Yamauchi from Sumitomo Chemical. Thank you very much for taking the time out of your busy schedule to join our conference call today.

We'd like to take this opportunity to express our sincere thanks to our investors and analysts for your continued understanding and support of our company's management. I will now explain the overview of our financial results for FY 2026 first quarter.

Please turn to slide 4. Before explaining the details of the financial results, let me briefly explain the profit and loss status for Q1.

Core operating income increased significantly from 27.7 billion yen in Q1 of FY 2025 to 62.3 billion yen in Q1 of FY 2026. Net income attributable to owners of the parent was 40.8 billion yen in Q1, up by 45.3 billion yen from the prior year, thanks to an increase in core operating income.

This was the second-best Q1 core operating income and net income attributable to owners of the parent on record, following Q1 of FY 2022, which were 64.1 billion yen and 70 billion yen, respectively. In Q1, core operating income improved significantly in Essential & Green Materials, thanks to better profit margins at Petro Rabigh and a temporary gain on the difference between the inventory valuation of materials and their increased market price, as well as Agro & Life Solutions, due to strong shipments of crop protection products and better margins for feed additives, and in ICT & Mobility Solutions, thanks to increased shipments of semiconductor processing materials.

Due to our strong business performance and Sumitomo Pharma's 97.8 billion yen capital increase, the D/E ratio improved significantly to 0.80 times from 0.93 times at the end of FY 2025. Next, more details.

For Q1 of FY 2026, consolidated sales revenue was 578.2 billion yen, up by 52.1 billion yen year-on-year. Core operating income, which shows our recurring profitability, was 62.3 billion yen, up by 34.7 billion yen year-on-year.

Non-recurring items not included in core operating income totaled a loss of 1.3 billion yen, an improvement of 900 million yen year-on-year. As a result, operating income was 61 billion yen, up by 35.6 billion yen year-on-year.

Finance income and expenses was a loss of 700 million yen, which improved by 18.9 billion yen year-on-year. Gains on foreign currency transactions included in finance income and expenses was 1.6 billion yen due to the weakening yen, an improvement of 18 billion yen year-on-year.

Income tax expenses was a loss of 9 billion yen, up by 7 billion yen in the tax burden year-on-year. As a result, net income attributable to owners of the parent was 40.8 billion yen, an increase of 45.3 billion yen compared to the same quarter of the previous year.

Regarding exchange rate and naphtha prices, which affect our company's performance, the average exchange rate for the U.S. dollar during the period was 159.57 yen to the dollar, and the naphtha price was 118,500 yen per kiloliter, resulting in a weaker yen and higher raw material prices compared with the prior year.

Next, I will explain the sales revenue by reporting segment. Please turn to page 6.

Company-wide sales revenue increased by 52.1 billion yen year-on-year, and revenue of all segments increased. Regarding the year-on-year change in sales revenue, a company-wide analysis by factor shows that revenue increased by 40.5 billion yen due to price.

This was mainly due to rising product prices in Essential & Green Materials. Revenue decreased by 19.2 billion yen due to volume.

Shipments decreased primarily in Essential & Green Materials due to the transfer of sales rights to Petro Rabigh products in FY 2025 and the impact of the sale of Japan A&L's business in FY 2025. Foreign currency conversion variance was an increase of 30.7 billion yen.

Next, please turn to page 7. Our core operating income increased by 34.7 billion yen year-on-year.

Company-wide variance analysis shows that price was up 15 billion yen, which was primarily due to a gain from the difference between inventory valuations and rising product market prices in Essential & Green Materials. Cost was negative 4 billion yen, mainly due to increased fixed costs associated with investments in semiconductor-related products in ICT & Mobility Solutions.

Volume, including the variance in equity method investment, was up by 23.7 billion yen. This was mainly due to the improvement in equity in earnings of Petro Rabigh in Essential & Green Materials.

Next, I will explain the performance overview for each segment. Please turn to page 8.

In Agro & Life Solutions, core operating income was 9.6 billion yen, an increase of 7.4 billion yen year-on-year. Crop protection shipments remained steady, and the improved shipment volume resulted in increased profits.

Feed additives profits increased thanks to profit margins improvement from the rising market prices. Please turn to the next page.

ICT & Mobility Solutions core operating income was 13 billion yen, down by 5.3 billion yen year-on-year. Profit in display-related products declined due to decline in the selling prices of polarizing films, absence of prior-year gain on the sale of the large LCD polarizing film business, and decline in shipments due to a shortage of semiconductors.

Semiconductor-related products saw increased profits thanks to increase in shipments due to growing demand for semiconductors. Mobility-related products saw increased profits thanks to increase in shipments of super engineering plastics driven by China's consumer electronics replacement policy.

Please turn to the next page. In Advanced Medical Solutions, core operating loss was 1.9 billion yen, down by 900 million yen year-on-year.

Profits decreased as profit margins at affiliated companies declined due to the Middle East geopolitical tensions and shipment timing difference for some active pharmaceutical ingredients and intermediates from the prior year. Please turn to the next page.

As for Essential & Green Materials segment, core operating income was 27.2 billion yen, up by 32.7 billion yen year-on-year. In Japan and Singapore, increases in product market prices generated gains on inventory valuation, leading to profit growth.

In Saudi Arabia, Petro Rabigh, our equity method affiliate, improved refining margins and others, which led to an improvement in equity method investment income, resulting in higher profits. Please see the next page.

As for Sumitomo Pharma segment, core operating income was 18.8 billion yen, down 2.2 billion yen year-on-year. As for cost variances, while costs decreased due to the partial sale of the Asia business in FY 2025, SG&A expenses in North America and R&D expenses increased.

Regarding volume and other variances, although shipments decreased due to the partial sale of our Asian operations in FY 2025, shipments increased as a result of expanded sales of Orgovyx, a treatment for advanced prostate cancer, and Gemtesa, a treatment for overactive bladder. This concludes the overview of financial results by segment.

The next page will explain the consolidated statement of financial position. Total assets as of the end of June 2026 amounted to 3,613.5 billion yen, an increase of 208.5 billion yen compared to the end of fiscal year 2025.

The main factors were the restart of the Chiba plant following its periodic plant maintenance in January through March 2026 and a temporary increase in working capital, including accounts receivables and inventory, due to the surge in naphtha prices. Interest-bearing liabilities totaled 1,132.2 billion yen, a decrease of 19.3 billion yen compared to the end of FY 2025.

Equity totaled 1,412.4 billion yen, an increase of 175.8 billion yen compared to the end of FY 2025. This increase was primarily due to the impact of Sumitomo Pharma's public offering.

Next, I will explain the consolidated cash flows. Please turn to page 14.

Cash flows from operating activities was positive at 5 billion yen, a decrease of 19 billion yen in cash inflows year-on-year. This was primarily due to a temporary increase in working capital and others associated with the restart of the Chiba plant following its periodic plant maintenance in January through March 2026.

Investing cash flow was a negative 49.2 billion yen, an increase in outflows of 3.3 billion yen year-on-year. As a result, free cash flow was a negative 44.3 billion yen, a deterioration of 22.3 billion yen compared to the negative 21.9 billion yen recorded in the same quarter of the previous fiscal year.

Cash flow from financing activities was positive 55.6 billion yen, driven by factors such as Sumitomo Pharma's public offering and improvement of 104.8 billion yen year-on-year. Next, I will explain our outlook for the first half of FY 2026.

Please turn to page 16. I will begin by explaining the business environment surrounding our company during the first half of FY 2026.

Regarding the economic outlook, while investment in the technology sector is providing solid support for the global economy, the outlook remains uncertain due to the geopolitical risks, including the deteriorating situation in the Middle East. In the main business environment, we use weather icons to indicate our major business sectors and our assessment of their respective business environments.

Starting from the top, regarding agricultural chemicals, crop protection products current shipment remains steady, but the level of inventory congestion in distribution chains varied by region. Regarding feed additives, although profit margin improved in the first quarter, raw material prices continued to soar, and the outlook remains uncertain.

In the display sector, the mobile market will remain sluggish due to the increasingly challenging procurement conditions for memory chips. The silicon semiconductor will remain solid, mainly driven by AI-related areas.

As for the petrochemicals and raw materials, although we have secured the quantities necessary for current production plans, the impact of soaring raw material prices is expected to continue for the time being. This concludes the overview of the business environment.

I will now explain the financial forecast summary. Please turn to page 17.

At the time of our previous financial results announcements on May 14th, the impact of the situation in the Middle East and other factors were extremely difficult to predict. Therefore, we provided only full-year forecasts for FY 2026 and did not disclose first-half forecasts.

We are now announcing our first-half financial forecasts. For the first half of FY 2026, we expect core operating income to be 125 billion yen and quarterly net income attributable to owners of the parent company to be 70 billion yen.

Core operating income, excluding gains on the sale of business, is expected to double year-on-year. We expect to achieve the forecast for quarterly net income attributable to owners of the parent company announced in May by the end of the first half.

Regarding core operating income, Essential & Green Materials will significantly improve due to profit margins improvement at Petro Rabigh and temporary gain on the variance between the inventory valuation. In the Agro & Life Solutions, crop protection products shipments remain strong and profit margin for feed additives will improve.

In ICT & Mobility Solutions, while shipments of display-related materials are projected to decline, shipments of semiconductor processing materials are expected to increase. That said, regarding our full-year forecast, as it remains difficult to predict the future ahead amid ongoing turmoil in the Middle East, we have not revised it at this time.

We will reassess and provide an update when we announce our first-half financial results. Next, page 18 explains summary of performance forecasts.

First, our exchange rate assumptions for the first-half forecast are based on an exchange rate of 155 yen to the dollar for the second quarter and project a rate of 157 yen to the dollar for the first half as a whole. Additionally, assuming that the current situation in the Middle East will continue throughout the first half, we project a naphtha price of 90,000 yen per kiloliter for the second quarter and 104,000 yen per kiloliter for the first half as a whole.

Based on these assumptions, sales revenue is expected to be 1.17 trillion yen, an increase of 74.6 billion yen year-on-year. Core operating income is expected to be 125 billion yen, an increase of 16.3 billion yen year-on-year.

Operating income to be 122 billion yen, an increase of 18.3 billion yen year-on-year. Quarterly net income attributable to owners of the parent company to be 70 billion yen, an increase of 30.3 billion yen year-on-year.

As for dividend, interim dividend will be 8 yen, year-end 8 yen, and annual dividend of 16 yen per share remains unchanged, which we announced in May. Next, page 19, regarding our forecast for the first half of the fiscal year.

Regarding a forecast for the first half of the fiscal year, I will explain the comparison with the same period of the previous year by segment. For Agro & Life Solutions, driven by steady shipments of crop protection products and rising market prices for feed additives, we expect a significant increase in profit year-on-year.

For ICT & Mobility Solutions, while shipments of semiconductor processing materials remain steady, we expect a decline in profit due to the absence of the gain from the sale of the large-size LCD business recorded in the same period of last year and a decrease in shipments of display-related materials. Essential & Green Materials segment, due to improved profitability at Petro Rabigh and gains from inventory valuation driven by rising market prices for synthetic resin and other products, we expect a significant increase in profit year-on-year.

At Sumitomo Pharma, due to the absence of gains from the sale of the Asian business, as well as increases in SG&A expenses and R&D expenses in North America, we expect a significant decrease in profit year-on-year. This concludes my explanation.

This is Watabe from Morgan Stanley. Thank you very much.

Agro and Life is my question. In Q1, you are off to a fairly good start.

Methionine and crop protection, I want you to do a breakdown. For the inventory adjustment, you said there are regional variances, 20 billion in Q2 you're expecting a big profit increase.

What is the background to that? El Niño impact, how do you see the El Niño impact for crop protection if you could elaborate, please?

Thank you for the question. AGL, Agro & Life Solutions.

In Q1, profit was 9.6 billion yen, which is compared to 2.2 billion last year, it was a significant improvement. This improvement was mainly due to the methionine feed additives.

Due to Middle East situation, the supply/demand is tightening. In Q1, prices rose, and that was the impact.

For crop protection, Q1 is not the busy demand season, and there is not much difference from last year. From Q2 onward, expecting Q2 and onward, we think we are in line with the forecast.

To your question on the El Niño, this year El Niño is expected to have a big impact. The impact of crop protection in each region, I think, is your question.

The impact of El Niño is mainly not in the northern, but the Southern Hemisphere. It impacts the Southern Hemisphere more.

Basically, it will not rain as much and temperature rises. Precipitation declines, temperature rises.

Now, by region: Brazil, first of all. Brazil is a big country, the southern part and northern part are different.

In the northern part, closer to the equator, as I mentioned earlier, precipitation declines and temperature rises, and that is the trend. This will negatively impact the planting of the crops on one hand, but if temperature rises, pests increases, which is a plus.

We don't know which will be the bigger factor, positives or negatives. It's hard to say.

On the other hand, in the southern part, precipitation increases. A few years ago, there was a flood in the southern part, and so there is a risk of that possibly happening again.

Next is India. El Niño impact is already emerging globally.

In India, monsoon is coming later, and so the planting, seeding is pushed out or becoming later. Q1 in India shipment was lower than our anticipation.

It is starting to rain in July, we're starting to see a recovery. Next is Southeast Asia: Vietnam, Thailand, and Indonesia.

Rain declines and temperature rises, and so this may impact the planting and seeding. As I mentioned earlier, if high temperature continues, the insects, the pests increase, so that may be a positive factor.

Australia is roughly the same as Southeast Asia. Watabe-san, your third question, I could not hear your third question very well.

Could you repeat?

Q1 to Q2 you are expecting a big profit increase?

From Q1 to Q2, the increase. Feed additives will improve and crop protection in Q2, Brazil in Latin America will enter the high-demand season and India will also enter the high-demand season.

There will be positives coming from the crop protection. That is factored in.

This time, your first-half forecast was issued. Agro has high probability?

Yes, we think so.

Thank you

very much.

This is Yamada from Mizuho. Hello.

I have a question regarding the ICT & Mobility section. The display, the performance is weak.

That is because the general-purpose usage and the large size is not doing well. Overall, the competitors, the performance is good.

Where you're going, not just resist type, but various things is selling from the first quarter to the second quarter is the demand season. The semiconductor display on a quarter-on-quarter, I assumed that it is going to improve.

Is that the case? For the first quarter, 13 billion; the second quarter, 15 billion.

It seems that the core operating income is not going to change that much. The movement from the first quarter to the second quarter in this segment, I would like to know.

Thank you very much for a question. This ICT part, as you have mentioned, the first quarter results was 13 billion and the first half is 28 billion.

If you do the calculation, the second quarter is 15 billion. Display and semiconductors and others, if we look at them, the display itself, towards the first to second quarter, we expect an improvement.

Regarding semiconductors, there's no seasonality. Therefore, first quarter, second quarter, we believe that there will not be a major movement between these two quarters.

The other mobility part from the first to second quarter, there is not a major factor here. However, there's a slight decline.

That is the situation. For displays for mobile applications, we believe that it is going to strongly grow.

That is our forecast. However, regarding towards the large-size displays, our company is starting to wind down in that area.

Therefore, we believe that this area is not that good of a performance. Also, as the memory shortage, we're not being impacted at the high end, but the middle end and low end will started to get impacted.

For us, it will be the touchscreen panels for us. These areas will be impacted.

As for semiconductors, there's not a large movement between the first and second quarter. However, here, as forecast, we believe it is steady.

The market itself is growing quite a bit. Photoresist and the high-purity chemicals and liquid crystals, they are going to grow steadily this fiscal year, we don't have any concerns here.

As

for semiconductors, looking at the other companies' financial results, the wafers June shipment volume was a record high is what was mentioned. They said that this situation is going to continue.

Regarding the wafer delivered to the fabs, we believe between the first quarter, second quarter, it's going to show an increase. The technology node, how it will progress, I believe that your company's product is going to increase.

Is the risk factors different, or your way of thinking is different from the market? If that is the assumption and if you're saying that it's flat, that's fine.

Please explain.

Just a moment, please. Thank you for waiting, Yamada-san.

From the first to second quarter, there's a slight flatness that you see. The semiconductor-related part is going to show a growth.

However, we have been making various investments towards the semiconductor-related area. In the first quarter, we're seeing a slight increase in fixed cost.

Especially from the second quarter onwards, the things that will start moving from the second quarter, there's an impact of the fixed cost increase from the second quarter. The fixed cost, with the cost variance part, we will start to see a slight negativity, and there's an advance investment that occurred, it's going to become this way?

Yes. The cost variance part, the streamlining positive factors included, but also the fixed cost increase, they're both included.

Maybe it's difficult to understand. However, this fiscal year, fixed cost increasing is the reason for the shipment increasing, but the profit not increasing as much.

Understood very well. Thank you.

SMBC Nikko Securities, Miyamoto speaking. Agro and Life is my question.

Page 29, crop protection sales year-on-year is 12% increase in Japan and the Central and Latin America, your front-loading. Including that, excluding the FX, it is flat year-on-year?

Q1 year-on-year, if you could elaborate on where you stand, and Q2 year-on-year, Agro and Life sales will be look like 30% up. What is the increase in crop protection year-on-year?

You're expecting a big jump in profit, what's the background? As Watabe-san said earlier, the distribution stock, there may be regional variances, if you could elaborate on that, too, in the distribution channel.

Crop protection sales by region. North America: it is positive, plus on the yen-denominated basis, but on a dollar-denominated basis, it is flat or slight decline.

This is because of the time lag in shipment, it is not that we are seeing some negative, foundational, essential factors. In Central and Latin America, profit is increasing significantly, increasing in foreign currency-based denominated basis as well.

There is partial front-loading from Q2, and that is also helping the increase. Asia and India, for India, as I mentioned earlier, because of the monsoon, there is a shift from Q1 to Q2, there's a slight decline.

Europe and others: no big change here. Our inventory in the distribution channel: North America and India and Europe, we have already reached the optimal inventory level.

In Central and Latin America, especially Brazil still has rather high inventory level in the distribution channel. Next, the trend from Q1 to Q2...

Yes, Q2 profit increase on a year-on-year basis? Yes, okay, Q2 on a year-on-year basis.

Just a moment, please. Q2 on a year-on-year basis, increase of 35 billion yen.

The reason for this increase is one, crop protection is increasing, and feed additives is also increasing. To give you some numbers, of the 35 billion yen increase, more than half is crop protection.

Feed additives, more than 10 billion increase. The price will rise further from Q1 to Q2, so that is the positive impact based on our assumption.

Thank you. Crop protection Q2 will be 20% increase year-on-year?

Which area, INDIFLIN or [Biorationals?] or, and region-wise, where would that be?

Because this is a big jump in profit, if you could elaborate, please.

By region, all regions are growing: North America, Latin America, Asia. Q2 year-on-year, they are all growing, enjoying profit increase.

Understood.

Latin America is higher in terms of the amount of profit increase. As we mentioned in the full-year forecast, until last year Latin America was sluggish, but is now on the recovery track.

Therefore, Latin America recovery is expected to be rather large.

Yes, understood. Thank you very much for the details.

Thank you very much. This is Umebayashi from Daiwa Securities.

I'd like to ask you about Essential & Green Materials, the changes from the first to second quarter. In the second quarter, on a Q-on-Q basis, the core operating income, you predict to be 12 billion.

For the first quarter, I believe there was not much major change. Japan and Singapore's performance was the reason, but I'd like to know the background on that.

Also the Singapore's utilization situation. I believe that one plant is suspending its operation, but can you share the current situation?

Thank you very much for your question. E&GM's first quarter to second quarter trends, I believe, was your question.

This part is, as you have imagined, the major factor is that the inventory valuation and the Petro Rabigh situation. For Petro Rabigh, at the local site, their financial results have been already disclosed, if I may share with you, the first quarter as an equity method affiliate, 9 billion has been recorded.

Second quarter, about 17 billion is included. The local financial results, the January to March, the first quarter was 400 million, the second quarter 700 million revenue, and that's incorporated.

In the other areas, about slightly under 20 billion deterioration is occurring. This part, the inventories variation is the cause.

The valuation of the inventory of the first quarter was a 15 billion, but the second quarter, the naphtha price, we reduced it to the current pricing. Therefore, we are expecting it to return in the negatives.

That is the situation. Therefore, the inventory valuation and Rabigh, other than these two, the first quarter and second quarter, there's not much of a change between the two quarters is how we look at it.

Regarding utilization, you asked a question. The situation both in Japan and Singapore has not been changing from the first quarter is the recent situation.

As for raw materials and naphtha, we are able to procure them. With consulting with the customers, the necessary amount is produced and sold at an appropriate pricing is the situation.

Therefore, here, there's no major positive or negative. Does this answer your question?

Thank you very much. The Singapore part, do you have an outlook that the utilization will increase a bit?

Maybe the second quarter you are looking at it to be flat, but if you get more naphtha, is it going to increase?

Currently, we are not thinking of increasing the utilization. Right now, in line with the customer demand, we are operating.

Therefore, it's not that we are receiving additional large-scale inquiries. For the time being, we believe we will maintain the current situation.

That is all. Thank you very much.

Thank you.

This is Okazaki from Nomura Securities. Can you hear me?

Yes.

Thank you. My question is on Agro & Life Solution, methionine.

You mentioned that from Q1 to Q2, the market price will rise. The current spot price seems to have peaked out.

Your sales price shipment has some time lag from spot, and so the market price will rise in July-September vis-à-vis April-June, is my understanding correct?

Yes, you are right. Basically, we do not sell in spot much.

We sell to our customers based on contract, we refer to spot price and decide on our prices, there are some time lags.

Basically, 180,000 tons per year capacity, and this high level is continuing in Q1 and Q2? It's difficult to forecast the second half, but if you have any comments you could share with us for market price?

Capacity utilization will be full capacity. We are maintaining a full-capacity operation.

For the second half, it's difficult to forecast, and that is why we have not issued a full-year forecast. We need to ascertain further and make the right decision.

Yes, thank you very much.

Thank you.

This is Omura from UBS Securities. Thank you very much.

I am looking at page 9 and page 24 for ICT & Mobility Solutions. On page 9, there's a factor for volume, plus positive and negative numbers.

I'd like you to break this down and give me a quantitative explanation. On page 24, under Mobility, it says that to make the sales price appropriately, but the sales price, it is a positive.

On page 9, with the volume, a comment, and the sales price, there's no comment. I'd like you to supplement the explanation in those two areas.

Just a moment, please. On page 9, where it says volume and others, it's almost close to zero, but there's a positive and negative, plus and minus.

The positive factors will be the semiconductor materials is positive. It's becoming positive number.

I cannot share with you numbers here, but several 10 billions yen, in the middle of several 10 billions of yen. Also, here, the impact of yen depreciation is included.

Here, as the segment, it's about 50. Compared to last year, it's a 15 yen depreciation, so that much is included.

The other areas will be the negative part. These will be display-related.

Over here, last year's sales gain, part of that, the large-size TV business was sold or divested, and this year that does not occur. For the semiconductor part, the middle-end and low-end part is not performing well, but actually the touchscreen is being impacted by that.

Basically, those factors are included in here is how I'd like you to understand this. Also, on the mobility part, the difference in sales, regarding price optimization, the raw material prices are increasing.

Therefore, the price is being increased in line with that. That's where the difference in revenue is showing.

You see a lot of that in Essential Materials, but in other areas, the crude oil-derived products, there is cost increased, and that part also is incorporated or passed on. That's why it is like this.

You're saying that it is not written in the core operating income? It's not written.

It's not that large. We're just increasing it only the amount that the raw material price increased, I hope you will understand in that way.

Understood.

The mobility's volume difference on page 9, it is not that large, but you still wrote it on this page? In mobility, the Chinese economic stimulus measures, there's a replacement of home appliance, and there, a lot of the super engineering plastics are used, so that is used as the positive factor.

Maybe you've already seen it and know. We changed the material by showing you the subsegments by products.

That's why there, even though the number is not large, it is written.

Understood. Thank you very much.

This concludes my question. Thank you.