According to the company’s website news release on November 10, 2022, during the first half of this consolidated fiscal year (April 1 to September 30, 2022), the global economy saw a return to normalcy from the COVID-19 pandemic. However, the sense of uncertainty increased even more as a result of the Russian invasion of Ukraine, increasing global inflation caused by high fuel and raw material prices, and the zero COVID policy in China.
The Nippon Kayaku Group launched KAYAKU Vision 2025, the new mid-term business plan beginning this fiscal year, amid such conditions. the company are working to implement the roadmap to the vision specified for each business while advancing initiatives to address key company-wide issues aimed at achieving the vision.
As a result, net sales for the first half of this consolidated fiscal year totaled 102,728 million yen, an increase of 13,888 million yen (15.6%) year-on-year. Sales in the pharmaceuticals business underperformed while the functional chemicals, safety systems, and other businesses outperformed the first half of the previous fiscal year.
Operating income totaled 13,559 million yen, an increase of 2,657 million yen (24.4%) year-on-year.
Ordinary income totaled to 16,628 million yen, an increase of 4,799 million yen (40.6%) year-on-year owing to foreign exchange gains.
Profit attributable to owners of parent was 11,281 million yen, an increase of 2,075 million yen (22.5%) year-on-year.
Functional Chemicals Business
Net sales reached 46,023 million yen, an increase of 8,410 million yen (22.4%) year-on-year. The functional materials business as a whole outperformed the first half of the previous fiscal year.
The outperformance resulted from strong sales of semiconductor materials such as epoxy resins, MEMS, and other resin composites. These materials are used in high-speed (5G) communication devices and IoT, which are proliferating, and IT equipment, where demand increased due to increasingly sophisticated electronic equipment in vehicles.
The color materials business as a whole outperformed the first half of the previous fiscal year. This outperformance resulted from strong sales of colorants for inkjet printers for consumer use in addition to a rebound in market demand for colorants and ink for inkjet printers in industrial applications.
The catalyst business outperformed the first half of the previous fiscal year, due to strong orders, both in Japan and for exports overseas. In the Polatechno business, strong sales of components for X-ray analysis systems more than compensated for sluggish demand for dye-type polarizing film.
This resulted in outperformance of the Polatechno Business as a whole, compared with the first half of the previous fiscal year. Segment profit totaled 7,838 million yen, an increase of 1,763 million yen (29.0%) year-on-year. This increase resulted from growth in sales in the functional materials and catalyst businesses.
Pharmaceuticals Business
Sales totaled 25,334 million yen, a decrease of 200 million yen (0.8%) year-on-year. Pharmaceuticals in Japan outperformed the first half of the previous fiscal year, owing to from the launch of DARVIASⓇ Injection, a new drug for blood cancer, in August and growth in sales of the new generic anti-cancer drug PEMETREXED for I.V. Infusion and ALAGLIOⓇ granule packets, a photodynamic diagnostic agent.
Sales of active pharmaceutical ingredients for the Japanese domestic market outperformed while exports, and sales of contract production and diagnostic drugs underperformed the first half of the previous fiscal year. Segment profit totaled 4,512 million yen, an increase of 396 million yen (9.6%) year-on-year.
Safety Systems Business
Sales reached 26,742 million yen, an increase of 5,124 million yen (23.7%) year-on-year.
The domestic business as a whole underperformed the first half of the previous fiscal year. This underperformance resulted from a year-on-year decline in sales of airbag inflators owing to low demand from automobile production cuts caused by the shortage of semiconductors and other factors, despite growth in sales of micro gas generators for seatbelt pretensioners.
The overseas business outperformed the first half of the previous fiscal year in sales of airbag inflators, micro gas generators for seatbelt pretensioners, and squibs, as demand rebounded from the slump caused by policies to combat the COVID-19 pandemic implemented in different countries and despite the impact from the shortage of semiconductors. Segment profit reached 3,985 million yen, an increase of 816 million yen (25.8%) year-on-year, owing to the rebound in demand and growth in sales boosted by the weakening yen.
Other
Sales were 4,628 million yen, an increase of 554 million yen (13.6%) year-on-year. The agrochemicals business as a whole outperformed the first half of the previous fiscal year due to a year-on-year increase in both domestic sales and exports.
Sales in real estate and other business increased compared to the same period of the previous fiscal year. Segment profit totaled 899 million yen, a decrease of 19 million yen (2.2%) year-on-year.
Analysis of Financial Position
Status of Assets, Liabilities, and Net Assets
Total assets were 329,503 million yen, an increase of 14,043 million yen from the end of the previous consolidated fiscal year. The main increases were in raw materials and stores, an increase of 6,775 million yen; cash and deposits, an increase of 3,490 million yen; and merchandise and finished goods, an increase of 2,983 million yen. The main decrease was in securities, a decrease of 2,774 million yen.
Liabilities were 70,264 million yen, an increase of 1,229 million yen compared to the end of the previous consolidated fiscal year. The main increase was in notes and accounts payable-trade, an increase of 3,804 million yen. The main decrease was in short-term loans payable, a decrease of 1,106 million yen. Net assets were 259,239 million yen, an increase of 12,813 million yen compared to the end of the previous consolidated fiscal year.
The main increases were in translation adjustments, an increase of 7,130 million yen; and retained earnings, an increase of 7,073 million yen. The main decrease was in unrealized holding gains on other securities, a decrease of 1,432 million yen.
Cash Flows Status
Net cash inflow in operating activities amounted to 12,035 million yen (versus a cash inflow of 14,384 million yen during the same period of the previous fiscal year). The positive cash flow was primarily generated from profit before income taxes of 16,445 million yen, depreciation and amortization of 6,655 million yen, and a decrease in notes and accounts receivable-trade of 2,011 million yen. The above factors more than compensated for an increase in inventories of 8,441 million yen and income tax paid of 3,853 million yen.
Net cash outflow in investing activities totaled 9,238 million yen (versus a cash outflow of 5,573 million yen during the same period of the previous fiscal year). The net outflow was mainly due to expenditures of 5,989 million yen for the purchase of property, plant, and equipment, 2,099 million yen for the purchase of investment securities, 402 million yen for the purchase of securities, and 339 million yen for time deposits.
Net cash outflow in financing activities amounted to 6,198 million yen (versus a cash outflow of 6,397 million yen during the same period of the previous fiscal year). This was mainly due to dividends paid of 4,198 million yen, expenditures for repayment of long-term loans of 1,167 million yen, and a net decrease of 681 million yen in short-term loans payable.
Reflecting the above cash flow performance, the balance of cash and cash equivalents at the end of the first half was 52,613 million yen (versus 50,410 million yen during the same period of the previous fiscal year), a decrease of 348 million yen from the end of the previous fiscal year.
Analysis of Forward-looking Statements, Including Consolidated Business Results Forecasts
The company expects the future business environment surrounding the Nippon Kayaku Group to bring a greater return to normalcy from the COVID-19 pandemic. However, the Russian invasion of Ukraine and increasing global inflation from high fuel and raw material prices pose the risk of an economic downswing.
Under these conditions, the Nippon Kayaku Group aims to respond flexibly to changes in the business environment and pursue optimal use of operating capital to increase the shareholder value, expand existing businesses in global growth markets, accelerate the development of new businesses and new products, and enhance profits.
There has been no change in the consolidated business results forecasts for fiscal year ending March 31, 2023 announced on July 29, 2022.
