During the first half of the fiscal year ending March 31, 2018 (fiscal year 2017), the Japanese economy continued to follow a recovery trajectory, underpinned by continuing improvement in employment and income levels, along with signs of an upturn in personal consumption and capital investment. Overseas economies trended firmly as a whole, supported by moderate growth in Europe and the U.S., as well as in Asia and certain other regions.

In these circumstances, the NOF Group (the “Group”) sought to “Greater Progress”. To this end, the Group embraced “the creation and expansion of innovative value” as the basic policy of the “2019 Mid-Term Management Plan,” a new three-year plan that started in the fiscal year ending March 31, 2018 (fiscal 2017). In parallel, the Group advanced the plan’s key themes: “Creating products and markets,” “Improving productivity,” “Enhancing Group management,” and “Promoting CSR activities.” At the same time, the Group undertook extensive management efforts toward sustainable growth to explore new markets by leveraging its high-function, high-value-added products, to expand sales of such products and to reduce production costs.

In the first half of fiscal 2017, consolidated net sales rose year on year, while consolidated operating income decreased due to lower sales of products in the explosives & propulsion segment and other factors. Consolidated ordinary profit and profit attributable to owners of parent both increased year on year.

In the second half of fiscal 2017, the Japanese economy is expected to remain on a gradual recovery path based on continued improvement in employment and income levels, along with solid public works spending and an upturn in production and exports. Meanwhile, the outlook will remain uncertain, due to factors such as the impact of trends in U.S. government policy and international geopolitical developments.

In each of its three prioritized fields of life sciences, electronics/IT and environment/energy, the Group will flexibly adapt to changes in the business environment and promote the creation of new products and new markets as well as the enhancement of productivity. We thereby aim to evolve further as a functional materials manufacturer that can provide unique products to the global market and continue our efforts to be a trusted business group with a strong presence.

We kindly ask all shareholders for your continuing support and guidance.
December 2017