On August 12, 2020 Kuraray reported Business Results for the Second Quarter of the Fiscal Year Ending December 31, 2020 (Press release, Kuraray, AUG 12, 2020, https://pdf.irpocket.com/C3405/PLDE/Hf1v/r28N.pdf [SID1234563464])
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1. Consolidated Financial Results for the Second Quarter of the Fiscal Year Ending December 31, 2020 (January 1, 2020 to June 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 Position
2. Dividends
1. Qualitative Information regarding Business Results
(1) Overview of Consolidated Business Results
In the second quarter of fiscal 2020 (January 1, 2020–June 30, 2020), the world economy saw a much clearer retraction as efforts to contain the spread of COVID-19 have failed to gain traction. 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 second quarter of fiscal 2020 are as follows: net sales fell ¥25,412 million, or 8.8%, compared with the previous fiscal year to ¥262,006 million; operating income decreased ¥8,310 million, or 29.8%, to ¥19,611 million; ordinary income decreased ¥7,047 million,
or 28.5%, to ¥17,638 million; and net income attributable to owners of the parent fell ¥4,093 million, or 30.9%, to ¥9,160 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 9.6% year on year to ¥121,809 million, and segment income fell 26.7% year on year to ¥16,924 million.
(1) The volume of PVA resin declined due to stagnant global demand. Although LCD panel manufacturers reduced inventory adjustments, shipments of optical-use poval film stayed level with the previous year due to effects from COVID-19 crisis. The sales of PVB film were weak 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 but sales for gas tank applications were heavily impacted by a decline in the number of vehicles produced.
Isoprene
Sales in this segment decreased 9.9% year on year to ¥24,720 million, and segment income
fell 38.6% year on year to ¥2,116 million.
(1) Sales of isoprene chemicals and SEPTON thermoplastic elastomer were affected by slowing 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 vehicle production.
Functional Materials
Sales in this segment decreased 5.5% year on year to ¥59,143 million, and segment income fell 52.4% year on year to ¥1,054 million.
(1) The overall methacrylate business was affected by worsening market conditions despite an increase in demand for spatter-blocking barrier panels.
(2) In the medical business, the dental materials business struggled, especially in the United States and Europe, as a result of an increase in dental clinic closures in response to spreading infections.
(3) As for Calgon Carbon, sales were steady even during COVID-19 crisis, this business’s products underpin people’s daily lives. In addition, in the Carbon Materials business, sales of high value-added products increased. Moreover, with expanding demand for high-performance activated carbon, we decided in this second quarter to expand the facilities at the U.S. plant of Calgon Carbon Corporation.
Fibers and Textiles
Sales in this segment fell 14.7% year on year to ¥28,224 million while segment income decreased 44.1% year on year to ¥1,656 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, the performance of KURALON for cement reinforcement use remained weak. Sales of products used in reinforcing rubber were negatively affected by a decline in the number of vehicles produced.
(3) In consumer goods and materials, sales of KURAFLEX were weak as demand for cosmetic and automotive applications stagnated despite an increase in the sales for mask-related applications.
Trading
In fiber-related businesses, sales of sewn products remained steady. However, sales of resins and chemicals were affected by lower demand in Japan and Asia. As a result, segment sales decreased 7.3% year on year to ¥60,037 million, and segment income rose 1.2% to ¥2,078 million.
Others
In other business, due to weak sales of domestic affiliates, segment sales declined 14.9% year on year to ¥22,155 million, and segment income fell 44.0% to ¥206 million.
(2) Overview of Financial Position
Total assets increased ¥92,640 million from the end of the previous fiscal year to ¥1,083,789 million mainly because of a ¥117,450 million increase in cash and cash deposits (due to an increase in liquidity undertaken in response to COVID-19 pandemic), a ¥10,686 million decrease in notes and accounts receivable—trade, and a ¥15,413 million decrease in
short-term investment securities. Total liabilities increased ¥98,903 million to ¥551,507 million due to factors that included the issuance of bonds payable totaling ¥30,000 million, a ¥36,000 million increase in commercial paper, and a ¥79,099 million increase in long-term loans payable, despite a ¥30,157 million decrease in accrued expenses.
Net assets fell ¥6,262 million to ¥532,282 million. Equity attributable to owners of the parent amounted to ¥517,189 million, for an equity ratio of 47.7%.
(3) Basis for the Revision in Forecasts, Including Consolidated Operating Results
Forecasts
The economy has receded significantly due to COVID-19 pandemic, and we assume that the effects will last into 2021 and beyond. We expect that demand will continue to stagnate for our operations in the third quarter onward accompanied by production adjustments.
The forecast of consolidated operating results for the fiscal year ending December 31, 2020 (January 1, 2020 to December 31, 2020) is as shown below.
(4) Notes regarding Quarterly Consolidated Financial Statements
1. 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 ¥6,214 million is the elimination of intersegment transactions of ¥776 million and corporate expenses of ¥6,991million. 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 ¥3,387 million in the second quarter of the fiscal year.
II. Second Quarter of Fiscal 2020 (January 1, 2020 to June 30, 2020)
1. Net sales, income and loss by reporting segment
1. The "Other Business" category incorporates operations not included in business segment eporting, including the environmental business and engineering business.
2. Adjustment is as follows: Included within segment loss of ¥4,425 million is the elimination of intersegment transactions of ¥1,044 million and corporate expenses of ¥5,470 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.