Kuraray Co., Ltd. reached a decision today regarding the Company's polyester staple business, opting to halt sale of the business's unprofitable products, while restructuring the business in order to continue the sale of distinctive products and to focus production on providing an adequate supply of materials for in-house use. Details regarding this restructuring plan are found below.

1.Background & Reasons for the Decision

Kuraray's polyester staple business has suffered under chronic overproduction conditions brought on by a dramatic rise in production capacity in China, following South Korea and Taiwan. The subsequent decline in competitiveness of the business's general-use products and the rapid deterioration in its profitability are directly linked to serious structural problems that are unlikely to be improved in the near future without immediate attention.

Nevertheless, Kuraray has in its time advanced the development of highly distinctive polyester materials and established a solid foothold in this particular market. In addition, as Kuraray's raw fibers -- used for production of the Company's mainstay man-made leather and non-woven fabric -- are indispensable to the competitiveness of these businesses, Kuraray will continue to produce enough of these distinctive materials for in-house use.

Thus, in response to an increasingly more difficult business environment, the decision was made to withdraw completely from the sale of the Company's unprofitable materials, and to improve overall business profitability by focusing production on supplying the Company's highly distinctive materials for outside sale and in-house use.

2.Overview of Planned Business Restructuring

1) Reorganized sales structure

  • Outside sale of loss-making general-use products halted as of end of fiscal 2002
  • Outside sales to be specialized on highly distinctive materials of textiles, industrial materials and household goods
  • Continuation and expansion of materials for in-house use (man-made leather, non-woven fabric, etc.)

2) Scale-back of production

  • Production to be reduced to 12,000 tons annually at the Kurashiki Plant (Tamashima) beginning fiscal 2003 (25,000 tons produced in 2001)

3) Organizational and staff restructuring

  • Number of staff to be reduced 50% at the Kurashiki Plant (Tamashima) by the end of fiscal 2002, to 120 employees
  • Kurashiki Plant (Tamashima), including administrative divisions, to be split off into a new production subsidiary in April 2003; Plant employees at the time of split-off will be transferred to the new company
  • 40% cut in sales and R&D staff by the end of fiscal 2002

2.Production Subsidiary Overview

Name Kuraray Tamashima Co., Ltd. (tentative)
Planned date of establishment April 1, 2003
Address 7471 Tamashima-Otoshima, Kurashiki, Okayama Prefecture
Representative undecided
Capital undecided
Employees approx. 120