Results Presentationof FY2023 1Q(The 1st 3 months of the Fiscal year ending March 2024)

Securities code: 4061
Denka Co., Ltd
August 7, 2023

For Stronger Compliance and Safety

Serious incidents related to quality and safety
Quality(May 29, 2023)

Improprieties Related to Third-Party Certification of Resin Products of Denka and Toyo Styrene, an
Equity-Method Affiliate
https://www.denka.co.jp/eng/storage/news/pdf/452/20230529_denka_styrene_ul_en.pdf

Progress and Future Steps
・An external investigation committee consisting of neutral outside experts has been established and is currently
investigating
・The committee will conduct a thorough investigation of the improprieties, determine its causes, and formulate
measures to prevent its recurrence, as well as issue a report

Safety(June 14, 2023)

Notice Concerning an Accident at Omi Plant(July 11, 2023)

Formation of Accident Investigative Committee Concerning the Pipe Burst Accident at Omi Plant

https://www.denka.co.jp/eng/storage/news/pdf/454/20230614_denka_omi_en.pdf

https://www.denka.co.jp/eng/storage/news/pdf/457/20230711_denka_investigation_committee_en.pdf

Progress and Future Steps・Established an accident investigation committee consisting of outside experts and specialists and determined its chairat the first meeting of the committee
・The committee's accident investigation is underway and will be reported as soon as the report is finalized

Two back-to-back incidents shook the very foundation of our management for ensuring safety and quality, which is ofutmost importance for a manufacturing company. We are sincerely regretful of these extremely serious situations.
Our President, as the ultimate leader of Company management, is taking responsibility for investigating the cause,
formulating countermeasures, and steadily implementing them as an urgent issue for our management to prevent
recurrence of any similar situations.
To regain the trust of all stakeholders, the Denka Group will work together to further strengthen compliance and safety.
1

Contents(Introduction) For Stronger Compliance and Safety

1

2

01

FY2023 1Q Resultsa) Summary(Year on Year)

04b) Operating Income Change Factors

(

)

05

c) By Segment

(

)

06

d) Change Factors by Segment

(

)

07-10

“
“
“

FY2023 1st Half Earnings Forecasta) Summary(vs Forecast at the beginning, Year on Year)b) Market Outlook

13c) Operating Income Change Factors(vs Forecast at the beginning)

14d) By Segment

(

)

15

e) Change Factors by Segment

(

)

16-19

f) Investment, Depreciation, R&D by Segment““g) Shareholder Returns , ROE

3

12Make the World a Better Place as Specialists in Chemistry

20
21

22-29

(Reference) 1st Half Breakdown (By Segment) (Year on Year)

30(Reference) Forecast (By Segment) (Year on Year)31(Reference) Quarterly Trends (By Segment)

32
2

FY2023 1Q Results

3

FY2023 1Q Resultsa) Summary (Year on Year)▮ Lower profit year on year(¥ billions)

FY2022
1Q Actual

FY2023
1Q Actual(Year on Year)

94.4

87.8

-

6.5

4.9

2.8

-

2.1

5.2%

3.2%

-

2.0%

Ordinary Income

5.1

2.4

-

2.8

Net Income Attributableto Owners of Parent

4.3

2.3

-

2.0

Sales
Operating Income
Operating Margin

Forex
(¥/$)
Japan Naphtha(¥/Kl)

*

126.5

135.8

86,50065,800*Gain on sale of strategic cross-shareholdings +1.0 billion yen

4FY2023 1Q Resultsb) Operating Income Change Factors (Year on Year)▮ Lower profit due to significant negative impact of volume difference due to lower demand,

despite the positive impacts from the decline in raw materials and fuel prices and price hikes
Operating
Income2.8 billion yen

Year on Year

Operating Income Variance Analysis(Year on Year)(¥ billions)

4.9
2.
+4.7

3.
-0.8
4.
-0.9

2.8

1.
-5.0
FY2022
1Q Actual

VolumePricing

Variablecost
difference

Costs

FY2023
1Q Actual-2.1 billion yen

1. Volume:(Minus)Chloroprene rubber: Lower demand for applications in industry, adhesives,automobiles, etc.
Semiconductor-related products, functional resins: Deceleration of market
activity in China for consumer electronics (smartphones, TVs, PCs, home
appliances)(Plus)
Increase in demand for simultaneous test kits for COVID-19 and influenza due tothe spread of influenza
2. Pricing: (Includes effect of currency fluctuations +3.4)(Plus)
Chloroprene rubber: Benefits of price increases implemented in stages over thelast fiscal year
(Minus)Styrene-related products: Price revision due to decline in raw materials and fuelprices3. Variable cost difference: (Includes effect of currency fluctuations -2.2)
Despite decrease in raw materials and fuel prices, negative difference due tocurrency fluctuations
4. Cost variances
Increase in repair, labor, and other costs at DPE in the U.S.
* DPE: Denka Performance Elastomer LLC, a U.S. chloroprene rubber manufacturingsubsidiary5

FY2023 1Q Resultsc) By Segment (Year on Year)▮ Lower profit year on year for Electronics & Innovative Products, as well as Elastomers &Infrastructure Solutions(¥ billions)

FY2022
1Q Actual

FY2023
1Q Actual

Electronics & Innovative
Products

21.9

Life Innovation

Incr.
Decr.

VolumePricing

19.2

- 2.7

- 4.5

+ 1.8

6.4

7.2

+ 0.8

+ 1.0

- 0.2

Elastomers & Infrastructure
Solutions

30.4

28.0

- 2.4

- 6.6

+ 4.2

Polymer Solutions

31.6

29.8

- 1.9

- 0.8

- 1.1

Others

4.1

3.7

- 0.3

- 0.3

-

Total

94.4

87.8

- 6.5

- 11.2+ 4.7

FY2022
1Q Actual

FY2023
1Q Actual

Electronics & Innovative
Products

4.1

2.1

-

Life Innovation

0.5

0.9

Elastomers & Infrastructure
Solutions- 0.2

Polymer Solutions

Sales

Operating Income(¥ billions)

Incr.
Decr.

VolumePricing

Cost&
Others

1.9

- 2.4

+ 1.8

- 1.4

+

0.4

+ 0.7

- 0.2

- 0.1

-0.7

-

0.5

- 2.7

+ 4.2

- 2.0

- 0.1

-0.0

+

0.1

- 0.5

- 1.1

+ 1.7

Others

0.6

0.5

-

0.1

- 0.1

-

- 0.0

Total

4.9

2.8

-

2.1

- 5.0

+ 4.7

- 1.8
6

FY2023 1Q Resultsd) Electronics & Innovative Products (Year on Year)▮ Lower profit due to further weakening in demand for consumer electronics (smartphones, PCs, home
appliances), which plummeted in 3Q of the previous fiscal year, weakened further in 1Q, despite movement
toward automotive-related demand recovery
Operating Income by Quarter-1.9 billion

Operating Income Variance Analysis(Year on Year)

4.1
+1.8

5.6
4.1

4.1

(¥ billions)

4.2

-2.4

-1.4

41

2.1

2.1
FY2022
1Q

FY2023
2Q

3Q

Sales Trends and Costs by Product

4Q

1Q*Costs: Increase in costs for systems to raise production, cost to
strengthen sales systems

Spherical alumina•

Shipments of xEVs exceeded the previous year's level, although they did not reach full recovery from 1Q of the previous fiscal
year, which was affected by automobile production cutbacks due to the shortage of semiconductors. However, overall
shipments significantly fell below the previous year's level due to further worsening of demand for consumer electronics in 1Qof the current fiscal year after plummeting in 3Q of the previous year

Spherical fused silica•

Demand for consumer electronics, which had plummeted in 3Q of the previous year, weakened further in 1Q, with shipments
falling below the previous year•

Shipments increased compared to the second half of the previous fiscal year, but shipments were lower year on year

Acetylene black•

While demand for xEVs remained strong and shipments exceeded the previous year's level, demand for consumer LiBs
worsened, and demand for high voltage cables, which had been growing steadily, temporarily declined due to construction
delays, resulting in lower overall shipments than the previous year

Ceramic substrates(silicon nitride,aluminum nitride)•

Shipments for electric railways were on par with the previous year, and shipments of xEVs exceeded the previous year's level,although they did not reach full recovery from 1Q of the previous fiscal year, which was affected by automobile production
cutbacks due to the shortage of semiconductors

High-performance film

7

FY2023 1Q Resultsd) Life Innovation (Year on Year)▮ Higher profit from increase in demand for simultaneous test kits (combo kits) for COVID-19

and influenza due to the spread of influenza
Operating Income Variance Analysis(Year on Year)

Operating Income by Quarter+0.4 billion
6.0

5.0

-0.2

-0.1

0.9

0.5
2.8

0.5
FY2022
1Q+0.7(¥ billions)

0.9
2Q

3Q

4Q

FY2023
1Q

Sales Trends and Costs by ProductInfluenza vaccine• In steady manufacturing toward September shipments

COVID-19 rapid antigen
test kit• Despite shipments of COVID-19 antigen test kits falling below the previous year's due to a decrease in new
COVID-19 cases, achieved higher sales and profits thanks to shipments of simultaneous test kits for COVID-19
and influenza (combo kits) due to the spread of influenza

IVD reagents(Inflammation
markers, etc.)• Shipments largely unchanged from last year

8

FY2023 1Q Resultsd) Elastomers & Infrastructure Solutions (Year on Year)▮ Lower profit due to increased repair and labor costs despite price hikes covering declining

demand for chloroprene rubber
Operating Income Variance Analysis(Year on Year)

Operating Income by Quarter(¥ billions)-0.5 billion
+4.2

1.5
-0.2
FY2022
1Q

2Q

-1.3

-1.1

3Q

4Q

-0.7

-2.0

-0.2

-0.7

-2.7

FY2023
1Q*Costs: Increase in repair, labor, and other costs at DPE in the U.S.

Sales Trends and Costs by Product
Chloroprenerubber••Shipments were lower year on year due to declining demand since 3Q ofthe previous fiscal year in industrial, adhesive, automotive, and otherapplications
Contributions from price increases implemented in stages over the last
fiscal year

Specialcementadditives•

Largely unchanged from last year

Cement•The 2,300 yen/ton price increase is complete (as of September 30 2022)
The 3,000 yen/ton price increase, despite delays, is almost complete as ofJuly 31 2023•

Coal prices fell
(FY2022 1Q: $373/t ⇒ FY2023 1Q: $161/t)[Customs Statistics] Chloroprene rubber (dry + latex) export unit price（US$/t）

6000
5500

5000
4500
4000

2021年

2022年

2023年

Jan 3月Mar 5月May 7月Jul 9月11月1月
Sep Nov Jan 3月
Mar 5月May 7月Jul 9月11月1月
Sep Nov Jan Mar
1月
3月 May5月

9FY2023 1Q Resultsd) Polymer Solutions (Year on Year)▮ Spreads maintained but remained sluggish as demand declined due to economic downturn
Operating Income Variance Analysis(Year on Year)

Operating Income by Quarter(¥ billions)+0.1 billion

-0.1
-0.1

-0.0

-0.1

FY2022
1Q

-0.9

2Q

3Q

4Q

-0.0

+1.7

-0.5

-0.0

-1.1

FY2023
1Q* Costs : Raw materials and fuel price decreases

Sales Trends and Costs by ProductMS resin• Shipments for LGP applications for TVs and PC monitors, which had been weak since the beginning of the previous
fiscal year, bottomed out in 3Q with the recovery trend continuing into 1Q of the current fiscal year, nearly
unchanged year on year

AS, ABS, transparent • Demand for consumer electronics, cosmetics containers, general merchandise, etc., which had deteriorated in 3Q ofresins, etc.
the previous year, weakened further in 1Q due to overall sluggishness in the global economy, with shipments falling
below the previous year
Food wrapping
sheets andcontainers• Shipments largely unchanged from the previous year

Toyokalon• Shipments were largely unchanged from the previous year stemming from continuing weakness in purchasing powerin Africa and the U.S. due to inflation from 1Q of the previous fiscal year10

FY2023 1st Half Earnings Forecast

11

FY2023 1st Half Earnings Forecasta) Summary (vs Forecast at the beginning, Year on Year)▮ Lower-than-expected demand for chloroprene rubber and consumer electronics-related products led to downward revisionof 1H forecast
Due to the uncertain economic environment in the second half, the full-year forecast remains unchanged at this time

1H Initial
Forecast(¥ billions)

Sales
Operating Income
Operating Margin
Ordinary Income
Net Income
Attributable to Ownersof Parent

Forex
(¥/$)
Japan Naphtha(¥/Kl)

vs
1H Revised Forecast
at theForecast
beginning

FY2022(Year on Year)
1H Actual

FY2023
Forecast(announced
May 11)

205.0

190.0

- 15.0202.9- 12.9

430.0

12.5

9.0

- 3.5

18.3

-

9.3

33.0

6.1%

4.7%

- 1.4%

9.0%- 4.3%

7.7%

11.0

7.0

- 4.0

17.0

- 10.0

29.0

8.5

5.0

- 3.5

14.3

-

22.0

130.0

138.7

131.6

130.0

64,20062,60082,85064,2009.3

12FY2023 1st Half Earnings Forecastb) Market Outlook▮ Market trends for the first half have changed since the initial forecast; demand for consumer

electronics, chloroprene, and food containers is expected to be lower than initial expectations(Market Trends)

Semiconductors

xEV

Revised Forecast

Initial Forecast
Automotive-related applications: Gradual recovery
toward the end of 2023

Automotive-related applications: No change tooutlookConsumer electronics-related applications: Gradualdemand recovery in 2Q and beyond

Consumer electronics-related applications: Demand
recovery significantly delayed

Accelerated market expansion despite negative effects
of inflation and other factors
Gradual recovery in automotive semiconductor
demand toward the end of 2023

No change

COVID-19

・Projection of approximately two epidemics per year
・Demand for in-hospital testing will continue, but
municipal testing will decrease・No revision for insurance points as of April 1

No change

Chloroprene rubber

Gradual recovery in demand beginning in the first half
Second half to recover to 90% of FY2022 first halflevels

Prolonged sluggish demand shows no signs ofrecoveryFood containers

Increase in demand in the ready-made meal market,
which is less expensive than eating out

Decreased in demand in the ready-made meal market
with further rising food prices

13

FY2023 1st Half Earnings Forecastc) Operating Income Change Factors (vs Forecast at the beginning)▮ Profit is expected to decrease due to the lack of expected recovery for products from 2Q

onward in the initial forecast
Operating
Income9.0 billion yen vs Forecast at the beginning -3.5 billion yen

Operating Income Variance Analysis(vs Forecast at the beginning)(¥ billions)

12.5

3.
+3.9

1.
-8.0

4.
-0.5

9.0

1. Volume:(Minus)Chloroprene rubber: Lower demand for applications in industry, adhesives,automobiles
Semiconductor-related products, functional resins: Deceleration of market activity
in China for consumer electronics (smartphones, TVs, PCs, home appliances)

2. Pricing: (Includes effect of currency fluctuations +4.5)(Minus)Styrene-related products: Price revision due to decline in raw materials and fuelprices2.
+1.2

3. Variable cost difference: (Includes effect of currency fluctuations -3.0)
Raw materials and fuel price decreases, etc.

InitialForecast

VolumePricing

Variablecost
difference

Costs

Revised
Forecast

4. Cost variances
Increase in repair, labor, and other costs at DPE in the U.S.
* DPE: Denka Performance Elastomer LLC, a U.S. chloroprene rubber manufacturing subsidiary14

FY2023 1st Half Earnings Forecastd) By Segment (vs Forecast at the beginning)▮ Despite increased profits expected in Life Innovation, decreased profits expected in Electronics& Innovative Products, Elastomers & Infrastructure Solutions, and Polymer Solutions
FY2023 1H
Initial Forecast

FY2023 1H
Revised
Forecast

Electronics & Innovative Products

45.0Life Innovation

Sales

Incr.
Decr.

VolumePricing

40.0

- 5.0

-

5.3

+

0.3

20.0

20.0

± 0.0

-

0.3

+

0.3

Elastomers & Infrastructure
Solutions

65.0

57.5

- 7.5

-

8.4

+

0.9

Polymer Solutions

67.5

65.0

- 2.5

-

2.2

-

0.3

Others

7.5

7.5

± 0.0

±

0.0

Total

205.0

190.0

- 15.0- 16.2+

FY2023 1H
Initial Forecast

FY2023 1H
Revised
Forecast

Incr.
Decr.

VolumePricing

Cost&
OthersElectronics & Innovative Products

6.0

4.0

-

2.0

-

2.6

+

0.3

+

0.3

Life Innovation

4.0

5.0

+

1.0

+

0.3

+

0.3

+

0.4

Elastomers & Infrastructure
Solutions

0.5

-1.5

-

2.0

-

4.3

+

0.9

+

1.4

Polymer Solutions

1.0

0.5

-

0.5

-

1.6

-

0.3

+

1.4

Others

1.0

1.0

±

0.0

+

0.2

-

-

0.2

Total

12.5

9.0

-

3.5

-

8.0

1.2

+

3.3

(¥ billions)Operating Income(¥ billions)

-

+

1.2

15

FY2023 1st Half Earnings Forecaste) Electronics & Innovative Products (vs Forecast at the beginning)▮ Demand for consumer electronics (smartphones, PCs, home appliances) is not expected to recover as per

the initial forecast, falling short of the forecast
Operating Income Variance Analysis(vs Forecast at the beginning)

Operating Income(¥ billions)-2.0 billion
9.2

9.5

9.6

6.0

8.3
6.0

-2.6
+0.3

101

+0.3

4.0

4.0

FY2021
1H Actual

FY2021
2H Actual

FY2022
1H Actual

FY2022
2H Actual

FY2023
1H Initial
Forecast

FY2023
1H Revised
Forecast

1H Revised
Forecast

1H Initial
Forecast

Market Outlook and Sales Trends(Market)Semiconduc
tors

xEV

Initial Forecast

Revised Forecast

Gradual recovery inautomotive-related demand
toward the end of 2023

No change to automotiverelated applications outlook

Demand recovery
Gradual recovery in consumer significantly delayed inelectronics-related application consumer electronics-related
applications
demand in 2Q and beyond
Accelerated market expansion
despite negative effects of(No change)
inflation and other factors

Renewable
Partial delay in large-scaleenergy (Highprojects in Europe
voltage-cables)(No change)

Sales Trends
Spherical fused silica
High-performancefilm: We forecast consumer electronics demand toswing downward and be lower than projected

Spherical alumina
Ceramic substrates(silicon nitride,aluminum nitride): Same as initial forecast

Acetylene black: We forecast demand for LiBs for consumer
use to decline and be lower than projected.
16

FY2023 1st Half Earnings Forecaste) Life Innovation (vs Forecast at the beginning)▮ Expecting to exceed forecasts due to higher profit from increase in demand for simultaneous test kits for
COVID-19 and influenza (combo kits) due to the spread of influenza, and to maintaining prices of test kits
due to downgrading of COVID-19 to a Class 5 infectious disease
Operating Income+1.0 billion

10.7

FY2021
2H Actual

FY2022
1H Actual

+0.3

+0.3

+0.4

5.0

101

4.8

FY2021
1H Actual

4.0

7.9

6.5

(¥ billions)Operating Income Variance Analysis(vs Forecast at the beginning)

FY2022
2H Actual

4.0

5.0

FY2023
1H Initial
Forecast

FY2023
1H Revised
Forecast

1H Initial
Forecast

1H Revised
Forecast

Market Outlook and Sales Trends(Market)Initial Forecast

Revised Forecast

Influenza

・The number of vaccinations wasin line with the as usual due toepidemic trends and a revisionof the number of COVID-19
vaccinations

・The epidemic from lastseason has not settled and iscontinuing

・Demand for in-hospital testing
will continue, but municipal
testing will decrease

Influenza vaccine: In the first half, shipments are scheduled to start in
September as expected(Same as initial forecast)

COVID-19 rapid
antigen test kits

: ・Increase in shipments expected for simultaneous test
kits for COVID-19 and influenza (combo kits) due tothe spread of influenza
・Maintaining the price of test kits after downgrading of
COVID-19 to a Class 5 infectious disease

IVD reagents(Inflammation
markers, etc.): Same as initial forecast

・No change to outlook fornumber of vaccinations

・Projection of approximately two
epidemics per year

COVID-19

Sales Trends(No change)

・No revision for insurance points
as of April 1
IVD reagents(Inflammation
markers, etc.)

Recovery in demand in the
Chinese market to the preCOVID-19 levels of 2019

(No change)

17

FY2023 1st Half Earnings Forecaste) Elastomers & Infrastructure Solutions (vs Forecast at the beginning)▮ With prolonged sluggish demand for chloroprene rubber, performance is expected to fall shortof the forecast with no sign of recovery
Operating Income-2.0 billion(¥ billions)Operating Income Variance Analysis(vs Forecast at the beginning)
0.5

-1.5

-1.5
1.3

0.0

0.5
-2.4

-3.5
FY2021
1H Actual

FY2021
2H Actual

FY2022
1H Actual

FY2022
2H Actual

+1.4

-1.5

FY2023
1H Initial
Forecast

FY2023
1H Revised
Forecast

-4.3

+0.9

1H Initial
Forecast

1H Revised
Forecast

Market Outlook and Sales Trends(Market)Initial Forecast

Revised Forecast

Sales Trends

Chloroprene rubber

Gradual recovery in demand
beginning in the first half
Second half to recover to 90% of
FY2022 first half levels

Prolonged sluggish demand showsno signs of recovery

We expect prolonged sluggish demand andvolumes to reduce significantly

Special cement
additives

Increase in domestic investments(private and government) anddemand recovery in China(No change)

Same as initial forecast

Coal price: $209/ton projected

Coal price: $150/ton projected

Additional price increase of 3,000
yen/ton will make a gradualcontribution over the first half

The 3,000 yen/ton additional price
hike, despite delays, is almost
complete as of July 31, 2023

CementDelayed contribution of price hikes despite
falling coal prices

18

FY2023 1st Half Earnings Forecaste) Polymer Solutions (vs Forecast at the beginning)▮ We forecast the recovery in demand to be slower than expected and project results to belower than the forecast
Operating Income-0.5 billion
4.3

FY2021
1H Actual

ConsumerElectronics (TVs,
PCs, home
appliances, etc.)

-1.6

1.0

-0.2

-1.1

FY2022
1H Actual

FY2022
2H Actual

Initial Forecast
Demand for LGP applications
will continue to be strong
Demand for other applications
also will recover beginning in 2Q

+1.4

0.5

-0.3

0.5
5

FY2023
1H Initial
Forecast

FY2023
1H Revised
Forecast

Market Outlook and Sales Trends(Market)

1.0

-1.5

3.6

FY2021
2H Actual(¥ billions)Operating Income Variance Analysis(vs Forecast at the beginning)

1H Revised
Forecast

1H Initial
Forecast

Revised Forecast

Sales Trends

Demand for LGP applications
will continue to be strong
Recovery of demand for otherapplications is expected to bedelayedMS resin: Same as initial forecast

AS, ABS,transparent
resins, etc.

: Demand for consumer electronics, cosmetics
containers, general merchandise, etc., expected
to be lower than forecast

Cosmetics
containers,
Generalmerchandise,etc.

Demand recovery beginning in
2Q

Recovery of demand is
expected to be delayed

Food containers

Increase in demand in theready-made meal market, whichis less expensive than eating out

Decreased in demand in theready-made meal market withfurther rising food prices

Food wrapping
sheets andcontainers: Lower than Initial forecast

Toyokalon

We expect a recovery in demandin the African and U.S. markets

Delayed recovery in demandin the African and U.S. markets

Toyokalon: Lower than Initial forecast

19

FY2023 1st Half Earnings Forecastf) Investment, Depreciation, R&D by Segment▮ 1Q is flat year on year, no change to initial forecast for the first half

1Q (Year on Year)(¥ billions)

Investment

Depreciation

R&D

FY2022

FY2023

FY2022

FY2023

FY2022

FY2023

1Q
Actual

1Q
Actual

1Q
Actual

1Q
Actual

1Q
Actual

1Q
ActualElectronics & Innovative Products

3.2

4.5

1.9

2.2

1.2

1.2

Life Innovation

0.3

0.6

1.0

1.0

1.2

1.4

Elastomers & Infrastructure
Solutions

2.1

1.6

2.5

2.1

0.8

0.6

Polymer Solutions

2.4

1.0

1.1

1.2

0.6

0.6

Others

-

-

0.1

0.1

-

-

Total

8.0

7.7

6.6

6.7

3.9

3.8

1H

(vs Forecast at the beginning)

Investment

Depreciation

R&D

FY2023

FY2023

FY2022

FY2023

FY2022

FY2023

1H Initial
Forecast

1H
Revised
Forecast

1H Initial
Forecast

1H
Revised
Forecast

1H Initial
Forecast

1H Revised
Forecast

Electronics & Innovative Products

10.0

4.5

2.5

Life Innovation

3.0

1.8

3.0

Elastomers & Infrastructure
Solutions

4.5

Polymer Solutions

2.5

2.5

1.0

-

0.2

-

20.0

13.5

8.0

OthersTotal

Nochange4.5

Nochange1.5

Nochange20

FY2023 1st Half Earnings Forecastg) Shareholder Returns , ROE▮ No change to dividend forecast
FY2018ActualNet Income
Dividends per Share*

FY2019ActualFY2020
ActualFY2021
ActualFY2022
ActualFY2023
Forecast(¥ billions)

25.0

22.7

22.8

26.0

12.8

22.0

(¥/share)

120.0

125.0

125.0

145.0

100.0

120.0
Mid-term 60.0
End 60.0

Dividend

10.5

10.8

10.8

12.5

8.6

10.4

42%

48%

47%

48%

68%

47%

(¥ billions)

2.1

-

-

-

-

-

(¥ billions)

12.6

10.8

10.8

12.5

8.6

10.4

50%

48%

47%

48%

68%

47%

(¥ billions)Shareholders Return
Stock PurchaseTotal Return
Total Return Ratio
Depreciation(¥ billions)

22.9

22.5

22.9

23.9

27.0

27.5

Investment & Lending(¥ billions)

32.8

36.9

42.3

35.6

39.4

47.0

Interest Bearing Debt(¥ billions)

112.1

134.3

138.2

137.0

169.7

177.0

Net D/E Ratio

0.40

0.42

0.42

0.40

0.50

0.51

ROIC

7.8%

6.6%

6.8%

7.3%

6.7%

5.6%

ROE

10.3%

9.1%

8.8%

9.4%

4.4%

7.3％
21

Make the World a Better Place asSpecialists in Chemistry22

Make the World a Better Place as Specialists in Chemistry▮ Aiming for further growth in FY2026 and beyond by implementing structural reforms in businesses that are

affected by the external environment and where there is pressure on earnings, and by concentrating
management resources in focus areas
Operating Income

100.0 billion or
more

ICT & Energy

Operating Margin

Healthcare

15%or higher

Sustainable Living

45.0

60.0

34.7

32.3

40.0

Declining demand(Economic slowdown in
China, inflation, etc.)

2021b) Decision on policy on One-Star Businesses
and businesses in the red by 2026
→ Toward a business structure lesssusceptible to the external environment
Strategic
investment

20.0

2020

[Actions to Take by 2026]
a) Carrying out strategic investment and R&D→ Concentrating management resources
on focus areas toward greater
expansion of Three-Star Businesses

30.0

40.1

Declining demand(COVID-19 impact)[Present]
・One-Star Businesses are under pressure to
break even due to declining demand in
FY2020 and ongoing declining demand
from FY2022

2022

2023

10.0
2024

2025

2026

15.0
2030

R&D

8-year cumulative(¥ billions)

ICT & Energy
Healthcare
Sustainable Living
Environmental
Investment
Process reforms
Other (M&A, etc.)
Basic Research

360.0

180.0

80.0
80.0
30.0

40.0
70.0
20.0

85.0
50.0
35.0

50.0
23

Make the World a Better Place as Specialists in Chemistry

Make the World a Better Place as Specialists in Chemistry

Concentrating management resources on "Denka Special," work we do better thananyone else, where we expect to make major leaps going forward

Denka Special
Work we do better thananyone else, where we
expect to make major leaps
going forwarda) Highly functional inorganic materials for EVsb) Organic low dielectric materials for nextgeneration communications usec) G47Δ, Oncolytic Herpes Virus and deployment
to CDMOs specialized in virus formulationd) Hydroelectric power generation + M to A

24

Make the World a Better Place as Specialists in Chemistry▮ Responding to growing EV demand with highly functional inorganic materials based on ceramic high-temperature firing technology, nanoparticle control technology, and impurity control technology
Denka Special a) Highly Functional Inorganic Materials for EVs

20.0 billion yen

FY2030(millions of vehicles)

80.0 billion yen

Potential market size: EV sales volume

FY202210 million vehicles

FY2030 Forecast

40+ million vehicles

Uniqueness: Highly functional inorganic materials based on ceramic hightemperature firing technology, nanoparticle control technology, and impurity
control technology

EV Sales Volume Forecast

Sales

FY2022

2022

Denka net sales per vehicle

Gasoline vehicles

200 yen

2023

2024

2025

2026

2027

2030

EVs

2,000 yen

Major Products

Major Applications in
Gasoline Vehicles

Spherical fused silica

Semiconductor sealants

Spherical alumina

Major Applications in EVs

Future Action

Semiconductor sealants

Capacity expansion in Singapore (launch in 2024)-

Thermal interface materials for LiB coolingmechanisms, OBC (on board chargers)

Capacity expansion in Singapore (launched in 2022)

Acetylene black-

Conductive agents for LiB cathode materials

New manufacturing base in Thailand (launch in 2025)

Silicon Nitride (Powder)-Insulating substrates for inverter power modules,
bearing balls for traction motors

Capacity expansion (launch in 2025)

Ceramic substrates (silicon nitride, aluminum nitride)-

Insulating substrates for inverter power modules

Capacity expansion (launch in 2023 2nd Half)

Others (metal substrates, etc.)

Headlights, electric power
steering, etc.

Headlights, electric power steering, etc.

-25

Make the World a Better Place as Specialists in Chemistry▮ We accurately identify market needs through inorganic materials, which have produced several de facto

materials in the field of electronic materials. Our unique organic material manufacturing technology iscontributing to next-generation telecommunications technologies
Denka Special b) Organic Low Dielectric Materials for Nextgeneration Communications Use

Sales

FY2022
Not launched yet

FY203010.0-15.0 billion yen

Potential market size: Next-generation
communications (5G, 6G)

Market size for low dielectric resins
FY20303x+ (vs FY2022)

Uniqueness: We accurately identify market needs through inorganic materials, which have produced several de facto materials in the field of electronicmaterials. Contributing to reducing transmission loss, an issue in high-speed communications (low permittivity) and transmission loss
reduction (low dissipation factor), through organic low dielectric materials combining inorganic material manufacturing technologies
accumulated with organic material manufacturing technologies, including precision film formation and coordinated polymerization

SNECTON (Low Dielectric Macromonomer/LDM)
Applications: Substrates for copper clad laminates(CCL) and interlayer dielectric materials

LCP Film (Liquid Crystal Polymer Film)

Applications: Substrates for flexible copper cladlaminates (FCCL)

Denka IP for Copper Clad Laminates (CCL)
Applications: Glass fabric base epoxy copper cladlaminates (CCL)
Hardening agent for prepreg

With thermosetting materials composed of ethylene-styrene-divinylbenzene, we resolve issues faced bysoft materials in heat resistance and dielectric properties. Evaluation is progressing steadily as a basematerial for rigid substrates for high-speed communications and an interlayer dielectric material. As the
only manufacturer of both resin materials and inorganic fillers, we are able to offer our own uniqueproposals by Varnish, a resin filler mixture
LCP is a extremely difficult resin to make into film, and few manufacturers can provide a stable supply of
LCP. By applying the film deposition technology for organic materials cultivated in the electronic
packaging and food packaging sheet businesses, we have established a technology for manufacturing
LCP using the T-die method (T-die extrusion method) , which offers superiority in mass production andfilm thickness control. LCP is expected to be a base material for flexible circuits of high-speed
communications.
We are currently making improvements in and developing Denka IP, which is currently manufactured andsold as a heat-resistant additive for ABS resin. These efforts are to make Denka IP a resin material that
can improve the glass transition temperature (Tg) and low dielectric properties of epoxy resin by adding
it to epoxy resin, which is currently the main material used as a hardening agent for substrate prepreg,
while maintaining the workability and adhesiveness characteristic of epoxy resin

26

Make the World a Better Place as Specialists in Chemistry▮ Aiming for further growth through expansion of G47Δ pharmaceutical in the treatment field and deployment

to CDMOs, as well as strengthening existing businesses
Denka Special c) G47Δ, Oncolytic Herpes Virus and deployment to CDMOs specialized in virus formulation
G47Δ Net Sales

FY203070.0 billion yen

Expanding manufacturing capacity to deliver G47Δ pharmaceutical to patients withmalignant glioma as soon as possible(Phase 1: End of FY2025; Phase 2: Second half of FY2027)
Uniqueness: The world's first approved oncolytic therapeutic virus for malignant glioma (brain
tumors)Potential market sizea) Number of patients with malignant glioma *1b) Adaptation to other cancers (clinical studies)c) Deployment to the domain of CDMOs specialized in virus formulation*2*1 (Number of new patients with malignant glioma per year)
About 3,000 patients in Japan, 50,000 in Europe and the U.S., and more if China is included*2 CDMO: Contract development and manufacturing organization27

Make the World a Better Place as Specialists in Chemistry▮ Toward large-scale mass production of acetylene with low environmental impact thanks toprocess conversion to M to A
Denka Special d-1) Introducing M to A (Methane to Acetylene) at the Omuta Plant
Acetylene black
manufacturing bases(Carbide method)
Omuta Plant(Petrochemical method)

Singapore subsidiary
Chiba Plant
JV in Thailand(in planning stages)

Continued production using the carbide method, which has high CO₂ emissions
In light of ESG considerations, though the decision was made to halt production,
it was decided to resume production in order to respond to the rapidly growing
demand for LiBs for EVs
Toward converting manufacturing from the carbide method
To reduce CO₂ emissions, we decided to introduce demonstration plant
for a new process to produce acetylene from methane developed byTransform Materials, a venture company in the U.S.
We demonstrate this technology and conduct joint research ontechnological improvements toward large-scale mass production ofacetylene(Reference: Released May 25, 2023)
https://www.denka.co.jp/eng/storage/news/pdf/449/20230525_denka_mtoa_en.pdf

The establishment of a manufacturing process for ensuring stable acetylene supply with low environmental
impact was approved for a grant of approximately 3.3 billion yen and is in compliance with METI's economic
security policy of enhancing the domestic supply chain for storage batteries

Process conversion to M to A generates hydrogen along with acetylene.
Further reduction of CO₂ emissions is also expected through effective use of hydrogen energy28

Make the World a Better Place as Specialists in Chemistry▮ Deploying the new M to A manufacturing method to the carbide chain at the Omi Plant, which has ourunique hydroelectric power generation system, to achieve low-carbon chloroprene rubber and utilization ofhydrogen energy
Denka Special d-2) Deploying Hydroelectric Power Generation + M to A (Methane to Acetylene) at the Omi Plant

Hydroelectric Power+

M to A= Low-carbon chloroprene rubber + hydrogen

Uniqueness:

Uniqueness:

Effective use of Company-ownedhydroelectric power generation,
which has a total maximum output of
140,000 kW

CO2 Reduction

Commercialization of new manufacturingmethod technology, utilizing
manufacturing expertise cultivatedthrough the current method of producing
acetylene from limestone

300,000 tons

Exploring utilization of hydrogen(methanation, in-plant use, potential
new hydrogen business, etc.): Reduction amount including conversion from the carbide process
and utilization of the hydrogen by-product(Current manufacturing method) Carbide-derived(Cannot be used for calcium carbide)

Highly functional chloroprene rubber
meets demand for low-carbon rubber(New manufacturing method) Methane-derived

LimestoneminingMethaneQuicklime
Hydroelectric
power
generation

Electric
furnace
Calcium
carbideCement*Complete withdrawal
in 1H FY2025

By-productHydroelectric
power
generation

M to A
By-product

Calcium
cyanamide(Hydrogen)

Acetylene(slaked lime, etc.)

Acetylene
Chloroprene rubber

Low-carbon chloroprene rubber
29

(Reference) 1st Half Breakdown (By Segment) (Year on Year)Sales(¥ billions)

FY2022
1H
ActualFY2023
1H
Forecast

Incr.
Decr.

VolumePricing

Electronics & Innovative
Products

47.5

40.0

-

7.5

-

9.7

+

2.2

Life Innovation

21.9

20.0

-

1.9

-

1.8

-

0.1

Elastomers & Infrastructure
Solutions

62.9

57.5

-

5.4

- 11.3+

5.9

Polymer Solutions

63.6

65.0

+

1.4

+

5.1

-

3.7

Others

7.0

7.5

+

0.5

+

0.5

Total

202.9

190.0

Operating Income(¥ billions)

FY2022
1H
Actual- 12.9FY2023
1H
Forecast

Incr.
Decr.

- 17.3+

4.4

VolumePricing

Cost&
OthersElectronics & Innovative
Products

9.6

4.0

-

5.6

-

4.4

+

2.2

-

3.5

Life Innovation

6.5

5.0

-

1.5

-

0.8

-

0.1

-

0.6

Elastomers & Infrastructure
Solutions

1.3

-1.5

-

2.8

-

5.0

+

5.9

-

3.8

Polymer Solutions

-0.2

0.5

+

0.7

+

0.1

-

3.7

+

4.3

Others

1.0

1.0

-

0.0

-

0.1

-

+

0.1

Total

18.3

9.0

-

9.3

- 10.2

4.4

-

3.5

+

30

(Reference) Forecast (By Segment) (Year on Year)Sales(¥ billions)

FY2022
ActualFY2023
InitialForecast

Incr.
Decr.

VolumePricing

Electronics & Innovative
Products

93.5

100.0

+ 6.5

+ 5.9

+ 0.6

Life Innovation

47.5

45.0

- 2.5

- 1.5

- 1.0

Elastomers & Infrastructure
Solutions

123.8

130.0

+ 6.2

+ 1.1

+ 5.1

Polymer Solutions

127.6

140.0

+12.4

+ 19.3- 6.9

Others

15.1

15.0

- 0.1

- 0.1

-

Total

407.6

430.0

+22.4

+ 24.7- 2.2

FY2023
InitialForecast

Incr.
Decr.

Operating Income(¥ billions)

FY2022
ActualVolumePricing

Cost&
OthersElectronics & Innovative
Products

18.0

15.0

-

3.0

+ 3.6

+ 0.6

- 7.1

Life Innovation

14.4

9.5

-

4.9

- 0.8

- 1.0

- 3.0

Elastomers & Infrastructure
Solutions

- 1.1

2.5

+

3.6

+ 1.9

+ 5.1

- 3.4

Polymer Solutions

-1.2

4.5

+

5.7

+ 3.4

- 6.9

+ 9.2

Others

2.3

1.5

-

0.8

- 0.8

-

-

Total

32.3

33.0

+

0.7

+ 7.2

- 2.2

- 4.3
31

(Reference) Quarterly Trends (By Segment)

Sales (¥billions)

FY2021

FY2022

FY2023

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q
Actual2Q
Forecast

Electronics & Innovative
Products

21.0

22.8

22.3

24.0

21.9

25.6

22.3

23.8

19.2

20.8

Life Innovation

6.0

19.3

10.9

9.9

6.4

15.5

16.9

8.8

7.2

12.8

Elastomers & Infrastructure
Solutions

24.6

26.8

26.1

29.3

30.4

32.5

31.6

29.3

28.0

29.5

Polymer Solutions

31.8

31.5

29.5

33.9

31.6

32.0

30.3

33.7

29.8

35.2

Others

3.5

4.0

4.0

3.7

4.1

2.9

4.7

3.4

3.7

3.8

Total

86.7

104.4

92.8

100.9

94.4

108.6

105.8

98.8

87.8

102.2

Operating Income(¥ billions)

FY2021

FY2022

FY2023

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

1Q
Actual2Q
Forecast

Electronics & Innovative
Products

4.4

4.8

4.6

4.9

4.1

5.6

4.1

4.2

2.1

1.9

Life Innovation

0.3

10.4

1.2

3.6

0.5

6.0

5.0

2.8

0.9

4.1

Elastomers & Infrastructure
Solutions

0.1

-0.0

-1.2

-2.3

-0.2

1.5

-1.3

-1.1

-0.7

-0.8

Polymer Solutions

2.6

1.8

1.9

1.6

-0.1

-0.0

-0.9

-0.1

-0.0

0.5

Others

0.4

0.5

0.4

0.2

0.6

0.4

0.9

0.4

0.5

0.5

Total

7.7

17.5

7.0

7.9

4.9

13.4

7.8

6.3

2.8

6.2
32

Cautionary statement regarding forward-looking information

業績予想の適切な利用に関する説明（将来に関する記述等についてのご注意）

Target figures in this material are not forecasts of business results.
In addition, any description relating to the future in this material is subject toknown or unknown risks and uncertainties, although it is based on management's
current assumptions and beliefs in light of the information currently available to it.
Please be cautioned that a number of important factors could cause actual results
本資料に掲載されている業績の見通し等の将来に関する記述は、
to differsignificantly from the description in the material.
Such risks and uncertainties include adverse economic conditions, currency
当社が現在入手している情報および合理的であると判断する一定
exchange rate fluctuations, adverse legislative and regulatory developments,
delaysin new product launch, pricing, and product initiatives of competitors,の前提に基づいており、実際の業績等は様々な要因により大きく
the inability of the Company to market existing and new products effectively,interruptionsin production, infringements of the company's intellectual property
異なる可能性があります。
rights and the adverse outcome of material litigation.

33

Inquiries regarding this material

Corporate Communications Dept,
Denka Co., Ltd.
TEL
ＵＲＬ

03-5290-5511
https://www.denka.co.jp/eng/