Showa Denko K.K. Announces First Quarter 2008 Results

JCN Newswires, May 8, 2008

Tokyo, Japan, May 8, 2008 - (JCN Newswire) - Showa Denko K.K. ('SDK'; TSE: 4004) today announced its business results for the first quarter (January 1 - March 31) of 2008, in which the Company recorded a 7.8% increase in net sales over the same period of the previous year, to JPY 246,882 million. However, operating income decreased 35.3%, to JPY 9,709 million, due mainly to the rise in depreciation expenses, the appreciation of the yen against the U.S. dollar, and soaring raw material/fuel costs.

Ordinary income fell 54.5%, to JPY 4,815 million, and net income of the quarter was down 50.4%, to JPY 3,210 million.

SDK and its Group companies are carrying out a three-year consolidated business plan, the Passion Project, that runs from 2006 through 2008, with the aim of establishing the groundwork for long-term sustainable growth. Under the project, we are continuing to expand strategic growth businesses while promoting structural reforms and cost reductions.

I. Consolidated Financial Summary for the Three Months ended March 31, 2007

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                                         (yen millions, US$ thousands)
                           Three Months Ended     Change
                        3/30/2008   3/30/2007      % YoY        US $*
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Operating Results
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Net Sales                 246,079     229,079       7.8     2,464,134
Operating Income            9,709      15,009     (35.3)       96,901
Income Before Taxes         4,815      10,591     (54.5)       48,060
Net Income                  3,210       6,473     (50.4)       32,034
EPS (basic)(yen)             2.57        5.50        --         0.026
EPS (diluted)(yen)             --        5.19        --            --
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                               as of  3/31/08    3/31/07        US $*
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Financial Position
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Total Assets                          996,531  1,041,004    9,946,408
Total Sh'hldrs Equity                 288,109    266,591    2,875,621
Shareholders EPS (yen)                 214.25     200.85         2.14
Sh'hldrs Equity Ratio (%)                26.8       22.7         26.8
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II. Net Sales and Operating Income by Segment

Petrochemicals

Sales rose 14.4%, to JPY 100,425 million. While sales of organic chemicals were maintained at the level of the first quarter of the previous year, sales of olefins increased due to the rise in selling prices, reflecting soaring raw material costs. Operating income decreased 43.6%, to JPY 2,749 million, due to lower export prices of olefins and higher cost of methanol used as raw material for acetic acid.

Chemicals

Sales increased 3.4%, to JPY 19,415 million, and operating income rose 0.2%, to JPY 1,594 million. Sales of acrylonitrile were up, reflecting steady selling prices and shipment volumes. Sales of ammonia increased due to the rise in selling prices. Sales of chloroprene rubber rose, reflecting steady shipment volumes and selling prices, while sales of amino acids increased due to the rise in shipment volumes.

Electronics

Sales increased 25.7%, to JPY 49,194 million. Sales of hard disk (HD) media increased due to the rise in shipment volumes as a result of capacity expansions and steady demand. Sales of compound semiconductors fell due to lower shipment volumes, while sales of specialty gases for semiconductor processing increased slightly. Sales of rare earth magnetic alloys were up due to the rise in shipment volumes as well as the rise in selling prices, reflecting soaring raw material costs. Operating income fell 35.9%, to JPY 2,636 million. This was due mainly to the rise in depreciation expenses, reflecting the expansion of HD media production capacity, lower-than-expected output of HD media as a result of the switching of production lines, and the appreciation of the yen.

Inorganics

Sales increased 5.7%, to JPY 19,747 million. Sales of ceramics rose slightly while sales of graphite electrodes increased due to steady demand. Operating income fell 2.4%, to JPY 4,236 million, reflecting soaring fuel/raw material costs for the ceramics business.

Aluminum

Sales fell 10.2%, to JPY 58,101 million. Sales of aluminum ingots fell due to lower shipment volumes. Although the business of high-purity foils for capacitors was steady, overall sales of rolled products decreased as a result of our withdrawal from the commodity foils operations. Sales of extrusions/specialty products fell, notwithstanding higher shipment volumes of aluminum cylinders for laser printers, as shipment volumes of commodity extrusions decreased in the aftermath of the revision of the Building Standard Law. Sales of heat exchangers were maintained at the level of the same period of 2007. Sales of Shotic forged products and aluminum cans decreased due to the fall in shipment volumes. Operating income decreased 90.2%, to JPY 136 million, due partly to the rise in fuel costs for the power generation business as an independent power provider.