News

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.

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.

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)

• Top