We sincerely apologize to nearby residents, concerned government ministries and agencies, and other concerned parties for all the great concerns and inconvenience caused by a fire accident that occurred at Tsuruga Research and Production Center on September 6, 2018.

We are currently investigating the cause of the fire accident in cooperation with relevant authorities and taking appropriate preventive steps including safety measures for other business establishments. From now, we will proceed with early recovery and make company-wide efforts for the restoration of confidence.

 

As for the business environment for the Toyobo Group (hereinafter referred to as the “Group”) in the six months ended September 30, 2018, in the global economy, although the economy slowed in China due to a decrease in infrastructure investments, business sentiment in the United States remained strong amid firm capital spending and robust consumer spending. In the Euro area the economy expanded gradually backed by brisk domestic demand. Meanwhile in Japan, the economy continued a moderate recovery amid increasing capital spending, despite a slowdown in inbound demand affected by disasters.

 

Amid this operating environment, the Group continued its activities aimed at becoming “The category leader, continuing to create new value that contributes to society in the environment, healthcare, and high-function products fields.” Accordingly, the Group is expanding its businesses in Japan and overseas markets through developing specialty products. During the six months ended September 30, 2018, the Group has been carrying out the following three key initiatives cited in the 2018 Medium-Term Management Plan: “prioritizing businesses and harvesting crops,” “enhancing development of new products and business in mid- and long-term,” and “strengthening business base.”

 

As a result, consolidated net sales in the six months ended September 30, 2018 increased ¥3.3 billion (2.1%) over the same period of the previous fiscal year, to ¥164.7 billion. Operating profit increased ¥0.1 billion (0.9%), to ¥10.6 billion, ordinary profit decreased ¥0.3 billion (3.7%) to ¥8.7 billion, and profit attributable to owners of parent decreased ¥2.1 billion (35.2%), to ¥3.9 billion.

With regard to the amount of losses including loss on extinguishment of non-current assets and fixed costs during a shutdown period due to the fire accident, ¥2.1 billion was recorded as extraordinary losses in the six months ended September 30, 2018.

 

As for the outlook for the business environment during the fiscal year ending March 31, 2019, as raw materials and fuel prices remained to be at a high level, and with concerns that impact of the trade friction between the United States and China could reach Japan, the business environment remained unclear.

 

In view of the current business environment and while positioning the fulfillment of corporate social responsibility (CSR) as the foundation of our business, the Group will strive to resolve social issues and increase corporate value and social value (CSV: Creating Shared Value) by providing socially beneficial products and services. Also, the Group will aim to be a “strong and good Toyobo Group,” with growth potential and stable profitability, that can contribute to societies around the world and that continues to create new technologies and products.

 

The performance of the Toyobo Group in the six months ended September 30, 2018 was affected by the effects of soaring raw materials and fuel prices.

In light of the impact of raw materials and fuel prices and the fire accident, operating profit and ordinary profit are revised in the forecast for the full fiscal year. Also, while an appropriate insurance policy against loss or damage was taken out, the insurance amount to be received has not been determined and it will take some time for it to be determined. Due to the reasons provided above, profit attributable to owners of parent is yet to be determined. We will announce the impact on the operating results promptly once we know the amount.

 

The Company considers providing returns to shareholders to be one of its highest priorities. Its basic policy is to continually provide a stable dividend, in a comprehensive consideration of such factors as sustainable profit levels, retention of earnings for future investment, and improving the financial position to provide shareholders returns, including the acquisition of treasury shares, with a target total return ratio (*) of 30%. At this point, the Company plans to pay a year-end dividend for the fiscal year ending March 31, 2019 of \40 per share.

 

(*) Total return ratio = (total dividend + total amount of share buybacks) / profit attributable to owners of parent

 

I would like to offer my most sincere appreciation to our shareholders and investors, and ask for your continued support.

November 2018

 Seiji Narahara

 President & Chief Operating Officer