Kaneka : Quarterly Financial Results for the 3rd Quarter, Ended December 31, 2022

Quarterly Financial Results for the 3rd Quarter, Ended December 31, 2022 (Japanese GAAP, Consolidated)

				February 8, 2023
Name of Listed Company: Kaneka Corporation		Stock Exchange Listing: Tokyo
Code Number:	4118		URLhttps://www.kaneka.co.jp/en/
Representative: Minoru Tanaka	Title: President, Representative Director
Contact Person: Osamu Ishida	Title: Executive Officer - Investors & Public Relations Department
		Phone: [phone]
Scheduled date for submitting financial statements: February 10, 2023	Scheduled date of dividend distribution: －

Note: Figures have been rounded down to the nearest million yen.

1. Consolidated Business Performance for the 3rd Quarter, Ended December 31, 2022 (from April 1, 2022 to December 31, 2022)

(1) Consolidated business performance (cumulative)		(% indicates year-on-year change)
	Net sales	Operating income	Ordinary income	Net income attributable
	to owners of parent
	¥ million	%	¥ million	%	¥ million	%	¥ million	%
Apr. 2022 - Dec. 2022	567,143	11.5	27,621	(17.1)	26,601	(15.0)	18,890	(14.2)
Apr. 2021 - Dec. 2021	508,716	20.7	33,317	92.7	31,288	147.7	22,021	128.0

Note: Comprehensive income: ¥27,794 million (1.6%) for the nine months ended December 31, 2022 ¥27,345 million (65.7%) for the nine months ended December 31, 2021

	Net income	Fully diluted net
	per share	income per share
	¥	¥
Apr. 2022 - Dec. 2022	286.61	285.86
Apr. 2021 - Dec. 2021	337.55	336.63
(2) Consolidated financial position
	Total assets	Net assets	Shareholders'
	equity ratio
	¥ million	¥ million	%
As of December 31, 2022	788,686	427,259	51.8
As of March 31, 2022	726,959	412,204	53.3

Reference: Shareholders' equity: ¥408,559 million as of December 31, 2022 ¥387,150 million as of March 31, 2022

2. Dividends

		Annual dividends
	1st Quarter	2nd Quarter	3rd Quarter	Year-end	Annual
	¥	¥	¥	¥	¥
Apr. 2021 - Mar. 2022	－	50.00	－	60.00	110.00
Apr. 2022 - Mar. 2023	－	55.00	－
Apr. 2022 - Mar. 2023				55.00	110.00
(Forecasts)
Note: Changes in dividend forecast during the quarter under review: None

3. Forecast for Consolidated Business Performance for the Year Ending March 31, 2023 (from April 1, 2022 to March 31, 2023)

(Percentage figures represent changes from the corresponding periods of the previous fiscal year)

			Operating				Net income	Net income
	Net sales			Ordinary income	attributable to
		income		per share
						owners of parent
	¥ million	%	¥ million	%	¥ million	%	¥ million	%	¥
Full year	756,000	9.3	36,500 (16.2)	34,000	(16.7)	24,000	(9.4)	364.67

Note: Revisions to consolidated business performance forecasts during the quarter under review: Yes

• Notes

1. Changes in principal subsidiaries during the term: None
2. Application of simplified methods of accounting and specific accounting methods: None
3. Changes in accounting principles, changes in estimates, or restatements

1. Changes owing to revisions in accounting standards: Yes
2. Changes other than 1. above: None
3. Changes in accounting estimates: None
4. Restatements: None

Note: For details, please refer to the section entitled "(3) Notes to the Consolidated Financial Statements (Changes in Accounting Principles)" under "2. Quarterly Consolidated Financial Statements and Main Notes" on page 10.

(4) Number of shares outstanding (common stock)

1. Number of shares issued at the end of the period (including treasury stock):
2. Number of shares of treasury stock at the end of the period:
3. Average number of shares during the period (calculated cumulatively from the beginning of the fiscal year):

December 31,	68,000,000	March 31, 2022	68,000,000
2022	shares		shares
December 31,	2,187,709	March 31, 2022	2,761,323
2022	shares		shares
December 31,	65,909,803	December 31,	65,239,177
2022	shares	2021	shares

※These financial statements are exempt from audit procedures

※Explanations or other items pertaining to appropriate use of business performance forecasts The business performance forecasts and certain other statements contained in this document are forward-looking statements, which are based on information currently available to the Company and certain assumptions determined to be reasonable by the Company. For a variety of reasons, actual performance may differ substantially from these forecasts. They do not constitute a guarantee that the Company will achieve these forecasts or other forward-looking statements. For cautionary items used in business performance forecasts, please refer to the section entitled "(3) Consolidated Business Forecasts" under "1. Quarterly Consolidated Business Performance" on page 5.

Quarterly Financial Results for the 3rd Quarter, Ended December 31, 2022, Kaneka Corporation (4118)

Supplementary Materials

Contents

1. Quarterly Consolidated Business Performance ------------------------------------------------------	P. 2
(1)	Consolidated Business Performance --------------------------------------------------------------	P. 2
(2)	Consolidated Financial Position ----------------------------------------------------------------------	P. 4
(3)	Consolidated Business Forecasts ------------------------------------------------------------------	P. 5
2. Quarterly Consolidated Financial Statements and Main Notes ---------------------------------	P. 6
(1)	Quarterly Consolidated Balance Sheets ----------------------------------------------------------	P. 6
(2)	Quarterly Consolidated Statements of Income and Comprehensive Income ------------	P. 8
(3)	Notes to the 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
	(Changes in Accounting Principles) ----------------------------------------------------------------	P. 10
	(Segment Information) --------------------------------------------------------------------------------	P. 10

－1－

Quarterly Financial Results for the 3rd Quarter, Ended December 31, 2022, Kaneka Corporation（4118）

1.Quarterly Consolidated Business Performance

(1) Consolidated Business Performance

• State of the Global Economy - Deceleration and Instability -
  During the first nine months (April 1 to December 31, 2022, "1-3Q") of the fiscal year ending March 31, 2023, the global economy was unstable due to the sharp rise in energy and resource prices triggered by the Ukraine crisis, growing inflation and monetary tightening in various economies, which put a sudden brake on the economy in the third quarter (October 1 to December 31, 2022, "3Q"), and there were also currency fluctuations.
• Kaneka Group's Business Performance - Despite Foundation Businesses Impacted, Leading-edge Businesses Grown -
  Under these circumstances, Kaneka Group's business performance for 1-3Q was as follows. Consolidated net sales were ¥567,143 million (up 11.5% year-on-year), operating income was ¥27,621 million (down 17.1% year-on-year), ordinary income was ¥26,601 million (down 15.0% year- on-year), and net income attributable to owners of parent was ¥18,890 million (down 14.2% year-on- year).

Net sales and operating income by segment for the first nine months	(Millions of yen)
				Net sales
		FY2022				Difference
	1Q	2Q		3Q		1-3Q	(year-on-year)
Material SU	88,919	83,975		77,812		250,707	33,469
		15.4%
Quality of Life SU	45,000	42,194		43,812		131,008	4,869
		3.9%
Health Care SU	16,623	17,369		18,658		52,651	10,630
		25.3%
Nutrition SU	41,879	44,091		46,018		131,988	9,454
		7.7%
Others	316	231		240		787	2
		0.3%
Total	192,739	187,863		186,541		567,143	58,426
		11.5%
		Operating income
		FY2022				Difference
	1Q	2Q		3Q		1-3Q	(year-on-year)
Material SU	10,756	7,947		3,767		22,470	(3,796)
		(14.5%)
Quality of Life SU	4,600	4,069		4,386		13,056	(727)
		(5.3%)
Health Care SU	3,856	3,653		4,471		11,981	3,561
		42.3%
Nutrition SU	806	1,296		2,290		4,393	745
		20.4%
Others	186	95		112		395	45
		13.1%
Adjustment	(7,994)	(8,460)		(8,221)		(24,676)	(5,523)
		-
Total	12,212	8,601		6,808		27,621	(5,695)
		(17.1%)
※SU：Solutions Unit

－2－

Quarterly Financial Results for the 3rd Quarter, Ended December 31, 2022, Kaneka Corporation（4118）

In 3Q, some of our segments continued to experience declining demand and falling market conditions due to factors including the sluggish building materials and construction markets in Europe and the U.S., falling PVC market prices in Asia, and supply-demand adjustments in the electronics market, which had a significant impact on our business performance. On the other hand, in leading-edge businesses (Health Care Solutions Unit, etc.), sales of new products using our unique and differentiated technologies are steadily expanding and the business is growing speedily. In foundation businesses, Foam & Residential Techs and Foods strengthened their earnings foundation as spreads improved due to price revisions in response to rising raw material prices and other factors. We are making steady progress in transforming our business portfolio.

• Foundation businesses … Vinyls and Chlor-Alkali, Modifiers, Foam & Residential Techs, Performance Fibers, Foods
  Leading-edge businesses… Modified Silicone polymers, E & I Technology, Pharma, Medical, Supplemental Nutrition, Agris, PV & Energy management

The operating performance by business segment was as follows:

• Material Solutions Unit

This unit was strongly affected by economic slowdown in Europe, the U.S., and Asia, resulting in higher sales and lower profits.

• For Vinyls and Chlor-Alkali, although caustic soda sales remained steady in 3Q, demand for PVC resins in Asian markets was dull and market conditions remained weak.
• For Modifiers, demand for rigid PVC usage for housing in Europe and the U.S. has slowed from the second quarter (July 1 to September 30, 2022, "2Q") and remained sluggish in 3Q due to customers' inventory adjustments. We have been shifting our Research & Business activities to expand the market for non-PVC applications to enhance profitability. Business performance bottomed out in 3Q and is now on a recovery track.
• For Modified Silicone polymers, demand temporarily slowed down due to the weak construction markets in Europe and the U.S., but the underlying tone of demand is strong, and following the decision made last year to increase capacity in Belgium, we are quickly considering the next capacity expansion in the U.S.
• KANEKA Biodegradable Polymer Green Planet™ has received many inquiries from major brand holders in Japan, Europe, and the U.S., and joint developments are expanding. We are also working hard on research and development of innovative technology to produce Green Planet™ from CO2 and H2 for social implementation of "biomanufacturing," a prioritized Japanese government policy.
• Quality of Life Solutions Unit

This unit increased sales, but E & I Technology was strongly affected by the supply-demand adjustment, resulting in a decrease in profits.

• For Foam & Residential Techs, performance recovered as a result of price revisions and firm sales in the domestic market. Demand in the overseas automotive sector is gradually recovering.
• As the energy crisis (electricity shortage) becomes a global problem, expectations for high-efficiency photovoltaic modules are increasing. Inquiries about our PV products are becoming increasingly active, as policies such as the mandatory installation of PV in new houses are spreading nationwide, including by the Tokyo Metropolitan Government. We will start operation of an additional production line for heterojunction PV during this fiscal year to respond to the strong demand for high-efficiency photovoltaic modules for residential use. We also plan to begin full-scale delivery of in-vehicle PV this spring. In addition, we are actively promoting initiatives that contribute to CO2 reduction, such as self-consignment and microgrids in cooperation with local governments.
• For E & I Technology, sales of polyimide products and resins for LCD panels fell below the previous year's level due to continued significant supply-demand adjustments in the smartphone and large-

－3－