Copyright (C) KH Neochem Co., Ltd. all rights reserved.
KH Neochem Co., Ltd.
March , 2018
President and CEO Keiichi Asai
Presentation Material for Investors
Contents
1
I. Company Outline
II. Medium-Term Business Plan (2016-2018)
III. Development in 2017 Results
Copyright (C) KH Neochem Co., Ltd. all rights reserved.
I. Company Outline
Company Outline
3
Paid in Capital
¥8,772 million (December 2017)
Business
Manufacture and sales of various chemical products
Employees
739 (consolidated, December 2017)
Number of issued shares
36,849,400 shares (December 2017)
3
KH Neochem
Americas, Inc.
Shanghai Seika Trading Co., Ltd.
Taiwan-Japan
Oxo Chemical Industries Inc.
Taiwan Representative Office
Yokkaichi Plant
Yokkaichi research laboratory
Primary products: Solvents, plasticizer raw materials, refrigeration lubricants raw
materials, cosmetic raw materials, and electronic materials
Head Office (Tokyo)
Osaka Branch
Office
Sakai Logistics
Center
Chiba Plant
Primary products: Plasticizer raw materials and refrigeration lubricants raw materials
History
4
Business Development
Organizational Transformation
1948
Kyowa Sangyo Co., Ltd. began
Japan’s first mass production
of acetone and butyl alcohol
from syrup
1988
Established Japan Oxocol Co., Ltd.
Switched to two plant systems, consisting of the Chiba and
Yokkaichi Plants.
2004
Name changed to Kyowa Hakko Chemical Co., Ltd. through
the merger of the Chemical Department of Kyowa Hakko
Kogyo Co., Ltd. and Kyowa Yuka Co., Ltd.
2011
Spun off from Kyowa Hakko Kirin Group
Name changed to KH Neochem Co., Ltd. in
the following year
1949
Established Kyowa Hakko Kogyo Co., Ltd.
1963
Completion of the Yokkaichi Plant
Umaokoshi section
2016
Listed on the 1st Section of
the Tokyo Stock Exchange
1970
Completion of the Yokkaichi Plant
Kasumigaura section
1966
Established Kyowa Yuka Co., Ltd. as a
subsidiary chemical manufacturer of
Kyowa Hakko Kogyo Co., Ltd.
1993
Development of
Refrigeration lubricants raw materials
Our Technologies
5
Raw materials
コア技術Oxo reactions
Other synthesis technologies
Distillation technologies
Quality control technologies
Various consumer goods
Alcohols Acids
OxidationReduction
Synthesis technologies using oxo gas
consisting of carbon monoxide and
hydrogen
Aldehydes
KH Neochem products
Basic chemicals
Performance chemicals
Oxo + α
Technologies
Our Business
6
Basic Chemicals Business
Plasticizer
raw materials
Performance Chemicals Business
Luxury cosmetics
Skin care products
Photoresists
High-purity
solvents
Semiconductors
LCD panelsAir conditioners
Automobiles
Housing
Sofa fabric
Wallpapers
Flooring
Plastic
wraps/films
Solvents
PlasticizersPaints
Cosmetic
raw materialsRefrigeration lubricants
raw materials
Refrigeration
lubricants
30%
54%
15%
1%
Business Segments (Net sales/Gross profit)
7
The percentage of profit from Performance Chemicals
(Performance Materials/Electronic Materials) is about 70%
Basic Chemicals(plasticizer raw materials,
solvents, etc.)
Performance Materials(refrigeration lubricants raw materials,
cosmetic raw materials, etc.)
Electronic Materials(high-purity solvents, etc.)
Net sales ¥97.0 billion
(forecast for 2018)
Basic
Chemicals
¥46.7 billion
Other
¥0.7 billion
48%
40%
11%
1%Electronic
Materials
¥11.1 billion
Performance
Materials
¥38.5 billion
Gross profit ¥21.5 billion
(forecast for 2018)
Basic
Chemicals
¥6.5 billion
Electronic
Materials
¥3.1 billion
Other
¥0.3 billion
Performance
Materials
¥11.6 billion
Perfomance
Chemicals
Perfomance
Chemicals
Our Business (Refrigeration lubricants raw materials)
8
Shift to alternative Refrigeration lubricants raw materials
following the changes in refrigerants
Refrigeration lubricants
raw materials
If the refrigerant that co-exists within the
system is changed, a change in the
Refrigeration lubricants is also required.
Cold air
Path of refrigerant Heat emission
Transition involving refrigerants and
Refrigeration lubricants
Global warming
reduction
Refrigerants Refrigeration lubricants(Raw materials)
Next-generation
refrigerant
Current refrigerant: R410A
(GWP 2,090)
Former refrigerant: R22
(GWP 1,810)
Ozone layer
protection
Petroleum
based
New refrigerant: R32
(GWP 675)
Synthetic
Under
development
Refrigeration
lubricants
Refrigeration
lubricants
raw materials
Synthetic
Note: “GWP” stands for “Global Warming Potential”
Our Business (Refrigeration lubricants raw materials)
9
Growth market in line with the change of refrigerants and
our company’s advantageous position
Position of KH Neochem
Refrigeration
lubricants
Compressors/
Air conditioners
Base oils
Raw materials
Refrigerant for residential
air conditioning units: forecast
2-ethylhexanoic acid
Source: Our estimate(2017)
(New unit sales globally: millions of units per year)
Isononanoic acid
New/Current refrigerants CAGR 7.8%
New/Current
refrigerants
Former
refrigerants
Global production capacity
(Our estimate)
19 17
71
103
2016 2021
90
120
Our Business (Cosmetic raw materials)
10
Functionality of 1,3-butylene glycol
High
Low
1,3-butylene glycol (BG)
Dipropylene glycol (DPG)
Propylene glycol (PG)
Skin care product moisturizers
High moisture retention
Hypoallergenic
Antibacterial
Low odor
Outstanding performance
Grade
Excellent functionality and huge potential demand
130 123
19 20
61
日本 韓国 中国 マレーシア インドネシア インド
Potential demand in Asian nations
Potential demand
Japan Korea IndonesiaMalaysiaChina India
Source: Our estimate(2017)
Increase in demand due to rising income levels and
high-end needs
Increased production capacity by 20% (2016)
Amount spent on skin care products per capita
Units: US dollar
11
Electronic materials that support the latest semiconductors and
basic chemicals that secure stable profit
Stable basic chemicals business
Ownership of multiple products that
are top of the line in Japan
Isononyl alcohol(plasticizer raw material)
2-ethylhexyl alcohol(plasticizer raw material)
Butyl acetate(solvent)
Butyl alcohol(solvent)
Production capacity in Japan (Our estimate)
High-purity solvent quality improvement
20 nm 14 nm 10 nm 7 nm
ppt (parts per trillion)
ppb(parts per billion)
ppm
(parts per million)Microfabriation of semiconductor circuit
Circuit formation
High-purity
solvent
Photoresist raw materials
that form semiconductor circuits
Photoresist Semiconductor
Control level of impurity of
high-purity solvent
Advancement of microfabrication and
high-purity solvents with higher quality
CAGR 4.6%
Source: Semiconductor CAGR (2016-2019) from Japan Electronics
and Information Technology Industries Association
Our Business (Electronic materials/Basic chemicals)
Respond to demand for plasticizer raw materials INA
with our company’s technology and stable and competitive supplies of raw materials
兆豊国際商業銀行
Taiwan-Japan Oxo Chemical Industries Inc.
Location Kaohsiung City, Taiwan
Production capacity Plasticizer raw material INA 180,000
ton/year (planned)
Commercial start-up 2020 (planned)
Total investment About ¥50.0 billion(planned)
47%47% 6%
Project overview
12
Southeast Asia
India
China Technology/Know-How
Stable and competitive
supplies of raw materials
Japan
investment income
Combination of technology and raw materials
Taiwan
CAGR 6.6%
Source: CAGR(2014-2019) from IHS Markit,Ltd. “Chemical Economics Handbook 2015”
INA (Iso Nonyl Alcohol): Plasticizer raw materials DINP with excellent heat
resistance and electrical insulation property
Our Business (Taiwan project)
Copyright (C) KH Neochem Co., Ltd. all rights reserved.
II. Medium-Term Business Plan (2016-2018)
Medium-Term Business Plan Basic Policy
14
With both growth and stability, make the 3-year term a leap for further growth
Achieve results with further
streamlining and cost
cutting efforts, and secure
stable profits
Strategic objective II
Enhance profitability of
basic chemicals
Strategic objective I
Globally expand
performance
chemical sales
Focus resource allocations to
the refrigeration lubricants
and cosmetics fields and
other sectors poised for high
growth
Strategic objective III
Establish a base
for the future
Prepare Taiwanese
manufacturing site, work
more swiftly to create new
businesses
Growth Stability Potential
Summary of Medium-Term Business Plan
15
Note: On the assumption that the exchange rate is 121 yen/$ for 2015 and 103 yen/$ for 2018 and that the rate of naphtha produced in
Japan is 46,000 yen/KL for 2015 and 33,000 yen/KL for 2018
Net sales and operating income in 2015 exclude the results of a subsidiary sold.
Op
era
ting in
co
me
Laying the foundations for growth, stability, and
a leap for further growthNext Medium-Term
Business Plan
Expansion of growth products
Streamlining/comprehensive cost reduction
Implementation of Taiwan project, creation of
new business
December 2015 period
Net sales: ¥89.2 billion
Operating income: ¥6.1 billion
Making our dream
a reality
Operating income
increase 30%
December 2018 period
Net sales: ¥80.5 billion
Operating income: ¥8.0 billionStarting point
Final fiscal year
Expansion of performance
chemicals
Operation of Taiwan plant
New products/business
New overseas deployment
M&A
Medium-Term Business Plan (2016-2018) (2019-2021)
Progress in the Medium-Term Business Plan
89.2
76.1 80.2
76.6
94.7
80.5
97.0
2015 2016 2017 2018
Net sales
6.1
7.5
9.0
7.0
11.5
8.0
10.5
2015 2016 2017 2018
Operating income
(Billions of yen) (Billions of yen)
16
Results
Medium-Term Business Plan
Forecasts
Medium-Term Business Plan Medium-Term Business Plan
Note: In 2015, both net sales and operating income exclude the figures for sold subsidiary.
Aim for operating income of ¥10.5 billion, 30% higher than the initial plan,
in 2018, the final year of the Medium-Term Business Plan.
2015 2016 2017 2018
Results Results Results ForecastsMedium-Term
Business Plan
Interest-bearing
debt¥34.1 billion ¥31.3 billion ¥24.7 billion ¥24.7 billion ¥25.0 billion
Equity ratio 20% 28% 33% 37% 30% or more
ROE 38% 28% 29% 22% 20%
Progress in strengthening the financial base for growth investments in the future
Interest-bearing debt is reduced in a planned manner.
The equity ratio is rising steadily.
ROE is at the highest level in the industry.
Medium-Term Business Plan
17
Progress in the Medium-Term Business Plan
Investment to support growth potential and contribution to global environmental protection
Decision to expand capacity for refrigeration lubricant raw materials
Refrigeration lubricant is a special
lubricant oil used inside air-conditioners.
Date of operation : 2020 (planned)
Investment amount : ¥7.5 billion (planned)
New construction and capacity expansion of 50%
Date of operation : 2018 1Q (planned)
Investment amount : Less than ¥100 million
Capacity expansion with multiple plants
Refrigeration lubricant
raw materials
Air-conditionersAreas of use
Overview of the plan
Growing
demand for air-
conditioners
Protection
of the
ozone layer
Reduction of
global
warming
Medium-Term Business Plan Initiatives
18
Yokkaichi Plant
Chiba Plant
Medium-Term Business Plan Initiatives
Strengthening and rationalization of management structure and various initiatives
19
Increased one independent outside director to two.
Evaluation of the effectiveness of the Board of
Directors by a third party organization
2.Rationalization and increased
efficiency of the Group
Made a subsidiary in Singapore dormant
Acquisition of a credit rating, issued CP, and
refinancing
3.Improvement of financial strategies
1.Improvement of corporate governance
Briefing session for individual investors, plant tour,
overseas IR
Efforts for social contribution activities
5.Active dialogue with stakeholders
4. Accomplishment of active large-scale
periodic maintenance
Establishment of a plant management office and
stronger management
Active preventive maintenance
Handing down of technologies to the next generation
and the cultivation of human resources
Shareholder Return
2016 2017 2017 2018
ResultsForecast as of
AugustResults/Plan Plan
Interim dividend - ¥25.0 ¥25.0 ¥27.0
Year-end dividend ¥50.0 ¥25.0 ¥29.0 ¥27.0
Annual dividend ¥50.0 ¥50.0 ¥54.0 ¥54.0
Plan to increase dividends in 2017 and maintain the same amount in 2018
Note: Dividends in 2016 include the commemorative dividend for listing of ¥3.5. The year-end dividend in 2017 is to be determined at the general
meeting of shareholders held in March 2018.
2017: Increase dividends from ¥50 to ¥54.
2018: Plan to maintain the same amount, despite an expected
income decline.
Investments for growth in the future are also taken into account.
20
Copyright (C) KH Neochem Co., Ltd. all rights reserved.
III. Development in 2017 Results
Development in Results (Quarterly)
22
21.4 22.323.2
24.224.9
4Q 1Q 2Q 3Q 4Q
Net sales
2.2
3.0 2.7
3.5
2.3
4Q 1Q 2Q 3Q 4Q
1.5
2.1 2.0
2.5
1.6
4Q 1Q 2Q 3Q 4Q
Net income
2016 2017
(Billions of yen)(Billions of yen)(Billions of yen)
Income declined in 4Q mainly due to a rise in naphtha prices and increased inventories
for periodic maintenance
2016 2017 2016 2017
Operating income
Development in Results by Segment (Quarterly)
Both net sales and gross profit remained firm in each segment
10.5 10.6 10.8 11.7 12.6
8.2 8.9 9.6 9.4
9.3
2.6 2.6 2.6 2.9
2.9 0.2 0.2 0.2 0.2
0.2
16/4Q 17/1Q 2Q 3Q 4Q
1.4 1.7 1.6 1.9 1.7
2.5 3.0 3.1
3.4 3.0
0.8
0.8 0.6
0.9
0.8 0.1 0.1 0.1
0.1 0.1
16/4Q 17/1Q 2Q 3Q 4Q
Basic
Chemicals
Electronic
Materials
Performance
Materials
Other
Net sales Gross profit
21.4 24.922.3 23.2 24.2 4.9 5.55.6 5.4 6.2
(冷凍機油原料・化粧品原料等)
23
(Billions of yen)
Basic Chemicals(plasticizer raw materials,
solvents, etc.)
Performance Materials(refrigeration lubricants raw materials,
cosmetic raw materials, etc.)
Electronic Materials(high-purity solvents, etc.)
2.4 2.4
1.6
3.6
2015 2016 2017 2018
CAPEX
(Billions of yen)(Billions of yen)(Billions of yen)
In 2018, the production base will be strengthened
by active facility and preventive maintenance
4.0
3.5 3.4 3.4
2015 2016 2017 2018
Depreciation
1.0 0.9 0.9 0.9
2015 2016 2017 2018
R&D expenses
Plan PlanPlan
24
CAPEX, Depreciation and R&D Expenses (Annual)
Inventories, Interest-bearing Debt and
Shareholders’ Equity ratio (Annual)
12.0
9.0
11.112.1
2015 2016 2017 2018
Inventories
Financial stability improved because results remained strong
34.131.3
24.7 24.7
2015 2016 2017 2018
Interest-bearing debt
20.5
28.2
32.6
37
2015 2016 2017 2018
Equity ratio
Plan Plan
(Billions of yen)(Billions of yen) (%)
Plan
25
Presenters
President and CEO
Keiichi Asai
1978 Joined Mitsubishi Corporation
2009 Executive Officer of Mitsubishi Corporation
2013 Executive Officer of Mitsubishi Corporation, Executive
Vice President of Lithium Energy Japan
2014 Board Director, Executive Officer of KH Neochem
2014 President and CEO of KH Neochem
Board Director and CFO
Kenichi Hirai
1978 Joined Nissan Diesel Motor (now UD Trucks Corporation)
2008 Vice President of Nissan Diesel Motor,Volvo Powertrain JAPAN, CFO
2012 Vice President of UD Trucks,Volvo Group Trucks Operations Japan
Controlling Coordination
2016 Board Director and CFO of KH Neochem
26
Copyright (C) KH Neochem Co., Ltd. all rights reserved.
Note:
The information presented herein is intended neither to solicit nor induce investors to either purchase or sell
shares of KH Neochem.
The forward-looking statements in this document such as those regarding future prospects of the business
include assumptions and forecasts based on information available as of the date of this document, and
accordingly such statements do not constitute KH Neochem’s assurance or guarantee. This document also
contains figures for reference purposes that have not undergone audit.
As such, please note that actual results may materially vary from those expressed or implied herein, due to
various future risks and uncertainties.
Also, please be aware that neither KH Neochem nor the information providers shall bear liability for any
damages incurred from use of this data.
Contact
KH Neochem Co., Ltd.
https://www.khneochem.co.jp/en/contact/
https://www.khneochem.co.jp/en/contact/