Risks of Intensified Competition, Technological Obsolescence and Declining Demand

「Because the profitability of the PVC-based specialty resin manufacturing equipment at Kaneka North America LLC declined due to weak demand, we reduced its carrying amount to its recoverable amount and recorded the resulting decrease of ¥2,169 million as an extraordinary loss.」

「Because the profitability of the PVC-based specialty resin manufacturing equipment at Kaneka North America LLC declined due to weak demand, we reduced its carrying amount to its recoverable amount and recorded the resulting decrease of ¥2,169 million as an extraordinary loss.」

「The continued weakness in Asian market conditions, together with weak demand in the US housing and construction markets, resulted in overall declines in revenue and profit.」

「Foam & Residential Techs was affected by lower demand in the automotive, domestic agriculture and fisheries, and construction sectors, as well as higher raw-material costs.」

「The recovery in overseas demand for E & I Technology and Performance Fibers was delayed more than expected, while temporary demand adjustments continued in Health Care SU.」

「Although E & I Technology is seeing a recovery in smartphone-market demand, the recovery is slower than expected, delaying the recovery in sales of polyimide products.」

「Vinyls and Chlor-Alkali were affected by the sluggish Chinese economy and a sharp decline in Asian market prices for both PVC and caustic soda. Performance Polymers' modifiers experienced sluggish shipments in Europe and the United States as supply-demand adjustments in construction applications continued for an extended period amid persistent inflation and high interest rates.」

「Demand for Material SU continued to decline as the global economic slowdown spread from the second quarter onward. Supply-demand adjustments in the E & I Technology supply chain also continued for an extended period. These demand adjustments bottomed out in the third quarter, but although signs of recovery began in the fourth quarter, the recovery was below expectations.」

「During the third-quarter consolidated accounting period, some of the group's segments continued to face declining demand and falling market prices due to weakness in the building materials and construction markets in Europe and the United States, falling PVC market prices in Asia, and supply-demand adjustments in the electronics market, significantly affecting business performance.」

「As the global economy showed increasingly strong signs of slowing during the second-quarter consolidated accounting period, Vinyls and Chlor-Alkali, Performance Polymers (MOD) and E & I Technology were affected by market supply-demand adjustments and falling market prices.」

「Sales of expanded polyolefin products remained sluggish as the global trend of reduced automobile production continued.」

「Following a review of future business plans for electronic-materials manufacturing equipment and other assets of Kaneka North America LLC that took into account the impact of COVID-19, recoverable amounts fell below carrying amounts. The carrying amounts were therefore reduced to recoverable amounts, and the resulting decrease of ¥897 million was recorded as an extraordinary loss.」

「The core businesses belonging to Material SU and QOL SU (Vinyl, MOD, MS, Foam and Fiber) saw demand disappear and were forced to reduce production due to the spread of COVID-19, becoming the primary cause of the substantial declines in revenue and profit for the current fiscal year.」

「From this perspective, in the third quarter, intensifying US-China trade friction spread its impact across technologically interconnected global supply chains and became a major factor behind the economic slowdown. Geopolitical risks also increased due to the UK's withdrawal from the EU and tensions between the United States and Iran, causing economic momentum to slow in the third quarter.」

「The global economy slowed visibly as intensifying US-China trade friction spread its impact beyond China to technologically interconnected global supply chains, while confusion surrounding the UK's withdrawal from the EU and rising geopolitical tensions in the Middle East also weighed on conditions.」

「Revenue was ¥148,822 million, down 2.3% year on year, operating profit was ¥7,004 million, down 30.0%, ordinary profit was ¥5,495 million, down 39.9%, and quarterly net profit attributable to owners of the parent was ¥3,491 million, down 44.5%, due to slowing demand in Asia and Europe and weakness in the automotive and electronics industries.」

「Although the global economy continued to grow moderately in the first half of the period, a global economic adjustment became evident, reflecting intensifying US-China trade friction stemming from protectionist US policies, geopolitical risks in the Middle East and Asia, the UK's withdrawal from the EU and other unstable political and economic conditions.」

「In addition to intensifying trade friction stemming from protectionist policies in the United States, concerns have spread about global geopolitical risks extending beyond the Middle East and East Asia, and a serious economic adjustment originating in China has begun to emerge. Business sentiment has deteriorated, and production adjustments to reduce distribution inventories have begun across a broad range of industries, from upstream to downstream.」

「Foam & Residential Techs expanded sales amid weak demand caused by lower fish catches due to typhoons and earthquakes, and delays in civil engineering and construction work.」

「Foam & Residential Techs saw sales volumes remain sluggish due to lower construction and civil engineering activity caused by delays from poor weather and lower fish catches. Demand for hair products in Africa is recovering from its trough and beginning to pick up, but the pace is slower than expected, and a full-scale recovery in business performance is expected from the fourth-quarter consolidated accounting period onward.」

「The electronics and synthetic fibres businesses were sluggish, affected by the stronger yen and delayed demand recovery.」

「Against this backdrop, the group's results for the third-quarter consolidated cumulative period (1 April 2016 to 31 December 2016) reflected an overall increase in volumes as the group expanded sales of new and highly specialised products. However, affected by the stronger yen and weak demand in the electronics market, revenue declined to ¥408,082 million, down 2.2% from the same period of the previous fiscal year, and operating income declined to ¥24,570 million, down 16.3%.」

「Sales of high-performance products and new products, which were new growth drivers for ultra-heat-resistant polyimide film and ultra-high-thermal-conductivity graphite sheets, expanded, but were affected by the delayed recovery of the smartphone market overall and the stronger yen.」

「Although we actively pursued market development for high-performance products and new products, sales of ultra-heat-resistant polyimide film and ultra-high-thermal-conductivity graphite sheets were significantly affected overall by weak demand in the smartphone and other markets.」

「For businesses and products experiencing declining demand due to intensifying price competition from new market entrants, declining profitability, product commoditisation and other factors, we are working to establish a corporate structure that is less susceptible to economic conditions by pursuing business withdrawals and structural reforms. However, if demand for our products declines at an unexpected speed due to a rapid deterioration in economic conditions or obsolescence of our technologies, these measures may not necessarily succeed, potentially having a material adverse effect on the financial position and operating results of the group.」