Message from the CFO
Investment Strategy Looking toward 2025
The Mitsui Chemicals Group worked to thoroughly improve its finances over the three-year period from 2014 to 2016. As a result, the net D/E ratio shrunk to 0.7 times, and we believe our financial standing improved somewhat. On the other hand, as a result of restraining investment, the potential sales expansion of our major products gradually declined, and we needed to expand capital investment, including boosting the production sites, which are in high demand.
In the 2025 Long-Term Business Plan, we are planning growth investments of ¥1 trillion over the ten-year period to 2025. Of this amount, we plan to earmark ¥400 million for M&A and other strategic investments.
In existing business fields in fiscal 2017, we boosted the global production capacity of our PP compound facilities and expanded and built facilities for high-performance nonwovens. As for M&A, we steadily carried out investment in line with our strategies, including the acquisition of shares in ARRK CORPORATION and the acquisition of a styrene thermoplastic olefinic elastomer business.
Net D/E ratio
In the three-year period starting with fiscal 2018, we plan to invest a total of ¥360 billion. Although this amount is about the same as net cash provided by operating activities calculated in the three-year rolling plan unveiled in fiscal 2018, the net D/E ratio will be kept at around 0.8 times, growth expanded in three targeted business domains, and we will continue to carefully choose a good balance of projects that help enhance the competitiveness of the Basic Materials business.
In addition, the Group is emphasizing the internal rate of return (IRR) as an indicator for investment decision making. In particular, regarding investment in growth fields, we have set the hurdle rate at a level higher than capital costs and are holding deliberations at investment and financing assessment meetings in addition to other meetings.
Measures to Improve the Cash Efficiency Ratio
The cash efficiency ratio is indispensable to maximizing our cash flow. In particular, reducing inventory, which accounts for about ¥300 billion on the balance sheet, is a major issue for the Group. Since 2016, we have launched projects to better manage inventory and taken steps to reduce it. We have implemented continuous PDCA cycles where we set inventory standards based on scientific methods, visualized inventory data, and manage inventory levels. We are currently working to roll out these cycles to the entire Group.
Stable Shareholder Returns
Mitsui Chemicals considers the return of profit to shareholders an important management issue and aims to incrementally reach a return ratio, which includes acquired treasury stock, of 30% or above.
Cash dividends per share for fiscal 2017 were ¥90, and we are planning for ¥100 for fiscal 2018, which would make five continuous years of dividend increases.
Going forward, in addition to steadily raising dividends to reflect performance trends, we will continue to enhance and reinforce shareholder returns by dynamically and flexibly acquiring treasury stock in response to share price levels and market conditions.
Note: On October 1, 2017, Mitsui Chemicals conducted a 5-to-1 share consolidation. All dividends are recalculated based on this share consolidation.