
24New Initiatives to Achieve KGIs (1)oJoint venture with Shenzhen Kedali Industry
Co., Ltd. and ATECS corporation
oManufacturing and sales of precision metal
molded components
oSupply electric drive system components

Target Market
ATECS Corporation President Asano (right)
New energy vehicle markets (EV, PHEV, FCV) Shenzhen Kedali Chairman Li (center left)
in China

Copyright © 2018 NAGASE & CO., LTD.

Target Market
LCD, semiconductor markets in China

Expanding Sales Network/AreaoAcquired Fitz Chem
Expanded customer base, inventory
facilities in Midwest U.S.
oEstablished branch in Lyon, France
Sales, cooperative research for cosmetics
raw materials
Target Market
Functional materials, personal caremarkets in the U.S.
Cosmetics markets in Europe

Overseas

Manufacturing

Investment

oEstablished Wuxi Chenghong Electronic
Chemicals Co., LTD., a joint venture with
China Star Entertainment Limited
oExpanded geographic area for chemicals
supply business

Equipment Inside Plant(Remover Tanks)

Focus

Base
Overseas

Overseas

GrowthManufacturing

Established 恵州三力協成精密部件有
限公司

Focus

Established Mianyang Chenghong
Electronic Chemicals Co., Ltd.

Investment

Fukui Governor Nishikawa (left)
TOYOBO President Narahara (center)

Investment

Target Market
Next-generation display market

Overseas

Investment

oJoint venture with TOYOBO
oManufacture and sales of high heatresistant polyimide film XENOMAX®
oGoal to achieve ¥10 billion in sales as
quickly as possible

Manufacturing

Focus

Establishment of Xenomax - Japan
Co., Ltd.

Exterior of Lyon Branch

25

New Initiatives to Achieve KGIs (2)Target Market
OLED market
OEL blue light-emitting materialoJoint development with Kansai ElectricPower, Kyoto Materials, Mitsubishi
Hitachi Power Systems
oReduce maintenance costs via
improved corrosion resistance insteel material
Corrosive Environment and Use Cases

Target Market
Thermal power plant and other infrastructure markets
Copyright © 2018 NAGASE & CO., LTD.

Manufacturing

Investment

oOwns specialty peptide pharmaceuticaltechnology
oR&D for next-generation medium moleculesynthesis, production methods
oUpdate cutting-edge technology and latest
information

Target Market

Next-generation pharmaceutical markets

GrowthStrengthened R&D Activities

Investment

Base
Manufacturing

Development of corrosion-resistantreactive coatings

Focus

Investment in PeptiStar
Overseas

Investment

oVenture company developing OLED
materialoNext-generation technology using TADF

Manufacturing

Focus

Investment in Kyulux

oHuman resources, technology interchange with INKRON
oDevelop market for Axonerve IP Core (semiconductor design
technology)
oBrain-inspired device, biomimetic technology research through IBM’s
RFI Consortium
oJoint R&D with national, public, private universities and research
institutes
Target Market
AI, IoT, 5G, photonics, car electronics, environmental businessmarkets
26

Reform Corporate Culture:
Mindset/Strengthen Management Platform
ACE-2020 Issues
MindsetoBuild Accountability, Responsibility and
Risk AwarenessInstill a shared vision of the mid-term
management planoThorough Monitoring and PDCA
Improve investment quality
oShare Management’s Message
Create better communication
Strengthen Management PlatformoPursue efficiency
Eliminate excess/duplication andincrease efficiency of theorganization/functionoHR Development

RAISE THE BAR
PosterCorporate Newsletter
ACE News

FY2016/FY2017
Delegation of authority, review organizationsgroup-wide

Review organizations group-wide

Hold seminar of mid-term management plan
Strengthen monitoring system
Create dashboard, change meeting structure

Implement rolling mid-term management plan

Update investment guidelines and management, launch M&A projects and management
Uncover risks in manufacturing business, establish rules/operations for NAGASE product market introduction

Branding activities (implement Top Management Tour), publish president videos, hold town meetings
Study ESG activity disclosure policies
Back Office Functionality and Efficiency Project
Establish Business Process Re-engineering Division

Consolidate operations to Nagase Business Expert for
greater efficiency

Launch new HR system

Run operations under new HR system

President Video(conversation with general managers in English)

Copyright © 2018 NAGASE & CO., LTD.

FY2018Top Management Tour
Singapore

Town Meeting

Wednesday Seminar(optional study session on no-overtime day)
27

KGI & KPIKGI（Key Goal Indicator）

KGI

FY2016FY2017FY2018(Forecast)

FY2020Consolidated Sales Amount
Consolidated Operating
IncomeROE

722.3 Brillion Yen

783.9 Brillion Yen

828.0 Brillion Yen

1.0 Trillion Yen or more

15.0 Billion Yen

24.1 Billion Yen

25.5 Billion Yen

30.0 Billion Yen or more

3.7%

5.8%

6.0%

6.0% or more

KPI（Key Performance Indicator）Factor index to achieve KGIReform/Strategy

Increase Focused
Business(Portfolio Optimization)

Accelerate
Globalization

Profit Structure
Reform Indicator (Expand and Strengthen Profit
Structure)

Increase Manufacturing
Profitability

Corporate
Culture Reform
Indicator
Financial
Strategy
Indicator

FY2016FY2017FY2018(Forecast)

FY202011.9B yen

13.1B yen

13.3B yen

16.9B yen

46%

52%

59%

35% <

＊Overseas Group Sales

350.2B yen

389.0B yen

405.1B yen

600B Yen

Sales Growth Rate in USA

90％

103％

110％

170％

9 B yen

11.4B yen

11.5B yen

14.4B Yen

KPI （Index)

measures＊Operating Profit in Focus Area
Growing investment distribution ratio in focus area

＊Operating Profit from Manufacturing(Expand and Strengthen Profit
Structure)＊Break-Even Point Sales Ratio

76％

76％

77％

73%

Pursue Efficiency

Consolidated Selling, General and
Administrative Ratio

10.6％

10.0％

9.9％

9.4%

8.2B yen**23.5B yen**42.3B yen* 100B Yen

「A」

「A」

「A」or more

[A] or more（Strengthen Management
Platform)

Investment
Financial Structure

Copyright © 2018 NAGASE & CO., LTD.

Growth Investment
Rating (R&I)＊Total numbers in 5 years＊ The figures in this document are all management accounting data (simple sums)
It is different from the figures disclosed on the consolidated financial statement.

28

Appendix : Past results and ACE-2020 Target
Consolidated Sales/Operating Income
Normalize 1.0 Trillion Yen or more/
30 Billion or more
Sales
(100Million Yen)

ROE
Normalize Over 6％ at early stage

Consolidated Operating Income（100 Million Yen）
300

10,000241

ROE （％）
8.0%

255
5.8%

180
5,000

6.0%

6.0%

4.4%

150

0

Copyright © 2018 NAGASE & CO., LTD.

150

4.0%

0

0.0%

3.7%

29

NAGASE Group Businesses
in Americas
Ryuichi Uchida
Nagase America Corporation CEO
Nagase do Brasil Comércio de Produtos Químicos Ltda. CEO
Nagase Enterprise Mexico S.A. de C.V. CEO
Copyright © 2018 NAGASE & CO., LTD.

30

Our History of Growth

Sales (No. of Offices)
Manufacturing/Processing(No. of Facilities)
No. of Employees

Mexico Brazil
2
1

5

1

341

226

* As of April 2018
* Includes branch offices

Copyright © 2018 NAGASE & CO., LTD.

2012

Established Nagase Brazil (São Paulo)

2012

Established joint venture in León, Mexico TQ-1 de Mexico
Urethane product manufacturing

Total
7
6

6

573

2016
2017

Epoxy resin manufacturing

Invested in Cytech Products (Kentucky, USA)
Grease products, urethane mold release agent manufacturing

Acquired Fitz Chem (Illinois, USA)
Expanded sales network in the US Midwest

ManufacturingManufacturingAcquired EMS (Ohio, USA)

Sales

2012

ManufacturingEstablished KN Platech (Indiana, USA) Automobile plastic components
manufacturing

2010

Sales
Manufacturing/Research

Sales

Established Nagase Enterprise Mexico (Mexico City), new branch in León (2015)

Manufacturing2010

ManufacturingMade PacTech USA (California) a subsidiary Semiconductor microfabrication technologies,
manufacturing equipment

2006

USA
4

Thermal paper materials manufacturing

Sales

Established Sofix (Tennessee, USA)

Research

1990

ManufacturingAlliances with U.S. Chemicals companies and export/import sales of chemicals and related materials New York, Michigan, California

Research

1971

Sales

Nagase America Corp Established* EMS：Engineered Materials Systems Inc.

31

Mid-Term Management Plan ACE-2020 Net Sales Targets(Millions of yen)

80,00065,00060,00040,00020,000
-

2015

2016

2017

Net Sales by Segment(Millions of yen)
80,0002018
2018計画Plan

2019

ACE-2020

Forecast

Target(FY)

Net Sales Composition Ratio by Segment (ACE-2020)
65,000

6%

60,00025%
40,0005%
20,000

23%

12%

44%

7%

2015
機能素材

2016
加工材料

2017
電子

2018
2018計画Plan
自動車・エネ2019

Forecast

生活関連

20%

[値]

ACE-2020
Target

機能素材

加工材料

電子

自動車・エネ

生活関連* Net sales figures are simple sums (by geographic location) and do not equal net sales as presented on published financial statements (by destination)

Copyright © 2018 NAGASE & CO., LTD.

32

Achieving ACE-2020 Mid-Term Management Plan
Focus Areas: Automobiles, Car Electronics, Life & Healthcare
Key Policies: Strengthen manufacturing/processing functions, utilize investment/VC, open new markets
Management Structure: Develop management functions and promote localization, while building a
structure to support head office management functions

Key Policies

Focus
Area

Develop local US-based businesses to achieve ACE-2020 KPI G6000*

Automobiles, Car Electronics, Life & Healthcare
Strengthen
Manufacturing
FunctionsUtilize
Investment/VC

Grow New
Markets

Grow businesses
relying on groupmanufacturingfunctions

Expand and createbusinesses throughinvestment

Develop markets in
Mexico and otherCentral/SouthAmerican regions*G6000: Mid-term management plan ACE-2020 KPI (¥600 billion in overseas sales)

Copyright © 2018 NAGASE & CO., LTD.

33

Focus Areas:
Automobiles, Car Electronics
Leverage strengths in Japan to provide materials and manufacturing technology solutions
Utilize resources in Michigan (US auto industry cluster) and California (venture company incubator) to Connect seeds and needs

NAGASE Use Cases: Change as Business Opportunity

Connected

Car Multimedia, HMI• Silicone• Heat-resistantpolarizing film
• AR, AG film
• Semiconductor-related
products

Focus
SharedResearch technologies
for future internal
components

Autonomous
Sensors• LiDARGrowthElectrification

Inverters, Motors,
Batteries

plastics
Focus
Growth •• Engineering
Epoxy resin(sealants, adhesives)• Electric drive components

Copyright © 2018 NAGASE & CO., LTD.

Growing North American Electric Vehicle Market
Production Volume and Market Share(Source: HIS Markit)

North America Auto Production

Electric Vehicles (HV + EV)
HV (Hybrid)
EV
Start-Stop34

Focus Area:
Life & Healthcare
Turn wide range of foods, personal care materials, and other products into core businesses
1. Acquire necessary licenses in US(1) NON-GMO(2) Natural Flavor(3) VEGAN

Two-Way Communication
With Customers...
oRaise awarenessoIdentify needs
oPropose applications

2. Online marketing
Webinars(Tools for two-way informationexchange)
3. Secure sales network
Acquisition of Fitz Chem
Secure sales organization and customerbase

Copyright © 2018 NAGASE & CO., LTD.

35

Key Policy:
Strengthen Manufacturing Functions

Grow businesses relying on group manufacturing functions
Supply manufactured goods to US/Mexican markets

Semiconductor
Microfabrication
Production Equipment

Epoxy Resin
Products

Plastics for
Automobiles

TQ-1 deMEXICO S.A. de
C.V.

Cytech Products
Inc.

SOFIX

Urethane Products

Urethane Mold
Release Agents

Thermal Paper
Materials

Nagase America(Sales, Marketing, Investment, New Businesses)

Semiconductors/Environment
and Energy

Copyright © 2018 NAGASE & CO., LTD.

Autos/EV

Paper Mfg. Materials/Contract
Manufacturing

36

Key Policy:
Utilize Investment/VC
Expand and Create Businesses Through Investment

Investment: 2017 Acquisition of Fitz Chem
Specialty chemicals and personal care business distributor active in US
MidwestPaint & Coating

Adds new functions to NAGASEoSales area covering 20 US Midwest statesoNearly 10 sales offices and inventory facilities
oCustomer base exceeding 1,000 companies
Allows Nagase America East/West Coast coverage to expand to Midwest US,
accelerates business synergies, and extends NAGASE reach across entire US

Personal CareNAGASE Geographical Areas

VC: 2016 Investment in VC
Establish opportunities to invest in companies with new technologies andinformation, access to start-up venture cooperative businesses and productcommercialization expertise
Leveraging Silicon Valley office location (hub of startup activity in US) as abase to collect and share information about new businesses with the NAGASE
Group

Fitz Chem Area

Nagase America Area

Current Projects
oOEL, next-generation display materialsoLiDAR, sensor technologies
o3D printing-related technologies

Copyright © 2018 NAGASE & CO., LTD.

37

Key Policy:
Grow New Markets (Area Expansion)Develop Markets in Mexico and Other Central/South American Regions
Mexico City Market Development

Export/importwith US
Monterrey
warehouse

Import from
EuropeIrapuato
warehouse

León
warehouse

Central Plateau
NAGASE-owneddelivery service

Import from Asia/Japan

Export to
Brazil

1. Distribution network
Expand use of dedicated truck
delivery in growing automotive
industry
2. Manufacturing functions
Use TQ-1 de MEXICO as a point foradding value through manufacturing
and processing functions, as well as
expanding auto interior component
customer baseMarkets
Automotive
materials

Food materials

Cosmetics materials

3. Cosmetics and hair care markets
Address unique market needs in
MexicoUse Brazil to expand sales agent network throughout South America (Colombia, Peru, Argentina)
Focus on food and personal care products using NAGASE materials
Leverage strengths of agricultural nation to build businesses in agriculture
Perfume Materials:
and feed
Orange oil, lemon oil
Use natural resources to build materials export business
Copyright © 2018 NAGASE & CO., LTD.

Food Materials:
Annatto38

Key Policy:
Grow New Markets (Locally Developed Businesses)
Provide Functional Materials for 3D Printers to Markets in Europe/America(Major New Tech Development)
At present, Europe and the US lead the growing market for 3D printing. We expect
to see rapid growth in our business over the next three years as we identify
development trends in these regions and provide high-quality functional materials.
We will coordinate among our group to launch businesses in Europe and the US,
laying the strategic foundation for growth in the Japanese and Asian markets.
3D Printer Global Market*3D printers, materials, software, and related services
2016 US$13.2 billion => 2020 US$28.9 billion (forecast)
No.1: US (US$3.3 billion), No.2: Europe, No.3: Asia
No.4: Japan ( less than ¥30 billion)

Identify cutting-edge technologies and information trends todevelop functional materials for each printing method, additives,
and related products
FDM(Fused Deposition Modeling)

Photo-Curing System

Method that melts thermoplastic

Layer-by-layer UV curing of liquid

resins and processes into thread-likephoto-curable resins

filaments, ejected from a nozzle tobuild up a model in layers

Nagase America
NagaseAmerica
売上見込み
Sales
Forecast

25

US Market Forecast

16
14
12
10

*FY2017 = 1.0

8
6
4
2
0
2017

2018

2019

2020

2018（
予） 2019（予） 2020（
予）(forecast)(forecast)(forecast)(Source: IDTechEx)

Copyright © 2018 NAGASE & CO., LTD.

39

(Reference) Information by Segment

Copyright © 2018 NAGASE & CO., LTD.

40

Functional Materials Segment
FYE March 2018 Actual<Net Sales/Operating Income by Location>(100 millions of yen)
FYE 03/18

Operating Income

Net SalesYear Actual

FYE 03/19
Vs. PYYear Forecast

Vs. PY

Domestic

1,617

110%

1,700

105%

Overseas

576

128%

579

100%

Net sales¥176.0 billion (115%)

The Performance Chemicals business recorded higher sales due toimproved sales of coating raw materials and urethane materials, spurredby strong automotive production in Japan and overseas. Anothercontributing factor was a jump in sales associated with the Company’s
acquisition of distributor Fitz Chem in the United States.

Eliminations

- 433

-

- 442

-

Total

1,760

115%

1,837

104%

The Speciality Chemicals business recorded higher sales overall. Sales offluorochemicals, electronics chemicals, and raw materials for industrial oil
solutions were higher for the semiconductor and other electronics
industry in Japan. Overseas, sales were higher for electronics chemicals
and other products.

Domestic

40

122%

41

103%

Operating income

Overseas

16

188%

16

95%

Eliminations

-5

-

-2

-

Total

51

124%

55

107%

*Figures above are a combination of consolidated entities by location.
Inter-region eliminates are not reflected; adjusted provided in the eliminations
column. (Includes amortization of goodwill)

Copyright © 2018 NAGASE & CO., LTD.

¥5.1 billion (124%)

Higher profits due to higher revenues.

FYE March 2019 Outlook◇ We project higher revenues and profits due to strong sales of coating
raw materials and fluorochemicals for semiconductors. Fitz Chem,
acquired in the prior year, will contribute to earnings for the full year.
Further, we expect to see increased revenues and profits fromdevelopment projects designed for business growth.
41

Advanced Materials & Processing Segment
FYE March 2018 Actual<Net Sales/Operating Income by Location>(100 millions of yen)
FYE 03/18

Net SalesYear Actual

FYE 03/19
Vs. PYYear Forecast

Vs. PYNet sales¥262.8 billion (108%)

Domestic

1,661

108%

1,831

110%

Overseas

1,596

109%

1,758

110%

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

Eliminations

- 628

-

- 699

-

The Polymer Global Account business recorded higher sales overall, driven
by growth in Japan, Greater China, and ASEAN.

Total

2,628

108%

2,890

110%

Operating Income

Operating income
Domestic

38

136%

43

111%

Overseas

29

131%

37

127%

Eliminations

-1

-

+0

-

Total

67

132%

80

120%

¥6.7 billion (132%)

Higher profits, mainly due to higher revenues and increased profits at
manufacturing subsidiaries.

FYE March 2019 Outlook◇ Our outlook calls for higher revenues and profits due to expanded trade
rights, as well as strong performance in plastics for office equipment,*Figures above are a combination of consolidated entities by location.
Inter-region eliminates are not reflected; adjusted provided in theeliminations column.

Copyright © 2018 NAGASE & CO., LTD.

appliance, game device, and electronics devices. Digital print-related
business performance should also be strong.
42Electronics Segment
FYE March 2018 Actual<Net Sales/Operating Income by Location>(100 millions of yen)
FYE 03/18

Operating Income

Net SalesYear Actual

FYE 03/19
Vs. PYYear Forecast

Vs. PY

Domestic

1,297

100%

1,283

99%

Overseas

753

106%

697

93%

Eliminations

- 757

-

- 745

-

Total

1,293

101%

1,235

95%

Domestic

49

125%

48

96%

Overseas

40

171%

37

92%

Eliminations

-1

-

-1

-

Total

89

141%

84

95%

Net sales¥129.3 billion (101%)

The Electronic Chemicals business recorded higher sales due to growth inphotolithography material and equipment-related sales, as well as strong
performance of formulated epoxy resins for the electric and electronics
industries.
The Electronic Materials business recorded lower sales. This decrease wasdue to declines in processed materials sales associated with smartphonemodel changeovers.

Operating income¥8.9 billion (141%)

Higher profits, mainly due to higher revenues and increased profits at
manufacturing subsidiaries.

FYE March 2019 Outlook◇ Sales and profits should be level with the prior year, after eliminating the*Figures above are a combination of consolidated entities by location.
Inter-region eliminates are not reflected; adjusted provided in the eliminations
column. (Includes amortization of goodwill)

impact of moving certain businesses to the Automotive & Energy Segment.
◇ While we saw special demand for electronics components in the prioryear, sales here will decrease this fiscal year. Despite expected lower salesof certain display-related materials, sales of both formulated epoxy resins
and photolithography materials should be strong. We also project strong
performance in China for glass thin processing business sales, polyimide
film business sales (for flexible display panels), and other businesses.
◇ Strategic growth investments are expected to increase costs for the year.

Copyright © 2018 NAGASE & CO., LTD.

43

Automotive & Energy Segment
FYE March 2018 Actual<Net Sales/Operating Income by Location>(100 millions of yen)
FYE 03/18

Net SalesYear Actual

Vs. PYYear Forecast

Net sales¥129.7 billion (115%)

Vs. PY

Domestic

674

115%

795

118%

Overseas

840

111%

875

104%

Eliminations

- 218

-

- 245

-

Total

1,297

115%

1,425

110%

2

-

12

425%

Domestic

Operating Income

FYE 03/19

The Automotive Solutions business recorded higher sales, driven by factors
including strong performance in our resins businesses in Japan, Greater
China, and ASEAN.

Operating income¥2.4 billion (157%)

Higher profits due to higher revenues.

FYE March 2019 Outlook◇ We forecast higher sales and profits, even when eliminating the impact

21

107%

Eliminations

-0

-

-0

-

Total

24

157%

35

147%

Overseas

23*Figures above are a combination of consolidated entities by location.
Inter-region eliminates are not reflected; adjusted provided in theeliminations column.

109%

of moving certain businesses from the Electronics Segment.
◇ We forecast higher revenues and profits, despite projections that
automobile production will be level with the prior year.
Sales of high-function materials in Japan, Greater China, and ASEAN
should rise in conjunction with the electrification and electronification of
automobiles.
Further, sales of car electronics-related products should also be strong
for the year.

Copyright © 2018 NAGASE & CO., LTD.

44

Life & Healthcare Segment
FYE March 2018 Actual<Net Sales/Operating Income by Location>(100 millions of yen)
FYE 03/18

Operating Income

Net SalesYear Actual

FYE 03/19
Vs. PYYear Forecast

Vs. PYNet sales¥85.3 billion (101%)

 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, medical materials, and pharmaceutical business products allunderperformed prior year. As a result, the business recorded sales slightly
lower compared to the prior year.

Domestic

1,006

99%

1,033

103%

Overseas

123

107%

140

113%

Eliminations

- 276

-

- 287

-

Total

853

101%

886

104%

 The Beauty Care Products business recorded lower sales, driven down due
to weak performance across all product categories.

Domestic

70

112%

69

99%

Operating income

Overseas

2

237%

5

194%

Eliminations

- 30

-

- 31

-

Total

42

127%

43

103%

*Figures above are a combination of consolidated entities by location.
Inter-region eliminates are not reflected; adjusted provided in the eliminations
column. (Includes amortization of goodwill and technology-based assets)

Copyright © 2018 NAGASE & CO., LTD.

¥4.2 billion (127%)

Higher profits due to higher revenues.

FYE March 2019 Outlook◇ We forecast overall sales and profit growth for the segment. We expect
strong sales of TREHA™, Hayashibara Hesperidin, Fibryxa™, and otherfunctional materials to the food materials industry. We also expect strong
sales of raw materials to the skincare and toiletries fields.
45https://www.nagase.co.jp/english

These presentation materials contain forward-looking projections based on assumptions,forecasts, and plans as of May 25, 2018. Actual earnings may differ from projections due torisks and uncertainties in the future global economy, competitive landscape, currency
exchange rates, etc.
Copyright © 2018 NAGASE & CO., LTD.