URL:http://www.zeon.co.jp/

(Rounded to the nearest million yen)

Overall
Rising prices of crude oil and naphtha reached a new heights in the first quarter of FY2006. In response to the increased cost of raw materials, ZEON group continued to thoroughly reduce costs through the ZΣ (Sigma) Activities. ZEON group has committed to pursue profit-oriented marketing in the Elastomer segment, whilst endeavoring to develop and expand the sales of new products in the Specialty Materials segment. ZEON group is also seeking to restore profitability by revising its sales prices to reflect the rise in raw material prices.
As a result, in the first quarter of FY2006 net sales increased by ¥5,438 million to ¥67,841 million, up 8.7% from the same quarter of the previous fiscal year. Operating income increased by ¥26 million to ¥5,380 million, up 0.5% from the same quarter of the previous fiscal year; ordinary income decreased by ¥278 million due to foreign exchange losses to ¥5,475 million, down 4.8%; and net income rose by ¥409 million due to improvements in extraordinary items and other factors to ¥3,069 million, up 15.4%.

Elastomer
In the Elastomer segment, whilst demand was on the whole favorable, we maintained a profit-oriented marketing strategy in response to the rise and subsequent stabilization of raw material prices at high levels. We were able to limit the negative impact of rising raw material prices on revenues and profit to a certain extent thanks to the effect of sales of end-of-term inventory for fiscal 2005 in preparation for regular repairs. In this segment, Chemicals business, sales volume for petroleum resins and thermoplastic elastomer SIS rose significantly compared with the same quarter of the previous fiscal year. As a result, sales increased by ¥7,015 million to ¥43,112 million, up 19.4% from the same quarter of the previous fiscal year, and operating income rose by ¥560 million to ¥3,554 million, up 18.7%.

Specialty Materials
In the Specialty Materials segment, sales of specialty chemicals recovered due to an expansion in the sales of Synthetic Aroma chemicals, with sales and operating income both exceeding levels in the same quarter of the previous fiscal year. With respect to Cyclo-olefin Polymer products, whilst the sales of Zeonor Film® for LCD panels grew, operating income remained below the same quarter of the previous fiscal year due to a deterioration in profit margins and an increase in selling, general and administrative expenses. Demand for ZEONEX® resin for optical lenses and medical uses remained stagnant, resulting in a slight decline in sales compared with the same quarter of the previous fiscal year, whilst in the information materials, sales of ZEORORA ZFL-58 etching gas remained flat.
As a result, net sales of the Specialty Materials segment increased by ¥1,439 million to ¥10,412 million, up 16.0% from the same quarter of the previous fiscal year, and operating income decreased by ¥327 million to ¥1,816 million, down 15.3%.

Other Businesses
In the others segment, whilst sales in the Environment business exceeded the same quarter of the previous fiscal year, sales in the Health business fell short due to the sale of a subsidiary in the previous fiscal year. Sales declined considerably as we reduced the scope of sales at the trading division of a subsidiary.
As a result, net sales decreased by ¥2,877 million to ¥14,605 million, down 16.5% from the same quarter of the previous fiscal year, and operating income fell by ¥214 million to ¥800 million, down 96.4%.

Total assets as of the end of the first quarter of FY2006 amounted to ¥280,596 million, an increase of ¥7,922 million compared to the end of the previous consolidated fiscal year. Investment securities decreased by ¥4,120 million due mainly to the decline in market valuation and inventory decreased by ¥3,717 million mainly due to the implementation of regular repairs. On the other hand, notes and accounts receivable-trade increased by ¥9,617 million mainly due to a decline in the outstanding balance of liquidated accounts receivable; tangible fixed assets increased by ¥2,769 million; and other liquid assets increased by ¥3,663 million due mainly to an increase in advance payments related to regular repairs.
Total shareholders’ equity amounted to ¥98,894 million. Whilst quarterly net income increased by ¥3,069 million, net unrealized holding gains on available-for-sale securities decreased by ¥2,406 million and there was a further decrease of ¥1,428 million due to the disbursement of dividends.

Forecast of Consolidated Financial Results for FY2006 (April 1, 2006 to March 31, 2007)

The Company has not revised its full-year forecast, but plans to do so at the end of the interim accounting period.

Consolidated Balance Sheet Summary, Consolidated Statement of Income Summary, Segment Information>>(PDF: 106KB)