kuraray


News Releases

Progress Report on "G-21" Five-Year Medium-term
Business Plan

Feb. 28, 2003
KURARAY CO., LTD.

Since fiscal 2001, Kuraray has been implementing a five-year Medium-term business plan under the name "G-21." Below, we report on our achievements in the first two years of the plan and outline our scheduled measures for the remaining three-year period.

1. Summary of basic strategies under G-21 plan and evaluation of achievements thus far

(1) Basic strategies
  • Strengthening of core businesses, including vinyl-acetate derivatives, isoprene-derivative, and man-made leather
  • Emphasis on strategic areas dominated by demand-pull forces, including materials for the IT sectors, eco-friendly products, environment fields, and medical products
  • Contribution to global environmental preservation efforts
No amendments have been made to the basic strategies of the G-21 plan. We intend to press forward with the execution of these strategies to create a company with solid earning power and a favorable reputation in the community.
(2) Principal measures taken in fiscal 2001-2002
  • Committee set up to oversee the improvement of the Company's earnings structure (Aug. 2001)
  • Restructuring of polyester operations implemented (Oct. 2001 - April 2003)
  • Medical business split out (Oct. 2001)
  • PVA/PVB operations of Clariant AG acquired (Dec. 2001)
  • In-house company system introduced (April 2002)
  • Production of thermoplastic elastomer started at SEPTON Company of America (Sep. 2002)
  • Decision made to increase production facilities at EVAL Europe N.V. (Jan. 2003; start of operation scheduled for 3rd quarter of 2004)
  • Business process reengineering program initiated; performance-linked staff compensation system introduced; Shanghai Office opened; stock option scheme adopted; own shares purchased, etc
(3) Evaluation of achievements in first two years of G-21
Achievements Shortcomings
  • Short-term business results put back on recovery track
  • Inventory and financial assets reduced,leading to more efficient asset allocation
  • Process seen too slow
  • Insufficient new business start-ups

2. Basic strategies for last three years of G-21 (FY2003-2005)

(1) Outline
  • On the basis of the shortcomings (slow implementation, insufficient new business start-ups) identified for the first two years of the plan, we aim to build a business organization capable of a fast and flexible response to changes in market conditions, and to move from a phase of "profitable growth" to one of actual growth in earnings.
  • To achieve growth in earnings, we must further reinforce businesses with good growth prospects, as well as our incubation functions for next-generation businesses.
(2) Reinforcement and expansion of growth businesses
  • Strengthening vinyl-acetate derivatives businesses and optical technology-related products
  • Aiming at substantial and continuous effects from investment in new production equipment
  • Focusing management resources on capital investment and research and development
(3) Strengthening incubation functions for next-generation businesses
  • Product development center for optical devices to be opened (March 2003)
  • Corporate reorganization to facilitate business alliances and M&As (April 2003)
  • Establishment of Research and Technical Center in the U.S. (autumn of 2003)

3. Capital investment and M&As

Investment in equipment will be focused mainly on the viny-acetate derivatives business, and on the optical technology products business.

  FY2001-02 FY2003-05 G-21 Total
Capital investment ¥35 bn ¥80 bn ¥115 bn

In the area of mergers and acquisitions, we will additionally employ a vertical (upstream to downstream) approach in view of the need to strengthen and expand our core businesses. We plan to proactively seek outside technological input through M&As and business alliances. The objective will be not merely to introduce new technological know-how, but to create novel technologies by the fusion of other companies' expertise with our own in-house technology.

4. In order to pursue further corporate growth, we aim to develop high-performance and high-value-added products using our original technologies from a viewpoint of market-in approach, as shown in the following table.

G-21

5. G-21 goals for final year of plan (FY2005)

  • Net sales: ¥400 billion
  • Operating income: ¥40 billion
  • Return on Assets (ROA): more than 8%

Note: The above figures assume exchange rates of ¥120 to both the U.S. dollar and the euro, and crude oil price of $25 per barrel

Seeking further capital utilization efficiency

  • Total asset turnover: 0.9 times
  • Inventory turnover: 1.8 months

Assets, liabilities and shareholders' equity (Billions of yen)

G-21

Forward-Looking Statements

Statements contained in this news release related to future plans of the Company, including numerical targets and so forth, are forward-looking statements, and do not constitute in any way a pledge or guarantee of future performance.