Quarterly Financial Results for the First Quarter, Ended June 30, 2016 (Japanese GAAP, Consolidated) August 8, 2016 Name of Listed Company: Kaneka Corporation Stock Exchange Listings: Tokyo, Nagoya Code Number: 4118 URL http://www.kaneka.co.jp Representative: Mamoru Kadokura Title: President, Representative Director Contact Person: Keiji Suzuki Title: General Manager Accounting Department Phone: +81-6-6226-5169 Scheduled date for submitting financial statements: August 10, 2016 Scheduled date of dividend distribution: Note: Figures have been rounded down to the nearest million yen. 1. Consolidated Business Performance for the First Quarter, Ended June 30, 2016 (from April 1, 2016 to June 30, 2016) (1) Consolidated business performance (cumulative) (% indicates year-on-year change) Net income attributable Net sales Operating income Ordinary income to owners of parent million % million % million % million % Apr. 2016 Jun. 2016 136,058 (2.4) 8,779 2.0 7,131 (11.3) 4,600 (10.7) Apr. 2015 Jun. 2015 139,374 2.5 8,607 76.5 8,044 64.8 5,150 72.8 Note: Comprehensive income: ( 2,245) million ( %) three months ended June 30, 2016 10,233 million (162.9%) three months ended June 30, 2016 Net income per share Fully diluted net income per share Apr. 2016 Jun. 2016 13.87 13.86 Apr. 2015 Jun. 2015 15.38 15.37 (2) Consolidated financial position Total assets Net assets Shareholders equity ratio million million % As of Jun 30, 2016 564,820 303,123 50.8 As of March 31, 2016 557,251 308,722 50.6 (Reference) Shareholders equity: 286,835 million as of June 30, 2016 292,208 million as of March 31, 2016 2. Dividends Annual dividends 1st Quarter 2nd Quarter 3rd Quarter Year-end Annual Apr. 2015 Mar. 2016 8.00 10.00 18.00 Apr. 2016 Mar. 2017 Apr. 2016 Mar. 2017 (Forecasts) 9.00 9.00 18.00 Note: Changes in dividend forecast during the quarter under review: No 3. Forecast for consolidated business performance for the year ending March 31, 2017 (from April 1, 2016 to March 31, 2017) (Percentage figures represent changes from the corresponding periods of the previous fiscal year) Net sales Operating income Ordinary income Net income attributable to owners of parent Net income per share million % million % million % million % First half 280,000 0.1 18,000 (6.2) 16,000 1.2 10,000 0.9 30.15 Full year 600,000 8.1 42,000 9.9 38,000 15.0 23,000 9.6 69.35 Note: Revisions to consolidated business performance forecasts during the quarter under review: No
4. Other (1) Changes in principal subsidiaries during the term: No (2) Application of simplified methods of accounting and specific accounting methods: No (3) Changes in accounting principles, changes in estimates, or restatements 1. Changes owing to revisions in accounting standards: No 2. Changes other than 1. above: No 3. Changes in accounting estimates: No 4. Restatements: No (4) Number of shares outstanding (common stock) 1. Number of shares issued at the end of the period June 30, 2016 350,000,000 (including treasury stock): shares 2. Shares of treasury stock at the end of the period: June 30, 2016 18,246,908 3. Average number of shares during the period (calculated cumulatively from the beginning of the fiscal year) shares June 30, 2016 331,663,263 shares March 31, 2016 350,000,000 shares March 31, 2016 18,356,481 Shares June 30, 2015 334,867,311 shares (Disclosure of Implementation Status of Review Procedures) As of the date of this report, the review procedures prescribed in the Financial Instruments and Exchange Act were not complete. (Explanations or other items pertaining to appropriate use of operating results forecasts) The operating results forecasts and certain other statements contained in this document are forward-looking statements, which are rationally determined based on information currently available to the company. For a variety of reasons, actual performance may differ substantially from these projections. They do not constitute a guarantee that the company will achieve these forecasts or other forward-looking statements. For cautionary items used in operating results forecasts, please refer to (3) Consolidated Business Forecasts under 1. Quarterly Consolidated Business Performance on page 3.
Supplementary Materials Contents 1. Quarterly Consolidated Business Performance --------------------------------------------------- P. 2 (1) Consolidated Business Performance -------------------------------------------------------------- P. 2 (2) Consolidated Financial Position ------------------------------------------------------------------- P. 3 (3) Consolidated Business Forecasts ------------------------------------------------------------------ P. 3 2. Other Information ------------------------------------------------------------------------------------------- P. 4 (1) Changes in Principal Subsidiaries during the Term -------------------------------------------- P. 4 (2) Application of Specific Accounting Methods in Preparation of Financial Statements -- P. 4 (3) Changes in Accounting Principles, Changes in Estimates, or Restatements ------------ P. 4 3. Quarterly Consolidated Financial Statements ------------------------------------------------------- P. 5 (1) Quarterly Consolidated Balance Sheets ---------------------------------------------------------- P. 5 (2) Quarterly Consolidated Statements of Income and Comprehensive Income ------------ P. 7 (3) Quarterly Consolidated Statements of Cash Flows -------------------------------------------- P. 9 (4) Notes on Consolidated Financial Statements ---------------------------------------------------- P.10 (Notes on the Premise of a Going Concern) ----------------------------------------------------- P.10 (Notes in the Event of Significant Changes in the Amount of Shareholders Equity) --- P.10 (Segment Information) -------------------------------------------------------------------------------- P.10 1
1. Quarterly Consolidated Business Performance (1) Consolidated Business Performance The global economic outlook lacked strength overall during the first three months under review (April 1, 2016 to June 30, 2016, hereinafter the first quarter ). In this situation, the U.K. s departure from the EU that was decided in late June caused turmoil that spread beyond the Eurozone, rippling out into financial markets around the world and adding to the sense of uncertainty surrounding the future of the global economy. The Japanese economy was also affected, with a rapid appreciation of the yen and a fall in stock prices beginning to have an impact on corporate earnings. In this business environment, the Kaneka Group reported consolidated net sales of 136,058 million (down 2.4% year on year), due to the effect of the yen s appreciation and the market conditions for raw materials. Operating income was 8,779 million (up 2.0% year on year) due to an increase in sales volume and to maintaining spreads, and ordinary income was 7,131 million (down 11.3% year on year), and net income attributable to owners of the parent was 4,600 million (down 10.7% year on year). By segment, sales increased year on year in the Functional Plastics, Foodstuffs, and Life Science segments and decreased in the Chemicals, Expandable Plastics and, Electronic, and Synthetic Fibers and Others segments. Operating income increased year on year in the Chemicals, Functional Plastics, Foodstuffs, and Life Science segments and decreased in the Expandable Plastics and, Electronic, and Synthetic Fibers and Others segments. Operating performance by business segment was as follows: 1) Chemicals In the PVC resins business, while net sales decreased amid declines in resource prices, profitability improved due to an increase in sales for Asian markets such as India. In the Specialty PVC resins business, sales for overseas markets remained solid, mainly due to demand for Paste PVC resins in Asia and Chlorinated PVC in the U.S. In the caustic soda business, profitability improved with cost reduction efforts while domestic market conditions remained sluggish. As a result of the foregoing, segment sales decreased 4,069 million, or 15.1%, year on year to 22,926 million, and the segment posted operating income of 1,933 million, an increase of 603 million, or 45.4%, year on year. 2) Functional Plastics In the modifiers business, sales volume in the markets of the U.S., Europe, and Asia steadily increased as the Kaneka Group made progress globally with steps to enhance product differentiation and to expand new products for application in the non-pvc field. The modified silicone polymers business saw a steady increase in sales volume in both domestic and overseas markets. This was because the polymers were evaluated highly for their unique quality and displaced other materials for application in the construction field. In addition, making CEMEDINE CO., LTD. a consolidated subsidiary of the Group from the fourth quarter of the fiscal year ended March 31, 2016 contributed to the profitability of the segment. As a result of the foregoing, segment sales increased 3,480 million, or 14.7%, year on year to 27,164 million, and the segment posted operating income of 3,744 million, up 133 million, or 3.7%, year on year. 3) Expandable Plastics and Sales in the expandable polystyrene resins and products business were affected by sluggish demand in the agriculture and fisheries fields. Sales in the extruded polystyrene foam boards business were solid due to a moderate recovery of the Japanese housing-related markets. Meanwhile, the segment saw faltering demand for bead-method polyolefin foam, particularly in the automotive field in overseas markets. As a result of the abovementioned factors, segment sales decreased 1,194 million, or 7.2%, year on year to 15,384 million, and the segment posted operating income of 1,271 million, down 66 million, or 5.0%, year on year. 4) Foodstuffs In the Foodstuff business, the Group focused on developing and selling new products that anticipate consumer needs in order to add high added-value to the product mix amid a continued faltering in domestic demand and consumer preference for low prices. Moreover, the Group improved profitability by promoting business structure innovations designed to strengthen and 2
streamline the entire supply chain totally. As a result of the foregoing, segment sales increased 1,043 million, or 3.0%, year on year to 36,326 million, and the segment posted operating income of 901 million, an increase of 535 million, or 146.5%, year on year. 5) Life Science In the medical devices business, sales in the vascular intervention business expanded due to conducting joint businesses with other companies in the Europe and U.S. markets despite the effect of revision of reimbursement prices in domestic markets. The segment also concentrated on initiatives for expanding business in new domains including internal treatment of gastrointestinal systems. In the pharmaceutical business, sales expanded steadily in the active pharmaceutical ingredients (API) market and the bio-pharmaceutical market. The functional foodstuffs business saw a steady increase in sales volume of the reduced form of coenzyme Q10 in all markets, and particularly the U.S market as the biggest market. Moreover, the Group saw sales of its Foods with Functional Claims products increase amid growing recognition of this category following the launch of a Food with Functional Claims System in the Japanese market. As a result of the abovementioned factors, segment sales amounted to 15,036 million, an increase of 449 million, or 3.1%, year on year, and the segment posted operating income of 2,845 million, an increase of 301 million, or 11.9%, year on year. 6) Electronic Overall sales of ultra-heat-resistant polyimide film and high thermal conductive graphite sheet were strongly affected by sluggish demand in the smartphone market despite progress with proactive steps to develop markets for high-function products and new products. In the photovoltaic modules business, profitability improved in tandem with the continued implementation of business structure reforms. The segment concentrated on expanding sales of new products and high-function products using heterojunction technology, which has one of the world s highest conversion efficiencies, and on initiatives to provide solutions contributing to realization of net zero energy houses. As a result of the abovementioned factors, segment sales decreased 2,289 million, or 22.2%, to 8,045 million, and the segment posted an operating loss of 585 million. 7) Synthetic Fibers and Others In the synthetic fibers business, sales for materials for hair accessory products in the African market remained solid despite the significant impact of the yen s appreciation. The segment also concentrated on expanding sales of products with high added-value and reducing costs. Moreover, a new plant in Malaysia started commercial operation in July, 2016. As a result of the foregoing, segment sales decreased 735 million, or 6.2%, year on year to 11,175 million, and the segment posted operating income of 3,932 million, a decrease of 93 million, or 2.3%, year on year. (2) Consolidated Financial Position 1) Status of Assets, Liabilities and Equity Total assets were 564,820 million as of June 30, 2016, down 12,431 million compared with March 31, 2016. Interest-bearing debt totaled 108,786 million, down 5,089 million. Net assets (equity) decreased 5,599 million, to 303,123 million, due to a decrease in the valuation difference on available-for-sale securities and also a decrease in the foreign currency translation adjustment. 2) Consolidated Cash Flows Net cash provided by operating activities during the first three months of the fiscal year was 16,705 million, mainly due to income before income taxes and minority interests and depreciation and amortization. Net cash used in investing activities amounted to 11,095 million, mainly owing to the purchase of property, plant and equipment. Net cash used in financing activities came to 5,585 million, mainly owing to cash dividends paid. As a result, cash and cash equivalents as of June 30, 2016 totaled 42,303 million. (3) Consolidated Business Forecasts The sense of uncertainty over the future of the global economy has grown stronger with the unpredictable impact of the U.K. s departure from the EU in addition to trends in the political and economic situations and fiscal policies of leading countries, the situation in China, and geopolitical risks. The risk of downward pressure on the real economy has grown more acute. Moreover, the Japanese economy faces the risk of a downturn in external demand and corporate earnings due to 3
uncertainty over the direction of the global economy and the persistent appreciation of the yen, although economic and fiscal policies are expected to have some positive effect. In this business environment, the Kaneka Group will strengthen the earnings capability of its competitive product groups and strive to expand earnings by strengthening R&D to create new businesses and by accelerating the transformation of its business structure. Therefore, the Group has not revised its first-half or full-year consolidated business forecast for the fiscal year ending March 31, 2017. 2. Other Information (1) Changes in Principal Subsidiaries during the Term There were no changes in the scope of consolidation of specific subsidiaries during the first three months of the fiscal year under review. (2) Application of Specific Accounting Methods in Preparation of Financial Statements Nothing to report (3) Changes in Accounting Principles, Changes in Estimates, or Restatements Nothing to report 4
3. Quarterly Consolidated Financial Statements (1) Quarterly Consolidated Balance Sheets FY2015 Term ended March 31, 2016 FY2016 1st Quarter Term ended June 30, 2016 5
FY2015 Term ended March 31, 2016 FY2016 1st Quarter Term ended June 30, 2016 6
7
Quarterly Consolidated Statements of Comprehensive Income FY2015 1st Quarter From April 1, 2015 to June 30, 2015 FY2016 1st Quarter From April 1, 2016 to June 30, 2016 8
(3) Quarterly Consolidated Statement of Cash Flows FY2015 1st Quarter FY2016 1st Quarter From April 1, 2015 to June 30, 2015 From April 1, 2016 to June 30, 2016 9
(4) Notes on Consolidated Financial Statements (Notes on the Premise of a Going Concern) No corresponding transactions Quarterly Financial Results for the First Quarter, Ended June 30, 2016, Kaneka Corporation (4118) (Notes in the Event of Significant Changes in the Amount of Shareholders Equity) No corresponding transactions (Segment Information) Term from April 1, 2015 to June 30, 2015 1) Sales and Income (Loss) by Segments Chemicals Functional Plastics Reporting Segment Expandable Life Foodstuffs Electronic Plastics and Science Synthetic Fibers and Others Segment Total Adjustment Total Sales Customers 26,995 23,683 16,578 35,283 14,586 10,335 11,911 139,374 139,374 Intersegment 249 165 13 1 4 72 327 834 (834) Total 27,245 23,849 16,592 35,284 14,591 10,407 12,238 140,209 (834) 139,374 Segment profit 1,329 3,610 1,338 365 2,543 141 4,025 13,354 (4,746) 8,607 (Note) Segment profit is reconciled with operating income in the quarterly consolidated financial statements. 2) Reconciliations between Segment Total and Quarterly Consolidated Statements of Income (Adjustments) Income Amount Segment total 13,354 Elimination of intersegment transactions 1 Companywide expenses (Note) (4,737) Other adjustments (10) Operating income in the quarterly consolidated statements of income 8,607 (Note) Companywide expenses primarily are expenses for basic R&D that are not allocable to any reporting segment. 10
Term from April 1, 2016 to June 30, 2016 1) Sales and Income (Loss) by Segments Chemicals Functional Plastics Reporting Segment Expandable Life Foodstuffs Plastics and Science Electronic Synthetic Fibers and Others Segment Total Adjustment Total Sales Customers 22,926 27,164 15,384 36,326 15,036 8,045 11,175 136,058 136,058 Intersegment 207 209 22 1 4 54 390 891 (891) Total 23,133 27,374 15,407 36,327 15,041 8,099 11,565 136,949 (891) 136,058 Segment profit (loss) 1,933 3,744 1,271 901 2,845 (585) 3,932 14,042 (5,262) 8,779 (Note) Segment profit or loss is reconciled with operating income in the quarterly consolidated financial statements. 2) Reconciliations between Segment Total and Quarterly Consolidated Statements of Income (Adjustments) Income Amount Segment total 14,042 Elimination of intersegment transactions (16) Companywide expenses (Note) (5,255) Other adjustments 9 Operating income in the quarterly consolidated statements of income 8,779 (Note) Companywide expenses primarily are expenses for basic R&D that are not allocable to any reporting segment. 11