As part of the earnings-enhancement measures under our medium-term business plan called "G-21", which started from April this year, the Company will transfer its clothing textile business to Kuraray Trading Co., Ltd. in April 2002, and will spin off the polyester filament production division at the Saijo Plant in Ehime Prefecture in October 2001.


1. Background, Objectives

The Company's polyester filament production business has formed the core of its fiber business since the start of production in 1969. In recent years, however, it has experienced very difficult conditions, suffering deficits in fiscal 1998 and 2000, under the impact of a slump in domestic consumption and an increase in the inflow of imports. On the other hand Kuraray has retained an excellent reputation in the market for its long pursuit of functionality in its polyester products and its development of unique polymer products such as an antibacterial deodorizing fiber, and the EVOH fiber SOPHISTA.

Kuraray Trading Co., Ltd., a wholly owned trading company, is the biggest handler of the entire range of Kuraray products. Of particular note is that in its apparel-related operations it has a strong track record not only in the sale of Kuraray products, but also in extensive and original development of composite materials incorporating Kuraray polyester and other fibers, and secondary products.

Today, the Japanese polyester industry has an excellent reputation globally for its development progress, and within the industry Kuraray's outstanding capabilities continue to be held in high regard. Nevertheless, in the shrinking Japanese market, affected by factors such as an increasing influx of imports, we concluded that it would be difficult to maintain the profitability of these operations without further enhancing competitiveness. In order to put into practice the market-in approach included in our "G-21" medium-term management plan, we will transfer our textile business and carry out operations through a new structure - to include the development of secondary products - more closely in tune with the market.

The following are the objectives of this transfer of the business.

(1) Comprehensive development ranging from textiles to secondary products
By combining the different areas of expertise of Kuraray and Kuraray Trading, for example Kuraray's know-how in the textile field and that which Kuraray Trading has built up both within Japan and overseas in the field of apparel, we will develop wider applications for textiles.
(2) Across-the-board cost reduction
We will totally rationalize costs by means of integrated production ranging from polyester filaments to textiles and secondary products, pursuing this vigorously in regard to products and fields in which high production costs have hitherto prevented the fully-fledged development of business.
(3) Pursuit of synergy through integration of human resources, and strengthening market-in orientation by utilizing trading-company capabilities
By bringing together human resources that were split between the two companies, the companies' complementary know-how (e.g. Kuraray's capabilities in the development of fibers and Kuraray Trading's abilities in the areas of sales and the development of secondary products) will be shared and further strengthened.

This transfer of the business will be accompanied by the spin-off of the Saijo Plant's polyester filament production division.

The following are the objectives of this spin-off.

(1) Enhancing flexibility of response to constantly changing markets
An independent organization will make it possible to build a manufacturing structure with faster decision-making and greater flexibility, thereby strengthening its ability to respond to the ceaseless changes occurring on the market.
(2) Further cost rationalization
Further cost rationalization will be achieved as a result of the reduction of indirect costs through the lowering of the ratio of fixed costs to total utility costs, and by such means as enhancing cost-consciousness by through the adoption of an autonomous profit-unit system.

2. Outline of Transfer of Business to Kuraray Trading

Implementation date April 2002
Operations affected All operations in the field of textiles for clothing use
(Kuraray Trading will not engage the development, manufacture, and sale of unprocessed polyester filaments)
Employees to be transferred approx. 70
Transferred sales approx. ¥25 billion

3. Outline of Spin-off of Polyester Filament Production Division

Establishment date October 2001
Company name Kuraray Saijo Co., Ltd. (tentative)
Address 892 Tsuitachi, Saijo, Ehime Prefecture (within the present Saijo Plant site)
President Takeshi Futami (currently General Manager, Saijo Plant; tentatively scheduled)
Capital To be determined
Employees approx. 260


Outline of Kuraray Trading Co., Ltd.

Head office 2-5-4 Hiranomachi, Chuo-ku, Osaka
Tel +81-6-6226-9011
President Mitsunobu Makino
Capital ¥1.5 billion (Kuraray 100%)
Total sales ¥78 billion (fiscal year ended March 2001)
Fiber-related sales approx. ¥40 billion (fiscal year ended March 2001)
Employees 220 (as of March 31, 2001)
Activities Trading company specializing in such fields as clothing-related products, industrial-use fiber materials, and chemical products