Since its foundation more than 50 years ago, Yuki Gosei Kogyo Co., Ltd. has used its unique and proprietary technologies to research, develop and manufacture a variety of fine chemical products useful for human life and health.

We will continue to expand our involvement with the pharmaceuticals sector, where Yuki Gosei's experience with fine chemicals can be applied to the manufacture of starting and intermediate materials of high added value and to development of new uses for our silicon-based compounds and other unique chemical products.

As a company closely aligned with the needs of society, we intend to further Yuki Gosei's contributions to our community and all stakeholders alike in our endeavor to be a company recognized not only for its technological prowess, but for the trust placed on us by our customers.

Japan’s economy in took a turn for the worse in the second half of FY 2008 (ending March 31, 2009) due to the serious global recession triggered by the sub-prime mortgage crisis. Investment in plants and equipment fell off, production activities declined in almost all sectors, and social unrest for unemployment was spread throughout among all generations.
In Japan’s chemical industry, corporate profits sharply dropped in the severe business environment caused by this sagging economy, while fluctuating crude oil prices and yen unexpectedly appreciating on the foreign exchange markets made the situation even more serious.

In this business environment, our sales slightly declined, but profits decreased drastically to the extent that the bottom line recorded big losses despite our intensified sales promotion, costs cutting efforts, and focus on new business development.

Our sales revenues in FY 2008 decreased by 0.9% over the previous term to ¥10,411 million. Ordinary income fell to ¥69 million, an 81.7% decrease, while operating income amounted to ¥176 million, a 60.3% decrease. Both were adversely affected by the price hike in raw materials and newly introduced accounting rules such as shortening depreciation terms. Net earnings ended at minus ¥782 million because some low-profit inventories devalued and two manufacturing facilities depreciated extraordinarily. However, export sales expanded to ¥3,524 million, a 12.1% increase over the previous term. Exports now represent 33.9% of our total sales.

FY 2009 (ending March 31, 2010) is the last term of our current three-year mid-range business plan for the fiscal years 2007 - 2009. Our sales budget for FY 2009 amounts to ¥10,700 million, a ¥289 million increase over the previous term, on the expectation that the main pillar of our pharmaceutical segment, β alanine, will advance, and industrial chemical products will take a turn for the better, although all this depends on the global economy recovering and market situations improving. As for income, we are counting on ¥440 million in operating profits, a ¥264 million increase, and ¥350 million in ordinary profits, a ¥281 million increase. Accordingly, we narrowly calculate ¥170 million in net earnings, a ¥952 million increase from the previous term.

In order to implement company-wide measures to enhance profitability, we established a three-year mid-range business plan for the fiscal years 2007-2009. To achieve that goal, we have set the following objectives:

1. Realization of the renewed global strategy
• Expansion of core businesses and contract-manufacturing
• Sales enforcements taking advantage of overseas foothold
• Creation of new products by advancing into forefront as well as growing business fields
2. Enhancement of technological capabilities
• Further pursuits, improvements and reinforcements of our base technologies
• Introductions and efficient utilizations of state-of-the-art technologies and manufacturing facilities
3. Active investments
• Energy shift from petroleum to LNG for cost containment and environmental friendliness
• Construction of new facilities to meet growing demand for both existing and new products
4. Total cost down
• Further pursuit of cost reduction through TPM(Total Productive Maintenance) campaign
• Procurement strategy of basic raw materials

Yuki Gosei places great emphasis on the research, development and creation of high value-added products for use in the pharmaceutical and fine chemicals industries.

In the field of pharmaceuticals, we focus our research and development on raw materials and intermediates such as amino acid derivatives, pyridine derivatives, and piperidine derivatives.

In the fine chemicals field, we focus on our core products with high added value (amino acid derivatives, pyridine derivatives, piperidine derivatives and organic silicon compounds) and on applied research involving our core technologies (organic synthesis technologies such as reduction reactions, Grignard reactions and biological reactions).

We are actively involved in R&D activities to expand our presence in the pharmaceuticals and fine chemicals markets both overseas and domestic.

Yuki Gosei believes that good corporate governance begins with a clear company-wide understanding of regulatory current compliance. Accordingly, we have established guidelines ("YGK Group's Action Guidelines") and manuals ("YGK Group Compliance Manuals") for all officers and employees of the company to follow, and have set up "Risk Management & Compliance Committee" to oversee these initiatives. By providing educational programs on compliance and ethics, we are taking every effort to ensure not only observance of relevant regulations and social norms by all officers and employees, but also their understanding, sharing and practice of the YGK Group Action Guidelines and YGK Group Compliance Manuals in such ways that will foster good corporate citizenship.

At Yuki Gosei Kogyo Co., LTD., we recognize and will continue to operate on the premise that good corporate governance enhances managerial health, efficiency, and transparency, and heightens the value of our company for all of our stakeholders.

I highly appreciate your continuing understanding and support of Yuki Gosei.