Financial data 2020(PDF : 2.2MB)

Management's Discussion and Analysis

Overview

In the fiscal period under review (the twelve-month period from April 1, 2020 to March 31, 2021, hereinafter the "fiscal 2020"), the global economy remained extremely harsh due to various restrictions imposed to stem the spread of coronavirus. Although the economy has shown signs of recovery after restrictions were lifted, some countries and regions have repeatedly imposed restrictions due to continued outbreaks.

In Japan as well, the manufacturing sector has shown signs of recovery but the outlook remains uncertain as the government has made several emergency declarations due to continued outbreaks.

On the other hand in the domestic chemical industry, the situation was temporarily harsh because of the pandemic but utilization of naphtha crackers is headed toward a recovery as the economy begins to recover.

Under these circumstances, the Mitsui Chemicals Group (hereafter "the Group") worked for business expansion and growth in three business domains-Mobility, Health Care, and Food & Packaging-while also creating and developing Next Generation Business and further enhancing competitiveness in the area of Basic Materials.

In Mobility, there has been diversified needs for lighter, more comfortable vehicles in the automotive industry in addition to a shift toward electric cars and needs for improved fuel economy. Regarding polypropylene compounds, which are contributing for lighter vehicles, our first production base in Europe began commercial operations. In addition, aiming to seize growing demand in Asia, we expanded the production facilities of our base in Thailand. As for our gear oil additive LUCANT™, which helps improve the fuel economy and longevity of automobiles, we completed construction of a new plant in Ichihara Works to meet expanding global demand. And regarding APEL™, which is mainly used in smartphone camera lenses in the information communication technology (ICT) industry, we began construction of a new plant in Osaka Works to meet a rapid increase in demand.

In Health Care, in addition to declining birthrates and aging populations in advanced countries and growing economies in emerging markets, health consciousness is rising due in part to current measures to address the pandemic. In non-woven fabric, to meet the robust demand for masks and medical staff support in light of the pandemic, our subsidiary Sunrex Industry Co., Ltd. established a production system for non-woven fabric for medical gowns and expanded production facilities for TEKNOROTE™ mask nose clamps. Regarding our ophthalmic lens materials boasting the world-leading market share, we expanded our product lineup by purchasing COTEC GmbH to manufacture, market, and research water-repellent and anti-refractive coating materials. In addition, as for dental materials, we concluded a capital business alliance agreement with SHOFU INC., which is a manufacturer of dental materials and equipment, with the aim of enhancing corporate value and raising our presence in the market.

In Food & Packaging, food security is becoming a major social issue amid global population growth and climate change. With standards of living in Asia rising, the packaging field is seeing growing needs for more highly functional products with a smaller environmental footprint. In performance films and sheets, we decided to expand production facilities for ICROS™ Tape, which commands the largest share of the global market for protective tape used in semiconductor manufacturing processes. In agrochemicals, the Group acquired registration in Japan for its insecticide BROFREYA™ SC, which utilizes the new agent TENEBENAL™ as the active ingredient. Pesticide-resistant pests have become a major problem in crop production and we will continue to help combat the issue.

In Basic Materials, which is centered on petrochemicals and basic chemicals, the Group provides materials to various manufacturing fields, including automobiles, residences, consumer electronics, infrastructure and packaging. As a strategic foundation, we have moved

Sales revenue (Net sales) (Billions of yen)

1,600
			1,482.9
	1,212.3	1,328.5		1,339.0	1,349.5	1,211.7
1,200
800
400
0
	'17/3	'18/3	'19/3	'20/3	'20/3	'21/3

Operating income before special items (Operating income)/ Ratio to sales revenue (Net sales) (Billions of yen, %)

120							10.0
100	102.1	103.5	93.4				8.0
	8.4				85.1
	7.8
80
			72.3	7.0
			6.3	71.6	6.0
60
			5.4	5.4
					4.0
40
20							2.0
0							0
	'17/3	'18/3	'19/3	'20/3	'20/3	'21/3

Operating income before special items (Operating income) (left scale)

Ratio to sales revenue (Net sales) (right scale)

J-GAAP

IFRS

J-GAAP

IFRS

76 Mitsui Chemicals Report 2021

forward to enhance, expand, optimize and reconstruct downstream products in order to strengthen competitiveness. We strove to further rationalize our crackers, such as by reducing and stabilizing costs through raw material diversification and improving energy efficiency through the installation of a new gas turbine. In order to enhance downstream products, the Group has resolved Honshu Chemical Industry Co., Ltd., which possesses high level of technology in the area of performance polymers relating to ICT, Mobility and Health Care, to become a subsidiary through a tender offer.

Moreover, the Group continues to minimize negative impact on profit or loss by shrinking inventory and reducing fixed costs.

Concept for Selection of Accounting Standard

Based on the Group's development of global business activities, the Group voluntarily adopted IFRS from the first quarter of fiscal 2020 for the purpose of improving international comparability of financial information in capital markets and enhancing its business management by unifying accounting standards across the Group.

In addition, the Group uses operating income before special items as a management indicator, which is operating income excluding non-recurring items.

Operating Results

Sales revenue

Sales revenue decreased 137.8 billion yen, or 10.2%, compared with the previous fiscal year to 1,211.7 billion yen. This was mainly attributable to decrease in sales prices due to the fall in naphtha and other raw materials and fuel prices, in addition to decrease in sales resulting from the spread of coronavirus.

Operating income before special items

Operating income before special items was 85.1 billion yen, an increase of 12.8 billion yen or 17.7% year on year. This result was due to favorable terms of trade and reduction of fixed costs, despite of decrease in sales resulting from the spread of coronavirus.

Operating income

Operating income was 78.1 billion yen, increased 13.5 billion yen or 20.9% year on year. This result was mainly due to increase of operating income before special items.

Financial income/expenses

Financial income/expenses worsened 0.1 billion yen year on year to 3.9 billion yen loss, due to a decline of dividend income received.

Income before income taxes

As a result of the aforementioned factors, income before income taxes amounted to 74.2 billion yen, an increase of 13.4 billion yen or 22.1% year on year.

Net income attributable to owners of the parent

Net income attributable to owners of the parent after accounting for income taxes and non-controlling interests was 57.9 billion yen, an increase of 23.9 billion yen or 70.4% compared with the previous fiscal year. Basic earnings per share for the period were 298.00 yen.

Segment information

Results by Business Segment

The status of each segment during fiscal 2020 is as follows.

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77

Mobility

Sales revenue decreased 52.4 billion yen compared with the previous fiscal year to 315.5 billion yen and comprised 26% of total sales. Operating income before special items decreased 12.9 billion yen to 30.2 billion yen year on year. The decrease in income was due to slowing demand for automobile.

In elastomers, performance compounds, overseas polypropylene compound, and solution business, sales decreased due to the impact of coronavirus.

In performance polymers, the Group captured demand and sales remained healthy for ICT-related products.

		Millions of yen
Mobility	2021/3		2020/3	Change (%)
Sales revenue	¥315,480		¥367,910	(14.3)
Operating income before special items	30,177		43,104	(30.0)
Total assets	346,837		367,094	(5.5)
Depreciation and amortization	17,463		17,919	(2.5)
Capital expenditures	21,136		33,501	(36.9)

Health Care

Sales revenue increased 0.7 billion yen year on year to 143.9 billion yen and comprised 12% of total sales. Operating income before special items increased 6.7 billion yen to 19.9 billion yen, mainly due to healthy sales in nonwoven fabrics.

In vision care materials, sales of ophthalmic lens materials stayed firm.

In nonwoven fabrics, sales of masks, medical gowns and disposable diapers stayed healthy. In dental materials, sales decreased due to the impact of coronavirus.

		Millions of yen
Health Care	2021/3		2020/3	Change (%)
Sales revenue	¥143,933		¥143,147	0.5
Operating income before special items	19,852		13,233	50.0
Total assets	199,251		195,956	1.7
Depreciation and amortization	10,991		11,865	(7.4)
Capital expenditures	9,582		11,271	(15.0)

Mobility (Change in operating income before special items)

(Billions of yen)

50
43.1
40
30		0.0		30.2
	(12.6)		(0.3)
20
10
0
'20/3	Volume	Price	Costs	'21/3
		IFRS

Health Care (Change in operating income before special items)

(Billions of yen)

20			+5.9	19.9
16
13.2	+0.5	+0.3
12
8
4
0
'20/3	Volume	Price	Costs	'21/3
		IFRS

78 Mitsui Chemicals Report 2021

Management's Discussion and Analysis

Food & Packaging

Sales revenue decreased 3.6 billion yen compared with the previous fiscal year to 197.7 billion yen and comprised 16% of total sales. On the other hand, operating income before special items increased 5.0 billion yen to 22.0 billion yen year on year, due to healthy sales in agrochemicals and industrial films and sheets.

In coatings & engineering materials, sales decreased due to the impact of coronavirus.

In performance films and sheets, sales were firm mainly in industrial films and sheets.

In agrochemicals, overseas sales were healthy.

		Millions of yen
Food & Packaging	2021/3		2020/3	Change (%)
Sales revenue	¥197,700		¥201,309	(1.8)
Operating income before special items	21,989		17,003	29.3
Total assets	253,218		242,414	4.5
Depreciation and amortization	10,419		9,705	7.4
Capital expenditures	13,485		16,586	(18.7)

Basic Materials

Sales revenue decreased 78.1 billion yen compared with the previous fiscal year to 541.4 billion yen and accounted for 45% of total sales. On the other hand, operating income before special items increased 10.2 billion yen to 19.6 billion yen, due to improved overseas market.

Naphtha cracker operating rates were lower than the previous fiscal year due to decreased demand of downstream products, which was impacted by coronavirus. Performances of polypropylene was affected by slowing demand for automotive products.

For Bisphenol A and Acetone, overseas market was at higher level than the previous fiscal year.

		Millions of yen
Basic Materials	2021/3		2020/3	Change (%)
Sales revenue	¥541,382		¥619,520	(12.6)
Operating income before special items	19,642		9,396	109.0
Total assets	606,146		597,162	1.5
Depreciation and amortization	32,245		30,476	5.8
Capital expenditures	39,376		38,247	3.0

Food & Packaging (Change in operating income before special items) (Billions of yen)

24
			+2.0	+0.7	22.0
18		+2.3
17.0
12
6
0
	'20/3	Volume	Price	Costs	'21/3
			IFRS

Basic Materials (Change in operating income before special items) (Billions of yen)

30
			+17.5
20					19.6
				(3.2)
10	9.4
		(4.1)
0
	'20/3	Volume	Price	Costs	'21/3
			IFRS

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Others

Sales revenue decreased 4.4 billion yen to 13.2 billion yen, comprised 1% of total sales. On the other hand, operating loss before special items was 1.1 billion yen, a decrease of 1.8 billion yen compared to the previous year.

		Millions of yen
Others	2021/3		2020/3	Change (%)
Sales revenue	¥13,230		¥17,636	(25.0)
Operating loss before special items	(1,045)		(2,981)	(64.9)
Total assets	80,790		66,993	20.6
Depreciation and amortization	4,862		5,311	(8.5)
Capital expenditures	9,156		6,433	42.3

Sales revenue

			Billions of yen
				Increase (Decrease)
	2021/3	2020/3		Volume		Price
	Total	contribution		contribution
Mobility	¥  315.5	¥  367.9	¥  (52.4)	¥(43.1)		¥  (9.3)
Health Care	143.9	143.2	0.7	0.2		0.5
Food & Packaging	197.7	201.3	(3.6)	5.3		(8.9)
Basic Materials	541.4	619.5	(78.1)	(4.2)		(73.9)
Others	13.2	17.6	(4.4)	-		(4.4)
Total	¥1,211.7	¥1,349.5	¥(137.8)	¥(41.8)		¥(96.0)

Operating income before special items

			Billions of yen
				Increase (Decrease)
	2021/3	2020/3		Volume		Fixed and other
	Total	contribution	Price*	cost differential
Mobility	¥30.2	¥43.1	¥(12.9)	¥(12.6)	¥  0.0	¥(0.3)
Health Care	19.9	13.2	6.7	0.5	0.3	5.9
Food & Packaging	22.0	17.0	5.0	2.3	2.0	0.7
Basic Materials	19.6	9.4	10.2	(4.1)	17.5	(3.2)
Others	(1.1)	(2.9)	1.8	-	-	1.8
Adjustments	(5.5)	(7.5)	2.0	-	-	2.0
Total	¥85.1	¥72.3	¥ 12.8	¥(13.9)	¥19.8	¥ 6.9
*Price = Price contribution + Variable cost differential
Overseas sales/Share of total sales revenue (Net sales)
(Billions of yen, %)			Operating income before special items (Billions of yen)

700			672.1				60
600		588.0		607.4	607.6	573.4	50
500	515.2		45.3	45.4	45.0	47.3	40
		44.3
	42.5
400
							30
300
200							20
100							10
0							0
	'17/3	'18/3	'19/3	'20/3	'20/3	'21/3

Overseas sales (left scale)

Share of total sales revenue (Net sales) (right scale)

J-GAAPIFRS

100
80		+19.8	+6.9	85.1
72.3
60
	(13.9)
40
20
0
'20/3	Volume	Price	Costs	'21/3
		IFRS

80 Mitsui Chemicals Report 2021