Message from the Integrated Report

I joined SEKISUI CHEMICAL in 1987 and began my career as an engineer working on adhesive tape for corrugated cardboard packaging. Since then, I have pursued my career in the High Performance Plastics Company. A major turning point came in 2006, when I was assigned to the United States. As president of a local subsidiary whose performance was struggling at the time, I faced the difficult decision of whether to rebuild the business or withdraw from it. Working together with employees to implement reforms aimed at rebuilding the business, we achieved record-high profit for the first time in 10 years, which gave me tremendous confidence. After returning to Japan, I served as head of the Interlayer Film and Foam Division, and from 2019, as President of the High Performance Plastics Company, I was also involved in the acquisition and PMI of SEKISUI AEROSPACE CORPORATION. I believe the valuable experience I gained through business revitalization, acquisitions, and integration will be of great use in management going forward.

At the Midpoint of Vision 2030 Toward the Launch of Accelerate 2028

In 2020, the SEKISUI CHEMICAL Group announced Vision 2030, which aims to double the scale of our business by FY2030. Today, all Group employees are working as one toward its realization. Under former President Kato, we drove growth over the five years from 2020 and firmly established momentum, including by achieving record-high profits. The year 2026 marks both the exact midpoint of Vision 2030 and the important milestone of launching a new Medium-term Management Plan. Having assumed responsibility for steering management at this juncture, I feel the weight of that responsibility keenly. As its name suggests, the new Medium-term Management Plan, Accelerate 2028 is a three-year period for accelerating growth toward the realization of Vision 2030. I believe my role, having received the baton, is to ensure that we execute this plan.

Through Accelerate 2028, we will turn challenges into tangible results and make a concerted effort to realize Innovation for the Earth, the vision statement set forth in our Long-term Vision, Vision 2030.

Realizing “Innovation for the Earth”

To fully realize Innovation for the Earth, we will pursue three priority measures. The first is “accelerating the expansion of existing business and continuing to strengthen preparations for future growth.” The Group operates across four segments: Housing, Urban Infrastructure & Environmental Products, High Performance Plastics, and Medical. We will concentrate management resources on the growth-driving and growth-potential businesses in each segment to accelerate business expansion, while steadily investing in new businesses and technologies that will underpin growth beyond that. The second is “launching the film-type perovskite solar cell business.” We will first devote our full efforts to establishing mass production at the Sakai Plant and, by developing this into a full-scale business, contribute to the wider adoption of renewable energy and the realization of a decarbonized society. The third is “developing people and organizations that continue to take on challenges.” While carrying forward former President Kato’s aspiration to create a vibrant company, we will further cultivate people and organizations that continue to take on challenges without giving up when they encounter obstacles. Specifically, we will advance human resource development programs that cultivate leaders capable of formulating and executing strategies and specialists with advanced expertise, while creating an environment in which every individual can step forward and take on challenges. By appropriately evaluating the act of taking on a challenge itself and the experience gained from it, regardless of success or failure, we will foster a corporate culture in which every individual continues to grow.

I am determined to realize Innovation for the Earth. I want to share that commitment with as many people as possible and, together with all stakeholders who share our aspirations, address social issues and co-create “peace of mind for generations to come.”

Value that the SEKISUI CHEMICAL Group Provides to Society

Since our founding, the Group has consistently worked to address social issues that affect the safety and health of people around the world, as well as global environmental issues such as climate change and natural disasters that pose serious threats to the continued existence of society.

Our Group Vision is: “Through prominence in technology and quality, SEKISUI CHEMICAL Group will contribute to improving the lives of the people of the world and the Earth’s environment, by continuing to open up new frontiers in Residential and Social Infrastructure Creation and Chemical Solutions.” To fulfill this vision, I believe the value the Group provides to society lies in fully realizing “Innovation for the Earth,” generating innovation on a global scale, and contributing to solutions to a wide range of social issues.

To contribute to solving social issues, we are focused on continuously creating “Products to Enhance Sustainability”. Among these, one business in which I see particularly significant potential is film-type perovskite solar cells.

I encourage everyone to imagine a world in which these cells are widely adopted. Film-type perovskite solar cells would be installed on roofs, walls, and throughout cities, turning entire communities into power plants. There would be no need to clear forests to install solar cells, nor to operate thermal power plants and emit CO2. If we can use our capabilities to create such cities around the world, I believe that would truly represent Innovation for the Earth on a global scale.

The Source of Innovation: Strategic Foresight, Processing, and Value Transformation

“Strategic foresight, processing, and value transformation” is one of our strengths. We generate innovation by driving our value creation process around these three capabilities. Specifically, we first anticipate social issues and market needs. We then combine and process highly competitive core technologies defined as our 27 Technological Platforms (TPFs) to create distinctive solutions. In this way, we create new value, including Products to Enhance Sustainability, and implement that value in society to drive social transformation.

Our distinctive position as a company with four domains—Residential, Advanced Lifeline, Innovative Mobility, and Life Science—comes into its own as we drive this cycle. We can identify new needs and seeds across a broad range of business fields, while also directly implementing material-based solutions created as a chemical manufacturer in social infrastructure such as housing and infrastructure.

One example is our approach to the social issue of increasingly severe natural disasters caused by climate change, where we are developing disaster-resilient communities. ASAKA Lead Town, developed on the former site of our Tokyo Plant in Asaka City, Saitama Prefecture, combines infrastructure technologies designed to withstand torrential rain and earthquakes with SEKISUI HEIM homes that are highly earthquake-resistant and possess energy self-sufficiency features. To address power and energy issues, we have our film-type perovskite solar cell business. These cells employ advanced technologies from the High Performance Plastics Company and are characterized by their high flexibility, thinness, and light weight. By combining these technologies with the engineering capabilities cultivated by the Urban Infrastructure & Environmental Products Company, we will initially promote installation on low-load-bearing roofs, such as those of elementary and junior high school gymnasiums that serve as evacuation shelters during disasters. In the future, we also intend to consider installation in ordinary homes by leveraging the technologies and networks of the Housing Company. In this way, by continuously driving the process of strategic foresight, processing, and value transformation, we will continue to realize Innovation for the Earth in ways unique to SEKISUI CHEMICAL and, in doing so, grow together with society.

Achievements and Challenges to Date under the Long-term Vision, Vision 2030, and the Path to Its Realization

One achievement during the first five years toward the Long-term Vision, Vision 2030 is that we have steadily made investment decisions and laid the groundwork for investments in growth-driving and growth-potential businesses and for future growth. Specifically, we have promoted a variety of capacity expansion investments, including the addition of a new interlayer film production line in Thailand, expansion of domestic production capacity for the “SELFA” semiconductor processing tape, and construction of a new synthetic lumber (FFU) railways sleeper plant in the Netherlands. For film-type perovskite solar cells, which hold significant promise for future growth, we have formulated a capital investment plan exceeding ¥300.0 billion. By 2030, we aim to achieve net sales on the scale of ¥100.0 billion and operating profit of ¥15.0–20.0 billion. This is becoming an indispensable business for achieving our Long-term Vision, and expectations continue to rise.

With regard to M&A, although some of the investment allocation under the previous Medium-term Management Plan remained unused, we actively pursued opportunities and conducted thorough evaluations. This was the result of carefully scrutinizing potential deals rather than simply seeking to use up the M&A allocation, and I believe this approach deserves recognition in its own right.

The challenge, in my view, is the speed at which we generate results. Under the previous Medium-term Management Plan, Drive 2.0, as noted above, we made firm decisions on growth investments and laid the groundwork for them. However, results did not emerge as quickly as expected, and operating profit ultimately fell short of the target, which was disappointing.

To achieve Vision 2030, we must continue investing in growth fields while quickly realizing the effects of those investments and increasing the trajectory of growth.

To do so, we must first follow through on investments and M&A for growth businesses. Accordingly, we have established an aggressive investment allocation under our new Medium-term Management Plan, Accelerate 2028. We will also establish the film-type perovskite solar cell business, which represents a major challenge for me personally.

The next priority is greater speed. Achieving this will require us to strengthen our management foundation, with DX being one key area of focus. Through digital transformation, we will improve productivity.

We will also further strengthen our focus on materials informatics (MI), an area in which we have been investing considerable effort and which is expected to improve development efficiency and contribute to the creation of new products.

Above all, however, it comes down to our people. Human resources are the driving force behind the realization of Vision 2030. The challenges and growth of each individual are indispensable. We will firmly establish a culture that embraces challenge we are currently fostering, support employee growth through challenge, and harness that strength to drive the Group’s growth. During the latter five years, we will accelerate growth through these activities and leverage that growth to realize Vision 2030.

Practicing Management with an Awareness of the Cost of Capital

Across the Group, the use of the cost of capital as a premise for investment decisions and business evaluations has become firmly established. We incorporate ROE and ROIC into KPIs and reflect them in employee evaluations as well. Awareness of capital efficiency has increased not only among management but also among employees, and the concept of the ROIC spread has steadily taken root. My own awareness of ROE and ROIC has also increased significantly compared with the past, reinforcing my determination to meet the expectations of investors and shareholders. To enhance corporate value, the Group is pursuing three initiatives: “Accelerated Growth,” “Improvement of Capital Efficiency,” and “Improvement of Confidence.”

Under Accelerated growth, we will thoroughly implement portfolio management, concentrate management resources on growth-driving and growth-potential businesses, and continue to strengthen our earning power.

Under Improvement of capital efficiency, we will decide, as necessary, to downsize or withdraw from businesses in light of the market environment and their future prospects. In addition to reviewing our shareholder return policy, we are pursuing capital policies with an awareness of the balance sheet we should maintain.

Under Improvement of confidence, we position safety and compliance as the foundation of management and are strengthening quality and risk management, including through the use of DX. Building a management foundation that reduces business risks and consistently generates results will enhance confidence from society and the market and also help reduce the cost of capital.

PBR, an indicator of share price valuation, currently remains at approximately 1.2 times, and we recognize that there is room to improve both ROE and PER.

We position ROE as a key management indicator and break it down into three components—net profit margin, total asset turnover, and financial leverage—working to improve each of them.

First, regarding the net profit margin, the underlying operating profit margin has improved as we shifted toward high-value-added products under the previous Medium-term Management Plan, Drive 2.0. On the other hand, partly as a consequence of proactive investment, impairment losses and other factors have prevented us from raising the net profit margin sufficiently relative to the operating profit margin. Our most important task is to increase net profit. To this end, we will steadily execute growth initiatives and further strengthen our management foundation to improve our net profit margin.

Total asset turnover has recently declined due to proactive capital investment for growth in areas including film-type perovskite solar cells and the High Performance Plastics Company’s growth-driving fields. Going forward, we aim to improve this ratio by generating sales from these facilities and realizing the effects of our investments. As for financial leverage, although we have financed growth investments primarily through debt and implemented proactive shareholder returns, shareholders’ equity has increased due to foreign exchange translation adjustments and other valuation differences, resulting in a recent decline in financial leverage. We will continue to select appropriate financing methods with capital efficiency in mind, while also maintaining shareholder returns.

Turning next to PER, SEKISUI CHEMICAL has many attractive businesses, including electronics, interlayer films, pipeline renewal construction, and film-type perovskite solar cells. We will proactively disclose information on their growth potential, competitive advantages, and investment progress to ensure that the market appropriately recognizes their value.

Although we cannot directly control our share price, I believe that by continuing these initiatives to enhance corporate value, together with careful dialogue and disclosure, we can sustainably improve ROE and PER.

Investors and shareholders sometimes voice criticism that “we have yet to deliver sufficient results.” We take such views seriously and will continue our dialogue with the market, responding through tangible improvements in capital efficiency and corporate value.

Portfolio Management

Our portfolio management analyzes and evaluates businesses from the perspectives of profitability (operating profit margin), capital efficiency (ROIC), and growth potential (net sales growth rate), clarifies the strategic role of each business—growth-driving, growth-potential, revenue base, or improvement—and allocates management resources accordingly. If we cannot secure a sufficient ROIC spread, or if the operating profit margin remains low and it is difficult to establish a path toward the target level, we promptly review the business strategy.

For example, the biorefinery business, which uses microorganisms to produce resources from combustible waste, was a highly advanced technology and a promising new business. However, as the external environment developed differently from our assumptions and the prospects for securing sufficient margins became uncertain, we decided to revise our strategy.

To advance portfolio management, it is important both to secure the ROIC spread and to undertake initiatives that reduce the cost of capital. We need to strengthen our management foundation through the practice of ESG management, firmly pursue IR activities, and earn the confidence of our stakeholders. We will continue to work steadily on these priorities.

Next, I would like to discuss portfolio management from the perspective of the Group-wide business structure. The Group comprises three companies—Housing, Urban Infrastructure & Environmental Products, and High Performance Plastics—as well as the Medical Business. This diversity of businesses is sometimes cited as a factor that can lead to a conglomerate discount. I, however, see our diverse business portfolio as a strength of the Group. By having each business establish an earnings base in a different market, we enhance management stability while also generating synergies among businesses. This is a value unique to the SEKISUI CHEMICAL Group. Going forward, we will continue to carefully communicate our approach to portfolio management and its current status, aiming to become a company that is valued for the strengths that come precisely from being a conglomerate.

“Adaptability to Change” Required in an Era of Uncertainty

In recent years, the external environment has become more uncertain than ever, and I recognize that companies are being called upon to respond with even greater adaptability. Recent major changes include instability in the Middle East and the accelerating pace of technological innovation, including AI. The situation in the Middle East has once again underscored, through its impact on supply chains, the importance of securing stable supplies of energy and raw materials. As a company that contributes to solving social issues, we have a responsibility to continue providing products and services reliably. To fulfill that responsibility, we will further strengthen the resilience of our procurement and production systems and our efforts to diversify risks.

At the same time, technological innovation centered on AI represents a major opportunity for us, while also being a factor that can significantly reshape the competitive environment. We are advancing initiatives including materials informatics (MI), which are helping to accelerate development and enhance our ability to create added value. Going forward, we will further evolve these initiatives and strengthen our competitive advantage. Rather than being buffeted by changes in the external environment, it is important to identify both risks and opportunities within those changes. We must properly assess and accept risks, transfer or avoid them as necessary, and turn them into opportunities.

Precisely because uncertainty is so high, we must question existing assumptions, reassess everything from the ground up, define where we want to be, and drive the transformation needed to get there. While maintaining sound day-to-day business management as our foundation, we will transform our businesses over the medium to long term and, through these efforts, build a strong organization in which every individual grows.

Taking Our Culture of Challenge to the Next Stage

With regard to Challenge Actions, we provide opportunities to try again even after failure, and I myself have repeatedly communicated the message that “people will not be blamed for failure.” The Challenge Action Rate, which we use as a KPI, reached 62% in FY2025, and I am increasingly hearing employees say, “Even in small ways, I feel I am now more willing to take on challenges.” I feel that a culture that embraces challenge is steadily taking root, but at the same time, we are still in a transitional phase. Until now, there has been value in the act of “trying something different from before” itself. From here, however, I believe we are entering a stage in which we must raise the quality and speed of our challenges and increase the probability of success. What I consider particularly important here is leadership management. I want leaders to encourage their team members to take on challenges, foster aspirations such as “this is what I want to pursue,” and channel those aspirations into challenges that contribute to realizing our Long-term Vision, while creating an environment in which each individual can develop their capabilities. Even when the outcome is failure, it is important to support people from a long-term perspective with the conviction that “the learning and experience gained will surely lead to the next opportunity.” Innovation begins with the challenges taken on by each and every employee.

The Group has always had a culture that encourages people to take on challenges. During my own years as an engineer, I was involved in designing a new process for kraft tape that reduced environmental impact, improved quality, and lowered costs. This process improvement required substantial capital investment, but it became possible because I clearly communicated what I wanted to achieve, and my supervisors and the Company responded to my commitment, encouraged me, and provided the necessary budget. I want to carry forward this culture of encouraging people to take on challenges.

Clarifying the Roles of Supervision and Execution and Practicing Management with an Even Stronger Focus on Corporate Value

I believe the structure of the Board of Directors must continually evolve toward the optimal form in accordance with the Company’s circumstances and the future state we seek to achieve. As our businesses become increasingly global and diverse, the Board is expected not only to deliberate individual matters but also to engage in higher-quality discussions on important themes that contribute to enhancing corporate value, including medium- to long-term management strategies and the ESG management foundation.

Accordingly, we have revised the Board structure so that Outside Directors constitute a majority, further clarifying the separation of supervision and execution, while also increasing the proportion of female Directors to more than 30%. By increasing independence and diversity, we have established a framework for supervising management from more objective and multifaceted perspectives.

Going forward, with this enhanced supervisory function in place, we will further delegate authority to executive management. At the Board of Directors, we will also deepen discussions aimed at sustainably enhancing corporate value, covering not only medium- to long-term business strategies and the ESG management foundation but also capital efficiency, including the ROIC spread, ROE, and WACC.

By strengthening oversight in a way that enables executive management to perform at its best, we will both accelerate management and enhance governance, supporting sustainable growth in corporate value.

Turning Dialogue with Shareholders and Investors into Enhanced Corporate Value

I believe dialogue with shareholders and investors is extremely important for enhancing corporate value and ensuring that our share price appropriately reflects that value. We will first improve on our communication so that stakeholders can accurately understand our current position, growth strategies, and future potential. With our improved communication, we will engage in dialogue to identify gaps between what shareholders and investors expect of us and where we stand today, and incorporate their opinions and recommendations into management with the aim of enhancing corporate value and ensuring that our share price appropriately reflects that value.

I personally place great importance on opportunities to engage directly with shareholders and investors. Recently, when speaking with investors in Europe, a shareholder who has held our shares for more than 20 years offered words of encouragement, saying, “I hope you will keep up the good work.” I took those words as an indication that they understood the direction we are pursuing, and found them extremely encouraging. The experience once again impressed upon me the importance of deepening mutual understanding through dialogue.

Of course, we sometimes receive critical feedback as well as expressions of support and high expectations, but we regard such feedback as important input for our medium- to long-term growth. We will continue constructive and candid dialogue and further deepen our relationships of trust with shareholders and investors.

My Challenge as President of the SEKISUI CHEMICAL Group

My greatest challenge as President is developing our people. I believe the growth of each individual strengthens our businesses and serves as the driving force behind enhanced corporate value. Creating an environment in which every employee can take on challenges and grow is my most important role.

Looking not only to the realization of Vision 2030 but also beyond it, we must begin systematically developing the next generation of leaders who can succeed globally. To that end, we will spare neither time nor investment in human resource development. I firmly believe that the growth of each and every employee will be the force that opens up the future of the SEKISUI CHEMICAL Group.