FY2023 Financial Briefing

NAGASE&CO.,LTD.

Stock exchange listing : Tokyo (Prime Market)

Code number : 8012

May 24, 2024

Executive Summary

FY2023 Results

The Prinova Group reported lower earnings due to lower food ingredient market prices and prior costs at the Utah plant

The color former business reported an operating loss, mainly due to declines in demand and market conditions

Resin sales declined due to declines in global demand and market conditions

Sales were strong for Nagase ChemteX-formulated epoxy resin used in high-end server applications

Nagase Viita (former Hayashibara) passed on the prices of utilities and other costs and posted increased sales of functional materials for cosmetics and foods

FY2024

Earnings

Projections

We expect to improve profitability through ROIC management and increase gross profit margin from 18.3% to 19.1%. We also expect to post a record-high operating profit.

We will reallocate resources among regions in our trading function. We will invest resources in regions with high growth potential.

We expect to produce results in the semiconductor manufacturing process of the chemical recovery and recycling business, as well as expand business for power semiconductors.

Medium-Term

Management

Plan ACE 2.0

・Steady implementation of QUICK WIN

・Decision to change Shareholder Returns policy (100% total return ratio in FY2024, FY2025)

Copyright © 2024 Nagase & Co., Ltd.

2

Business Environment by Segment

Industry

FY2023 Trends

FY2024 Trends

Segment

Gradual recovery in automotive

Automotive applications to remain strong,

Coatings

applications, but sluggish construction-

but generally flat overall

related applications

Functional

Color

Demand remained weak and market

Oversupply to continue while market

Materials

Formers

conditions declined further

conditions remain sluggish

Semiconduct

High-end applications performed well

Moderate recovery, full-scale recovery in the second

half of the fiscal year, with sales of high-end

ors

despite slow market recovery

applications to continue strong

Electronics &

Display

Sluggish shipments of smartphones, etc.,

Demand to recover year on year

throughout the fiscal year

Energy

Smartphones

Sluggish shipments throughout the year

Expected growth year on year

Advanced

OA and

Resin market conditions declined due to

Overall demand and resin market

Materials

& Processing

Games

sluggish global demand

conditions to make a moderate recovery

Automobiles

The Japanese automotive-related industry in China was

Moderate recovery in automobile

Mobility

sluggish, while sales in Japan were steady due to a

production to continue

recovery in the semiconductor shortage

Demand to increase while sales of raw materials

Medical

Sluggish overall industry performance

decrease due to patent expiration of brand-name drugs,

etc.

Cosmetics

Demand increased due to the end of the

Overall demand to continue to recover

Life & Healthcare

COVID-19 pandemic

Food

Demand began recovering in the second half of the year,

Demand in the U.S. market to continue to

despite lower demand in the U.S. market and weak

recover

market conditions

*Based on the business environment of the Nagase Group, excluding one-time losses, etc. (Forecasts may not be consistent with general industry trends)

Copyright © 2024 Nagase & Co., Ltd.

3

Contents

■ FY2023 Results and FY2024 Earnings Projectionｓ

P5～P22

■ Medium-Term Management Plan ACE 2.0

P23～P36

  • Appendix：Evaluations and Transition from External Organizations

Copyright © 2024 Nagase & Co., Ltd.

FY2023 Results and

FY2024 Earnings Projections

Copyright © 2024 Nagase & Co., Ltd.

Consolidated statements income

  • Gross profit increased due to strong performance of high-profit manufacturing subsidiaries; however, operating income decreased due to increases in personnel expenses and other selling, general and administrative expenses
  • Net income decreased with the decrease in ordinary income, despite decreases in loss on securities and impairment loss.
  • Overall performance was in line with the full-year forecast

100 millions of yen

FY2022

FY2023

Change

Vs.PY

Forecast

Forecast

Comparison

Sales

9,128

9,001

(127)

99%

9,000

100%

Gross profit

1,554

1,647

93

106%

1,630

101%

17.0%

18.3%

1.3ppt

－

18.1%

－

SG&A expenses

1,220

1,341

120

110%

1,330

－

Operating income

333

306

(27)

92%

300

102%

Ordinary income

325

305

(19)

94%

290

105%

Profit Attributable

to owners of the

236

224

(12)

95%

225

100%

parent

US$ Exchange rate

@ 135.5

@ 144.6

@ 9.1

Weak yen

@ 143.0

(period average)

RMB Exchange rate

@ 19.7

@ 20.1

@ 0.4

Weak yen

@ 20.0

(period average)

  • Offset to sales and cost of sales from revenue recognition standards: FY2022 -¥268.9 billion, FY2023 -¥272.3 billion
  • Impact from foreign exchange: Gross profit, +¥5 billion; Operating income, +¥0.9 billion

Copyright © 2024 Nagase & Co., Ltd.

6

Gross Profit By Region

  • Higher profit both domestic and overseas
  • Increase in domestic business sales, mainly due to higher sales of cosmetic materials and formulated epoxy resins
  • Overseas profit increased due to the impact of the weaker yen and strong performance in the food ingredient business in Europe

Domestic & Overseas Gross profit(100 millions of yen)

Overseas gross profit By Region(100 millions of yen)

1,800

100%

900

Total 896 Other

Total 833

Other

15

Total 1,647

90%

15

Europe

800

1,600

Total 1,554

Overseas

Europe

154

896

80%

Overseas

112

1,400

833

700

Overseas

Overseas

70%

1,200

gross profit

gross profit

600

ratio

ratio

Americas

60%

54.4%

Americas

53.7%

343

331

500

1,000

50%

800

40%

400

600

300

ASEAN

ASEAN

30%

149

152

400

Domestic

Domestic

20%

200

750

720

Greater

Greater

200

10%

100

China

China

225

231

0

0%

0

FY2022

FY2023

FY2022

FY2023

※Domestic figures under Domestic & Overseas Gross Profit include inter-regional adjustments

Copyright © 2024 Nagase & Co., Ltd.

7

Gross Profit By Business & Segment

  • Functional Materials saw a decline in sales of coating materials and raw materials for semiconductor-related and other materials for the electronics industry, as well as weakening profitability in the digital print processing materials manufacturing business
  • Advanced Materials & Processing posted lower sales due to decreased demand for resin sales in the office equipment, appliance, and video game device market, as well as the impact of inventory adjustments by customers
  • Overall profits in Electronics & Energy increased due to increased sales of raw materials for semiconductor-related products and formulated epoxy resins for semiconductor- and mobile device products
  • In Life & Healthcare, sales of food ingredients, cosmetic ingredients, and pharmaceutical raw materials increased

Gross Profit By Business & Segment (100 millions of yen)

Change in Gross Profit By Segment (100 millions of yen)

1,500

1,200

900

600

300

0

Total 1,554

Manufa cturing 618

Trading

936

By Business

FY2022

Total 1,647

Manufa cturing 692

Trading

954

By Business

FY2023

Total 1,647

Life &

Total 1,554

Healthcare

1,647

75

Corporate

ElectronicsMobility

& Others

Life &

& Energy

8

(0)

1,554

34

Life &

Healthcare

Healthcare

634

Functional

559

Advanced

Materials

Materials

(17) & Processing

(6)

Mobility

Mobility

152

144

Electronics &

Electronics &

FY2022

FY2023

History of Gross Profit(100 millions of yen)

Energy

Energy

307

342

500

Advanced

Advanced

399 387

394 401

425

432

390

369

Materials

Materials

400

& Processing

& Processing

242

300

236

Functional

Functional

200

Materials

Materials

298

281

100

By Segment

By Segment

0

FY2022

FY2023

1Q

２Q

3Q

4Q

Copyright © 2024 Nagase & Co., Ltd.

FY2022

FY2023

8

Operating Income by Business & Segment

  • Functional Materials and Advanced Materials & Processing posted lower operating income due to a decrease in gross profit
  • Electronics & Energy posted higher operating income with increased gross profit
  • Life & Healthcare recorded higher gross profit; however, weaker profitability at the Prinova Group, increased personnel expense, other selling, general and administrative expenses, and a delay in the profit contribution of the Utah plant caused a decrease in operating income
  • Corporate & Others reflected higher expenses, mainly due to the beginning of amortization for intangible assets (enterprise system and DX investments), an increase in amortization expenses for accounting-based retirement benefit actuarial differences, and other factors

Operating Income by Business & Segment(100 millions of yen)

Total 333

Total 306

420

Life &

Life &

360

Total 333

Healthcare

Healthcare

105

103

Manufa

Total 306

300

Mobility

Mobility

cturing

Manufa

47

49

91

cturing

Electronics &

240

88

Electronics &

Energy

Energy

92

113

180

Advanced

Materials

Advanced

120

Trading

Trading

& Processing

Materials

241

76

& Processing

217

Change in Operating Income By Segment (100 millions of yen)

333

Electronics

Life &

& Energy

Mobility Healthcare

20

1

(2)

Functional

306

Materials

(18)

Advanced

Corporate

& Others

Materials

(19)

& Processing

(8)

FY2022

FY2023

History of Operating Income(100 millions of yen)

Functional

68

60

Functional

Materials

Materials

104

86

0

Corporate

Corporate

&Others

(60)

&Others

(94)

(113)

(120)

By Business

By Business

By Segment

By Segment

120

100

80

60

40

20

0

108

69

90

85

75

75

75

59

FY2022

FY2023

FY2022

FY2023

１Q

２Q

３Q

４Q

FY2022 FY2023

Copyright © 2024 Nagase & Co., Ltd.

9

Functional Materials Segment Operating Income Overview

  • Overall sales of coating materials decreased due to sluggish sales for mainly architectural applications, despite a recovery in applications for the automobile and other industries
  • Sales decreased for raw materials for the electronics industry, including semiconductor-related products
  • The manufacturing business related to digital print processing materials posted lower sales and a decline in profitability, resulting in an operating loss
  • Profits decreased due to customer inventory adjustments, mainly in the first half, and weak profitability in the manufacturing business

Operating income by business（100 millions of yen）

History of operating income （100 millions of yen）

Total 104

Manufa cturing

9

Trading

95

Total 86

Trading

95

Manufa cturing

(9)

26

15

26

21

26

25

24 24

FY2022

FY2023

１Q

２Q

３Q

４Q

FY2022 FY2023

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10

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Nagase & Co. Ltd. published this content on 26 June 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 26 June 2024 07:43:07 UTC.