JAPAN PURE CHEMICAL : IR Info > Interview with the President

This fiscal year in the electronic components industry the demand for gold plating chemicals was sluggish due to factors such as a slowdown in PC purchases prior to the release of models with the latest OS installed and inventory adjustments in the second half of the year by major mobile telephone manufacturers. The demand for gold plating,however, continued to grow steadily in line with the increasing sophistication of electronics and the trend toward use of lead-free components.

Although our Company recorded its highest ever sales with a YoY increase of 28%, those sales offset by large price increases in precious metals, particularly gold (YoY increase 35%) and palladium (YoY increase 47%), resulting in only a slight increase in income.

The growth in income reached record levels with a YoY increase of almost 5%, but it fell short of the planned growth target of approximately 9%.

As a result, sales of ¥9,536,769 thousand (YoY increase of 28.0%), operating income of ¥2,032,671 thousand (YoY increase of 3.7%), ordinary income of ¥2,040,007 thousand (YoY increase of 4.1%), and net income of ¥1,225,275 thousand (YoY increase of 3.6%) were recorded.

Our Company’s financial results are greatly influenced by trends in the electronic components industry and semiconductor market. In particular, the number of PCs, mobile phones, flat screen TVs, and digital cameras shipped to the market and the increase in the sophistication of these products has a large impact. Although our Company fully analyzes and investigates industry and market trends and is aware of the overall market consensus, factors such as the increased production of PCs and mobile phones, inventory adjustments, and fluctuations in the economy and in industry are matters we are unable to control, no matter how hard we work within our own Company. For this fiscal year,however, without considering the market trends for PCs,mobile phones, and other items, the current level of chemicals shipped by our Company and their prices are expected to remain largely unchanged from the previous year.

Our Company continues to aggressively focus on areas where through our own efforts we are able to improve revenues,such as the development of new products, improvements in and strategic replacement of existing products, and expansion of our client base.

Accordingly, results forecast for the fiscal year ending March 31, 2008, are sales of ¥10,000 million (YoY increase of 4.9%), operating income of ¥2,140 million (YoY increase of 5.3%), ordinary income of ¥2,160 million (YoY increase of 5.9%), and net income of ¥1,300 million (YoY increase of 6.1%).

Based on its stated policy of ”Provide unique plating chemicals to the electronics industry to grow up to an excellent chemical company highly praised in international markets,”our Company established a new Mid-Term Management Plan for the period from April 2007 to March 2010 that incorporates the following four business and three organizational strategies.



		In the 20th century the chemical industry was engaged in mass chemical production based on engineering. In the 21st century, however, the chemical industry based on chemistry produces fine chemicals that allow production of highly functional and highly profitable products capable of transferring theories into reality. Although Japan is not known for having a highly developed industry in the sector for which fine chemicals were originally envisaged, i.e., the development of pharmaceutical products, it is a leader in the development of fine chemicals for electronic applications. Since its establishment, with the aim of differentiating ourselves from our competitors in the fine chemical industry,our Company has considered its most important assets not to be capital or production capacity, but rather R&D and marketing strength based on the acquisition of superior human resources with unique ideas. As in the past, our Company will continue to emphasize quality over quantity in order to further improve the products created by our technical group. In addition, our Company will continue to establish sales hubs in markets where future growth is expected and dispatch staff to these markets. At the same time, we are focusing on establishing a network in Japan that will serve as a hub for new technical developments and enable a free exchange of information between the R&D departments of major device makers and our Company. We are also continuing our efforts to strengthen our marketing systems.



		I’d like to explain the measures by outlining the fundamental policies for each department. <Technical Development Department> Given that our competitors are involved not only in the precious metal plating chemical industry but also in the base metal plating chemical industry, our Company will continue to promote ongoing expansion of its market share through timely improvement of our core precious metal plating technologies at the same time that it clearly identifies areas that have not yet been fully addressed in technical terms within both the precious and base metal plating industries. <Sales Department> Our Sales Department’s fundamental policies are to maintain close contact with corporations in the electronics industry developing cutting edge technologies in order to quickly understand their most advanced needs, to create products in cooperation with the Technical Development Department that satisfy those needs and become the de-facto standards within the electronics industry, and to follow through closely when transferring those products overseas as technology transfer. This department is also highly focused on the development of new applications for precious metal plating and the collection and analysis of information related to the expansion into new areas of business such as those related to base metal plating. <Administration Department> As our Company is committed to the concurrent promotion of the above strategies, our Administration Department leads the way in establishing internal control systems in compliance with the J-SOX Law, establishing environmental strategies, and acquiring ISO certifications. Our Company, while focusing on its stakeholders also recognizes its social responsibilities and therefore has set forth as one of its fundamental principles to be a “Good Faith Company” that besides its CSR (Corporate Social Responsibility)activities continues its contributions toward creating a sustainable society.

End-of-year dividends were ¥3,000 per ordinary share, and total dividend payments for the year were ¥5,500. Taking into account the share split performed in this fiscal period,dividends increased YoY by ¥1,500 and accounted for 28.2% of the appropriation of retained earnings.

Our Company’s financial strategy is comprised of three stages.

In the first stage, directly after the MBO that resulted in liabilities of ¥2,250 million,there were no dividend payments. These iabilities,however, were repaid in full two and a half years later.

In the second stage our Company concentrated on building up internal reserves to ensure future growth. We now have sufficient cash reserves for ongoing business growth.

Now having entered the third stage, at the same time as continuing to focus on “Ensuring the necessary amount of internal retained earnings for future business development and strengthening our corporate foundation,” we believe we have entered a period where a flexible approach in returns to shareholders is possible, dependent on the amount of earnings.