Kanto Denka Kogyo Co., Ltd. · TSE:4047

Kanto Denka Kogyo — FY2023 Earnings Presentation

38 slides from Kanto Denka Kogyo's earnings presentation, May 23, 2024

1. Slide 1: Financial Results Briefing for the Fiscal Year Ended March 31, 2024

   Note: This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail. The Company assumes no responsibility for this translation or for direct, indirect o

2. Slide 2: Contents

   Contents I Overview of Financial Results for the Fiscal Year Ended March 31, 2024 II Business Outlook and Future Trends III Progress of Medium-Term Management Plan IV Supplementary Materials © Kanto Denka Kogyo Co., Ltd. All rights reserved. 2

3. Slide 3: I Overview of Financial Results for the Fiscal Year Ended March 31, 2024

   I Overview of Financial Results for the Fiscal Year Ended March 31, 2024 © Kanto Denka Kogyo Co., Ltd. All rights reserved. 3

4. Slide 4: Key Earnings Data

   Key Earnings Data  Fiscal year ended March 31, 2024 (FY2023)  Net sales and profit both down significantly  Major deterioration in the market environment for both fluorochemicals and battery materials  Recorded ¥3.5 billion impairment loss on inventories, primarily for battery materials  Recogn

5. Slide 5: Statement of Income

   Statement of Income (Billions of yen) FY2022 FY2023 Difference % change Net sales 78.6 64.7 –13.9 –17.7 Operating profit (loss) 12.9 (1.9) –14.9 — Ordinary profit (loss) 13.6 (1.3) –14.9 — Profit (loss) before income taxes 13.4 (5.3) –18.7 — Profit (loss) attributable to owners of parent 9.3 (4.6) –

6. Slide 6: Balance Sheet

   Balance Sheet (Billions of yen) FY2022 FY2023 Difference % change  Highlights  Level of cash and deposits Assets 130.7 125.3 –5.4 –4.2 Primarily allocated to payments for capital investment Cash and deposits 22.3 25.4 3.0 13.7 Current cash reserves deemed adequate  Decrease in trade receivables D

7. Slide 7: Fundamental Chemicals Division

   Fundamental Chemicals Division (Billions of yen) FY2022 FY2023 Difference Net sales 9.4 8.8 –0.5 Operating profit (loss) 0.3 (0.1) –0.4 Net sales ・ Caustic soda: Sales increased due to effects from price revisions, despite lower sales volumes ・ Hydrochloric acid: Sales increased due to effects from

8. Slide 8: Fine Chemicals Division

   Fine Chemicals Division (Billions of yen) FY2022 FY2023 Difference Net sales 63.9 51.2 –12.6 Operating profit (loss) 11.4 (2.8) –14.2 Net sales ・Nitrogen trifluoride: Sales decreased due to lower sales volume ・Tungsten hexafluoride: Sales decreased due to lower sales volume ・Hexafluoro-1,3-butadiene

9. Slide 9: Ferrochemicals, Commercial Business, Facilities Divisions

   Ferrochemicals, Commercial Business, Facilities Divisions (Including consolidation adjustments) (Billions of yen) FY2022 FY2023 Difference Net sales 5.3 4.6 –0.6 Operating profit 1.1 0.9 –0.1 Ferrochemicals Sales and profit decreased due to lower sales volume of carriers Commercial Business Unchange

10. Slide 10: Consolidated Operating Profit: Difference Analysis (FY2022 vs. FY2023)

    Consolidated Operating Profit: Difference Analysis (FY2022 vs. FY2023) (Billions of yen) Fluorochemicals: Sales volumes down 140 14 Battery materials: Sales volumes and unit prices down 120 12 100 10 80 8 –10.03 The price of lithium declined substantially 60 6 12.90 from the end of last fiscal year.

11. Slide 11: Operating Profit and Operating Profit Margin Over Time (Consolidated)

    Operating Profit and Operating Profit Margin Over Time (Consolidated) (Billions of yen) 17.9% Operating profit (loss) 20% 14 16.5% 12 14.4% Operating profit margin 15% 10 10.9% 8 10% 6 12.9 11.1 5% 4 7.7 2 5.6 –3.0% 0% 0 -2 –1.9 -5% FY2019 FY2020 FY2021 FY2022 FY2023 © Kanto Denka Kogyo Co., Ltd. Al

12. Slide 12: Capital Investment and Depreciation Over Time (Consolidated)

    Capital Investment and Depreciation Over Time (Consolidated) (Billions of yen) 16 Capital investment Depreciation 12 8 16.6 13.8 12.2 10.1 4 8.4 7.6 8.4 5.4 6.7 6.6 0 Investment Depreciation Investment Depreciation Investment Depreciation Investment Depreciation Investment Depreciation FY2019 FY2020

13. Slide 13: The Kanto Denka Group (Consolidated Subsidiaries)

    The Kanto Denka Group (Consolidated Subsidiaries) Net sales: Year-on-year Share of change Capital FY2023 Major business lines investment (%) (Billions of yen) (Billions of yen) Sale of chemical products, maintenance of Kanden Kosan Co., Ltd. ¥10 mil. 100.0 8.3 –2.9 containers, insurance agency servi

14. Slide 14: II Business Outlook and Future Trends

    II Business Outlook and Future Trends © Kanto Denka Kogyo Co., Ltd. All rights reserved. 14

15. Slide 15: Performance Forecast By Segment (Consolidated)

    Performance Forecast By Segment (Consolidated) (Billions of yen) Net sales Operating profit (loss) FY2023 FY2024 Difference FY2023 FY2024 Difference Fundamental Chemicals 8.8 8.5 –0.3 (0.1) 0.0 0.1 Fine Chemicals 51.2 56.0 4.7 (2.8) 4.5 7.3 Other1 4.6 4.5 –0.1 0.9 0.4 –0.5 Total 64.7 69.0 4.2 (1.9)

16. Slide 16: Consolidated Operating Profit: Difference Analysis (FY2023 vs. FY2024)

    Consolidated Operating Profit: Difference Analysis (FY2023 vs. FY2024) (Billions of yen) Recording of an impairment loss on inventories of Fixed costs: –¥1.3 billion, consolidation lithium compounds, etc. in the previous fiscal year adjustments: –¥800 million, subsidiaries, (FY2023: –¥3.5 billion, F

17. Slide 17: Performance Forecast by Segment: H1 Results vs. Forecast

    Performance Forecast by Segment (Consolidated): H1 Results vs. Forecast (Billions of yen) Net sales Operating profit (loss) H1 (results) H1 (forecast) Difference H1 (results) H1 (forecast) Difference Fundamental 4.3 4.2 –0.1 (0.0) (0.1) –0.1 Chemicals Fine 28.2 24.7 –3.5 (0.8) 1.0 1.8 Chemicals Othe

18. Slide 18: Consolidated Operating Profit: Difference Analysis (FY2023 H1 vs. FY2024 H1 Forecast)

    Consolidated Operating Profit: Difference Analysis (FY2023 H1 vs. FY2024 H1 Forecast) (Billions of yen) Recording of an impairment loss on inventories of Subsidiaries: –¥800 million, fixed costs: 40 lithium compounds, etc. in the previous fiscal year –¥700 million, consolidation 4 (FY2023: –¥3.1 bil

19. Slide 19: Performance Forecast By Segment: H1 vs. H2

    Performance Forecast By Segment (Consolidated): H1 vs. H2 (Billions of yen) Net sales Operating profit (loss) H1 (forecast) H2 (forecast) Difference H1 (forecast) H2 (forecast) Difference Fundamental 4.2 4.3 0.1 (0.1) 0.1 0.3 Chemicals Fine Chemicals 24.7 31.3 6.6 1.0 3.5 2.5 Other* 2.1 2.4 0.3 0.1

20. Slide 20: Consolidated Operating Profit: Difference Analysis (H1 Forecast vs. H2 Forecast)

    Consolidated Operating Profit: Difference Analysis (H1 Forecast vs. H2 Forecast) (Billions of yen) Impairment loss on inventories Subsidiaries: +¥600 million, H1 forecast: –¥1 billion consolidation adjustments: +¥100 50 5 million, fixed costs: –¥900 million H2 forecast: +¥700 million Fluorochemicals

21. Slide 21: Topics (Status of Major Capital Investments)

    Topics (Status of Major Capital Investments) Investment Details Remarks Hexafluoro-1,3-butadiene (C4F6) 400 t/yr ⇒ 600 t/yr ・Scheduled for completion by the end of FY2024 Carbonyl sulfide (COS) 150 t/yr ⇒ 200 t/yr ・Scheduled to commence operation in FY2025 Lithium hexafluorophosphate ・Operational pe

22. Slide 22: Topics (New Fluorochemical Products)

    Topics (New Fluorochemical Products) Development of fluorochemicals for semiconductors with superior etching performance and low environmental impact KSG®-14 KSG®-5 KSG®-22 Mass production planning Started sales in April 2023 Started sales in April 2024 underway This new etching gas enables high Thi

23. Slide 23: III Progress of Medium-Term Management Plan

    III Progress of Medium-Term Management Plan © Kanto Denka Kogyo Co., Ltd. All rights reserved. 23

24. Slide 24: Progress of Each Strategy and Measure

    Progress of Each Strategy and Measure Business strategy Increasing capital efficiency Strengthening governance Promote expansion of the fine chemicals ●Reduce cross-shareholdings ⇒To be implemented as planned with some business sold already ●Revise the officer remuneration system ●Growth strategy ●S

25. Slide 25: Progress of Battery Material Business

    Progress of Battery Material Business Operating environment ●Slow growth in electric vehicle (EV) sales in 2023 ●Continued stagnation in LiPF6 market ●U.S.-China trade tensions over EVs appear to be intensifying Strategy/Measures Activity achievements Capturing rapid ●In discussions with multiple co

26. Slide 26: ROIC Tree

    ROIC Tree Specific Initiatives Activity achievements Strengthen earning power Steadily expand sales opportunities by Emphasized dialogue with customers staying close to customers utilizing each branch Cost of sales ratio (%) Cost of manufacturing Bring cutting-edge, low GWP products to Launched high

27. Slide 27: Progress of measures to correct a PBR of less than 1x

    Progress of measures to correct a PBR of less than 1x PBR (x) Over Time ROE (%) Over Time Revision of the Medium- Term Management Plan (10.0) ―Kanto Denka ―Average for other companies in the chemical industry (Kanto Denka research) PER (x) Over Time Measures to improve PBR ●Expand business, mainly i

28. Slide 28: IV Supplementary Materials

    IV Supplementary Materials © Kanto Denka Kogyo Co., Ltd. All rights reserved. 28

29. Slide 29: Outlook for Major Products: Nitrogen Trifluoride (NF3)

    －Outlook for Major Products－ Nitrogen Trifluoride (NF3)  Chamber cleaning gas for plasma CVD equipment for semiconductor and FPD manufacturing  Production capacity: 3,700 t/yr. Demand trends (Kanto Denka forecasts for Forecasted market share tons FY2024 and beyond) ・Kanto Denka holds over 10% of m

30. Slide 30: Outlook for Major Products: Tungsten Hexafluoride (WF6)

    －Outlook for Major Products－ Tungsten Hexafluoride (WF6)  Wiring material gas for semiconductors  Production capacity: 1,400 t/yr. tons Demand trends (Kanto Denka forecasts for Forecasted market share FY2024 and beyond) 8,000 ・Kanto Denka holds over 20% of market share 6,000 4,000 Kanto Denka 2,00

31. Slide 31: Outlook for Major Products: Hexafluoro-1,3-butadiene (C4F6)

    －Outlook for Major Products－ Hexafluoro-1,3-butadiene (C4F6)  Etching gas for semiconductors  Production capacity: 260 t/year (Dec. 2019) ➡ 400 t/year (Apr. 2022) ➡ 600 t/year (Scheduled for completion by the end of FY2024) tons Demand trends (Kanto Denka forecasts for Forecasted market share FY20

32. Slide 32: Outlook for Major Products: Carbonyl Sulfide (COS)

    －Outlook for Major Products－ Carbonyl Sulfide (COS)  Etching gas for semiconductors  Production capacity: 80 t/year (Oct. 2019) ➡ 150 t/year (June 2022) ➡ 200 t/year (Scheduled to commence operation in FY2025) Demand trends (Kanto Denka forecasts for tons FY2024 and beyond) Forecasted market share

33. Slide 33: Outlook for Major Products: Lithium Hexafluorophosphate (LiPF6)

    －Outlook for Major Products－ Lithium Hexafluorophosphate (LiPF6)  Electrolyte materials for lithium-ion secondary batteries  Demand reaches full-scale pace for EVs and other in-vehicle applications  Production capacity: 5,400 t/year ➡ 8,000 t/year (Operational period decided based on demand trend

34. Slide 34: Kanto Denka Fine Products Korea Co., Ltd.

    －Overseas Production Sites－ Kanto Denka Fine Products Korea Co., Ltd.  Location Cheonan City, South Chungcheong Province, Republic of Korea  Business Lines Manufacture and sale of fluorochemicals for semiconductors and FPDs  Production Items ・ Carbonyl sulfide (COS) ・ Carbon tetrafluoride (CF4) ・

35. Slide 35: Xuancheng KDK Technology Co., Ltd.

    －Overseas Production Sites－ Xuancheng KDK Technology Co., Ltd.  Location Xuancheng City, Anhui Province, People's Republic of China  Business Lines Approx. 250 km Manufacture and sale of fluorochemicals for semiconductors and FPDs  Production Items Phase I construction: ・ Ammonium fluoride Phase

36. Slide 36: Kanto Denka's Technology and Business Direction

    Kanto Denka’s Technology and Business Direction ■Future SDGs/ESG High-sensitivity LIB materials using Aim to be a company that thrives analysis recycled Li through environmental friendliness ・Promote DX Fine Chemicals ・Significantly strengthen existing Fluorination High purity Fluorochemicals busine

37. Slide 37: Business Segments

    Business Segments Name Products and services Fundamental Inorganic products Caustic soda, hydrochloric acid, sodium hypochlorite, aluminum chloride, etc. Chemicals Organic products Trichloroethylene, perchloroethylene, vinylidene chloride, cyclohexanol, etc. Sulfur hexafluoride, carbon tetrafluoride

38. Slide 38: Notes

    Notes  This document does not constitute disclosure material as defined by the Financial Instruments and Exchange Act and other laws and regulations, and therefore the Company does not guarantee its accuracy or completeness.  Performance forecasts in this document were created based on information

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