Establishing ourselves as “Individualized Chemical …Establishing ourselves as “Individualized Chemical Company” and realizing our vision Progress Made in the 2nd Year of “SPROUT

　　Establishing ourselves as Establishing ourselves as ““Individualized Chemical CompanyIndividualized Chemical Company””　　and realizing our visionand realizing our vision

Progress Made in the 2nd Year of Progress Made in the 2nd Year of ““SPROUT Project,SPROUT Project,””Showa Denko K.K.Showa Denko K.K.’’ss

MediumMedium--TermTermConsolidated Business PlanConsolidated Business Plan

Growth Started to AccelerateGrowth Started to Accelerate

December 14, 2004December 14, 2004

P. 1

【【Our VisionOur Vision】】We at Showa Denko K.K. and its Group companies will provide prodWe at Showa Denko K.K. and its Group companies will provide products and ucts and

services that are useful and safe and exceed our customersservices that are useful and safe and exceed our customers’’ expectations, thereby expectations, thereby enhancing the value of the Group, giving satisfaction to our shaenhancing the value of the Group, giving satisfaction to our shareholders, and reholders, and

contributing to the sound growth of society on a global scale.contributing to the sound growth of society on a global scale.This document, containing statements relating to projections of the Company’s future performance, has been prepared on the basis of information available at this moment and which we believe is correct. However, the Company cannot guarantee that all statements are accurate and perfect because of inherent risks and uncertainty. Please note that actual results may differ materially from the forecast due to variety of factors, including changes in the market conditions. The timely commercialization of products under development by the Company may be disrupted or delayed by a variety of factors, including market acceptance, and the introduction of new products by competitors. The foregoing list of factors is not inclusive.

Contents

Part Part Ⅱ　Ⅱ　Implementation of Growth StrategyImplementation of Growth Strategy　　（（22））SproutsSprouts

Blue LED: Developed Blue LED with proprietarytechnology 22

Blue LED: result of interconnection of amassedtechnologies 23

Autoprep®　@Series: 　　　　　　　Environmental protection & food safety 24Organic electroluminescent materials durable

for 10,000 hours 25Key materials for the future 26Portfolio management → Changes in earning structure

27

Part Part Ⅲ　Ⅲ　Improved Earning Power through Structural ReformImproved Earning Power through Structural Reform

Petrochemicals : Completed restructuring;now a base business 29

Chemicals: Striving to improve profitability 30Aluminum: Restructuring to be completed in 2005 31Aluminum: Increasing profitability (1) 32Aluminum: Increasing profitability (2) 33Aluminum: Increasing profitability (3) 34

Part Part Ⅳ　Ⅳ　Plan for 2005Plan for 2005

Tasks to be accomplished 36

Yearly Sales and Operating Income PlanYearly Sales and Operating Income Plan 37

SixSix--year consolidated business planyear consolidated business plan 3

SMU projects and supporting technologies (TPF)SMU projects and supporting technologies (TPF) 44

Part Part ⅠⅠ Progress in ReformProgress in Reform

How the Sprout Project is changing the company 6Encouraging signs that Sprout goals will be

accomplished 7Expansions in high-growth markets 8Progress in restructuring 9Business Portfolio 10Portfolio management → Changes in earning structure

11Financial goals achieved ahead of schedule 12

Part Part ⅡⅡ Implementation of Growth StrategyImplementation of Growth Strategy　（　（11））Establishment of Establishment of ““RoadmapRoadmap””

HD: Focusing on growing market for very small media 14HD: Interconnection of core technologies 15Solid conductive polymer Al capacitors （SDK-CAP®）:

Applications broadening 16Solid conductive polymer Al capacitors （SDK-CAP®）:

Interconnection of core technologies 17Fine gases: Growing demand from IC/LCD makers 18Fine gases: Etching gas for IC processing

at narrow line widths 19VGCF ®: Developing composites 20

P. 2

Six-year consolidated business plan

20002001

2002

2005

Realizing our visionRealizing our visionCustomer/shareholderCustomer/shareholder

satisfactionsatisfactionContribution to societyContribution to society

on a global scaleon a global scale

Growth strategy Growth strategy through the Sprout Projectthrough the Sprout Project

Establishing ourselves as an individualized Establishing ourselves as an individualized chemical companychemical company

Strategic reduction in scaleStrategic reduction in scalethrough the Cheetah Projectthrough the Cheetah Project

Transformation from a diversified chemical Transformation from a diversified chemical company to an individualized chemical companycompany to an individualized chemical company

200420042004

2003

Achieved restructuringAchieved restructuringSteady implementation of growth strategySteady implementation of growth strategy

Attained financial goalsAttained financial goals

P. 3

SMU projects and supporting technologies (TPF)SMU projects and supporting technologies (TPF)SMU projects and supporting technologies (TPF)

12 12 SMU projectsSMU projectsSMU : Strategic Market Unit

27 27 TPFsTPFs　　

TPF : Technology Platform

Auto parts

Battery materials

Parts for lighter cars

Magnetic materials

Life science productsHeat exchangers

Semiconductor processing materials

Communications devices

Capacitors / their materials

Displays / their materials

Raw materials for cosmetics

Energy-saving system

Printer parts

Personal Care/Environment

Electronics

SupportSupport CooperationCooperation

Structural analysis; Chemical analysis; Computational science

Organic electronic materials,Battery/capacitor/recording media materials, Inorganic electronic materials, Crystal growth/thin film depositionprocesses, Precision fabricatingprocess, Micro-system process,Functional gases, Ultimate conditions process

Functional molecular designControlled reaction designHigh-performance catalystsSpecialty polymer designFine particles, Biochemistry,Organic chemicals manufacturing processSurface and interface chemistry

Heat transfer systemCasing processPlasticity processingBondingFunctional metallic materials

P. 4

PartPartⅠ　Ⅰ　Progress in ReformProgress in Reform

P. 5

PartⅠ Progress in Reform　How the Sprout Project is changing the companyPartPartⅠⅠ Progress in ReformProgress in Reform　　How the Sprout Project is changing the companyHow the Sprout Project is changing the company

SMU strategySMU strategy

Strategic growth Strategic growth businessesbusinesses

Businesses to be Businesses to be restructuredrestructured

Base businessesBase businesses

ReformReformIncreasing Increasing

competitivenesscompetitivenessCost reductionsCost reductions

Inventory Inventory reductionsreductions

Issue of CBIssue of CBSale of assetsSale of assets

Greater financial Greater financial strengthstrength

Strengthening HD business

PetrochemicalsCommodity ceramicsCommodity aluminum

products

Basic chemicalsElectrodes,

Aluminum cans SproutsSproutsExpansion in high-growth markets

Expansion in highExpansion in high--growth marketsgrowth marketsImproving profitability of existing base businessesImproving profitability of existing base Improving profitability of existing base

businessesbusinesses

By completing the Sprout Project, By completing the Sprout Project, we will establish ourselves as an we will establish ourselves as an ““individualized chemical company.individualized chemical company.””

Big jump in the Big jump in the ““postpost--SproutSprout”” periodperiodP. 6

Expansions in highExpansions in high--growth marketsgrowth marketsAdvancement in SMU projectsAdvancement in SMU projects

Established a roadmap for growthEstablished a roadmap for growthFound the key to further advancementFound the key to further advancement

Hard diskHard disk（（HDHD））Leading the market with the best technology in the worldLeading the market with the best technology in the world

SproutsSproutsTechnical development in anticipation of sophisticated market neTechnical development in anticipation of sophisticated market needseds

HD business transformed into a growth engineHD business transformed into a growth enginePetrochemicals business becoming more competitive Cash coPetrochemicals business becoming more competitive Cash coww

PartⅠ Progress in Reform　Encouraging signs that Sprout goals will be accomplishedPartPartⅠⅠ Progress in ReformProgress in Reform　　Encouraging signs that Sprout goals will be accomplishedEncouraging signs that Sprout goals will be accomplished

Accelerating growthAccelerating growthAccelerating growth

Progress in restructuringProgress in restructuringProgress in restructuring

P. 7

PartⅠ Progress in Reform　Expansions in high-growth marketsPartPartⅠⅠ Progress in ReformProgress in Reform　　Expansions in highExpansions in high--growth marketsgrowth markets

Establishment of the road mapEstablishment of the road mapHD Becoming the world leader

Technical advantagesMarket creation through small-sized media

Capacitors Volume production　　　Further growth

Fine gases　 Launching next-generation products ahead of competitors

VGCF® 　　　 Developing composites

SproutsSproutsGaN　　　　　　 Highest-level brightness with proprietary

technology

Autoprep® Environmental protection and food safety

Phosphorescent polymer　 For organic electroluminescent devices; 　　　 durable for 10,000 hours

P. 8

20032003

AluminumAluminum

CeramicsCeramics

HDHD

PetrochemicalsPetrochemicals

20042004 20052005

Established as stable source of profit

Established as stable Established as stable source of profitsource of profit

On track for further growth as the world

leader

On track for further On track for further growth as the world growth as the world

leaderleader

Lowest cost and competitive derivatives

Lowest cost and Lowest cost and competitive derivativescompetitive derivatives

Restructuring to be Restructuring to be completed in 2005completed in 2005

PartⅠ Progress in Reform

　Progress in restructuringPartPartⅠⅠ Progress in ReformProgress in Reform

　　Progress in restructuringProgress in restructuring

Cost reductions (One of the most competitive complexes in Asia)　　Feedstock diversification (most advanced in Japan）

　　　　　Strengthening acetyls business (Japan Ethyl Acetate)　　　　　Reform of polyolefins business (JPE)　　　　　　　　　　　　　　　Reform of plastic products business

Growth through acquisitions of existing facilities　　　　　　（Singapore）　　(Taiwan）

　　　New technologies(higher memory density; very small media)

Drastic cost reductions　　　　Production in China (Lianyungang)Concentration on selected areas

(withdrew from unprofitable operations)

Drastic cost reductions and expansion of high-value products operationsNew organization (head office and R&D functions concentrated)Optimizing production setup (separation of rolled products business into a subsidiary; concentration of extrusions business) 　　　　　　　　　　　　　　

P. 9

　　Sprout : Strategic Business ExpansionSprout : Strategic Business Expansion　　　　

Strategic growth Strategic growth businessesbusinesses

Ingot/alloysIngot/alloys

Base businessesBase businesses Businesses that Businesses that need restructuringneed restructuring

OlefinsOlefinsOrganic ChemicalsOrganic ChemicalsPolyolefinsPolyolefinsPlastic productsPlastic products

Hard disksHard disks

Commodity CeramicsCommodity Ceramics

Commodity Commodity aluminum materialsaluminum materials

Aluminum andAluminum andothersothers

InorganicInorganicMaterialsMaterials

ElectronicsElectronics

ChemicalsChemicals

PetrochemicalsPetrochemicals

Specialty Chemicals (Raw Specialty Chemicals (Raw material for cosmetics; material for cosmetics; Medical/agrochemical interme Medical/agrochemical interme diates; Amino acids, etc.)diates; Amino acids, etc.)

Specialty gases & chemicals for Specialty gases & chemicals for semiconductor processingsemiconductor processingCompound semiconductorsCompound semiconductorsRare earths, Solid conductiveRare earths, Solid conductivepolymer aluminum capacitorspolymer aluminum capacitorsHard disksHard disks

Fine carbonsFine carbonsAdvanced ceramicsAdvanced ceramics

HighHigh--performance aluminum performance aluminum components *components *HighHigh--purity aluminum foils for purity aluminum foils for capacitors,capacitors,Heat exchangers,Heat exchangers,EnvironmentEnvironment--related businessrelated business

OlefinsOlefinsOrganic ChemicalsOrganic ChemicalsSpecialty polymersSpecialty polymers(vinyl ester, allyl ester)(vinyl ester, allyl ester)

Basic chemicalsBasic chemicals(ammonia, industrial gases, etc.),(ammonia, industrial gases, etc.),Agrochemicals, DisinfectantsAgrochemicals, Disinfectants

Graphite electrodesGraphite electrodesCommodity CeramicsCommodity Ceramics

Aluminum cansAluminum cans

* Shotic; highly heat-conductive aluminum alloy(ST60);photosensitive drums for laser beam printers


　Business PortfolioPartPartⅠⅠ Progress in ReformProgress in Reform

　　Business PortfolioBusiness Portfolio

P.10

223290 290

90

95

210

0

100

200

300

400

500

600

2002 2003 2004 forecast 2005

Growth businessBase business


　Portfolio management　 Changes in earning structurePartPartⅠⅠ Progress in ReformProgress in Reform

　　Portfolio managementPortfolio management　　 Changes in earning structureChanges in earning structure

（（100 100 million yenmillion yen）） Operating IncomeOperating Income

4.5

Profit Ratio(％)

5.5

6.5

7.5

4.6

5.5

6.87.0

6.0

5.0

Profit Ratio

P.11

　　Accelerating growth: Progress in SMU projects and growing HD business

HD shiftedto a growth business


　Financial goals achieved ahead of schedulePartPartⅠⅠ Progress in ReformProgress in Reform

　　Financial goals achieved ahead of scheduleFinancial goals achieved ahead of schedule

　　Reductions in interest-bearing debt and improvement in D/E ratio

5,100

5,811

5,274

3.9

3.2

4,600

4,800

5,000

5,200

5,400

5,600

5,800

6,000

2002 2003 2004 forecast 2005

1.8

2.2

2.6

3.0

3.4

3.8

4.2

4.6

Interest bearing debt D/E Ratio

2.9

D/E Ratio（（100 100 million yen)million yen)

Sprout TargetSprout Target

P.12

PartPartⅡⅡ Implementation of Growth StrategyImplementation of Growth Strategy

（１）（１）Establishment of Establishment of ““RoadmapRoadmap””（２）（２）SproutsSprouts

P.13

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

2004.0 2005 2006 2007 2008 2009 2010

Regular sizes Very small

1000

Memory density（Gb/in2)

100

10

Memory Memory densitydensity

Vertical media Discrete media Patterned media

SDKSDK’’s sales s sales forecast 850forecast 850

PartⅡ Implementation of Growth Strategy (1)Establishment of Roadmap

　HD: Focusing on growing market for very small mediaPartPartⅡⅡ Implementation of Growth Strategy (1)Establishment of RoadmapImplementation of Growth Strategy (1)Establishment of Roadmap

　　HD: Focusing onHD: Focusing on growing market for very small mediagrowing market for very small media

　　A ¥200 billion market growth expected by 2010　　Half of the growth coming from new applications for very small media

Market sizeMarket size((¥¥100 million)100 million)

To grow by To grow by ¥¥200 200 billionbillion

Estimated by SDK

P.14


20052005Vertical mediaVertical media

20072007Discrete mediaDiscrete media

20102010Patterned mediaPatterned media

Improvement in interference control technology

Improvement in interference Improvement in interference control technologycontrol technology

1μm

150nm


　HD: Interconnection of core technologiesPartPartⅡⅡ Implementation of Growth Strategy (1)Establishment of RoadmapImplementation of Growth Strategy (1)Establishment of Roadmap

　　HD: Interconnection of core technologiesHD: Interconnection of core technologies

　　Memory density improving rapidly supported by SDK’s thin-film depositionand precision processing technologies

Organic electronic materials,Battery , capacitorRecording media materials,Inorganic electronic materials,Crystal growth processThin film deposition process, Precision fabricating process,Micro-system process,Functional gases, Ultimate conditions　process



P.15

1 2 5 10 20 50 100

104

103

102

10

1

0.1

0.01

Conductive polymer Conductive polymer aluminum capacitorsaluminum capacitors

High capacitance

High capacitance

High capacitance

High voltage

High voltageHigh voltageLow heightLow heightLow height

PC marketPC market

Cell phone marketCell phone market

Automotive marketAutomotive market

SDK’s sales forecast4 billion yen （（20052005年）年）

SDKSDK--CAPCAP®®

CV range expandingCV range expanding

PartⅡ Implementation of Growth Strategy (1)Establishment of Roadmap　Solid conductive polymer Al capacitors (SDK-CAP®): Applications broadeningPartPartⅡⅡ Implementation of Growth Strategy (1)Establishment of RoadmapImplementation of Growth Strategy (1)Establishment of Roadmap　　Solid conductive polymer Al capacitors (SDKSolid conductive polymer Al capacitors (SDK--CAPCAP®®): Applications broadening): Applications broadening

　　 Applications broadening due to their advantages:High capacitance, high voltage, low-height, low ESR and high reliability

Capacitance (μF）

Rated voltage (V)

P.16

P.17

0

5

10

15

20

25

30

2003 1st half 2003 2nd half 2004 1st half 2004 2nd half 2005 1st half 2005 2nd half

Annual Sales (Annual Sales (¥¥100 million)100 million)

Second line on Second line on streamstream

Epoxy resin

Mask

Lamination

Aluminum foilAluminum foil

Solid electrolyteSolid electrolyte

Cabon paste

Silver paste

Merallic frame

prospect forecast forecast


　Solid conductive polymer Al capacitors (SDK-CAP®)PartPartⅡⅡ Implementation of Growth Strategy (1)Establishment of RoadmapImplementation of Growth Strategy (1)Establishment of Roadmap

　　Solid conductive polymer Al capacitors (SDKSolid conductive polymer Al capacitors (SDK--CAPCAP®®))

　　Interconnection of SDK core technologies to meet market requirementsInterconnection of organic chemical and Interconnection of organic chemical and aluminum technologiesaluminum technologies

（（ Sectional view of SDKSectional view of SDK--CAPCAP®® ））





0

500

1,000

1,500

2,000

2,500

3,000

2004.0 2005 2006 2007 2008 2009 2010

P.18

SDKSDK’’s sales s sales forecast 140forecast 140

　　Market will grow more than ¥100 billion by 2010.

PartⅡ Implementation of Growth Strategy (1)Establishment of Roadmap　Fine gases: Growing demand from IC/LCD makersPartPartⅡⅡ Implementation of Growth Strategy (1)Establishment of RoadmapImplementation of Growth Strategy (1)Establishment of Roadmap　　Fine gases: Growing demand from IC/LCD makersFine gases: Growing demand from IC/LCD makers

Market size Market size （（¥¥ 100 million 100 million ））

Estimated by SDK

C4F6: Started commercial production ahead of competitorsAdopted by major device manufacturers　　　 To be used worldwide

P.19

Technolo

gy n

ode [

nm

]

CC44FF6 6 applicationsapplications

PartⅡ Implementation of Growth Strategy (1)Establishment of Roadmap　Fine gases: Etching gas for IC processing at narrow line widthsPartPartⅡⅡ Implementation of Growth Strategy (1)Establishment of RoadmapImplementation of Growth Strategy (1)Establishment of Roadmap　　Fine gases: Etching gas for IC processing at narrow line widthsFine gases: Etching gas for IC processing at narrow line widths

An SiO2-selective-etching gas that gives a high aspect ratioAn SiOAn SiO22--selectiveselective--etching gas etching gas that gives a high aspect ratiothat gives a high aspect ratio

Roadmap for IC miniaturizationRoadmap for IC miniaturization

Based on SIA dataBased on SIA data

0

50

100

150

200

250

300

1995 2000 2005 2010 2015





　　 A key material for lithium-ion batteries

　　Developed VGCF-S for use in resin composites

Prof. Endo of Shinshu

Univ.

P.20

Showa Denko

MEFS Co., Ltd.

＋

＋＋

0

20

40

60

80

100

120

140

160

180

2001.0 2002 2003 2004 2005 2006 2007 2008

Fine carbon sales in Fine carbon sales in 2005: 2.5 billion yen2005: 2.5 billion yen


　VGCF® : Developing compositesPartPartⅡⅡ Implementation of Growth Strategy (1)Establishment of RoadmapImplementation of Growth Strategy (1)Establishment of Roadmap

　　VGCFVGCF®® : : Developing compositesDeveloping compositesMarket/technology Market/technology

developmentdevelopment

VGCFVGCF®® sales (T/Y)sales (T/Y)

Growing in the area of composites

Growing in the area of composites

Growth in the battery market

Growth in the battery market




Functional molecular designControlled reaction designHigh-performance catalystsSpecialty polymer designFine particles,Biochemistry,Organic chemicals manufacturing processSurface and interface chemistry

PartPartⅡⅡ Implementation of Growth StrategyImplementation of Growth Strategy

（１）（１）Establishment of Establishment of ““RoadmapRoadmap””（２）（２）SproutsSprouts

P.21

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

2004年 2005年 2006年 2007年 2008年 2009年 2010年

Cell phone Regular LED Backlight Automotive lights

40

60

80

100

120

P.22

Luminous efficacy

AdvantagesAdvantagesHighest-level brightnessLow forward voltage and low electricity consumption

Proprietary technologyProprietary technologyEpitaxial crystal growth Chip manufacturing

CommercializationCommercializationNov. 2004Started sample shipment

2005To start full-scale marketing

PartⅡ Implementation of Growth Strategy (2)SproutsBlue LED: Developed Blue LED with proprietary technology

PartPartⅡⅡ Implementation of Growth Strategy (2)SproutsImplementation of Growth Strategy (2)SproutsBlue LED: Developed Blue LED with proprietary technologyBlue LED: Developed Blue LED with proprietary technology

Output (Mp/YOutput (Mp/Y）） Luminous efficacy (lm/W)

Increasing brightness for illumination applicationsIncreasing brightness for illumination applications

SDK’s sales forecast4 billion yen （（20052005年）年）

P.23

４００

４５０

５００

５５０

６００

６５０

７００

７５０

８００

８５０

９００

９５０

Wave-length(nm)

GaN

AlInGaP

GaAlAsGaP-R

GaP

GaAs

GaNGaN

AlInGaPAlInGaP

UltravioletUltravioletGreenGreen

LiquidphaseLiquidphaseepitaxialepitaxial processprocess

Lineup of LED productsLineup of LED productsLineup of LED products

PartⅡ Implementation of Growth Strategy (2)SproutsBlue LED: result of interconnection of amassed technologies

PartPartⅡⅡ Implementation of Growth Strategy (2)SproutsImplementation of Growth Strategy (2)SproutsBlue LED: result of interconnection of amassed technologiesBlue LED: result of interconnection of amassed technologies

　　Developing GaN-based ultraviolet and green LEDs

MOCVD processMOCVD process





　　Sample-preparation cartridge for analysis of trace amounts of chemical substances

Increasing concern of the public about the environment and food safetyGrowing demand for analysis of trace amounts of chemical substances in water and food

0

10

20

30

40

50

60

2004 2005 2006 2007 2008 2009 2010

Environmental & Food safety Pharmaceutical

PartⅡ Implementation of Growth Strategy (2)SproutsAutoprep® ＠ Series: Environmental protection & food safety

PartPartⅡⅡ Implementation of Growth Strategy (2)SproutsImplementation of Growth Strategy (2)SproutsAutoprepAutoprep®® ＠＠ Series: Environmental protection & food safetySeries: Environmental protection & food safety

Removing components that interfere with Removing components that interfere with analysis; andanalysis; andconcentrating target chemical substancesconcentrating target chemical substances

New packing material with nanoNew packing material with nano--scale scale ““doubledouble--porepore”” structurestructure　　　　Improved efficiency Improved efficiency Using the Using the ShodexShodex®® technology andtechnology andorganic/inorganic materials

P.24

Size of domestic marketSize of domestic market((¥¥ 100 100 million)million)





Estimated by SDK

organic/inorganic materials

PartⅡ Implementation of Growth Strategy (2)SproutsOrganic electroluminescent materials durable for 10,000 hours

PartPartⅡⅡ Implementation of Growth Strategy (2)SproutsImplementation of Growth Strategy (2)SproutsOrganic electroluminescent materials durable for 10,000 hoursOrganic electroluminescent materials durable for 10,000 hours

　　Developed the world’s first phosphorescent polymer for commercialapplication in the next-generation displays.

Used for illumination at an exhibitionUsed for illumination at an exhibitionDramatically improved durabilityDramatically improved durability

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

11,000

3 4 5 6 7 8 9 10 11

Application to highApplication to high--precision displaysprecision displays

2004

Hal

fH

alf -- l

ife (h

ours

)lif

e (h

ours

)

Developing new businesses Developing new businesses using innovative using innovative

phosphorescent polymer

P.25Structural analysis; Chemical analysis; Computational science




phosphorescent polymer

P.26Note: Apprecier is SDK’s trademark. (Registration applied for.)

PartⅡ Implementation of Growth Strategy (2)Sprouts

　Key materials for the futurePartPartⅡⅡ Implementation of Growth Strategy (2)SproutsImplementation of Growth Strategy (2)Sprouts

　　Key materials for the futureKey materials for the future

　New products based on market-oriented concept and technological synergies

New isocyanate monomerNew isocyanate monomerKarenzKarenz®® AOIAOI

The worldThe world’’s first commercial s first commercial production of the monomer;production of the monomer;

High photoHigh photo--curability contributing to curability contributing to efficient production of displaysefficient production of displays

Electromagnetic wave Electromagnetic wave absorption sheetabsorption sheet

HalogenHalogen--free;free;Effectively controls noise;Effectively controls noise;

Flame retardant and resistant to heatFlame retardant and resistant to heat

New stabilized vitamin CNew stabilized vitamin CApprecierApprecier

High wrinkleHigh wrinkle--care effect;care effect;Removes active oxygenRemoves active oxygen generatedgenerated

deep in the skindeep in the skin

Electrode for resinElectrode for resin--based based solar cellsolar cell

SPSP--XX

Enables the production of flexible and Enables the production of flexible and light solar cells; Expected to be widely light solar cells; Expected to be widely used for portable device applicationsused for portable device applications

Aluminum reflector for Aluminum reflector for LCD backlightingLCD backlighting

95% 95% or more reflectivityor more reflectivity

223290 290

90

95

210

0

100

200

300

400

500

600

2002 2003 2004 forecast 2005

Growth businessBase business

PartⅡ Implementation of Growth Strategy (2)Sprouts

　Portfolio management　 Changes in earning structurePartPartⅡⅡ Implementation of Growth Strategy (2)SproutsImplementation of Growth Strategy (2)Sprouts

　　Portfolio managementPortfolio management　　 Changes in earning structureChanges in earning structure

4.5

Profit Ratio(％)

5.5

6.5

7.5

4.6

5.5

6.87.0

6.0

5.0

Profit Ratio

　　Accelerating growth: Progress in SMU projects and growing HD business

P.27（Same drawing appearing on Page 11)

（（100 100 million yenmillion yen）） Operating IncomeOperating Income

HD shiftedto a growth business

PartPartⅢ　Ⅲ　Improved Earning Power Improved Earning Power through Structural Reformthrough Structural Reform

P.28

Part Ⅲ Improved Earning Power through Structural Reform

　Petrochemicals: Completed restructuring; now a base business Part Part ⅢⅢ Improved Earning Power through Structural ReformImproved Earning Power through Structural Reform

　　Petrochemicals: Petrochemicals: Completed restructuring; now a base business Completed restructuring; now a base business

““Simple and compactSimple and compact””Source of stable profit and cash flowSource of stable profit and cash flow

Competitive ethylene plantEstablished optimum production setupOne of the most cost-competitive complexes in AsiaFeedstock diversification (most advanced in Japan)Plant location closest to the Chinese/Asian markets

Business structure resistant to fluctuations in naphtha pricesRestructuring of the polyolefins business completed

Leading position in the acetyls market in AsiaEthyl acetate: the world leaderAdvancing into the growing Chinese market

P.29


　Chemicals: Striving to improve profitabilityPart Part ⅢⅢ Improved Earning Power through Structural ReformImproved Earning Power through Structural Reform

　　Chemicals: Striving to improve profitabilityChemicals: Striving to improve profitability

Base businessesBase businessesRestructuring in the commodity chemicals operations

Oxygen/nitrogen/hydrogen: Integration with the Tokyo Gas Group

Ammonia: Strengthening cost-competitivenessIncreasing utilization of the waste plastic gasification plant

Growth businesses (speedy commercialization)Growth businesses (speedy commercialization)

Raw materials for cosmetics : Stabilized vitamins and UV shieldShodex® liquid chromatography columns :

Meeting the growth of the analytical equipment marketDeveloping new businesses

Semiconductor processing materials (photoresist, etc)Fluorescent nanoparticles

P.30


　Aluminum: Restructuring to be completed in 2005 Part Part ⅢⅢ Improved Earning Power through Structural ReformImproved Earning Power through Structural Reform

　　Aluminum: Restructuring to be completed in 2005 Aluminum: Restructuring to be completed in 2005

Through drastic cost reductions and expansion of highThrough drastic cost reductions and expansion of high--value value products operations, the restructuring of the aluminum busineproducts operations, the restructuring of the aluminum business ss will be completed by the end of 2005.will be completed by the end of 2005.

(1) Automotive heat exchangers: Laying the groundwork for growth(2) Restructuring of rolled products/extrusion operations(3) Expansion of high-value products operations

Head office/marketing functions consolidated at OyamaIntegration of production and marketingIntegration of production and marketing

Established Aluminum Technology CenterEstablished Aluminum Technology CenterControlling core aluminum technologies

P.31

Optimum production setup to meet customers’ global strategies

Managing production & development on a global basis; pursuit of optimum costs

Automotive heat exchangers: Laying the groundwork for growthAutomotive heat exchangers: Laying the groundwork for growthCompleted the development of next-generation productsRehabilitating the U.S. operation

　　　　 Advancing into the Chinese market through a joint ventureDrastic cost reductions

To provide high-performance products by fully utilizing our materials/parts design capability


　Aluminum: Increasing profitability (1)Part Part ⅢⅢ Improved Earning Power through Structural ReformImproved Earning Power through Structural Reform

　　Aluminum: Increasing profitability (1)Aluminum: Increasing profitability (1)

P.32

2004

Providing customers with high-performance products based on

advanced components technology

2005 2006 2007 2008

Establishing optimum production setup and increasing cost-

competitiveness

To launch next-generation products

and expand the business

To develop environment-friendly

heat exchangers

Rehabilitate the U.S. site; advance into China

Returning to a growth trackReturning to a growth trackReturning to a growth track

Sales ¥30 billion ¥50 billion




Restructuring of rolled products/extrusions operationsOptimized production setup and drastically reduced costs

Separation of Sakai Plant into a subsidiaryReduction in the scale of the plain foil businessConsolidation of extrusions operation sites and optimization ofproduction capacity

Shift to high-value productsFocusing on high-purity foil for capacitorsGrowing sales of large extrusions for IC/ LCD production

Reorganization of sales/distribution channelsMarketing in western Japan consolidated at newly formedShowa Denko Aluminum Trading K.K.

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Expansion of highExpansion of high--value products operationsvalue products operationsShotic®®

Record shipments due to technology/quality advantagesCommercial production of suspension arms

Aluminum cylinders for laser beam printers (world leader)Commercial production started at Dalian plant.Technical synergies through integration with extrusions business

High-purity foil for capacitors (world leader)Highly cost-competitive due to the integrated production linesFoil shipment growing for high-voltage applications (PDP , Car)

Lithium ion battery package (market leader in Japan)Foil processing technology meeting market requirements

Aluminum cansShipment of aluminum bottles started in 2nd half of 2004.

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Part Part Ⅳ　Ⅳ　Plan for 2005Plan for 2005

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Part Ⅳ Plan for 2005

　Tasks to be accomplishedPart Part ⅣⅣ Plan for 2005Plan for 2005

　　Tasks to be accomplishedTasks to be accomplished

To complete the Sprout Project, To complete the Sprout Project, we should:we should:

Expand strategic growth businesses, andcommercialize new products quickly.

Establish ourselves as an “individualized chemical company”Achieve highly profitable business structure

Preparing for the Preparing for the ““postpost--SproutSprout””periodperiodTo accelerate growth strategy, andfurther improve financial strength

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2002 2003 2004(forecast*) 2005(Sprout)

Sales O.I. Sales O.I. Sales O.I. Sales O.I.

PetrochemicalsPetrochemicals227.8

10.0235.1

12.0252.0

18.0173.0

9.1

ChemicalsChemicals68.5

5.778.2

6.082.0

5.587.0

8.7

ElectronicsElectronics75.2

6.294.7

10.7114.0

15.0116.0

14.6

InorganicInorganicMaterialsMaterials

56.91.4

51.02.7

55.05.5

49.03.8

AluminumAluminum245.6

12.9230.3

11.6232.0

12.0255.0

15.7

HQ costsHQ costs▲4.8 ▲4.4 ▲6.0 ▲1.9

TotalTotal674.0

31.3689.4

38.5735.0

50.0680.0

50.0

Sprout Project :

　Yearly Sales and Operating Income PlanSprout Project : Sprout Project :

　　Yearly Sales and Operating Income PlanYearly Sales and Operating Income Plan

（unit: billions of yen）* Revised on Nov. 16, 2004

Notes: Sprout target figures for respective segments were announced in January 2002.

The performance forecast and plan are based on the economic conditions and the Company’s policy at this point of time. Please note that actual results may differ from the forecast and the plan due to a variety of factors, including changes in the market conditions. P.37

Documents

Establishing ourselves as “Individualized Chemical …Establishing ourselves as “Individualized Chemical Company” and realizing our vision Progress Made in the 2nd Year of “SPROUT