Taking on New Challenges

Transcription

1 3 rd Medium-term Business Plan ( ) Taking on New Challenges February 13, 2019 KH Neochem Co., Ltd.

2 Contents 1 Review of 2 nd Medium-term Business Plan 2 VISION Business Environment Perception( ) The 3 rd Medium-term Business Plan Taking on New Challenges Strategy I Strategy II Strategy III Profit Increase by New Facilities Active Investment for the Expansion of Performance Chemical Business Improvement of Business Framework 5 Capital Investment Plan 6 Financial & Capital Strategies 7 Numerical Management Targets 1

3 1 Review of 2 nd Medium-term Business Plan By implementing our original strategy, we exceeded the initial plan by a wide margin Net Sales Operating income Medium-term 中期経営計画 Business Plan Actual 実績 (bn JPY) (bn JPY)

4 1 Review of 2 nd Medium-term Business Plan Profitability increased over the last 3 years, a new focus is needed to continue growth Key Strategy Ⅰ Global expansion of sales of performance chemicals Key Strategy Ⅱ Profit improvement of basic chemicals Key Strategy Ⅲ Strengthen our foothold for the future Growth Stability Potential Concentrate resources on areas expected to show high growth, e.g., refrigeration lubricants and cosmetics Implement further rationalization and cost reductions to ensure stable profit Preparation for manufacturing base in Taiwan planned to start operating in 2019 Enhanced efforts to create new business Performance chemicals Gross profit 1.8 bn JPY (8% increase from 2015) Raw materials for refrigeration lubricants & cosmetics are growing Cost reduction target 2 bn JPY in 3years [Actual] 3-year TTL 2. bn JPY (120%) Expansion of refrigeration lubricant raw materials production capacity Cancellation of new plant plan in Taiwan 3

5 2 VISION2030 A Leading Global Specialty Chemical Company Ambitions Strategic domains Providing specialty chemicals that contribute to the reduction of global warming and a better quality of life Expansion of products with the largest global share and new businesses in three strategic domains Top-class profitability in the chemical industry Healthcare Cosmetic raw materials Skin care/home care market to contribute to improved quality of life Environment Refrigeration lubricant raw materials Work to capture changes in global warming and environmental regulations Electronics High-purity solvents High performance materials market to support IoT and AI

6 2 VISION2030 A Leading Global Specialty Chemical Company To accomplish VISION2030 TTL Capital investment 100 bn JPY 2030 CY Net Sales 180 bn JPY Operating Income over 25 bn JPY 2018 CY Net Sales bn JPY Operating Income 10.9 bn JPY Taking on New Challenges Environment Healthcare Electronics 3 rd medium-term plan th medium-term plan 5 th medium-term plan 6 th medium-term plan

7 3 Business Environment Perception( ) While uncertainty increases in the world's economy, demand continues to grow Basic Chemicals Solvents & plasticizer raw materials Performance Chemicals Although domestic demand has matured, Asian demand will continue to grow. While the effect of Chinese environmental regulation is still unclear, the current supply/demand balance will continue.. Refrigeration lubricant raw materials The growth of the Chinese market is slowing down a little, but demand will continue to grow. Conversion to new type of refrigerant for air conditioners will continue in Asian countries. Cosmetic raw materials Demand will grow as population and average income increase in Asian countries. The popularity of high-end products will also increase. Electronics-related materials Although there is a concern if world demand for semiconductors is levelling off, the demand will grow due to the increasing popularity of IoT and AI. Requirement for high quality products will increase as semiconductors get smaller. 6

8 3 rd Medium-term Biz. plan Taking on New Challenges The 3 years of Taking on New Challenges towards the accomplishment of VISION2030 Strategy Ⅰ Strategy II Strategy III Profit Increase by New Facilities Active investment for the expansion of performance chemical business Improvement of business framework Stat up of new facilities for refrigeration lubricant raw materials and marketing of new products Operate facilities for the next generation semiconductor materials Further increase in production capacity for performance chemicals Creation of new business through the new research hub Further introduction of facility control system with latest technologies (AI and IoT) Improvement of work environment and encouragement of diverse work styles 7

9 3 rd Medium-term Biz. plan Taking on New Challenges The 3 years of Taking on New Challenges towards the accomplishment of VISION2030 Strategy Ⅰ Strategy II Strategy III Profit Increase by New Facilities Active investment for the expansion of performance chemical business Improvement of business framework Stat up of new facilities for refrigeration lubricant raw materials and marketing of new products Operate facilities for the next generation semiconductor materials Further increase in production capacity for performance chemicals Creation of new business through the new research hub Further introduction of facility control system with latest technologies (AI and IoT) Improvement of work environment and encouragement of diverse work styles 8

10 3 rd Medium-term Biz. plan Taking on New Challenges Strategy I Profit Increase by New Facilities Environment Expand sales thanks to new plant for refrigeration lubricant raw materials Launch new raw materials for refrigeration lubricants for next generation HFC Refrigeration lubricant market For A/C For HCFC For HFC/Next Gen HFC/Next Gen. CAGR China 7% +8% 99% Other Asia (excl. Japan) 70% CAGR +9% 90% 99% Start up in 2020 X 1.5 capacity *Source: estimates of the Company ( ) *As a target product only 9

11 3 rd Medium-term Biz. plan Taking on New Challenges Strategy I Healthcare Profit Increase by New Facilities Electronics Improve production capacity of 1,3BG Improve quality by odor reduction, etc. Operate facilities for the next generation semiconductor materials Cosmetics Increase population Increase global income Improved QOL High demand for E-commerce Skincare market (Asia) CAGR 6% Semiconductor photoresist market (Million $) 1,700 1,200 EUV resist 2017 Actual 2018 Est Est Est Est. *Source: estimates of the Company based on the materials of Euromonitor ( ) *Source: estimates of the Company based on the materials of Fuji-Keizai 10

12 3 rd Medium-term Biz. plan Taking on New Challenges Strategy I Profit Increase by New Facilities Gross profit By product type Performance chemicals (raw materials for refrigeration 機能性材料 lubricant, cosmetics etc.) 22.0 (bn JPY) 25. Increase sales of performance chemicals by 20% in 3 years Basic chemicals (solvents & plasticizer raw materials)

13 3 rd Medium-term Biz. plan Taking on New Challenges The 3 years of Taking on New Challenges towards the accomplishment of VISION2030 Strategy Ⅰ Strategy II Strategy III Profit Increase by New Facilities Active investment for the expansion of performance chemical business Improvement of business framework Stat up of new facilities for refrigeration lubricant raw materials and marketing of new products Operate facilities for the next generation semiconductor materials Further increase in production capacity for performance chemicals Creation of new business through the new research hub Further introduction of facility control system with latest technologies (AI and IoT) Improvement of work environment and encouragement of diverse work styles 12

14 3 rd Medium-term Biz. plan Taking on New Challenges Strategy II Active Investment for the Expansion of Performance Chemical Business 3 rd Medium-term Plan ( ) th Medium-term Plan ( ) Refrigeration lubricant raw materials Semiconductor materials-related Utility-related Renew of material receiving facilities Introduce new ERP system Strategic Investment 12.5 bn JPY over 3 years Large-scale investment of Performance Chemical Business Refrigeration lubricant raw materials Cosmetic raw materials etc. FS / Construction Final investment decision Decision making for large-scale investment 13

15 3 rd Medium-term Biz. plan Taking on New Challenges Strategy II Active Investment for the Expansion of Performance Chemical Business Creation of new business through the new research hub New Innovation Strategies Office Creation of new businesses Create new businesses for the accomplishment of VISION2030 Enhance development with open innovation Environment Global warming prevention Step up green chemical raw materials Healthcare Worldwide QOL improvement Electronics Spread IoT and AI Mobility revolution Environmental friendly raw materials Marketing of new refrigeration lubricant raw materials and additives Products using natural resources Study for marine plastic reduction Cosmetic raw materials Study to reduce odor & development of applied products Expand related product line Electronic materials Capital investment for new products targeting the frontline 1

16 3 rd Medium-term Biz. plan Taking on New Challenges The 3 years of Taking on New Challenges towards the accomplishment of VISION2030 Strategy Ⅰ Strategy II Strategy III Profit Increase by New Facilities Active investment for the expansion of performance chemical business Improvement of business framework Stat up of new facilities for refrigeration lubricant raw materials and marketing of new products Operate facilities for the next generation semiconductor materials Further increase in production capacity for performance chemicals Creation of new business through the new research hub Further introduction of facility control system with latest technologies (AI and IoT) Improvement of work environment and encouragement of diverse work styles 15

17 3 rd Medium-term Biz. plan Taking on New Challenges Strategy III Improvement of Business Framework Promote the development of competitive facilities Aggressive rationalization 2nd Medium-Term Plan Cost reduction by procurement strategy Reduction of logistic cost Rationalization of system investment 3rd Medium-Term Plan Improve production efficiency with facility control system utilizing latest technologies (AI & IoT) Optimization of company-wide maintenance strategy Decrease in cost Improve competitiveness by structural reform 16

18 3 rd Medium-term Biz. plan Taking on New Challenges Strategy III Human resources and corporate culture Headquarters relocation & plant work environment improvement Ensure comfortable work environment for diverse personnel Promotion of diversity Ensure risk management and business continuity in disaster New research hub New Headquarters address : 2-3-1, Nihonbashi-Muromachi, Chuo-ku, Tokyo Japan Promotion of open innovation Clarify missions to achieve VISION2030 Improvement of Business Framework Revitalization of organization and promotion of diverse work styles New research hub address : 7-1 Shin-Kawasaki, Saiwai-ku, Kawasaki, Kanagawa Japan 17

19 3rd Medium-term Biz. plan Taking on New Challenges Strategy III Governance Improvement of Business Framework Improvement of Transparency and Sustainability of Management Expansion of the diversity of the board Apoint a female independent outside director(s) Thorough risk management Develop a business continuity plan (BCP) Improve the business continuity management (BCM) Active dialogue with shareholders Develop and release an integrated report 18

20 5 Capital Investment Plan Total investment 23.0 bn JPY over 3 years Investment decision: We emphasize capital cost Investment criteria (sample) Framework improvement & rationalization 10.5 bn JPY 6% 23.0 bn JPY Strategic investment 12.5 bn JPY 5% NPV>0 IRR> Hurdle rate Hurdle rate: WACC*Coefficient 1* Coefficient 2 Coefficient 1: Taking into account market risks such as rationalization and new business Coefficient 2: Taking into account risks in different countries/areas Discussed and decided at investment evaluation meeting attended mainly by the management 19

21 5 Financial & Capital Strategies For financial health and capital efficiency, standard equity ratio is 0% 50% Equity ratio 0~50% Stronger financial health management range Higher growth & capital efficiency Debt reduction Active utilization of debt Investment within depreciation amount Active investment Expected dividend ratio: 30% Increase shareholder returns flexibly While securing financial health, we will work on investment for growth, capital efficiency enhancement, and shareholder return improvement Equity ratio: 38% in 2018, 7% in 2021 (planned) 20

22 6 Financial & Capital Strategies Finance with mobility while investing within operating cash flows Cash Flow Plan Summary Operating cash flows(excl. R&D) Net profit total of 26.0 bn JPY will be yielded Total depreciation cost will be 13.0 bn JPY 37.0 bn JPY Investment cash flows(incl. R&D) 12.5 bn JPY for growth investment (incl. 2.0 bn JPY for strategy investment) 10.5 bn JPY for framework improvement & rationalization (incl. improvement of work environment) 3.0 bn JPY will be allocated for R&D Shareholder returns Returns will be provided stably based on dividend ratio of around 30%, consistent with profit growth 26.0 bn JPY 7.0 bn JPY Financing Utilize external debt while considering stability (as necessary) Finance with mobility 21

23 7 Numerical Management Targets Work for steady profit growth and stronger financial framework Net Sales Net Sales Operating income bn JPY 10.9 bn JPY bn JPY 13.5 bn JPY ROE 20% 18% Equity ratio 38% 7% Exchange rate Domestic naphtha 110 JPY/$ 50,900 JPY/KL 110 JPY/$ 6,000 JPY/KL Operating income

24 Note: The information presented herein is intended neither to solicit nor to induce investors to either purchase or sell shares of KH Neochem. The forward-looking statements in this document, such as those regarding the future prospects of the business, include assumptions and forecasts based on the information available as of the date of this document, and accordingly such statements do not constitute KH Neochem s assurance or guarantee. This document also contains figures for reference purposes that have not undergone an audit. As such, please note that the actual results may vary materially from those expressed or implied herein due to various future risks and uncertainties. Please also be aware that neither KH Neochem nor the information providers shall be liable for any damage incurred from the use of this data. Contact KH Neochem Co., Ltd.