To Our Shareholders

Outlook for Fiscal 2017

In fiscal 2017, demand for cement in Japan is expected to remain roughly level with the previous fiscal year, edging up only 0.8% to 43,000 thousand metrics tons.

We are assuming an exchange rate of US$1 to ¥110, ¥11 per dollar stronger than the average fiscal 2016 rate of US$1 to ¥121.

In the Cement business, we expect a rise in income reflecting increases in sales volume and income from recycling processing as well as decreases in coal and oil procurement costs. We forecast exports for the year of 1,500 thousand metric tons, but expect to face challenging conditions as prices decline.

In terms of domestic sales prices, since October 2013 we have been seeking to raise unit prices by ¥1,000 to ¥1,500 yen, achieving some progress through fiscal 2015. However, we now recognize that the market will not yet tolerate the prices we had originally targeted. We will therefore take market conditions into consideration as we decide on further price increases going forward.

In businesses other than Cement, although the Cement-Related Products business will be affected by retreating demand due to the completion of large-scale soil improvement work undertaken in the previous fiscal year, we expect increased income in the Optoelectronics and Others businesses due to improvement in profit from battery materials.

Amid such circumstances, we anticipate consolidated fiscal 2017 net sales of ¥236,000 million, operating income of ¥25,000 million, ordinary income of ¥26,000 million and net income attributable to owners of parent of ¥17,200 million.

Furthermore, fiscal 2017 is the final year of the current medium-term management plan. The goals for the final year of the plan were set at net sales of ¥250,000 million, operating and ordinary income of ¥26,000 million each and net income attributable to owners of parent of ¥14,600 million.

Since the plan was formulated, coal and oil procurement costs have fallen. However, we expect cement demand to fall and the export market environment to grow more challenging. As a result, our current forecast for fiscal 2017 operating income of ¥25,000 is ¥1,000 million below the initial target of the management plan. Even so, through cost cutting and other measures, we will strive to achieve the targets of the plan.