Nagase & Co., Ltd. · TSE:8012
Nagase & — Q2 FY2024 Earnings Presentation
40 slides from Nagase &'s earnings presentation, Nov 26, 2024
Slide 1: FY2024 Second Quarter Financial Briefing
FY2024 Second Quarter Financial Briefing NAGASE&CO.,LTD. Stock exchange listing : Tokyo (Prime Market) Code number : 8012 November ６, 2024 Copyright © 2024 Nagase & Co., Ltd.
Slide 2: Executive Summary
Executive Summary Prinova Group profits declined due to ongoing challenging conditions in the manufacturing and allowance for doubtful accounts. Nagase Viita profit declined due to weak sales in Functional Materials for cosmetics due to sluggish demand in China, the final consumption market FY2024 T
Slide 3: Business Environment by Segment
Business Environment by Segment Industry Full-Year FY2024 Initial Forecast First Half Trends Second Half Trends Segment Growth in both automotive and Growth in Asia is likely to remain sluggish, Automotive applications to remain Coatings construction applications was sluggish, despite a production r
Slide 4: Contents
Contents ■ FY2024 Second Quarter Results and FY2024 Earnings Projectionｓ P5～P24 ■ Medium-Term Management Plan ACE 2.0 P25～P36 Appendix： ✓Review : Management Conscious of Capital Costs and Share Prices -From the FY2023 Financial Briefing- ✓Sales, Gross Profit, and Operating Income by Quarter (Before
Slide 5: FY2024 Second Quarter Results and FY2024 Earnings Projections
FY2024 Second Quarter Results and FY2024 Earnings Projectionｓ ■ Consolidated Statements Income P6 ■ Gross Profit by Region P7 ■ Gross Profit by Business & Segment P8 ■ Operating Income by Business & Segment P9 ■ Sales, Gross Profit and Operating Income by Quarter P10 ■ Segment Overview P11～P15 ■ Ove
Slide 6: Consolidated Statements Income
Consolidated Statements Income ▶ Gross profit was the highest ever for the cumulative consolidated second quarter; gross profit margin improved across all business segments ▶ Operating income reached a record high in the cumulative consolidated second quarter and operating income margin improved, de
Slide 7: Gross Profit by Region
Gross Profit by Region ▶ Higher profit both domestic and overseas ▶ Increase in domestic business sales, due to higher sales of raw materials and formulated epoxy resins for semiconductor industries ▶ Profits increased due to impacts of the weakening yen overseas, higher sales of food ingredients (m
Slide 8: Gross Profit by Business & Segment
Gross Profit by Business & Segment ▶ Trading business profits increased to ¥7.4 billion due to strong performance in the Functional Materials, Advanced Materials & Processing, and Electronics & Energy segments , stemming from moderate recoveries, mainly in the semiconductor, electrical appliances ,
Slide 9: Operating Income by Business & Segment
Operating Income by Business & Segment ▶ Trading business profits increased approx. ¥6.8 billion due to an increase in gross profit and impacts of actuarial gains and losses ▶ Despite strong sales of formulated epoxy resins by Nagase ChemteX and narrowed losses in the color formers business, manufac
Slide 10: Sales, Gross Profit and Operating Income by Quarter
Sales, Gross Profit and Operating Income by Quarter ▶ Gross profit has remained strong since fiscal 2023 ▶ Second-quarter operating income in the manufacturing business declined from the first quarter, primarily due to weak performance in the Prinova Group, while the trading business continued to pe
Slide 11: Segment Overview: Functional Materials
Functional Materials Segment Overview: Functional Materials ▶ Gross profits increased primarily for the following reasons ・ Coating materials sales increased due to higher market prices, despite sales remaining flat for automotive and architectural applications ・ Sales of raw materials for semicondu
Slide 12: Segment Overview: Advanced Materials & Processing
Advanced Materials & Processing Segment Overview: Advanced Materials & Processing ▶ Gross profits increased primarily for the following reasons ・ Resin sales increased with the recovery in demand for office equipment and other applications in the electrical appliances and electronic industries ・ Sal
Slide 13: Segment Overview: Electronics & Energy
Electronics & Energy Segment Overview: Electronics & Energy ▶ Gross profits increased primarily for the following reasons ・ Sales of semiconductor materials increased due to the moderate market recovery ・ Sales of formulated epoxy resins increased due to strong demand for semiconductors for high-end
Slide 14: Segment Overview: Mobility
Mobility Segment Overview: Mobility ▶ Gross profits increased primarily for the following reasons ・ Resin sales, which account for about half of gross profit, increased due to yen depreciation and rising market prices, despite a decline in automobile production volume ・ Sales of functional materials
Slide 15: Segment Overview: Life & Healthcare
Life & Healthcare Segment Overview: Life & Healthcare ▶ Gross profits increased primarily for the following reasons ・ Sales of Nagase Viita increased overall due to strong sales of food ingredients, despite lower sales of cosmetic materials stemming from sluggish sales overseas ・ Increased sales of
Slide 16: Overview of Major Manufacturing Subsidiaries: Nagase ChemteX
Overview of Major Manufacturing Subsidiaries: Nagase ChemteX ▶ Gross profits increased primarily for the following reasons ・ Sales of formulated epoxy resins increased due to strong demand for semiconductors for high-end servers, stemming from robust demand in the generative AI market ・ Sales decrea
Slide 17: Overview of Major Manufacturing Subsidiaries: Nagase Viita
Overview of Major Manufacturing Subsidiaries: Nagase Viita ▶ Gross profits increased primarily for the following reasons ・ Sales of food ingredients increased in Japan and overseas ・ Sales of cosmetic materials declined due to lower demand in China, the final demand region ▶ Operating income decreas
Slide 18: Overview of Major Manufacturing Subsidiaries: Prinova Group
Overview of Major Manufacturing Subsidiaries: Prinova Group ▶ Gross profits increased primarily for the following reasons ・ Food ingredient sales saw an increase in volume and an improvement in gross profit margin ▶ Operating income decreased due to allowance of approx. ¥1.3 billion for doubtful acc
Slide 19: Consolidated Balance Sheets
Consolidated Balance Sheets ▶ Investment securities decreased due to the sale of strategic cross-shareholdings of approx. ¥3.2 billion and a decline in market value 100 millions of yen 2024/03 2024/09 Change Details Total Current Assets 5,424 5,462 37 (Cash&deposits) 594 544 (49) (Trade account rece
Slide 20: Consolidated Cash Flows
Consolidated Cash Flows ▶ Operating cash flow amounted to ¥11.9 billion, primarily due to an increase in profit for the period from strong business performance 100 millions of yen FY2023 FY2024 2Q 2Q Operating CF 382 119 (Income before income taxes) 148 230 (Depreciation and amortization) 79 89 (Cha
Slide 21: FY2024 Earnings Projection
FY2024 Earnings Projection ▶ While our full-year earnings forecast remains unchanged in light of the following circumstances, we revised the forecast for each segment ▶ Semiconductor-related businesses performed well, driven by a moderate recovery in market conditions and higher-than-expected demand
Slide 22: FY2024 Earnings Projection By segment (Revised)
FY2024 Earnings Projection By segment (Revised) ▶ We revised figures upward for Functional Materials due to increased coating material sales, increased raw material sales for the semiconductor industry, and a better-than-expected improvement in profitability of the color former business ▶ We revised
Slide 23: FY2024 Earnings Projections by Major Manufacturing Subsidiaries (Revised)
FY2024 Earnings Projections by Major Manufacturing Subsidiaries (Revised) ▶ Nagase ChemteX :Revised upward due to better-than-expected sales of formulated epoxy resins for high-end server semiconductors, driven by strong demand in the generative AI market, despite lower-than-expected sales of photol
Slide 24: Shareholder Returns
Shareholder Returns ▶ We plan to pay ¥90 per share for the full year, consisting of an interim dividend of ¥45 per share and a year-end dividend of ¥45 per share, ¥5 per share higher than our originally planned interim dividend of ¥40 per share for fiscal 2024 (forecasting a 15th consecutive year of
Slide 25: Medium-Term Management Plan ACE 2.0
Medium-Term Management Plan ACE 2.0 ■ Medium-Term Management Plan ACE 2.0 Basic Policies P26 ■ Growth Strategies for the Future P27 ■ Efforts in the Semiconductor Area P28 ■ Efforts in the Life Science Area P29 ■ Efforts in the Food Area -Prinova Group Status- P30 ■ Efforts in the Global South P31 ■
Slide 26: ACE 2.0 Basic Policies
ACE 2.0 Basic Policies Become a true “Business designer” ACE 2.0 “Pursuit of Quality” With a mindset focused on Accountability (A), Commitment (C) and Efficiency (E), and to enable its sustained growth, NAGASE will work to give concrete shape (business, mechanisms, culture) (Pursuit) to the aspirati
Slide 27: Growth Strategies for the Future
Reform of Profit Structure Growth Strategies for the Future Make proactive investments in Focus Area of manufacturing (across the three areas of food, semiconductors, and life sciences) to expand profit scale and profit margin over the medium to long term Potential investments in Focus Area and Deve
Slide 28: Efforts in the Semiconductor Area
Reform of Profit Structure Efforts in the Semiconductor Area The Focus Area works to establish a de facto standard in molding compounds for advanced semiconductors, while the Base Area expands commercial rights Focus Area ・Establish position as the de facto standard in molding compounds (LMC/a- Semi
Slide 29: Efforts in the Life Science Area
Reform of Profit Structure Efforts in the Life Science Area Decided to add diagnostics business through M&A, Aim to expand business by developing new materials in the Develop Area Acquire Diagnostics and Other Businesses From Focus Area Asahi Kasei Pharma Corporation Acquire enzyme production busine
Slide 30: Efforts in the Food Area -Prinova Group Status-
Reform of Profit Structure Efforts in the Food Area -Prinova Group Status- The growth trend in the sports nutrition market remains unchanged We are proactively advancing efforts to establish a profit-contributing structure at the Utah plant Manufacturing Trading ・Expand business in South America and
Slide 31: Efforts in the Global South
Reform of Profit Structure Efforts in the Global South Accelerate portfolio transformation through the rapid monetization in new businesses in India, Mexico, Brazil, and Indonesia Mexico Japanese OEMs in the automobile industry, along with Japanese manufacturers and Taiwanese EMS providers in the el
Slide 32: Improve Area in the First Half of FY2024
Reform of Profit Structure Improve Area in the First Half of FY2024 Initiated prompt efforts to improve ROIC, focusing on areas where management decisions yield swift results Improvement Targets and Initiatives Develop and implement improvement plans as early as possible. 1. Operating loss among sub
Slide 33: Cash Allocation in FY2024 and FY2025
Reform of Corporate Culture Cash Allocation in FY2024 and FY2025 Leverage interest-bearing debt to pursue growth investments and shareholder returns Cash In Cash Out Adjusted operating CF Growth Investments Adjusted Add back depreciation, Growth Consider M&A deals in operating R&D, and other Investm
Slide 34: Pursuit of Profitability and Efficiency -Shareholder Returns-
Reform of Corporate Culture Pursuit of Profitability and Efficiency -Shareholder Returnｓ- ▶ Raised the fiscal 2024 dividend per share from the initial plan of ¥85 (up ¥5 from the previous year) to ¥90 (up ¥10) ▶ Resolved to conduct an additional ¥7 billion in share buybacks (planned: November 2024 t
Slide 35: Sustainability-Related Initiatives
Functions supporting reforms Sustainability-Related Initiatives Sustainability-Linked Loan Execution SBT ※ Commitment Letter Contract Signing Date: October 28 Submission ･Nagase & Co., Ltd. submitted a letter of commitment to the SBT Initiative in September Borrowing Date: October 31 2024 to obtain
Slide 36: Revision of Materiality to achieve sustainability
Revision of Materiality to achieve sustainability ▶ Updated Materiality Established During ACE 2.0 Formulation in September 2024 ▶ We made changes to our multi-stakeholder description, refining the wording to be more concise to ensure all employees are aware of the change ▶ We explore setting non-fi
Slide 37: Inquiries and Investor Relations Website
■Inquiries: https://www.nagase.co.jp/english/contact/ir/ ■NAGASE Group Investor Relations Website: https://www.nagase.co.jp/english/ir/ These presentation materials contain projections based on forward-looking assumptions, forecasts, and plans as of November ６, 2024 Actual earnings may differ from p
Slide 38: Review: Management Conscious of Capital Costs and Share Prices
Review: Management Conscious of Capital Costs and Share Prices ー From the FY2023 Financial Briefing ー Policies to Enhance Corporate Value Execute growth, financial, and capital strategies set forth in the Medium-Term Management Plan ACE 2.0 Current Issue Recognition ● PBR has been below 1x since FY2
Slide 39: Sales, Gross Profit, and Operating Income by Quarter
Sales, Gross Profit, and Operating Income by Quarter (Before Allocation of Corporate & Others) In FY2024, the Company began allocating company-wide shared expenses, excluding a portion of Nagase non-consolidated expenses, to business units under Corporate & Others We are allocating company-wide shar
Slide 40: Major Cash Inflows and Outflows for FY2021-FY2023
Major Cash Inflows and Outflows for FY2021-FY2023 100 millions of yen 3-year 3-year Cash Inflow FY2021 FY2022 FY2023 Cumulative Cash Outflow FY2021 FY2022 FY2023 Cumulative Total Total Operating CF after Dividends and share 525 363 476 1,364 124 139 178 442 adjustments* buybacks Proceeds from sales