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Shin Etsu Chemical : Q&A Summary (394 KB)

11/07/2022 | 11:34pm EST

Shin-Etsu Chemical Co., Ltd.

Summary of Telephone Conference on Financial Results for the First Half Ended September 30, 2022


October 27, 2022, 16:30-17:30


Shin-Etsu Chemical Co., Ltd.


Yasuhiko Saitoh, Representative Director - President

from the

Masahiko Todoroki, Senior Managing Director, In Charge of Semiconductor Silicon



Toshiya Akimoto, Managing Corporate Officer, In Charge of Public Relations

Toshiyuki Kasahara, Corporate Officer, General Manager of Finance & Accounting


Shinji Fukui, General Manager of Public Relations Department


Consolidated Financial Results for the First Half Ended September 30, 2022


* This memo is a summary of a dialogue exchange in the telephone conference.

[Greetings and summary of financial results (President Yasuhiko Saitoh)]

  • In the first half ended September 30, 2022, the Company posted the following results:
    Consolidated net sales of ¥1,409.3 billion (up 50% year on year), operating income of ¥536.2 billion (up 80% year on year), ordinary income of ¥559.0 billion (up 84% year on year), and
    net income attributable to owners of parent of ¥392.3 billion (up 78% year on year)
  • Profits increased in the July-September period for the 10th consecutive quarter.

[Status by segment]

  • [Infrastructure Materials]:

In North America, the effects of monetary tightening are first and foremost evident in the housing market. However, housing starts, which influence the demand for PVC, remained at the level of more than 1.4 million units in September. In addition, inventory adjustments for resin have been coming full circle. For PVC, while the trends in the market for second-hand housing, which accounts for 90% of the market, are also important, the trend of new housing is a major matter of interest. As we have been pointing out for a long time, the housing shortage still continues. In fact, the inventory of houses has not increased. Most recently, there


were about 1.3 million units (incidentally, there were 4 million units in 2006 immediately following the burst of the housing bubble). The reason why the number of housing starts remains at 1.4 million is that there are still not enough houses. We believe there is still room for lowering housing prices to stimulate demand.

The situation in China holds the key to the Asian market price, but the price already appears to be at the bottom.

Demand for caustic soda is generally stable in both North America and Asia.

  • [Electronics Materials]:
    In the area of semiconductor front-end process materials, customer purchases so far have generally been in line with contracts.
    As for rare earth magnets, although inventory adjustments are taking place for HDD, demand is growing in other markets. All of our customers are confident that electronization and electrification, high-performance computing (HPC), and green transformation (GX) will continue, and are making investments. We are increasing capacity while separating short-term adjustments and basic demand.
  • [Functional Materials]:
    The market for general-purpose products tends to be influenced by trends in China, but demand for advanced functional products and specialty products, which is where our strength lies, is firm, and the ratio of such products is steadily increasing. We will continue to strengthen our supply system.
  • [Processing, & Specialized Services]:
    Demand for semiconductor wafer cases, including wafer cases used in the device manufacturing process, has not changed so far.

[Full-year earnings forecast]

  • Based on the results for the July-September quarter, the Company revised upwards to its full-year earnings forecast. The Company expects consolidated net sales of ¥2.7 trillion and ordinary income of ¥980 billion. Economic conditions are changing significantly. We will make steady efforts to further expand our business while swiftly taking short-term measures.


[Supplementary explanation (Shinji Fukui, General Manager of Public Relations Department)]

  • Capital investment in the fiscal year ending March 31, 2023, is estimated to be worth approximately ¥300 billion, and the level of depreciation and amortization is expected to be ¥215 billion.
  • Foreign exchange sensitivity of ordinary income: ¥5.8 billion per year for the U.S. dollar and ¥0.3 billion yen per year for the euro, at a fluctuation of ¥1.

[Q&A Session]


Please describe the trends in the PVC market and the outlook for the next

fiscal year's earnings.

While the Asian PVC price moves rather roughly, the price in the U.S. and

Europe move more moderately than that in Asia. We will see that

customers understand this difference in the nature of the market.

While there are several views on the future market conditions in general,


market conditions, particularly in Asia, have fallen considerably, and

there is a sense of bottoming out. We will continue to monitor

developments in China among other factors and make full use of our cost

competitiveness to earn profits. This is the approach we have taken many

times in the midst of market fluctuations, and we will do our best in

accordance with market movements.

  1. How do you view PVC and caustic soda market conditions?
    • The supply and demand of caustic soda is relatively stable, and because of this, there is no choice but to make PVC for caustic soda. This trend is depressing the PVC price in part.
    • The PVC market is large, and the situation differs from region to region.
  1. We respond to these differences and find it important to fully utilize our capacity. We will also make good use of the situation with raw materials.
    • Currently in the U.S., we are in the process of annual contract negotiations for PVC. In this process, we are pursuing negotiations, keeping in mind that there may still be some adjustments.



What was the status of Shintech in the third quarter (July-September


Shintech was in full operation during the July-September quarter. The

export ratio is also increasing.

As for raw materials, ethane prices have recently been coming down. We

have in-house ethylene and also procure ethylene, but ethylene prices

  1. have also dropped considerably, and this will contribute to the October-December quarter.
    • (Profit level for the July-September quarter) Although it is lower than the April-June quarter, profit is higher than the level of the same period in the previous year.
  1. What are the risks of Asian PVC being exported to the U.S.?
  • One point is that the U.S. imposes punitive tariffs on Chinese PVC, which acts as a bulwark. Also, although the transport prices have come down, they are still higher than before. In addition, customers in the U.S. do not
  1. receive products in bags because delivery is made in the form of freight trains. That is the form of the logistics system in place. Because of such restrictions, the U.S. market has not been affected by imports, and we believe that it will also not be affected in the future.

Please describe the trends in semiconductor wafers by diameter in the

  • July-Septemberquarter.
    • The 300 mm and 200 mm wafer markets also remained strong during the July-September quarter. Small-size wafers with a diameter of 150 mm or
      less are on a declining trend.
  • What is the current status of the semiconductor wafer market?
    • In the device market, adjustments are becoming generally more evident in almost all areas, including PC, smartphone, consumer, and industrial

sectors, which represent the major users. Demand for data center applications is also showing signs of a pause. In the wafer market, shipments continue to be steady in general. There is a possibility that the first half of next year will be an adjustment phase, but in that case, we


may discuss our response, including adjusting the delivery dates while maintaining the contracted quantity and covering the price without changing the value of the contract, with our customers.

What is the difference between the past adjustment phase and the present

  • situation concerning semiconductor wafers?
    • As the adjustment trend is becoming more evident in the semiconductor device market, new fields of application such as DX, GX, and electric vehicles continue to be steady, and applications of semiconductor are
  • expanding. Unlike the past adjustment phase, device manufacturers talk to us mainly about the long-term issue of supplying materials to increase production in the future, rather than about short-term needs.
  • What is the status of long-term contracts for semiconductor wafers?
    • We have long-term contracts for 300 mm wafers through 2027 for the most
  • part.
  • Please tell us about investments for semiconductor wafers.
    • The production capacity of semiconductor wafer manufacturing equipment is limited, and the delivery time of equipment is generally long. Regardless of whether there are short-term adjustments or not, we will steadily promote capital investment based on long-term contracts.
  • Regarding investment amounts, when investing purchases from overseas manufacturers, such as those related to inspection equipment, in Japan, we are impacted by foreign exchange rates. However, the investments we arrange in Japan are based on long-term contracts, and there is no significant impact.


What are the differences in market trends for semiconductor devices vs.

semiconductor wafers?

Due to factors such as short-term device production adjustments, the

buildup of wafer inventories by semiconductor device manufacturers, and

  1. the outlook for post-adjustment demand, there is a possibility that device shipment volumes and wafer shipment volumes will show slightly different moves.
  • Are there differences in demand for semiconductor wafers vs. photoresists?
    • So far, they are moving in the same direction, i.e., the vectors are perfectly

A aligned so to speak.

  • There are various combinations for photoresists depending on nodes and


This is an excerpt of the original content. To continue reading it, access the original document here.


Shin-Etsu Chemical Co. Ltd. published this content on 08 November 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 08 November 2022 04:33:05 UTC.

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Sales 2023 2 781 B 21 240 M 21 240 M
Net income 2023 724 B 5 528 M 5 528 M
Net cash 2023 1 300 B 9 931 M 9 931 M
P/E ratio 2023 11,1x
Yield 2023 2,55%
Capitalization 7 750 B 59 197 M 59 197 M
EV / Sales 2023 2,32x
EV / Sales 2024 2,33x
Nbr of Employees 25 625
Free-Float 96,6%
Duration : Period :
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Number of Analysts 16
Last Close Price 19 200,00 JPY
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Spread / Average Target 13,6%
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Yasuhiko Saitoh Senior Managing Representative Director
Chihiro Kanagawa Representative Director & Vice President
Fumio Akiya Managing Director & Head-Technology
Toshio Shiobara Deputy GM-Electronic Materials Business
Tsuyoshi Miyazaki Independent Outside Director
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