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To Our Shareholders and Investors (2017)

Junichi Takahashi, President & Representative Director

  I would like to take this opportunity to thank you sincerely for your continued patronage.

  As the core of the agrichemical business of the Idemitsu Kosan Group, SDS Biotech K.K. engages in business activities that focus on the protection of useful plants and animals and prevention of epidemics through research and development in the area of life science. Ever since the company's founding in 1968, we have consistently continued to deliver safe and effective products in our aim of contributing to "increasing food demand" and ensuring "food safety and security."

  Under the business environment surrounding the agrochemical industry, demand for farm products is growing in response to a worldwide population increase and economic growth in developing countries, as well as increased demand for biofuel, and the industry is expected to continue to grow in the medium to long term.
  Under these business circumstances, our Group is not only strengthening its domestic earnings base, but is promoting the restructuring of its earnings base for global development. Specifically, besides strengthening the supply networks for Daconil technical with capital contributions to two Chinese entities, it is aiming to strengthen the structure of the global earnings base with the overseas development of Benzobicyclon, which was registered in the US on April 20.

  Our Group saw a slowdown in shipments due to delays in the shift to new Benzobicyclon mixtures in the paddy herbicide field in Japan and in the registration of agrochemicals outside Japan. This was despite robust shipments of the Company’ mainstay product Daconil technical and its intermediate IPN, attributable to a global increase in demand for Daconil. In addition, SDS Ramcides CropScience Private Limited, a consolidated subsidiary in India, reported a loss due to sluggish net sales caused by the impact of inventory adjustments for unfavorable weather in the previous period and low occurrence of pests. Since this had caused significant deviation from the sales plan developed at the time of acquisition, the Group recognized an impairment loss on goodwill on a consolidated basis, recording an impairment loss of 778 million yen as extraordinary losses.
  For the period under review, as a result, consolidated net sales were 14,988 million yen, consolidated operating income totaled 734 million yen, consolidated ordinary income was 561 million yen and consolidated net loss attributable to owners of parent came to 203 million yen.

  To restructure the management of Ramcides, we have seconded from our personnel a staff member to become its president, in order to provide general leadership to its management. We will not pursue sales revenue, but aim to improve the financial structure, and will ensure financial restructuring is achieved reliably through fund collection and reducing borrowings while making positive free-cash flow the top priority. We will also endeavor to proactively promote domestic sales expansion of the Daconil business and overseas development of Benzobicyclon, which are key elements of our growth strategy. At the same time, we will introduce new products that meet the needs of our customers in the Greenery-Related Products business, thus reinforcing our business earnings base.

  Our dividend policy is to continue returning profits, if not greater than at a constant level, to our shareholders. Based on this principle, we will strive to stably distribute dividends in consideration of mid- and long-term earnings, etc. At the same time, we are committed to ensuring fair disclosure and strengthening corporate governance to further enhance our corporate value.
  We would greatly appreciate your continued guidance and support in our endeavors.

   June 2017
   Junichi Takahashi
   President & Representative Director