Sumitomo Chemical Announces Consolidated Financial Results for FY2021.
With the rapid spread of the Omicron variant of COVID-19 since the end of last year, the surge in prices of natural resources and the supply chain disruptions stemming from Russia's invasion of Ukraine, and the sudden rise in inflation, mainly in the U.S., the growth momentum of the world economy during the period leveled off, but the recovery continued. In Japan, too, while there was growing concern about an economic downturn, the economy moderately recovered, and annual real GDP turned positive compared to the prior year.
Against this backdrop, the Sumitomo Chemical Group has been implementing its Corporate Business Plan (for fiscal 2019 - fiscal 2021), centered on the basic policies of accelerating the development of next-generation businesses, improving productivity through digital innovation, raising the sophistication of the company's business portfolio, and building a more robust financial structure. The Group has come together in working to create a sustainable society and to deliver sustainable growth through dramatic growth in productivity and acceleration of innovation.
As a result, the Sumitomo Chemical Group's sales revenue for the period increased by JPY478.3 billion compared to the prior year, to JPY2,765.3 billion. In terms of profits and losses, core operating income* was JPY234.8 billion, operating income was JPY215.0 billion, and net income attributable to owners of the parent was JPY162.1 billion, all higher than the results from the previous year.
*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.
The financial results by business segment for the fiscal 2021 are as follows:
Petrochemicals & Plastics
Although the segment's consolidated financial results for fiscal 2021 were adversely affected by a shutdown for periodic maintenance at the company's Chiba Works, market conditions for synthetic resins, synthetic fibers, and a variety of industrial chemicals improved, and margins also improved, due to a recovery in demand as well as an increase in raw material prices. Therefore, sales revenue increased by JPY253.2 billion, to JPY842.5 billion, and core operating income recovered by JPY65.5 billion, to JPY53.5 billion, compared with the previous year, when the shipment volumes decreased due to the periodic shutdown maintenance for Rabigh Refining and Petrochemical Company, our equity method investee, and due to the impact of the COVID-19 pandemic mainly on demand for automotive use.
*Sumitomo Chemical has changed the name of its Petrochemicals & Plastics Sector to 'Essential Chemicals & Plastics Sector' as of April 1, 2022.
Energy & Functional Materials
Shipments of separators for lithium-ion secondary batteries performed well. Market prices for aluminum and for the metal raw materials for cathode materials increased, resulting in higher selling prices. For the previous fiscal year, shipments had been lower, mainly for automotive use, due to the COVID-19 pandemic. As a result, sales revenue increased by JPY71.1billion to JPY316.4 billion from the previous year, while core operating income at JPY20.1 billion was almost flat, because of a decline in margins resulting from a rise in raw material prices in the second half of the fiscal year.
IT-related Chemicals
Shipments of processing materials for semiconductors (including high purity chemicals and photoresists) increased, driven by growing demand for these items. Besides, shipments of materials for display applications increased in the face of stay-at-home demand and telework demand continued from the previous year. Thereby sales revenue increased by JPY41.9 billion to JPY473.7 billion, and core operating income increased by JPY18.1 billion to JPY57.8 billion from the previous year.
Health & Crop Sciences
Shipments of crop protection products in North America, South America and India stayed firm. Market prices of methionine (feed additives) increased from the previous year. Sales revenue consequently increased by JPY50.8 billion from the previous year, to JPY473.8 billion, and core operating income increased by JPY10.7 billion from the previous year, to JPY42.3 billion.
Pharmaceuticals
In North America, Orgovyx (therapeutic agent for advanced prostate cancer), which was launched in the previous fiscal year, and Gemtesa (therapeutic agent for overactive bladder) and Myfembree (therapeutic agent for uterine fibroids), both of which commenced sales in the fiscal year under review, as well as the recording of a lump-sum upfront payment for the collaboration and license agreement for joint development and commercialization, contributed to sales revenue. These more than offset the negative impact of sales declines for drugs such as Latuda (atypical antipsychotic agent) and Brovana (therapeutic agent for chronic obstructive pulmonary disease), the latter of which saw its exclusive marketing period expire. On the other hand, in Japan, sales revenues were adversely affected by the National Health Insurance (NHI) drug price revisions. As a result, sales revenue increased by JPY45.3 billion from the previous year, to JPY591.7 billion. Core operating income declined by JPY10.0 billion compared to the previous fiscal year, to JPY61.7 billion, despite an increase in sales revenue, attributable to a significant increase in selling, general and administrative expenses associated with the launch of new products.
Others
In addition to the above five segments, the Sumitomo Chemical Group supplies electric power and steam, designs chemical plants and supervises the construction of those facilities, provides transportation and warehousing, and conducts physical property analysis and environmental analysis. Sales revenue of these businesses increased by JPY16.1 billion from the previous year, to JPY67.2 billion, and core operating income increased by JPY3.0 billion from the previous year, to JPY15.8 billion.
Sumitomo Chemical has decided to pay a year-end dividend of JPY14 per share. As a result, the Company's annual dividend for fiscal 2021 is JPY24 per share, including an interim dividend of JPY10 per share.
As of the end of the consolidated 2021 fiscal year, total assets increased by JPY317.9 billion compared to the previous year, to JPY4,308.2 billion. Inventories and trade and other receivables increased.
Total liabilities increased by JPY98.0 billion compared to the end of the previous year, to JPY2,606.2 billion. Interest-bearing liabilities decreased by JPY0.6 billion compared to the prior year, to JPY1,350.5 billion.
Total equity (including non-controlling interests) increased by JPY219.9 billion compared to the end of the previous fiscal year, to JPY1,702.0 billion, due to an increase in retained earnings and other components of equity. The ratio of equity attributable to the owners of the parent company increased by 2.8 percentage points compared to the end of the prior fiscal year, to 28.3%.
Net cash from operating activities in fiscal 2021 was a net inflow of JPY171.7 billion, a decrease of JPY202.7 billion from the previous fiscal year because of an increase in working capital and other factors.
Net cash from investing activities was a net outflow of JPY115.4 billion, compared to a net outflow of JPY177.4 billion in the prior fiscal year, a reduction of JPY62.0 billion, because in the prior fiscal year there were outflows relating to a loan to Rabigh Refining and Petrochemical Company.
This resulted in positive free cash flow of JPY56.3 billion for fiscal 2021, compared with positive free cash flow of JPY197.1 billion for fiscal 2020.
Net cash outflows from financing activities were JPY81.4 billion. The balance of cash and cash equivalents at the end of fiscal 2021 increased by JPY4.5 billion compared to the end of fiscal 2020, to JPY365.4 billion.
For fiscal 2022, the Company forecasts that sales revenue will increase compared to fiscal 2021, to JPY3,120.0 billion, core operating income and operating income are projected to be JPY200.0 billion and JPY180.0 billion, respectively, and net income attributable to owners of the parent to be JPY125.0 billion, assuming an exchange rate of JPY125.0/US$ and a naphtha price of JPY80,000/kl.
Although we cannot anticipate when COVID-19 will be controlled, we do not expect there to be any material impact from it on the Sumitomo Chemical Group's financial results in fiscal 2022 or beyond. In addition, there continues to be considerable uncertainty regarding the future situation in Ukraine, and we will continue to pay close attention to developments there.
The Company plans to pay an interim dividend of JPY12 per share and a year-end dividend of JPY12 per share, making the Company's annual dividend for fiscal 2022 JPY24 per share, unchanged from fiscal 2021.
RABIGH REFINING AND PETROCHEMICAL COMPANY 
