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SDK to Sell Shares in SDS Biotech via MBO Scheme

March 15, 2005

Showa Denko K.K. (SDK) decided at its board of directors meeting today to transfer all of its shares in SDS Biotech K.K. (SDS), a wholly owned agrochemical business subsidiary, to current board members of SDS and Mizuho Capital Partners Co., Ltd. through a management buyout (MBO) scheme.

In line with the ongoing consolidated business plan, the Sprout Project, SDK is proceeding with structural reform and improving financial strength while expanding strategic growth businesses.

SDS is a leading agrochemical company in Japan engaged in the development, production and marketing of agrochemical raw materials and products, having a wide variety of product lines based on its development capability.

In view of the drastic changes in the agrochemicals market, however, SDS needs to establish a stronger position in the market by more quickly responding to market requirements.

Under the circumstances, SDK has decided to make SDS an independent company through the MBO scheme with the support of Mizuho Capital Partners. All of the SDS shares (8,960,000 shares) will be transferred from SDK to SDS Biotech Holdings Corporation, a special-purpose company owned by Mizuho Capital Partners, on March 31, 2005.

[Profile of SDS Biotech K.K.]

Head office 5-6, Shiba 2-chome, Minato-ku, Tokyo
President Takashi Shirai
Capital ¥732 million (owned 100% by SDK)
Establishment October 1968
Scope of business Production, import and sale of agrochemicals, industrial fungicides, disinfectants and specialty chemicals
Number of employees 128
Total assets ¥13,491 million (At December 31, 2004)
Annual sales ¥13,127 million (Fiscal 2004)

This transaction will have only slight influence on the consolidated and non-consolidated net sales and operating income of SDK. Consolidated net income will increase approximately ¥6 billion.

On a non-consolidated basis, net income will increase around ¥500 million due to such factors as loss on sale of securities and dividend income.

[Revised performance forecast for 2005]

(a) For the first six months

Consolidated basis
(Billions of yen, %)
  Net sales Operating income Ordinary profit Net income
Earlier forecast (A)
(Announced on Feb. 9, 2005)
380 22.5 16.5 7.0
Revised forecast (B) 380 22.5 16.5 13.0
(B)-(A) - - - 6.0
Percentage of increase - - - 85.7%
2004 results (whole year) 740.7 52.1 38.9 7.6
Non-consolidated basis
(Billions of yen, %)
  Net sales Operating income Ordinary profit Net income
Earlier forecast (A)
(Announced on Feb. 9, 2005)
264 14.5 10.0 5.0
Revised forecast (B) 264 14.5 16.0 5.5
(B)-(A) - - 6.0 0.5
Percentage of increase - - 60.0% 10.0%
2004 results (whole year) 525.8 44.1 35.2 9.6

(b) For the whole year

Consolidated basis
(Billions of yen, %)
  Net sales Operating income Ordinary profit Net income
Earlier forecast (A)
(Announced on Feb. 9, 2005)
780 52.5 40.5 18.5
Revised forecast (B) 780 52.5 40.5 24.5
(B)-(A) - - - 6.0
Percentage of increase - - - 32.4%
2004 results (whole year) 740.7 52.1 38.9 7.6
Non-consolidated basis
(Billions of yen, %)

Net sales Operating income Ordinary profit Net income
Earlier forecast (A)
(Announced on Feb. 9, 2005)
543 32.0 23.0 10.5
Revised forecast (B) 543 32.0 29.0 11.0
(B)-(A) - - 6.0 0.5
Percentage of increase - - 26.1% 4.8%
2004 results (whole year) 525.8 44.1 35.2 9.6