Economy Report

The Medium-term Business Plan for Business Restructuring III

Results of the DOWA group

We actively invested in M & Afs and in enhancement of production equipment and facilities and promoted various activities, in order to strengthen existing and ongoing businesses and expand our growth areas of business, in the second year of the three-year medium-term business plan titled as gBusiness Restructuring III ? Jump up to the New Stage ?.h We also strived to increase revenues by introducing new products and reducing costs in connection with soaring prices of raw materials and other materials.

Current consolidated sales increased by 4% year-over-year to 475,826 million yen; consolidated sales profit decreased by 9% year-over-year to 44,319 million yen; consolidated operating profit decreased by 10% year-over-year to 44,888 million yen and current consolidated net profit decreased 7% year-over-year to 24,520 million yen.

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Main Investments

Construction of new smelting and refining equipment and facilities in Kosaka Smelting and Refining that serve for recycled raw materials

In August 2007, the new 12 billion yen smelting and refining equipment and facilities for recycled materials completed in Kosaka Smelting and Refining Co., Ltd. The production started in April 2008 after the commissioning period.

Construction of a new furnace in ECO-SYSTEM Chiba

A new furnace with capacity of 600 tons per day is now being constructed in ECO-SYSTEM Chiba, the main base of waste processing in the Kanto area. Completion is expected in October 2008 and the facilities will offer an annual waste processing capacity of a million tons across the entire DOWA group.

Construction of a nitride semiconductor plant

A new production plant of nitride semiconductors was completed in DOWA Semiconductor Akita Co., Ltd., the production base of our semiconductor business (Construction started in February 2007). This will enhance our product lines significantly, combined with our top market share product of gallium-arsenic semiconductors.

A processing and sales company of copper elongation goods was established in Thailand and it started construction of its plant there.

A local processing and sales company of copper elongation goods (Dowa Metaltech (Thailand) Co., Ltd.) was established in Thailand in 2006 and it started construction of its plant in summer of 2007. We aim at expanding our business on a global basis in the future by building a supply system covering the entire Asian region, focusing on Thailand as our Asian center.

Results by business unit

Smelting and refining Engagement for stabilizing our business infrastructure, including implementation of new Kosaka process and enhanced recycling business of zinc.
Environment and recycling Expansion of business including construction of new furnace for waste processing and expansion of recycling processing menus
Electronic materials Accelerating development of nitride semiconductors and nano- metal powders in addition to existing product of metal powders
Metal processing Active investment including acquisition of the shares of DOWA METANIX and expansion on a global basis, including cooperation of the Thai plant
Heat treatment Establishment of heat treatment bases both in Japan and throughout the world and the development of s new furnace to reduce environmental load in our industrial furnace business unit