Showa Denko K.K. Reports 2007 First Quarter Consolidated Results.

Tokyo, Japan, May 8, 2007 - (JCN Newswire) - Showa Denko  K.K. (SDK; TSE: 4004) has reported results for the first quarter of 2007 (January 1 - March 31). The Company recorded an 11.5% increase in net sales over the first quarter of 2006, to JPY 229,079 million. However, operating income decreased 2.6%, to JPY 15,009 million, and ordinary income fell 17.4%, to JPY 10,591 million. Net income of the quarter was down 17.7%, to JPY 6,473 million.

Showa Denko K.K. and its Group companies are carrying out a three-year consolidated business plan, the Passion Project, that runs from 2006 through 2008, with the aim of establishing the groundwork for long-term sustainable growth. Under the project, we are continuing to expand strategic growth businesses while promoting structural reforms and cost reductions.

2007 First Quarter by Segment

In the Petrochemicals segment, sales rose 24.3%, to JPY 87,798 million, and operating income jumped 66.4%, to JPY 4,872 million. While there was a maintenance shutdown of the ethylene plant - conducted once in every four yearsin the same quarter last year, there was no such shutdown this quarter. As a result, sales of olefins and organic chemicals were up due to higher shipment volumes. Sales of plastics by Showa Highpolymer Co., Ltd., increased due to the rise in selling prices.

In the Chemicals segment, sales increased 4.7%, to JPY 18,774 million, and operating income jumped 55.7%, to JPY 1,590 million. Sales of acrylonitrile were up due to the rise in selling prices. Sales of caustic soda and hydrochloric acid were also up due to steady shipment volumes and selling prices. Meanwhile, sales of commodity industrial gases, such as oxygen, nitrogen and hydrogen, decreased. In specialty chemicals, sales of ShopreneTM chloroprene rubber, amino acids, and Shodex(TM) chromatography columns increased due to higher shipment volumes.

In the Electronics segment, sales increased 0.9%, to JPY 39,138 million. However, operating income fell 48.8%, to JPY 4,110 million due mainly to the shift in production to higher-capacity hard disk (HD) media and increased depreciation expenses following the expansions of HD media production capacity ahead of schedule. Sales from HD operations were maintained at the year-earlier level despite the rise in shipment volumes of HD media as sales of substrates to outside the Group decreased. Sales of compound semiconductors were also maintained at the year-earlier level. Sales of rare earth magnetic alloys were up due to the rise in shipment volumes. Meanwhile, sales of specialty gases for semiconductor processing were down due to the fall in the shipment volumes of cleaning agents for LCD panels.

In the Inorganics segment, sales increased 11.1%, to JPY 18,675 million and operating income climbed 35.0%, to JPY 4,342 million. Although sales of ceramics slipped, sales of graphite electrodes increased due to steady demand.

In the Aluminum segment, sales rose 5.7%, to JPY 64,694 million, and operating income climbed 29.7%, to JPY 1,383 million. Sales of rolled products increased due to the rise in shipment volumes, while sales of extrusions/specialty products were up due to the rise in shipment volumes and selling prices. Sales of heat exchangers increased, mainly in the Japanese market. Sales of Shotic(TM) forged products rose due to the rise in shipment volumes for auto parts applications. Sales of aluminum cans also rose due to higher selling prices. Meanwhile, sales of aluminum alloys fell as the business was removed from consolidation in the second half of 2006.

I. Consolidated Financial Summary for the Three Months ended March 31, 2007

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                                         (yen millions, US$ thousands)
                           Three Months Ended     Change
                        3/30/2007   3/30/2006      % YoY         US $*
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Operating Results

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Net Sales                 229,079     205,407      11.5     1,940,522
Operating Income           15,009      15,412      (2.6)      127,141
Income Before Taxes        10,591      12,821     (17.4)       89,718
Net Income                  6,473       7,869     (17.7)       54,832
EPS (basic)(yen)             5.50        6.89        --         0.047
EPS (diluted)(yen)           5.19        6.46        --         0.044

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                                        As of      As of
                                      3/31/07    3/31/06        US $*
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Financial Position

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Total Assets                        1,041,004    972,503    8,818,333
Total Sh'hldrs Equity                 266,591    195,439    2,258,286
Shareholders EPS (yen)                 200.85     171.01         1.70
Sh'hldrs Equity Ratio (%)                22.7       20.1

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II. Net Sales and Operating Income by Segment for the Three Months ended March 31, 2007

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                                         (yen millions, US$ thousands)
                              Three Months Ended
                          3/31/2007    3/31/2006    Change      US $*
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Petrochemicals
   Net Sales                 87,798       70,638    17,160    743,739
   Operating Income           4,872        2,928     1,944     41,267

Chemicals                    18,774       17,938       836    159,032
   Operating Income           1,590        1,021       569     13,471

Electronics
   Net Sales                 38,138       38,791       347     331,535
   Operating Income           4,110        8,021    (3,912)     34,812

Inorganic Materials
   Net Sales                 18,675       16,813     1,862     158,193
   Operating Income           4,342        3,218     1,125      36,784

Aluminum
   Net Sales                 64,694       61,228     3,466     548,023
   Operating Income           1,383        1,066       317      11,712

HQ costs and other
   Net Sales                     --           --        --         --
   Operating Income          (1,287)        (842)     (446)   (10,905)

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Total
   Net Sales                229,079      205,407     23,671  1,940,522
   Operating Income          15,009       15,412       (403)   127,141

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The U.S.$ is valued at JPY 118.05 for this statement.

III. Financial conditions for the January 1 - March 31, 2007 period (as compared with the conditions at December 31, 2006)

Total assets at the end of the quarter amounted to JPY 1,041,004 million, an increase of JPY 3,181 million from the level at December 31, 2006, owing to an increase in inventories, reflecting higher raw material costs, and an increase in fixed assets as a result of capital investment. Interest-bearing debt increased JPY 1,481 million, to JPY 434,653 million. Stockholders' equity at the end of the quarter increased JPY 1,098 million, to JPY 266,591 million.

IV. Major steps taken since the beginning of 2007

Electronics

- Developing high-performance, large area-emission organic EL panels

We have developed singlelayer organic electroluminescent (organic EL) devices based on innovative phosphorescent polymer materials, achieving the highest-level external quantum efficiency and durability of 350,000 hours. We are developing a large area-emission panel based on this polymer technology, aiming to commercialize high-performance organic EL panels for use in displays and illumination.

- New crystal growth technology for nitride-based semiconductors

We have succeeded in developing a new process for making high-quality nitride-based compound semiconductors to meet growing demand for use in blue/white LEDs. The process, called "Hybrid PPDTM," enables the production of four-inch epitaxial wafers with high quality. We have also succeeded, using the Hybrid PPDTM process, in developing blue LEDs with the highest-level brightness on the market today. We will start commercial shipments of these blue LEDs within this year.

Inorganics

- Capacity expansion for 30" and 32" diameter graphite electrodes

Last year, we began strengthening the production setup of 30-inch and 32-inch-diameter graphite electrodes for use in electric arc furnace steelmaking. As a result, a new line of graphitizing furnace will be completed at the Omachi Plant, Japan, in July this year and expanded facility will start up at our U.S. subsidiary Showa Denko Carbon, Inc. in the third quarter. Upon completion, our total production capacity of these large-diameter graphite electrodes will increase from 15,000 tons to 25,000 tons. We are investing slightly over JPY 1 billion for the said capacity expansion.

- Establishment of JV for F/S regarding alumina project in Indonesia

We reached formal agreement with PT. ANTAM Tbk of Indonesia, Straits Trading Amalgamated Resources Private Limited of Singapore, and Marubeni Corporation of Japan to establish a joint venture for implementation of a feasibility study for a chemical-grade alumina plant in Indonesia. The name of the joint venture is P.T. Indonesia Chemical Alumina.

Aluminum and other

- Expanding automotive heat exchanger business in China

We decided to increase our equity participation in Grand Ocean-Showa Auto Air Conditioning (Dalian) Co., Ltd. and to make it our consolidated subsidiary. Grand Ocean-Showa will expand its production capacity and start producing innovative NRT III(TM) condensers with around 20% higher performance compared with existing products.

- Absorption of Showa Financing K.K.

We decided to absorb our wholly owned subsidiary Showa Financing K.K. in July this year. By taking over Showa Financing's operations, we will enhance the efficiency of financing activities within our Group.

V. Forecast for the year ending December 2007

We expect the consolidated performance for fiscal 2007 will be basically in line with the forecast we announced on February 8, 2007:

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                                                       (yen millions)
Forecast                       2007 H1     2007 FY    2006 FY result
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Net Sales                      460,000     960,000         914,500
Operating Income                30,000      73,000          68,700
Net Income                      12,000      31,500          28,800

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The above forecast is based on the information available at this point of time. It is also based on risk factors, considered being present as of May 8, 2007, that could adversely affect our future performance. Actual results may differ materially due to a variety of reasons.

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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