P-mates

		January 1, 2005
		2005 CEO New Year's Greeting ~ Rising to the Challenge of "Market Change," on the Strength of "Innovation from Within" ~
		Yasumasa Komura, CEO


	I extend my wishes for a very Happy New Year to all employees of the Polyplastics Group. I trust the opening of this new year of hope and promise finds you and your loved ones in the best of health and spirits, and I look forward to working together as members of the same corporate team over the coming 12 months. Reflecting on the year that has just concluded, I am pleased to report that, thanks to the precious support of our customers and the devoted efforts of our employees, we achieved solid business results for 2004. Yet at the same time, 2004 brought major upheavals in our business environment, with the lion's share of this change carried over into this new year. During 2005, therefore, we will face the need to come to grips with and hopefully resolve the numerous ongoing challenges at hand. On the international front, the world has moved into 2005 with few prospects of an end to the turmoil in Iraq. The forging of a global consensus on eradicating the roots of political and religious hostility, and dealing with the diversity of civilization and culture, remains a theme with which the world must wrestle again this year. Political instability has evolved into soaring crude oil prices and a jump in related basic materials prices — a development that directly impacts our business. We channeled a great deal of energy into these problems over the past year, with the struggle continuing in 2005 as well. One of the factors behind the surge in raw material and fuel prices is the swift economic growth charted by China. The Middle Kingdom's robust advance has triggered a trend toward overheated corporate and individual investment in that nation, moving the Chinese government to take steps to curtail excessive outlays. In this sense, a keen source of interest for the global economy in 2005 is shaping up as the question of whether China can succeed in bringing macroeconomic market controls to bear, thereby engineering a soft landing in its desired transition to a stable market economy. While the Japanese economy also held to a solid growth path in 2004, this year will see no real change in the need to define reliable direction while dealing with the impact of the economic trends in China and the United States. As I noted above, with various issues being carried over from 2004, we expect 2005 to evolve as a type of adjustment period for finding resolutions to these and other challenges. Then again, under a careful examination of the market movements from the past year, we have seen greater clarification of the characteristics indicating the direction to be taken in advancing our business in the near future, including the current year. First, with regard to the Japanese market, you may remember that in my New Year's Message for 2002, I touched upon my forecast for a rise in technological innovation that would compensate for the hollowing of Japan's industrial production. In my 2004 report, meanwhile, I detailed my impressions of the so-called "post-industrialized society." Over the past year, the actions of our customers have clearly reflected the signs that I spoke of. I am referring to the creation of "core technologies" capable of spearheading a resurgence in Japanese industrial production. In the electrical machinery and electronics field, for instance, we have seen impressive technical innovations in digital memory systems and accompanying drive equipment, digital displays and other devices. Many people are excited by the high-tech showdown emerging between the two standards of HD-DVD and Blu-ray surrounding the next-generation DVD technology. I admit, in fact, that this does conjure up images of a "second coming" of the war waged between the VHS and Beta recording modes in the not so distant past. For us, however, this creates the critical demand to determine just what impact this confrontation will have on our own business fortunes. In the automobile industry, dramatic progress has been made in electronic control technology. On the products now built by Japanese automakers, for example, each vehicle normally contains between 50 and 100 microcomputers. There are also steady advances in the forging of technologies aimed at developing hybrid and electric cars, aimed at reducing and ultimately eliminating volatile organic compounds, carbon dioxide and other pollutants — indicative of concerted efforts to ease the burden on the environment. As a supplier of raw materials, for Polyplastics such technological advances by our customers present major business opportunities, and the need to muster energetic responses to the dynamic challenges on the near horizon. With our customers spelling out their core technologies to the Japanese market, it is up to us to manifest the know-how, products, services and management skills capable of satisfying their demands. There is no doubt that China, with its massive consumer population, will emerge as the world's most promising market over the years to come. At Polyplastics, we have progressively bolstered our approach to the Chinese market, steadily increasing product shipment volume year by year. A close examination of this trend, however, reveals that the majority of this volume is comprised of shipments transplanted from Japan, Taiwan and other markets. What we must set our sights on, therefore, is the true China market. From the past fiscal year, our customers have begun a major shift in the target of their investment in China. Simply stated, they are moving away from the creation of re-export bases with lower cost, in favor of building product manufacturing bases to satisfy China's rising domestic demand. Polyplastics has responded to this trend by accelerating the pace of construction at our Nantong Plant, which is now set to launch operations in the first quarter of this year. In 2005, our guiding theme for the China market is to put the final touches on the formation of a sales and marketing system that meets the needs of true Chinese domestic demand. In a very real sense, therefore, this is an extension of the "Act Locally" phase of the Polyplastics corporate philosophy. The ASEAN market of Southeast Asia is also experiencing major change. This concerns the liberalization of trade within the region, together with the push to enter into free trade agreements (FTA) with India, China, Japan and other outside countries. These moves are clear evidence of the desire by ASEAN to create a massive production bloc that will strengthen its position in the global market. A case in point is the progress made by the ASEAN countries in liberalizing the automotive product trade, thereby enabling the overall ASEAN region to integrate its motor industries at a massive scale capable of doing business with the world. Toyota Motor Corp. has constructed its third global R&D center in Thailand, while launching the innovative International-Multipurpose Vehicle (IMV) as its global strategy standard model. In my view, our own focal theme for the ASEAN market in 2005 must be to foster firm awareness and strategic thinking toward this crucial region. In more concrete terms, we must clearly discern the growth characteristics in each of the countries that comprise the ASEAN marketplace as a whole, and foster understanding that ASEAN, a regional association formed as a network of these individual markets, is destined to grow into a massive manufacturing alliance what will supply the world with industrial products. As suggested in this bird's-eye view, each of the markets in which we do business is changing and innovating structurally, and effectively inviting us to take part. For our Group, the time has arrived to clarify the steps we must use to respond to such market demands. As we move into 2005, the need has never been greater for consistency throughout all sectors of the Group, spanning marketing, R&D, and development of products and applications, along with the strategic perspective to firmly back up such teamwork. To address the themes of 2005 and achieve our goals, we must continue to improve the quality of the software for "Polyplastics Value Creation". Last year we succeeded in the quest for licensing under ISO and TS16949, while we also cleared all hurdles to obtain PTW certification. The next step is to elevate our Quality Management System (QMS), comprised of ISO9000, ISO14000 and TS16949, to the status of a core management system for the extended Polyplastics Group. Finally, last year, in reaction to the soaring price of raw materials, I appealed for your understanding of the critical importance of "marginal profit control." This refers to the reality that establishing "solid profitability" provides the true wellspring of corporate strength needed to address all types of market shifts. In that spirit, I wish to underscore that point once again here, in my initial message for 2005. This will be a year during which we will face greater demands than ever before for "innovation from within," in rising to the challenges of "market change." With these thoughts in mind, I wish you all the best of health and happiness throughout 2005, and look forward to our collective mission to carry the Polyplastics Group to even greater heights of growth and progress.