On February 2, 2021 Nippon Kayaku reported that (Press release, Nippon Kayaku, FEB 2, 2021, View Source [SID1234574483])
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1. Consolidated Business Results for the First Three Quarters of the Fiscal Year Ending March 31, 2021 (April 1, 2020–December 31, 2020) (Figures shown are rounded down to the nearest million yen.)
(1) Consolidated Operating Results
(2) Consolidated Financial Position Total assest
2. Status of Dividends
3. Consolidated Business Results Forecasts for the Fiscal Year Ending March 31, 2021 (April 1, 2020–March 31, 2021) (1) Significant changes in subsidiaries during the first three quarters (changes in designated subsidiaries that result in changes in scope of consolidation): None
(2) Adoption of special accounting methods for presenting the quarterly consolidated financial statements:
None
(3) Changes to accounting policies and estimates and restatements
[1] Changes to accounting policies associated with revision of accounting standards or similar items: None
[2] Changes other than
[1]: None
[3] Changes to accounting estimates: None
[4] Restatements: None
(4) Number of shares issued (common stock)
[1] Number of shares issued at end of the fiscal period (including treasury stock) As of December 31, 2020: 177,503,570 shares As of March 31, 2020: 177,503,570 shares
[2] Number of treasury stock at end of the fiscal period As of December 31, 2020: 6,710,387 shares As of March 31, 2020: 6,709,685 shares
[3] Average number of shares during the fiscal period (cumulative) First three quarters of fiscal year ending March 31, 2021: 170,793,503 shares First three quarters of fiscal year ended March 31, 2020: 173,012,317 shares
*Quarterly summary financial statements are not subject to audit by a certified public accountant or audit firm. *Analysis related to appropriate use of the business results forecasts, and other notes (Disclaimer concerning forward-looking statements) The information in this report constitutes forward-looking statements regarding future events and performance. This information is based on the beliefs and assumptions of management in light of information currently available to it at the time of announcement and subject to a number of uncertainties that may affect future results.
Actual business results may differ substantially from the forecasts herein due to various factors. For matters pertaining to business forecasts, please refer to "(3) Analysis of Forward-looking Statements, Including Consolidated Business Forecasts" on page 3 of the Supplementary Information. (How to obtain the materials for the briefing on quarterly financial results) We have scheduled a teleconference for securities analysts and institutional investors on Friday, January 29, 2021.
The materials for the briefing will be posted on the corporate website.
1. Qualitative Information Concerning Results for the First Three Quarters
(1) Analysis of Operating Results In the first three quarters of this consolidated fiscal year (April 1, 2020 to December 31, 2020), a deceleration in the overall global economy occurred from restrictions on economic activity to prevent the spread of the novel coronavirus. The U.S. and Europe experienced rapid deterioration in their economies from March onward, but measures taken to combat the virus and economic measures implemented by each country provided underlying support and signs of a gradual rebound were seen in consumer spending and corporate revenues. In China, the economy continued to recover as economic activity resumed. The Japanese economy saw improvement in consumer spending and corporate revenues, but the unpredictability of the timing for bringing the pandemic under control caused uncertainty over the future to persist. Amid these conditions, the Nippon Kayaku Group worked to implement the key themes and resolve the midand long-term key issues outlined in "KAYAKU Next Stage," the mid-term business plan launched in the fiscal year ended March 31, 2020, while also making active use of flextime, telecommuting, and other systems to accommodate the restrictions on corporate activity.
We took these steps to ensure the safety of employees working in the Company and at Group companies while also implementing a new lifestyle and promote efficient workstyles aimed at minimizing the impact on our business. As a result, net sales for the first three quarters of this consolidated fiscal year totaled 125,655 million yen, a decrease of 6,169 million yen (4.7%) year-on-year. Sales in the pharmaceuticals business outperformed the same period of the previous fiscal year, while sales in the functional chemicals and the safety systems businesses declined. Operating income totaled 11,790 million yen, a decrease of 2,441 million yen (17.2%) year-on-year.
Ordinary income totaled 12,145 million yen, a decrease of 2,537 million yen (17.3%) year-on-year. Profit attributable to owners of parent was 8,971 million yen, a decrease of 2,330 million yen (20.6%) year-onyear. Performance by business segment is as described below. [Functional Chemicals Business] Sales stood at 52,127 million yen, a decrease of 1,133 million yen (2.1%) year-on-year. The functional materials business outperformed the same period of the previous fiscal year, despite a decline in vehicle-related sales. This resulted from strong sales of epoxy resins used in semiconductor encapsulation and circuit boards due to increased demand for IT equipment such as high-speed (5G) communications devices and PCs. The color materials business underperformed the same period of the previous fiscal year due to slow sales of colorants for inkjet printers in industrial applications and dyes for textiles due to the impact from the spread of the novel coronavirus. Sales of colorants for inkjet printers for consumer use were firm due to telecommuting.
The catalyst business outperformed the same period of the previous fiscal year, both in Japan and overseas. The Polatechno business saw slow sales of dye-type polarizing films and other optical materials and components due to the impact from the spread of the novel coronavirus, underperforming the same period of the previous fiscal year. Segment profit totaled 5,186 million yen, a decrease of 766 million yen (12.9%) year-on-year. This resulted from a decline in sales of the color materials business and the Polatechno business. [Pharmaceuticals Business] Sales reached 38,313 million yen, an increase of 1,986 million yen (5.5%) year-on-year. Pharmaceuticals in Japan were impacted by two drug price revisions since the first three quarters of last fiscal year.
Nevertheless, the segment outperformed the same period of the previous fiscal year as growth in sales contributed to performance due to market penetration of Portrazza, a new biomedicine, the switch to biosimilars and generic drugs, and growth in the antibody biosimilars, TRASTUZUMAB BS and INFLIXIMAB BS, in particular. The new drug, APREPITANT capsules, also contributed to sales. Exports, sales of contract production and diagnostic drug underperformed the same period of the previous fiscal year due to the impact from the spread of the novel coronavirus. Segment profit was totaled 6,810 million yen, an increase of 1,001 million yen (17.2%) year-on-year.
This resulted from a decrease in sales-related expenses due to decreased sales activities as the novel coronavirus spread and growth in sales of antibody biosimilars. [Safety Systems Business] Sales fell to 29,830 million yen, a decrease of 6,351 million yen (17.6%) year-on-year. The automotive market did see a rebound from the slump caused by the spread of the novel coronavirus during the third quarter of this fiscal year, but sales of airbag inflators, micro gas generators for seatbelt pretensioners, andsquibs underperformed the first three quarters of the previous fiscal year owing to the slump in the automotive market in all regions outside of China. A decline in sales led to segment profit of 3,492 million yen, a decrease of 2,392 million yen (40.6%) from the same period of the previous fiscal year.
[Other] Sales stood at 5,384 million yen, a decrease of 671 million yen (11.1%) year-on-year. The agrochemicals business underperformed the same period of the previous fiscal year in both domestic sales and exports. Sales in real estate and other business increased compared to the same period of the previous fiscal year. Segment profit totaled 1,279 million yen, a decrease of 203 million yen (13.7%) year-on-year. (2) Analysis of Financial Position Status of Assets, Liabilities, and Net Assets Total assets were 288,456 million yen, an increase of 9,959 million yen from the end of the previous consolidated fiscal year.
The main increases were in securities, an increase of 8,972 million yen; notes and accounts receivable-trade, an increase of 7,898 million yen; and investment securities, an increase of 2,504 million yen. The main decrease was in cash and deposits, a decrease of 16,275 million yen. Liabilities were 69,288 million yen, an increase of 811 million yen compared to the end of the previous consolidated fiscal year. The main increase was in notes and accounts payable-trade, an increase of 3,132 million yen. The main decrease was in income taxes payable, a decrease of 2,459 million yen. Net assets were 219,167 million yen, an increase of 9,148 million yen compared to the end of the previous consolidated fiscal year. The main increases were in retained earnings, an increase of 3,848 million yen; and translation adjustments, an increase of 3,193 million yen.
(3) Analysis of Forward-looking Statements, including Consolidated Business Results Forecasts The future business environment surrounding the Nippon Kayaku Group still bears the risk of an economic slowdown despite signs of a recovery in the global economy, due to uncertainty over an economic downswing under the impact from the spread of the novel coronavirus and U.S.-China trade friction, among other factors. The Japanese economy is being supported by monetary easing and the benefits from economic measures implemented by the Japanese government and is expected to gradually improve, but sufficient caution must be exercised with respect to the risk of an economic downturn in Japan and overseas from a resurgence in the novel coronavirus. Under these conditions, the Nippon Kayaku Group will work to ascertain and respond globally to the changing conditions. We will endeavor to keep our employees safe, while also continuing efforts to minimize the significant impact of this infectious disease on the business results of the Nippon Kayaku Group. The Nippon Kayaku Group also aims to respond flexibly to changes in the business environment and pursue optimal use of operating capital to increase the shareholder value, as well as expand existing businesses in global growth markets, accelerate the development of new businesses and new products, and enhance profits.
The forecasts for the fiscal year ending March 31, 2021 announced on November 10, 2020 have been revised. See the disclosure today entitled, Notice Concerning Revision of Consolidated Business Results Forecasts for the Fiscal Year Ending March 31, 2021 for further details
2. Quarterly Consolidated Financial Statements and Notes to Quarterly Consolidated Financial Statements
(2) Consolidated Statements of Income & Consolidated Statements of Comprehensive Income
(3) Notes to Quarterly Consolidated Financial Statements (Notes Regarding Assumptions for the Going Concern) No items to report (Notes in Case of Significant Change in Shareholders’ Equity) No items to report (Segment Information and Other Items) I. First three quarters of the fiscal year ended March 31, 2020 (April 1, 2019– December 31, 2019)
1. Information on sales and profit (loss) by reportable segment II. First three quarters of the fiscal year ending March 31, 2021 (April 1, 2020– December 31, 2020)2. Changes in reportable segments (Revision of the method for allocation of corporate expenses) From the first quarter of the consolidated fiscal year under review, the Company’s general and administrative expenses which has previously been allocated among the reportable segments, have been reclassified as corporate expenses.
This was done to reflect the actual state of responsibility for management activities for the entire Group and to more accurately ascertain the performance of each reportable segment. This has resulted in increases in segment profit in the first three quarters of the consolidated fiscal year under review of 2,212 million yen in the functional chemicals business, 1,386 million yen in the pharmaceuticals business, 1,383 million yen in the safety systems business, and 259 million yen in the other businesses, and a decrease of 5,241 million yen in adjustments to segment profit compared calculations under the previous method. The segment information provided for the first three quarters of the previous fiscal year has been recalculated to show segment profit and loss after the revision. (Business Combinations, etc.) (Transactions, etc. under common control) (Company split from consolidated subsidiary (simple, abbreviated absorption-type split)) At its Board of Directors meeting held on March 31, 2020, Nippon Kayaku passed the following resolution for the Company to take over the business of manufacturing and selling polarizing films for LCDs, polarizing films for projectors, and other precision-processed products (hereafter, "the business") from its consolidated subsidiary, POLATECHNO CO., LTD. (hereafter, "Polatechno"), via an absorption-type split (hereafter, "the absorption-type split"), effective on October 1, 2020. Nippon Kayaku took over this business as scheduled on October 1, 2020.
1. Summary of transaction
(1) Companies involved in the business combination and names and descriptions of the business The business of Polatechno, a wholly-owned subsidiary, in manufacturing and selling polarizing films for LCDs, polarizing films for projectors, and other precision-processed products (2) Date of business combination Date of Board of Directors resolution approving the absorption-type split agreement (Nippon Kayaku): March 31, 2020 Date of Board of Directors resolution approving the absorption-type split agreement (Polatechno): March 27, 2020 Conclusion date of absorption-type split agreement: May 22, 2020 Date on which the absorption-type split agreement became effective: October 1, 2020
Note: This absorption-type merger constitutes an abbreviated split under Article 784, Paragraph 1 of the Companies Act for Polatechno, the company splitting off the business; and as a simple split under Article 796, Paragraph 2 of the Companies Act for Nippon Kayaku, the succeeding company. Both companies therefore executed the absorption-type split agreement without obtaining approval from the Shareholders Meeting.
(3) Legal form of business combination The form is an absorption-type split (simple absorption-type split) in which Polatechno is the splitting company and Nippon Kayaku is the succeeding company.
(4) Name of company after business combination There are no changes to the names, location of headquarters, capital, and fiscal year-end of either company as a result of this absorption-type split. However, the description of the main business of the split company after the absorption-type split was changed to the land leasing business. The accompanying amendments to the Articles of Incorporation for the split company were approved at the Annual Shareholders Meeting held on June 24, 2020.
(5) Other information concerning the summary of the transaction Incorporating the business into the Company as a business division will enable more effective use and optimal allocation of the management resources possessed by both companies, such as human resources, sales channels, production locations, and intellectual property. The Company is aiming to improve the efficiency of and expand the business by integrating the R&D structures of both companies to improve the efficiency and speed of R&D, strengthen governance, and achieve other benefits
2. Summary of accounting standards implemented The Company accounted for the combination as a transaction under common control in accordance with ASBJ Statement No. 21, Accounting Standard for Business Combinations (January 16, 2019) and ASBJ Guidance No. 10, Implementation Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures (January 16, 2019).
This absorption-type split was eliminated as an internal company transaction in the consolidated financial statements and it therefore had no impact on profit and loss. (Additional Information) (Accounting estimates accompanied by the spread of the novel coronavirus) There are no significant changes in the assumptions regarding the timing for bringing the novel coronavirus under control detailed in the Annual Securities Report (supplemental information) for the previous consolidated fiscal year.