Strategies That Underpin Medium- to Long-term Growth
Last updated: Sep. 28, 2021
Review of the Medium-term Management Plan
Progress under the Medium-term Management Plan “Drive 2022”（FY2020～2022）
Drive sustainable growth/reform/preparation for doubling the Group’s business by expanding its contribution to resolving social issues
The basic strategies of the Medium-term Management Plan Drive 2022 are to build a corporate structure that is able to practice ESG management and enhance corporate value on a sustainable basis, address the three key Drive issues of (1) business growth and reform, (2) preparation for long-term growth, and (3) strengthening the ESG management base as a first step toward realizing the long-term vision while also accelerating efforts through fusion and digital transformation.
Fiscal 2022 Targets
High Performance Plastics Company
Urban Infrastructure &
Environmental Products Company
“Drive 2022” Basic Strategies
Existing Business Drive (1) Business growth and reform
In the Housing Company, we place a special emphasis on further boosting sales capabilities for ready-built houses, and together with investigating a “successful model” that can take maximum advantage of plant-production merits gained through leveling, we are moving forward on preparations for the long term, notably with town and community development. In UIEP, we are endeavoring to generate new prioritized products, regardless of conventional products and fields. Moreover, by specifically promoting our business expansion strategy for overseas markets, we are making progress on sharpening our portfolio and illustrating our growth story. The HPP Company is accelerating its efforts to make ready and execute its upcoming growth strategy, fully seizing upon the results of its upgrades to promote productivity, mainly with those made up until now at overseas locations, as well as undertaking M&A and other activities. In the Medical Business, we will expand our operations to become a company strengthen the foundations for growth by putting in place a global development system and reforming such organizations as CDMO, which is included in the Pharmaceutical Sciences Business.
New Business Drive (2) Preparation for long-term growth
Fully fledged biorefinery development verification
SEKISUI CHEMICAL Group is accelerating efforts for social implementation of carbon recycling technology that circulates carbon derived from petroleum raw materials. More specifically, we developed technology (Bio-Refinery) that converts burnable waste, including maritime plastics, into gas and uses microorganisms to create ethanol, a raw material used in plastics, from this gas. In April 2020, upon receiving investment from INCJ (Innovation Network Corporation of Japan), we established SEKISUI BIO REFINERY CO., LTD. In addition to identifying issues with a view to social implementation, steps to scale up operations are currently being considered at the test plant in Yorii Town, Saitama Prefecture. Moreover, a 1/10 scale pilot plant is under construction in Kuji City, Iwate Prefecture, and is scheduled to be completed in March 2022.
Commercialization and business development schedule for the envisioned Bio-Refinery (BR) ethanol technology
Life Science: Secure the next pillar
The life science domain is an area in which we are focusing efforts on tripling growth by 2030, from current sales levels. In April 2021, we newly established our Life Science Strategy Group within Corporate, and we are formulating specific strategies toward aggressively expanding investment. In the Pharmaceutical Sciences field, which we anticipate will enjoy a high growth rate, we are looking into the prospects of utilizing Company technology for regenerative medicine and in other disciplines, and we will also enthusiastically leverage M&A and venture investments.
Business Base Drive (3) Strengthening the ESG management base
Return on invested capital (ROIC), a newly adopted key performance indicator in the Medium-term Management Plan, will be applied to reform the business portfolio. Moreover, we will monitor how effectively each initiative related to long-term sustainability, which was stipulated as a Key ESG issue, is helping to control financial and non-financial capital costs. SEKISUI CHEMICAL Group defines the difference between ROIC and the cost of capital as the “SEKISUI Sustainable Spread,” which measures the improvement of the Group’s corporate value. We believe that if each employee is aware that his or her work contributes to reducing the cost of capital, this will ultimately lead to an increase in our corporate value and enhance our management ability to sustain business. When looking at capital costs in a financial and non-financial respect, the non-financial elements contained therein serve to control capital costs over the medium to long term and to enhance our management ability to sustain business. For example, this is achieved through the control of major incidents in the five domains of safety, quality, accounting, legal/ethical, and information management with the potential to cause significant damage to our corporate value, and through investments in the business foundation, including those for digital transformation (DX) intended to address climate change and encourage various work styles.
[Development of Measures]
- Financial strategies / capital policies: Leverage debt to invest aggressively in growth
- Risk reduction / avoidance: Reduce risk by thoroughly implementing Safety, Quality, Accountin Legal/Ethical, and Information Management
- ESG investment: Undertake upfront investments in digitization and contributions to the environment; reform the corporate culture (HR system reform, etc.)
Learn more Strengthening the ESG Management Base
Investment and Financial Strategies
In addition to the cash generated during the three years of the Medium-term Management Plan Drive 2022, the Company will establish an investment limit of ¥500 billion in order to procure funds in an appropriate and flexible manner. Strategic investment has been raised to ¥400 billion, more than doubling that under the previous medium-term management plan. Of this total, ¥300 billion has been set aside for M&A investment, which will be used to acquire a wide range of resources including technology, know-how, and global sales channels. Moreover, we set the new ESG investment limit at ¥40 billion. This ESG investment serves to control long-term capital costs and contribute to greater corporate value through reduced environmental impact, work-style reforms, and digital transformation (DX).
Returns to Shareholders
Under the medium-term management plan, SEKISUI CHEMICAL Group will return profits to its shareholders more aggressively than ever before. The Company seeks to secure a dividend-on-equity (DOE) ratio of 3% or higher while targeting a dividend payout ratio of 35% or higher on a consolidated basis, as a part of efforts to implement stable dividend measures in line with its performance. In addition, SEKISUI CHEMICAL Group has set a target of 50% or higher for its total return ratio, which includes the buyback of shares, so long as its D/E ratio is less than 0.5. Moreover, the Company plans to retire treasury stock to no more than 5% of the total number of shares outstanding.
Details of SEKISUI CHEMICAL Group’s total shareholders’ return, including dividend and stock price fluctuation trends, are presented at the graph below. While return on investment, taking into account dividends and the share price as of the end of March 2021, for investments made as of the end of March 2011, has recently fallen below the Tokyo Stock Price Index (TOPIX), for the Chemical sector, a comparative indicator, data including dividends, the rate of return over the past 11 years has generally exceeded TOPIX.
SEKISUI CHEMICAL Group’s Total Shareholders’ Return (TSR)* over the Past 11 Years
- Figures for SEKISUI CHEMICAL and TOPIX are indices with data as of March 31, 2011, as 100.
- Total Shareholders Return (TSR) = (Dividend per share + Share price appreciation) / Initial share price x 100
* 1 Total return ratio = (Amount of treasury stock acquired + Total dividends) / Net income attributable to owners of the parent
* 2 DOE = Total dividend payment (full year) / Average equity