Sumitomo Chemical Announces Consolidated Financial Results for FY2017
2018-05-16    [Source:Sumitomo Chemical]
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Beginning this consolidated fiscal year, the Sumitomo Chemical Group is adopting international financial reporting standards (IFRS) in place of Japanese GAAP, which it previously used, and is therefore restating figures for the previous consolidated fiscal year using IFRS for comparative analysis.

The world economy remained strong for this fiscal year, with the US continuing to see economic expansion supported by rising employment numbers and strong consumer demand, Europe continuing its steady recovery, despite issues such as the UK leaving the EU, and emerging nations, including China, seeing movement towards economic recovery.

At the same time, the Japanese economy has continued a steady trend toward recovery due to improvements in wages and the job market as well as strong corporate earnings.

Under these circumstances, the Sumitomo Chemical Group undertook group-wide efforts to improve business performance. At the same time, the Group worked to further accelerate its transformation into a more resilient Sumitomo Chemical that continues to grow, based on the current three-year Corporate Business Plan for fiscal 2016 to 2018 that has a basic policy of further improving business portfolio, generating more cash flow, and accelerating the launch of next-generation businesses.

As a result, the Sumitomo Chemical Group’s sales revenue for this fiscal year totaled ¥2,190.5 billion, an increase of ¥251.4 billion compared with the previous fiscal year. The Group posted core operating income of ¥262.7 billion, operating income of ¥250.9 billion, and net income attributable to owners of the parent of ¥133.8 billion, all of which surpassed the results for the previous fiscal year.

The Sumitomo Chemical Group’s financial results by business segment for the fiscal year are as follows.

“Core operating income” is a gain and loss concept that reflects recurring earning capacity. It excludes gains and losses from non-recurring factors from operating income, including share of profit of investments accounted for using the equity method.

Petrochemicals & Plastics Market prices of petrochemical products and synthetic resins rose because of higher feedstock prices. Market prices of raw materials for synthetic fibers and methyl methacrylate (MMA) also increased. In addition, for associates accounted for using the equity method, the earnings of Petrochemical Corporation of Singapore (Pte.) Ltd. remained strong, while the earnings of Rabigh Refining and Petrochemical Company improved due chiefly to a continued high level of capacity utilization and rising market price of petrochemical products. As a result, the segment’s sales revenue grew by ¥116.3 billion compared with the previous fiscal year, to ¥674.1 billion. Core operating income increased by ¥35.7 billion, to ¥94.6 billion.

Energy & Functional Materials Shipments of resorcinol, a raw material for adhesives, and engineering plastics increased due to a rise in demand. Shipments of separators for lithium-ion secondary batteries also rose due to production capacity expansion. In addition, the acquisition of a manufacturer of cathode materials in the previous fiscal year pushed up sales. As a result, the segment’s sales revenue increased by ¥44.6 billion compared with the previous fiscal year, to ¥251.0 billion. Core operating income grew by ¥13.2 billion, to ¥19.2 billion.

IT-related Chemicals Shipments of touchscreen panels and polarizing film increased due to growth in demand while selling prices declined. The weaker yen had a positive effect on sales from overseas subsidiaries in yen terms. As a result, the segment’s sales revenue increased by ¥10.2 billion compared with the previous fiscal year, to ¥368.7 billion. Core operating income rose by ¥3.6 billion, to ¥12.3 billion.

Health & Crop Sciences Sales of the feed additive methionine dropped due to lower market prices. Meanwhile, the acquisition of an Indian agrochemicals company in the previous fiscal year boosted sales. As a result, the segment’s sales revenue increased by ¥19.1 billion compared with the previous fiscal year, to ¥339.7 billion. Core operating income declined by ¥3.5 billion, to ¥44.0 billion.

Pharmaceuticals In North America, sales of Latuda® (atypical antipsychotic) and other drugs increased steadily. In Japan, sales of Trulicity® (type 2 diabetes drug), Aimix® (anti-hypertension drug) and other drugs rose as well. As a result, the segment’s sales revenue increased by ¥59.3 billion from the previous fiscal year, to ¥500.2 billion. Core operating income grew by ¥24.9 billion, to ¥94.8 billion.

Others In addition to the above five segments, the Sumitomo Chemical Group engages in supplying electrical power and steam, providing services for the design, engineering, and construction management of chemical plants, providing transport and warehousing, and conducting materials and environmental analysis. The segment’s sales revenue increased by ¥2.0 billion from the previous fiscal year, to ¥56.8 billion. Core operating income grew by ¥0.9 billion, to ¥11.1 billion.

The Company has decided to pay a year-end dividend of ¥12 per share. As a result, the Company’s annual dividend for fiscal 2017 is ¥22 per share, including an interim dividend of ¥10 per share.

Net cash provided by operating activities in fiscal 2017 was ¥293.3 billion, an increase of ¥107.5 billion compared to the previous fiscal year, due chiefly to a rise in operating income and a decrease in income taxes paid. Net cash used in investing activities was ¥154.5 billion, a decrease in cash outflows of ¥51.2 billion compared to the previous fiscal year, due mainly to the acquisition of Cynapsus Therapeutics Inc. (the present Sunovion CNS Development Canada ULC) and Tolero Pharmaceuticals Inc. by Sumitomo Dainippon Pharma, a subsidiary of Sumitomo Chemical, in the previous fiscal year. This resulted in free cash flow of ¥138.7 billion for fiscal 2017, compared with negative ¥19.9 billion for the previous fiscal year. Net cash used in financing activities was ¥94.3 billion. The balance of cash and cash equivalents at the end of the fiscal year increased by ¥38.6 billion over the previous fiscal year, to ¥231.9 billion.
For fiscal 2018, the Company forecasts that sales revenue will increase by 13.7%, to ¥2,490.0 billion, while core operating income and operating income are projected to be ¥240.0 billion and ¥205.0 billion, respectively, and net income attributable to owners of the parent to be ¥130.0 billion, assuming an exchange rate of ¥110.0/US$ and a naphtha price of ¥47,000/kl.

The Company plans to pay an interim dividend of ¥11 per share and a year-end dividend of ¥11 per share, making the Company’s annual dividend for fiscal 2018 ¥22 per share, unchanged from the previous fiscal year.

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