A happy new year to all the employees of the Polyplastics Group. I wish you all and your families’ good health and prosperity in the year ahead.

At the end of last year, we decided to close a pilot plant at TAP GmbH, a joint venture between Polyplastics and Daicel Corp., and reduce the research and development staff due to TAP’s sluggish performance. As a result, nearly 20 employees were made to leave the company. It was extremely regrettable that we were not able to protect the well-being of the employees and their families, for which I feel a great responsibility as management. Similarly, our existing businesses have continued to face a very severe business environment. At the point of this writing, early December 2013, net sales are estimated to be about 114.4 billion yen in the previous fiscal year (FY2013), and operating profit is expected to be about 9.3 billion yen, resulting in lower profits on higher sales compared to FY2012. Although sales and profits are forecast to increase in FY2014 (from April 2014 to March 2015), operating profit on a consolidated basis is expected to be about only 9.7 billion yen. Thus, we expect no significant increase in profits. Operating margin is predicted to be 8.1%. Although we have aimed to achieve an operating margin of over 10%, it has stayed at the 8% level for the fifth consecutive period since 2011 (including the special period of January-March 2014) under the current business structure.

A rapidly changing external environment is one of major factors behind such a situation. For POM, PBT, and PPS products, reflecting fierce price competition in the market against the backdrop of a supply glut, the prices of the Company’s products have trended downward. Additionally, with the market shrinking in Japan, where prices are relatively high, while Asian markets for lower-price products expanding, product prices are dropping due to differences in sales composition. Sales volume is growing, while our profit margin is shrinking due to falling prices. Thus, the business structure has continued to change. Although raw materials and fuel prices, including methanol and oil prices, have stayed at a high level, considering the highly competitive market environment, it is difficult to pass on cost increases to product prices, another major factor behind the shrinking profit margin. Meanwhile, LCP is facing a major environmental change, in addition to the factors mentioned above. The growing use of multifunctional smartphones is diminishing demand for personal computers and digital cameras, and lighting systems for liquid crystal display TVs is being replaced by LED, resulting in a decline in demand for LCP. For the COC business, the weaker yen against the euro is putting downward pressure on profits.

We must give our full attention to these changes in the external environment and overcome difficulties. It is necessary to redouble our efforts to expand sales, realize manufacturing costs to survive price competition, and offer high-performance materials that exceed customers’ expectations. Group-wide project activities to expand sales started at the end of last year. On the production front, considerable efforts are being made to improve productivity and reduce costs, including MP-2 and PNL operation. The research and development division is doing its utmost to develop materials with higher added value. Business support departments are also striving to make managerial contributions, including improving work efficiency, utilizing global human resources, and promoting cooperation within the group.

There is a well-known saying that goes, “A company is its people.” Amid the current severe business environment, I sometimes find myself focusing on short-term profits. But I should pay more attention as to how to create an environment where employees can display their ability and enjoy their work with high motivation. This will eventually lead to an improvement in the Company’s performance.

I aim to create a company where employees are working actively and resultant profits and continuous business growth can be achieved, thereby continuing to protect the well-being of employees and their families. At the same time, I wish to create a socially responsible company, which will provide support to the socially vulnerable, including people with disabilities and disadvantaged children. This year, let’s work together to get closer to these goals.

Polyplastics Co., Ltd.
CEO
Noboru Goto