Message from President

In the consolidated 3rd quarter of the current fiscal year (October 1, 2009–December 31, 2009), the operating environment emerged from the period of truly dismal conditions that followed the Lehman shock, and overall demand, including that for Kuraray products, entered into a recovery trend. Notably, sales of PVA resin and EVAL began to rebound, in Asia as well as in the U.S. and European markets. Sales were also favorable for poval film and other materials for LCD use. In addition, efforts throughout the Company to reduce fixed costs and other initiatives to improve profit structure—as detailed under the medium-term action plan that commenced last April—are now bearing fruit.

The success of these efforts has been demonstrated by net sales climbing 1.7% from the 2nd quarter of the current fiscal year to ¥85,588 million and operating income rising 22.% to ¥9,787 million. Both sales and earnings power have shown improvement with each quarter. In fact, sales have recovered to a level equivalent to approximately 85% of the peak reached in the first part of the previous fiscal year.

In light of these conditions, the abovementioned businesses are expected to continue to show favorable results. Consequently, full-year performance forecasts are for net sales of ¥330,000 million, same as previously announced projections, and upward revisions have been made to forecasts for earnings, with operating income expected to rise ¥5,000 million to ¥28,000 million, ordinary income ¥5,500 million to ¥26,500 million and net income ¥1,500 million to ¥14,000 million.

While it can be said that we are moving toward recovery, the economic environment continues to be unpredictable. Along with the ongoing implementation of cost structure improvement measures, we will make further concerted efforts to develop new businesses with an eye toward the future as well as aim to be a company that provides value to society through its existence.

Placing high management priority on the distribution of profit to its shareholders, Kuraray aims to keep the dividend payout ratio at 30% or more of consolidated net income. Based on this business policy, Kuraray is planning an annual dividend of ¥16 yen per share, comprising an interim dividend of ¥8 per share and a year-end dividend of ¥8 per share.

We ask for all of your continued understanding and generous support.

February 5,2010
Fumio Ito
Representative Director and President