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 Special News(2)
 
 

 

Favorable business performance for the first half of 2003
-Consolidated net income ¥1,829 million -

1. Business Environment

(1)Our performance for the first half of fiscal 2003 demonstrated a favorable shift. Fortunately, the Iraq War and SARS in China, although troubling, had a negligible impact on our performance.
(2)The effects of the Iraq War raised doubts about the U.S. economy, but 2nd Quarter ("2Q") revealed the beginning of a rapid recovery as well as signs of increasingly robust consumption.
Moreover, the Japanese economy also shifted toward growth in Q2, buoyed by strong domestic and international demand for automobiles and digital consumer electronics. Supported by this positive environment both in Japan and abroad, we experienced an encouraging level of product shipments and all our plants enjoyed full operation.
(3)The yen/dollar exchange rate, which was ¥119.95/US$ at the end of 2002, averaged ¥119.11/US$ for the period under review, representing a positive shift from our budget forecast of ¥115/US$. As a result, this is the first announcement regarding our earnings in the 1st half in a long time that has not been negatively affected by the exchange rate.
(4)The sudden worldwide price rise in raw materials and fuels in the first half of the fiscal year represented the main cost-push factor. In particular, the steep rise in the world price of methanol was remarkable, with the price rising from the fiscal 2002 average price of $160/metric ton to $300/metric ton in Q2. This trend abated somewhat as we approached the second half of the fiscal year, but the market has held firm at the level of $250/metric ton.
In order to absorb this cost increase, we asked our customers to accept a price increase; however, the rigid market environment has not enabled us to achieve the desired results. Consequently, we have had to adapt to this reality by growing our sales volume and achieving an increased operation rate to cover our cost increases.
  

2. Performance for the First Half of Our Fiscal Year: Profit and Loss

(1)Presented below are the consolidated profit and loss figures for the first half of fiscal 2003 against the background of the economic environment outlined above.
 Unit: Million Yen
 1st half of 20031st half of 2002vs.
budget		vs.
2002
Actual%Budget%Actual%
Net sales35,44310033,31010033,469100106.4105.9
Gross Profit10,40329.49,71129.29,21927.5107.1112.8
Operating
Profit		3,72410.52,9708.92,5787.7125.4144.5
Ordinary
Profit		3,3939.62,7128.17192.1125.1471.9
Net income
before tax		3,1548.92,4337.35471.6129.6576.6
Net income1,8295.21,1023.31760.5166.01039.2
(2)Please refer to our Q1 and Q2 results for changes in sales volume and the like.
Sales of POM, PBT, PPS and LCP exceeded both our forecasts and our results for the same term a year earlier. The high sales growth of PBT and PPS was particularly remarkable.
Looking to sales by region, sales growth of POM in Greater China has remained firm. At the same time, sales of POM, PBT and PPS to the automobile sector in Japan continued to grow.
However, two developments worthy of note are the growth in the automobile components market in Thailand and the PBT film market in Japan.
(3)Although costs increased due to the rising price of methanol fuel, we absorbed this through cost containment efforts, increased sales volume and higher sales revenue as a result of favorable currency exchange rates. As a result, our net sales exceeded our forecast.
While we were unable to increase the prices of our products through difficult negotiations with our customers in Japan, we succeeded in implementing upward price revisions in the local Chinese POM market.
(4)Looking at revenue by product, our high dependency on the POM market remained unchanged. As well, the increased volume of our PPS business enabled us to achieve operating profitability for the first time.
(5)You may have noticed that we posted no difference in operating profit and ordinary profit compared with the same period a year earlier. In the preceding year, however, we suffered an exchange loss slightly exceeding ¥1 billion. Please understand that, because our business is global, exchange rate risk such as this cannot be avoided.
  

3. Performance for the First Half of Our Fiscal Year: Financial Circumstances

(1)Consolidated net assets on our balance sheet as of the end of the 1st half 2003 totaled ¥85.6 billion, which represents an increase of ¥3.7 billion compared with the end of fiscal 2002. This increase in assets is completely attributable to the increase in current assets. This increase in current assets was the result of two factors: a lower accounts receivable balance despite sales growth, and an increase in cash and cash equivalents amounting to a little over ¥5 billion.
As will be expanded upon later in this report, this was due to a shortening of the accounts receivable collection period by our sales headquarters, which put tremendous efforts into this initiative as one of their projects to squeeze our working capital. Looking to our inventory, the planned shutdown of our Fuji Plant in October and PAP in December this year has contributed to inventory accumulation; however, we must strive to optimize our inventory levels.
(2)Our working capital as of the end of June totaled ¥21.8 billion, which represents 31.1% of sales, or a decrease of 2.7% and 5.2% compared with our forecast and our results for the same period a year earlier, respectively. I would like to thank all employees who understood the significance of facing the challenge to ensure the efficient use of capital. We are confident that we can pool our wisdom to ensure the soundness of our company's financial affairs from now on.
(3)Cash flow for the first half of our fiscal year reflects good results thanks to increased earnings and the benefits or our efforts to compress our working capital. Our cash has increased by roughly ¥5 billion compared with the beginning of the term.
  

 

 
 
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