Message from the President

The operating environment during the interim period of fiscal 2011 (April 1, 2011 to September 30, 2011) became increasingly uncertain despite favorable conditions experienced throughout the first half of the period. Such heightened uncertainty was attributable to financial crises in Europe and the economic slowdown in the United States during the second half of the period under review. In addition, economies in emerging countries, which had continued to show steady growth, plateaued during the period. Turning to the Japanese economy, concerns have been raised regarding ongoing high raw material and fuel prices as well as the strong yen. Such concerns have overshadowed the gradual progress of post-disaster reconstruction.

Amid these circumstances, Kuraray's Kashima Plant promptly resumed operations that had been suspended due to the disaster, and Kuraray implemented price revisions to compensate for climbing raw material and fuel prices. In addition, in line with the GS-Twins medium-term action plan (fiscal 2009 to fiscal 2011), Kuraray continued to aggressively and steadily implement measures aimed at expanding businesses and securing future growth.

Consequently, net sales for the interim period rose ¥4.9 billion (2.7%) compared with the corresponding period of the previous fiscal year to ¥185.6 billion, operating income grew ¥3.9 billion (15.3%) to ¥29.4 billion, ordinary income increased ¥4.0 billion (15.9%) to ¥29.0 billion and net income surged ¥3.3 billion (23.7%) to ¥17.2 billion. All of these income results are the highest ever recorded by Kuraray.

With fiscal 2011 being the final fiscal year of GS-Twins, Kuraray aims to achieve annual net sales of ¥390.0 billion, operating income of ¥60.0 billion, ordinary income of ¥58.5 billion and net income of ¥34.0 billion while treating as key issues the following two initiatives: "Acceleration of global strategy for core businesses" and "Creation and expansion of new business."

As part of these initiatives, Kuraray is strengthening its core businesses through such efforts as boosting production capacity for EVAL gas-barrier resin in North America and optical-use poval film in Japan. In addition, Kuraray is promoting the expansion of new business primarily by establishing a joint venture to undertake the full-scale development of the Aqua Business in China and commencing the operation of a KURARITY acrylic thermoplastic elastomer production facility in Japan.

Positioning the payment of dividends to shareholders as a priority management issue, Kuraray is aiming for a dividend payout ratio of 30% or more of consolidated net income in the period covered by GS-Twins and dividend increases through sustained improvements in business performance. Based on these policies, the interim dividend payment increased ¥3 to ¥16 per share, compared with ¥13 per share paid for the corresponding period of the previous fiscal year. Assuming planned consolidated net income of ¥34.0 billion, a total full-year dividend payment of ¥33 per share (a payout ratio of 33.8%) is planned for fiscal 2011, up ¥6 from the ¥27 paid for the previous fiscal year.

On behalf of Kuraray, I would like to extend our gratitude to all shareholders for their continuing understanding and generous support.

October 31, 2011
Fumio Ito
Representative Director and President