TOKYO OHKA KOGYO CO., LTD. (TOK) provides chemical products, such as photoresist, and equipment for semiconductors and liquid crystal displays.

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President Noriaki Taneichi reports business results and development
and explains the future tasks and strategies.

Looking Back over the Fiscal Year Ended December 31, 2019

Results of Operations

tane 投資

For the fiscal year endedDecember 31, 2019, the performance in the electronics market fell below the level in the previous year due to stagnant demand for data servers and smartphones affected by the impact of the U.S.-China trade friction.

Under such circumstances, the Group has implemented various measures with an aim to return to a growth track.
In FY2019, we established a new R&D building at the Sagami Operation Center, our main development site, for the purpose of creating new values, and also made investments to enhance production facilities in the U.S., Korea, and Taiwan in line with the production expansion starting in 2020.

In R&D, we have promoted development of new products in collaboration with companies, universities, and national research institutes, etc.

In corporate governance, we implemented measures to enhance the management foundation while responding to the tightening export control against Korea.

Thanks to these measures, acceptance inspections of shipped products progressed and sales in the Equipment Business exceeded the previous year’s level. However, sales in the Material Business decreased due to the influence of the deteriorating semiconductor market environment, and as a result, consolidated net sales for the fiscal year ended December 31, 2019 was \102,820 million (down 2.3% year on year). 

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As for profit, operating income was \9,546 million (down 9.1%) and ordinary income was \9,707 million (down 9.6%), due to a decrease in net sales and an increase in expenses as we increased the number of personnel to prepare for mass production of products to be used in the cutting-edge semiconductor manufacturing process. Profit attributable to owners of the parent was \5,410 million (down 21.3%) due to increases in extraordinary loss and non-controlling interests in net income.

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Business Development

Material Business 

Electronic functional materials
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While sales of display photoresists decreased due to a decline in demand for small-and mid-sized LCD panels, sales was strong in EUV photoresists which have started to be used in the cutting-edge semiconductor manufacturing process as well as thick-film KrF excimer laser photoresists for 3D-NAND and MEMS materials for electronic components.

As a result, electronic functional materials division recorded sales of \58,249 million (down 0.9%), the same level as the previous year.

High purity chemicals

Sales of photoresists-related chemicals used in semiconductor manufacturing process decreased as production volume of semiconductors in Taiwan decreased due to the influence of the deteriorating environment of market for smartphones, data servers, etc.

As a result, high-purity chemicals division recorded net sales of \40,674 million (down 7.0% year on year).

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Equipment Business

Acceptance inspections of shipped Zero Newton wafer handling system progressed, and sales of other semiconductor manufacturing equipment used to manufacture semiconductors for automotive devices remained the same level as the previous year.

As a result, sales of process equipment division increased from the previous year to \3,833 million (up 44.4% year on year).

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Sales Composition of Electronic Functional Materials by Type

The sales composition of KrF excimer laser photoresists increased 2 percentage points year on year as the usage volume of photoresists grew due to an increase in the number of layers associated with evolution of 3D-NAND despite the effect of the deteriorating market environment.

Meanwhile, the sales composition of ArF excimer laser photoresists decreased 1 percentage point year on year due to the customers’ lower operation rate affected by stagnant demand for semiconductors.

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Outlook for the fiscal year ending December 31, 2020 (the 91st business year)

For the fiscal year ending December 31, 2020, the Material Business expects to see increase in sales of semiconductor photoresists due to the recovery of semiconductor production and also in sales of high functional clean solution, in high-purity chemicals division, used in cutting-edge semiconductor manufacturing process in the U.S.   

The Equipment Business expects to see a year-on-year increase in sales due to expected sales of plasma ashing systems used in power semiconductor manufacturing and Zero Newton wafer handling system used in back-end processes of semiconductor manufacturing to realize high function and performance.

As for profit, we expect a significant increase in operating income in the Material Business over the previous year due to increases in sales and sales volume of high value-added products in the Material Business, and a decrease in expenses, despite certain negative factors such as discount pricing. In addition, the Equipment Business plans to reduce loss through cost reduction, etc.

As a result of the above, we forecast increases in operating income, ordinary income, and profit attributable to owners of the parent.

 FY2019FY2020Rate of change
Net sales102,280107,0004.1%
Operating income9,54611,30018.4%
Ordinary income9,70711,70020.5%
Profit attributable to owners the parent5,4107,90046.0%

Dividends to Shareholders

Despite such harsh business results, from the viewpoint of stable and continuous shareholder returns and based on our dividend policy targeting a dividend on equity ratio (DOE) of 3.5%, the Company plans to pay a year-end dividend for the fiscal year ended December 31, 2019 of \60 per share in acknowledgement of the continued support from our shareholders.

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