Toray Reaches an Agreement with Boeing to Supply Carbon Fiber Composite Materials

May. 26, 2004

Toray Reaches an Agreement with Boeing to Supply Carbon Fiber Composite Materials
- Approximately 3 billion US dollars for B7E7-

Toray Industries, Inc. has agreed with Boeing Inc. of the U.S. for the supply of carbon fiber composite materials to be used in the primary structural elements of the B7E7 Dreamliner, a next-generation medium-size aircraft scheduled to enter service in 2008. Based on the agreement, Toray is to supply carbon fiber composite materials to Boeing from 2004 through 2021, total 18 years.

During the period, Toray will provide Boeing with carbon fiber prepreg, a sheet made from epoxy resin pregnated in carbon fiber. The total value of the supply is estimated to reach approximately 3 billion US dollars. This figure will increase still further if another composite materials get approval from Boeing.

Boeing has selected Toray as the sole supplier of carbon fiber reinforced plastics for the primary structures of the B7E7 aircraft. In 1982, Boeing adopted Toray’s carbon fiber “TORAYCA” for the secondary structural elements of its B757 and B767, and since 1992 has been using “TORAYCA” prepreg for the primary structural elements of B777. These have been decisive factors in Boeing’s project that Boeing’s high evaluation for the superior performance of “TORAYCA” carbon fiber and “TORAYCA” prepreg, as well as the two companies’ long reliable business relationship.

The B7E7 Dreamliner is being described as an “All Composite Airplane.” Based on the “Point to Point” carrier concept, which allows an airplane to offer passengers non-stop travel between destinations, the B7E7 is now undergoing development for the aims of improved fuel efficiency and extended flight range through weight reduction. Energy-saving through incorporation of a lighter fuselage is the most important factor, and the fuselage of the B7E7 is expected to make extensive use of light-weight, strong and highly durable advanced composite materials. “TORAYCA” prepreg, which is a combination of Toray-developed high-strengthened carbon fiber “TORAYCA” and toughened epoxy resin, has been used for the primary structural areas of the B777 empennage and floor beams. Boeing has selected Toray’s advanced composite materials for almost all primary structural parts of the B7E7, including wing and fuselage. Accordingly, in comparison with existing airplanes, the B7E7 will incorporate a substantially increased quantity of carbon fiber composite materials.

In line with the material approval and long-term supply agreement with Boeing, Toray Composites (America), Inc. (TCA), Toray’s prepreg manufacturing and marketing base in the U.S., will supply Boeing with “TORAYCA” prepreg. Prior to this, with approximately 16 billion yens of strategic investments, Toray had proactively decided to expand production facilities of PAN-based carbon fiber and prepreg in the U.S. to meet the requirements of operations scheduled for the beginning of 2006. Toray Carbon Fibers America, Inc. (CFA), Toray’s carbon fiber production base, will build a new production facility for PAN precursor, a raw material of carbon fiber, and double the size of its production facility for carbon fiber, while TCA will double its production facility for prepreg, thus enabling the company to establish an integrated production system from PAN precursor to prepreg. In France, Toray has invested about 8 billion yen in the projects for increasing production capacity for carbon fiber at SOFICAR, and at the same time increasing production capacity for PAN precursor at the Ehime Plant, with the intention to capture the growing demand for carbon fiber products globally. Both the French and Japanese new facilities are scheduled to come on stream in October 2004.

Toray started implementation of its new mid-term management reform program “Project NT - II” in April 2004. As part of the program, the company is focusing on “Expanding Advanced Materials Businesses,” “Expanding and Reinforcing Global No.1 Businesses” and “Expanding Overseas Businesses.” Among the strategic businesses, the carbon fiber composite material business is a core activity for the company. On the basis of the agreement with Boeing, Toray will further strengthen its partnership and the leading power of carbon fiber manufacturer based on the managerial framework of a global operation system comprising production bases in Japan, the U.S. and Europe.

<Reference>
Toray’s annual production capacity of PAN-based carbon fiber (Tons per year)

	Current	Oct. 2004	Beginning of 2006
Japan (Ehime Plant)	4,700	4,700	4,700
France (SOFICAR)	800	2,600	2,600
U.S.A. (CFA)	1,800	1,800	3,600
Group Total	7,300	9,100	10,900

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