Closure of Shiraoi Plant of Asahi Kasei Construction Materials and Withdrawal of Fine Chemicals Business of Asahi Kasei Pharma

Asahi Kasei announces the closure of the Shiraoi Plant of Asahi Kasei Construction Materials and the withdrawal of the fine chemicals business of Asahi Kasei Pharma, including the liquidation of Asahi Kasei N&P Co., Ltd., fine chemicals production subsidiary of Asahi Kasei Pharma. All Asahi Kasei Group operations located in Shiraoi, Hokkaido, Japan, will thus be discontinued.

Closure of Asahi Kasei Construction Materials Shiraoi Plant
The Shiraoi Plant of Asahi Kasei Construction Materials began operation in April 1970 with the production of pre-cast concrete piles. In April 1974 this was joined by the production of autoclaved aerated concrete (AAC), and the Shiraoi Plant developed as a key base for the supply of construction materials to markets in Hokkaido.

After reaching its peak at some 120 thousand m3 in fiscal 1989, production of AAC at the Shiraoi Plant has decreased year-to-year following the collapse of Japan’s economic bubble. With the 2004 discontinuation of production of pre-cast concrete piles, the Shiraoi Plant has operated as a base for production of AAC alone. The operating climate for the Shiraoi Plant has been challenging ever since, particularly following the 2007 revision of Japan’s building code, and the impact of the recent economic recession has only intensified the severity of the state of operation.

Although wide-ranging and pervasive measures have been implemented to reduce costs and improve the profitability of operation at the Shiraoi Plant, a continuing decline in construction demand in Hokkaido with no foreseeable recovery has precluded any clear prospect for the continuation of operations. The decision was therefore reached to close the Shiraoi Plant as a base for production in Hokkaido.

Schedule
Production to discontinue at the end of November 2009, plant closure to be completed at the end of March 2010.

Marketing in Hokkaido
Marketing of AAC in Hokkaido will continue unchanged, with product to be supplied from the Sakai Plant of Asahi Kasei Construction Materials in Ibaraki Prefecture.

Employees
Employees working at the Shiraoi Plant are in principle to be repositioned within the Asahi Kasei Group.

Plant outline
Production volume: ≈30 thousand m3 (fiscal 2008)
Employees: 36
Location: Shiraoi, Hokkaido

Withdrawal of fine chemicals business of Asahi Kasei Pharma
In 1975 Asahi Kasei Pharma established a subsidiary in Shiraoi for the production of antibiotic for use as animal feed additive, and the Shiraoi Plant of this subsidiary developed as a key base for the manufacture of fermentation products. Since 2005 this plant has focused on the production of the functional food additive coenzyme Q10 as part of Asahi Kasei N&P, Asahi Kasei Pharma’s subsidiary for the production of fine chemicals.

The global market for coenzyme Q10 reached a crest in 2004 and 2005, with demand outstripping supply worldwide. This was followed by successive plant expansions by competitors in Japan and the new market entry of Chinese producers, resulting in a situation of severe overcapacity. In the US, the main market for coenzyme Q10, price deterioration has been particularly pronounced. The fine chemicals business of Asahi Kasei Pharma, which performs the production and sale of coenzyme Q10, has thus been placed in a position of continuing unprofitability. Despite every effort toward enabling the continuation of this business, the situation is one which offers no foreseeable prospect for the recovery of profitability. The decision was therefore reached to withdraw the fine chemicals business, including the liquidation of Asahi Kasei N&P and the closure of its Shiraoi Plant.

Schedule
Production to discontinue at the end of July 2009, sale to discontinue at the end of December 2009.

Employees
Employees working in the fine chemicals business of Asahi Kasei Pharma and those working at Asahi Kasei N&P are in principle to be repositioned within the Asahi Kasei Group.

Fine chemicals business outline
Sales: ¥2.5 billion (fiscal 2008)
Employees: 48
Plant location: Shiraoi, Hokkaido (Asahi Kasei N&P)

Financial effect
A special loss of some ¥800 million is recorded in the consolidated statements of income for fiscal 2008 (ended March 31, 2009) for losses associated with the above, including loss on disposal of property, plant and equipment.

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