Showa Denko K.K. (SDK) Operating Income Up 14.7% in Jan.-Sept. Period.

Tokyo, Japan, Nov 15, 2005 - (JCN Newswire) - Showa Denko  K.K. (SDK) announces a 14.7% increase in operating income for the first nine months (January-September) of 2005, to JPY 41,557 million, on net sales up 10.5%, to JPY 593,699 million. Ordinary income increased 32.7%, to JPY 35,386 million, while net income jumped 137.2%, to JPY 27,946 million.

1) Consolidated Financial Summary for the First Nine Months September 30, 2005

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                                                    (yen millions)
                            Nine Months Ended      Change
                       9/30,2005   9/30, 2004      % YoY         US $*
----------------------------------------------------------------------
Operating Results

Net Sales                593,699      537,156       10.5     5,245,158
Operating Income          41,557       36,216       14.7       367,143
Income Before Taxes       35,386       26,672       32.7       312,646
Net Income                27,946       11,782      137.2       246,892
EPS (basic)(yen)           24.46        10.35         --         0.216
EPS (diluted)(yen)         22.73         9.67         --         0.201
----------------------------------------------------------------------
                           As of        As of
                       9/30/2005    9/30/2004                    US $*
----------------------------------------------------------------------
Financial Position

Total Assets             943,739      954,409                8,337,656
Total Sh'hldrs Equity    210,526      182,024                1,859,935
Shareholders EPS (yen)    184.27       159.31                     1.63
Sh'hldrs Equity Ratio       22.3         19.1                     22.3
----------------------------------------------------------------------
The U.S.$ is valued at JPY 113.19 for this statement.

Performance Sales and Operating Income by Segment (revised Nov. 15):

----------------------------------------------------------------------
                                               (Unit: millions of yen)
                       Nine Months Ended            Three Months Ended
                    9/30/2005  9/30/2004   Change 9/30/2005  9/30/2004
----------------------------------------------------------------------
Petrochemicals
   Net Sales          219,400    182,600   36,700    76,800     65,400
   Operating Income    17,400     14,000    3,400     6,000      6,400

Chemicals
   Net Sales           53,400     56,400   (3,000)   17,200     17,900
   Operating Income     3,200      2,300      900       600        600

Electronics
   Net Sales           97,000     81,800   15,200    34,300     30,400
   Operating Income    13,100     10,900    2,200     5,400      4,100

Inorganic Materials
   Net Sales           45,100     40,400    4,700    15,300     13,700
   Operating Income     6,200      4,300    1,900     2,000      1,500

Aluminum
   Net Sales          178,800    175,900    2,900    59,200     61,500
   Operating Income     6,500      9,300   (2,800)    1,900      2,900

HQ costs and other
   Net Sales               --        --        --       --         --
   Operating Income    (4,900)   (4,600)     (300)  (1,500)    (1,500)
----------------------------------------------------------------------
Total
   Net Sales          593,700    537,200   56,500   202,700    188,900
   Operating Income    41,600     36,200    5,300    14,400     14,000
----------------------------------------------------------------------

During the period, SDK and its Group companies made progress with the implementation of the medium-term consolidated business plan, the Sprout Project, fostering strategic growth businesses while renovating operations and reducing costs. The following are summary of the results by business segment:

Petrochemicals

Operating income increased 24.2%, to JPY 17,386 million, on sales up 20.1%, to JPY 219,367 million. In the third quarter (July-September), sales of olefins and organic chemicals were up due to higher selling prices, reflecting a rise in the raw material costs. Plant utilization remained at high levels due to continued brisk demand. Sales of plastics by Showa Highpolymer Co., Ltd. increased slightly due to a rise in the selling prices, reflecting increases in the raw material costs.

Chemicals

Operating income was up 41.4%, to JPY 3,226 million, despite a 5.3% decline in sales, to JPY 53,436 million. In the third quarter, sales of acrylonitrile and ammonia were up due to steady demand and those of Shoprene polychloroprene synthetic rubber were also up, reflecting a rise in selling prices. Shipment volumes of industrial gases (oxygen, nitrogen, etc.) were maintained at the year-earlier level. Sales of agrochemicals decreased substantially following the sale of SDS Biotech K.K. in March.

Electronics

Operating income increased 20.2%, to JPY 13,141 million, on sales up 18.6%, to JPY 96,998 million. In the third quarter, sales of hard disk (HD) media increased substantially, reflecting continued brisk demand and the contribution of capacity expansions carried out in the second half of 2004. Sales of rare earth magnetic alloys were up due to a rise in the shipment volumes and sales of specialty gases for semiconductor processing also rose. Meanwhile, the shipment volumes of compound semiconductors fell substantially due to inventory adjustments by the LED industry.

Inorganic Materials

Sales increased 11.7%, to JPY 45,137 million and operating income climbed 44.9%, to JPY 6,199 million. In the third quarter, sales of ceramics and graphite electrodes increased due to continued steady shipments, reflecting brisk demand.

Aluminum and others

Sales rose 1.6%, to JPY 178,762 million, but operating income fell 30.0%, to JPY 6,495 million. In the third quarter, sales of Shotic forgings were slightly up while sales of aluminum ingot, rolled products and extrusions fell, reflecting declines in shipment volumes. Sales of automotive heat exchangers in Japan fell due to lower shipment volumes, but those in the United States and the Czech Republic increased due to higher shipment volumes. Sales of aluminum cans were down due to lower shipment volumes.

Financial conditions

(As compared with the conditions at June 30, 2005)

Total assets at September 30, 2005 amounted to JPY 943,739 million, an increase of JPY 12,125 million from the level at June 30, reflecting an increase in inventories due to higher raw material costs. Interest-bearing debt decreased JPY 15,504 million, to JPY 459,793 million, as a result of our continuous efforts to reduce debt. Stockholders' equity at the end of the third quarter increased JPY 11,864 million, to JPY 210,526 million, due mainly to an increase in retained earnings.

Major Seps Taken after the Announcement of the Half-year Results

Petrochemicals

Modification of the ethylene plant to increase the use of non-naphtha feedstock:

SDK decided to modify its ethylene plant at the Oita Petrochemical Complex to increase the use of non-naphtha feedstock, including natural gas liquids, to a maximum of 50% of the total requirement. Major part of the modification work will be conducted during the maintenance shutdown starting in the middle of March 2006. At the same time, SDK will modify certain lines of the ethylene plant to increase efficiency, thereby increasing the production capacity by 24,000 tons a year. These modifications will cost around JPY 2 billion.

Chemicals

Launch of a new isocyanate monomer "Karenz BEI":

SDK started selling a new grade of high-performance isocyanate monomer under the brand name of Karenz BEI. With photo-setting speed two times that of the conventional grade, the new product enables precision surface treatment of liquid crystal displays (LCDs) and semiconductors.

Electronics

Joint development of the SiC epitaxial wafer technology:

In August, SDK started research for commercial production of high-performance silicon carbide (SiC) epitaxial wafers jointly with the National Institute of Advanced Industrial Science and Technology, and the Central Research Institute of Electric Power Industry. Compared with silicon-based semiconductors, SiC-based semiconductors are expected to have such advantages as smaller size and lower loss. Applications will include switching for power conversion and heavy-current, high-frequency communication devices.

Construction of a new R&D facility for HD media development:

SDK decided to build a new R&D facility to promote the development of the next-generation HD media with greater storage capacity. The facility, to be built at the premises of Showa Denko HD K.K., will be completed at the end of April 2006 with the investment of approximately JPY 3 billion.

Inorganic Materials

Start of commercial production of 32" graphite electrodes:

SDK started commercial production of 32-inch-diameter graphite electrodes at its Omachi Plant. The product represents the largest diameter for graphite electrodes used in electric-arc-furnace steel production. SDK's U.S. subsidiary Showa Denko Carbon, Inc. will also start production of this size when demand grows further.

Doubling fused alumina abrasives production capacity:

SDK introduced a continuous production system for Single Morundum-specialty alumina abrasives used in grinding stones for hard materials, including auto parts. The process change will result in doubling of the production capacity, to 4,000 tons a year.

Termination of carbon black joint venture:

SDK decided to terminate, effective November 2005, the shareholders agreement with Cabot Corporation of the United States concerning their carbon black joint venture Showa Cabot K.K.

Aluminum and others

Expansion of production capacity for aluminum cylinders for laser printers:

SDK decided to expand its capacity for producing aluminum cylinders for laser printers from the current nine million tubes per month to 15 million tubes per month by the end of 2006. The expansion will be achieved by construction of a new three-million-tubes-per-month production line at the cost of around JPY 2 billion and by way of debottlenecking. The expansion reflects an increasing demand for color printers that use four aluminum cylinders per unit compared with monochrome printers that use only one aluminum cylinder per unit.

Participation in solvent recycling business in China:

In September, Shoko Co., Ltd., the core trading firm in the SDK Group, participated in the production and recycling of solvents in China by investing in a Chinese firm jointly with Toyodakagaku Kogyo Co., Ltd. The Chinese firm, Guanzhou Raysound Chemical Co., Ltd., produces solvents for paints used in car production.

The Showa Denko Group Performance Forecast for FY 2005 (revised Nov. 15):

----------------------------------------------------------------------
                                               (Unit: millions of yen)
                       Revised    Earlier
                      forecast   forecast                2004
                    FY12/31/05   8/9/2005    Change   Results   Change
----------------------------------------------------------------------

Net sales               810,000    790,000   20,000   740,700   69,300
Operating income        56,000     56,000        0    52,100    3,900
Net income              15,000     31,000  (16,000)    7,600    7,400
Interest bearing debt  450,000    452,000   (2,000)  502,400  (52,400)
----------------------------------------------------------------------

Forecast Sales and Operating Income by Segment (revised Nov. 15):

----------------------------------------------------------------------
                                               (Unit: millions of yen)
                       Revised    Earlier
                      forecast   forecast               2004
                    FY12/31/05   8/9/2005   Change   Results   Change
----------------------------------------------------------------------
Petrochemicals
   Net Sales           304,000    287,000   17,000   254,400   49,600
   Operating Income     22,000     19,500    2,500    20,100    1,900

Chemicals
   Net Sales            71,000     73,000   (2,000)   80,200   (9,200)
   Operating Income      4,500      5,000     (500)    4,800     (300)

Electronics
   Net Sales           132,000    130,000    2,000   112,500   19,500
   Operating Income     18,500     18,500        0    14,900    3,600

Inorganic Materials
   Net Sales            61,000     60,000    1,000    55,300    5,700
   Operating Income      8,500      8,500        0     6,100    2,400

Aluminum
   Net Sales           242,000    240,000    2,000   238,400    3,600
   Operating Income      9,000     11,000   (2,000)   12,300   (3,300)

HQ costs and other
   Net Sales                --         --       --        --       --
   Operating Income     (6,500)     (6,500)      0    (6,200)    (300)
----------------------------------------------------------------------
Total
   Net Sales           810,000    790,000   20,000   740,700   69,300
   Operating Income     56,000     56,000        0    52,100    3,900
----------------------------------------------------------------------

For more information, please visit the SDK IR Website: http://www.sdk.co.jp/contents_e/investment_info/index.htm

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