Toyo Ink SC : Presentation Briefing transcript of First Half of FY2023 Results Briefing

Financial Results Briefing for the First Half of Fiscal Year Ending December 31, 2023

Presentation(Transcript)

• Date/time: Aug. 22, 2023 10:00am - 11:00am (Japan time)
• Speakers:
• • Satoru Takashima: President and Representative Director, and Group CEO
  • Hiroyuki Hamada : Senior Managing Director,
  • Takeshi Arimura: Executive Officer, Group Financial Director
  • Hideki Okaichi: President and Representative Director, TOYOCOLOR CO., LTD.
• Presentation Material:

https://schd.toyoinkgroup.com/en/ir/archives/pdflib/2023/frp_fy2023_q2_en.pdf

TRANSLATION:

This is a transcript of Financial Results Briefing for the First Half of Fiscal Year Ending December 2023, held on Aug. 22, 2023. This is an English translation of the Japanese original, prepared only for the convenience of shareholders residing outside Japan. The original Japanese version will prevail should there be any difference in the meaning between the English version and the Japanese version.

DISCLAIMER:

The forecast or projections in this material are based on the assumptions and beliefs of our management in light of the information available as of Aug. 22, 2023. Changes in global, economic and business conditions could cause actual results to differ materially from these forecasts.

The content of this transcript have been edited or revised by the company.

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Presentation

Takashima: I would like to begin by discussing today's key points on the first page.

At the financial results meeting just six months ago, I mentioned that I saw two management issues facing us this year. One is the urgent need to improve the decreased operating profit once more, which is a short-term task that must be accomplished in the short term. The other issue is a medium- to long-term challenge: structural reforms in both business and management to achieve growth. I said that we will take concrete actions to achieve these two goals starting this year.

As we have been working on this initiative, here is a summary of our performance for the first six months of this year. As I am sure Senior Managing Director Hamada will explain in the next two pages, the operating profit margin bottomed out in Q3 of last year and has begun to rise, and we expect this upward trend to continue through H2.

One of the reasons for this is that measures to cope with soaring raw material prices, especially price revisions, are catching up not only overseas but also in Japan. Especially for display

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materials, one of our profit sources, H1 of last year was very good, but in H2, the market for displays suddenly slowed down. But now, the display market is coming back. We can expect the trend in H2 as well. These are major factors.

This is an outlook for H2 of this fiscal year. Overall, as I mentioned earlier, the operating profit margin will continue to improve. Then, sales expansion activities should proceed overseas in general. We also have good prospects for further improvement in the display and electronics-related businesses. Therefore, we have not revised our full-year forecasts.

Then we will focus on the second management issue I mentioned, which is the structural reforms of both management and business for growth this year.

Regarding business, we expect steady expansion in the dispersion business for lithium-ion batteries, one of the growth businesses that will become a pillar of our operations. As we will explain later in the business briefing, we have revised our sales targets for this business upward.

Other new items, not included in today's explanation, are adhesives and laminating adhesives for environment-related themes other than lithium-ion batteries, and various polymer materials to meet semiconductor and automotive heat dissipation needs. These new themes are steadily being developed one by one.

We have made a major decision to change our company name, which will start on January 1 next year, and we will announce the details in our next medium-term management plan, which will start in January next year. We regard this company name change as a big opportunity for us and aim to expand earnings mainly by reforming our business portfolio.

We strongly believe that ROE, as a specific indicator, and the resulting improvement in PBR, should be the result. I will discuss this in more detail later.

These are the main points of today's briefing. First, Senior Managing Director Hamada will provide details of the consolidated financial results for H1 of the fiscal year.

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Hamada: I, Hamada, who is in charge of IR, will now report on our business results for H1 of FY2023. In the material, it is after page two.

As you can see, net sales decreased slightly from the previous year. Background will be provided later.

Operating profit increased. This is 43% of the full-year forecast of JPY11 billion. Ordinary profit was pushed up by foreign exchange gains due to the weakening of the yen, and although it decreased from the previous year, it is 56.5% of the full-year forecast of JPY9.5 billion for the current fiscal year.

The ratio of overseas sales to total sales increased slightly from the previous year to 52.8%, but this was mainly due to an increase in sales in yen terms resulting from the effect of the weaker yen.

We assumed an exchange rate of JPY130 at the beginning of the fiscal year, but the average for H1 was JPY136.5. The weaker yen is an overall profit-increasing factor for the Company. This is the yen conversion of overseas profits and the profitability of exports. Conversely, however, it will be a factor in price increases of raw materials.

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I would like to add a few more details.

Although there was an increase in overseas sales in yen terms due to foreign exchange effects and the effect of price revisions, net sales decreased due to a decline in volume caused by weak market conditions in general, especially in the Chinese market, and the recession in the electronics market. Sales of packaging-related products such as liquids and functional inks, and functional dispersion, materials for lithium-ion batteries increased.

Operating profit increased due to improved profit margins in packaging-related products such as liquid inks and adhesives, as price revisions for soaring raw material costs made some progress both in Japan and overseas.

However, the slump that began around Q2 of the previous year due to inventory adjustments in the LCD panel and electronics markets has yet to lead to a full-fledged recovery. However, as we have said in the past, we expect recovery to begin in Q3 of this year, and we had expected H1 to be difficult to some extent, so in a sense, we are in line with our expectations. The trend is toward recovery in H2.

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