Inabata : Integrated Report 2021

2021 Report Integrated

Integrated Report 2021

December 17, 2021

Introduction

Inabata will continue to grow by flexibly responding

to changes in the business environment with the "sound and solid strength" it has cultivated for more than 130 years.

Starting from importing dyes in 1890, we have expanded our business around chemicals that form the foundation of all kinds of industries, responding to the changing needs of our clients and society.

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Contents

Corporate Philosophy and DNA	3
Our Company
History of Value Creation	5
The Evolution and Structural Reorganization of
the Chemicals Business	7
At a glance	9
Medium- to Long-term Growth Strategy	11
The Process of Value Creation	13
Business Model	15
Strategies
Message from the President	21
CFO Interview	27
Annual Report
Feature COVID-19:
The Pandemic's Impact and Our Response	31
Financial and Nonfinancial Highlights	35
Segment Overview	37
Global Network	45
Regional Overview	47
ESG Information
Corporate Governance
Management	49
Outside Directors' Roundtable	51
Interview with an Outside Director	55
Risk Management	65
Society	67
Environment	73
Financial Information /
Consolidated Subsidiaries and Affiliates /
Corporate Information / Stock Information	77

Editing Policy

We prepare the Integrated Report as an important tool that enables Inabata's stakeholders to understand the company's business activities and distinctive initiatives for value creation. The aim of Integrated Report 2021 is to present the sound and solid strength of our company, which has evolved with the times, responding to a significant societal change triggered by the spread of COVID-19 infection.

Guidelines referenced:

The International Integrated Reporting Framework by International Integrated Reporting Council (IIRC), Guidance for Integrated Corporate Disclosure and Company-Investor Dialogue for Collaborative Value Creation by Ministry of Economy, Trade and Industry (METI), etc.

Relevant period:

From April 2020 to March 2021 (Some information may not be limited to this period)

Relevant organizations:

Inabata & Co., Ltd. and its domestic and overseas Group companies

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Corporate Philosophy and DNA

Love (ai) and Respect (kei)

Mission

People come first, based on the spirit of "love (ai)" and "respect (kei),"

and together we strive towards contributing to the development of society.

Vision

To continually evolve, serving clients and society, through global operations and meeting their changing needs.

IK Values

• To cherish integrity and respect for people (ethics)
• To continually challenge the limits with high ideals, big dreams and great passion (aspiration)
• To prize dialogue and teamwork, and to treasure professional growth of employees (organization)
• To become the best partner of our clients, providing solutions from the clients' standpoint (role)
• To grow with people across borders, sharing and respecting diverse values with the aim of co-prosperity (symbiosis)

Katsutaro Inabata, Founder

Katsutaro Inabata washing silk threads in the Rhone river in the winter during his study abroad (by Sekka Kamisaka)

Inabata Senryoten at the time of founding

Inabata Dye House's happi coat with IK logo

Founder Katsutaro Inabata's signature

The Founder's Passion and the Origin of Inabata

Our founder, Katsutaro Inabata, was born in Kyoto in 1862 as the eldest son to a family that ran the long-standing Japanese sweet shop, Kameya Masashige, which was a purveyor to the Imperial Household. At an early age of 15, Katsutaro was selected to visit France to study, sponsored by the Kyoto Prefectural government which was aiming for industrial development. He not only studied dyeing techniques at an engineering school in Lyon, but also learned practical skills by working at the Marnas dyeing factory. He studied applied chemistry afterward, focusing on dyeing techniques at the University of Lyon. Katsutaro returned to Japan in 1885 at the age of 23 and became a government employee with Kyoto Prefecture. At 24, he started teaching at a dyeing institute in Kyoto, where he leveraged the advanced knowledge and skills in synthetic dyes and dyeing techniques he had learned in France. In 1890, at the age of 28, he founded Inabata Senryoten along with his wife and started a business as a dye distributer for St. Denis, a French company.

Apart from running his company, Katsutaro also devoted himself to domestic production of dyes. In 1916, when Japan Dyestuff Manufacturing Co., Ltd. was established under national policy, Katsutaro was also involved in its establishment and was appointed as auditor. When the dyeing industry was undergoing a crisis under the recession during World War I, Katsutaro emphasized the need to understand that a national business such as dyeing surpassed the concepts of profit and loss. In 1926, he took over as president and committed himself to the development of the industry.

The DNA of "love (ai )" and "respect (kei )"

In 2010, 120 years after Inabata was founded, the company had grown to a global corporation with about 3,600 employees on a consolidated basis. Katsutaro's great-grandson and our sixth president, Katsutaro Inabata, felt the need to have a shared value among ourselves to demonstrate the company's strengths. Selected employees from the company put their heads together and formulated the new management philosophy, vision, and values that the company should stand for 10 years later. What is the purpose of our existence? What matters the most is the spirit of love and respect that we have inherited. These values have been loved and been our company's unchanged motto since its founding, along with the symbol of "IK," which is taken from the initials of our founder. Another meaning behind our logo IK is that love in Japanese kanji is pronounced "ai," and respect "kei." "Honesty is the only way to earn trust of society" - This is one of the words left behind by our founder, which describes the spirit of love and respect. Our company's history of over 130 years boasts a lineage of diverse businesses that contribute to social interests relevant to the times and that spirit has become the unwavering guideline for sustainable growth in the medium- to long-term.

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Our Company History ofValue Creation

Since the company's founding in 1890, we have been creating

Since 1890

1000.0

and offering value that caters to the times through the sound and solid strength that defines Inabata.

1984- TheThird Founding Period

2010- The Fourth Founding Period

900.0

1890-	The First Founding Period
Early Period

Amid the Great Depression,

the company took on the challenge of domestic production of dyes with

a commitment that went beyond profits

1945- The Second Founding Period

Growth Era

After the devastation caused by World War II, the company steadily expanded its business and built its foundation as a chemical trading company

Reform Era

After losing its pillar of earnings, Inabata rebuilt its management base and aggressively expanded overseas

As the value of trading companies was being challenged, Inabata enhanced multifaceted functions such as manufacturing and logistics

800.0

700.0

Press conference announcing the launch of Sumitomo Pharmaceuticals

A plastics compound manufacturing base

IK Plastic Compound Mexico, S.A. de C.V. (Mexico)

In 2010, Inabata celebrated the 120th anniversary of its founding. As it was expanding its manufacturing and

600.0

Inabata Dye House established in 1897

After the Sino-Japanese War, when the entire Japanese industry was in recession, our founder devoted himself to producing dyes domestically while managing the Inabata Senryoten.

He established Muslin Boshoku in 1895. After which he started business with Société Alsacienne de Constructions Mécaniques of France, which was considered the best spinning and weaving machines manufacturer at the time. He, then, established Inabata Dye House, gathered the best machinery and technology, and became the factory manager himself. Even during harsh times, he advocated the need to commit to the understanding that a national business such as dyeing surpassed the concepts of profit and loss and contributed to the development of the business.

1890 Inabata Senryoten established in Kyoto

1897 Inabata Dye House established

1918 Inabata Shoten (Inabata & Co., Ltd.) established

1922 Osaka Chamber of Commerce and Industry appoints Katsutaro Inabata as its 10th president (until 1934)

1926 Katsutaro Inabata assumes the presidency of The Japan Dyestuff Manufacturing Co., Ltd.

1943 "Inabata Sangyo" becomes the Japanese company name

1944 The Japan Dyestuff Manufacturing merges into Sumitomo Chemical Co., Ltd. Inabata & Co., Ltd. becomes the exclusive distributor of dyestuffs, chemicals, and pharmaceuticals for Sumitomo Chemical Co., Ltd.

Sales trends

(hundred million yen)

New Osaka Head Office completed in 1954

In the midst of the post-war recession, Inabata expanded its business fields to include synthetic resins and construction materials and grew to become a listed company by the 1960s. In 1976, the company established Inabata Singapore as its first post-war overseas base, and subsequently developed trading companies and manufacturing and processing plants in Southeast Asian countries. In addition, it adopted a corporate division system in order to strengthen its structure in anticipation of business expansion. With the establishment of the dyestuffs, chemicals, plastics, and machinery divisions, the business structure that forms the foundation of today's Inabata Industry was established.

1961 Stock listed on Second Section of the Osaka Securities Exchange

1962 Stock listed on Second Section of the Tokyo Stock Exchange

1966 Pharmaceuticals division expands its business by enhancing its structure

1970 Introduced a corporate division system and established dyestuffs, chemicals, plastics and machinery divisions

1973 Listed on the first section of the Tokyo Stock Exchange and the Osaka Securities Exchange

1976 Inabata Singapore (Pte.) Ltd. set up to become the first overseas office after World War II

1979 Overseas division established

Sumitomo Pharmaceuticals Co., Ltd. (now Dainippon Sumitomo Pharma Co., Ltd.*) was established in October 1984 as a joint venture with Sumitomo Chemical Co., Ltd. The pharmaceutical business, which had been in operation for nearly 40 years since 1946, was separated from Inabata. However, the bulk pharmaceuticals business was succeeded by the chemicals division, as it handled a wide range of products to meet the needs of society. Moreover, Inabata focused on aggressive overseas expansion while rebuilding its management base. It particularly focused on the resin compounding business to build a new earnings pillar.

*The name is set to change to Sumitomo Pharma Co., Ltd. in April 2022.

1984 Pharmaceuticals division separated, Sumitomo Pharmaceuticals Co., Ltd. (now Dainippon Sumitomo Pharma Co., Ltd.) established as a joint venture with Sumitomo Chemical Co., Ltd.

1988 Food division established

1990 New Osaka Head Office building completed

1999 Business reorganized into IT & Electronics,

Housing Materials, Chemicals, Plastics, and Food segments

2000 Inabata certified ISO 14001 (environment management system)

2005 Inabata certified ISO 9001 (quality management system)

processing bases, the company responded to diverse needs in the rapidly changing market by developing not only a trading function but also a manufacturing and processing function that directly participates in production. Today, it is a global company operating in about 60 locations in 17 countries. In 2017, Inabata formulated the IK Vision 2030, which describes how it envisions itself in 10 to 15 years. With the spirit of "love" and "respect" handed down from generation to generation since its founding, the company continues to evolve, eyeing the future.

2010 Mission, Vision, and IK Values are newly established to coincide with Inabata's 120th anniversary

2012 Business reorganized into Information & Electronics, Chemicals, Life Industry, Plastics, and Housing & Eco Materials segments

2019 Business domains reorganized into four areas: Information & Electronics, Chemicals, Life Industry, and Plastics

500.0

400.0

300.0

200.0

100.0

1890	1900	1910	1920	1930	1940	1945	1950	1960	1970	1980	1984	1990	2000	2010	2020	2030

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Our Company

The Evolution and Structural Reorganization of the Chemicals Business

Since starting from importing dyes in 1890, we have expanded our business around chemicals that form the foundation of all kinds of industries, responding to the changing needs of our clients and society.

1890- Early Period

1945- Growth Period

1984- Reform Period

2010- The Fourth Founding Period

The era of founding and growth

We started with the import and sales of dyes and dying & weaving machines and expanded our business around the chemicals field.

The era of restructuring and revival

We advanced into new domains while strengthening the pharmaceuticals business, amid post-war chaos in

the country.

The era of challenges and hardship

We created new value by separating the pharmaceuticals business and expanding overseas bases.

The era of progress and creation

We are striving to become our clients' best partner as a shosha, or Japanese trading company, providing manufacturing, logistics, and finance solutions backed by our highly specialized knowledge.

Mask blanks	Pellicles	Polarizing film materials for	Encapsulant for LEDs
		liquid crystal displays

Founder and dyes

Information &

Our founder went to study in France on government sponsorship at the age of 15. There, he studied cutting-edge synthetic

Electronics

dyes and dyeing techniques of the time for eight years and brought back the knowledge to Japan.

Information &

1897

February 1920

April 1959

April 1977

May 1983

April 1999

Electronics Div. I

Spinning machine (Société Alsacienne de

Machinery division

Machinery and

Machinery and

Machinery and

IT and Electronics

Information &

February 1941

Metals division

Housing Materials

Electronics Materials

division

Electronics Div. II

Constructions Mécaniques)

Closed down

division

division

Restarted business with Société Alsacienne de

Materials for solar power

Information &

generation

Electronics Div. III

Constructions Mécaniques in 1959 and

established the Machinery and Metals division

Renewable energy materials

Additives for plastics and rubber

Limited partnership company Inabata Koryo

Silicone

Chemicals for papermaking

Dyes for printers

Dyes

The perfume division separated in1926 to become an independent

entity and a limited partnership company Inabata Koryoten was

established. The name was changed in 1966 to Inabata Koryo.

June 1918

*There is no capital relationship with our company now.

Dyeing division

Chemicals

June 1918

January 1958

Dye samples of Nippon Senryo Seizo K.K.

Chemicals Division

Trading division

January to

Chemicals department

October 1946

Perfumes

November 1933

Succeeded the pharmaceutical substances business

April 2019

Pharmaceuticals

Pharmaceuticals

Chemicals Division and Housing

division

division

& Eco Materials Division

Pharmaceuticals business separated

October 1984

Imported

restructured

Sumitomo Pharmaceuticals Co., Ltd. (now Sumitomo

pharmaceuticals

Pharmaceuticals Materials for insecticides

Cornstarch

Dainippon Pharma Co., Ltd.) was established as a

joint venture with Sumitomo Chemical Industry Co.,

Life Industry

Ltd. (now Sumitomo Chemical Co., Ltd.)

October 1975

Poleon Tablets

Food division

Life Industry Division

April 2012

Advertisement

Particle board

Shrimp for processing

Blueberries

Life Sciences-related

in Shukan Asahi

Materials for regenerative

Started selling

(1941)

cornstarch, which is a

products and services of

medicine

paste for cardboards, to

the Chemicals Division

the food industry as an

integrated with

Adhesives for plastics

auxiliary raw material for

the Food division

beer brewing

October 1963

Housing Materials division

Plastics

October 1961

Entered the housing material business with

Vinyl chloride

the sale of adhesives for plywood

Plastics division

Plastics Division I

Plastics division spun off from Chemicals division

Plastics Division II

Flow of major structural

Also expanded market to durable consumer goods as the types of plastics

Sporting goods

increased and processing methods advanced

reorganization and the timing of

the start of dealing in major items

Resins

Compounding of resins

Film products

(Polypropylene, etc.)

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