On November 11, 2020 Kuraray reported that (Press release, Kuraray, NOV 11,2020,https://pdf.irpocket.com/C3405/aMKh/VVRN/bW0m.pdf [SID1234570579])
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Consolidated Earnings Report for the Third Quarter of the Fiscal Year Ending December 31, 2020
Name of listed company: Kuraray Co., Ltd.
Stock code: 3405 Stock exchange listing: Tokyo, first section
URL: View Source Representative:
Title: Representative Director and President Name: Masaaki Ito Contact: Title: Senior Manager, Corporate Communications Department, Corporate Management Planning Office Name: Fumio Uegaki Tel: +81-3-6701-1070 Preparation of supplementary documentation for the quarterly earnings report: Yes Holding of quarterly earnings results briefing: Yes (for securities analysts and institutional investors) (Millions of yen rounded down unless otherwise stated)
1. Consolidated Financial Results for the Third Quarter of the Fiscal Year Ending December 31, 2020 (January 1, 2020 to September 30, 2020)
(1) Consolidated Operating Results (Percentage changes displayed for net sales, operating income, ordinary income and net income attributable to owners of the parent are comparisons with the corresponding period of the previous fiscal year.)
(2) Consolidated Financial Position2. Dividends3. Forecasts of Consolidated Financial Results for the Fiscal Year Ending December 31, 2020 (January 1, 2020 to December 31, 2020) (Percentage changes displayed for net sales, operating income, ordinary income and net income attributable to owners of the parent are comparisons with the corresponding period of the previous fiscal year.)
[Reference]
(1) Changes in Important Subsidiaries during the Period (Changes in Special Subsidiaries Involving Changes in the Scope of Consolidation) Added: No companies Excluded: No companies
(2) Adoption of Special Accounting Practices in the Preparation of Quarterly Consolidated Financial Statements No
(3) Changes in Accounting Principles, Procedures and Presentation Methods in Connection with the Preparation of
Quarterly Consolidated Financial Statements
1. Changes following revision of accounting standards:
No 2. Changes besides 1. above:
No 3. Changes in accounting estimates:
No 4. Restatement:
No (4) Number of Shares Issued and Outstanding (Common Shares)
1. Number of shares issued and outstanding (including treasury stock) as of the period-end: As of September 30, 2020 354,863,603 shares As of December 31, 2019 354,863,603 shares 2. Number of treasury shares as of the period-end:
As of September 30, 2020 10,939,561 shares As of December 31, 2019 11,130,834 shares 3. Average number of shares for the period (cumulative): As of September 30, 2020 343,865,009 shares As of September 30, 2019 346,518,211 shares Note: It is not required that this type of earnings report be audited. Cautionary Statement with Respect to Forecasts of Consolidated Business Results (Cautionary note regarding forward-looking statements)
The results forecasts presented in this document are based upon currently available information and assumptions deemed rational. A variety of factors could cause actual results to differ materially from forecasts. Please refer to "(3) Basis for the Revision in Forecasts, Including Consolidated Operating Results Forecasts" on page 4 of the Attachment for the assumptions used.
1. Qualitative Information regarding Business Results
(1) Overview of Consolidated Business Results In the third quarter of fiscal 2020 (January 1, 2020–September 30, 2020), despite a decline in demand in many industries as the spread of COVID-19 continued to grow, economic activities began to gradually restart later on, and China and the United States saw signs of recovery. Even amid this kind of environment, our Group maintained its business activities while thoroughly ensuring safety and working to prevent infection with the aim of supporting industrial supply chains. Consequently, consolidated operating results for the third quarter of fiscal 2020 are as follows: net sales fell ¥35,136 million, or 8.2%, compared with the previous fiscal year to ¥393,778 million; operating income decreased ¥9,807 million, or 23.2%, to ¥32,527 million; ordinary income decreased ¥8,118 million, or 21.4%, to ¥29,823 million; and net income attributable to owners of the parent fell ¥4,210 million, or 21.8%, to ¥15,147 million. The Group’s long-term vision, Kuraray Vision 2026, is to become a "Specialty Chemical Company, growing sustainably by incorporating new foundational platforms into its own technologies."
As we continue working to realize this vision, we will steadily take specific measures in line with the key management strategies underlined in the medium-term management plan "PROUD 2020" from a medium-to long-term perspective. Through these efforts, we will also continue working to establish a new business portfolio. Results by Business Segment Vinyl Acetate Sales in this segment decreased 7.3% year on year to ¥186,759 million, and segment income fell 22.3% year on year to ¥27,996 million.
(1) Sales of PVA resin remained weak due to stagnant global demand and a subsequent production adjustment. Due to a recovery in demand, especially for large displays, sales of optical-use poval film remained firm. Sales of PVB film were affected by stagnant demand for construction and automotive applications. However, sales of water-soluble PVA film continued to expand for use in unit dose detergent packets.
(2) The sales volume of EVAL ethylene vinyl alcohol copolymer (EVOH resin) increased for food packaging applications due to expanded at-home consumption but the sales volume for gas tank applications fell due to a decline in the number of vehicles produced. Isoprene Sales in this segment decreased 9.6% year on year to ¥36,143 million, and segment income fell 48.1% year on year to ¥2,130 million.
(1) Sales of isoprene chemicals and SEPTON thermoplastic elastomer were affected by stagnant demand, mainly in China and the rest of Asia.
(2) Although sales of GENESTAR heat-resistant polyamide resin remained steady for electric and electronic device applications, sales for automotive applications were affected by the decline in automobile production. Functional Materials Sales in this segment decreased 4.1% year on year to ¥90,675 million, and segment income fell 9.4% year on year to ¥2,891 million.
(1) The overall methacrylate business was affected by rising raw material costs and worsening market conditions despite an increase in sales of spatter-blocking barrier panels and displays.
(2) In the medical business, although the dental materials business struggled early on in Europe and the United States as a result of an increase in the number of closed dental clinics due to the pandemic, demand is on track toward a recovery as clinics later reopened.
(3) As for Calgon Carbon, sales were steady even during the novel coronavirus crisis as this business’s products underpin people’s daily lives. In the Carbon Materials business, sales increased due to growing demand for water treatment applications. Furthermore, in line with expanding demand for high-performance activated carbon, we decided to expand facilities at Calgon Carbon Corporation’s existing U.S. factory in the second quarter. In addition, with expanding demand for industrial applications, we decided in this third quarter to expand the facilities for reactivated carbon at our Belgian subsidiary.
Fibers and Textiles Sales in this segment fell 15.9% year on year to ¥40,020 million while segment income decreased 38.0% year on year to ¥2,703 million.
(1) The sales volume of CLARINO man-made leather decreased due to receding demand in Asia and Europe.
(2) In fibers and industrial materials, demand for KURALON stagnated. The sales volume decreased for cement reinforcement and rubber materials.
(3) In consumer goods and materials, sales of KURAFLEX were weak as demand for cosmetic and automotive applications stagnated despite an increase in sales for mask-related applications. Trading Although sales of products for various applications struggled in fiber-related businesses, demand for resins and chemicals recovered in China, and performance was on par with the previous year.
As a result, segment sales decreased 7.7% year on year to ¥89,322 million, and segment income fell 6.1% to ¥2,817 million. Others In other business, due to weak sales of domestic affiliates, segment sales declined 16.3% year on year to ¥32,051 million, and segment income fell 40.4% to ¥347 million.
(2) Overview of Financial Position We increased liquidity in preparation of the novel coronavirus pandemic. Specifically, liquidity comprising cash and cash deposits and short-term investment securities increased ¥103,670 million due mainly to an increase of ¥135,996 million in interest-bearing debt, including increases of ¥30,000 million in corporate bonds, ¥28,000 million in commercial paper, ¥78,364 million in long-term loans payable. In addition to the above, accrued expenses decreased ¥25,927 million, and, as a result total assets increased ¥83,898 million from the end of the previous fiscal year to ¥1,075,047 million,) and total liabilities increased ¥94,353 million to ¥546,957 million.
Total net assets fell ¥10,455 million to ¥528,089 million. Equity attributable to owners of the parent amounted to ¥512,924 million, for an equity ratio of 47.7%
(3) Basis for the Revision in Forecasts, Including Consolidated Operating Results Forecasts Although the COVID-19 is continuing to spread, we saw signs of recovery in demand for the Company’s mainstay applications, including automobiles, electronic devices, and displays, especially in China and the United States, underpinned by economic stimulus measures. Demand is expected to continue gradually recovering while countries work to control the pandemic and maintain social and economic activities. We have revised the full-year operating results forecast announced in August 12, 2020 based on the consolidated third quarter operating results, the current business environment, and trends in exchange rates and raw material prices. Revised Consolidated Operating Results Forecast for Fiscal 20202.
Quarterly Consolidated Financial Statements and Notes
(1) Quarterly Consolidated Balance Sheets
(2) Quarterly Consolidated Statements of Income and Quarterly Consolidated Statements of Comprehensive Income Quarterly Consolidated Statements of Income1. The "Other Business" category incorporates operations not included in business segment reporting, including the environmental business and engineering business.
2. Adjustment is as follows: Included within segment loss of ¥8,947 million is the elimination of intersegment transactions ended as a profit of ¥1,622 million and corporate expenses ended as a loss of ¥10,570 million. Corporate expenses mainly comprise the submitting company’s basic research expenses.
3. Segment income is adjusted to agree with operating income in the consolidated statements of income.
2. Information related to goodwill or impairment loss of fixed assets for each reportable segment
Important impairment losses related to fixed assets In the vinyl acetate segment, Kuraray recorded an impairment loss. Furthermore, the amount recorded for said impairment loss was ¥3,358 million in the third quarter of the fiscal year.II. Third Quarter of Fiscal 2020 (January 1, 2020 to September 30, 2020)
1. Net sales, income and loss by reporting segment1. The "Other Business" category incorporates operations not included in business segment reporting, including the environmental business and engineering business.
2. Adjustment is as follows: Included within segment loss of ¥6,358 million is the elimination of intersegment transactions ended as a profit of ¥1,448 million and corporate expenses of ended as a loss ¥7,807 million. Corporate expenses mainly comprise the submitting company’s basic research expenses. 3. Segment income is adjusted to agree with operating income in the consolidated statements of income.