AGC : Formulates New Management Policy, Long-term Strategy, and Medium-term Management Plan(PDF 894KB)

February 5, 2021

Corporate Name: AGC Inc. President & CEO: Yoshinori Hirai (Code Number: 5201; TSE 1st section)

Contact: Kazumi Tamaki, General Manager, Corporate Communications & Investor Relations (Tel: [phone])

AGC Formulates New Management Policy, Long-term Strategy, and Medium-term

Management Plan

AGC Inc. (Headquarters: Tokyo; President: Yoshinori Hirai) has formulated its new management policy

AGC plus 2.0, long-term management strategy Vision 2030, and medium-term management plan AGC plus-2023. An overview is provided below.

Mid/Long-term Management Policy and Management Strategy>

1. The new management policy AGC plus 2.0 and the new long-term strategy "Vision 2030"

The AGC Group has formulated a new management policy, AGC plus 2.0, and a long-term management strategy Vision 2030 as described below.

New management policy AGC plus 2.0

The AGC Group add a "plus" by:

• Providing safety, security and comfort to society,
• Creating new value and functions for customers and business partners and building trust with them,
• Enhancing job satisfaction among employees,
• Increasing the Group's corporate value for investors, and
• Building a better future for coming generations.

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New Long-term management strategy: Vision 2030

By providing differentiated materials and solutions, AGC strives to help realize a sustainable society and become an excellent company that

grows and evolves continuously.

To realize our Vision 2030, the AGC Group aims to create sustainable economic and social value by transforming our business portfolio with both core and strategic businesses playing an integral role.

In our core businesses, such as architectural glass, automotive glass, display, essential chemicals, and fluorochemicals, we will enhance the competitiveness of each business and build a solid and long-term stable earnings base.

In the strategic businesses of Electronics, Life Science and Mobility, which are high-growth fields, we will create and expand high-profit businesses that will be the pillars of our Group's future by leveraging our strengths.

By implementing various measures based on this strategy, we aim to achieve the following financial targets.

	FY2020	FY2023	FY2025	FY2030
	Actual	Target	Target	Target
Operating	75.8	160.0	200.0
profit	billion yen	billion yen	billion yen	By 2030, we will
ROE	2.9%	8%	9%	achieve record
Operating				profit* and
Profit of	44.4	70.0	100.0	ensure a stable
strategic	billion yen	billion yen	billion yen	ROE of 10% or
business				higher.
D/E ratio	0.63	0.5 or less	0.5 or less

*Record profit: Operating profit in fiscal 2010: 229.2 billion yen

In addition to achieving our financial targets, we are required to achieve a balance between "business growth" and "realization of a sustainable society." In light of major opportunities and risks that the AGC Group faces, we will strive to achieve sustainability targets in all our business activities and contribute to the resolution of the following five social issues.

• Contributing to the realization of a sustainable global environment
• Contributing to the realization of safe and comfortable urban infrastructure
• Contributing to the realization of safe and healthy lifestyles
• Contributing to the realization of a healthy and secure society
• Contributing to the realization of fair and safe workplaces

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2. Looking back on the Medium-term Management plan AGC plus-2020

		FY2017	FY2020	FY2020	Excluding
		Actual	Target	Actual	the impact
					of COVID-19
					(estimate)
Operating profit	119.6	160.0	75.8	125.0
		billion yen	billion yen	billion yen	billion yen
			or more
	ROE	6.1%	8% or more	2.9%	6%
Strategic	Contribution	12%	25% or more	59%	36%
business	ratio
	Operating	14.2	40.0	44.4	No impact
	profit	billion yen	billion yen	billion yen
D/E ratio	0.38	0.5	0.63	0.53
		or less

When the medium-term management plan, AGC plus-2020, was formulated in 2018, asset efficiency was low and the proportion of businesses affected by market fluctuations was high. Based on the recognition that portfolio reform was an issue for improving ROE, we established the following four strategies and managed our business in pursuit of them.

• Strengthen high-value-added businesses that are resilient to market fluctuations
• Promote growth strategies of strategic businesses
• Concentrate management resources in growing and winnable regions
• Achieve sustainable growth through strategic M&A

As a result, in the glass business, which was also affected by the coronavirus disaster, many issues remained unresolved, and operating profit, ROE, and D/E ratio targets were not achieved. However, among strategic business, Electronics and Life Sciences expanded faster than expected, achieving the initial targets.

3. The New Medium-term Management Plan AGC plus-2023

To steadily implement its long-term strategy Vision 2030, AGC has formulated a new medium-term management plan AGC plus-2023. The management financial targets and key strategies are as follows.

	FY2020	FY2023
	Actual	Target
Operating profit	75.8	160.0
	billion yen	billion yen
ROE	2.9％	8％
OP (Strategic business)	44.4	70.0
	billion yen	billion yen
D/E ratio	0.63	0.5 or less

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<> Image of performance by business segment>

（Unit：billion yen）

		Net sales			Operating profit
	FY2019	FY2020	FY2023	FY2019	FY2020		FY2023
	Actual	Actual	Target	Actual	Actual		Target
Glass	742.9	651.0	710.0	9.3	▲16.6		33.0
Electronics	276.7	289.4	350.0	25.6	37.8		40.0
Chemicals	475.8	451.2	560.0	63.0	50.5		85.0
Other	22.6	20.7	30.0	3.7	4.1		2.0
Total	1,518.0	1,412.3	1,650.0	101.6	75.8		160.0

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1. Pursuing Ambidextrous Management

Direction of each business

Under its management policy, AGC plus, AGC has been implementing ambidextrous management to

deepen core businesses and explore strategic businesses. The major issues and directions of each business under AGC plus-2023 are as follows.

AGC plus-2023 will further pursue its ambidextrous management style and accelerate growth in strategic business areas while exploring new business areas such those related to energy. By 2023, we aim to achieve sales of 300 billion yen and operating profit of 70 billion yen in strategic businesses.

On the other hand, in architectural glass and automotive glass, by 2023, we will reduce fixed costs and other costs under both businesses by 15 billion yen from the 2019 level, by shifting to production capacity that correspond to demand, concentrating production through the introduction of highly efficient facilities and reducing headcount, and reducing investment to 80% or less of depreciation costs. In addition, as an industry leader, we launched a structural reform project for architectural glass headed by the CFO to carry out structural reforms with a sense of urgency and a view to reorganizing the industry.

Initiatives to allocate investment resources and improve asset efficiency

Regarding the allocation of investment resources, we will strengthen investments in growth and strategic businesses and plan to invest 200 billion yen in strategic businesses, which is equivalent to 33% of the total investment. We also plan to reduce the ratio of investment in the three glass businesses (architectural glass, automotive glass, and display) in our total investment to 33% from 52% set during the previous medium- term management plan.

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Through these initiatives, we will improve the asset efficiency of all our businesses and reform our business portfolio, aiming to achieve Group-wide ROCE (return on capital employed) of 7.5% and EBITDA of 344 billion by 2023.

Change in shareholder return policy and cash flow plan

We have decided to change our shareholder return policy as follows to secure investment opportunities in growth businesses while maintaining mid/long-term financial soundness.

Maintain a consolidated total return ratio of 50% or higher, including share buybacks, on the basis of maintaining at least the current annual dividend per share.

Maintain stable dividends with a consolidated dividend payout ratio aiming for 40%. Share buybacks will be implemented flexibly.

The cash flow plan for AGC plus-2023 based on the above business plan, investment plan, and shareholder return policy is as follows.

We will achieve growth by prioritizing the allocation of cash generated to businesses with high asset efficiency and growth businesses on the premise of ensuring financial soundness.

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(2) Promoting Sustainability Management

Since its foundation, AGC has been working to solve social issues in response to the demands of the times through long-term R&D and taking on the challenges of commercialization based on a relationship of trust with customers.

We will continue to fulfill our mission of "AGC, an everyday essential part of our world" and contribute to the realization of global and social sustainability through our unique materials and solutions.

In 2014, AGC set a goal of reducing its annual CO2 emissions by six-fold in 2020 through energy-saving and energy-creating products. We have generally achieved our targets through initiatives to reduce CO2 emissions in our business activities and to promote and expand sales of energy-saving and energy-creating products such as energy-saving glass and environmentally friendly, next-generationlow-GWP refrigerants.

For realizing a sustainable global environment, we have set a new goal of achieving net zero carbon in

2050. As milestones, we aim for a GHG emission reduction rate of 30% in 2030 and a rate of improvement in GHG emissions per unit of sales* of 50%.

*GHG emissions per unit of sales = GHG emissions/net sales

To achieve this goal, AGC is promoting the introduction of energy-efficient oxygen combustion methods and electric melting boosters that will lead to reduced fuel consumption in the glass melting process and accelerate the electrification of melting heat sources going forward. We will also contribute to the realization of net zero carbon in the world by supplying high-performance,energy-saving glass and fluorine- based electrolyte polymers for fuel cell membranes.

(3) Strengthening Competitiveness by Accelerating Digital Transformation (DX)

Until now, AGC has used digitization to transform business processes in areas such as development and manufacturing, sales and marketing, and logistics. We are also focusing on the cultivation of digital talent who can wield two swords, that is those who possess both highly specialized business knowledge and advanced data analysis skills to support our transformation. By end-2020, through our own development programs we had trained 1,600 data scientists and 40 data experts capable of solving their division's problems using data science. By 2025, we plan to train 5,000 data scientists and 100 data experts.

Going forward, the AGC Group will transform its business model by further advancing and combing the initiatives which it has cultivated up to this point. In this way, we will build a competitive advantage and provide new added value to our customers and society.

The AGC Group will add value to all stakeholders, including society, customers, business partners, employees, investors, and future generations, by achieving its management and financial targets and promoting sustainable management through the implementation of the strategies set forth in the new AGC plus-2023 medium-term management plan.

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