TOKUYAMA CORPORATION (Note) This document has been translated from the Japanese original for reference purposes only. In the event of any
discrepancy between this translated document and the Japanese original, the original shall prevail.
February 25, 2021
Company name: Tokuyama Corporation
Representative name: Hiroshi Yokota,
President and Representative Director
(Code No. 4043, First Section TSE)
Contact: Taro Kobayashi, General Manager,
Corporate Communications & Investor Relations Dept.
TEL: +81-3-5207-2552
Notice concerning the Company's Medium-Term Management Plan
Tokuyama Corporation (hereinafter referred to as "Tokuyama" or "the Company") today announced details of its Medium-Term Management Plan that covers the period from fiscal 2021, the fiscal year ending March 31, 2022 to fiscal 2025, the fiscal year ending March 31, 2026. Brief details are presented as follows.
1. Background behind formulating the Medium-Term Management Plan
Positioned as the "Cornerstone of the Group's Revitalization," Tokuyama announced details of its Medium-Term Management Plan, which covers the five-year period from fiscal 2016, the fiscal year ended March 31, 2017, to fiscal 2020, the fiscal year ending March 31, 2021, in May 2016. With the goal of becoming a global leader in advanced materials while at the same time securing a top position through traditional businesses in Japan, every member of the Tokuyama Group has worked in unison to realize a cost competitive business structure. Thanks largely to these endeavors, the Group has achieved certain results. This includes withdrawing from unprofitable businesses, boosting sales of semiconductor-related, dental materials, and other products, and reducing interest-bearing debt. Buffeted by such factors as the impact of COVID-19 and an increase in fixed costs attributable to upfront investments, however, we anticipate falling short of our final fiscal year net sales, operating income, ROA, and cash conversion cycle targets.
Looking ahead, the business environment in which the Company operates is expected to undergo considerable change, against the backdrop of the growing awareness toward environmental issues and rapid progress in the digital revolution. Recognizing the need to undertake a fundamental review of conventional strategies that have been based on its own coal-fired thermal power as a source of competitiveness, as well as the importance of building and growing businesses that are not merely extensions of the past, Tokuyama has put in place the five-year "Medium-Term Management Plan 2025", which begins in April 2021, guided by its newly established vision.
2. Pertinent Details of the New Medium-Term Management Plan
(1)Term of the Plan
April 1, 2021 to March 31, 2026
(2) Priority issues
1. Transform business portfolio
2. Mitigation of global warming
3. Practice socially responsible management
(3) Final Year Targets
Index
FY2020 (Forecast)
FY2025 (Target)
Net Sales:
Accounting Standard for Revenue Recognition* :
¥255.0 bn
¥320.0 bn
Current standard:
¥300.0 bn
¥370.0 bn
Operating Profit:
¥30.0 bn
¥40.0 bn
Growth Business Net Sales Growth Rate:
－
CAGR over 10%
ROE:
13.2%
Over 10%
[Assumptions] Exchange rate: Domestic naphtha price:
¥105/US$ ¥32,000/kL
¥105/US$ ¥32,500/kL
* The revised "Accounting Standard for Revenue Recognition" which is to be applied from FY2021 and other
standards are applied.
(4) Changes in segments
While transforming its business portfolio, and in line with the redefinition of growth businesses based on "Electronics," "Healthcare," and the "Environment" as keywords, Tokuyama will reclassify its operations into the six "Chemicals," "Cement," "Electronic Materials," "Life Science," "Eco Business," and "Others" business segments effective from fiscal 2021.
[Accompanying Materials]
" Presentation on Tokuyama's New Vision and Medium-Term Management Plan 2025"
Assessment of Operating Environment
We must build/grow businesses that branch out in new directions.
Earnings power and competitiveness are essential.
Tokuyama's Aims
Achieve SDGsReduce CO2 emissions
Society
JapanTarget societal challenges within Tokuyama's circle of competence as core business domains
Electronics
Healthcare
Environment
Realize carbon-neutral by FY50
Less dependent on energy-inte efficient busi | nsive businesses (chemicals, ce nesses (electronics, healthcare, | ment) while scaling up energy-nvironment) |
Pursuing a new vision with a redefined mission
Slogan: "For the People of Tomorrow"
Mission
Based on the field of chemistry, The Tokuyama Group willcontinue to create a better future in harmony with the environment, in collaboration with its customers
• Be a value creation-oriented company that places first priority on marketing and R&D
• Be a company that never stops challenging new domains while refining and exploiting its unique strengths
Vision
• Be a company with healthy employees who have healthy families and take pride in their work at the Company
• Be a company that fosters bonds with people in communities and societies worldwide
• Customer satisfaction is the source of profits
• A higher and broader perspective
Values
• Personnel who consistently surpass their predecessors
• Integrity, perseverance, a sense of fun and courage
Medium-Term
Management Plan 2025
（FY21-25）
Progress Toward Targets in Current Medium-Term Management Plan
FY15
FY20 （Target）
FY20 （Forecast）
¥335.0bn ¥300.0bn
¥36.0bn ¥30.0bn
Exchange rate (¥/US$)
Domestic naphtha price (¥/kl)
10% 7.9%
10% 10.0%
Assessment
▲ Fell short of target, largely because of pandemic's impact and fixed cost growth due to spending to lay groundwork for next medium-term plan
▲ Achieved operating margin target by exiting unprofitable businesses and growing sales in growth businesses, including semiconductor-related products and dental materials/equipment
69 days
55 days
67 days※
4.7
1.0 0.5※
120 42,800
110 105
58,000 32,000
▲ Failed to reduce inventories enough to achieve target
〇 Achieved target by building retained earnings and paying down debt
※ As of 3Q FY20
Progress on Priority Issues in Current Medium-Term Management Plan
FY16
FY17
FY18
FY19
FY20
●Revised new-business assessment process (exit criteria)
Rebuild business strategy
●Opened Taiwan Research Laboratory
Decided to establish Center for Commercialization of Advanced Technology (silicon nitride) ●
Liquidated Tianjin
Established Taiwanese JV
Strengthen group management
●Partially divested equity stake in Figaro Engineering (gas sensors)
Agreed to acquire affiliate A&T
Excel Shanon (plastic window sashes) formed capital tie-up with Panasonic ●
Improve financial position
●Issued preferred stock to strengthen financial foundation
●Redeemed preferred stockTokuyama Plastics (microporous film) ●
to sell high-purity IPA to electronics industry ●
Partially divested equity stake in Sun-Tox (polyolefin film) ● wholly owned subsidiary ●
(medical diagnostic systems) as
Final Year Targets
Index | FY20 （Forecast） | FY25 （Target） | Factors in Achieving Targets |
(Note) Assumptions：exchange rate (¥/US$) 105, domestic naphtha price (¥/kl) 32,500 *The application of the "Accounting Standard for Revenue Recognition" and other standards
▶Cash Flow Generation and Allocation
▶Business Portfolio Transformation ▶Organizational Revision to Promote Strategy ▶Target Business Portfolio
▶Strategy by Business ▶R&D Policy
▶Promoting Digital Transformation (DX) ▶Accelerated International Expansion ▶Capex Plan Breakdown
Business Portfolio Transformation
Increase growth businesses' share of consolidated net sales to over 50%
FY21-25 Plans
Redefine/reorganize growth businesses around three themes: Electronics, Healthcare and Environment. Proceed full speed ahead with their expansion.
The Chemicals and Cement businesses to promote increased efficiency while generating sustainable cash flows
Priorities and initiatives
Technology
Pursue added value and promote technological differentiation by collaborating more with external partners
Pursue Group-wide operational efficiency, mainly through DX
Efficiency gains
Expand operations in growing overseas markets
International expansion
Organizational Revision to Promote Strategy (from April 2021)
Accelerate strategy by matching business promotion system with focus areas "Electronic" "Healthcare" "Environment"
［Before］
Business Cement
［After］
Segment
Cement
Cement
Cement
Recycling and Environment
Soda Ash and Calcium Chloride
Chemicals
Chlor-Alkali and Vinyl Chloride
New Organic Chemicals
Electronic Materials
Fumed Silica
Specialty Products
Cleaning System
Heat Management Materials
IC Chemicals
Fine Chemicals
Microporous film
Life & Amenity
Dental materials / equipmentRecycling
Soda Ash and Calcium ChlorideChlor-Alkali and Vinyl Chloride
Chemicals
Silicon
Silica
Heat Management Materials
IC Chemicals
Fine Chemicals
Microporous filmDentall materiials // equiipment
Medical diagnosis systems
Environment
Medical diagnosis systems
Ion exchange membranes
Plastic window sashes
Ion exchange membranes
Plastic window sashes
Target Business Portfolio
Position a consolidated sales ratio of 50% or more for growth businesses in FY25 as a milestone while aiming for even higher levels
Breakdown of consolidated net sales by business
Targeting combined sales share of at least
60％
by FY30
We expect chemicals and cement's shares of sales to shrink in tandem with domestic demand
17%
12% 9%
FY20 （Forecast）
FY30 （Planned）
Strategy by Business
Chemicals
Business Goal
Ensure stable earnings in the existing business
Priority Measures
▶
Engage in innovative, sustainable and environmentally-friendly
manufacturing processes
▶
Improve electrolyzer cell energy efficiency to world-class levels,
reduce CO2 emissions through energy saving
▶
Improvement of manufacturing processes and supply chains
through promoting DX (digital transformation)
Investment Policy
▶ Maintain and update facilities needed for stable business continuity
▶ Energy savings and
rationalization to address environmental issues
FY20（Forecast） | FY25（Target） | |
Net sales | 81.0 | 85.0 |
Operating profit | 13.5 | 13.5 |
* Billions of yen
Business Goal
Cement
Become the domestic industrial leader in energy efficiency
Priority Measures
▶Introduce energy-saving equipment to reduce CO2 emissions ▶Reduce use of coal by increasing combustion amount of waste plastic
Investment Policy
▶Maintain and update facilities needed for stable business continuity ▶Energy saving and rationalization to address environmental issues ▶Expand waste treatment that contributes to a recycling society
FY20（Forecast） | FY25（Target） | |
Net sales | 48.0 | 56.0 |
Operating profit | 4.5 | 3.5 |
* Billions of yen
* Data for both fiscal 2020 and fiscal 2025 reflects changes in reportable segments as well as the application of the "Accounting Standard for Revenue Recognition" and other standards
Strategy by Business
Business Goal
Electronic Materials
Capture top share in high-purity and thermal management materials fields supporting the miniaturization of semiconductors and accelerate international expansion
Priority Measures
▶Aggressive expansion in overseas markets ▶Develop new applications, expand product portfolio
International Expansion
IC Chemicals :
Expand Taiwan JV facilities, expand new global facilities
Thermal management : materials
Launch silicon nitride, boron nitride products and expand overseas sales
AsiaN. AmericaEurope
Silicon :
Strengthen marketing of high-purity polycrystalline silicon Expand silane products and sales expansion to Asia
Silica :
Expand uses for CASE* and personal care, enter the organic silicone field
＊ CASE：Coating, Adhesive, Sealant, Elastomer
FY20（Forecast） | FY25（Target） | |
Net sales | 65.0 | 102.0 |
Operating profit | 8.0 | 20.0 |
* Billions of yen
Life Science
Business Goal
Use unique technology to capture top niche share in areas wheredifferentiation is possible (vision, dental, diagnostics)
Priority Measures
▶
Expand product portfolio including biotin and other products for health/pharmaceutical applications
▶ ▶
Develop new applications for unique biaxially-oriented microporous film; expand Shanghai site Accelerate overseas expansion of cosmetics materials, supplements and other healthcare products, develop new product areas
▶
Accelerate the development of diagnostic reagents through chemical integration, establish new alliances, and expand testing areas
International Expansion
Fine Chemicals
:
Aim for 25% global share in photochromic dye materials
Accelerate overseas expansion for cosmetics materials, supplements, animal-related products, etc.
Dental materials and equipment
:
Penetration of brands, acceleration of overseas sales of OMNICHROMA series
N. America Russia / CIS
Europe Emerging countries
Medical diagnosis systems
:
Through alliances, aim to become No.1 OEM supplier for open, automated bioangnastic testing system
* Billions of yen
FY20（Forecast） | FY25（Target） | |
Net sales | 31.0 | 46.0 |
Operating profit | 3.0 | 7.5 |
* Data for both fiscal 2020 and fiscal 2025 reflects changes in reportable segments as well as the application of the "Accounting Standard for Revenue Recognition" and other standards
Strategy by Business
Eco Business
Business Goal
Establish as a new business pillar to carry the future
Priority Measures
▶
Respond to expanded demand for water treatment membranes due to strengthened environmental regulations
▶
Expand resource recycling business in waste gypsum board, photovoltaic modules and others
▶
Commercialize of developed next-generation energy technologies
Investment Policy
Ion exchange membranes Waste gypsum board recycling Photovoltaic module recycling
： ： ：
Boost production capacity Expand business site
Establish and commercialize recycling technology
International Expansion
Ion exchange：Incorporate environmental demand, enter membranes countries in Asia and Europe
Korea Europe
* Billions of yen
FY20（Forecast） | FY25（Target） | |
Net sales | 8.0 | 18.0 |
Operating profit | (0.5) | 1.5 |
*Billions of yen
Current standard | Accounting Standard for Revenue Recognition | |||||||||
FY2020 （Forecast） | FY2020 （Forecast） | FY2025 （Target） | Difference | |||||||
Net sales | Operating profit | Net sales | Operating profit | Net sales | Operating profit | Net sales | % | Operating profit | % | |
Chemicals | 83.0 | 13.5 | 81.0 | 13.5 | 85.0 | 13.5 | +4.0 | +5 | - | - |
Cement | 85.0 | 4.5 | 48.0 | 4.5 | 56.0 | 3.5 | +8.0 | +17 | (1.0) | (22) |
Electronic Materials | 65.0 | 8.0 | 65.0 | 8.0 | 102.0 | 20.0 | +37.0 | +57 | +12.0 | +150 |
Life Science | 31.0 | 3.0 | 31.0 | 3.0 | 46.0 | 7.5 | +15.0 | +48 | +4.5 | +150 |
Eco Business | 9.0 | (0.5) | 8.0 | (0.5) | 18.0 | 1.5 | +10.0 | +125 | +2.0 | - |
Others | 57.0 | 4.5 | 44.0 | 4.5 | 38.0 | 5.0 | (6.0) | (14) | +0.5 | +11 |
Total | 330.0 | 33.0 | 277.0 | 33.0 | 345.0 | 51.0 | +68.0 | +25 | +18.0 | +55 |
Adjustment and corporate-wide expenses | (30.0) | (3.0) | (22.0) | (3.0) | (25.0) | (11.0) | (3.0) | - | (8.0) | - |
Consolidated results | 300.0 | 30.0 | 255.0 | 30.0 | 320.0 | 40.0 | +65.0 | +25 | +10.0 | +33 |
(Note) Sales and operating profit in each segment shown above include inter-segment transactions
R&D policy
Current Medium-Term Management Plan
▶ Customer-oriented R&D
Focusing management resources on business division by R&D
▶
Strengthening open innovation
（+）New chemical solution for semiconductors and an alkaline water electrolysis
（+）Confirmation of elemental technologies and review of strengths
（+）Conduct a course change of R&D themes （+）Increase in products under development
（-）Decrease in medium- to long-term development themes due to the lack of corporate R&D （-）Delay in R&D in the environmental field
～FY15
Delay in R&D
© 2021 Tokuyama Corporation. All rights reserved. 20
Make the transition to a company that creates value and provides solutions
▶ Focusing management resources on corporate R&D
・Concentrate energy on medium- to long-term development themes centered on marketing ・Attack areas where the company's business division development has not yet started
▶ Strengthening business division R&D
・Have a wider range of product variations which can meet customer requirements
・Accelerate the pace of development
▶ Strengthening open innovation
Unique Technologies
High purification
Nitride reduction
Powder control
Crystallization, deposition
Sol-gel
PhotopolymerizationSintering
Electrode and membrane
Molecular design
Promoting Digital Transformation (DX)
Promote DX by utilizing data and digital technology
Makes the conventional impossible possible utilizing AI
Accelerate manufacturing process improvement and R&D through DX善
〈 Phase 2 〉 Preparing foundations for reforms
Improve supply chain management levels / Improvement of digital education/ Utilization of AI
〈Phase1〉 Steps to ensure corporate survival
Generate human resource reserves by improving efficiency / Innovate manufacturing process management / Utilize CRM tools
〈Changes in the world〉Declining workforce, increasing of digitalization, changes in competitive environment
Overcome Change
FY30
*MI…Materials Informatics
© 2021 Tokuyama Corporation. All rights reserved. 22
IC Chemicals
Thermal management materials
Silicon
Silica
Fine Chemicals
Dental materials / equipment
Medical diagnosis systems
Ion exchange membranes
Capex Plan Breakdown
Key words are priority investment in growth fields, reduction of CO2 emissions, and energy saving
Cash Flow Generation and Allocation
Formosa Tokuyama Advanced
Chemicals (IPA-SE)
Silicon nitride production facilities
Power plants : Biomass combustion facilities
Tokuyama Factory : Port infrastructure facilities
Strongly promote business portfolio transformation through aggressive investment
25
Key Investment Projects
Mitigation of Global Warming
Accelerate development of and commercialize next-gen energy technologies
Reduce total CO2 emissions 30％* (2.00mil. MT) by FY30
CO2 reduction scope
*FY19 baseline: 6.76mil. MT
Initiatives for FY50 carbon neutrality
▶Zero CO2 emissions（target a 50% reduction in FY30）
▶Seek to reduce limestone consumption
▶Explore possibility of offsetting emissions with CCU technologies, green products, etc. (already in progress)
Emissions from raw materials (limestone)
FY50 CO2 Emission Reduction Target
Aiming to decarbonize raw material/fuel inputs and achieve carbon-neutrality by developing/deploying green products
FY19 (Baseline)
CO2 from energy
[Power plants] Use biomass/hydrogen (ammonia) as mono-fuel or in combination with other fuels, use local energy
[Cement] Increase combustible waste usage
[Whole plants] Increase energy efficiency, improve processes, upgrade equipment
CO2 from raw materials
[Cement] Increase SCMs, develop calcium recycling technologies
❶
(70)％
[Chemicals] Improve processes
❶～❸
Transform business portfolio, collaborate with other companies in Shunan petrochemical complex, productively use waste heat
[R&D] Develop CCU technologies and green products
Carbon-Neutrality Action Plan
TCFD: Recommendations on February 25, 2021
Develop green products
Use biomass/hydrogen (ammonia) as mono-fuel or in combination with other fuels, use renewable energy
Improve Tokuyama Factory's
energy efficiency and
processes
FY21
FY30
Green products, technological innovationsFY50 target
(20)％
© 2021 Tokuyama Corporation. All rights reserved. 28
■ Reduction of CO2 emissions from energy / raw materials ■ Technological development
FY50
CSR Priorities
Committed to addressing CSR priorities (materiality) through concrete action plan aimed at realizing vision
Tokuyama's Vision
CSR priorities
Helping to Fight Global Warming
Environment
Conserving the environment
Preventing accidents and preparing fordisasters
Safety and Accident Prevention Occupational Health and Safety
Developing products and technologies thataddress social issues
Better chemical management and product safety
Engaging with local communities
Promoting CSR procurement
Developing human resources
Society
Promotion of diversity and career fulfillment
Promotion of physical / mental health
Technical Quality
© 2021 Tokuyama Corporation. All rights reserved.
Appendix
Review of Medium-Term Management Plan: Cornerstone of the Group's Revitalization 5-year Q2Q (quantity to quality) shift under banner of "building a new foundation"
Progress of Q2Q reforms
Growth businesses*Traditional Business
Accomplishments
*Growth businesses…Specialty Products and Life&Amenity segments
Next steps
Progress Toward Targets in Current medium-term management plan
Changes in operating profit by factor
Operating profit fell short of target, largely due to increased spending on repairs and R&D in pursuit of future growth
Semiconductor-related products （＋）
Tokuyama's Evolution
103-year history of adding value attuned to the needs of the times
Launched recycling business in response to
burgeoning environmental consciousness
Branched into healthcare space and electronic materials that support information society
Supplied basic materials and chemical derivatives, supporting postwar reconstruction and
2010
1972 Isopropyl alcohol
1967 Ion exchange membranes
1966 PVC resin
1964 Propylene oxide
1918
1950
1960
1970
Ever Faster Societal Change
1983 Medical diagnostic systems
1983 High-purity chemicals for electric manufacturing
1982 Plastic lens materials
1981 Plastic window sashes
1978 Dental materials / equipment
1980
How should Tokuyama evolve to keep growing?
Environmental regulatory tightening
Decarbonization
Planet Earth
1985 Pharmaceutical ingredients / intermediates 1985 Aluminum nitride
1984 High-purity polycrystalline silicon
Global warming
1990
Society 4th industrial revolution
International cooperation
Japan
Changes in industrial structure
Population shrinkage, societal aging
2013
2000 Material recyclling
2000
2020
SDGsClosed-loop societySociety 5.0
Market shrinkage
Tokuyama
Healthspan extensionChanging values
AutomationLabor shortagesHealthcare spending cutsProductivity growth
Tokuyama has updated its mission statement (management philosophy) to sharpen its focus on essential value
Based on the field of chemistry,
The Tokuyama Group will continue to create a better future in harmony with the environment, in collaboration with its customers
While remaining rooted in chemistry,
Tokuyama will branch out beyond the materials domain with an environmentally conscientious mindset, embracing a mission of creating products and services that contribute to people's convenience, health, comfort and happiness in collaboration with customers.
Disclaimer
This material is supplied to provide information of Tokuyama and its Group companies, and is not intended as a solicitation for investment or other actions.
This material has been prepared based on the information currently available and involves uncertainties. Tokuyama and its Group companies accept no liability in relation to the accuracy and completeness of the information contained in this material.
Tokuyama and its Group companies assume no responsibility whatever for any losses or deficits resulting from investment decisions based entirely on projections, numerical targets and other information contained in this material.
Accordingly, the information on this material may not be used, reproduced, altered, distributed, sold, reprinted or published without the prior approval of the Company.
© 2021 Tokuyama Corporation. All rights reserved.
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Tokuyama Corporation published this content on 25 February 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 25 February 2021 06:03:13 UTC.
