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FYE March 2017 Financial Highlights NAGASE & CO., LTD. May 2, 2017 Copyright © 2017 NAGASE & CO., LTD. Agenda Consolidated Statements of Income 2 N t Sales Net S l b by R Region i (D (Domestic, ti O Overseas)) 3 Net Sales: Two-Year Comparison (by Segment) 4 Operating Income: Two-Year Comparison (by Segment) 5 Consolidated Balance Sheets 6 Consolidated Cash Flows 7 FYE March 2018 Earnings Projections 8 Dividends 9 Copyright © 2017 NAGASE & CO., LTD. Consolidated Statements of Income ■Net sales: Lower, mainly due to the impact of the strong yen and a decrease in naphtha prices ■Operating income: Lower, mainly due to ¥3.1 billion in expenses related to retirement benefit accounting actuarial losses (¥4.0 billion negative impact in prior year) (100 millions of yen) 16/03 17/03 Change Published Forecast Vs. PY Achievement 7,421 7,223 △ △198 97% 7,350 98% Gross profit 916 915 △1 100% 923 99% <GP ratio> 12.4 12.7 +0.3% - 12.6% - SG&A expenses 736 764 +28 104% 778 - Operating income 180 150 △29 83% 145 104% Ordinary income 183 163 △20 89% 160 102% Profit attributable to owners of the parent 123 103 △19 84% 95 109% @120.1 @108.3 @108 - Net sales US$ Exchange rate (period average) @11.7 revaluation (Foreign exchange rate impact on17/03 net sales and operating income results) Net sales :- ¥46.8 billion (approx.) Operating income :- ¥1.7 billion (approx.) Copyright © 2017 NAGASE & CO., LTD. 2 Net Sales by Region (Domestic, Overseas) ■Higher sales in Japan; lower sales overseas due to the impact of the strong yen Domestic & Overseas Sales (100 millions of yen, %) Domestic (Left axis) 8,000 Overseas (Left axis) Overseas Sales by Region (100 millions of yen, %) Oversales Net sales (Right axis) Greater China 51.1% 48.9% 7,000 50% 4,000 3,791 3,500 161 161 139 320 6,000 40% 3,791 3 791 3,000 Americas Europe Other 3,530 156 119 295 (V:97%) (V:86%) (V:92%) 3,530 5,000 2,500 1,098 1,019 30% , 4,000 (V:93%) 2 000 2,000 3,000 2 000 2,000 ASEAN 20% 3,630 3,693 10% 1,500 1,000 2,071 1,000 1,937 (V:94%) 500 0 0% 16/03 17/03 0 16/03 Copyright © 2017 NAGASE & CO., LTD. 17/03 V:Vs 16/03 3 Net Sales: Two-Year Comparison (by Segment) ■ Functional Materials: Lower segment sales, mainly due to a decrease in naphtha prices driving sales of coating raw materials and urethane Functional Materials: Lower segment sales, mainly due to a decrease in naphtha prices driving sales of coating raw materials and urethane materials lower. At the same time, sales of plastic additives and silicone materials were strong in the Americas. ■ Advanced Materials & Processing: Lower segment sales. Despite higher performance in conductive materials, sales of plastic materials in Greater China were lower, as were sales of plastic resins for packaging applications and digital print processing materials in Japan and overseas. ■ Automotive & Energy: Lower segment sales. Despite strong performance in the plastics business in Japan, lower naphtha prices drove sales down overseas. Net Sales by Segment (100 millions of yen) Functional Materials Advanced Materials & Processing Electronics Automotive & Energy 7 421 7,421 7,000 855 6 000 6,000 1 153 1,153 5,000 Life & Healthcare Other 7,223 849 1,129 1,279 1,277 4,000 3,000 2,555 2,426 1,571 1,535 , 16/03 17/03 2,000 1,000 0 Copyright © 2017 NAGASE & CO., LTD. 4 Operating income: Two-Year Comparison (by Segment) ■Although profits in the Life & Healthcare segment were down due to lower sales of cosmetics and health foods, other segments reported higher profits, mainly due to profitability improvements i l d fi bili i and cost reduction measures d d i at manufacturing subsidiaries. f i b idi i ■Other/Corporate: Recorded ¥3.1 billion in expenses related to retirement benefit accounting actuarial losses (¥4.0 billion negative impact in prior year). *Posted retirement benefit actuarial loss of ¥3.1 billion at end of prior period, after revising the discount rate to reflect low market interest rates (fully amortized this year) Net Sales by Segment (100 millions of yen) Functional Materials Advanced Materials & Processing Automotive & Energy Life & Healthcare 180 190 38 13 Electronics Other/Corporate 150 33 15 140 62 63 90 49 50 40 36 (10) 41 - 20 - 54 (60) 16/03 Copyright © 2017 NAGASE & CO., LTD. 17 /03 5 Consolidated Balance Sheets ■Current assets increased, mainly due to increases in notes and accounts receivable ■Non‐current assets increased mainly due to increases in investments in securities (price increases for retained shares offset sales of some ■Non‐current assets increased, mainly due to increases in investments in securities (price increases for retained shares offset sales of some securities) ■ Shareholders’ Equity Ratio up 1.2 point to 54.7% Assets Liabilities and Net Assets 16/03 Total current assets Cash and time deposits Notes and accounts receivable 17/03 3,123 3,212 432 398 1,963 2,068 +88 Total current liabilities ‐ 34 +105 +103 1,020 +42 Short-term loans 341 316 ‐24 (Including current portion of long-term long term loans) +100 +85 +98 Total long-term liabilities 768 690 ‐77 676 +11 Long term loans Long-term 231 200 ‐30 30 445 407 ‐37 Bonds 300 200 ‐100 887 1,011 +124 Net defined benefit liability 140 146 +5 +132 Other (Deferred tax liabilities liabilities, etc etc.)) 96 143 +47 2,329 2,355 +26 2,791 2,951 +160 1,997 2,095 Property plant and equipment Property, 664 Intangible fixed assets Investments, other assets Other 1,664 978 100 +16 Investments in securities 1,561 Notes and accounts payable 327 +2 114 Total non-current assets 813 945 74 66 Current portion of bonds Other ‐ 7 Total liabilities Total net assets 2,346 2,396 +50 Accumulated other comprehensive income 393 505 +112 Net unrealized holding gain on securities 370 476 +106 44 31 ‐12 ‐ 21 ‐2 +19 51 49 ‐2 5,120 5,307 +186 Shareholders’equity Translation adjustment Other Non-controlling interests Total assets Change - 631 97 Other 17/03 241 629 Inventories (100 millions of yen) 16/03 Change 5,120 5,307 +186 Total liabilities and net assets Copyright © 2017 NAGASE & CO., LTD. 6 Consolidated Cash Flows ■Cash and cash equivalents lower by ¥3.1 billion. Despite an increase of ¥14.5 billion in cash flows from operating activities (¥16.1 billion in profit before income taxes), the company made ¥6.5 billion in cash outlays for investing activities (¥11.5 billion in purchases of property, plant and equipment) and ¥10.5 billion in cash outlays for financing activities (¥4.9 billion in net cash outlays for short-term loans, ¥4.0 billion in dividend payments). *By region, cash decreased ¥4.4 billion in connection with increased working capital in Greater China. Cash Flows (100 millions of yen) 17/03 Net cash provided by (used in) operating activities Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities Eff Effects off exchange h rate changes h on cash h and d cash equivalents Net increase (decrease) in cash and cash equivalents Main breakdown Profit before income taxes +161 Depreciation and amortization/amortization of goodwill +109 g +145 Increase in adjustments for retirement benefits+32 Working capital - 77 Income tax paid - 77 Purchases of property, plant and equipment ‐106 Purchases of intangible fixed assets included in other assets ‐8 -65 Purchases of investment in securities -18 Proceeds from sales of investments in securities +46 Sh t llong-term Short, t loans l (net ( t payments/proceeds) t / d ) -49 -105 Cash dividends paid ‐ 40 Purchase of treasury stock -11 16/03 +293 +293 ‐ 126 ‐ 128 -5 ‐ 15 - 31 +23 Cash and cash equivalents at beginning of the year 429 Japan 239 , Greater China 115 , ASEAN42 , Europe 18 , Americas 4 , Other 9 405 Cash and cash equivalents, at end of the period 397 Japan 254 , Greater China 70 , ASEAN 35 , Europe 18 , Americas 5 , Other 13 429 Copyright © 2017 NAGASE & CO., LTD. 7 FYE March 2018 Earnings Projections ■Net sales: Higher net sales. Despite our projection of lower sales of liquid crystal‐related products ■Net sales: Higher net sales Despite our projection of lower sales of liquid crystal related products in our Electronics segment, other in our Electronics segment other segments are expected to report higher sales, including stronger performance of plastics in our Advanced Materials & Processing segment. ■Operating income: Higher profits due to increased revenues. Further, amortization of retirement benefit actuarial losses are expected to be ¥0 3 billion (representing a ¥2 8 billion positive impact on earnings compared to the prior fiscal year) to be ¥0.3 billion (representing a ¥2.8 billion positive impact on earnings compared to the prior fiscal year). (100 millions illi off yen)) 17/03Actual 18/03Forecast Change Vs. PY 7,223 7,320 +96 101% Operating income 150 191 +40 127% Ordinary income 163 209 +45 128% P fit attributable Profit tt ib t bl to t owners of the parent 103 125 +21 121% @108 3 @108.3 @108 @¥0.3 revaluation ― Net sales US$ Exchange rate (period average) Copyright © 2017 NAGASE & CO., LTD. 8 Dividends ■Current period: Annual ¥33 per share dividend (¥1 increase YoY) representing a ¥16 interim and ¥17 year end dividend ■Current period: Annual ¥33 per share dividend (¥1 increase YoY), representing a ¥16 interim and ¥17 year‐end dividend ■Next period: Annual ¥35 per share dividend (¥2 increase YoY), representing a ¥17 interim and ¥18 year‐end dividend (%) (%、yen) y 45 1.6 40 1.4 35 12 1.2 30 1.0 25 0.8 20 0.6 15 10 0.4 5 0.2 0 一株当たり配当金 Dividend per Share (left axis) (左メモリ) 配当性向 Payout Ratio (左メモリ) 左 (left axis) DOE(右メモリ) DOE (right axis) 08/03 09/03 10/03 0/03 11/03 /03 12/03 /03 13/03 3/03 14/03 /03 15/03 5/03 16/03 6/03 17/03 (Forecast) (予定) 18/03 (Forecast) (予定) 17 16 16 22 24 26 28 30 32 33 35 21 8 21.8 35 4 35.4 27 3 27.3 22 1 22.1 36 0 36.0 23 4 23.4 30 5 30.5 33 7 33.7 33 0 33.0 40 4 40.4 35 3 35.3 1.08 1.07 1.08 1.42 1.52 1.52 1.50 1.44 1.46 1.48 1.50 0.0 *17/03 year-end dividend to be submitted for approval to general meeting of shareholders scheduled for June 2017 Copyright © 2017 NAGASE & CO., LTD. 9 http://www.nagase.co.jp/english/ These presentation materials contain forward-looking projections based on assumptions, forecasts, and plans as of May 2 , 2017. Actual earnings may differ from projections due to risks and uncertainties in the future global economy economy, competitive landscape landscape, currency exchange rates, etc. Copyright © 2017 NAGASE & CO., LTD.