Consolidated Earnings Report for the 2Q of the FY2010
Kuraray Co., Ltd.

Consolidated Earnings Report for theSecond Quarter of the Fiscal YearEnding March 31, 2011(Unaudited)

October 28, 2010
Kuraray Co., Ltd.

Consolidated Earnings Report for the 2Q of the FY2010
Kuraray Co., Ltd.

October 28, 2010
Kuraray Co., Ltd.
Consolidated Earnings Report for the Interim Period of the Fiscal YearEnding March 31, 2011
Name of listed company: Kuraray Co., Ltd.
Stock code: 3405
Stock exchange listings: Tokyo, first sections
URL: http://www.kuraray.co.jp
Representative
Title: Representative Director and President
Name: Fumio Ito
Contact
Title: General Manager, Office of Corporate Communications
Name: Morihiro Nakayama
Tel: +81-3-6701-1070
Preparation of supplementary documentation for the quarterly earnings
report: Yes
Holding of quarterly earnings results briefing: Yes (For securities analysts andinstitutional investors)

1Consolidated Earnings Report for the 2Q of the FY2010
Kuraray Co., Ltd.

(Millions of yen rounded down unless otherwise stated)

1. Consolidated Financial Results for the Interim Period of the Fiscal
Year Ending March 31, 2011 (April 1, 2010 to September 30, 2010)(1) Consolidated Operating Results (Cumulative)(Percentages displayed for net sales, operating income, ordinary income andnet income are comparisons with the corresponding period of the previous fiscal year)
Net Sales

Operating Income(Change)
Fiscal 2010
InterimFiscal 2009
InterimOrdinary Income(Change)(Millions of yen)
Net Income(Change)(Change)

180,775

15.1 %

25,461160.9 %

24,995165.7%

13,913166.5%

157,065(25.0 %)

9,758

(58.1 %)

9,409

(57.7 %)

5,221

(61.1 %)Net Income
per Share (¥)

Fully Diluted
Net Income
per Share (¥)

Fiscal 2010 Interim

39.96

39.90

Fiscal 2009 1Interim

15.00

14.98

(2) Consolidated Financial Position
Total Assets
As of September 30, 2010
As of March 31, 2010

Net Assets(Millions of yen)
Shareholders’Equity Ratio

Net Assets
per Share%Yen

494,060

336,96267.5

958.23502,815

337,81866.5

961.24(Reference)
Shareholders’ equity: As of September 30, 2010
As of March 31, 20102

¥ 333,640 million¥ 334,583 million

Consolidated Earnings Report for the 2Q of the FY2010
Kuraray Co., Ltd.

2. Dividends(Yen)
Cash Dividends per Share
Record Date

Jun. 30, 2010

Sept. 30, 2010

Dec. 31, 2010

Fiscal 2009

―

8.00

Fiscal 2010

―

13.00

Fiscal 2010 (Forecast)Mar. 31, 2011

Annual

―

8.00

16.00

―

14.00

27.00

Note: Revisions to cash dividend forecast during this period: Yes
3. Forecasts of Consolidated Financial Results for the Fiscal YearEnding March 31, 2011 (April 1, 2010 to March 31, 2011)(Percentages displayed for net sales, operating income, ordinary income and net income
are comparisons with the corresponding period of the previous fiscal year)(Millions of yen)

Net Sales

Operating Income

Ordinary Income

52,00050,000Net Income

Net Income
per Share

Full Fiscal Year
365,000

9.6%

70.8%

72.9%

28,500

74.7%

81.86

Yen

Note: Revisions to forecasts of consolidated financial results during thisperiod: Yes
4. Other
(1)

(2)

(3)

(4)

Changes in Important Subsidiaries during the Period (Changes inSpecial Subsidiaries Involving Changes in the Scope ofConsolidation)No
Adoption of the Simplified Accounting Method and Special
Accounting Practices in the Preparation of Quarterly
Consolidated Financial Statements
Yes
Changes in Accounting Principles, Procedures and Presentation
Methods in Connection with the Preparation of Quarterly
Consolidated Financial Statements (Recorded under “Changes inImportant Items Considered Fundamental to the Preparation of
Quarterly Consolidated Financial Statements”)
1. Changes following revision of accounting standards: Yes
2. Changes besides 1. above: None
(Note: Items to be disclosed in “Significant Changes in the Basis of
Presenting Quarterly Consolidated Financial Statements”
Number of Shares Issued and Outstanding (Common Shares)
1. Number of shares issued and outstanding (including treasury stock)
as of the period-end:3

Consolidated Earnings Report for the 2Q of the FY2010
Kuraray Co., Ltd.

As of September 30, 2010 382,863,603 shares
As of March 31, 2010
382,863,603 shares
2. Number of treasury stock as of the period-end:
As of September 30, 2010 34,681,527 shares
As of March 31, 2010
34,790,071 shares
3. Average number of shares for the period:
As of September 30, 2010 348,135,295 shares
As of March 31, 2010
348,212,265 shares
Indication of quarterly review procedure implementation status
This quarterly earnings report is exempt from the quarterly review procedure
based upon the Financial Instruments and Exchange Act. Furthermore, it wasundergoing the review procedure process at the time of release.
Cautionary Statement with Respect to Forecasts of Consolidated Business Results
The results forecasts presented in this document are based upon currently
available information and assumptions deemed rational. A variety of factors
could cause actual results to differ materially from forecasts. Please refer to p.
4 “Qualitative Information on Consolidated Operating Results Forecast”
contained in the Attachment for the assumption used.

4Consolidated Earnings Report for the 2Q of the FY2010
Kuraray Co., Ltd.

Index of the Attachment
1. Qualitative Information and Financial Statements......................................................................... 6(1) Qualitative Information and Overview of Consolidated Business Results................................ 6(2) Qualitative Information on Consolidated Financial Position.....................................................10(3) Qualitative Information on Consolidated Operating Results Forecast.....................................11
2. Others ..................................................................................................................................................12(1) Changes in Significant Consolidated Subsidiaries ........................................................................12(2) Application of Accounting Methods for Consolidated Financial Statements that are Simplified
or Extraordinary.................................................................................................................................12(3) Outline of Changes in Significant Accounting Policies, Procedures and Presentation..........12
3. Quarterly Consolidated Financial Statements ...............................................................................14(1) Quarterly Consolidated Balance Sheets ...........................................................................................14(2) Quarterly Consolidated Statements of Income..............................................................................16(3) Quarterly Consolidated Statements of Cash Flows.......................................................................17(4) Notes regarding Going Concern Assumption................................................................................18(5) Segment Information..........................................................................................................................18(6) Material Changes in Shareholders’ Equity.......................................................................................20

5

Consolidated Earnings Report for the 2Q of the FY2010
Kuraray Co., Ltd.

1. Qualitative Information and Financial Statements(1) Qualitative Information and Overview of Consolidated BusinessResults
The operating environment in the interim period (April 1, 2010 to September
30, 2010) saw a gradual recovery in demand for Group products in Europe
and the United States as well as strong demand in emerging economies,
chiefly China. On the other hand, the situation remained unpredictable, with astagnant global economy and a decelerated Japanese economy due to rapid
appreciation of the yen. Amid such circumstances, the Kuraray Group madeacross-the-board efforts, including cutting back fixed costs, to improve its
earnings structure. The Company also took proactive measures for further
business growth, one of the objectives stated in its “GS-Twins,” themedium-term action plan.
During the period under review, sales of LCD and LED-related
products grew favorably, and demand in Kuraray’s core businesses, including
poval resin, EVAL and Isoprene Chemicals, increased. In line with sales
growth, the plant utilization ratio of each business improved.
As a result, net sales for the period under review grew 15.1% from ayear earlier to ¥180,775 million, operating income jumped 160.9% to ¥25,461
million, ordinary income soared 165.7% to ¥24,995 million and net income
surged 166.5% to ¥13,913 million.
(Reference) Quarterly consolidated performance(Millions of yen)

Fiscal year ended March 31, 2010

Fiscal year ending March 31,
2011

1Q

2Q

3Q

4Q

1Q

2Q

Net sales

72,91084,15485,58890,22687,71593,060Operating income

1,730

8,025

9,787

10,875

12,534

12,916

Ordinary income

1,512

7,896

9,240

10,276

11,98313,012

Net income

138

5,082

6,923

4,170

5,699

8,213

Results by business segment compared with the corresponding period of theprevious fiscal year are as follows. The interim period of Kuraray’s overseas
subsidiaries is from January 1, 2010 to June 30, 2010.
From the fiscal year under review, the Company introduced the “Revised
6

Consolidated Earnings Report for the 2Q of the FY2010
Kuraray Co., Ltd.

Accounting Standard for Disclosures about Segments of an Enterprise andRelated Information” (Accounting Standards Board of Japan (ASBJ)
Statement No. 17 of March 27, 2009) and the “Guidance on AccountingStandard for Disclosures about Segments of an Enterprise and RelatedInformation” (ASBJ Guidance No. 20 of March 21, 2008). The Company has
not had a quarterly review by an independent auditor for year-on-year datastated in the abovementioned “1. Qualitative Information and Financial
Statements.”
Results by Business Segment
ResinsThe Resin segment saw steady business recovery in China and other Asian
countries as well as in Europe and the United States. As a result, sales in thissegment grew 15.4% year on year to ¥74,815 million, while operating income
jumped 49.1% to ¥25,239 million.
(1) Sales of poval resins were brisk in China and other Asian countries as wellas in Europe. Furthermore, sales of the Company’s local subsidiaries are
expanding, particularly in Europe, on the back of a decreased inflow ofcompetitors’ products from other regions due to the weaker euro. Sales of
optical-use poval film for LCD polarizers grew as a result of booming
demand for LCD TVs. In order to meet this demand growth for the
medium term, the Company commenced the establishment of a new
production line at the Saijo Plant to increase annual production by 20
million square meters. Sales of polyvinyl butyral (PVB) film remainedsluggish, reflecting intensifying competition in the European construction
market, despite healthy sales growth for encapsulant for solar power
generators.
(2) Demand for ethylene vinyl alcohol polymer resin EVOH expanded in the
United States and Europe for use in food packaging and automobiles.
Amid growing demand in emerging countries, sales of EVOH increased.
particularly in the Asian market, and especially in China, for use inautomobiles. Furthermore, sales expanded both in Japan and overseas foruse in food packaging as well as new applications such as vacuum
insulation panels in refrigerators.

7

Consolidated Earnings Report for the 2Q of the FY2010
Kuraray Co., Ltd.

Chemicals
The overall performance in the Chemicals segment expanded in China andother Asian countries. As a result, sales in this segment climbed 19.2% year on
year to ¥37,495 million. The Chemicals segment recorded operating incomeof ¥3,418 million, a turnaround from an operating loss in the corresponding
period of the previous fiscal year of ¥1,321 million.
(1) Demand for methacrylic resin was vigorous for use in LCD light guideplates. Sales of this product also grew for molding materials and sheets.
(2) As for Isoprene Chemicals, sales of SEPTON thermoplastic elastomer
were steady in Asia and Europe. Sales for chemicals and fine chemicals
steadily recovered, mainly in Japan and other Asian countries. Against thisbackdrop, the Company added higher value to its products.
(3) In the Medical segment, sales of dental materials were healthy on the backof the introduction of new types of composite resins and bonds in theEuropean and U.S. markets as well as the Company’s efforts to reinforce
its sales structure.
(4) Demand for GENESTAR heat-resistant polyamide resin expanded for
LED reflector applications in edge light-type LCD TVs despite a slow
increase in demand for electronics materials, including connectors.
Fibers and Textiles
In the Fibers and Textiles segment, almost all businesses, including
KURALON, recovered in the period under review. As a result, sales in thissegment grew 10.0% year on year to ¥30,580 million. The Fibers and Textiles
segment recorded operating income of ¥84 million, a turnaround from an
operating loss in the corresponding period of the previous fiscal year of¥1,622 million.
(1) Demand for KURALON expanded for use in automotive brake hoses andprimary cell separators. In addition, demand for use as an asbestos
substitute in FRC (fiber reinforced cement) gradually recovered.
(2) Sales of conventional CLARINO man-made leather and newenvironment-friendly processed CLARINO products[ak1] showed signs ofrecovery for use in footwear. Amid a drastic business restructuring, theCompany is transferring general-purpose product manufacturing to a
Chinese joint venture, while promoting the integration of new processing
procedures for high-value-added products in domestic plants.
8

Consolidated Earnings Report for the 2Q of the FY2010
Kuraray Co., Ltd.

(3) Sales of KURAFLEX nonwoven fabrics were stable for use in industrial
wipers, although demand for use in industrial masks was stagnant. During
the period under review, FELIBENDY nonwoven fabric produced using
steam jet technologies heating expanded its applications.
(4) Demand for MAGIC TAPE hook and loop fasteners were steady forindustrial materials and medical and transport-related applications despite
stagnant sales for use in automobile and housing-related applications.
(5) Demand for VECTRAN high strength polyarylate fiber showed a gradual
recovery, mainly for optic fiber reinforcement applications in China.
Trading
The Trading segment saw market recovery in such fiber-related businesses aspolyester (in apparel and materials fields), as well as in an increase indifferentiated materials. On the back of steady demand, mainly in Asian
countries, sales of resins, chemicals and chemical products expanded. As aresult, sales in this segment grew 16.2% year on year to ¥57,856 million, while
operating income surged 101.9% to ¥1,506 million.
(1) During the period under review, demand for formalwear and uniform
applications rapidly recovered. In addition, sales of the Company’s
proprietary ELMOZA polyester material with excellent color and texture
steadily increased.
(2) In the materials field, sales for materials used in medical-related items andfootwear expanded on the back of a steady demand increase. Demand forindustrial materials for use in automobiles grew substantially in Asian
countries.
(3) In the resin, chemicals and chemical products businesses, the Company
enjoyed growth in sales of other items, such as solvents, environmental
materials including activated carbon and industrial membranes, and in
high-value-added businesses, including ISOBAM alkaline water-soluble
polymer and elastomer.
OthersSales in the Others segment climbed 22.6% year on year to ¥27,468 million,
while operating income rose 24.0% to ¥2,408 million.
During the period under review, sales of active carbon for capacitors(electric storage devices) and water purification systems were steady, while9Consolidated Earnings Report for the 2Q of the FY2010
Kuraray Co., Ltd.

other business showed signs of gradual recovery.
(2) Qualitative Information on Consolidated Financial Position
Assets, Liabilities and Net Assets
Total assets decreased ¥8,755 million from the end of the previous fiscal yearto ¥494,060 million, owing to a decrease in fixed assets. Total liabilities
declined ¥7,899 million to ¥157,097 million, and net assets decreased ¥855
million to ¥336,962 million. Shareholders’ equity stood at ¥333,640 million,
for an equity ratio of 67.5%.
Cash Flows
Cash Flows from Operating Activities
Net cash provided by operating activities stood at ¥31,566 million at the endof the period under review, a decrease of ¥6,761 million compared with thesame period of the pervious fiscal year. Major components included income
before income taxes and minority interests of ¥22,416 million, depreciation
and amortization of ¥16,295 million, an increase in notes and accounts
payable of ¥2,915 million, an increase in notes and accounts receivable of¥5,554 million and income taxes paid of ¥6,007 million.
Cash Flows from Investing Activities
Net cash used in investing activities totaled ¥8,315 million. Major
components included payments for the acquisition of property, plant andequipment and intangible assets worth ¥9,012 million and a net decrease inmarketable securities of ¥16,996 million.
Cash Flows from Financing Activities
Net cash used in financing activities was ¥11,839 million. Major components
included proceeds from short-term loans of ¥1,565 million, a decrease incommercial paper of ¥6,000 million, repayment of long-term debt of ¥4,444
million and dividends paid of ¥2,784 million.
As a result, Kuraray recorded total cash inflow of ¥28,042 million in
the period under review, and cash and cash equivalents at the end of theinterim period increased ¥27,076 million from a year earlier to ¥43,488
million.
10

Consolidated Earnings Report for the 2Q of the FY2010
Kuraray Co., Ltd.

(3) Qualitative Information on Consolidated Operating Results
Forecast
During the interim period under review, sales of LCD and LED-related
products, and in the core businesses such as poval resins, EVAL andIsoprene Chemicals, increased on the back of demand recovery, while theplant utilization ratio also improved. Furthermore, the Company’s sales andprofits were higher than expected, reflecting across-the-board cost reduction
efforts.
On a full-year basis, the Company revised its forecast for the second
half of the fiscal year under review as follows, based on the assumption ofmaintaining healthy performance following the first half in core businesses
despite the influence of such negative factors as raw material price hikes andthe appreciation of the yen on the Japanese economy.
Revision to the consolidated forecast for the full period of the fiscal year
ending March 31, 2011 (April 1, 2010–March 31, 2011)(Millions of yen, unless otherwise stated)
Net Sales
Previous forecast (A)Operating

Ordinary

IncomeIncomeNet Income

Net Income
per Share

365,000

48,00046,00026,00074.69

Revised forecast (B)

365,000

52,00050,00028,50081.86

Difference (B)-(A)－+4,000+4,000+2,500Difference (%)

－

+8.3%

+8.7%

+9.6%

332,880

30,451

28,925

16,315(Announced on August 4, 2010)

Result for the previous fiscal year
ended March 31, 2010

46.86

Average currency exchange rates for the third quarter and later are assumptions and are as follows: ¥82
to the U.S. dollar, ¥114 to the euro, and a domestic naphtha price of ¥45,000 per kiloliter.

The assumptions and conditions upon which forecasts pertaining to main
businesses in the second half of the fiscal year under review are based are as
follows:
Demand for poval resins is expected to grow steadily in Asia andEurope. Even taking into consideration a part of the effect of users’
ongoingproduction adjustments, Kuraray expects healthy demand for
optical-use poval film throughout the year under review. Demand for EVAL
11

Consolidated Earnings Report for the 2Q of the FY2010
Kuraray Co., Ltd.

is projected to expand continuously in Europe and the United States, and it isexpected to show particularly high growth in emerging nations, mainly in
China, for use in automobiles and food packaging.
For methacrylic resin, the Company expects to see demand growth inmolding materials for light guide plates as well as a positive impact from pricerevisions. For isoprene chemicals, Kuraray anticipates demand growth mainlyin Asian countries, and it is thus pursuing sales expansion for new products
and high-value-added items. The Company expects a sales volume increasefor GENESTAR for use in LED reflector applications. Sales of
medical-related products for dental applications will remain stable both inJapan and overseas.
Results of the Company’s business restructuring efforts in the
CLARINO business are expected to fully appear in the fiscal year ending
March 31, 2012 and later.

2. Others(1) Changes in Significant Consolidated Subsidiaries
No(2) Application of Accounting Methods for Consolidated Financial
Statements That Are Simplified or Extraordinary(i) Simplified accounting method
Tax expenses related to certain consolidated subsidiaries that have nosignificant impact on Kuraray’s quarterly consolidated financial statements arecalculated by multiplying income before income taxes and minority interests
for the period under review by the effective income tax rate after theapplication of tax effect accounting to the consolidated statements of income
for the previous fiscal year.
(ii) Special accounting practices used in the preparation of quarterly
consolidated financial statements:
No(3) Outline of Changes in Significant Accounting Policies, Procedures
and Presentation:(i) Changes in accounting procedures(Accounting Standard for Asset Retirement Obligations)12Consolidated Earnings Report for the 2Q of the FY2010
Kuraray Co., Ltd.

From the first quarter of the fiscal year ending March 31, 2011, Kurarayapplies the “Accounting Standard for Asset Retirement Obligation” (ASBJ
Statement No. 18, March 31, 2008) and “Guidance on Accounting Standard
for Asset Retirement Obligations” (ASBJ Guidance No. 21, March 31, 2008).
This change has had no significant impact on the Company’s
operating income and ordinary income. Income before income taxes andminority interests for the period under review decreased ¥1,549 million. Thechange in the asset retirement obligations due to the application of therelevant accounting standards was ¥1,564 million.
Up to the previous fiscal year-end, the asset retirement obligations ofoverseas subsidiaries were included in others under fixed assets. As of the
fiscal year ending March 31, 2011, however, such obligations are classified
differently for the purpose of facilitating comparison with the previous fiscal
year.
(ii) Changes in presentation methods(Consolidated Quarterly Statement of Income)
Based on the “Accounting Standard for Consolidated Financial Statements”(ASBJ Statement No. 22, December 26, 2008), Kuraray applies the “Cabinet
Office Ordinance Partially Revising Regulation on Terminology, Forms andPreparation of Financial Statements” (Cabinet Office Ordinance No. 5, March24, 2009). As a result, “Income before minority interests in net income of
consolidated subsidiaries” is included in the consolidated financial statements
for the interim period of the fiscal year ending March 31, 2011.
Figures for the interim period of the previous fiscal year are displayed
for the purposes of comparison.

13

Consolidated Earnings Report for the 2Q of the FY2010
Kuraray Co., Ltd.

3. Quarterly Consolidated Financial Statements(1) Quarterly Consolidated Balance Sheets(Millions of yen)

September 30, 2010ASSETS
Current Assets
Cash and cash equivalents
Notes and accounts receivable–trade
Short-term investment securities
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
OthersAllowance for doubtful accounts

March 31, 2010

32,23579,251
79,99137,736
7,928
11,351
6,206
6,876
(819)

28,99175,92373,97838,8298,044
10,972
5,824
7,366
(604)

260,754249,326

Tangible fixed assets
Buildings and structures (net)
Machinery and equipment (net)Land
Construction in progress
Others (net)34,56286,40818,0049,580
2,707

34,88096,17018,23011,5602,867

Total tangible fixed assets

151,263

163,709

13,842
3,129

17,941
3,848

Total intangible fixed assets

16,971

21,790Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Prepaid pension costs
OthersAllowance for doubtful accounts

45,892
1,302
7,028
6,427
4,699
(279)

49,006
1,279
6,570
6,666
4,999
(532)

Total investments and other assets

65,07067,989233,305

253,489

494,060

502,815

Total current assets
Fixed Assets

Intangible fixed assets
Goodwill
OthersTotal fixed assets
Total

14

Consolidated Earnings Report for the 2Q of the FY2010
Kuraray Co., Ltd.

(Millions of yen)
September 30, 2010

March 31, 2010

LIABILITIESCurrent Liabilities
Notes and accounts payable–trade
Short-term loans payable
Commercial paper
Income taxes payable
Provision for bonuses
Other provision
Other

28,89910,242
—
8,569
6,485
3
15,683

27,235
12,158
6,000
6,038
6,129
138
18,85069,88376,55010,00045,6905,152
14,195
135
1,170
2,295
8,573

10,00046,502
5,524
14,248
167
1,275
812
9,915

87,21388,446

157,097

164,996

88,95587,168215,199(40,940)

88,95587,192204,070(41,068)

350,383

339,150

Valuation difference on available-for-salesecurities
Deferred gain or losses on hedges
Foreign currency translation adjustments

1,909
(50)
(18,602)

3,767
(103)
(8,230)Total valuation and translation adjustments(16,742)(4,566)

Stock subscription rights

209

186

Minority interests

3,113

3,048

Total net assets

336,962

337,818

Total liabilities and net assets

494,060

502,815

Total current liabilities
Long-Term Liabilities
Corporate bonds
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for retirement benefits for directors
Provision for environmental measures
Asset retirement obligations
OthersTotal long-term liabilities
Total liabilities
NET ASSETS
Shareholders’ equity
CapitalCapital surplus
Retained earnings
Treasury stock
Total shareholders’ equity
Valuation and Translation Adjustments

15

Consolidated Earnings Report for the 2Q of the FY2010
Kuraray Co., Ltd.

(2) Quarterly Consolidated Statements of Income(Millions of yen)Six-month period
ended September 30,
2009(April 1, 2009 –September 30, 2009)

Six-month period
ended September 30,
2010(April 1, 2010 –September 30, 2010)

Net sales
Cost of sales

157,065
115,433

180,775
121,933

Gross profit

41,632

58,842

Selling, general and administrative expenses
Selling expenses
General and administrative expenses

8,208
23,6649,376
24,00431,87333,381

Operating income

Total selling, general and administrative expenses

9,758

25,461Non-operating income
Interest income
Dividend income
Equity in earnings of affiliates
Other, net

190
961
9
649

208
918
12
550

Total non-operating income

1,810

1,690

Interest expenses
Other expenses

706
1,453

587
1,568

Total non-operating expenses

2,160

2,155

9,409

24,995

Impact of the application of the Accounting Standard for
Asset Retirement Obligations
Loss on valuation of investment securities
Loss on disposal of tangible fixed assets
Business structure improvement losses
Impairment losses

—
173
—
1,033
59

1,548
627
219
183
—

Total extraordinary expenses

Non-operating expenses

Ordinary income
Extraordinary expenses

1,266

2,579

Income before income taxes and minority interests

8,142

22,416

Current income taxes

2,864

8,843

Deferred income taxes

18

(416)

Total income taxes

2,882

8,427

Income before minority interests in net income of consolidated
subsidiaries

5,260

13,989

38

75

5,221

13,913

Minority interests in net income of consolidated subsidiaries
Net income

16Consolidated Earnings Report for the 2Q of the FY2010
Kuraray Co., Ltd.

(3) Quarterly Consolidated Statements of Cash Flows(Millions of yen)Six-month period
ended September 30,
2009(April 1, 2009 –September 30, 2009)

Six-month period
ended September 30,
2010(April 1, 2010 –September 30, 2010)

8,142
16,97659—

22,416
16,295—219—
173(5,396)
13,787
257
1,701

1,548
627
(5,554)(1,647)2,915
203

Subtotal

35,70337,026

Income taxes refunded (paid)

2,073(6,007)

Others551

547

38,32731,566(7,671)(51,988)834
16,996(13,016)
(430)
(777)

(9,012)
(117)
(385)

(73,884)

8,315(2,584)(3,000)12,000—(3,482)
(267)

1,565
(6,000)—(4,444)(2,784)(175)

Net Cash Provided by (Used in) Financing Activities

2,665(11,839)

Effect of Exchange Rate Changes on Cash and Cash
Equivalents

193

(966)

Net (Decrease) Increase in Cash and Cash Equivalents(32,698)

27,076

Cash and Cash Equivalents, Beginning of the Period

46,157

16,412

Cash and Cash Equivalents, End of the Period

13,45943,488Net Cash Provided by (Used in) Operating Activities
Income before income taxes and minority interests
Depreciation and amortization
Impairment losses
Loss on disposal of tangible fixed assets
Impact of the application of the Accounting Standard for
Asset Retirement Obligations
Write-down of investment securities
Increase in notes and accounts receivable
Decrease (increase) in inventories
Increase in notes and accounts payable
Other, net

Net Cash Provided by Operating Activities
Net Cash (Used in) Provided by Investing Activities
Net (increase) decrease in time deposits
Net (increase) decrease in marketable securities
Payments for acquisition of property, plant and equipment
and intangible assets
Payments for purchase of investment securities
Other, net
Net Cash (Used in) Provided by Investing Activities
Net Cash Provided by (Used in) Financing Activities
Net increase (decrease) in short-term loans payable
Net decrease in commercial paper
Proceeds from long-term loans payable
Repayment of long-term loans payable
Dividends paid
Other, net

17

Consolidated Earnings Report for the 2Q of the FY2010
Kuraray Co., Ltd.

(4) Notes Regarding Going Concern Assumptions
None(5) Segment Information
1) Overview of Reportable [ak2]Segments
The business segments reported by Kuraray are the business units forwhich the Company is able to obtain respective financial information
separately in order for the Board of Directors to conduct periodic
investigations to determine distribution of management resources andevaluate their business results.
Kuraray adopts an in-house company system where each in-housecompany develops business activities and establishes its own
comprehensive strategy, for both Japan and overseas markets, inaccordance with the products it handles. In addition, among Kuraray
subsidiaries, Kuraray Trading Co., Ltd. independently conducts propriety
planning and sales activities, including processing and sales of Kuraray
products as well as other companies’ products.
Consequently, Kuraray has created four business segments forreporting—“Resins,” “Chemicals,” “Fibers and Textiles” and“Trading”—categorized by products based on respective in-housecompanies.
The Resins segment manufacturers and markets functional resins andfilm, including PVA, PVB and EVAL. The Chemicals segment produces
and sells methacrylic resin, isoprene-related products, GENESTAR, andmedical products. The Fibers and Textiles segment manufactures and sells
synthetic fibers and textiles, man-made leather, non-woven fabrics andothers. The trading segment conducts processing and sales activities forsynthetic fibers and man-made leather, and it conducts planning andmarketing for the products produced by the Kuraray Group and othercompanies.

18

Consolidated Earnings Report for the 2Q of the FY2010
Kuraray Co., Ltd.

Business Segments Reported
Interim Period of Fiscal 2010 (April 1, 2010 to September 30, 2010)(¥ million)
Reportable Segments
FibersResinsChemicalsandTextilesNet sales(1) Outside
customers(2) Inter-segment
sales and transfers
Total
Operating income(loss)

Trading

Total

Other
Business1

Total

Adjustment2

Consolidated
Statements ofIncome3

58,94023,216

21,06456,168159,389

21,386

180,775--

180,775

15,875

14,278

9,516

1,688

41,3586,082

47,440(47,440)--

74,81537,49530,58057,856200,747

27,468228,216(47,440)

180,775

25,239

3,418

84

1,506

30,2492,408

32,657(7,196)25,461

Notes:
1. The “Other Business” category incorporates operations not included
in business segments reported, including activated carbon,
environmental business and engineering.
2. Adjustment is as follows: Included within operating income (loss) of¥7,196 million is the elimination of intersegment transactions of ¥128
million and corporate expenses of ¥7,324 million. Corporate expenses
mainly comprise headquarters’ general and administrative expenses
and the submitting company’s basic research expenses not usually
attributed to segments.
3. Segment income is adjusted with operating income under consolidated
statements of income.
4. From the first quarter of the fiscal year ending March 31, 2011,
Kuraray applied the “Accounting Standard for Asset Retirement
Obligation” (ASBJ Statement No. 18, March 31, 2008) and “Guidanceon Accounting Standard for Asset Retirement Obligations” (ASBJ
Guidance No. 21, March 31, 2008). This change has had no significant
impact on the Company’s operating income and ordinary income.
(Supplemental Information)
From the consolidated first quarter under review, Kuraray has applied the
Revised Accounting Standard for Disclosures about Segments of anEnterprise and Related Information (ASBJ Statement No. 17 of March 27,2009) and Guidance on Accounting Standard for Disclosures about Segmentsof an Enterprise and Related Information (ASBJ Guidance No. 20 of March
21, 2008).
19

Consolidated Earnings Report for the 2Q of the FY2010
Kuraray Co., Ltd.

(6) Material Changes in Shareholders’ Equity
None20