News Release 2015

Rationalization of Carbon and Ceramics Segment

Capacity for Graphite Electrode Production to be Reduced Substantially and

Used for Fine Carbon and Functional Material


August 5, 2015

Tokai Carbon Co., Ltd. (the "Company") hereby announces its decision to implement reorganization of its three domestic plants (Hofu Plant, Shiga Plant, and Tanoura Plant) in the graphite electrode, fine carbon, and functional material (negative electrode materials for lithium-ion secondary batteries "LiB negative electrode materials") segments incrementally by 2018.
The rationalization plan, which efficiently utilizes the graphite electrode production processes and optimizes the production systems of each segments in accordance with respective changes in each business environment, aims to increase the Company's earnings by reducing capital expenditure to one third the cost (savings of approximately 7 billion JPY) which will be required if each of the segments made independent investments to meet respective future market demands.

1. Overview of reorganization of three domestic plants

(1) Graphite electrodes: Hofu Plant (Yamaguchi Prefecture) and Shiga Plant (Shiga Prefecture) The graphite electrode business continues to suffer from structural depression. Under such
circumstances, the Company will reduce the current 60,000 tons per year production capacity (total of Hofu and Shiga) by slightly less than 40%, to 38,000 tons per year. The surplus capacity created by this reduction will be transferred for the manufacturing of fine carbon and LiB negative electrode materials.
(2) Fine carbon: Tanoura Plant (Kumamoto Prefecture)
Inefficient, obsolete facilities will be disposed of, manufacturing of isotropic graphite will be concentrated in the newest facilities, and part of isotropic graphite manufacturing will be transferred to the Hofu Plant and extruded material manufacturing will be transferred to Shiga Plant, aiming to maintain stable quality, increase productivity, and improve cost competitiveness.
Through this scrap-and-build project, the production capacity for isotropic graphite will reach approximately 11,000 tons per year when Tanoura and Hofu Plants are combined, which will be at the top level in the industry.
The productivity for extruded materials will be raised by using the production line of the electrode plant.
(3) LiB negative electrode materials
To meet medium- to long-term demand for in-vehicle products, the use of heat treatment facilities at Hofu Plant will be increased and production capacity will be maintained with minimal capital investment.
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2. Background and objectives of domestic plant reorganization

Low selling prices caused by chronic oversupply continues in the market of graphite electrodes used for electric steelmaking furnaces. As a further decline in demand and intensified competition are expected in the near future, the Company has positioned the continuous recovery and improvement of its profitability in the graphite electrode segment as its most important task and decided to drastically cut down its production capacity.
Meanwhile, the fine carbon segment urgently requires a reduction of unnecessary expenses by disposing of obsolete facilities, etc. and an increase in productivity, as a trend of recovery is evident in the products for solar batteries and semiconductors, for which increased demand is expected in the near future.
Further, significant medium- to long-term growth is expected for LiB negative electrode materials in line with increasing demand for in-vehicle products, and the Company will meet future increase in demand by utilizing the surplus graphite electrode facilities and increasing its cost competitiveness to survive fierce competition.
The effect of this plant reorganization on the consolidated financial results of the Company for fiscal
year 2015 will be negligible.

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