Overview of Fiscal 2009 During the reporting term (January 1 to December 31, 2009), the Japanese economy showed signs of upturn, but stopped short of a full recovery as weak private sector investment and consumer spending continued to weigh heavily. Business conditions in the chemical industry remained difficult, as recovery in demand was weak and raw material and fuel prices continued to rise. Against this backdrop, the Group made an all-out effort to improve business performance, through rigorous cost-cutting, withdrawal from unprofitable businesses, and consolidation of Group company clerical operations and other rationalization. However, sales for the reporting period fell steeply, by 13.9%, on a consolidated basis, to \140,033 million (US$1,520 million), due to reduced demand amid the economic slowdown. Turning to earnings, operating income slipped 4.4% yearon- year to \11,158 million (US$121 million), with rationalization measures such as reduction of fixed costs and efficiency improvements failing to cover the shortfall in sales. Net income increased 86.8% year-on-year to \3,541 million (US$38 million). This was due chiefly to the fact that the Company was able to recognize valuation losses from the previous fiscal year in the term under review (since impairment and associated losses from business closures were recorded as extraordinary losses), causing income taxes to fall. Sales by Segment Commodity Chemicals Although demand began to recover moderately in the second half, significantly lower demand for caustic soda and inorganic chlorides at the beginning of the term caused full-term shipments to decline, leading to a fall in sales. Sales of chlorinated organic solvents fell steeply due to reduced demand. Sales of liquefied hydrogen chloride and chemical compounds incorporating copper fell steeply as well, with a rebound in demand from the middle of the term failing to offset the falloff in demand in the first half. Reduced demand likewise significantly dragged down yearon- year sales of industrial gases. Total sales in the Commodity Chemicals segment came to \45,646 million, a year-on-year decrease of 17.3%, and segment operating income fell 24.2% to \4,283 million. Acrylic Products Sales of acrylic esters declined substantially, due to a sharp drop in full-term shipments. The moderate recovery in demand in the second half failed to offset the impact of weak shipments in the first half. Sales of acrylic polymers and polymer flocculants were likewise down significantly, due in both cases to the slow pace of demand recovery. Management’s Discussion & Analysis Operating income (left scale) Operating income ratio (right scale) 15236 12950 12719 11668 11158 10.1 8.3 7.8 7.2 8 05 06 07 08 09 0 4,000 8,000 12,000 16,000 0.0 3.0 6.0 9.0 12.0 (Millions of yen) (%) Operating income & ratio as a percentage of net sales 05 06 07 08 09 0 15 30 45 60 (Yen) 46.31 26.64 24.52 7.27 13.85 Net income per share 20 Annual Report 2009