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SHOWA DENKO K.K.

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Showa Denko K K : 2021 First Quarter Consolidated Financial Statements and summary

05/13/2021 | 02:40am EDT

SHOWA DENKO K.K.

May 13th, 2021

First Quarter, 2021 Consolidated Financial Results (Summary)

1. First Quarter Results

(1) Summary

(Unit: billions of yen)

Items

2020 CQ1

2021 CQ1

Increase/

Jan.1 - Mar.31

Jan.1 - Mar.31

decrease

Net Sales

171.7

339.7

167.9

Operating Income

2.5

20.8

18.3

Net Income Attributable to Owners of the Parent

2.7

5.2

2.5

Showa Denko K.K. made Showa Denko Materials Co., Ltd. (Showa Denko Materials) a consolidated subsidiary, and started

on July 1, 2020 to incorporate Showa Denko Materials' sales figures and incomes/losses into its consolidated financial statements.

First Half, 2021

Forecast*

695.0

34.0

9.0

*Announced on May 10, 2021

(2) Net Sales and Operating Income by Segment

(Unit: billions of yen)

Segment

2020 CQ1

2021 CQ1

Increase/

Jan.1 - Mar.31

Jan.1 - Mar.31

decrease

Petrochemicals

Net Sales

55.0

57.8

2.7

Op. Income

-0.2

5.5

5.7

Chemicals

Net Sales

36.3

41.3

5.0

Op. Income

2.3

4.9

2.6

Electronics

Net Sales

23.6

21.7

-1.9

Op. Income

1.0

1.4

0.4

Inorganics

Net Sales

21.4

21.2

-0.2

Op. Income

0.8

1.0

0.2

Aluminum

Net Sales

19.2

22.5

3.3

Op. Income

0.0

2.3

2.2

Showa Denko Materials

Net Sales

159.6

159.6

Op. Income

7.6

7.6

Others

Net Sales

28.6

28.2

-0.4

Op. Income

0.2

0.2

-0.0

Adjustments

Net Sales

-12.3

-12.5

-0.2

Op. Income

-1.7

-2.0

-0.3

Total

Net Sales

171.7

339.7

167.9

Op. Income

2.5

20.8

18.3

Showa Denko K.K. started on July 1, 2020 to incorporate Showa Denko Materials' sales figures and incomes/losses into its financial statements as "Showa Denko Materials segment."

2. Reference

Items

2020 CQ1

2021 CQ1

Increase/

Jan.1 - Mar.31

Jan.1 - Mar.31

decrease

Exchange Rate (yen/US$

Yen appreciated

108.9

105.9

by 3.0

Domestic Naphtha Price (yen/kl)

44,800

38,800

-6,000

(Unit: billions of yen)

Items

Dec.31, 2020

Mar.31, 2021

Increase/

decrease

Total Assets

2,203.6

2,240.9

37.3

Interest-Bearing Debt

1,060.1

1,056.3

-3.9

First Half, 2021

Forecast*

125.0

9.0

84.0

9.0

49.0

3.5

47.0

4.5

51.0

5.0

321.0

10.0

36.0

0.2 -18.0-7.2 695.0 34.0

The above forecast is based on the information available as of today and assumptions as of today regarding risk factors that could affect our future performance. Actual results may differ materially from the forecast due to a variety of risk factors, including, but not limited to, the influence of the coronavirus disease 2019 (COVID-19) on the world economy, the economic conditions, costs of naphtha and other raw materials, demand or market conditions for our products such as graphite electrodes and other commodities, and foreign exchange rates. We undertake no obligation to update the forward-looking statements unless required by law.

SHOWA DENKO K.K.

Consolidated Financial Statements

For the first quarter ended March 31, 2021

Ⅰ. Consolidated Financial Results

May 13th, 2021

(1) Results of operations:

( in millions, US$ in thousands, except for

net income attributable to owners of the parent per share)

Results for the first quarter (Jan.1-Mar.31)

2020

2021

Increase

2021

(Decrease)

%

$

Net sales

171,734

339,679

97.8

3,068,186

Operating income

2,469

20,814

742.9

188,004

Ordinary income

3,221

25,083

678.7

226,569

Net income attributable to owners of the parent

2,699

5,191

92.4

46,891

Net income attributable to owners of the parent per share: Basic

18.50

35.59

0.32

Net income attributable to owners of the parent per share: Diluted

Showa Denko K.K. made Showa Denko Materials Co., Ltd. (Showa Denko Materials) a consolidated subsidiary, and started on July 1, 2020 to incorporate Showa Denko Materials' sales figures and incomes/losses into its consolidated financial statements.

Notes

Important changes in accounting policies : not applicable Comprehensive income :

Results for the year ended March 31, 2021 33,292 million Results for the year ended March 31, 2020 -13,034 million

(2) Financial position:

( in millions, US$ in thousands, except for stockholders' equity ratio)

Dec.31, 2020

Mar.31, 2021

Mar.31, 2021

$

Total assets

2,203,606

2,240,902

20,241,190

Total equity

718,080

732,456

6,615,985

%

%

%

Stockholders' equity ratio

18.4

19.0

19.0

(3) Dividends:

2020

2021 Forecast

Q1 dividends per share ()

Q2 dividends per share ()

0.00

0.00

Q3 dividends per share ()

End of Term dividends per share ()

65.00

65.00

Annual dividends per share ()

65.00

65.00

Ⅱ. Forecast of performance for the year ending December 31, 2021

( in millions, US$ in thousands, except for net income attributable to owners of the parent per share)

1st half

fiscal year

$

$

Net sales

695,000

6,277,662

1,345,000

12,148,857

Operating income

34,000

307,109

68,000

614,217

Ordinary income

35,000

316,141

64,000

578,087

Net income attributable to owners of the parent

9,000

81,293

11,000

99,359

Net income attributable to owners of the parent per share: Basic

61.70

0.56

75.40

0.68

*The above forecast was announced on May 10, 2021.

The above forecast is based on the information available at this point of time. Actual results may differ materially due to a variety of reasons, including such economic factors as fluctuations in foreign currency exchange rates as well as market supply and demand conditions.

Note

The U.S. dollar is valued at 110.71 throughout this statement for convenience only.

1

[Business Results and Financial Conditions] 1. Analysis of business results

(1) Summary

With regard to the global economy in the first quarter of 2021 (January 1 - March 31), it was stagnant due to the global restraint on economic activities caused by the pandemic of coronavirus disease 2019 (COVID-19), although there was a sign of recovery in a part of manufacturing industries including the semiconductor-related industry, whose market remained strong. As for the Japanese economy, although consumer spending kept bearish tendency, corporate business sentiment was bottoming out due to an increase in export and business recovery in some manufacturing industries including semiconductor-related industry.

As for the business environment of the Showa Denko Group, although there were some uncertain factors such as continued spread of COVID-19, a global argument over policy on carbon-neutrality, and US-China trade friction, the semiconductor-related industry remained strong, and car production showed a sign of recovery.

Since the beginning of the pandemic of COVID-19 in 2020, the Showa Denko Group has been giving the highest priority to all stakeholders' safety and health, and implementing various measures to prevent further spread of the infectious disease. To be specific, we are taking various measures to give the highest priority to keeping our employees' health and preventing the spread of COVID-19, including teleworking implemented by employees belonging to major plants, divisions and departments, and grant of special holidays. At the same time, in our production bases, we are making utmost efforts to fulfill our corporate social responsibility to continue providing our customers with products essential for infrastructural functions of society.

The Showa Denko Group set up its long-term vision and has been promoting its medium- term consolidated business plan "The TOP 2021" since 2019. It is very important for the Showa Denko Group to enhance the value of the Group and satisfy all stakeholders including shareholders, customers, suppliers, local communities and employees in order that the Group continuously grows and becomes trusted and acclaimed by society. The Showa Denko Group defines this idea as the Group's business philosophy, thereby promoting management to maximize shareholders', customers' and social value.

The Group will strengthen its earning power and reduce the range of fluctuation in income and enhance the value of the Group through successful execution of "The TOP 2021." SDK aims to realize substantial business integration with Showa Denko Materials Co., Ltd. (SDMC) in July 2021 and integration of legal personalities in January 2023. In December 2020, SDK announced "Long-term Vision (2021-2030) for Newly Integrated Company," which aims to establish the basis of business growth far into the future through integration of SDK and SDMC. In terms of the meaning of the Newly Integrated Company's existence (purpose), SDK and SDMC will cooperatively seek to "change society through the power of chemistry." This includes contributing to the sustainable development of global society by creating functions required of the times as an advanced material partner. In addition, the Newly Integrated Company will strive to become "a company that can win the global competition" and "a company that contributes to a sustainable global society," which are the two things the Company aims to achieve in terms of its ideal state in order to fulfill its purpose.

In the first quarter of 2021, the Group recorded consolidated net sales of ¥339,679 million, a significant increase of 97.8% from the same period of the previous year. The sales in the

2

Electronics segment decreased due to a reduction in shipment volumes of hard disk media. The sales in the Inorganics segment decreased due to a decline in market prices of graphite electrodes, though their sales volumes recovered. The sales in the Others segment also decreased due to a decline in sales volumes. However, sales in the Showa Denko Materials segment significantly increased due to new consolidation of the segment which started at the beginning of the third quarter of 2020. Sales in the Petrochemicals, Chemicals, and Aluminum segments also increased due to an increase in shipment volumes under a gradual recovery of global economy from the impact of COVID-19. Operating income of the Group in the first quarter of 2021 significantly increased by 742.9%, to ¥20,814 million. Operating income in the Others segment slightly decreased. However, operating income in the Petrochemicals increased due to a rise in market prices of products. Operating income in the Showa Denko Materials segment increased due to consolidation throughout the quarter. Operating income in the Chemicals and Aluminum segments also increased. Ordinary income of the Group increased 678.7%, to ¥25,083 million due to an increase in operating income, foreign exchange gain, and equity in earnings of affiliates, despite an increase in interest expenses.

The Group recorded net income attributable to owners of the parent of ¥5,191 million in the first quarter of 2021, an increase of 92.4% from the same period of the previous year. We recorded an extraordinary loss resulting from expenses for execution of environmental measures, and an increase in corporate tax.

(Unit: millions of yen)

1Q 2020

1Q 2021

Increase/decrease

Sales

171,734

339,679

167,945

Operating income

2,469

20,814

18,345

Ordinary income

3,221

25,083

21,862

Net income

attributable to

owners of the parent

2,699

5,191

2,492

(2) A breakdown of net sales and operating income by segment (January 1 - March 31, 2021)

[Petrochemicals segment]

In the Petrochemicals segment, sales increased 5.0%, to ¥57,754 million. In our olefin business, sales increased due to an improvement in supply-demand balance in East Asia resulting from recovery of demand in China and a rise in prices of products including ethylene and propylene resulting from a rise in prices of raw materials. Sales of organic chemicals increased due to a rise in sales volumes of ethyl acetate and vinyl acetate as a result of rebound from the periodic shutdown maintenance of facilities to produce these products that took place in the first quarter of 2020, in addition to the effect of a significant rise in market prices of organic chemicals. As a result, the Petrochemicals segment recorded an operating income of ¥5,533 million, an improvement of ¥5,689 million from the same period of the previous year.

(Unit: millions of yen)

1Q 2020

1Q 2021

Increase/decrease

Sales

55,025

57,754

2,730

Operating income

-156

5,533

5,689

3

[Chemicals segment]

In the Chemicals segment, sales increased 13.7% from the same period of the previous year, to ¥41,283 million. Sales of basic chemicals increased. Sales of liquefied ammonia increased due to an increase in shipment volumes. Sales of acrylonitrile increased due to a rise in market price. Sales of chloroprene rubber increased due to an increase in export volumes. Sales of functional chemicals increased due to an increase in sales for Japanese market and export. Sales of industrial gases remained at the same level of the year before period. Sales of electronic chemicals increased due to an increase in shipment volumes of products for the semiconductor industry. Sales of coating materials increased due to an increase in shipment volumes. Operating income of the segment increased 112.1%, to ¥4,850 million.

(Unit: millions of yen)

1Q 2020

1Q 2021

Increase/decrease

Sales

36,315

41,283

4,968

Operating income

2,286

4,850

2,564

[Electronics segment]

In the Electronics segment, sales decreased 8.1% from the same period of the previous year, to ¥21,653 million. Sales of HD media decreased due to a decrease in shipment volumes of media for PCs, though sales of HD media for use in data centers increased. Sales of compound semiconductors increased due to an increase in export. Sales of lithium-ion battery (LIB) materials increased due to an increase in sales volumes of Showa Denko Packaging's aluminum laminate film (SPALFTM) used as packaging material for LIBs built into cars, PCs, and mobile devices. As for SiC epitaxial wafer business, sales slightly decreased due to a decrease in sales volumes for export, most of which was compensated by an increase in sales volumes for the domestic market. Operating income of the segment increased 41.4%, to ¥1,396 million due partly to an increase in sales volumes of SPALFTM, which contributed to a cost reduction in the segment.

(Unit: millions of yen)

1Q 2020

1Q 2021

Increase/decrease

Sales

23,553

21,653

-1,900

Operating income

987

1,396

409

[Inorganics segment]

In the Inorganics segment, sales decreased 0.7% from the year before period, to ¥21,228 million. Our graphite electrode business turned into the black for the first time in four quarters due to an increase in sales volumes caused by an increase in the global demand for steel, which started in the second half of 2020, despite a decline in market prices of graphite electrodes from the level of the year before period. Sales of ceramics increased due to an increase in sales volumes of abrasives and fine ceramics for electronics. Operating income of the segment increased 21.2% from the year-before period, to ¥1,027 million.

(Unit: millions of yen)

1Q 2020

1Q 2021

Increase/decrease

Sales

21,385

21,228

-157

Operating income

848

1,027

179

4

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

Disclaimer

Showa Denko KK published this content on 13 May 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 13 May 2021 06:39:00 UTC.


© Publicnow 2021
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Sales 2021 1 380 B 12 478 M 12 478 M
Net income 2021 9 450 M 85,5 M 85,5 M
Net Debt 2021 756 B 6 834 M 6 834 M
P/E ratio 2021 46,4x
Yield 2021 2,16%
Capitalization 438 B 3 966 M 3 965 M
EV / Sales 2021 0,87x
EV / Sales 2022 0,76x
Nbr of Employees 33 684
Free-Float 94,2%
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Kohei Morikawa President, CEO & Representative Director
Motohiro Takeuchi CFO, Representative Director & Head-Accounting
Hideo Ichikawa Chairman
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Masaharu Oshima Independent Outside Director
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