Overview of Fiscal 2012 During the reporting term (January 1 to December 31, 2012), operating conditions remained harsh amid a Japanese economy experiencing sagging overseas demand caused by prolonged economic stagnation in Europe along with a business slowdown in China and the rest of Asia. This was further compounded by lackluster demand for post-disaster reconstruction, the longprevailing strength of the yen, and climbing electricity rates. Under these conditions, the Toagosei Group sought to expand sales and new opportunities with high value-added products while slashing costs and adjusting product prices to keep up with rising raw material and fuel prices. Nevertheless, earnings remained under pressure as domestic and overseas markets languished amid softening demand and excess supply. As a result, net sales in the reporting term decreased 3.1% year on year on a consolidated basis to \148,203 million ($1,711 million), operating income declined 15.9% to \14,583 million ($168 million) and net income dropped 25.4% to \9,699 million ($112 million). Sales by Segment Commodity Chemicals Despite moves to raise product prices in response to rising raw material and fuel costs, sales volumes of caustic soda and inorganic chlorides were weak due to sluggish overall demand. High-purity products faced flagging demand in the key area of semiconductor applications, yet sales were firm for the year overall as exports prompted a partial rebound beginning in the second half. Despite price adjustments initiated at the end of fiscal 2011, sulfuric acid sales remained at previous-year levels owing to lower sales volumes amid a downturn in overall demand. Sales of industrial gases were poor due to dwindling sales volumes amid generally weak demand. As a result of the foregoing, sales in this segment decreased 1.4% year on year to \47,435 million, and segment income slipped 1.6% to \4,413 million. Acrylic Products Sluggish markets for manufactured products in Asia caused a slowdown in sales of acrylic esters, despite a recovery in sales volumes largely fueled by domestic buyers as the year came to a close. Sales of acrylic polymers were strong thanks to brisk overall demand. Sales of polymer flocculants were poor amid slumping prices mainly due to waning public demand. Sales of Aronix UV-curable resins were weak due to soft demand for generalpurpose resins coupled with lower sales volumes in the flat panel display business. As a result of the foregoing, sales in this segment decreased 5.4% year on year to \54,354 million, and segment income slipped 32.1% to \5,764 million. Specialty Chemicals Adhesive sales were strong thanks to steady demand for consumer-use adhesives, as well as brisk demand, especially for industrial-use adhesives and adhesives used with mobile devices. Despite firm sales of construction repair materials, overall sales of products for construction and civil engineering Management’s Discussion & Analysis 0 50,000 100,000 150,000 200,000 (Millions of yen) 08 09 10 11 12 0 5,000 10,000 15,000 25,000 20,000 (Millions of yen) 08 09 10 11 12 Net sales Operating income 0 5,000 15,000 10,000 (Millions of yen) 08 09 10 11 12 Net income 28 Annual Report 2012