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Message from the President and CEO

Hitachi Chemical will continue to change how we compete while relentlessly creating innovation to increase corporate value.

President and Chief Executive Officer Hisashi Maruyama

I would like to thank all of our shareholders for their continued support of the Company.

In fiscal 2017, solid conditions were seen throughout the global economy. In the United States, economic growth continued against a backdrop of strong consumer spending. In Europe, recovery continued to be driven by consumer spending and exports. China and other emerging countries also enjoyed strong economic conditions. Japan, too, experienced ongoing economic recovery, which was supported by increases in exports and capital expenditures.

In this environment, the Group moved forward with the three-year Medium-term Management Plan kicked off in fiscal 2016 with an eye to building solid operating foundations for supporting sustainable growth. Under this plan, we put forth the policies of “cultivate top share business by changing method of competition” and “accelerate commercialization through Open Innovation.” We acted in accordance with these strategies as we implemented measures for drawing out the benefits of Niche and Cluster Strategies, strengthening our capacity to launch new products and businesses, and growing our business through mergers, acquisitions, and alliances. The goal of these efforts was to create new value.
Specifically, we decided to bolster our production capacity for slurry for chemical mechanical planarization and copper-clad laminates. This move was aimed at expanding operations dealing in semiconductor materials anticipated to see future growth in demand stimulated by social trends, such as the transition to high-speed 5G communications, the shift toward electric vehicles, and the advent of self-driving cars. At the same time, we utilized the Open Laboratory for Semiconductor Packaging Materials to develop the materials and packaging processes that will be necessary to the practical application of next-generation semiconductors together with semiconductor and equipment manufacturers. Meanwhile, our quantum dot film, a new product that makes it possible to display more vivid images, was adopted for use in high-resolution televisions. We also realized practical application of our exterior plastic molded foam technology, which allows for lighter automobiles while maintaining the rigidity and appearance required of automotive molded plastic products.
At the same time, the Company moved ahead with mergers and acquisitions. In July 2017, ISOLITE GmbH, a Germany manufacturer and distributor of thermal insulation for automobiles, aircraft and other industrial applications, was converted into a consolidated subsidiary. We then welcomed another consolidated subsidiary in the form of Thai Storage Battery Public Company Limited, a company in Thailand that manufactures and sells automotive and industrial lead-acid storage batteries, in September of the same year. The incorporation of these two companies into the Group enabled us to bolster our development and manufacturing bases for automotive products and energy storage devices and systems while expanding related sales network on a global scale. In addition, we consolidated PCT, LLC, a Caladrius Company, which is now Hitachi Chemical Advanced Therapeutics Solutions, LLC, in May 2017. The consolidation of this U.S. company, which performs contract manufacturing of regenerative medicine-related products, was to facilitate our entry into the regenerative medicine business. We also converted Kyowa Medex Co., Ltd., into a consolidated subsidiary in January 2018. Kyowa Medex develops, manufactures, and sells in vitro diagnostic drugs, a type of diagnostic medicine, for diagnosing diseases such as hyperlipidaemia and diabetes. The acquisition of this company was meant to strengthen our foundations in the diagnostic medicine business.

Consolidated revenue in fiscal 2017 increased 21% year on year, to ¥669.2 billion. In addition to the measures I just mentioned, revenue was also buoyed by higher demand for semiconductor materials, copper-clad laminates, and carbon anode materials for lithium ion batteries as well as the benefits of newly acquired consolidated subsidiaries. Conversely, operating income decreased 13%, to ¥46.2 billion, and net income attributable to owners of the parent was down 10%, to ¥36.3 billion. Factors behind the lower income included soaring raw material prices, an inability to take full advantage of synergies with newly acquired consolidated subsidiaries, and the recording of fines and other expenses in relation to prior cartel activities in the Groupís capacitor operations. These factors offset the income-boosting benefits of higher sales volumes and ongoing cost reductions.

As for the year-end dividend for fiscal 2017, we chose to issue a year-end dividend of •30 per share, the same level as in the previous fiscal year. Combined with the interim dividend, this will make for annual dividends of •60 per share, through which we hope to repay shareholders for their support.

Looking ahead, ongoing growth is expected to be seen in the global economy and in the domestic economy. Regardless, the outlook remains opaque given concern for trade issues between the United States and China and the trends in negotiations regarding the United Kingdomís withdrawal from the European Union as well as the geopolitical risks in East Asia.

Even amid these conditions, the Group is committed to implementing the basic policies of the Medium-term Management Plan, namely “cultivate top share business by changing method of competition” and “accelerate commercialization through Open Innovation,” in fiscal 2018, the planís final year. We thereby intend to relentlessly create innovation in order to achieve growth that exceeds the growth rate of the market while also bolstering earnings capacity.

I am deeply grateful that you, our shareholders, continue to offer us your support and understanding.

President and Chief Executive Officer Hisashi Maruyama

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