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CEO Message

Yoshiharu Yoshikawa, President and Representative Director

I am pleased to express greetings to all of our shareholders, along with our appreciation for your continued loyal support.
Below, I would like to report on our operating highlights for the first half of the 115th term (period from April 1, 2018 to September 30, 2018).

During the first half under review, Japan's business climate saw a moderate recovery overall, driven by an uptick in consumer spending, steady increases in production, and growing capital expenditures, which more than made up for the slowdown in exports.

As for the global economy, a moderate recovery continues despite uncertainty caused by U.S. and Chinese trade policies along with the impacts of trade issues and volatile financial and capital markets.

As for the general business climate, in Japan's petroleum industry, a conclusion has been reached regarding integration and reorganization which was a pending problem. As a result, the major reorganization of Japan's petroleum industry that had continued over the past several years is set to end.

In addition, in Japan's petroleum market, which is seeing waning demand for oil products, the supply-demand climate for oil products improved on previous reductions in supply capacity and the business climate is now positive, but gasoline prices have remained elevated for a prolonged period of time, causing concerns that gasoline consumption could decline.

Meanwhile, in Japan's petrochemical industry, the market remained strong, while demand for high performance products was firm. At the same time, general industries including general purpose chemicals saw a recovery in capital investments on the back of the moderate economic recovery.

We forecast an increase in turnaround maintenance this fiscal year (ending March 31, 2019) over the previous year (ended March 31, 2018), work for plant resilience measures, and modification work for measures to deal with aging facilities and stable operations, not to mention ongoing construction work on new plants for the production of high performance products. For these reasons, we prioritized capturing orders for these types of work and strived to secure profits by reducing cost price of direct construction costs and ongoing cost reductions in the face of factors behind rising material, payroll, and outsourcing costs.

As for the Group's performance during the first half under review, new contracts increased 10.8% year-on-year to 51,399 million yen, and works completed, which accounts for net sales, declined 2.8% year-on-year to 43,789 million yen. In addition, operating income totaled 3,588 million yen (up 1.7% year-on-year), ordinary profit was 3,706 million yen (up 0.2% year-on-year), and profit attributable to owners of parent for the first half came in at 2,449 million yen (down 0.8% year-on-year).

Although we will forgo our interim dividend, our business results have been solid; therefore, we plan to offer a year-end dividend of 42 yen per share, up 10 yen per share from 32 yen per share forecast at the beginning of the year. This amounts to a consolidated dividend payout ratio of 40.4%.

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