JSR New Mid-Term Business Plan FY ending March 2018 to FY ending March 2020

Transcription

1 JSR New Mid-Term Business Plan FY ending March 2018 to FY ending March 2020 May 24, 2017 Representative Director and President 1

2 Table of contents Summary of JSR20i9 Reviewing of previous mid-term business plan (JSR20i6) Explanation of new mid-term business plan (JSR20i9) Basic policy Resource allocation Measures for each business Petrochemical business Semiconductor materials business Display materials business Life Sciences business Others Capital allocation policy CSR Summary 2

3 Summary of JSR20i9 Summary of JSR20i9 External factors JSR20i6 We failed to achieve our earnings target. Operating income remained at a 30.0 billion yenlevel. Sluggish growth in customers industries and a deteriorating supply-demand situation Weak synthetic rubber-related markets Slowdown in LCD panel production and shifting production bases to China JSR20i9 We aim to increase operating income to a 40.0 billion yenlevel (quantitative target: 42.0 billion yen) through solid earnings growth. Business environment remains uncertain, though the supply-demand situation stopped deteriorating. We forecast that the growth of the entire market will be limited Internal factors (Unit) million yen 3, As we failed to put our businesses on growth track, net sales remained almost flat. Petrochemical business: Delay in launch of SSBR, adjustment of excessive inventories of commodity rubber Fine Chemicals and Other Products business: Decline in our market share and prices in some markets in the LCD materials business 3, , , ,867 3, We aim to achieve our growth target by boosting the following three businesses. Petrochemical business: Expansion of SSBR sales, business integration (plastics business) Fine chemicals business: Expansion of our market share in the semiconductor materials. Focus on Chinese market of LCD. Life Sciences business: In-house developed materials and M&A 324 Net Sales 4, ,000 50,000 40, Operationg income 30,000 20, JSR20i3 JSR20i6 JSR20i9 10,

4 Reviewing of previous mid-term business plan (JSR20i6) 4

5 Reviewing of previous mid-term business plan (JSR20i6) Reviewing of previous mid-term business plan 6,000 <Net sales of FY ended March 2017> Changes in operating income (unit: 100 million yen) Results for FY ended Mar 2014 Results for FY ended Mar2017 Initial target for FY ended Mar2017 Petrochemical business ,000 2, Initial target: billion yen 2016 Actual Results: billion yen <Operating income of FY ended March 2017> Initial target: 50.0 billion yen 2016 Actual Results: 32.4 billion yen Fine Chemicals and Other Products business (Fine Chemicals business + Strategic business) Petrochemical business Fine Chemicals business Strategic business Measures implemented Launch of a new SSBR plant in Thailand, start the construction of a new plant in Hungary Expansion of SSBR sales (a 15% annual growth) Decision on the integration of the Plastics business Obtaining of high market share in cutting-edge lithography materials Establishment of a joint-venture company for manufacturing EUV Establishment of a manufacturing base (Display materials) in China Transfer of JMT/OPSTAR business Focusing on the Life Sciences (LS) business Consolidation of KBI*1 and MBL*2 Decision on the establishment of the JSR-Keio University Medical and Chemistry Innovation Center (JKiC) Withdrawal from unprofitable businesses Total Reasons for the failure of achieving the numerical target Shrinking of the tire market in Japan Deteriorating environment for the elastomers business Delay in constriction of the SSBR new plant in Thailand Decline in profitability of the Display materials business (*1) KBI Biopharma Inc., (*2) Medical & Biological Laboratories Co., Ltd. - 5

6 Reviewing of the Petrochemical business (JSR20i6) Business environment for the Petrochemical business Fiscal measures by the Chinese government after the Lehman shock, global monetary easing + slowdown in the growth of the automobile and tire markets Successive commencement of operations of petrochemical and synthetic rubber plants in Asia after 2014 Continuous decline in synthetic rubber-related markets from 2015 to the middle of 2016 due to falling material prices and excessive supply Reviewing of previous mid-term business plan Reviewing of the Petrochemical business earnings Operating income: 21.2 billion yen in FY ended Mar billion yen in FY ended Mar 2017 Elastomers business Delay in the launch of an overseas investment project (SSBR plant in Thailand) Shrinking of spread due to a sluggish market Fall in sales due to the shrinking of the market in Japan Plastics business Achievement of a record operating income due to the improvement of profitability (Unit) $/MT 4,500 4,000 3,500 3,000 <Changes in prices of butadiene and BR> BR-Butadiene Butadiene BR (Market) 125 <Changes in tire production and JSR s sales volume> JSR: sales volume of tire-use rubber (Japan) Market: tire production (global) * Market growth (line graph): 2011 base of 100 * JSR s sales volume (bar graph): Total of sales volume for tires on non-consolidated basis JSR: sales volume of tire-use rubber (Export) Market: tire production (Japan) (Unit) ton (The Company) 400,000 2,500 2, Exports Exports Exports Exports Exports Exports 300,000 1, ,000 1, Japan Japan Japan Japan Japan Japan 100, /1/6 2013/1/6 2014/1/6 2015/1/6 2016/1/6 2017/1/ Source: Prepared by JSR using ICIS data Source: Prepared by JSR using LMC International and JATMA data 6

7 (Unit) Million square meters Reviewing of the Fine Chemicals and Other Products business (JSR20i6) Business environment for the Fine Chemicals and Other Products business The customers markets did not grow as we had initially expected. Especially, in the LCD market, shipments slowed down and prices declined. Furthermore, the relocation of production bases to China proceeded at a rapid pace. In the semiconductor market, manufacturers moved their processes to finer design rules. <Panel shipments by region (calendar year)> China's share CY2011 to CY2013 Panel shipments CAGR Around 10.4% CY2014 to CY2016 Panel shipments CAGR Around 4.4% 28% 40% 30% China Reviewing of previous mid-term business plan Reviewing of the Fine Chemicals and Other Products business Operating income: 14.8 billion yen in FY ended Mar billion yen in FY ended Mar 2017 Semiconductor materials business Gaining of high market share in 14nm/16nm generation products. Achieving of earnings growth Display materials business Decline in earnings due to sluggish customers markets and the failure to cope with and structural changes in a timely manner Strategic business Implementation of M&A in the LS business, Paving the way to the improvement in earnings. Progress in the business restructuring. Decrease in loss % 22% Taiwan 20% 80 10% 13% 40 6% 10% South Korea Source: Prepared by JSR using IHS DisplaySearch data Japan 0% 7

8 Issues to be addressed under a new mid-term business plan Reviewing of previous mid-term business plan In the first place, we must improve profitability. Our top priority is acceleration of our efforts to reap the benefits of our investment for growth conducted in the previous mid-term business plan. To cope with changes in business environment, we need to implement measures to stabilize earnings in a timely manner. Then, we will make a strategic move for sustainable growth. 1 Accelerate efforts to reap the benefits of our investment for growth Maximize the return on our growth investment conducted under the previous mid-term business plan SSBR Semiconductor materials LS (KBI, MBL) 2 Increase competitiveness drastically Implement measures to stabilize earnings in line with a change in business environment General-purpose petrochemical materials business LCD materials (CF materials (*1)) LIC (*2), peripheral businesses 3 Develop the next generation businesses Allocate resources from long-term viewpoint, develop organizational capacity, M&A LS (New business sphere) Digital innovation (*1) Color filter materials (color pigmented resists, protective coatings, spacers), (*2) Lithium-ion capacitor 8

9 Explanation of new mid-term business plan (JSR20i9) 9

10 (*1) As the necessary approval from the relevant authorities has not yet been obtained, we do not include the impact of business integration in our quantitative target. 10 Overview of the new mid-term business plan 基本方針 Basic policy Quantitative target Net sales: billion yen Operating income: 42.0 billion yen ROE: 8.0% of higher Three businesses Petrochemical business Fine chemicals business Life Sciences business Policy (i) Obtain No.1 position in global SSBR market (ii) Integrate businesses (Plastics) (*1) (i) Semiconductor materials Maintain high market share and expand the product portfolio (ii) Display materials Concentrate resources on alignment films and the Chinese market (i) Expand business in the antibody pharmaceutical area (ii) A business ranked as a new pillar for growth Resources to be allocated Business environment Since business environment, in general, is uncertain, the growth of the entire market will be limited. Capital expenditures: 85.0 billion yen Employees: 7,700 people

11 Earnings target Basic policy Earnings driver under JSR20i9 SSBR <Net sales> Semiconductor materials business Life Sciences business <Operating income> billion yen 42.0 billion yen billion yen Fine Chemicals and Other Products Fine Chemicals and Other Products 32.0 billion yen Fine Chemicals and Other Products Fine Chemicals and Other Products Petrochemicals Petrochemicals Petrochemicals Petrochemicals (Estimate) (Estimate)

12 Resource allocation Resource allocation As large-scale capital expenditures have completed during the period under the previous mid-term business plan, capital expenditures are expected to decrease under the new mid-term business plan. Meanwhile, we will conduct capital expenditures in response to growth opportunity timely and quickly. Capital expenditure plan (on a decided basis) Large-scale capital expenditures in the Petrochemical business have completed. We plan to invest mainly in the Life Sciences and Fine Chemicals businesses in FY ending March 2018 or later. Employment planning (number of employees on a consolidated basis) The number of employees is expected to reach nearly 8,000 on a consolidated basis, since the number of employees will increase overseas billion yen 7,200 people 7,700 people 85.0 billion yen total total

13 New mid-term business plan (JSR20i9) Measures for each business 13

14 2011/1/7 2011/2/ /4/ /6/3 2011/7/ /9/9 2011/10/ /12/ /2/3 2012/3/ /5/ /6/ /8/ /10/5 2012/11/ /1/ /3/1 2013/4/ /6/7 2013/7/ /9/ /11/1 2013/12/ /2/7 2014/3/ /5/ /7/4 2014/8/ /10/ /11/ /1/ /3/ /4/ /6/ /8/7 2015/9/ /11/ /12/ /2/ /4/8 2016/5/ /7/ /9/2 2016/10/ /12/9 2017/2/ 年 2017 年 2017 年 2017 年 2017 年 2017 年 2018 年 2018 年 2018 年 2018 年 2018 年 2018 年 2019 年 2019 年 2019 年 2019 年 2019 年 Source: Prepared by JSR using LMC International and JATMA data 年 2019 年 Petrochemical business: Market trends Elastomers (Unit)$/MT 5,000 4,000 3,000 2,000 1,000 0 Changes in prices of butadiene and naphtha Butadiene MOPJ Source: Prepared by JSR using Platts data Global automobile and tire production and domestic tire production 1500 (2011 base of 100) Global automobile production Global tire production Domestic tire production to 2013 CAGR: Global automobile production: around 5.1% Global tire production: around 1.4% Domestic tire production: around (2.9%) 2014 to 2016 CAGR: Global automobile production: around 2.3% Global tire production: around 2.4% Domestic tire production: around (4.0%) 2017 to 2019 CAGR: Global automobile production: around 4.2% Global tire production: around 3.7%

15 Petrochemical business: Supply-Demand balance of butadiene (BD) Elastomers Ethylene plants, which were built one after another from 2010 to 2011, mainly in Asia, came on line from 2014, causing excessive supply of BD from 2015 to The supply-demand balance of BD is expected to improve in the future, since the number of new plants that will start operation is limited and gas-based plants that generate less C4 will increase. (Unit) 1,000 tons 12,000 12,000 10,000 Line graph: Demand estimate Bar graph: Supply estimate Target BD production Plants scheduled to be built (gasbased) 8,000 8,000 Existing supply volume 6, ,000 年年年年年 年見 年見 年見 年見 estimate estimate estimate estimate Prepared by JSR using IHS and the Ministry of Economy, Trade and Industry s data 15

16 Petrochemical business: SSBR sales plan Elastomers The market is expected to grow by 6.0 to 8.0% annually, but we forecast our sales can show a double-digit growth during the period of our new mid-term business plan. We plan to operate our plant in Thailand at full capacity, market the next generation products, and launch our plant in Hungary. EU tightened its regulations on CO2 emissions from automobiles (130g/km 95g/km in 2021) Enforcement of the tire labeling system Market the 5th generation products that satisfy the strengthened environment regulations and expand the sales of the middle-range zone products Operate the second production line in Thailand plant at full capacity and expand cash flow Establish a three-pole production system to strengthen relationship of mutual trust with global users over long term <Sales volume by base> Market growth Annual growth of 6.0% to 8.0% Hungary Growth of sales volume during JSR20i6 Up 15.0% annually Estimated growth of sales volume during JSR20i9 Up 10.0% or higher annually Thailand Japan Source: Prepared by JSR using LMC International data 16

17 Petrochemical business: Plastics Plastics Two major Japanese players, Techno Polymer (our subsidiary) and UMG ABS agreed to integrate ABS resin business to strengthen the development of business in overseas high-end markets. In addition, we will seek for optimization opportunities including alliance in other Petrochemical business. < Outline of a new company > <Global bases> Techno Polymer UMG ABS 51% 49 % Integrated new company Europe Thailand Guangzhou Shanghai Hong Kong Indonesia America Business: manufacture, process, sale, and research and development of styrene resins (ABS, AS, AES, ASA, and other polymer alloy) Production capacity: 400,000 tons annually (official capacity) Net sales: around 90.0 billion yen* *Estimated combined sales amount after the integration Bases of Techno Polymer Bases of UMG Otake Ube Nagoya Osaka Yokkaichi Tokyo 17

18 Semiconductor materials business: Market growth potential Semiconductor materials Demand for semiconductor materials will increase along with the digital technology innovation such as IoT (Internet of things), Big data and AI (Artificial Intelligence). At the same time, as semiconductor manufacturers move their processes to finer or more complicated design rules, technical requirements for semiconductor materials will become demanding Semiconductor market(calendar year) (Unit) $Million Up 5.4% annually 12,000 10,000 8,000 6,000 (Unit) MSI Area growth of the Silicon wafer shipments(calendar year ) Up 4.2% annually Source: Prepared by JSR using IHS data 4,000 Upstream semiconductor manufacturing process: Fabricating equipment capital expenditures (calender year) Source: Prepared by JSR using IHS data Source:NRI Source:World Fab Forecast report February 2017, SEMI 18

19 Semiconductor materials business: 3D NAND Semiconductor materials Shift from conventional 2D NAND to 3D NAND is progressing in the NAND flash memory industry. JSR has high market shares mainly in high-value-added ArF photoresists in 3D NAND. The market shares in the other materials for 3D NAND such as multilayer materials for lower layers have been increasing as well. <Composition trend of 3D NAND in NAND flash memory (calender year)> 2D 3D Photoresist <Our relative share of 3D NAND> The number of processes (Estimate) 48 Layers 64 Layers ArF 10~15 96 Layers KrF 20~25 Source: Gartner (2016) These numbers are all based on the Company s estimation. The number of processes in KrF includes thin and thick films. means over 30% shares, means 10-30% shares, means less than 10% shares and means zero shares. 19

20 Semiconductor materials business: Growth scenario Semiconductor materials Thoroughly seek Innovation One on One with semiconductor manufacturers Developing materials by closely contacting with customers, gain the market share in the cutting-edge lithography materials and expand the business from the lithography materials to peripheral materials, such as CMP and cleaning materials Achieve business growth that exceeds market growth by boosting sales of lithography and peripheral materials 80,000 60,000 (Unit) Millions of yen lithography materials Start full-scale commercial operation for 10nm generation products Lead competitors in the industry in the field of EUV for 7nm generation products or later Continue to maintain No.1 share in the cutting-edge lithography material business 40,000 20,000 0 lithography materials Process materials Packaging materials lithography materials Process materials Packaging materials (Estimate) Peripheral materials Customers will expand applications for our CMP materials in the cutting-edge field. Customers will adopt our cleaning materials on a full-scale basis in FY ending March (Estimate) 20

21 Display materials business: Growth scenario Display materials Growth scenario for Display materials business Concentrate resource in the Chinese market: Promote the establishment of the manufacturing-marketing-engineering structure in China Increase market share of alignment films (FFS) and di-electric films (South Korea and China) Implement a fixed cost reduction plan (reduction of 3.0 billion yen from FY ended March 2016) Expand product lineups for mobile equipment by developing new FPD materials and optical materials <Changes in FPD shipments by area (calendar year)> (Unit) Million m % China's share CY2014 to CY2019 FPD shipments CAGR Around 4.5% 22% 28% 33% 38% 43% China Taiwan 60% 50% 40% 30% 20% (Unit) Millions of yen 90,000 80,000 70,000 60,000 50,000 40,000 30,000 <Forecast of Display materials sales> Expand market share; Improve the product portfolio Optimize the supply chain; Reduce costs Expand sales Stabilize earnings 50 South Korea 10% 20,000 10,000 0 Japan Source: Prepared by JSR using IHS DisplaySearch data 0% 0 21

22 Life Sciences business: Growth scenario Life Sciences The number of clients that adopted Protein A carrier (Amsphere A3) increased during the period of the previous mid-term business plan. At the same time, KBI s business expanded from drug development and analysis under contract to manufacturing under contract. We will offer new value to the pharmaceuticals industry by combining materials innovation and customer services. We may conduct M&A to exploit growth opportunities. <KBI s Business domain> <Performance of the Amsphere A3> High efficiency - Showing high DBC * on high speed of moving fluid High purity - Low remaining rate of HCP * Process stability Good pressure performance and well resistant to alkalis JSR20i6 JSR20i9 Process development business and manufacturing services provider Develop drug Under contract Analysis Service business Culturing process Refining process Antibody pharmaceuticals (Photo: Amsphere A3) Antibody Technology *DBC: Dynamic Bonding Capacity *HCP: Host Cell Protein 22 AmsphereA3 products from other manufacturers A products from other manufacturers B

23 Major measures Target markets Life Sciences business: Growth scenario Life Sciences We achieved to turn the Life Sciences business into the black on an EBITDA basis in FY ended March The business is expected to fully contribute to the growth of earnings during the JSR20i9. We aim to expand net sales from the current level of 25.0 billion yen to 50.0 billion yen. Bio-pharmaceutical market Global market size: around 16.0 trillion yen CAGR: 10.0% or higher Diagnostic reagent market Global market size: around 6.0 trillion yen CAGR: 10.0% or higher Expand production capacity in anticipation of increase in demand (Unit) 100 million yen Consolidation of MBL, KBI <Forecast of sales in the Life Science business> A base for Amsphere in Europe will begin operations. KBI s base in Europe will begin operations. Achieved black figures in EBITDA Turnaround to black figures <Strengthening global business structure> Japan (JSR), A3 plant in Europe (NV *1 ) KBI, KBI Europe 0 (*1) JSR Micro N.V

24 Life Sciences business: production capacity expansion Life Sciences JSR Life Sciences Expands Amsphere A3 Production Capacity (Press Release dated May 10 th, 2017) JSR Life Sciences Expands Manufacturing Capabilities at KBI Biopharma (Press Release dated May 22 nd, 2017) JSR Life Sciences 's Amsphere A3 has experienced rapid adoption as an alternative option for downstream purification in the biopharmaceutical industry. JSR announced plans for expansion of its production capabilities in Europe because of the extensive biochemistry. Overview of the Expansion of Amsphere A3 Location :JSR Micro NV Production Capability:About 6 times(compared to the current capability) Completion:Phase 1 the end of 2017 Phase 2 within 2019 Commercial Operation :The early days in 2018 (Phase 1) <JSR Micro NV> KBI's strong development capabilities and track record of success in clinical bulk drug substance manufacturing are the foundation for its expansion into commercial production. Building commercial mammalian cell culture manufacturing capability and microbial fermentation capability. KBI also plans to expand in Europe with the opening of an analytical services. Overview of the Expansion of KBI Mammalian Cell Culture Manufacturing Capability :2 X 2000L single-use bioreactors Microbial Fermentation Capability:1 X 300L fermentation tank Commercial Operation:Within 2017 (Both capabilities) Amount of the Investment:30 million US dollar Europe Analysis Base: Built in JSR Micro NV Start the analytical services in the first half of 2018 <KBI Biopharma, Inc.> 24

25 Utilization of the JSR-Keio University Medical and Chemistry Innovation Center (JKiC) Life Sciences JSR and Keio University will jointly develop innovative materials and products that will support the development of new medical treatment. JKiC is scheduled to open in October Keio University School of Medicine and hospital Research field Precision Medicine Microbiome Stem Cell Biology and Cell Based Medicine Designed Medical Device 25

26 Measures for digitalization Others Measures for digitalization for the growth after 2020 Improve labor productivity including back-office sections workers Improve R&D efficiency more than 10 times: AI and robots Take in ICT technology at the manufacturing division: Introduce IoT at plants; and use VR/AR for safety education Take in external human resources and technology in cooperation with external parties Create digital mindset of the management team, managers, and employees (invite CDO from outside of the Company) Review the basic system and search for a new business Open Innovation IBM Research Frontiers Institute Carbon 3D (3D printer) EUV resist development Source: Source: 26

27 New mid-term business plan (JSR20i9) Capital allocation policy 27

28 Return to shareholders Return to shareholders Considering the balance between growth investment and return to shareholders, we will implement our policy for return to shareholders appropriately in the future. (Unit) 100 million yen 200 Share buyback Dividend Total payout ratio 140.0% 120.0% % 100.0% % 53.3% 64.5% 80.0% 60.0% % 52.0% 40.0% 20.0% % Annual dividend per share (yen) Dividend payout ratio Total payout ratio % 27.0% 35.8% 31.2% 47.2% 37.2% 29.2% 46.7% 53.3% 64.5% 84.2% 52.0% 28

29 New mid-term business plan (JSR20i9) CSR 29

30 CSR activities CSR Corporate mission and CSR philosophy Integration of management and CSR creates benefits for both society and the JSR Group through its contribution to the development of a sustainable global environment and society. Evaluation by outside organizations (as of April 1, 2017) The JSR Group has earned high recognition for its initiative in non-financial fields, including CSR activities. Therefore, the Group is included in internationally-known socially responsible investing indices and brands presented below. FTSE4Good Index Series EURONEXT VigeoEiris World 120 Index Ethbel Pioneer & Excellence Investment Registers Morningstar Socially Responsible Investment Index SNAM sustainability index The next generation certification mark Kurumin JSR was selected as Nadeshiko stock in FY2016. JSR shares are included in Global Compact 100. JSR was named as one of Asia s top 100 most sustainable companies in the Channel NewsAsia Sustainability Ranking 2016 conducted by Channel News Asia, etc. 30

31 New mid-term business plan (JSR20i9) Summary 31

32 Summary Summary We will achieve operating income of 42.0 billion yen through solid earnings growth under JSR20i9. We will achieve sustainable growth to fulfill our responsibility to all our stakeholders. JSR20i9 We aim to achieve our growth target by boosting the following three businesses. Petrochemical business: Expansion of SSBR sales, business integration (Plastics business) Fine chemicals business: Expansion of our market share in the semiconductor materials and focus on Chinese market of LCD Life Sciences business: In-house developed materials and M&A (Unit) 100 million yen 350 million yen 420 million yen Develop the next generation business Fine chemicals business Fine chemicals business + LS Return to shareholders Petrochemical business CSR

33 * 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. 33