Kaneka Integrated Report 2019

Kaneka Integrated Report 2019

1-12-32, Akasaka, Minato-ku, Tokyo 107-6028, Japan
Tel: +81-3-5574-8000 Fax: +81-3-5574-8121
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Sustainable Solutions
for an Evolving World.

From the Editorial TeamK ANE KA thinks“ Wellness Fi rst ”.

Kaneka Integrated Report 2019, covering both financial andnon-financial information, has been issued to enhance theunderstanding of our stakeholders regarding the Kaneka Group’s
value creation in the medium to long term.
It is created based on the New Medium-term Management Plan
as of May 15, 2019.
For product registered trademarks and other trademarks, pleaserefer to our website.
https://www.kaneka.co.jp/en/esg/report/trademarks

Organizations Covered in This Report

Kaneka brings the environment to its ideal state,This report covers Kaneka Corporation and its consolidated
subsidiaries both in Japan and other countries. The data on
Responsible Care activities encompass the parent and all 61
Group production subsidiaries.
In this report, “Kaneka” refers specifically to Kaneka Corporation.
“Kaneka Group” encompasses Kaneka Corporation and Group
companies (its consolidated subsidiaries). References to “Group
company/companies” do not include Kaneka Corporation.

develops its business in a “wellness-first” direction,

Notes Regarding Future Prospects

energizes people, adds vibrancy to business,and helps build a happier society.
To make the world more wellness-first.
Kaneka takes an innovative approach to science,and seeks to fulfill people’s dreams by offering
a wide variety of solutions.

Statements in this report regarding performance forecasts andother future prospects are based on currently available
information and certain assumptions that we consider reasonable,
and Kaneka Corporation does not guarantee their achievement.
Actual results may differ greatly due to various factors.

C O N T E N T S
Ⅰ Management Philosophy
1. Management Philosophy Structure

Ⅱ Top Message
1. Top Message

Ⅲ Management Strategies
1. Management System
2. ESG Management
3. Value Creation Process
4. R&B Strategies
5. Global Strategies
6. Human Resource Strategies

Ⅳ Special FeatureSpecial Feature 1:
New large-scale businesses
Biodegradable Polymer PHBH
Special Feature 2:
Leading-edge businesses
Probiotics Business

Ⅴ Business Foundation
1. List of Directors
2. Corporate Governance3. Business Risks and Uncertainties
4. Compliance
5. Intellectual Property
6. ESG Promotion
7. Environment
8. Safety / Quality

Ⅵ Appendices
1. Consolidated Financial Statements
2. Financial and Nonfinancial Highlights
3. Corporate Profile / Global Network

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Management
Philosophy

Management Philosophy

Top Message

Management
Strategies

SpecialFeatureBusiness
Foundation

AppendicesManagement Philosophy Structure“Declaration of Kaneka United”
With people and technology growing together intocreative fusion, we will break fresh ground for the future
and tie in to explore New Values. We are also committed
to challenge the environmental issues of our planet andcontribute to upgrading the quality of life.

As good citizens, we look towards
the same future as all stakeholders
from the same viewpoint.

Toward an Even More Impressive
and Productive Future
Hold in your hands the future you have always dreamed of.
We are a highly perceptive and collaborative value-creatinggroup or, as we like to say, a “Dreamology Company.*”
We want to look at the future from the same perspective
as our customers. The future that Kaneka visualizes is one
that connects us with our customers.

Customers* “Dreamology” is an expression coined from ‘dream’ and‘ology’ (science). Our “Dreamology Company” is a “highly
perceptive and collaborative value-creating group.”

1

Five “ties”

Corporate
Philosophy

1. Tie to the future

Society

2. Tie to the world

Our business is rooted
in local communities,
promoting social contributions and community
engagement. We also
contribute to creating awell (sound) communityand society, ensuring safe
operation of plants anddisclosure of information.

2
Corporate Ideals

As a research and development company brimming withcreative energy and passion, we will create future-oriented
businesses that leap beyond current market needs and backthem up with new product development, thus protecting the
global environment and contributing to the quality of life.
We are determined to become a truly global enterprise withdiverse human resources working together on a global scale.
Our presence will be felt in markets around the world, including newly emerging ones.

3. Tie with value

3

ESG Charter

We are proud of our unity and identity as the Kaneka Groupand will take on the challenges of value creation and business
innovation through close collaboration.

4. Tie for innovation

We will never cease to pursue innovation, fusing wisdomfrom both internal and external sources without gettingcaught up in organizational compartmentalization and conventional ways of doing things.

5. Tie with people

We in the Kaneka Group believe that the wellspring of corporate
growth resides in human resources and will continue to seek
innovation as we cultivate and nurture our valued employees.

Putting the Corporate Philosophy Into Practice
1. We offer solutions characterized by value to global markets and contribute to the evolution of lifestyles and theenvironment through innovative chemistry.
❶ We bring innovation to lifestyles and the environment by harnessing the unlimited potential of chemical materials to help communities achievesustainability. (Earthology Chemical Solution)❷B y adopting a unified approach to food and medicine that is defined by a focus on chemistry, we provide innovative solutions that empower people
to live healthier lives. (Active Human Life Solution)

Kaneka Group’s
ESG Activities
Working to resolve
social issues to keep
the world well
Providing Valuable
SolutionsPursuing Social
Responsibility

Shareholders andInvestors
We offer appropriate returns
and disclose timely information to those who recognize
our corporate stance andbrand value and who own
our shares, so that we canincrease overall trust in theGroup seeking to ensure a
company culture and a society
characterized by wellness.

We provide quality products, services and value
aimed at creating a soundsociety, ensure productsafety, and disclose
information to those whopurchase our products aswell as potential customers.

KanekaGroup

Employees
Bearing in mind Kaneka
Group employees andtheir family members, weoffer a workplace environment of wellness — job
satisfaction, appropriate
treatment and remuneration, and safe working
environments — andrespect their diversity.

The Environment
We make efforts to reduce
environmental burden in
raw material procurement,
manufacturing and transportation processes. We
also fulfill social responsibilities by developing
cutting-edge materials andunique technologies toenhance the wellness ofthe global environment.

Vendors
We conduct fair transactions with suppliersand contractors focusing
on compliance and build
mutually beneficial andwell (sound) relationshipsof trust with them, offering equal opportunities to
do business.

2. We fulfill our social responsibility by empowering individual employees to put our corporate philosophy into
practice through serious, forward-looking effort.
❶ We actively contribute to our communities by cultivating understanding of the cultures and customs of the countries and regions where we dobusiness and by pursuing corporate activities that are deeply rooted in those communities.
❷ We operate our businesses in a fair and impartial manner based on the principles of free competition and legal compliance.
❸ We’re committed to communicating with shareholders and other stakeholders and to making information about our operations available in a timely
and appropriate manner.
❹ We strive to foster an organizational culture that respects the personalities and uniqueness of all employees so that they can enjoy good health, feel
motivated, and make the most of their abilities.
❺R eflecting a commitment to make safety the top priority in our operations, we work to create safe and healthy workplaces, ensure product safety,
and protect and preserve the environment.

In 2018, Kaneka Group established the ESG Charter, aiming to evolve its ESG management.

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Top Message

The New Economy Is Here !
We will materialize discontinuous growth byaccelerating portfolio transformation

Kimikazu Sugawara

Management
Philosophy

Top Message

Management
Strategies

Awareness of the times
Through the technological innovation such as
digital transformation (DX) and “data-ism,” oursociety and business environment are beingtransformed at speed that exceeds what mostpeople have imagined. Looking at the dramaticchanges in a short period of time, we feel as
if the future society in the 22nd century has
already begun in 2019.
On the other hand, efforts to implementa sustainable society in the field of energy,
resources, and food-problem are accelerating
on a global scale. At the same time, awarenessof, and interest in the environmental protection
issues such as microplastics problem and carbon dioxide emissions are growing and spreading rapidly worldwide. With the Old Economy,a conventional and obsolete materials and solutions getting less competitive, companies thatfail to move into the New Economy are at risk
to withdraw from their markets.

Chairman and Representative Director

Kaneka’s purpose

SpecialFeatureBusiness
Foundation

AppendicesWe’ve defined our purpose (meaning ofexistence) as “to solve social issues and realize
a sustainable society by providing innovative
materials as solutions through the break-throughtechnology and global network.”
Based on our key strength: “highly competitive technological and global development
capabilities to create innovative products
continuously” we will solve social issues byidentifying future social needs and proposing
solutions.

Management strategies to realize thepurpose
We aim for the goal of “Wellness First” tomake the world healthy.
● We’ve identified three areas in which theworld faces crises: “Environment / Energy”,“Food”, and “Wellness”.
● We will generate cash flow from core businesses and invest it to drive R&D and create
new businesses. In this way, we will reform
our portfolio.

What is Kaneka’s purpose, its raison d’être(meaning of existence) ?
Kaneka is making a fresh start from thispoint of view.
Discontinuous growth is the only path forcompanies to survive by speeding up the innovation and the social implementation of new
businesses. Companies must propose andprovide solutions to crucial social issues by
anticipating the future society needs andchanges, not merely solving the existing problems.

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Management
Philosophy

Top Message

	Issues of portfolio transformation

	Strengthening the management platform(Accelerating the implementation of goals)(measures to accelerate discontinuous growth)

Earthology Chemical Solution“We bring innovation to lifestyles and theenvironment by harnessing the unlimited
potential of chemical materials to help
communities achieve sustainability.”
We will promote social implementation of
PHBH and solar technology to launch largescale of new businesses.
● We’re strengthening the profitability of corebusinesses: Vinyls and Chlor-Alkali SV, Performance Polymers (MOD) SV, and Performance
Polymers (MS) SV. Foam& Residential Techs
SV will strengthen its profitability and offer aline of products to meet the weight reductionneeds of automobiles and so on. We’ll keep
and enlarge the profitability of Performance
Fibers SV.
● E & I Technology SV will improve quality oflife by providing new solutions to intelligent
and multifunctional devices for automobiles,
homes, medicine, and telecommunications
infrastructure.
Active Human Life Solution“By adopting a unified approach to food andmedicine that is defined by a focus on chemistry, we provide innovative solutions thatempower people to live healthier lives.”● Foods & Agris SV will transform itself to adapt

the New Economy by launching and growing
new businesses such as dairy products andcreate innovative products to deliver nutritional value in collaboration with our supplement business.
● Medical Devices SV will enlarge its businessglobally and attain high profitability. We will
hasten the social implementation of regenerative medicine and cell therapy.
● Pharma & Supplemental Nutrition SV willdevelop global API market and growbio-pharmaceuticals business centered on
Kaneka Eurogentec S.A.

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Kaneka Integrated Report 2019

Transformation of the management system isa significant theme that management is working on. We are achieving the results of thisapproach with the progress of new businesses,
trying a large number of things and putting
in place the ones that work. I’ve been urging
employees to move forward quickly to transform our portfolio, by saying “Change with Purpose, Grow with Result.” This phrase reflects
my belief in the importance of the following
priorities:● “Backcasting” from our vision and target tofocus on what we need to do now.
● “Confidence (everyone believes we willwin)”, “Strategy (refine a detailed game plan)”,“One Team (form a scrum of connected
teammates)”, and “Momentum (challenge ahigh goal courageously and create a strong
momentum for a big leap)”.
Kaneka Tower● Kaneka Tower is a fundamental structure of

our management model. We’re taking advantage of the strengths (DNA) we’ve cultivatedsince our founding to evolve our ability tocreate businesses (inner strengths) and todevelop markets (outward strengths) with our
excellent execution capability at the frontline
so that business innovation can be carried out
autonomously in response to changing times.
● We will inspire all employees facing theactual business fields through two workshops(Change and Growth Triangle, and Kaneka
1on1).
The Triple Package as Management System
Transformation
This is our business philosophy platform forrealizing change and growth. We will boost
effectiveness by docking our management hardware and software.

Top Message

Management
Strategies

Change and Growth Triangle
The triangle of an awareness of the times,
actions, and goal precisely embodies the framework of our management plan. We will clearly
define results by identifying objectives, measures to achieve goals including technologicalinnovation, and operate them considering theimportance of scale and speed.
Reforms of R&B structures● In 2019, we reorganized our R&D organization

to R&B Division in an attempt to transformR&D into R&B (Research & Business). The
purpose of research at Kaneka is to create
major new businesses by delivering solutions to social issues. We’ve been focusing
on obtaining the breakthrough technologies
necessary to achieve that goal.
To that end, we will:● Accelerate the speed of social implementation of new businesses.
● Improve the productivity of R&B significantly
by grouping research themes into clusters
based on the degree of difficulty and the
speed.
● Bring in state-of-the-art technologies andcombine them with Kaneka’s own technologies to advance themes and sales of new
products. We will allocate more resources forresearch of life science and electronics business fields.
Work Culture Innovation: Kaneka 1on1
● The concept of the “Human Driven Com-SpecialFeatureBusiness
Foundation

Appendicesthe use of IoT and robotics to create a Human
Driven Company and a community, wherealgorithms and human power resonate, andimprove the competitiveness of manufacturing.
Enhancing our corporate governance
We are committed to “Wellness First” healthmanagement, in which each and every
employee is mentally and physically healthy,
and our corporate activities and attitudes are
sound. What is important for top management
is to discern and commit a vision of what asociety should be, improve corporate attitude,
and realize corporate governance in response asnecessary.
Strengthening business executive functions
is a key point amid the ongoing paradigm shift
and our growing business. We will make innovation a “scope of compass” and settle thehealth management at the frontline of business
to open up the unknown. To that end, we willreinforce the executive functions to monitor andfind choke points, while each function reflecting
the “perspective knowledge”.
I believe that it is crucial to continue
self-reformation of management and establish
series of structures to achieve our management
goals and take our corporate governance to thenext level.
Our goal is to realize a type of “governancesystem of Federal States”.

pany” forms the backbone of our management philosophy. Kaneka 1on1 is a workshop
for facilitating personal growth through work.
It’s also the backbone of the “Trial & Error
experiment driven company” that supports
our ability to pursue business innovation
through the Kaneka Tower.
● We’re working urgently to redesign operations that is suitable for this new era andreform our work culture. We will develop ahighly productive organization and people toimprove operation efficiency by utilizing digital
tools.
● We will promote production innovations suchas automation and manpower saving throughKaneka Integrated Report 20198

Management
Philosophy

Management System

Top Message

SpecialFeatureManagement
Strategies

Business
Foundation

Appendices

Two major systems as the backbone of management

As the backbone of management, two major systems
increase social and corporate value

Kaneka Tower (Key basic structure of our management model)
Valuing the Kaneka Tower as Kaneka’s DNA, we aim to deepen our ESG management

Trial & Error experiment driven company
We try new things without fear of failure.
We enjoy answers produced from accumulated
experiments.
We continue to be a “Trial & Error experiment
driven company,” creating unique solutions.

The Triple Package as Management System Transformation
Further accelerate transformation to a solution provider based on a new
management system

Ability to grow tall
Design of the Housing● Kaneka as a “Trial & Error

experiment driven company”● “Wellness-First Management” as partof ESG management

Outward strengths

Inner strengths● Advance initiatives with a global● Diversity

Broad business domains, a diverse
range of technologies, global corporate
activities, diverse workforce

Management
Innovation● Shift from things to ideas,

Large Domain[Problem]

Scope

Our Ambition

The 4 SUs
The 10 SVs

Where we are● Serve as an interface between

Ambition
Strategy

perspective
do, uniqueness● Structure customer needs; Ask

Large Action

Speed &
Scale

TechnologicalInnovation &Driving Force● Do things that only Kaneka canLarge GoalManagement System
Transformation“Are we playing a useful role?”● A leader who will face challenges● Open innovationmaterials to solutions

FuturePerspective

What, When, How
to complete

What to domarkets and technology● Start small and grow big

Kaneka1-on-1● Facilitate personal growththrough employees’ job
performance“Kaneka 1-on-1”

Business
Creation

MarketDevelopment

Frontline execution

Change and
Growth Triangle

DriverPerformance● Think by exercising all fivesenses on the frontline,
make decisions and createvalue● Implement Value Communication to link the frontlines together

Operational Excellence

Leadership that lights a fire in peoples’ hearts

Medium-term Management Plan

《Management Software》

Growth strategy fromthe viewpoint of the Change
and Growth Triangle

Implementation of the new
personnel system [Kaneka 1-on-1]
Growth of people and work

Work Culture Innovation
Effective use of time, information, and people
Maximization of organizational productivity

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Management
Philosophy

ESG Management

Top Message

Management
Strategies

Business
Foundation

Appendices

K A N E K A’ S

E SG

KANEKA’s ESG

Providing visionary solutions for people,
quality of life, and the environment

Trial & Error experiment
driven company

By providing valuable solutions globally, we will continue growing
and building a reputation for contributing to the evolution ofpeople’s lives and the environment throughout the world.

Contribute to the advancement of life and the environmentof people world wide through chemistry

Solutions Unit vision

Material Value
CreatorMaterial SU

Earthology Chemical
Solution

SpecialFeatureVinyls and Chlor-Alkali SV
Performance
Polymers (MOD) SV

Performance
Polymers (MS) SV

To support the advancementof life and the environment
by drawing out the richnessof the materials

Measures
Contribute to global environmental
conservation and comfortable living● Provide outstanding materials for evolving social infra-

structure, mobility (lighter weight, more fuel efficient
vehicles), and more
● Provide solutions where materials like biopolymers areof direct help to ecological society

We bring innovation to lifestyles andthe environment by harnessing theunlimited potential of chemicalmaterials to help communities achievesustainability.

Quality of Life SU
Foam & Residential
Techs SV

E&I
Technology SV

PV & Energy
management SV

Performance
Fibers SV

Health Care SU

Active Human Life
Solution
By adopting a unified approach to foodand medicine that is defined by a

Medical Devices SV

Foods & Agris SV

Nutrition SU

Kaneka Integrated Report 2019high quality, sustainable housing market

To produce the leadingedge of the enhancementof the quality of life throughthe power of materials● Provide unique materials and services that excel

Medical Edge
Explorer

Contribute to a society advancing in age andmedical sophistication

To create a world in where
advanced medical means
are available to as many
people as possible

Nutrition Value
Chain Innovator

innovative solutions that empower

11

Contribute to energy-saving and a rich life
● Deliver energy-efficient housing solutions→Create aregarding both energy-saving and smart applicationneeds● Strengthen marketing and product development glob-

ally in cutting-edge medical fields including biopharmaceuticals, and regenerative medicine and cell therapy● Proactively utilize open innovation and U.S. R&B bases● Provide solutions that deliver value by fusing devices

and medicine

Pharma & Supplemental
Nutrition SV

focus on chemistry, we provide
people to live healthier lives.

Quality of Life
Pathfinder

To re-innovate foodand healthContribute to health and a plentiful,varied diet● Provide a broad range of solutions that help diversify

and enrich people’s diets● Offer solutions that help prevent disease and promotehealth, and enhance the food materials lineup● Deliver solutions that assist production in the fields ofagriculture, livestock, and fishery

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Management
Philosophy

Value Creation Process

Top Message

Management
Strategies

SpecialFeatureBusiness
Foundation

Appendices

KANEKA thinks “Wellness First.”

Support for the United Nations Global Compact

Expanding technology for people and society toprovide new value on a global scale

In March 2015, the Kaneka Group became a signatory to the United Nations Global Compact.
The UN Global Compact is a voluntary code of conduct through which the top management ofsignatory companies commit themselves to take action aimed at achieving ten principles in thefour areas of Human Rights, Labour, Environment, and Anti-Corruption. As a group with a global
network, we actively share information about our commitment to global sustainable growth asa responsible corporate citizen with our stakeholders and the international community.

Creative fusion of people and technology
Business is conducted by people, and our technology underpins various products. We will provide
new value on a global scale by encouraging healthy and vibrant people to repeat value communication from the perspective of B-to-B-to-C and the more social perspective of B-to-B-to-C-to-S in
combination with our technology.

Create added value
through open
innovation

Work culture
innovation

Diverseworkforce

Wellness of
employees

Resolution of social issues
KANEKA thinks “Wellness First”.

Energy saving

Ocean pollution control

Social infrastructure

Kaneka1-on-1Three Crises

Food production support

Informatization
Health promotion

Medical sophistication

Environment / Energy
Through the development of marine
biodegradable polymer materials
and a photovoltaic system installable
on building walls, we aim to createa society where everyone can use
clean and sustainable resources andenergy.

Human Driven Company
Consider with the B-to-B-to-C-to-S concept

Building integrated photovoltaics (BIPV)

Challenge on a global scale

M&A

GlobalsystemTrial & Error experiment driven company– Active learning to promote dissimilar connection

Brainstorm various ideas

Feel, perceive, and findOpeninnovation

Source-in/
Source-out

Only One and Global No. 1 Diverse Technology Base

13

Foundation
businesses

New large-scalebusinesses

Leading-edgebusinesses

Vinyls and Chlor-Alkali
Performance Polymers
Foam & Residential Techs
Performance Fibers / Foods

Organic EL Lighting
Biodegradable Polymer
Opto-electrochemicals
Regenerative Medicine andCell Therapy, etc.

E & I Technology
Pharma / Medical Devices
Supplemental Nutrition / Agris
PV & Energy management

Kaneka Integrated Report 2019

Biodegradable Polymer PHBH

Food
By developing food production support
products and producing high-value-added
dairy products through cooperation withdairy farmers, we realize a society where
safe, secure and highly nutritious foodis available to everyone and where foodproducers are also satisfied.

KANEKA PEPTIDE

Milk for Bread / Café au lait for Bread

Combine technologies
from different industries
Wellness
In addition to management system
reform, M&A-based discontinuous growthis also essential for achieving our longterm vision.
By breaking away from our self-sufficiency
policy and adopting open innovation, we
will pursue technological innovation andcluster our business and products basedon external technologies. Thus, we will
acquire cutting-edge technologies andaccelerate new business development tocontinue creating added value.

By developing safe and highly effective supplements and other products
to maintain and improve physicalhealth, we realize a society where
everyone has access to adequate
medical services and can continue
to live a vibrant and healthy life.

Kaneka Ubiquinol

Floradapt (Lactic acid bacteria)

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Management
Philosophy

R&B Strategies

Top Message

Management
Strategies

SpecialFeatureBusiness
Foundation

AppendicesThree Crises

Resolving social issues
through R&B (Research & Business)

Resolution of social issues
Social implementation of
new materials and systems

We have set the purpose of our R&D activities as “resolving social issues at the earliest opportunity
possible by pursuing value from the perspectives of markets and customers through the proactive use ofleading-edge technologies” and have redefined R&D as R&B (Research & Business).
We will work to ensure sustainable growth as a solution provider by sharpening our ability to identify
technologies that help to resolve social issues and by developing overwhelmingly competitive technologies
and materials and realizing their social implementation.

Environment / Energy● Biodegradable materials for food andproduct packaging and containers● Next-generation mobility materials(vehicles, aircraft, spacecraft)● Next-generation information terminal materials● High-efficiency photovoltaic modeles andsee-through photovoltaic modeles thatrealize 100% renewable energy

Actions to embody the concept of Kaneka as“Trial & Error experiment driven company”

Food

Promoting innovation
through three “I”s
Identifying promisingtechnologies through three “I”s
● Impactful ● Innovative● Implementable

From R&D to R&B● Global research network● Solution Provider

Fusion ofself-developed
technologies withintroduced technologies

Clustering domains

Drug-coated balloon
technology

Born small and grow big

Adsorption separation technology

Resin foaming technology

Fermentation technology

Polyimide resin

Heat-resistantcomposite materials

Biodegradable
plastics

Ultra-heat-resistantpolyimide film

Aerospace andaircraft materials

Biodegradable polymer

Energymanagement

OLED Lighting
devices

Next-generation
breeding technology

accelerates the growth of crops andboosts their resistance to environmental
stress, including climate change

Wellness● Health maintenance / Frailty*1 prevention● Refractory disease: Innovative treatment● Circulatory disease: Minimally invasive treatment*2

Bioorganic synthesis technology

Precision polymerization technology

Self-developed
technologies

Hypoallergenic crops● High-performance fertilizer that

Cell separation and culturing technology
Microbial biopharmaceuticalproduction technology

Macromolecular technology● Environmental stress-tolerant crops /Key technologies andkey drivers for the future

Photovoltaic modules
integrated into roofing tiles

Organic EL lighting

Genome edited crop

Food production
supportCatheters

Regenerative medicine
and cell therapy

New high-performance
fertilizer

Drug-coated balloon
catheter

iPS cells / Stem cells

Biotechnology

Functional film processing technology

Powder granulation technology
Resin modification / blending technology

Spinning technology

OLED device designingtechnology

Metal microfabrication technology

Thin-film formation technology

Thermosetting resin
Compounding / processing technology*1 A state where physical and mental weakness appears
associated with decline in motor and cognitive functions
caused by aging and decline in daily living function due
to the impact of comorbid chronic diseases.
It is possible to maintain and improve daily living
function through appropriate intervention and support.
*2 Treatment that reduces burden on the patient’s body.

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Management
Philosophy

Global Strategies

Top Message

Management
Strategies

SpecialFeatureBusiness
Foundation

Appendices

Think Global,
Act Local
Kaneka Group has always promoted business operations, leading the way in advance of other companies, on aworld scale.
We are currently accelerating technological and material development tailored to regional characteristics
around the world, with an emphasis on glocalization (local-based global business).
We will continue to promote business operations rooted in the local community and offer valuable solutions
to the world market in a timely manner, aiming to become a company with a global presence.

Americas
Kaneka Americas Holding, Inc. (Regional headquarters)● Create and expand new businesses in the Health Care,

Nutrition (Lactic acid bacteria) and Aerospace fields● Aggressively conduct M&A and open innovations● Strategically utilize the Kaneka US Innovation Center and

the Kaneka US Material Research Center● Further strengthen production and sales foundations inexisting businesses● Acceleration of businessdevelopment based on local perspectives

Reinforcement of
production / sales systems
with deep local roots● Market expansion in emerging

countries

Kaneka US
Innovation Center● Production systems basedon local characteristics

M&A, reinforcementof alliances

Kaneka US
Material Research Center

EuropeKaneka Europe Holding N.V. (Regional headquarters)● Expand production capacity in growth fields and conduct M&A(Health Care, Material, QoL)

● Discontinuous growth driven by● Strategically use Kaneka’s European Photovoltaics

Kaneka’s Global● Realization of technology and● Actively expand solutions business into new andStrategies● Collaboration with partners

the fusion of new technologies
value chain synergies

Research Laboratory
untouched businesses and fields

capable of sharing value on
a global scale

Research & Business
open innovation©imec

Kaneka’s European Photovoltaics
Research Laboratory (Belgium)● Establishment of R&B bases

focused on local needs

Asia● Creation of new globally

Kaneka Asia Co., Ltd. (Regional headquarters)competitive businesses● Use of outside technology

in addition to Kaneka technology

Training of personnel
with global skills● Training of people withenhanced international skills● Evolution as a multinational

company

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Kaneka Integrated Report 2019

● Maximize returns on large-scale capital investment● Aggressively expand sales in China, ASEAN countries, and India● Expand business in the Health Care and E & I fields

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Management
Philosophy

Human Resource Strategies – Human Driven Company

Wellness and growth of individual employees asa source of innovation and value creation
Being a “Human-Driven Company” is the DNA of Kaneka. Considering that it is individual employees who
generate the results and value of work and realize innovation, we are involved in various activities to ensurethat employees and organizations can maintain health and achieve high productivity.

—Human resource development with a focus on Kaneka 1-on-1

SpecialFeatureManagement
Strategies

Business
Foundation

Appendices

Development of leaders
Program Name

Content

Fiscal 2016
No. ofparticipants

Fiscal 2017
No. ofparticipants

Fiscal 2018
No. ofparticipants

Total from the startof the program
No. of participants

Hitotsubu-no
Tane Momi Juku

Lectures and exercises by the top
management and first-class
instructing staff targeted at future
leaders and management personnel

13

12

12

49

Kaneka Creative
CornerLectures and exercises by the top
management and first-class
instructing staff targeted at future
leaders of national staff

10

12

12

34

(outside Japan)(outside Japan)(outside Japan)(outside Japan)(in Japan)(in Japan)(in Japan)(in Japan)

The Leadership
Challenge
Workshop

Development of leadership that lights a fire in peoples’ hearts

Top Message

Acquiring and practicing leadershipskills and follow-up

102
197

24

236

21

288

428
951

* Aggregated data for Kaneka and group companies in and outside Japan.

Development of diverse
human resources withstrong physical presence

The 4 SUs
The 10 SVs

Creation of a unitedorganization (One Team)

Kaneka 1-on-1
Management System

Leadership that lights
a fire in peoples’ hearts

Transformation
Changeand Growth
Triangle

PurposeKaneka1-on-1

I. Set the business goals and implement
II. Communicate with each boss about progress for goals

Off-JT

OJT● Hitotsubu-no Tane Momi Juku

● Kaneka Creative Corner● The Leadership Challenge Workshop● Language training● e-Learning, etc.

The growth of people and the results of work arelike the two sides of one coin. We aim to simultaneously realize human resource development and goal
achievement through Kaneka 1-on-1.
We regularly conduct workshops and coaching
training programs, measure their effects, and provide
feedback to improve value communication.

19

Kaneka Integrated Report 2019

Executive
LeaderAll employees

We also conduct training programs for employees,
including those at group companies within and outside Japan, to develop future executive candidates
and leaders who strongly lead businesses and operations. Some participants in the programs have been
appointed to division chief and executive positions atoverseas group companies.

Work culture innovation
To make effective use of time, information, andhuman resources and maximize the productivity oforganizations and employees from the perspectives of“Life in Work” and “Work in Life,” we have formed theWork Culture Committee under the ESG Conference
to streamline business processes and change officeenvironments. We also work to enhance value communication and create a robust organization where
members are united toward the same purpose.
We have promoted the reform of working practices by introducing various systems that allow
employees to choose a flexible working style, includ-ing the adoption of telecommuting. We have also
introduced shorter and staggered work hours programs and a babysitting expense aid system to help
employees achieve a better work life balance. We will
create a more flexible working environment in anticipation of the continuing declining birthrate and aging
population.
We will continue to review and expand existing
systems and create a more employment-friendly corporate culture to ensure for all employees a satisfying
work and personal life.

Diverse workforce
Active promotion of female employees
We are trying to resolve various social issues as asolution provider. Promoting the participation of personnel with diverse values in the workplace is one of
the important initiatives for this.
For female employees, we have advanced efforts
to increase their recruitment (employment rate of
women who graduated from technical colleges anduniversities: 33%) and expand the range of occupational opportunities (active assignment of women to
manufacturing divisions as well as R&D, sales, andstaff divisions) for the past several years. We arebuilding a corporate culture where women actively
participate in the workplace and promoting the proactive appointment of female managers to expand
opportunities for women to demonstrate their abilities
in business and management, thereby turning ideas
unique to women into solutions.

Hiring and support of employees with various
nationalities
Of approximately 11,000 employees of the Kaneka
Group, approximately 3,000 with foreign nationalities are engaged in operations worldwide, playing anactive role.
Under the circumstances where we are expanding
our business globally, we further increase the recruitment of employees with foreign nationalities. We also
focus on developing future global leaders by having
them gain experience in countries other than theirhome country through the Study Abroad Program andthe Overseas Trainee Dispatch Program.

Kaneka Integrated Report 201920

Management
Philosophy

Human Resource Strategies – Human Driven Company

Employment of persons with disabilities

Employment of senior citizens

The employment rate of persons with disabilities in
Kaneka in fiscal 2018 was 2.17%. We will expand therange of occupational opportunities to increase therecruitment of persons with disabilities, reinforce
efforts to create a welcoming workplace, and support
employment efforts by group companies, aiming toincrease their employment rate in the entire Kaneka
Group.

Considering senior employees after retirement age to
be a great asset to the company, we accommodate
those who wish to continue their employment up to
age 65.
We conduct career design training for 50- and55-year-old employees to encourage them to keep
working with enthusiasm after age 60.
In anticipation of the advent of the 100-year life-span,
we are planning to create a new system where senior
employees can autonomously shape their careers andwork with high motivation.

Top Message

Management
Strategies

SpecialFeatureBusiness
Foundation

Appendices

Provision of opportunities to become moreaware of lifestyle modification
We consider it most important that all employees at
the Kaneka Group and their family members lead colorful lives in good health, mentally and physically.
To this end, we provide various opportunities (contents) to help individual employees raise their healthawareness and change their behavior, so that they can
improve self-care awareness and establish a healthy
lifestyle. Many employees actively participate in these
activities.

Wearable device
distributed to
employees● Toward increasing awareness of lifestyle modifica-

Wellness of employees
System toward health maintenance and promotion

ESG Committee

Global CSV (Quality Environment) Center
Global Safety Integrity Center①(Deliberation and determinationof a company-wide policy)(Management of equipment
and chemical substances that
affect health)②

Chairperson:
Executive Vice President

①

C

②

Human Resources Department(Health care for employees
and organizations)

Personnel leader at each site
Health Consultation Room↑↓

Health Care
Coordinating Meeting① Approval / Instruction② Report / Proposal↑↓
High productivity

Lifestyle visualized through application
software

Office yoga program provided

Leader responsible forenvironment and safetyat each site

A
Healthy employees
and organizations

tion, distribution of a wearable device to all interested
employees so that energy intake and consumption
and sleeping hours can be visualized● Implementation of the Walking Challenge event,commending those who show excellent performance in terms of walking distance● Introduction of healthy menus, including smart
meals, at canteen● Provision of hands-on programs, including an officeyoga program and a seminar on sleep● Abolition of office smoking areas and prohibition ofsmoking during working hours to eliminate passive
smoking

Running on a company-wide basis

P

③

④

Individual Organizations

D(Core of health care)③

Leader at each organization

We are making various efforts to encourage running tohelp employees enhance health awareness, maintainand improve fitness, and increase physical strength.
● Conducting a running training session and a seminar④③ Monitoring / Health improvement guidance↑↓Each employee④ Consultation

In 2018, we established the Health Care Promotion Standards to improve the health care system on a company-widebasis.

on running to support those who wish to improvetheir full marathon time, to start some form of exercise to improve their health, and to make running ahabit● Continuing to hold the long-distance relay race
“Run, Run, Run. Kaneka,” in which employees from
Kaneka group companies in Japan and overseas andour partner companies gather together

Time trial to participate in the Hokkaido Marathon

No. of participants in the race
Fiscal year

2016

2017

2018

No. ofparticipants

950

2,031

2,288

● Sponsoring the Hokkaido Marathon

Long-distance relay race “Run, Run, Run. Kaneka 2018”21

Kaneka Integrated Report 2019

Kaneka Integrated Report 201922

Management
Philosophy

Special Feature

Top Message

Management
Strategies

Business
Foundation

SpecialFeatureAppendicesBusinesses supporting
Kanekaʼs next growth phase

Radical business transformation
through intensive investmentin priority areas

We position new large-scale and leading-edge businesses as driving forces to lead the next phase of our
growth. “Biodegradable polymer PHBH” and the “Probiotics business” are designated as our priority
product and business, representing our intensive efforts at the frontline of research, manufacturing, andmarketing.

New large-scalebusinesses
Driving-force of business transformation
Organic EL Lighting
Biodegradable Polymer PHBH
Opto-Electrochemicals
Regenerative medicine and cell therapy, etc.

Leading-edgebusinesses
Multiple business
E & I Technology ／ Pharma
Medical Devices
Supplemental Nutrition ／ Agris
PV & Energy management

New large-scale + Leading-edge businesses

Case

1
Biodegradable
Polymer PHBH
➡ P27

Case

2
Probiotics
Business➡ P31

Foundation businesses
Strengthen Only One, Global No.1
Vinyls and Chlor-Alkali ／ Performance Polymers
Foam & Residential Techs ／ Performance Fibers ／ Foods

Foundation businesses

23

Kaneka Integrated Report 2019

Kaneka Integrated Report 201924

Management
Philosophy

SpecialFeature1

Top Message

Management
Strategies

SpecialFeatureBusiness
Foundation

Appendicesfeatures, we focused on the fact that microbeads*
were becoming a major social issue and began tocollect data on marine degradability, following trends
in legal restraints in Europe, where plastic issues had
been rigorously addressed. Thus, our timely action
succeeded in transforming the risk to the global environment caused by microplastics issues into business
opportunities.

Environment / Energy
Case Study

Biodegradable
Polymer PHBH

* Microbeads are plastics produced in a micro size of 1mm or less, used as
scrub materials in facial cleansers, tooth paste, and cosmetics.

Takeshi Chiba, Ph.D.
General Manager
BDP Technology Laboratories

We apply Kaneka Biodegradable
Polymer PHBH (“PHBH”), which is 100%plant-based and biodegradable in sea

Foreseeing market needs to develop products tailored to each market

water, to daily life, leading to innovationin lifestyles and the environment to help
communities achieve sustainability.

In recent years, marine pollution caused by microplastics has become a global social issue due to its
impact on ecosystems.
PHBH, developed through fusion of our long-cultivated fermentation and micromolecular technologies, will be a major factor in resolving marine plastic problems facing the world. Further broadening
the application of our 100% plant-based and marine biodegradable polymer technology, we are developing easy-to-use products that help to resolve social issues together with partner companies thatshare our principles.

Marine plastic issues, one of the major agenda items
at the G20 Osaka Summit held in June 2019, havebecome recognized throughout the world, including
Japan, and specific measures and restraints havebeen implemented.
We began to operate a PHBH production facility,with the capacity of approximately 1,000 tons a year,
at the Takasago Manufacturing Site in May 2011, earlier than other companies.

Timely action to change risks into opportunities
Since our foundation, we have deployed our knowhow with fermentation methods as one of our coretechnologies. Broadening the application of our culturing technology, fostered by many years of research on
yeast, through company-wide, cross-sectional projects,
we have established a mass-production method for
Kaneka Ubiquinol. We have also developed various
raw materials for pharmaceuticals and functional foodmaterials. We are currently working to realize a bioeconomy society through manufacturing using smart
cells (finely-designed biological cells), making use of
rapidly-developing synthetic biological technologies.
PHBH has been developed due to the fusion of
fermentation and chemical processes that we realized as a chemical company with the technical ability
to run large-scale plants and expertise in advanced
biotechnology.
PHBH is a 100% plant-based polymer extracted
from microorganisms that process plant oils. It is produced through the cultivation of microorganisms andis biodegradable by them.
While considering how to apply PHBH, with these25

Kaneka Integrated Report 2019

Characteristics and life cycle of PHBH

Kenji Kurosawa＝

Marketing Manager
Green Planet Project (Japan)

Since it was impossible to replace all plastics with
PHBH, we drew a road map for its application and production capacity for it from the perspectives of technology and the most effective measures to resolve
marine plastic issues.
We planned to gradually market PHBH by 2020,
applying it to checkout bags, beverage labels, straws,
and cutlery, while developing these products inconformity with market needs in each country. For
instance, in Europe, products are often required to bebiodegradable in soil due to social infrastructure andcustoms concerning composting of garbage. We alsoplan to develop and introduce products substitutedfor PET bottles by 2025, first developing disposable
products related to food and beverages and then
expanding the product range.
In our plan, in accordance with the expansion of
PHBH product lineup, production capacity is increasedby five times to 5,000 tons per year by the end of2019 and will be gradually expanded to 100,000 to
200,000 tons per year by 2030. We believe that noother companies have comparably concrete plans tomass-produce PHBH.

PHBH accumulated in microorganisms (Electron micrograph)
Fermentation
Plant oils

CO2 / Water

Biodegradation in
Soil and Marine

PHBH

Microorganism(Bacteria)

Processing

Molded / processed
products
Garbage bags

Kaneka Integrated Report 201926

Management
Philosophy

Special Feature

Road map to develop and disseminate PHBH products and a plan to increase product capacity

By 2030

By 2025

By 2020
Checkout bags, Beverage labels,
Straws, Cutlery, Trays, Food packaging,
General packaging, Plastic bottles,
Paper composite materials,
Injection molded cases, Mulching film

Textiles, nonwoven fabrics, Foam molded products,
Injection blown bottles as a PET alternative

Top Message

Management
Strategies

The application
range of PHBH will
expand dramaticallyin the future

Japan

EuropeBio-based
A42001

Listed in Inventory of Food Contact
Substance Notifications with U.S.
Food & Drug Administration

Europe(EU)

Listed in the positive list ofCommission Regulation (EU) No.
10/2011

Compost (Home)

Japan

Listed in the positive list for foodutensils, containers and packaging
by Japan Hygiene Olefin and Styrene
Plastics Association

Biodegradable
MarineCommercial production facilities
Construction was completed in December 2019

Plant operation started in May 2011

Production capacity will be
successively increased
as demand grows

Aiming to ensure stable quality and supply through manufacturing fueled by technology

Yoichi Kitadani

U.S.

A42001

20,000 to 50,000 tons per year

Our attempt to develop technology that manufactures polymers industrially through fermentation
was unprecedented, world-wide. Despite achieving

Food Contact

U.S.

Compost (Industrial)

5,000 tons per year

Appendices

Status of the acquisition of certification related to PHBH

100,000 to 200,000 tons per year

1,000 tons per year

Business
Foundation

SpecialFeaturepositive results in the laboratory, we were initiallyunable to obtain similar success at a mass production
scale at the plant. We repeatedly adjusted cultivation
conditions and manufacturing technology, verifying
the obtained results every day. In addition, we had todisassemble and wash manufacturing equipment several times a day at first, when mass production was
impossible. Currently, we still have to do the same
maintenance work, but only once every six months.
Through so many trials and modifications it became
possible to manufacture polymers with a guaranteedlevel of quality.
Aiming to further enhance production capacity, we
will improve operational technology and incorporate AI
and IoT technology to create a cost-competitive andhighly productive manufacturing base.

Manager
BDP Production Group
Takasago Manufacturing Site

Soil
<Some grades>

Realizing economic value and creating a sustainable management system
Through PHBH, we pay attention to values benefitting
society and are actively expanding such values throughsharing with other companies and stakeholders.
In Japan, PHBH has been adopted in straws for
Seven Cafés at about 10,000 Seven-Eleven stores. We
are also jointly developing cosmetic containers with
Shiseido Japan Co., Ltd. Outside Japan, PHBH has
been adopted for wide-ranging purposes, including
fruit and vegetable bags, garbage bags, seedling pots,and coffee capsules. It is also being newly adopted
by many global brand holders for various purposes,
including cutlery, checkout bags, home delivery bags,
cup lids, paper coating materials, and food trays. Ourcurrent production capacity of 5,000 tons per year canbarely satisfy these demands when operated at full
capacity. We are therefore planning to build a plantwith a capacity of 20,000 tons per year.
Under our mission of “Kaneka thinks ‘Wellness
First’”, we are engaged in our unique wellness-firstmanagement. We believe that PHBH is one of thesymbolic products that help us provide socially valuable products to produce economic value and createa sustainably developing system. We will contribute
further to society in the future.

Business model focusing on sharing principles and values as well as marketing products
For the development of PHBH, it was important for us
to find companies that could share the principles ofresolving marine plastic issues. Based on this, we aim
to embody a new partnership-type business model
to promote joint development with B-to-C companies
that are sensitive to the needs of consumers and society and have a strong brand image, brand holders, andprocess manufacturers.
To correctly inform people of the function of PHBH
and expand its application, it is important to obtaincertification and pass screening criteria, including
legal restraints related to food hygiene and new chemical substances, in each country. PHBH is permitted
to be sold for use in major countries, including Japan,
the United States, and European countries.

27

Kaneka Integrated Report 2019

TOPICS

Various products made of PHBH provided at the G20 Osaka Summit

Sosuke TakemuraGroup Leader
Strategy & BusinessGreen Planet ProjectAt the International Media Center of the G20 Osaka Summit held in June 2019,Japan’s advanced technologies and efforts to resolve environmental issues wereintroduced to the media from various countries. At our booth, we exhibited
various molded products, such as spoons and forks made of PHBH, as materials
proposed to resolve marine pollution issues, and samples showing biodegradability in seawater. Compostable garbage bags and cutlery made of PHBH wereused at the Summit venue.
In his address at the Science and Technology in Society forum held in October
2019, Prime Minister Shinzo Abe expressed high expectations for our PHBH.

Stationeries made of
PHBH introduced anddistributed at the G20
SummitKaneka Integrated Report 201928

Management
Philosophy

SpecialFeature2

Top Message

Management
Strategies

is being lost, due to the effects of antibiotic drugs andartificial additives. It has been proved that a decreasein diversity, or a decline in the number of kinds ofbacteria, is associated with various diseases. Lactic
acid bacteria, among others, play an important role inrestoring the balance of intestinal bacteria.

Wellness
Case Study

Probiotics
Business

SpecialFeatureBusiness
Foundation

AppendicesLactic acid bacteria have recently attracted attention for their new effects, such as allergy symptom
relief and infection prevention as well as the effects
of improving the intestinal environment and immunity.
Their application is rapidly expanding to dairy products,
including yogurt, functional foods, and supplements.

Establishing an advantage through inimitable combination of strains

We are creating new value in the fieldof lactic acid bacteria with an immunity
improvement function as one of ourinnovative solutions empowering people
to live healthier lives.

Our fermentation technology, one of the core technologies that we have cultivated since our foundation, has made possible bakery yeast and functional food materials, such as Kaneka Ubiquinol. The
development of these products is strongly supported by the management and individual employees
who seek to develop new materials that meet safety requirements and are supported by clear data
proving positive effects for humans, thereby helping people live healthy and active lives.
To expand a new business, in 2018 the Spanish company AB-Biotics S.A. (“AB-Biotics”*1),
engaged in original research on lactic acid bacteria, became a Kaneka Group company. By combining
AB-Biotics’s probiotics products with our functional food materials and dairy products, we bringunique products to the market, developing a new business to contribute to people’s wellness.

Among many companies in lactic acid bacteria-related
markets, AB-Biotics, a subsidiary of Kanaka, possesses advanced R&D capability, with more than
550 original probiotics*2 strains from human healthy
intestinal samples. One of the distinctive features of
its strains is that they have clear effects and mechanism in humans, including improving the intestinal
environment and decreasing risks of cardiovascular,
periodontal, and infectious diseases.
A key feature of probiotics products produced by
AB-Biotics and Kaneka is that several kinds of highly
effective strains for specific targets, such as immunity
improvement, can be combined. Even if symptoms
are identical, their causes vary among individuals. The
supply of products with diverse effects and mechanisms can increase the ratio of those who can enjoy
their benefits, leading to higher effectiveness. We
believe that this gives an advantage over competitive
products.

Takahiro Ueda
Manager
Nutrition Strategic Unit
Pharma & Supplemental Nutrition Solutions Vehicle*2 Probiotics: Live microbial community and foods containing it, giving beneficial effects to the human body by improving the intestinal environment andcontrolling intestinal function and the immune system.

*1 AB-Biotics was founded in 2004 by Sergi Audivert and Miquel Àngel Bonachera, as students at University Autonoma of Barcelona. Having actively engaged in R&D
since its foundation, it currently has operations in more than 60 countries with over 200 core patents.

Kaneka’s knowledge and technologies enhancing added value
Diversity of intestinal bacteria being lost from the human body, and the roles oflactic acid bacteria
Approximately 1,000 kinds and 100 trillion individual
intestinal bacteria live in the human intestinal tract,
mainly in the large intestine. Categorized into threegroups: beneficial, harmful, and neutral, they areclosely related with each other, maintaining an intricate
balance, and are deeply involved in human health.
However, it is said that the original diversity ofintestinal bacteria in people living in urban areas today

Features of AB-Biotics’s functional lactic acid bacteria

Possesses more than 550
original bacteria strains

Clear effects, such as reduced
risk of heart disease, intestinal
environment improvement,
periodontal disease reduction,and infection prevention

29

Kaneka Integrated Report 2019

EffectProduct nameProduct features

Cardiovascular

AB LIFE

Reduces LDL cholesterol by 24%

Kaku Nakagawa, Ph.D.

Immune system

AB IMMUNO

Reduces influenza infections

GI(Gastro Intestinal)

I3.1

Comprehensively alleviates symptoms of IBS(irritable bowel syndrome), in addition to
alleviating IBS related pain.

Officer
Nutrition Strategic Unit
Pharma & Supplemental Nutrition Solutions Vehicle

Oral

AB DENTALAC

Efficiently reduces periodontal disease bacteriaChildren

AB KOLICARE

Reduces crying in 68% of infants with baby colic

Women

AB INTIMUS

Reduces the recurrence rate of infectious diseases

Having engaged in R&D on fermentation products
and plant extracts for 40 years, we have accumulated a wealth of knowledge and know-how basedon scientific evidence from clinical tests. The collaboration between us and AB-Biotics, with extensive
knowledge of lactic acid bacteria, makes it possible
to increase our portfolio of more effective lactic acidbacteria products supported by scientific evidence.
Use of our know-how in fermentation productionin AB-Biotics’s production of probiotics products leads
to cost reduction. It also generates many synergies,
including expanding the application of our pharmaceuticals and foods and marketing products on a global
basis, thereby enhancing added value. Although wehave different areas of expertise, we are engaged in
R&D on lactic acid bacteria toward product commercialization, sharing the mission to disseminate safer
products supported by scientific evidence to society
in order to support wellness.

Kaneka Integrated Report 201930

Management
Philosophy

Special Feature

Top Message

Management
Strategies

SpecialFeatureBusiness
Foundation

Appendices

Grasping the market’s features to pursue value for customers

From Japan to the world, with our steadfast mission to contributing to healthy longevity

The U.S. market for lactic acid bacteria is the world’s
largest, making it the most important market for us.
We have therefore launched an organization dedicatedto lactic acid bacteria on the West Coast of the U.S
to focus on business development. We also work on
introducing our brand “Floradapt” at exhibitions andacademic conferences.
Since the U.S. does not have a universal healthinsurance system, people in America are highly awareof self-medication*3. Meeting needs for preventive
health care, the market share of lactic acid bacteria
products is steadily increasing as products available atreasonable prices. Considering that needs for preventive health care will grow in Japan, we expect stable
growth in this market.
Ways of consuming lactic acid bacteria products,
their required functions, and their categorization vary
among countries. In Japan, more than 90% of products
are yogurt-based, many of which highlight their functionality. In the U.S., yogurt is a product with a strong
focus on palatability, and more than one-third of lactic
acid bacteria products are consumed as supplements.
The situation in Europe is midway between the two.
While a variety of new functions are pursued in Japan,
including lowering uric acid and neutral fat levels, inthe U.S. emphasis is placed on categorization such as
products for women and the elderly. We will pursue
value tailored to customers, considering differences inmarketability.

As human longevity increases, thanks to medical
advances in Japan and the world, in the future it will
become crucial to live a long healthy life. In particular,
as a country with long life-expectancy, Japan is on
the leading edge of this trend. We plan to create amodel project for contributing to healthy longevity andexpand it on a global scale.
We aim to further contribute to society by not only
developing and marketing better probiotics products,
but also incorporating them into our solutions asmaterials contributing to our “wellness-first management” and healthy longevity.

Hiroyuki Miyaji
Senior Manager
Nutrition Strategic Unit
Pharma & Supplemental Nutrition Solutions Vehicle

Our co-creation further spurring a highly competitive edge
Message from the founders of AB-Biotics

Our probiotics product brand, “Floradapt” series*3 Taking responsibility for one’s own health and treating slight physicaldisorders by oneself.

AB-Biotics was founded in 2004 by Sergi Audivert (right) and MiquelÀngel Bonachera (left), as students at University Autonoma ofBarcelona.
Having actively engaged in R&D since our foundation, wecurrently have operations in more than 60 countries with over 200
core patents. Becoming a member of the Kaneka Group in 2018 has
improved the motivation of our staff members and has accelerated
our business growth through various types of cooperation. We
expect that your many years of manufacturing experience and global
market expansion capabilities will help improve our competitivenessand productivity, generating a wide range of synergetic effects. We
will do our best to show a strong presence in the health care field.

Original position established in terms of function and taste
Products offered by us and AB-Biotics are supported
by clear evidence. In the U.S., functionality can be
described based on clinical data but in Japan it is necessary to pass rigorous screening to gain authorization
for Foods with Function Claims, and notification to theConsumer Affairs Agency is essential. We will clearly
describe functionality through function claims in the
supplement market so that product effectiveness andefficacy can be easily understood by consumers.
In the food market, including dairy products,
consumers do not repeat purchase of the same
Pur Natur Invest
BVBA
Yoghurtmanufacturing
technology

31

AB Biotics, S.A.
Functional
lactic acidbacteria

Kaneka Integrated Report 2019

Functional
yoghurtproduct if it tastes unpalatable, in spite of its effectiveness. Accordingly, in January 2018 we establisheda technical tie-up with Pur Natur, a Belgian company
marketing its organic dairy products in European
countries, to bring to the Japanese market our uniquefunctional yogurt products with good taste, a featureof Pur Natur’s products, and effectiveness, a featureof AB-Biotics’s products.
In the B-to-B market, we aim at differentiation fromothers by considering what value should be provided
to consumers in cooperation with clients as well as
simply marketing probiotics products. We also conduct
presale of products through Kaneka Your Health Care
Co., Ltd., a Kaneka Group company engaged in the
mail order business, to have consumers recognize
their commercial value, thereby encouraging clients in
the B-to-B market to choose our products.

On our way of developing the market in the U.S with
unprecedentedly valuable probiotics products
In North America, which has the largest health food market, we are engaged inmarket expansion, setting up a dedicated team, with probiotics products basedon AB-Biotics’s evidence serving as the core of differentiation. With the“Floradapt” brand launched in 2018, we are involved in sales promotion, customer development, scientific research enhancement, and responses to pharmaceutical regulations to become a provider of finished products with higher added
value. Since lactic acid bacteria are hard to handle and technology accumulationis required for quality control, it is important to create an on-site manufacturing
and supply system. We are therefore promoting collaboration with local business
operators to enhance competitiveness. We aim to build a new pillar of our healthfood business by establishing our position in the U.S. market, overcoming any
obstacles through support from the U.S. team and other global support.

Kaneka Integrated Report 201932

Management
Philosophy

Business Foundation

List of Directors

Management
Strategies

Top Message

SpecialFeatureBusiness
Foundation

Corporate GovernanceAppendices

For details, see our website.
https://www.kaneka.co.jp/en/esg/governance/corporate/

Basic Policy
Guided by our Corporate Philosophy, Kaneka aims
to achieve sustainable growth, improve medium- tolong-term corporate value, and build trust among all
stakeholders, including shareholders, investors, cus-

Kimikazu Sugawara

Mamoru Kadokura

Minoru Tanaka

Chairman of the Board(Representative Director)

President(Representative Director)

Executive Vice President(Representative Director)

tomers, local communities, vendors, and employees,
realizing optimum corporate governance to fulfill oursocial responsibility.

Diagram of Corporate Governance System

General Meeting of Shareholders

Board of Directors

Shinobu Ishihara

Akira Iwazawa

Kazuhiko Fujii

Member of the Board,
Senior Managing
Executive Officer

Member of the Board,
Senior Managing
Executive Officer

Member of the Board,
Managing Executive
OfficerMember of the Board,
Managing Executive
OfficerIndependent External
Director’s Meeting

ReportAppointment andRemuneration
Advisory Committee

Appointment

Shinichiro Kametaka

ReportAppointment

Appointment

Chair of Boardof Directors

President
Audit

Manegement
Committee

Board ofAuditors
Cooperation

ESG Committee

Katsunobu DoroJun Enoki

Takeo Inokuchi

Mamoru Mohri

Member of the Board,
Managing Executive
OfficerMember of the Board,
Managing Executive
OfficerMember of the Board,
Managing Executive
OfficerIndependent Memberof the Board

Independent Memberof the Board

Audit & Supervisory Board Members

Managing Executive Officers

Executive Officers

Hideyuki Matsui
Masami Kishine
Hiroshi Fujiwara (Outside)
Yasuhiro Uozumi (Outside)

Atsushi Kawakatsu
Ikuo Aoi
Fuminori Hoya
Masaaki Kimura
Yoshiki Takeoka
Yasuhiro Sumi

Haruhiko Maki
Riichi Nishimura
Toshio Komori
Masahiro Ueda
Takuo Ishibashi

Kaneka Integrated Report 2019

Shinji Mizusawa
Takamune Yasuda
Kazuo Ochiai
Hitoshi Yahara
Minetoshi Marufuji
Kan Okabe

Cooperation

33

Yasuaki Nuri

Divisions including
Operation Production, R&D,
General Administration;
and Group Company

Internal Audit,
Internal Control
Evaluation

Internal Control
Division,ESG Department

Accounting Audit

Accounting
AuditorYasuyoshi Ueda
Osamu Ishida
Etsuo Yoshiike
Naoki Furukawa
Hiroyuki Deguchi

Kaneka Integrated Report 201934

Management
Philosophy

Business Foundation

Top Message

Management
Strategies

SpecialFeatureBusiness
Foundation

Appendices

Corporate GovernanceCorporate Governance Structure
Organizational Design
We currently have two independent external directors
and two independent external auditors. Since boththe overseeing of business operations by the Boardof Directors and auditing by the Board of Auditors arefunctioning well, Kaneka has chosen to be a Company
with Board of Auditors under the Companies Act.

Directors and the Board of Directors
The Board of Directors seeks to ensure efficient andeffective corporate governance in order to realize thecompany’s sustainable growth and increase corporate
value in the medium to long term.
The Board of Directors exercises its oversightfunctions on overall management to ensure fairness
and transparency, as well as to appoint management
positions, evaluate and determine remuneration, evaluate serious risks and determine strategies to counter
them, and make the best decisions on importantbusiness operations. The Board of Directors makes
resolutions on important matters related to the management of the Kaneka Group after deliberation by theManagement Committee, which includes the president. There are at most 13 members on the Boardof Directors. Of these, two are independent external
directors to strengthen the oversight function. Directors serve for a period of one year to clearly define
management responsibilities.

Auditors and the Board of Auditors
Auditors and the Board of Auditors seek to ensure
healthy and sustainable corporate growth and toestablish a structure with good corporate governancethat can gain social trust by checking on the performance of directors in regard to their duties.
The Board of Auditors comprises four members,
two of whom are independent external auditors inprinciple, and performs audits in coordination with the
Accounting Auditor and the ESG Department Internal
Control Division’s. Auditors are given space to periodically exchange views with the president, and monitor
the state of business operations when necessary, byattending key meetings of the Board of Directors andthose of the Management Committee, which decides
on the implementation of important matters, as well
as division head meetings.

Appointment and Remuneration Advisory
Committee / Independent External Director’s
Meeting
The Appointment and Remuneration Advisory Committee discusses the remuneration of Directors andthe appointment of Director and Auditor candidates
to report to the Board of Directors. The Independent
External Director’s Meeting discusses the effectiveness of the Board of Directors to report to the Chair of
the Board of Directors.

Implementation of Business Operations
Kaneka has adopted the executive officer system toharmonize the oversight function of directors with
the implementation function of business operations,which also facilitates decision-making and clearly
defines roles. The Board of Directors decides on key
management strategies and business operations of
the entire Kaneka Group, while executive officers
assume responsibility for business operations. Division heads, including executive officers appointed by
the Board of Directors, are given extensive authority
over daily business execution. Monthly division headmeetings are held to enable the directors and auditors
to directly hear progress reports from each division
head. The Internal Control Division of the ESG Department evaluates the effectiveness of internal control
and conducts an internal audit.

35

Kaneka Integrated Report 2019

	Standards for Independence ofExternal Directors/Audit &Supervisory Board Members
We have defined the Standards for Independence ofExternal Directors/Audit & Supervisory Board Members
to guarantee the independence of independent external directors and auditors in practice. The standards aredisclosed in our notice of convocation general meetingof shareholders, corporate governance report, etc.

Our Efforts to Strengthen the Governance Capacity● I ntroduced the executive officer system

2006

●C
 hanged the number of directors from 21 to 13●F ormulated the Basic Policy on Internal Control

System
2011
2013

●A
 ppointed an outside director●F ormulated the Criteria for Independence ofOutside Directors● I ncreased the number of outside directors from

1 to 2

Selection Criteria for Directors
At Kaneka, directors are selected by the Board of Directors, on the basis of character, judgment, expertiseand experience as well as ethics without limitations on
gender, age, nationality and other attributes, after deliberation by the Appointment and Remuneration Advisory
Committee, which is comprised of representative directors and independent external directors.

●F ormulated the Basic Policy on Corporate

2015

Governance●E stablished the Appointment and Remuneration

Advisory Committee●E stablished the Independent Outside Officers

Meeting
2016
2019

●C
 ommenced the effectiveness evaluation on the

Board of Directors●R evised part of the Basic Policy on Corporate

Governance	Analysis and Evaluation of
Effectiveness of the Board of Directors
Kaneka regularly implements an analysis and evaluation of the effectiveness of the Board of Directors,
and discloses a summary of the evaluation results.
Specifically, the Chair of Board of Directors periodically receives reports from the Independent External
Director’s Meeting and opinions from the internal
directors. Based on these reports, the current statusof operations of the Board is evaluated. In the evaluation process in fiscal 2018, the Independent External
Director’s Meeting held discussions focusing on theoperation of the Board of Directors (number of meetings held, frequency, length, contents of information
provided beforehand, contents of agendas, deliberations, etc.), role of external directors, and risk management. Based on the discussion results, the Boardof Directors conducted a self-evaluation. As a result,it has been confirmed that the Board of Directors
functions effectively in making decisions on importantmatters for the Group such as risk management andsupervising business execution. We will continue toenhance the effectiveness of our Board of Directors
through effectiveness evaluations.

Kaneka Integrated Report 201936

Management
Philosophy

Business Foundation

Business Risks and Uncertainties
Basic Policy
Our basic risk management policy is that each division
identifies operational risks and other types of risks
that it may face, takes appropriate preventive measures, and responds appropriately in cooperation withother relevant divisions if a risk manifests itself.
For preventive measures against potential risks
including those related to ethics and legal compliance,
the Compliance Subcommittee of the ESG Committee
oversees the development and implementation of thecompany-wide plans.
When a risk occurs or is likely to occur, the ESG
Committee handles the risk in cooperation with therelevant divisions.
We regularly check whether the above-mentioned
activities are implemented properly to prevent our risk
management system from falling into mere formality,
and strive to maintain and improve its effectiveness.

Business-Related Risks
Factors that may significantly affect the performanceand the financial position of the Kaneka Group include
those described below.
Please note that the matters described are only
those that we considered risks as of March 31, 2019
and that this is not an exhaustive list of risks borne by
the Group.
1. Risks related to the Group’s ability to maintain
operational advantages and trends in the Japaneseand overseas economic environments
2. Risks associated with the globalization of ourbusiness (fluctuations in foreign exchange rates andoverseas business development)
3. Risks of price fluctuations of raw materials andfuels

For details, see our website.
https://www.kaneka.co.jp/en/esg/governance/risk/

Strengthening of Information Security
Kaneka Group has established a Basic Information
Management Policy, and works to disseminate it to
all employees, thereby ensuring appropriate management of information.

6. Impact of environment related regulations
7. Risks associated with legal action
8. Other risks
See the Financial Section for more details

37

Kaneka Integrated Report 2019

Management
Strategies

Compliance
Basic Policy
Viewing compliance as an important management
issue, we implement various initiatives to ensure all
directors and employees comply with all applicablelaws and regulations.

Basic Information Management Policy
1. Observance of laws/regulations and rules
The trust and confidence of society and customers isthe most precious asset the Group must protect.
Complying with laws and regulations, social norms, andinternal regulations/procedures is the basic principle that
all individuals engaged in business activities should follow.
2. Protection of confidential information
Confidential information concerning manufacturing
processes, research, sales, etc. is the source of theGroup’s competitiveness.
All individuals engaged in business activities must be
fully aware of this, and must not leak such information oruse it for illicit purposes. In particular, data requiring strict
handling, such as personal information and information
entrusted as confidential from other entities, must be
identified as such and managed strictly by the person in
charge of information management at each company.

Compliance Awareness Raising
Our corporate Intranet provides ready access to
our Compliance Guidebook, which provides a clear
explanation of our Ethical Code of Conduct as wellas the laws and regulations to be observed by all ofour directors and employees. Additionally, a variety of
training sessions and meetings, and activities of theCompliance Subcommittee ensure that we strictly
adhere to our compliance policies.

3. Establishment of systems/structures
In order to sustain and expand the Group’s business,
it is essential to make effective use of information andincrease the efficiency of business operations.
In addition to establishing rules regarding information
security and continuing to improve information systems
to ensure safe, effective use of information, the persons
responsible for information management should be determined to ensure appropriate information management.
4. Implementation of training and awareness-raisingprograms
With the strengthening of Group management andincreased use of external resources, people withdiverse values and ethics are involved in Kaneka’sbusiness operations.
To ensure smooth cooperation with these members,
efforts should be made to raise awareness of information security risks and to enhance and continue training
on information security including ethical aspects.

4. Risks associated with product liability, industrial
accidents and large scale disasters
5. Risks associated with the protection of intellectual
property rights

Top Message

SpecialFeatureBusiness
Foundation

Appendices

For details, see our website.
https://www.kaneka.co.jp/en/esg/governance/compliance/

Self-Check in Training Session
The compliance online course for all employees,
launched in 2014, was expanded to include Group
companies in Japan in 2016; employees from 43 companies participated in fiscal 2018.
Training sessions on the Antimonopoly Act are
conducted regularly with all of managerial officers fromthe Kaneka and Group companies in Japan who are
involved in sales, purchasing, and business development, all of whom are required to submit a pledge.

	Internal Audits and Establishment ofConsultation Hotlines
The scope of ESG evaluation audits, which are carriedout for all Group companies in Japan, the U.S. andEurope, was expanded to include those in China infiscal 2018. Going forward, Group companies outside
Japan will be included as well.
We have also set up compliance consultation
hotlines both internally and with outside law firms
in order to answer inquiries from those within theGroup. We strive to respond quickly to provide a rapid
resolution to any concerns that may arise.

Compliance Guidebook

A compliance training session

To protect its information assets from risks including cyberattacks, Kaneka Group continues striving toenhance security levels, by utilizing the knowledgeof external experts. Since fiscal 2018, measures havebeen taken to reduce risks associated with rapidchange in the information security environment,
including reviewing existing facilities and introducing
various security tools. Stratified training programs,
audits, drills, and e-learning education are held regularly to improve employees’ information security
literacy.

Kaneka Integrated Report 201938

Management
Philosophy

Business Foundation

Intellectual Property
Basic Policy
Kaneka’s Intellectual Property Department, operating directly under the President, secures intellectual
property rights such as patents for our R&D results,
aiming to provide prompt solutions to help resolve
social issues.
From the glocal perspective, the intellectual property staff are allocated to each site in the Americas,
Europe, and Asia, with the Department serving as acenter, to respond directly to local issues.
The Department formulates and implements intellectual property strategies for each division, including
establishment of patent portfolios covering upstream
to downstream business, in cooperation with thebusiness and R&D divisions.
Our invention incentive programs include patentapplication incentives, patent master incentives forthe acquisition of a certain number of registeredpatents, and overseas patent registration incentives.
Increasing application incentives for employees
actively creates intellectual property.
We respect the intellectual property rights ofother companies and, to avoid disputes, we conduct
careful patent searches, securing patent clearance ateach phase of development including theme proposal,commercialization, and specification changes.

For details, see our website.
https://www.kaneka.co.jp/en/esg/intellectual-property/

form of coenzyme Q10, blocked the marketing of
infringing products, and replaced them with our regular products.

Number of Patents HeldMore than 200 domestic patents were newly registered in fiscal 2018, as in last year, toward transforming our business portfolio. Meanwhile, some productpatents expired, so the total number of domestic
patents remained almost the same. Foreign patents
continued to increase in all SUs, reflecting our recent
efforts to strengthen our foreign patent portfolio. Consequently, domestic and foreign patents held by theGroup as of the end of fiscal 2018 numbered 3,481
and 3,519, respectively. In particular, globalizationof businesses significantly increased the number offoreign patents in the Health Care and Nutrition SUs,
our new priority areas.
Number of National Patents Held
(Number）

4,000

39

Kaneka Integrated Report 2019

3,481

987

979

954

1,651

1,698

1,715

1,000
0

In fiscal 2018, we acquired patent rights mainly inpriority areas contributing to our “Wellness-FirstManagement.” In Japan, patents were registered forresin compositions with superior moldability, madeof marine biodegradable Kaneka Biodegradable Polymer PHBH, for “Kaneka Luce,” an organic EL lighting
device with a tiltable/rotatable light-emitting surface,
and for margarine containing fermented butter.
Outside Japan, we acquired patent rights forhybrid organic EL elements that produce a color
closer to natural light, for a plant-growth promoting
agent following “Kaneka Peptide,” and for a manufacturing method of oxidized and reduced forms ofcoenzyme Q10, mainly in the U.S.
Executing intellectual property rights, we administratively prosecuted three companies that illegally
produced and sold wig products under the nameof “Kanekalon” in China and confiscated labels andproducts infringing on our trademark right. In Europe,
based on patent rights, we issued warnings to six
companies involved in distributing and selling reduced

3,491

3,000
2,000

	Establishment of Patent Portfolio andExecution of Patent Rights

3,442

Others

506
296

2

2016

510
298

2017

Others

6

514
291

2018

Others7

Top Message

Management
Strategies

ESG Promotion

SpecialFeatureBusiness
Foundation

Appendices

For details, see our website.
https://www.kaneka.co.jp/en/esg/promotion/prm/

Basic Policy

ESG Inspections

In 2018, Kaneka Group established the ESG Charterto evolve its ESG management. Aiming to provide
valuable solutions globally with a focus on chemistry,the ESG Charter serves as an action agenda for each
employee to materialize our Corporate Philosophy.

ESG Promotion System
In line with the ESG Charter, the ESG Committee isaddressing environmental, social, and governanceissues, coordinating the Compliance Subcommittee,
the Safety & Human Health Subcommittee, the EarthEnvironment Subcommittee, and the Product Safety
Subcommittee.
In fiscal 2018, the ESG Committee met twice, andthe four Subcommittees met individually (Compliance:
twice, Safety and Human Health: twice, Earth Environment: twice, and Product Safety: once).
The ESG Committee assessed the implementation status of each Subcommittee’s activities, shared
information on key issues, deliberated the fiscal 2019
action policy plan, and decided on necessary management measures.
In April 2019, the ESG Conference was newly
established to set policy directions to promote ESG
management, wellness-first management, and work
culture innovation, aiming to enhance sustainablecorporate value.

To inspect the legal and regulatory compliance statusof the Kaneka Group and to improve its occupationalsafety and health performance, ESG inspections arecarried out, comprising ESG safety and quality inspections and ESG evaluation audits, targeting all Group
companies within and outside Japan.
In fiscal 2018, we conducted ESG safety andquality inspections at all parent Manufacturing Sites,
15 sites of 13 Group companies in Japan, and six sitesof six Group companies outside Japan, focusing onserious risk management, compliance, 3Ss, and company-wide implementation of basic safety actions.
We also conducted ESG evaluation audits relating
to competition laws, including the Antimonopoly Act,for all business operations divisions, 28 Group companies in Japan, and 14 outside Japan.

ESG Education
We engage in educational activities to promote ESG
within the company through training sessions and ourIntranet.
In fiscal 2018, training sessions were conductedfour times for new employees and twice for mid-career
employees.

(Fiscal year)

Number of Foreign Patents Held

Diagram of ESG Promotion System(Number）

4,000
3,000
2,000

3,210
1,010
1,274

3,386

3,519

1,037

1,048

1,338

1,384
658

1,000

571
355

615
396

429

0

2016

2017

2018

■ Nutrition SU■ Health Care SU■ Quality of Life SU■ Material SUManagement

ESG Committee(Chairperson:
Executive Vice President)

Compliance Subcommittee
Focuses on corporate ethics and compliance

Safety & Human Health Subcommittee
Focuses on occupational safety, process safetyand disaster prevention associated withproduction and technological activities(Fiscal year)

ESG Conference
Earth Environment Subcommittee
Work Culture Subcommittee

Contributes to realizing a sustainable society by
setting and pursuing basic policies and goals
related to the global environment

Product Safety Subcommittee
Oversees product safety and quality assurance

Kaneka Integrated Report 201940

Management
Philosophy

Business Foundation

Environment

In keeping with our ESG Charter, we at the Kaneka
Group will contribute to realizing sustainable development and the enrichment of society by conserving
resources and reducing environmental impacts ateach stage of the entire product lifecycle.
Important matters pertaining to the protectionof the global environment are decided by the ESG

Committee. Meanwhile, issues on global environment protection are shared and further discussed at
the management meeting, the Plant Management
Committee, and other meetings. The medium-term
management plan also focuses on strengthening
initiatives on important matters to further improve our
ESG management.

Material Balance in Production Activities
Kaneka Group is working to reduce environmental
impacts by aggregating the status of energy andresource inputs and material outputs through emissions and products to grasp production activity volume, targeting Kaneka and Group companies within
Material Balance in Production Activities (FY 2018)

INPUT

Energy(Crude oil
equivalents)

1,153,000
261,000 tons
445,000

Kaneka Group companies in Japan 46 Group Companies outside Japan 15

1,097,000
167,000 ton-CO
305,000

NOX

825.7
41.9 tons
79.7

Chemical
oxygendemand241.4
7.3 tons
151.1

SOX

74.5
35.0 tons
0.9

21.6
3.5 million m
9.7

3

PRTR Law
designatedsubstances

82.2
101.4 tons–

Final
landfill

2.2
875 tons
4,684

2

Biodiversity
Considering the impacts of our businesses on ecosystems, we at Kaneka strive to develop technologies,
materials and products that have less environmental
impacts, as well as to mitigate environmental impactsof our production.
As part of our corporate social responsibility
efforts, we also collaborate with stakeholders outside
the company in biodiversity conservation activities.
Since 2012, we have been involved in the Kaneka
Forestry for the Future project aimed at conserving a private forest in Taka Town, Hyogo Prefecture.
Employees at the Takasago Manufacturing Site thinout the forest in spring and autumn for more efficient
CO2 absorption. The carbon sink since the start of the41

Kaneka Integrated Report 2019

SpecialFeatureBusiness
Foundation

AppendicesSettsu-no-mori Kaneka Biotope(Osaka Manufacturing Site)

Walnut School(Shiga Manufacturing Site)

Eco-Friendly Products
Kaneka Group is engaged in various environmental
initiatives. Focusing on eco-friendly management fromfiscal 2017, we will define, enhance, and expand ourEnergy Storage

Energy Saving

eco-friendly products*.
* Products that can contribute to reducing global environmental impacts at thestages of customer use, disposal and recycling, compared to conventional
products

Energy Saving

Waste Reduction

Chemical Pollution
Prevention

and outside Japan.
In fiscal 2018, while the inputs remained unchanged
from the previous fiscal year, the outputs showed adecrease of NOx by 41.1 tons (4.1%) and of final landfill
waste by 476.7 tons (7.8%).

CO2437,000
79,000 kiloliters
170,000

Kaneka Forestry for the Future(Takasago Manufacturing Site)

Energy Creation

Major OUTPUT

Water

Management
Strategies

For details, see our website.
https://www.kaneka.co.jp/en/environment/esg/env/

Basic Policy

Main rawmaterials

Top Message

project amounts to 1.93 tons-CO2.
Since 2012, we have operated the Settsu-no-moriKaneka Biotope on the premises of the Osaka Manufacturing Site in collaboration with the Settsu Firefly
Society, to create a firefly habitat in Settsu City. When
fireflies appear, we hold a firefly viewing gathering,
inviting local residents.
Employees at the Shiga Manufacturing Site havejoined the Walnut School’s efforts to conserve theKonooka Biotope, a precious natural environment of
Lake Biwa, as a steering committee member. We
learn the importance of natural environment, interacting with seasonal creatures and nature together withlocal residents.

Product nameProduct nameProduct nameProduct nameProduct nameProduct name

VISOLA
SoltileX
GRANSOLA

Residential electricity
storage systems

Kanepearl

EperanPHBH

KANEKA Surfactin

Intended use

Intended use

Intended use

Intended use

Intended use

Intended use

Residential stationary
batteries

Residential/
automotive foams

Automotive parts
Package cushioning
materials

Biodegradable
Polymer

Biosurfactant,
Cleaning agents

Solar power
generation systems
Reason for environmental
contribution
Creating energy withhouses equipped with thisproduct

Reason for environmental
contribution
Storing energy by houses
equipped with this productReason for environmental
contribution
Saving energy as
insulation and lightweightresidential/automotive
materials

Reason for environmental
contribution
Saving energy as lightweight automotive parts(Packaging materials,
garbage bags, foams)

Reason for environmental
contribution
A naturally derived andbiodegradable polymer
that has little environmental impact when discarded

Reason for environmental
contribution
A naturally derived andbiodegradable material
friendly to the environment

TOPICS

Development of T-Green Multi Solar, an exterior system that generates electricity utilizing
the outer wall and window surfaces of buildings
We have developed, in partnership with Taisei Corporation, the exterior system “T-Green Multi Solar,” which
generates electricity through photovoltaic laminates integrated into wall and window surfaces of buildings.
With high efficiency in generating electricity, its multi-functionality (providing natural light, high visible lighttransmission, heat shielding and thermal insulation), and flexibility in building design, the system also functions as an independent emergency power source during times of disaster.
I. Solid type (Wall)
We will actively propose this system as an energy-creation
technology towards realization of urban-type ZEBs (Zero Energy
II. See through type
(Window)
Buildings) to companies engaged in environmental management, companies reinforcing their BCPs, public facilities acting
as bases during disasters, and condominium residences aiming
to strengthen their LCP (Life Continuity Performance).
* “T-Green” is a registered trademark of Taisei Corporation.

Sample of utilization (The exterior of a smallto medium-sized building)

Kaneka Integrated Report 201942

Management
Philosophy

Business Foundation

Top Message

Management
Strategies

SpecialFeatureSafety / Quality

Environment
Climate Change

Pollution Control and Waste Reduction

We are undertaking efforts to address climate change,
with the Earth Environment Subcommittee established under the ESG Committee. We are working topromote energy-efficient use to reduce CO2 emissions
through various measures, for example by utilizing ourown environmental capital investment program.
We also use carbon-Life Cycle Analysis (cLCA) to
calculate CO2 emission reduction benefits by quantitatively assessing CO2 emissions throughout productlifecycle, making comparisons with similar products.
We also calculate indirect greenhouse gas (GHG)
emissions (Scope 3) associated with our businessactivities through supply chains.
The energy-origin CO2 emission intensity index*1
for all parent Manufacturing Sites in fiscal 2018
was 91.4, achieving our fiscal 2020 target of 93.2 inadvance.
Our greenhouse gas (GHG) emissions*2 decreased
1.3% from the previous year to 1,097,000 metric tonsof CO2, mainly through reducing the CO2 emission
coefficient of electricity.
We will continue to streamline our production processes through innovation to reduce CO2 emissions.

GHG Emissions and Energy-origin
CO2 Emission Intensity Index

(Baseline year: 2013)

Kaneka engages in production activities in compliancewith the standards specified in the Air Pollution Control Act and the Water Pollution Control Act as well as
the criteria included in agreements made with local
governments.
We will continue to comply with these standards
and reduce the emission of volatile organic compounds(VOC) and chemical substances subject to the Pollutant
Release and Transfer Register (PRTR) Act, including six
toxic air pollutants set independently by us.
Since waste reduction leads to maintaining andimproving the global environment through resourcesavings, cost cutting, and CO2 emission reduction,
Kaneka Group promotes the 3Rs (Reduce, Reuse, andRecycle) company-wide, and has achieved zero emissions*3 for 13 years consecutively. We also facilitatecontinuous improvement activities through process
analysis using Material Flow Cost Accounting (MFCA).
*3 Zero emission defined by Kaneka: The final landfill waste must be less than
0.5% of the generated waste.

Occupational Safety, Process Safety and Disaster Prevention
Placing the top priority for management on safety,
we have established the Basic Policy on Safety, underwhich all employees as well as all persons working at
the Kaneka Group and our partner companies aim forno accidents and no disasters.
To share the importance of safety, members of top
management inspect plants to check the on-site situation and create an opportunity to talk with employees.
Through our safety-related efforts, the actual
safety situation is evaluated by the Safety and Human
Health Subcommittee to clarify important mattersrelated to safety that should be addressed in thefollowing fiscal year, which are finally decided by the
ESG Committee.
Key challenges worked on in fiscal 2018 were:(1) promoting establishment of safety efforts on a
global scale, (2) enhancing awareness of danger andrisk identification capabilities, (3) familiarizing theoperation of company-wide risk management, and(4) creating a corporate culture where employees
enjoy good health and feel motivated.
We will work to achieve no-accident and no-disaster
operations by determining the real causes of individual
accidents and disasters, making employees thoroughly
aware of basic safety actions, implementing risk
assessment, instructing employees to make preoperativerisk predictions, and sharing information on accidents
and disasters.

Efforts to Ensure Zero Accidents
In 2018, 12 occupational accidents occurred in the
Kaneka Group, of which seven resulted in lost work
time, and five did not. Although occupational accidents have been decreasing for the past five years,
we have promoted safety activities in compliancewith the Zero Accident Principles to boost personalsafety awareness. The accident frequency rate has
decreased throughout the Kaneka Group due toreducing the number of occupational accidents at
Group companies within and outside Japan. Kaneka’s
accident frequency and severity rates have reachedzero. Group companies that achieve good safety
performance are commended by the President basedon the internal standards. By sharing excellent safety
activity examples, we aim to raise safety awarenessto achieve zero accidents.
Accidents Resulting/Not Resulting in Lost Time■ Lost time at Kaneka ■ No lost time at Kaneka■ Lost time at group companies ■ No lost time at group companies(Number)

25
20

GHG emissions (10,000 tons-CO2)

5

110

140

100

118.1
96.2

114.8

110.0

95.2

111.1

●S
 afety forms our management foundation,

109.7

100
93.4

80

91.5

91.4

90
60
40
20
0

23.4
16.4

2014

25.0
14.9

2015

25.5
15.3

2016

28.7
16.8

2017

Basic Safety Policies

30.5
16.7

and is the basis of all corporate activities.

We take action with priority given to ensuring safety inall activities in the company.
●S afety is the foundation of local andworldwide communities’ confidence in Kaneka.
We do our best to develop their trust.

80

2018 (Fiscal year) 70*1 A ratio of energy-origin CO2 emissions per unit of output of a product,
which is indexed against the baseline year of fiscal 2013 as 100.
*2 G
 HG emissions, calculated in accordance with the Act on Promotion of
Global Warming Countermeasures, are the total amount of energy-origin
CO2 emissions, non-energy origin CO2 emissions, and the CO2 equivalent ofmethane and N2O emissions.

●S afety is based on our belief that

“All accidents can be prevented.”

We always move forward without being satisfied withlukewarm results.
●S afety is the responsibility of every employeein accordance with his/her duties.

We fulfill our responsibilities by mutually clarifying theduties we have assumed.
●S afety must be maintained continuously.

We ensure safety through steady efforts on a daily
basis.

76

15
10

CO2 emission intensity index

Appendices

For details, see our website.
https://www.kaneka.co.jp/en/esg/social/safety-quality/■ Kaneka ■ Group companies in Japan ■ Group companies outside Japan
CO2 emission intensity index for all parent Manufacturing Sites (right scale)

120

Business
Foundation

4

9

0

1

6

5

2
1

2014

2015

7

2

2

5

3

2

2016

2017

5
6
0

0

1

2018

(Year)The number of occupational accidents includes those among employees at
Kaneka and partner companies working in the Kaneka Group.

Accident Frequency Rate and Accident Severity RateArea

All Kaneka
Group

KanekaGroup Companies inJapan and Overseas

Year

2017

2018

2017

2018

2017

2018

Accident
Frequency
Rate

0.31

0.23

0.00

0.00

0.47

0.36

Accident
Severity
Rate

0.01

0.02

0.00

0.00

0.01

0.03

Accident Frequency Rate: An index that shows the frequency of occupational
accidents that caused death and/or injury by indicating the number of casualties
per total 1 million actual working hours
Accident Severity Rate: An index that shows the level of severity of occupational
accidents by indicating the number of lost work days per total 1,000 working hours
Both rates are calculated targeting employees at Kaneka and Group companies.

43

Kaneka Integrated Report 2019

Kaneka Integrated Report 201944

Management
Philosophy

Business Foundation

Top Message

Management
Strategies

SpecialFeatureBusiness
Foundation

Appendices

Safety / Quality
Product Responsibility

Implementation of Disaster Drills
Disaster drills are conducted annually in cooperation
with local governments at all parent Manufacturing
Sites to improve disaster coping skills in case of
emergency situations.
In fiscal 2018, we implemented comprehensive
disaster drills based on a scenario of a large-scale
earthquake followed by a fire caused by hazardous
material leakage.

The Product Safety Subcommittee under the ESG
Committee and its implementation bodies, namely the
Product Safety Review Conference and Quality Management Conference, are responsible for all mattersrelating to product safety and quality assurance within
the Kaneka Group.

Comprehensive disaster drill held in cooperation withthe local government

Comprehensive Disaster Drills
Manufacturing Site

Date

No. ofParticipants

Takasago
Manufacturing Site

December
14, 2018

2,079

The Manufacturing Site held a joint firefighting drill with the Takasago
City Fire Department based on the scenario of an earthquake resulting ina fire caused by combustible gas leakage.

Osaka
Manufacturing Site

October25, 2018

1,101

The Manufacturing Site held a joint firefighting drill with the Settsu City
Fire Department based on the scenario of an earthquake resulting in a firecaused by combustible gas leakage.

Shiga
Manufacturing Site

November
14, 2018

479

The Manufacturing Site held a firefighting drill based on the scenario ofan earthquake resulting in a fire in a production building.

October
18, 2018

130

The Manufacturing Site held a firefighting drill based on the scenario ofan earthquake resulting in a fire caused by high-pressure gas leakage(West area).

November17, 2018

230

The Manufacturing Site held a damage expansion prevention drill with theEast Industrial Complex Joint Facility Team on the scenario of an earthquake resulting in high-pressure gas leakage (East area).

KashimaManufacturing Site

Details

Mental Health Care
Mental health care activity is necessary to maintainemployees’ mental health. In addition to providing care to those with high stress levels, identified
through stress checks (which were introduced in2016), we continue efforts to improve the workplaceenvironment based on the stress check results. Suchefforts involve conducting stress check group analysis
for each workplace, identifying problems based on theanalysis results, and working to solve the identified
problems.
We also provide opportunities to help employees
relieve stress, including a seminar on sleep.

45

Kaneka Integrated Report 2019

Quality Management
We at the Kaneka Group strive to benefit society andsatisfy our customers, through providing a stablesupply of safe and reliable products. To that end, we
undertake quality management activities to ensure
the safety and quality of our products at all stages ofdesign, development, manufacturing and sales.
In fiscal 2018, related activities included the following:● We checked product inspection implementation at

all parent Manufacturing Sites and found no serious
compliance violations.
● We held four Quality Management conferences,inviting persons in charge of quality managementin each business division, to instill the policy andinstructions of the Product Safety Subcommittee,
exchange views, and share information on productquality.
● We undertook a range of activities to build thecapacity of our employees, including through outside seminars and in-house lectures by external
experts.

Product Safety Review Conference

Seminar on how to have good quality sleep

Due to expanded business operations and diversified activities of the Group, we need to conduct anincreasing number of reviews of our new services andproducts targeted at general consumers.
To respond to emerging opportunities in a timely
and speedy manner, in fiscal 2018 the Product Safety
Review Conference and its administration office carried out related pre-consultations (hearings).

Chemical Substance Management
Internationally, regulatory systems are becoming
more stringent in order to achieve appropriate management of chemical substances related to consumer
products. We strictly follow Japanese and international laws and regulations, and also actively offer
information for the proper handling of our products,
through displaying the Globally Harmonized Systemof Classification and Labelling of Chemicals (GHS*)
labels and providing a safety data sheet for products.
* GHS: A worldwide system for classifying and labelling chemicals according
to their hazardous properties

Audits and Inspections
Companies within the Kaneka Group regularly
undergo reviews and audits by external organizations,based on established standards and criteria such as
the ISO 9001 standards.
In addition, we are working to improve our performance through ESG safety and quality inspections
and internal auditing.
In fiscal 2018, related activities included the following:● We conducted an inspection with external experts inthe fields of functional food and food, electrical andelectronic materials, and high-performance resin.
● We continued to clarify the strengths and weaknesses of our product quality through quantitativeevaluation and conducted an audit at all Group
companies in Japan through self-inspection using
an audit checklist.
● We continued to develop and train internal auditors
to further improve internal audit capabilities.
Implementation of internal audits led to enhancing theself-inspection and improvement capabilities of eachGroup company.
We will optimize the quality management systemwith the Product Safety Subcommittee serving asa center and through the improvement of frontline
execution.

Kaneka Integrated Report 201946

Management
Philosophy

Appendices

Top Message

Management
Strategies

SpecialFeatureBusiness
Foundation

Appendices

Consolidated Financial Statements
Consolidated Balance Sheets
KANEKA CORPORATION AND CONSOLIDATED SUBSIDIARIESMarch 31, 2019 and 2018

AssetsMillions of yen

Thousands of
U.S. dollars

2018

2019

2019

Current assets:
Cash and cash equivalents

Liabilities and net assets

Millions of yen

Thousands of
U.S. dollars

2018

2019

2019

Current liabilities:¥

39,970¥47,414$360,123

Notes and accounts receivable - trade147,993

142,195

1,333,391

Inventories

112,434

104,215

1,013,010

1,722

1,735

15,515

Short-term loans receivable from unconsolidated subsidiaries and affiliates

Short-term loans payable¥

63,982¥50,356$576,466

Current portion of long-term loans payable

3,687

9,298

33,219Current portion of bonds payable

10,000－90,098Notes and accounts payable:

Other current assets

13,365

11,684120,415Trade84,797

84,914

764,006

Allowance for doubtful accounts(1,238)(973)(11,154)

Construction

11,545

8,373

104,018

Total current assets

314,246306,270

2,831,300

Other

18,682

18,971

168,321

Property, plant and equipment:

Income taxes payable

2,865

4,481

25,813

Accrued expenses

13,764

13,514

124,011

Other current liabilities

4,590

4,975

41,357

Total current liabilities

213,912

194,882

1,927,309

Land

31,35532,545282,503

Buildings and structures

199,621

194,565

1,798,549

Machinery, equipment and vehicles

577,115564,428

5,199,703－

10,000－Construction in progress

26,33912,712

237,310Long-term loans payable

45,12345,848406,550

Net defined benefit liability

34,98537,325315,209

Other

Noncurrent liabilities:
Bonds payable

3,697

3,728

33,309838,127

807,978

7,551,374

Provision for directors' retirement benefits

Less accumulated depreciation

586,205

570,5035,281,602

Deferred tax liabilities

Property, plant and equipment, net

251,922

237,475

2,269,772

Other noncurrent liabilities

2,438

3,389

21,965

Total noncurrent liabilities

84,94998,300765,375

33,04733,047

297,748

266

297

2,397

2,137

1,441

19,254

Contingent liabilities
Intangible assets:

9,892

13,425

120,957
Net assets
Shareholders’ equity:
Capital stock

Investments and other assets:

Authorized—150,000,000 shares

Investment securities:
Unconsolidated subsidiaries and affiliates

4,115

5,514

37,075

Other

57,64063,857519,326

Long-term loans receivable

1,100

1,229

9,911

Deferred tax assets

6,864

5,669

61,843

Other

10,537

10,14594,938

(261)

(270)

(2,352)

Allowance for doubtful accounts
Total investments and other assets

79,995¥659,588¥

86,144

720,741

639,781$ 5,942,770

The translation of the Japanese yen amounts into U.S. dollar amounts is included solely for the convenience of readers outside Japan,
using the prevailing exchange rate on March 31, 2019, which was ¥110.99 to U.S. $1.00.

Issued— 68,000,000 shares

Capital surplus

32,78432,799295,378

Retained earnings

272,944

264,964

2,459,176(11,602)(18,684)(104,532)

327,173

312,126

2,947,770

19,64324,731

176,980

(110)

(109)

(991)

Less treasury stock, at cost—2,778,423 shares in 2019
4,456,938 shares in 2018
Total shareholders’ equity
Accumulated other comprehensive income:
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustments(4,008)(3,035)(36,111)

Remeasurements of defined benefit plans(5,706)(7,527)(51,410)

Total accumulated other comprehensive income

9,819

14,06088,468

432

301

3,892

23,303

20,112

209,956

Subscription rights to shares
Non-controlling interests
Total net assets

346,599

360,727¥

659,588¥639,781

3,250,086$

5,942,770

The translation of the Japanese yen amounts into U.S. dollar amounts is included solely for the convenience of readers outside Japan,
using the prevailing exchange rate on March 31, 2019, which was ¥110.99 to U.S. $1.00.

47

Kaneka Integrated Report 2019

Kaneka Integrated Report 201948

Management
Philosophy

Appendices

Consolidated Statements of Income

Management
Strategies

SpecialFeatureBusiness
Foundation

Appendices

Consolidated Statements of Changes in Net Assets

KANEKA CORPORATION AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2019, 2018 and 2017

Net sales

Top Message

Millions of yen

Thousands of
U.S. dollars

2019

2018

2017

2019

¥ 621,044¥ 596,143¥ 548,222$ 5,595,495

KANEKA CORPORATION AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2019, 2018 and 2017

Thousands of
U.S. dollars

2017

2019

2018

2019

Shareholders’ equity

Cost of sales

446,255

426,960

385,3624,020,677

Capital stock

Gross profit

174,789

169,183

162,860

1,574,818

Selling, general and administrative expenses

138,747

132,294

129,695

1,250,086

Balance at beginning of year

Operating income

36,04236,88933,165

324,732¥

33,047¥33,047¥33,047$

297,748

Changes of items during the period
Total changes of items during the period
Balance at the end of current period

Other income (expenses):Millions of yen

Interest and dividend income

1,921

1,602

1,783

17,308

Capital surplus

Interest expenses(2,014)(1,692)(1,428)(18,146)

Balance at beginning of year

Gain on sales of investment securities

1,515

－

－

－

－

－

33,04733,04733,047

297,748

32,79932,81334,936295,513

1,602

13,650Changes of items during the period

428

－

626

3,856

Change in treasury shares of parent arising from transactions(2,521)(1,745)(2,534)(22,714)with non-controlling interests

(15)

(14)

(2,123)(135)

Foreign exchange gains (losses), net

(334)

455

(2,270)(3,009)Total changes of items during the period

(15)

(14)

(2,123)(135)

Equity in earnings of affiliates, net

30

147

118

270

－

－

32,79932,813295,378

954－

32,784Gain on negative goodwill
Litigation expenses(1,684)(1,088)(963)(15,173)

Restructuring charges(1,851)(1,782)－(16,677)

264,964

248,524

234,378

2,387,278

Gain on step acquisitions

444

1,430

Environmental expenses

－

(567)

(5,906)(5,934)(6,329)(53,212)

－

823

－

－

22,23821,572

20,485200,360

(0)

(21)

(10)

(0)

(8,352)－－(75,250)

Gain on sales of property, plant and equipment
Loss on disposal of property, plant and equipment－

Provision of allowance for doubtful accounts

－

4,000

－

(638)
－

－

－

－

－

Settlement received

1,052

Gain on contribution of securities to retirement benefit trust

1,608

－

－

14,488Other, net(2,727)(2,880)(1,407)(24,569)

Income before income taxes and non-controlling interests

31,90931,08528,692

287,494

7,894

8,372

7,089

71,124

9,478

Income taxes
Current
Deferred
Net income
Net income attributable to non-controlling interests
Net income attributable to owners of parent

40

(83)

88

360

23,975

22,796

21,515

216,010

1,224

1,737
¥

22,238¥21,572

1,030¥

20,485$

Net income attributable to owners of parent
Disposal of treasury stock
Cancellation of treasury stock
Total changes of items during the period
Balance at the end of current period

7,980

16,44014,146

71,898272,944

264,964

248,524

2,459,176(18,684)(16,753)(15,559)(168,340)(15,929)

Treasury stock
Balance at beginning of year
Changes of items during the period
Purchase of treasury stock(1,768)(2,619)(1,812)

Disposal of treasury stock

498

688

618

4,487

8,352

－

－

75,250Cancellation of treasury stock
Total changes of items during the period
Balance at the end of current period

7,082(1,931)(1,194)63,808(11,602)(18,684)(16,753)(104,532)

24,731

22,33817,451

222,822

Valuation difference on available-for-sale securities
Thousands of
U.S. dollars

Millions of yen
2018

2019

¥

23,975¥

22,7962017¥

21,515

2019$

216,010

Other comprehensive income:
Valuation difference on available-for-sale securities

2,440(5,164)

Deferred gains or losses on hedges

5,047(46,527)

(2)

(47)

(9)

(18)

Foreign currency translation adjustments(1,178)2,116(4,268)(10,613)

Remeasurements of defined benefit plans

1,800

2,154

1,248

16,218

Share of other comprehensive income of associates accounted
for using equity method
Total other comprehensive income

(5)

3

(2)

(45)

(4,549)

6,666

2,016

(40,985)¥

19,426¥

29,462¥

23,531$

175,025¥

17,997¥

27,959¥22,597$

162,150

Comprehensive income attributable to:Comprehensive income attributable to non-controlling interests

Dividends from surplus - ¥64.00 per share
Change of scope of consolidation

Accumulated other comprehensive income

KANEKA CORPORATION AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2019, 2018 and 2017

Comprehensive income attributable to owners of parent

Balance at beginning of year
Changes of items during the period

15,650Consolidated Statements of Comprehensive Income

Comprehensive income

Retained earnings

200,360

The translation of the Japanese yen amounts into U.S. dollar amounts is included solely for the convenience of readers outside Japan,
using the prevailing exchange rate on March 31, 2019, which was ¥110.99 to U.S. $1.00.

Net income

Balance at the end of current period

1,429

1,503

934

Balance at beginning of year
Changes of items during the period
Net changes of items other than shareholders' equity(5,088)

2,393

4,887

(45,842)

Total changes of items during the period(5,088)

2,393

4,887

(45,842)

Balance at the end of current period

19,64324,731

22,338

176,980

(109)

(61)

(52)

(982)

Deferred gains or losses on hedges
Balance at beginning of year
Changes of items during the period
Net changes of items other than shareholders' equity

(1)

(48)

(9)

(9)

Total changes of items during the period

(1)

(48)

(9)

(9)

(110)

(109)

(61)

(991)

Balance at the end of current period

Continued on the following page.

12,875The translation of the Japanese yen amounts into U.S. dollar amounts is included solely for the convenience of readers outside Japan,
using the prevailing exchange rate on March 31, 2019, which was ¥110.99 to U.S. $1.00.

49

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Management
Philosophy

Appendices

Top Message

Management
Strategies

SpecialFeatureBusiness
Foundation

Appendices

Consolidated Statements of Cash Flows

2019

2018

Millions of yen

Thousands of
U.S. dollars

2017

2019

Foreign currency translation adjustments
Balance at beginning of year

(3,035)(5,105)(1,082)(27,345)

Changes of items during the period
Net changes of items other than shareholders' equity

(973)

2,070

(4,023)(8,766)

Total changes of items during the period

(973)

2,070

(4,023)(8,766)(4,008)(3,035)(5,105)(36,111)(7,527)(9,653)(10,910)(67,817)

Balance at the end of current period
Remeasurements of defined benefit plans
Balance at beginning of year
Changes of items during the period
Net changes of items other than shareholders' equity

1,821

2,126

1,257

16,407

Total changes of items during the period

1,821

2,126

1,257

16,407

Balance at the end of current period(5,706)(7,527)(9,653)(51,410)

301

271

228

2,712

Subscription rights to shares
Balance at beginning of year
Changes of items during the period
Net changes of items other than shareholders' equity

131

30

43

1,180

Total changes of items during the period

131

30

43

1,180

Balance at the end of current period

432

301

271

3,892

20,112

16,13016,285

181,206

3,191

3,982

(155)

28,750Non-controlling interests
Balance at beginning of year
Changes of items during the period
Net changes of items other than shareholders' equity
Total changes of items during the period

3,191

3,982

(155)

28,750

Balance at the end of current period

23,303

20,112

16,130209,956

346,599

321,551

308,722

3,122,795(5,906)(5,934)(6,329)(53,212)

－

823

－

－

Total net assets
Balance at beginning of year
Changes of items during the period
Dividends from surplus- ¥64.00 per share
Change of scope of consolidation
Net income attributable to owners of parent

22,23821,572

20,485200,360

Purchase of treasury stock(1,768)(2,619)(1,812)(15,929)

Disposal of treasury stock

498

667

608

4,487

Cancellation of treasury stock

－

－

－

－

(15)

(14)

(2,123)(135)

Change in treasury shares of parent arising from transactions
with non-controlling interests
Net changes of items other than shareholders' equity
Total changes of items during the period
Balance at the end of current period(919)

10,5532,000(8,280)14,12825,04812,829127,291¥ 360,727¥ 346,599¥ 321,551$ 3,250,086

The translation of the Japanese yen amounts into U.S. dollar amounts is included solely for the convenience of readers outside Japan,
using the prevailing exchange rate on March 31, 2019, which was ¥110.99 to U.S. $1.00.

KANEKA CORPORATION AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2019, 2018 and 2017

Thousands of
U.S. dollars

2017

2019

2018

2019

Cash flows from operating activities
Income before income taxes and non-controlling interests¥ 31,909
Depreciation and amortization
32,151Gain on step acquisitions(444)
Gain on negative goodwill－
Restructuring charges
1,851
Settlement received(1,052)Gain on contribution of securities to retirement benefit trust(1,608)
Increase (decrease) in net defined benefit liability
2,244
Increase (decrease) in allowance for doubtful accounts(12)Interest and dividend income(1,921)
Interest expenses
2,014
Loss (gain) on disposal of property, plant and equipment
445
Gain on sales of investment securities(1,515)Equity in earnings of affiliates, net(30)
Decrease (increase) in notes and accounts receivable-trade(5,330)Decrease (increase) in inventories(9,869)
Increase (decrease) in notes and accounts payable-trade(141)
Others142
Subtotal
48,834
Interest and dividend income received
1,997Interest expenses paid
(2,009)Settlement package received
1,052
Income taxes paid
(8,761)
Net cash provided by operating activities
41,113
Cash flows from investing activities
Purchase of property, plant and equipment(43,987)
Proceeds from sales of property, plant and equipment
1,706
Purchase of intangible assets(1,810)Purchase of investment securities(1,607)
Proceeds from sales and distributions of investment securities
1,635
Purchase of shares of subsidiaries resulting in change in scope of consolidation－
Proceeds from purchase of shares of subsidiaries resulting in change
in scope of consolidation
227
Purchase of stocks of subsidiaries and affiliates(1,879)Payments for transfer of business－
Payments of loans receivable(1,221)
Collection of loans receivable
1,162
Others(1,455)
Net cash used in investing activities(47,229)
Cash flows from financing activities
Net increase (decrease) in short-term loans payable
13,648Proceeds from long-term loans payable
3,811
Repayment of long-term loans payable(10,881)
Proceeds from sales and leasebacks－
Repayments of lease obligations(128)
Proceeds from share issuance to non-controlling shareholders
246
Cash dividends paid
(5,906)
Cash dividends paid to non-controlling interests(351)
Purchase of treasury stock(1,768)Proceeds from sales of treasury stock
396
Payments from changes in ownership interests in subsidiaries
that do not result in change in scope of consolidation(22)
Net cash used in financing activities(955)
Effect of exchange rate change on cash and cash equivalents(373)
Net increase (decrease) in cash and cash equivalents(7,444)
Cash and cash equivalents at beginning of period
47,414
Increase in cash and cash equivalents resulting from change of scopeof consolidation－
Cash and cash equivalents at end of period¥ 39,970

Millions of yen¥¥

31,08530,323(1,430)
(954)
1,782
－
－
3,026
639
(1,602)
1,692
531
－
(147)
(12,054)(6,176)
8,568
1,706
56,9891,753(1,681)－(7,310)49,751¥

28,69227,808
－
－
－
－
－
2,516
34
(1,783)
1,428
102(1,602)(118)(4,609)(4,057)7,304
1955,734
1,904(1,405)－(8,113)
48,120$287,494
289,675(4,000)－16,677(9,478)(14,488)
20,218(108)(17,308)
18,146
4,009(13,650)(270)(48,022)(88,918)(1,270)1,279
439,986
17,993(18,101)
9,478(78,935)
370,421(34,113)62(1,406)(1,385)157(1,464)(36,726)
1,093(1,474)
(76)
1,586
(102)

(396,315)
15,371(16,308)(14,479)
14,731
－

780
－
(332)
(934)
896
(1,057)(38,796)

－
－
－
(315)
213
(569)
(36,370)

2,045(16,929)－(11,001)
10,469(13,109)(425,525)

6,702
5,628
(9,169)232(266)－(5,934)(359)(2,618)475(2,859)6,251(5,986)－(171)
54(6,329)(400)(1,812)411

122,966
34,336(98,036)－(1,153)
2,216(53,212)(3,162)(15,929)
3,568

(82)
(5,391)
232
5,796
41,018(2,772)(13,613)(281)(2,144)
43,162(198)(8,604)(3,361)(67,069)
427,192600
47,414¥－41,018$－360,123

The translation of the Japanese yen amounts into U.S. dollar amounts is included solely for the convenience of readers outside Japan,
using the prevailing exchange rate on March 31, 2019, which was ¥110.99 to U.S. $1.00.

51

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Philosophy

AppendicesFinancial Highlights
Net Income Attributable to Owners of Parent / ROE■■ Net income attributable to owners of parent

Operating income(Billions of Yen)

(Billions of Yen)

700
600

552.2

555.2

400
300

596.1

621.0

548.2

60

36.9

36.0

40

33.2

7.1

25

21.0

(Baseline year: 2013)

ROE (Return on equity)
(%)

6.9
20.5

18.0

20

GHG Emissions and Energy-origin CO2 Emission Intensity Index

6.8

6.7

21.6

22.2

24.6

GHG emissions (10,000 tons-CO2)

6.0

15

4.5

100

10
2014

2015

2016

2017

2018 (Fiscal year) 0

3.0■ Asia ■ North America ■ Europe ■ Other

5

0

1.5

2015

2014

(%)

300
38.2

200

39.2

211.1

217.4

25.1

27.1

54.6

55.7

37.1
203.3
23.4

39.7
236.4
22.9
58.8

51.1
44.7

43.5

43.6

40.2
249.7
26.0
59.3

45.0

2016

2017

2018 (Fiscal year) 0

Shareholders’ equity ratio

400

(%)

53.5

50.6
308.7

300

51.5
321.6

346.6
51.0

86.2

2014

2015

2016

■■ R&D expenses

50.0

30

26.8
23.7

115.7

2017

2018 (Fiscal year) 0

30.0
20.0

0

2014

2015

29.0

(%)

4.7

(Billions of Yen)

6.0

200

2016

40
20

2017

22

118.3

3.0

138.6

50

Kaneka Integrated Report 2019

2017

2015

2016

30.5

28.7
16.8

16.7

80

2018 (Fiscal year) 70

20172018 (Fiscal year) 0

0

2014

2015

2016

63

0

43

42

41

37

35

20

12 12
7

0

11
4

6

(%)

(Persons)

25.0

25

21.5

10.0

10

5.0

5

2017

2018 (Fiscal year) 0

0

6

7

4

2016

16 18
8

5

2017

6

2018 (Fiscal year)

22.0

21.9

21.5

21.6

20.0

3,690
2,829

15.0
2,282
1,669 1,702 1,554 1,579 1,758

2000（Base year）

2005

2010

（Target）

2010

2014

2015

2016

2017

9.7

10.0

7.7

7.1

6.5

6.1

5.0

3.8

3.3

3.6

3.8

3.5

0

2014

2015

2016

2017

2018

2018 (Fiscal year)(Fiscal year)

Employment Rate of Persons with Disabilities
Legally mandated employment rate

(%)

22

2.5
2.0
2.0

20

15

15 15

(Million m3)

20

15.0

14 14
6

2015

2014

1996

14

37

Water Consumption

Number of Female Executives

20.0

68

63

60

5,436

2,000

100

1.0
2016

2014

25.5
15.3

25.0
14.9

68

66

1.90

15

2.0

2015

23.4
16.4

123.3

12

2014

71

40

3,000

2018 (Fiscal year) 0

155.0

4.0

80

25.0

1,000

23

5.0
131.2

(Thousands of tons)

100■■ Employment rate of persons with disabilities

18

6

91.4

■ Amount of waste generated by Kaneka ■ Amount recycled by Kaneka■ Amount of waste generated by group companies in Japan■ Amount recycled by group companies in Japan■ Amount of waste generated by group companies outside Japan■ Amount recycled by group companies outside Japan■ Kaneka ■ Group companies in Japan ■ Group companies outside Japan

6,000

10.0

25

24

150

4.3

91.5

New product sales ratio

21
4.7

24

Appendices

Waste Generated and Recycled

5,000

New Product Sales / New Product Sales Ratio

28.0

93.4

100

110.0

5.2

4.8

Business
Foundation

90

40.0

■■ New product sales

28.5

109.7

100

95.2

80

4,000

200

R&D expenses ratio(Billions of Yen)

53

51.1

30.0

R&D Expenses / R&D Expenses Ratio

0

360.7

60.0

15.0
91.0

96.2

111.1

110.0

VOC Discharge: Voluntary Plan and Performance

42.7

87.8

114.8

(Tons)(Billions of Yen)

309.2

48.8

100

0

■■ Net assets

Overseas sales ratio

118.1

60

Net Assets / Shareholders’ Equity Ratio(Billions of Yen)

110

100

0

Overseas Sales / Overseas Sales Ratio

CO2 emission intensity index

140
120

10
20

■ Kaneka ■ Group companies in Japan ■ Group companies outside Japan
CO2 emission intensity index for all parent Manufacturing Sites (right scale)

7.5

30

200

0

(Billions of Yen)

6.3
50

38.2

500

SpecialFeatureNonfinancial Highlights

Net Sales / Operating Income■■ Net sales

Management
Strategies

Top Message

2.0

2.06

2.19

2.0

2.0

2016

2017

2.2
2.17

1.83

1.5

13
9

1.0

0.5

2014

2015

2016

2017

2018 (Fiscal year)

0

2014

2015

2018 (Fiscal year)

Kaneka Integrated Report 201954

Management
Philosophy

Appendices

Top Message

Corporate Profile

Global Network

Corporate Profile

EUROPE / AFRICAName

KANEKA CORPORATION

OfficesTokyo Head Office
1-12-32, Akasaka, Minato-ku, Tokyo 107-6028,
Japan
Tel: +81-3-5574-8000 Fax: +81-3-5574-8121
Osaka Head Office2-3-18, Nakanoshima, Kita-ku, Osaka 530-8288,
Japan
Tel: +81-6-6226-5050 Fax: +81-6-6226-5037

Date of
Establishment

September 1, 1949

Paid-in Capital

33,046 million yen (As of March 31, 2019)

Net Sales

621.043 billion yen(Fiscal year ended March 2019)(Including consolidated subsidiaries)

Number of
employees(Including consolidated subsidiaries)

10,571(As of March 31, 2019)

Facilities inJapan

Sales Office
Nagoya (Aichi Prefecture)
Manufacturing Site
Takasago (Hyogo Prefecture)
Osaka (Osaka Prefecture)
Shiga (Shiga Prefecture)
Kashima (Ibaraki Prefecture)
Material Solutions New Research Engine
BDP Technology Laboratories
Biotechnology Research Laboratories
Regenerative Medicine and Cell Therapy
Laboratories
Photovoltaic & Thin Film Device ResearchLaboratories
Process Development Research Laboratories
Process Technology Laboratories

AffiliatedCompanies

109 Subsidiaries (Including 42 (in Japan) and41 (outside Japan) consolidated subsidiaries)

SpecialFeature● Kaneka Europe Holding N.V.

● Eurogentec Ltd.

● Kaneka Belgium N.V.

● Eurogentec France S.A.S.U.

● Kaneka Pharma Europe N.V.

● Eurogentec Nederland B.V.

● Kaneka Eurogentec S.A.

● AB-Biotics, S.A.

Business
Foundation● Kaneka Modifiers Deutschland GmbH● Kaneka Africa Liaison Office● Eurogentec Deutschland GmbH■ Kaneka’s European Photovoltaics● Eurogentec Proteomics GmbH

Research
Institutes

Management
Strategies

Research Laboratory

Appendices

Kaneka Europe Holding N.V.
Kaneka Belgium N.V.
Kaneka Pharma Europe N.V.

Investor Information (As of March 31, 2019)
CommonStock Traded

Tokyo, Nagoya

Transfer Agent

Mitsubishi UFJ Trust and Banking Corporation,
Osaka Branch
3-6-3, Fushimimachi, Chuo-ku, Osaka 541-8502,
Japan

Accounting
Auditor

KPMG AZSA LLC
Ginsen Bingomachi Bldg., 3-6-5, Kawaramachi,
Chuo-ku, Osaka 541-0048, Japan

Authorized
Capital150,000,000 shares

Issued Shares

68,000,000 shares

Number of
Shareholders

15,484

Shareholder Composition● Overseas Subsidiaries

1.0％■ Overseas R&D Facilities

Financial institutions
34,908,000 shares (79 shareholders)

7.9％

Foreign companies

14.7％

17,007,000 shares (486 shareholders)Number of
Shareholders

15,484

Individuals and others
51.3％

10,022,000 shares (14,628 shareholders)

Other companies

25.0％

5,365,000 shares (249 shareholders)

Financial instruments firms
694,000 shares (42 shareholders)

ASIA / OCEANIA● Kaneka Asia Co., Ltd.

● Asia Cemedine Co., Ltd.

● Kaneka Americas Holding, Inc.

● Kaneka Trading (Shanghai) Co., Ltd.

● Showa Global (Thailand) Co., Ltd.

● Kaneka North America LLC● Kaneka Eperan (Suzhou) Co., Ltd.

● Cemedine (Thailand) Co., Ltd.

● Kaneka Pharma America LLC● HiHua Fiber Co., Ltd.

● Kaneka India Pvt. Ltd.

● Kaneka Aerospace LLC● Kaneka (Foshan) High Performance● PT. Kaneka Foods Indonesia● Anaspec Inc.

● Kaneka Taiwan Corporation● Cemedine North America LLC● Cemedine Shanghai Co., Ltd.

● Taiwan Cemedine Co., Ltd.

● Eurogentec North America Inc.

● Dalian Showa Plastic Co., Ltd.

● Kaneka Korea Corporation● Kaneka South America● Kaneka (Malaysia) Sdn. Bhd.

● Cemedine Philiippines Corporation

Materials Co., Ltd.
* Share numbers are rounded down to the nearest thousand.
Percentages are rounded to the nearest decimal point.

Common Stock Price Range (Tokyo Stock Exchange; Yen)

Representative Ltd.

● Kaneka Eperan Sdn. Bhd.

● Showa Global Ltd.

■ Kaneka US Material Research Center● Kaneka Paste Polymers Sdn. Bhd.

● TGA Pastry Company Pty. Ltd.

■ Kaneka US Innovation Center

Kaneka Asia Co., Ltd.
Kaneka Trading (Shanghai) Co., Ltd.

Kaneka Americas Holding, Inc.
Kaneka North America LLC

Years ended
March 31

2015

2016

2017

2018

2019

High

898

1,278

1,061

1,114

5,620

● Kaneka Apical Malaysia Sdn. Bhd.

Low

558

810

643

815

3,640

● Kaneka MS Malaysia Sdn. Bhd.

* The above figures are stock prices quoted at the Tokyo Stock Exchange (First
Section).
Our shares were consolidated on the basis of one new common share forfive existing common shares as of October 1, 2018.

AMERICA● Kaneka Innovative Fibers Sdn. Bhd.

● Kaneka Singapore Co. (Pte) Ltd.
● Kaneka Pharma Vietnam Co., Ltd.
● Vina Showa Co., Ltd.
● Kaneka (Thailand) Co., Ltd.

55

Kaneka Integrated Report 2019

Kaneka Integrated Report 201956