On February 4, 2020 Nippon Kayaku reported Financial Results For the Third Quarter of the Fiscal Year Ending March 31, 2020 (Press release, Nippon Kayaku, FEB 4, 2020, View Source net/doc/4272/ir_material_for_fiscal_ym8/76321/00.pdf [SID1234553800]).
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1. Consolidated Business Results for the First Three Quarters of the Fiscal Year Ending March 31, 2020 (April 1, 2019–December 31, 2019)
(1) Significant changes in subsidiaries during the first three quarters (changes in designated subsidiaries that result in changes in scope of consolidation): None
(2) Adoption of special accounting methods for presenting the quarterly consolidated financial statements: None
(3) Changes to accounting policies and estimates and restatements
[1] Changes to accounting policies associated with revision of accounting standards or similar items: None
[2] Changes other than
[1]: None
[3] Changes to accounting estimates: None
[4] Restatements: None (4) Number of shares issued (common stock)
[1] Number of shares issued at end of the fiscal period (including treasury stock) As of December 31, 2019: 177,503,570 shares As of March 31, 2019: 182,503,570 shares
[2] Number of treasury stock at end of the fiscal period As of December 31, 2019: 5,275,358 shares As of March 31, 2019: 9,358,749 shares
[3] Average number of shares during the fiscal period (cumulative) First three quarters of fiscal year ending March 31, 2020: 173,012,317 shares First three quarters of fiscal year ended March 31, 2019: 173,145,466 shares *Quarterly summary financial statements are not subject to audit by a certified public accountant or audit firm. *Analysis related to appropriate use of the business results forecasts, and other notes The information in this report constitutes forward-looking statements regarding future events and performance.
This information is based on the beliefs and assumptions of management in light of information currently available to it at the time of announcement and subject to a number of uncertainties that may affect future results. Actual business results may differ substantially from the forecasts herein due to various factors.
For matters pertaining to business forecasts, please refer to "(3) Analysis of Forward-looking Statements, including Consolidated Business Results Forecasts" on page 3 of the Supplementary Information
1. Qualitative Information Concerning Results for the First Three Quarters
(1) Analysis of Operating Results In the first three quarters of this consolidated fiscal year (April 1, 2019 to December 31, 2019), the global economy as a whole saw continued slow growth. This was mainly due to the deceleration of external demand in the manufacturing industry, while consumer spending remained steady on the back of an improved employment and income environment in the U.S. and Europe. The trend of deceleration in economic growth persisted in China, owing to the impact from trade friction between the U.S. and China, among other factors. The Japanese economy showed signs of a gradual rebound despite weak exports. This resulted mainly from moderate growth in capital investment and a resurgence in consumer spending. Amid these conditions, the Nippon Kayaku Group worked to implement the key themes and resolve the midand long-term key issues outlined in "KAYAKU Next Stage," the mid-term business plan launched this fiscal year.
We worked to cut costs further to reinforce our profit structure, in addition to focusing on strengthening R&D, optimal allocation of business resources into core businesses, and expanding our overseas business. Owing to these actions, net sales for the first three quarters of this consolidated fiscal year outperformed the same period of the previous fiscal year in the functional chemicals business, the pharmaceuticals business, and the safety systems business, resulting in total net sales of 131,825 million yen, an increase of 2,924 million yen (2.3%) yearon-year. Operating income totaled 14,231 million yen, a decrease of 331 million yen (2.3%) year-on-year. Ordinary income totaled 14,682 million yen, a decrease of 1,307 million yen (8.2%) year-on-year due to an increase in exchange losses. Profit attributable to owners of parent was 11,302 million yen, an increase of 721 million yen (6.8%) year-onyear due to a decrease in income taxes-deferred. Performance by business segment is as described below. [Functional Chemicals Business] Sales stood at 53,260 million yen, an increase of 1,892 million yen (3.7%) year-on-year. The functional materials business recorded growth in sales over the same period of the previous fiscal year. This growth was resulted from strong sales of epoxy resins for 5G base stations, which more than covered for the deceleration in demand from the semiconductor market. The color materials business outperformed the same period of the previous fiscal year, boosted by strong sales of colorants for inkjet printers for industrial applications and materials for thermal paper, despite the negative impact from deceleration of the Chinese market. The catalyst business outperformed the same period of the previous fiscal year. In the Polatechno Group, sales of components for X-ray analysis systems were strong, but sluggish sales of dyetype polarizing films resulted in underperformance of the Polatechno Group as a whole, compared with the same period of the previous fiscal year. Segment profit was 4,537 million yen, a decrease of 1,011 million yen (18.2%) year-on-year. [Pharmaceuticals Business] Sales stood at 36,327 million yen, an increase of 831 million yen (2.3%) year-on-year. Pharmaceuticals in Japan were impacted by drug price revisions accompanying the increase in the consumption tax rate, but the segment outperformed the same period of the previous fiscal year as growth in sales for the antibody biosimilar, INFLIXIMAB BS for I.V. Infusion, and for TRASTUZUMAB BS for I.V. Infusion contributed to performance along with growth in generic anti-cancer drugs as the switch to generic drugs continued. Although exports and diagnostic agents underperformed the same period of the previous fiscal year, sales of active pharmaceutical ingredients and contract production for the Japanese domestic market outperformed the same period of the previous fiscal year. Segment profit totaled 3,947 million yen, an increase of 991 million yen (33.5%) year-on-year. [Safety Systems Business] Sales stood at 36,182 million yen, an increase of 797 million yen (2.3%) year-on-year. Business in Japan outperformed the same period of the previous fiscal year due to firm sales of both airbag inflators and micro gas generators for seatbelt pretensioners. The overseas business overall saw sales decline from the same period of the previous year as the deceleration of Chinese market growth caused sales of air bag inflators and squibs to underperform year-on-year. While sales of micro gas generators for seatbelt pretensioners outperformed the same period of the previous fiscal year due to the increase in the automotive safety component installation rate, this did not compensate for the above decline. Nippon Kayaku Co., Ltd.
Summary of Consolidated Financial Results [Japanese GAAP] For the Third Quarter of the Fiscal Year Ending March 31, 2020
I. First three quarters of the fiscal year ended March 31, 2019 (April 1, 2018– December 31, 2018)
2. Information concerning impairment losses on non-current assets, goodwill, etc. by reportable segment (Material change in the amount of goodwill) The business combination with RaySpec Limited which was implemented on December 26, 2017, was subject to provisional accounting in fiscal year ended March 31, 2018 and confirmed during the previous consolidated fiscal year. This has resulted in a decrease in the amount of goodwill in the functional chemicals business segment. (Business Combinations, etc.) (Regarding the Acquisition of Shares via Tender Offer and the Demand for the Sale of Shares) Nippon Kayaku decided to acquire the consolidated subsidiary POLATECHNO CO., LTD. (hereafter, "Polatechno") via tender offer (hereafter, "this tender offer"), based on the Financial Instruments & Exchange Act. The resolution was approved at the Board of Directors meeting held on August 27, 2019.
This tender offer was executed and the acquisition was completed on October 10, 2019. A Demand for the Sale of Shares was subsequently exercised based on Article 179, Paragraph 1 of the Companies Act, and Nippon Kayaku made Polatechno a wholly owned subsidiary on November 12, 2019.
1. Summary of Business Combination (1) Name and business description of the business to be combined Name of company: POLATECHNO CO., LTD. Business description: Manufacture and sale of components for LCD displays, components for LCD projectors, etc.
(2) Dates of business combination Acquisition via tender offer: October 18, 2019 (deemed acquisition date: October 1, 2019) Acquisition via the Demand for the Sale of Shares: November 12, 2019 (deemed acquisition date: October 1, 2019)
(3) Legal form of business combination Acquisition of shares for cash
(4) Name of company after combination No change.
(5) Percentage of subsidiary shares held after additional acquisition: Percentage of shares held prior to business combination: 66.45% Percentage of shares held after tender offer: 99.20% Percentage of shares held after the Demand for the Sale of Shares: 100.00% 2.
Breakdown of the cost of acquiring additional shares of the subsidiary and type of payment (including the shares Nippon Kayaku intends to acquire via the Demand for the Sale of Shares) Acquisition for cash: 13,808 million yen Acquisition cost: 13,808 million yen 3.
Overview of Accounting Method Implemented These transactions qualify as transactions under common control specified in the Revised Accounting Standard for Business Combinations (ASBJ Statement No.21, September 13, 2013) and Revised Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures (ASBJ Guidance No.10, September 13, 2013) and Nippon Kayaku is handling these as transactions under common control.