Ube Group to Restructure Caprolactam Business and Related Operations

Ube Industries, Ltd. (President: Kazumasa Tsunemi), as part of the restructuring initiatives of its current "New 21.UBE Revised Plan", three-year management plan, will be restructuring its caprolactam (CPL) business-one of the Ube Group's fundamental businesses-and related operations.

1. CPL Business Restructuring
   The Ube Group's CPL business currently maintains an annual production capacity of 365,000 tons-equal to approximately 10% of global annual demand-as well as a global distribution framework through the four manufacturing centers of Ube's Sakai Factory; Ube Chemical Factory; a subsidiary in Thailand, Thai Caprolactam Public Co., Ltd. (TCL); and a subsidiary in Spain, Productos Quimicos del Mediterraneo, S.A. (PQM). Ube will be shutting down the Sakai Factory's No. 1 CPL plant in spring 2003, thereby achieving a substantial cost reduction. The No. 1 CPL plant, which has an annual capacity of approximately 20,000 tons, uses a traditional process which produces relatively large volume of ammonium sulphate as by-product. Through concurrent reductions in personnel and running costs, Ube anticipates achieving an overall cost reduction of ¥2.3 billion between fiscal 2002 and 2003.
   Also, in April 2002 organizational reforms were implemented at Ube Chemical Factory, and departments indirectly related to manufacturing were slimmed down. Through these reforms, Ube will strengthen its production technologies and enhance production efficiency, aiming to achieve ¥1.8 billion improvement in profit between fiscal 2002 and 2003 from the streamlining.
   
   With these initiatives, Ube will strive to improve earnings by a total of more than ¥4.0 billion between fiscal 2002 and 2003, which will add an additional Y1.0 billion to the streamlining plans in the New 21(UBE revised plan for the CPL business.
   Meanwhile, to coincide with these rigorous streamlining plans in Japan, Ube will shift its CPL production from Japan to overseas and aggressively develop its CPL related business. Specifically, reflecting the closure of the Sakai Factory's No. 1 CPL plant, TCL will expand its CPL production capacity by approximately 20,000 tons (representing roughly ¥0.8 billion increase in annual earnings in fiscal 2004 and thereafter), which will improve Groupwide profitability through the shift to more cost-competitive TCL products.
2. Restructuring of Related Operations
   Ube maintains a chemical complex located in Ube district that focuses on CPL operations, including its subsidiaries. The complex deals in the manufacture of such CPL downstream products as nylon-6 and nylon-12 resins, several kinds of fine chemical products derived from intermediary materials, and agricultural products which utilizes ammonium sulphate by-product and ammonia as a raw material of CPL. In addition to the aforementioned CPL streamlining plans, a variety of initiatives will be implemented in these related operations to generate additional profitability for the entire Ube Group.
   Specifically, the three manufacturing plants of Ube Agri-Materials, Ltd., will be consolidated into a single plant to achieve rationalization, and Ube Ammonia Industry, Ltd., will work to reduce costs by lowering raw materials prices and curtailing labor and operating costs, while striving to achieve greater competitiveness by reducing maintenance costs through the attainment of voluntary security certification.
3. Ube Group positions the CPL business and related operations as one of its fundamental businesses, and will continue to restructure manufacturing operations both in Japan and overseas, strengthen its chemical complex by leveraging the synergistic effects among related products, and implement further specific initiatives to improve its earning stability.