NIPPON GOHSEI | Review of Operations

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Review of Operations

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Annual Report

From April 1, 2009 to March 31, 2010 (Consolidated basis)

Sales of chemicals were ¥87,846 million (down 9.6%) and with common costs for the chemical division deducted, operating income was ¥10,775 million (up 149.2%).

Sales of the PVOH resin Gohsenol for the general-purpose field fell year-on-year due to sluggish domestic demand and the effects of the strong yen relative to the dollar. However, in the secondary processing area of functional film, sales grew due to growing demand triggered by overseas and domestic consumption stimulus measures, so overall the PVOH business sales showed an increase year-on-year.

Demand for the EVOH resin Soarnol grew steadily, mainly in the area of food packaging applications, but the effect on the exchange rate of the strong yen was considerable, causing sales to decrease year-on-year.

Sales of adhesives and functional coatings, the specialty polymers, remained at the same level as the previous consolidated fiscal year. Although recovery was weak in the area of construction applications, demand in the information processing and electronics areas grew for adhesives for optical applications.

Therefore, net sales for synthetic resins reached ¥65,099 million (up 0.9%). Operating income increased by ¥6,491 million year-on-year, to ¥1,073 million (up 154.1%). This was due to efforts to maintain the appropriate sale price spread and higher sales volume in specialty areas, in spite of lower sales due to sluggish demand in the general-purpose field and rise in fixed costs due to production adjustment for inventory reduction, as well as the allowance for depreciation related to the start of commercial operation of the OPL film 4th line manufacturing facility.

Sales of industrial chemicals such as acetic acid and vinyl acetate monomer, and fine chemical products, mainly acetic acid derivatives, fell to ¥22,747 million (down 30.3%) due to sluggish demand. Operating income also fell to ¥262 million (down 10.1%) because of a large fall in sales price, in spite of efforts to ensure an appropriate sale price spread.

Sales and operating income in other divisions, mainly facilities construction, environmental analysis and the logistical services business, also fell year-on-year to ¥2,239 million (down 40.7%) and ¥14 million (down 61.6%) respectively. This was partially due to a change in the accounting period, which resulted in a nine-month settlement period.

Note: The settlement periods for all domestic companies have been harmonized to the end of December for the results for the full year ending March 2010, so for those domestic companies whose accounting period was changed, the results are for the nine months from 1 April 2009 until 31 December 2009.