Second Quarter, Overview of 2024 Financial Statements

Business Results

In the six-month period ended June 30, 2024 (“1H 2024”), the global economy showed a pick-up, although supply constraints such as the impact of the rise in energy and raw material costs due to the prolonged situation in Ukraine and the Middle East remained and the global monetary tightening continued. In particular, the semiconductor industry showed a recovery. Japanese economy recovered moderately as a whole, while standstills in the recovery of consumer spending were seen and corporate capital investment showed a gradual recovery. Consolidated sales for 1H 2024 increased from the corresponding six-month period of the previous year (“1H 2023”). Sales decreased in the Chemicals segment due to a decrease in the volume of Graphite Electrodes. In the Semiconductors and Electronic Materials segment, sales increased significantly compared to 1H 2023, when adjustments were taken place in the semiconductor industry. And sales in the Mobility and Innovation Enabling Materials segments also increased due to volume increases. Consolidated operating income for 1H 2024 1Q increased from 1H 2023. In the Chemicals segment, operating income decreased due to a decrease in volume, though in the Semiconductors and Electronic Materials segment, operating income increased significantly. In the Mobility and Innovation Enabling Materials segments, operating income increased. Ordinary income for 1H 2024 increased from 1H 2023 mainly due to an increase in equity in earnings of affiliates. Net income attributable to owners of the parent for 1H 2024 increased from 1H 2023 due to gains on sales of fixed assets of land and buildings of the former head office.

Segment Information

Net sales by Segment

Operating Income by Segment

Semiconductor and Electronic Materials

In the Semiconductor and Electronic Materials segment, sales of Semiconductor Materials increased due to a gradual recovery in semiconductor market conditions from the second quarter of the previous fiscal year. In Device Solutions, sales of HD media increased significantly due to a recovery in demand for data centers, and sales of SiC epitaxial wafers increased due to an increase in sales volume. As a result, sales and operating income in this segment increased from 1H 2023.

Mobility

In the Mobility segment, Automotive Products faced sluggish demand due to the situation in Thailand, however, due to the recovery of automobile production and the launch of products for new models, sales remained at the same level as 1H 2023. For Lithium-ion Battery Materials, while the impact of slowing demand for consumer products continued, sales increased due to an increase in the demand for electric vehicles. As a result, sales and operating income increased in this segment compared from 1H 2023.

Innovation Enabling Materials

In the Innovation Enabling Materials segment, sales from 1H 2023 increased due to the pass-through of higher raw material prices to product sales prices and an increase in sales volume. Operating income increased from 1H 2023 due to the elimination of the time lag factor in price pass-through.

Chemicals

In the Chemicals segment, sales and operating income of Olefins & Derivatives increased due to an increase in unit sales price in line with the rise in naphtha prices, despite a decrease in sales volume caused by the maintenance of petrochemical derivatives. Sales of Basic Chemicals remained at the same level as １H 2023, and operating income decreased due to higher raw material prices for some products. Sales and operating income of Graphite Electrodes decreased due to a decrease in sales volume and unit sales price. As a result, sales and operating income decreased from 1H 2023.

Financial Conditions

Total assets at the end of 1H 2024 increased from the end of the previous fiscal year 2023 due to an increase in cash and deposits, and property, plant and equipment, despite a decrease in intangible fixed assets such as goodwill. Total liabilities increased mainly due to increases in interest-bearing debt and accounts payable. Net assets increased due to the recording of Net income attributable to owners of the parent and increases in foreign currency translation adjustments.

Cash Flow

Net cash provided by operating activities during 1H 2024 increased from 1H 2023 due to an increase in profit before income taxes, despite a decrease in income due to an increase in working capital. Net cash used in investing activities during 1H 2024 decreased from 1H 2023 mainly due to an increase in proceeds from sales of fixed assets. As a result, free cash flow increased from 1H 2023. Net cash used in financing activities during 1H 2024 decreased from 1H 2023 mainly due to an increase in proceeds from the issuance of corporate bonds. As a result, cash and cash equivalents at the end of 1H 2024 increased from the end of 1H 2023, including the impact of currency fluctuations.