Message from the CEO
Start of the 2025 Long-Term Business Plan
We achieved our highest ever income and are seeing signs of change in the mindsets of our employees.
The Group formulated a three-year Medium-term Business Plan, but amid upheavals in the environment, there seemed to be some difficulty in advancing the plan toward the fixed three-year goals. In addition, even as we achieved operating income of around ¥100 billion, we considered it necessary to delve into debates about the best direction in which to point employees and the best action to take to maintain a high growth rate. We therefore decided to set relatively long-term goals, take environmental changes into consideration, and implement annual plans on a rolling basis.
Although we set an ambitious goal of ¥200 billion in operating income in the Long-Term Business Plan, I think the mindset of employees is changing significantly and feel that we are firmly beginning to move toward our target.
Fiscal 2017 was the first, crucial year of the Long-Term Business Plan and we were able to make a solid first step by expanding sales of our major products. However, this was, regrettably, a second year of loss for the dental materials business, and it seems that expansion will remain an ongoing issue for the Health Care domain. In the Mobility domain, we made ARRK CORPORATION a Group company in an M&A effort for growth and can see that smoothly carrying out the post-merger integration (PMI) will be a major concern going forward.
Three targeted business domains, their current status and challenges.
In the Mobility domain, we offer a wide variety of functional polymeric materials that can provide solutions to meet needs for lighter automobiles and more electric vehicles. The business handling PP compounds, one such central material, seizes growth opportunities and continues to steadily expand. Being weakened by not possessing our own factory in Europe, in April 2018 we decided to set up a new European base when we had secured a certain level of sales. Furthermore, because we are running at full production capacity for TAFMER™, we are considering expanding our current facilities and then building new facilities in North America. Frankly, limiting the amount of investment during the course of the 2014 Mid-Term Business Plan has come back to bite us in the form of an ever tighter production capacity situation at certain facilities. I therefore think that a big issue for the Mobility domain will be taking action to establish a stable supply system capable of meeting the expanding needs in the near future.
The acquisition of ARRK CORPORATION will be key to growth going forward. Following the acquisition of the molds manufacturer Kyowa Industrial Co., Ltd., we expanded our scope to include markets not related to material provision. Seizing the opportunity this afforded, we integrated our expertise in functional polymeric material technology with ARRK’s expertise in design, prototype, analytic, and other technologies in line with our ongoing focus on enhancing our ability to provide solutions.
In the Health Care domain, we are seeing steady expansions in sales of such products as vision care materials, which command the largest share of the global market, and our high-performance nonwoven used in premium disposable diapers, which are becoming very popular in Asia. In addition, we launched sales of our new, next generation TouchFocus™ eyewear, which can instantaneously switch between near- and far-sightedness at the push of a button. Looking ahead, we will continue working to expand our sales network to ensure sales grow to a certain volume.
As for dental materials, the situation remains harsh due to sluggish sales in Germany and a delay in the launch of digital-related items. Nevertheless, we are continuing to strengthen our sales system and working to establish a base for launching and expanding sales of digital products. In fiscal 2018, we will continue focusing on steps we can take to turn around the aspects characterized as current weaknesses.
Food & Packaging is a business segment with a wide scope. In films and sheets, sales were favorable for ICROS™ TAPE, a protective tape used in semiconductor manufacturing processes that enjoys the largest share of the global market. We established a subsidiary as a new base in Taiwan, which is a major global market. It is important that we quickly begin operations.
In agrochemicals, we have Five Next Generation Active Ingredients in the pipeline. Of these five, we have already released products containing two of them on the market. As for our major new insecticides and fungicides, however, we are working with influential agrochemical manufacturers in Europe and the United States to release the products on the markets there by around 2020 as we take steps to expand our agrochemical business.
We will continue creating forward-looking Next Generation Businesses and further strengthening the Basic Materials domain.
In the Next Generation Business domain, although we aim to create new solution businesses with an eye toward the next 10 or 20 years, it finally appears that the domain has begun to make sales as a lead player. It is becoming increasingly important to quickly meet societal demand by introducing, for example, such products as our rapid diagnosis system for sepsis, solar photovoltaic power generation diagnosis, and the iCAST™, an irrigation system that significantly reduces the amount of water needed. We are moving ahead with plans to respond to social demands with an emphasis on speed, although profits are also important.
The Basic Materials domain has been the center of our structural reforms to date, and we have done what we needed to do. However, we believe further investment is necessary to strengthen this domain. There seems to be some misunderstanding surrounding this issue. Although we talk about focusing investment in growth areas, that does not mean we are saying we shouldn’t invest in the Basic Materials domain. Rather, that means that by working to strengthen this area, the products in the Mobility and other domains will gain vigor.
For example, regarding polypropylene, we are considering scrap and build measures. But this is not simply to raise efficiency, it is to raise quality, and, by providing higher quality polypropylene for making PP compounds and nonwoven, we will maintain competitiveness in those areas, which is important.
Strengthening Our ESG Promotion System
We will continue laying a foundation from a long-term perspective as we place SDG initiatives and ESG responses at the core of management.
Since the United Nations’ adoption of sustainable development goals (SDGs), sustainability has become a keyword. In response to these shifts in society, companies are being asked how they can spur innovation in order to contribute to the realization of a sustainable society and how they will transform their business models to enable sustainable growth alongside society while accurately perceiving opportunities and risks.
Issues strongly relevant to the chemicals industry include climate change and marine plastic pollution, such as microplastics. What kind of solutions can chemistry offer to help improve the quality of people’s lives going forward while we work diligently on these issues? Although realizing a sustainable society is an issue that requires radical innovation, it can also be thought of as a big opportunity.
Environment, social, and governance (ESG) indicators have recently gained attention as important tools for assessing investments. Corporations have to accurately assess the opportunities and risks related to SDGs and various ESG issues and show what role they can play through their business activities. This proposition is indispensable to the sustainable growth of the global Mitsui Chemicals Group.
In April 2018, the Company established the Corporate Sustainability Division, a new organization.
I believe that it is important to set easy-to-understand key performance indicators (KPIs) and share the value of those KPIs with all stakeholders. Under the 2025 Long-Term Business Plan, we set 13 KPIs related to the environment and society and promoted relevant initiatives. One KPI was to raise the net sales ratio of Blue Value™ and Rose Value™ certified products and services to 30% each by fiscal 2025. Blue Value™ represents value that helps the environment, and Rose Value™ represents value that helps improve quality of life (QOL). We will hold active discussions about ESG matters at Board of Directors meetings and Company-wide strategy conference and reflect those decisions in the Group’s management.
We must change mindsets inside the Company so that each employee understands the importance of ESG topics and maintains a daily awareness of social issues.
Long-Term Innovation Initiatives
Innovation is necessary to provide solutions to social issues.
The advancement of AI, IoT, electric vehicles, and other technologies is heralding what has been called a once-in-a-century era of transformation, and automakers are showing signs of crisis. I think this transformative period is actually a big opportunity for chemical companies.
Take the shift to electric vehicles, for instance. Chemical manufacturers are involved in most lithium-ion battery technologies. In addition, no matter the source of power for automobiles, there will always be demand for lighter vehicles.
When it comes to responding to a changing world, chemical manufacturers lead the way in generating innovation. Today, it feels like we have entered an era where we are providing solutions to customers’ issues by opening the conversation with reassuring words like, “these are methods we can use” or “we can set up these kinds of devices.”
However, the social issues the world faces are monumental in scale, and there is a limit to how much one company can do with regard to any given issue. If we don’t use open innovation to develop new technologies and business fields, we will fall behind. We also need to work across different industries. Each company has its own strengths, and the steps taken to cultivate technology vary. It is important to fully understand the nature of the technological base your company has created and what your company’s strengths are and then to expand from that clearly defined point.
We will fulfill our social responsibility while ensuring safety and pursuing higher quality.
One goal of the long-term business plan is to ensure comprehensive safety, high quality, and fairness throughout the supply chain. Of these things, what I’m most focused on is safety.
To continue to preserve safety, what we must not forget is the explosion that occurred at the Iwakuni-Ohtake Works in 2012. We constantly try to remind employees to put safety into everything we do, yet fire broke out at the Mobara Branch factory and the Osaka Works in 2017 and in 2018. There is no easy road to Safety. We take these facts to heart, and revise our initiatives to date and continue building a solid track record of steady efforts to ensure safety.
We are now working to ensure safety and improve quality at all steps in our supply chain as we fulfill our social responsibility and bolster governance globally.
Sustainable Development of Society and the Group
We aim to realize management balanced along three axes and achieve the sustainable development of society and the Group through business activities.
Over the three years of the 2014 Mid-Term Business Plan, we improved our financial standing, prioritized returning to profitability, and restrained investment. We have recovered since then, and turning toward the goals of our 2025 Long-Term Business Plan, we declared that we were changing our stance to a more active investment style. My mission with regard to the Long-Term Plan is to return to a stable growth trajectory.
To this end, we must be able to bring in cash. I aim to steadily raise profit and allot it to investments, repeating this process to ensure we are on a growth trajectory. We will continue working to enhance shareholder returns.
What I’ve been telling employees is that I would like them to show initiative and take action in the first person, declaring, “I want to do this.” Each employee must be aware of their connection with society and generate innovation of their own volition. It has been gradual, but I get the feeling that an increasing number of various self-directed actions are being taken.
We will continue holding high-quality discussions with all stakeholders going forward and work toward realizing our ambitious dreams and future vision. We aim to create new customer value and achieve sustainable development for society and the Group itself.
(Billions of yen)