edited transcript of 4188.t earnings conference call or presentation 6-feb-19 8:00am gmt

February 8, 2019 PresentationTokyo Q3 2019 earnings from Mitsubishi Chemical Corporation (
Thomson StreetEvents)--
Editorial record of Mitsubishi Chemical Holdings earnings conference call or presentation Wednesday, February 6, 2019 8:00:00 am GMTTEXT edition record
Executive Officer and General Manager of company management office Research conference call participants
Director and analyst, investment bank, Research Department * Go MiyamotoUBS-
Analyst Mikiya YamadaMizuho Securities Co. , Ltd.
Research Department-
Senior analyst at Securities CompanyLtd.
Research Department-
Head and analyst of Japan chemical, textile, electronic materials basic materials research team
Research Department-
Senior analyst at research department * Shogo UmedaJP Morgan Chase & Co-
Analyst * Research Department Takato WatabeMorgan Stanley-
Survey analyst = = = Introduction-------------------------------------------------------------------------------
Mitsubishi Chemical Holding Company-Damu Yuanbo
President and General Manager of company management office1]--------------------------------------------------------------------------------Good evening.
Woody Hong of Mitsubishi Chemical Holdings.
Thank you for your support and understanding of our business.
Despite your busy schedule today, I would also like to thank you for attending this conference call.
I would like to introduce the operational summary for the nine months ended December 31, 2018.
Please turn to page 4 for the consolidated operating report for the 9 months ended December 31, 2018.
The RMB exchange rate is 111 yen. 3 to the U. S.
The dollar, the yen appreciation 0. 5 year-on-year.
The price of naphtha is 52,100 yen per thousand liters, up 12,200 yen year on yearon-year.
Sales in nine months totaled 2,931 yen.
8 billion yen, up 169 yen.
6 billion or 6% yearson-year.
The main factors are as follows: the appreciation of the yen has a negative impact on the 9 billion yen, but the spread has a positive impact on the 126 billion yen, and the transaction volume has a positive impact on the 53 billion yen.
The price impact is positive because higher naphtha prices bring higher sales prices, and the continued strong market prices of MMA monomer during the 9-month period lead to higher price distribution --on-year. Volume-
It is wise that the negative effects include the effects of regular maintenance and repair, as well as the reduction in optical film shipments due to a slowdown in smartphone demand.
Positive factors include high sales growth
Performance engineering plastics and battery materials and the volume growth brought about by the acquisition of the European industrial gas business.
Core operating income was 267 billion yen, down 38 billion or 12% year on yearon-year.
I will explain the situation by business department later.
The special price for 9 months is 3 yen. 3 billion.
This is mainly due to the sale of acrylic sheet business in Europe as part of a portfolio reform effort.
Last year, we recorded the costs associated with the integration of the three chemicals businesses. Year-on-
The yen rose 14 this year. 1 billion.
I will give details later.
Operating income of 270 yen.
3 billion yen, down 23. 9 billion year-on-year.
The total financial income and expenditure for 9 months is negative yen 4.
8 billion, one yearon-
The yen improved in one year. 7 billion.
The main reason is the dividend received within the group, an increase of 1 billion yen from last year-on-
And changes in the impact of foreign exchange.
A loss of 0. 5 billion yen in the previous year, while the increase recorded this year was 0. 9 billion yen.
Earnings before tax totaled 265 yen. 5 billion.
The total income tax fee is 59 yen.
1 billion yen or 4 yen.
8 billion younger than before.
The year before, Japan\'s sansuo company benefited from the tax cut effect in the United States. S.
Non-recurring 17 billion yen in 2018. But year-on-
With the decrease of profits, the tax amount is reduced and the tax expenditure is reduced.
Net income totaled 206 yen. 4 billion.
Net income attributable to the owner of the parent company is 166 billion yen-on-
During the year, the yen fell 3 billion, down slightly.
Decrease in net income attributable to non-controlling interests-on-year by JPY 14. 4 billion.
This is due to the fact that the profit of Japan\'s miso is too low, which is due to the increase in tax spending and the low profit of Mitsubishi Tiantian Pharmaceutical.
Of core operating income, 9-
A total of 21 yen during several months.
6 billion, improvement of JPY 3. 3 billion year-on-year.
This is mainly due to the increase in MMA single profit
Related business.
Page 5, sales revenue and core operating income of each business segment.
Sales revenue grew year-on-year in nine monthson-
Annual of all business units except health care.
Core operating income fell year on yearon-
Years other than carbon products.
It will be outlined in part later, but I would like to make some comments on the comparison between the third and second quarters.
In terms of functional products, the polyester film factory was negatively affected by the fire, but the optical film demand recovered from the second quarter in the third quarter, using the impact of the old model inventory.
The third quarter was the peak season for demand for food packaging films, which led to an increase in profits.
For Performance Chemicals, rapid material price drop for phenol
Pc chain.
This is the main reason for the decline in profits.
At MMA, regular maintenance and repair at the Beaumont plant in the United States have had an impactS. and at SAMAC.
In addition, the decline in Chinese market prices and falling demand also mainly affected the decline in production and sales.
In the petrochemical industry, the lag problem of transferring higher naphtha prices to selling prices has been solved, but the market price of ethylene glycol and other products is lower, resulting in lower profits.
In the previous year\'s carbon products, unplanned maintenance of needle coke and the impact of heavy rains in western Japan on coke.
With the resolution of these problems, profits have increased.
In terms of industrial gas, the acquisition of European operations and strong sales of Japanese hard products have had an impact, resulting in higher profits.
In healthcare, profits have increased as the third quarter is the peak season for flu vaccines and other vaccines.
Go to the analysis of core operating income, page 6.
In total, the yen fell 38 billion-on-
The difference in price minus the year of 12 yen. 1 billion;
The volume is poor, 19 yen less. 1 billion;
Fixed cost plus 18 yen5 billion;
And others, minus 23 yen. 5 billion.
As for the comprehensive price difference, the yen fell by 12. 1 billion.
In terms of chemicals, the price gap is small in terms of olefin.
But for 9 months MMA, the price difference-
Or the spread is still high, resulting in a positive 8 billion yen.
In terms of health care, minus the impact of 17 billion yen due to the NHI price revision;
In terms of functional products, the rise in raw material prices narrowed the spread, minus the yen 7. 2 billion. Volume-
On the basis of the total merger, minus the yen 19. 1 billion.
In terms of chemicals, the scope of regular maintenance and repair varies.
The polypropylene problem at the Deer Island factory has had an impact.
In the third quarter, with the rapid decline in demand for MMA monomer in China, the yen was negatively affected on the 18 th. 2 billion;
Fixed cost plus 18 yen. 5 billion.
In the healthcare sector, SG & A spending decreased by 20 billion yen as operational productivity reforms progressed.
25 yen less3 billion.
In the functional product, minus 10 yen. 8 billion.
In polycarbonate chains and other aspects, the cost of repair has increased, and the cost of restoring electrolyte operations in the United States has increasedK.
Labor costs and outsourcing costs have also increased, resulting in an increase in fixed costs.
Chemicals, plus yen 4.
5 billion, mainly the impact of inventory valuation gains and losses.
Industrial gas, 2 yen less. 7 billion.
This is because the total acquisition cost in Europe is 2 yen. 8 billion.
The negative effects of health care and other aspects are mainly related to higher R & D costs.
Now overview by paragraph, page 7.
Performance Product Segment
Sales revenue totaled 880 yen.
1 billion, one yearon-
The yen gained 27 years. 8 billion.
61 yen core operating income.
4 billion yen, down 14. 5 billion year-on-year.
According to the market segment, the total sales revenue of functional products is 588 yen. 1 billion;
Core operating income 37 yen. 2 billion.
The yen\'s income increased on the third day.
8 billion yen, but the core operating income fell. 1 billion year-on-year.
Overview of functional products, high sales-
Engineering plastics.
However, due to the rise in raw materials, the price gap generally narrowed.
As demand for smartphones slows down mainly in China, the number of optical films has decreased.
Optical film factories in Wuxi, Indonesia and China were affected by the fire, resulting in a year-on-
Annual profit fell.
Let me introduce the optical film plant fire in detail.
On July, a fire broke out in a polyester film factory in Indonesia.
The operation is still suspended and we will replace it with the operation of the Shiga factory.
We look forward to recovery or recovery in June.
As for the Mylar film factory fire that occurred in Wuxi, China on August, the operation was suspended again and we expect to resume on April.
Sales revenue of Performance Chemicals totaled 292 billion yen.
Core operating income is 24 yen. 2 billion. Year-on-
The annual sales revenue increased by 24 billion yen, and the core operating income decreased by 3 yen. 4 billion.
Overview of Performance Chemicals: market price of phenol
In the first half, the performance of polyester chain materials is strong.
But in the third quarter, we saw a rapid decline. For the 9-
During the month, the profit decreased, mainly due to the impact of regular maintenance and repair of phenol
Pc chain.
Analysis of core operating income of the performance product sector: price difference, minus JPY 7.
2 billion, mainly due to the high cost of raw materials, the price difference of functional products is reduced.
For Performance Chemicals, 9-
Monthly cycle of phenol
The polycarbonate chain continues for a month-
During the month, the yen is 3 billion. Volume-
Wise, minus yen 2.
4 billion, mainly due to the slowdown in smartphone demand and the decrease in optical film sales in functional products.
As for others, there is an impact on regular maintenance and repair of polycarbonate chains and others, as well as an increase in the cost of restoring US electrolyte operationsK.
And higher labor costs and outsourcing costs.
Next, the chemicals section.
Sales revenue totaled 970 yen.
8 billion yen, core operating income of 110 billion yen. Year-on-
Sales revenue rose 101 yen this year.
4 billion yen, core operating income fell by 2. 8 billion.
MMA single sales revenue totaled 307 yen. 8 billion;
Core operating income 79 yen. 8 billion. Year-on-
Sales increased by 26 yen this year.
2 billion, operating profit fell by 1 yen. 6 billion.
Due to the strong market price in the first half of the year, the price spread of 9-9 is still higher than the previous year
However, due to the slowdown in demand, mainly in China, the scope of regular maintenance and repair is different, and production and sales are reduced.
As a result, profits from high sales are lower.
The average market price for MMA in the same period last year was $2,305.
The third quarter of fiscal 2018 averaged $2,578.
Market prices remained high until September, until it began to fall and recently fell to around $2,100.
As for regular maintenance and repair and on-site failure in the third quarter, our factory in Beaumont, USAS.
Scheduled maintenance and repairs were completed.
In SAMAC, there is also regular maintenance and repair, and the restart operation was delayed for 18 days due to a failure during startup
But it was restarted in December 23.
In the third quarter, China expressed concern about the prospect of a trade dispute between the United States and the United States. S.
And China, and uncertainty in the future, have led customers to be more hesitant to buy in their efforts to reduce inventory.
In response, we made production adjustments, especially in Asia, to help optimize our inventory levels.
The overall average capacity utilization for the quarter was around 70%, excluding the impact of regular maintenance and repairs.
Sales revenue of petrochemical business totaled 455 yen.
3 billion yen, up 55 yen. 3 billion year-on-year;
Core operating income 12 yen.
6 billion yen, down 10. 4 billion year-on-year.
The increase in sales revenue is due to the rise in sales prices, linked to the rise in naphtha prices, despite the decline in sales, which reflects the greater impact of regular maintenance and repair of the Ludao ethylene production facility.
The decline in profits is due to the fact that scheduled maintenance and repairs are larger than in the previous fiscal year, as well as the impact of the failure of polypropylene production facilities, and delays reflecting the increased cost of raw materials when the price of naphtha rises, sales of olefin rose.
Sales of carbon products increased by 19 yen.
9 billion yen to 207 yen.
7 billion yen, core operating income 9.
2 billion to 17 yen.
6 billion, mainly due to strong demand for Coke and other products, the price of needle coke has risen.
Next, I want to move to industrial gas.
Sales in this area totaled 512 yen.
Core operating income of 4 billion yen 42.
Rose 1 billion yen 46.
The yen fell 5 billion. 8 billion year-on-
It\'s a year.
Sales revenue has increased over the previous year, mainly due to the establishment of a new domestic online sales system
Positive impact of on-site gas plant and European business acquisition.
Core operating profit fell year on yearon-
Mainly due to the increase in raw materials and fuel costs, Yen 2.
Despite continued strong demand, 8 billion per cent is the cost of acquiring a European business.
Let me make some comments on the third quarter European business acquisition.
The results of the acquisition business in December 2018 merged into 12 yen.
The sales revenue is 6 billion, and the core operating profit is 0. 5 billion yen.
The core operating income of 0. 5 billion yen is recorded after deducting 1 yen.
7 billion fees calculated based on provisional figures in the allocation of purchase prices, including mark-to-
The market value of 0. 8 billion yen is recorded as the sales cost of inventory goods, and the other 0. 8 billion yen is used as depreciation and amortization expenses for tangible and intangible assets and other transitions --
The relevant expenses are 100 million yen.
Next, let me go to the health care section.
Sales revenue fell 7 billion yen to 421 yen. 8 billion.
Core operating income fell by 15 yen.
7 billion yen against 56 yen.
An increase of 5 billion over the previous year.
The decline in sales revenue is due to the NHI price revision of domestic ethical drugs, the decline in royalty income and the transfer of the non-patented drug business, although Radicava\'s sales in the United States contributedS.
As well as sales growth of major products such as Simponi in Japan.
As for core operating income, the impact of NHI price revisions is offset by the growth in sales of Radicava and Simponi and the reduction of costs by promoting operational productivity reforms.
But the impact of the acquisition of neural derm Co. , Ltd.
And the increase in the cost of VLP or virus research and development --like particle-
Basic vaccines and new sales, among other things, led to a decline in profits.
The next slide is a special item about merging.
The total amount of special items in the first nine months was 3 yen.
3 billion, improve the yen 14.
Up 1 billion from the same period last year.
In the third quarter, the total sales of special goods were 4 yen.
Profit of 9 billion, mainly including the sales income of 7 yen inter-company securities.
3 billion, impairment loss of 1 yen. 6 billion.
The proceeds from the sale of intercompany securities include the proceeds from the transfer of acrylic sheet business in Europe as part of the business portfolio reform, as well as the proceeds from the sale of refined benzene acid business in Europe, which India has done in the past.
Impairment losses occur in fixed assets related to structural reforms in the performance product segment.
Let me go to the next page of Consolidated cash flow.
In terms of adjusted cash flow, the net cash provided by operating activities ended in the first nine months of the third quarter with a cash inflow of 276 yen. 7 billion.
In addition to income and depreciation amortization before income tax, inventory changes are shown as cash outflows of 28 yen.
4 billion yen and other 105 yen.
6 billion respectively.
Other major projects are tax expenditures.
Net cash usage for investment activities-to-
Cash outflows totaled 801 yen as of the third quarter. 9 billion.
Capital expenditure led to a cash outflow of 167 yen. 3 billion.
No big-
Scale capital investment.
Thus, investment in production reform and streamlining initiatives mainly includes expenditure.
Sell assets worth 31 yen.
3 billion including the sale of intercompany Securities, I explained on the slide that the consolidation of special items, the sale of shares held by the strategy and the sale of idle land.
Investment Loans receivable, a total of 665 yen.
Cash out of 9 billion.
This includes TNSC\'s acquisition of a European gas business worth 632 yen.
8 billion and the acquisition of shares in cleaning Group Co. , Ltd.
As a result, free cash flow for nine months ended with a cash outflow of 525 yen. 2 billion.
But as I said, this includes TNSC\'s acquisition of a European gas business worth 632 yen.
Cash out of 8 billion.
If this factor is excluded, our cash inflow will reach 107 yen.
6 billion, this will meet our target of 140 billion yen in cash flow at the end of this fiscal year.
As for net cash for financing activities, interest-
Debt increased by 676 yen.
3 billion due to the acquisition of the European natural gas business by TNSC.
Dividends, etc. include cash outflows due to the year of payment
The final dividend for fiscal 2017 and the interim dividend for fiscal 2018 totaled 52 yen.
Share Repurchase of 9 billion yen and 20 billion yen.
Please go to the next page, where you can see the consolidated statements for your financial positions.
Total assets increased by 912 yen.
Compared to the balance as at the end of March 2018, 5 billion to 5,613,900,000,000 yen.
In this increase, 775 billion yen was attributed to TNSC\'s acquisition of a European gas company with fixed assets of 408 billion yen and goodwill of 301 billion yen.
Other projects include Mitsubishi Chemical\'s acquisition of shares in Clean parts, cash and cash equivalents, and an increase in inventory, as well as the impact of foreign exchange rates.
Net interest on credit-
The debt held was 1,782,700,000,000 yen and the net D/E ratio was 1.
30 as of the end of the third quarter, the deterioration of 0.
41 points after the end of fiscal 2017.
The proportion of equity attributable to the owner of the parent company is 24.
The third quarter was 4%, down 2 year on year.
9 percentage points after the end of the previous fiscal year.
All of this is for profit.
Now, let me briefly comment on the forecast for the fourth quarter and for the whole year.
Please refer to the 16 am page quarterly data under the reference \"sales revenue and core operating income by business unit.
Please allow me to make some comments on core operating revenue as you view the page.
As you may know, our business environment is expected to be so uncertain in the future, and to be honest, we find it difficult to make predictions.
As I said, in recent months since the third quarter, we have seen Chinese consumers increasingly hesitant to buy MMA, especially to reduce inventory, which makes it very likely that demand will remain weak before the Chinese New Year.
In addition, the petrochemical business experienced an unexpected rapid decline at the end of the third quarter, below our expectations.
With these factors in mind, if I can start with the overall situation, we expect that the results for the whole year will miss the forecast announced in November 1, 2018, one percentage point.
If I can start with a feature product, continue to take a look at what\'s going on in the third to fourth quarters by business.
We usually see a downward trend in third-quarter to fourth-quarter profits due to seasonal factors, such as the Chinese New Year, and while some businesses tend to publish sales at the end of the fiscal year, they offset each other.
As a result, we expect fourth-quarter profits to be roughly aligned with the third quarter, and most of them achieve previous forecasts for the full year.
Market price of phenol in Performance Chemicals
The Pc chain began to fall sharply in the third quarter and is expected to remain low in the fourth quarter.
In the performance chemicals business, however, there are some factors specific to the end of the fiscal year in the fourth quarter, which will help to increase profits by 2 billion yen over the third quarter.
So while we expect a slight decline in the forecast for the full year, it is expected that the fourth quarter will be slightly better than the third quarter.
As I said, in MMA, the fourth quarter, regular maintenance and repair by Bomont and Samak will not have more impact, but market prices have been falling recently compared to the third quarter.
As a result, we expect fourth-quarter profits to remain substantially unchanged from the third quarter, with full-year profits likely to be lower than previously forecast.
However, these projections may change depending on the situation after the Chinese New Year, so we need to pay close attention to the situation.
As for the petrochemical business, naphtha prices began to fall sharply at the end of the third quarter, and we expect market prices for products such as ethylene glycol to continue to fall in the fourth quarter.
In addition, if the market price of naphtha remains at the same low level as recently in the fourth quarter, we will be hit by the loss of inventory valuation, at the same time enjoy the benefits of the time difference between the cost of raw materials and the decline in olefin prices, offset some losses.
So in the fourth quarter, we should be able to stay profitable, although we may see a decline in third-quarter profits.
However, on a year-round basis, we expect profits to Miss previous forecasts.
As for carbon products, due to the adjustment of the price of needle coke, we expect the profitability of the fourth quarter to be further enhanced, thus exceeding the previous forecast for the whole year.
With respect to industrial gas, as announced by TNSC, we expect fourth-quarter profits to grow by about 7 billion yen over the third quarter.
In healthcare, as MTPC has not revised its earnings outlook, we expect fourth-quarter profits to fall by 6 billion yen from the third quarter.
Therefore, it is quite difficult to forecast by business unit, but our current forecast for the whole company will miss about one percentage point.
There is, however, a lot of uncertainty, which, to be honest, makes it difficult for us to make any predictions.
With these circumstances in mind, I share with you our current forecast for the whole year.
Thank you for your attention.
We answer questions now.
Questions and Answers--------------------------------------------------------------------------------Operator [1]--------------------------------------------------------------------------------
The first question is Mr.
Watanabe of Morgan Stanley Securities. --------------------------------------------------------------------------------
Watanabe of Morgan Stanley Research-
Research analyst [2]--------------------------------------------------------------------------------
I have a question about MMA monomer.
You are cutting a lot of production, but the market price is still falling.
We did see some rebound for other petrochemical products, but haven\'t we seen this happening with MMA monomer yet?
What are you taking?
Or, don\'t you know until the end of the Chinese new year holiday? --------------------------------------------------------------------------------
Mitsubishi Chemical Holding Company-Damu Yuanbo
President and General Manager of company management office3]--------------------------------------------------------------------------------
Yes, before the end of the Spring Festival holiday, we do not know the market price in China, nor do we know the reduction in inventory and the situation in which orders are put on hold.
At the moment, the price is around $2,100 and we hope it will not fall again. --------------------------------------------------------------------------------
Watanabe of Morgan Stanley Research-
Research analyst [4]--------------------------------------------------------------------------------
Price spreads are shrinking as raw material prices fall. Am I correct? --------------------------------------------------------------------------------
Mitsubishi Chemical Holding Company-Damu Yuanbo
President and General Manager of company management office5]--------------------------------------------------------------------------------
Prices of raw materials are falling.
The same is true for acetone and methanol.
We believe that the spread will be maintained to a certain extent. --------------------------------------------------------------------------------
Watanabe of Morgan Stanley Research-
Research analyst [6]--------------------------------------------------------------------------------I see.
Finally, you talked about the rapid decline in the price of naphtha and the impact of the profit and loss of inventory valuation.
Does this remove the price distribution associated with olefin? --------------------------------------------------------------------------------
Mitsubishi Chemical Holding Company-Damu Yuanbo
President and General Manager of company management office7]--------------------------------------------------------------------------------
-Structure of petrochemical products-
We believe that some negative effects from ethylene to olefin will be canceled as a whole. --------------------------------------------------------------------------------Operator [8]--------------------------------------------------------------------------------
The next question is Mr.
Okazaki of Nomura Securities. --------------------------------------------------------------------------------
Mr. Okazaki, Nomura Securities Co. , Ltd. Ltd.
Research Department-
Head and analyst of basic materials research team of chemical, textile and electronic materials in Japan [9]--------------------------------------------------------------------------------
I have a question about performance chemicals.
You said phenol-
Pc chain business is facing difficulties.
But what about other products, such as advanced polymer or battery materials?
What is your forecast for the fourth quarter and what is the situation for the third quarter? --------------------------------------------------------------------------------
Mitsubishi Chemical Holding Company-Damu Yuanbo
President and General Manager of company management office10]--------------------------------------------------------------------------------
For advanced polymers, automotive applications in Europe are seeing the impact of the WLTP regime or emission control.
We see a slowdown in volume.
In terms of battery materials, the situation is very stable-remain firm.
The amount is increasing. --------------------------------------------------------------------------------
Mr. Okazaki, Nomura Securities Co. , Ltd. Ltd.
Research Department-
Head and analyst of basic materials research team of chemical, textile and electronic materials in Japan [11]--------------------------------------------------------------------------------
So relative-à-
The forecast is mainly due to the reduction of the price difference of phenol
Part of it is the European automobile industry. Am I correct? --------------------------------------------------------------------------------
Mitsubishi Chemical Holding Company-Damu Yuanbo
President and General Manager of company management office12]--------------------------------------------------------------------------------Yes. --------------------------------------------------------------------------------
Mr. Okazaki, Nomura Securities Co. , Ltd. Ltd.
Research Department-
Head and analyst of basic materials research team of chemical, textile and electronic materials in Japan [13]--------------------------------------------------------------------------------
The next question is about carbon products.
After the fourth quarter, your supply and demand for needles are expected to rise in price.
Graphite electrode application and LIB, lithium-
Ion battery, application? --------------------------------------------------------------------------------
Mitsubishi Chemical Holding Company-Damu Yuanbo
President and General Manager of company management office14]--------------------------------------------------------------------------------
We believe that supply and demand remain strong and unchanged. --------------------------------------------------------------------------------
Mr. Okazaki, Nomura Securities Co. , Ltd. Ltd.
Research Department-
Head and analyst of basic materials research team of chemical, textile and electronic materials in Japan [15]--------------------------------------------------------------------------------
Two apps? --------------------------------------------------------------------------------
Mitsubishi Chemical Holding Company-Damu Yuanbo
President and General Manager of company management office16]--------------------------------------------------------------------------------Yes. --------------------------------------------------------------------------------
Mr. Okazaki, Nomura Securities Co. , Ltd. Ltd.
Research Department-
Head and analyst of basic materials research team of chemical, textile and electronic materials in Japan [17]--------------------------------------------------------------------------------
For the next fiscal year, don\'t you think the price or supply and demand situation will deteriorate? --------------------------------------------------------------------------------
Mitsubishi Chemical Holding Company-Damu Yuanbo
President and General Manager of company management office18]--------------------------------------------------------------------------------
Based on the comments we received from our customers, we feel that this strong situation will be retained for the time being. --------------------------------------------------------------------------------
Mr. Okazaki, Nomura Securities Co. , Ltd. Ltd.
Research Department-
Head and analyst of basic materials research team of chemical, textile and electronic materials in Japan [19]--------------------------------------------------------------------------------
But it is reported that the price of graphite electrodes in China is falling in part.
But I\'m right. don\'t you worry? --------------------------------------------------------------------------------
Mitsubishi Chemical Holding Company-Damu Yuanbo
President and General Manager of company management office20]--------------------------------------------------------------------------------
We\'re not worried. --------------------------------------------------------------------------------Operator [21]--------------------------------------------------------------------------------
The next question is Mr.
Chi Tian, Japan, Citigroup global market. --------------------------------------------------------------------------------
Research Department of Citigroup Corporation-
[Director and analyst]22]--------------------------------------------------------------------------------
I have a question about MMA monomer.
What are the factors for profit differences between the second quarter and the third quarter?
Market prices fell by $100.
I don\'t know the price difference.
But what is the impact?
Quarterly profits have indeed fallen a lot. on-quarter.
So, can you talk separately about the impact of regular maintenance and repair, reduction of production and reduction of sales? --------------------------------------------------------------------------------
Mitsubishi Chemical Holding Company-Damu Yuanbo
President and General Manager of company management office23]--------------------------------------------------------------------------------
You may know that market prices averaged $2,683 in the second quarter;
The third quarter was $2,433, down about $250.
Therefore, the influence of volume change is greater.
Excluding the impact of regular maintenance and repair, the utilization rate of facilities has been very low, about 70%.
Maintenance and repair in Bomont and Samak have an impact, so I\'m afraid I can\'t give you a quantitative explanation. --------------------------------------------------------------------------------
Research Department of Citigroup Corporation-
[Director and analyst]24]--------------------------------------------------------------------------------
So are you saying that more of a volume factor is affecting utilization? --------------------------------------------------------------------------------
Mitsubishi Chemical Holding Company-Damu Yuanbo
President and General Manager of company management office25]--------------------------------------------------------------------------------Yes. On a year-on-
Change in quantity.
Reduction in production and decrease in sales are the main factors. --------------------------------------------------------------------------------
Research Department of Citigroup Corporation-
[Director and analyst]26]--------------------------------------------------------------------------------
For MMA monomer, it is said that the situation in the Chinese market is quite bad.
Any difference area-to-region?
To be fair, markets in Europe and the United StatesS. remain strong? --------------------------------------------------------------------------------
Mitsubishi Chemical Holding Company-Damu Yuanbo
President and General Manager of company management office27]--------------------------------------------------------------------------------
We don\'t see any specific factor areas-by-region.
I think there is a concern that the trade friction effect will be extended and therefore the customer will not place an order.
This is the case in Asia.
As for Europe, prices are expected to drop, so do not place orders. --------------------------------------------------------------------------------
Research Department of Citigroup Corporation-
[Director and analyst]28]--------------------------------------------------------------------------------
Starting in the second quarter,and-
The balance of demand has eased, so supply tensions have eased.
What about America? S. ? --------------------------------------------------------------------------------
Mitsubishi Chemical Holding Company-Damu Yuanbo
President and General Manager of company management office29]--------------------------------------------------------------------------------For the U. S.
Demand remained strong in the third quarter.
But recently, we have seen a slight softening. --------------------------------------------------------------------------------
Research Department of Citigroup Corporation-
[Director and analyst]30]--------------------------------------------------------------------------------So the U. S.
Relatively speaking, in the best state. Am I correct? --------------------------------------------------------------------------------
Mitsubishi Chemical Holding Company-Damu Yuanbo
President and General Manager of company management office31]--------------------------------------------------------------------------------Yes.
Supply and demand-wise, yes.
Due to the tight maintenance turnaround time, the planned maintenance will be carried out centrally during this period. --------------------------------------------------------------------------------
Research Department of Citigroup Corporation-
[Director and analyst]32]--------------------------------------------------------------------------------
What about functional products, trouble with optical film factories in Indonesia and other places? As for --
The smartphone business did not perform well in the second quarter and rebounded in the third quarter.
What about the fourth quarter?
What is the impact of trouble on mobile and big-scale TV? --------------------------------------------------------------------------------
Mitsubishi Chemical Holding Company-Damu Yuanbo
President and General Manager of company management office33]--------------------------------------------------------------------------------
What do you mean by trouble? --------------------------------------------------------------------------------
Research Department of Citigroup Corporation-
[Director and analyst]34]--------------------------------------------------------------------------------
I am referring to the impact of fire accidents, loss of opportunity and other aspects. --------------------------------------------------------------------------------
Mitsubishi Chemical Holding Company-Damu Yuanbo
President and General Manager of company management office35]--------------------------------------------------------------------------------
Regarding the impact of the fire accident, we cannot give you the exact number.
But in the third quarter, the negative impact may exceed 1 billion yen. --------------------------------------------------------------------------------
Research Department of Citigroup Corporation-
[Director and analyst]36]--------------------------------------------------------------------------------
Do you think the impact will be similar in the fourth quarter? --------------------------------------------------------------------------------
Mitsubishi Chemical Holding Company-Damu Yuanbo
President and General Manager of company management office37]--------------------------------------------------------------------------------Probably.
Well, but the fourth quarter is a slow season, so the impact may be smaller than in the third quarter. --------------------------------------------------------------------------------
Research Department of Citigroup Corporation-
[Director and analyst]38]--------------------------------------------------------------------------------
What about mobile devices?
Generally speaking, things get worse from the second quarter to the third, but not for you.
What about the fourth quarter? --------------------------------------------------------------------------------
Mitsubishi Chemical Holding Company-Damu Yuanbo
President and General Manager of company management office39]--------------------------------------------------------------------------------
In the fourth quarter, this was considered a slow quarter due to seasonal factors.
So we expect it to be the same as the average year.
However, compared with the third quarter, trading volume may decline slightlywise.
Smartphone demand fell in the first and second quarters, with some recovery in the third quarter.
In the fourth quarter, due to the low season, we expect further decline in the fourth quarter. on-quarter. --------------------------------------------------------------------------------Operator [40]--------------------------------------------------------------------------------
The next question is Mr.
Shantian of Mizuho Securities. --------------------------------------------------------------------------------
Mikiya Yamada, Mizuho Securities Co. , Ltd. , Ltd.
Research Department-
Senior analyst41]--------------------------------------------------------------------------------
My first question is not core operating income but special projects. For the 9-
During the month, I think this value is higher than your original forecast.
Do you expect special projects to happen in the fourth quarter? Does this not change?
For core business revenue, you talk about less likely than the predicted singledigit percent.
What is the level of operating income? --------------------------------------------------------------------------------
Mitsubishi Chemical Holding Company-Damu Yuanbo
President and General Manager of company management office42]--------------------------------------------------------------------------------
For special items, a record of disposal of the plant, property and equipment is left.
There was no record for the third quarter.
But disposal work is in progress, so they may have time lag in the fourth quarter.
Therefore, we believe that the overall amount will be the same as the original forecast. --------------------------------------------------------------------------------
Mikiya Yamada, Mizuho Securities Co. , Ltd. , Ltd.
Research Department-
Senior analyst43]--------------------------------------------------------------------------------
As for the proceeds from the disposal business, you recorded JPY 7.
Third quarter 3 billion.
Is this part of your original plan and, therefore, not a benefit? --------------------------------------------------------------------------------
Mitsubishi Chemical Holding Company-Damu Yuanbo
President and General Manager of company management office44]--------------------------------------------------------------------------------
When we made the revised forecast in November 1, it included part of the sales revenue of acrylic sheet business. --------------------------------------------------------------------------------
Mikiya Yamada, Mizuho Securities Co. , Ltd. , Ltd.
Research Department-
Senior analyst45]--------------------------------------------------------------------------------Is that included? --------------------------------------------------------------------------------
Mitsubishi Chemical Holding Company-Damu Yuanbo
President and General Manager of company management office46]--------------------------------------------------------------------------------Yes. --------------------------------------------------------------------------------
Mikiya Yamada, Mizuho Securities Co. , Ltd. , Ltd.
Research Department-
Senior analyst47]--------------------------------------------------------------------------------So JPY 7.
3 billion is included in the forecast for November? --------------------------------------------------------------------------------
Mitsubishi Chemical Holding Company-Damu Yuanbo
President and General Manager of company management office48]--------------------------------------------------------------------------------Yes.
It was added as of November 1. So JPY 7.
Includes 3 billion. --------------------------------------------------------------------------------
Mikiya Yamada, Mizuho Securities Co. , Ltd. , Ltd.
Research Department-
Senior analyst49]--------------------------------------------------------------------------------
Therefore, at the level of operating income, a single-digit percent. Am I correct? --------------------------------------------------------------------------------
Mitsubishi Chemical Holding Company-Damu Yuanbo
President and General Manager of company management office50]--------------------------------------------------------------------------------Yes. --------------------------------------------------------------------------------
Mikiya Yamada, Mizuho Securities Co. , Ltd. , Ltd.
Research Department-
Senior analyst51]--------------------------------------------------------------------------------I see.
My second question is about the increasing R & D and fixed costs in the healthcare sector, where core operating income is significantly affected by other factors.
If possible, could you please let us know if these fees will continue to increase in the next financial year?
I think they will, because both MPTC and LSII may see an increase in fees.
But is my assumption correct?
Another question is about the cell processing center CPC in Kawasaki, which I remember was scheduled to start operations last month.
Is there no problem with it?
Can you update us? --------------------------------------------------------------------------------
Mitsubishi Chemical Holding Company-Damu Yuanbo
President and General Manager of company management office52]--------------------------------------------------------------------------------
As for R & D costs, we have not yet budgeted for the next fiscal year. But as VLP-
Based on vaccines and other development projects we are currently working on, progress has been made in its phase and in the number of diseases targeted by Muse cell
The base formula is also increasing and we expect the cost of R & D to increase from the fiscal year to the next fiscal year. --------------------------------------------------------------------------------
Mikiya Yamada, Mizuho Securities Co. , Ltd. , Ltd.
Research Department-
Senior analyst53]--------------------------------------------------------------------------------
Since February 1, the CPC of Tonomachi, HCM city has been fully put into use.
With the start of the full operation of the Muse cell product, it is now being manufactured there, is that correct? --------------------------------------------------------------------------------
Mitsubishi Chemical Holding Company-Damu Yuanbo
President and General Manager of company management office54]--------------------------------------------------------------------------------
Yes, it is manufacturing Muse cell products, first of all for the 3 diseases announced in last December, clinical trial materials for acute myocardial infarction, myocardial infarction, and great room angle, commercial production will be carried out after obtaining the following approval-
Signs one by one. --------------------------------------------------------------------------------Operator [55]--------------------------------------------------------------------------------
Let\'s go to the next question.
Miyamoto of UBS Securities. --------------------------------------------------------------------------------
Research Department of UBS Investment Bank-MiyamotoAnalyst [56]--------------------------------------------------------------------------------
Miyamoto of UBS Securities.
I also have questions about MMA.
In the previous earnings briefing, you said you would reduce production by about 10%, especially in Asia.
So I would like to know how much production cuts you actually made during the quarter.
I\'m also interested in knowing how you cut in the fourth quarter.
Some industry media reported that SAMAC would cut by 20% or suspend the operation of the Singapore plant.
Can you tell us what you think? --------------------------------------------------------------------------------
Mitsubishi Chemical Holding Company-Damu Yuanbo
President and General Manager of company management office57]--------------------------------------------------------------------------------
We are implementing a 30% operational adjustment around Asia. --------------------------------------------------------------------------------
Research Department of UBS Investment Bank-MiyamotoAnalyst [58]--------------------------------------------------------------------------------
Are you saying that the operation adjustment is mainly done in Asia, resulting in an adjustment of 30% on the global average? --------------------------------------------------------------------------------
Mitsubishi Chemical Holding Company-Damu Yuanbo
President and General Manager of company management office59]--------------------------------------------------------------------------------Yes. --------------------------------------------------------------------------------
Research Department of UBS Investment Bank-MiyamotoAnalyst [60]--------------------------------------------------------------------------------
Does this mean that the adjustment in Asia will exceed 30%? --------------------------------------------------------------------------------
Mitsubishi Chemical Holding Company-Damu Yuanbo
President and General Manager of company management office61]--------------------------------------------------------------------------------
Yes, our policy is to keep the SAMAC running at full capacity.
We work with a number of joint venture partners and limit raw materials, so we also bear the possibility of adjustment of SAMAC operations if necessary. --------------------------------------------------------------------------------
Research Department of UBS Investment Bank-MiyamotoAnalyst [62]--------------------------------------------------------------------------------
Will the operation of the Singapore factory be suspended?
The Singapore plant is reported to be suspended.
According to media reports, in order to adjust the output, your factory in Singapore will be suspended.
Do you have such a plan? --------------------------------------------------------------------------------
Mitsubishi Chemical Holding Company-Damu Yuanbo
President and General Manager of company management office63]--------------------------------------------------------------------------------
We cannot disclose the plan separately. --------------------------------------------------------------------------------
Research Department of UBS Investment Bank-MiyamotoAnalyst [64]--------------------------------------------------------------------------------I see.
When you say that in the fourth quarter, you expect the MMA profit level to remain at the same time as in the third quarter, have you not taken into account the possibility of a decrease in SAMAC production? --------------------------------------------------------------------------------
Mitsubishi Chemical Holding Company-Damu Yuanbo
President and General Manager of company management office65]--------------------------------------------------------------------------------This is correct.
The assumption we are predicting is that we will cut production mainly in Asia. --------------------------------------------------------------------------------
Research Department of UBS Investment Bank-MiyamotoAnalyst [66]--------------------------------------------------------------------------------I see.
My second question is the performance product and you said you expect a 2 billion yen improvement from the third quarter to the fourth quarter.
In addition to the usual seasonal factors, such as the trend of sales after the end of the fiscal year, is there any other factor that helps to increase profits?
Can you also tell us what you think about the future price of polycarbonate market? --------------------------------------------------------------------------------
Mitsubishi Chemical Holding Company-Damu Yuanbo
President and General Manager of company management office67]--------------------------------------------------------------------------------
The expected growth in earnings from the third quarter to the fourth quarter of performance products is mainly due to the usual seasonal factors. --------------------------------------------------------------------------------
Research Department of UBS Investment Bank-MiyamotoAnalyst [68]--------------------------------------------------------------------------------
What are your prospects for supply?
Demand and market price for Pc? --------------------------------------------------------------------------------
Mitsubishi Chemical Holding Company-Damu Yuanbo
President and General Manager of company management office69]--------------------------------------------------------------------------------
Basically, we expect the production site to keep running at full capacity.
In terms of supply-
Demand Outlook, due to the increase in production capacity of the industry, supply
Demand has eased, leading to a decline in market prices.
But we have recently heard that prices have rebounded a bit so we think the current supply
Balance of demand remains unchanged. --------------------------------------------------------------------------------Operator [70]--------------------------------------------------------------------------------
We will now discuss the next issue.
Bamboo from SMBC Nikko Securities. --------------------------------------------------------------------------------
Shengu Securities Co. , Ltd.
Research Department-
Senior analyst71]--------------------------------------------------------------------------------
Bamboo from SMBC Nikko Securities.
You explain the level of operation of MMA and polycarbonate, but can you tell us the actual results of the third quarter and your fourth-quarter outlook for other petrochemical products such as olefin and olefin? --------------------------------------------------------------------------------
Mitsubishi Chemical Holding Company-Damu Yuanbo
President and General Manager of company management office72]--------------------------------------------------------------------------------
Basically, for products other than MMA, we assume full capacity operations. --------------------------------------------------------------------------------
Shengu Securities Co. , Ltd.
Research Department-
Senior analyst73]--------------------------------------------------------------------------------
Do I correctly understand that in products other than MMA, the inventory is at the appropriate level and there is no such concern about MMA for customers who are currently unwilling to buy products? --------------------------------------------------------------------------------
Mitsubishi Chemical Holding Company-Damu Yuanbo
President and General Manager of company management office74]--------------------------------------------------------------------------------
We haven\'t heard such attention in derivatives yet. --------------------------------------------------------------------------------
Shengu Securities Co. , Ltd.
Research Department-
Senior analyst75]--------------------------------------------------------------------------------
So the trend in China is limited to MMA, isn\'t it? --------------------------------------------------------------------------------
Mitsubishi Chemical Holding Company-Damu Yuanbo
President and General Manager of company management office76]--------------------------------------------------------------------------------
Yes, MMA is the most affected at the moment. --------------------------------------------------------------------------------
Shengu Securities Co. , Ltd.
Research Department-
Senior analyst77]--------------------------------------------------------------------------------
Is the situation of MMA in China deteriorating?
Or keep it in the same bad situation?
How do you see the extent or direction of the deterioration of the situation? --------------------------------------------------------------------------------
Mitsubishi Chemical Holding Company-Damu Yuanbo
President and General Manager of company management office78]--------------------------------------------------------------------------------
The situation has been present since November.
To be honest, we have to wait until the end of the Chinese New Year holiday to see the way forward more clearly. --------------------------------------------------------------------------------
Shengu Securities Co. , Ltd.
Research Department-
Senior analyst79]--------------------------------------------------------------------------------
So do I understand correctly that you do think that the situation of the challenge will continue to move forward? --------------------------------------------------------------------------------
Mitsubishi Chemical Holding Company-Damu Yuanbo
President and General Manager of company management office80]--------------------------------------------------------------------------------Yes.
Judging from the current situation, we do not see any clear signs of recovery.
So our prediction is purely based on the current situation, which we explained earlier. --------------------------------------------------------------------------------
Shengu Securities Co. , Ltd.
Research Department-
Senior analyst81]--------------------------------------------------------------------------------
Regular maintenance and repair in the third quarter.
But in addition, assuming that MMA production and sales will not change from the third quarter to the fourth quarter, the profit level is expected to remain unchanged.
Is that how you predicted it? --------------------------------------------------------------------------------
Mitsubishi Chemical Holding Company-Damu Yuanbo
President and General Manager of company management office82]--------------------------------------------------------------------------------
Your understanding is correct. --------------------------------------------------------------------------------
Shengu Securities Co. , Ltd.
Research Department-
Senior analyst83]--------------------------------------------------------------------------------
My second question is about carbon products.
Page 16 shows the company\'s quarterly results.
Sales revenue increased by 5 yen in the third quarter.
Quarter 8 billion-on-
But core operating income grew by only 0. 8 billion yen.
The price of needle focus has not risen so much from the second to the first ---
In the third quarter, it is expected to soar from the third quarter to the fourth quarter. Am I correct? --------------------------------------------------------------------------------
Mitsubishi Chemical Holding Company-Damu Yuanbo
President and General Manager of company management office84]--------------------------------------------------------------------------------
Needle coke has been and will be fully operational, and its price is expected to be revised again in the fourth quarter.
This segment also includes cokes, whose business is also reflected in overall performance. --------------------------------------------------------------------------------
Shengu Securities Co. , Ltd.
Research Department-
Senior analyst85]--------------------------------------------------------------------------------
But the price between the second and third quarters didn\'t have much impact, right? --------------------------------------------------------------------------------
Mitsubishi Chemical Holding Company-Damu Yuanbo
President and General Manager of company management office86]--------------------------------------------------------------------------------
In the domestic market, prices were fixed between January and June and between July and December, so prices did not change between the two quarters. --------------------------------------------------------------------------------Operator [87]--------------------------------------------------------------------------------
Let\'s discuss the next issue now.
Mei Tian of JPMorgan Securities. --------------------------------------------------------------------------------
Shogo Umeda, research arm of JPMorgan Chase-Analyst [88]--------------------------------------------------------------------------------
Mei Tian of JPMorgan Securities.
I have two questions.
First of all, I would like to know if there is any one-time factor in the third quarter that will increase and decrease profits.
You mentioned that the impact of the fire accident at your polyester film factory was slightly higher than 1 billion yen.
But is there any other one-off factor that affects profit? A follow-
About the problem of polyester film.
You said the factory in Indonesia is scheduled to restart in July.
However, should we bear the consequences of the loss of opportunity caused by the fire accident of the polyester film business transferred to the first or second quarter of the next fiscal year? --------------------------------------------------------------------------------
Mitsubishi Chemical Holding Company-Damu Yuanbo
President and General Manager of company management office89]--------------------------------------------------------------------------------
As for the polyester film business, we plan to resume our factory operation in Wuxi, China in April.
We are trying to get the Indonesian factory back in operation in June.
While there may be a slight fallout for the next fiscal year, we expect that the impact will be almost entirely apparent in this fiscal year, leaving little to the next fiscal year. --------------------------------------------------------------------------------
Shogo Umeda, research arm of JPMorgan Chase-Analyst [90]--------------------------------------------------------------------------------I see.
In addition to polyester film, can you share with us other one-off factors that affect third-quarter profits or expenses? --------------------------------------------------------------------------------
Mitsubishi Chemical Holding Company-Damu Yuanbo
President and General Manager of company management office91]--------------------------------------------------------------------------------
There are no particularly important factors. --------------------------------------------------------------------------------
Shogo Umeda, research arm of JPMorgan Chase-Analyst [92]--------------------------------------------------------------------------------I see.
Do I correctly understand that there are no new one-off factors in the fourth quarter than those already identified in segments other than the Mylar business? --------------------------------------------------------------------------------
Mitsubishi Chemical Holding Company-Damu Yuanbo
President and General Manager of company management office93]--------------------------------------------------------------------------------
The problem with polyester film is the main problem. --------------------------------------------------------------------