Tosoh Corporation: The Chemistry of Innovation

Tokyo, Japan - Tosoh Corporation announced its consolidated results for the fiscal year, ended March 31, 2003. A strategy that is raising competitiveness and improving the company-wide earning structure proved viable amid faltering global economies. Favorable changes in the business environment over fiscal 2001 were countered by geopolitical events that resulted in rising prices for raw materials. Ongoing cost cutting and restructuring is helping to cope with a prolonged stagnant Japanese economy and growing competitive interaction of global markets. Tosoh will continue to expand the scale of basic operations in Asia and develop niche markets worldwide.

Business Results and Outlook

Results in the fiscal year to March 31, 2003

Tosoh's net sales advanced 10.4%, to JPY 471.9 billion (USD 3.9 billion). High demand from Asian markets supported strong shipments of bulk chemicals products and rising overseas markets supported slightly improved business conditions despite increases in naphtha prices. Net income increased, to JPY 4.8 billion (USD 40 million). Charges of JPY 7.7 billion (USD 64 million) in funding for a shortfall in Tosoh's reserve for benefit liabilities and JPY 3.5 billion (USD 29 million) in valuation losses of securities holdings were offset partially by a JPY 3.8 billion (USD 32 million) extraordinary gain. The Company recognized a gain on the return of the substitutional portion of its retirement benefit obligations for national welfare pension funds.

* Tosoh has prepared the U.S. dollar translations solely for the convenience of readers at the rate of USD 1 = JPY 120.20 (US dollar to Japanese yen), the exchange rate at fiscal year-end (March 31, 2003).

By business segment

Petrochemical Group

Sales of the Petrochemical Group rose 11.2%, to JPY 136.8 billion (USD 1.1 billion) while operating income surged 29.6%, to JPY 6.5 billion (USD 54 million).
Demand for such olefins as ethylene, propylene, and other fractions and their derivative products was firm. Moreover, plants were kept at full operations by flexibly adjusting to demand. Against the backdrop of soaring demand in Asian markets, prices outside Japan for styrene monomer and cumene rose as well as export volumes. The Group was also able to implement price hikes in Japan.
Polyethylene shipments increased on the strength of recovering demand in film applications, but domestic prices softened. Exports of chloroprene rubber expanded favorably to China and other Asian countries. Shipments of polyphenylene sulfide (PPS) increased, supported by demand from the automobile, electrical machinery, and electronics industries.

Basic Group

Basic Group sales increased 3.2%, to JPY 135.0 billion (USD 1.1 billion) and operating income, to JPY 5.7 billion (USD 47 million).
Shipments of caustic soda to overseas and domestic markets were favorable, but prices were at low levels in Japan and dropped substantially in the non-Japanese market, which principally comprises aluminum producers in Australia. Domestic shipments and exports of vinyl chloride monomer (VCM) were robust and prices rose in overseas markets. Despite a weak market in Japan for polyvinyl chloride (PVC) resins, strong sales efforts resulted in solid shipments. Prices in Japan for PVC resins were soft in the first half but rose in the second half, and prices in other markets increased as well.
Shipments of cement declined as a result of the continued reductions in government spending on public works projects and sluggishness in Japanese private-sector demand.

Specialty Group

Sales of the Specialty Group increased 19.9%, to JPY 160.2 billion (USD 1.3 billion), while operating income jumped 44.2%, to JPY 13.5 billion (USD 112 million). Organo Corporation, a manufacturer of wastewater treatment chemicals and systems, and Tosoh F-TECH, Inc., a manufacturer of organic fluorochemicals, were made consolidated subsidiaries in September and November 2001, respectively.

In fine chemicals, shipments of brominated flame-retardants rose on a recovery in demand, but shipments of organic intermediates declined because of a shift in emphasis to the more lucrative pharmaceutical intermediates and electronic materials industries. Boosted by increased demand and aggressive sales efforts, shipments-particularly exports-of ethylene amines increased.

Tosoh posted strong growth worldwide in shipments of packing materials for high-performance liquid chromatography columns and other scientific instruments and related chemical products. Although shipments of some diagnostics equipment were weak in Japan, shipments of columns and diagnostic reagents were up. Overseas, reagents and diagnostics equipment were favorable and contributed to growth in sales.

In specialty materials, shipments of sputtering targets expanded worldwide on the basis of information technology-related demand and the continued expansion of the flat panel display market. Shipments of zirconia fell because of weak optics-related demand and shipments of electrolytic manganese dioxide for alkaline dry-cell batteries also dropped because of a sluggish domestic market and intensified competition in other markets.

Growth in shipments of quartz glass was supported by a slow recovery in semiconductor-related demand. Shipments of fused quartz materials grew based on increased demand, mainly from the Asian market while shipments of synthetic quartz materials for large LCD substrates rose favorably. Shipments of fabricated quartzware decreased under the impact of the slump in semiconductor-related markets and business mergers and restructuring among customers in the United States and Europe.

Service Group

Sales of the Service Group edged down 0.3%, to JPY39.9 billion (USD 332 million), but operating income increased 8.2%, to JPY 2.3 billion (USD 19 million).
Although the revenues of construction services subsidiaries declined, the revenues of logistics services subsidiaries increased due to aggressive sales development and cost reduction efforts.

By geographical segment

Sales of the parent company and Japanese subsidiaries rose 11.8%, to JPY425.7 billion (USD 3.5 billion). Operating income jumped 88.3%, to JPY 26.5 billion (USD 220 million).
Several factors contributed to strong sales in Japan, such as Organo Corporation and Tosoh F-TECH, Inc. becoming consolidated subsidiaries. In addition, shipments of olefins were strong along with firm demand for PVC resins and vinyl chloride monomer (VCM) in non-Japanese markets. These buoyant markets helped offset the large drop in caustic soda demand overseas and the decline in shipments of cement and zirconia.

At non-Japanese subsidiaries, operating income edged down 0.1%, to JPY 1.6 billion (USD 13 million), on a 1.1% decrease in sales, to JPY 46.3 billion (USD 385 million). Sales benefited from growth in shipments of scientific instruments and diagnostic products in European markets. In Asia, the inclusion of Organo Corporation's subsidiaries as consolidated subsidiaries helped pump up sales in that region. In North America, shipments rose for scientific instruments and sputtering targets, but shipments of quartz glass declined. In addition, the appreciation of the Japanese currency against regional currencies reduced the yen-denominated value of sales.

Outlook for the fiscal year to March 31, 2004

Tosoh's projections call for net sales for the fiscal year ending March 31, 2004, to increase 6.0%, to JPY 500 billion, and net income to nearly triple, to JPY 13 billion. Management plans to recommend maintaining the dividend at JPY 5 per share for the fiscal year. Business projections reflect expected progress in raising the competitiveness of core operations and in improving Tosoh's earnings structure throughout the company's organization. In making its forecasts, the company has used the following assumptions: naphtha prices in Japan, JPY 27,000 per kiloliter and a currency exchange rate of JPY 120 to the U.S. dollar.

Tosoh Corporation has announced its consolidated figures for fiscal 2001, which ended March 31, 2002. Despite the severe operating environment, Tosoh was able to remain profitable while generating some growth in consolidated net sales. This achievement demonstrates that Tosoh's strategy of a value-added chemicals group with a significant presence in specialty products - that is capable of riding out harshly cyclical conditions in the core chloro-petrochemicals sector - has been successful. Tosoh is now poised to generate sustained growth, especially in specialty materials and overseas markets. As China emerges as a powerhouse manufacturer and consumer nation, Tosoh is moving quickly to supply that high-growth market.

For further details on Tosoh's financial perfomance, access Financial section at the link provided below:

Detailed Financial Information 2002
Fiscal Year 2002 Consolidated Results (April 1, 2002 -March 31, 2003) (PDF)
Summary
Consolidated Income Statements
Consolidated Balance Sheets
Consolidated Statements of Cash Flows

About Tosoh Corporation

Headquartered in Tokyo, Japan, Tosoh Corporation is a diversified global chemical and specialty materials company. Founded in 1935, the Company has expanded its reach into high value-added businesses such as fine chemicals, scientific instrumentation, thin film materials, and quartzware. Tosoh is a multi-billion dollar corporation that employs more than 9,000 people worldwide. The Company is listed on the Tokyo and Osaka Stock Exchanges.

Stock Exchange Ticker Symbol: 4042

For more information, please contact:

Michael Hoover
International Public Relations
Tosoh Corporation
3-8-2 Shiba, Minato-ku, Tokyo 105-8623, Japan
m_hoover@tosoh.co.jp
Tel: +81-3-5427-5118
Fax: +81-3-5427-5198
www.tosoh.com

Disclaimer
This document contains forward-looking statements, including without limitation, statements concerning product development, objectives, goals, and commercial introduction, which involve certain risks and uncertainties. The forward-looking statements are also identified through use of the words "anticipates," "plans," "expects," and other words of similar meaning. Actual results may differ significantly from the expectations contained in the forward-looking statements.