Message from the President

Representative Director
and President Masaaki Ito

Dear Shareholders and Investors

In the second quarter of fiscal 2017 (January 1, 2017–June 30, 2017), exchange rates and the price of crude oil held relatively steady despite lingering political instability, and the world economy remained favorable overall. The Japanese economy gradually trended upward as corporate profits expanded and signs of recovery in personal consumption appeared due to improving employment and income levels. The U.S. economy remained healthy as personal consumption grew amid strong employment figures. In Europe, the economy remained favorable for now despite a high number of worrying factors since the United Kingdom decided to leave the European Union. In China, the economy continued to gradually strengthen as various government-led measures showed results and personal consumption began to improve. Economies in emerging countries are recovering due to the effects of the favorable world economy.

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.”

Consequently, cumulative consolidated operating results for the second quarter of fiscal 2017 are as follows: net sales rose ¥7,240 million, or 3.0%, compared with the corresponding period of the previous fiscal year to ¥251,340 million; operating income grew ¥2,863 million, or 8.3%, to ¥37,505 million; ordinary income increased ¥2,582 million, or 7.7%, to ¥36,264 million; and net income attributable to owners of the parent rose ¥1,611 million, or 7.2%, to ¥23,988 million.

Kuraray has revised its consolidated operating results forecasts for the full fiscal year ending December 31, 2017 as follows net sales is ¥530,000 million; operating income is ¥75,000 million; ordinary income is ¥73,000 million; and net income attributable to owners of the parent is ¥46,000 million.. We reflect the continued favorable performance of many businesses despite an expected rise in costs owing to raw material and fuel costs remaining higher than original projections.

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. Kuraray paid out an interim dividend of ¥20 per share as originally planned. Regarding the full-year dividend for the current fiscal year, although Kuraray is considering a purchase of treasury stock and an increase in dividends as it is likely to achieve an annual total return ratio of at least 35% in line with revised business results, at present the Company is leaving in place the ¥42 per share dividend (payout ratio of 35.1%) as announced at the beginning of the year because a profit return method has not yet been established.

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

August 9, 2017
Masaaki Ito
Representative Director and President