Sumitomo Chemical Co ((JP:4005)) has held its Q2 earnings call. Read on for the main highlights of the call.
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Sumitomo Chemical Co’s recent earnings call revealed a mixed sentiment, reflecting both positive strides and challenges. While the company reported significant improvements in core operating income and Sumitomo Pharma’s performance, it faced a decline in overall sales revenue and nonrecurring losses that impacted its financials. The sentiment was balanced by a strengthened financial position and progress in certain segments.
Significant Improvement in Core Operating Income
Sumitomo Chemical reported a substantial increase in core operating income, which rose by JPY 79.2 billion year-over-year to JPY 108.7 billion. This improvement was primarily driven by robust sales at Sumitomo Pharma, along with favorable foreign exchange and tax adjustments.
Sumitomo Pharma Performance
Sumitomo Pharma’s core operating income saw an impressive increase of JPY 94.3 billion year-over-year. This growth was attributed to the expanded sales of ORGOVYX and GEMTESA, as well as gains from the partial divestiture of its Asian business.
Essential & Green Materials Segment Improvement
Despite reporting a loss, the Essential & Green Materials segment showed a year-over-year improvement of JPY 16.1 billion. This was due to better profit margins from synthetic resins and aluminum.
Financial Position Strengthening
The company’s financial position strengthened significantly, with interest-bearing liabilities decreasing by JPY 94.5 billion and equity increasing by JPY 105.2 billion compared to the previous term’s end.
Decline in Overall Sales Revenue
Sumitomo Chemical faced a decline in total sales revenue, which decreased by JPY 146 billion year-on-year. This decline was observed across all segments except Sumitomo Pharma.
Nonrecurring Items Loss
The company reported a total loss of JPY 5 billion in nonrecurring items, marking a deterioration compared to a profit of JPY 91.8 billion in the previous year.
ICT & Mobility Solutions Segment Decline
The ICT & Mobility Solutions segment experienced a decrease in core operating income by JPY 10.5 billion year-over-year, affected by lower selling prices and shipments due to yen appreciation.
Free Cash Flow Deterioration
Free cash flow deteriorated significantly, standing at JPY 41 billion, a decline of JPY 97 billion compared to the previous year.
Forward-Looking Guidance
Looking ahead, Sumitomo Chemical has revised its core operating profit forecast for the full fiscal year to JPY 185 billion, anticipating a JPY 35 billion increase compared to the previous forecast. This revision is based on improved performance trends and partial sales of Petro Rabigh shares. The company continues to benefit from strong sales at Sumitomo Pharma, foreign exchange gains, and reduced corporate income tax expenses.
In summary, Sumitomo Chemical’s earnings call presented a balanced outlook, highlighting significant improvements in core operating income and Sumitomo Pharma’s performance, despite challenges such as declining sales revenue and nonrecurring losses. The company’s strengthened financial position and revised profit forecast offer a positive outlook for the future.