Kureha : FY2023 Earnings Briefing Presentation Material（with Script/Q&As）

I am Kobayashi, the President and Chief Executive Officer.

I will talk about how I see the current situation as president and what we would like to do in the future.

In April last year, we launched a new medium- to long-term management plan, "Toward Creating a New Future (FY2023-2030)".

The plan was launched with the aim of improving mid- to long- term corporate value and contributing toward a sustainable society.

The basic concept of that plan was to grow the polyvinylidene fluoride (PVDF) business as the core of the Company's operations until 2030.

However, from the first year, the business environment was very unstable, and so we formulated the "Kureha Group Medium to Long-Term Management Plan, the Rolling Plan 2025 (the Rolling Plan 2025)" as the plan until the fiscal year 2025.

Our market forecasts for electric vehicles (EVs) might not be sufficient and we were not prepared enough for the worst-case scenario in our original plan.

The issue we are facing is how to change the profit structure that has been overly dependent on the PVDF business.

We will create a structure that will generate stable profits as quickly as possible, PPS, and PGA. In addition, agrochemicals will also generate significant profits around 2030.

We will take on challenge to make our existing business a pillar of profit in the future.

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Another thing is a request from the Tokyo Stock Exchange for "action to implement management that is conscious of cost of capital and stock price".

We thought we had incorporated such factors in the new medium-term management plan we announced last year. But looking at stock price movements, we feel that we may not have fully met the expectations of our shareholders.

In the Rolling Plan 2025, we have set new ROE and PBR targets for fiscal 2025, and have created a scenario to achieve these goals.

This time, we have reviewed shareholder returns and the dividend payout ratio, and we are aiming to create a new Kureha by shifting from a focus on stability to utilizing the capital and linking it to growth.

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I am Tanaka, the Senior Vice President and General Manager of Corporate Strategies & Accounting Division.

I will give an explanation based on the materials.

Last year, we made a second revision to our earnings forecast at the end of March.

We had forecasted 11 billion yen on an operating income, but the actual result was 12.8 billion yen, up 1.8 billion yen.

This is mainly because, customers secured inventories following the withdrawal from the ML film business and expenses related to ML withdrawal were lower than expected. Furthermore, group-wide activity expenses were also lower than expected.

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Comparison with the previous year (FY2023).

Both sales and profits were significantly lower than in FY2022.

The main reason for the decline in sales was a drop in both volume and unit price of PVDF, a binder for lithium-ion batteries, which had been very strong in 2021 and 2022.

< Core Operating Profit >

In addition to the impact of PVDF on operating income by segment, the decrease in equity in earnings of the PPS business in the US, which was affected by the economic slowdown and other factors, also contributed to the decline in profits.

Despite an improvement in profits due to a gain from inventory revaluation of processed PGA, total core operating profit in FY2023 was lower than in FY2022.

Due to factors such as the cancellation of the PVDF expansion plan in China and the costs of withdrawing from the ML film business, ¥7.2 billion was recorded as other expenses, resulting in a total of ¥12.8 billion, which was significantly lower than in FY2022.

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In FY2022, an impairment loss was recorded for the ML film business on the assumption that the business would continue to operate. In FY2023, the decision was made to withdraw from this business, and 0.9 billion yen was recorded as a gain on reversal of impairment loss, based on a market valuation of the equipment expected to be sold.

In FY2023, we recorded other expenses of 2.3 billion yen for the cancellation of the PVDF manufacturing facilities expansion plan in China, 2.8 billion yen for the withdrawal from the ML film business, and 1.2 billion yen for the removal of existing facilities to increase PVDF production at the Iwaki Plant.

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