Last Updated: Feb. 2, 2021
Financial Results for the 3Q of FY2020
About conditions in the three strategic fields of the HPP Company and other matters
In the 3Q, we saw advance orders generated in the Electronics field from customers who were concerned about the further spread of the COVID-19 pandemic, and thus we are expecting there to be a certain amount of recoil in the 4Q. With regard to the Mobility field, although we are anticipating something of an impact from a temporary reduction in automobile production brought about by a shortage of semiconductors and other factors in the 4Q, thus far no movements, such as a decrease in orders, are being seen.
- *HPP Company：High Performance Plastics Company
Due to the concerns about supply caused by the further spread of the COVID-19 pandemic in the 3Q, we saw a certain amount of advance demand generated and resultant firm sales of products for the Liquid Crystal field and robust sales of products for the Non-LCD field. In the meantime, in the 4Q we are expecting there to be temporary inventory adjustments in both product fields.
As their performance, for example in terms of heat resistance and their easy peel off capability, is highly rated, sales of our semiconductor process materials are exhibiting growth. Sales of heat release materials for 5G base stations, which feature strengths in their high heat release properties and flexibility for forming into shapes, are also on the increase.
The increase in the number of vehicles for which HUDs are being adopted is gaining pace. We also believe that we are expanding our share of the market.
With regard to the interlayer film products for HUDs, these have up to now been adopted mainly on luxury cars, but with awareness increasing that they can improve safety when driving and provide other benefits, their adoption is expanding to include the mid-range class of automobiles. We also maintained our production and transportation systems even during the COVID-19 pandemic in the first half of the year and have been responding without any problems even in the situation caused by the rapid recovery in demand from the 3Q onward.
For EVs we have an insulating interlayer film that will assist in reducing the amount of power consumed by items of equipment, such as air conditioners. We would like to expand sales of products that possess combined functions with the interlayer films for HUD products.
A new line capable of producing interlayer films for HUD products has commenced operations, and we believe that, for the time being, a sufficient supply system is ensured.
About trends in new housing orders and other matters
When the previous state of emergency was in effect, exhibition venues were closed nationwide, but this time they are opening after implementing thorough infection prevention measures. By utilizing digital marketing mechanisms—such as attracting visitors online and online business negotiations as well as experience-based showrooms—while establishing a business negotiation style that does not reduce points of contact with customers even in a coronavirus pandemic, we also believe that it is possible to achieve the 4Q plan and increase orders from the next fiscal year onward.
The land for sale is carefully selected and the length of the turnover period from purchase to sale strictly controlled. We possess strengths in smart houses, which are equipped with solar power generation systems and storage batteries, and are building our brands, but we are also mainly selling products that possess the same fundamental functions for both subdivision houses and ready-built houses. We will also roll out the Town and Community Development brand nationwide utilizing products from other SEKISUI CHEMICAL divisional companies.
We have already completed the preparation of multiple projects scheduled to commence sales during this Medium-term Management Plan, and we believe that new projects will be launched one after another from the next fiscal year onward, creating a format that contributes to stable profits.
If the order plan for the second half is achieved, the downward trend in the order backlog at the end of the period will be halted. In addition, the inventory of ready-built houses, which are posted as sales immediately upon the receipt of an order, has increased significantly.
About conditions in the Medical Business and other matters
Most of the second-half increase in sales of the diagnostics (overseas) business is from COVID-19 diagnostic kits. Amid decreasing numbers of outpatients overseas and no increases in sales of other diagnostic reagents, the COVID-19 diagnostic kits are taking up the slack.
About 3Q financial results, full-year forecasts and other matters
The full-scale impact will probably be felt from next fiscal year. With regard to product prices, we will proceed with negotiations with customers in the coming months so that they can understand the situation of rising raw material prices with regard to our products.
For the non-operating expenses, these are expected to be foreign exchange loss and the structural reform expenditures incurred amounting to several billion yen. We will refrain from providing the details of the structural reforms, but we are working on the optimization of the production system to better meet global demand.
After the impairment, $115 million of intangible assets remain. The aircraft production rate of Boeing, a principal customer of SEKISUI AEROSPACE CORPORATION, has fallen since the time of the acquisition. Since it is expected that the profit that should have been obtained in proportion to the number of aircraft produced will decrease, the impairment of customer-related assets was undertaken. At the present time, we are proceeding with cutbacks of the production structure and deployment to applications other than aircraft, such as the medical field and drones, ahead of schedule, and we believe that there is no risk of impairment other than the intangible assets so far.
Our impression is that, out of that ¥12 billion, about half was caused by insufficient business activity brought about by the COVID-19 pandemic, and about half was due to the structural reforms of business. We believe that implementing the structural business reforms ahead of schedule will strengthen our profitability from the next fiscal year onward.