1. Outline of Consolidated Financial Results

FY 2018
Financial Results Briefing

for FY 2018
2. Forecast of Consolidated Financial Resultsfor FY 2019
3. Medium-Term Business Plan
4. Products and Research & Development

2019年5月24日
日本化学工業株式会社 4092
© 2019 Nippon Chemical Industrial Co., Ltd.

Notice: This document is an excerpt translation of the original Japanese
document and is only for reference purposes. In the event of any discrepancy
between this translated document and the original Japanese document,
the latter shall prevail.

1

Outline of Consolidated Financial
Results for FY 2018

© 2019 Nippon Chemical Industrial Co., Ltd.

Outline of Consolidated Financial Resultsfor FY 2018

（Millions of yen）

FY 2017
Net sales
Operating profit
Ordinary profit
ProfitROE

FY 2018

36,798
4,084
4,009
2,774

36,157
3,084
3,057
2,154

8.3%

6.2%

© 2019 Nippon Chemical Industrial Co., Ltd.

ChangeChange rate

640

▲1.7%

▲ 1,000▲24.5%▲ 951▲23.7%▲ 620▲22.4%

3

Revenue by Business Segment for FY 2018
（Millions of yen） Chromium
ChangeFY 2017

FY 2018

16,137

15,584

▲ 552

▲3%

767

661

▲ 106

▲14%

Changerate

Inorganic

Net sales

Chemicals

Operating profit

Specialty

Net sales

14,971

14,849▲ 121▲1%Chemicals

Operating profit

2,260

1,423

▲ 837

▲37%

Leasing

Net sales

874

893

19

2%

Business

Operating profit

540

548

8

1%

3,834

3,869

35

1%

Operating profit

455

350

▲ 105

▲23%

Net sales

980

959

▲ 20

▲2%

Operating profit

39

81

42

108%

Net sales

36,79836,157

▲ 640

▲1.7%

Operating profit

4,084

3,084 ▲ 1,000▲24.5%

Airconditioning
Business
OthersTOTAL

Net sales© 2019 Nippon Chemical Industrial Co., Ltd.

Compounds

Products for refractories performed
steadily

Silicates and Silica

Products for pulp and paper deteriorated

Inorganic Phosphorus
Products for LCDs deteriorated
Compounds
Phosphine Derivatives Products for lithium ion batteries weresluggishAgrochemicals

Decreased due to customer inventory
adjustments, etc.

Battery Materials

Products for main customers performed
strongly

Electronic CeramicMaterials

Products for smartphones andautomobiles performed steadily

Circuit Materials

Products for small- to medium-sizedpanels were sluggish

Leasing business

Completed the redevelopment of theformer Nishi-yodogawa Plant site

Air-conditioning
business

New designs and installations weresluggish, while maintenance was steadyConsolidated Rockgate Corporationacquired by the Company

Book store operation

The book store business was sluggish

4Consolidated Balance Sheet(Assets)（Millions of yen）

As of March 31, As of March 31,【Assets】
Current assets
Cash and deposits
Notes and accounts receivable - trade
Inventories
Other
Non-current assets
Property, plant and equipment
Intangible assets
Investment securities
Other
Total assets© 2019 Nippon Chemical Industrial Co., Ltd.

2018

2019

29,593
8,937
11,8498,212
595
32,451
24,445
265
6,723
1,018
62,04430,794
9,051
10,861
10,364518
34,70327,014
319
6,597
773
65,497

Change
1,201
113
▲ 988
2,152
▲ 77
2,252
2,569
53
▲ 126
▲ 245
3,452

5

Consolidated Balance Sheet(Liabilities and Net Assets)（Millions of yen）

As of March 31, As of March 31,【Liabilities】
Current liabilities
Notes and accounts payable - trade
Short-term loans payable
Other
Non-current liabilities
Long-term loans payable
Retirement benefit liability
Deferred tax liabilities
Other
Total liabilities

2018

2019

16,178
4,107
6,535
5,536
11,347
5,960
931
2,278
2,177
27,52518,925
4,617
9,143
5,165
11,073
5,422
1,299
2,118
2,233
29,99930,976
3,542
34,51862,04432,5142,983
35,49765,497

Change
2,747
510
2,608
▲ 371
▲ 274
▲ 537
368
▲ 160
56
2,474

【Net assets】
Shareholders' equity
Accumulated other comprehensive income

Total net assets
Total liabilities and net assets© 2019 Nippon Chemical Industrial Co., Ltd.

1,538
▲ 559
978
3,452

6

Consolidated Statements of Cash Flows（Millions of yen）

FY ended

FY ended

March 31, 2018 March 31, 2019

Ⅰ Cash flows from operating activities
Profit before income taxes
Depreciation
Decrease (increase) in inventories
Other

Ⅱ Cash flows from investing activities
Capital expenditure
Other

Ⅲ Cash flows from financing activities
Increase (decrease) in loans payable
Cash dividends paid
Other
Effect of exchange rate change on cash and cash equivalents

Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period© 2019 Nippon Chemical Industrial Co., Ltd.

3,858
3,875
1,975
▲ 673
▲ 1,319▲ 1,784▲ 2,262478▲ 1,683▲ 1,150
▲ 527
▲6
3
393
8,534
8,927

2,632
2,956
2,155
▲ 2,148▲ 331▲ 3,966▲ 3,965
▲1
1,445
2,068
▲ 614
▲9
2
113
8,927
9,041
7

2

Forecast ofConsolidated Financial Resultsfor FY 2019

© 2019 Nippon Chemical Industrial Co., Ltd.

Forecast of Consolidated Financial Resultsfor FY 2019

（Millions of yen）

FY 2018

FY 2019

ActualForecast

ChangeChange rate

Net sales

36,15737,500

1,343

3.7%

Operating profit

3,084

3,100

16

0.5%

Ordinary profit

3,057
2,154

3,100
2,200

43

1.4%

46

2.1%

Profit© 2019 Nippon Chemical Industrial Co., Ltd.

9

Revenue by Business Segment for FY 2019
（Millions of yen） Chromium
FY 2018

FY 2019

ActualForecast

15,584

15,955

371

2%

661

566

▲ 95

▲14%

Net sales

Chemicals

Operating profit

Specialty

Net sales

14,84915,840991

7%Chemicals

Operating profit

1,423

1,631

208

15%

Leasing

Net sales

893

905

12

1%

Business

Operating profit

548

590

42

Air-

Net sales

3,869

3,953

Operating profit

350

Net sales
Operating profit

Business
OthersTOTAL

Perform steadily

Silicates and Silica

Likely to ship radioactive substanceabsorbents

Change Change Rate

Inorganic

conditioning

Compounds

Inorganic Phosphorus Grow due to price revisions and sales
Compounds
expansion
Phosphine Derivatives Perform steadily
Agrochemicals

Perform steadily

8%

Battery Materials

Prices of raw material cobalt spike

84

2%

291

▲ 59

▲17%

Electronic CeramicMaterials

Sales volume of products for MLCCs
increases

959

847

▲ 112

▲12%

Circuit Materials

Perform smoothly

81

22

▲ 59

▲73%

Leasing business

Perform steadily

Net sales

36,15737,500

1,343

3.7%

Operating profit

3,084

3,100

16

0.5%

Air-conditioning
business

Perform steadilyBook store operation

Sales decrease due to industry slump© 2019 Nippon Chemical Industrial Co., Ltd.

10

Capital Expenditure and Depreciation and Amortization
100

Capital expenditure

c

80 c

30

73

20

Depreciation and amortizaion

19

60

26

20

22
46

40

22

26

20

c

Main capital expenditures

Forecast for FY 201910

The business performance of electronic
ceramic materials will remain strong

0

Continue to invest in growth products
in a concentrated manner

Invest aggressively without losing growth
opportunities

0
FY 2016

FY 2017

Product

Use

Plant

Background and description of investment

Value

Organic
electronicmaterials

Leading-edgeorganic electronicmaterials

Fukushima 2

Arrange for the construction of a new plant to meet therising needs for leading-edge organic materials.
Aim to double sales of organic electronic materials business.

2.0 billion
yen

Fukushima 1

Add a new production line.
Expand production capacity by 10%.

1.0 billion
yen

Aichi
or
Tokuyama

Cater to soaring MLCC demand stemming from a shift to EV
cars as well as the installation of 5G base stations.
Considering arranging for a new plant building to beconstructed in Aichi or Tokuyama as a BCP measure.

Underconsideration（Hundreds of millions of yen）

Major recent investments

Electronic
ceramic
materials

MLCC materials

FY 2018

FY 2019
forecast© 2019 Nippon Chemical Industrial Co., Ltd.

11

3

Medium-Term Business Plan

© 2019 Nippon Chemical Industrial Co., Ltd.

Medium-Term Business Plan Policy

Toward earning sustained and steady profits(i) Concentrated investment(ii) Aggressive development(iii) Reinforcement ofin priority areasof overseas strategies

business foundation

Expand Specialty Chemicals businessSell to non-Japan Asian markets
aggressively

Regain businessin existing domestic markets

Arrange for the construction ofa new plant incorporatingnext-generation products

Reinforce the liaison between
our international business sites

Utilize asset holdings effectively

Push forward with mergers andacquisitions (M&As)

Verify the proposed establishment of
a South East Asian production baseand implement it

Promote developing humanresources

Growth strategy

Structural reformand reinforcement© 2019 Nippon Chemical Industrial Co., Ltd.

13

Medium-Term Business Plan Measures and Progress(i) Concentrated investment in priority areas
MeasureStatus of progress
・Established the Advanced Materials R&D Department within the

Expand Specialty Chemicals
business

R&D Division
・Increased the capital expenditure and prototype development
costs for electronic materials and organic products
・Made large investments in electronic materials and organic

Arrange for the construction productsof a new plant incorporating ・Devising the Medium-Term Business Plan
next-generation products
for the next period

Push forward with mergers
and acquisitions (M&As)

・Acquired Rockgate Corporation, the laboratory
instrument company (by Nippon Puretec Co., Ltd.)・Considering several potential cases(Source：Rockgate Corporation Website)© 2019 Nippon Chemical Industrial Co., Ltd.

14

Medium-Term Business Plan Measures and Progress(ii) Aggressive development of overseas strategies
USA

THAILANDSHANGHAI

Cultivating demand in the
Chinese market

・Established JCI (THAILAND) (August 2017)
・Cultivating South East Asian markets

New
production
base・Reinforcing the liaison between our overseas sites toaim for inter-base trade
・Organize overseas representatives meeting periodically

Considering overseas production of some products and their profitability(South East Asia)© 2019 Nippon Chemical Industrial Co., Ltd.

15

Medium-Term Business Plan Measures and Progress(iii) Reinforcement of business foundation
MeasureStatus of progress
・Recommencing business with former customers as well as acquired

Regain business in existing
domestic markets

new customers
・Considered and took cost-saving measures
・Completed the redevelopment of the former

Utilize asset holdings
effectively

Nishi-yodogawa Plant site
・Renewed the agreement on AEON TOWN
KORIYAMA
・Secure human resources by mid-career recruitment

Promote developing humanresources

・Conducted “right man in the right place” staff allocation
・Resumed mid-level employee and youth training programs© 2019 Nippon Chemical Industrial Co., Ltd.

16

Medium-term business plan
Key Numerical Targets（Hundreds of millions of yen）

FY 2017

FY 2018

FY 2019

Net sales

350

360

375

Operating profit

25

28

29

Rate (%)

7.1%

7.7%

7.7%

Capitalexpenditure

34

53

30

New products
sales

22

28

20

© 2019 Nippon Chemical Industrial Co., Ltd.

17

Medium-Term Business Plan Measures and Progress
Progress in net sales and operating profit
Net sales

Plan

Status of progress

Actual367

375 375
360 362

350

Both net sales and operating profit
will likely reach plans for the third
consecutive year
Shipments of products such as
electronic materials are running outof steam, affected by U.S.-China
trade tensions
Rising raw material costs as well asclimbing depreciation andamortization caused by large
investments are causes for concern

FY 2017

FY 2018

FY 2019(Hundreds of millions of yen)

Plan

Operating profit

Actual 40

25

FY 201728

31

FY 201829

31

FY 2019(Hundreds of millions of yen)

© 2019 Nippon Chemical Industrial Co., Ltd.

18

Medium-Term Business Plan Measures and Progress
Capital expenditure and new products sales
Capital expenditure

Plan

Status of progress

Actual53

Capital expenditure: Continue toinvest in growth products
aggressively and flexibly.

34

New products sales: Likely to fallshort of plan due to a launch delay.

FY 2017* A “new product” is defined as one that has
been registered within the last three years,
counting FY of registration as the first year.

Plan

73

46
30

26

FY 2018

FY 2019(Hundreds of millions of yen)

New products sales
28

Actual

22

21

24
20
13

FY 2017

FY 2018

FY 2019(Hundreds of millions of yen)

© 2019 Nippon Chemical Industrial Co., Ltd.

19

4

Products and Research & Development© 2019 Nippon Chemical Industrial Co., Ltd.

BESPA BT(Barium Titanate made by Oxalic method)
BESPA BT is Barium Titanate (BaTiO3) products made by Oxalic method. Barium Titanate has been used in
ceramic capacitor, especially MLCC (Multi Layer Ceramics Capacitor ), by the high dielectric characteristics. Our
products have contributed much to the high-performance electric circuit.
BaTiO3 production methods consist of Oxalic method, Hydrothermal method and Solid state method. Nippon
Chemical Industrial Co., Ltd. produces BaTiO3 mainly by Oxalic method.

Production
methodOxalic method

Characteristic

MLCC application

A method by which to produce BaTiO3 by calcining Ba and Ti
oxalate. Mole ratio (Ba and Ti) in BaTiO3 is uniform because its
intermediate has identical composition via oxalic acid.
Barium titanate
Intermediate
Ba Oxalic acid Ti

Highly reliable parts and smallsized parts(Automotive and IoT)

Hydrothermal
methodA method by which to produce BaTiO3 in a liquid phase underhigh pressure. Hydrothermal method has an advantage to
produce fine particles.

Ultra-small-sized parts andsmall-sized parts（IoT）

Solid state method

A method by which to produce BaTiO3 by mixing and calcining ofBarium Carbonate and Titanium Oxide. Solid state method has
wide range of raw material selection, and is able to produce
BaTiO3 relatively cheaply.

General purpose parts（IoT）© 2019 Nippon Chemical Industrial Co., Ltd.

21

SMERF®: Anisotropic Conductive Paste
for IC card and tag products
The Ministry of Economy, Trade and Industry advocated 100 billion RFID tags for convenience stores in April 2017
Packaging of SMERF®
and a smart drug store concept in March 2018

RFID technology
RFID tagRadio wave

Demand of ICs, antennas and anisotropic conductive pastes used for IC card and tag production, is
expected to grow.
Nippon Chemical Industrial used its proprietary materials and technologies to develop SMERF,® an anisotropic conductive paste forthe suitable connection of ICs and antennas.
Photo of RFID tag connected by using SMERF®

GradeCuringtemperature

Curingtime

Pot life@25°C

Standard grade
RL/NL series

170°C–190°C

7 to 10seconds

1 month or
more

Fast curing grade
RF/NF series

170°C–190°C

2 seconds

4 days© 2019 Nippon Chemical Industrial Co., Ltd.

Anisotropic conductive paste: SMERF®

IC

Antenna22

Joint research with the Ito Lab of
Hokkaido University
Boron
substituent

Borylation

Developed a high performance chiral catalyst designed rationally
via computational science—Resolved a six-decade-unresolved issue by computation and experimentation—+ Highperformancechiral catalyst

Nature Communications volume 9, Article number: 2290 (2018)https://www.nature.com/articles/s41467-018-04693-9

Research target: Develop
a high-performance chiralcatalyst that can
introduce a boron atom in
the internal carbon atomwith chirality

There were no
successful pastcases due to thehigh difficulty
involved① Analyze reaction by
the quantum chemical
calculation② Extract an important
structure factor③ Design of a new
catalyst (ligand)Boron
substituent

Inside of molecule① Analyze reaction by
the quantum chemical
calculation

Structure offirst-generation catalyst(ligand)Molecule end

Borylation

A boron atom was introduced fora terminal carbon atom in anexisting hydroboration reaction(from 1950 onwards)② Extract an important
structure factor

Structure ofsecond-generation catalyst(ligand)③ Design of a new
catalyst (ligand)

Structure ofthird-generation catalyst(ligand)

Repeat this ligand design cycle based on a combination ofcomputational and experimental evaluations

・Academic value: Made a type of catalytic asymmetric reaction happen for the first time ever, somethingthat had not been possible for the past 60 years
・Industrial value: Enables pharmaceutical materials to be produced efficiently from inexpensive industrial
products, helping lower drug costs
・Benefit for the Company : Allows us to efficiently develop asymmetric ligands, which are new product candidates© 2019 Nippon Chemical Industrial Co., Ltd.

23

Suspension of anti-cancer drug development(Organic phosphine gold complex)
Although the Company had been pursuing the development of anorganic phosphine gold complex-based anti-cancer drug, we decided tosuspend the development as we concluded that, based on an interim
pre-clinical study outcome, it would be challenging to achieve theefficacy assessment items.

Launched joint
development in China

Joint development with
Shanghai University ofTransportation andShanghai Institute ofPharmaceutical Industry

Suspended joint
development in China

China’s pharmaceuticalregistration system wasamendedConsideration results were
nullified

Decision to suspend
development© 2019 Nippon Chemical Industrial Co., Ltd.

Launched joint development with aJapan-based pharmaceuticalmanufacturer

Development of three compounds aspotential new drugs

Suspendeddevelopment

Conducted a pre-clinical study

Based on the interim outcome of the
pre-clinical study, we concluded it
would be challenging to achieve
efficacy assessment items

24

Disclaimer- Earnings forecasts and business plans presented in thismaterial are those prepared by the Company, based on various
assumptions from information obtainable on the date of releaseof the document. It should be noted that these forecasts andplans are not intended to neither promise nor guarantee theachievement of the planned figures or measures presented
herein.

© 2019 Nippon Chemical Industrial Co., Ltd.

25