Asahi Glass: Progress of the Mid-term Management Plan

AGC today announced the major business activities in 2011, and highlighted the progress of the mid-term management plan, the current business conditions surrounding the AGC Group and the Group´s policy for addressing changing environment.

AGC (Asahi Glass Co., Ltd.; Headquarters: Tokyo; President & CEO: Kazuhiko Ishimura) formulated the mid-term management plan "Grow Beyond-2012" in February 2010 for the realization of the group´s long-term growth picture "AGC´s Aspirations for 2020," and has been working to build foundations for growth.

1. Progress of the Mid-term Management Plan

The AGC Group, in its long-term growth picture, aims to achieve net sales of two trillion yen, and increase the ratio of sales to fast-growing markets, the ratio of environment-related sales and the ratio of sales of new products to 30% each. To realize this growth picture, the AGC Group set two specific initiatives, "building growth foundations" and "boosting profitability of existing businesses," as key action items for 2011 under the mid-term management plan "Grow Beyond-2012" (2010 to 2012). Specifically, the Group was committed to business expansion in fast-growing regions, including the decisions to invest in production facilities for architectural/automotive glass in Brazil and to expand the electrolysis capacity at production facilities in Indonesia, and the launch of the polishing plant operation for TFT LCD glass substrates in China. In addition, the Group was actively engaged in market launch of new products such as Dragontrail, specialty glass for chemical strengthening. Moreover, the Group worked to expand the line-up of high value added products through efforts such as the expansion of energy-saving product line-ups. As a result of these measures, the ratio of sales to fast-growing markets, the ratio of environment-related sales and the ratio of sales of new products were all steadily improved to 19%, 16%, and 8% respectively.

2. Group´s policy for addressing changing environment

Today, the business environment surrounding the AGC Group is changing drastically. The growth of the Flat Panel Display (FPD) market is slowing down as the CRT-FPD replacement demand subsided. Also, due to the economic growth in fast-growing countries, uneven distribution of resources and other problems, resource/energy prices are expected to continue to stay high. In the global economy, a high growth rate is expected in fast-growing markets while advanced economies will likely experience low growth. The AGC Group regards such changing environment not only as challenges to overcome, but also as a business opportunity that the Group should take advantage of. Accordingly, the AGC Group has set the following policy for addressing changing environment to swiftly bring thefinancial results back to a growth track.

Slowdown in the growth of the FPD market

The AGC Group will reinforce the FPD glass substrates business through further productivity improvements in an effort to maintain and secure profitability. By increasing the profitability of the glass and chemicals businesses, the Group will realize a group-wide profit structure by taking advantage of the group´s business portfolio so that the Group will not overly dependent on FPD business. In addition, the Group accelerates its commitment to build growth foundations and secure new profit sources through initiatives such as the development and market launch of new products.

High resource prices

The AGC Group will improve the energy efficiency of its production facilities and achieve greater cost competitiveness by introducing state-of-art energy-saving technologies in glass melting furnaces, electrolysis facilities for chemical products, and other energy intensive facilities. Moreover, the Group recognizes the increasing energy-saving consciousness
triggered by energy problems in the world as a business opportunity, and will accelerate sales expansion of energy-saving related products, such as Eco-glass (Low-E double glazing) and urethane insulation materials.

Uncertain global economic trends

The AGC Group will steadily take advantage of the growth in fast-growing markets such as the countries where the Group already has a presence like Russia, China and Indonesia, and Brazil where the Group decided to launch full-fledged business. In developed countries, the Group will strengthen cost competitiveness through productivity improvements and other efforts, and will promote market launch/sales expansion of high value added products such as high-performance window glass, Dragontrail, and UV Verre Premium for profitability increase.

3. Future action items

Based on the above mentioned policy, the AGC Group will be committed to the Group´s future action items, "Further enhance the Group´s strengths" and "Accelerate the building of growth foundations," as follows.

"Further enhance the Group´s strengths"

At every business segment, the AGC Group will rigorously pursue strength-building measures to boost profitability, including the introduction of innovative, high-efficiency production facilities, the optimization of the operation and geographical arrangement of its production facilities to meet demand trends, the improvement of yield and productivity by scientific method, the improvement of cash flows by inventory reduction, and the increase in investment efficiency. In addition, each business segment will implement the following measures.