* FY2011(Plan) announced at the FY2010 financial results briefing held on April 27, 2011.
For the FY2011 revised plan, please see the presentation materials.

The High Performance Plastics (HPP) Company, under the banner "Chemistry for your Win," adopts a business strategy of focusing management resources on the automotive materials (AT), IT-related materials (IT) and medical products (MD) fields. The company views these three fields as presenting significant growth potential and as areas where the company can fully apply Sekisui Chemical's highly-differentiated products, leveraging its competitive advantages.

The HPP Company solidly increased both net sales and operating income in fiscal year 2010 by steadily capturing the demand accompanying the recovery and growth of the markets in these three fields and by implementing measures to accelerate business growth and reinforce the business base.

The HPP Company's efforts to expand business in the strategic fields and overseas generated a 34.0 billions of yen year-on-year increase in net sales to 281.6 billions of yen. Net sales in the strategic business fields rose by 14.7 billions of yen to 134.6 billions of yen for the year, largely as a result of expanded sales contributions from the AT and IT fields. Overseas sales also improved substantially, rising by 35.4 billions of yen to 142.6 billions of yen. The HPP Company achieved these results through increased production capacity and market development, which enabled the company to fully respond to the growth demand in Asia and other emerging markets, and also through the augmentation of its business scope via M&A activities in the AT field.

The HPP Company recorded operating income of 24.4 billions of yen in fiscal year 2010. The operating income result reflected the positive impact of a 12.2 billions of yen increase resulting from growth in sales, and the negative impact of a 1.8 billions of yen decrease owing to higher materials costs and company efforts to reduce costs. The result was a 10.3 billions of yen improvement in marginal profit in real terms.

Additional factors influencing operating income for the year were the positive impact of a 600 millions of yen contribution from newly consolidated subsidiaries, the negative impact of a 2.8 billions of yen increase in fixed costs from the reinforcement of staff accompanying overseas business expansion, and a 2.9 billions of yen decrease as a result of the impact of the foreign exchange rate because of the strong yen. The overall result was a 5.2 billions of yen increase in operating income from the previous fiscal year.

Operating income of 24.4 billions of yen exceeded our initial target of 21.0 billions of yen for the year, and came very close to the HPP Company's record high of 24.5 billions of yen, attained in fiscal year 2007.

In the strategic business fields, net sales in the AT field rose by 8.5 billions of yen year on year to 58.1 billions of yen in fiscal year 2010. While the strong yen and rising raw material costs were negative factors, increasing demand in emerging countries and recovering demand in Europe and the United States fueled a vigorous recovery in the AT market, with significant sales growth for interlayer film for laminated glass, polyolefin film, and other products.

While working to expand sales by solidly capturing growth demand, the HPP Company took steps during the term to prepare for future expansion in the AT field. One key step was to expand production capacity for the core interlayer film products. The company increased production capacity for high value-added, high-performance interlayer films at the Shiga Minakuchi Plant in Japan and expanded the production lines for the interlayer film material polyvinyl butyral (PVB) resin at the plants in Shiga Minakuchi and the Netherlands.

In the IT field, net sales surged by 8.1 billions of yen to 38.0 billions of yen for the year, led by strong growth in sales of LCD panel-related products and other competitive products. During the year, the company expanded its production capacity for tape and film products with the aim of keeping pace with the rapidly rising demand for those products for touch panel applications accompanying the growing popularity of smart phones and other devices.

In the MD field, net sales declined by 2.0 billions of yen, due to decreased sales of influenza diagnostic reagents resulting from the mild influenza season compared to the previous year, despite steady sales expansion of diagnostic equipment in Japan and diagnostic reagents overseas. However, excluding sales of influenza diagnostic reagents, which are highly dependent on seasonal conditions, net sales of the MD field increased by 1.6 billions of yen. With the aim of positioning the HPP company for further growth in the MD field, Sekisui Chemical acquired the diagnostics business of U.S.-based Genzyme Corporation, focusing on the fields of biochemistry, diabetes, infectious diseases, and immunological testing.

Sales and Income Targets

We plan to continue expanding sales in our strategic business fields and overseas business. Our sales target for the three strategic business fields is to raise total combined net sales by 21.0 billions of yen year on year to 155.6 billions of yen. In our overseas business, we will endeavor to maintain the rapid growth pace and increase net sales by 17.4 billions of yen year on year to 160.0 billions of yen. Based on the strong growth in the strategic business fields and overseas business, we are aiming for HPP Company to achieve net sales of 310.0 billions of yen in fiscal year 2011.

We also plan to take steps to increase operating income. We expect a rise in marginal profit (14.2 billions of yen) from the growth in sales to more than offset the anticipated negative impacts of higher raw material prices (3.0 billions of yen after cost-cutting efforts), increased fixed costs due to higher labor costs and other expenses from newly consolidated companies (5.5 billions of yen), costs associated with new consolidation (1.4 billions of yen), and the impact of the foreign exchange rate (2.7 billions of yen). As a result, we plan to increase operating income by 1.6 billions of yen year on year to 26.0 billions of yen in fiscal year 2011.

The HPP Company's first priority will be to implement measures to address the supply chain issues and prepare for anticipated power shortages following the Great East Japan Earthquake. These measures will focus on limiting the impact on product deliveries to customers by addressing issues related to parts procurement systems in which potential supply shortages are anticipated, as well as issues related to the expected power shortages and energy-conservation needs in summer. In particular, we will take steps to ensure that we maintain stable production and supply of our liquid crystal-related materials, automobile interlayer films, and other products that command high market shares in the global markets.

In addition, the company will place priority on the implementation of growth strategies and the solidification of the HPP Company's earnings base, to position the company for accelerated business growth and establish a strong business foundation. Growth strategies will focus on the continued efforts to strengthen the businesses in strategic fields and overseas, and on the development of new products and businesses.

Regarding the strategic business fields, in the AT field we will seek to establish the optimal production allocation on a global basis as a measure to counter foreign exchange fluctuation risk and maximize profit. In the IT field, we will continue to fortify the peripheral businesses and technologies of our existing core businesses and products. In the MD field, we plan to bring the three previously acquired companies up to full operation.

Regarding strategic investments to fortify our operations in the strategic business fields, we have completed investments to boost production capacity in the AT field to respond to growing demand in emerging countries and rising demand for high-performance products, particularly in industrialized countries. In the MD field, our M&A moves have established a solid foundation for business expansion overseas. Beginning in fiscal year 2011, we will turn our attention to producing results through further sales growth. In the IT field, in order to fortify and expand business, Sekisui Chemical has acquired functional film maker Suzutora Corporation with the aim of capturing the booming demand for materials for use in touch panels and other new technologies.

In overseas business operations, the HPP Company is strengthening its local management capabilities while utilizing overseas business bases to offset foreign exchange risk and increasing overseas procurement of materials. The company is also making inroads into emerging markets to realize further business growth overseas.