Mitsui Chemicals

Special Explanation of
Business Results & Outlook
February 6, 2014
Toshikazu Tanaka
President & CEO
1
Today, details of a key measure in assuring
our Group’s future growth and sustainability,
namely the restructuring of our three volume
market sectors, will be announced.

With unwavering determination, we will initiate

the measures and tactics full force to assure
realization of a “V-Shaped” turnaround.

2
１．Financial Results & Outlook for FY2013
２．Restructuring Measures for
Unprofitable Businesses
３．V-shaped Turnaround
４．Conclusion

3
 Financial Results & Outlook for FY2013

Operating income is unchanged from the previously announced

(Billion yen) ▲ Denotes a minus
FY2012 FY2013 forecast FY2013
Items Forecast
1-3Q Full Year 1-3Q Full Year (on Nov .1)

Sales 1007.4 1406.2 1108.8 1570.0 1550.0

Operating income (loss) 2.5 4.3 15.1 25.0 25.0
Non-operating income (expenses) ▲ 1.1 4.9 ▲ 1.0 ▲ 4.0 ▲ 4.0
Ordinary income (loss) 1.4 9.2 14.1 21.0 21.0
Special gains/losses ▲ 5.3 ▲ 10.0 ▲ 22.9 ▲ 32.0 ▲ 7.0
Net income (loss) before income
taxes and minority interests ▲ 3.9 ▲ 0.8 ▲ 8.8 ▲ 11.0 14.0

Net income (loss) ▲ 9.7 ▲ 8.1 ▲ 18.5 ▲ 23.0 1.0

Exchange Rate (Yen/US$) 80 83 99 100 99
Domestic Standard
55,400 57,500 65,700 67,300 64,900
Naphtha Price (Yen/KL) 4
 Special Losses & Dividend

１）Special losses (Impairment)

- Record 32 billion yen extraordinary loss for current fiscal year
for measures including restructuring of unprofitable large volume market

２）Dividend per share

- Fiscal 2013 dividends: 3 yen interim dividend / 0 yen year-end dividend
- Concentrate management resources on V-shaped turnaround measures
- Recompense director bonuses & reduce monthly remuneration
(minus 12 - 20%)

Promote restructuring and pursue growth path to

resume dividend pay out by FY2014 year-end
5
 Operating Income (business segment)
(Billion Yen) ▲: Denotes a minus
FY2012 FY2013 forecast I ncr. FY2013
Segment (Decr.) forecast
Full Year Full Year (on Nov 1)
1-3Q 1-3Q (b)-(a)
(a) (b)

Functional Chemicals 9.5 12.4 12.1 16.5 4.1 16.5

Functional Polymeric
6.6 8.4 9.3 13.0 4.6 13.0
Materials
Polyurethane ▲ 1.8 ▲ 2.6 ▲ 4.8 ▲ 4.0 ▲ 1.4 ▲ 2.0

Basic Chemicals ▲ 12.6 ▲ 18.9 ▲ 13.9 ▲ 18.5 0.4 ▲ 16.0

Petrochemicals 4.3 7.7 15.4 23.0 15.3 19.5

Films & Sheets ▲ 2.2 ▲ 3.3 1.2 0.5 3.8 ▲ 0.5

Others ▲ 1.3 0.6 ▲ 4.2 ▲ 5.5 ▲ 6.1 ▲ 5.5

Total 2.5 4.3 15.1 25.0 20.7 25.0

6
 Operating Income from FY2008

(billion yen)
40
400 40.5 21.6 25
28.7
▲45.5 ▲9.5 23.1
17.4 4.3
200
20 11 14
10 9.5
1.5 2.8

00
▲7.1
-20
-200 Accident at Iwakuni Works
▲19
-European Financial Crisis
-Economic slowdown in emerging
-400
-40 Lehman Shock countries
▲55.5

-600
-60
FY08
08年度 FY09
09年度 FY10
10年度 FY11
11年度 FY12
12年度 FY13(Outlook)
13年度（予想）
▲ Denotes a minus
１．Financial Results & Outlook for FY2013
２．Restructuring Measures for
Unprofitable Businesses
３．V-shaped Turnaround
４．Conclusion

8
Business Portfolio Condition and Challenges
- Steady progress in “High Functional Products” and “High Value
Added Polymers”
- Restructuring of Phenol, PTA, and Polyurethane businesses

（Operating income: billion yen） 25

▲ Denotes a minus
28
21.6 4.3
49
High Value 39
2Q Forecast
Added Polymers 27 28
45 billion yen

High Functional
Products
▲5.4 ▲11
Phenol, PTA,
Restructuring
Polyurethane, etc. ▲23.7 ▲24

FY11 FY13 Budget FY13 Outlook

FY12 （ʼ13/5/10） （ʼ14/2/6） 9
Restructuring Businesses

① Polyurethanes

② Phenols

③ Purified Terephthalic Acid(PTA)

④ Summary
10
 ①-1）Key Point in Restructuring Polyurethane
Plan
- Reinforce Coating & Engineering business
through specialty isocyanates
- Establish optimum operations for general-use polyurethane by
terminating non-competitive plants and maintaining competitive plants

Polyurethane Business Sector

Polyurethanes Coating & Engineering Materials

General Polyurethanes
ＴＤＩ 64% 36%
Specialty isocyanates
MＤＩ Sales
170 billion Urethane coating resins
PPG yen Acrylic coating resins
System housing Others
Bio-Polyol
Organic acid
(maleic anhydride, fumaric acid)
11
①-2) Reinforcing Specialty Isocyanates

- Establish new large-scale, state-of-the-art competitive plant

for specialty isocyanates (XDI) made with unique proprietary
technology to match increasing demands for coating resins and
ophthalmic lens monomers
(Omuta Works, 5,000MT/y, Oct. 2015)

Worldʼs top high refractive

ophthalmic lens monomers Solar panel back sheets

ＸＤＩ Immediate hardening

Micro capsules features agent for ink
（non-formalin）
& uses

New durable sealant Highly safe adhesives

for building materials for food packaging

Contribute to expansion and strengthening of coating resin and

lens monomers competitiveness through large-scale XDI facilities 12
①-3) Restructuring General-Use Polyurethane
Environment(TDI) Environment(MDI)
- New facilities in Asia centering on China - Driven by strong growth in demand,
upset supply balance causing downward market deterioration slight despite new
market prices facilities in Asia centering on China
- Omuta TDI remains competitive while - Korean MDI is competitive while Omuta
Kashima TDI loses competitiveness MDI loses competitiveness due to
small capacity facilities

Maintain competitive plants and suspend non-competitive plants

Restructuring
1) Kashima Works: Terminate all plants incl. TDI and Shut-down
(target Dec. 2016)
-TDI（117KTA）/ Stable supply to existing customers
by sourcing from third parties
-Specialty isocyanate（2.4KTA）/ Establish new large scale plant in Omuta
-Organic acid（maleic anhydride 32KTA, Fumaric acid 15KTA）/
Withdrawal from organic acids with shut-down Kashima Works

2) Omuta Works: Terminate MDI plant (60KTA, target Dec. 2016）

※maintain employment of all staff 13
①-4) Summary of Polyurethane Restructuring

⿅島
Kashima Omuta 韓国
Korea
MDI
Shut-down Works Terminate MDI
（Target Dec.2016） （Target Dec.2016） India
Bio-polyol
（Jan.2015）
TDI TDI
Middle-East
(under consideration)
Specialty
Organic acid isocyanate TDI MDI
Specialty Large-scale Strengthen
isocyanate
XDI plant Coating & Engineering
and
（Oct. 2015）
Ophthalmic lens monomers

- Establish optimal production system for general-use polyurethane raw material

sustainability through plant competitiveness
- Strengthen position by strategic deployment in highly competitive Middle East
and through business alliances
14
①-5) XDI Strengthening World’s Top Ophthalmic Lens Monomers

Increasing demand for high refractive lens monomers

Strengthening of
Purchasing
Ageing Comfort
power
(developing countries)

Thin & Lightweight Clear View Strong & Safe Good Durability

Material Patent Global Marketing

Only 1 Over 250 45%
Branding
Worldʼs first use of
XDI thiol technology Strong global Highest share Strategic partnership
for lens materials patent network in the world with global customers

Respond to expanding demand for high refractive lens

through competitive new large-scale plant for proprietary XDI 15
Restructuring Businesses

① Polyurethanes

② Phenols

③ Purified Terephthalic Acid(PTA)

④ Summary
16
 ②-1) Key Point for Restructuring Phenol

【Background of phenol business deterioration】

- Over supply from new facilities and production increases in China
- Weak market and sharp increases in benzene prices
⇒ Spread deterioration between phenol/BPA and benzene
1500
15
Supply World Supply and Demand（million MT） (MCI estimate)
Demand

1000
10

89％ 83％ 79％ 81％ 84％ 85％ 86％

5
500
Operating rate

00

2011 2012 2013 2014 2015 2016 2017

Startup of new players has slowed. Existing manufacturers are expanding facilities
to offer selections including derivatives. World supply and demand is expected to
17
improve gradually by 2016-17.
 ②-2) Restructuring Phenol (Japan)
Environment
- Surplus 300KTA in Japan
- Stop export to China due to unprofitable margin
（anti-dumping duties: 6%, high transport costs)
⇒Need to establish local production for local consumption

Restructuring Supply供給 Demand

需要
1 Japan (million MT)

1) Terminate BPA plant

(90KTA, Ichihara, Mar.2014) 0.5

2) Terminate Chiba Phenol

（250KTA, Sep.2014） Improvement

3) Energy cost cuts 0

2012 2013 2014 2015 2016 2017

4) Use advantage of Chinese plant competitiveness

in growing Chinese market
Establish local production-local consumption for domestic profitability
18
②-3) After Restructuring Phenol (Japan)

Phenol BPA

Capacity
Export
reduction
reduction
250KTA

Export to
strategic partners
Capacity
reduction
90KTA
390KTA Domestic
sales Export
reduction
65KTA Domestic Sales

Capacity Sales Capacity Sales

- Reduce exports of phenol & BPA while establishing a local

production for local consumption system
- Exports with be continued for strategic customers with
long-term agreements 19
②-4) Restructuring Phenol (Singapore)

Environment
- Only 2 phenol companies in ASEAN
- High energy costs (electricity, steam, etc.)
- Low operation rates for BPA due to weak market
⇒Strengthen competitiveness of energy costs
while establishing a local production for local consumption system

Restructuring

1) Cost cuts
- Convert to competitive energy (coal)/ electricity (new partner)
- Purchase competitive raw materials (new supplier)
2) Suspend BPA（70KTA）
3) Establish system to distribute total amount in ASEAN
(zero export to China)
4) Study partnerships

Extensive cost cuts for regional sustainability 20

②-5) Restructuring Phenol (China)
Environment
- Forecast of continuing phenol surplus in China demand.
- With start-up of derivative plants, improvement forecasted in 2016-17
- China domestic spread competitive over imports due to 5.5% duty
and transportation costs

4
400 China(million MT)
供給
Supply 需要
Demand

Improvement
3
300
Import Expansion of existing makers
position No new players
2
200 96％
87％
80％
87％
1
100
Operating rate
New players

0 0

2012 2013 2014 2015 2016 2017 21

②-6) Restructuring Phenol（China）
- Strategic sites in growing Chinese market through joint ventures with Sinopec
(250KTA, startup May 2014)
- Use of superior low cost utilities and new state-of-the–art proprietary
processes (25％ improvement over earlier processes)
- Low cost utility and competitive materials through collaboration with
Asiaʼs largest Sinopec
- Sinopecʼs strong sales network in China

Smooth startup of China plant for immediate profitability

Comparison of competitiveness（MCI estimate）
106 108
104 105
103
100

Secure top competitiveness

MCI（SSMC） A B C D E
（materials only)（new plant) （scale, cumene)
Top competitiveness in growing Chinese market 22
②-7) Summary of Phenol Restructuring

Japan Singapore China

（tax measures, FTA） （tariff merit）

Terminate BPA Suspend BPA Newest state-of-the-art

（90KTA, Mar.2014） （70KTA） processes with
superior utility per unit
Cost cuts
(utility, materials)
Terminate Partnership with Sinopec
Chiba Phenol Secure competitive Competitive utility and
（250KTA, Sep.2014） raw materials
raw materials
（Nghi Son Project）
Sinopecʼs huge sales
Zero exports to China network
Stable, long-term sales to good domestic customers Stable supply to good
customers

Local sustainability Top competitiveness

Sustainability through
through extensive locally to secure
optimum operations
cost cuts Chinese market
23
Restructuring Businesses

① Polyurethanes

② Phenols

③ Purified Terephthalic Acid(PTA)

④ Summary
24
 ③-1) Restructuring PTA

Environment
- New facilities in China result in 15 million ton surplus after 2013
- Demand/supply gap will not be resolved soon

China(million MT) ASEAN(million MT)

40
供給 需要 40
35 Supply Demand Supply Demand
供給 需要
35
30
30
25
25
20
Surplus 15 million MT 20 Fall in China exports
15
15
Oversupply in Asia
10
10
5
5
0 0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2009 2010 2011 2012 2013 2014 2015 2016 2017

Restructuring
1) AMI (Indonesia): Transfer all shares to BP Global (540KTA,Mar.2014)
2) SMPC (Thailand):
Secure worldʼs top class competitiveness through rationalization 25
③-2) Transfer all shares in AMI to BP Global

Company Outline
Name ：P.T. Amoco Mitsui PTA Indonesia （AMI）
History ：Establish in1995, Operation start in Sep.1997
Capital ：BP (50%), MCI (45%), Mitsui & Co (5%)
Timing of transfer：end of Mar. 2014
Sales ：530 Million US$（2012）
Details
- Studied future prospects from 2012 with BP and AMI
- MCI focused on: Lessening performance variation and
prioritizing portfolio reform
BPI focused on: Strengthening Indonesian PTA operations
- Based on these differences, the companies commenced studies
related to purchase/sale of AMI stock in 2013.
- By December the companies agreed that MCI would sell
all its shares to BP
Due to equity company status, there is no impact on operating
income. Sale will contribute to reduction of performance
variables of income before taxes 26
③-3) Restructuring PTA (Thailand)

Environment
- Suspension of China exports result in oversupply in Asia ＡＳＥＡＮ
- Resolution of supply/demand gap cannot be expected
Comparison of competitiveness（MCI estimate） 10 ASEAN(million MT)
供給
Supply 需要
Demand
9
8
105 107 7
Drop in China exports after 2012
result in area oversupply
101 100 6
5
4
Top class Worldʼs top 3
2
1
0
2009 2010 2011 2012 2013 2014 2015 2016 2017
SMPC(THA) A(THA) B(China) C(China)
1 2 3 4
Restructuring
１）Secure worldʼs top competitiveness through improvement in
acetic acid consumption
２）Suspension of China exports (1 plant currently suspended)
Strengthen sales to other areas 27
③-4) Summary of PTA Restructuring

Indonesia Thailand Japan

PTA PET PTA PET Iwakuni
（AMI） (PNR) (SMPC) (TPRC) PTA PET
540KTA 80KTA 1,440KTA 100KTA 400KTA 145KTA

AMI sales: 530MUS$

Suspension of *Only domestic
integrated manufacturer
China export of PTA・PET bottle resin
Transfer all shares (1plant currently suspended)

in AMI *Independent operations

to BP Global Secure worldʼs top
competitiveness Cost cuts

Secure competitive raw materials

（Ngi-Son Project）
Sustainability through collaboration with local production
Withdrawal of PTA for local consumption in derivatives(PET)
in Indonesia Promotion of integrated alliance from
raw material to derivatives 28
Restructuring Businesses

① Polyurethanes

② Phenols

③ Purified Terephthalic Acid(PTA)

④ Summary
29
④ Summary of Restructuring

“Target early profitability by

restructuring volume market products”

- Targeted restructuring will mitigate 23 billion yen deficit

of three businesses and improve operating profit by

14 billion yen without taking into account recovery of

market conditions

- Push forward with new large-scale alliances and

extensive cost cuts to actualize early profitability 30

④-2) Profit range of restructuring

Extensive Reforms
Current Proposed Further Large scale
Terminate plants restructuring project
Shut-down Works （alliance, etc.） （Middle East project, etc.）

＋
Max30

P
r
o
f
i
t
0
R
a
n
g
e 14

2013：▲23 （Operating income : billion yen）

－
31
１．Financial Results & Outlook for FY2013
２．Restructuring Measures for
Unprofitable Businesses
３．V-shaped Turnaround
４．Conclusion

32
3. V-shaped Turnaround

“Aims of V-Shaped Turnaround”

1) Early profitability in net profit

2) Restore year end dividends for FY2014

“Aims of Mid-Term Business Plan”

3) Early actualization of net D/E ratio = x1.2
4) ROS=5% (Long range target ROS=7%)

33
 Improvement Model of Net Income

Early profitability in net profit & Restore year end dividends for FY14

FY10 FY11 FY12 FY13 FY14 FY15

Dividend Dividend Dividend Dividend Stable
6yen 6yen 6yen 3yen Restore Dividend
2010 2011 2012 2013 2014
dividends 2015
No dividend
（Net income: ASAP
FY11:▲13.9 at year-end
billion yen） Restructuring costs
incl. impairment of
24.9 polyurethane business

FY12:▲9.9
Restructuring costs Investment effect
incl. suspension of ＋21
general PE plant

▲1 ▲8.1 FY13:▲32 Restructuring effect

Impairment of
FY12: ▲9 ＋14
restructuring
Other special
(▲ denotes a minus) losses
due to accidents
※Performance targets for 2014
will be presented in May 2014 (tentative)
▲23
Restructuring costs：▲56 34
 Financial Conditions
- Extensive restructuring efforts result in net D/E x1.46 at FY2013 year end
- Target net D/E x1.2 through improvement in operating income,
asset liquidation and divestitures

6,000
Net D/E ratio (NDER) 1.8
（ billion yen） 有利子負債(net) 自己資本 DER(gloss) NDER
1.60 1.6
5,000
1.35
1.4

1.46
4,000 1.39 1.2

1.22 1.2 1.0

1.11 1.12
3,000
1.04
0.8
Interest-bearing
liablities (net)

2,000 540 0.6

370
Equity

0.4
1,000

0.2

0 0.0
2008年度 2009年度 2010年度 2011年度 2012年度 2013年度 目標
FY08
08年度 FY09
09年度 FY10
10年度 FY11
11年度 FY12
12年度 FY13(forecast)
13年度（予想） Target
目標

35
Note：FY2013 NDER＝×1.56 (including projected retirement obligations)
 Effect of Investments

Focus 90% of growth investments on

“High Functional Products” and “High Value Added Polymers”
FY2011-2013 Growth investments Investment effect (50 themes)

Others
その他 31
(billion yen) Others
Phenol Chains
ﾌｪﾉｰﾙ・ﾁｪｰﾝ Phenol Chains
High Functional
高機能製品 21
Products
高付加価値 High Value Added
High Value Added Polymers
Polymers
ポリマー 1,300
130
billion yen
億円 High Functional Products
(incl. Heraeus Dental)

Heraeus Dental M&A

1.1
Heraeus歯科材M&A

FY13
1 FY15
2 FY17
3

Effect of current growth investments will

result in rapid expansion after FY2014 31
 Steady Progress in Two Key Areas

- Steady progress in “High Functional Products” and

“High Value Added Polymers”
- Accelerate further expansion
(Operating income: billion yen） 66

49 PP compounds
Admer
39 Elastomer
Evolue, etc.

27 28
High Value Ophthalmic
lens monomer
Added Polymers Dental materials
Nonwovens
High Functional Agrochemicals, etc.
Products

FY11 FY12 FY13 budget FY13 Outlook FY15

（ʼ13/5/10） （ʼ14/2/6）
37
 Growth Trajectory

(Operating income: billion yen）

Further restructuring
100
1000

10

20
Investment effects
Strengthen and Expand
31 “High Functional Products”
“High Value Added Polymers”
500
Restructuring

14

25
0

FY13 Target
38
１．Financial Results & Outlook for FY2013
２．Restructuring Measures for
Unprofitable Businesses
３．V-shaped Turnaround
４．Conclusion

39
Conclusion

“V-shaped Turnaround”

◆Extensive restructuring maneuvers

in painful manner to pursue growth path

◆Culmination of portfolio transformation

◆Early profitability/stable share dividends

◆Improvement of financial structure

40
Ｃｈａｌｌｅｎｇｅ, Ｄｉｖｅｒｓｉｔｙ, Ｏｎｅ Ｔｅａｍ
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