Overview of Fiscal 2010 During the reporting term (January 1 to December 31, 2010), the Japanese economy flatlined overall. In the first half, the economy showed signs of recovery momentum supported by economic growth in China and other emerging countries. In the second half, despite fears of economic backsliding as the strong yen eroded exports, performance remained stable due to the effect of government stimulus measures. Business conditions in the chemical industry were buoyant overall. Despite a reduction in demand from some electronics materials manufacturers on inventory adjustment in the second half, demand from the Asian countries in particular increased, and raw material and fuel prices remained relatively stable. Under these circumstances, the Group took aggressive measures to grow earnings, by boosting marketing in Asia, pressing on with cost-cutting, and streamlining manufacturing and marketing operations within the Group. In addition, to further lift profitability from fiscal 2011, we have decided to increase capex, for new facilities for high-purity sulfuric acid, expansion of lines for intermediate raw materials for feed additives and establishment of a manufacturing subsidiary for materials for electrolytes used in lithium-ion batteries. At the same time, we overhauled research organizational structures to accelerate innovation of new products and businesses, and set up our General Center of R&D. Sales in the reporting period increased 9.8% year on year on a consolidated basis to \153,779 million (US$1,887 million), on increased Acrylic Products sales. Turning to earnings, operating income increased 90.6% year on year to \21,271 million (US$261 million). Key factors were product price rises in response to buoyant demand in Asia for acrylic esters, amendments to prices in line with rising raw material and fuel prices, our withdrawal from unprofitable businesses, and measures to reduce fixed costs and improve operational efficiency. Net income jumped 270.9% to \13,133 million (US$161 million) due to a decrease in income taxes deferred because part of the allowance for doubtful receivables was recorded as deferred tax assets. Both operating and net income hit record highs. Sales by Segment Commodity Chemicals Despite strong shipments of caustic soda and inorganic chlorides, sales declined slightly due to a dip in prices as supplies became plentiful from the second half of the period. Copper products sales increased steeply due to increased demand and rising copper prices. Sales of liquefied hydrogen chloride also grew strongly, supported by buoyant demand from manufacturers of electronics materials. Sales also increased for industrial gases, as shipments rose in line with recovery in demand. As a result of the foregoing, sales in this segment increased 2.7% year on year to \46,870 million, and operating income grew 55.6% year on year to \6,665 million. Acrylic Products Sales of acrylic esters rose significantly due to high product prices in overseas markets. Sales of acrylic polymers and polymer flocculants likewise increased significantly on strong shipments. Management’s Discussion & Analysis ■■ Operating income (left scale) Operating income ratio (right scale) 06 07 08 09 10 0 5,000 15,000 10,000 20,000 25,000 0.0 3.0 6.0 9.0 15.0 12.0 (Millions of yen) (%) 12950 12719 11668 11158 21271 8.3 7.8 7.2 8 13.8 Operating income & ratio as a percentage of net sales 06 07 08 09 10 0 15 30 45 60 (Yen) 26.64 24.52 7.27 13.85 52.05 Net income per share 22 Annual Report 2010