Yutaka Kinebuchi
What is your analysis and evaluation of the business environment and results for the term under review (fiscal 2009)?

The wave of recession that stemmed from the U.S. financial crisis has, since summer, spread throughout the world with real economic effects.
As everyone knows, fiscal 2009, ended March 31, 2009, was one of such dramatic upheaval that it is the sort that only comes once in a hundred years.
Domestically, decreases in production and inventory adjustments have been taking place on unprecedented levels in all manners of industry since last autumn. It has been a time when there has not been a sign of a turnaround. The chemical industry has been no exception: we have seen wide reductions in demand in the petrochemical category, as a prime example, and, adding to the problems caused by production decreases and inventory adjustments, there have been violent fluctuations in exchange rates and in the cost of raw materials and fuel.
Despite such a severe business environment, which we had never seen before, the Group posted net sales of ¥151 billion, operating income of ¥5.7 billion, ordinary income of ¥11.9 billion, and net income of ¥6.7 billion. While net sales and operating income were down, both ordinary income and net income reached a historical high.
In regard to sales, in addition to the slump in the functional chemical products and non-ferrous metals categories linked to the automotive and IT industries, whose results worsened in the second half of fiscal 2009, there was also a huge influence from the high-valued yen. And, even though industrial chemicals and other products made price amendments and there were favorable international market conditions for the feed additive “Methionine,” as well as an increase in exports of the fungicide “TOPSIN-M,” the herbicide “Clethodim,” etc. spurred by international demand for agricultural chemicals, those favorable elements were not sufficient to bolster sales.
Concerning profits, ordinary income was significantly boosted not only by sales efforts and company-wide cost cutting, but also by strong performance by equity-method affiliates such as Novus International.
In regards to dividends, from the comprehensive viewpoint of maintaining stable dividends, enhancing shareholders´ equity and improving financial positions, we decided to propose a dividend of ¥6 per share-unchanged from the previous year.


Please tell us about progress in the medium-term business plan (April 2007 to March 2010).

In terms of target figures, up until the first half of fiscal 2009, we saw a consistent trend of exceeding targets. However, as we entered into the second half, conditions turned and sales were no longer reaching the target. We expect to see a continuation of challenging times ahead in fiscal 2010 as well.
However, as our policy for the future, we are aiming toward business expansion and infrastructure reinforcement with an eye to fiscal 2012. We are closely following a concrete “Action Plan,” which lays out measures to be implemented, and I believe that things are going almost exactly as planned.
It is in times such as this, when the business environment has taken such a bad turn for the worst that we must take a firm, practical approach, and this is what we have done, with rational and level-headed measures such as cost cutting and selling price modifications. In particular, with cost cutting, we have been making efforts with the strengthening and expansion of production systems, with a focus on securing medium-to-long-term competitiveness.

Please tell us about the strategic policies for individual fields in the “Action Plan” under the medium-term business plan.

The medium-term business plan marks the start of the period in which management structures will be strengthened to allow for business expansion and a widening of the scope of operations in order to reach the consolidated target for fiscal 2011 (net sales of ¥170 billion and operating income of ¥13 billion, with an 8% or more of operating profit return on total assets).
It may become necessary to adjust target figures in line with the badly fluctuating business environment, such as of late. However, there will be no major changes in our basic stance. Following the “Action Plan” that was established as a guide, we will strive toward the establishment of a robust and stable financial structure, injecting management resources in a proactive and efficient manner.

1) Agro Products Field
The strengthening and expansion of our Agro Products business is the life-blood of the Company. The strengthening of existing products such as the fungicide “TOPSIN-M” and the insecticide “MOSPILAN” goes without saying, and the launch of new products will also be indispensable. Consequently, as well as continuing investment in R&D in order to come up with new products as we have always done, we will also work toward strengthening our product lineup through in-licensing from other companies.
In regards to the strengthening of existing products, we plan to enlarge, and also create, new markets through steps like launching new and mixed chemical agents. At the same time, we will take measures such as switching over to producing products in-house that were formerly outsourced, improving manufacturing methods, strengthening production systems and performing cost cutting.
Regarding new chemical agents, we are making every effort to move the following development projects into a new phase: “Conclude,” a herbicide for lawns, which is targeted toward the afforestation industry and is planned to go on sale from July; “AgroCare,” the Company´s first biological agricultural chemical, which we are soon registering; and a new fungicide that is effective against soil-borne diseases.

2) Functional Materials and Precise Organic Synthesis Fields
We are always striving to make the most of research and production systems and expand and strengthen sales with the Company´s exclusive, functional chemical products such as the food and pharmaceutical addictive “HPC,” the functional resin “NISSO PB” and developers “D-8” and “D-90.” At the same time, however, we are constantly doing our utmost in proactively cultivating peripheral business ventures.
We are continuing development of nano-level thin film surface treatment agents “SAM” (self-assembled monolayers) and electronic materials related agents such as precise polymers. In September of this year, the Processing Technology Center, which will carry out the indispensable job of testing and evaluation for developing products, will be completed within the R&D Laboratory for High-Performance Materials (Chiba Prefecture). Thus, we hope that we will see an increase in development speed.
What´s more, a mid-scale experiments facility will be constructed within the Takaoka Plant, due to which we can expect more rapid development of high organic functional products in the precise organic synthesis field. Through this facility, we will be able to establish characteristic manufacturing techniques, starting with high-temperature reduction and cryogenic reactions. The facility will lead to new products and business development.

3) R&D
With R&D, we place primary focus on the three areas of agro products, functional materials and precise organic synthetics, and aim for swiftness in development. In agro products, the development of new agents primarily takes place at the Odawara Research Center. However, through the recent establishment of a new organizational system, we aim to get new products, including those such as the above-mentioned fungicide, on to the market as early as we possibly can.
In the functional materials and precise organic synthesis fields as well, investment in processing evaluation and testing facilities continues to form the basis for the spurring on of development in areas surrounding electronic materials and pharmaceuticals. But, we are also proactively involved with the cultivation of new developer agents and peripherals of existing products, making the most of unique technological methods.


Please tell us about developments in overseas business.

In existing overseas bases (USA, Germany, Brazil, China and Korea) we are seeing proactive developments centered around the field of Agro Products business. There has been an increase in positive results from Europe and Brazil, and in the Functional Chemical business, too, systems are gradually being implemented. We are also looking towards the creation of business bases in geographical regions that are showing positive growth.
In addition, international affiliate companies Novus International and Iharabras are increasingly growing in importance as they undergo expansion of their operations. At present we are closely looking at management conditions, as well as working towards strengthening cooperation on an operating level.

Please give us your predictions for the next fiscal year.

The Japanese economy is now seeing a decrease in exports, reflecting the greater international recession; a slump in production levels; a tightening on capital investment; and, a slump in consumer spending. With the harsh economic conditions continuing since the second half of last year, stock prices and exchange rates have fluctuated and there are mounting fears that the situation with the world economy may worsen. With all of these contributing factors, one must assume that it will take some time before there is any economic recovery.
Our business environment is also extremely severe. It is difficult to predict what one year will bring, but in terms of consolidated results for fiscal 2009, we are predicting net sales of ¥140 billion, operating income of ¥5.1 billion, ordinary income of ¥8 billion, and net income of ¥5.7 billion. Unfortunately, in comparison with fiscal 2009, this means a decrease both in sales and profits. However, this prediction comes in the middle of today´s difficult economic conditions and we will strive to, even if just a little, exceed these projections.
While fiscal 2010 is the final year of the three-year mid-term business plan, it is also the turning point heading toward the goals we have set for fiscal 2012. Compared to the period when this plan was drawn up, the business environment has completely changed. However, there has been no alteration in the direction of the Company´s goals. We will decisively implement the “Action Plan” while staying apace with changes in conditions. We will also put our full efforts into strengthening business structures and expanding business while also remaining flexible in working with policies and measures to ensure business expansion in fields such as M&A.

Please tell us about your policies in regards to disclosure and compliance.

Nippon Soda Group publishes a yearly “Environmental Report” as a part of its “Responsible Care Activities” focusing on caring for the environment. In addition to this, we work to provide appropriate disclosure in regards to management information and strive to maintain transparency in regards to the Company´s information. Also, concerning matters of compliance, the Nippon Soda Group, as a whole, aims to be as thorough as possible in respecting the spirit of legal responsibility, while following, as its basis, the Nippon Soda Group Code of Conduct.
Furthermore, in order to precisely carry out the basic management policy of compliance with laws and execution of robust and transparent management through the filing of the Internal Control Report, which we began to do this year, we will make further efforts with the Internal Control Audit Department at the center.

Having taken up the position of President, please tell us about your determination to lead the Nippon Soda Group. Also, please give a message to shareholders and investors.

Taking the position of president in this time of unprecedented financial turmoil that comes “once in a hundred years” means the taking on of a great deal of responsibility. I feel that responsibility lying very heavily upon my shoulders.
The financial environment that envelops this Company and the other individual companies within the Group daily adds to the difficulty of doing business. However, I hope to help build a stable revenue structure, regardless of the external conditions. I also hope to contribute to society by helping to further techniques in manufacturing and R&D in order to create new businesses. I honestly and sincerely plan to do my very best to contribute to the development of business, and I hope that our shareholders will also bring their level of support up in response.