R&D Spending Slows Kyowa Hakko Profits

R&D Spending Slows Kyowa Hakko Profits

TOKYOKyowa Hakko Kogyo Ltd. (TOKYO:4151) reported fiscal year 2005research spending was up 14.3 percent over 2004 amounts, leading to slightlydeclined net sales and income. Revenues fell 1.5 percent to $353.4 billion yen,while earnings dipped 7.2 percent to $38.7 billion yen. In its bio-chemicalsbusiness, which includes amino acid raw materials, sales decreased 0.6 percentwhile operating income fell 40.7 percent, reflecting increased price competitionand higher raw material and fuel prices. More specifically, the company citedweak domestic demand for beverage-use amino acids, despite growth in amino acidhealth foods overseas. Kyowas food business also suffered declines, as salesdecreased 4.6 percent and operating income dropped 3.6 percent.

Fiscal 2005 was the first year of the business plan that we announced inMay last year, said Yuzuru Matsuda, president. In a challenging operating environment we exceeded our business planprofit target for fiscal 2005, and we expect to do so again in fiscal 2006. Wewill continue to invest to achieve sustained growth, by taking further steps toadvance our research and development, invest in production facilities, promotesales growth, and implement cost reductions as we build the foundations forsustained growth in shareholder value.

Kyowa (http://ir.kyowa.co.jp/english/index.cfm) expects its bio-chemicalbusiness to increase in fiscal 2006, due to development strategies to broadensales of amino acids, coenzyme Q10 (CoQ10) and various health care products. Italso forecasts increase in its food business, with increased sales volume fornatural seasonings for take-out food and foodservice industries.