FY2020 Financial Results

May 12, 2021

1

Contents

I. FY2020 Results• Overview• Segment results• Financial position• Cash flow results• Key indicators

3-5
6-10
11
12
13-14

II. Consolidated Companies• Revenue, total assets

16-17

III. FY2021 Outlook• Overview• Segment forecast• Cash flow forecast

19-22
23-27
28

IV. Review of ‘Kureha’s Challenge 2020’• KC2020 review
30-34
V.

‘Kureha’s Challenge 2022’
FY2021-2022 Mid-term Management Plan
36
• What we do in FY2021-22
37• Management/Quantitative goals
38-39• PGA & PVDF businesses• Capital management/ Our basic policy
40
on shareholders’ return

VI. ESG Management• Advancing ESG initiatives

42-44

2

I.

FY2020 Results(Period April 1, 2020 – March 31, 2021)

3

FY2020 Financial Summary(in billions of yen except as otherwise indicated)

ChangeYOY

FY2019FY2020

Revenue

142.4

144.6

(+1.5%)

Core operating profit

16.0

18.9

(+17.8%)Adjustments
Other income
Other expenses

0.0

0.1

0.0

13.4
11.4

0.9
2.5

-12.6

Operating profit

18.0

17.3

(-4.3%)

Financial income
Financial expenses

0.5

0.7

0.2

0.6

0.2

Profit before taxes

17.9

17.7

-0.4
-0.2
(-1.1%)

Profit for the period
attributable to ownersof the Company

13.7

13.5

(-1.6%)¥692.61¥691.33

Profit per share (¥)

Crude oil prices (/bbl)
Currency exchange rates: US$1=
€1=
CHN¥=

US$60
¥108.7¥120.8¥15.6

US$44¥106.1¥123.8
¥15.7

2.2
2.8

-8.9
-0.8

-0.2

Vs. FY2019• Revenue growth driven by higher sales volumes in
PVDF (LiB cathodes binder), agrochemicals, home
products, fishing lines and environment businesses,
partially offset by slower PPS (automobile
components), PGA (shale oil and gas drilling tools),
packaging materials, and industrial chemicals sales• Core operating profit improved on higher revenue,
coupled with lower fuel and raw materials cost andfewer SG&A expenses• Operating profit declined primarily due to an
impairment loss of ¥1.6bn related to the PGA business• Profit before taxes decreased as a result of lower
operating profit• Profit attributable to the Company decreased as aresult of lower profit before taxes

4

FY2020 Financial Summary(in billions of yen)

Performance by segment
FY2019

Revenue
44.5
41.8

FY2020FY2019Core operating profit

43.5 42.4

24.3 23.5

FY2020

7.7

6.3

18.3 20.3

4.4

3.7 3.5

14.513.9

2.7

2.1 2.2
1.1 1.1

Advanced
Materials

Other
Specialty Specialty Construction
Operations
Chemicals Plastics

FY2019: ¥142.4bn

Advanced
Materials

FY2020: 144.6bn

Specialty
Chemicals

Other
Specialty Construction
Operations
Plastics

FY2019: ¥16.0bn

FY2020: 18.9bn

Factors attributing to core operating profit (vs. FY2019)
AM: PGA-related operating loss (¥3bn) more than offsetting PVDF volume growth in the automobile LiB market
SC: Higher agrochemicals volumes driven by improved demand and additional large-account sales offsetting
declines in pharmaceuticals and industrial chemicals
SP: Robust volume growth in home products and fishing lines partially offset by lower packaging materials volumes
CO: Delays and cancellations of private construction projects offsetting steady public construction volumes
OO: Increased low-PCB waste treatment volumes and temporary volume growth related to post-typhoon wastes inthe environment engineering business5

FY2020 Financial Summary(in billions of yen)

FY2019

AM

SC

SP

CO

OO

Total

Revenue

41.8
3.7

24.3
2.1

43.5
6.3

14.5
1.1

18.3
2.7

142.4
16.0
0.0
13.4
11.4
18.0
0.5
0.6
17.9
13.7

Segment operating profit
Intersegment adjustment
Other income
Other expenses
Operating profit
Finance income
Finance costs

Profit before income tax
Profit for the period

FY2020

AM

SC

SP

CO

OO

Total

Revenue

44.5
3.5

23.5
2.2

42.4
7.7

13.9
1.1

20.3
4.4

144.6
18.9
0.1
0.9
2.5
17.3
0.7
0.2
17.7
13.5

Segment operating profit
Intersegment adjustment
Other income
Other expenses
Operating profit
Finance income
Finance costs
Profit before income tax
Profit for the period

Notes:(FY2019)- Other income includes a gain from
non-current asset sales (¥10.2bn)- Other expenses include businessrestructuring cost (¥10.6bn)(FY2020)- Other expenses include an
impairment loss of non-current assets
related to the PGA business (¥1.6bn)
and a loss on sale of non-current
assets (¥0.4bn)

6

Segment Results: Advanced Materials(billions of yen)

Vs. FY2019

FY2019FY2020Change%Advanced Materials
Advanced plastics

27.4

28.8

+5%

Carbon products

5.6

5.3

-5%

Other

8.9

10.3

+17%

Segment revenue

41.8

44.5

+6%

Segment operating profit

3.7

3.5

-6%

[FY2020 market conditions]

Revenue Up, Operating Profit Down
Advanced plastics
Revenue increased on higher PVDF (automotive
LiB binder) sales volumes, partially offset byslower PGA and PPS sales, while operating profit
declined due to PGA-related operating loss anda decrease in equity affiliate earnings related to
PPS
Carbon products
Declines in revenue and profit led by lower
carbon fiber sales volumes related to automotive(sliding material) and furnace insulation
applications
Other
Revenue and profit grew on strong adhesives
sales

Automotive materials

Demand recovered in 3Q following the end of customer-side inventory adjustments

Automotive lithium-ion
batteries

Demand recovered and continued to grow after summer, driven by the environment
and economic policies in China and Europe; Maritime logistics disruptions prompted
some advanced purchase orders

Shale oil and gas

Frac plug demand declined nearly 50% (about 300,000 plugs) from pre-COVID levels

Semiconductor wafers

Semiconductor shortage continued after 3Q; Wafer makers are hesitant and cautious
to increase production capacity

7

Segment Results: Specialty Chemicals(billions of yen)

Vs. FY2019

FY2019FY2020Change%Specialty Chemicals

Agrochemicals

5.8

7.1

+23%

Pharmaceuticals

4.9

4.0

-18%

Industrial chemicals

6.9

6.1

-12%

Other

6.7

6.3

-6%

Segment revenue

24.3

23.5

-3%

Segment operating profit

2.1

2.2

+5%

Revenue Down, Operating Profit Up
Agrochemicals
Growth in revenue and profit supported byhigher fungicide sales volume
Pharmaceuticals
Profit improved on fewer expenses, despitea decline in revenue
Industrial chemicals
Revenue and profit reduced by lower sales
volumes for both organic and inorganic
chemicals[FY2020 market conditions]
Agrochemicals

Demand improved with favorable weather conditions in Europe and the US

Pharmaceuticals(for kidney failures)

Drug prices decreased 4% due to impact of the 2020 NHI drug price revisions;Weak demand continued due to fewer outpatient visits amid the pandemic;
Kremezin fast-dissolving tablets approved for use in South Korea and Taiwan

Industrial chemicals

Demand declined for caustic soda in paper manufacturing and for chlorobenzene
in PPS resin production; Caustic soda surplus resulted from a demand surge for
PVC resins in 3-4Q

8Segment Results: Specialty Plastics(billions of yen)

Vs. FY2019

FY2019FY2020Change%Specialty Plastics
Home products

21.3

21.8

+3%

Fishing lines

3.0

4.0

+32%

Packaging materials

14.1

11.9

-16%

Other

5.1

4.7

-8%

Segment revenue

43.5

42.4

-3%

Segment operating profit

6.3

7.7

+22%

Revenue Down, Operating Profit Up

Home products / Fishing lines
Revenue and profit grew, driven by sales
volume growth of ‘NEW Krewrap’ (home-use
wrap film) and ‘Seaguar’ fishing lines
Packaging materials
Declines in revenue and profit resulting fromlower heat-shrink multilayer film volumes
and impact associated with the divestmentof the blow-bottle business[FY2020 market conditions]Home-use wrap film

Domestic market volumes remained at prior year’s levels, despite slower demand after ahike for ‘stay-home consumption’ in Feb-Mar 2020; NEW Krewrap increased its market
share slightly with the launch of an 60th anniversary productLeisure fishing lines

Recreational fishing increased amid the pandemic; A share of fluoropolymer fishing lines
expanded in the US market

Packaging materials

Demand for multilayer shrink film declined due to outdoor dining restrictions in Europe
amid the pandemic

9

Segment Results: Construction(billions of yen)

Vs. FY2019

FY2019FY2020Change%Construction
Construction

22.4

21.1

-6%

Elimination(Intercompany sale)

-7.9

-7.2

--

Segment revenue

14.5

13.9

-4%

Segment operating profit

1.1

1.1

-6%

Revenue Down, Operating Profit Down
Construction
Revenue and profit declined as a result ofcancellations and delays for private
construction projects, while construction
volumes in the public sector remained atprior year’s levels

10

Segment Results: Other Operations(billions of yen)

Vs. FY2019

FY2019FY2020Change%Other Operations

Environmental
engineering

12.8

14.9

+17%

Logistics

8.2

7.8

-5%

Hospital
operations

4.0

4.0

-1%

Others

2.2

2.4

+11%

-8.9

-8.9

--

Segment revenue

18.3

20.3

+11%

Segment operating profit

2.7

4.4

+61%

Elimination(Intercompany sale)

Revenue Up, Operating Profit Up
Environmental engineering
Revenue and profit increased on volumes
growth related to low-level PCB wastes
and post-typhoon wastes in Fukushima
Logistics
Revenue and profit on par with prior year
Hospital operations
Declines in revenue and profit[FY2020 market conditions]
Low-level PCB
wastesPrivate contracts expanded in the market as three private companies were newly certified
to treat and dispose wastes containing PCB greater than 5000mg/kg in April 2020
http://www.env.go.jp/recycle/poly/facilities.html

Post-disaster
wastesDemand temporarily increased for disposal and management of post-disaster wastes
related to the October 2019 typhoon (temporary growth factor)

11

Financial Position
Assets(billions of yen)

Liabilities and Equity
Mar. 312020

Mar. 31
Change2021

Mar. 312020

Mar. 31
Change2021

Cash and cash equivalents

7.3

17.8

10.6

Trade and other payables

19.4

19.2

-0.2

Trade and other receivables

28.3

28.2

-0.1

Interest-bearing debt

37.3

29.5

-7.8

Inventories

38.2

36.5

-1.8

Provisions

7.8

7.8

-0.0

Other current assets

5.2

3.7

-1.4

Other liabilities

15.7

14.9

-0.8

Total current assets

79.0

86.2

7.2

Total liabilities

80.3

71.4

-8.9

Property, plant and equipment

119.8

120.2

0.4

Shareholders’ equity

18.2

18.2

-

Intangible assets

0.8

2.2

1.4

Capital surplus

15.0

14.9

-0.1

Investments and other assets

47.3

48.3

1.1

Less: Treasury stock

-8.7

-8.7

-0.0

Retained earnings

135.9

154.2

18.2

Other components of equity

4.6

5.3

0.7

Non-controlling interests

1.6

1.7

0.1

Total non-current assets

167.9

170.7

2.8

Total equity

166.6

185.5

18.9

Total assets

246.9

256.9

10.0

Total liabilities and equity

246.9

256.9

10.0

12

Cash Flow(billions of yen)

FY2019FY2020ChangeProfit before income tax

17.9

17.7

-0.2

Depreciation

12.1

11.7

-0.4

Other

-14.9

-2.7

12.2

Cash flow from operating activities

15.2

26.7

11.6

Cash flow from investing activities

5.5*

-3.9

-9.4

Free cash flow

20.6

22.8*

2.2

Cash flow from financing activities

-19.4

-12.5

6.8

Effect of exchange rate changes on cash and cash equivalents

-0.0

0.3

0.3

Increase/decrease in cash and cash equivalents

1.3

10.6

9.3

Cash and cash equivalents at beginning of period

6.0

7.3

1.3

Cash and cash equivalents at end of period

7.3

17.8

10.6

*Notes -FY2019 Cash flow from investing activities includes a gain on the sale of noncurrent assets (¥10.8bn)-FY2020 Free cash flow reflects an increase in core operating profit and a decrease in inventory

13

Key Indicators(billions of yen)

Capital investment

Depreciation expenses

200
20
150
15
100
10
505
00

17.0
11.4
6.0
5.4

13.2
10.3

9.8
7.4

5.5
4.8

14.9

100
8.2

10.3

10.2

9.9

10.3

5.4

5.1

5.0

5.4

5.0

5.1

4.9

5.0

10

8.2
5

5.8

6.7

6.1

00

1H

R&D expenditures
1000

10

100

5

0
0

4.9

4.7

5.0

2.6

2.5

2.7

2.8

2.3

2.2

2.3

2.5

6.1

5.9

6.0

5.8

11.7

6.0

5.6

3.1

2.9

2.9

2H

Interest-bearing debt

100

50

11.7

FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021e

2H

5.3

12.1

50

FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021e

1H

15

14.3

5.8
4.0

150

81.2
71.0

6.1
500
50

48.1
39.0

37.3

29.5

30.2

2.7
0

FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021e

1H

2H

0

FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021e

14

Key Indicators
ROE

ROIC

9.0%

10%

8.4%

7.1%

8%

8%

7.7%
6%

5.8%
6%

6.3%

4.1%

4%

4%

6.1%

4.9%
2.9%

3.5%

2%

2%

0%

0%
2015

FY2015 FY2016 FY2017 FY2018 FY2019 FY2020

FY2016 FY2017 FY2018 FY2019 FY2020

DE ratio

ROA
7.1%

8%

7.3%

7.0%

1

0.69

5.3%

6%

3.8%
4%

6.5%

2.7%

0.57
0.5

2%

0.32

0.24

0.23

0.16

0

0%
FY2015 FY2016 FY2017 FY2018 FY2019 FY2020

FY2015 FY2016 FY2017 FY2018 FY2019 FY2020

15

II. Consolidated Companies

16

Consolidated Companies: Revenue, Assets(billions of yen)

FY2019Kureha Corporation
Kureha Trading Group
Kureha Corporation
Kureha Trading Group
Kureha Extron
Kureha Europe Group
Advanced Kureha America Group
Materials Kureha (Shanghai) Carbon Fiber
Materials

Kureha China Group
Consolidation adjustments
Total
Kureha Corporation
Specialty Kureha Trading
Chemicals Consolidation adjustments
Total
Kureha Corporation
Kureha Trading
Kureha Gohsen
Kureha China GroupSpecialty
Kureha America Group
Plastics
Kureha Europe Group
Kureha Vietnam
Consolidation adjustments
Total

FY2020ChangeRevenue

Total assets

Revenue

Total assets

Revenue

Total assets

76.3
21.6
30.6
9.1
3.0
2.0
7.5
1.1

192.3
12.3
--4.6
0.9
26.9
1.2

74.2
23.2
29.8
11.9
2.9
1.8
6.7
1.1

199.1
13.3
--4.2
1.1
28.2
1.5

-2.1
1.6
-0.9
2.8
-0.1
-0.2
-0.8
0.0

6.8
1.0
---0.4
0.1
1.4
0.2

5.7
-17.2
41.8
19.8
7.4
-2.8
24.3
25.9
5.1
4.2
0.1
1.6
8.5
3.1
-5.1
43.5

9.2
--------5.1
-1.0
7.3
3.0
---

7.0
-16.7
44.5
19.1
7.0
-2.5
23.5
25.4
4.3
4.7
0.2
2.1
7.6
3.1
-5.1
42.4

10.6
--------5.9
-1.3
7.1
3.5
---

1.3
-2.6
-0.7
-0.4
--0.8
-0.5
-0.8
0.5
0.1
0.5
-0.9
0.0
--1.1

1.4
--------0.9
-0.4
-0.2
0.5
---

17

Consolidated Companies(billions of yen)

FY2019Kureha Nishiki Group
Construc- Kureha Engineeringtion
Consolidation adjustments
Total
Kureha Ecology Mgt Group
Kureha Unyu Group
Kureha Trading
Other
Kureha Service GroupOperations
Kureha-Kai Medical Corp.
Consolidation adjustments
Total
Kureha Group Total
Number of consolidated subsidiaries
Number of equity-method affiliates

FY2020ChangeRevenue

Total assets

Revenue

Total assets

Revenue

Total assets

19.9
2.5
-7.9
14.5
11.5
8.2
0.1
3.4
4.0
-8.9
18.3

11.6
1.9
--25.9
5.7
-3.1
3.5
---

17.4
3.7
-7.2
13.9
13.7
7.8
0.0
3.6
4.0
-8.9
20.3

11.9
2.0
--29.4
5.8
-3.7
3.6
---

-2.5
1.2
--0.5
2.2
-0.4
-0.0
0.2
0.0
-2.0

0.3
0.1
--3.5
0.0
-0.6
0.1
---

142.4

246.9

144.6

256.9

2.2

10.0

28
2

28
2

18

Ⅲ. FY2021 Outlook(Period April 1, 2021 – March 31, 2022)

19

FY2021 Forecast(in billions of yen except as otherwise indicated)

FY20201H

FY2021e
2H Full-year

ChangeYoY
5.4

Revenue

144.6

74.5

75.5

150.0

Core operating profit

18.9

7.5

8.5

16.0

Adjustments
Other income
Other expenses

0.1
0.9
2.5

0.1
0.1

0.2
1.2

0.3
1.3

Operating profit

17.3

7.5

7.5

15.0

(+3.8%)-2.9(-15.1%)

-0.1
-0.5
-1.2
-2.3
(-13.1%)

Financial income
Financial expenses
Profit before taxes

0.7

0.1

0.2

0.3

-0.4

0.2

0.1

0.2

0.3

0.1

17.7

7.5

7.5

15.0

-2.7
(-15.5%)

Profit attributableto owners of theCompany
Profit per share (¥)

13.5

5.7

5.0

¥691.33

Crude oil prices (US$/bbl)$44
Currency exchange rates: US$1= ¥106.1€1= ¥123.8
CHN¥= ¥15.7

10.7¥548.22

$60

$55
¥107
¥128
¥16.5

-2.8
(-20.7%)

Vs. FY2020- Revenue expected to grow on sales volume
growth in the Advanced Materials segment,
partially offset by slower construction
business and the absence of post-typhoon
waste treatment in the environmentengineering business- Operating profit will decrease primarily due
to unfavorable product mix, a rise in raw
materials and fuel prices, and higher SG&A
expenses- Profit before income tax to decrease as aresult of lower operating profit- Profit attributable to the Company decreased
as a result of lower profit before tax

20

FY2021 Forecast
Segment performance forecast (Vs. FY2020)
Revenue

FY2020

53.0
50
500

44.5

FY2021e42.4 42.5
23.5 23.5

25
250(in billions of yen)Core operating profit
7.7

808

FY20207.3

FY2021e

606
404

3.5

20.3 18.5

13.9 12.5

4.4

4.0
2.2

202

2.6
1.7

1.1

0.4

00

00
Other
Advanced 化学製品
Specialty 樹脂製品
Specialty Construction
機能製品
建設関連 その他関連
Operations
Materials Chemicals Plastics

FY2020: ¥144.6bn

Other
Advanced Specialty Specialty
機能製品 化学製品 樹脂製品 Construction
建設関連 その他関連
Operations
Materials Chemicals
Plastics

FY2021e: 150.0bn

FY2020: ¥18.9bn

FY20201e: 16.0bn

Factors attributing to core operating profit (vs. FY2020)
AM:
SC:
SP:
CO:
OO:

Narrowed PGA-related operating loss, improved profit in PPS domestic business operations
Lower agrochemicals volumes, impact of the mandatory drug price revisions
Lower sales volumes and higher expenses in home products
Fewer construction projects in the private sector
Lower post-typhoon waste treatment volumes

21

FY2021 Forecast(in billions of yen)

FY2020

AM

SC

SP

CO

OO

Total

Revenue

44.5
3.5

23.5
2.2

42.4
7.7

13.9
1.1

20.3
4.4

144.6
18.9
0.1
0.9
2.5
17.3
0.7
0.2
17.7
13.5

Segment operating profit
Intersegment adjustment
Other income
Other expenses
Operating profit
Finance income
Finance costs

Profit before income tax
Profit for the period

FY2021e

AM

SC

SP

CO

OO

Total

Revenue

53.0
4.0

23.5
1.7

42.5
7.3

12.5
0.4

18.5
2.6

150.0
16.0

Segment operating profit(Notes)(FY2020)- Other expenses include an
impairment loss of ¥1.6bn on noncurrent assets and a loss of ¥0.4bn
on sales of non-current assets

Intersegment adjustment
Other income
Other expenses
Operating profit
Finance income
Finance costs
Profit before income tax
Profit for the period

0.3
1.3
15.0
0.3
0.3
15.0
10.7

(FY2021)- Other expenses include an one-timeincrease of ¥0.55bn in retirement
benefit obligations associated withthe extension of retirement age

22

FY2021 Forecast
FY2020-2021e Core operating profit analysis

20(¥ billions)

1.6

19
SC

17
15

18.9

0.5

SP

18
16

AM

OO

16.0

AM

0.1

1.4

SC
SP

-0.5

CO

CO
OO

-0.4
-0.7

-0.1

16.0
-1.8

-0.2

14

13
12
FY2019Core ope. profit
Total

FY2020Core ope. profit
Total

FY2021
Core ope. profit
Total

23

FY2021 Forecast: Advanced Materials(billions of yen)

FY2020

FY2021e Change%

Advanced Materials
Advanced plastics

28.8

36.8

+28%

Carbon products

5.3

4.8

-9%

Other

10.3

11.4

+11%

Segment revenue

44.5

53.0

+19%

(1st half year)(18.6)(27.0)(+45%)

Segment operating profit

3.5

4.0

+15%

(1st half year)(-0.8)(1.6)

Vs. FY2020
Revenue Up, Operating Profit Up
Advanced plastics
Revenue and profit expected to improve onhigher PGA and PPS sales volumes:- PGA frac plug sales expanding in mid-/hightemperature shale fields as oil production
rebounds- PPS volume growth bolstered by capacity
enhancements in Jan. 2021
- PVDF likely to maintain prior year’s profit
levels, despite slower volume growth due tolimited production capacity and higher raw
materials and fuel cost
Carbon products
Operating profit to decrease on flat revenue
due to unfavorable product mix and higher cost
Other
Revenue will improve on higher adhesive
volumes, while profit remains on par with prioryear due to unfavorable product mix

24

FY2021 Forecast: Specialty Chemicals(billions of yen)

FY2020

FY2021e Change%

Specialty Chemicals
Agrochemicals

7.1

6.7

-6%

Pharmaceuticals

4.0

4.2

+4%

Industrial chemicals

6.1

6.5

+7%

Other

6.3

6.1

-4%

Segment revenue

23.5

23.5

-0%

(1st half year)(11.1)(11.8)(+7%)

Segment operating profit

2.2

1.7

-24%

(1st half year)

(0.9)

(0.9)

(+2%)

Vs. FY2020
Revenue Levelling Out, Operating Profit Up
Agrochemicals
Revenue likely to decrease in competitivemarket conditions, while operating profit will
decline due to higher R&D cost

Pharmaceuticals
Revenue expected to grow with the launchof Kremezin fast-dissolving tablets inoverseas markets and their sales expansion
in Japan, while profit will decrease primarily
due to impact of the mandatory drug pricerevisions
Industrial chemicals
Increases in revenue and profit driven by
improved demand for organic and inorganic
chemicals

25

FY2021 Forecast: Specialty Plastics(billions of yen)

FY2020

FY2021e Change%

Specialty Plastics
Home products

21.8

21.5

-1%

Fiber products

4.0

4.0

+1%

Packaging materials

11.9

11.7

-1%

Other

4.7

5.3

+13%

Segment revenue

42.4

42.5

0%

(1st half year)(21.1)(21.0)(-0%)

Segment operating profit

7.7

7.3

-5%

(1st half year)

(3.7)

(3.7)

(-1%)

Vs. FY2020
Revenue Up, Operating Profit Up
Home products / Fiber products- A slight decrease in revenue from home
products and flat revenue growth for fishinglines- Operating profit to decrease primarily due tohigher raw materials and fuel cost andincreased expenses
Packaging materials
Revenue to decline slightly and profit to levelout as higher multilayer shrink film volumes
offset lower PVDC film volumes in East Asia
markets

26

FY2021 Forecast: Construction
Vs. FY2020
Revenue Down, Operating Profit Down(billions of yen)

FY2020

FY2021e Change%

Construction
Construction

21.1

20.0

-5%

Elimination(Inter-company sale)

-7.2

-7.5

--

Segment revenue

13.9

12.5

-10%

(1st half year)

(5.8)

(5.7)

(-2%)

Segment operating profit

1.1

0.4

-63%

(1st half year)

(0.5)

(0.1)

(-78%)

Construction
Revenue and operating profit to decrease
due to lower construction volumes in theprivate sector, intensified competition andhigher construction cost

27

FY2021 Forecast: Other Operations
Vs. FY2020
Revenue Down, Operating Profit Down(billions of yen)

FY2020

FY2021e Change%

Other Operations
Environmental
engineering

14.9

13.0

-13%

Logistics

7.8

7.9

+1%

Hospital
operations

4.0

4.1

+3%

Others

2.4

2.3

-5%

-8.9

-8.8

--

20.3

18.5

-9%
(-5%)

Elimination(Inter-company sale)
Segment revenue(1st half year)

(9.5)

(9.0)

Segment operating profit

4.4

2.6

-40%

(1.2)

(-40%)(1st half year)(2.0)

Environmental engineering
Revenue and profit expected to decrease
due to a lack of post-typhoon waste
treatment projects seen in the previous
year
Logistics, Hospital operations
Revenue will increase slightly while
operating profit will remain on par with prioryear in logistics and hospital operation
businesses

28

Cash Flow Forecast(billions of yen)

FY2020

FY2021e

Profit before income tax

17.7

15.0

-2.7

Depreciation

11.7

11.7

0.0

Other

-2.7

-8.0

-5.3

Cash flow from operating activities

26.7

18.7

-8.0

Cash flow from investing activities

-3.9

-17.3

-13.4

Free cash flow

22.8

1.4

-21.4

Cash flow from financing activities

-12.5

-3.1

9.4

Effect of exchange rate changes on cash and cash equivalents

0.3

--

-0.3

Increase/decrease in cash and cash equivalents

10.6

-1.7

-12.3

Cash and cash equivalents at beginning of period

7.3

17.8

10.6

Cash and cash equivalents at end of period

17.8

16.1

-1.7

Change*Notes: FY2021 estimated cash flow from investing activities includes proceeds from the sale of investment securities (¥9.6bn)

29

Ⅳ. Review of ‘Kureha’s Challenge 2020’(FY2019-2020 Mid-term Management Plan)

30

KC2020 Review‘Kureha’s Challenge 2020’- Product Differentiation and New Business Creation Strategic direction
Management Goals• Expand the PGA business and generate profit• Strengthen the PVDF business for further expansion• Optimize business models for existing businesses• Globally explore and develop new businesses• Strengthen management foundations

FY2018-2020 is a period to solidify the foundation
for Kureha’s future expansion

As a company driven by innovation,
Kureha will develop differentiatedproducts in the field of specialty
chemicals and become a high valueadded enterprise that continuallycontributes to the global society

31

KC2020 Review(billions of yen)

KC2020targets

FY2020results

ChangeYOY

Revenue

157.0

144.6

-8%

Core operating profit

18.0

18.9

+5%

Operating profit
Operating profit margin

18.0

17.3

-4%

11.5%

11.9%

Profit for the period
attributable to ownersof the Company
ROA
ROE

14.0

13.5

Approx. 7.1%

7.0%

8.0%

7.7%

Revenue and operating profit fell below KC2020 targets:
Advanced Materials- Achieved operating profit target for PVDF, despite ashortfall of volumes in the automobile LiB market due toChina’s revised NEV subsidy policies- Delays in the development of PGA frac plugs used inultra-low-temperature shale fields- PGA sales volume target not achieved due to slower oil
production in the pandemic- Recorded an impairment loss of ¥1.6bn related to PGA
due to changes in the business circumstanceSpecialty Chemicals- A slower-than-expected decline in agrochemical demand-4%

Specialty Plastics- Achieved profit targets for home products and fishing lines- Not achieved sales and profit targets for packaging
materials
Other- Earnings grew in the environment engineering businessdue to increased volumes of low-PCB wastes andtemporary post-disaster wastes• Advanced Materials businesses, which key markets include automotive and shale oil and gas, were severely
impacted by the economic slowdown during the pandemic and failed to meet targets at all profit levels• Overall core operating profit reached its target due to an increase in value-added product volumes, cost
reduction efforts, and increased earnings in the environmental engineering business• Operating profit fell short of target primarily due to an impairment loss related to the PGA business32

KC2020 Review
Segment performance (FY2020 results vs. targets)
Revenue
55.0(billions of yen)Core operating profit
44.5

46.0

FY20 Targets
FY20 Results

42.4

26.0 23.5

17.5

12.5

20.3

13.9

7.7

7.6

FY20 Targets
FY20 Results

6.2

4.4

3.5
2.1 2.2

1.8

1.1
0.3

Other
Advanced Specialty Specialty
Construction
Operations
Materials Chemicals Plastics

FY2020 Targets:¥157.0bn

Results:¥144.6bn

Advanced Specialty
Materials Chemicals

Other
Specialty
Construction
Operations
Plastics

FY2020 Targets:¥18.0bn

Results:¥18.9bn

Factors attributing to core operating profit (vs. FY2020 targets)
AM: PGA and PPS fell far short of profit targets more than offsetting profit achieved for PVDF
SC:
Improved margin in pharmaceuticals and steady volume growth in agrochemicals partially offset by ashortfall in industrial chemicals
SP:
Home products and fishing lines exceeding sales and profit targets partially offset by a shortfall inpackaging materials
CO: Higher construction volumes in the public sector and fewer expenses
OO: Increased low-PCB waste treatment and temporary volume growth related post-typhoon waste treatment

33

KC2020 Review:
Progress & Challenges
Priority Measures
1. PGA: Business expansion and profit generation• Generate earnings• Launch ultra low-temp PGA frac plugs to acceleratesales expansion in the US• Launch market development in China

2. PVDF: Strengthening for further business expansion
2000tpa capacity Increase at Iwaki Factory(→ Commercial production started in Jan. 2019)

3. Optimization of existing business models
PPS: Start up an additional production facility in Feb. 2021

Home products: Maintain steady profit and develop newmarkets in East Asia

Progress and Challenges• Delays in the development of PGA frac plugs for ultra
low-temperature application• Market development in China lagged behind schedule• Adopted flexible pricing strategies and expanded use of
PGA frac plugs for full-bore application in high-/mid-temp
shale fields• Secured market access by launching intermediate nonPGA plugs in ultra-low temp shale fields• Debottlenecking at the Iwaki Factory facility to becompleted in FY2021• Construction plan for an additional production facility to
be finalized and construction scheduled to start in
FY2021• Completed the construction of an additional PPS facility
in Jan. 2021 and will start commercial production shortly• Needs to further collaborate with business partners toaddress changes in the PPS market• Achieved profit growth for NEW Krewrap• Completed the transfer of the blow bottle business
Packaging materials: Reconstruct its business strategy• Needs to respond to changes in the packaging materials
market34

KC2020 Review:
Progress & Challenges
Kureha’s
Challenge 2020（重点課題と課題）
Progress and Challenges
Priority Measures
4. Exploration and development of new businesses
Explore new business themes in Japan and overseas
Invest resources to promote downstream businessdevelopment and accelerate technology innovation
Speed up the launch of new businesses by leveraging
external resources• Collaborative projects continuing with multiple start-up
companies• Invested additional resources in the development of new
agrochemicals and PVDF products• Needs to review some new business themes due tochanging market conditions (emerging competitors,
earnings prospects, etc.)

5. Strengthening of management foundations
Improve management efficiency and strengthen the Groupwide management system• Expanded the environment business• Completed the restructuring of several consolidated
companies in Japan

Enhance efficiency and productivity via the Reform Project;
FY2019-2020 cost reduction target: ¥1.5bn

・ Achieved cost reduction twice more than originallyplanned through the Reform Project

Improve operational efficiency with digital technologies;
promote smart operation models in manufacturing and
R&D divisions

・ Still in process of transferring more personnel into
strategic divisions

Develop products to address social/environment issues,
with a view to fulfilling the SDGs
Develop human resources for business globalization andnew business creation

・ Needs to further improve individual IT skills to promote
digital transformation
・ Needs to address global environment challenges
including carbon neutrality
・ Completed labor management consultations regarding
a new personnel system

35

Ⅴ. ‘Kureha’s Challenge 2022’
FY2021-2022 Mid-term Management Plan
(A Final stage of Kureha’s Challenge extension plan)

36

Kureha’s Challenge 2022
FY2021-2022: What We Do..
➢ A ‘follow-through, uncompromising’ stance (Kureha’s culture)→ will complete the measures remaining
from the previous mid-term management plan
➢ Will embody and clarify a future vision of Kureha Group and formulate an action plan to fulfill thisvision from a medium-/long-term perspective➢ Will strenuously carry out priority measures set out in ‘Kureha’s Challenge 2022’
Strategic direction:
Kureha wants to be..

Environment & Social Trends Around Us..

‧ Accelerating climate change ‧ Transition to zerowaste society ‧ Carbon neutrality ‧ Marine plastic
pollution ‧ Global population growth & aging society ‧Food shortages and polluted water resources ‧Improved living standards and advanced medical care
‧ Changing individual life styles ‧ Globalization anddiversity ‧ Digitalization and social network ‧Increasing geopolitical conflicts (trade wars)‘A high-value added enterprisethat develops differentiatedproducts in the field of specialty
chemicals and continuallycontribute to society’

Action plan to fulfill
our future vision‘Kureha’s Challenge 2022’
・Commit to achieve four management goals
・Achieve quantitative goals set on a year-byyear basis reflecting impact of the pandemic

Areas we can offer solutions to:・ Mobility market: lightweight, highperformance and low carbon solutions
・ Materials to reduce environmental load
・ Carbon neutrality and zero emission
・ Sustainable food production andfood loss reduction
・ Chemical recycling

EnvironEnergy
ment

Life

37

Kureha’s Challenge 2022
Management Goals and Priority Measures
Expansion of Advanced
Materials Businesses

Optimization of Existing
Businesses• Solidify the foundation for the PGA
business• Expand the PVDF business• Improve profitability in the PPS
business• Establish new business models for
Advanced Materials businesses• Review business strategies and growthmeasures in response to changes in thebusiness environment (carbon products,
pharmaceuticals, agrochemicals)• Increase earnings in the home products
business• Revise business strategies for packaging
materials• Develop new applications for existingproducts

Strengthening Management
Foundations

Identification and Developmentof New Businesses• Develop and commercialize
environmental load reduction
technologies to contribute tosociety• Accelerate pipeline projects todevelop new products• Create new businesses withintegrated in-house and external
technologies• Implement a new personnel system (further emphasizes role-/performancebased compensations and gradually extend retirement age to 65)• Further strengthen production technology and cost competitiveness• Strengthen IT-related human resources and promote digitalization• Strengthen ESG management with a view to fulfilling the SDGs and achievingcarbon neutrality

Quantitative Goals*Quantitative goals are set on a year-by-year basis due to uncertainties related to the economic impact of the pandemic

FY2021

Revenue¥150bnOperating profit¥15bn

Net profit¥10.7bn

Capital investment¥17bn

Depreciation¥11.7bn

R&D expenditures¥6.1bn38

PGA Business
FY2020: ¥3.0bn in operating loss, ¥1.6bn impairment
loss on manufacturing facilities- Frac plug market volumes decreased by half from prepandemic levels due to plunging oil prices and a sharp drop in
shale oil production- Sales of Kureha original PGA frac plug grew after 3Q, driven
by flexible pricing and increased full-bore applications (use foran entire wellbore) by major accounts, while stock shapes
sales were slow due to customer-side inventory adjustments- Recorded a ¥0.33bn loss on retirement of inventories(included in the above operating loss) and an impairment lossof ¥1.6bn (as ‘other expenses’) after re-valuating PGA-related
non-current assets in the light of changing business conditions
and ongoing product development

FY2021: Reducing operating loss to 2.6bn- Will continue to execute measures to expand volume growth but
expect to reduce operating loss marginally by ¥4bn due to lower
prices and higher cost related to inventory withdrawals- Aim to generate profit in and after FY2023
30
3

Sales growth of Kureha degradable plugs(PGA & non-PGA plugs)

20
2(¥ billions)

1
10
00

FY2019FY20202019 FY2019
2019 FY2020
2020 FY2020
2020 FY2021
2021
2021
上期
下期
上期
下期
下期
1H
2H
1H
2H
1H上期
(est.) 2H(est.)
予想
予想

660

Revenue & Operating profit

4
40
2
20

5.5

(¥ billion)

4.5

4.4
2.8

FY20232.2

1.6

generating
Profit00

2016 2017 2018 2019 2020 2021 2022 2023

△ -2
20
△ -4
40

-1

0

-2.6 -2.7
Revenue
売上-3
Ope. profit
営業利益

-2.6
Action 1
Action 2

Action 3
Action plans to achieve profitability
1- Expand full-bore applications for PGA frac plugs andincrease a share in high-/mid-temperature shale
markets with a new pricing strategy and by improving
plug designs
2- Launch a non-PGA degradable frac plug in FY2021
3- Launch an improved PGA frac plug targeted for ultralow temp application in FY2022 and increase its
market share

39

PVDF Business
PVDF business revenue

20020• Kureha maintains a roughly 40% share in theautomotive LiB cathode binder market, serving
major South Korean and Chinese lithium-ion
battery (LiB) makers(¥ billion)

15015
10010
50
0

• Demand recovered and growing rapidly after a
temporary halt of LiB production in early 2020
amid the pandemic, driven by global
environmental and economic initiatives

5

0

2016

FY2017FY2018

LiB binder application

FY2019FY2020

FY2021e

Other applications

Growing production capacity
Feb 2019

2000tpa capacity increase at Iwaki Factory(Nameplate capacity: 6000tpa/Japan Iwaki Factory, 5000tpa/China
Changshu Factory)

May 2020

Production of specialty grades for LiB binder application at China
Changshu Factory (No change in nameplate capacity)

FY2022

Improved productivity for specialty grades at Iwaki Factory(No change in nameplate capacity)

FY2024

Production at a new facility in China(Nameplate capacity: 6000tpa or more)• Kureha China Changshu facility manufacturesand supplies PVDF specialty binder grades(May 2020-)• Ongoing studies for an additional PVDF facility(delayed due to the pandemic)- Location: China (tentative)- Other details to be released in FY2021 1H- Start of commercial production: FY2024(tentative)

40

Capital Policy andReturning to Shareholders◼

◼

Aiming for sustainable growth and enhanced corporate value, Kureha will set the stage for future businessdevelopment by steadily achieving the management goals and quantitative targets set forth in Kureha's
Challenge 2022 mid-term management plan. While maintaining financial stability, we will further strengthen
our scrutiny of investments and enhance earnings capacity and capital efficiency.
Our basic policy for the distribution of earnings is to strengthen the company overall to realize longer-term
growth, prepare for future business expansion, enhance retained earnings, and provide a stable andcontinued dividend. In addition, Kureha will consider options of repurchasing its shares, which is flexible innature, upon reviewing its financial conditions.

(Yen)

Recent trends of annual dividend payout and dividend payout ratio

200
165
53.4%

100

100

110

25.7%

120

170

170

170
50%

125

110

110

22.4%

25.7%

27.0%

24.6%

FY2014FY2015FY2016FY2017

Annual dividend
per share (¥)
25%

24.3%

24.5%

24.6%

24.6%

FY2018FY2019FY2020

FY2021Dividend payout
ratio (%)

0%

0
FY2012FY2013

Notes:- Kureha conducted a ten-to-one share consolidation on October 1, 2016. All figures in thischart are presented on a post share consolidation basis for comparison purposes- Accounting standards: Japanese GAAP (-2015); IFRS (FY2016-)- A commemorative dividend of ¥10 is included in FY2014 and 2018 annual dividends- Kureha repurchased treasury shares in FY2018 (¥3bn) and in FY2019 (¥5bn)(Forecast)

41

Ⅵ．ESG Management

42

Advancing ESG Initiatives
For Environment◼ Set forth a goal to reduce greenhouse gas emissions in Sept. 2020
FY2030 Goal: Reduce CO₂ emissions from energy use by 20% from FY2013 levels
Our step-by-step approach to this goal includes:- Reduce in-house power generation and review its long-term operation- Expand the use of recycled/regenerated electricity for net-zero CO₂ emission- Upgrade equipment and facilities to improve energy efficiency- Promote energy-saving initiatives in daily operations◼ Set forth a goal to reduce industrial wastes at Kureha Corporation
FY2025 Goal: Reduce wastes from 18% (FY2019) to 1.5% (FY2025)
Kureha Group CO₂ emissions from energy use(10,000 tons)

47.0 44.6 45.4
41.5 43.7 42.3 42.8

20132014 2015

2016

2017

2018

2019

55.6
37.6

2030
BAU*

2030
*Business as usual
TargetIn April 2021, Kureha established the Carbon Neutral Drive Committee under R&D
Division to develop technologies that will enable us to reduce CO2 emissions fromour operations and contribute such technology solutions to global society43

Advancing ESG Initiatives
For Society◼ Revised Kureha Ethical Charter and set forth our policy on human rights in Nov. 2020
- Aims to join the UN Global Compact
https://www.kureha.co.jp/en/newsrelease/docs/20201102_Ethical%20Charter_en.pdf◼ Implements a new human resources system and gradually extend retirement age to 65 (inKureha Corporation)- The new HR system allows more promotions for younger employees and adequate pays andbenefits for mid-career recruitment, while it further emphasizes responsibility- and performancebased benefits for all employees- Retirement age is gradually extended to 65 as to provide senior employees with more
opportunities to work actively
October 2021- Introduce a new HR system
April 2022- Start extending retirement age by one year for each year
April 2026- Completing the increase in retirement age to 65
Kureha aims to achieve sustainable growth driven by a corporate culture,
where each employee works autonomously and plays active roles, while
swiftly responding to changes in our business environment◼ Announced FY2021-23 action plans to support women’s empowerment and advancement insociety- Submitted to the Japanese Ministry of Health, Labour and Welfare in April 2021
https://positive-ryouritsu.mhlw.go.jp/positivedb/planfile/202104141010495187758_1.pdf

44

Advancing ESG Initiatives
To Strengthen Governance◼ Employed a delegation-type executive system in April 2020
◼ Continues to reduce cross-shareholdings to improve corporate governance- We have sold off cross-shareholdings in companies who are remotely related to our business¥ billion

300
30
15.8%

16.8%

20%

17.2%
15.1%
12.1%

200
20

15%

9.4%
10%

10
100
5%

00

0%
Mar.31a2016

Mar.31b
2017Mar.31c2018

Mar.31d
2019

Balance of cross-shareholdings

Mar.31e
2020

Mar.31f
2021% of net assets

45

Disclaimer•

These materials are supplied to provide a deeper understanding of ourcompany, and are not intended to as a solicitation for investment or otheractions.

•

These materials have been prepared by our company based on theinformation available at this point in time. However, actual performance
may produce results that differ from the plan due to unforeseeable eventsand factors.

•

Please utilize these materials using you own judgment and responsibility.