On May 14, 2020 Kuraray reported that First Quarter of the Fiscal Year Ending December 31, 2020 (Press release, Kuraray, MAY 14, 2020, https://pdf.irpocket.com/C3405/yCGV/mXhw/evng.pdf [SID1234557964])
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1. Consolidated Financial Results for the First Quarter of the Fiscal Year Ending December 31, 2020 (January 1, 2020 to March 31, 2020)
(1) Consolidated Operating Results
(2) Consolidated Financial Position
2. Dividends
3. Forecasts of Consolidated Financial Results for the Fiscal Year Ending December 31, 2020 (January 1, 2020 to December 31, 2020) Regarding the full-year forecasts of consolidated financial results, due to the difficulty of reasonably calculating the impact of COVID-19 pandemic on the Group’s results from the third quarter onward, we have temporarily withdrawn the forecasts released on February 13, 2020 and it is to be determined. We will swiftly release a forecast once calculations become possible. [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 March 31, 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 March 31, 2020 11,005,846 shares As of December 31, 2019 11,130,834 shares 3. Average number of shares for the period (cumulative): As of March 31, 2020 343,781,244 shares As of March 31, 2019 348,198,564 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 "
1. Qualitative Information regarding Business Results
(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 first quarter of fiscal 2020 (January 1, 2020–March 31, 2020), the world economy dramatically decelerated due to the serious impacts on consumption and production of the restrictions on economic activity to counter the global spread of COVID-19. Consequently, consolidated operating results for the first quarter of fiscal 2020 are as follows: net sales fell ¥4,719 million, or 3.3%, compared with the previous fiscal year to ¥136,927 million; operating income decreased ¥2,660 million, or 18.2%, to ¥11,971 million; ordinary income decreased ¥1,488 million, or 11.6%, to ¥11,306 million; and net income attributable to owners of the parent increased ¥619 million, or 10.2%, to ¥6,705 million.
The global spread of COVID-19 remains a serious issue with no end in sight regarding containment. In addition, it is expected to take a long time for economic activity to return to normal. Even amid this kind of environment, we will continue to supply needed products around the world. We realize the importance of the role that has been given to us, and we will maintain our business activities while thoroughly ensuring safety and working to prevent infection. 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 3.6% year on year to ¥63,866 million, and segment income fell 22.4% year on year to ¥8,387 million.
(1) The volume of PVA resin declined due to stagnant global demand. Due to the effect of an LCD panel inventory adjustment continuing from the second half of the previous fiscal year, shipments of optical-use poval film stayed level with the previous year. In addition, sales of PVB film remained weak, mainly for automotive applications. However, sales of water-soluble PVA film steadily expanded 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 weak due to a decline in the number of vehicles produced. Isoprene Sales in this segment decreased 3.4% year on year to ¥13,162 million, and segment income fell 16.0% year on year to ¥3,140 million.
(1) Shipments of isoprene chemicals declined, especially those to China. Sales of SEPTON thermoplastic elastomer struggled in Asia, but U.S. demand remained firm.
(2) The sales volume of GENESTAR heat-resistant polyamide resin increased due to anticipatory demand in China for electric and electronic device applications. Demand for connectors for automotive devices remained favorable. Functional Materials Sales in this segment increased 1.0% year on year to ¥30,766 million, and segment income grew 12.5% year on year to ¥1,268 million.
(1) Although the sales volume of methacrylic resins and sheets increased, the methacrylate business was affected by worsening market conditions.
(2) In the medical business, sales were steady in the first quarter due to anticipatory demand for dental materials, especially exports, but there are concerns about decelerating demand as many dental clinics have closed, mainly across the United States and Europe.
(3) As for Calgon Carbon, demand remained steady in North America, especially for drinking water applications while demand was sluggish in Europe. In the Carbon Materials business, sales of high value-added products increased. Fibers and Textiles Sales in this segment fell 12.5% year on year to ¥14,467 million while segment income decreased 18.1% year on year to ¥916 million.
(1) The sales volume of CLARINO man-made leather decreased due to stagnant 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 vehicle production. However, sales results for VECTRAN were firm.
(3) In consumer goods and materials, sales of KURAFLEX were weak as demand for cosmetic and automotive applications fell despite an increase in sales for mask-related applications. Trading In fiber-related businesses, sales of sportswear-use products remained steady, but sales of resins and chemicals targeting Japanese and Chinese markets struggled. As a result, segment sales decreased 5.1% year on year to ¥29,771 million, and segment income rose 9.9% to ¥961 million. Others In other business, due to weak sales of domestic affiliates, segment sales declined 18.0% year on year to ¥11,661 million, and segment income fell 67.2% to ¥43 million.
(2) Overview of Financial Position Total assets increased ¥1,950 million from the end of the previous fiscal year to ¥993,099 million mainly because of a ¥4,757 million increase in cash and cash deposits and a ¥4,515 million increase in inventory assets that offset a ¥3,716 million decrease in intangible fixed assets and a ¥4,204 million decrease in investment securities. Total liabilities increased ¥10,693 million to ¥463,297 million due to factors that included the issuance of commercial paper totaling ¥26,000 million and a ¥23,364 million increase in long-term loans payable, despite a ¥29,392 million decrease in accrued expenses. Net assets fell ¥8,742 million to ¥529,802 million. Equity attributable to owners of the parent amounted to ¥515,406 million, for an equity ratio of 51.9%.
(3) Basis for the Revision in Forecasts, Including Consolidated Operating Results Forecasts Due to economic restrictions to combat the global spread of COVID-19, first quarter results for all segments were weak as demand for automobiles, electronic devices, displays and other mainstay Kuraray applications stagnated. Further deterioration in demand from the second quarter is unavoidable, and we need to respond accordingly with production adjustments and other measures. We expect this to have a large impact on our operating results. Based on these circumstances, the forecast of consolidated operating results for the second quarter of fiscal 2020 (January 1, 2020 to June 30, 2020) is as shown below. Furthermore, regarding the full-year forecasts of the consolidated financial results, due to the difficulty of reasonably calculating the impact of COVID-19 pandemic on the Group’s results from the third quarter onward, we have temporarily withdrawn the forecasts released on February 13, 2020 and it is to be determined. We will swiftly release a forecast once calculations become possible. In addition, although we recorded an extraordinary loss in fiscal 2019 related to the litigation over the fire at the U.S. subsidiary in May 2018, if it is determined that we need to revise our results forecasts in the course of future negotiations, we will make a swift announcement.