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| October 7, 2009 |
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| September 28, 2009 |
| Mitsubishi Rayon Co., Ltd. |
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Announcement of transfer of shares in subsidiary |
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By resolution of the Board of Directors of Mitsubishi Rayon Co., Ltd. (MRC) held on September 28, 2009, MRC will transfer the equity stake it holds in its consolidated subsidiary Ningbo Rayon Acrylic Fibers Co., Ltd.(hereinafter Ningbo Rayon) to Nantong Zhongxin Textile and Dyeing Co., Ltd. and Fordking Limited of Hong Kong.Details are given below. |
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| 1. Reasons for transfer of equity stake |
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The Mitsubishi Rayon Group is currently pursuing the restructuring of its acrylic fiber operations as a priority issue under the Group's current three-year management plan, which ends in March 2011. As part of this restructuring program, we have reduced the scale of production at our Otake Production Center, located in Hiroshima Prefecture, and have withdrawn from spinning operations, which were conducted at overseas locations. In addition, we have applied impairment accounting to fixed assets (plant and equipment) at the Otake Production Center and at Ningbo Rayon Acrylic Fibers Co., Ltd., which is located in the city of Ningbo, Zhejiang Province, China. In the face of declining demand for acrylic fibers in the Chinese market, Ningbo Rayon has been scaling back its production for some time, and production was halted this May. The management of the company are currently examining the question of whether or not to resume production, but regardless of their decision, there will be no resumption of growth in scale of the acrylic fibers business, in view of the weakening of demand around the globe as acrylic fibers lose ground to competing materials.
Against this backdrop, we have determined to focus production activity at the Otake Production Center on high-value-added fibers to achieve improved profitability.We believe it is unlikely that Ningbo Rayon will be able to resume profitable production operations through its own efforts, in consideration of the fiercely competitive market it faces in China. Nantong Zhongtin Textile and Dyeing Co., Ltd. recently made a proposal to buy the Company's equity stake in Ningbo Rayon. In view of the circumstances, we have decided to agree to this proposal, and to sell MRC's shares in Ningbo Rayon to Nantong Zhongtin Textile and Dyeing Co., Ltd. as detailed below.
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| 2. Subsidiary to be subject to change of ownership |
| 1. Name |
Ningbo Rayon Acrylic Fibers Co., Ltd. |
| 2. Address: |
Liya Road 26, Qingzhi Industrial Zone, Beilun Area, Ningbo, Zhejiang, China |
| 3. Representative: |
Shimpei Haratake |
| 4. Lines of business |
Production and sale of acrylic fibers |
| 5. Paid-in capital |
US$138 million |
| 6. Establishment |
March 7, 2003 |
| 7. Equity stake of main shareholder (the Company) |
100% |
| 8. Relationship between MRC and Ningbo Rayon |
Capital relationship |
Ningbo Rayon is a whollyowned subsidiary of MRC |
| Personnel relationship |
All members of the board of directors of Ningbo Rayon are employees of MRC |
| Transactional relationship |
Nothing of note |
| 9. Business performance and financial position of Ningbo Rayon for the past 3 years (currency: renminbi [unit - million yuan]; fiscal year ends December 31) |
| Fiscal year |
FY2006 |
FY2007 |
FY2008 |
| Net assets (accumulated deficit) |
252 |
184 |
(349) |
| Total assets |
840 |
717 |
216 |
| Sales |
403 |
638 |
110 |
| Operating (loss) income |
(106) |
(53) |
(128) |
| Ordinary (loss) income |
(130) |
(68) |
(154) |
| Net loss (loss) income |
(130) |
(68) |
(671) |
| Dividends paid |
- |
- |
- |
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| 3. Counterparties to transfer of equity shares |
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| 1. Name |
Nantong Zhongxin Textile and Dyeing Co., Ltd. |
| 2. Address |
Jiangsu, China |
| 3. Representative |
Zhu Wei Qiang |
| 4. Business lines |
Production of acrylic fiber, wool fibers, knitted goods, and viscose rayon. Processing and sale of cotton textile, synthetic fiber, and wool products as well as their raw materials. Sale of dyes and textile printing agents (excluding dangerous chemical substances). Dyeing on consignment. |
| 5. Paid-in capital |
38 million yuan (renminbi) |
| 6. Established |
November 17, 2000 |
| 7. Net assets |
260 million yuan |
| 8. Total assets |
470 million yuan |
| 9. Equity stakes of main shareholders |
Zhu Wei Qiang, 95%
Zhou Wei Fang, 5% |
| 10. Relationship between MRC and Nantong Zhongtin Textile and Dyeing Co., Ltd. |
Capital relationship |
Nothing of note |
| Personnel relationship |
Nothing of note |
| Transactional relationship |
Sale of acrylic fibers |
| Related-party transactions |
Neither Nantong Zhongtin Textile and Dyeing Co., Ltd. nor its affiliates, nor its directors and employees as individuals, fall into the category of related parties of MRC. |
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| 1. Name |
Fordking Limited |
| 2. Address |
Hong Kong |
| 3. Representative |
Zhu Wei Qiang |
| 4. Business lines |
Sale of acrylic fibers, nylon fibers, and other synthetic fibers |
| 5. Paid-in capital |
n.a. |
| 6. Established |
February 18, 2004 |
| 7. Net assets |
US$4 million |
| 8. Total assets |
US$4 million |
| 9. Equity stake of main shareholder |
Zhu Wei Qiang, 100% |
| 10. Relationship between MRC and Fordking Limited |
Capital relationship |
Nothing of note |
| Personnel relationship |
Nothing of note |
| Transactional relationship |
Sale of acrylic fibers |
| Related-party transactions |
Neither Fordking Limited nor its affiliates, nor its directors and employees as individuals, fall into the category of related parties of MRC. |
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4. Details of equities to be transferred |
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| 1. MRC's equity stake prior to transfer |
US$138 million (100%) |
| 2. Value of equity shares to be transferred |
US$138 million (shares to change hands at transaction price of approximately ¥1,500 million *) |
| 3. MRC's equity stake subsequent to transfer |
Value: zero (0%) |
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| * Transfer price is determined on the basis of net worth of Ningbo Rayon (i.e. paid-in capital plus balance of deposits [renminbi-denominated]) as of September 30, 2009. Payment will be made in US dollars. Equity stakes after share transfer will be 75% for Nantong Zhongtin Textile and Dyeing Co., Ltd. and 25% for Fordking Ltd. |
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5. Schedule |
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| 1. Resolution of Board of Directors |
Meeting of September 28, 2009 |
| 2. Period for share transfer * |
Early to mid-November 2009 |
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| * Date for the transfer will be determined following approval of the share transfer by the Chinese authorities. |
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6. Extraordinary gain to be posted |
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| For the third quarter (Oct.-Dec.) of fiscal 2009 (the year ending March 31, 2010), during which the share transfer will take place, an extraordinary gain of approximately ¥1,400 million will be posted by MRC in its consolidated accounts. As this figure has been recognized as an impairment loss on fixed assets of Ningbo Rayon for prior years, the corresponding amount has already been deducted from the balance-sheet amount. The impact of this change on the Group's business performance forecasts for fiscal 2009 will be made public when a reasonable estimate is available. |
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| For further reference: |
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| FY2009 business performance forecasts for MRC on a consolidated basis (forecasts as of August 7, 2009) |
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| [Unit - million yen] |
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Sales |
Operating income |
Ordinary income |
Net(loss) income |
| Full term |
¥370,000 |
¥4,600 |
¥500 |
(¥1,000) |
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| FY2008 business performance of MRC on a consolidated basis |
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| [Unit - million yen] |
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Sales |
Operating (loss) income |
Ordinary (loss) income |
Net (loss) income |
| Full term |
¥345,048 |
(¥7,612) |
(¥3,758) |
(¥28,950) |
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| For further inquiries, please contact: |
| Public and Investor Relations Office |
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