Mitsubishi Chemical : The First Quarter (Aug. 03, 2022)

August 3, 2022

Consolidated Financial Results

for the First Quarter of the Fiscal Year Ending March 31, 2023

(Under IFRS)

Company name:	Mitsubishi Chemical Group Corporation	Listing:	Tokyo Stock Exchange
Securities code:	4188	URL: https://www.mitsubishichem-hd.co.jp/english
Representative:	Jean-Marc Gilson
	Representative Corporate Executive Officer, President&Chief Executive Officer
Contact:	Osamu Shimizu			TEL: [+81] (0)3-6748-7120
	Director, Corporate Communications Div.

Scheduled date to file quarterly securities report:	August 9, 2022
Scheduled date to commence dividend payments:	－
Preparation of supplementary material on financial results:	Yes
Holding of financial results briefing:	Yes (for securities analysts and institutional investors)

(Yen amounts are rounded down to millions, unless otherwise noted.)

1. Consolidated financial results for the First Quarter of the Fiscal Year Ending March 31, 2023("FY2022") (from April 1, 2022 to June 30, 2022)

1. Results of Operations:

(Percentages indicate year-on-year changes.)

			Core	Operating			Net income	Comprehensive
	Sales Revenue	Operating	Net income	attributable to
	income	Income
			Income *			owners of the parent
Three months ended		%		%		%		%		%		%
June 30, 2022	1,106,534	19.2	72,052	(18.7)	68,004	(21.9)	53,324	(9.9)	44,879	(10.1)	149,344	65.0
June 30, 2021	928,264	28.4	88,676	490.8	87,022	266.8	59,200	619.2	49,927	865.7	90,532	323.8

Reference: Income before taxes

Three months ended June 30, 2022: ¥75,055 million((12.0)%)

Three months ended June 30, 2021: ¥85,291 million(317.9%)

* Core operating income is calculated as operating income excluding certain gains and expenses attributable to non-recurring factors.

Basic earnings

Diluted earnings

per share

per share

Three months ended

Yen

Yen

June 30, 2022

31.58

30.22

June 30, 2021

35.14

32.31

(2) Financial Position:

Ratio of equity

Total assets

Total equity

Equity attributable to

attributable to owners

owners of the parent

of parent to total

assets

As of

%

June 30, 2022

5,845,556

1,961,060

1,556,761

26.6

March 31, 2022

5,573,871

1,844,319

1,458,077

26.2

2. Cash dividends

Annual dividends per share

First quarter-

Second

Third

Fiscal

Total

end

quarter-end

quarter-end

year-end

Fiscal year ended

Yen

Yen

Yen

Yen

Yen

March 31, 2022

－

15.00

－

15.00

30.00

March 31, 2023

－

March 31, 2023

15.00

－

15.00

30.00

(Forecast)

Note:

Revisions to the forecast of cash dividends most recently announced: None

3. Forecast for the Current Fiscal Year

(Percentages indicate changes in comparison with the same period of the previous fiscal year)

			Core	Operating			Net income	Basic
	Sales Revenue	Operating	Net income	attributable to	earnings
	income
			Income			owners of the parent	per share
First Half of		%		%		%		%		%	Yen
FY2022	2,162,000	14.7	125,000	(19.9)	121,000	(21.0)	80,000	(21.5)	61,500	(27.8)	43.28
FY2022	4,436,000	11.5	275,000	1.0	277,000	(8.6)	194,000	(7.4)	153,000	(13.6)	107.66

Reference: Income before taxes

First Half of FY2022: ¥116,000 million((21.2)%), FY2022: ¥266,000 million((8.4)%)

Note:

Revisions to the forecast for the current fiscal year most recently announced: None

* Notes

(1) Changes in significant subsidiaries during the period			:	None
(changes in specified subsidiaries resulting in the change in scope of consolidation)
(2) Changes in accounting policies and changes in accounting estimates
(i) Changes in accounting policies required by IFRS	:	None
(ii) Changes in accounting policies due to other reasons	:	None
(iii) Changes in accounting estimates	:	None

(3) Number of issued shares (ordinary shares)

(i)Total number of issued shares at the end of the period (including treasury shares)

As of	1,506,288,107 Shares	As of	1,506,288,107 Shares
June 30,2022	March 31,2022
(ii)Number of treasury shares at the end of the period
As of	84,853,043 Shares	As of	85,199,844 Shares
June 30,2022	March 31,2022
(iii)Average number of shares outstanding during the period
Three months ended	1,421,314,077 Shares	Three months ended	1,420,721,525 Shares
June 30,2022	June 30,2021

*Mitsubishi Chemical Group Corporation adopted a performance-based share compensation plan that uses executive compensation Board Incentive Plan (BIP) trusts. Mitsubishi Chemical Group Corporation stocks held by BIP trust are included in treasury shares.

(Reference)

Number of Company's shares in executive compensation BIP trust:

June 30, 2022	2,833,314	Shares
March 31, 2022	2,833,314	Shares

Disclosure regarding quarterly review procedures

Financial results reports are exempt from quarterly review conducted by certified public accountants or an audit corporation.

Proper use of earnings forecasts, and other special matters

*The forward-looking statements are based largely on the Company's expectations and information available as of the date hereof, and are subject to risks and uncertainties which may be beyond the Company's control. Actual results could differ materially due to numerous factors.

*Change of Trade Name

Based on the new management policy of "Forging the future" announced in December 2021, we have been promoting the shift to a "One Company, One Team" flat organizational structure since April 1, 2022. To represent our new organizational structure, which will execute in a unified manner across the Group, we have decided to change our trade name from "Mitsubishi Chemical Holdings Corporation" to "Mitsubishi Chemical Group Corporation" on July 1, 2022.

*This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail.

Contents:

1. Qualitative Information on Financial Results for the Term
(1)	Business Performance	P.	2
(2)	Financial Position	P.	4
2. Condensed Consolidated Financial Statements
and Notes Concerning Condensed Consolidated Financial Statements
(1)	Condensed Consolidated Statement of Profit or Loss	P.	5
(2)	Condensed Consolidated Statement of Comprehensive Income	P.	6
(3)	Condensed Consolidated Statement of Financial Position	P.	7
(4)	Condensed Consolidated Statement of Changes in Equity	P.	9
(5)	Condensed Consolidated Statement of Cash Flow	P.	11
(6)	Notes to Condensed Consolidated Financial Statements	P.	13
(Segment Information)	P.	13

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1. Qualitative Information on Financial Results for the Term

1. Business Performance

Performance Overview

In the business environment of the consolidated first quarter (April 1, 2022 - June 30, 2022; same hereafter) of the Mitsubishi Chemical Group (MCG), given the return to normal socio-economic activities, the global economy overall continued to trend upward. However, due to factors such as the prolonged state of affairs in Ukraine and the impact from lockdowns in China, in addition to a continued rise in raw material and fuel prices and chaos in the supply chain, the outlook remains murky, including concern of a downturn in the economy.

Against this backdrop, sales revenue in the consolidated quarter under review (April 1, 2022 - June 30, 2022; same hereafter) increased ¥178.2 billion, or 19.2%, to ¥1,106.5 billion. In the profit front, core operating income fell ¥16.6 billion, or 18.7%, to ¥72.1 billion. Operating income was down ¥19.0 billion, or 21.9%, to ¥68.0 billion. Income before taxes decreased ¥10.2 billion, or 12.0%, to ¥75.1 billion. And net income attributable to owners of the parent dropped ¥5.0 billion, or 10.1% to ¥44.9 billion.

Overview of Business Segments

The overview of financial results by business segment for the first quarter of fiscal 2022 is shown below. Segment gains or losses are stated as core operating income, which excludes gains or losses from non-recurring factors and including losses from business withdrawals, streamlining, and other factors.

Performance Products Segment, Performance Products Domain

In comparison with the same quarter in the previous consolidated fiscal year, sales revenue increased ¥36.4 billion, to ¥319.5 billion and core operating income declined ¥5.4 billion, to ¥21.2 billion.

In polymers and compounds, sales revenue climbed as MCG was able to pass on a rise in raw material costs to selling prices and despite a fall in sales volumes mainly for products used in automobile applications.

In films and molding materials, sales revenue increased. Although there was a decline in sales in tandem with the transfer of the alumina fiber business in March 2022, there was positive impact mainly from a correction to selling prices accompanying a rise in raw material costs as well was strong trends for molding materials demand.

In advanced solutions, sales revenue grew underpinned primarily by a correction to selling prices in tandem with a rise in raw material costs and also strong demand trends in the semiconductor-related business.

Core operating income in this segment decreased year-on-year. Although there was progress made in passing on cost to selling prices, mainly due to negative impact from a rise in raw material costs, there was an increase in costs in tandem with a recovery in sales activities following COVID-19.

In this segment in the consolidated first quarter under review, the following items were implemented by or occurred at MCG.

• In China, MCG decided to boost its production capacity for newly-developedlow-swelling natural graphite anode materials from a current 2,000 tons/year to 12,000 tons/year to address brisk demand for anode materials used in lithium-ion batteries. The goal is to launch this new production capacity in the first half of fiscal 2023.

Chemicals Segment, Industrial Materials Domain

In comparison with the same quarter in the previous consolidated fiscal year, sales revenue increased ¥67.1 billion, to ¥359.0 billion and core operating income declined ¥15.9 billion, to ¥18.9 billion.

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In MMA, sales revenue expanded owing to a rise in selling prices for MMA monomer primarily in tandem with higher raw material and fuel costs, and despite a slowdown in demand in Europe and Asia.

In petrochemicals, sales revenue improved. Although sales volumes decreased due to an increase in impact from scheduled maintenance and repairs at the ethylene production facility, selling prices rose owing mainly to an uptick in raw material and fuels costs and other factors.

In carbon products, sales revenue grew reflecting a climb in selling prices for cokes in tandem mainly with a rise in raw material and fuel costs.

Core operating income in this segment, despite an expansion in inventory valuations in tandem with a rise in raw material costs, decreased mainly due to an overall drop in sales volume, plus a contraction in the price gap between raw materials and products, primarily for polyolefin.

Industrial Gases Segment, Industrial Materials Domain

In comparison with the same quarter in the previous consolidated fiscal year, sales revenue increased ¥57.1 billion, to ¥273.9 billion and core operating income rose ¥5.7 billion, to ¥29.5 billion.

In industrial gases, sales revenue and core operating income both rose. This mainly reflects a rise in selling prices in tandem with a climb in fuel costs and forex impact, as well as strong demand for in Japan and overseas.

In this segment in the consolidated first quarter under review, the following items were implemented by or occurred at MCG.

• An agreement was signed with Petroleos del Peru (PetroPeru), the Peruvian National Oil Company (Head Office: Lima, Peru), related to the operations, maintenance and supply of hydrogen and nitrogen plants at the Talara refinery. This agreement was signed owing to the evaluation of performance at the HyCO business thus far and the proposals to PetroPeru. The goal is to supply hydrogen and nitrogen from the second half of fiscal 2022 onward.

Health Care Segment, Health Care Domain

In comparison with the same quarter in the previous consolidated fiscal year, sales revenue increased ¥5.0 billion, to ¥103.4 billion and core operating income declined ¥1.4 billion, to ¥3.3 billion.

In pharmaceuticals, sales revenue increased. Although there was negative impact from National Health Insurance drug price revisions in the domestic ethical pharmaceuticals business, this was primarily offset by a growth in sales volume for priority products. However, core operating income dropped chiefly due to an increase in R&D cost due to forex impact. Note that some royalty revenue from Novartis Pharma AG for Gilenya, a treatment agent for multiple sclerosis, has not been recognized as sales revenue in accordance with IFRS 15 (Revenue from Contracts with Customers) due to the start of arbitration proceedings since February 2019. In the consolidated first quarter under review, some royalty revenue was not recognized as sales revenue due to ongoing arbitration proceedings.

In this segment in the consolidated first quarter under review, the following items were implemented by or occurred at MCG.

• In May 2022, RADICAVA ORS® (Development code: MT-1186; Generic name: edaravone) was approved in the US for its indication as a treatment to treat amyotrophic lateral sclerosis (ALS). Thus far, the route of administration of edaravone was limited to intravenous infusion. However, the approval of RADICAVA ORS® is expected to alleviate the burden to ALS patients as it can be administered orally which will eliminate the pain of intravenous infusion and the need for outpatient visits.

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