Tokai Carbon : Mid-Term Management Plan T-2018

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News Release 2016

Mid-Term Management Plan T-2018

February 12, 2016

Tokai Carbon Group has formulated T-2018, a new mid-term management plan for the three years from 2016 to 2018.

1. Review of the previous Mid-Term Management Plan T-2015

   
   

   In the previous Mid-Term Management Plan T-2015 (2013 to 2015), the Group aimed to expand its business activity in several aspects: enhancing equipment capacity and achieving full-capacity operation (in anticipation of the growth of existing markets), expanding and upgrading business interfaces, and creating new businesses. Due to changes in China and other Asian markets as well as rapid declines in crude oil price during the final year of the plan, however, the Group fell well short of the numerical targets set in T-2015 (140 billion yen net sales and 11% ROS).

   In addition to the market changes, the Group suffered from its own problems. These include delayed response to businesses bloated by aggressive investments in the past, a lack of organization management and personnel development systems (which should have been built in keeping with globalization), and organizational rigidity and overconfidence in engineering ability. The three years of the previous three-year mid-term management plan have left the Group many lessons to learn.

   Following reflections on these problems that arose under T-2015, the new T-2018 Mid-Term Management Plan formulates thoroughgoing structural reforms - in both areas of business restructuring and internal awareness-raising - in its first year. The aim is to establish a foundation for further growth.

   
   

2. Basic policies of the T-2018 Mid-Term Management Plan

   
   

   • Structural reforms: business restructuring and internal awareness-raising

   • Introduction of ROIC control: improving capital efficiency and controlling progress in achieving the Mid-Term Plan

   • Maintaining financial health

   • Growth strategies: developing specific growth plans after establishing a foundation for growth (to be announced in 2017)

     
     

3. Performance targets (consolidated)

   
   

   Key performance targets for 2018	Results for 2015 (for reference only)
   Net sales	110 billion yen	104.9 billion yen
   Operating income	9 billion yen	4.1 billion yen
   ROS	8% or higher	3.9%
   ROIC	6% or higher	2.1%

4. Basic strategies

   
   

5. The first year (2016) is defined as the year of structural reforms (Phase 1), during which the company will concentrate on optimizing its core businesses, with particular emphasis on fine carbon, graphite electrodes, and carbon black.

   
   

   O p t i m i z a t i o n o f c o r e b u s i n e s s e s
   a. Fine carbon	Reduce production capacity for isotropic graphite and narrow down the product lineup
   b. Graphite electrodes	Further downsizing and work on industry reorganization
   c. Carbon black	Optimize Asian and domestic production locations and study feasibility of entry in new markets

   
   

6. Internal mindset change will be pursued by making efforts to regain our previous highly acclaimed technical standards, strengthen corporate divisions, and vitalize human resources.

   
   

   I n t e r n a l M i n d s e t C h a n g e
   a. Regain highly acclaimed technical standards	Improve existing technologies and strengthen the ability to develop new technologies Pursue synergy between product divisions Restructure research Make effective use of internal and external human resources
   b. Strengthen corporate divisions	Strengthen the control of management strategies Establish an environment that facilitates appropriate risk taking
   c. Vitalize human resources	Review the recruitment policies and training system Vitalize the organization by personnel exchange among product divisions

   
   

7. The ROIC management indicator will be introduced and established as a means of improving capital efficiency and controlling progress in implementing medium-term plans. In addition to improving the earnings ratio, the Group aims to achieve 6% or higher ROIC in 2018 by securitizing notes and accounts receivable, reducing inventories and fixed assets, and optimizing the investment profitability.




Introduction of ROIC (return on invested capital) control
Operating income (after tax) Working capital + Fixed assets	= above 6% (Year 2018)




8. Growth strategies




The focus on structural reforms (Phase 1) will consolidate a foundation for growth in 2016, followed by the announcement of specific growth plans (Phase 2) in 2017.




End of Notice