Results Presentationof FY2020 3Q

Denka Co.,LtdFebruary 2021

Contents1FY2020 Q3 Resultsa) Summary

2（Year-on-Year Comparison ）02b) Change Factors （Year-on-Year Comparison ）03c) by Segment

05（Year-on-Year Comparison ）FY2020 Earnings Forecasta) Summary（Year-on-Year Comparison）

06b) Assumptions Used to Formulate Forecast

07c) by Segment（Year-on-Year Comparison）

08d) Comments on Earnings Forecast09e) Shareholder Returns and Investment-Related Data

10f) Growth of Specialty Businesses

11

３ Environmental Management (Carbon-Neutral Initiatives)(Reference)

Environmental Managementat Denka Performance Elastomer（News Release List）

12131

FY2020 Q3 Resultsa) Summary （Year-on-Year Comparison）(¥ billions)

FY2020
Apr-Dec
Actual

FY2019Apr-Dec
Actual

Incr.
Decr.

Sales

262.0

288.7

‐ 26.7

Operating Income

28.0

24.0

＋ 4.0

Elastomer & Performance Plastics ‐5.9
Infrastructure & Social Solutions ‐0.2
Electronics & Innovative Products + 1.6+ 1.1
Living & Environment Products+ 7.5
Life Innovation+ 0.0
Others+4.0
Operating Margin

Ordinary Income
Net income
attributable toowners of parent

10.7%

27.3
18.9

8.3%

22.7
16.7＋

2.4%

＋ 4.6＋ 2.2

Interest rates,
non-operating income, etc.

+ 0.6+4.6
Extraordinary gains and losses
and corporate tax etc.

‐2.4+2.22

FY2020 Q3 Resultsb) Change Factors （Year-on-Year Comparison）
YoY (¥ billions)262.0 billion

Sales

1. Volume: Difference due to the impact of the novel coronavirus pandemic
2. Pricing:

Difference due to styrene-based product price revisions inconnection with the raw materials market decline- 26.7- 7.0- 19.7

YoY (¥ billions)Operating Income
1. Volume

28.0 billion+ 4.0: Impact of the novel coronavirus pandemic -12.4
Other (Rapid Antigen Test for COVID-19, xEV-related, semiconductor-related, etc.） +17.4 + 5.0

2. Spread: Sales prices -17.8 ＞Materials costs, etc. +13.9- 3.9

3. Forex: Sales prices -1.8 ＞ Materials costs, etc. +1.3

- 0.5

4. Costs: Other administrative expenses and manufacturing costs, etc.

+ 3.5

3

FY2020 Q3 Resultsb) Change Factors （Year-on-Year Comparison）

Operating Income Change factors(¥ billions)+ 17.4

+ 3.5

24.0
- 3.9

- 12.4
Impact ofthe novelcoronavirus
pandemic
FY2019Apr-Dec
ActualVolume(The pandemic’simpact)

Rapid Antigen
Test for
COVID-19,
xEV-related,
Semiconductor-related, etc.
Volume(Other)- 0.5

Sales prices -17.8 Sales prices -1.8
Materials
Materials
costs, etc. +13.9 costs, etc. +1.3
Spread

28.0

Forex

Other
administrative
expensesandmanufacturingcosts, etc.
Costs

FY2020
Apr-Dec
Actual4

FY2020 Q3 Resultsc) by Segment （Year-on-Year Comparison）(¥ billions)

FY2020
Apr-Dec
Actual

FY2019Apr-Dec
Actual

Incr.
Decr.

Pricing

VolumeElastomers & Performance Plastics

86.4

112.1

- 25.7- 17.6-

Infrastructure & Social Solutions

38.4

41.3

-

2.9+ 0.3- 3.2

Electronic & Innovative Products

51.5

49.9+

1.6

-

1.2+ 2.8

Living & Environment Products

25.6

28.1

-

2.5

-

1.1

-

Life Innovation

36.6

28.7

+7.9

-

0.1

+ 8.0

Others

23.5

28.5

-

5.0

―- 5.0

Total

262.0

288.7

- 26.7- 19.7- 7.0(¥ billions)

FY2020
Apr-Dec
Actual

FY2019Apr-Dec
Actual

Incr.
Decr.

Pricing

VolumeCost &Others

Elastomers & Performance Plastics

2.28.2-5.9- 17.6-

4.0+ 15.7

Infrastructure & Social Solutions

0.10.4-0.2+ 0.3-

1.0+ 0.4

Electronic & Innovative Products

10.1

8.5+1.6-

1.2+ 2.0+ 0.8

Living & Environment Products

1.1

0.0+

1.1

-

1.1-+ 3.0Life Innovation

13.8

6.3+7.5-

0.1+ 8.6-

1.0

Others0.7

0.7+ 0.0―+-0.1

Total

28.0

24.0+ 4.0- 19.7

Sales

Operating Income

8.1

1.5

0.80.1+ 5.0+ 18.75FY2020 Earnings Forecasta) Summary （Year-on-Year Comparison）(¥ billions)

Sales

Operating Income

FY2020
ForecastFY2019
Actual350.0

380.8 ‐ 30.8

33.0

Incr.
Decr.

31.6 ＋ 1.4

Elastomer & Performance Plastics
Infrastructure & Social Solutions
Electronics & Innovative Products
Living & Environment ProductsLife Innovation
Others‐‐+++‐

7.9
0.3
0.6
0.9
8.5
0.4+ 1.4
Operating Margin

Ordinary Income
Net income
attributable toowners of parent

9.4%

30.0
22.0

8.3%

＋

1.1%

30.0 ‐ 0.0
22.7 ‐ 0.7

Interest rates,
non-operating income, etc.

‐ 1.4‐ 0.0
Extraordinary gains and losses
and corporate tax etc.

‐ 0.7

‐ 0.76

FY2020 Earnings Forecastb) Assumptions Used to Formulate Forecast

Assumptions

FY2020
Forecast

Apr-Dec
ActualJan-Mar
Forecast

FY2019Actual

Apr-Dec
ActualJan-Mar
Actual

Forex

106.1

106.1

106.0

109.1

109.1

109.3

Japan Naphtha

30,15029,36032,50042,65042,60043,700

Reference

FY2020
Forecast

Apr-Dec
ActualJan-Mar
Forecast

FY2019Actual

Apr-Dec
ActualJan-Mar
ActualInvestment

45.0

31.7

13.3

36.9

26.5

10.4

Depreciation

23.0

17.2

5.8

22.5

11.6

10.9

R&D

16.0

11.1

4.9

15.0

11.2

3.8InterestBearing Debt

141.0

140.0

141.0

134.3

126.8

134.3

(¥/$)

(¥/Kl)¥ billions

7FY2020 Earnings Forecastc) by Segment （Year-on-Year Comparison）
Sales(¥ billions)

FY2020
Forecast

FY2019ActualIncr.
Decr.

Pricing

VolumeElastomers & Performance Plastics

115.0

149.3

- 34.3- 22.4- 11.9Infrastructure & Social Solutions

52.0

54.8

-

2.8+ 0.4-

Electronic & Innovative Products

70.0

68.0

+2.0

-

1.8+ 3.8

Living & Environment Products

33.0

37.0

-

4.0

-

1.4

-

Life Innovation

46.0

35.5

+ 10.5-0.0+ 10.5

Others34.036.2-2.2

―-

2.2

Total

350.0

380.8- 30.8- 25.3-

5.5

FY2020
ForecastFY2019
ActualIncr.
Decr.

Pricing

Elastomers & Performance Plastics

3.010.9-

7.9- 22.4

Infrastructure & Social Solutions

0.5

0.3

-

0.2

Electronic & Innovative Products

13.0

12.4

Living & Environment Products

1.0Life Innovation

Operating Income

3.2
2.5

VolumeCost &Others-

5.1+ 19.6+ 0.4-

0.8+ 0.7+ 0.6-

1.8+ 2.4‐ 0.00.1+ 0.9-

1.4-+ 3.4

15.07.0+ 8.0-0.0+ 9.8-1.7

Others

0.50.9‐ 0.4― ‐ 0.1-0.3

Total

33.031.6+(¥ billions)1.4- 25.3+

1.1

5.1+ 21.6
8

FY2020 Earnings Forecastd) Comments on Earnings Forecast

InitialForecast

Projected Full-Year Operating Income

COVID-19 Infection (assumption)
ー Gradual subsidence beginning in Q2; normal conditions beginning in Q3

Projected Full-Year Operating Income
Q1
Announcement

31.0 billion

31.0 billion (unchanged)

Lower Upside Potential
ー Increase in data center-related demand; contribution of Rapid Antigen Test for COVID-19 not incorporated

Downside Risk
ー Impact of pandemic on certain mainstay products (chloroprene rubber, etc.) exceeds expectations.

Projected Full-Year Operating Income
Q2
Announcement

33.0 billion (upward revision)

Upside Factors
ー Commenced sales of Rapid Antigen Test for COVID-19; revised head office and factory fixed costs

Downside Factors
ー Impact of pandemic on certain mainstay products (chloroprene rubber, etc.) greater than expected.

Projected Full-Year Operating Income
Q3
Announcement

33.0 billion (unchanged)

ー Recovery in demand for chloroprene rubber
ー Demand growth in environment and energy fields(faster move to vehicle electrification, increase in semiconductor demand, spread of 5G)
Previous forecast unchanged due to uncertainties caused by the re-emergence of COVID-19
9FY2020 Earnings Forecaste) Shareholder Returns and Investment-Related Data

FY2016
Actual

FY2017
Actual

FY2018Actual

FY2019ActualFY2020 FullYear Forecast(¥ billions)

18.1

23.0

25.0

22.7

22.0

Dividends per share*(¥/share)

70.0

105.0

120.0

125.0

125.0

Total dividend(¥ billions)

6.2

9.2

10.5

10.8

10.8

34%

40%

42%

48%

49%

(¥ billions)

2.9

2.3

2.1--(¥ billions)

9.1

11.5

12.6

10.8

10.8

50%

50%

50%

48%

49%

Net income

Payout ratio
Share buybacks
Total shareholder return
Total return ratio
Depreciation(¥ billions)

24.4

24.6

22.9

22.5

23.0

Capital investment(¥ billions)

26.9

27.0

32.8

36.9

45.0

8.3%

10.0%

10.3%

9.1%

ROE

*The company executed a one-for-five reverse stock split for common shares on October 1, 2017. Dividends per share have been recalculated to reflect this reverse split for comparison.

10FY2020 Earnings Forecastf) Growth of Specialty BusinessesFY2017 Actual
Operating Income
Operating Margin

33.7B
8.5 %

Specialty Ratio

50％

FY2018 Actual
Operating Income
Operating Margin

34.2B
8.3 %

Specialty Ratio

54％

FY2019 Actual
Operating Income
Operating Margin

31.6B
8.3 %

Specialty Ratio

63％

FY2020 Forecast
Operating Income
Operating Margin

33.0B
9.4 %

Specialty Ratio

88％

Environment and Energy

Operating Income

Specialty Business
Operating Income

16.7B
FY2017(Actual)Specialty Business
Operating Income

18.5B
FY2018(Actual)Specialty Business
Operating Income

20.0B

13.0B
Healthcare

Operating Income

Specialty
Operating
Income Total

29.0B

15.0B
FY2019(Actual)FY2020(Foredcast)

Revise the “Denka Value-Up” Management Plan to be announced in May 2021
11

Environmental Management (Carbon-Neutral Initiatives)

1

Medium- to long-range targets forgreenhouse gas emission reductions(Scope 1 + Scope 2)

Expand use of clean energy and adopt high-efficiency gas turbine
power generation
ー Approximately 40% of total Denka electricity consumption is provided by 15 hydroelectric facilities
ー New Omigawa Power Plant (16th power plant) is now in operation
ー New Himekawa Power Plant No. 6(in cooperation with Kurobegawa Electric Power Company; 17th power plant) is under construction(Unit: 10,000t-CO2 / year)
100%

23586%

203

283%

19674%

174

Environmentally friendly products and technologies to reduce
environmental impact
ー Pursue EV-related products and CO₂-absorbing concrete (carbonating admixture “LEAF”)

0％

0

3

Development and implementation of CCUS*

2013

2018

2019

2030

2050

＊Carbon Dioxide Capture, Utilization and Storage

4

Chemical recycling technologies
ー Commercialization of chemical recycling of PS resin
ー First proof-of-concept facility in Japan (aiming for operations in 2022)

5Portfolio reform (restructure commodity business)

Declaration of Support for theTask Force on Climate-Related
Financial Disclosures (TCFD)

CDP2020:
Scored A- for Climate Change,
B for Water Security Evaluation

12

(Reference)

Environmental Management at Denka Performance Elastomer (DPE)News Release List（ Denka's website）
June 19, 2019

“Statement regarding NATA’s Toxicity Assessments on the Areas Surrounding
Denka’s U.S. Subsidiary and InitiativesBeing Undertaken to Reduce
Environmental Burden”
https://www.denka.co.jp/eng/storage/news/pdf/238/20190619_statement_en.pdf

February 14, 2020

“Notice Regarding Litigation Against US Subsidiary”

https://www.denka.co.jp/eng/storage/news/pdf/265/20200214_denka_dpe_litigation_en.pdf“Review of Chloroprene Monomer Toxicity Assessment Performed by the U.S.
Environmental Protection Agency”
https://www.denka.co.jp/eng/storage/news/pdf/266/20200214_denka_statement_en.pdf

December 17, 2020

“Latest Epidemiological Study of Chloroprene Monomer Workers in the US”
https://www.denka.co.jp/eng/storage/news/pdf/317/20201217_denka_dpe_en.pdf

 Review toxicity assessment based on the latest science Engage epidemiological and statistical studies (epidemiological studies by outside experts, Louisiana Tumor Registry) Reduce environmental impact substance emissions by 85% through capital investment

13

Cautionary statement regarding forward-looking information
Target figures in this material are not forecasts of business results.
In addition, any description relating to the future in this material is subject
to known or unknown risks and uncertainties, although it is base 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 to differ significantly from the description in the material.
Such risks and uncertainties include adverse economic conditions, currency
exchange rate fluctuations, adverse legislative and regulatory
developments, delays in new product launch, pricing, and product initiativesof competitors, the inability of the Company to market existing and new
products effectively, interruptions in production, infringements of thecompany's intellectual property rights and the adverse outcome of material
litigation.

14