Sumitomo Chemical Announces Revisions to its Financial Forecast and its Projected Dividend for Fiscal 2019.

Revisions to the Consolidated  Financial Forecast for the First Half of Fiscal 2019

In the half-year ended September 30, 2019, there were clear signs of moderating growth in the global economy, including a slowdown in China’s economy because of such factors as the impact of trade tensions between the US and China.

In light of these conditions, sales revenues are expected to be lower than the previously announced forecast, primarily in the Petrochemicals & Plastics sector, due to lower selling prices in accordance with a decline in feedstock prices.

In terms of profitability, in the Petrochemicals & Plastics sector, profit margins have deteriorated because of a decline in demand. In addition, in the Health & Crop Sciences sector, market conditions for the feed additive methionine have been worse than anticipated, and the impact of extreme weather in North America caused shipments of crop protection chemicals to be weaker than originally anticipated. On the other hand, business performance in the Energy & Functional Materials, IT-related Chemicals, and Pharmaceuticals sectors has been solid, primarily because of higher demand. Particularly in the Pharmaceuticals sector, operating income is expected significantly rise because of very strong sales and a lower than anticipated increase in selling, general and administrative expenses. As a result of these factors, core operating income is expected to be higher than the previously announced forecast.

Operating income is also expected to be higher than the previously announced forecast. In addition to the increase in core operating income, the Pharmaceuticals sector has implemented changes to its business plan, and while it expects to record an impairment loss on the intangible assets of in-process research and development in the oncology business, in accordance with the changes to its business plan, there will be a major decline in the fair value of contingent consideration, and it is expected that this will lead to a reversal of expenses that will exceed the impairment loss.

Net profit attributable to owners of the parent is expected to fall below the previously announced forecast because of the recording of losses on foreign currency translation adjustments stemming from the appreciation of the yen, and because income tax expenses are expected to increase, primarily owing to the reversal of deferred tax assets that had been recorded in the US, resulting from the discontinuation of the phase 3 clinical study of napabucasin for patients with pancreatic cancer.

Revisions to the Full-Year Consolidated Financial Forecast

For the second half of the fiscal year, amid growing uncertainty over the global economy, it is expected that its business environment will continue to be uncertain. In these conditions, Sumitomo Chemical has revised its foreign exchange forecast to 105 yen per US dollar from the previously announced 110 yen per US dollar.

For the full fiscal year, although the appreciation of the yen would reduce the sales proceeds outside of Japan in yen terms, business performance in the Energy & Functional Materials, IT-related Chemicals, and Pharmaceuticals sectors is expected to continue to be solid. On the other hand, because business performance in the Petrochemicals & Plastics and Health & Crop Sciences sectors is expected to deteriorate more than originally anticipated in the second half of the fiscal year, sales revenue and core operating income are expected to be lower than the previously announced forecasts.

Operating income and net income attributable to owners of the parent are both also expected to fall below the previously announced forecast because of such factors as lower core operating income, the impact of losses on foreign currency translation adjustments stemming from the appreciation of the yen, and the reversal of deferred tax assets.