Showa Denko K.K. Makes Progress in Implementation of 'PASSION Project'.

Tokyo, Japan, Dec 5, 2006 - (JCN Newswire) - Showa Denko  K.K. (SDK) announces that it has made progress in the implementation of its medium-term consolidated business plan, the "Passion Project," exceeding all financial goals for 2006, except profit ratio.

Under the project running from 2006 through 2008, SDK aims to create individualized products and businesses by fully utilizing the rich stock of technologies accumulated over many years and to achieve greater contribution to the sound growth of society.

I. Accomplishments in 2006

For 2006, the initial year under the Passion Project, SDK expects to exceed almost all of the financial goals as shown in the table below:

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                       Estimated results   Goals for 2006 under
                           (Announced on       Passion Project
                         August 8, 2006)   (Announced on
                                            November 29, 2005)
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Net sales                    900 billion         800 billion     Achieved

Operating income            67.5 billion        62.0 billion     Achieved

Profit ratio
(operating income basis)            7.5%                7.8%

ROA                                 6.6%                6.5%     Achieved

Interest-bearing debt        445 billion       461.0 billion     Achieved

D/E ratio                      2.0 times           2.1 times     Achieved

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Compared with the figures set under the Passion Project, net sales will exceed the initial goals in all of the five business segments. In terms of operating income, the Electronics and Inorganics segments will exceed the goals, more than offsetting the shortfall in the Aluminum segment. As a result, the total operating income is expected to substantially exceed the initial goal. We implemented the capital investment plans ahead of schedule and the amount of capital investment for the initial year exceeded the plan. However, we steadily repaid loans. As a result, we will also exceed the goals pertaining to ROA, interest-bearing debt, and D/E ratio.

Under the Passion Project, we have classified our operations into three categories of "growth drivers", "new growth drivers" and "base businesses." In 2006, we strengthened operations, and developed new products in various business units, creating new cash flows and profits. We also proceeded with structural reform.

Major reinforcement and capacity expansions in 2006

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                            Expansions at Taiwan and Chiba:
HD                          Total capacity reaching 15.75 million disks
                            a month at the end of 2006
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Semiconductor-processing    High-purity chlorine for semiconductors/LCDs:
  materials                 From 300 t/y to 600 t/y

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Fine carbons                VGCF: From 40 t/y to 100 t/y

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Olefins                     Ethylene: From 653,000 t/y to 677,000 t/y

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                            Acetic acid: From 100,000 t/y to 130,000 t/y
Organic chemicals           Vinyl acetate: From 120,000 t/y to 175,000 t/

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                            Showa Highpolymer:
Specialty polymers          Turned into a fully owned subsidiary

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                            Second magnetic alloy plant being
Rare earths                 built in China.

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Graphite electrodes         Shifting to large-diameter electrodes

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                            New plant in Lianyungang, China,
Commodity ceramics          has started full-scale operation.

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High-purity aluminum foils  Expansion at Sakai Plant:
  for capacitors            From 1,500 tons to 1,800 tons per month

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High-performance aluminum   Cylinders for laser printers:
  components                From 9 mil. units to 15 mil. units per month

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Major new products developed/commercialized in 2006

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HD                          Perpendicular magnetic recording technology
                              media: 100 GB/P (2.5-inch) (Best in world)

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Life science                New curling agent (Spiera)

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                            Additive in photo-curing resins (Karenz MT)
Fine chemicals              Highly insulating ink using urethane-based
                              thermoset resin

                            Halogen-free epoxy resin
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Ultra bright LEDs           Commercial production of ultra bright
                               AlGaInP LEDs will be started.
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Capacitors                  High-capacitance, high-voltage products

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Heat exchangers             Full-scale sales of NRT-cV condensers

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                            Epitaxial wafers for SiC power devices
Others                         Pipes based on recycled PET bottles
                               (Showa Eco-Pipe)
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Structural Reforms Carried Out in 2006

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Segments                    Measures taken
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Petrochemicals              Transferred shares in Showa Aluminum Powder
  (Restructuring            Transferred the medical packaging business
  subsidiaries/affiliates)    (Restructuring plastic products operations)

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Aluminum                    Alliance in the alloys business
  (Focusing on high-value   Withdrawal from the commodity foils business
   product lines)           Withdrawal from the refrigerator-evaporator
                               business in Indonesia

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II. Growth strategy

1) Growth drivers

a) Hard disk media

Demand for hard disk drives (HDDs) is expected to grow at an annual rate of 15% in the coming years. The high growth is expected to center on consumer electronics (CE) applications. As the world's largest independent supplier of HD media, SDK is leading the industry by launching the world's first media based on the perpendicular magnetic recording (PMR) technology. SDK provides both aluminum- and glass-based media, covering the whole range from 0.85 to 3.5 inches.

We will further increase record density to supply high-capacity, high-value media, thereby establishing our competitive edges in the rapidly growing market for CE applications. Our new HD media plant is scheduled to start up in January 2007, enabling us to serve the market from four plants at three locations. We will continue to optimize our production setup and expand production lines in a timely manner to meet growing demand. Our total production capacity will reach 24 million disks per month by the end of 2008.

b) Semiconductor-processing materials

Demand for semiconductor-processing high-purity gases has been increasing sharply due to the rapid growth of the LCD panels market. SDK will focus its resources on the high-purity gas business in which we have the "number one" position or we can expect high market growth.

We will improve our earning power in such areas as high-purity chlorine, ammonia and nitrous oxide gases, while developing high-purity etching gases (C4F6, HBr) and next-generation CVD-film-forming materials. We will focus our attention on the Asian market and promote direct sales of our own products, ensuring stable quality, stable supply and quick delivery. Thus, we aim to achieve annual sales of JPY 30 billion from this business in 2008.

2) New growth drivers

a) Bright LED

SDK is the only one company in the world that can provide ultra bright full-color LEDs, using the three primary colors (RGB). We are aiming to achieve the highest-level quality and lowest cost based on proprietary technologies. We have decided to increase our production capacity of aluminum-gallium-indium-phosphide (AlGaInP) LED from 30 million units per month at present to 100 million units per month. As ultra bright LEDs will be increasingly used in LCD backlighting for flat panel TVs and PCs in and after 2008, we will continue aggressive R&D efforts to meet those requirements. We will also accelerate the development of ultra bright LEDs for general lighting, which is expected to become a big market in the future.

3) VGCF carbon nanofiber

Demand for VGCF carbon nanofiber is increasing for use in lithium-ion batteries (LIBs) for PCs. Demand for LIB is expected to grow, centering on power tools that require a large electric current. We will develop composites with resins, metals and ceramics. We aim to improve our volume production technology to reduce costs, thereby creating more demand. We are planning to increase annual sales of VGCF to JPY 10 billion in 2010.

III. Base Business Strategy

1) Graphite electrode

We have a modern, 40,000-ton-a-year plant in South Carolina, U.S., which focuses on the production of large-diameter electrodes. We also have a 60,000-ton-a-year plant in Omachi, Japan (one of the largest plants in the world), which fully utilizes electricity from in-house hydropower plants. We are pursuing synergies between the two plants to achieve the best quality and service as well as the lowest cost. There is a growing need for high-performance, large-diameter graphite electrodes for use in large electric arc furnaces for steelmaking. We have the leading market share (40%) in the category of largest diameter products (30- and 32-inch) and aim to expand our share further, ensuring stable source of profits.

2) Aluminum

In the heat exchanger business, we will promote the sales of NRT-cV condensers. In the aluminum can business, we will reduce costs and improve profitability. Meanwhile, in the laser-printer cylinders business, we have started up in Oita our sixth plant to ensure stable supply. We will soon complete expansion work of the capacitor-grade high-purity aluminum foil plant to meet growing demand. In the Shotic forgings business, we will develop new applications, including suspension and other auto parts, in addition to serving the existing car air-conditioner parts market. We will produce high-performance aluminum products by fully utilizing our fabricating technology, achieving individualized and competitive product lines.

For more information, please visit the SDK IR webpage at

http://www.sdk.co.jp/aa/english/news/index.html .

About Showa Denko K.K.

Showa Denko K.K. ('SDK'; TSE: 4004, US: SHWDF) is a major manufacturer and marketer of chemical products serving a wide range of fields ranging from heavy industry to the electronic and computer industries. SDK makes petrochemicals (ethylene, propylene), aluminum products (ingots, rods), electronic equipment (hard disks for computers) and inorganic materials (ceramics, carbons). The company has overseas operations and a joint venture with Netherlands-based Montell and Nippon Petrochemicals to make and market polypropylenes. In March 2001, SDK merged with Showa Denko Aluminum Corporation to strengthen the high-value-added fabricated aluminum products operations, and is today developing next-generation optical communications-use wafers. For more information, please visit www.sdk.co.jp.

Source: Showa Denko K.K.

Contact:

Showa Denko K.K.
Nobuhiro Kato
[e-mail]
[phone]

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