Message from the President

Representative Director
and President Masaaki Ito

Dear Shareholders and Investors

In the fiscal year ended December 31, 2016 (“fiscal 2016”), signs of economic recovery were apparent in Japan due to the depreciation of the yen at the end of the period. In the global economy, business conditions in the United States were brisk, backed by positive employment conditions in addition to personal consumption. In Europe, the economy continued to gradually improve. Although the United Kingdom's decision to leave the European Union cast a shadow on Europe's outlook, there has currently been no major impact. Meanwhile, the deceleration of China’s economy was halted by the government's successful measures to stimulate consumption. An economic slowdown continued in emerging countries.

Under these circumstances, the Kuraray Group has been successively implementing the business strategies outlined in GS-STEP, its medium-term management plan that started in fiscal 2015, to realize “a high-profit specialty chemical company with a global presence.”

Regarding results of operations for fiscal 2016, net sales decreased ¥36,529 million, or 7.0%, compared with the previous fiscal year to ¥485,192 million; operating income increased ¥1,749 million, or 2.6%, to ¥67,827 million; ordinary income increased ¥1,645 million, or 2.5%, to ¥66,181 million; and net income attributable to owners of the parent increased ¥4,650 million, or 13.0%, to ¥40,400 million.

The distribution of profits to shareholders is one of the Company's top management issues, and it has a basic policy of increasing distribution of profits through continuous improvement in business results. During GS-STEP, the medium-term management plan for fiscal 2015 through fiscal 2017, the Company has set a total return ratio of 35% or more relative to net income attributable to owners of the parent and annual dividends per share of ¥36 or higher.

Pursuant to this dividend policy, a year-end dividend of ¥21 per share is planned for fiscal 2016, an increase of ¥1 per share from the initial forecast. The total of this year-end dividend and the interim dividend will be ¥41 per share for fiscal 2016, and the dividend payout ratio will be 35.7%.

For fiscal 2017, the Company plans annual dividends of ¥42 per share (payout ratio of 35.2%), consisting of an interim dividend of ¥20 per share and a year-end dividend of ¥22 per share, assuming a forecast for net income attributable to owners of the parent of ¥42.0 billion.

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

February 8, 2017
Masaaki Ito
Representative Director and President