Message from the President

Dear Shareholders and Investors

In the fiscal year ended December 31, 2019 (“fiscal 2019”), the prolonged trade war between the United States and China and emerging geopolitical risks across the globe fostered a stronger sense of uncertainty with each passing period. Due to these factors, a clear decelerating trend emerged in the world economy. Consequently, consolidated operating results for fiscal 2019 are as follows: net sales decreased ¥27,188 million, or 4.5%, compared with the previous fiscal year to ¥575,807 million; operating income fell ¥11,620 million, or 17.7%, to ¥54,173 million; ordinary income decreased ¥12,896 million, or 21.1%, to ¥48,271 million; and net loss attributable to owners of the parent totaled ¥1,956 million (compared with net income attributable to owners of the parent of \33,560 million in the previous fiscal year). In fiscal 2019, Kuraray has recognized a loss of ¥50,590 million, including a settlement in connection with a fire in May 2018 at a group subsidiary in the United States. Based on a reasonable estimate of damages, the settlement was paid to the plaintiffs and, along with other expenses, has been classified as an extraordinary loss. Kuraray also recognized insurance income totaling ¥10,360 million as part of extraordinary income.

In the two years since the launch of the medium-term management plan “PROUD 2020,” we have strengthened initiatives aimed at building a forward-looking, stable business portfolio, for example, by investing in a new isoprene plant in Thailand and acquiring Calgon Carbon Corporation, which is the largest activated carbon producer in the world, then leveraging our synergies from integration. In addition, we steadily implemented targeted strategic measures to achieve growth, including expanding facilities for optical-use poval film and water-soluble PVA films. However, in terms of performance, our results fell short. This was due to a decline in demand as the automobile, display, and electronic device industries—Kuraray’s main customers—made adjustments in light of global economic deceleration. In fiscal 2020, the final year of “PROUD 2020,” we expect global economic growth to slow further and the headwinds in the operating environment surrounding our businesses to continue, making it difficult to achieve planned performance targets. Amid this environment, we will steadily implement measures targeted at achieving our main business strategies. We will also focus greater attention on generating cash flows, such as by accelerating the contribution to results in businesses that conducted capital investment and stepping up the creation of synergies with the acquired activated carbon business. In addition, we revise strategies in businesses as necessary depending on market changes and other factors, and we intend to connect these efforts with the next medium-term management plan that will start in 2021. As Kuraray heads toward the 100th anniversary of its founding, the Group will continue to give its all going forward to achieve astounding results as a sustainably growing specialty chemical company.

In addition, the distribution of profits to shareholders is one of the Company’s top management issues. Kuraray will continuously and stably pay out dividends, taking into consideration business performance and financial standing while carefully securing internal reserves, which are its primary source of funds for business development.

During PROUD 2020, the medium-term management plan for fiscal 2018 through fiscal 2020, the Company will uphold a basic policy of increasing the distribution of profits through continuous improvement in business results. It has set targets of a total return ratio of 35% or more, reflecting net income attributable to owners of the parent, and annual dividends per share of ¥40 or higher.

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

February 13, 2020
Masaaki Ito
Representative Director and President