Masakazu Shimooka, Makoto Iida, and Chuichi Arakawa The University of Tokyo
Current Management Priority Issues and Business Strategy€¦ · Masakazu Tokura. President....
Transcript of Current Management Priority Issues and Business Strategy€¦ · Masakazu Tokura. President....
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Contents
Current Management Priority Issues
Business Strategy
1. Current Situation2. Enhance Financial Strength3. Develop New Businesses4. Promote Globally Integrated Management
1. Bulk Chemicals Business2. Information and Communication Technology Related Business3. Life Sciences Business
Outline of the Next Corporate Business Plan1. Management Priority Issues of the Next Corporate Business Plan2. Business Restructuring
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Outlook of Performance1. Outlook for FY2012 4
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Shareholder Return1. Dividend Policy 62
Ⅴ
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Current Management Priority Issues
Business Strategy
1. Current Situation2. Enhance Financial Strength3. Develop New Businesses4. Promote Globally Integrated Management
1. Bulk Chemicals Business2. Information and Communication Technology Related Business3. Life Sciences Business
Outline of the Next Corporate Business Plan1. Management Priority Issues of the Next Corporate Business Plan2. Business Restructuring
Ⅱ
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42
5859
Outlook of Performance1. Outlook for FY2012 4
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Shareholder Return1. Dividend Policy 62
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Outlook for FY2012
Naphtha Price ¥54,900/kl ¥55,000/kl
Exchange Rate ¥79.08/US$ ¥80.00/US$
FY2011 FY2012 (Forecast) Change
Sales 1,947.9 2,020.0 +72.1
Operating Income 60.7 65.0 +4.3Equity in Earnings of Affiliates 2.0 12.0 +10.0
Ordinary Income 50.7 62.0 +11.3
Net Income 5.6 10.0 +4.4
(Billions of yen)
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Current Management Priority Issues1. Current Situation2. Enhance Financial Strength3. Develop New Businesses4. Promote Globally Integrated Management
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Outlook of Performance1. Outlook for FY2012 4
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Business Strategy1. Bulk Chemicals Business2. Information and Communication Technology Related Business3. Life Sciences Business
Outline of the Next Corporate Business Plan1. Management Priority Issues of the Next Corporate Business Plan2. Business Restructuring
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5859
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Shareholder Return1. Dividend Policy 62
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Current Management Priority Issues
Last 10 Years 2 to 3 Years Next 10 to 20 Years
20112001
Pave the way for future growth
Establishedand expanded
IT-related Chemicals
Sector
Launched DSP,Acquired Sepracor
RabighProject
Develop New Businesses
Environment and
Energy
Life Sciences ICT
Globalization Promote globally integrated management
2020~30
(Tackle Three Management Priority Issues)
Improve profitability
Enhance financial strength
Rigorously select investments
Improve asset efficiency
7
Current Situation
Last 10 Years 2 to 3 Years Next 10 to 20 Years
20112001
Pave the way for future growth
Establishedand expanded
IT-related Chemicals
Sector
Launched DSP,Acquired Sepracor
RabighProject
Develop New Businesses
Environment and
Energy
Life Sciences ICT
Globalization Promote globally integrated management
2020~30
(Tackle Three Management Priority Issues)
Improve profitability
Enhance financial strength
Rigorously select investments
Improve asset efficiency
8
Current Situation (Results of Major Projects)
Priority Issues
Major Projects
Investment
Results:Sales increase
FY2000 vs FY2010
Strengthen fundamentals of petrochemicals
business
Implementation of Rabigh Project
Approx. ¥166.0 bn
Petrochemicals & Plastics Sector
(¥375.5 bn →
¥649.9 bn)Approx. 1.7 times
Gain critical mass in pharma business to
achieve strong growth
Launch of Dainippon Sumitomo Pharma
Acquisition of Sepracor (Sunovion) in
US
Approx. ¥219.0 bn
Pharmaceuticals Sector
(¥156.7 bn →
¥365.9 bn)Approx. 2.3 times
Develop new core business
Establishment and expansion of
IT-related Chemicals Sector
Approx. ¥355.0 bn
IT-related Chemicals Sector
(¥60.2 bn →
¥322.3 bn)Approx. 5.4 times
(equity investment and lending)
Total project cost $10.1 bn
(increased shareholding and acquisition)
(cumulative capital expenditures
in 10 years since inception)
9
Current Situation (Trends in Performance)
Sales, Ordinary Income, Net Income
1,897 1,982 1,948 2,020
1,621
1,1111,0181,158
1,296
1,5571,790 1,788
10
35
62
6
63
9491
-59
6530 31
34 15 24
-33
67 6866
158141
12493
8461
-1,000
-500
0
500
1,000
1,500
2,000
2,500
-100
-50
0
50
100
150
200
250
Sales (left axis) Net Income/Loss (right axis) Ordinary Income/Loss (right axis)
2002 2003 2005 200720062001 2009 2010 FY2012 (Forecast)
(Billions of yen) (Billions of yen)
US financial crisis European debt crisis
2004 2008 2011
10
Current Situation (Trends in Financial Ratios)
487
9981,040 1,053 1,070
579
471485
485
641674
795
32% 30% 33% 35% 33% 34% 33%27% 24% 22% 21%
1.461.37
0.670.620.61
1.21
1.03
0.700.80
0.900.92
0
0.3
0.6
0.9
1.2
1.5
1.8
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120
200
400
600
800
1,000
1,200
Equity investment and lending for Rabigh ProjectInterest-bearing liabilities (right axis)Shareholders' equity ratioDebt equity ratio (left-axis)
(Billions of yen)(Times)
(Forecast)
US financial crisis European debt crisis
FY
11
Enhance Financial Strength
2 to 3 Years Next 10 to 20 Years
20112001
Develop New Businesses
Environment and
Energy
Life Sciences ICT
Promote globally integrated management
2020~30
Establishedand expanded
IT-related Chemicals
Sector
Launched DSP,Acquired Sepracor
RabighProject
Globalization
Improve profitability
Rigorously select investments
Improve asset efficiencyImprove asset efficiency
Last 10 Years
Pave the way for future growth(Tackle Three Management Priority Issues)
Enhance financial strength
12
Enhance Financial Strength
Improve profitability
Enhance Financial Strength
Rigorously select investments
Improve asset efficiency
Quickly maximize returns on major projects
Restructure/exit unprofitable businesses
Drastically reduce overhead costs
Minimize sensitivity of earnings to currency fluctuations
Keep investment cash flows within the range of operating cash flows
Reduce cash conversion cycle
Secure greater strategic freedom to aggressively pursue growth opportunities
Target: Reduce interest-bearing debt balance to below ¥900.0 billion by the end of FY2015
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13
1514
0
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10
15
20
FY2013 FY2014 FY2015
Enhance Financial Strength (Improve Profitability: Drastically Reduce Overhead Cost)
Streamline research activities (Increase per-person productivity)Improve the efficiency of service functions (Promote the use of shared services and the outsourcing of administrative functions)
Corporate overhead cost (incl. research cost) has increased to support the
globalization of our operations(Billions of yen)
Cut overhead cost by 15 billion yen by FY2015
Target for Corporate Overhead Cost Reduction
Improve overall operational efficiency
14
0
1
2
3
4
End ofFY2012
(Forecast)
End ofFY2010
End ofFY2011
(Billions of yen)
Enhance Financial Strength (Improve Profitability: Minimize Sensitivity to Currency Fluctuations)
Foreign Exchange Sensitivity(Change in operating income per one yen change in the exchange rate of the yen against $US)
High volatility in financial performance due to sharp currency fluctuations
(Appreciation of the yen)
Expand overseas production
Better balance foreign currency- denominated payables and receivables (e.g., by increasing US$-denominated purchase of raw materials for products sold in US$, such as polarizer film)
Halve sensitivity of operating income to currency fluctuations
from over 4 billion yen to over 2 billion yen per year for each one-yen change in
the exchange rate of the yen against US$
15
Investment Cash Flow
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200
300
400
500
600
700
FY2003 -FY2005
FY2004 -FY2006
FY2007 -FY2009
FY2010 -FY2012
FY2013 -FY2015
(billons of yen)
Enhance Financial Strength (Rigorously Select Investments)
(Forecast) (Target)
Rigorously Select Investments
Restrict the amount of investments decided FY2012 to FY2014
to 400 billion yen (incl. the investment of 130 billion yen
in major projects already decided)
Limit investment cash flow for FY2013 to FY2015
to below 400 billion yen
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Enhance Financial Strength (Improve Asset Efficiency: Reduce Cash Conversion Cycle)
Target
Shorten accounts receivable terms
Reduce and optimize inventory levels
Extend accounts payable terms
Our initiatives
Cash Conversion Cycle (CCC) = accounts receivable turnover + inventory turnover - accounts payable turnover
Sumitomo Chemical’s CCC
Estimated total cash flow improvement between FY2011 and FY2015 through
these CCC reduction initiatives
87106
92 9584
69
7356
7656
7357 77
58
8061
5540
84104
126108 114
102
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20
40
60
80
100
120
140
160
180
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FY2008 FY2009 FY2010 FY2011 FY2015 (Target)
Inventory CCCAccounts receivable Accounts payable
(Days)
130 billion yen
Reduce CCC by 25% from FY2010 level by FY2015
FY2012 (Forecast)
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Develop New Businesses
Last 10 Years 2 to 3 Years Next 10 to 20 Years
20112001
Pave the way for future growth
Establishedand expanded
IT-related Chemicals
Sector
Launched DSP,Acquired Sepracor
RabighProject
Develop New Businesses
Environment and
Energy
Life Sciences ICT
Globalization Promote globally integrated management
2020~30
(Tackle Three Management Priority Issues)
Improve profitability
Enhance financial strength
Rigorously select investments
Improve asset efficiency
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Contribute to the sustainable development of society
Develop new businesses by providing products that help solve global challenges
Develop New Businesses (Creative Hybrid Chemistry)
Environment and
Energy
High- precision
processing
Design of functional organic
chemicals and polymers
Design of functional inorganic materials
Device design
Analysis of bio-
mechanisms
Catalyst design
Life Sciences
Information and
Communication Technology
Combine and leverage six core technologies
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Commercialization Timeline (Environment & Energy and ICT)
EnergyGeneration
Energy Storage
EnergySaving
EnergyManagement
Commercialization Timeline2011 2015 2020-
Lithium-ion secondary batteries (separators)
Lithium-ion secondarybatteries (cathode materials)
Silicon solar cells(HEVA, electrode paste, etc.)
Organic thin-film photovoltaicsUltra-high-efficiency photovoltaic(epitaxial wafer)
LED lighting applications (sapphire substrates and alumina, etc.)
PLED lighting
Power semiconductors (epitaxial wafers)
High thermal conductive resin
Environment CO2 separationDiesel particulate filters
ICT Next generation polarizing filmsPLED (displays)
Organic semiconductors
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Develop New Core Business (CO2 Separation Business)
Target market
Features of CO2 separation technology using CO2 selective membrane
①Low energy consumption②Simple separation process③Small-scale equipment④Flexibility of equipment capacity⑤Smaller investment than chemical
absorption method
Overview of New Company
The carbon capture and storage (CCS) market is expected to grow from 2020 onward, due to regulation for reducing CO2 emission sources.The new company will initially work to foster business in the existing market segments of hydrogen production and natural gas refining, with the aim of building a foundation for future business expansion in the CCS market.
・Business: CO2 separation using CO2 selective membrane
・Capital: 800 million yen・Shareholders:
Sumitomo Chemical 47.5%Sumitomo Corp. 47.5%Renaissance Energy Research 5.0%
0
500
1,000
1,500
2,000
2,500
3,000
2011 2016 2021 2031CTLCCS for blast furnance gas, othersCCS for power plantsNatural gasHydrogen production
(Million tons of CO2) Market forecast by application
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Promote Globally Integrated Management
Last 10 Years 2 to 3 Years Next 10 to 20 Years
20112001
Pave the way for future growth
Establishedand expanded
IT-related Chemicals
Sector
Launched DSP,Acquired Sepracor
RabighProject
Develop New Businesses
Environment and
Energy
Life Sciences ICT
Globalization Promote globally integrated management
2020~30
(Tackle Three Management Priority Issues)
Improve profitability
Enhance financial strength
Rigorously select investments
Improve asset efficiency
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Globally Integrated Management
Promote Globally Integrated Management
What is globalization in the true sense?
Optimize across national borders the functions in each business—from R&D to manufacturing to marketing, sales and logistics—
in terms of cost, technology and business environment
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Promote Globally Integrated Management (Trends in Sales Outside of Japan)
0
200
400
600
800
1,000
1,200
1,400
FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY20120.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0Asia North AmericaEurope Middle East and AfricaCentral and South America Oceania and OthersPercentage of Sales Outside of Japan
Started production of Rabigh complex; Acquired Sepracor
Decided to implement Rabigh Project; Completed the 2nd phase expansion of MMA in Singapore
Started production of polarizing film in Taiwan
Started production of polarizing film in South Korea Acquired CDT
Completed the 3rd phase expansion of MMA in Singapore
Formed comprehensive business tie-up with Nufarm and made strategic investment in the company
Percentage of overseas production in FY2011: 40%(Billions of yen) (%)
(Forecast)
24
Promote Globally Integrated Management (Sales outside of Japan)
Exchange Rate ¥124.98/US$ ¥79.08/US$
Percentage of Sales Outside of Japan 28% 52%
FY2001 (Billons of yen)
FY2012 (Billions of yen)
Change2012/2001
Sales in Japan 731.2 938.9 128%
Sales outside of Japan 287.2 1,009.0 351%
Global Sales 1,018.4 1,947.9 191%
* Percentage of overseas production: 40% Percentage of employees oversees: 39%
*
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Promote Globally Integrated Management
IT-related ChemicalsKorea Built a touch sensor panel production facility Built a sapphire substrate production facilityChina Establishing supply chains
Basic ChemicalsSingapore Increased methyl methacrylate production capacityPoland Building DPF production facilities
PharmaceuticalsUS Launched LATUDA Acquired BBI and ElevationEurope License agreement with Takeda Pharmaceuticals for the joint development and exclusive commercialization of lurasidone
Singapore Building a S-SBR production plantSaudi Arabia Rabigh Phase II project
Petrochemicals and Plastics
Overseas
Production
FY201140%
Health & Crop ScienceAustralia Comprehensive business alliance with NufarmUS Collaboration with Monsanto
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Current Management Priority Issues
Business Strategy
1. Current Situation2. Enhance Financial Strength3. Develop New Businesses4. Promote Globally Integrated Management
1. Bulk Chemicals Business2. Information and Communication Technology Related Business3. Life Sciences Business
Outline of the Next Corporate Business Plan1. Management Priority Issues of the Next Corporate Business Plan2. Business Restructuring
Ⅱ
7111721
2634
42
5859
Outlook of Performance1. Outlook for FY2012 4
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Ⅲ
Ⅳ
Shareholder Return1. Dividend Policy 62
Ⅴ
27
Bulk Chemicals Business
Customers shifting operations to the outside of Japan
Appreciation of the yen
High-cost feedstock (naphtha) and utility (electricity)
Increase in import of low-priced products
New plans for shale gas-based petrochemicals projects in North America
Current state of petrochemical business in Japan
Enhancing overseas operations is essential for the survival and
growth of our petrochemical business
Sumitomo Chemical has been actively expanding business outside of Japan since 1980s
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Globalized operations capitalizing on distinctive competitive advantage of each operation base
Bulk Chemicals Business
SingaporeDeliver high value added products, meeting the needs of key customers in Asian markets
JapanDevelop new technologies, products and know-how and roll them out globally, playing the role as “mother plant,” “mother laboratory”
Saudi ArabiaProduce cost competitive products, taking advantage of low-cost feedstocks and fuels
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Bulk Chemicals Business (Rabigh Phase I Project)
March 2006 Started construction
April 2009 Began operation of ethane cracker
November 2009 Held the Inauguration Ceremony
April 2012 Completion guarantee under the project financing agreements lifted
March 2006 Started construction
April 2009 Began operation of ethane cracker
November 2009 Held the Inauguration Ceremony
April 2012 Completion guarantee under the project financing agreements lifted
Integrated oil refining and petrochemical complex
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2010 2011 2012 1Q
2012 2Q
2012 3Q
Sales
Refined products 10,416 12,071 3,663 3,290 3,606
Petro- chemicals 2,074 2,163 604 669 528
Operating Income -30 27 40 -17 123
Net Income 56 18 31 -28 109
(US$ millions)
Bulk Chemicals Business (Rabigh Phase I Project)
Performance of Rabigh Phase I
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Bulk Chemicals Business (Rabigh Phase II Project)
1. Investment Approx. US$ 7 billion
2. Feedstock Ethane (approx. 400,000 tons/year) Naphtha (approx. 3 million tons/year)
3. Products Ethylene propylene rubber (EPDM); thermoplastic polyolefin (TPO); methyl methacrylate (MMA) monomer; methyl methacrylate (MMA) polymer; low-density polyethylene/ ethylene vinyl acetate (LDPE/ EVA); para-xylene/benzene; cumene; phenol/ acetone
4. Start of operations
First half of 2016
5. Products under consideration
Acrylic acid; superabsorbent polymer (SAP); caprolactam; nylon-6; polyols
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Bulk Chemicals Business (Rabigh Phase II Project)
Low‐cost ethane as feedstock
Use of existing infrastructure of Rabigh I Project
State-of-the-art facilities
Strong partnership with Saudi Aramco
Purposes of the Project
Advantages of the Project
123
4
Expand product line
Enhance the value added
Take full advantage of the proximity to growing Middle East and North African markets
1
23
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Bulk Chemicals Business
0%
20%
40%
60%
80%
100%
Present After Rabigh II Project startup
Saudi Arabia Singapore Japan
Petrochemicals production capacity by area
34
Current Management Priority Issues
Business Strategy
1. Current Situation2. Enhance Financial Strength3. Develop New Businesses4. Promote Globally Integrated Management
1. Bulk Chemicals Business2. Information and Communication Technology Related Business3. Life Sciences Business
Outline of the Next Corporate Business Plan1. Management Priority Issues of the Next Corporate Business Plan2. Business Restructuring
Ⅱ
7111721
2634
42
5859
Outlook of Performance1. Outlook for FY2012 4
Ⅰ
Ⅲ
Ⅳ
Shareholder Return1. Dividend Policy 62
Ⅴ
35
LCD materials
Electronic materials
Semiconductor materials
Compound semiconductor materials
Battery materials
ICT Related Business
Color filters
Touchscreenpanels
Polarizing film
Retardation film
Anti-glare & anti-reflection film
Light control film
Light-guiding panels
Light-diffusion panels
LCP cast film
Gallium arsenideepitaxial wafers
Process chemicalsEtchantsAluminum/copper
targets
PhotoresistsTransparent resistColor resists for
color filters
Sapphire substratesLiquid crystal polymer (LCP)Polyethersulfone
CleansersPhotoresists for
micromachining
High-purity galliumMetal organicsAluminum targets
Cathode materials
Base materials
Components
Raw materials
Heat-resistant separators
36
80132
181247
308
634 673
1,260
907
1,113
0
200
400
600
800
1,000
1,200
1,400
CY2011 CY2012 CY2013 CY2014 CY2015
Tablet PCs Smartphones
210227
246263
275
0
50
100
150
200
250
300
CY2011 CY2012 CY2013 CY2014 CY2015
ICT Related Business
(Source:Display Search 2012.07)
Average annual growth rate : 7%
(million units) (million units)
Liquid Crystal Display TV Market
Tablet PC and Smartphone Market
Average annual growth rate :Tablet PCs 41%Smartphones 19%
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ICT Related Business (Polarizing Film)
Large-sizedpolarizing film for LCD TVs
Small- and medium-sized polarizing film for
smartphones and tablet PCs
Demand trends Stable growth Rapid growth
Customer needs Large film size and low price High performance (light; thin; sturdy; wide viewing angle)
Requirements for polarizing film makers
Capability to reduce cost(economies of scale and technology development)
Capability to develop high performance products
StrategyEnhance production speed
Develop cost competitive new materials
Accelerate technology development
偏光板メーカーで生き残れるのは2~3社Only 3 or 4 polarizing film makers can survive
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ICT Related Business (Touch-screen Panel)
Touch sensor(our product)
Touch module
Touch panel
Cover glassPattern printing Optical adhesive
Wiring
BondingDouble sided adhesive LCD panel/OLED panel
Touch sensor(our product)
Demand for the touch-screen panel, used in smart phones and tablet PCs, has been growing rapidly in recent years.
Expected to be widely employed in a variety of applications in the future, such as digital blackboards and car navigation system displays.
0
200
400
600
800
1,000
1,200
1,400
2011 2012 2013 2014 2015
Tablet PCsSmartphones
(million units)
(Source: Display Search 2012.07)
Touch-screen panel Touch-screen Panel Demand by Applications
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ICT Related Business (Polymer Organic Light Emitting Diodes)
Progress on commercialization of Polymer Organic Light Emitting Diodes (PLEDs) for display panels
Challenges and market
Further improvement of the performance of light-emitting materials (luminous efficiency) We are developing materials with higher luminous efficiency to meet demand for lower power consumption displays.
PLED television market We expect the PLED television market to take off in 2015.
Performance of light-emitting materials (red, green, blue) Our light-emitting materials for PLED televisions have achieved initial performance targets.
Mass production plant for light-emitting materials A newly constructed mass production plant for light-emitting materials at Sumitomo Chemical’s Osaka Works started supplying samples this autumn.
Technology to mass-produce light-emitting materials Mass production technology was established for the above materials.
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ICT Related Business (PLED lighting)
Flexible PLED lights
Next-generation lighting technology that offers new value to society
Next-generation lighting technology that offers new value to society
Development Plan
Plastic substrate
Glass substrate
Designlighting
General lighting
30
20
10
0
80
60
40
20
0
PLED lights in 60 colors
Efficacy[Im/W]
Lifetime[thousands of hours]
FY2012 FY2013 FY2014 FY2015
41
ICT Related Business (PLEDs)
PLED materials
for displays
Organic semiconductors
PLED lighting Organic
photovoltaics
Applications in Printed ElectronicsApplications in Printed Electronics
42
Current Management Priority Issues
Business Strategy
1. Current Situation2. Enhance Financial Strength3. Develop New Businesses4. Promote Globally Integrated Management
1. Bulk Chemicals Business2. Information and Communication Technology Related Business3. Life Sciences Business
Outline of the Next Corporate Business Plan1. Management Priority Issues of the Next Corporate Business Plan2. Business Restructuring
Ⅱ
7111721
2634
42
5859
Outlook of Performance1. Outlook for FY2012 4
Ⅰ
Ⅲ
Ⅳ
Shareholder Return1. Dividend Policy 62
Ⅴ
43
Life Sciences (Health & Crop Sciences)
Expand business globally
Establish highly profitable core business
Ensure compliance and maintain safe operations
Environment Improvement of Quality
of Life and the Environment
Sumitomo ChemicalR&D
Food Increase Food ProductionSustainable AgricultureSafer Produce
HealthEnsuring Public Health
and Hygiene
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Provide farmers in Japan with a variety of agricultural supplies and services as a total solution provider
Sumika Chemical Analysis Service,Sumitomo Chemical
Sumika Agrotech
Nihon Ecoagro,Sumitomo ChemicalSumika Chemical
Analysis Service
Nihon Ecoagro
SanTerra,Sumika Agrotech
Sumika Agrotech,Nihon Ecoagro
Soilpreparation
Seeds/seedlings
CultivationHarvest
Sales
Greenhouse/ farmland
Cultivationsystem
Life Sciences (Health & Crop Sciences)
TSP Total Solution Provider
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Sumika Farm Nagano (Strawberries)
Sumika Farm Oita (Tomatoes)
Sumika Farm Mie (Mitsuba)
Sunrise Farm Saijo (Lettuce etc.)
Sumika Farm Yamagata (Tomatoes, Strawberries)
Farming Corporation: Sumika Farm
Life Sciences (Health & Crop Sciences)
46
Sumitomo Chemical’s globalized operations in Health & Crop Sciences Business
Sales bases: 33
Plants: 5
Research laboratories: 8
Life Sciences (Health & Crop Sciences)
Countries in which Sumitomo Chemical has formed sales alliance with Nufarm
19 countries (as of July 2012)
47
SumitomoChemical
(Valent U.S.A.)MonsantoStarted collaboration to
seek synergies
Selective soybean herbicides business
Seeds and non-selective herbicides business
Expand sales of Flumioxazin
Doubled production capacity for active ingredient of selective
herbicides for soybeans
SumitomoChemical
(Oita plant)
Growing demand due to an increase in
soybean acreage
FlumioxazinSumitomo Chemical’s herbicide for soybeans, cotton, fruit trees, and sugarcane.
Effective against glyphosate-resistant weeds and difficult-to-control weeds
October 2010
August 2012
Supply active ingredient
Life Sciences (Health & Crop Sciences)
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Expand sales of Clothianidin
The AmericasFocus on
seed treatment
EuropeFocus on
granule treatment
Agricultural insecticide “Clothianidin” is highly effective for soil insect pests Seed treatment or granule treatment can be
selected depending on local needs and trends
In the Americas, demand for seed treatment
is increasing due to high growth of the seed
business.
In Europe, granule treatmentby soil mixing is the most
popular application.
Seed treatment
Granule treatment
Life Sciences (Health & Crop Sciences)
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SeedsSeed
treatment
In-seasonPest controlFertilization
Postharvest
Seeds• Sunflower• Rapeseed• Sorghum
Agricultural chemicals• Insecticide, fungicide, herbicide
Bio-rational• Microbial pesticide• Plant growth regulator
Fertilizer• Coating fertilizer
Formulation technology• Microcapsule
Products• Fungicide• Preservative• Coating agent• Plant growth regulator
Services• Postharvest treatment• Pre-shipment treatment• Residue analysis
Life Sciences (Health & Crop Sciences)
① Expand business domain② Increase presence in market by differentiation from multinational competitors③ Strengthen downstream businesses ④ Seek synergies among seeds, seed treatment, in-season, pest control and
fertilization businesses
Agricultural chemicals• Insecticide, fungicide
Formulation and application technology
• Insecticide and plant growth regulator for seed treatment
• Seed treatment technology
Strategic entry into postharvest business
50
Agricultural Insecticide1 AI (spinetoram)
Agricultural Fungicide2 AIs (isotianil,
fenpyrazamine)Agricultural Herbicide1 AI (propyrisulfuron)
Agricultural Fungicide1 AI
Plant Growth Regulator 1 AI
Household Insecticide1 AI
Animal Health Product 1 AI
Life Sciences (Health & Crop Sciences)
Agricultural Insecticide2 AIs
Agricultural Fungicide2 AIs
Agricultural Herbicide4 AIs
Household Insecticide1 AI
Sumitomo Chemical
Year oflaunch
Product pipeline of new crop protection chemicals
(Note) AI: Active Ingredient
Product launch by multinational crop protection chemical companies
(Source) Estimated by Sumitomo Chemical based on public source
CY2016 -CY2013 –CY2015CY2010 –
CY2012
Sumitomo Chemical
Company A
Company B
Company C
Company D
Company E
4 AIs 2 AIs 5 AIs 1 AI None 1 AIs
51
Established its own sales network in US
Expands sales in the CNS area in North AmericaLaunched LATUDA®
Enriched product pipelinein the oncology area byacquiring BBI and in the respiratory area by acquiring Elevation
Expansion of Overseas Operations (Focusing on North America)
2009 DSP Acquired Sepracor (now Sunovion Pharmaceuticals)2011 Launched atypical antipsychotic LATUDA®
2012 DSP Acquired BBISunovion Acquired Elevation Pharmaceuticals
2013 Approval of LATUDA®’s new indication as treatment for bipolar disorder expected
Life Sciences (Pharmaceuticals)
52
DSP Cancer InstituteGlobal Oncology Office (Osaka)
DSP Cancer InstituteGlobal Oncology Office (Osaka)
Location ofR&D bases
Cambridge
Global Oncology R&D Center*R&D organization
Research:Osaka Development:Osaka, Tokyo
Global Oncology Business Development Office, DSP Cancer Institute (under direct control of president)
North AmericaJapan
Global Oncology Office (Tokyo)
Global Oncology Office (Tokyo)
Globalizing R&D activities in the oncology area- U.S. subsidiary BOSTON BIOMEDICAL as global oncology R&D center -
* To be established in FY2012 and employ 100 staff by the end of 2013.
Life Sciences (Pharmaceuticals)
53
Mechanisms of Action of BBI608 and BBI503
Treatment by chemotherapy
Recurrence
Metastasis
Existing therapies cannot control the “red cells” or CSC
so that CSC tumorigenicity (self-renewal activity), recurrence or
metastasis takes place.
Existing therapies cannot control the “red cells” or CSC
so that CSC tumorigenicity (self-renewal activity), recurrence or
metastasis takes place.
Cancer stem cells (CSC) surviveand develop chemotherapy resistance
Drugs targeting cancer stem cells are expected to offer significant advances over current therapies
Treatment by anti-cancerstem cell drugs
BBI-608 and BBI-503
Life Sciences (Pharmaceuticals)
54
Life Sciences (R&D)
Genomic Science Laboratory
Sumitom
o Chem
icalD
ainippon Sum
itomo Pharm
a
Environmental Health
Science Laboratory
Health & Crop Sciences
Research Laboratory
Sumika Chemical Analysis Service
Organic SynthesisResearch Laboratory
Safety ResearchLaboratories
Pharmacokinetics Research
Laboratories
Pharmacology Research
Laboratories
Chemistry Research
Laboratories
Conduct R&D of cutting-edge genomics-based technologies and apply them to the discovery and development of new
pharmaceuticals and agricultural chemicals
iPS/ES cells High-throughputscreening
Omics In silico drug discovery
Protein structure analysis
• Development of agricultural chemicals
• Safety assessment research
• ES cell technology
Drug discovery research
55
Joint research with Dr. Sasai at the Riken Center for Developmental Biology
Enabling more accurate prediction of the effects of chemical substances on humans
Opening the way to regenerative treatment for retinitis pigmentosa and other diseases
Self-organized retinal tissue from human embryonic cells
Life Sciences (R&D)
• Succeeded in forming embryonic-type optic cups by self-organization in human ES cell culture
• Succeeded in forming multilayered retinal tissues containing visual cells and ganglion cells
• Developed a method for cryopreservation of retinal tissues developed from human ES cells, an important step toward clinical application
Retinal tissue of human ES cell origin
56
• Conducting joint research with Kyoto University’s Center for iPS Cell Research and Application (CiRA) for discovering treatments for rare intractable diseases
• Conducting joint research with Johns Hopkins University and Keio University using state-of-the-art cell technologies
DSP works on drug discovery and regenerative medicine using state-of-the-art cell technologies,
including iPS cell technology
iPS cell
Life Sciences (R&D)
57
Current Management Priority Issues
Business Strategy
1. Current Situation2. Enhance Financial Strength3. Develop New Businesses4. Promote Globally Integrated Management
1. Bulk Chemicals Business2. Information and Communication Technology Related Business3. Life Sciences Business
Outline of the Next Corporate Business Plan1. Management Priority Issues of the Next Corporate Business Plan2. Business Restructuring
Ⅱ
7111721
2634
42
5859
Outlook of Performance1. Outlook for FY2012 4
Ⅰ
Ⅲ
Ⅳ
Shareholder Return1. Dividend Policy 62
Ⅴ
58
Management Priority Issues of the Next Corporate Business Plan
Promote Globally Integrated Management
Develop New Businesses
Restructure Businesses
Enhance Compliance
Enhance Financial Strength
1
2
3
4
5
Five Management Priority Issues
59
Bold reform of business portfolio in each business sector
Restructuring
Implement measures and action plans to achieve the expected returns from major strategic projectsDrastically restructure underperforming and unprofitable businesses and make substantial reductions in production costsFocus investments and human resources on new businesses and on businesses with high asset returns
Outline of business restructuring under Corporate Business Plan for FY2013 to FY2015
Evaluation of business portfolio
60
Restructuring (Framework of Business Portfolio Management)
Financial evaluation
Strategy evaluation
Financial track records
① Position in industry (Top priority)
② Demand growth rate
③ Technological strength
④ Marketing capabilities
⑤ Cost competitiveness
+
Evaluate and focus on core businesses and core competitive advantages
Business evaluation
Financial evaluation(ROI/EVA)
Weak Strong
ⅣⅡ
Ⅴ Ⅴ
Ⅰ
Strategy evaluation
Category Ⅰ Ⅱ Ⅲ Ⅳ Ⅴ
Strategy Grow Enhance profitability
Strengthen position Restructure Scale-
down/Exit
Action RestructureInvest
Ⅲ
Ⅰ
High
Low
Strategy and action by business category
Ⅰ
61
Current Management Priority Issues
Business Strategy
1. Current Situation2. Enhance Financial Strength3. Develop New Businesses4. Promote Globally Integrated Management
1. Bulk Chemicals Business2. Information and Communication Technology Related Business3. Life Sciences Business
Outline of the Next Corporate Business Plan1. Management Priority Issues of the Next Corporate Business Plan2. Business Restructuring
Ⅱ
7111721
2634
42
5859
Outlook of Performance1. Outlook for FY2012 4
Ⅰ
Ⅲ
Ⅳ
Shareholder Return1. Dividend Policy 62
Ⅴ
62
Dividend Policy
(Billions of yen)(Yen)
3 3 3 4 3
3 6 3
666
63 0
3 3 3
5
6
7 6
24106
-59
1530
3124
6365
9194
-4
-2
0
2
4
6
8
10
12
14
16
FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012-60
-30
0
30
60
90
120
150
180
210
Interim Dividend (left axis) Year-end Dividend (left axis) Net Income (right axis)
5
6
We consider shareholder return as one of our priority management issues and have made it a policy to maintain stable dividend payment, giving due consideration to our business performance and a dividend payout ratio for each fiscal period, the level of retained earnings necessary for future growth, and other relevant factors.
810
12 12
9
6
9 9
(Forecast)
Undecided
666
64
Cautionary Statement
Statements made in this document with respect to Sumitomo Chemical’s current
plans, estimates, strategies and beliefs that are not historical facts are forward-
looking statements about the future performance of Sumitomo Chemical. These
statements are based on management’s assumptions and beliefs in light of the
information currently available to it, and involve risks and uncertainties.
The important factors that could cause actual results to differ materially from
those discussed in the forward-looking statements include, but are not limited to,
general economic conditions in Sumitomo Chemical’s markets; demand for, and
competitive pricing pressure on, Sumitomo Chemical’s products in the
marketplace; Sumitomo Chemical’s ability to continue to win acceptance for its
products in these highly competitive markets; and movements of currency
exchange rates.