Medium-term Management Initiative (FY 2016 – 2018) Progress and Outlook March 2019 Asahi Kasei Corporation
Outline 1. Progress and outlook for “Cs for Tomorrow 2018” P3 2. Material segment P13 3. Homes segment P33 4. Health Care segment P41 5. New businesses P51 2
1. Progress and outlook for “Cs for Tomorrow 2018” 3
Financial performance New records in net sales, operating income, and net income Cs for Tomorrow 2018 (CT2018) FY 2018 FY 2018 FY 2025 (¥ billion, except where noted) FY 2015 FY 2016 FY 2017 forecast target outlook (As of April 2016) (As of April 2016) (As of Feb. 2019) 1,940.9 1,883.0 2,042.2 2,171.0 2,200.0 3,000.0 Net sales 165.2 159.2 198.5 201.0 180.0 280.0 Operating income 8.5% 8.5% 9.7% 9.3% 8.2% 9.3% Operating margin 91.8 115.0 170.2 145.0 110.0 Net income Net income per shareholders’ 8.6% 10.5% 14.0% 9.0% 10.0% equity (ROE) Net income per shareholders’ 7.1% 7.6% 9.7% 7.0% 8.0% equity and interest-bearing debt 34 1 20 24 34 Dividends per share 35.0% 30.4% 29.1% 27.9% 32.7% Payout ratio 2 ¥/US$ Exchange rate 120 108 111 111 110 1 Dividends will be determined based on FY 2018 consolidated net income results in consideration of total return ratio target of 35%. 2 FY 2018 target figure for payout ratio is total return ratio including share buybacks. 4
Financial results and plan by segment FY 2018 FY 2025 FY18 – 25 FY 2018 FY 2016 1 FY 2017 (¥ billion, except where noted) target increase, outlook forecast growth rate (As of Feb. 2019) (As of April 2016) (As of April 2016) 977.9 1,087.7 1,182.0 1,250.0 1,650.0 Net sales Operating Material 88.5 121.9 126.5 100.0 140.0 income Operating 9.0% 11.2% 10.7% 8.0% + 0.5 pt 8.5% margin 619.0 641.0 655.0 700.0 1,000.0 Net sales Operating Homes 64.1 64.4 65.0 70.0 + 30.0 100.0 income Operating 10.4% 10.0% 9.9% 10.0% 10.0% margin 270.1 296.3 314.0 370.0 + 7.2%/year 600.0 Net sales Operating Health Care 31.9 39.5 42.0 50.0 80.0 income Operating 11.8% 13.3% 13.4% 13.5% 13.3% margin Operating (25.3) (27.3) (32.5) (40.0) (40.0) Others income Operating 159.2 198.5 201.0 180.0 280.0 Total income 1 Beginning with FY 2017, the Energy Division, which was formerly included in Others, is reclassified into the Material segment. 5 FY 2016 figures are recalculated in accordance with the new classification.
Sales and operating income FY 2018 target Net sales Operating income Net sales ¥2,200 billion (¥ billion) (¥ billion) Operating income ¥180 billion 250 2,500 Net sales 200 2,000 150 1,500 Operating income 100 1,000 50 500 0 0 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '18 (FY) target forecast (as of April 2016) (as of Feb. 2019) Operating margin 7.7 2.3 4.1 7.9 6.6 5.5 7.6 7.9 8.5 8.5 9.7 9.3 (%) Dividends per 13 10 10 11 14 14 17 19 20 24 34 34 share (¥) 6
Financial and capital strategy Operating cash flow (3-year total): ¥600 – 700 billion • Enhancing competitiveness of established businesses • Creating new added value in each sector Total investment (3- year total): ≈¥700 billion • Proactively advance M&A and other new investment in addition to investment to maintain and expand established businesses Target for total return ratio • Stable and continuous dividend increases • 35% in FY 2018 (including share buybacks performed flexibly) Funding policy • In principal by borrowings while maintaining D/E ratio around 0.5 7
Progress on long-term investment (on decision-adopted basis) Planning to determine ¥700 billion investment in total, in CT2018 (FY 2016 – 2018) ・ Acquisition of Sage Automotive Interiors, a US-based manufacturer of Major investments automotive interior material Material ・ Acquisition of Erickson Framing Operations, a US company which • Capacity expansion for battery separator • Construction of new R&D facility (Fibers) offers pre-fabricated building products to single-family homebuilders Homes • Capital and business alliance with Mori-Gumi • Capital and business alliance with Chuo Build Industry • Establishment of Kanto-area site for steel-frame members Health Care • Augmenting product pipeline (pharmaceuticals) FY 2018 plan FY 2016 Major investments (including Approx. Material M&A, etc.) ¥150 billion • Capacity expansion for battery separator • Capacity expansion for S-SBR for fuel-efficient tires • Capacity expansion for Lamous microfiber suede Material • Capacity expansion for Leona nylon 66 filament • Automotive • Acquisition of Senseair, a Swedish manufacturer of • Environment/energy CO 2 sensor modules • Healthcare/hygiene FY 2017 Homes Homes Approx. • Capital alliance with McDonald Jones Homes in • Acceleration of new business ¥190 billion Australia creation • Environment/energy Health Care Health Care • Capacity expansion of spinning for Planova virus • Acceleration of globalization removal filters 8
Long-term investments compared to previous mid-term management plan Contribution to increased production Value of long-term investments on decision-adopted basis and profit growth in FY 2019 – 2020 (compared to previous mid-term management plan) (¥ billion) Major capacity expansion 200 (start-up from FY 2018 onward) ◇ LIB separator Approx. 500 million m 2 /y (+80%) capacity increase 150 start-up: FY 2018 – 2020 increase 70% ◇ S-SBR for fuel-efficient tires 100 Approx. 30,000 t/y (+30%) capacity increase start-up: FY 2018 ◇ Lamous microfiber suede 200 50 Approx. 3 million m 2 /y (+50%) capacity increase start-up: FY 2019 ◇ Leona nylon 66 filament 0 Approx. 5,000 t/y (+15%) capacity increase 1 FY 2011 – 2015 1 FY 2016 – 2017 start-up: FY 2019 (average) (average) ◇ Planova virus removal filters For Tomorrow Cs for For Tomorrow Cs for Tomorrow 2015 Tomorrow Approx. 40,000 m 2 /y (+40%) capacity increase 2015 2018 start-up: FY 2019 2018 1 Acquisition of ZOLL and Polypore is excluded. 9
Acceleration of globalization Actions to accelerate global Capturing demand growth Provision of new value development • Capacity expansion for spunbond Asia nonwovens for diapers • Strengthening local management human • Capacity expansion for S-SBR resources • Capacity expansion for Daramic lead-acid battery separator • Acquisition of Erickson Framing Holdings LLC, advancing standardization and • Acquisition of Sage Automotive Interiors, systemization in homes America North • Advancing clinical trial of ART-123 Inc., contributing to the expansion of automotive-related business for the treatment of severe sepsis with • Reinforcing CVC activity • Start-up of new plant of resin compounds coagulopathy • Capacity expansion for Celgard LIB • Receipt of 510(k) clearance from the US separator Food and Drug Administration for Lucica Glycated Albumin-L, an in vitro diagnostic assay kit for glycated albumin Europe • Acquisition of shares of Senseair AB, • Start-up of Asahi Kasei Europe GmbH • Start-up of Europe R&D Center starting CO 2 sensor modules business • Selection of Microza hollow-fiber • Launch of Klaran UVC LED Others • Capital alliance with McDonald Jones membrane for a seawater desalination plant Assigning executive officers for in Kuwait, representing the company’s Homes Pty Ltd of Australia, advancing China, North America, and Europe to largest-scale hollow-fiber filtration standardization and systemization in homes integrate each region membrane order construction 10
Review for “Cs for Tomorrow 2018” For fiscal 2025 Performed Smooth start of operating holding company Adapting to business environment change • ESG/SDGs, international trade policy, etc. configuration Revised forecast to exceed FY 2018 target Maximizing Group capabilities • Operating income: ¥201 billion (+¥21 billion) • Connections among diverse businesses, human • Net income: ¥145 billion (+¥35 billion) resources, and technologies Measures for growth and expansion Additional strategic measures • Material • Further strengthening businesses with competitive Proactive investments and measures to advantage • Performing strategic M&A automotive- and environment/energy-related • Global-oriented strategy in each region businesses • Homes Accelerating creation and launch of new Expansion of overseas business businesses • Health Care • Strengthening CVC activities Expansion of Critical Care business • Reinforced coordination with outside entities Reinforced business foundations Strengthening and developing • Enhanced framework for risk management and business foundations compliance • Innovating and heightening businesses • Further strengthening of petrochemical operations by IoT and AI (digital transformation) • Enhanced manufacturing infrastructure • Maintaining risk management and thorough • Utilization of IoT and AI compliance • Improving productivity (work style reform) • Linkage between human resources development and businesses strategy 11
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