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Copyright (C) KH Neochem Co., Ltd. all rights reserved.
KH Neochem Co., Ltd.
Presentation Material for Investors
June , 2017
President and CEO Keiichi Asai
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Contents
1
I. Company Outline
II. Medium-Term Business Plan (2016-2018)
III. Development in 1Q 2017 Results
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Copyright (C) KH Neochem Co., Ltd. all rights reserved.
I. Company Outline
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Company Outline
3
Paid in Capital
¥8,745 million (December 2016)
Business
Manufacture and sales of various chemical products
Employees
731 (consolidated, as of December 31, 2016)
Number of issued shares
36,749,400 shares (December 2016)
3
KH Neochem
Americas, Inc.
Shanghai Seika Trading Co., Ltd.
Taiwan-Japan
Oxo Chemical Industries Inc.
Taiwan Representative Office
Yokkaichi Plant
Umaokoshi Plant/
Kasumigaura Plant
Primary products: Solvents, plasticizer raw materials, refrigeration lubricants raw
materials, cosmetic raw materials, and electronic materials
Head Office (Tokyo)
Osaka Branch
Office
Sakai Logistics
Center
Chiba Plant
Primary products: Plasticizer raw materials and refrigeration lubricants raw materials
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History
4
Business Development
Organizational Transformation
1948
Kyowa Sangyo Co., Ltd. began
Japan’s first mass production
of acetone and butyl alcohol
from syrup
1988
Established Japan Oxocol Co., Ltd.
Switched to two plant systems, consisting of the Chiba and
Yokkaichi Plants.
2004
Name changed to Kyowa Hakko Chemical Co., Ltd. through
the merger of the Chemical Department of Kyowa Hakko
Kogyo Co., Ltd. and Kyowa Yuka Co., Ltd.
2011
Spun off from Kyowa Hakko Kirin Group
Name changed to KH Neochem Co., Ltd. in
the following year
1949
Established Kyowa Hakko Kogyo Co., Ltd.
1963
Completion of the Yokkaichi Plant
Umaokoshi section
2016
Listed on the 1st Section of
the Tokyo Stock Exchange
1970
Completion of the Yokkaichi Plant
Kasumigaura section
1966
Established Kyowa Yuka Co., Ltd. as a
subsidiary chemical manufacturer of
Kyowa Hakko Kogyo Co., Ltd.
1993
Development of
Refrigeration lubricants raw materials
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Our Technologies
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Raw materials
コア技術Oxo reactions
Other synthesis technologies
Distillation technologies
Quality control technologies
Various consumer goods
Alcohols Acids
OxidationReduction
Synthesis technologies using oxo gas
consisting of carbon monoxide and
hydrogen
Aldehydes
KH Neochem products
Basic chemicals
Performance chemicals
Oxo + α
Technologies
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Our Business
6
Basic Chemicals Business
Plasticizer
raw materials
Performance Chemicals Business
Luxury cosmetics
Skin care products
Photoresists
High-purity
solvents
Semiconductors
LCD panelsAir conditioners
Automobiles
Housing
Sofa fabric
Wallpapers
Flooring
Plastic
wraps/films
Solvents
PlasticizersPaints
Cosmetic
raw materialsRefrigeration lubricants
raw materials
Refrigeration
lubricants
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Business Segments (net sales/gross profit)
7
48%
39%
12%
1%
Net sales ¥86.3 billion
(forecast for 2017)
Basic
Chemicals
¥41.7 billion
Performance
Materials
¥33.9 billion
Other
¥0.6 billionElectronic
Materials
¥10.0 billion
Gross profit ¥19.6 billion
(forecast for 2017)
Performance
Materials
¥10.9 billion
Electronic
Materials
¥2.8 billion
Other
¥0.1 billion
The percentage of profit from Performance Chemicals
(Performance Materials/Electronic Materials) is about 70%
Basic Chemicals Performance Materials Electronic Materials
Basic Chemicals (plasticizer raw materials, solvents, etc.), Performance Materials (refrigeration lubricants
raw materials, cosmetic raw materials, etc.), Electronic Materials (high-purity solvents, etc.)
Final applications
Performance
chemicals
Performance
chemicals 29%
56%
14%
1%
Basic
Chemicals
¥5.8 billion
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Our Business(Refrigeration lubricants raw materials)
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Shift to alternative Refrigeration lubricants raw materials
following the changes in refrigerants
Refrigeration lubricants
raw materials
If the refrigerant that co-exists within the
system is changed, a change in the
Refrigeration lubricants is also required.
Cold air
Path of refrigerant Heat emission
Transition involving refrigerants and
Refrigeration lubricants
Global warming
reduction
Refrigerants Refrigeration lubricants(Raw materials)
Next-generation
refrigerant
Current refrigerant: R410A
(GWP 2,090)
Former refrigerant: R22
(GWP 1,810)
Ozone layer
protection
Petroleum
based
New refrigerant: R32
(GWP 675)
Synthetic
Under
development
Refrigeration
lubricants
Refrigeration
lubricants
raw materials
Synthetic
Note: “GWP” stands for “Global Warming Potential”
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Our Business(Refrigeration lubricants raw materials)
198
71105
2016年 2025年
9
Growth market in line with the change of refrigerants and
our company’s advantageous position
Position of KH Neochem
Refrigeration
lubricants
Compressors/
Air conditioners
Base oils
Raw materials
(Ex.) Refrigerant for residential air
conditioning units: forecast
2-ethylhexanoic acid
Source: “Heat pump hot water and air conditioning market 2017
— Current Status and Outlook,” Fuji Keizai Co., Ltd.,
2016 2025
(New unit sales globally: millions of units per year)
Isononanoic acid
New/Current refrigerants CAGR 4.4%
(New refrigerants CAGR 13.6%)
New/Current
refrigerants
Former
refrigerants
Global production capacity
(Our estimate)
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Our Business (Cosmetic raw materials)
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Functionality of 1,3-butylene glycol
High
Low
1,3-butylene glycol (BG)
Dipropylene glycol (DPG)
Propylene glycol (PG)
Skin care product moisturizers
High moisture retention
Hypoallergenic
Antibacterial
Low odor
Outstanding performance
Grade
Excellent functionality and huge potential demand
130
114
19 19
5 1
日本 韓国 中国 マレーシア インドネシア インド
Potential demand in Asian nations
Potential demand
Japan Korea IndonesiaMalaysiaChina India
Source: Our estimate(2016)
Increase in demand due to rising income levels and
high-end needs
Increased production capacity by 20% (2016)
Amount spent on
skin care products per capita
Units: US dollar
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Electronic materials that support the latest semiconductors and
basic chemicals that secure stable profit
Stable basic chemicals business
Ownership of multiple products that
are top of the line in Japan
Isononyl alcohol(plasticizer raw material)
2-ethylhexyl alcohol(plasticizer raw material)
Butyl acetate(solvent)
Butyl alcohol(solvent)
Production capacity in Japan (Our estimate)
High-purity solvent quality improvement
20 nm 14 nm 10 nm 7 nm
ppt (parts per trillion)
ppb(parts per billion)
ppm
(parts per million)Microfabriation of semiconductor circuit
Circuit formation
High-purity
solvent
Photoresist raw materials
that form semiconductor circuits
Photoresist Semiconductor
Control level of impurity of
high-purity solvent
Advancement of microfabrication and
high-purity solvents with higher quality
CAGR 4.6%
Source: Semiconductor CAGR (2016-2019) from Japan Electronics
and Information Technology Industries Association
Our Business(Electronic materials/Basic chemicals)
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Respond to demand for plasticizer raw materials INA
with our company’s technology and stable and competitive supplies of raw materials
兆豊国際商業銀行
Taiwan-Japan Oxo Chemical Industries Inc.
Location Kaohsiung City, Taiwan
Production capacity Plasticizer raw material INA 180,000
ton/year (planned)
Commercial start-up 2020 (planned)
Total investment About ¥50.0 billion(planned)
47%47% 6%
Project overview
12
Southeast Asia
India
China Technology/Know-How
Stable and competitive
supplies of raw materials
Japan
investment income
Combination of technology and raw materials
Taiwan
CAGR 6.6%
Source: CAGR(2014-2019) from IHS Markit,Ltd. “Chemical Economics Handbook 2015”
INA (Iso Nonyl Alcohol): Plasticizer raw materials DINP with excellent heat
resistance and electrical insulation property
Our Business (Taiwan project)
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Copyright (C) KH Neochem Co., Ltd. all rights reserved.
II. Medium-Term Business Plan (2016-2018)
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Medium-Term Business Plan Basic Policy
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With both growth and stability, make the 3-year term a leap for further growth
Achieve results with further
streamlining and cost
cutting efforts, and secure
stable profits
Strategic objective II
Enhance profitability of
basic chemicals
Strategic objective I
Globally expand
performance
chemical sales
Focus resource allocations to
the refrigeration lubricants
and cosmetics fields and
other sectors poised for high
growth
Strategic objective III
Establish a base
for the future
Prepare Taiwanese
manufacturing site with
scheduled launch in 2020 or
later, work more swiftly to
create new businesses
Growth Stability Potential
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Summary of Medium-Term Business Plan
15
Note: On the assumption that the exchange rate is 121 yen/$ for 2015 and 103 yen/$ for 2018 and that the rate of naphtha produced in
Japan is 46,000 yen/KL for 2015 and 33,000 yen/KL for 2018
Net sales and operating income in 2015 exclude the results of a subsidiary sold.
Op
era
ting in
co
me
Laying the foundations for growth, stability, and
a leap for further growthNext Medium-Term
Business Plan
Expansion of growth products
Streamlining/comprehensive cost reduction
Implementation of Taiwan project, creation of
new business
December 2015 period
Net sales: ¥89.2 billion
Operating income: ¥6.1 billion
Making our dream
a reality
Operating income
increase 30%
December 2018 period
Net sales: ¥80.5 billion
Operating income: ¥8.0 billionStarting point
Final fiscal year
Expansion of performance
chemicals
Operation of Taiwan plant
New products/business
New overseas deployment
M&A
Medium-Term Business Plan (2016-2018) (2019-2021)
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Breakdown of Investment Plan
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4.8
4.0
8.9
Taiwan project
Performance chemicals
Shared
Streamlining/energy saving
Stable operation/
enhancement of supply base
Refrigeration lubricants raw materials
Cosmetic raw materials
Electronic materials, etc.
Refrigeration lubricants raw materials
responding to low GWP refrigerant
Front-line quality of high-purity solvents
Use oxo technology for the development of
new products
Concentrate all
on performance chemicals
Note: “GWP” stands for “Global Warming Potential”
R&D expenses (3 years) ¥3.0 billionCapital investments and loans (3 years) ¥17.7 billion
Strategic concentration on performance chemicals and Taiwan project
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Progress in the Medium-Term Business Plan
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(Billions of yen) (Billions of yen)
89.2
76.180.2
76.6
86.380.5
2015 2016 2017 2018
Net sales
2016 2017
6.1
7.5
9.0
7.0
9.2
8.0
2015 2016 2017 2018
Operating income
2016 2017
Results exceeded the Mid-Term Business Plan
Note: In 2015, both net sales and operating income exclude the figures for sold subsidiary.
Medium-Term Business Plan (2016 - 2018)
Results or recent forecasts
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Copyright (C) KH Neochem Co., Ltd. all rights reserved.
III. Development in 1Q 2017 Results
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Development in Results (Quarterly)
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21.9
17.5
19.4
21.422.3
1Q 2Q 3Q 4Q 1Q
Net sales
3.0
1.3
2.5
2.2
3.0
1Q 2Q 3Q 4Q 1Q
Operating income
2.0
0.8
1.6 1.5
2.1
1Q 2Q 3Q 4Q 1Q
Net income
2016 2017
(Billions of yen)(Billions of yen)(Billions of yen)
Results remained strong mainly driven by growth in volume
2016 2017 2016 2017
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20
Development in Results by Segment(Quarterly)
Steady progress both in net sales and in gross profit
was achieved in each segment
9.2 9.0 9.6 10.5 10.6
9.15.9
7.28.2 8.9
2.3
2.42.5
2.6 2.61.3
0.20.2
0.2 0.2
16/1Q 2Q 3Q 4Q 17/1Q
Net sales
1.3 1.21.8 1.4 1.7
2.31.6
2.2 2.53.0
0.7
0.7
0.8 0.8
0.81.0
0.1
0.1 0.1
0.1
16/1Q 2Q 3Q 4Q 17/1Q
Gross profit
Basic Chemicals
Electronic Materials
Performance Materials
Other
(Billions of yen)
4.94.9
3.7
5.3
5.621.9 21.419.4
17.5
22.3
Basic Chemicals Performance Materials Electronic Materials
Basic Chemicals (plasticizer raw materials, solvents, etc.), Performance Materials (refrigeration lubricants
raw materials, cosmetic raw materials, etc.), Electronic Materials (high-purity solvents, etc.)
Final applications
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CAPEX, Depreciation and R&D Expenses (Quarterly)
0.4
0.7
1.1
0.3
0.2
1Q 2Q 3Q 4Q 1Q
CAPEX
2016 2017
(Billions of yen)(Billions of yen)(Billions of yen)
CAPEX for 1Q mainly maintenance and renewal
2016 2017 2016 2017
0.8 0.80.9
1.0
0.8
1Q 2Q 3Q 4Q 1Q
Depreciation
0.2 0.2 0.2 0.2 0.2
1Q 2Q 3Q 4Q 1Q
R&D expenses
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Inventories, Interest-bearing Debt
and Shareholders’ Equity (Quarterly)
9.99.3 9.1 9.0
10.0
1Q 2Q 3Q 4Q 1Q
Inventories
(Billions of yen)(Billions of yen)
Steady rise in the equity ratio due to accumulation of income
33.9 33.2 32.5 31.3 31.2
1Q 2Q 3Q 4Q 1Q
Interest-bearing debt
22.6 23.324.7
28.229.5
1Q 2Q 3Q 4Q 1Q
Equity ratio
(%)
2016 2017 2016 2017 2016 2017
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Shareholder Returns
In 2016, we paid a year-end dividend of ¥46.5 and
a commemorative dividend of ¥3.5 per share
In 2017, we plan to pay an interim dividend.
Year-end dividend
¥46.5
Commemorative dividend
¥3.5
Annual dividend
¥50.0
Interim dividend
¥23.0
Year-end dividend
¥23.5
Annual dividend
¥46.5
Aim to maintain the dividend payout ratio of
30% continuously and stably.
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Presenters
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President and CEO
Keiichi Asai
1978 Joined Mitsubishi Corporation
2009 Executive Officer of Mitsubishi Corporation
2013 Executive Officer of Mitsubishi Corporation, Executive
Vice President of Lithium Energy Japan
2014 Board Director, Executive Officer of KH Neochem
2014 President and CEO of KH Neochem
Board Director and CFO
Kenichi Hirai
1978 Joined Nissan Diesel Motor (now UD Trucks Corporation)
2008 Vice President of Nissan Diesel Motor,Volvo Powertrain JAPAN, CFO
2012 Vice President of UD Trucks,Volvo Group Trucks Operations Japan
Controlling Coordination
2016 Board Director and CFO of KH Neochem
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Copyright (C) KH Neochem Co., Ltd. all rights reserved.
Note:
The information presented herein is intended neither to solicit nor induce investors to either purchase or sell
shares of KH Neochem.
The forward-looking statements in this document such as those regarding future prospects of the business
include assumptions and forecasts based on information available as of the date of this document, and
accordingly such statements do not constitute KH Neochem’s assurance or guarantee. This document also
contains figures for reference purposes that have not undergone audit.
As such, please note that actual results may materially vary from those expressed or implied herein, due to
various future risks and uncertainties.
Also, please be aware that neither KH Neochem nor the information providers shall bear liability for any
damages incurred from use of this data.
Contact
KH Neochem Co., Ltd.
https://www.khneochem.co.jp/en/contact/
https://www.khneochem.co.jp/en/contact/