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SDK and Kyowa to Establish JV for Ethyl Acetate Production

Showa Denko K.K.
Kyowa Hakko Kogyo Co., Ltd.
April 17, 2003

Showa Denko K.K. (SDK) and Kyowa Hakko Kogyo Co., Ltd. (Kyowa) have agreed to establish a joint venture (JV) for the production of ethyl acetate in or around August 2003 subject to approval by competent authorities. The JV, which is scheduled to start commercial operation in April 2004, will concentrate on manufacturing, with the two parent companies continuing sales activities.

The JV, tentatively named JAPAN ETHYL ACETATE Co., Ltd. and to be capitalized at ¥400 million, will be owned 55% by SDK and 45% by Kyowa. It will operate a 100,000-ton-a-year ethyl acetate plant located at SDK’s Oita Petrochemical Complex. The JV’s board will have three directors from SDK and two from Kyowa.

Demand for ethyl acetate is expected to continue to increase in Japan and other Asian countries for use as solvent contributing to the improvement of printing and painting work conditions. Thus, it is expected to replace such aromatics as toluene and xylene.

SDK has been pursuing the possibility of starting ethyl acetate production at its Oita Petrochemical Complex in view of the growing demand. Kyowa has been proceeding with restructuring of its chemicals operations and aiming to increase production capacity and improve profitability.

The ethyl acetate plant will be built by converting an acetic acid plant (acetaldehyde process) in Oita suspended in the summer of 2001. This ensures ethyl acetate production at a low capital-cost, highly competitive, world-scale plant.

SDK currently has annual ethyl acetate production capacity of 200,000 tons, consisting of 150,000 tons at Tokuyama, Japan, and 50,000 tons in Indonesia through its subsidiary, PT. Showa Esterindo Indonesia. This means that SDK is the largest ethyl acetate manufacturer in Asia and the second largest in the world. Based on the agreement reached with Kyowa, SDK will establish a comprehensive production setup in Oita co vering all the stages from ethylene to acetaldehyde and to ethyl acetate.
In SDK’s consolidated business plan for the 2003-2005 period named the “Sprout Project,” the petrochemicals business is classified as one of the “businesses that need restructuring.” SDK will work hard to enhance the profitability of its petrochemicals business by forming alliances, like the one with Kyowa, reducing costs through streamlining of the ethylene plant operation, and improving the competitiveness of organic chemicals operations.

Kyowa has been implementing measures to restructure its chemicals operations and to improve their profitability in accordance with its desired business portfolio. Ethyl acetate is an important component of that portfolio because of its high growth potential as an environment-friendly solvent.

With the establishment of the joint venture with SDK, Kyowa is confident that its solvent business will grow further since the JV will ensure stable supply and better cost competitiveness.

Kyowa will continue to strengthen its life science-based core businesses, centering on pharmaceuticals operations, and restructure its chemicals business, thereby increasing the value of Kyowa and its Group companies.