VISION 2030 and Medium-term Plan

Last Update : Sep 30, 2020

Review of the Medium-term Management Plan

Vision 2030〈Long-term Vision〉

Aiming to Double the Group’s Business by 2030 Centered on ESG Management

“Vision 2030,” the Group’s long-term vision, presents the vision statement of “Innovation for the Earth,” which incorporates the Group’s resolute will to continuously drive innovation as a means of “supporting the basis of LIFE and continuing to create ‘peace of mind for the future’ in order to realize a sustainable society.” This Vision lays down the four business domains of Residential (Housing), Advanced Lifeline (Social Infrastructure), Innovative Mobility (Electric/Mobility), and Life Science (Health and Medical), and aims to double business by 2030 through the expansion of existing business and creation of new business domains along the strategy axis of “business growth, reform and creation centered on ESG management.”

Domain Growth Image and Targeted Business Structure

In each of the Residential (Housing), Advanced Lifeline (Social Infrastructure), Innovative Mobility (Electric/Mobility), and Life Science (Health and Medical) business domains, the Group will grow sales 1.5 to 3 times to achieve the major target for 2030 of ¥2 trillion in net sales, a doubling of business from today, and transform into an attractive company with diverse growth engines and a strong presence. By taking up the challenge of pursuing innovation as an extension of core technologies in each domain, the Group will create new businesses and the next frontier for the new business domains in anticipation of major paradigm shifts.

Approach to Expansion of Sustainable Contribution and Growth Image through 2030

The efforts of SEKISUI CHEMICAL Group to contribute to resolving social issues directly connect to the greater sustainability of society, while the net sales gained in exchange for these contributions indicate the degree to which the Group helps resolve social issues. By raising this degree of contribution, the Group can ensure its own profitable sustainable growth and in turn enable the further expansion of its contributions to customers, shareholders, employees, business partners, local communities, the global environment, and all other stakeholders.

Proactive Investment of Management Resources

The expansion of business for which the long-term vision aims is difficult to achieve along the Group's current trajectory, and relies on a standard that can only be met by attaining exponential growth. SEKISUI CHEMICAL Group is proactively investing management resources to double the size of business by 2030. When executing new investments, the Group considers financial soundness and steps to increase the probability of return in anticipation of making investments exceeding ¥2 trillion in total value over the 10 years through 2030. Along with aiming to achieve a scale of ¥1 trillion through domestic growth, the Group will accelerate efforts to cultivate frontier businesses without slowing its current pace of growth overseas as part of a plan to expand the scale of overseas business to ¥1 trillion, more than three times that of today.

Drive 2022 〈Medium-term Management Plan〉 (FY2020-2022)

Based on its long-term vision, SEKISUI CHEMICAL Group has identified the need to drive sustainable growth, reform, and preparation for doubling the Group’s business as its basic policy under its medium-term management plan Drive 2022. Guided by this basic policy, we will accelerate the pace of global efforts to promote ESG management by engaging in the three “business growth and reform,” “preparation for long-term growth,” and “strengthening the ESG management base” drives. Moving forward, we will accelerate by engaging in these drives and through “Fusion” and digital transformation while striving to build a corporate structure that is able to practice ESG management and enhance corporate value on a sustainable basis.

Policy

Drive sustainable growth/reform/preparation for doubling the Group’s business by expanding its contribution to resolving social issues

Basic Strategies

  • Promote ESG management and build a corporate structure that is able to enhance corporate value on a sustainable basis.
  • Engage in the “Three Drives” as a first step toward realizing the long-term vision
    “Existing Business Drive” ① Business growth and reform
    “New Business Drive” ② Preparation for long-term growth
    “Business Base Drive” ③ Strengthening the ESG management base
  • Accelerate through “Fusion and digital transformation

FY2022 Targets

Basic Strategies

①Business Growth and Reform

Under its first drive of business growth and reform, SEKISUI CHEMICAL Group is looking to achieve an incremental growth in net sales of more than ¥90 billion over a period of three years through products and businesses in each domain that help resolve social issues. In the first year, fiscal 2020, we will prioritize the need to fortify our business base and structure as we push forward structural reforms taking into consideration the enormous impact of COVID-19. Determined to pursue manufacturing innovation as well as the structural reform of our business, we will also endeavor to increase our operating income ratio. In addition, in terms of the digital transformation we organized formally in April 2020, we are aggressively investing in and undertaking Groupwide measures in a bid to improve productivity across all business operations while at the same time realizing the effects of efforts to accelerate structural reform.

Structural reform: Secure profitability with a Group- wide operating income ratio around the 10% level

Manufacturing innovation
  • Housing: Onset of the effects of production company integration (boost profitability, stabilization of production → response to increased volume)
  • Other divisional companies: Purchasing and logistics innovation, automation and unmanned night shifts, optimization of manufacturing systems
Business structure reform
  • Identify low-margin products
  • Reform the business portfolio

DX: Strengthen the promotion structure, support growth strategies and structural reforms

Visualization and standardization
  • Standardize operations, introduce ERP, renew infrastructure and network
Increase productivity
  • Automation/unmanned shifts, improve operational efficiency through the use of digital technology, ICT and AI
Sophistication
  • Increase the sophistication of operational control, internal control and the supply chain

②Preparations for Long-term Growth

Drawing on our prominence in technology as a base, SEKISUI CHEMICAL Group is building a business base in each domain. For example, as indicated by the Bio-Refinery (BR) business case study at the top left of the diagram on the right, we are undertaking a demonstration scheme to promote an environmentally friendly technology that converts waste into ethanol. In addition to establishing a joint venture to engage in fully fledged operations in April 2020, we are pushing forward new domain initiatives that fuse together our prominence in technology and innovation.

Build business base in each domain

③Strengthening the ESG Management Base

SEKISUI CHEMICAL Group has identified the practice of ESG management as its top priority under its Medium-term Management Plan Drive 2022. We have adopted “Products to enhance sustainability” to replace our existing “Environment-Contributing Products” as we work to resolve social issues and accelerate the pace of profitable growth. Moreover, we have newly set an ESG investment limit of ¥40 billion and are controlling capital costs over the medium to long term and enhancing our management ability to sustain business by holding down major incidents and investing in the business foundation including digitization, human resources, and the environment.

Return on invested capital (ROIC), a newly adopted key performance indicator in the Medium-term Management Plan, is being applied to measure the efficacy of efforts to reform the business portfolio. ROIC will help monitor how effectively each initiative is helping to control financial and nonfinancial capital costs from a long-term sustainability perspective. 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. On this basis, we have positioned the need to control major incidents that have the potential to cause a significant deterioration in our corporate value in the five domains of safety, quality, accounting, legal/ethical, and information management as our highest priority.

[Development of Measures]
  • Financial strategies/capital policies: Leverage debt to invest aggressively in growth
  • Risk reduction/avoidance: Reduce risk by thoroughly implementing Safety, Quality, Accounting, 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.)
[Development of Measures]
  • Financial strategies / capital policies: Leverage debt to invest aggressively in growth
  • Risk reduction / avoidance: Reduce risk by thoroughly implementing Safety, Quality, Accounting, 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.)

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 procure funds in an appropriate and flexible manner and establish an investment limit of ¥500 billion. The strategic investment limit has been raised to ¥400 billion, doubling the limit 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.

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.

Returns to Shareholders Track Record

  • *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

SEKISUI CHEMICAL Group’s Total Shareholders Return (TSR) over the Past 10 Years

Details of SEKISUI CHEMICAL Group’s total shareholders return, including dividend and stock price fluctuation trends, are presented below.

Return on investment, taking into account dividends and the share price as of the end of March 2020, for investments made as of the end of March 2010, exceeds the Tokyo Stock Price Index (TOPIX), a comparative indicator, data including dividends.

* Total Shareholders Return (TSR) = (Dividends per share + Share price appreciation) / Initial share price x 100