HOME > Investor Relations > IR Events > Presentation of Financial Results for 1Q FY2017

Investor Relations
IR Events

Last updated:Aug 1, 2017

Question and Answer in Presentation of Financial Results for 1Q FY2017

(About 1H FY2017 forecasts)

Looking at the analysis of operating income on slide 6 of the Presentation of Financial Results for the First Quarter of F2017, an increase in sales volumes and improvement in the product mix is forecast to contribute 8.5 billion yen in the 1H. This is 1.3 billion yen higher than the forecast of 7.2 billion yen identified at the beginning of the period. For which specific products are you projecting upside movement?
We are projecting increases of 0.4 billion yen and 0.9 billion yen in the High Performance Plastics (HPP) and Urban Infrastructure & Environmental Products (UIEP) companies, respectively, compared with forecasts identified at the beginning of the period. In specific terms, this upward revision of forecasts mainly applies to electronics-related products in the HPP Company as well as polyvinyl chloride (PVC) pipes and FFU-related products in the UIEP Company.
Why do you anticipate operating income in the HPP Company will decline in the 2Q of FY2017 compared with the 1Q?
Our forecast decline in operating income in the HPP Company in the 2Q of FY2017 compared with the 1Q is mainly attributable to an increase in fixed costs. We expect that the incidence of R&D expenditures will be slightly concentrated in the 2Q.
Why do you believe that the total increase in operating income in the 1H of FY2017 in the UIEP Company will be held to 0.8 billion yen when operating income increased substantially by 1.8 billion yen in the 1Q?
As far as our 2Q forecast is concerned, we have factored in corrections to the temporary rush in demand prior to the increase in PVC product prices in the 1Q as well as the downside risk of further delays in a recovery in aircraft sheets, which struggled slightly in the 1Q, due to the impact of customer inventory adjustments in the 1Q.

(About the impact of an increase in raw material costs)

Looking at the analysis of operating income on slide 7 of the Presentation of Financial Results for the First Quarter of F2017, you are projecting a further deterioration due to increases in raw materials costs in the 1H of FY2017. Despite the fact that naphtha prices have not increased as much as initially anticipated, you are now projecting a negative impact of 2.6 billion yen compared with the 2.4 billion yen forecast at the beginning of the period. What are your reasons for this revised forecast?
While the costs of principal raw materials have not risen by as much as initially anticipated, special raw materials used by certain overseas subsidiaries rose sharply in the 1Q exceeding expectations. On a more positive note, this sharp rise in special raw material costs is anticipated to be temporary.
The Company has set its naphtha price assumption at 42,000 yen/KL for the fiscal year under review. However, prices are currently trending below this level. Is there a possibility of upside, and an improvement in business results in the future?
Operating income is expected to improve should the current naphtha price levels continue.

(About the outlook for the automobiles and transportation field)

Sales in the automobiles and transportation field in the 1Q of FY2017 have declined compared with the 4Q of FY2016. According to explanations, this is attributable to the deterioration in market conditions. Which products in particular have been impacted? In addition, is the use of high-performance products, which has driven growth in the automobiles and transportation field up to now, still increasing?
Looking at the products that have been impacted, such as foams for use in the interiors of automobiles, sales to models adopting high-performance products are decreasing. While the adoption of high-performance products tends to be most prevalent at the time of each vehicle model change, we are to some extent in a phase where results are yet to emerge.
There is a strong sense of deceleration in the North American automobile market. To what degree will the affect the Company’s activities in the automobiles and transportation field in the in the future?
The Company will feel the effects should sales of models adopting its products drop off. On the other hand, demand for heat insulation interlayer films is increasing as attention on the need to mitigate the burden imposed by air conditioning grows. We are looking to offset sluggish conditions by improving the product mix.
Have results in automobiles and transportation-related products in the 1Q of FY2017 increased on a sales volume basis compared with the corresponding period of the previous fiscal year?
Sales volumes were flat year on year owing mainly to the impact of market conditions. Meanwhile, the use of high-performance products is expanding.

(About new housing orders)

New housing orders in the 1Q of FY2017 were unchanged from the corresponding period of the previous fiscal year. Will you be able to achieve a year-on-year increase of 5% in the 2Q?
The 1Q of FY2016 posed a significant hurdle owing also to demand following the Kumamoto Earthquake last year. As the effects of this extraordinary circumstance dissipates new housing orders will confront a lower hurdle in the 2Q. Meanwhile, we will release a new product on July 28, 2017 as the first in a series of 70th anniversary commemorative products. By emphasizing these kinds of strategic products, we believe we will be able to achieve our 2Q plans.
What is the status of test sales of new wood-frame products that are capable of capturing a share of the volume zone market? What marketing methods will you employ to avoid the cannibalization of existing products?
In order to establish marketing methods that will help avoid the cannibalization of existing products, we are undertaking test sales in the 1H. Looking at result of implementation for roughly three months, we believe this is working well.

(About the outlook for each business in the UIEP Company)

Tell us about trends in PVC pipe demand. Will you be able to carry out the forecast increase in prices in the 2Q?
Even after excluding the impact of temporary trends, demand is robust. We expect to be able to lift prices.
Sales in the advanced materials field in the UIEP Company have increased substantially in the 1Q. Can we expect this to continue in the 2Q and beyond?
Overseas export activity is strong for FFU used in railway sleepers. We are also seeing increased use in tunnel construction retaining walls in Japan. As far as sheets are concerned, sales are struggling slightly owing mainly to inventory adjustments by customers in the 1Q. In contrast, trends are robust if we also include demand for use in the renewal of the interiors of existing aircraft. Furthermore, we are expanding sales of functional blow mold containers as well as medical-use and electronic material-related products.