According to the company’s website news release on November 11, 2022, during the second quarter of the current fiscal year (April 1, 2022 to September 30, 2022), although consumer spending showed a recovery trend due to the relaxation of behavioral restrictions, the domestic economy did not achieve a full-fledged recovery due to soaring raw material prices and inflation. Under these circumstances, in the Chemicals Segment, sales of both Basic Chemicals and Fine Chemicals increased, despite the impact of problems with nitric acid plant.
In the Performance Materials Segment, sales of display materials declined, but Semiconductor Materials performed well. In the Agricultural Chemicals Segment, sales increased. In the Healthcare segment, sales of rmaceutical companies) decreased.
As a result, sales and each income exceeded the same period of the previous fiscal year and the outlooks announced in August. In addition, operating income, ordinary income, and net income attributable to owners of the parent reached record highs for the second consecutive year.
The Chemicals Segment
In Basic chemicals, sales of melamine (adhesives agent for particle board), urea, AdBlue®* (high-grade urea solution) increased due to price revisions in response to higher raw material and fuel prices and freight rates. In Fine Chemicals, sales of "TEPIC" (powder coating agent for paint, sealants, etc.) and environmental chemicals (sterilizing and disinfecting agents for pools and septic tanks, etc.) also increase. However, the segment as a whole reported higher sales and lower profits.
As a result, sales of this segment were 19,753 million yen (an increase of 2,668 million) and operating income was 1,061 million yen (a decrease of 106 million yen). Compared to the outlook (Note), sales were above 0.3 billion yen and operating income was below 0.4 billion yen.
* AdBlue® is a registered trademark of the Verband der Automobilindustrie (VDA).
(Note) The outlook is described on page 44 of the 1Q FY2022 Presentation Materials (announced on August 8, 2022).
The Performance Materials Segment
In Display Materials, sales of "SUNEVER" (LCD alignment coating) declined. In Semiconductor Materials, sales of anti-reflective coating for semiconductors (ARC®*) and multilayer materials (OptiStack®*) increased due to favorable customer operations. In Inorganic materials, sales of "SNOWTEX" for polishing electronic materials and hard coating, Organo / Monomer sol (various kinds of coating materials, resin additive), and Oilfield materials (solvents to improve the efficiency of shale oil and gas extraction) were steady.
As a result, sales of this segment were 42,001 million yen (an increase of 2,446 million) and operating income was 13,867 million yen (an increase of 737 million yen). Compared to the outlook (Note), sales were below 0.4 billion yen and operating income was below 0.3 billion yen.
* ARC®, OptiStack® are registered trademarks of Brewer Science, Inc.
(Note) The outlook is described on page 44 of the 1Q FY2022 Presentation Materials (announced on August 8, 2022).
The Agricultural Chemicals Segment
Sales of Fluralaner (active ingredients for veterinary pharmaceuticals) increased due to the completion of customer inventory adjustments in the previous fiscal year. In Japanese domestic ma -selective foliar application herbicide), "GRACIA"
In the overseas market, sales increased significantly due to strong sales of "LEIMAY" (fungicide), "PERMIT" (herbicide), and "GRACIA", as well as the shift in the timing of some shipments.
As a result, sales of this segment were 35,688 million yen (an increase of 10,738 million yen) and operating income was 12,066 million yen (an increase of 5,178 million yen). Compared to the outlook (Note), sales were above 2.5 billion yen and operating income was above 1.5 billion yen. (Note) The outlook is described on page 44 of the 1Q FY2022 Presentation Materials (announced on August 8, 2022).
The Healthcare Segment
Shipments of "LIVALO" (anti-cholesterol drug) to overseas were firm. In "Custom Chemicals", sales decreased due to the concentration of shipments in the second half of the year.
As a result, sales of this segment were 3,248 million yen (a decrease of 91 million) and operating income was 1,457 million yen (an increase of 69 million yen). Compared to the outlook (Note), sales were above 0.1 billion yen and operating income was above 0.2 billion yen.
(Note) The outlook is described on page 44 of the 1Q FY2022 Presentation Materials (announced on August 8, 2022).
Trading
Sales of this segment were 47,650 million yen (an increase of 11,208 million yen) and operating income was 1,951 million yen (an increase of 695 million yen). Compared to the outlook (Note), sales were above 4.0 billion yen and operating income was above 0.3 billion yen.
(Note) The outlook is described on page 66 and 67 of the 1Q FY2022 Presentation Materials (announced on August 8, 2022).
Others
Sales of this segment were 12,445 million yen (an increase of 2,072 million yen) and operating income was 100 million yen (an increase of 104 million yen).
Financial Position
(Position of Assets, Liabilities and Net Assets)
Total assets as of September 30, 2022 was 280,233 million yen (an increase of 545 million yen from March 31, 2022). It is mainly due to the increase of cash and deposits and construction in progress.
Also, total liabilities as of September 30, 2022 was 60,839 million yen (a decrease of 10,838 million yen). It is mainly due to the decrease of short-term loans payable.
Net assets as of September 30, 2022 was 219,393 million yen (an increase of 11,384 million yen). As a result of these factors, equity ratio was 77.2% (an increase of 3.6% from March 31, 2022).
Position of Cash Flow
Deducting income taxes paid from income before income taxes and non-controlling interests, depreciation and gain and loss on working capital, net cash provided by operating activities for the six months ended September 30, 2022 was 43,381 million yen (33,765 million yen for the same period of the previous year). Due to the investment on plant and equipment, net cash used in investing activities for the six months ended September 30, 2022 was 9,633 million yen (6,091 million yen).
Due to the decrease in loans payable, payment for dividends and share repurchase, net cash used in financing activities for the six months ended September 30, 2022 was 29,218 million yen (31,560 million yen).
Cash and cash equivalents at the end of this period increased 6,134 million yen from March 31, 2022 after adjusting for the 1,605 million yen effect of exchange rate. Moreover, after adding the 3,116 million yen increase in cash and cash equivalents resulting from change in scope of consolidation, the balance stood at 43,909 million yen (28,371 million yen).
Outlook of Consolidated Financial Results and Other Forward-looking Information
Outlook for the year ending March 31, 2023 was revised as follows based on the cumulative second quarter and demand forecast. The exchange rate for the third quarter and beyond is assumed to be 135 yen to the U.S. dollar.
Basic Policy on Distribution of Earnings
shareholders by improving company value through increasing revenue in the medium and long terms. In medium- Stage I launched from April 2022, the company aims to realize dividend payout ratio to be 55% and total payout ratio to be 75% after FY2022.
Notes to Consolidated Financial Statements
The Company made a stock payment of 4,700 shares to the eligible party on April 26, 2022 based on the trust agreement of the Board Benefit Trust (BBT) resolved by the Board of Director's meeting on July 30, 2019. In addition, the Company made a stock payment of 6,800 shares to the eligible party on July 25, 2022. As a result, treasury shares decreased by 55 million yen during the second quarter of current consolidated fiscal year. Also, the Company canceled 1,000,000 treasury shares on May 10, 2022 based on the resolution of Board of Directors' meeting held on April 26, 2022. Furthermore, the Company canceled 700,000 treasury shares on August 31, 2022 based on the resolution of Board of Directors' meeting held on August 23, 2022. As a result, retained earnings and treasury shares decreased by 11,097 million yen during the second quarter of current consolidated fiscal year.
In addition, the Company repurchased 683,300 treasury shares based on the resolution of Board of Directors' meeting held on May 13, 2022. As a result, treasury shares increased by 4,999 million yen during the second quarter of current consolidated fiscal year.
Changes in Accounting Policies
The company adopted (ASBJ Guidance No. 31, June 17, 2021) from the first quarter of the fiscal year ending March 31, 2023. Based on the transitional treatment prescribed in Paragraph 27-2 of "Implementation Guidance on Accounting Standard for Fair Value Measurement", we have decided to apply the new accounting policies set forth by into the future. This change had no impact on the quarterly consolidated financial statements.
Adoption of the group tax sharing system
The company and some of its domestic subsidiaries have transitioned from the consolidated taxation system to the group tax sharing system from the current first quarter ended June 30, 2022. Accordingly, corporate, local corporate income taxes, and taxeffect accounting are accounted (PITF No. 42, August 12, 2021 ). In addition, based on Article 32 (1) of PITF 42, the effects of the change in accounting policies due to the adoption of PITF 42 are deemed negligible.
