According to the company’s website press release on November 11, 2022, Showa Denko (SDK) (TOKYO: 4004) hereby announces that it has made partial corrections to the "Consolidated Financial Statements for the first three quarters ended September 30, 2022", disclosed on November 7, 2022.
Contents of correction
The company's consolidated subsidiary has been sued in the United States and other countries for violations of the Antimonopoly Act relating to transactions of aluminum electrolytic and other capacitors, and the plaintiffs are seeking compensation. In light of the progress of negotiations and other factors, our company has decided to book a reasonable amount as an expense for the case. Our company judged that it is necessary to recognize the expense as subsequent events and we decided to book an extraordinary loss of US$42 million (6,082 million yen) as an "Antimonopoly Law Related Loss" in the third quarter of 2022. The tax effect (deferred tax assets) of 1,853 million yen on the expense is booked as income tax-deferred, which results in a negative impact of 4,229 million yen on net income attributable to owners of the parent. This has been already expected in the full-year forecast revised on November 7 and has no further impact.
Since there are multiple corrections, please refer to the revised text as the attached with underlined correction and below chart for summary.
Analysis of business results
Summary
In the nine-month period ended September 30, 2022 (“2022 1Q-3Q”), while the global restraint caused by the pandemic of COVID-19 being eased and normalization progressed, the global economy showed progress of inflation, energy and raw material price rise caused by the prolonged situation in Ukraine, occurrence of supply constraints, standstill in the recovery of consumption in some regions. Also we are beginning to see some signs of adjustments in the semiconductor industry, which has been performing steadily. In the Japanese economy, consumer spending, corporate capital investment and production showed signs of a gradual recovery.
Consolidated sales for 2022 1Q-3Q, decreased to ¥1,034,152 million, down 1.7% from the corresponding nine month period of the previous year (“2021 1Q-3Q”). While the Semiconductor and Electronic Materials segment performed well due to the recovery of the semiconductor-related industry, and sales in the three segments of Mobility, Innovation Enabling Materials, and Chemicals also increased due to rising market conditions, impact of divestment conducted in the previous fiscal year caused ¥140,000 million sales decrease. The previous fiscal year figures for Energy Storage Devices and Systems business, Aluminum Can business, Aluminum Rolled Products business which were divested, and SHOKO CO., LTD. which was excluded from consolidated accounting due to reduction of stake, are included in the Others segment. Consolidated operating income for 2022 1Q-3Q decreased to ¥53,536 million, down 25.6% from 2021 1Q-3Q. Although the operating income of the Semiconductor and Electronic Materials segment increased, in three segments of Mobility, Innovation Enabling Materials, and Chemicals, due to the time lag between rise in raw material prices and shift to product prices caused decline in operating income. And also divestment had impact on decrease in operating income. Non-operating income increased mainly due to foreign exchange gains, and ordinary income decreased to ¥64,125 million, down 12.5% from 2021 1Q-3Q.
Net income attributable to owners of the parent of 2022 1Q-3Q increased to ¥35,451 million, up ¥45,781 million from 2021 1Q-3Q due to the absence of an extraordinary loss such as a business structure improvement charge related to the divestment of the Storage Devices and System business recorded in 2021 1Q-3Q.
In the Semiconductor and Electronic Materials segment, sales of both Front-end Semiconductor Materials and Backend Semiconductor Materials subsegments increased due to strong demand for semiconductors since the beginning of the year, despite the recent adjustments in semiconductor production and the impact of the divestment of the Printed Wiring Board business which took place in the fourth quarter of the previous fiscal year, 2021. In Device Solutions subsegment, sales also increased primarily due to higher volumes of HD media for data centers. As a result, the segment posted sales of ¥332,322 million (up 7.1% from 2021 1Q-3Q) and operating income of ¥39,823 million (up 15.1% from 2021 1Q-3Q) due to an increase in sales despite the impact of rising raw material prices.
In the Chemicals segment, sales of Petrochemicals subsegment increased, mainly due to higher selling prices caused by the sharp rise in naphtha prices, despite once-in-four-year large-scale maintenance with shutdown. Operating income decreased, due to reduction in spreads and a decrease in sales volume caused by the large-scale maintenance with shutdown. Sales of the Basic Chemicals subsegment increased due to higher selling prices affected by higher raw material and fuel prices, however, operating income declined due to a time lag in price passthrough. Sales and operating income of the Graphite Electrodes subsegment increased mainly due to higher selling prices.
As a result, the segment posted sales of ¥376,976 million (up 23.8% from 2021 1Q-3Q) and operating income of ¥19,321 million (down 37.5% from 2021 1Q-3Q).
Financial conditions for the January 1 - September 30, 2022 period
(as compared with the conditions at December 31, 2021)
Total assets at the end of the third quarter increased by ¥57,067 million from the end of the previous fiscal year, to ¥2,199,457 million, due to an increase in inventories and property, plant and equipment, despite a decrease in cash and deposits and intangible assets such as goodwill. Total liabilities increased by ¥265,769 million, to ¥1,589,706 million due to an increase in interest-bearing debt as a result of financing through subordinated loans to acquire preferred stock issued by a subsidiary. Net assets decreased by ¥208,701 million, to ¥609,751 million, due to a decrease in noncontrolling interests resulting from the acquisition by our company of preferred stock owned by financial institutions, despite an increase in foreign currency translation adjustments.
