According to the company’s website news release on November 10, 2022, as for the business environment surrounding the Toyobo Group (hereinafter the “Group”) in the six months ended September 30, 2022, in Europe and the United States, business conditions, which had been in recovery following the easing of COVID-19, have now entered a phase of slowdown brought about by increasing inflationary pressure, monetary tightening policies and rising raw material and fuel prices accompanying the worsening and prolongation of the situation in Ukraine. In China, the weakening of economic growth has become more pronounced due to zero-COVID policy (lockdowns) and a slump in the real estate sector. In Japan, on the other hand, despite previous signs of a business recovery due to an easing of requests for voluntary restriction of movement following the present reduction in COVID-19 infections, the trade deficit has expanded as a result of yen depreciation and rising raw material and fuel prices. Going forward, there are concerns regarding the negative impact on economic activities from continuing yen depreciation and raw material and fuel prices remaining high.
Under this business environment, sales of volatile organic compound (VOC) treatment equipment for recovering solvents have proceeded robustly owing to increased demand for lithium-ion batteries. Moreover, sales of raw materials and reagents for PCR testing grew in response to the demand for PCR testing due to the resurgence of COVID-19 infections since July. On the other hand, sales of polarizer protective films for LCDs “COSMOSHINE SRF” and mold releasing film for multilayer ceramic capacitors (MLCC) fell due to a temporary deterioration in the market. In addition, sales of films and spunbond faced challenges as product price revisions were unable to keep up with the rising raw material and fuel prices.
As a result, consolidated net sales in the six months ended September 30, 2022 increased ¥17.3 billion (9.4%) over the same period of the previous fiscal year, to ¥201.1 billion. Operating profit decreased ¥9.2 billion (53.9%), to ¥7.9 billion and ordinary profit decreased ¥6.5 billion (49.2%) to ¥6.8 billion. Profit attributable to owners of parent increased ¥1.3 billion (13.0%) to ¥11.0 billion after recording extraordinary income in the first three months of the fiscal year of ¥5.6 billion from insurance claim income for a fire accident.
Results by business segment were as follows:
Films and Functional Materials
In this segment, sales increased while operating profit decreased due to impacts from rising raw material and fuel prices and a deterioration of market conditions for the industrial film business.
In the films business, the packaging film business was sluggish due to difficulties in realizing product price revisions to compensate for rising raw material and fuel prices, despite strong sales.
In the industrial film business, sales fell due to a temporary deterioration in the market for polarizer protective films for LCDs “COSMOSHINE SRF” and mold releasing film for MLCC. In the functional materials business, sales of industrial adhesives “Vylon” declined due to the impact of China’s zero-COVID policy.
As a result, sales in this segment increased ¥0.8 billion (0.9%) from the same period of the previous fiscal year to ¥86.7 billion, and operating profit decreased ¥8.0 billion (65.4%) to ¥4.2 billion.
Mobility
In this segment, sales increased while operating loss increased due to the impact of production curtailment of automobiles in addition to rising raw material and fuel prices.
Sales of engineering plastics decreased due to product price revisions being unable to keep up with the rising raw material and fuel prices both in Japan and overseas, in addition to the impact of the production curtailment of automobiles.
Regarding airbag fabrics, despite achieving sales increase, spread between raw material prices and sales prices deteriorated due to rising procurement prices for airbag yarn caused by yen depreciation and the rising raw materials.
As a result, sales in this segment increased ¥2.6 billion (12.0%) from the same period of the previous fiscal year to ¥24.1 billion, with an operating loss of ¥2.0 billion. (Compared with operating loss of ¥0.9 billion for the same period of the previous fiscal year.)
Lifestyle and Environment
In this segment, sales increased while operating profit decreased as product price revisions were unable to keep up with rising raw material and fuel prices, such as for nonwoven materials business, despite strong sales of VOC treatment equipment for recovering solvents. In the environmental solutions business, with regard to VOC treatment equipment, sales of replacement elements as well as VOC treatment equipment used in the manufacturing process for lithium-ion battery separators were strong due to the increase in demand for lithium-ion batteries as a result of the global shift to EV.
In the nonwoven materials business, sales of spunbond and functional filters were affected by the production curtailment of automobiles in Japan, and sales of functional cushion material “BREATHAIR” were affected by zero-COVID policy in China. Moreover, the business faced challenges as product price revisions were unable to keep up with the rising raw material and fuel prices.
In the high performance fibers business, sales of “ZYLON” for applications for bicycle tires and building structural reinforcement were strong. As a result, sales in this segment increased ¥9.9 billion (18.1%) from the same period of the previous fiscal year to ¥64.6 billion, and operating profit decreased ¥0.7 billion (35.1%) to ¥1.2 billion.
Life Science
In this segment, sales and operating profit increased as demand for reagents for PCR testing increased significantly in the second quarter.
In the biotechnology business, sales of raw materials and reagents for PCR testing grew in response to the demand for PCR testing due to the resurgence of COVID-19 infections. Sales of enzymes for diagnostic reagents as well as those for genetic testing reagents were strong due to the impact of foreign exchange in addition to an increase in sales for Europe and the United States.
In the medical materials business, sales of artificial kidney hollow fiber and virus removing membranes trended strong, but were affected by rising raw material and fuel prices.
As a result, sales in this segment increased ¥3.0 billion (18.1%) from the same period of the previous fiscal year to ¥19.3 billion, and operating profit increased ¥0.8 billion (17.3%) to ¥5.4 billion.
Real Estate and Other Business
This segment includes infrastructure-related businesses such as real estate, engineering, information processing services, and logistics services. Results in these businesses were generally in line with plans.
As a result, sales in this segment increased ¥1.1 billion (19.7%) from the same period of the previous fiscal year to ¥6.4 billion, and operating profit decreased ¥0.1 billion (8.1%) to ¥1.0 billion.
Qualitative Information on the Consolidated Financial Position
Assets, Liabilities and Net Assets
Total assets increased ¥23.4 billion (4.5%) from the end of the previous fiscal year, to ¥541.2 billion. This was mainly due to an increase in inventories and an increase in property, plant and equipment due to capital investment.
Total liabilities increased ¥13.6 billion (4.2%) to ¥334.2 billion. This was mainly due to an increase in notes and accounts payable – trade and borrowings.
Net assets increased ¥9.8 billion (5.0%) from the end of the previous fiscal year, to ¥207.0 billion mainly due to an increase in retained earnings and foreign currency translation adjustment.
Cash Flows
Net cash provided by operating activities amounted to ¥12.2 billion in the subject first half period. This was due mainly to a cash decrease from an increase in inventories of ¥16.4 billion, and a cash increase from profit before income taxes of ¥14.8 billion and depreciation of ¥9.6 billion.
Net cash used in investing activities amounted to ¥16.8 billion. This was due mainly to purchase of property, plant and equipment and intangible assets of ¥19.5 billion.
Net cash provided by financing activities amounted to ¥5.2 billion. This was due mainly to proceeds from long-term borrowings of ¥22.9 billion, repayments of long-term borrowings of ¥19.2 billion. As a result, the balance of cash and cash equivalents at the end of the subject first half (September 30, 2022) stood at ¥28.1 billion, an increase of ¥1.7 billion from the end of the previous fiscal year (March 31, 2022).
Qualitative Information on Consolidated Forecasts
In light of recent developments, we have revised our consolidated earnings forecasts for the fiscal year ending March 31, 2023, which were announced on May 12, 2022. For details, please refer to the “Notice of Revision of Consolidated Earnings Forecasts” released (November 10, 2022).
TOYOBO Co., Ltd.
URL https://ir.toyobo.co.jp/en/ir.html
Stock Code: 3101 (Prime Market, Tokyo Stock Exchange)
Representative: Ikuo Takeuchi, President & Representative
Contact Person: Sonoko Ishimaru, General Manager, Corporate Communication Department
TEL: +81-6-6348-3044
