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Message from President & CEO

Ensuring the achievement of Both “Quantitative Growth” and “Qualitative Transition” of our business activities based on our prominence in technology and quality, we will realize sustainable growth in line with the efforts to fulfill our social responsibility

The Sekisui Chemical Group celebrated its 70th anniversary in March 2017. The Group was first established with the aim of promoting the comprehensive commercial application of plastics, which was a new and innovative material in Japan at that time.

Since its founding, the Sekisui Chemical Group has endeavored to create value for society through business activities, one of the “3S principles” embodied in its Corporate Philosophy, by providing various products and services that help solve problems that arise in people’s daily lives and throughout society.

In the future, we will maintain our focus on improving people’s lives and the global environment. Making every effort to earn the trust of society through our prominence in technology and quality, we will continue to take up the challenge of forging a presence that is strong enough to last a century.

Record-High Operating Income for a Fourth Year

Looking at the Sekisui Chemical Group’s performance in fiscal 2016, resolute efforts by the Urban Infrastructure & Environmental Products (UIEP) Company to carry out structural reforms, centered largely around the withdrawal from unprofitable businesses, contributed significantly to earnings. As a result, successful steps were taken to boost operating income, which came in at 96.5 billion yen. This represented an eighth consecutive year of increased profit as well as record-high operating income for four fiscal years in a row. Profit in the High Performance Plastics (HPP) Company grew year on year owing mainly to the upswing in volume and improvements in the product mix primarily in four strategic business fields. An increase in orders contributed to the results in the Housing Company, which reported profit growth for the first time in two fiscal years.

Fiscal 2016 was the final year of the SHINKA!-Advance 2016 Medium-term Management Plan, which was initially launched in fiscal 2014. At the start of the Plan, we identified the fiscal 2016 operating income target of 100 billion yen. Other goals for the final year of the Plan included an operating income ratio of 8.0% and an ROE of 10.0%. With results for operating income, the operating income ratio, and ROE coming in at 96.5 billion yen, 9.1%, and 11.3%, respectively, the Sekisui Chemical Group has for all intents and purposes achieved its established goals.

Ensuring the Achievement of Both “Quantitative Growth” and
“Qualitative Transition” while Working Toward SHIFT 2019 -Fusion-Medium-term Management Plan

With an eye to future growth, trends in those products in particular that are expected to underpin the Group’s performance five or more years from now under the previous medium-term management plan were sluggish. In light of these trends, the Sekisui Chemical Group has put in place the SHIFT 2019 -Fusion- Medium-term Management Plan, a three-year plan that commences in fiscal 2017. Under this new plan, we will promote quantitative growth that looks beyond the timeframe of the plan while at the same time undertaking a qualitative transition in a bid to secure high profitability.

As far as quantitative growth is concerned, we will actively engage in forward-looking growth investment with a view to boosting both sales and profitability. As a part of efforts to undergo a qualitative transition, we will work to improve profitability by implementing a variety of measures including the reorganization of our manufacturing structure together with the allocation of resources to promising fields. Through these means, we will target an operating income ratio of 10% or more.

Guided by the Medium-term Management Plan, the Sekisui Chemical Group is taking one step forward toward a new phase of growth and achieving net sales of 2 trillion yen and operating income of 200 billion yen during the 2020s.

In naming the Medium-term Management Plan, we have incorporated the word “SHIFT” to indicate our commitment to shifting the quality of growth. In this regard, we have identified the twin goals of ensuring the achievement of both quantitative growth and the qualitative transition of our business activities, and realizing sustainable growth in line with efforts to fulfill our social responsibility. Moreover, the letters that make up the word “SHIFT” are the first letters of the five components of our basic strategy that will allow us to achieve our twin goals.

As a part of this basic strategy, which is designed to help crystallize the achievement of quantitative growth and a qualitative transition, we have set up a new business portfolio based on the two core axes of our Group Vision: prominence in technology and quality as well as contributions to the lives of people and the global environment.

Prominence in technology and quality indicates the axis of maintaining our competitive edge, and contributions to the lives of people and the global environment indicates the axis of the potential and possibility to cultivate markets. Our aim is to create as many star businesses positioned high at each axis as possible. To ensure a portfolio of 10 or more star businesses in fiscal 2019, we will actively engage in the development of new products and applications while undertaking strategic investments and pursing M&As. Another key word that we have positioned to accelerate each of these activities is “Fusion.” Through the fusion of technologies, opportunities, and resources that extend beyond company boundaries both internally and externally, we will ramp up pace at which each action is undertaken.

We have identified key quantitative management targets for fiscal 2019, the final year of our Medium-term Management Plan. In specific terms, we will make every effort to secure net sales of 1,200 billion yen, operating income of 120 billion yen, and ROE of 12%. In fiscal 2017, the first year of the Plan, we aim to secure net sales of 1,104 billion yen, operating income of 102 billion yen, and net income attributable to owners of parent of 63 billion yen. This includes record-high operating income in each of the HPP and UIEP companies.

Embarking on Efforts to Strengthen Our Business Base while Promoting Diversity

The Sekisui Chemical Group will further strengthen its environmental, social, and governance (ESG) initiatives in a bid to realize sustainable growth in line with efforts to fulfill its social responsibility throughout the period of the Medium-term Management Plan.

As a part of these efforts, the Group revised its CSR conceptual scheme at the start of the plan. With a view to integrating our CSR and business activities, we have codified our Principles together with our approach to CSR. Steps are also being taken to reorganize our overall structure in line with this approach.

First, we have positioned governance as the foundation of our CSR approach. In this regard, we will reinforce the necessary mechanisms that will allow us to make proper and resolute decisions as we work toward securing sustainable growth. In our overseas operations, which are expected to expand even further in the future, we will bolster our governance structure. In specific terms, we will strengthen and newly establish functions of the Group’s regional headquarters while at the same time promoting increased awareness and understanding of our Principles.

Building on this governance foundation, we have clearly stipulated our commitment through a Pledge to Society regarding safety, compliance and respect for human rights, and our working environment. This Pledge to Society embodies our efforts to fulfill our social responsibility through every facet of our business processes. The Sekisui Chemical Group will place the utmost importance on workplace safety to ensure the peace of mind of its employees and the local community. At the same time, we will engage in fair and honest corporate activities as well as CSR procurement that maintains a deep respect for human rights. We will also build healthy and invigorating workplaces as well as systems.

Furthermore, we will utilize our three prominences in the environment, CS Quality, and human resources in a bid to solve social issues through our business activities. From the perspective of the environment, we will expand contributions to the return of natural capital. In addition to lifting the sales ratio of environment-contributing products based on the concept of Sustainable Development Goals (SDGs) to 60% in 2019, we have established an energy saving investment framework geared toward reducing greenhouse gas emissions of 12 billion yen over the three-year period from fiscal 2017 to fiscal 2019. As far as CS Quality are concerned, we will return to our roots and place the utmost emphasis on customer feedback as the beginning of our manufacturing while providing products and services that inspire. Taking into consideration human resources, and in particular diversity management, we are rolling out our Diversity Management Policy, which was first formulated in fiscal 2015, across the Group as a whole. In fiscal 2016, the Sekisui Chemical Group focused on putting in place an organizational culture that would help realize diversity. This included developing support programs that would allow diversity promoters to take the initiative in pushing forward diversity in each of their organizations. In an effort to empower women, considerable effort has been made to expand opportunities that allow women to excel. Starting from the active hiring process, this effort encompasses career education programs for female employees. Thanks largely to these endeavors, we are seeing steady increases in such key indicators as the ratio of women among newly hired employees, retention rates, and the number of women in management positions. These initiatives are also attracting increased external acclaim. In fiscal 2016, Sekisui Chemical was selected as a Nadeshiko brand by Ministry of Economy, Trade and Industry (METI) and Tokyo Stock Exchange, Inc. In recognition of its proactive efforts to employ individuals with disabilities, our Group company was selected for the METI Minister Award program of the New Diversity Management Selection 100 sponsored by Japan’s Ministry of Economy, Trade and Industry (METI).

Enhancing Corporate Value and Providing Increased Value to Society

As mentioned earlier, the SHIFT 2019 -Fusion- Medium-term Management Plan revolves largely around the need to balance the value for the Company with the value for society as a part of efforts to secure the sustainable growth not only of the Group, but also of society. It is therefore important to avoid any gap between them.

With this in mind, it is absolutely vital that we promote earnest dialogue with stakeholders, work to foster deep and mutual understanding, and increase the number of opportunities through which we can gain new knowledge as well as important feedback from stakeholders.

Fiscal 2017 is the first year of our Medium-term Management Plan in which we will embark on a new phase of growth. In addition to the steps taken to improve profitability (undertake a qualitative transition), we will endeavor to simultaneously pursue quantitative growth in line with profitability. As we work toward expanding the scope of our business throughout the 2020s, we undergo a major shift in our management direction.

In order to achieve our targets, we will further strengthen our business base. Working in unison, we will redouble our efforts and focus especially on fostering personnel (Prominence in Human Resources), increasing customer satisfaction (Prominence in CS Quality), and contributing to the return of natural capital (Prominence in the Environment).

As we work toward achieving our established goals, we kindly ask for the continued support and understanding of all stakeholders.

Enhancing Corporate Value and Providing Increased Value to Society
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