Consolidated Earnings Report for theSecond Quarter of the Fiscal Year Ending
March 31, 2013 (Unaudited)

November 1, 2012
Kuraray Co., Ltd.

November 1, 2012
Kuraray Co., Ltd.
Consolidated Earnings Report for the Interim Period of the Fiscal YearEnding March 31, 2013
Name of listed company:
Stock code:
Stock exchange listing:Kuraray Co., Ltd.
3405
Tokyo, first section

URL:

http://www.kuraray.co.jp/en

Representative:
Title:
Name:

Representative Director and President
Fumio Ito

Contact:
Title:

Manager, Corporate Management Planning Division,
Corporate Communications Department

Name:

Tomoyuki ShimamotoTel:+81-3-6701-1071(Millions of yen rounded down unless otherwise stated)

Preparation of supplementary documentation for the quarterly earnings report: Yes
Holding of quarterly earnings results briefing: Yes (For securities analysts and institutional
investors)

1. Consolidated Financial Results for the Interim Period of the Fiscal
Year Ending March 31, 2013 (April 1, 2012 to September 30, 2012)(1) Consolidated Operating Results (Cumulative)(Percentages displayed for net sales, operating income, ordinary income and net income are comparisons withthe corresponding period of the previous fiscal year.)(Millions of yen)
Net Sales

Operating Income

Ordinary Income(Change)(Change)(Change)

Net Income(Change)

Fiscal 2012 Interim

180,888(2.6%)

23,899(18.6%)

21,884(24.5%)

12,745(26.0%)

Fiscal 2011 Interim

185,635

2.7%

29,36415.3%

28,981

15.9%

17,21423.7%

Note: Comprehensive income: For the fiscal 2012 interim period:¥12,463 million (40.4%)

For the fiscal 2011 interim period:

Net Income
per Share (Yen)¥20,907 million (― %)Fully Diluted
Net Income
per Share (Yen)

Fiscal 2012 Interim

36.57

36.53

Fiscal 2011 Interim

49.43

49.35

(2) Consolidated Financial Position
Total Assets(Millions of yen)
Shareholders’ Equity Ratio(%)

Net Assets

As of September 30, 2012

525,543

373,122

69.7

As of March 31, 2012

523,247

366,314

68.8(Reference)
Shareholders’ equity: As of September 30, 2012:¥366,457 million

As of March 31, 2012:¥360,018 million

Note: Shareholders’ equity here represents total net assets less share subscription rights and minority
interests.

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

Jun. 30

Sept. 30

Fiscal 2011

―

16.00

Fiscal 2012

―

18.00

Fiscal 2012 (Forecast)

Dec. 31Mar. 31Annual

―

17.00

33.00

―

18.00

36.00

Note: Revisions to cash dividend forecast during this period: No

3. Forecasts of Consolidated Financial Results for the Fiscal YearEnding March 31, 2013 (April 1, 2012 to March 31, 2013)(Percentages displayed for net sales, operating income, ordinary income and net income are comparisons withthe corresponding period of the previous fiscal year)(Millions of yen)
Net Sales
Full Fiscal Year

380,000

3.0%

Operating Income

Ordinary Income

52,00050,500(5.0%)(6.4%)Net Income
30,000(4.7%)Net Income
per Share
86.07

Yen

Note: Revisions to forecasts of consolidated financial results during this period: Yes

4. Other(1)

Changes in Important Subsidiaries during the Period (Changes inSpecial Subsidiaries Involving Changes in the Scope of

(2)
(3)

(4)

Consolidation)No
Adoption of Special Accounting Practices in the Preparation of
Quarterly Consolidated Financial Statements
NO
Changes in Accounting Principles, Procedures and Presentation
Methods in Connection with the Preparation of Quarterly
Consolidated Financial Statements
1. Changes following revision of accounting standards: Yes
2. Changes besides 1. above: None
3. Changes of accounting estimates: Yes
4. Restatement: None
Number of Shares Issued and Outstanding (Common Shares)
1. Number of shares issued and outstanding (including treasury stock)
as of the period-end:
As of September 30, 2012 382,863,603 shares
As of March 31, 2012
382,863,603 shares
2. Number of treasury stock as of the period-end:
As of September 30, 2012
34,316,668 shares
As of March 31, 2012
34,506,810 shares
3. Average number of shares for the period (Cumulative):
As of September 30, 2012 348,490,740 shares
As of September 30, 2011 348,284,800 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 this release.
Cautionary Statement with Respect to Forecasts of Consolidated Business Results(Cautionary note regarding forward-looking statements)
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“Qualitative Information on Consolidated Operating Results Forecast” onpage 4 of the Attachment for the assumptions used.
Access to Documents and Other Materials Relating to the Quarterly Results Briefing to Be
Held on November 1, 2012

Related documents and materials, including the video of the briefing, will be
posted on the Company’s website immediately after the briefing is closed.

Index of the Attachment
1. Qualitative Information and Financial Statements ..............................................................

2(1) Qualitative Information on Consolidated Business Results..............................................

2(2) Qualitative Information on Consolidated Operating Results Forecast ..........................

4

2. Items regarding Summary (and Notes) Information............................................................

5

Changes in Accounting Policies, Accounting Estimates and Restatement .....................

5

3. Quarterly Consolidated Financial Statements........................................................................

7(1) Quarterly Consolidated Balance Sheets ...............................................................................

7(2) Quarterly Consolidated Statements of Income and Quarterly Consolidated Statementsof Comprehensive Income ......................................................................................................

9

Quarterly Consolidated Statements of Income ....................................................................

9

Quarterly Consolidated Statements of Comprehensive Income .......................................

11(3) Quarterly Consolidated Statements of Cash Flows.............................................................

12(4) Notes regarding Going Concern Assumptions....................................................................

14(5) Segment and Other Information............................................................................................

14(6) Material Changes in Shareholders’ Equity.............................................................................

16

1. Qualitative Information and Financial Statements(1) Qualitative Information and Overview of Consolidated BusinessResults
In the Company’s operating environment during the first half of fiscal 2012
(April 1, 2012 to September 30, 2012), demand remained weak overall due tothe economic downturn in Europe reflecting the financial crisis as well as thesoftening of growth in China and other emerging countries. On the domestic
front, difficult circumstances continued as the yen continued to appreciate.
Confronting these circumstances, the Kuraray Group is taking various
measures to achieve sustained growth based on the core management
strategies set forth in its “GS-III” medium-term management plan launchedin the current fiscal year. In line with the management strategies, the Group isundertaking large-scale investments as well as M&A aiming to accelerate
global expansion in its core business while proactively developing new
businesses to secure its future growth in water treatment, environment, energy,
optical and electronics fields.
Consolidated net sales for the first half fell ¥4,747 million, or 2.6%,
compared with the corresponding period of the previous fiscal year to¥180,888 million, operating income fell ¥5,465 million, or 18.6%, to ¥23,899
million, ordinary income fell ¥7,096 million, or 24.5%, to ¥21,884 million andnet income fell ¥4,469 million, or 26.0%, to ¥12,745 million.
Results by Business Segment
ResinsAffected by the global economic slowdown, and particularly the slowdown of
the European economy, first half sales in this segment fell 3.1% year on yearto ¥75,113 million, and operating income fell 5.8% to ¥24,410 million.
(1)
The poval resin and polyvinyl butyral (PVB) film market saw demand
fall due to the global economic slowdown. Performance of optical-use
poval film recovered in the second quarter and remained virtually the same
year on year, despite the impact of adjustments in inventories related to
LCD panels in the first quarter.
As a part of its growth strategy, the Kuraray Group took the following
steps:2

(i)Building a new production site (capacity of 40,000 ton/year, tobe completed in September 2014) in Texas, U.S., toaccommodate the growing global demand for poval resins(ii)
Acquired MonoSol, LLC, a leading U.S. manufacturer ofwater-solvent type poval film, such as packaging films forlaundry and dishwashing detergent products(2) Sales of EVAL ethylene vinyl alcohol copolymer (EVOH resin) grewsteadily for automotive applications, although stagnated for food packaging
applications.
Chemicals
Performance in this segment was affected overall by the economic slowdown,
although the Company has promoted development of new applications incertain products. As a result, sales in this segment slightly decreased from¥38,931 million in the first half of the previous fiscal year to ¥38,930 million,
and operating income fell 59.7% year on year to ¥2,076 million.
(1)
Sales of methacrylic resin were firm, with a steady demand for use as
molding materials for light guide panels. However, the overall
performance was affected by the deteriorating condition of thedomestic market as well as increased costs for raw materials and fuel.
(2)
In isoprene chemicals, sales of liquid isoprene rubber grew. However,
SEPTON thermoplastic elastomer and fine chemicals were affected by
the deteriorating business sentiment in Europe and Asia as well as
foreign exchange losses.
(3)
Sales of GENESTAR heat-resistant polyamide resin progressed, amid
favorable demand for LED reflector applications and connector
applications, as well as expanding applications for automobiles.
(4)
In the medical business, performance of dental materials remained
stable.
Fibers and Textiles
Performance in this segment was affected overall by deteriorating businesssentiment, with first half sales decreasing 5.7% year on year to ¥27,865
million. However, operating income increased 23.3% year on year to ¥759
million.
(1) KURALON for use as an asbestos substitute in fiber reinforced cement
3

(FRC) was affected by the stagnant European market. VECTRAN
ultra-high strength fiber, however, showed progress with the developmentof new applications.
(2) Sales of CLARINO man-made leather remained favorable for school bag
applications, but stagnated for footwear applications. In addition, work isunder way to focus more resources on innovative green processing as partof Kuraray’s restructuring efforts.
(3) Sales of KURAFLEX nonwoven fabrics for use in commercial counter
cloth stagnated due to such factors as intensifying competition with
imported products as well as deterioration in the domestic market.
Trading
Although sales in such fiber related business as polyester grew steadily, export
sales of resin and chemical-related components stagnated. As a result, firsthalf sales in this segment were down 4.5% year on year to ¥54,244 million,
and operating income decreased 7.6% year on year to ¥1,619 million.
OthersSales of activated carbon for use in water purification systems remained weak,
but energy-related applications grew steadily. Other items were also affected
overall by the deteriorating business sentiment. As a result, sales in thissegment decreased 6.1% year on year to ¥31,650 million, and operating
income declined 27.1% to ¥2,175 million.
The Company acquired an equity stake in Kureha Battery Materials
Japan Co., Ltd. to expand manufacturing of hard carbon for use in lithium ion
secondary batteries. The Company in tandem with Kureha Battery Materials
Japan Co., Ltd. established a joint venture company that produces plant-based
hard carbon.
(2) Qualitative Information on Consolidated Operating Results Forecast
Kuraray has revised its performance forecasts for the fiscal year ending March
31, 2013 (April 1, 2012 – March 31, 2013), as shown in the following table inlight of the prolonged stagnation of the global economy.

4Revised forecast for the fiscal year ending March 31, 2013 (April 1,
2012—March 31, 2013)(Millions of yen, unless otherwise stated)

Net Sales

Operating
IncomeOrdinary Income

Net Income

Net Income
per Share (yen)Previous forecast(A) (Announced
on April 26, 2012)

400,000

60,00058,50035,000100.47

Revised forecast (B)380,000

52,00050,50030,00086.07

Change (B – A)

(20,000)(8,000)(8,000)(5,000)(5.0)(13.3)(13.7)(14.3)

53,94031,469Change (%)(Reference) Fiscal
368,975
54,7332011 results
Assumptions for the third quarter and later are as follows:¥80 = US$1
¥100 = 1 euroDomestic naphtha price: ¥54,000 per kiloliter<Reference> Consolidated result forecast for the fiscal year ending March 31,
2013 (Breakdown of segment sales and income)(Billions of yen)

Net Sales Operating Income
Resins158

51

Chemicals

82

7

Fibers and Textiles

58

1.5

Trading112

3.5

Others67

4

Adjustment

(97)

(15)

Total

380

52

2. Items Regarding Summary (and Notes) Information
Changes in Accounting Policies, Accounting Estimates and Restatement(Changes in Accounting Estimates and Minor Changes to Accounting
Policies)
From the first quarter of this fiscal year, Kuraray and the consolidated
5

90.35

subsidiaries in Japan are complying with the revised Corporation Tax Act.
They have adopted the method of calculating depreciation expenses set out inthe revised Corporation Tax Act with regard to tangible fixed assets acquired
on and after April 1, 2012.
The effect of this change on operating income, ordinary income, andincome before income taxes and minority interests in the quarterly
consolidated statements under review is minor.

63. Quarterly Consolidated Financial Statements(1) Quarterly Consolidated Balance Sheets(Millions of yen)March 31, 2012

September 30, 2012ASSETS
Current Assets
Cash and cash deposits
Notes and accounts receivable–trade
Short-term investment securities
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Noncurrent Assets
Tangible fixed assets

31,464

48,33680,627

80,112

71,995

14,98150,361
9,528

52,078
10,48014,542

14,488

5,560

5,456

5,783

7,855

(781)

(708)

269,083

233,081

Buildings and structures, net

34,53638,035

Machinery, equipment and vehicles, net
LandConstruction in progress
Other, net
Total tangible fixed assets

71,57876,927

19,971

20,21023,06026,527

3,730

3,984

152,877

165,685

11,53838,426

2,465

3,226

14,00441,652

Investment securities
Long-term loans receivable

70,02968,684

572

684

Deferred tax assets
Prepaid pension costs
OthersAllowance for doubtful accounts
Total investments and other assets
Total noncurrent assets
Total assets

4,688

4,347

5,822

5,579

6,262

5,902

(93)

(75)

Intangible fixed assets
Goodwill
Other
Total intangible fixed assets
Investments and other assets

87,282
254,163523,2477

85,123
292,461525,543

(Millions of yen)March 31, 2012

September 30, 2012

LIABILITIESCurrent Liabilities
Notes and accounts payable–trade
Short-term loans payable
Income taxes payable
Provision for bonuses
Provision for loss on disaster
Other provision
Other
Total current liabilities
Long-term liabilities
Corporate bonds payable
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for directors’ retirement benefits
Provision for environmental measures
Asset retirement obligations
Other
Total noncurrent liabilities
Total liabilities
NET ASSETS
Shareholders’ equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-for-salesecurities
Deferred gain or losses on hedges
Foreign currency translation adjustments
Pension liability adjustments
Total accumulated other comprehensive
incomeSubscription rights to shares
Minority interests
Total net assets
Total liabilities and net assets

8

32,94531,517

13,781

7,553

9,075

6,613

6,657

6,320

68

―

59

135

19,09521,78081,68473,921

10,00010,00041,981

42,125

4,531

5,480

5,617

5,799

194

155

1,106

1,050

2,224

2,203

9,593

11,68475,24878,499156,933

152,42088,95588,95587,147

87,147

246,733

253,515(40,732)(40,508)

382,103389,109

2,763

2,589

(32)

(22)

(24,419)(24,814)

(396)

(404)

(22,084)(22,651)

1,151

1,260

5,143

5,404

366,314373,122523,247

525,543

(2) Quarterly Consolidated Statements of Income and Quarterly
Consolidated Statements of Comprehensive Income
Quarterly Consolidated Statements of Income(Millions of yen)Six-month period

Six-month period

ended Sept. 30,

ended Sept. 30,

2011 (April 1, 20112012 (April 1,2012– Sept. 30, 2011)–Sept. 30,2012)

Net sales

185,635

180,888

Cost of sales

122,874

122,560

Gross profit

62,76058,328Selling expenses

9,189

9,255

General and administrative expenses

24,20625,172

Total selling, general and administrative expenses

33,39634,42829,36423,899Interest income

199

190

Dividends income

929

1,021

8

0

Other, net

503

451

Total non-operating income

1,640

1,664

Interest expenses
Foreign exchange losses

532

494

184

1,368

Other expenses

1,307

1,816

Total non-operating expenses

2,024

3,679

28,981

21,884Gain on change in equity

845－

Total extraordinary income

845－

Acquisition-related cost－

748

Loss on valuation of investment securities

539

562

Loss on disposal of tangible fixed assets

235

120

Provision for environmental measures－

111

Loss on disaster

929－

Selling, general and administrative expenses

Operating income
Non-operating income

Equity in earnings of affiliates

Non-operating expenses

Ordinary income
Extraordinary income

Extraordinary loss

9

(Millions of yen)Six-month period

Six-month period

ended Sept. 30,

ended Sept. 30,

2011 (April 1, 2011 2012 (April 1, 2012
– Sept. 30, 2012)– Sept. 30, 2011)
Provision for loss on disaster

60－

Impairment loss

128－

Total extraordinary expenses

1,893

1,544

Income before income taxes and minority interests in net income of
consolidated subsidiaries

27,933

20,340

Income taxes－current

9,978

6,766

Income taxes－deferred

444

543

Total income taxes

10,423

7,309

Income before minority interests in net income of consolidated subsidiaries

17,50913,030295

285

17,214

12,745

Minority interests
Net income

10Quarterly Consolidated Statements of Comprehensive Income(Millions of yen)Six-month period

Six-month period

ended Sept. 30,

ended Sept. 30,

2011 (April 1, 2011 2012 (April 1, 2012
– Sept. 30, 2011)
Income before minority interests in net income of consolidated
subsidiaries– Sept. 30, 2012)

17,50913,030

Valuation difference on available-for-sale securities

35

(174)

Deferred gain or losses on hedges

(14)

10

Foreign currency translation adjustments

3,374

(394)

Pension liability adjustments

2(8)

Share of other comprehensive income of associates
accounted for using equity method

0

－

3,397

(567)

20,907

12,463

20,612

12,178294

284

Other comprehensive income

Total other comprehensive income
Quarterly comprehensive income
Comprehensive income attributable to:
Owners of the parent
Minority interests11(3) Quarterly Consolidated Statements of Cash Flows(Millions of yen)Six-month period

Six-month period

ended Sept. 30,

ended Sept. 30,

2011 (April 1, 20112012 (April 1, 2011

–Sept. 30, 2011)–Sept. 30, 2011)

Cash Flows from Operating Activities
Income before income taxes and minority interests in net

27,933

20,340Depreciation and amortization

14,732

13,829Impairment loss

128－

Provision for environmental measures－

111

Provision for disaster losses

60－

Loss on disposal of tangible fixed assets

235

120

Acquisition-related cost－

748

Loss on valuation of investment securities

539

562

Gain on change in equity

(845)

－

Decrease(increase) in notes and accounts receivable―trade(2,098)

1,489

Increase (decrease) in inventories(6,981)(2,183)

Increase (decrease) in notes and accounts payable―trade

2,927(1,950)

Other, net

469

249

Subtotal

37,09933,318

Income taxes paid

(10,082)(9,192)646

685

27,664

24,811

Net decrease in time deposits

3,208

606

Net decrease in short-term investment securities

4,988

49,989(15,827)(19,390)

Other
Net Cash Provided by Operating Activities
Cash Flows from Investing Activities

Purchase of tangible fixed assets and intangible assets

12Purchase of investments in subsidiaries resulting in change(104)(31,051)

in scope of consolidation(Millions of yen)Six-month period

Six-month period

ended Sept. 30,

ended Sept. 30,

2011 (April 1, 20112012 (April 1, 2011

–Sept. 30, 2011)–Sept. 30, 2011)

Other, net(1,187)(474)

Net Cash Used in Investing Activities(8,921)(319)

Net decrease in short-term loans payable(166)(4,642)

Repayment of long-term loans payable(607)(2,922)

Cash dividends paid

(4,875)(5,922)Other, net

(170)

126

Net Cash Used in Financing Activities(5,819)(13,359)

248

(652)

Net Increase in Cash and Cash Equivalents

13,171

10,480Cash and Cash Equivalents, Beginning of the Period

29,42334,811

consolidated subsidiary4－

Increase in cash and cash equivalents from merger

0－42,60045,291

Cash Flows from Financing Activities

Effect of Exchange Rate Changes on Cash and Cash
Equivalents

Increase in cash and cash equivalents from newly

Cash and Cash Equivalents, End of the Period13(4) Notes regarding Going Concern Assumptions
None(5) Segment and Other Information[Segment Information]
I. Interim Period of Fiscal 2011(April 1, 2011 to September 30, 2011)
1. Net sales, income and loss by reporting segment(Millions of yen)
Reporting Segment
ResinsFibers andChemicals
Trading
Textiles

Total

Others1

Total

Consolidated
Adjustment Statements
2of Income3

Net Sales
Outside customers

62,18524,435

21,22554,870 162,717

22,917

185,635－

185,635

Inter-segment sales andtransfers

15,354

14,495

8,335

1,924

40,10910,79550,905(50,905)－

Total

77,54038,931

29,56056,795 202,827

33,713

236,540(50,905)

185,635

Segment Income

25,910

5,156

616

1,752

2,984

36,419(7,055)29,36433,435

Notes:
1. The “Other Business” category incorporates operations not included in businesssegments reported, including activated carbon, environmental business andengineering.
2. Adjustment is as follows: Included within segment income of ¥7,055 million is theelimination of intersegment transactions of ¥298 million and corporate expenses of¥6,756 million. Corporate expenses mainly comprise headquarters’ general andadministrative 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 ofincome.

14

II. Interim Period of Fiscal 2012 (April 1, 2012 to September 30, 2012)

1. Net sales, income and loss by reporting segment(Millions of yen)
Reporting Segment
ResinsChemicals

Consolidated

Fibers andTrading
Textiles

Total

Others1

Total

Adjustment2 Statementsof Income3

Net Sales
Outside customers

60,544

24,683

19,67652,479 157,383

23,504

180,888－

180,888

Inter-segment sales andtransfers

14,56914,246

8,189

1,765

38,7708,145

46,916(46,916)－

Total

75,11338,93027,86554,244 196,153

31,650227,804(46,916)

180,888

Segment Income

24,410

2,076

759

1,619

2,175

31,041(7,142)

23,89928,866

Notes:
1. The “Other Business” category incorporates operations not included in businesssegments reported, including activated carbon, environmental business andengineering.
2. Adjustment is as follows: Included within segment income of ¥7,142 million is theelimination of intersegment transactions of ¥205 million and corporate expenses of¥6,936 million. Corporate expenses mainly comprise headquarters’ general andadministrative 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 ofincome.

2. Information regarding assets by reporting segment
There were material changes in assets by reporting segment in the period
under review compared to the corresponding period of the previous fiscal
year. A brief summary follows.
As Kuraray Holdings U.S.A., Inc., a consolidated subsidiary of the KurarayCo., Ltd., acquired all the shares of MONOSOL HOLDINGS, INC. in thefirst quarter of this fiscal year, the assets of the Resins segment increased. The
amount of the increase stemming from the acquisition was ¥37,833 million($477,033 thousand).
3. Information regarding impairment loss on fixed assets and goodwill byreporting segment(Important change in the amount of goodwill)15

In the Resins segment, goodwill of ¥28,018 million ($353,275 thousand) wasrecorded in the period under review due to the corporate merger involving
MonoSol, LLC. This amount is based on current calculations, but remains anestimate as the Company has yet to complete the allocation of acquisition
costs.
4. Matters Related to the Changes of Segments in the Statements
As stated in “Changes in Accounting Estimates and Minor Changes to
Accounting Policies” in 2. above, following the revision of the Corporation
Tax Act, Kuraray has changed its accounting policies. From the first quarterof this fiscal year, the Company adopted the method of calculating
depreciation expenses in accordance with the revised Corporation Tax Act
with regard to tangible fixed assets acquired after April 1, 2012. Accordingly,
Kuraray has changed the method of calculating depreciation expenses foreach business segment to agree with the revised Corporation Tax Act. The
effect of this on the statements for each segment is minor.
(6) Material Changes in Shareholders’ Equity
None16