The Medium-term Business Plan
"INNOVATION25"(TSE Prime Market: 4463)
February 10, 2023

CONTENTS

１

Overview

P 3

２

Business Features and Our Strengths

P 7

３

The Medium-term Business Plan (Target figures)

P 14

４

The Medium-term Business Plan (Company-wide basic strategy)

P 19

５

Appendix

P 35

2

１

Overview

3

The Medium-term Business Plan "INNOVATION25"

Corporate data
Headquartered in Fukui City, a surface science manufacturer with 81
years of history
Head Office

Fukui City, Fukui Prefecture

1940-

TSE Prime Market / NSE Premier Market

Rella

ListedIndia
China (Dongguan)Non-consolidated : 593 (As of December 31st, 2022)

Bangladesh

Consolidated : 1,472 (As of December 31st, 2022)

Ohtomo-chemical ins.
Emori Engineering

Employees

Domestic
locations

EraL

Consolidated : ¥2,628 million (As of FY2022)

Korea (Cosmetics)
China (Cosmetics)

Operating profit

23 companies
in 10 countries
and regions

VietnamChina (Shanghai)

Consolidated : ¥50,627 million (As of FY2022)

China (Hangzhou)
China (Guangzhou)

Net sales

2020-

2000-

YamadaPharmaceutical

JPY 2,898 million

U.S.A.

Capital

1980Indonesia
Thailand
Korea

1941

International
locationsTaiwanEstablished

1960-

Cosmetics
Specialty Chemicals
Cleaning and Medical Agents
Textile Chemicals
COPYRIGHT © NICCA CHEMICAL CO.,LTD. ALL RIGHTS RESERVED

4

The Medium-term Business Plan "INNOVATION25"

Our Business
Two major business areas: "Chemicals“ and "Cosmetics"
Chemicals

Cosmetics

Textile Chemicals

Cleaning Agents

Hair care

Scalp care

Specialty Chemicals

Specialty Chemicals

Hair color

Styling(Performance Chemicals)(Advanced Materials)

Major Affiliates
・Ohtomo-chemical ins., corp (for semiconductor industry)
・NICCA CHEMICAL (CHINA) CO., LTD.
・NICCA KOREA CO., LTD.
＆13 others
For details of each business, please refer to pages 36-38 of appendix and our website.

Major Affiliates
・Yamada Pharmaceutical Co., Ltd. (Cosmetics OEM/ODM)
・EraL Co., Ltd.
・DEMI KOREA CO., LTD.
& 4 others
COPYRIGHT © NICCA CHEMICAL CO.,LTD. ALL RIGHTS RESERVED

5

The Medium-term Business Plan "INNOVATION25"

Sales Composition by Business Segment (FY2022)
Sales of cosmetics and chemicals increased significantly due to overseas growth
Net sales (FY2022) ¥50.6 billion *1, 2
Net sales (FY2012) ¥31.6 billion

Cosmetics¥7.3 billion
23%

Chemicals (Domestic)¥12.2 billion
39%

Chemicals (Overseas)¥12 billion
38%

Cosmetics¥13.2 billion
26%

Chemicals (Domestic)¥16 billion
32%

CAGR 6.1%
CAGR 2.7%

Chemicals (Overseas)¥21.2 billion
42%
CAGR 5.9%*1 “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, March 31, 2020) and others have been applied since FY2022.
*2 “Chemicals segment” includes other segments.
COPYRIGHT © NICCA CHEMICAL CO.,LTD. ALL RIGHTS RESERVED

6

2

Business Features and Our Strengths

7

The Medium-term Business Plan "INNOVATION25"

Surface science are essential to our daily lives“Surface science” refers to technologies that control the boundaries and surfacesof various materials through the use of both scientific and chemical approaches.
Example: Surface science technology is indispensable
when making water-repellent clothing.

Resin
Pulp and Paper

Softners
Dye
Leveling

Form
control

Cleaning

Surface scienceDyefixing
WettingAndpenetrations

Surface science

TextileWater andOil repellency

Cleaning
Emulsifying
Dispersing

Cosmetics
Sterilization,
Anti-bacterial

Smoothing
And Lubricating
Emulsifying
Dispersing

Electronics
Auto parts

MedicalRain

Surface
Cloths, Fabrics
COPYRIGHT © NICCA CHEMICAL CO.,LTD. ALL RIGHTS RESERVED

8

The Medium-term Business Plan "INNOVATION25"

Core Technology
Our core technology has been cultivated in the textile industry for more than 80 years
and has evolved while expanding into other industry domains.
Core technology(Market)Controlling diversified surfaces

Paper manufacturing

Evolving hand-in-hand withvarious industry developments(Technology)

Softening, Cleaning…

Metal

Textile processing
ApparelInterior
Car Seats
Nonwoven fabrics…

ClothesCleaning, Antibacterial…

Cleaning, Surface treatment...

Automobiles
Digital equipment
Medical equipment...

Dyeing, Washing…

Hair(Material)

Cellulose

Cosmetics

Creating Valueby Providing "Technology"

Laundry Chemicals
COPYRIGHT © NICCA CHEMICAL CO.,LTD. ALL RIGHTS RESERVED

9

The Medium-term Business Plan "INNOVATION25"

Technology that supports people’s lives
Our technology is used in various areas of daily life and is deployed in many nicheareas that are difficult to solve with general-purpose products.
SportsApparelWater-repellent,water-absorbing,and quick-drying

Fashionunderwear

Flame retardant,
DurableHair color

Silicon wafer

Movement,
TextureColoring,
Glossing

Cutting,
Machining

Newspapers,
Magazines

Skin care

Hair care

Moisturizing,
Gentleness

Professional use

Antibacterial,
Antiviral

Automobiles
Car Seats

Styling

Interior

Head cure

Stain and flame
retardant

Moisture,
Fragrance

Perm
Damage reduction

Please refer to Appendix P39 and our website for details of technology applications.

De-inking,De-foaming

Laundry
Chemicals

Digital device
Lubrication,
Heat resistance

Cleaning,
Antibacterial

HotelsHospitals

Medicalequipment

Cleanliness,
HygieneCleaning,
Disinfection

COPYRIGHT © NICCA CHEMICAL CO.,LTD. ALL RIGHTS RESERVED

10

The Medium-term Business Plan "INNOVATION25"

Business mechanism (Example: Textile Chemicals)Innovations based on our technology and experience have created epoch-making
products that are highly supported by customers.
NR-8800 : Innovative silicone-based PFC-free durable
Winner of the 2020 R&D 100 Award*1
water repellent
Difficult new
challenges•••

Leading global apparel companies restricting use of hazardous chemicals
Growing need for PFC-free water repellents
Major challenges achieving right comfort balance (fabric texture, etc.)

Solution through Innovation
NICCA Chemical discovered asilicone component capable ofsolving conventional challenges

Joint development with world-classsilicone manufacturer, Dow Inc.
(U.S.A.)

Technology × Partner × People
Hundreds of samples were tested at leading domestic textile processing manufacturers.
Feedback and adoption by global apparel, sports and outdoor product manufacturers.
*1 R&D 100 Award: Sponsored by "R&D World Magazine" in the U.S., this award is presented to the 100 most revolutionary products and technologies
developed by world-class research institutes and companies, and applied to practical use, over the past year. There were four award winners from Japan
in 2020: NICCA Chemical, Toyota Motor Corporation, Toyota Central R&D Labs, and Hitachi, Ltd.

COPYRIGHT © NICCA CHEMICAL CO.,LTD. ALL RIGHTS RESERVED

11

The Medium-term Business Plan "INNOVATION25"

Business mechanism (Example: Cosmetics)
Generation of more than 3,000 science-based formulas and feedback from hairdressers
who are hair specialists support our Cosmetics business
Planning & development of innovative products
from more than 3,000 formulas created by thecompany's "hair science"

Our human talent are information leaders with a wealthof industry knowledge•

Scientific analysis and research of not only hairand scalp, but also chemicals and ingredients••

Providing products to and capturing feedback
from hairdressers on product development for 40
years

Providing content cooperation forlearning materials, etc. of the Japan
Hair Care Meister Association•

Significant media exposure, including
lectures on hair & skin science•

Commercialization of products selected fromover 3,000 formulas (hair care, perms, coloring,
styling, hair growth, skin care, etc.)•

Active communication on SNS, suchas "DEMI Color Channel" on Instagram

Formulas for Professional Use also expanded to ODM•

The best formulas for Professional Use are
selected and proposed to customers with ODM
needs

•

Flexible in-house plant can handle smallquantity, high-mix orders
COPYRIGHT © NICCA CHEMICAL CO.,LTD. ALL RIGHTS RESERVED

12

The Medium-term Business Plan "INNOVATION25"

The growing possibilities of surface science
Given the major changes occurring in the world, the need for innovation throughsurface science is becoming increasingly important.

Changes in the world

Major changes in manufacturing

ClimatechangeMaterial evolution & diversification• Bio-materials, recycled materials• Diversified composite materials

Changes in chemical raw materials

Interest in
health• Restrictions & regulations on the use of harmful
chemicals• Compliance with new substance regulations aroundthe world

Super-smart
Society

New surface
challenges

NICCA Chemical’s
technology & experience
Learn about various materials and raw materials

A trustworthy partner
New wisdom & technology created through collaboration

Employees that never give up
Sophisticated functional needs• Enhanced energy-saving and decarbonization,
and water conservation during processing• Low dielectric materials for high-frequency
applications required in post-5G era, etc.

Driven & tenacious

Innovation chance
COPYRIGHT © NICCA CHEMICAL CO.,LTD. ALL RIGHTS RESERVED

13

3The Medium-term Business Plan
(Target figures)

14

The Medium-term Business Plan "INNOVATION25"

Perceived business environment
In the uncertain business environment expected in 2023 - 2025,
our major management challenge will be growth in "quality" rather than "quantity”

Global response
to climate change
challenges

The rise of thecircular economy

Steady changes toproceed within uncertain
political and economic
climateAccelerated
development ofSuper-smart
Society

People to behealthier andmore hygienic

Opportunities to increase
added value
abound in all NICCA
Chemical businesses

Focus of growthover 3 years:
quality over quantity
COPYRIGHT © NICCA CHEMICAL CO.,LTD. ALL RIGHTS RESERVED

15

The Medium-term Business Plan "INNOVATION25"

Medium to Long-term Growth Vision
To be the most respected innovation company for customers all over the world.

Medium to long-term vision■Net sales■Operating profit

Vision for 2030

57.0（¥ billion）

50.6

INNOVATION25（～2025）

46.1

4.0
（ROS7%）（～2020）Net sales¥57 billion
ROS 7％
2.6¥70 billion
ROS 10％Net sales¥46.1 billion
ROS 3％
1.3

Net sales*2019

Resolving social issues with the technologies
of surface science to brighten society and thefuture.

“The most respected innovation company
for customers all over the world”
COPYRIGHT © NICCA CHEMICAL CO.,LTD. ALL RIGHTS RESERVED

16

The Medium-term Business Plan "INNOVATION25"

Growth Image for the next three years （2023～2025）
This next three years will be used to drive business structure transformation, improved
profitability, and aggressive investment in growth areas, all aimed at firmly establishinga new growth spiral.
Current Medium-term Business Plan (2021-2025): “INNOVATION25”

2020-2022

2023-2025

3 years to huddle andrethink NICCA Chemical

Establish new
growth spiral◆ Reform profitability–

Business structuretransformation

Price revisions, cost
reductions– Concentrate on
businesses thatsolve social issues◆ Improve employee
productivity––

Rethink waste throughdigitalization
Reform work styles bypromoting remote work

Aggressive
investment ingrowth areas– Carefully select &execute necessary
investments

For a review of the past few years, please refer to pages 40-41 of appendix.

2026 & beyond

Toward further
sustainablegrowthImproved
profitability– High value-added
technology & products– Continuous cost
reductions
COPYRIGHT © NICCA CHEMICAL CO.,LTD. ALL RIGHTS RESERVED

17

The Medium-term Business Plan "INNOVATION25"

Management target figures（2025）（¥ billion）

Strike a good balance between improving profitability and aggressively investing in
growth markets
FY2025

FY2022

Actual results*1,2,3

plan

CompanyChemicals Cosmetics Company-wide
wide① Net sales(¥ billion)
*4

50.6

37.3

13.2

57.0

Chemicals

Cosmetics

40.0

17.0

•
•

Aim for company-wide growth that exceeds global GDP growthforecasts
For Chemicals, focus on growth in profits (quality) rather thansales (quantity)

3.1%

2.4%

5.2%

4.0%

2.3%

8.6%

2.6

0.9

1.7

4.0

2.0

2.0

ROS

5.2%

2.4%

12.9%

7.0%

5.0%

11.8%

•

③ ROE*5

6.4％

ー

ー

8.0％

ー

ー

•

Aim for 10% ROE in 2030 as medium- to long-term target④ ROIC*6

4.6%

2.0%

15.3%

7.0％

5.0％

12.0％

•

Target a level that is stable and significantly above WACC

Assumptions¥132/USD (end of Dec. 2022)¥72,500/KL (Avg. 4Q 2022)•

Plan assumptions based on exchange rate as of end of
December 2022 and average naphtha price in 4Q 2022

CAGR

② Operating
Profit (¥ billion)

Exch. Rate/
Naphtha price•(8.0%)¥132/USD¥72,500/KL•

Aim for 10% or more company-wide ROS in 2030 as a medium- tolong-term target
Improved profitability for Chemicals with shift to high valueadded businessTemporarily lower ROS for Cosmetics due to aggressive
investment aimed at growth*1 “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29) and others have been applied since FY2022.
*2 “Chemicals segment” includes other segments.
*3 "Eliminations and Corporate" are allocated to Chemicals and Cosmetics segments.
*4 CAGR represents three-year average growth rate of net sales*5 ROE is an estimate and excludes extraordinary gains/losses and other extraordinary factors.
*6 ROIC is an estimate based on working capital, fixed assets and other information.

For assumptions used for market trend scenarios during the planning process, please refer to page 42 of appendix.

COPYRIGHT © NICCA CHEMICAL CO.,LTD. ALL RIGHTS RESERVED

18

4The Medium-term Business Plan
(Company-wide basic strategies)

19

The Medium-term Business Plan "INNOVATION25"

Company-wide basic strategies
No major changes to the five major strategies, but the key to achieving
numerical targets will be the acceleration of 1, 2, and 3 below.

■ INNOVATION25「Five Major strategies」
1. Major transformation of business structure
2. Well-balanced investment
3. Productivity reform
4. Promotion of sustainable management
5. Evolution of the extended family policy
COPYRIGHT © NICCA CHEMICAL CO.,LTD. ALL RIGHTS RESERVED

20

The Medium-term Business Plan "INNOVATION25"

Strategy 1. Major transformation of business structure
Drive the shift to EHD domains where focus is on social issues of E: Environment, H:◎/ Special focus in future
Health and D: Digital (advanced materials).
〇/ Focus on

Chemicals

EHD domains to focus on
Environment

Cosmetics

Improve customer production process environment(energy and water conservation, decarbonization,
environmental improvement, waste reduction, etc.)
Switch to raw materials and containers with lessenvironmental impact

TextileChemicals

Cleaning andmedical agents

Chemicals to reduce
Chemicals to reduce
processing time, save water, processing time, save water,
etc.
etc.

Plant-derived raw
materials and eco-friendly
containers

Bio-derived raw materials
and recycled raw materials

Healthier and cleaner
hair & scalp products

Evolution for use in
sportswear and otherfunctionsBio-derived raw materials
and recycled raw materials

Specialty
Chemicals

Recovery & recycling ofcooling agent used insemiconductor wafer processing

Solvent-based→ Water-based

Help people stay healthy and clean

HealthHygiene management, antibacterial, antiviral, etc.

Hand cleaningproducts

Antibacterial and antiviralfor apparel, interior design,etc.

A healthier and cleaner
life

Chemicals to control
infection

Address new surface challenges to support nextgeneration communications and nanotechnology

Low-dielectric materials
for high-frequency
applications, etc.

DigitalPromote digitalization of customer workplaces
Propose chemicals
management andsupply system

COPYRIGHT © NICCA CHEMICAL CO.,LTD. ALL RIGHTS RESERVED

21

The Medium-term Business Plan "INNOVATION25"

Strategy 1. Major transformation of business structure
In particular, there is significant room to improve the EHD ratio in the Chemicals
business. Increasing this ratio will increase the profitability of the overall Chemicals
business.
Chemicals
EHD sales ratio

2022

¥37.4
billion2025 (plan)37％（2030 target）

Comparison of interest rates(2025 Plan for Chemicals)

75％

50％
¥41.0

¥45.0

billionbillion

35%
25%
EHD products

Existing products

Cosmetics•

Many of the company’s products using the opinions of hair and scalp professionals and "hair science" as a starting
point are created based on research aimed at producing a healthy scalp and hair.

•

Further deepening of E/H domains through new product development with a greater awareness of health andpackaging sustainability.
COPYRIGHT © NICCA CHEMICAL CO.,LTD. ALL RIGHTS RESERVED

22

The Medium-term Business Plan "INNOVATION25"

Strategy 1. Major transformation of business structure
Raise the Group's profitability through the two pillars of the expansion of the Cosmetics
business and the EHD shift in the Chemicals business.
Basic policy for major transformation ofbusiness structure

Aggressive investment in
Cosmetics business to acceleratebusiness expansion

Medium- to long-term (2030) business structure◆ Increased sales composition for Cosmetics tosupport company-wide operating profit growth◆ Significantly improved profitability in Chemicals toboost company-wide profitability
company-wide

Net sales（composition
ratio）

Chemicals business to focus on
EHD domains, prioritizing
profitability improvement over sales
volumeCosmetics¥37.4 billion ¥13.3 billion

2022¥50.6 billion

2030¥45.0 billion ¥25.0 billion¥70.0 billion （64％）（36％）

Operating 2022
profit¥2.7 billion[ROS]（composition
ratio）

Chemicals

2030¥7.0 billion

（74％）

（26％）

¥0.9 billion¥1.7 billion

[2％]
（33％）

[13％]
（67％）

¥3.5 bln.

¥3.5 billion

[8％]
（50％）

[14％]
（50％）

COPYRIGHT © NICCA CHEMICAL CO.,LTD. ALL RIGHTS RESERVED

23

The Medium-term Business Plan "INNOVATION25"

Strategy 1. Major transformation of business structure (Cosmetics)
Commercial opportunities exist within major market changes. In addition to leveraging thecompany‘s strengths of product planning and development, expand the market through full-scale
marketing and promotions, which are activities the company has not previously done.
Summary of 3-year growth plan for Cosmetics businessBusiness environment◆ Commercial opportunities within major changes
in market structure• Growing consumer awareness of self hair care
→Growth of high-priced hair care market• Rise of emerging brands with strong productplanning and marketing capabilities; taking market
share from major players

Business strategy overview for 2023-2025◆ Launch of new large brand & product renewals• New ground-breaking scalp care brand• Full renewal of hair color brand◆ Full-scale marketing & promotion• Media advertising and digital communication• Reinforce brand recognition and attract customers to salons◆ Expand ODM business• Aggressively capture ODM needs of emerging brands

NICCA Chemical’s strengths◆ Innovative product planning anddevelopment capabilities based on hairscience and feedback from hairdressers◆ Start full-scale study for new plant operations• New concept plant capable of dramatically improving productivity
and accommodating business expansion (full-scale operation
planned in 2026 or later)
COPYRIGHT © NICCA CHEMICAL CO.,LTD. ALL RIGHTS RESERVED

24

The Medium-term Business Plan "INNOVATION25"

Strategy 1. Major transformation of business structure (Cosmetics)
DEMI DO Launch scheduled in April 2023.
• A scalp care brand that maximizes theperformance of an individual's scalp and hair
• Backed by its confidence in hair science
technology, this first-ever DEMI-branded
series will dispel conventional scalp care
ideas

TOIROCTION Launch scheduled in June 2023.
• Full renewal, including a new brand name, ofcomprehensive hair color band “ASSORTALLIA C”
• Newly shaped small cap uses around 55%
less plastic
COPYRIGHT © NICCA CHEMICAL CO.,LTD. ALL RIGHTS RESERVED

25

The Medium-term Business Plan "INNOVATION25"

Strategy 1. Major transformation of business structure (Cosmetics)
Commenced review of a new cosmetics plant, predominantly aimed at expanding
production capacity and improving productivity. Aim for operations to start in 2026 orlater.

Production capacity◆ Approx. 4 times current capacity(Production capacity: 2,674 t ⇒10,800 t)

Increased productivity

Smart Factory Concept•

Mechanization, automation, labor-saving, energy-saving•

Environmental measures (cut CO2 emissions & wastewater)•

Automated filling & packaging•

Automated delivery of raw materials, materials, etc.

◆ Manufacturing productivity per
employee ⇒ Approx. 3 times◆ Inventory turnover months ⇒ 1/2 or less

Planned construction site: Fukui
COPYRIGHT © NICCA CHEMICAL CO.,LTD. ALL RIGHTS RESERVED

26

The Medium-term Business Plan "INNOVATION25"

Strategy 1. Major transformation of business structure (Chemicals)
In addition to concentrating on EHD-related themes, R&D will focus on areas thatwill contribute to the circular economy and next-generation manufacturing.
Examples of Innovation themes to focus on in 3-year period (2023-2025)
Contribute to energy
issues and carbon
offsetting

Contribute to thecircular economy

R&D expenses（¥ billion）

Contribute to nextgeneration
manufacturing

2.6
About 20%
2.2
2.0

⚫ Water-saving, energy-saving and timesaving solutions⚫ Next-generation dyeing technologies,
such as waterless dyeing⚫ Carbon reduction in dyeing processes,
etc.

⚫ Mono-materialization of apparelmaterials⚫ Inkjet digital textile printing⚫ Utilization of bio- and recycled raw
materials, etc.

2.2

2.1

2.2

2.0

⚫ Interior materials that provide
comfortable spaces in EVs⚫ Coatings for next-generation mobility⚫ New materials for next-generation
displays, etc.

For examples of EHD development in Chemicals business, please refer to pages 43-46 of appendix.

COPYRIGHT © NICCA CHEMICAL CO.,LTD. ALL RIGHTS RESERVED

27

The Medium-term Business Plan "INNOVATION25"

Strategy 2. Well-balanced investment
Careful selection of investments with high investment efficiency and well-balanced
investments
Capital expenditure,
etc.*1（¥ billion）

Depreciation and
EBITDA（¥ billion）

3-year (2023-2025) investment policy

18.0■Depreciation■EBITDA◆ Manage investment efficiency using ROIC foreach business

14.1

12.7

12.5

◆ Focus on shift to EHD and efficiency
investments

11.9

10.0
8.1

7.6
5.8

4.4

8.0

Cosmetics

6.1
Chemicals

Major investment plans for 3-year period

ROIC target (2025)• Expansion of manufacturing functions forlong-term growth• Aggressive marketing, etc.

12.0%
Decrease in short term due
to active investment, etc.

• Investment to ramp-up production and R&D
5.0%
aimed at EHD-related business growth
Increase due to careful• DX and other productivity improvement
selection of investments
investments, etc.

and improved profit margins(14-16)(17-19)(20-22)(23-25)(14-16)(17-19)(20-22)(23-25)Companywide• Introduction of new HR system, etc.

7.0% or more
More than WACC

*1 The 2023-2025 plan includes major expenditure items, such as marketing, that were not previously included.

COPYRIGHT © NICCA CHEMICAL CO.,LTD. ALL RIGHTS RESERVED

28

The Medium-term Business Plan "INNOVATION25"

Strategy 2. Well-balanced investment
While our current financial position has improved dramatically, the aim is for a wellbalanced financial structure with an awareness of the DE ratio and investments being
made within operating CF during the current medium-term business plan period.
Changes in Cash and Loanspayable（¥ billion）■Cash■Loans

19.5

7.9
6.3

7.6

Borrowings for strategic investment
period (2017-2019) reduced by around half
• Completed a series of major investments,
including the NICCA INNOVATION CENTER,
Kashima Plant expansion, and a chemicals
plant in South Korea.

16.3
11.7

Changes Equity ratio

10.3
7.0

• In addition to achieving business growthduring Covid-19, cost reductions andinvestment restraints were also successful.
• While future investments will basically befunded by operating CF, the aim is for a wellbalanced financial structure with anawareness of the DE ratio.

COPYRIGHT © NICCA CHEMICAL CO.,LTD. ALL RIGHTS RESERVED

29

The Medium-term Business Plan "INNOVATION25"

Strategy 3. Productivity reform
Aggressively promote DX to improve efficiency and PH*, and analyze and utilize
various data to create new value.
DX examples

PH operating profit (when 2020 is set as 100)

Workplace reform/Remote-work utilization•••

Use of Teams, Zoom, etc.
Microsoft Surface for all employees and expansion of Office365
functionsPreparing to introduce new HR system

Production efficiency/Automation••

Digitalization of manufacturing sites, including weighing systems,
electronic SOPs, and MES
Introduction of automation equipment such as robot arms, semiautomatic packaging equipment, etc.

Visualization of R&D activities/HR development••

Revamp and upgrade core research system
Introduction of electronic lab notebooks and talent management
systemData utilization/Analysis sophistication••

Company-wide deployment of BI tools
Rollout of sales management system* PH：per head
COPYRIGHT © NICCA CHEMICAL CO.,LTD. ALL RIGHTS RESERVED

30

The Medium-term Business Plan "INNOVATION25"

Strategy 4. Promotion of sustainable management
Reduce net CO2 emissions for the entire Group by 30% by 2030 compared to 2018 levels
Contribute to CO2 emissions reduction

Materiality (Key issues)•••

Environment

Life

SocietyWork toward acleaner global
environment

Make people's
lives more
comfortable

Enrich society

Cut net CO2 emissions for entire Group
Business activities to solve social issues through EHD
businesses
Promotion of social contribution activities through work, etc.

School excursion groups during Covid-19• Junior high school students in Fukui
Prefecture visited NICCAINNOVATION CENTER as part oftheir school excursions• Students experienced the fun ofcommunicating with employees andmaking an original shampoo
For details on how TCFD and SDGs are addressed, please refer to pages 47-48 of the Appendix.

Scope 1–2 emissions (t)27,107
20,617

24%DOWN2018• In July 2021, all business sites in Fukui
Prefecture switched to 100%hydroelectric power usage• Shift from petroleum-based to plantderived raw materials

2022

Scholarship program provided by EraL Co., Ltd.
• Establishment of a unique scholarshipprogram for beauty school students
aspiring to become hairdressers• Back up students aiming for solving
issues in the beauty industry caused by
the declining birth rate and changing
work styles
COPYRIGHT © NICCA CHEMICAL CO.,LTD. ALL RIGHTS RESERVED

31

The Medium-term Business Plan "INNOVATION25"

Strategy 5. Evolution of the extended family policy
Evolve the large-family approach so that the shift to EHD brings together people
who are willing to take on social challenges and can maximize their own potential

Shift to EHD
Both the company and theindividual face the challenge ofsolving social issues
Increased job satisfactionand enjoyment

Challenges

Employee &company
bonding &engagement

Taking on difficult tasks on one’s own
Sparing no effort to grow•

Extended family
policy that is
firm and kind

• Women, older staff, non-Japaneseand outside personnel play activeroles

Big difference in compensation
amount dependent on
Diverse humanevaluation-based rankings
resources• Selection of young
employees and those
who voluntarily step
Merit-based
forward
Talentcompensation Major
spotting • A culture thatrecognizes a failure inpolicies ofthe face of a challenge

HR system

Flexiblework style

Learning
opportunities• Penetration of work style notdependent on time nor location• Enhance internal andexternal programs,
including reskilling

Fair evaluation of results
COPYRIGHT © NICCA CHEMICAL CO.,LTD. ALL RIGHTS RESERVED

32

The Medium-term Business Plan "INNOVATION25"

Dividends policy• We continue to pay stable dividends to our shareholders, and we decide to pay dividends to retained
earnings in comprehensive consideration of the results of each fiscal year, investments required for
future growth, and business development in the future. We also plan to expand our dividend payout
ratio to 30% in the future.
• Going forward, we will continue to strive to enhance measures for returning profits to shareholders,strengthen our financial position and effectively and strategically utilize capital to improve profitability
in a well-balanced manner.

Changes in dividends per share
Ordinary dividend (JPY/share)
Special dividend(JPY/share)

Changes in Consolidated Dividend Payout Ratio

2015
Acquired 10.8%of shares astreasury shares(forecasts)(forecasts)
COPYRIGHT © NICCA CHEMICAL CO.,LTD. ALL RIGHTS RESERVED

33

The Medium-term Business Plan "INNOVATION25"

Corporate purpose

Shine brightly through science and chemistry.

Corporate Purpose
We defined "NICCA Chemical’s corporate purpose" as what it is that NICCA Chemical aims to achieve over the

next 20 to 30 years, when we launched the medium-term business plan. "Activate Your Life" entails us working
together with our stakeholders to solve various social issues by leveraging the infinite power of surface science andcontributing to a more affluent life and brighter future.

Specifically, we will provide value by safeguarding people from environmental risks that society faces, creating afuture society overflowing with health and smiles, and contributing to society through new technologies in responseto the rapid progress of nano-sizing and digitalization. With our corporate purpose at the core of our management,
we aim to achieve sustainable growth by nurturing the ability of every employee to brighten society and the future.
COPYRIGHT © NICCA CHEMICAL CO.,LTD. ALL RIGHTS RESERVED

34

5

Appendix

35

The Medium-term Business Plan "INNOVATION25"

Description of Business (Chemicals)
Applying total solution technology for textile processing, cultivated since the company's
founding, to a wide range of markets.
Acquired Ohtomo-chemical in 2015. Also expanding into the fast-growing digital sector.
Chemicals
Textile Chemicals

Changes in net sales/operating profit *1,2,3
Cleaning Agents(¥ billion)
Net sales
Operating profit

Specialty Chemicals(Performance Chemicals)

Specialty Chemicals(Advanced Materials)

Major Affiliates
・Ohtomo-chemical ins., corp (for semiconductor industry)
・NICCA CHEMICAL (CHINA) CO., LTD.
・NICCA KOREA CO., LTD.
＆13 others*1 “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, March 31, 2020) and others
have been applied since FY2022.
*2 “Chemicals segment” includes other segments.
*3 "Eliminations and Corporate" are allocated to the Chemicals and Cosmetics segments.
COPYRIGHT © NICCA CHEMICAL CO.,LTD. ALL RIGHTS RESERVED

36

The Medium-term Business Plan "INNOVATION25"

Description of Business（Chemicals）
Three divisions of the Chemicals Sector
Textile Chemicals

Specialty Chemicals

Textile processing chemicals

Paper and pulp chemicals（Scouring agent, dyeing aids, etc.）（De-inking agent, Softening agent,
Thermal paper developer, etc.）

Functional processing agents

Metal and rubber processing agents（Water repellent, flame retardant,
antibacterial, etc.）（Detergents, Mold release agents, etc.）

Functional Intermediates, Monomers（Alkylene oxide adducts, etc.）

Chemicals for synthetic andhuman skins（Polyurethane coatings）

Functional polymers

Cleaning and medical agents

Laundry Chemicals（Detergents, fabric softeners, etc.）

Agents for medical equipment（Detergents, disinfectants, etc.）

Environmental hygiene agents（Hand sanitizers, Antibacterial/Antiviral agents, etc.）

In vitro testing and diagnostic agents（In vitro genetic testing, Artificial nucleic acids, etc. )（Water-based urethane resin, Fluoropolymers, etc.）

Agents for semiconductor production
processes（Coolant and other Ohtomo-chemical products）
COPYRIGHT © NICCA CHEMICAL CO.,LTD. ALL RIGHTS RESERVED

37

The Medium-term Business Plan "INNOVATION25"

Business（Cosmetics）
Professional hair salon products centered around flagship "DEMI" brand
Based on customer voices, R&D has focused on the theme of healthy and beautiful hair
Changes in net sales/operating profit*1,2,3

Cosmetics(¥ billion)
Hair care

Scalp care
Net sales
Operating profit

Hair color

Styling

Major Affiliates
・Yamada Pharmaceutical Co., Ltd. (Cosmetics OEM / ODM)・EraL Co., Ltd.
・DEMI KOREA CO., LTD.
& 4 others*1 “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, March 31, 2020) and others
have been applied since FY2022.
*2 “Chemicals segment” includes other segments.
*3 "Eliminations and Corporate" are allocated to the Chemicals and Cosmetics segments.
COPYRIGHT © NICCA CHEMICAL CO.,LTD. ALL RIGHTS RESERVED

38

The Medium-term Business Plan "INNOVATION25"

NICCA Chemical technology supporting everyday lives

Environmentally friendly waterrepellent finish sought by apparel
manufacturers around the world

Sweat-absorbing, quickdrying finish for sportswear

De-inking process to remove
ink essential for magazine andnewsprint recycling

Environmentally friendly
artificial leather finish

Antiviral & antibacterial
deodorizing treatment of odors
and underwear to inhibit growthof sweat bacteria

Thermal paper for various tickets,
such as airline and train tickets

Flame retardant finish andtreatment to prevent sun damage
and fading for car seats

Detergents, water repellents, etc.
for dry cleaners

Environmentally friendly lowtemperature cleaning agent forvehiclesStain resistant & flame-retardantfinish for curtains and carpet

Linen cleaning, etc.
for hotels and hospitals

Easy-to-remove stains andenvironmentally friendly
maintenance cleaner for
Shinkansen trains

Hygienic living essentials, handsoap and other hand sanitizing
products

Various processing agentsused in semiconductor
silicon wafer processing

Cleaning of medical
instruments and otherequipment used in surgery

Advanced materials used indigital devices andsemiconductors

Professional hair careproducts for hair salons

Professional hair color
products for hair salonsCube-shaped styling products
popular in hair salons

Shampoos and oils, etc. forhead spas at beauty salons andhair salons

COPYRIGHT © NICCA CHEMICAL CO.,LTD. ALL RIGHTS RESERVED

39

The Medium-term Business Plan "INNOVATION25"

Review of past two years（2021-2022）
Reached management targets for FY2023 set in previous medium-term plan ahead ofschedule
Changes in net sales/operating profit*1(¥ billion)
50.1

2.9

50.6 50.0

2.6 2.5◼ Lockdowns occurred as Covid-19 worsened aroundthe world. Given the unpredictable businessenvironment, a 5-year medium-term business plan for2021 to 2025 was developed.
◼ Achieved steady improvement in businessperformance with increased revenue and profit inboth 2021 and 2022.
◼ It has been a patient two years of thorough cost
reductions and reduced capital investment, but
streamlined activities and remote work have also
contributed to work style reforms.
◼ In addition, implemented activities to increasebusiness value through price revisions and thedevelopment of new markets amid continued highraw material and logistics costs.

*1 “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29, March 31, 2020) and others have been applied since FY2022.
COPYRIGHT © NICCA CHEMICAL CO.,LTD. ALL RIGHTS RESERVED

40

The Medium-term Business Plan "INNOVATION25"

Review of past two years（Comparison with Before Corona）
Initiatives and KPIs tied to the five major strategies have significantly improved, with
our financial condition improving dramatically.

FY2019FY2022

EHD business• EHD Net sales: About ¥10.3 billion (Chemicals)• Ratio of EHD: About 30％• EHD Net sales: About ¥14.0 billion (Chemicals)• Ratio of EHD: About 37%

Productivity
improvement• PH*1 net sales: ¥30.8 million/person• PH operating profit: ¥0.9 million/person• PH net sales: ¥34.3million/person (+11％)• PH operating profit: ¥1.7million/person (+91％)• Interest-bearing debt: ¥19.5 billion• Equity ratio: 37%• EBITDA: ¥3.6 billion• Interest-bearing debt: ¥10.3 billion• Equity ratio: 50%• EBITDA: ¥5.0 billion

Financial base
Sustainability

The extended
family policy

•
•
•
•

Acquired 3 stars for “Nikkei SDGs” and “Nikkei SW” for 3 consecutive years (2020/2021/2022)
Started climate change scenario analysis and assessments based on TCFD framework (2022)
Renewal of sustainability website (2021)
Switched to 100% renewable energy sources for electricity used at business sites in Fukui
Prefecture (2021)• “EraL” revamped as a sustainable brand (2021)• Eruboshi Rank 3 certification (2020)*1 PH：per head
COPYRIGHT © NICCA CHEMICAL CO.,LTD. ALL RIGHTS RESERVED

41

The Medium-term Business Plan "INNOVATION25"

Major business environment assumptions in Medium-term Business Plan

Market trends over the next three years also indicate a shift tomanagement that pursues quality over quantity.
Exchange rate

¥132/USD

Around 2022 year-end rate

Naphtha price¥72,500/KL

Around 4Q 2022 priceChemicals

Main business environment• The global economy will not fully recover until mid-2024 or later (prolonged invasion of Ukraine, higher-than-expected inflation, sharply risinginterest rates, risk of a Taiwan contingency due to strained U.S.-China relations, uncertain outlook for end of coronavirus infection in China, etc.).
• Textile processing for global apparel manufacturers will not recover until mid-2024 or later due to the economic slowdown in Europe and the U.S. In
addition, the shift to leaner production and recycling-oriented consumption will lead to a change in the content of products to more environmentallyand health-conscious products, rather than quantitative expansion.
• Global automobile production will recover to pre-Covid levels, partly due to improved semiconductor supply conditions, but full recovery will bedelayed by the global economic slowdown. Full-scale recovery expected from mid-2024 onward, but growth by volume will gradually slow down.
• The domestic laundry market will gradually recover from 2023 onward when Covid-19 is downgraded to Class 5, but the market for home use will
not return to normal, partly due to the entrenchment of working from home and other factors. On the other hand, the market for linen will return to astable growth trend along with a recovery in inbound travel.
• Aggressive investment to resolve supply capacity shortages will proceed globally for semiconductors. Although there are forecasts of a temporary
slowdown in the growth rate, this is a growth market in the medium- to long-term, and accompanied by economic recovery, the market as a wholewill grow strongly in 2024 and beyond.

Cosmetics• The domestic hair salon market is expected to continue its slightly upward trend in 2023 and beyond as the market recovers from Covid-19. (It willtake some time after 2023 to recover to pre-Covid levels as consumers continue to refrain from attending salons or attend less frequently, etc.) In
addition, due to the structural decline in population, even though there will be an initial recovery, the market will turn to a slight downward trend in
the medium- to long-term.
• On the other hand, consumer behavior is changing markedly due to growing environmental concerns and health consciousness, and demand forhigh-value-added hair care products for professionals will continue to increase in the future.
COPYRIGHT © NICCA CHEMICAL CO.,LTD. ALL RIGHTS RESERVED

42

The Medium-term Business Plan "INNOVATION25"

Strategy 1. Major transformation of business structure（Chemicals)
There are "major EHD commercial opportunities" in Chemicals where the company canleverage its strengths in each business and concentrate resources.
TextileChemicals

Key EHD opportunities(business environment changes)• Dyeing and processing plants toproactively respond tosustainability demands• PFC-free textile processing• Higher brightness, higher quality,and non-solvent use of colors in
automobile interiors

NICCA Chemicals strengths

Key EHD examples focused on• Ability to propose technologies andformulations that address new
surface issues• Relationship of trust with leading
apparel manufacturers, dyeing andprocessing plants, and automobile
seat material manufacturers• Focus on three “E” areas– PFC-free durable water repellent– Program proposing formulations to reduce
environmental impact of dyeing plants (SMART
DYEING PROCESS)– Water-based polyurethane resins• Plans to account for majority of increase in textile
chemicals sales and profits (2022→2025)

Cleaning andMedical Agents• Continued difficult market
conditions forecast and laundrycompanies to strengthen
sustainability management• Aggressive cost reduction• Reliability evidenced by top share ofdomestic laundry chemical market.
Good knowledge of inside of a factory• Ability to propose systems throughcollaboration with Emori Engineering(subsidiary)• Proposal and sales of automated systems for laundry
factories– Improvement of added value and profitability fromselling chemicals as a service rather than a product(automatic feeding, remote monitoring/operation)– Contribute to customers' sustainability management(energy/material/labor-saving)Specialty
Chemicals• Semiconductor processing
companies to strengthen
sustainability management• Demand for high functionality in
optical materials and growing
need for 5G low-dielectricmaterials• Long-standing relationship of trustwith a major silicone wafer
processor for semiconductors• Manufacturing and sales bases inSouth Korea and other Asian
countries• Proposal and provision of business model for collecting
and recycling silicone wafer cutting coolant– Improvement of value-added by shifting from productsales to service sales– Contribute to customers’ sustainability management• Become one of the pillars of earnings for Chemicals

COPYRIGHT © NICCA CHEMICAL CO.,LTD. ALL RIGHTS RESERVED

43

The Medium-term Business Plan "INNOVATION25"

Strategy 1. Major transformation of business structure（Ex/Textile chemicals）
Focus heavily on products in the three "E: Environment" areas which have highprofitability and large potential for market share expansion
Reducedenvironmentalload within
dyeing process
Program to propose complex formulations
aimed at reducing the environmental impact ofdyeing and processing plants
Water-saving dyeing & process rationalization formulation✓

Proposal to improve customer productivity, cut CO2 emissions,and improve product quality through process rationalization

PFC-freeDurableWater Repellent

Water-based
polyurethane
resinsProgram to comply with fluorinated chemical
regulations in textiles

High value-added proposal program for
automotive synthetic leather, with a switch fromsolvent-based to water-based resins

Proposal of chemicals & formulations for nextgeneration water-repellent processing✓

Products incorporating bio/recycled raw materials✓

Proposal to cut customer CO2 emissions. In addition, registeredas an environmentally certified product by bluesign®, etc.

Proposal of chemicals & formulations compatible with nextgeneration dye formulations✓

Contributes to customers' CO2 reduction; Registered as
an environmentally certified product by bluesign®, etc.

Proposal of products incorporating bio/recycled
raw materials✓

Contributing to society through the development of cutting-edge
technology such as developing dyes, dyeing facilities, and agentsthat match the evolution of textiles.

Proposal of technology that can solve issues such as stain resistancefor bright synthetic leather and yellowing over time (patented
technology)

Surface treatment agent for high wear resistance✓

Delivers high wear resistance, an eternal challenge in automobileinteriors. Expand to urethane and PVC synthetic leather with goodgetting in/out durability.

Global supply✓

Proposal with local production and local supply system in Japan,
South Korea, China, Mexico, Indonesia, and Thailand

Proposal for products incorporating bio/recycled raw
materials

Delivering safe, reliable, and sustainable chemicals tocustomers and society

Increasing needs and proposal opportunities at leading
dyeing and processing plants around the world, which are
under pressure to address environmental issues such asenergy and water conservation and decarbonization.

✓

Contributes to customers' decarbonization; Proposal forbio/recycling of final products

Development of chemicals that do not contain restricted
substances✓

Surface treatment agent for high brightness synthetic
leather✓

The textile industry is becoming increasingly PFC-free,and policies surrounding apparel, mainly in Europe andthe U.S., have increased opportunities for proposals.
Expansion to global apparel over several years

Helping customers increase their bio/recycling ratios

Increased need for higher brightness and higher quality
for automobile interiors have increased opportunities for
proposals
COPYRIGHT © NICCA CHEMICAL CO.,LTD. ALL RIGHTS RESERVED

44

The Medium-term Business Plan "INNOVATION25"

Strategy 1. Major transformation of business structure （Ex/ Cleaning agents）
For the laundry business, propose chemical management systems, mainly for large
linen factories. Contribute to solving management issues through production DX,
such as labor-savings through full automation of chemical loading, delivery by lorry,and delivery in large reusable tanks to significantly reduce waste, etc.
Zero chemical container
waste achieved by filling
directly from lorries
Accurate chemical
management
incorporating liquid levelsensors and flow meters

Able to adjust chemical dosage by remotecontrol (Centralized management at
headquarters is possible even for companies
with many factories throughout Japan.)
COPYRIGHT © NICCA CHEMICAL CO.,LTD. ALL RIGHTS RESERVED

45

The Medium-term Business Plan "INNOVATION25"

Strategy 1. Major transformation of business structure（Ex/specialty chemicals ）Ohtomo-chemical growing through expansion of resource-recycling business forsemiconductor silicon wafer processing coolant agent
Ohtomo-chemical's resource-recycling
business model

Changes in semiconductor silicon wafer shipment
area (million square inches)

After coolant sold to a customer is used, the waste liquid is purchased
as a valuable material, recycled at Ohtomo facilities, and re-produced
and resold.

Negative forecast for 2023 due to inventory adjustment, but overallmarket is firm
Shipment area
18,000

Ohtomo-chemical

Customer

Growth rate

16,00014,017
14,000Silicon ingot
Cutting (coolant)

Sales

Water-soluble coolant

14,694

14,60015,555

16,49025.0%

12,29020.0%

12,000

14.1%

15.0%

10,0008,000

Distillation

30.0%

6,000

5.3%

6.5%

4.8%

10.0%

6.0%
5.0%

Liquidcomponent

Solidcomponent

4,000

-0.6%

0.0%

2,000
0

Waste coolant

Purchase

Solid-liquid separation

-5.0%

2020

2021
Actual

2022

2023

2024

2025

Forecast

Source: SEMICOPYRIGHT © NICCA CHEMICAL CO.,LTD. ALL RIGHTS RESERVED

46

The Medium-term Business Plan "INNOVATION25"

Strategy 4. Promotion of sustainable management（Efforts to reduce CO2 emissions）
Accelerate corporate efforts to realize a decarbonized society by establishing a new
Sustainability Committee and conducting business impact assessments in accordancewith the TCFD framework.
Business impact assessment (TCFD)

Total CO2 emissions

Total CO2 emissions
SCOPE 1
Breakdown
SCOPE 2CO2 emission results
2022
2018
(Base year)
20,617 t-CO2
27,107 t-CO2
9,166 t-CO2
11,898 t-CO2
11,451 t-CO2
15,209 t-CO2

Governance
Board of Directors
Sustainability Committee
Chair: President and Representative Director
Committee members: Management Council members

Sustainability Management Subcommittee
Monitoring of progress of sustainability
planning and initiatives

Each division

Each subsidiary

COPYRIGHT © NICCA CHEMICAL CO.,LTD. ALL RIGHTS RESERVED

47

The Medium-term Business Plan "INNOVATION25"

Strategy 4. Promotion of sustainable management（SDGs Initiatives）
SDGs Initiatives
Materiality×SDGs

SDGs Initiatives【Environment】⚫ Joined ZDHC (first in Japan)⚫ Certified bluesign® system partner (first textile processing chemical
manufacturer in Japan)⚫ NICCA Innovation Center certified as a project leading sustainablearchitecture, etc. (project leading CO2 reduction) in a Ministry ofLand, Infrastructure, Transport and Tourism subsidy program⚫ Promoted acquisition of ISO 14001 certification

Work toward a cleaner global environment【Life】
Make people's lives more comfortable【Society】
Enrich society

External evaluations (2022)⚫ Contributed to infection control using antibacterial and antiviralproducts⚫ Provided products that contribute to healthy, clean living, such as theprocessing of sports apparel products to add functionality andlaundry agents⚫ Developed an innovative cosmetic product in pursuit of the healthand beauty of hair
⚫ Promoted acquisition of ISO 9001 and ISO 22716 certifications⚫
⚫
⚫

Acquired 3star at "Nikkei SDGs
Management Survey“. ）Acquired 3star at "Nikkei Smart WorkManagement Survey“. (for threeconsecutive year)
Recognition in Eruboshi Rank 3 (Certified in
December 2020)⚫ Donated to aid the development of the textile industry in Bangladesh⚫ Held a seminar on drainage measures in Indonesia⚫ Carried out activities to make towns more comfortable to live in,including neighborhood cleaning and a private fire brigade⚫ Supported international students from emerging countries and helped
people with physical disabilities receive education⚫ Acquired ISO 45001 certification (occupational health and safety)

COPYRIGHT © NICCA CHEMICAL CO.,LTD. ALL RIGHTS RESERVED

48

Shine brightly through science and chemistry.

Contact

IR staff
TEL:(0776)25-8584 (direct)
Email：matsushima@niccachemical.com
This document contains forward-looking statements and forecasts based on management's current expectations and plans as of February 10, 2023.
Actual results may differ from these forecasts due to risks and uncertainties associated with changes in economic conditions and other factors.
COPYRIGHT © NICCA CHEMICAL CO.,LTD. ALL RIGHTS RESERVED

49