Kureha Corporation · TSE:4023
Kureha — FY2023 Earnings Presentation
54 slides from Kureha's earnings presentation, March 2024
Slide 1: President's message on the management plan
I am Kobayashi, the President and Chief Executive Officer. I will talk about how I see the current situation as president and what we would like to do in the future. In April last year, we launched a new medium- to long-term management plan, “Toward Creating a New Future (FY2023-2030)”. The plan was
Slide 2: Cost of capital and shareholder returns
Another thing is a request from the Tokyo Stock Exchange for “action to implement management that is conscious of cost of capital and stock price”. We thought we had incorporated such factors in the new medium-term management plan we announced last year. But looking at stock price movements, we feel
Slide 3: Difference from earnings forecast of March 27, 2024
I am Tanaka, the Senior Vice President and General Manager of Corporate Strategies & Accounting Division. I will give an explanation based on the materials. <Difference from the earnings forecast disclosed on March 27, 2024> Last year, we made a second revision to our earnings forecast at the end of
Slide 4: Outline (2): Rolling plan of mid- to long-term plan
Outline (2) KURFHA CORPORATION Rolling plan of Mid- to Long-term Management Plan - The growth of the EV market is slowing down, and the environment for the PVDF business has changed drastically from what was expected at the start of the medium- to long-term management plan. + Although the EV market
Slide 5: I. FY2023 Financial Results
4 KURFHA CORPORATION l. FY2023 Financial Results (April 1, 2023 — March 31, 2024) KUREHA 7
Slide 6: Comparison with the previous year (FY2023)
Comparison with the previous year (FY2023). Both sales and profits were significantly lower than in FY2022. <Revenue> The main reason for the decline in sales was a drop in both volume and unit price of PVDF, a binder for lithium-ion batteries, which had been very strong in 2021 and 2022. < Core Ope
Slide 7: FY2023 Financial Summary
6 FY2023 Financial Summary ( KUREHA CORPORATION Revenue & Core Profit ment ( bation) Revenue 88.5 89.5 178.0 101.8 89.5 191.3 Advanced Materials 34.0 30.5 64.5 473 354 82.7 Specialty Chemicals 17.1 169 33.9 175 14.3 31.8 Specialty Plastics 23.4 23.9 47.3 23.8 23.0 46.8 Construction S4 86 13.9 42 71
Slide 8: FY2023 Financial Summary (3): Segment revenue and core operating profit
7 FY2023 Financial Summary (3) KUREHA CORPORATION Segment Revenue & Core Operating Profit (vs. FY2022) W¥ bition {Revenue} patyenee [Core Operating Profit) miFv2022 @FY2023 @FY2023 82.7 4.5 ‘8a 46.847.3 ; 86 35 31.833-9 1 11.313 lle us m 28 2.5 a 18 17 5 eee a me hy 7 Agvancee Specialty Specialty Co
Slide 9: Other income and other expenses
<Other income> In FY2022, an impairment loss was recorded for the ML film business on the assumption that the business would continue to operate. In FY2023, the decision was made to withdraw from this business, and 0.9 billion yen was recorded as a gain on reversal of impairment loss, based on a mar
Slide 10: Segment Performance: Advanced Materials
9 Segment Performance: KURFHA CORPORATION Advanced Materials (¥ billion) <VS FY2022> . | Revenue “ Operating profit = Advanced plastics 45.0 63.0 -29% Advanced Plastics Carbon products 79 63 134 Despite the increase in sales revenue of PPS and PGA products for shale oil and gas drilling applications
Slide 11: Segment Performance: Specialty Chemicals
10 Segment Performance: KURFHA CORPORATION Specialty Chemicals (¥ billion) <VS FY2022> Revenue * Operating profit = Agrochemicals 9.7 9.3 4% Agrochemicals, Pharmaceuticals Pharmaceuticals 4.0 3.8 3% Sales of agrochemicals, horticultural fungicides, and pharmaceuticals increased, but income Industria
Slide 12: Segment Performance: Specialty Plastics
11 Segment Performance: KUREHA CORPORATION Specialty Plastics (¥ billion) <VS FY2022> Revenue * Operating profit = | Home products 23.2 22.5 3% Home products, fishing lines Increase in sales revenue and profit mainly due to the Fishing lines 5.1 47 7% impact of the price revision of household wraps
Slide 13: Segment Performance: Construction and Other Operation
Segment Performance: Construction and Other Operation (Construction) Revenue 13.9 11.3 23% Operating profit 1.5 09 68% [Other Operation] a Logistics 1.6 26 -39% Hospital operations 43 44 4% Others 0.5 0.6 12% Revenue 18.2 18.7 2% Operating profit eek 28 13% 12 KURFHA CORPORATION Construction | Reven
Slide 14: Financial Position
Financial Position KURFHA CORPORATION Assets Liabilities and Equity (¥ billion) Cash and cash equivalents 23.1 32.2 -9.1 Trades and other payables 20.5 27.7 -72 Trades and other receivables 40.6 319 88 interest-bearing debt 54.9 263 286 Inventories 51.2 52.0 -08 Provisions 1.3 85 28 Other current as
Slide 15: Cash Flow
14 Cash Flow KURFHA CORPORATION (¥ billion) Profit before income tax 13.9 23.0 “9.1 Depreciation 11.7 11.6 0.0 Other -14.0 11.9 -24 Cash flow from operating activities 11.6 22.7 -11.1 Cash flow from investing activities -34,3 -11.1 -23.2 Free cash flow -22.7 11.6 © -34.3 Cash flow from financing act
Slide 16: FY2024 Financial Outlook
FY2024 Financial Outlook (April 1, 2024 — March 31, 2025) 15 KURFHA CORPORATION KUREHA 7 15
Slide 17: FY2024 earnings forecast explanation
I will explain our earnings forecast for FY2024. Although revenue is expected to be lower than in FY2023, operating income is expected to be 14 billion yen, which is higher than in FY2023. <Revenue> We are planning based on the assumption that inventory adjustments by LiB manufacturers will continue
Slide 18: FY2024 Financial Forecast (2)
17 FY2024 Financial Forecast (2) reel OH ARG Tr Revenue and Operating Profit by Segment (¥ Ditiony Revenue 85.0 85.0 170.0 885 89.5 178.0 Advanced Materials 340 36.0 70.0 340 30.5 64.5 Specialty Chemicals 15.5 13.5 29.0 7.1 16.9 33.9 Specialty Plastics 21.0 19.0 40.0 234 23.9 47.3 Construction S$ 8.
Slide 19: FY2024 Financial Forecast (3)
18 FY2024 Financial Forecast (3) riche Goeeoeinon <Segment Revenue & Core Operating Profit (vs. FY2023)> © billion) [Revenue] [Core operating profit) oFY2023 miveii mrY2024e ary202e 645/0.0 47.3 0.0 48 5.7 33.929.0 . j 45 13.914.5 18216.5 | 17 ; L 1.0 I 0.8 Tle ie | a i lu, P| ! in Agvancec Specialt
Slide 20: Segment Performance Forecast: Advanced Materials
19 Segment Performance Forecast: KURFHA CORPORATION Advanced Materials (bilion) <VSFY2023> Revenue ~ Operating profit ~ . , Advanced plastics Advanced plastics 50.0 45.0 11% Revenue of PVDF for automotive LiB binder will increase due to gradual growth in the EV market, Profit margins in the PVDF bus
Slide 21: Segment Performance Forecast: Specialty Chemicals
20 Segment Performance Forecast: Specialty Chemicals KURFHA CORPORATION (¥ billion) <VS FY2023> Revenue “ Operating profit ™ Agrochemicals 6.5 9.7 P =. Agrochemicals Pharmaceuticals 3.5 4.0 Be Revenue and profits of fungdomestic market Industrial chemicals 10.5 10.7 2% industrial. chemicals icides f
Slide 22: Segment Performance Forecast: Specialty Plastics
Segment Performance Forecast: KURFHA CORPORATION Specialty Plastics (¥ billion) R = Oo ti fit‘ Home products 23.5 23.2 1% | oe perating pro’ Fishing lines 5.5 51 Bx Home products, fishing lines Home products profit increase due to sales growth, but profit decrease due to higher fixed costs. ‘ . xe R
Slide 23: Segment Performance Forecast: Construction and Other Operation
Segment Performance Forecast: Construction and Other Operation KURFHA CORPORATION 2 <VS FY2023> (¥ billion) (Construction) Revenue 14.5 13.9 4% Operating profit 0.8 15 ~+46% [Other Operation] Environmental engineering 10.0 11.8 15% Logistics 1.5 1.6 -8% Hospital operation 45 43 5% Other 0.5 05 24% R
Slide 24: FY2024 cash flow forecast
This is the cash flow forecast for FY2024. Cash flow from operating activities will increase significantly due to improvements in working capital and a decrease in income tax payments. Cash flow from investing activities includes approximately 33 billion yen of capital investment related to the expa
Slide 25: II. Key Indicators
Il. Key Indicators 24 KURFHA CORPORATION KUREHA 7 24
Slide 26: Key Indicators (1)
Key Indicators (1) (in billions of yen) 500 400 300 200 100 by) 50 Capital investment 14 103 93 132 149 143 143 165 ; GRR R oo 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 estimate BiH @2H R&D expenditures 49 47 50 53 56 56 81 65 i 2015 2016 2018 2019 2020 2021 2022 2023 2024 estemat= @IH @2H 1
Slide 27: Main indicators dropped in FY2023
We will explain the main indicators. All indicators dropped significantly in FY2023. Each index other than PBR is due to the decline in profit, which is the numerator part of the calculation We expect these indicators to recover in line with the gradual recovery of the PVDF business environment. We
Slide 28: Net debt/equity ratio, equity ratio and EPS
The net debt/equity ratio and equity ratio have changed due to an increase in borrowings such as corporate bonds and the acquisition of treasury stock. EPS has fallen due to a decline in profits, but we expect to see an increase due to improved profits and share buybacks as the PVDF business environ
Slide 29: Kureha Group Rolling Plan 2025
Next, I will explain the "Kureha Group Medium to Long-Term Management Plan, the Rolling Plan 2025 (the Rolling Plan 2025)”. In April 2023, we started our new medium- to long-term management plan, “Toward Creating a New Future”. We have been working to achieve both “improving medium- to long-term cor
Slide 30: Performance targets and KPIs for FY2025
<Performance Targets and Key Performance Indicators (KPIs) for FY2025> Due to the unexpected PVDF outlook, we will not be able to reach the operating profit of 25 billion yen we announced last year, but we have formulated this rolling plan with the strong intention of making Kureha a company with a
Slide 31: Operating Profit Growth Scenario
30 Operating Profit Growth Scenario KURFHA CORPORATION @ Will strengthen and expand the profit base by executing thorough measures to revamp the PVDF business and expand other existing businesses ® Will implement across-the-board measures to further reduce costs in order to ensure profit improvement
Slide 32: FY2025 Performance Targets by Segment
FY2025 Performance Targets by Segment Sees Revenue & Core Operating Profit by Segment (¥ billion FY2023 FY2024 FY FY2025 Results Plan Estimate Original Pian Revenue 178.0 170.0 185.00rmore 200.0 Advanced Materials 64.5 70.0 81.0 100.0 Specialty Chemicals 33.9 29.0 30.0 30.0 Specialty Plastics 47.3 4
Slide 33: Capital strategies
We will explain our capital strategies. In this rolling plan, We will not be changing the dividend payout ratio of 30% or more. We have set a new minimal yearly dividend of 86.7 yen per share. There will be no change in the total return ratio of 50% or more. In addition, we have decided to double th
Slide 34: Basic policy on distribution of earnings
Our basic policy on the distribution of earnings is to maintain stable dividends, while enhancing internal reserves to enable active investment in future business expansion. 33
Slide 35: V. Business Strategies
34 KURFHA CORPORATION V. Business Strategies KUREHA 7 34
Slide 36: PVDF business and EV market environment
I am Natake, and the Senior Vice President and Managing Director of Business Division. I would like to provide a more detailed explanation of the PVDF business, which is undergoing significant changes in the business environment. The largest application for our PVDF is as a binder for the cathode ma
Slide 37: PVDF sales volume
We show the sales volume of PVDF. Sales volume in FY2022 and FY2023 has decreased compared to FY2021. In addition to the sluggish European market, we are entering an inventory adjustment phase in 2021 and 2022 due to the production of electric vehicles and batteries that exceeded actual demand, resu
Slide 38: PVDF sales trends
We show PVDF sales trends. In FY2021 and FY2022, sales revenue grew significantly. One of the reasons for this was special demand resulting from sales that exceeded actual demand. The other reason is the price pass-through of the high raw material prices that occurred during this period. In FY2023,
Slide 39: PVDF capacity expansion plan
Page 38 describes the expansion plan in the medium- to long-term plan. We plan to increase our production capacity of 20,000 tons by adding the 8,000 tons expansion planned to be operational in FY2026 to the existing facilities. In July 2021, we announced the construction of a second plant in China.
Slide 40: PVDF risks: PFAS regulation and LFP batteries
I would like to explain two points regarding our awareness of the risks of the PVDF business and how we are responding to them. In the EU, the proposed restrictions will, in principle, collectively regulate more than 10,000 PFAS compounds, which are each different in terms of toxicity and potential
Slide 41: PGA Business — Market Environment
PGA Business — Market Envir US Oil and Gas Wells Completed by Region 89° area of underground temperatures 14000 12000 10000 CAGR 17% 2019 2020 2022 2022 2023 Appalachia @Permiat mAnadako © Bakken aNictrwa mEagieFord m@ Haynesville Data source: £14 Dring Productivty Report 40 KUREHA CORPORATION Crude
Slide 42: PGA Business - Frac Plug Market
41 PGA Business - Frac Plug Market mupeik CORPORATION ea of high underground ratures a Of mid-to-high inderground temperatures Area of low underground Planning for temperatures Size of circle: Estimated size of the frac plug market Number in circle: Kurena's market share estimated in the area Number
Slide 43: PGA Business — Business Progress
42 PGA Business — Business Progress KUREHA CORPORATION Break-even analysis Business revenue Marginal profit adjusted by ¥ billion excluding impacts of irregular 12 —e— Fixed cost = Marginal profit accounting treatmentand whether or not production 10 a8: activities are carried out ia 8 Adjusted margi
Slide 44: Domestic Foodwrap film market
Domestic Foodwrap film market ¥ dillon 80 70 Data source: INTAGE SRI+ ‘Wrapping Film Market’ rr Valle P= Volume (square measure) April 2018-March 2024 Market Value/Volume A shift in our business strategy * Although Japan's population is decreasing, there is an increasing need to streamline housework
Slide 45: Agrochemicals Business
Agrochemicals Business Agrochemicals business revenue 1 Stippoaseiairante inanes | 2021S 2022S HF 2023ER 202MSH 2025SF Plan Estimate r n Operating profit is forecast to improve largely after FY2025 as sales volume rebounds after inventory adjustments, and while R&D expenses related to our new agrich
Slide 46: Progress in New Business Development (1)
Progress in New Business Development (1) SURE CORPORATION We are exploring development themes inthe areas of Environment & Energy, Life, and Digital Communications with a market-in perspective and a future global expansion in mind, while actively incorporating third-party technologies in our develop
Slide 47: Progress in New Business Development (2)
46 Progress in New Business Development (2) FOREN CORPORATION <Environment> + Our corroborative initiative with US startup, Claros Technologies, Inc., to provide technology solutions and services that capture and destroy PFAS substances in waste water, including low-molecular-weight perfluorooctanes
Slide 48: Improving the Business Portfolio and ROIC
47 Improving the Business Portfolio and ROIC URE CORPORATION FY2023 ® Kureha further optimized its business portfolio by: + Proceeding to withdraw from the heat shrink multilayer film business, a part of Kureha's food packaging business + Reconstructing two businesses in the Kureha Group (effective
Slide 49: Review of Capital Investment Plans
48 Review of Capital Investment Plans SUpENK CORPORATION ® Kureha’s policy to actively invest for growth is unchanged. Our investment plan for the PVDF business is however revised in light of significant changes in the business environment. @ The decrease in capital expenditures related to PVDF is r
Slide 50: VI. Progress toward Environmental Load Reduction Targets
Xe) KURFHA CORPORATION VI. Progress toward Environmental Load Reduction Targets KUREHA 7 49
Slide 51: Reducing Our Environmental Footprints
Reducing Our Environmental Footprints COz emission reduction (FY2030target) 390% 4. more vs. FY¥2013 actual -Working to establish the technology that enables the use of COz-free, regenerative energy, partially replacing coal, at our primary power plant of the Iwaki Factory KUREHA CORPORATION Zero wa
Slide 52: Disclaimer
51 Disclaimer KURFHA CORPORATION * This presentation material is provided for a deeper understanding of our company, and is not intended to be used as a solicitation for investment or other activities. * This material has been prepared by our company based on the information available at the time of
Slide 53: Major Questions and Answers
Major Questions and Answers Q: What are the major reasons that Specialty Plastics segment is expected to see a significant decrease in operating profit by 3 billion yen in FY2024? A: The majority of the decrease in sales is due to the withdrawal from the multilayer barrier shrink film business. Ther
Slide 54: Questions and Answers: PGA business profitability and market share
A: In our plan PGA business will be profitable in FY2025 even without gain from inventory revaluation, but the main factors behind the improvement from FY2024 to FY2025 will be the contribution of sales expansion. While we had not manufactured PGA resin for three years, we have started production ag