Update on JSR20i6 in FY March May 25, 2016 Representative Director and President

Transcription

1 Update on JSR20i6 in FY March 2017 May 25, 2016 Representative Director and President 1

2 Table of Contents Outline Overview Summary of our mid-term business plans, JSR20i3 and JSR20i6 Present business management policy Measures for each business Petrochemicals business Fine chemicals business Life Sciences business Lithium-ion Capacitor business Capital allocation policy Summary 2

3 Outline 3

4 4 Outline Growth period of the Fine Chemicals business in the 2000s Under a favorable economic environment, including the double-digit growth of the semiconductor and LCD markets, and stable foreign exchange rates and naphtha and butadiene prices, we achieved high growth by channeling management resources into the Fine Chemicals business, which was on a growth trend. On the other hand, we failed to prepare in a timely manner for the growth in the next generation. Summary of our mid-term business plans, JSR20i3 and JSR20i6 JSR20i3: FY March 2012 FY March 2014 JSR20i6: FY March 2015 FY March 2017 We began using management resources to foster a third pillar of JSR s earnings following the Petrochemicals business and the Fine Chemicals business. Our net sales steadily expanded until FY March 2015 due to the contribution of relatively stable core businesses (the Petrochemicals business and the Fine Chemicals business). We explored our growth scenario of the next generation in four new areas. We reviewed the allocation of our management resources in FY March 2016 according to the prediction that slower growth was likely to continue in customers markets for our core businesses from the end of FY March 2015 to FY March Specifically, we undertook the review of Strategic businesses withdrawal from the ITO, reduction of Precision Processing businesses and the Functional Chemicals business, and downsizing of the lithium-ion capacitor (LIC) business. Consequently, we decided to concentrate our management resources into the Life Sciences (LS) business, and made the most of using M&As to foster a third pillar of JSR s business. Outlook for FY March 2017 and beyond In FY March 2017, the economic environment is expected to be difficult due to the yen s appreciation, and more intensified competition is anticipated in the customers markets due to slower growth. Furthermore, geopolitical risk is likely to increase. Thus, we will take a conservative management stance to prepare for moves to avert risk. We will also size up the growth opportunities of each business and conduct the selection of businesses into which we will channel management resources. Meanwhile, since our vision toward 2020 remains unchanged, we will invest in growth opportunities without hesitation.

5 Overview 5

6 Summary of our mid-term business plans, JSR20i3 and JSR20i6: Changes in earnings We actively explored and fostered new businesses until FY March 2015 against the backdrop of a steady sales increase in core businesses supported by relatively stable growth of the customers market. However, we will reallocate management resources by taking into account changes in the latest economic and market environments and rising geopolitical risk. (Unit: 100 million yen) 1,200 1, Gross Profit SGA Operating Profit SGA to sales ratio Operating margin 994 1,038 1, % 15.3% 15.3% 15.4% 16.1% 16.3% 11.5% 10.3% 9.5% 9.1% 9.4% 8.9% % 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% JSR20i3 JSR20i6 6

7 Summary of our mid-term business plans, JSR20i3 and JSR20i6: Earnings and cost structure Net sales increased by around 60.0 billion yen (Elastomers business: around 40.0 billion yen; Fine Chemicals business: around 20.0 billion yen) from FY March 2011 to FY March Although gross profit also grew by around 12.0 billion yen during the same period, it fell short of the initial target. An increase in selling and general administrative expenses (SGA) cut into profit. Although we explored the next growth scenario in four business areas from FY March 2011, we have decided to concentrate our management resources into the LS business in the future. We withdrew from ITO business. We will transfer the Functional Chemicals business to a group company in order to focus on the sales. (Unit: 100 million yen) 1,200 1, ,407 Sales 523 SGA 3, % 15.3% 15.4% Gross Profit Operating Profit SGA to sales ratio 3, , , % 16.3% 1,065 4,041 3, % 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% JSR20i3 JSR20i6 0.0% 7

8 Summary of our mid-term business plans, JSR20i3 and JSR20i6: Changes in management and business strategies Growth period of the Fine Chemicals business JSR20i3 JSR20i6 Relying on domestic businesses and maintaining earnings Extracting growing products Full-scale global development Petrochemicals business Restraint in management resource spending and cost reduction by CR-G *1 Determination of the switch to global production of SSBR and the establishment of the foundation therefor. E100 *2 :cost structure reform Commencement of SSBR global production Cancellation of a manufacturing outsourcing agreement in Europe Preparation of global infrastructures Global development Semiconductor materials: Measures to cope with slower growth Fine Chemicals business Investment of management resources with the aim of achieving global growth (such as the establishment of an overseas production base) Semiconductor materials Response to ballooning capital expenditures Consolidation of R&D bases in Japan LCD materials Further localization of operations (manufacturing and sales + R&D) Semiconductor materials Recapture of No.1 position; growth based on the product portfolio strategy LCD materials Acceleration of business development in China and a delay in the restructuring of the business structure Exploration of investment opportunities in four strategic business areas Selection of the Strategic business Strategic business (New business) Exploration of growth opportunities in four business areas: Functional Chemicals, Precision Processing and ITO, LIC *5, and LS Establishment of the LS business as a third pillar of JSR s business and use of an inorganic growth strategy (consolidation of KBI *3 and MBL *4 ) Reduction of the Functional Chemicals business and the Precision Processing. Withdrawal from ITO businesses, and downsizing of the LIC business *1 CR-G:Abbreviation of Cost Reduction for Growth (Name of the cost structure reform in JSR) * 2 E100: Abbreviation of Efficiency100 (Name of the cost structure reform in JSR). *3 KBI:KBI Biopharma Inc., * 4 MBL:MEDICAL & BIOLOGICAL LABORATORIES CO., LTD., * 5 LIC:lithium-ion capacitor. 8

9 Present business management policy Petro chemicals Since the SSBR market has been growing as expected, we will continue focusing on this business. As the market in Japan has been shrinking, we will not exclude the possibility of forming a business alliance with other companies. Semiconductor Display LS We will concentrate on the front-end area, which will become a driver for miniaturization. We will aim to seize a leading market share in the lithography materials business and continue to expand the product portfolio, such as post CMP cleaning solutions and materials for High-Density packaging, by fully utilizing R&D facilities and strategic alliances with customers. The commoditization of products has progressed rapidly. The globalization of our R&D system brought the opposite results of what we had aimed for. We will streamline the operation costs and management resources. The acquisition of KBI and MBL has expanded our business opportunities, raising the possibility that the LS business will achieve net sales of 40.0 billion yen to 50.0 billion yen in We will accelerate the growth of the LS business using these companies as a vehicle and aim to bring the business segment into the black in around two years. LIC We decided to focus on high-value added applications which have more advantages over LiB and other energy-storing devices. We will promote development of the market while minimizing the business investments. 9

10 Measures for each business 10

11 Petrochemicals business: Change in the spread between butadiene (BD) and naphtha prices In the 2010s, prices of BD and naphtha have drastically fluctuated. The spread between BD and naphtha prices has narrowed since FY March 2015 due to the oversupply of BD and weak demand, particularly in eastern Asia. We forecast the market will remain sluggish in FY March (Unit:$/ton) 4,500 Change in butadiene and naphtha prices 4,000 3,500 3,000 2,500 2,000 1,500 1, Spread (Butadiene-Naphtha) Butadiene Naphtha Lehman Shock 0 *Source: Statistics of Platts and JSR, etc. 11

12 Petrochemicals business: Strategy of the SSBR business The second-phase plant in JBE will begin commercial production in the second half of FY March We expect the sales volume of SSBR to steadily increase. We plan to launch production in Hungary with the aim of supplying SSBR from FY March (Unit: ton/year) 250,000 Change in JSR s SSBR production capacity and sales volume 250, , ,000 Germany Hungary Thailand Japan Second-phase expansion of production capacity at JBE s plant Launch of production capacity at Hungary plant 200, ,000 SSBR Sales volume 100, ,000 50,000 50,

13 Petrochemicals business: Strategy of the SSBR business We will aim to expand the top line of the SSBR business by implementing the following measures: Technology (establishment of the next generation technology), Production (launch of the second-phase plant in JBE), and Marketing (strengthening of overseas sales bases). Launching the second-phase plant in JBE Ensuring the completion of customers approval Promoting the shift to overseas products Marketing Strengthening sales bases in Europe Forming specialized units for tire materials Production Technology Establishing the fifth generation technology Launching products targeted at the high-volume segment of the S-SBR market 13

14 Petrochemicals business: Next Jump in the Plastics business Since the domestic market has been shrinking year by year, we plan to consolidation of Plastics business with UMG ABS in order to establish a solid business structure that we can provide stable supplies in the future. Furthermore, we aim to expand oversea sales aggressively by combination of the two companies differentiated material technologies. Techno Europe Techno America UMG Indonesia Factory locations of Techno Polymer Factory locations of UMG ABS Ube Otake Yokkaichi Domestic manufacturing capacity of ABS resin (from FY March 2016) (KTA) Company Country Base location Capacity Techno Polymer Japan Yokkaichi 250 UMG ABS Japan Ube 100 Otake 50 NIPPON A&L INC. Japan Ehime 70 Osaka 30 Toray Industries, Inc. Japan Chiba 72 Denka Company Limited Chiba 50 Total

15 Semiconductor materials business: Market trend and JSR s sales forecast Since more than moore continues, the lithography market is expected to continue to grow faster than the wafer market. We will continue to focus on the cutting-edge processing technology of front-end process and secure the leading position in the market. (2010 base of 100) Growth in silicon wafer input (area) vs. Growth in the photoresist material market (value) Wafer( mm) ArF and KrF photoresist market CAGR: +5%( 10-15) Resist(KrF&ArF) Silicon wafer input growth rate: +4%( 10-19) (Unit: 100 million yen) Change in sales of the semiconductor materials Lithography Process Packaging and other 45nm 32~22nm 14~7nm * Source: JSR prepared the chart based on statistics of Gartner, etc. 45nm 32~ 22nm 14~7nm 15

16 Semiconductor materials business: Efforts to commercialize the EUV resist business JSR and imec will jointly establish a manufacturing company and control the quality of photoresists in order to commercialize EUV lithography. * Image of an EUV joint venture company <JSR s advantage> Manufacturing technology and quality control of high-performance materials <imec s advantage> State-of-the-art equipment and process JSR Micro N.V. (Belgium) Sales EUV joint venture company JSR Micro, Inc. (United States) Sales Analysis tool Manufacturing facilities Rights to use an EUV exposure tool EUV exposure tool Contract Manufacturing 16

17 Display materials business: Market trends and JSR s efforts Shipments are expected to continue to grow on a panel area basis, but are likely to slow down on a value basis due to intensified competition. Consequently, the environment for Display materials business is expected to become difficult. We will cut down business costs and select management resources. (2011 base of 100) Trend in TV panel shipments Panel Area Shipment value (Unit: Change in sales of the Display materials business 100 million yen) Intensified competition Maintaining stable earnings 80 * Source: JSR prepared the chart based on statistics of IHS DisplaySearch and JSR, etc. 0 * Source: JSR prepared the chart based on statistics of IHS DisplaySearch and JSR, etc. 17

18 Display materials business: Measures to maintain earnings growth We have moved into the Chinese market, which is expected to grow faster, ahead of our competitors. Meanwhile, we will try to maintain earnings growth in the Display materials business by carrying out a drastic business structural reform related to the operations of other bases, and also continuously expand our product portfolio. JSR s Group business deployment for LCD panel manufacturers in China 20% of the world s LCD production in 2016 is expected to be in China. Chinese manufacturer s market share Source: IHS Technology (based on the number of panels shipped) Location of customers LCD plants in China Location of JSR Group companies and their business areas 18

19 Life Sciences business: Development of global organization We have established an organizational framework centering on KBI and MBL and have newly established the Life Sciences Division in JSR. We have placed an American as General Manager of the Life Sciences Division to unitarily control the division, including overseas bases. JSR Corporation Life Sciences Division Base in USA Base in Europe Base in China Manufacturing/R&D/Sales of Diagnostic reagent materials Manufacturing/R&D/Sales of research reagents and diagnostic agents Analyzing and manufacturing biopharmaceuticals under contract 19

20 Life Sciences business: Two growth drivers We have obtained material+α business areas through consolidations of KBI and MBL. We will accelerate the growth of the Life Sciences business by placing KBI and MBL as growth drivers. We will continue to actively invest in the business. Contract process development and manufacture of antibody medicines business KBI Biopharma Establishment 1997 JSR s investment ratio 51.0% Number of employees 428(as of March 31, 2016) Offices Durham, North Carolina and Boulder, Colorado, the United States Business Contract process development and manufacture of antibody medicines Competitive advantage Development of a purification process for antibody medicines and analysis technology Diagnostic agents and research reagents business MEDICAL & BIOLOGICAL LABORATORIES CO, LTD. (MBL) Establishment 1969 JSR s investment ratio 50.4% Number of employees 291 on a nonconsolidated basis, 485 on a consolidated basis(as of March 31, 2016) Offices Head office in Nagoya, Production and Research & Development in Ina Business Manufacturing and sale of diagnostic agents and research reagents Competitive advantage Technology to produce antibodies and reagents for diagnosing autoimmune diseases 20

21 Life Sciences business: Future outlook In the markets of advanced countries, such as Europe, North America, and Japan, we will try to expand business in the field of personalized medicine that is expected to grow in the future by using MBL and KBI. Meanwhile, we will endeavor to grow the in vitro diagnostic agent business in the markets of emerging countries, including China. (Unit: 100 million yen) 700 Sales of the Life Science Business Turning MBL into a consolidated subsidiary Turning KBI into a consolidated subsidiary

22 LIC business: Business strategy We decided to focus on high-value added applications where LIC s feature can be used more effectively. Meanwhile, we attempted to minimize the business costs. Regions We will focus on markets that are sensitive to environmental issues (China and Europe). In Japan, we will market products mainly to existing customers. Products We will concentrate on applications where our LIC has advantages in performance. Applications We will actively promote our LIC where its features can be used effectively, such as energy regeneration (public transportations, elevators) and system stabilization (UPS). Super-low-resistance type laminated cells 1100F, 2200F Modules for laminated cells Hybrid buses Flat prismatic type cells 2300F, 3300F Modules for flat prismatic cells Instantaneous voltage drop compensators (UPS) 22

23 Capital allocation policy 23

24 Amounts returned to shareholders (100 million yen) Capital allocation policy: Return to shareholders We have implemented our policy for return to shareholders stably and flexibly. We will support our policy to maintain the ratio of return to shareholders at 50% to 100% % Changes in amounts returned to shareholders and the ratio of total amounts returned to shareholders to profit Annual dividend per share (yen) Dividend payout ratio Total payout ratio 36.0% 117.8% 46.5% 46.7% 29.2% 46.7% 53.3% 64.5% 84.2% '07/3 '08/3 '09/3 '10/3 '11/3 '12/3 '13/3 '14/3 '15/3 '16/3 '07/3 '08/3 '09/3 '10/3 '11/3 '12/3 '13/3 '14/3 '15/3 '16/3 Annual dividend 配当単価 per share ( 円 (yen) ) Dividend payout 配当性向 ratio 18.0% 21.7% 56.8% 46.5% 28.3% 29.2% 27.0% 35.8% 31.2% 47.2% Total payout 総還元性向 34.0% 36.0% 117.8% 46.5% 46.7% 29.2% 46.7% 53.3% 64.5% 84.2% ratio 120.0% 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% The ratio of total amounts returned to shareholders to profit 24

25 Summary 25

26 Summary Organic growth scenario: Our future growth drivers consist of three pillars: S-SBR, semiconductor materials business, and life sciences businesses. In businesses other than growth drivers, we will give priority to creating a long tale of earnings by striking a balance between earnings opportunities and costs. In-organic growth: We will explore opportunities to transform our businesses and the Company at the same time. Realization of JSR s Vision/Target (Market Cap: 1 trillion yen) Growth supported by core businesses Petrochemicals business SSBR Promote overseas manufacturing and differentiation Fine Chemicals business Semiconductor materials business Focus on cutting-edge front-end technology Growth supported by new businesses Strategic businesses Life Sciences business Accelerate growth using two drivers Operating income supported by core businesses Plastics business Further leap through Jump LCD Convert the business structure and expand product lineups

27 * The forecasts, future plans and strategies made in this document contain a variety of uncertain factors, since it has been prepared based on judgments from currently available information. Actual business results may differ from those projected, depending on factors such as the economic status of the market surrounding the company. 27