Resonac : Financial Report 2022

2022

FINANCIAL REPORT

The Origin of

Resonac

The name Resonac is derived from the word resonate and the letter C from chemistry.

It represents our strong will to bring together our broad and agile cutting-edge material technology and our customers' technology and inspiration, sending a strong wave of resonance toward a shared future and meeting new partners as the wave extends its reach, in this way creating a major movement that could change society.

Our corporate color, Resonac Blue, is a combination of blue and green, which stands for the ocean and the sky as well as trees and forests. These two precious colors provided by the earth mix together and resonate in harmony, representing our commitment to contribute to the future of the global environment.

Contents

1

Our Strengths

2

Consolidated 11-Year Summary

4

Message from CEO

5

At a Glance

6

Management's Discussion

and Analysis

8

Risk Factors

13

Financial Data

48

Corporate Data

Corporate Philosophy

Purpose	Change society through
			the power of chemistry
			Contribute to the sustainable development of global
			society by creating functions required of the times as an
			advanced material partner
Values	Passionate & Results Driven
			By taking pride and passion to our work,
			By focusing our strengths and performance,
			We will became a globally recognized top player.
			Agile & Flexible
			By learning through trial-and-error,
			By thinking flexibly and acting swiftly,
			We will transform into a dynamic organization.
			Open Minds & Open Connections
			By showing mutual trust and respect,
			By collaborating openly beyond boundaries,
			We will co-create new value with all stakeholders.
			Solid Vision & Solid Integrity
			We truly recognize the power and potential of chemistry,
			We prioritize sustainability for future generations,
			We commit to upholding our values of integrity to all stakeholders and
			ethics in developing chemical technologies.
Profile	In January 2023, Showa Denko K.K. (SDK) and Showa Denko Materials Corporation, the
			former Hitachi Chemical Company, Ltd. (SDMC), integrated to make a new start as the
			Resonac Group.
			SDK, the forerunner of Resonac Holdings Corporation (Resonac), was founded in
			1939. Today, ranked as one of Japan's leading chemical companies, Resonac operates in
			four major segments for information disclosure: semiconductor and electronic
			materials, mobility, innovation-enabling materials, and chemicals.
			In 2020, the SDK Group brought SDMC into the Group as a member. Following the
			integration, SDK and SDMC formulated Long-Term Vision (2021-2030) for the Newly
			Integrated Company (Long-Term Vision).
			The Resonac Group is committed to providing new functionality and value as an
			integrated company in the chemicals industry, where global competition and changes
			in the market structure are expected to intensify. In this way, we will contribute the
			realization of a sustainable society.

Please Visit Our Website

Sustainability Site https://www.resonac.com/sustainability

Integrated Reports https://www.resonac.com/sustainability/report/report.html

Our Strengths

Resonac has many products maintaining high world market shares.

Here we introduce semiconductor materials where the Resonac Group has a special advantage. The semiconductor materials market is expected to continue growing rapidly due partly to the spread of 5G, IoT, an increase the xEVs' share of the car market, and more investment in data centers. The Resonac Group is one of the world's leading manufacturers of semiconductor materials and our annual sales of semiconductor materials comes to about ¥200 billion. The Group manufactures and sells a wide range of semiconductor materials used in wafer processes to packaging processes, including high-purity gases and solvents for electronics, CMP slurries, copper clad laminates, photosensitive films, and epoxy molding compounds.

The Group will continue developing leading-edge products by making the most of our technological strengths which have grown through the integration of former Showa Denko and former Showa Denko Materials, and responding to customers' expectations by providing one-stop solutions, in this way achieving growth of our semiconductor materials business that exceeds the growth of the market.

Manufacturing process for semiconductors

Key products of the Resonac Group

		Film formation
		Photoresist application
		Exposure
Process
Etching
Wafer		Photoresist removal
		CMP
		Cleaning
		Substrate
		Rewiring layer formation
		Dicing
Process
Die bonding
Packaging
Wire bonding
Molding

High-purity gases

and solvents

for electronics

High-purity gases

for electronics

CMP slurries

Copper clad laminates Photosensitive films Solder resist

Die bonding

materials

Epoxy molding

compounds

85% of sales of semiconductor materials are earned from products with a top-three global market share

World No. 1

High-purity gases

High-purity solvents

Ceria slurry World No. 1

CMP slurries

Packaging substrate materials

World No. 1

Copper clad laminates

World No. 1

Photosensitive films

World No. 1

Die bonding materials

World No. 2

Epoxy molding compounds

Note: The global market positions shown on this page are Resonac estimates.

1

Consolidated 11-Year Summary

Financial Highlights

Resonac Holdings Corporation and Consolidated Subsidiaries		Millions of yen
December 31	2012	2013	2014		2015	2016	2017 (Note 2)
For the year
Net sales	¥739,675	¥847,803	¥ 872,785	¥775,732	¥671,159	¥	780,387
Operating income (loss)	28,108	25,953	20,551		33,508	42,053		77,708
Net income (loss) attributable to owners of the parent	9,368	9,065	2,929		921	12,305		37,404
Net cash provided by operating activities	53,310	63,565	66,996		61,170	68,949		67,235
Net cash provided by (used in) investing activities	(41,741)	(55,203)	(46,876)		(42,497)	(53,754)		(29,866)
Free cash flow	11,569	8,362	20,120		18,674	15,195		37,369
R&D expenditures	20,633	20,435	20,362		20,289	17,313		18,539
Capital expenditures	42,503	44,370	47,318		44,059	39,276		41,787
Depreciation and amortization	46,232	39,779	40,673		42,137	38,761		38,565
At year-end
Total assets	933,162	985,771	1,009,843		940,494	932,698	1,026,999
Total net assets	314,966	345,811	319,087		308,142	311,231		368,994
Interest-bearing debt	342,262	353,686	383,124		368,835	359,929		346,726
Debt/equity ratio (to FY2018, gross; from FY2019, net) (times) (Note 4)	1.09	1.02	1.20		1.20	1.16		0.94
				Yen
Per share (Note 5)
Net income (loss)-primary (Note 6)	¥ 6.26	¥ 6.06	¥ 1.99	¥	6.45	¥ 86.27	¥	262.44
Net income (loss)-fully diluted (Note 6)	6.26	6.06	1.99		6.45	86.27		262.44
Net assets	182.24	201.27	209.76	2,076.05	2,080.85	2,473.06
Cash dividends (applicable to the period) (Note 7)	3.00	3.00	3.00		3.00	-		80.00
Number of employees at year-end	9,890	10,234	10,577		10,561	10,146		10,864

Notes: 1. Yen amounts have been translated into U.S. dollars, for convenience only, at the rate of ¥132.70 to US$1.00, the approximate rate of exchange at December 31, 2022.

1. The tentative accounting policy applied to calculation of 2017 financial results due to consolidation of former SGL GE Holding GmbH was finalized when the Company settled accounts for the third quarter of 2018. Accordingly, the amounts of depreciation and amortization and some other costs for the year ending December 2017 were changed. The amount in the above table includes those retroactively changed numbers for the year ending December 2017.
2. The former Showa Denko K.K. (SDK) started on July 1, 2020 to incorporate Showa Denko Materials' sales figures and incomes/losses into its financial statements.
3. In accordance with the consolidation of the former Showa Denko Materials Co., Ltd. (SDMC), SDK calculated the D/E ratio with an assumption as follows, starting from the third quarter of the fiscal year ended December 31, 2020. For the preferred shares issued by HC Holdings K.K., which was a subsidiary of SDK, we added the amount equivalent to 50% of the value of issued preferred shares to interest- bearing debts and the remaining 50% of it to the equity capital of SDK. SDK also added lease liability to the equity capital of SDK, and used the net interest-bearing debt (interest-bearing debt minus cash and deposits) in calculation of D/E ratio. The assumption that we consider 50% of the total value of issued preferred stocks as equity capital is based on the credit rating given by Japan Credit Rating Agency, Ltd.

Net Sales

(Billions of yen) 1,500

1,200
900
600
300
0	2019	2020	2021	2022
2018

Operating Income (loss)

(Billions of yen) 200

150
100
50
0
(50)	2018	2019	2020	2021	2022

Net Income (loss) Attributable to Owners of the Parent

(Billions of yen) 120

80
40
0
(80)
2018	2019	2020	2021	2022

2 Resonac Holdings Corporation Financial Report 2022

Resonac Holdings Corporation and Consolidated Subsidiaries			Millions of yen				Thousands of
					U.S. dollars (Note 1)
December 31		2018		2019	2020 (Note 3)	2021		2022
For the year
Net sales	¥	992,136	¥	906,454	¥	973,700	¥1,419,635	¥1,392,621		$10,494,509
Operating income (loss)		180,003		120,798		(19,449)	87,198	59,371		447,410
Net income (loss) attributable to owners of the parent		111,503		73,088		(76,304)	(12,094)	30,793		232,051
Net cash provided by operating activities		149,785		78,554		109,286	115,283	100,349		756,207
Net cash provided by (used in) investing activities		(49,338)		(48,156)		(930,047)	28,606	(54,667)		(411,962)
Free cash flow		100,447		30,397		(820,761)	143,889	45,681		344,246
R&D expenditures		19,735		20,605		34,379	46,750	47,135		355,203
Capital expenditures		41,727		50,216		69,052	78,647	107,074		806,890
Depreciation and amortization		39,459		37,704		68,643	97,726	92,716		698,690
At year-end
Total assets	1,074,983	1,076,381	2,203,606	2,142,390	2,100,421		15,828,342
Total net assets		465,340		519,433		718,080	818,452	574,677		4,330,649
Interest-bearing debt		287,968		298,524	1,060,146	850,603	1,066,119		8,034,054
Debt/equity ratio (to FY2018, gross; from FY2019, net) (times) (Note 4)		0.62		0.36		1.84	1.15	1.08
						Yen				U.S. dollars (Note 1)
Per share (Note 5)
Net income (loss)-primary (Note 6)	¥	758.15	¥	501.03	¥	(523.06)	¥ (77.40)	¥ 170.03		$ 1.28
Net income (loss)-fully diluted (Note 6)		758.15		501.03		(523.06)	(77.40)	170.03		1.28
Net assets	3,057.16		3,423.25		2,782.79	2,838.51	3,038.12		22.89
Cash dividends (applicable to the period) (Note 7)		120.00		130.00		65.00	65.00	65.00		0.49
Number of employees at year-end		10,476		10,813		33,684	26,054	25,803

on April 21, 2020. Futhermore, D/E ratio for 2019 was adjusted in the same way. In addition, 50% of the subordinated loans raised during 2022 to purchase preferred stock were deducted from interest-bearing debt and added to equity capital. The 50% equity recogniton for subordinated loans is based on the rating by Japan Credit Rating Agency, Ltd., dated October 4, 2022.

1. SDK consolidated every ten shares of common stock into one share on July 1, 2016. "Per share" indicators for 2015 and 2016 (except for cash dividends) are calculated on the basis of the number of outstanding shares after this consolidation.
2. Net income per share has been computed based on the average number of shares of common stock outstanding during the respective fiscal year. Fully diluted net income per share additionally assumes the conversion of the convertible bonds.
3. SDK resolved payment of dividends of ¥30.00 per share based on the record date of May 11, 2017 at the extraordinary general meeting of shareholders held in June 2017. Cash dividends applicable to 2017 includes this amount.

Interest-Bearing Debt

Debt/Equity Ratio

(Billions of yen)				(Times)
1,200						2.0
900						1.5
600						1.0
300						0.5
0	2018	2019	2020	2021	2022	0

Interest-bearing debt (left axis)

Debt/Equity ratio (right axis, gross)

Debt/Equity ratio (right axis, net)

Capital Expenditures Depreciation and Amortization

(Billions of yen)
100
75
50
25
0
2018	2019	2020	2021	2022

Capital expenditures

Depreciation and amortization

Cash Flows

(Billions of yen)
150
100
50
0
(1,000)
2018	2019	2020	2021	2022

Cash flows from operating activities	Free cash flow
Cash flows from investing activities

3