FYE March 2020
Financial Briefing
NAGASE & CO., LTD
June 10, 2020

Copyright © 2020 NAGASE & CO., LTD.

Summary■ FYE March 2020 Results- Factors including trade friction between the United States and China caused a slowdown in growth in China and other parts of the world
economy. Meanwhile, the COVID-19 pandemic caused the world economy to deteriorate quickly in the fourth quarter. In addition, thedeclining market for resins and other products led to weak performance for the year as a whole.
- The Prinova Group’s contribution to operating income was limited in part because of the temporary costs associated with merging ourbusinesses.
- As a result, profits were lower, despite net sales level with the prior year.
■ FYE March 2021 Earnings Outlook- Projections are based on the assumption that the economic impact of the COVID-19 pandemic will largely abate in the second half for
NAGASE Group business domains.
- The automotive industry will be especially impacted. Sales are forecast to be down sharply in the first half and recover gradually in thesecond half.
- Prinova Group performance will contribute for the year as a whole.
- We project lower sales and profits overall.
■ Toward a New Paradigm for the Post-Corona Era- We recognize and will respond to the changes that the COVID-19 pandemic is making in the environment■ Progress of Mid-Term Management Plan ACE-2020- We are building a strategic foundation to expand food ingredients business in Europe/Americas in the focus area of Life & Healthcare

Copyright © 2020 NAGASE & CO., LTD.

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ContentsFYE March 2020 Results

P. 4

FYE March 2021 Earnings Projections

P. 17

Toward a New Paradigm for the Post-Corona Era

P. 24

Progress of Mid-Term Management Plan ACE-2020

P. 26

NAGASE Food Ingredients Business

P. 35(Reference) Information by Segment

P. 48

Copyright © 2020 NAGASE & CO., LTD.

3

FYE March 2020 Results

Copyright © 2020 NAGASE & CO., LTD.

4

Consolidated Statements of Income■ Net sales: Net sales were largely flat. The Group added sales from the Prinova Group, acquired by the Company in the consolidated second
quarter of the fiscal year, but sales also suffered from trade friction between the US and China and the growing COVID-19 pandemic■ Operating income: The Prinova Group’s contribution to profitability during the fiscal year was limited because of the temporary costs
associated with merging our businesses.
Factors such as increasing investment in DX and leading-edge technologies caused general and administrative expenses to rise and led tolower profits(100 millions of yen)

19/03

20/03

ChangeVs. PY

Orig. Forecast(full year)

Achievement

Net sales

8,077

7,995

△ 81

99%

8,200

98%

Gross profit

1,054

1,049

△5

99%

1,080

97%

<GP ratio>

13.1%

13.1%

+0.1%

－

13.2%

－

SG&A expenses

802

857

+ 55

107%

865

－

Operating income

252

191

△ 60

76%

215

89%

Ordinary income

266

190

△ 75

72%

220

87%

Profit attributable to owners of
the parent

201

151

△ 49

75%

173

88%

@ 110.9@ 108.7@ 2.2 strong yen@108.0－@ 16.5@ 15.6@ 0.9 strong yen@ 15.4－

US$ Exchange rate
(period average)
RMB Exchange rate
(period average)[Foreign exchange rate impact on 20/03 net sales and operating income results]
Net sales: △¥12.6 billion (approx.);Operating income: △¥500 million[Per-yen exchange rate impact on net sales and operating income]
Impact of US$ /yenImpact of RMB/yen
Net sales¥1.5 billion (approx.) ¥7.8 billion (approx.)
Operating income¥0.0 million (approx.) ¥370 million (approx.)*DX: digital transformation (transforming products, services, business models, business processes, organizations, and corporate cultures and establishing competitive advantage by using digitaltechnologies and data to better met customers’ and society’s needs)

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Net Sales by Region (Domestic, Overseas)■ In Asia including Japan, sales were down, but with the acquisition of the Prinova Group, net sales in Europe/Americas rose(overseas ratio of total sales: 49.7%)(V:94%)(V:94%)(V:91%)(V:91%)

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Net Sales: Two-Year Comparison (by Segment)■ Advanced Materials & Processing: Lower sales. Though sales of plastic materials were up by volume, prices declined.
In addition, sales of conductive materials fell, leading to lower sales overall■ Mobility & Energy: Lower sales because of factors like lower sales of plastic materials in Japan and overseas as the number of automobiles
produced declined■ Life & Healthcare: Sales were up. Although sales of AA2G™ declined, sales of TREHA™, pharmaceutical raw materials and intermediates,
and medical materials increased, and we added sales from the Prinova Group, newly-acquired by the Company in the consolidated second
quarter of the fiscal year

* As of April 1, 2019, the Automotive & Energy Segment has been renamed the Mobility & Energy Segment

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Gross Profit: Two-Year Comparison (by Segment)■ Despite increased profits in the Life & Healthcare segment due to the new consolidation of the Prinova Group, profits decreasedin other segments, so that profits ended up level with the prior fiscal year

Gross Profit by Segment(100 millions of yen)
機能素材

加工材料

電子

モビリティ・エネルギー

1,054

生活関連

Change in Gross Profit by Segment(100 millions of yen)
Functional
Materials
△3

その他

1,049

Advanced
Materials &Processing

1,000
230
800

600

117

252

Life &
Healthcare
+45

△3

276

Others△0Electronics△25

Mobility &Energy
△17

100
227

1,054 1,044 1,034

1,039 1,049
982

400
276

272

173

169

19/03

20/03

947

947

200

0

19/03

20/03

* As of April 1, 2019, the Automotive & Energy Segment has been renamed the Mobility & Energy Segment

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Operating income: Two-Year Comparison (by Segment)■ Advanced Materials & Processing: Despite reduced sales, increased profitability in the Company’s manufacturing subsidiaries in Japan led tohigher profit■ Electronics: Lower profits due to declining sales and worsening profitability of the thin processing business for glass substrate in China■ Life & Healthcare: Despite increased sales, profitability declined because of temporary costs associated with merging businesses and theworsening of profitability at some of the Company’s Japanese manufacturing subsidiaries■ Other/Corporate: Factors such as increasing investment in DX and leading-edge technologies caused general and administrative expenses torise and led to lower profits* As of April 1, 2019, the Automotive & Energy Segment has been renamed the Mobility & Energy Segment

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Earnings at Major Consolidated Subsidiaries■ Nagase Plastics Co., Ltd. sales and profits remained level despite a declining market for resins, mainly due to an increase ofsales of super engineering plastics to the electronics industry■ Nagase (Thailand) Co., Ltd. recorded lower sales and profits mainly due to lower sales of engineering plastics for the automotive
and OA industries(100 millions of yen)

Net sales

Vs. PY

Operating Income(Note 2)

Vs. PY

250

98％

49

95％

263

101％

27

95％

1,054

97％

110

95％

Nagase Plastics Co., Ltd.

368

99％

9

97％

Nagase Chemical Co., Ltd.

188

100％

3

111％

Nishinihon Nagase Co., Ltd.

82

89％

3

71％

924

98％

26

93％

Nagase (Thailand) Co., Ltd.

374

93％

11

89％

Shanghai Hua Chang Trading Co., Ltd.

366

102％

8

88％

Shanghai Nagase Trading Co., Ltd.

428

96％

6

67％

Total for overseas sales (Note 1)

3,835

101％

78

87％

Company Name
Hayashibara Co., Ltd.
Manufacturing
Nagase ChemteX Corporation
Companies
Total for manufacturing (Note 1)

Domestic Sales
Companies

Total for domestic sales (Note 1)

Overseas Sales
Companies

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.

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State of Two Major Manufacturing Subsidiaries■ Hayashibara Co., Ltd.: Recorded lower sales and profits. Though sales of TREHA™ and pullulan rose overseas, sales of AA2G™ in
Japan dropped, impacted by the decrease in inbound demand in Japan■ Nagase ChemteX: Sales remained level. Sales in the Performance Chemicals Business were slow, but firm in the Epoxy Resin
Business and Bio Chemicals Business, and favorable for the Photolithography Materials Business. Profits down due to worsening
product mix

Hayashibara Co., Ltd.

Nagase ChemteX Corporation(100 millions of yen)(100 millions of yen)

19/03

20/03

ChangeVs. PYNet sales

254

250

△4

98%

Operatingincome

51

49

△2

95%

・ Sales of TREHA™ were higher due to strong sales overseas(particularly in Europe)
・ Sales of AA2G™ were lower, despite strong sales to major
customers in overseas markets, as inbound demand in Japandecreased
・ Higher sales with new adoptions of Fibryxa™ in the foodindustry・ Higher sales of pullulan for use in hard capsules for medical
and health food products
・ Strong sales of other and LUMIN™-A

Copyright © 2020 NAGASE & CO., LTD.

19/03

20/03

ChangeVs. PYNet sales

260

263

＋2

101%

Operatingincome

28

27

△1

95%

・ The Epoxy Resin Business recorded higher sales, mainly due
to sales increase in mobile device electronic components andfor semiconductor industries
・ The Photolithography Materials Business recorded higher
sales due to a recovery in customer capacity utilization
・ The Performance Chemicals Business recorded lower sales
despite strong performance in epichlorohydrin conductors for3D printers and household goods as sales of conductive
materials for the LCD industry were down
11Prinova Group Performance■ The Prinova Group’s contribution to operating income was limited because it was consolidated for fivemonths of the fiscal year, we amortized goodwill and other intangible assets, and we recorded temporary
costs resulting from fair market valuation of inventory
FYE March 2020
Impact on NAGASE Group Consolidated Earnings(August–December performance)*Reference
FYE December 2019 (full year)(excluding special M&A-related expenses)

Prinova Group net
sales¥31.8 billion

Approx. ¥82.0 billion

Prinova Group
operating income¥1.4 billion

Approx. ¥4.0 billion

Amortization of goodwill
and other intangible assets¥0.8 billion-¥0.6 billion-

Inventory cost processing(temporary costs)**All costs for inventory that underwent fair market valuation were recorded in the fiscal year (temporary costs for the fiscal year only)

Amount of goodwill andother intangible assets
recorded(amount originally recorded)

Copyright © 2020 NAGASE & CO., LTD.

Goodwill
Customer-related assets
Trademark rights¥10.7 billion (20-year amortization)¥18.2 billion (19-year amortization)¥6.5 billion (20-year amortization)
12

Prinova Group PMI Status■ The work of integrating Prinova Group into the NAGASE Group following acquisition is largely finished■ In addition to building a governance system, synergy with Hayashibara is starting to produce results

Business✓ Prinova began selling Hayashibara and Nagase ChemteX
products in Europe/Americas✓ Hayashibara Hesperidin S has newly produced results for
sports nutrition applications✓ Lowered costs by making concentrated purchases of raw
materials✓ Began business collaboration in various regions to prepare for
Prinova business expansion into Asia
✓ Began DX initiatives, etc.

➢ Exhibiting at Supply Side WEST 2019 in Las
Vegas, USA to promote Hayashibara’s TREHA™
and Hayashibara Hesperidin S

Governance✓ Revised management system, decision-making authority, etc.,
and began operation✓ Revised HR related regulations and started operation✓ Introduced monthly management accounting and global CMS✓ Implemented internal control and confirmed effectiveness, etc.
*PMI: Post Merger Integration

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➢ Deepening communication in NAGASE Group asa whole and pursuing business as a unified
Group

13

Consolidated Balance Sheets■ Assets increased ¥44.1 billion due to an increase of assets and the recording of goodwill and other intangible assets related
to the new consolidation of subsidiaries, though this was offset somewhat by a decrease in investments in securities
stemming from the sale of certain shares owned by the Company and lower fair values of shares owned■ Liabilities increased ¥43.4 billion due to increase in long-term loans and bonds as a result of procuring funds for the Prinova
Group acquisition■ Shareholders’ Equity Ratio down 4.3 points to 49.9%

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14

Consolidated Cash Flows

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15

Working Capital and Investments■ Working Capital: New consolidation of Prinova Group, etc., led to increased working capital
We practiced thoroughgoing management to adjust inventory; reduced existing inventory (which excludes
newly consolidated inventory)■ Investments: Stepped up investment in focus area of Life & Healthcare (for example, acquiring Prinova
shares) and in acquiring new technology

Investment (100 millions of yen)
1,942

2,085

820

Accounts
Receivable
2,304

Accounts
Receivable
2,211

Prinova631

210
Inventories
810

Inventories
956

Accounts
Payable1,172

Accounts
Payable
1,082

19/03

20/03

189

20/03
Actual21/03
Forecast*The investment noted above does not include cost in DX and leading-edge technologies

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FYE March 2021 Earnings Projections

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17

FYE March 2021 Earnings Projections■ We forecast sales and profits to decline because of the impact of the growth of the COVID-19 pandemic■ In the Life & Healthcare Segment, on the other hand, we foresee a material increase in sales. This will be driven by the Prinova
Group, now able to contribute for an entire year, and by favorable trends in Europe/Americas, especially sales of vitamins, aminoacids, and other products[Assumptions]•The economic impact of the COVID-19 pandemic will largely abate in the second half
•Foreign exchange rates: ¥106 to the U.S. dollar and ¥14.7 to the RMB(100 millions of yen)

20/03

.21/03

ActualFull Year Forecas

ChangeVs. PY

7,995
1,049

7,540
1,070

△ 455
+ 21

94%
102%

13.1%

14.2%

+1.1%

－

SG&A expenses

857

920

+ 63

107%

Operating income
Ordinary income

191
190

150
155

△ 41
△ 35

78%
81%

Profit attributable to owners of
the parent

151

125

△ 26

83%

@ 108.7@ 106.0@ 2.7 strong yen@ 15.6@ 14.7@ 0.9 strong yen

Net sales
Gross profit<GP ratio>

US$ Exchange rate
(period average)
RMB Exchange rate
(period average)
Copyright © 2020 NAGASE & CO., LTD.

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Net Sales Forecast (by Segment)■ Advanced Materials & Processing: Although we expect factory operation to gradually pick up, we anticipate global demand will be down in
the OA, home appliance, electrical equipment, and electronics markets and forecast falling sales as sales decline for resins, dyes, inks, anddigital print processing materials■ Electronics: Forecasting lower sales. Although sales of formulated epoxy resins will be comparable to those of last year for mobile devices
and heavy electrical equipment, it is hard to foresee the market’s direction■ Life & Healthcare: Though sales in the fragrances and cosmetics field (such as AA2G™) will be down, those in the pharmaceuticalintermediates field will be robust. In the food ingredients field, sales of TREHA™ will be in line with the prior year, and having Prinova
Group as part of the consolidated Group for the entire year will also boost sales, leading to higher sales overall

Net Sales by Segment (100 millions of yen)
機能素材

加工材料

電子

モビリティ・エネルギー

生活関連

Change in Net Sales by Segment (100 millions of yen)
Functional
Materials
△213

その他

7,995
8,000

7,540
1,215

Electronics
△306

1,750
6,000

1,260
1,151

2,670

Life &
Healthcare＋534

Others＋0

Mobility &Energy
△230

1,030
845

4,000

Advanced
Materials &Processing
△240

7,995
7,540

2,430

2,000

0

1,693

1,480

20/03(Actual)
20/03実績

21/03(Forecast)
21/03見通し

Copyright © 2020 NAGASE & CO., LTD.

20/03(Actual)
20/03実績

21/03見通し
21/03(Forecast)
19

Net Sales Forecast by Segment, Comparison of Firstand Second Halves■ The first half will see big declines especially in the Functional Materials and Mobility & Energy segments,
because of the impact of the COVID-19 pandemic. The automobile industry accounts for a high percentage ofbusiness in these segments.
Net sales forecast by segment, comparison of firstand second halves (100 millions of yen)
First

上期
Half

Major markets/market conditions impacting the
NAGASE Group because of the COVID-19 pandemic
Functional Materials:
Markets: Automotive, building materials, etc.
Market conditions: Price of naphtha

Second

下期
Half

Advanced Materials & Processing:Markets: OA, electronics, electrical equipment, paper
manufacturing, etc.
Market conditions: Prices of polycarbonate and other resins,
color formers

1,200
1,000
800

Electronics:
Markets: Displays, semiconductors, mobile devices, etc.
600
Mobility & Energy:Markets: Automotive
Market conditions: Price of naphtha

400
200
0
Functional
機能素材
Materials

Advanced

加工材料
Materials &Electronics

電子

Processing

Copyright © 2020 NAGASE & CO., LTD.

Mobility &モビリティ・
Energyエネルギー

Life &

生活関連
Healthcare

Life & Healthcare:
Markets: Food products, fragrances and cosmetics, sports
nutrition, etc.
Market conditions: Price of starch, vitamins
20

Operating Income Forecast (by Segment)■ Advanced Materials & Processing: Forecasting lower sales, as well as lower profits due to poorer income because ofworsening market conditions in the digital print processing materials business■ Life & Healthcare: Higher sales and higher profits owing to factors such as Prinova Group contributing for the year as a whole■ Other/Corporate: Increase in costs due to promoting DX for medium- to long-term growth and stepped up investment inleading-edge technology

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

250

加工材料

電子

モビリティ・エネルギー

150

全社・その他

18
53

150
68

Electronics
△5

11
48

100

Advanced
Materials &Processing△29
Functional
Materials
△10

191
39

200

生活関連

Change in Operating Income by Segment(100 millions of yen)85

Life &
Healthcare
Mobility & ＋28
Energy△7

Others/Corporate
△16

191
150

56
50

53

43

△59

△76

20/03(Actual)
20/03実績

21/03(Forecast)
21/03見通し

0(50)

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20/03実績
20/03(Actual)

21/03見通し
21/03(Forecast)21

Other/Corporate (Investment for Sustained Growth)■ Increasing investment for creating new value to offer, such as DX and materials informatics

Costs, by attribute (100 millions of yen)
Other
他費用
Expenses

80

60

Investment
投資

Global Marketing Office▲76• Newly established, its purpose is to promote DX
for the NAGASE Group as a whole, including
development of MI Project and digital marketing• Promotion of digital marketing▲59
NVC Office (New Value Creation Office)• Creation of new business models with leadingedge technologies⇒ Materials informatics (MI)⇒ Blockchain⇒ Axonerve™ algorithm search engine IP
core, etc.

40

20

Next-Generation Information &Communication Project Team0
20/03実績
20/03(Actual)

21/03見通し
21/03(Forecast)• Creation of new business in the 5G market
using NAGASE’s elemental technology andnetworks*Materials informatics (MI): Information science techniques that use data and artificial intelligence (AI) to efficiently search for new and alternative materials

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22

Dividends■ Current fiscal year: Expecting to pay dividends of ¥44 per share for the full year, consisting of a ¥22 per shareinterim dividend and a ¥22 per share year-end dividend■ Next fiscal year: Expecting to pay dividends of ¥44 per share for the full year, consisting of a ¥22 per shareinterim dividend and a ¥22 per share year-end dividend*1 FYE March 2018 dividends include a special dividend of ¥5 per share.
*2 20/03 year-end dividend to be submitted for approval to general meeting of shareholders scheduled for June 2020

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23

Toward a New Paradigm for
the Post-Corona Era

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24

Toward a New Paradigm for the Post-Corona Era
We see the dramatic changes in the environment as a good
opportunity for reform, and will work to create new value tooffer our stakeholders from a long-term perspective
Changes in environment◼

Response for now

Spread of COVID-19 pandemic
Worries that containment will take a long time andthere will be a second wave
A new normal foreseen after the epidemic iscontained
Transformation of consumer behavior✓ Growing demand for safety, peace of mind,
and health✓ Reconsideration of our mass-production,
mass-consumption society
Reconsideration of global supply chains✓ Geopolitical risks because of China/US
friction and rising protectionism✓ Long-term slump in crude oil and petroleum
product prices
Permeation of digital transformation✓ Reconsideration of conventional sales andmarketing activities✓ Transition to diverse working styles
Changes in stock markets✓ Demand for engagement as an ESG issue✓ Reconsideration of financial strategy(stability, leverage)◼ Response for FY2020✓ Consider stakeholders’ safety and peace of mind
✓ Secure supply chains✓ Strengthen risk management✓ Increase productivity of remote work

A sense of values, reconsidered in light ofdramatic changes in environment
Expectations for concrete action from the NAGASE Group

Identify value we offer to stakeholders
Create new value to offer

◼
1.

2.

3.

4.

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Medium- to long-term response◼
✓✓

Update long-term management policy
Put sustainability at the core of management strategy
Enhance value we offer to stakeholders and promotedialogue with them◼
✓✓Update medium-term management plan
Step up pace of digital transformation
Expand functions, from materials procurement tooffering solutions
Reconsider financial strategy supporting businessactivities✓

25

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

R&D

Logistics

Business
GlobalNetworkBusiness
Business
Designer
Designer
Designer
Trading
Manufacturing

NAGASE Transforms from Shosha/Trading to Business Designer

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26

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
3and start stage 1 as the beginning of the Mid-Term management Plan ACE-2020.
In FY2020 we will continue the fourth year of ACE-2020 and continue reforming the business aiming for significant
growth.
*Our goal: Normalization of the profit more than tripled.

Long-Term Management Policy
Environmental
Adaptability

FY2020Stage1｢Reformof Profit structure｣｢Reform ofcorporate culture｣【Reform】
2016～2020

Change-S 2014
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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
27

ACE-2020 Basic Policy
NAGASE Transforms from “Shosha/Trading”
to “Business Designer”.
NAGASE strings all the groups together to create and provide newvalue to the world through 6 key functions.

Investment

R&D

Logistics

Business
Designer

Leverage Group functions to achieve the quantitativeand qualitative targets.

GlobalNetwork

Trading
Manufacturing

Reform Profit Structure

Reform Corporate Culture

Portfolio Optimization

MindsetCategorization of business and execution ofstrategy that matches with the area

Breed independence and responsibility

Replacement of asset and reallocation of
resources

Share the management’s message

Acceleration in investment that creates corebusiness of group

Thorough monitoring and PDCA

Expand and Strengthen Revenue BaseStrengthen Management Platform

Accelerate globalization ” G6000”

Pursue efficiency

Improve manufacturing profitability

HR development

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【6 Functions】

28

Reform of Profit Structure: Portfolio Optimization
FY2019 Accomplishments

Categorization of business and execution of strategy that matches with the area / Replacement of assets and reallocationof resources

Focus Areas

Business domains where we expect
further increase in profit[Life & Healthcare]○ Converted Prinova Group (USA) to a subsidiary○ Established NAGASE Food Ingredients Food
Development Center (Xiamen)○ Established new Food Ingredients Department[Electronics]○ Applied management resources to nextgeneration information & communication (5G)
market○ INKRON: Started work on global businesscollaboration system
Base Areas

Areas that stably contribute to raising corporate value○ Capital participation in wastewater, circulating water, andexhaust treatment business○ Focus on studying supply chains, starting with chemical supply○ Maintain plastics sales volume, especially high-function resins

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Growth Areas

Areas we expect to transform into
Focus Areas within 3 years○ Establishment of digital transformation
promotion system○ Start of development of digital marketing○ Materials informatics development
proceeding smoothly○ Promoting research on rare amino acids

Areas in which drastic
improvement in profit structure is immediately required

Improvement Areas○ Decision to withdraw from unprofitable businesses• Replacement of non-business assets○ Sale of cross-shareholdings

29New Initiatives to Achieve KGIs (1)FY2019 Accomplishments••

INKRON began collaborations with SCHOTT(Germany), EV Group (Austria), WaveOptics (UK)
Aiming to develop 300 mm glass wafer process
enabling mass-production of optical waveguides

Target markets
Next-generation wearables market(Augmented reality (AR) and mixed reality(MR) applications)

Overseas

China website

Focus Area
Overseas

Trading

Strengthened development of optical components
for augmented/mixed reality (XR) applications

Manufacturing

Trading

Overseas

Manufacturing

Focus Area
Overseas• Made 3D Glass Solutions, Inc., which has
special glass processing technologies, anaffiliated company, and are developing its
technologies into elemental technologies forhigh-frequency devices• Launched Next-Generation Information &Communication Project Team as a crosssegment organization, stepping up
collaboration with Group network• Hayashibara application development lab
L’Plaza, first overseas location for the company• Established official account on WeChat and a
China website for food ingredients, started
operating them together• Achieved communication in which we co-create
with customers and helped build up a presencerooted in the local area

Focus Area

Target markets
China food ingredients market

At the kickoff(at Prinova)

Investment

Applied management resources to nextgeneration information & communication(5G) market

Established NAGASE Food Ingredients
Food Development Center (Xiamen)

Manufacturing

Target markets
Food ingredients markets in Europe/Americas

Manufacturing•

Developed business with vertically integrated
vertical supply chain, including food ingredientssales, formulation manufacturing, andcontracted manufacturing of finished products
Collaborating with materials development
functions of Hayashibara, Nagase ChemteX,etc., with aim to provide new materials andsolutions

Investment•

Focus Area

Investment

Converted Prinova Group(USA) to a subsidiary

Optical waveguides

Target markets
Next-generation information & communication(5G) market

Copyright © 2020 NAGASE & CO., LTD.

30

New Initiatives to Achieve KGIs (2)FY2019 Accomplishments

Growth Area

Step up pace of digital transformation (DX)

Growth Area

Develop and promote businesses that
benefit the environment

Investment

Overseas• Made Aience Inc., which works in wastewater,
Ergothioneine: a naturally occurring amino acid, found incirculating water, and exhaust treatment businesses,
fungi and other sources, with exceptional anti-oxidative
capacity
an affiliated company• We aim to establish mass-production technology using a• Benefit the environment and achieve cost savings by
biological process as an alternative solution to chemicalusing microbial metabolism to treat wastewater,synthesis that has high cost and high environmental impact
organic solvents, and smoke and other exhaust without• Selected as a NEDO*1 set-issue-type industrial technology development costchemicals
assistance project for FY2019
Target markets
Target markets
Wastewater and exhaust treatment markets in
Wide range of markets, including food products, cosmetics, and pharmaceuticals•

Overseas

Manufacturing

An image of the platform

Base Area
Trading

Target markets
Markets requiring new (or alternative) materials

Manufacturing

Promoting research on rare amino acidergothioneine

At the Philadelphia base

Investment• Joint development with IBM (USA) began in
FY2016; development project has beenproceeding smoothly, and service is expected to
begin in FY2020• Utilizing artificial intelligence (AI) and the latest
data processing technology, will offer cost- andtime-saving solutions for development of new(or alternative) materials• Secured human resources and set up base in the
US to develop a digital marketing platform• Established Global Marketing Group, which ispursuing development with a team of 20

Target markets
Offer new solutions to existing markets

Materials informatics development
proceeding smoothly

Investment

Overseas

Start of development of digital marketing
platform

Investment

Established Global Marketing Office in April 2020
In charge of digital marketing, materials informatics, etc.

Japan and overseas*1: New Energy and Industrial Technology Development Organization

Copyright © 2020 NAGASE & CO., LTD.

31

Reform Corporate Culture:
Mindset/Strengthen Management Platform
ACE-2020 Issues
Mindset○ Build Accountability,
Responsibility and Risk AwarenessInstill a shared vision of the midterm management plan
○ Thorough Monitoring and PDCA
Improve investment quality○ Share Management’s Message
Create better communication

FY2016 to FY2019

FY2020Delegation of authority, review organizations company-wide

Establish Group Management Committee

Strengthen monitoring system, create dashboard, review meeting structureACE-2020 Rolling update, company-wide questionnaires

Probability evaluation/issue identification for new measures
Establish Group Manufacturers’ Collaboration Committee

Strengthen governance at overseas
manufacturing operations

Use new-investment guidelines, M&A promotion project, venture capital
Branding activities (implement Top Management Tour), publish president videos, hold town meetings

Strengthen Management Platform○ Pursue efficiency
Eliminate excess/duplication andincrease efficiency of theorganization/function○ HR Development

Begin studying ESG activity disclosure policies

Back Office Functionality and Efficiency Project

Establish Sustainability Committee
Set materialities, non-financial targets

Consolidate operations to NAGASE Business Expert for greater efficiency

Run operations under new HR system
Develop new technology through company-wide cross-departmental efforts(Technical Vitality Program)

Fiscal year slogan(“Listen”) poster

Corporate PR
image makeover

Copyright © 2020 NAGASE & CO., LTD.

Distribution of video of President
Conversation with Donald K. Thorp, President of Prinova USA

Top management visits a site
Nagase ChemteX: September

Websitesustainability page overhauled

32

KGI& KPIKGI(Key Goal Indicator)
KGI

FY2018FY2019FY2020 (Plan)

FY2020 (Target)

Consolidated Sales Amount
Consolidated Operating
IncomeROE

807.7 Billion Yen

799.5 Billion Yen

754.0 Billion Yen

1.0 Trillion Yen or more

25.2 Billion Yen

19.1 Billion Yen

15.0 Billion Yen

30.0 Billion Yen or more

6.6%

4.9%

4.0%

6.0% or more

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

Measures
Increase Focused
Business(Portfolio Optimization)

Profit Structure
Reform Indicator

Accelerate
Globalization(Expand and Strengthen Profit
Structure)

KPI (Index)*Operating Profit in Focus Area
Growing Investment Distribution Ratio
in Focus Area

*Overseas Group Sales
Sales Growth Rate in USA

Increase Manufacturing * Operating Profit from Manufacturing
Profitability(Expand and Strengthen Profit* Break-Even Point Sales Ratio
Structure)
Corporate Culture
Reform Indicator
Financial Strategy
Indicator• Pursue efficiency(Strengthen Management
Platform)

Consolidated Selling, General and
Administrative Ratio

Investment**Growth Investment

Financial Structure

Rating (R&I)

FY2018FY2019FY2020(Plan)FY2020(Target)12.6B Yen

13.6B Yen

15.3B Yen

16.9B yen

82%

96%

64%

35% <

405.3B Yen

406.7B Yen

462.8B Yen

600 B Yen

118%

191%

340%

170%

11.6B Yen

11.0B Yen

11.4B Yen

14.4B Yen

76%

77%

77%

73%

9.9%

10.7%

12.2%

9.4%

32.4B Yen

110.8B Yen

128.0B Yen

100B Yen[A][A][A] or more

[A] or more

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

Copyright © 2020 NAGASE & CO., LTD.

33

Appendix : Past Results and ACE-2020 Target
Consolidated Sales/Operating Income

ROE

1.0 Trillion Yen/30 Billion Yen or more

Normalize Over 6％ at early stage

Sales(100 millions of yen)

Consolidated operating Income(100 millions of yen)

10,000ROE (%)
300

241

255

8.0%

300

6.6%
6.0%

5.8%

191
4.9%
4.4%

180

4.0%

Copyright © 2020 NAGASE & CO., LTD.

TargetFY2020( Forecast)

0.0%

FY20190

FY20184.0%

FY2017

TargetFY2020 (Forecast)

FY2019FY2018FY2017FY2016FY20150150

FY2016150

FY2015

150

5,000

3.7%

34

NAGASE Food Ingredients Business

Koichiro Kojima, General Manager
Food Ingredients Department
June 10, 2020
Copyright © 2020 NAGASE & CO., LTD.

35

Overview of NAGASE Food Ingredients Business
Using its procurement, R&D, manufacturing, processing, and application
development functions, the NAGASE Group offers a wide range of solutions
globally so that people can enjoy healthier, richer lives through food.

Business design
R&D, food ingredients sale

Functional saccharide
production and saleR&D and application
development

Enzyme production andapplication development

Food ingredients sale, R&D,
premix and contract
manufacturing

Consolidated business scale: ¥131.7 billion (estimate for FYE March 2021)*Consolidated business scale is found by simple totaling and does not match consolidated performance forecast.

Copyright © 2020 NAGASE & CO., LTD.

36

NAGASE Food Ingredients Business Sales Breakdown

9,773
7% 3,240
3%NAGASE & CO., LTD.

19,66015%

Business scale 131,722

87,36066%

Nagase ChemteX Corporation

Hayashibara Co., Ltd.
7,300
6%
4,389
3%

Nagase Sanbio Co., Ltd.

NAGASE overseas affiliates

Prinova(Millions of yen)
Estimate for FYE March 2021
This figure is found by simple totaling and does not match consolidated performance forecast.

Copyright © 2020 NAGASE & CO., LTD.

37

Value Offered by NAGASE Food Ingredients Business
Procurement/supply

Application
Development

R&D
In
Progress

Solving Issues

Manufacturing

Processing, contract
manufacturing

Seminars

symposium

Copyright © 2020 NAGASE & CO., LTD.

38

NAGASE Food Ingredients Business Supply Chain
Ingredients
production

Foodingredients
manufacturers

ingredientssales

Premixing(materials mixing)

Foodingredients
sales
businesses

Premixbusinesses

Finalprocessing andpackagingFood products
manufacturers

MarketSportsnutrition

Nutrition

Prinova(Ingredients)(Aromas)(Flavor)Prinova(Solutions)

Beverages

Prinova(Armada)Bakeryproducts
Dairyproducts

NagaseChemteX
Corporation

NAGASE & CO., LTD.
Nagase Sanbio Co., Ltd.
NAGASE overseas
affiliates

Contract
manufacturer

Processedmeat products

Hayashibara Co., Ltd.

Copyright © 2020 NAGASE & CO., LTD.

39

A History of NAGASE Food Ingredients BusinessPrinova head office

Hayashibara (Okayama
Functional Saccharide Plant)

1990

1940
1939 Started Japan's firstindustrial production of enzymes,
at Amagasaki, got foothold tosubsequently enter food productenzymes business2012 Hayashibara acquired
Gained domestic sales networkand functional saccharides
business, began expanding
overseas

2000

2020

2007 Began production of
enzyme product phospholipid,
at Fukuchiyama
2012 Factory supportingkosher and halal dietscompleted, at
Fukuchiyama
Nagase R&D Center

1990 Nagase R&D Center opened in
Kobe, started development of enzymes
with actinomycetes
Copyright © 2020 NAGASE & CO., LTD.

20102019 Prinova acquired
NAGASE gains a food ingredientsbusiness platform in Europe/Americas
and a foothold in premixes and sports
nutrition

Nagase ChemteX Corporation(Fukuchiyama Office)40

Strategy of NAGASE Food Ingredients Business

Natural/organic

Health/beautyFood
waste

Plantbasedfoods Product line expansion:
Use Prinova’s sourcing capacity
Search out new materials (M&A, biotech) Strengthen application development:
Clarify target applications in each region
Expand labs
 Expand manufacturing function:
Use premixes to expand proprietary products globally
Expand food additives/ingredients manufacturers
 Focus on growth markets:
Sports nutrition, nutrition, beverages
Processed food products (bakery products, dairy products,
processed meat products)
Copyright © 2020 NAGASE & CO., LTD.

41

Expansion of Food Additives Lineup
Food additives market ¥4.7 trillion overseas, ¥300 billion in Japan(source: IHS MARKIT)

Copyright © 2020 NAGASE & CO., LTD.

42

Expansion of Application LabsJapan
Hayashibara Co., Ltd., Okayama and Tokyo
Nagase ChemteX Corporation, Fukuchiyama

China
Food Development Center(Xiamen)Opened in August 2019
Bakery products, traditional
sweets, beverages

Singapore
Regional Innovation Center
Opening planned for June 2020
Bakery products, processed meatand seafood products

Copyright © 2020 NAGASE & CO., LTD.

43

Global System for Premixes◆ Premix market scale: ¥161 billion (growing to ¥230 billion in 2027)◆ Have established three global hubs, considering adding two more
Sales ¥11.1 billion (¥24.9 billion if contracted sports nutrition business is included)◆ Target applications: (short term)Sports nutrition, nutrition, beverages(medium term) Processed foods including bakery products

Europe¥48 billion

Middle East
& Africa¥13 billion

China
¥11
billionNorth America¥59 billion

APEC¥21 billion

Latin America¥9 billion

Premix market scale, by region. Source: Future Market Insight

Copyright © 2020 NAGASE & CO., LTD.

44

Sports Nutrition: Start of Approach to Japan Market
Sales start in the US!
Prinova’s capacity to propose solutions and its
premix technology + Hayashibara’s materials

Prinova’s
innovative spirit＋
The Group’s
unique functional
materials
Japan market

Protein bar
Jelly drinks
Amino Acid Powder/ Tablet

Sports drinks
Protein drinks(Source: Global Nutrition Group Analysis)

Copyright © 2020 NAGASE & CO., LTD.

45

Outlook for the NAGASE Food Ingredients Business[Net sales]

Now

After 5years

¥200 billion• Continuing growth of sports nutrition(functional ingredients, premixes,
contracted production)• Advancement into South America¥100 billion
Europe/Americas• Application lab effect• Enter bakery products premix market

Asia(other than Japan)

Japan• Enter sports nutrition market(functional ingredients, premixes)• Product lineup expansion effect

Our aim is to realize a combination of product lineup expansion,stronger application development, manufacturing function
expansion, and focus on growth markets to expand our business.
Copyright © 2020 NAGASE & CO., LTD.

46

Contact for Inquiries

Contact us as indicated below if you have any questions or concerns
about today’s briefing or these materials.
Contact for inquiries:
Investor Relations Team, Corporate Administration Office,Corporate Planning Department
Telephone: +81-3-3665-3028
Contact forms: https://www.nagase.co.jp/english/contact/*Contact us by clicking the above URL, then fill in the required items under For inquiries about our financial
information and other IR related topics.

Copyright © 2020 NAGASE & CO., LTD.

47

(Reference) Information by Segment

Copyright © 2020 NAGASE & CO., LTD.

48

Functional Materials Segment
FYE March 2020 Actual<Net Sales/Operating Income by Location>(100 millions of yen)

FYE 03/20

Operating Income

Net salesYear Actual

FYE 03/21

Vs. PYYear Forecast

Vs. PY

Domestic

1,577

95%

1,473

93%

Overseas

558

95%

470

84%

Eliminations

▲442

-

▲463

-

Total

1,693

94%

1,480

87%

Domestic

40

95%

32

81%

Overseas

14

99%

11

81%

Eliminations

▲1

-

▲1

-

Total

53

98%

43

80%

*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 © 2020 NAGASE & CO., LTD.

Net sales¥169.3 billion (94%)◆The Performance Chemicals business recorded slightly lower sales
due to lower sales in coating raw materials and urethane materials asa result of lower automotive production in Japan and overseas.
◆The Speciality Chemicals business recorded slightly lower sales
overall, from decreased sales of both electronics chemicals for thesemiconductor and other related electronics industries in Japan andoverseas, and of industrial oil solutions.

Operating income¥5.3 billion (98%)◆ Lower profits due to lower sales

FYE March 2021 Outlook◇ Although the 5G and environmental businesses will remain firm, we
forecast that, as a result of factors like the COVID-19 epidemic, salesof coatings, urethane materials, processed industrial lubricants, plastic
additives, and more for the automotive industry will decline and thatbusiness in electronics chemicals for the electronics industry andbusiness in filters will be slow, and we project that sales and profits will
be down overall
49

Advanced Materials & Processing Segment
FYE March 2020 Actual<Net Sales/Operating Income by Location>(100 millions of yen)

FYE 03/20

Net salesYear Actual

Vs. PYYear Forecast

Vs. PY

Domestic

1,749

99%

1,643

94%

Overseas

1,653

96%

1,522

92%

Eliminations

▲731

-

▲735

-

Total

2,670

97%

2,430

91%

54

106%

36

67%

30

97%

22

74%

Domestic

Operating Income

FYE 03/21

Overseas

Eliminations

Total

1

85

-

105%

▲2

56

¥267.0 billion (97%)◆ Sales rose in the Colors & Advanced Processing business overall.
Though sales fell for industrial and packaging application plastic
resins and conductive materials, sales of digital print processing
materials rose in Japan and overseas◆The Polymer Global Account business recorded lower sales overall,
mainly due to lower sales in Japan, Northeast Asia, and Southeast
Asia.

Operating income¥8.5 billion (105%)◆ Despite reduced sales, increased profitability at the Company’s
manufacturing subsidiaries in Japan led to higher profit

FYE March 2021 Outlook-

66%*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 © 2020 NAGASE & CO., LTD.

Net sales◇ We project sales and profits will fall overall. Although there are somedomains in which sales will rise, the COVID-19 epidemic will slow thebusiness in resins for the OA, electrical, and electronic industries,
while sales of digital print processing materials, conductive materials,
etc., will also decline

50

Electronics Segment
FYE March 2020 Actual<Net Sales/Operating Income by Location>(100 millions of yen)

FYE 03/20

Operating Income

Net salesYear Actual

FYE 03/21

Vs. PYYear Forecast

Vs. PYNet sales¥115.1 billion (94%)◆ Despite increased sales of photolithography materials and of
formulated epoxy resins for mobile device electronic components
and for semiconductor industries, the segment recorded lower sales
overall driven by lower sales of precision processing-related,equipment-related, and display-related materials used in connection
with intermediate processing in semiconductors and otherapplications

Domestic

1,174

99%

1,005

86%

Overseas

661

89%

558

84%

Eliminations

▲684

-

▲718

-

Total

1,151

94%

845

73%

Operating income

Domestic

39

104%

35

89%

◆ Sales were down, and in addition there were lower profits due tofactors like worsening profitability at certain overseas
manufacturing subsidiaries

Overseas

17

50%

14

80%

Eliminations

Total

▲3

53

-

73%

▲1

48

FYE March 2021 Outlook-

89%*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 © 2020 NAGASE & CO., LTD.

¥5.3 billion (73%)◇ Although sales of formulated epoxy resins will be comparable to thoseof last year for mobile devices and heavy electrical equipment,
equipment-related sales will be down given slowdowns in investment,
and it is hard to predict the market because of such forces as the
COVID-19 epidemic, so we project lower sales and profits overall

51

Mobility & Energy Segment
FYE March 2020 Actual<Net Sales/Operating Income by Location>(100 millions of yen)

FYE 03/20

Net salesYear Actual

FYE 03/21

Vs. PYYear Forecast

Vs. PY

Domestic

764

97%

659

86%

Overseas

723

84%

606

84%

Net sales◆ The Mobility Solution business recorded lower overall sales, mainly
due to lower sales in the resins business in Japan and overseas,
despite higher sales in car electronics-related materials in Japan

Operating income
Eliminations

▲227

-

▲235

¥126.0 billion (90%)¥1.8 billion (62%)-◆ Lower profits, mainly due to lower sales.
1,260

90%

1,030

82%

Domestic

10

96%

4

40%

Overseas

8

42%

7

91%

Eliminations

0

-

0

-

Total

18

62%

11

58%

Operating Income

Total

FYE March 2021 Outlook◇ We project lower sales and profits in the segment. Factors such as
the COVID-19 epidemic have led to lower production volumes ofautomobiles. Together with the price drop of naphtha, this has
lowered sales of resin in Japan and overseas and sales of materials
and components for car electronics and others*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 © 2020 NAGASE & CO., LTD.

52

Life & Healthcare Segment
FYE March 2020 Actual<Net Sales/Operating Income by Location>(100 millions of yen)

FYE 03/20

Operating Income

Net salesYear Actual

FYE 03/21

Vs. PYYear Forecast

Vs. PYNet sales¥121.5 billion (134%)◆ In the food ingredients field, sales of TREHA™ were up overseas,
and we added sales from the Prinova Group, so sales were up
overall. Sales were down in the skin care and toiletries sectors, withlower sales of products like AA2G™. In the medical andpharmaceutical field, sales of pharmaceutical raw materials andintermediates as well as medical materials increased, leading tohigher sales. Sales were up in the business overall.
◆The Beauty Care Products business recorded lower sales, driven
down due to weak performance across all product categories.

Domestic

1,044

100%

1,041

100%

Overseas

468

318%

1,015

217%

Eliminations

▲298

-

▲306

-

Total

1,215

134%

1,750

144%

Domestic

67

93%

66

99%

◆ Although sales were up, profits were down, mainly due to worsening
profitability at certain domestic manufacturing subsidiaries

Overseas

19

300%

53

267%

FYE March 2021 Outlook

Eliminations

▲47

-

▲52

-

Total

39

85%

68

171%

*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 © 2020 NAGASE & CO., LTD.

Operating income¥3.9 billion (85%)◇ We project sales will be down in the skin care and toiletries sectors,
with lower sales of products like AA2G™, owing to the COVID-19
epidemic.
Sales are projected to rise in the food products field, with the Prinova
business performing well and sales of TREHA™ and other products
similar to the year before. Firm performance is likewise expected in
the medical and pharmaceutical field with rising sales and profits
projected overall (the Prinova Group will be part of the consolidated
Group for the entire year)53https://www.nagase.co.jp/english/

These presentation materials contain forward-looking statements based on assumptions,forecasts, and plans as of June 10, 2020. Actual earnings may differ from projections due torisks and uncertainties in the future global economy, competitive landscape, currency
exchange rates, etc.
Copyright © 2020 NAGASE & CO., LTD.