SUMITOMO CHEMICAL CO., LTD. For Immediate Release | October 27, 2023 |
Sumitomo Chemical Announces Impairment Loss and Revisions to Its
Financial Forecast for the Half-Year Ended September 30, 2023
Sumitomo Chemical Co., Ltd. (the "Company") announces that an impairment loss will be posted in the second quarter ended September 30, 2023. In addition, based on recent performance trends, the Company has made revisions to its consolidated financial forecast for the half-year ended September 30, 2023, previously announced on May 15, 2023, as detailed below.
1. Posting the Impairment Loss
Regarding the methionine (feed additives) production facilities, due to higher costs stemming from sharply higher prices for raw materials and fuel, as well as a deterioration in the supply and demand environment, which led to lower selling prices, their carrying amount was written down to its value in use, and the impairment loss was recognized in the fiscal year ended March 31, 2023. Initially, the decline in demand was expected to be temporary, but due to the economic downturn caused by global inflation, it is now assumed that demand will remain weak for a longer period, and selling prices will not increase as much as originally anticipated. Therefore, the Company reviewed the forecast of the earnings of its methionine business, and posted an impairment loss of ¥14,600 million, which is the entire carrying amount of the facilities.
Future initiatives for this business will be explained with consolidated financial results for the half- year ended September 30, 2023, which are scheduled to be announced on November 1, 2023.
2. Revisions to Consolidated Financial Forecast for the Half-Year Ended September 30, 2023 (Millions of yen)
Sales | Core | Operating | Net Income | Earnings | |||
Operating | Attributable to | ||||||
Revenue | Income | Owners of the | per Share | ||||
Income * | (yen) | ||||||
Parent | |||||||
Previous forecast (A) | 1,370,000 | -30,000 | -45,000 | -30,000 | -18.35 | ||
Revised forecast (B) | 1,187,000 | -97,000 | -134,000 | -76,000 | -46.48 | ||
Variance in amount (B-A) | -183,000 | -67,000 | -89,000 | -46,000 | |||
Variance in percentage (%) | -13.4% | - | - | - | |||
Results for Half-Year ended | 1,528,563 | 115,620 | 60,567 | 81,063 | 49.58 | ||
September 30, 2022 | |||||||
- Core Operating Income is a gain and loss concept, reflecting recurring earning capacity, and deducts gains and losses incurred by non-recurring factors from operating income. It includes the share of profit from investments accounted for using the equity method.
Reasons for the Revision
Regarding the consolidated financial forecast for the half-year ended September 30, 2023, in Essential Chemicals & Plastics, the global economic downturn resulted in a decrease in demand and a deterioration in margins for petrochemical products. In addition, in Health & Crop Sciences, crop protection products inventory was liquidated in the midst of weaker demand in South America, and the methionine business deteriorated as noted in "1. Posting the Impairment Loss" above. As a result, sales revenue and core operating income are forecasted to be lower than the previous forecast. Moreover, operating income is expected to fall short of the previous forecast due to the decrease in core operating income, in addition to the impact of the impairment loss mentioned above. Net income attributable to owners of the parent is also expected to be lower than the previous forecast, despite foreign exchange gains from the weak yen, because of lower operating income.
The revised forecast for the full-year ending March 31, 2024 will be explained with consolidated financial results for the half-year ended September 30, 2023, which are scheduled to be announced on November 1, 2023.
Cautionary Statement
Statements made in this document with respect to Sumitomo Chemical's current plans, estimates, strategies and beliefs that are not historical facts are forward looking statements about the future performance of Sumitomo Chemical. These statements are based on management's assumptions and beliefs in light of the information currently available to it, and involve risks and uncertainties.
The important factors that could cause actual results to differ materially from those discussed in the forward looking statements include, but are not limited to, general economic conditions in Sumitomo Chemical's markets; demand for, and competitive pricing pressure on, Sumitomo Chemical's products in the marketplace; Sumitomo Chemical's ability to continue to win acceptance for its products in these highly competitive markets; and movements of currency exchange rates.
Information:
Financial Forecast by Segment for the Half-Year Ended September 30, 2023
(Millions of yen)
Fiscal 2023 | Results for | ||||
Fiscal 2023 | Variance in | Half-Year | |||
Previous | Revised | ended | |||
Amount (B-A) | |||||
Forecast (A) | Forecast (B) | September 30, | |||
2022 | |||||
Essential Chemicals | Sales revenue | 480,000 | 390,000 | -90,000 | 467,299 |
& Plastics | Core operating income | -17,000 | -44,000 | -27,000 | 23,270 |
Energy & Functional | Sales revenue | 180,000 | 150,000 | -30,000 | 173,505 |
Materials | Core operating income | 5,000 | 7,000 | 2,000 | 13,448 |
IT-related Chemicals | Sales revenue | 200,000 | 204,000 | 4,000 | 222,194 |
Core operating income | 12,000 | 18,000 | 6,000 | 26,432 | |
Health & Crop | Sales revenue | 290,000 | 241,000 | -49,000 | 293,902 |
Sciences | Core operating income | 24,000 | -8,000 | -32,000 | 36,310 |
Pharmaceuticals | Sales revenue | 180,000 | 167,000 | -13,000 | 334,445 |
Core operating income | -49,000 | -66,000 | -17,000 | 25,191 | |
Others / | Sales revenue | 40,000 | 35,000 | -5,000 | 37,218 |
Adjustments | Core operating income | -5,000 | -4,000 | 1,000 | -9,031 |
Total | Sales revenue | 1,370,000 | 1,187,000 | -183,000 | 1,528,563 |
Core operating income | -30,000 | -97,000 | -67,000 | 115,620 | |
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Sumitomo Chemical Co. Ltd. published this content on 27 October 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 27 October 2023 08:11:20 UTC.
