Contents

SEKISUI KASEI’s Value Creation
1 Management Philosophy/Editorial Policy
3 SEKISUI KASEI’s Accomplishments
5 100th Year Vision
7 CSR Declaration
9 Value Creation Model
11 Earnings Model
13 Financial and Non-Financial Highlights

Goal
Plastics Solution Company Trusted by
Customers around the World

Strategies for Value Creation
15 Message from the President
21 New Mid-Term Management Plan
23 Process for Materiality (Key Management Issues)
25 Business Overview:
25 Industry Segment

We make efforts toward solving

environmental and social issues
through our business

27 Human Life Segment
29 Research & Development Strategy
31 Human Resources Strategy
Foundation of Value Creation
33 SEKISUI KASEI’s ESG
33 Environment
41 Social
45 Governance
49 Directors & Auditors
51 Discussion between Three Outside Directors
Other Information
55 MD&A and Business Risks
59 Consolidated Financial Statements
65 Notes to Consolidated Financial Statements
85 11 Years Summary
87 Our Group Network
88 Company Profile
88 Stock Information

Editorial Policy
To convey the sustainable growth potential of SEKISUI KASEI to all readers, including our stakeholders, from the perspective of ESG, we showcase
corporate information focusing on medium- to long-term value creation.
Scope of the Report
Period covered:	April 1, 2021 – March 31, 2022
(includes activities from April 2022 onwards)
Target organizations:	SEKISUI KASEI Co., Ltd. and SEKISUI KASEI Group
Guidelines Used as Reference• International Integrated Reporting Council (IIRC): International Integrated
Reporting Framework• Ministry of Economy, Trade and Industry: Guidance for Integrated Corporate
Disclosure and Company-Investor Dialogue for Collaborative Value Creation•Ministry of the Environment: Environmental Accounting Guidelines(Y2018 Edition)•Japanese Standards Association: Guidance on Social Responsibility
JISZ26000 (ISO 26000)

Cautionary Note on Forward-looking Statements
Results forecasts, plans, business strategies, awareness and assessments offacts, and other forward-looking statements concerning the Company or theGroup are assumptions that the Company’s management believes to be reasonable based on currently available information. Actual outcomes may differ materially from those expressed in these forward-looking statements due
to various factors. The Company undertakes no obligation to publish revised
forward-looking statements to reflect new events, conditions, or circumstances.

1

Integrated Report 2022 / SEKISUI KASEIManagement
Philosophy

We, SEKISUI KASEI, practice “Zen-in Keiei” based on
respect and mutual trust. We are always innovating in
our aim of “new happiness.”

The founding spirit of“For happiness of people working for the Company”
leads to “new happiness”

Code of Conduct
1. Unite individual efforts to make a strong power.
2. Grow and develop together with customers by creating top quality and service.
3. Contribute to a better environment and an enriched society in perfect harmony among people,
nature, and technology.
4. Make an honest, generous and fresh workplace.
5. Address each and every challenge in creation and innovation to achieve our goals.

Zen-in Keiei
Each and every employee acts in the spirit ofentrepreneurs and industrialists

Publication of Integrated Report 2022
We would like to thank all stakeholders for their valuable input to the Integrated Report. As a leading company in foamed plastics, SEKISUI KASEI offers a variety of products and services that support people’s daily lives.
From our Industry segment, which supports the electronics, mobility, and medical/healthcare sectors, to our
Human Life segment, which supports the food, housing, and energy markets, we contribute to the creation ofsolutions for society by practicing our corporate culture, Zen-in Keiei, while utilizing the material development
and molding technologies we have developed since our founding.
In FY2021, the business environment remained uncertain, not only due to the impact of the COVID-19 pandemic, but also due to the shortage of semiconductors and soaring raw material and fuel prices, as well as thesituation in Ukraine. The Group is also facing a challenging environment, but in order to overcome the current
difficulties and make steady progress toward the future, we have formulated a new mid-term management
plan starting in April 2022 and are moving forward with its initiatives.
This Integrated Report communicates what we are doing to enhance our corporate value and how we aredoing it. Production of the report is treated as a management matter with participation from across the organization. Going forward, we will continue to value dialogue with our stakeholders and work to improve thisreport every year to make it even better. We appreciate your frank opinions and feedback.

Katsumi Sasaki—Publication Officer
Director and Senior Managing Executive Officer
Head of Corporate Strategic Headquarters

Integrated Report 2022 / SEKISUI KASEI2SEKISUI KASEI’s Value Creation

SEKISUI KASEI’s Accomplishments
It has been over 60 years since we became the first company in Japan to manufacture and sell EPS (expandable polystyrene) beads in 1959. As a pioneer in the foaming business, we have provided products in a wide range of fields,
including food packaging, cushioning materials and lightweight automotive components, expanding globally inearnest from 2000 onwards. Currently, we are working to create a sustainable society and achieve corporate growthby executing our new mid-term management plan.

Development of business results
140.0 (Billions of yen)
120.0

1978

100.0

1969
Changed company name tothe current one.

80.0

1973

60.0
40.0
20.0

Listed on the first section both of
the Tokyo Stock Exchange andOsaka Securities Exchange.

Listed on the second
section of the Tokyo
Stock Exchange.

1959
Sekisui Sponge Industries Co., Ltd.
(former company name) established

0

(FY)

1959

1970

Net Sales (left axis)
Whole company (1959-2009)
Net income (right axis)

1980
Industry segment (2010-2021)

Human Life segment (2010-2021)

Note: Non-consolidated results until FY1998, consolidated results from FY1999 onward listed.

History of
Challenges and
Growth1959–1978

1979–1991

Establishment Period

Accelerated Growth

In 1959, Sekisui Sponge Industries Co., Ltd. was

The 1980s was a period characterized by expand-founded with a total of 25 employees. The fol-ing and innovating production facilities. Demandlowing year, we began manufacturing and selling

for ESLEN Sheets rose further for use as foodESLEN Beads, Japan’s first foaming polystyrene

trays and instant noodle containers, going beyond

beads made with domestic technology. In 1962,supermarkets and into convenience stores, which

we developed our own manufacturing method for

were expanding their store network during thisESLEN Sheets which is foamed polystyrene sheet

period. In response to the growing demand, weand after applying for a patent, began production

built a plant in Tenri, Japan, that automated theof these products as well.

entire process of winding, picking, packing, andAs Japan continued on its path of rapid eco-

palletizing. In addition, we pushed for further

nomic growth, we listed on the second section ofplant automation in our plant in the Kanto region

the Osaka Securities Exchange in the year of the

by introducing unmanned forklifts.

Tokyo Olympics and five years after our founding,Subsequently, we implemented labor-saving mea-

thanks to a rapid expansion of our business withsures by proactively investing resources, such asa series of capital increases, production increases,

building the Okayama Plant equipped with a CIM

and sales growth. We subsequently overcame thesystem that centrally manages everything fromfirst oil crisis and the movement to ban EPS foam,

production conditions to logistics data.

and were listed on the First Section of the Tokyo
Stock Exchange in 1978.

3

Integrated Report 2022 / SEKISUI KASEI2007
Sekisui Kasei Europe B.V.
established2006(Billions of yen) 3.5

Sekisui Kasei U.S.A. Inc.
established

2004

3.0

Established Sekisui Kasei Shanghai
International Trading Co., Ltd. andSekisui Kasei Tianjin Co., Ltd.

2.5
2.0
1.5
1.0
0.5
0
-10.0

1990

2000

2010

2021

(FY)

1992–2003

2004–20082009–

Resurgence

Global Expansion

New Challenge

We built up our production and R&D struc-

Since the 1970s, our overseas activities have

To mark our 50th anniversary, we embarked onture by expanding our plants and opening a

focused on technology exports to a widea new journey by formulating our 100th Year

research laboratory, but from 1992 onward,

range of customers, including the US, India,

Vision aimed at achieving further development

the Japanese economy plunged into a major

South Korea, Hong Kong and France.

and growth over the next 50 years.

recession. The economy remained in a severe

After that, in the early 1990s, our foray into

In addition, we are also working to solve envi-

downturn with no signs of a recovery, and weoverseas markets took form. While not yet

ronmental problems on a global scale throughsuffered two consecutive periods of consol-a full-fledged global operation, we began

the effective use and recycling of limited

idated losses starting in 1998. At the time,

establishing sites in Taiwan, Thailand, andresources by making use of the expertise andwe were pursuing business opportunities inother parts of Asia.

technology we have accumulated since oura variety of fields, but it became an urgent

In 2000, we designated our Overseas Strategy

founding.

issue to select and concentrate on certain

as one of our key issues and our products,

We will continue working to create a sustainablebusinesses and to place emphasis on areas

centered on PIOCELAN, were subsequently

society while taking to heart our corporate mes-

that should be prioritized and strengthened.

adopted not only as packaging materials forsage of “Our Planet. Our Tomorrow.”

To get out of the red, we not only reviewed

automobile parts, but also for automobile

our businesses and streamlined our orga-

components such as bumper cores and tibia

nization, but also stepped up R&D in areaspads, which led to the opening of our plants

such as high-functional materials, and werein the US and Europe.

able to reinstate dividend payments in 2000.

Integrated Report 2022 / SEKISUI KASEI

4SEKISUI KASEI’s Value Creation

100th Year Vision

To mark its 50th anniversary, in 2009, SEKISUI KASEI Co., Ltd. formulated SEKISUI KASEIGroup’s 100th Year Vision to serve as a roadmap for further growth and development in
the next half century.

Corporate Goal for Our 100th Year Anniversary (in FY2059)
SEKISUI KASEI Group aims to gain the trust of customers by globally expanding businesses based on plastics and providing solutions.

Situation Goal

Scale Goal
Consolidated Sales

Plastics Solution Company¥500.0 billion or more

Trusted by Customers around the World

Corporate Domains

SEKISUI KASEI Group Solutions

Materials

Technologies

Systems

Plastics based

Technology thatcreates added value

By systemizing, know-how
and providing information

Industry: Contributing to the growth and development of the industry by proposing business solutions to client companies
Lifestyle Transformation: Contributing to the transformation of people’s lifestyles
Global Environment: Simultaneously aiming to improve the global environment

5Integrated Report 2022 / SEKISUI KASEIBusiness Vision—Develop Globally as a “Plastics Solution Company” in Three Business Segments
SEKISUI KASEI Group is targeting net sales of over ¥250 billion and ¥200 billion in the Industry and Human Life segments, respectively, and also will grow the Environment/Energy segment to the ¥50 billion scale in net sales in FY2059,
the 100th anniversary of the Group’s founding.
FY2009Consolidated sales
50th Year
Anniversary¥100.7billion

FY2059Consolidated sales
100th Year
Anniversary¥500.0billion or more

¥50.0 billion
or moreEnvironment/
Energy¥200.0

Human Life

¥250.0Industry

billion or morebillion or more

¥71.5billion¥29.2billion

2059

2009

CSR Vision—SEKISUI KASEI Group, Expanding Our Dreams for People and the EarthWe, SEKISUI KASEI Group, carry out social responsibility to stakeholders including the global environment by practicing
our management philosophy and contribute to the sustainable development of the global society.

Responsibility to Stakeholders

Customers

Group
Members

Local
Communities

Shareholders

Business
Partners

GlobalEnvironment

Culture Vision—Zen-in Keiei
All members, including managements and employees in general, of SEKISUI KASEI Group always recognize the 4 keywords, “Innovation,” “Speed,” “Teamwork” and “Respect for Diversity” as starting point of achievement by making themost of strength and improving the weakness.

Integrated Report 2022 / SEKISUI KASEI

6SEKISUI KASEI’s Value Creation

CSR Declaration

Looking ahead to the “SEKISUI KASEI Group 100th Year Vision,” SEKISUI KASEI Groupis conducting business activities with the aim of fulfilling its social responsibilities toall stakeholders, including the global environment. The CSR activities that form thebasis of the Group’s business activities are summarized in its “CSR Declaration.”

Stakeholder

7

Responsibility of SEKISUI KASEI Group

Customers

The Company not only supplies safe/reliable products but also bring comfort and convenience to thelives of people by always creating new functions/value and proposing materials/services as solutions
for customers.

Group Members

The Company places emphasis on mutual respect and trust, and pursues the happiness of people
working for the company. Consequently, we will improve fairness to skill development and rating, andmake efforts to create a healthy/safe work environment, and a good balance between work and family.

Local Communities

The Company believes being a safe workplace is the most important to communities. In addition, as amember of local communities, we aim to be a company trusted and loved by the whole community.

Shareholders

The Company meets expectations from shareholders with returns by improving its corporate value.
Furthermore, we focus on the active disclosure of our management information and dialogue withshareholders.

Business Partners

The Company builds trust in relationships with business partners through fair, honest businesspractices with sincerity as our motto. Also, we aim at co-existence and co-prosperity as a better
partner for the partners.

GlobalEnvironment

The Company actively endeavors to improve environment to protect our precious earth. In particular,
we contribute to the low-carbon society and develop the recycling-based society with foam plastics inthe community and lowering carbon levels centering on foam plastics which are eco materials.

Integrated Report 2022 / SEKISUI KASEIZen-in Keiei
Under the concept of Zen-in Keiei, each member thinks by themselves, proposes, and makes voluntary actions, not beforced by top-down instructions. Under SEKISUI KASEI Group culture, we value brainstorm with other members for improving personality and strength of individuals.

For the growth of both company and its people
4 keywords for the practice of Zen-in Keiei

Innovation

Speed

Teamwork

Respect for
Diversity

Zen-in Keiei

Make the most of
personality andstrength ofindividuals(power ofindividuals)

Respect diversity
and join forces
as a team(power of teams)

Recognizes
Group’s
direction
as a member
Share the aim of
the entire Groupand havethe same goals

Leads toachieving
the Group’s
goals

People andcompany growtogetherSet up andachieve goals
as a member

Integrated Report 2022 / SEKISUI KASEI

8SEKISUI KASEI’s Value Creation

Value Creation Model
We leverage the unique management resources of SEKISUI KASEI Group to provide sustainable value to society throughour two business domains and the business activities that support them.

INPUT[Human Capital]

Diverse human resources practicing
Zen-in Keiei	No. of employees: 3,658

BUSINESS ACTIVITIES & OUTPUT

Products and Services in
Two Business Segments
INDUSTRY SEGMENT

P.25

Electronics(as of the end of March 2022)

Human Resources Strategy —> P31

Mobility(Promoting workstyle reforms & diversity)

Medical/Healthcare

Strengthening management foundation(Strengthening corporate governance system)

Automotive structural
materials
Transporting automotive
parts packaging materials[Intellectual Capital]

Technological capabilities thatmade us pioneers in foamed resins

Medical/health carematerials
Home appliance packaging
materials

PIOCELAN
Bumper cores

Industrial components

Extensive knowledge and experience inpolymerization, extrusion, impregnation
foaming, molding, and processing

	No. of patents held:
Japan 1,258/Overseas 178

TECHPOLYMER
LCD film additive

ELASTIL
Shoe midsoles(as of the end of March 2022)

	R&D costs:¥2.8 billion (FY2021 results)

HUMAN LIFE SEGMENT

P.27

Food

R&D Strategy —> P29(Enhancing development of new materials &competitiveness)

Housing/Energy
Agricultural andmarine product containers
Food containers[Manufactured Capital]

Production management systemthat provides safety and qualitythat satisfies the customer

Distribution materials
Construction materials
Civil engineering materials

ESLEN Beads

	Capital expenditures: ¥3.8 billion(FY2021 results)
ESLEN Sheets[Social & Relationship Capital]

Stable product supply capability	40 locations across 16 countries andregions (as of the end of March 2022)

ESLEN Blocks

Businesses that solve environmental
and social issues
Management Philosophy[Financial Capital]	Equity ratio: 40.1%(FY2021)[Natural Capital]	Energy consumption: 2,710,680 GJ(FY2021 results)

9Integrated Report 2022 / SEKISUI KASEIWe, SEKISUI KASEI, practice “Zen-in Keiei”
based on respect and mutual trust.
We are always innovating in our aim of “new happiness.”

Founding spirit“For happiness of people working for the company”

OUTCOMESSocial & Relationship Capital

Contributing to the development of society by proposing business solutions

Eco-friendlinessHigh	Development of eco-friendly
andcomfortable mobility components

For example,

	Providing materials that reduce food loss

Sustainable Star Product (SSP) * Environmentally-friendly productexample,Products and systems thatFor
makegreater contributions to
the environment among our sustainable productswith food containers, we have...

Achieved
ourpursuit of shock absorbency and* Eco-friendly
product
Sustainable Productimproved
heat
insulation
Products
andsystems
thatareusefulin
daily life andAchieved reduction of thickness and weight without
friendlytotheenvironment,
such
as
foam
plastics
In
addition
toprotecting
food from impact during transport,
compromising functionality Low
it also helps to reduce food loss by keeping food fresh andImproved fuel efficiency leads to reduced CO2 emissions
preserving it for a long period of time
Developed materials with improved strength and heat resistanceContributed to food safety and security
Leads to improved safety
Thorough compliance with laws and regulations and efforts
toward quality lead to improvements in food hygienewith automotive components, we have...

Eco-friendly andcomfortable automobiles

Reusable containers
for food delivery

Natural Capital

Existing in harmony with the global environment	Contributing to the realization of a circular
economy by creating Sustainable Star Products
and expanding their market

For example,

For example,

in business activities, we have...

as an environmental
strategy, we have...
Promoted SKG-5R
Creating “Sustainable Star Products” and expanding theirmarket leads to the realization of a sustainable society	Challenge to achieve carbon neutrality in 2050
Leads to “Our planet. Our tomorrow.”

Worked to minimize CO2 emissions
Utilization ofrenewable energy
Energy saving andhigh efficiency

Developed materials with improved strength and heat resistanceLeads to improved safety

Intellectual Capital

Manufactured Capital

Future value creation
through technology

Establishment of a system that can
provide products in a stable manner

	Utilizing RX to improve output

	Increased productivity throughDX promotion

Human Capital

Financial Capital

Establishment of a corporate
structure that is trusted by society

Enhancing corporate value in themedium to long term	Implementation of diversity promotion andwork style reforms to foster respect forpeople and mutual trust	Strengthening our financial position andimplementing capital efficiency-oriented
management

高「サステナブル・スタープロダクト(SSP)」 ＊環境貢献製品

Integrated Report 2022 / SEKISUI KASEI「サステナブル・プロダクト」の中でも、特に環境貢献において
環

優れた効果を発揮する製品・商品・システム

10

SEKISUI KASEI’s Value Creation

Earnings Model
SEKISUI KASEI Group generates stable earnings through an integrated business that extends from the production offoam resin as an intermediate material to the manufacture and sale of finished products for a variety of applications invarious markets.
Under our new mid-term management plan “Spiral-up 2024,” we have set the strengthening of the earnings structure
as one of our key issues, and we are restructuring our business portfolio and quickly monetizing developed products inorder to expand earnings.

Example business earnings model

Two Business Domains  

INDUSTRY SEGMENT

Automotive manufacturers, automotive parts manufacturers,
home appliance and IT companies, LCD-related manufacturers,
other various industrial product manufacturers, medical equipment manufacturers,
cosmetics manufacturers, trading companies, etc.

Group Manufacturing and Sales Companies<Main companies>
Sekisui Kasei Chubu Co., Ltd.
Sekisui Kasei Yamakyu Co., Ltd.
Sekisui Kasei Europe B.V.
Sekisui Kasei U.S.A., Inc.
Sekisui Kasei Mexico S.A.de.C.V.
Sekisui Kasei Taiwan Co., Ltd.
Sekisui Kasei (Thailand) Co., Ltd.
PT. Sekisui Kasei Indonesia<Main uses>
Automotive structural materials
Transporting automotive parts
packaging materials
Industrial components
Industrial packaging materials
Electronic component materials
Medical/health care materials
OthersBusiness Partners

Group Manufacturing andSales Companies
Proseat Group<Main uses>
Automotive structural materials• Lightweight structural members• Various interior materials• Seats, trim, etc.
Businessmanagement

Holding company
Proseat Europe GmbH

Shareholding

Major raw
Various monomers (styrene, MMA, acrylamide, etc.)

11

Integrated Report 2022 / SEKISUI KASEISales of products and goods

Purchase of products and goods   Product & Service

HUMAN LIFE SEGMENT

Packaging container manufacture, wholesale markets,
agriculture and fisheries-related companies,
construction companies, landscaping companies,
construction material manufacturers, etc.

Group Sales Companies<Main companies>
Sekisui Kasei Korea Co., Ltd.
Sekisui Kasei Shanghai International Trading
Co., Ltd.
<Main uses>
Automotive structural materials
Transporting automotive parts packaging materials
Industrial components
Industrial packaging materials
Electronic component materials
OthersGroup Manufacturing and Sales Companies<Main companies>
Sekisui Kasei Hokkaido
Co., Ltd.
Sekisui Kasei Kansai Co., Ltd.
Sekisui Kasei Toubu Co., Ltd.
Sekisui Kasei Chubu Co., Ltd.
Sekisui Kasei Seibu Co., Ltd.

<Main uses>
Agricultural and marine
product containers
Food containers
Distribution materials,
Construction materials
Civil engineering
materials
Othersmaterial suppliers
Various polymers (polystyrene, polyethylene, elastomer, etc.)

Integrated Report 2022 / SEKISUI KASEI

12SEKISUI KASEI’s Value Creation

Financial and Non-Financial Highlights
Net Sales/Overseas Sales Ratio

Operating Income/Operating Income Ratio(%) 50150.0 (Billions of yen)

39.4

120.0
90.0

117.6

60.0

20

30.0

10

0

46.4
2017

2018

2019

2020

2021

(%) 12

40
30

71.2

6.0 (Billions of yen)

0

FY

4.0

8

2.0

1.2
0

Overseas Sales (left axis)
Japan Sales (left axis)
Overseas Sales Ratio (right axis)

2017

2018

2019

Operating Income (left axis)

Net Income Attributable to Owners of the Parent/ROE
(%) 6

0

0

2020

2021

FY

0

Operating Income Ratio (right axis)

Although one of the priority policies in the previous mid-term management plan was to “Execution of strategies to strengthen earnings structure,” we met with harsh results as the business environment remained
uncertain due to the impact of the spread of COVID-19 and soaring raw
material and fuel prices. We will strengthen our earnings structure as we
execute on our Spiral-up 2024 (2022-2024) plan to ensure that we makesteady progress toward the future.

In our 100th Year Vision, SEKISUI KASEI Group has committed to longterm global business expansion and is working to increase the ratio ofoverseas sales to total sales, so one of the Key Issues in the New MidTerm Management Plan, Spiral-up 2024 (FY2022-2024) is “Strengthen
the earnings structure” which includes constructing a highly profitablestructure in the Proseat business.

4.0 (Billions of yen)4

1.5

Free Cash Flow
5.0 (Billions of yen)
2.5

0.6
0

-6

-4.0

-5.9
-8.0

-9.3
2017

2018

2019

2020

2021

FY

-12

-2.5
-5.0

2017

2018

2019

2020

2021

FY

Net Income Attributable to Owners of the Parent (left axis)
ROE (right axis)

One of the Key Issues of Spiral-up 2024 (2022-2024) is to reinforce ourmanagement foundations, and we are focusing on enhancing financial
health. We will work to improve ROE by shifting from PL-oriented management to capital efficiency-oriented management, focusing on improving cash flow and working capital metrics.

Research and Development Costs
3.0 (Billions of yen)

We aim to improve free cash flow, the ability to earn cash, as an indicator for judging corporate performance in addition to accounting profits.

Capital Expenditure/Depreciation and Amortization
8.0 (Billions of yen)

2.8

6.2

6.0

2.0

3.8

4.0
1.0

0

2.0

2017

2018

2019

2020

2021

FY

0

2017

2018

Capital Expenditure

We are engaged in research and development aimed at providing value to society, positioning our developed products as our medium tolong term growth driver and focusing on achieving our FY2030 targetof creating “Sustainable Star Products” (environmentally-friendly products) and expanding their market.
P29

13

Integrated Report 2022 / SEKISUI KASEI

2019

2020

2021

FY

Depreciation and Amortization

We curbed investments during Make Innovations Stage-II (2019-2021)
because of unfavorable market conditions, but we plan to boost capital
expenditures by 180% (22 billion yen over 3 years) compared to theprevious mid-term management plan during Spiral-up 2024 (2022-2024)
in order to strengthen growth investments, including environment- anddigital transformation-related investments.
P22

No. of Sustainable Star Products Registered/Ratio of Net Sales
120 (products)

100

90

(%) 60

45

50

16

0

2018

2019

2020

2021

FY2018comparison

FY2018(7.6%) comparison
108,909 (10%)

120,000

FY2018comparison

(27%)

30

42

30

150,000 (t-CO2)

90,0006060

CO2 Emissions (Scope 1+2)

60,000

20

15

2024

2030

(target)(target)FY

CarbonNeutrality
Target30,0000

00
2018 2019 2020 2021

2024

(target)2030(target)2050(target)FY

No. of Sustainable Star Products Registered (left axis)
Ratio of Net Sales (right axis)

We have set a FY2030 target for “Sustainable Star Products” (environmentally-friendly products) and are working on advancing our existingproducts and bringing new materials into use.
P33

In March 2022, we formulated an initiative to achieve carbon neutrality
by 2050, looking beyond the 2030 target set in the SKG-5R to promote
CO2 emission reduction efforts.
P33

No. of Employees

Energy Consumption

5,000(%) 100

3,658
1,932

4,000
3,000

52.8

2,000

187,534

150,000

60
100,000

83,534

40

1,726

1,000
0

80

200,000 (GJ)

2017

2018

2019

2020

2021

20

FY

50,00000No. of Employees in Japan
No. of Employees outside Japan
Ratio of Employees outside Japan

2017

2018

Japan

Overseas

2019

2020

FY

*Company-wide totals include the Proseat Group from FY2018 (January 2019) onward.

With a view to long-term global business expansion, we are promoting
diversity by enhancing our Group employees who are active at our locations outside of Japan.

No. of Paid Vacation Days

We recognize the importance of resource and energy savings during
the production as well as use of our products, and are working to reduce our energy consumption.

Ratio of Women Employees
40 (%)

12 (days)

9.8
9

30

6

20

3

10

0

2021

2017

2018

2019

2020

2021

FY

*SEKISUI KASEI (non-consolidated) and all Group companies in Japan

In keeping with our founding spirit “For happiness of people working
for the Company,” we are committed to promoting work style reforms.
We believe that work-life balance is important for each individual towork creatively and enthusiastically.

0

28.5

2017

2018

2019

2020

2021

FY

*All companies excluding some Group companies

To promote diversity, we have set target ratios for women managers, women employees, and women hires based on our “Action planon Promotion of Woman’s Participation and Advancement in the
Workplace & Advancement of Measures to Support Raising NextGeneration Children” (2022-2024), and have been working to achieve
them.
P31

Integrated Report 2022 / SEKISUI KASEI

14

Strategies for Value Creation

Message from the President

Our management philosophy and vision
Our management philosophy reads as follows: We,

multiple fronts for the next generation.

SEKISUI KASEI practice “Zen-in Keiei” based on respect

Our purpose in society is to develop and provide valuable

and mutual trust. We are always innovating in our aim of

products through monozukuri (manufacturing craftsman-“new happiness.” The term “new happiness” carries moreship) in harmony with the environment, and to deliver hap-than one meaning. I believe that by creating products andpiness to daily life in a variety of ways. As people’s values

services that not only bring material and spiritual fulfillment

change with the times, I believe it is essential for us to con-to people, but also contribute to the global environment

tinue to support the happiness of each and every personand solve social issues, we can achieve sustainable corpo-

we interact with by adapting to these changes and contin-

rate development and thereby bring about happiness on

uously innovating.

Review of the mid-term management plan “Make Innovations Stage-II”

15

Under our mid-term management plan “Make Innovations

company, we also focused on advancing our efforts toStage-II,” which we kicked off in FY2019, we worked toachieve the targets set forth in the SKG-5R STATEMENT,

transform our business portfolio and execute strategies towhich we announced in July 2020.

strengthen our earnings structure in order to further pro-In FY2021, the final year of the plan, we faced an extremely

pel the transformation process we started in our previous

challenging environment, characterized not only by theplan. To solidify our position as a leading environmental

impact of the COVID-19 pandemic, but also by soaring

Integrated Report 2022 / SEKISUI KASEIWe will do our utmost to achieve ourtargets in the new mid-term management
plan by holding our heads high andfocusing on our vision in this challenging
business environment.
Masato Kashiwabara
President and Chief Executive Officer

fuel prices and the invasion of Ukraine by Russia, which

digitalization. Furthermore, as part of our work style reformspurred disruptions in supply chains across the globe. In

and diversity promotion efforts, we introduced a work-from-contrast, SEKISUI KASEI Group implemented measures tohome program and implemented a three-year Action plan

improve profitability, including efforts to boost productivity

on Promotion of Woman’s Participation and Advancement

and reduce fixed costs. However, our profits fell substan-in the Workplace & Advancement of Measures to Support

tially, with net sales coming in at ¥117,567 million, operat-

Raising Next-Generation Children to focus on improving

ing income at ¥1,463 million, and a net loss attributable toour human resource capabilities.

owners of the parent of ¥5,917 million.

In our third priority policy of contributing to a sustaina-

In our first priority policy of evolving our business portfolio,

ble society, we made steady progress toward achieving

we made some progress in expanding our Industry segment

our FY2030 targets by advancing our SKG-5R efforts andand global business, with the Industry segment accounting

achieving our FY2021 target of expanding our Sustainable

for 58% of net sales (versus our target of 60%) and global

Star Product lineup.

sales accounting for 40% (versus our target of 37%). On the

We are embarrassed that we were not able achieve the tar-other hand, net sales from priority development areas weregets of our mid-term management plan “Make Innovations

sluggish at ¥31.5 billion, compared to our plan of ¥37.7 bil-Stage-II,” as the business environment was drastically dif-lion, mainly reflecting stagnant production stemming fromferent from the assumptions made when preparing theautomotive component shortages, although sales of highplan due to unforeseen changes such as the COVID-19

functional food containers were firm.

pandemic and the invasion of Ukraine by Russia. However,

As for our second priority policy of strengthening our group

we plan to continue diligently addressing management

management foundation, we restructured our organiza-

issues to ensure that we build on the initiatives we under-tion, reviewed our committee structure and governancetook during this period as we work on our new mid-term

structure to enhance our organizational capabilities, andmanagement plan.

made steady progress in boosting productivity throughIntegrated Report 2022 / SEKISUI KASEI

16

Strategies for Value Creation

Message from the President

Understanding of external environment
I feel that the three-year period under the Make Innovations

which have become major environmental issues on a global

Stage-II plan was a time of great change, where social

scale. In addition, the COVID-19 pandemic triggered achanges became apparent.

change in our lifestyles, and the spread of remote work

First, the shift toward a recycling-based economy and sus-and the expansion of the takeout food market created newtainable society has accelerated amid growing awarenessbusiness opportunities. Digital technology is advancing atof the problem of marine plastic waste and global warming,a remarkable pace, and I believe that we can bolster ourcompetitiveness not only in R&D, product development,
and production sites, but also by promoting digital transformation throughout our company. Furthermore, I believe
it is critical for us to enhance our competitiveness in termsof human resources by developing various personnel systems that meet the needs for different and flexible work
styles, as well as by promoting diversity.
On the other hand, there are still uncertainties that are likely
to linger, which extends beyond the COVID-19 pandemic andalso includes soaring crude prices, production adjustments
by automakers stemming from semiconductor and component shortages, global supply chain disruptions triggered by
Russia’s invasion of Ukraine, accelerated inflation, and more.

Overview of the new mid-term management plan “Spiral-up 2024”

17

While the external environment makes it difficult to antic-

businesses portfolio and invest heavily in fields with growth

ipate the future, SEKISUI KASEI Group has kicked off its

potential, while actively leveraging new technologies to

new mid-term management plan, “Spiral-up 2024,” inbolster our cost competitiveness through production inno-

April 2022, with the aim of delivering various forms of hap-vations and quickly monetizing our developed products

piness to people’s lives, even as people’s values change

through R&D innovations. In the Proseat business, since wewith the times.

consolidated our production sites as part of the previous

Our basic policy is “To contribute to a sustainable society

mid-term management plan, we will focus on thoroughly

and to achieve the sustainable enhancement of our corpo-

executing growth strategies for each business field andrate value, we will establish a resilient earnings foundation

enhancing synergies with our Group companies to build abased on ESG management.”

highly profitable business structure.

We set three key issues, which are to strengthen the earn-

As part of our shift to businesses that solve environmental

ings structure, shift to businesses that solve environmental

and social issues, we have established the GX Development

and social issues, and reinforce our group management

Department, and will focus on company-wide structural

foundations.

reforms aimed at transforming our business structure in

To strengthen the earnings structure, we will reorganize ouranticipation of a shift toward a recycling-based economy.

Integrated Report 2022 / SEKISUI KASEIAs for reinforcing our group management foundations, we

In terms of quantitative targets, we aim to reach net sales ofwill establish materiality (key management issues) for each¥135 billion, operating income of ¥5 billion, and bottom-line

ESG item and strengthen our foundation by thoroughly

profit of ¥3 billion in FY2024. Compared to FY2021 results,

repeating the PDCA cycle, while also boosting our finan-

we expect net sales to grow by an average of about 5% overcial position by shifting from PL-oriented management to

the three-year period, but we are aiming for 50% growth

capital efficiency-oriented management and working toin operating income, and we want to focus on ensuring

improve ROE.

profitability.

Environmental initiatives
Since its founding, SEKISUI KASEI Group has advanced its

and expanding their target markets, we have exceeded our

foaming and polymerization technologies while also work-

plan both in terms of net sales ratio and the number ofing on monozukuri (manufacturing craftsmanship) in har-

Sustainable Star Products registered in FY2021. In addition,

mony with the environment, including energy conservation

we have set a new target of replacing 50% of the raw mate-

and recycling, with the aim of creating a low-carbon andrials for products manufactured by our Group with recycled

recycling-based society.

or biomass-derived materials by FY2030, and have estab-

In July 2020, during our previous mid-term management

lished and strengthened our category brands, ReNew+ andplan, we announced our SKG-5R STATEMENT and set our

BIOCellular.

two FY2030 targets of “creating Sustainable Star Products(SSPs) and expanding their target markets” and “reducing
CO2 emissions.”
To achieve these targets, we will promote SKG-5R, which
combines the 3Rs (Reduce, Reuse, Recycle) that we have been

Product categories using
recycled raw materials

Product categories using biodegradable or biomass-derived plastics

working on, with SEKISUI KASEI Group’s own 2Rs (Replace
and Re-create), to help solve issues on a global scale.
For our target of creating Sustainable Star Products (SSPs)

In terms of reducing CO2 emissions, we aim to achieve a
27% reduction in CO2 emissions by FY2030 (compared to
FY2018). In pursuit of this, we have been working to conserve energy in our production activities and reviewing ourenergy procurement methods, and as a result, we wereable to exceed our FY2021 CO2 emissions reduction target.
Furthermore, as global efforts to address climate change
issues accelerate, we endorsed the Japanese government’s
2050 Carbon Neutrality Declaration and developed initiatives to achieve carbon neutrality.
In addition, we expressed our support for the TCFD (Task
Force on Climate-related Financial Disclosure) and willcontinue to disclose information in accordance with thisguideline.

Integrated Report 2022 / SEKISUI KASEI

18

Strategies for Value Creation

Message from the President

Society—human resource initiatives
We have established that our responsibility to all SEKISUI

style reforms and other initiatives.

KASEI Group members is to help them in their pursuit of

At the same time, I believe that ensuring fairness in the devel-

happiness while emphasizing respect and mutual trust.

opment and evaluation of the skills of our Group members

Based on this approach, we have been working on work

is also an important factor in the pursuit of our employees’
happiness. With this in mind, we have been reorganizing ourinternal training system in recent years, while thinking about
ways to develop our human resources and set them up for
success. We plan to incorporate outside training, and aim todevelop the flexible and forward-thinking human resources
needed in this new age.
With regard to safety and disaster prevention and quality, we have established a new Safety Policy and Quality
Policy. We prioritize safety and health in everything wedo and strive to achieve accident-free and disaster-free
operations by promoting safety activities, while providing
quality that customers appreciate, and offering valuable
products and services.

Governance—corporate governance initiatives
With respect to strengthening corporate governance,

whether a company needs to work under its own principles.

the most pressing issue we need to address is the needIn addition, on a topic related to the Board of Directors, it

to develop a Group governance system on a global scale.

has been three years since we established the Nominating

Previously, we had looked at the governance of our global

and Compensation Advisory Committee. We are continu-

Group companies as an extension of our domestic Grouping to examine what we need to do when nominating direc-

companies, but we reaffirmed that there are problems withtors for the next term from many different angles. I also

our existing approach if circumstances were to quickly

believe that we need to review the skill matrix we publisheddeteriorate in a short period of time. We need to exam-

to see whether we can keep it as it is going forward. On theine whether or not our Japanese way of doing things isother hand, we have been able to make some progress incompatible with the way things are done in other countries

establishing a remuneration system, and we should oper-

and restructure our existing governance system in some

ate it along with the newly introduced performance-based

cases, taking into consideration whether a company can

remuneration and restricted stock remuneration.

work under the same basic principles as we do in Japan, or

19Integrated Report 2022 / SEKISUI KASEIShareholder returns
SEKISUI KASEI Group positions shareholder returns as one

development. We posted a net loss in FY2021 partly due toof its most important management issues. Our basic pol-the COVID-19 pandemic, but we paid an annual dividend

icy is to return profits to shareholders by providing stableof 12 yen per share. While we continue to face challenging

dividends while securing internal reserves to strengthen

circumstances in FY2022, we currently intend to pay a sta-

our management structure and prepare for future businessble dividend to our shareholders.

To our stakeholders
We were unable to achieve our mid-term management

The business environment remains challenging, but we willplan targets as we recorded a net loss in FY2021. However, I

do our utmost to achieve our targets in the new mid-term

believe that we are making steady progress in our medium

management plan “Spiral-up 2024” by holding our heads

to long term growth initiatives that we have been pursuinghigh and focusing on our vision to make steady progress

during this period, such as expanding our Industry seg-in actively developing our high-value-added business, solv-

ment and global business.

ing environmental and social issues, and strengthening ourcorporate governance system.

President and Chief Executive Officer

Integrated Report 2022 / SEKISUI KASEI

20

Strategies for Value Creation

New Mid-Term Management Plan

Name of the plan

Spiral-up 2024
In addition to the PDCA cycle, we are committed to creating a virtuous cycle between the challenge of“realizing a sustainable society” and the “sustainable enhancement of our corporate value.”

Basic policy

To contribute to a sustainable society, and to achieve the sustainableenhancement of our corporate value, we will establish a resilient earnings
base based on ESG management.

Quantitative targets

FY2021(Unit: Billions of yen)

ActualPlan

Net sales

117.6

125.0

+7.4

(Income ratio)(1.2%)(1.4%)

1.5

1.8(1.2%)(1.3%)

1.4

1.6(Income ratio)(—)

Net income-5.9(0.7%)(Income ratio)

Recurring income

Target ROE

Key issues

FY2024FY2021comparison

Operating income
Consolidated

FY2022

0.9

—

Plan

FY2021comparison

135.0

+17.4

+0.3
+0.2
+6.8

(3.7%)+3.5

5.0(3.6%)+3.4

4.8(2.2%)+8.9

3.0

1.5% or higher

3.0% or higher

1. Strengthen the earnings structure(1) Restructuring the business portfolio (5 priority fields as our targeted areas)
Food

Electronics

Mobility

Medical/Healthcare

Housing/Energy(2) Constructing a highly profitable structure in the Proseat business		Maximize Group synergies and provide differentiated solutions to the increasingly sophisticated requirements of European OEMs in response to the shift to EVs(3) Strengthening cost competitiveness through innovations in production
		Continue to promote production innovation, including the use of technology, and strengthen manufacturing capabilities(4) Rapidly generating profits from developed products		Position our developed products as medium- to long-term growth drivers and strive to quickly monetize them

2. Shift to businesses that solve environmental and social issues• Expanding Sustainable Star Products through recycling-based business• Striving to achieve carbon neutrality

P35

P36

3. Reinforce our management foundations• Strengthening efforts to address materiality (key management issues)• Enhancing financial health

21

Integrated Report 2022 / SEKISUI KASEI

P23

Review of Previous Mid-Term Management Plan
The previous mid-term management plan, “Make Innovations
Stage-II,” which covered FY2019 to FY2021, focused on
three priority policies: “Improvement of corporate value
through evolution of business portfolio,” “Strengthening
Group management foundation,” and “Contribution to sustainable society.”
Although we were able to promote sustainable society initiatives centered on SKG-5R and strengthen the Groupmanagement foundation through organizational restructuring and other measures, our net sales and profits fell significantly below their targets as a result of our insufficient
response to a challenging business environment characterized by significant changes in the structure of the market,
including the COVID-19 pandemic, semiconductor shortages, and soaring raw material and fuel prices.

New Mid-Term Management Plan
In April 2022, we launched a new three-year mid-term
management plan, “Spiral-up 2024,” based on the lessons
learned from the previous mid-term management plan.
The key issues in the plan are to strengthen the earnings
structure, shift to businesses that solve environmental andsocial issues, and reinforce our management foundations.
Key issue 1. Strengthen the earnings structure
In order to further stabilize our core businesses and create
and expand growth businesses, we established 5 priority
fields as our targeted areas and will restructure our businessportfolio through selection and concentration of our management foundations. In addition, along with efforts to drastically innovate production, we will position our developed
products as profitable growth drivers and strive to quickly
monetize them.

2. Shift to businesses that solve environmental and social issues

Key issue

We have been contributing to solving various environmental
and social issues through our business activities.
To achieve both social and economic value, we will transform
our business structure based on the circular economy andwork toward achieving carbon neutrality by 2050.
Key issue 3. Reinforce our management foundations
In promoting ESG management, we have identified materiality (key management issues). We will contribute to therealization of a sustainable society through thorough management of the identified materiality items.
In addition, as a way to enhance our financial health, wewill work to improve ROE by shifting to a capital efficiencyoriented management.

Actual Results vs. Plan
Net sales/ Operating Income/Operating Income Ratio
Make Innovations
Stage-II(Billions of yen)

145.0

160.0

150.0

Spiral-up 2024

136.2

80.0

4.9

118.9
6.5

155.0

0
Operating
Income Ratio

135.0

24.0

12.0

18.0

8.0

12.0

180

%
increase compared tothe previous mid-term
management plan

12.3

1.8
1.5

2019

2020

2021

2022

2024

2.7%

1.8%

1.2%

1.4%

3.7%

Net sales actual (left axis)
Operating income actual (right axis)

22.0
OthersDX
Development
Renewal/repair

5.0

2.1

Net sales plan (left axis)
Operating income plan (right axis)(Billions of yen)

16.0

117.8
7.8

40.0

3.7

Investment (3-year cumulative total)(Billions of yen)

125.0
120.0

Capital expenditure

(FY)

4.0

6.0

0

0

Rationalization/labor saving
Expansion of capacity
Previous mid-term
management plan
FY19-FY21

New mid-term
management plan
FY22-FY24* Environmental investment:• Previous plan = ¥0.6 billion • New plan = ¥2.5 billion

Integrated Report 2022 / SEKISUI KASEI

22

Strategies for Value Creation

Process for Materiality (Key Management Issues)
Among the issues that are of high importance for sustainable growth, we have identified materiality items to be addressedwith particular priority.

Process for Identifying Materiality (Key Management Issues)
STEP 1

Select issues
We selected issues based on international guidelines on sustainability, various issues emphasized by
ESG rating agencies, and the SDGs.
Non-financial information disclosure standards
and other sources consulted
Global standards•	“ The International Integrated Reporting Framework,”
International Integrated Reporting Council (IIRC)• United Nations Global Compact• ISO 26000 (Guidelines for Corporate Social Responsibility)• “GRI Standards,” Global Reporting Initiative

STEP 2Rate their importance•	“SASB Standards,” Sustainability AccountingStandards Board
ESG evaluation indicators• DJSI, FTSE, MSCI
SDGs
Benchmarks for leading CSR companies

High
Importance to stakeholders

We evaluated the importance of the selectedissues along two axes: “importance to stakeholders (expected value)” and “importanceto the management of the Group.”

Most important issues

MediumImportance to the management of the GroupE Environment

STEP 3

S SocialHigh

G Governance

Identify key management issues
Obtain approval of Board of Directors
The identified materiality is discussed by the relevant departments and the CSR Control Committee,
deliberated by the CSR Control Committee, and then approved by the Board of Directors.
Process for approving materiality

Relevant departments

Consult

CSR Control Committee

Board of Directors

Deliberate

Deliberate and approve

Contributing to the Realization of a Sustainable Society“The 2030 Agenda for Sustainable Development” establishing international sustainable development targets forthe years between 2016 and 2030 was adopted at a UN
Summit in 2015. The Agenda contains 17 Sustainable
Development Goals (SDGs) that are applied universallyto all countries, including developed countries, and focus
on confronting climate change, ensuring sustainable consumption and production, and resolving poverty andinequalities. With this international focus in mind, we arecommitted to clarifying our priority issues.

23

Integrated Report 2022 / SEKISUI KASEIInitiatives to Address Materiality and ESG Issues
To contribute to the realization of a sustainable society, we divided the materiality (important management issues) into thethree classes of E (environment), S (social), and G (governance), and then categorized them as “environment,” “innovation,”“human resources,” “quality / security and disaster prevention,” and “governance.” We are undertaking specific initiatives
in each area.
E/S/G

Category

Materiality

Action item

Creation and expansion ofsustainable star products

SKG-5R promotion(expanding Sustainable Star Products)

Responding to climatechangeSKG-5R Promotion (realization of carbon neutrality byenergy saving and utilization of renewable energy)

Reduction ofenvironmental impact

Proper management of air, water, waste, and hazardous
substances

Business model resilience

Open innovation, external cooperation/collaboration

DX

Production innovation, business innovation, marketing
innovation, R&D innovation

Diversity

Diverse workforce (women, seniors, non-Japanese)

Workstyle reform

Promotion of health management, various systems forwork-life balance, and diverse and flexible workstyles

Work engagement

Personnel system design that promotes the growthof workers

Providing safety andsecurity

Promote zero accidents and zero quality complaints

Corporate governance

Strengthen internal controls, improve the effectiveness of
the Board of Directors, and enhance Group governanceCompliancePrevent problems and improve reporting system

Risk Management

Promote BCP initiatives

P33-36

E

Environment

Innovation

S

Human
resources

Quality /Securityand disasterprevention

G

GovernanceP37-40

P29-30

P31-32,
44

P41-43

P45-54

Materiality will be regularly confirmed and reviewed in light of changes in the external environment and other factors.
In addition, we will set KPIs for each action item and implement effective initiatives to achieve them.

Integrated Report 2022 / SEKISUI KASEI

24

Strategies for Value Creation

Business Overview: Industry Segment
We contribute to value creation by developing
materials and new applications that combine
sustainability and functionality in fields where
technological innovation is accelerating.
Tetsuharu Hirota
Director and Managing Executive Officer,
Head of The 2nd Business Headquarters

SWOT analysis
Strength

Opportunity• Solution proposals that combine sustainability and functionality• Material development and customization using composite technology• Integrated technical capabilities from raw material resin to design
and processing• Expanded use of recycled materials and biomaterials• Global efforts to reduce environmental impact•V arious needs accompanying the growth of EVs including lighter
weight, improved comfort, and electrification• Growing demand to reduce environmental impact• Increase in health awareness, including prevention oflifestyle-related diseases

Weakness

Threat• Regional unevenness in the distribution of production sites• High dependence on petroleum-derived materials• Stable procurement of recycled materials• New alternative materials to solve environmental problems• Risk of raw material price fluctuations

Strategic areas
Electronics

Mobility

Medical/Healthcare

Aim for high profitability through differentiated products, such as advanced materials
and Sustainable Star Products, to contributeto the diffusion and advancement of digitaltechnologies

Contribute to the technological innovationof next-generation mobility such as EVs,
by maximizing synergies with Proseat, anddeveloping new materials and applications

Provide new value globally, by meeting theneeds of the medical and healthcare fields
through advanced proprietary products

Actual Results vs. Plan
Net Sales

Operating income

The economy has recovered to a certain extent from the impact
of COVID-19 pandemic, and despite sluggish business growth in
the automotive sector due to semiconductor shortages, we are focusing on expanding our global net sales ratio with a view toward
long-term global expansion.

The new mid-term management plan aims to strengthen ourearnings structure in the face of a significant decline in profits
caused by the impact of soaring raw material prices and supply
chain disruptions.

Industry segment(Billions of yen)

composition ratio(Billions of yen)

58.0%

68.0

-1.78
2017

25

2018

2019

2020

Integrated Report 2022 / SEKISUI KASEI

2021

2022
Plan

2024
Plan

(FY)

2017

2018

2019

2020

2021

2022
Plan

2024
Plan

(FY)

Mid-term management plan (2022-2024)
Electronics

Net sales targets

Stable growth and area expansion in the electronic materials field

Electronicmaterials(Billions of yen)

• Maintain a dominant position in display applications• Meet the challenge of expanding into the high-speed communications field

Transition to a recycling-based business

Packagingmaterials

16.0• Launch Sustainable Star Products in markets• Improve the recycling system and develop recycling-based business

Structuralcomponents

Provision of structural components that support high-speed communications technology• Develop applications for FRP + high-strength foam composite structures(e.g., exterior structural materials for antennas and base stations)

43.0

Mobility

4.0

Expansion of adoption in next-generation mobility, such as EVs

Automotive
components

Components
logistics

2021
Actual• Propose further weight reduction by increasing the expansion rate of PIOCELAN• Advance the development of next-generation vehicle components through synergy with Proseat• Achieve results for ST-Eleveat

18.0

16.2

48.5

50.0

4.7

6.0

2022

2024

(FY)

Electronics
Mobility

Sales expansion by leveraging our strengths(design know-how + environmental responsiveness)

Medical/Healthcare• Strengthen proposal activities for components that will increase with the shift to EVs• Launch Sustainable Star Products in markets• Improve the recycling system and develop resource-recycling business

Improvement of competitiveness via thorough cost reductions

Enhancement ofcompetitiveness• Establish a system that can enhance production efficiency and reduce fixed costs for Proseat, andrespond more quickly to fluctuations in demand• Introduce cost planning to model plants, and expand it across the Group

Medical/Healthcare
Expansion of ELASTIL applications

Sports• Develop new applications (sports and health products, etc.)• Expand applications for shoes beyond sports shoe soles

Expansion of sales channels to the skin care market

Skin care• Propose biodegradable and naturally derived microparticles to the market• Expand sales of ST-gel (AI-Fit) using AI technology

Expansion of ST-gel into new areas

Biologicalsensing• Lifestyle-related diseases, infant biomonitoring, etc.
• Healthcare areas such as TENS, EMS, wearable devices, etc.

Expansion of mobility domain
Materials and products

Packaging materials
for transporting
automobile parts

Material development capability
Seat Core

Development
proposal capability

Vision of the European
automobile industry

Full EV transition

Floor Spacer
Door Pad

Tool Box
Tire Spacer

Bumper Core

ST-Eleveat launched
PIOCELANlaunched

1974

Tibia Pad

Present

Integrated Report 2022 / SEKISUI KASEI

26

Strategies for Value Creation

Business Overview: Human Life Segment
We will actively develop products that meet theneeds of the times and support lifestyles withsolutions that contribute to solving environmental
and social issues.
Yasunobu Furubayashi
Director and Managing Executive Officer,
Head of The 1st Business Headquarters

SWOT analysis
Strength

Opportunity• Polymerization, extrusion, impregnation, and foaming technology;
molding technology• Product design that takes advantage of the light weight, heat insulation, and cushioning properties of foam products• An integrated system that can handle everything from material development to molding to the supply of final products• Development of materials to meet environmental needs• Building recycling systems that support the circular economy

Weakness

Threat• Risk of price fluctuations in raw materials and fuel• Expansion of various related regulations due to environmental issues

Industry segment(Billions of yen)

composition ratio

Strategic areas(Billions of yen)

58.0%

68.0
Food

Housing/Energy

Launch Sustainable Star Products in markets
Assist in providing food safety/security and reducing food loss,
to contribute to solving environmental and social issues

Contribute to sustainable urban development by launching products for disaster prevention, disaster mitigation, and infrastructuredevelopment

-1.78
2017

2018

2019

2020

2021

2022
Plan

2024
Plan

(FY)

2017

2018

2019

2020

2021

2022
Plan

2024
Plan

(FY)

Actual Results vs. Plan
Net Sales

Operating income

Although demand for fishery-related products was weak, demand
for food containers and life goods was stable. We will work to expand the market by steadily capturing new demand in the era ofcoexistence with COVID-19.

Despite efforts to improve productivity and reduce fixed costs,
profits decreased due mainly to the impact of soaring raw material
prices. However, we aim to strengthen our earnings structure by
expanding sales of high-value-added materials and environmentally friendly products.

(Billions of yen)(Billions of yen)
Human Life Segmentcomposition ratio

42.0%
3.38

49.5

2017

27

2018

2019

2020

Integrated Report 2022 / SEKISUI KASEI

2021

2022
Plan

2024
Plan

(FY)

2017

2018

2019

2020

2021

2022
Plan

2024
Plan

(FY)

Mid-term management plan (2022-2024)
Food

Net sales targets(Billions of yen)
Marketlaunch of Sustainable Star Products

Environment(Billions of yen)

• Foam products using recycled plastic• Foam products using biodegradable and biomass
18.0 plastics

16.2

16.0

Product development and stable supply in response to changes in demand structure

New markets• Respond to needs in new markets, together with container manufacturers* Home-cooked and ready-made meals markets, home-delivery markets, etc.

50.0

48.5

43.0

44.0

45.0

50.0

8.0

8.9

10.0

Proposals for products and technologies that support food safety and security

Logistics• Propose logistics containers that maintain freshness, using our product temperature analysis technology• Contribute to the production and logistics efficiency of our customers in Japan and overseas

4.0

2021
Actual2022

Electronics

Disaster prevention/
mitigation

Housing
improvement

Environment/
energy

6.0

4.7

2024

2021
Actual(FY)

Housing/Energy

2022

2024

(FY)

Food

ExpansionMobilityof sales of products that support the “Fundamental Plan for National Resilience”

Housing/Energy

Medical/Healthcare• Countermeasuresagainst torrential rains and earthquakes• Disaster recovery

Expansion of sales of products for infrastructure development• Expansion of green infrastructure• Improve social infrastructure

Expansion of sales of products that contribute to a sustainable society• Launch Sustainable Star Products in markets• Renewable energy (water, solar, and offshore wind power)

Expansion of food domain
Materials and products

High-value-added
materials
Compounding

Fresh Keeper

CELPET
food container

Farm product box

Recycling ofresources

Heat resistanceFish box

ESLEN Wood

Thermal insulation
High-strengthand lightweightESLEN Beads
ESLEN Sheet
production starts production starts

1960

1962

Food tray

Food container

Bento box

Oven-safe container

Present

Integrated Report 2022 / SEKISUI KASEI

28

Strategies for Value Creation

Research & Development Strategy
To contribute to a sustainable society,we will work head-on to shift to abusiness that solves environmental andsocial issues and create new value that
illuminates a brighter future for the
global environment and society.
Hideyuki Asada
Director and Managing Executive Officer,
Head of Research & Development Center and General
Manager of GX Development Dept.

SEKISUI KASEI’s R&D Process
In today’s highly uncertain and unpredictable world, it is tempting to focus the negative side. On the other hand, today’s
world is also overflowing with potential to overturn conventional wisdom and create new businesses and services.
As the pace of change continues to increase, we are working to quickly establish a path for translating research and development into practical applications.
Embodying RX (Research Transformation)

Embodying the RX(Research Transformation) mindset
Target for earnings generated by developed products:
10% or more of company-wide operating income in FY2024

We actively incorporate RX into our series of R&D processes. We aim to improve our output by applying
machine learning-based AI (Artificial Intelligence) andsimulation to materials informatics and by conducting
pre-marketing linked with MA (Marketing Automation)and SFA (Sales Force Automation).

Commercialization study

Materials informatics(Fusion of real and digital)

Pre-marketing(Fusion of real and digital)

Prototyping• Machine learning• Simulation• Experimental database• MA, CRM, SFA• Hypothesis proposal• Digital exhibition

Research and development
Feasibility verification

Prior art search• Utilization of chemical substance database• Utilization of AI

Open innovation• Universities• NEDO• Cross-industry collaboration

Idea creation
Issue setting

External technologies
Core technologies

Social value

Future value creation

Problem-setting process
To perform highly accurate problem identification, thefirst step is to formulate a “hypothesis,” which involves
setting the problem and generating ideas for solving it.
We then proceed with feasibility verification and improvements on a small-start basis. We also work with universities
and companies in other industries to accelerate R&D.

29

Integrated Report 2022 / SEKISUI KASEIPriority areas

Marketing process
We focus on marketing as well as prior art search.
We aim to be an R&D organization that envisions whatkind of value we can contribute to society in the future
and then implements verification cycle in a hypotheticalmarket up to the point of commercialization.

Research & Development Policy
Develop new products that contribute to the growth of the company
Sharpen marketing thinking and promote development based on hypothetical needs and actively utilize
and promote interaction with other industries
Engage in technological development that leads to enhancement and expansion of existing businesses
Promote solution development and technological innovation that will help enhance existing businesses
from the three perspectives of “economic value,” “social value,” and “environmental value”
Nurture creative personnel who think about and experiment with business
Employees who have their own thoughts and put their “desire to achieve something” into practiceResearch & Development Framework
The Research & Development Center, which is our central
facility for R&D, is responsible for a series of tasks related
to research on core technologies and development of new
products that lead to new businesses.
Within the Center, the R&D Planning Dept., the Basic
Research Laboratory, the Development Dept., theIntellectual Property Dept., the Evaluation Test Dept., and
the Product Development Dept. work to speed up thedevelopment cycle by conducting integrated R&D fromproblem setting through marketing to mass production,
which leads to commercialization.
The Center collaborates with both the Production
Technology Center, which works on production innovation
processes and design development for equipment, including the use of IoT and AI, and with the Design & Technology
departments of each business division to ensure the earlycommercialization of products and services.

TOPIC

Embodying RX (Research Transformation)
Fluorinated surfactants, which are used as dispersing agent and surface modifiers, are being subjected to tighter environmental regulations now that their properties of bioaccumulation and persistence inthe environment have been identified.
There is therefore a need to introduce alternative, non-fluorinateddispersing agent. Inspired by the adhesion abilities of mussels,
Associate Professor Hiroshi Yabu (Junior PI) of the Advanced Institutefor Materials Research at Tohoku University has succeeded in developing an alternative dispersing agent that does not contain fluorine.
When we tested the dispersing agent, it was able to disperse hydrophobic particles in water with no leaching of fluorine into the effluent,which will help enable industrial processes with reduced ecologicaland environmental impact.
We aim to apply the results of this research to the practical application of non-fluorinated dispersing agent. We have already started
pre-marketing, and are currently proceeding with market development for commercialization.
Going forward, we will actively promote such open innovation initiatives to link R&D to practical applications as quickly as possible.

Dispersion in water

PTFE+
dispersant

PTFE
only

Uniformly
dispersed andtransparent

UnmixedandcloudyChemical structure of dispersing agent

Catechol group, an adhesion molecule in mussels(adheres to a wide variety
of materials)

Ethylene glycol
group soluble invarious solvents

Integrated Report 2022 / SEKISUI KASEI

30

Strategies for Value Creation

Human Resources Strategy
In order to embody our founding spirit,“For happiness of people working for
the Company,” we aim to become anorganization where each and every memberof our diverse human resources candemonstrate his or her abilities to the fullest
in a workplace that encourages employees
to take on new challenges.
Makoto Okuno
General Manager of Human Resources Dept.
Administration Headquarters

Strengthening Our Human Capital
The management philosophy of SEKISUI KASEI Group
states that “we practice Zen-in Keiei based on respect andmutual trust and are always innovating in our aim of ‘new
happiness.’” In order to carry out this philosophy, we haveformulated the five human resource qualities required of
employees of SEKISUI KASEI Group.

To ensure that each individual is able to independently
envision his or her career and to obtain opportunities for
self-improvement and growth through work to achieve thatcareer, we are promoting the creation of an environment
where Zen-in Keiei can be put into practice through various
systems including education and training programs.

The Ideal Type of Person Being Sought by SEKISUI KASEI Group
1. Aspiration
Human resources that feel strongly about achieving high goals and the nurturing of people
2. Creativity
Personnel with the ability to conceptualize in order to create and innovate based on mental agility, and that are notbound by preconceived notions
3. Self-reliance
Having a sense of ownership in all matters, people who can think for themselves, who can think things through andmake assessments, and then take responsibility for their actions
4. Communication skills
Together with being able to clearly convey their own thoughts in any situation, human resources who will become
engaged through the exchange of ideas with others
5. Ability to execute
Personnel who make concrete plans to achieve objectives, act promptly and take the initiative, and who produce results

Training Programs to Promote the Development of a Diverse Professional Workforce
SEKISUI KASEI Group’s personnel systems
and education and training programs define
the knowledge and experience required ateach career stage, from joining the company
to assuming Managerial position.
In addition, through our “specialist system”
introduced in 2019, we have established amulti-track personnel course that allows not
only management personnel but also specialist personnel to play an active role, andwe are working to expand our personnel systems that empower diverse human resources
to develop their individuality.

31

Integrated Report 2022 / SEKISUI KASEI

Job-class-specifictraining programs

Career development
support training

Director training

Career development training
for 53-year-olds

SK-Juku Screening for appointment
course A of advisory senior manager

Managerial
position

Training for newly
appointed managers

Supervisor
training

SK-Juku Screening for promotion tocourse B
managerial position

Senior regular
employee
Regularemployee

Career development training
for 45-year-olds

Career development training
for 35-year-olds

Career development training
Screening for promotion tosenior regular employee

Self-development
supportExternal seminars
Distance learning
Language training,etc.

Career development training
for 30-year-olds

Basic training* SK-Juku is a fixed-term, hands-on training program designed to develop next-generation leaders.

Professional
position* There is a system
for transitioning
to a professional
position.

Basic Stance with Regard to Human Resources
We believe that our founding spirit “For the happiness of people working for theCompany” as well as Zen-in Keiei, which has always been the culture and DNA
supporting our growth, are the basic and essential elements needed to realize ourvision, and are worth passing down and putting into practice into the future.

Diversity & Inclusion Initiatives
As an initiative commencing from FY2019, we have formulated
a three-year Action plan on Promotion of Woman’s Participation
and Advancement in the Workplace & Advancement of
Measures to Support Raising Next-Generation Children, andhave conducted educational activities to promote understanding and awareness of diversity.
Meanwhile, we set a goal of increasing the ratio of Womenhires to at least 17%, and we have exceeded this goal for all
three years of our recruiting activities.
To further promote diversity, in FY2022 we formulated a
new Action plan on Promotion of Woman’s Participation
and Advancement in the Workplace & Advancement of
Measures to Support Raising Next-Generation Children,
and are working to achieve this plan.
Ratio for Women Managers
Ratio for Women Employees
Ratio of Women Hires

FY2021 Results
4.7%
16.1%
23.1%

FY2024 Target
7.0% or higher
18.0% or higher
25.0% or higher

The employment rate for people with disabilities for theentire Group was 1.4% (FY2021 results). To expand employment of the disabled, we are developing case studies ofbusiness sites and Group companies that are making progress in hiring people with disabilities.
Promoting a diverse workforce — in other words, creating
an inclusive environment where everyone can thrive — isthe essence and true nature of Zen-in Keiei. We aim to be
the Group that respects diversity and where everyone cancontribute their energy and enthusiasm.

Promoting Workstyle Reforms
The COVID-19 pandemic has completely changed the way
people think about work, and has led to progress in IT-driven
efficiency and the deployment of new systems. In addition to
improving the IT infrastructure so that employees can workat home in the same way as when they go to work, in 2021,
we made the work-from-homeprogram permanent, allowing
for a combination of work-fromhome and on-site work basedon business needs. We are also
working to promote work-lifebalance by expanding systems
We have institutionalized worksuch as childcare leave andfrom-home and encourage diverse and flexible workstyles.
nursing care leave.

TOPIC

SKG Kaizen Activities Tournament
Based on the concept “monozukuri (creating things) is creating humanresources” and aiming to develop its human resources and strengthen the
manufacturing capabilities of the Group as a whole, SEKISUI KASEI Groupholds an annual company-wide SKG Kaizen Activities Tournament as partof its efforts to promote improvements in productivity and workability in all
aspects of its operations.
This year, 201 teams from around the world entered the competition, and
11 teams that passed the regional qualifying rounds participated in the
15th SKG Kaizen Activities Tournament,
company-wide tournament.
held remotely
After the presentation of the kaizen activities, the best teams are recognized,
and their kaizen efforts are shared through our internal Group publication and on the Web. This kind of settingfor Kaizen activities is another example of our initiatives to support “Zen-in Keiei that drives the growth of people
and the Company.”
Integrated Report 2022 / SEKISUI KASEI

32

Foundation of Value Creation

SEKISUI KASEI’s ESG
E

Environment

Manufacturing in harmony with the environment is our starting point
Since its founding, SEKISUI KASEI Group has advanced its
foaming and polymerization technologies while also working on monozukuri (manufacturing craftsmanship) in harmony with the environment, including energy conservation
and recycling, with the aim of creating a low-carbon andrecycling-based society.
For example, the lightweight and heat-insulating properties of foamed products help to reduce CO2 emissions
by improving automobile fuel efficiency and also reducefood loss.
But now, in light of the severity of climate change, ocean
pollution, and other global-scale challenges, we feel theneed to explore new possibilities and build solutions to
our environmental problems. Aiming for a future in whichpeople and the earth are healthy together, we will promote
SKG-5R and continue to take on the challenge of innovation in our products and business activities.

Environmental Policy
Basic Policy
SEKISUI KASEI Group, through its business activities, contributes to realizing a sustainable society where people
and our planet continue to live harmoniously.
1. Addressing Climate Change
In our business activities and throughout the life-cycle of our products and services, we aim to achieve carbon
neutrality through reductions in energy usage and effective utilization of resources.
2. Resource Circulation
With the aim of building a society with material circulation, we pursue innovations that lead to “Reduce, Reuse,
Recycle” and “Replace, Re-Create” based on our unique technologies.
3. Ecosystems Conservation
By making efforts for the secure management, treatment and reuse of the chemical substances used and thewaste generated, we will contribute to the conservation of rich ecosystems.
4. Compliance and Information Disclosure
We comply with laws, regulations, ordinances and international rules and we disclose the information relating
to the environment timely for the communication and mutual understanding with society.
5. Education and Enlightenment
We make efforts for the continuous education and enlightenment to improve the knowledge of our employees
and promote the activities to mitigate environmental impacts through management by all members’ participation (Zen-in Keiei).

33

Integrated Report 2022 / SEKISUI KASEITargets
SEKISUI KASEI Group (SKG) released the SKG-5R STATEMENTin 2019 and set two targets to be achieved by 2030.
One is the creation and market expansion of Sustainable
Star Products and the other is the reduction of CO2
emissions. By promoting SKG-5R, we aim to achieve 100
Sustainable Star Product registrations, accounting for
50% of net sales, and a 27% reduction in CO2 emissions

compared to FY2018. With respect to the reduction of CO2
emissions, we regard the achievement of the 2030 target
as a milestone, and will accelerate our efforts to achievecarbon neutrality by FY2050.

3Rs for the creation of a recycling-based society

2Rs based on SEKISUI KASEI Group’s unique technologies

ReduceReduce raw material consumption via higher foam expansion rates,
lighter weights, and thinner walls
Promote energy savings in production and logistics (CO2 reduction)

Reuse

Core measures

RecycleCore measures

Core measures

Switch from petroleum-based to biomass andbiodegradable materials
Switch to renewable energy

Promote replacement withsustainable materials and energy

Re-create

Expand the lineup of reusable products
Reuse distribution materials

Reuse waste materials and energy

Core measures

Re-create value and functions to contribute toenvironmental improvement

Create Sustainable Star Products and expand their market
We develop and design products that take into account environmental impacts and limited resources
throughout the life cycle, from the raw material procurement stage to the use stage and the disposal andrecycling stage. Under SKG-5R, products with a particularly high contribution to the environment are certified as Sustainable Star Products and their expansion is promoted as an indicator.
Creation of the “Sustainable Star Product” logo

High
Development

Application
Examination
product
Sustainable
Star Product (SSP) * Environmentally-friendly

Eco-friendliness

Products and systems that make greater contributions toApplicationamong
filed by
Examination by
the environment
our sustainable products

Low

TargetII

Create next-generation products and business models
with new value and functions that contribute to
an improved environment

Commercialize and promote sales of products made fromregenerated materials
Develop recycling technologies (material, chemical, thermal)

Develop recycling technologies andsystems to promote recycling

I

ReplaceCore measures

Reduce the use of resources and energy

Target* The number of Sustainable Star Product registrations, percentage of net
sales, and CO2 emissions are currently being calculated in a way that incorporates figures for the Proseat Group. Consolidated figures will be posted
starting next fiscal year.

CO2 emissions

the dept. in charge

the Environmental Committee

Approval

Total number ofApproval ata management meeting
registrations

Sustainable Product * Eco-friendly productProducts and systems that are useful in daily life andfriendly to the environment, such as foam plastics

申請

審査

Reduce CO2 emissions to virtually zero in FY2050

Certification/

Targetsfor FY2030
Registration

承認

100

Share ofnet sales

50%

認定・登録

経営会議にて、社長・取締役・役員による承認

Reduce FY2030 CO2 emissions (Scope 1+2) by 27% compared to FY2018
Under SKG-5R, CO2 emissions in Scope 1+2 were set to be reduced by 27%
by FY2030 (compared to FY2018).
Today, as the world focuses on tackling climate change, we regard theachievement of the 2030 target as a milestone, and will accelerate ourefforts to achieve our new goal of carbon neutrality by FY2050.

Targets for FY2030

Scope1+2-27%(Compared to FY2018)

Targets for FY2050

Carbon neutrality

achieved

Integrated Report 2022 / SEKISUI KASEI

34

23

30
0

2018

2019

2021

Foundation of Value Creation

2024(plan)

2030(FY)(target)SEKISUI KASEI’s ESG

E

Environment

FY2021 Results

3Rs for the creation of a recycling-based society

Sustainable Star Products as percentage of net sales
Core measures
50

Reuse

50 (%)

40

RecycleCore measuresregenerated materials
Develop recycling technologies (material, chemical, thermal)

Develop recycling
10 technologies andsystems to promote recycling
100

Re-create(FY)

Replace2030(target)Recycle(plan)

Reuse

2024

Reduce2021

Re-create value and functions to contribute toenvironmental improvement

30

ReduceReduceExamination,
certification,
Reuse
Reuse and registration process
2019

Re-createwith new value and functions that contribute to
an improved environment

4260

16 Commercialize and promote sales of products made from

20

2018

Number of registered Sustainable Star
Products
Core measures
100 and business models
Create next-generation products
9030

Switch from petroleum-based to biomass andbiodegradable materials
Switch to renewable energy

Promote replacement withsustainable materials and energy

120

Expand the lineup of reusable products
Reuse distribution materials

Reuse waste materials and energy

Core measures

Re-create

Replace

Reduce raw material consumption via higher foam expansion rates,
lighter weights, and thinner walls
Promote energy savings in production and logistics (CO2 reduction)

Reduce the use of resources and energy

0RecycleReuse

I

ReduceTarget2Rs based on SEKISUI KASEI Group’s unique technologies

Replace
ReduceSustainable
ReduceReduceCreating
Star Products and expanding their target markets
Core measures

23

2018

2019

2021

2024

2030

(plan)(FY)(target)The process of registering a Sustainable Star Product is as follows. After receiving the application from the department in charge, the Environmental Committee examines it, and those that meet the criteria as a result of the examination are certified and registered after approval at a management meeting. A third party evaluates the validity of
the certification and registration process.

Reuse
Reuse
RecycleRecycleCertification Criteria

Application filed by
the dept. in charge

Re-create

Application

Replace

ReduceRecycleDevelopment

Reuse

ReduceReduceFlow for examination, certification, and registration

Examination

Approval

Examination by
the Environmental Committee

Approval ata management meeting

申請

審査

Certification/
Registration
高

「サ

承認

認定・登録

We have set detailed criteria for each environmental contribution item for the certification, creatinga system to環境certify products and systems that exceed a certain predefined level as “Sustainable Star Products.”50
貢
50 (%)

Reuse
Recycle35

Reuse

Reusability

Use of recycled materials
Higher recyclability (e.g. easier to sort)

RecycleEstablishment of an independent recycling system

Replace
Re-create
Reuse

Replace
Re-create
Reuse

Use of biomass raw materials
Substitution of oil-derived materials

Other environmental
contributions

Offset of environmental load and support forenvironmental conservation activities

Contribution to environmental improvement by the re-creation of
new value and functions

RecycleIntegrated Report 2022 / SEKISUI KASEIRecycle0Re-create

Energy saving and improved durability (longer life) during use
Reduction of other environmental loads during use

Re-create

Energy saving during transportation (established as a system)

10

Replace

Reduction of waste during production

Recycle2

Reuse

RecycleEnergy saving and reduction of CO emissions during production
Replace
ReduceReductionof water resource use during production
ReduceRecycleReplace
ReduceWeight and space reduction
Reduction of the amount of waste after product use
Reduction of hazardous substances and volatile solvents
Reduction of greenhouse gases
Reduction of other environmental loads in development and design

Replace

Reuse

RecycleReuse

Environmental contribution item

Reuse

ReduceReduceReduce・取締役・
40 at the 経営会議にて、社長
Contribution
Contribute at
役員による承認
development/design Contribution at thethe shipping30
and raw material
production stage (transportation)
procurementstage
16
20 stages

10

2018

2019

2021

献
度

Contribute at theuse stage低2024(plan)

Contribution at thedisposal/recycling
stage

2030

(target)

(FY)

「サス

優れ

「サ

発泡

環境

FY2021 Results

CO2 emissions (thousand t - CO2)

140,000

Re-create

ReplaceScope 1+2 reduction plan

RecycleReduceReduceReduction of CO2 emissions

Reuse

II

ReduceTargetReduce by27%
in FY2030

BAU (Business as usual)

BAU comparison

130,000
120,000

90,0000

2018(Baseline)

FY2018 comparison

2026

in FY2050

2028

2030

2050

(FY)

Re-create

Replace

RecycleReuse
Recycle

2024

Reuse

Core
measures

Reduce2022

ReduceReduce2020

Carbonneutrality
achieved

Re-create

SKG-5R activities

Replace

RecycleReduce
Reuse

Reuse

Reduce100,000
Reuse

Reduce110,000

Promote streamlined production processes and energy savings
Decarbonize fuels and switch to renewable energy sources

Reuse
Createenvironmentally-friendly products (Sustainable Star Products) and expand their business
RecycleDevelop new processes and introduce new production facilities under environmental investment limits

Replace

Re-create

RecycleReplace

Re-create

RecycleReplace

RecycleRecycleReplace

Reuse

Reduce
Reuse

Reuse

ReduceReuse

ReduceWe believe it is important to reduce CO2 emissions
Under SKG-5R, we will contribute through ourassociated with our business activities while also workSustainable Star Products and collaborate with compaing to reduce them throughout the supply chain.
nies involved in the supply chain, focusing on the identified hotspots, thereby contributing to the reduction
As part of our SKG-5R initiative, we have calculated our
Scope1※：
事業者自らによる温室効果ガスの直接排出
of CO2 emissions in Scope 3.
supply chain emissions and identified Scope 3* hotspots(categories
with high emissions and large* Scope 3: Other indirect CO2 emissions not included in Scope 1+2
Scope2：他社から供給された電気・poten熱・蒸気の使用に伴う間接排出tial for reduction).

Examples of specific measures

ReduceReduceReducePromote reduction of raw materials used in products and energy conservation duringtransportation and delivery

Reuse
RecycleReuse
Promoteexpansion of products made from regenerated materials and recycling ofRecycleEfficient use of energy (heat) sources
used products

from petroleum-based to biomass and biodegradable materials
Replace Switch
Replace
Re-create Creation
Re-createof new value and next-generation products to contribute to the environment

Reuse

Reuse

Integrated Report 2022 / SEKISUI KASEI

36

Foundation of Value Creation

SEKISUI KASEI’s ESG

E

To achieve a sustainable society, SEKISUI KASEI Group promotes monozukuri (manufacturing craftsmanship) activities in coexistence with the environment, such as the reductionof environmentally hazardous substance emissions generated through business activities.

Environment

Inputs/Outputs (FY2021 Results)
SEKISUI KASEI Group manages the environmental impact arising from business activities in “output/unit consumption,”
which expresses environmental loadings per production volume.

Japan

Overseas

Inputs

InputsEnergy consumption

Energy consumption

1,875,340 GJ

Water consumption

Electric: 122,351 MWh

3,302 thousand m

Non-electric: 17,393 kl

835,340 GJ
3[Crude oil equivalent]

Recycling 9,716 t
Materials Recycling: 8,045 t
Thermal Recycling: 1,671 t

Atmospheric environmental load
CO2 emissions : 9,086 t-CO2 (Logistics)
NOx emissions : 21 t
SOx emissions : 57 t

Aquatic environmental load
Total effluent

37: 2,975 thousand m3

194 thousand m

Electric: 39,516 MWh
Non-electric: 10,474 kl[Crude oil equivalent]

3

SEKISUI KASEIRecycling 2,289 t• Sales• Production• R&D

Materials Recycling: 2,274 t
Thermal Recycling:
15 t

Outputs

CO2 emissions : 92,140 t-CO2 (Production)

Water consumption

Outputs
Atmospheric environmental load
CO2 emissions : 33,847 t-CO2 (Production)
NOx emissions : 16 t
SOx emissions : 5 t

Aquatic environmental load
Total effluent: 144 thousand m3

Amount of COD discharge : 13 t

Amount of COD discharge : 14 t

Industrial waste

Industrial waste

10,098 t

2,886 tFinal landfill disposal and simple incineration:
381 t

Final landfill disposal and simple incineration:
595 t

Integrated Report 2022 / SEKISUI KASEIInputs/Outputs (FY2021 Results)
Fiscal Year
Number of production sites
Japan
Overseas

2017

2018

2019

2021

2020

37
10

39
19

39
19

39
19

38
19

Inputs (Japan)
Energy consumption (GJ)
Unit consumption/output (GJ/sales in millions of yen)
Water consumption (thousand m3)
Unit consumption/output (thousand m3/sales in millions of yen)

1,884,800
20.3
3,459
37.3

1,934,530
21.0
3,401
36.9

1,929,480
22.2
3,457
39.8

1,866,190
23.7
3,252
41.4

1,875,340
26.3
3,302
46.4

Outputs (Japan)
CO2 emissions (Production) (t-CO2)
Unit consumption/output (kg-CO2/sales in millions of yen)
CO2 emissions (Logistics) (t-CO2)
Unit consumption/output (kg-CO2/t)
CO2 emissions (Office) (t-CO2)
Unit consumption/output (kg-CO2/m2)
Effluent (thousand m3)
Unit consumption/output (thousand m3/sales in millions of yen)
COD discharge (t)Industrial waste (t)Recycling rate (%)

102,742
1,108
7,854
36.0
110
28.8
3,255
35.1
16.6
8,961
98.5

101,909
1,105
8,304
36.3
125
32.7
3,269
35.4
17.0
8,780
97.2

95,760
1,103
8,180
36.3
100
26.2
3,272
37.7
15.8
10,436
95.4

89,571
1,140
7,634
33.7
74
19.5
2,962
37.7
14.0
9,764
95.6

92,140
1,294
9,086
39.9
76
19.9
2,975
41.8
12.8
10,09896.2

Inputs (Overseas)
Energy consumption (GJ)
Unit consumption/output (GJ/sales in millions of yen)
Water consumption (thousand m3)
Unit consumption/output (thousand m3/sales in millions of yen)

297,260
15.3
138
7.1

539,150
26.5
163
8.0

918,660
18.6
253
5.1

858,470
21.3
221
5.5

835,340
18.0
194
4.2

Outputs (Overseas)
CO2 emissions (Production) (t-CO2)
Unit consumption/output (kg-CO2/sales in millions of yen)Effluent (thousand m3)
Unit consumption/output (thousand m3/sales in millions of yen)
COD discharge (t)Industrial waste (t)Recycling rate (%)

15,437
796
128
6.6
11
474
74.2

25,178
1,236
81
4.0
7.5
1,494
80.7

41,883
848
214
4.3
13.6
3,511
78.8

38,503
956
166
4.1
16.0
2,958
81.8

33,847
730
144
3.1
14.1
2,886
79.4

Note 1: SEKISUI KASEI Group ascertains and manages the environmental impact that arises in various aspects of its business activities in terms of “unit consumption/output,” which expresses environmental loadings per production volume.
Note 2: Company-wide total including the Proseat Group, which became a consolidated subsidiary in FY2018 (January 2019).

Recycling of Expandable Polystyrene Foam (EPS)
100 (%)

80.3

80

30.3

60

51.5

40

20.3

20
0

12.6

31.2

1991

1998

Material recycling rate

50.0

2007

85.4

85.7

88.3

90.2

90.2

90.4

90.8

89.5

90.8

92.0

28.6

30.7

31.9

34.0

34.5

36.0

38.0

38.1

37.9

38.2

56.8

55.0

56.4

56.2

55.7

54.4

52.8

51.4

52.9

53.8

2009

2011

2013

2015

2016

2017

2018

2019

2020

2021

(CY)

Energy recovery rate

* Data source: JEPSA

Integrated Report 2022 / SEKISUI KASEI

38

Foundation of Value Creation

SEKISUI KASEI’s ESG

E

Environment

Environmental Accounting (Japan)
Environmental Conservation Costs(Millions of yen)

Category

FY2021

FY2020Major activities

Investment

Costs

Investment

Costs

Control measures for air/water quality

19

94

6

(2) Global environment

Energy saving

61

2

125

14

(3) Recycling

Recycling, industrial waste treatment

4

400

0.2

353

1) Costs in business area
(1) Pollution control

114

Subtotal

84

496

131

481

2) Up-/down-steam

Product recycling

0

20

0

43

3) Management costs

Departmental costs associated withintroducing environment management system

2

140

3

72

4) R&D costs

R&D for environmental conservation products

0

40

0

44

5) Social Activity cost

Greening, social supports

0.1

1

0.1

1

6) Environmental damage fixing cost

Nature restoration
Total

Environmental Conservation Effects(in terms of volume)
Details of effects (Unit)

0

0

0

697

134

641

Economic Effects Related toEnvironmental Conservation Measures (Millions of yen)
FY2021

FY2020(1) Electricity consumption (MWh)120,562

122,351(2) Crude oil consumption (kl)

17,235

17,235(3) Total effluent (thousand m3)

3,268

3,272

(4) Amount of COD discharge (t)

14.7

16

200

201

FY2020

FY20212(11)2) Income from recycling

325

280

Total

328

269

Details of effects

1) C ost reduction through energy-saving
activities

1) Effects on costs in business area

Cost Effectiveness ofEnvironmental Conservation Activities

2) Effects on Up-/down-steam costs
Amount of recycled polystyrene foam (t)086

FY2020

FY2021

47.1%

42.0%

Investment figures are for construction completed during the period.
Expense figures do not include depreciation and amortization.

Compliance with the Chemical Substances Management Act
We promote improvements in compliance with the PRTR*
system under the Chemical Substances Management
Act (the Act on Confirmation, etc. of Release Amountsof Specific Chemical Substances in the Environment andPromotion of Improvements to the Management Thereof).
* PRTR: Pollutant Release and Transfer Register

Emissions of Chemical Substances (PRTR substances: Rounded to one decimal place)
Substance
Fiscal Year

Toluene

2018

2019

2020

2021

2017

2018

2019

Methyl methacrylate
2020

2021

2017

2018

2019

2020

Ethyl benzene
2021

2017

2018

2019

2020

2021

Air

4.7

4.7

6.7

5.0

5.4

0.5

0.4

0.5

0.3

0.4

1.6

1.4

1.4

1.2

1.3

0.1

0.1

0.1

0.1

0.1

Water

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Soil

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Transfer

2.8

3.4

3.1

1.6

3.2

0.0

0.0

0.0

0.0

0.0

0.0

0.0

1.1

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Emission

39

Styrene2017(t)Integrated Report 2022 / SEKISUI KASEIContributing to the creationof a sustainable society

Endorsement of recommendations of the Task Force on
Climate-related Financial Disclosures (TCFD)SEKISUI KASEI has identified addressing climate change as a key management
issue (materiality). We are accelerating our efforts to achieve carbon neutrality by
reducing CO2 emissions through energy conservation and efficiency in production
and the use of renewable energy, and by creating and expanding environmentallyfriendly products that contribute to decarbonization.
In April 2022, we announced our new mid-term management plan “Spiral-up
2024,” which sets “Shift to businesses that solve environmental and social issues”
as one of three key issues, to be driven by the initiatives “Expanding Sustainable
Star Products through recycling-based business” and “Striving to achieve carbon
neutrality.” The newly established GX Development Department will drive the resolution of these issues in order to steadily implement the activities that are thecornerstone of our Green Transformation.
Going forward, the Group will work to disclose information on our response to
climate change in line with the TCFD recommendations, contribute to the realization of a sustainable society through our business activities, and strengthen ourmanagement foundation for the sustainable growth of the Group.
* TCFD: A task force established in 2015 by the Financial Stability Board (FSB), an international organization
dedicated to stabilizing the financial system. The TCFD encourages companies to disclose information on
climate change risks and opportunities.

Integrated Report 2022 / SEKISUI KASEI

40

Foundation of Value Creation

SEKISUI KASEI’s ESG

SSocialSafetySince its founding, SEKISUI KASEI Group has prioritizedsafety and health and promoted safety activities in all of its
business activities. We strive to prevent accidents and disasters and aim to be a safe company that is trusted not only
by each and every one of our workers, but also by the community and society. As the COVID-19 pandemic spreads
around the world, with significant consequences for society

and the economy, we have continued to give top priority
to the safety and health of our Group employees and theirfamilies, while never stopping our corporate activities.
Going forward, we will continue to take measures to meet
new challenges and provide a stable supply of products
and services that support people’s daily lives.

Safety Policy
Basic Policy
SEKISUI KASEI Group prioritizes health and safety above all else, promotes safety activities with the objective ofachieving zero accidents and zero disasters, and seeks to become a safe and secure company that is trusted by
employees and society.
1. Creating a Safe and Secure Workplace
We promote the creation of a comfortable workplace environment in which all employees are healthy in both
body and mind and feel that their work is worthwhile.
2. Compliance
We comply with laws, regulations and ordinances related to health and safety, and security and disaster prevention, aiming a company trusted by society.
3. Evolution of Safety Activities
Investigating danger and hazards in the working environment and reducing the risks with new perspectives
without been obsessed with current condition, we continue to evolve our safety activities.
4. Communication with Society
We aim good communication with authorities and local communities, and timely information disclosure.
5. Education and Enlightenment
We aim rising awareness for the health and safety through enhancing educational and enlightenment activities
and work on leveling up of every individual.

41

Integrated Report 2022 / SEKISUI KASEI

Safety Management System

CSR Control Committee(Chair: President)

Safety Committee

Oversees and promotes safety and health management
within SEKISUI KASEI Group

Kanto Safety Committee
All Group offices(38 in Japan)

Group companies in the East Japan region

Kansai Safety Committee

Safety and
Health Committee

Group companies in the Tokai and Kansai regions

West Japan Safety Committee(Safety Committee)

Group companies in the West Japan region

Production Section Safety Meeting (5 sections)
Safety meetings grouped by similar facilities and similar work

TOPICSFirst safety tournament held

Distribution of safety information

We held a safety tournament with the aim of spreading best practices by sharing disaster prevention andsafety activities independently implemented by eachbusiness site with the entire Group. A total of 38 sites,
including global ones, participated in the first tournament, and eight sites introduced case studies. We plan
to hold these tournaments on a regular basis to raisesafety awareness throughout the organization.

The “Safety Activity of the Week” is sent out every
Monday to provide information on key safety-related
activities and initiatives. In addition to introducing
safety activities at each business site, the bulletin provides a wide range of information which will raise safety
and health awareness, from lessons learned from accidents at other companies to information on the government’s “Spring National Traffic Safety Campaign”
and “Disaster Prevention Week.”

Lost Time Injury Frequency Rates*

Accident Severity Rates*

1.50 1.50

0.15 0.15

1.20 1.20 1.20 1.20 1.21 1.21
1.00 1.00

1.02 1.02

1.31 1.31

1.14 1.14

0.1300.130
0.10 0.10

0.10 0.10

0.08 0.08

0.10 0.10

0.62 0.62

0.06 0.06

0.50 0.50

0.05 0.05

0.20 0.20
000.07 0.07

0

0

0

0

20172017 20182018 20192019 20202020 20212021(FY) (FY)SEKISUISEKISUIKASEIKASEIGroupGroup Manufacturers
Manufacturers(100 or(100
more
or moreemployees)
employees)

000.0050.005

000.0100.010
0020172017 20182018 20192019 20202020 20212021(FY) (FY)SEKISUISEKISUIKASEIKASEIGroupGroup Manufacturers
Manufacturers(100 or(100
more
or moreemployees)
employees)* Lost Time Injury Frequency Rate: The number of absent employees due toindustrial accidents per 1 million working hours* Accident Severity Rate: The number of lost workdays per 1,000 working hours

Lost Time Injury Frequency Rates of Manufacturers (100 or more employees):
Excerpted from statistics in the Ministry of Health, Labour and Welfare’s Survey
on Industrial Accidents

Accident Severity Rates of Manufacturers (100 or more employees): Excerpted
from statistics in the Ministry of Health, Labour and Welfare’s Survey on
Industrial Accidents

Integrated Report 2022 / SEKISUI KASEI

42

Foundation of Value Creation

SEKISUI KASEI’s ESG

SSocialQualityGroup pursues quality from the customer’s perspective
and promotes quality management activities in accordancewith its management philosophy and quality policy.
In order to manage the quality of our products and services, we have established a quality assurance system foreach product according to its characteristics.
Starting from the R&D phase, we clarify the customer’s
specifications and focus on improving product quality fromthe development stage.

We have also developed internal regulations to deal withproduct accidents. In the unlikely event of a product accident, responsible departments take the lead in promptly
responding in line with regulations, with full considerationof the customer’s perspective, and related departments
cooperate in finding a solution as necessary. In the eventof a particularly serious product accident, the situation isimmediately reported to top management for prompt andappropriate action.

TOPICS

Chemical Substance Initiatives
In order to provide information swiftly to our customers, we use ChemSHERPA (a scheme for standardizing
information handling in Japan) to manage the chemical substances contained in our products. SEKISUIKASEI Group has also established a green procurement standard for raw materials and strives not only tothoroughly comply with laws and regulations, but also
to develop products that take into account the environment, safety, and health.

Response to Food Sanitation Act Revisions
The partial revision of the Food Sanitation Act (effective June 2020) introduced a “Positive List” system forfood utensils, containers, and packaging. The Grouphas filed notifications at applicable manufacturing

sites, and complies with the revised Food Sanitation
Act for all products that fall under the category of foodutensils, containers, and packaging.

Quality Training and Awareness-raising Activity
During World Quality Month in November, we conducted Group-wide e-learning (on quality management
and the Food Sanitation Act) to further raise awarenessof product quality. In addition, in order to improve thelevel of quality knowledge throughout the Group, we
promote the acquisition of QC certification*, whichtests knowledge of quality management.
* The exams are certified by The Japanese Society for Quality Control,
and are administered by the Japanese Standards Association (JSA)
Group and the Union of Japanese Scientists and Engineers.

Quality Policy
Basic Policy
SEKISUI KASEI Group pursue the quality with customer perspective and provides valuable products and services
that satisfy our customers and society.
1. Providing Satisfactory Quality
Building in the quality which satisfies customers requirements, we provide safe and secure products and services that satisfy the customers.
2. Thorough Quality Control
By thorough quality control from procurement of raw materials to delivery of products, we work on prevention
and recurrence prevention of defects by all the group members in pursuit of higher-quality manufacturing.
3. Perform Quality Assurance
We take the opinions and assessments of the customer seriously and use them for the improvements and weaim appropriate information disclosure and quick resolution with customer perspective for the complaints andrequests for improvements from the customers.
4. Compliance
We comply with laws, regulations and ordinances relating to the quality, and we work to maintain and enhancethorough quality management.
5. Education and Enlightenment
Through continuous educational and enlightenment programs, we promote improvement quality awarenessand strengthen management capabilities.

43

Integrated Report 2022 / SEKISUI KASEIContributing to the creationof a sustainable society

Human Rights/Labor Practices
SEKISUI KASEI Group respects fundamental human rights
and takes into consideration that no one is discriminatedon any and all factors including nationality, ethnicity, creed,
religion, gender, and age.

On the basis of our founding spirit, “For happiness of people working for the Company,” we regard human resources
as one of our most important management resources.

Initiatives for Human Rights
Our stance on human rights appears in the Company’s
Compliance Manual and is widely entrenched among theGroup’s employees.
To prevent sexual harassment, power harassment, andother abuses that could occur in the workplace, we conductvarious training programs as part of employee education.
In March 2018, SEKISUI KASEI published the second edition of the Company’s Compliance Manual, which included
revisions centered on labor practices and harassment. In
order to disseminate the contents of the second edition,
we are implementing e-learning programs for all Group
employees on a yearly basis, and with the goal of fostering
the compliance awareness of employees, we continue toremind them that the issues of human rights and harassment can occur in a variety of circumstances around us.

Company Business Promotion Committee (Shasui Kai)—Upholding SEKISUI KASEI’s Founding Spirit—
The Company Business Promotion Committee is an organization comprised of all members of the Company (management as well as employees), and it pursues our founding
spirit of “happiness of people working for the Company”
and corporate growth based on respect for humanity andmutual trust.
Realizing the “happiness of people working for theCompany” means Group employees working in good
health, both physically and mentally, and through the

The “Zen-in
Keiei” Card

Committee we are working to
implement our corporate cultureof “Zen-in Keiei” so that employees can voluntarily participate
in management activities andhave an awareness of contributing to society through businessactivities.

SEKISUI KAEI Group has created the “Zen-in Keiei” card that contains information on the originof the Group name “Sekisui,” management philosophy, code of conduct, action guidelines forthe “Zen-in Keiei,” and the ideal type of person sought by SEKISUI KASEI Group. All information is compiled in a small booklet-sized card and provided to Group employees.

Integrated Report 2022 / SEKISUI KASEI

44

Foundation of Value Creation

SEKISUI KASEI’s ESG

G

Governance

Our Basic Approach to Corporate Governance
SEKISUI KASEI Group aims to be a plastics solutions company
trusted by customers around the world as it fulfills its social
responsibilities to all its stakeholders.
In order to achieve this, we recognize that we will need toensure effective corporate governance, reliability and transparency in management, and the establishment of a management system that is well equipped of responding to changes

in the business environment.
We have established Corporate Governance Guidelines thatset forth our basic approach and policy regarding corporate
governance and have published them on our website.
Corporate Governance Guidelines
https://www.sekisuikasei.com/en/assets/images/company/pdf/guideline.pdf

Corporate Governance System
We adopt a corporate auditor system, with supervision andaudits of business execution conducted by the Board of
Directors and Audit & Supervisory Board.
Of the eight directors, three are outside directors, who supervise management from an objective perspective while ensuring the appropriateness and transparency of the Board of
Directors’ decision making.
Of the five members of the Audit & Supervisory Board, three
are outside members. By establishing a system of timely andappropriate reporting of important matters to the Audit &Supervisory Board and its members, we have strengthened

the auditing function and ensure the rationality, transparency,
and fairness of management decisions.
Further, in 2019, we established Nominating and Compensation
Advisory Committee of which a majority of members are independent outside officers, which deliberates matters including
candidates to succeed the president, director candidates,and director remuneration.
Through this current system, we have put in place a structurethat functions both to ensure the rationality, transparency,
and fairness of management decisions and to supervise management from an objective and neutral perspective.

Chart of SEKISUI KASEI Corporate Governance System (As of July 21, 2022)
Shareholders Meeting
Appointment/Dismissal

Nominating and Compensation Advisory Committee

Consultation

Board of Directors
8 Directors

Appointment/
Dismissal(Inside Board Members: 5) (Outside Board Members: 3)

Audit & Supervisory Board

Total Members: 7(Inside Board Member: 1) (Outside Board Members: 6)

AdviceCSR Integral Committee

President

Total Audit & Supervisory
Board Members: 5(Internal Members: 2)(Outside Members: 3)

ReportCompliance andRisk Management Committee

Internal Audit Department

Audit

Executive Officers: 13

Cooperation

Independent
Accounting Auditor

Appointment/Dismissal

Executive Committee

ReportAudit

Appointment/Dismissal
Audit

Internal Audit

Headquarters, Departments, Subsidiaries

Nominating and Compensation Advisory Committee
As an advisory body to the Board of Directors, the Nominating
and Compensation Advisory Committee deliberates on matterssuch as director appointments, remuneration, and questionnaire
items for evaluating the effectiveness of the Board of Directors,
with the aim of strengthening the independence and objectivity of the Board of Directors in relation to overall corporate

45

Integrated Report 2022 / SEKISUI KASEI

governance and fulfilling its accountability to stakeholders. It isstipulated that the majority of committee members must consist of independent outside officers. Currently, the committee
consists of one internal officer, five independent outside officers,
and one outside officer, and the chair is elected from among theindependent outside officers by an internal vote.

Operational Status of the Board of Directors
The Board of Directors consists of eight directors, three ofwhom are outside directors, and the President serves as its
chairperson. The three outside directors and all five Audit& Supervisory Board members, including the three outside
members, attend the meeting and express their opinions as
appropriate.
The Board of Directors formulates management policies
and mid-term management plans, reports, deliberates,

and resolves important matters related to business execution, supervises directors and executive officers regarding
business execution, and develops internal control systems.
Furthermore, in order to clarify the management responsibilities of directors and to build a management structure that canquickly respond to changes in the business environment, wehave introduced an executive officer system and set the termof office for directors at one year.

Skill Matrix of Directors
The Board of Directors ensures that its roles and responsibilities are effectively fulfilled by having a well-balanced mix of
directors with a wide range of knowledge and experience, inorder to accurately assess the business situation and makeappropriate decisions. With regard to our policy for selecting
director candidates and specific candidate selection proposals,
the Nominating and Compensation Advisory Committee prepares a skill matrix of each director’s knowledge, experience,
Name

Position and Duties at the Company

Masato Kashiwabara

Representative Director
President and Chief Executive Officer

Katsumi Sasaki

Director
Senior Managing Executive Officer

Tetsuharu Hirota

Director
Managing Executive Officer

Hideyuki Asada

Director
Managing Executive Officer

Yasunobu Furubayashi

Director
Managing Executive Officer

Morio Kubota

Independent Outside Director

Naoto Kitagawa

Independent Outside Director

Michiko Uehara

Independent Outside Director

GenderCorporate Management
Management Strategy

Financial
Accounting

and abilities, and then comprehensively deliberates and prepares a draft proposal, taking into consideration the balance,
qualifications, and diversity of each director in relation to eachfunction and business of the Company, as well as management
experience at other companies in the case of independent
outside directors, and submits the draft proposal to the Boardof Directors. The Board of Directors then takes the proposal
into consideration when making its decision.
Legal Affairs
Governance

HRInternationality
Overseas
Business

Sales
Marketing

Development/
Production/
Quality

Environment
EnergyInsight
into Other
Industries* The “ ” above does not indicate all insights held by each Director
Men

Woman

Composition of Board of Directors
Internal Directors

Outside Directors

Ratio of Women Directors

Ratio of Outside Directors

5

3

12.5%

37.5%

1
Men

Men

3

1

Men
Woman

Men

Woman

1

Men

Men

Woman

1

Men

Woman

Integrated Report 2022 / SEKISUI KASEI
1

3

1
Men

3

1

46

Foundation of Value Creation

SEKISUI KASEI’s ESG

G

GovernanceEvaluation of the Effectiveness of the Board of Directors
such as management, deliberation, and setting of proposals,
were also evaluated.
On the other hand, some issues were pointed out, so wehave formulated an action plan to (1) enhance discussions on
medium to long term business directions and management
strategies, (2) discuss and consider non-financial agenda
items, and (3) conduct executive training, in order to further
improve the effectiveness of the Board of Directors.

In order to analyze and evaluate the overall effectiveness of
the Board of Directors, we conducted a survey of all the directors as well as Audit & Supervisory Board members based on
the advice and guidance of a third party, with the results ofthe survey discussed at a Board meeting.
As a result, the level of management and supervision of theBoard of Directors has risen, and it has been evaluated that it
is generally functioning, and efforts to improve effectiveness,

Policy for Determining Remuneration, etc. of Directors
The Board of Directors has resolved as follows regarding
the policy for determining the individual remuneration of

directors and other details based on the report from theNominating and Compensation Advisory Committee.

Policy on Director Remuneration (excerpt)

The link between director remuneration and the Company’s
shareholder value shall be clarified to further promote value
sharing with shareholders in order to contribute to improved
medium to long term business performance and increased
corporate value. In addition, the remuneration system shallemphasize the proportion of remuneration determinedthrough a comprehensive analysis, including in regard to thedegree to contribution toward performance and progress inachieving targets.

Specifically, remuneration of directors responsible for businessexecution shall consist of basic remuneration, performancebased remuneration, and stock-based remuneration, while
remuneration of outside directors responsible for supervisory
functions shall consist only of basic remuneration.
Furthermore, the policy for determining director remuneration shall be based on the discussions of the Nominating
and Compensation Advisory Committee, of which independent outside officers comprise the majority.

Director Remuneration
FY2021 Officer Remuneration Amounts
Classification(Millions of yen)

Eligible
Personnel

Basic
Performance-based Restricted stock
remuneration
remuneration
remuneration

Total

Directors (excluding outside directors)

7

83

—

19

103

Audit & Supervisory Board members(excluding outside members)

3

43

—

—

43

Outside officers

6

43

—

—

43

Notes: 1. The above includes two directors and one Audit & Supervisory Board member who stepped down at the conclusion of the 77th Ordinary General
Meeting of Shareholders held June 24, 2021.
2. Director remuneration amounts do not include employee salaries for directors concurrently serving as company employees.

Restricted Stock Remuneration System

We introduced a restricted stock remuneration system atthe 76th Ordinary General Meeting of Shareholders held in
June 2020.
This system aims to further promote shared value with shareholders by clarifying the link between director remuneration

47

Integrated Report 2022 / SEKISUI KASEI

and the value of Company shares and by providing incentive
to contribute to improvements in medium to long term business performance and increase corporate value for directors, with the exclusion of outside directors.

Contributing to the creationof a sustainable society

Risk Management System
In SEKISUI KASEI Group, the departments in charge ofeach type of risk formulate response plans and take specificcountermeasures under the basic policy on risk management established by the Compliance and Risk Management
Committee, which manages all risks. Further, the Complianceand Risk Management Committee creates a matrix of currently assumed risks according to their degree of severity,and evaluates and deliberates on the response status basedon reports from the departments in charge of each risk. The
committee then operates on a system of reviewing the risk
response measures and repeating the PDCA cycle dependingon the results of their evaluations and deliberations.
In addition, the management status of each risk is reported andshared with the Board of Directors and Executive Committee.

Plan

Do

Compliance andRisk Management Committee
Formulates risk management policy

Departments in charge of risk
Implement risk response
measures

Departments in charge of risk
Formulate risk response plans

ActionCheck

Compliance andRisk Management Committee
Reviews risk additions
and changes

Departments in charge of risk
Report on status of risk response
Compliance and Risk
Management Committee
Evaluates/deliberates status ofrisk response

Departments in charge of risk
Review risk response measures

Compliance Promotion
throughout the Group, we established the Compliance and Risk
Management Committee to ensure ongoing compliance withall laws and regulations. The Compliance and Risk Management
Committee meets in principle once every six months to discuss
compliance issues within SEKISUI KASEI Group and to reportany items for attention to the Executive Committee.
We have also established Compliance Committees andCompliance officers at Group companies, depending on theirsize, with the goal of further promoting cooperation within
the Group.

SEKISUI KASEI Group defines compliance as not only complying with laws and regulations, but also ensuring that operations
within SEKISUI KASEI Group are carried out in an appropriatemanner by complying with related rules and regulations while
acting with integrity based on the values, personal ethics, andcorporate ethics required by the society in which we operate.
SEKISUI KASEI Group Compliance Action Guidelines define
how we should act as a corporate entity as part of our effort topromote a strong relationship with society.
With the goal of strengthening and promoting compliance

SKG Clean Network
To fulfill its corporate social responsibilities, SEKISUI KASEIGroup set up the “SKG Clean Network” as an internalreporting system in line with our effort to build a fair andactive organization.

Users can choose between an internal or external contact
points and can issue their report either anonymously or under
their own name.

Internal contact point

External contact point

General Manager of the Legal &Compliance Department

Request for investigation

Office of the Compliance andRisk Management Committee

Reply

ReportSelection

Reply

Lawyers

Report
Reply

Person reporting

Integrated Report 2022 / SEKISUI KASEI

48

Foundation of Value Creation

Directors & Auditors

Osamu Matsumoto

Mamoru Akashi

Keizo Kousaka

Yasunobu Furubayashi

1985 Joined the Company
2021 Audit & Supervisory Board
Member of the Company[incumbent]

1988 Joined The Dai-ichi Mutual Life
Insurance Company*
2013 Director of The Dai-ichi Frontier Life
Insurance Co., Ltd.
2015 Director, Managing Executive Officer of The
Dai-ichi Frontier Life Insurance Co., Ltd.
2016 Vice President and Representative Director,
Vice-chief Executive Officer of The Dai-ichi
Frontier Life Insurance Co., Ltd.
2020 Managing Executive Officer of Dai-ichi
Life Holdings, Inc.
Director, Managing Executive Officer of
The Dai-ichi Life Insurance Company
2021 Director, Managing Executive Officer of
Dai-ichi Life Holdings, Inc. [incumbent]
2022 Outside Audit & Supervisory Board
Member of the Company [incumbent]

1970	Admitted to the bar
Joined Irokawa Law Office
2001 Chairman of Irokawa Law Office2009 Outside Director of Sumitomo Rubber
Industries, Ltd. [incumbent]
2012 Outside Audit & Supervisory Board
	Member of the Company[incumbent]
2016 Outside Audit & Supervisory
Board Member of Techno AssocieCo., Ltd. [incumbent]
2020 Chairman of Irokawa Law Office[incumbent]
Outside Audit & Supervisory
Board Member of Seiren Co., Ltd.
[incumbent]

Head of The 1st Business
Headquarters

Audit & Supervisory Board
MemberOutside Audit & Supervisory Board
MemberOutside Audit & Supervisory Board
MemberDirector
Managing Executive Officer
1992 Joined the Company

2021 Director, Managing Executive	Officer of the Company[incumbent]*Currently The Daiichi Life Insurance Company, Limited

Tetsuharu Hirota

Director
Managing Executive Officer
Head of The 2nd Business Headquarters,in charge of PX Development Department
and Information Systems Department
1984 Joined the Company
2016 Director, Managing Executive	Officer of the Company[incumbent]

49

Integrated Report 2022 / SEKISUI KASEIMichiko Uehara

Naoto Kitagawa

Please refer to page 54 fordetailed profile.

Please refer to page 54 fordetailed profile.

Outside Director

Outside Director

Hideyuki Asada

Toshitaka Fukunaga

Kojiro Takekoshi

Head of Research & Development
Center, General Manager of GX
Development Department

1979 Joined Sekisui Chemical Co., Ltd.
2011 Executive Officer of Sekisui
Chemical Co., Ltd.
2017 Managing Executive Officer
of Sekisui Chemical Co., Ltd.
2020 Full-time Audit & Supervisory
Board Member of Sekisui
Chemical Co., Ltd. [incumbent]
Outside Audit & Supervisory
Board Member of theCompany [incumbent]

1978 Joined the Company
2020 Audit & Supervisory Board
Member of the Company[incumbent]

Director
Managing Executive Officer

1989 Joined the Company
2020 Director, Managing Executive	Officer of the Company[incumbent]

Masato Kashiwabara
President and Representative
Director
1983 Joined the Company
2014 Representative Director,
President and Chief
Executive Officer of theCompany [incumbent]

Outside Audit & Supervisory
Board Member

Morio Kubota
Outside Director

Please refer to page 54 fordetailed profile.

Audit & Supervisory Board
MemberKatsumi Sasaki

Director
Senior Managing Executive
Officer
Head of Corporate Strategic
Headquarters
1983 Joined the Company
2021 Director, Senior Managing
Executive Officer of theCompany [incumbent]

Integrated Report 2022 / SEKISUI KASEI

50

Foundation of Value Creation

Discussion between Three Outside Directors

Naoto Kitagawa

Michiko Uehara

Morio Kubota

Outside Director

Outside Director

Outside Director

Aiming to become a company thatsolves environmental and social issues
SEKISUI KASEI is working to enhance corporate governance with the aim of achieving sustainable growthand improving corporate value over the medium to long term.
In this section, we invited outside directors Morio Kubota, Naoto Kitagawa, and Michiko Uehara to share
their views on the previous mid-term management plan “Make Innovations Stage-II” and their discussions informulating the new mid-term management plan “Spiral-up 2024.”

51

Integrated Report 2022 / SEKISUI KASEIReview of the previous mid-term management plan “Make Innovations Stage-II”
What are your thoughts on the mid-term manage-

further improve profitability. I recently visited two production

ment plan “Make Innovations Stage-II,” which con-sites, one in Germany and another in the Czech Republic,

cluded at the end of March 2022?

and felt that there was still plenty of room for improvement
throughout. It is important for all employees to be thor-

I was very disappointed that the Company fell

oughly committed to improving productivity and eliminating

short of the targets in the previous mid-term management

waste. The Company and the Proseat Group must deepenplan.

mutual understanding and accelerate their initiatives.

Kitagawa

In the Industry segment, the Proseat Group, which was
acquired to expand global sales, did not perform well in the

What about other initiatives?

wake of the COVID-19 pandemic and the recent developments in the Ukraine, which led to lackluster results.

Kubota In terms of promoting diversity, we were able towelcome Ms. Uehara as a woman outside director, and we

KubotaAlthough there were some inevitable factors ashave also added a foreign national to our executive officers.

the pandemic and the accompanying external environment

I believe this represents a significant step forward.

changed substantially after FY2020, the second year of theRegarding remuneration for officers, we introduced aplan, I was still disappointed that the Company was unable

restricted stock remuneration system, and also held discus-

to achieve the quantitative targets.

sions on how to evaluate performance and the appropriateness of officer remuneration levels.

On the other hand, I believe that there are

In addition, for selecting next-generation managers andthings the Company can do even under the harsh external

officers, we exchanged opinions on the qualifications andenvironment.

capabilities required for a manager, and also reformed per-It began working on creating a system to visualize the profit-

sonnel systems by removing hierarchies in order to actively

ability of each product in detail, which was raised as an issue

promote competent personnel, and I believe we gainedin last year’s discussion, by introducing the concept and meth-some success during the three-year period.

Kitagawa

ods of management accounting, among other things.

How do you see the European business strategy?
Kitagawa

During the previous mid-term management

plan, the Proseat Group was noticeably affected by theslump in demand for automobiles in Europe, but I believe
proactive measures, such as recording impairment losses
and reorganizing production bases, are being taken now.
The challenge going forward for the Proseat Group will beto implement company-wide cost reduction initiatives toIntegrated Report 2022 / SEKISUI KASEI

52

Foundation of Value Creation

Discussion between Three Outside Directors

New mid-term management plan “Spiral-up 2024”
What were the main points of discussion in preparing

Kubota Exactly. However, investors are also looking for fi-

the new mid-term management plan “Spiral-up 2024”?

nancial indicators and financial plans, so I think it is a goodidea to set qualitative targets as Mr. Kitagawa mentioned,

Kitagawa

We live in an age when it is difficult to foreseeaccompanied by quantitative targets.

the future, so for better or worse, there will be discrepancies

In terms of qualitative targets, raising “the shift to businesses

between our targets and actual results. With this in mind,

that solve environmental and social issues” as one of the key

I instead suggested that we should set up a management

issues in the “Spiral-up 2024” plan is highly commendable.

indicator that would show what kind of qualitative change in

Going forward, it would be good to take this a bit further

management we are going to accomplish.

and continue discussions regarding specific measures from a“backcasting” perspective in order to sustainably contributeto the environment and society.
Kitagawa With regard to the environment, we also discussed how we would respond to the challenge of global
decarbonization, and we incorporated achieving carbon
neutrality by 2050 into the plan. Looking ahead, I would
like to see the Company formulate a medium- to long-term
roadmap for reducing CO2 emissions, and steadily implement specific measures each year.

Role as a new outside director
How do you perceive your role as an outside director,

a gender perspective. I feel that in the future, promoting

having been appointed to the Board in June 2022?

employees irrespective of nationality, age, or gender will
enhance corporate growth and sound management by pro-

Uehara53

I believe that the role our stakeholders expect me

moting diversity.

to play as a Board member is to make recommendations

Also, in terms of being a legal professional, I believe thatfrom a perspective different from conventional ones.

stakeholders expect me to pay close attention to theMore specifically, I believe this means from a woman’s per-Board of Directors in general and contribute to corporate

spective and from a background as a judge and a lawyer,

governance.

which would be a different perspective from someone with a

To fulfill these expectations, I need to gain a good under-

background in corporate management.

standing of the Company’s business operations. Moving

First, I can provide advice on the medium- to long-term

forward, I would like to visit production sites and conduct

state of the Company and the direction it should take frominterviews with business departments.

Integrated Report 2022 / SEKISUI KASEIExpectations for SEKISUI KASEI going forward
What expectations do you have for SEKISUI KASEI?

new things.

Kitagawa

Kubota The public’s negative sentiment toward plastics

I think SKG-5R, SEKISUI KASEI’s action plan for

the environment, is an excellent and concrete initiative.

is loud and clear. I believe it is important to view this as a

It is important to expand the lineup of Sustainable Star

great opportunity to switch to a new mindset and turn it into

Products on the market and boost product market share,

new businesses. I would like to see SEKISUI KASEI become

and it is also critical that these products are widely promot-

a company that solves environmental and social issues by

ed to the public.

going beyond plastics and fully leveraging its technologies

Furthermore, I hope that each and every employee of SEKISUI

and expertise to continue contributing to society.

KASEI Group will internalize the initiative and be able to talkto people about the SKG-5R plan in their own words.
UeharaI agree. I also think SKG-5R is a very good environ-mental initiative.
However, seeing the sweeping changes in society as thetimes change dramatically with the COVID-19 pandemic, I
do feel that there is a need to accelerate business activities
in general.
I am looking forward to the Company’s transformation intoa “speedy company” that can lead the world in creating

Profile of Morio Kubota

Profile of Naoto Kitagawa

Profile of Michiko Uehara

Apr. 1977	Joined Okura & Co., Ltd. (until August 1998)
Mar. 1996	Director of ORBCOMM Japan Planning Limited(now ORBCOMM Japan Limited)
Jun. 2002	Representative Director and Managing Director of
ORBCOMM Japan Limited
Oct. 2007	Resigned from post of Managing Director of
ORBCOMM Japan Limited
Sep. 2017	Resigned from post of Representative Director of
ORBCOMM Japan Limited
Oct. 2017	Counselor of ORBCOMM Japan Limited(until August 2018)
Jun. 2018	Outside Director of SEKISUI KASEI Co., Ltd.
[incumbent]

Apr. 1976	Joined Toyota Motor Co., Ltd.
(currently Toyota Motor Corporation)(until June 2006)
Jun. 2006	Executive Officer of Daihatsu Motor Co., Ltd.
Jun. 2008	Director and Senior Executive Officer of Daihatsu
Motor Co., Ltd.
Jun. 2010	Director and Senior Managing Executive Officer of
Daihatsu Motor Co., Ltd. (until June 2015)
Jun. 2020	Outside Director of SEKISUI KASEI Co., Ltd.
[incumbent]

Apr. 1976 Assistant Judge at Kobe District Court
Apr. 1979	Assistant Judge at Kobe District Court Amagasaki
BranchApr. 1982	Assistant Judge at Osaka District Court
Apr. 1986	Judge at Fukuoka District Court(until March 1989)
May 1989	Admitted to the bar
Joined The Miyake Joint Partnership Law Office(currently Miyake & Partners)
Mar. 1992	Established The Uehara Joint Partnership Law OfficeJun. 2016	Outside Audit & Supervisory Board Member,
Sumitomo Electric Industries, Ltd.
[incumbent]
Feb. 2017	Outside Audit & Supervisory Board Member, The
Japan Wool Textile Co., Ltd. [incumbent]
Jun. 2022	Outside Director of SEKISUI KASEI Co., Ltd.
[incumbent]

Integrated Report 2022 / SEKISUI KASEI

54

Other Information

MD&A and Business Risks

MD&A
Market Environment
Looking at the global economy in FY2021, the situation
remains uncertain with respect to the novel coronavirus(COVID-19) pandemic that started in January 2020, withrepeated waves of vaccination-driven reductions in COVID19 followed by its re-emergence in the form of highly contagious mutant strains. In addition, price hikes have been
seen in a wide range of sectors due to soaring raw material
and fuel prices and the invasion of Ukraine by Russia, which
has spurred supply chain disruptions across the globe. In
the automotive industry, the situation in Ukraine has casta shadow over production activities, compounding theeffects of shortages of semiconductors and components
since last summer. Meanwhile, in the consumer electronics
and IT-related sectors, the demand for personal computersand related products has been strong as the practice ofworking from home spreads and takes root.
The Japanese economy, like the world economy, hasbeen improving as a result of vaccinations, but its recovery remains difficult to predict due to the effects of mutant
strains and other factors. In addition, addressing environmental issues such as the reduction of greenhouse gas
emissions is becoming even more important.
In the foamed plastics industry in Japan, demand for foodcontainer-related products has been strong due to COVID19. However, the situation in Ukraine and other new problems have prevented a full-fledged recovery in demandfor various parts, transportation materials, and packaging
materials. In addition, the outlook remains uncertain due tosuch factors as continued cost increases caused by soaring
raw material and fuel prices.

Consolidated Performance
In FY2021*, we achieved net sales of ¥117.567 billion (YoY
N/A), operating income of ¥1.463 billion (down 30.0% YoY),
recurring income of ¥1.401 billion (down 28.4% YoY), andnet loss attributable to owners of the parent of ¥5.917 billion (YoY N/A).
The results by segment were as follows. The Human Lifesegment recorded net sales of ¥49.530 billion (YoY N/A)
and segment income of ¥3.376 billion (down 10.1% YoY).
The Industry segment recorded net sales of ¥68.036 billion(YoY N/A) and a segment loss of ¥1.777 billion (compared
to a loss of ¥957 million in the previous fiscal year).
* The “Accounting Standard for Revenue Recognition” (ASBJ AccountingStandard No. 29, March 31, 2020) and related standards have been applied
starting at the beginning of FY2021. Compared to the year before the ap-

55

Integrated Report 2022 / SEKISUI KASEI

plication of the new standards, net sales in FY2021 decreased by ¥12.35
billion (¥8.432 billion in the Human Life segment and ¥3.872 billion in the
Industry segment). Profits were unaffected. For this reason, the operating
results for FY2021 are presented without showing the increase or decreasein net sales compared to the previous year or the ratio (%) of net sales tothe previous year.

Financial Position• Assets
Total assets as of the end of FY2021 were ¥143.308 billion, falling by ¥15.130 billion year-on-year. Current assets
increased ¥1.027 billion to ¥63.771 billion, mainly due toincreases in notes and accounts receivable, contract assets,
and electronically recorded monetary claims-operating.
Non-current assets decreased by ¥16.157 billion to ¥79.536
billion mainly due to a decrease in the market value ofinvestment securities and the processing of impairment
losses at a consolidated subsidiary.
• Liabilities
Total liabilities as of the end of FY2021 were ¥85.065 billion,
falling by ¥2.715 billion year-on-year due to decreases inlong-term loans, deferred tax liabilities, and other liabilities.
• Net assets
Total net assets as of the end of FY2021 decreased by¥12.415 billion to ¥58.242 billion, mainly due to a decrease
in retained earnings resulting from impairment losses anda decrease in net unrealized holding gains on securities.
• Cash flow
Cash and cash equivalents in FY2021 were ¥10.503 billion,
falling by ¥1.995 billion year-on-year.
(Cash flow from operating activities)
Cash flow from operating activities in FY2021 saw proceeds
decrease by ¥2.596 billion year-on-year, resulting in ¥3.831
billion in net cash provided by operating activities, mainly
due to the decrease in net income before income taxes inthis fiscal year and the impact of an increase in inventories.
(Cash flow from investment activities)
Cash flow from investment activities in FY2021 saw expenses
decrease by ¥179 million year-on-year, resulting in ¥3.186
billion in net cash used in investing activities, mainly due
to decreased outlays for purchases of property, plant andequipment and a decrease in proceeds from sale of investment securities.

(Cash flow from financing activities)
Cash flow from financing activities in FY2021 saw expenses
decrease by ¥1.940 billion year-on-year mainly due to adecrease in proceeds from long-term loans, resulting in¥2.573 billion in net cash used in financing activities.
• Capital investment
SEKISUI KASEI Group (the Company and consolidated subsidiaries) implements initiatives in line with its management
plan, making capital investments focusing on renewals,
repairs, and capacity expansion. The Group’s capital investment in FY2021 totaled ¥3.825 billion.
By segment, the investment amount was ¥1.856 billion for
the Industry segment and ¥1.229 billion for the Human Lifesegment.
• Dividend policy
The Company positions the returning of profits to shareholders as an important management issue. Our basic policy is to distribute profits in accordance with consolidated
financial results as well as in consideration of stability of
dividends while strengthening our management structureand securing internal reserves to prepare for future business development. We target a consolidated payout ratioof 30% to 40%.
In FY2021, in order to maintain stable dividends to shareholders, we decided to execute a year-end dividend of ¥7
per share, despite the fact that we recorded significant
losses due to impairment losses on non-current assets,
goodwill, etc. On December 2, 2021, we executed aninterim dividend of ¥5 per share, resulting in an annual dividend of ¥12 per share in FY2021.

Business Risks
Business and Other Risks
The main items considered to be risk factors for business development and that have the potential to have an
important impact on investors’ decisions are described
below. The Group’s policy is to recognize the possibility of the occurrence of these risks and to strive to avoid
their occurrence and to respond to them if they do occur.
Overall risk management is evaluated and deliberated by
the Compliance and Risk Management Committee, which
regularly reports its results to the Board of Directors.
1. COVID-19 Risks
We recognize mainly the following risks associatedwith COVID-19 that could particularly have implicationsfor SEKISUI KASEI Group. Under the leadership of the
President, the Group is making collective efforts to manage
and respond to the risks posed by COVID-19.
a. Infection of Officers and Employees
If officers or employees of the Group become infected with
COVID-19 and a cluster develops within the Company, theresulting suspension or delay of operations at the businesssite could cause a significant impact on the performanceand financial condition of the Group.
In order to ensure the health and safety of officers, employees, and their families and to prevent the spread of COVID19 within and outside of the Group, we have strengthened
measures such as encouraging employees to telework or
stagger work hours and refraining from travelling between
business sites.
b. Prolonged Suspension of Business Partner Operations
and Deterioration of Credit Status
In the case that COVID-19 causes a prolonged suspensionof operations at the global plants of the Group’s business
partners, particularly plants of the automotive, home appliance, and IT industries, the Group’s product net sales will
decrease, which could have a significant impact on the performance and financial condition of the Group. In addition,
if the credit status of the Group’s business partners deteriorates as a result of COVID-19, there may be delays in theGroup’s collection of accounts receivable or the accounts
receivable may be irrecoverable, which could have a significant impact on the performance and financial conditionof the Group.

Integrated Report 2022 / SEKISUI KASEI

56

Other Information

MD&A and Business Risks

The Group is therefore working to drastically reduce costs
and boost productivity in its business activities and forsome time now has endeavored to minimize the impact of
the current business environment on the Group’s performance and financial condition with the use of factoring andother credit guarantee systems.
c. Disruption and Stagnation of the Logistics Network
COVID-19 may cause a disruption or stagnation of theworldwide logistics network, resulting in delays in the
procurement of raw materials of products and their components and in the transportation of products and intermediate products, which could have a significant impact
on the performance and financial condition of the Group.
The Group has thus been taking measures for some time,such as procuring raw materials from multiple business
partners and decentralizing production sites, in order tominimize the impact.
d. R&D Risks
If the prolonged impact of the COVID-19 pandemic causes
long-term restrictions on employees going to the Group’s
research and development (R&D) sites, ongoing R&D activities may face scheduling delays, possibly hindering thedevelopment and launch of new materials and products.
The Group has thus been working for some time to minimize the impact by taking measures, such as increasing thenumber of R&D sites and ensuring close sharing of information. It is also taking steps to smoothly undertake joint
developments and other collaborative activities with external partners with the use of online tools.
2. Business Risks Unrelated to COVID-19
a. Ensuring Safety
If a major industrial accident were to occur at any of thebusiness locations of SEKISUI KASEI Group, it will result inloss of social trust, costs for dealing with the accident, lossof opportunities from suspending production activities, andclient compensation, which could have a significant impact
on the performance and financial condition of the Group.
The Group has thus established the Safety Committee.
The entire Group is committed to ensuring that there areno accidents and disasters across all of its business activities, setting forth a policy on safety operations and planningand implementing activities, including safety patrols, safety
awareness-raising, safety education, and various trainings.

57

Integrated Report 2022 / SEKISUI KASEI

b. Product Quality Assurance
Unexpected product defects or failures could have a significant impact on the performance and financial conditionof the Group, including product recalls and compensation
for damages.
The Group has thus established the Quality Committee
to strengthen its quality management system. The entire
Group has also set forth a quality management policy. It
plans and implements activities, such as quality audits,quality management training, and quality meetings, giving
consideration to safety and quality in the product development and production stages. In addition, the Group conducts business activities in compliance with quality-related
domestic and international laws and ordinances as well as
regulations and standards set by industry organizations.
Furthermore, it is enrolled in product liability insurance incase a quality problem arises.
c. Environmental Management
If an incident occurs that affects the environment surrounding a plant, such as leakage of a chemical substance or an
accident during the process of storing and managing product materials or manufacturing, the performance and financial condition of the Group could be significantly impacted
by loss of trust from clients and local communities, compensation and other associated costs, and loss of opportunities from production suspension.
The Group has thus established the Environmental
Committee. The entire Group is committed to environmental management, setting forth an environmental management policy and planning and implementing activities,
including environmental audits, environmental education,and various trainings at respective business sites. In addition, the Group conducts business activities in compliancewith environmental regulations, laws, and ordinances.
d. Economic Situation and Public Works
The Group’s performance and financial condition may
potentially be affected by contracting demand due to economic trends, as well as by changes in the supply-demandbalance and prices owing to competition with rival companies. In addition, the COVID-19 pandemic has had an enormous impact on global economic activity and the overall
future outlook remains uncertain, including when the virus
will be brought under control and what the post-pandemic
economic situation might look like. It is therefore expectedthat the pandemic will significantly impact the Group’s performance and financial condition.

Accordingly, the Group is committed to strengthening its
sales capabilities, development know-how, and financial
health to ensure it can flexibly respond to changes in economic conditions, customer trends, and personal consumption. At the same time, we will strive to minimize revenue
loss by steadfastly promoting the measures in our mid-term
management plan.
e. Overseas Business Activities
SEKISUI KASEI Group has production and sales businesses
in Asia, the United States, Central America, and Europe. In
addition to the effects of the COVID-19 pandemic, unexpected changes in laws and regulations, unfavorable political and economic factors, and social disruptions such as
war and political instability may affect the performance andthe financial condition of the Group.
In order to minimize such risks, the Group actively collects
information to be ready to adapt to changes in the business environment.
f. Raw Material Market Fluctuations
The Group uses mainly raw materials such as styrene monomer and polystyrene. If price fluctuations of such raw materials are not passed on to product prices in a timely manner,
or if there is a natural disaster or the supply of raw materials
from the supplier is unstable, it may affect the performanceand financial condition of the Group.
In this light, the Group seeks to create favorable conditions
for purchases, including raw materials, packing materials,
and production equipment. In addition, we negotiate withcustomers as appropriate so that the price fluctuations of
raw materials can be transferred to the product price in atimely manner.
g. Foreign Currency Risk
Transactions denominated in foreign currency in theGroup’s domestic and overseas businesses are impacted
by exchange rate fluctuations when converted into yen. The
Group takes steps to minimize the risk on these transactions,but fluctuations in currency exchange rates could impact theperformance and financial condition of the Group.
The Group will continue to consider additional measures,such as foreign currency hedging of transactions, in orderto minimize risk.
h. Impairment and Asset Write-Down Risks
The Group books goodwill and various property, plantand equipment and intangible assets for businesses when

acquiring other companies. It also has shareholdings inother companies. In the event these assets fail to generate expected cash flow due to a divergence from earnings
targets, changes in market trends, or other factors, or if thevalue of such assets declines, the performance and financial condition of the Group could be impacted.
The Group has therefore established the Investment and
Financing Committee to carefully discuss the propriety ofinvestments and financing. The Group also has a system inplace to ensure scrupulous after-the-fact project management and to also accurately gauge asset value.
i. Natural Disaster Risks
In the event the Group’s business sites are severely damaged
or opportunity losses arise from suspended production
owing to supply chain disruptions affecting mainly the
procurement of raw materials as a result of a larger-thanexpected earthquake, typhoon, or other natural disaster, ora fire, explosion, or similar incident, the performance andfinancial condition of the Group could be impacted.
The Group has produced an emergency response plan in
the event of a natural disaster or other emergency situation,
has made preparations in full readiness for such scenarios,and has methods in place for sharing critical information.
The Group is also working on the development of a business continuity plan (BCP) for its mainstay businesses.
j. Information Security
The Group stores confidential information and personal
information for business purposes, but in the event theGroup’s critical systems go offline and impede the execution of business due to a natural disaster or unforeseen
attack from outside of the Group, or if the Group’s credibility is undermined by the leaking or inappropriate use of
information from within the organization, the performanceand financial condition of the Group could be impacted.
The Group has therefore established the IT Promotion
Committee to handle the management and promotion ofGroup-wide IT measures in order to appropriately safeguard the aforementioned information assets. This committee formulates information security action plans, improves
the functionality of information security systems, and provides training to employees. The Group also assigns an
information security officer to each department and eachGroup company to oversee information security activities
and properly manage information assets.

Integrated Report 2022 / SEKISUI KASEI58

Other Information
Consolidated Financial Statements

Consolidated Balance SheetSEKISUI KASEI Co., Ltd. and Consolidated Subsidiaries
March 31, 2021 and 2022
Thousands of U.S. dollars(Note 4)

Millions of yen

2022

2021

2022

AssetsCurrent assets:
Cash and cash equivalents (Note 5)
Short-term investments (Note 5)
Notes and accounts receivable (Notes 3 and 5)¥ 12,498¥ 10,503$

85,81532

757

28,301——

Notes receivable (Notes 3 and 5)

—

4,335

35,419Accounts receivable (Notes 3 and 5)—

23,565

192,540

Contract assets (Note 5)

—

1,092

8,922

Electronically recorded monetary claims (Note 5)

5,220

6,526

53,321Inventories (Note 7)

13,324

15,175

123,988

Other current assets

3,426

2,617

21,382

(59)

(52)

(424)

62,744

63,771

521,047

Less allowance for doubtful accounts
Total current assets

Property, plant and equipment (Notes 2 and 20):
Land (Notes 9 and 13)

21,306

21,413

174,957

Buildings and structures (Note 9)

48,112

48,614397,205

Machinery and equipment (Note 16)

109,301

108,503886,534

1,978

1,743

14,241

Construction in progress
Less accumulated depreciation
Property, plant and equipment, net

180,698

180,275

1,472,955(119,266)(124,622)(1,018,236)

61,43255,652454,710Intangible assets (Note 2)
Goodwill (Notes 16 and 20)
Software
Other intangible assets (Note 16)
Total intangible assets

1,236

—

—

587

665

5,433

1,549

465

3,799

3,373

1,131

9,240

35

35

285

21,314

14,813

121,031

Investments and other assets:
Investments in unconsolidated subsidiaries and affiliates (Notes 5 and 6)
Investments in securities (Notes 5 and 6)

808

822

6,716

Assets for retirement benefits (Note 11)

7,772

6,155

50,290

Other assets

1,007

973

7,949

(49)

(47)

(384)

Deferred income taxes (Note 10)

Less allowance for doubtful accounts
Total investments and other assets
Total assets (Note 20)

59

Integrated Report 2022 / SEKISUI KASEI

30,88922,752

185,897¥ 158,439¥ 143,308$ 1,170,912

Thousands of U.S. dollars(Note 4)

Millions of yen

2022

2021

2022

Liabilities and net assets
Current liabilities:
Notes and accounts payable (Note 5)¥ 23,145¥ 25,703$

210,008

Short-term loans (Notes 5, 8 and 9)

3,627

6,086

49,726

Current portion of long-term loans (Notes 5, 8, 9 and 17)

5,558

10,166

83,062Contract liabilities (Note 3)

—

405

3,309

Accrued expenses (Note 3)

4,481

3,357

27,428

Accrued income taxes (Note 10)

1,213

767

6,266

Provision for bonuses to employees

1,054

1,046

8,546

Provision for bonuses to directors and audit andsupervisory board members

59

6

49

Provision for loss on business withdrawal of a subsidiary

919

446

3,644

3,246

2,731

22,31343,30550,715414,372

Long-term debt less current portion (Notes 5, 8, 9 and 17)

27,90020,863

170,463

Liabilities for retirement benefits (Note 11)

3,590

3,608

29,479Deferred income taxes (Note 10)

7,261

4,410

36,032

Deferred income taxes for land revaluation

1,596

1,596

13,040

Other current liabilities (Note 3)
Total current liabilities
Long-term liabilities:

132

108

882

Other long-term liabilities

3,995

3,763

30,745

Total long-term liabilities

44,47534,349280,652

16,533

16,533135,084

Capital surplus

16,515

16,503

134,839

Retained earnings (Note 21)

23,523

16,602

135,648

Provision for product warranty

Net assets:
Shareholders’ equity (Note 12):
Common stock:
Authorized:	124,751,000 shares as of March 31, 2021 and 2022
Issued:	46,988,109 shares as of March 31, 2021 and 2022

Less treasury stock, at cost:
1,850,959 shares as of March 31, 2021
1,794,266 shares as of March 31, 2022

(1,493)(1,448)(11,831)

Total shareholders’ equity

55,07748,190393,741

Net unrealized holding gain on securities (Notes 5, 6 and 14)

11,8597,442

60,805

Surplus arising from land revaluation (Note 13)

1,479

1,479

12,084

Accumulated other comprehensive income:

11

745

6,087

Retirement benefits liability adjustments (Notes 11 and 14)

1,527

(332)

(2,712)

Total accumulated other comprehensive income

14,877

9,334

76,264

702

717

5,858

Translation adjustments (Note 14)

Non-controlling interests
Total net assets
Total liabilities and net assets

70,65758,242475,872¥ 158,439¥ 143,308$ 1,170,912

See notes to consolidated financial statements.

Integrated Report 2022 / SEKISUI KASEI60

Other Information
Consolidated Financial Statements

Consolidated Statement of Income
SEKISUI KASEI Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2021 and 2022
Thousands of U.S. dollars(Note 4)

Millions of yen

2022

2022

¥ 118,851¥ 117,567$ 960,593

Cost of sales (Note 3)

92,451

92,831

758,485

Gross profit

26,39924,735

202,099

24,30823,271

190,138

2,091

1,463

11,954

Interest income (Note 20)

17

13

106

Dividend income

311

328

2,679

Subsidy income

289

58

473

Foreign exchange income, net

(97)

288

2,353

Interest expense (Note 20)

2021
Net sales (Notes 3 and 20)

Selling, general and administrative expenses (Notes 3 and 15)
Operating income
Other income (expenses):

(373)

(386)

(3,153)Equity in loss of an affiliate (Note 20)

(9)

—

—

Compensation expenses

(21)

(114)

(931)

Loss on sales or disposal of fixed assets

(139)

(214)

(1,748)Commission paid

(58)

(57)

(465)

Gain on sales of investments in securities (Note 6)

857

445

3,635

Loss on sales of investments in securities

(37)

—

—

Loss on impairment of investments in securities

(2)

—

—

Impairment loss (Notes 2 and 16)—(6,407)(52,349)

Loss on subsidiary liquidation

(2)

—

—

Loss on business withdrawal of a subsidiary

(901)

—

—

Other, net

(52)

(21)

(171)

1,870

(4,560)(37,258)

Current

1,564

1,436

11,732

Deferred

(3)

(120)

(980)

1,560

1,316

10,752309(5,876)(48,010)

Profit (loss) before income taxes
Income taxes (Note 10):

Profit (loss)
Profit (loss) attributable to:Non-controlling interests
Owners of parent
See notes to consolidated financial statements.

61

Integrated Report 2022 / SEKISUI KASEI

(816)
¥

1,126

¥

41

334

(5,917)$ (48,345)

Consolidated Statement of Comprehensive Income
SEKISUI KASEI Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2021 and 2022
Thousands of U.S. dollars(Note 4)

Millions of yen

2022

2022

309

¥ (5,876)$ (48,010)

2,633(4,417)(36,089)

640

720

5,882

Retirement benefits liability adjustments

1,128(1,860)(15,197)

Total other comprehensive income (loss)

4,402(5,557)(45,404)¥ 4,712¥ (11,433)$ (93,414)¥ 5,584¥ (11,460)$ (93,635)

(872)

27

220

2021
Profit (loss)¥

Other comprehensive income (loss) (Note 14):
Net unrealized holding gain (loss) on securities
Translation adjustments

Comprehensive income (loss)
Comprehensive income (loss) attributable to:
Owners of parent
Non-controlling interests
See notes to consolidated financial statements.

Integrated Report 2022 / SEKISUI KASEI

62

Other Information
Consolidated Financial Statements

Consolidated Statement of Changes in Net Assets
SEKISUI KASEI Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2021 and 2022
Millions of yen
Common stock

Balance as of April 1, 2020
Cash dividends
Profit attributable to owners of parent for the year
Acquisition of treasury stock
Disposal of treasury shares
Change in scope of equity method
Other changes
Balance as of April 1, 2021
Cash dividends
Profit (loss) attributable to owners of parent for the year
Acquisition of treasury stock
Disposal of treasury shares
Change in scope of equity method
Other changes
Balance as of March 31, 2022

Capital surplus¥ 16,533
—
—
—
—
—
—
16,533——————¥ 16,533

Retained earnings¥ 16,532
—
—
—
(17)
—
—
16,515
—
—
—
(12)
—
—
¥ 16,503

Treasury stock,at cost¥ 23,524
(951)
1,126
—
—
(176)
—
23,522(1,002)(5,917)————¥ 16,602¥ (1,426)
—
—
(141)
57
16
—
(1,493)
—
—
(0)
45
—
—
¥ (1,448)

Millions of yen

Balance as of April 1, 2020
Cash dividends
Profit attributable to owners of parent for the year
Acquisition of treasury stock
Disposal of treasury shares
Change in scope of equity method
Other changes
Balance as of April 1, 2021
Cash dividends
Profit (loss) attributable to owners of parent for the year
Acquisition of treasury stock
Disposal of treasury shares
Change in scope of equity method
Other changes
Balance as of March 31, 2022

Net
unrealized
holding
gain (loss)onsecurities

Surplusarisingfrom land
revaluation

Translation
adjustments¥ 9,226
—
—
—
—
—
2,633
11,859—————(4,417)¥ 7,442¥ 1,479
—
—
—
—
—
—
1,479
—
—
—
—
—
—
¥ 1,479¥ (583)
—
—
—
—
—
594
11
—
—
—
—
—
734
¥ 745

Retirement
benefits
liability
adjustments

Noncontrollinginterests

¥

399
—
—
—
—
—
1,128
1,527
—
—
—
—
—
(1,860)¥ (332)

Total net
assets¥ 1,531 ¥ 67,217
—
(951)
—
1,126
—
(141)
—
40
—
(160)
(829)
3,406
702
70,657—(1,002)—(5,917)
—
(0)
—
33
—
—
14
(5,528)¥ 717 ¥ 58,242

Thousands of U.S. dollars (Note 4)
Common stock

Balance as of April 1, 2021
Cash dividends
Profit (loss) attributable to owners of parent for the year
Acquisition of treasury stock
Disposal of treasury shares
Change in scope of equity method
Other changes
Balance as of March 31, 2022

Capital surplus$ 135,084
—
—
—
—
—
—
$ 135,084$ 134,937
—
—
—
(98)
—
—
$ 134,839

Retained earnings

Treasury stock,at cost$ 192,197(8,186)(48,345)————$ 135,648$ (12,198)
—
—
(0)
367
—
—
$ (11,831)

Thousands of U.S. dollars (Note 4)
Netunrealized
holding
gain (loss)onsecurities

Balance as of April 1, 2021
Cash dividends
Profit (loss) attributable to owners of parent for the year
Acquisition of treasury stock
Disposal of treasury shares
Change in scope of equity method
Other changes
Balance as of March 31, 2022
See notes to consolidated financial statements.

63

Integrated Report 2022 / SEKISUI KASEISurplusarisingfrom land
revaluation$ 96,895 $ 12,084
—
—
—
—
—
—
—
—
—
—
(36,089)—$ 60,805 $ 12,084

Translation
adjustments$

Retirement
benefits
liability
adjustments

89 $ 12,476
—
—
—
—
—
—
—
—
—
—
5,997
(15,197)$ 6,087 $ (2,712)

Noncontrollinginterests

Total net
assets$ 5,735 $ 577,310—(8,186)—(48,345)
—
(0)
—
269
—
—
114
(45,167)$ 5,858 $ 475,872

Consolidated Statement of Cash FlowsSEKISUI KASEI Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2021 and 2022
Thousands of U.S. dollars(Note 4)

Millions of yen

2021

2022

2022

¥ 1,870¥ (4,560)$ (37,257)

6,217
—
168
(4)
(328)
373
9
15
(26)
(332)
(820)
2
138
(289)
901
(868)
699
(596)
(496)
6,633
328
(377)
105
289
(552)
6,428

6,176
6,407
128
(11)
(342)
386
—
(9)
(23)
(1,058)
(445)
—
210
(58)
—
(892)
(1,544)2,209(1,041)
5,530
342
(357)
157
58
(1,899)3,831

50,461
52,3491,045(89)(2,794)
3,153
—
(73)
(187)
(8,644)(3,635)
—
1,715
(473)
—
(7,288)(12,615)(18,049)(8,505)45,183
2,794(2,916)
1,282
473(15,515)
31,301

Cash flows from investing activities
Payments into time deposits
Proceeds from withdrawal of time deposits
Purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchases of investments in securities
Proceeds from sales of investments in securities
Increase in short-term and long-term loans receivableCollection of short-term and long-term loans receivable
Other, net
Net cash used in investing activities(23)—(3,987)
13
(5)
1,113
(3)
2
(115)
(3,007)—(26)(3,700)
37
(4)
581
(7)
17
(137)
(3,186)—(212)(30,231)
302
(32)
4,747
(57)
138
(1,119)(26,031)

Cash flows from financing activities
Net increase in short-term loans
Proceeds from long-term loans
Repayment of long-term loans
Purchases of treasury stock
Dividends paid
Dividends paid to non-controlling shareholders
Other
Net cash used in financing activities

851
4,989
(4,943)
(141)
(953)
(2)
(433)
(632)

2,243
2,751
(5,570)
(0)
(993)
(2)
(1,002)(2,573)18,32622,477(45,510)(0)(8,113)(16)(8,186)(21,022)

177
2,965
9,532
¥ 12,498(67)(1,995)
12,498¥ 10,503(547)(16,300)
102,116$ 85,815

Cash flows from operating activities
Profit (loss) before income taxes
Adjustments for:
Depreciation and amortization
Impairment loss
Amortization of goodwill
Decrease in allowance for doubtful accounts
Interest and dividend income
Interest expense
Equity in losses of an affiliate
Increase (decrease) in provision for bonuses to employees
Decrease in provision for product warranty
Changes in assets and liabilities for retirement benefits, net
Gain on sales of investments in securities
Loss on impairment of investments in securities
Loss on sales or disposal of fixed assets, net
Subsidy income
Loss on business withdrawal of a subsidiary
Increase in notes and accounts receivable
Decrease (increase) in inventories(Decrease) increase in notes and accounts payable
Other, net
SubtotalInterest and dividends received
Interest paid
Proceeds from casualty insurance claims
Amount of receipt of subsidy received
Income taxes
Net cash provided by operating activities

Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
See notes to consolidated financial statements.

Integrated Report 2022 / SEKISUI KASEI64

Other Information

Notes to Consolidated Financial Statements
SEKISUI KASEI Co., Ltd. and Consolidated Subsidiaries
March 31, 2022

1. Significant Accounting Policies(a) Basis of Preparation
The consolidated financial statements of SEKISUI KASEI Co., Ltd. (the“Company”) and its consolidated subsidiaries are prepared on the basisof accounting principles generally accepted in Japan, which are different in certain respects as to the application and disclosure requirementsof International Financial Reporting Standards (“IFRS”), and have been
compiled from the consolidated financial statements prepared by theCompany as required by the Financial Instruments and Exchange Act
of Japan.
In preparing the consolidated financial statements, certain reclassifications and rearrangements have been made to the consolidated financial statements issued domestically in order to present them in a format
which is more familiar to readers outside Japan.
Certain reclassifications of previously reported amounts have been
made to conform the consolidated financial statements for the year
ended March 31, 2021 to the 2022 presentation. Such reclassifications
had no effect on consolidated profit or net assets.
As permitted by the Financial Instruments and Exchange Act of Japan,
amounts of less than one million yen have been omitted. Consequently,
the totals shown in the consolidated financial statements do not necessarily agree with the sum of the individual yen and U.S. dollar amounts.
(b) Principles of Consolidation and Accounting for Investments in
Unconsolidated Subsidiaries Affiliates
The principles of consolidation are to include significant subsidiaries
over which substantial control is exerted either through majority ownership of voting stock and/or by other means.
The consolidated financial statements include the accounts of theCompany and its 39 significant consolidated subsidiaries (collectively,
the “Group”) for the years ended March 31, 2021 and 2022. There is noequity-method affiliate for the year ended March 31,2022.
The five affiliates including Yusui Kasei Kogyo Co., Ltd. as a main affiliated company are not significant in terms of their total assets, profit orloss, and retained earnings. Accordingly, these affiliates have not been
consolidated nor are they accounted for by the equity method as ofMarch 31, 2022. Investments in such affiliates are stated at cost unlessthere has been a permanent decline in the value of such investments. In
such case, the Company is required to write down the investments.
All significant intercompany balances and transactions have been eliminated in the consolidated financial statements.
Goodwill arising from the difference between the purchase cost and theunderlying equity in net assets at the respective dates of acquisition isamortized by straight-line method over the estimated period of its effect.
Five overseas consolidated subsidiaries whose fiscal year end is
December 31 have been consolidated using provisional financial statements as of March 31, 2022.
For other nine overseas consolidated subsidiaries whose fiscal year ends
on December 31, necessary adjustments have been made for any significant intercompany transactions which took place during the period
between the year end of the overseas consolidated subsidiaries and theyear end of the Company.
(c) Foreign Currency Translation
The financial statements of the overseas consolidated subsidiaries aretranslated into yen at the rates of exchange in effect at the balance sheet
date except that the components of net assets excluding non-controllinginterests are translated at their historical exchange rates. Differences
resulting from translating the financial statements of the overseas consolidated subsidiaries are not included in the determination of profit but
are reported as translation adjustments and non-controlling interests in
net assets in the consolidated balance sheet.

65

Integrated Report 2022 / SEKISUI KASEIRevenue and expense items arising from transactions denominatedin foreign currencies are generally translated into yen at the rates of
exchange in effect at the respective transaction dates.
All monetary assets and liabilities denominated in foreign currencies
are translated into yen at the rates of exchange in effect at the balance
sheet date and gain or loss on each translation is credited or charged
to income.
(d) Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, deposits with banks
withdrawable on demand and short-term investments with a maturity of
three months or less when purchased which can easily be converted to
cash and are subject to little risk of change in value.
(e) Allowance for Doubtful Accounts
The Group provides an allowance for doubtful accounts at an amountcalculated based on their historical experience of bad debts on ordinary
receivables plus an additional estimate of probable specific bad debts
from customers experiencing financial difficulties.
(f) Inventories
Inventories are stated at lower of cost or net selling value, cost being
determined by the moving average method.
(g) Securities
Securities are classified into three categories: trading securities, held-tomaturity debt securities and other securities. Trading securities, consistingof debt and marketable equity securities are stated at fair value. Gain or
loss, both realized and unrealized, is credited or charged to income. Heldto-maturity debt securities are stated at amortized cost. Quoted securities
classified as other securities are carried at fair value with any changes
in unrealized holding gain or loss, net of the applicable income taxes,
reported as a separate component of accumulated other comprehensive
income. Unquoted securities classified as other securities are carried atcost determined by the moving average method.
(h) Property, Plant and Equipment (except for leased assets)
Property, plant and equipment are stated at cost.
Depreciation of buildings and structures is calculated by the straightline method over the estimated useful lives of the respective
assets. Depreciation of other property, plant and equipment is principally computed by the straight-line method, except for certain subsidiaries which compute depreciation by the declining-balance method
over the estimated useful lives of the respective assets.
The estimated useful lives of major property, plant and equipment aresummarized as follows:
Buildings
Machinery

principally 31 to 38 years
principally 8 years

Significant renewals and additions are capitalized at cost. Maintenanceand repairs are charged to income as incurred.
(i) Leased Assets (included in other assets)
Leased assets under finance lease contracts that do not transfer ownership to the lessee are depreciated to a residual value of zero by thestraight-line method using the term of the contract as the useful life.
(j) Income Taxes
Income taxes are calculated on taxable income and charged to incomeon an accrual basis. Certain temporary differences exist between taxableincome and income reported for financial statement purposes which
enter into the determination of taxable income in a different period. The
Group has recognized the tax effect of such temporary differences in the
consolidated financial statements.
The Company and certain domestic consolidated subsidiaries haveapplied the consolidated taxation system, which allows companies tofile tax returns based on the combined profits or losses of the parent
company and wholly owned domestic subsidiaries.
(Treatment of Tax Effect Accounting for Transition from Consolidated
Taxation System to the Group Tax Sharing System)
From the following fiscal year, the Company and certain domestic consolidated subsidiaries will transition from the consolidated taxation system to the group tax sharing system.
As an alternative to applying Article No.44 of “Partial Amendments to
Accounting Standard for Tax Effect Accounting (Accounting Standards
Board of Japan (“ASBJ”) Guidance No. 28, February 16, 2018), theCompany and certain domestic consolidated subsidiaries that adopted
the consolidated taxation system calculate deferred tax assets anddeferred tax liabilities based on provisions stipulated in related tax
laws before revision for certain items remeasured from the single tax
payment system at the time of transition to the group tax sharing system based on provisions in “Act for Partial Amendments to Income Tax
Act” (Act No.8) in accordance with Article No.3 of “Practical Solution
on the Treatment of Tax Effect Accounting for the Transition from theConsolidated Taxation System to the Group Tax Sharing System” (ASBJ
PITF No.39, March 31, 2020).
From the beginning of the following fiscal year, the Company will apply
the “Practical Solution on the Accounting and Disclosure Under theGroup Tax Sharing System” (ASBJ PITF No. 42, August 12, 2021), which
provides for the accounting treatments and disclosure of corporation
tax, local corporation tax and tax effect accounting in the case of application of group tax sharing system.
(k) Provision for Bonuses to Employees
Provision for bonuses to employees is provided at the estimated amountof bonuses to be paid to the employees in the following year which has
been allocated to the current fiscal year.
(l) Provision for Bonuses to Directors and Audit and Supervisory
Board Members
Provision for bonuses to directors and audit and supervisory board
members is calculated based on the estimated amount of bonuses tobe paid to directors and audit and supervisory board members in thefollowing year which has been allocated to the current fiscal year.
(m) Provision for Product Warranty
Provision for product warranty is provided based on an estimatedamount which is expected to be incurred subsequent to the balance
sheet date.
(n) Provision for Loss on Business Withdrawal of a Subsidiary
Provision for loss on business withdrawal of a subsidiary is provided
for estimated future expenses arising from the termination of its business activities.
(o) Retirement Benefit Plansi) Method of attributing expected benefits to each period
The retirement benefit obligation for employees is attributed to eachperiod by the benefit formula method over the estimated years ofservice of the eligible employees.

ii) Amortization method of actuarial gain or loss
Actuarial gain or loss is amortized from the year following the year inwhich the gain or loss is recognized by the straight-line method overa period of 5 years, which is within the estimated average remaining
years of service of the eligible employees.
(p) Revenue Recognition
The Group’s main business consists of manufacturing and sales of
products in the Human Life segment and Industry segment. The Group
recognizes revenue from the sale of these products upon delivery to
the customer, since the customer obtains control over such products
and the performance obligation is fulfilled upon delivery of the products. Revenue is measured at an amount after deducting sales returns,
discounts and rebates from the transaction price in the contract withthe customer.
The Group receives a consideration for a transaction within one year
after fulfilling the performance obligations, and the consideration does
not include a significant financing component.
(q) Software (except for leased assets)
Expenditures relating to computer software developed for internal use
are charged to income when incurred, except if these are deemed tocontribute to the generation of future income or cost savings. Suchexpenditures are capitalized as assets and amortized by the straight-line
method over their respective estimated useful lives, generally a periodof 5 years.
(r) Research and Development Costs
Research and development costs are charged to income when incurred.
(s) Hedge Accounting
The Company has entered into interest-rate swaps to hedge the risk ofinterest rate and foreign currency exchange rate fluctuations on longterm loans denominated in foreign currencies.
i) Hedge accounting method
Interest-rate swaps that meet special matching criteria are notremeasured at market value, but the differential paid or received
under the swap agreements is recognized and included in interest
expense or income, and the long-term loans hedged by the swap by
the swap agreements is translated at the swap contract rate (“special treatment”).
ii) Hedging instruments and hedged items
Hedging instruments: Hedged items:
Interest-rate swaps
Long-term loans denominated inforeign currenciesiii) Hedging policy
Derivative transactions are used to hedge the risk of interest-rate fluctuation in accordance with the Company’s risk management policy.
iv) Assessing hedge effectivenessWith regard to interest-rate currency swaps accounted for by the special treatment evaluation of hedge effectiveness is omitted.
(t) Distribution of Retained Earnings
Under the Corporation Law of Japan, the distribution of retained earnings with respect to a given financial period is made by resolution of theshareholders at a general meeting held subsequent to the close of thefinancial period. The accounts for that period do not, therefore, reflect
such distributions (see Note 21).

Integrated Report 2022 / SEKISUI KASEI

66

Other Information

Notes to Consolidated Financial Statements
2. Significant Accounting Estimates(Impairment of Fixed Assets)
Due to the decline in profitability as a result of recent changes in the business environment, the Group determined that there was an indication of

impairment for fixed assets attributable to Proseat Europe GmbH andits subsidiaries, which were acquired by the Company in February 2019,
and the Company made the following judgements.

(a) Amount reported in consolidated financial statements for the year ended March 31, 2022
Millions of yen

For the year ended March 31, 2022
Impairment loss
As of March 31, 2022
Property, plant and equipment
Intangible assets
Total

Thousands of U.S. dollars¥ 6,407$ 52,349¥ 3,320$ 27,126

177

1,446

¥ 3,497$ 28,572

The Group recognized impairment loss for the year ended March 31, 2022 due to a decline in profitability caused by changes in the businessenvironment.
(b) Other information that contributes to the understanding of theusers of financial statementsi) Method of calculation
The Group categorizes assets by business. The Group determines
whether recognition of impairment loss is necessary whenever indications of impairment exist for an asset or an asset group. When theGroup determines that an impairment loss should be recognized,
the Group reduces the carrying amount to the recoverable amountand records the difference as an impairment loss. In assessing theamount of impairment loss on fixed assets, the Group measures therecoverable amount of the asset group based on its value in use. The
value in use is calculated as the present value of estimated future cash
flows. In assessing the amount of impairment loss on property, plantand equipment, the Group measures the recoverable amount of theasset group based on its value in use. The value in use is calculated
as the present value of estimated future cash flows and the future
cash flows to be generated from the continued use of an asset groupare estimated based on the business plan approved by the Board of

Directors of the company and the market growth rates for the periods
subsequent to the period covered by the business plan.
ii) Significant assumptions
Significant assumptions in estimating future cash flows are i) the forecasts of product sales volumes, ii) trends in sales prices, iii) trends ingross profit margin, which serve as the basis of the business plan, iv)
the market growth rates for the periods subsequent to the period
covered by the business plan, v) the discount rates and vi) the impact
of COVID-19 on business activities. The market growth rate was determined based on the available external market data as a reference.
iii) Impact on the financial statements for the following fiscal year.
Given that the significant assumptions, are subject to a high degreeof uncertainty in its estimation, therefore, changes in these assumptions could result in the recognition of additional impairment losses
on property, plant and equipment and intangible assets.

3. Changes in Accounting Policies(Application of Accounting Standards for Revenue Recognition)
The Group has applied the “Accounting Standard for Revenue
Recognition” (ASBJ Statement No. 29, March 31, 2020) from the beginning of the fiscal year ended March 31, 2022 and recognizes revenue atthe amount expected to be received in exchange for the goods or services when the control of the goods or services promised is transferredto the customer. The main changes is as follows.
(a) Revenue Recognition in Agent Transactions
For those transactions in which the Group previously recognized revenue at the gross amount of the consideration received from customers,
the Group recognizes revenue at the net amount of the consideration
received from customers less the amount paid to suppliers when theGroup acts as an agent in transactions providing goods or services tocustomers.
(b) Revenue Recognition of Sales Commission
In the transactions previously recorded as selling, general and administrative expenses, the Group recognizes revenue at the net amount of thetransaction price less the amount of consideration payable to a customer,
if the Group makes a payment to the customer when it is not a payment
for a distinct good or service that the customer transfers to the Group.
As a result, net sales for the year ended March 31, 2022 decreasedby ¥12,305 million ($100,539 thousand), cost of Sales decreased by¥11,832 million ($96,674 thousand), and selling, general and administrative expenses decreased by ¥473 million ($3,864 thousand), but
operating income, ordinary income and loss before income taxes were67

Integrated Report 2022 / SEKISUI KASEI

not affected.
The application of the Accounting Standard for Revenue Recognitionis subject to the transitional treatment provided in the provision to
Paragraph 84 of the Accounting Standard for Revenue Recognition. The
cumulative effect of the retroactive application, assuming the new
accounting policy had been applied to periods prior to the beginningof the year ended March 31, 2022, was added to or deducted from the
beginning balance of retained earnings for the year ended March 31,
2022, and thus the new accounting policy was adopted from the beginning of the current fiscal year. However, there is no effect on the beginning balance of retained earnings for the year ended March 31, 2022.
As a result of the application of the Accounting Standard for Revenue
Recognition, “Notes and accounts receivable,” in current assets arereclassified as “Notes receivable” and “Accounts receivable”, and“Contract assets,” which were previously included in “Other current
assets,” are presented as “Contract assets,” and “Contract liabilities,”
which were previously included in “Accrued expenses” in current liabilities, are presented as “Contract liabilities” from the beginning of theyear ended March 31 2022.
However, in accordance with the transitional treatment provided for in
Paragraph 89-2 of the Accounting Standard for Revenue Recognition,
the Group has not reclassified the balances as of March 31, 2021 basedon the new presentation method.
Furthermore, in accordance with the transitional treatment provided forin Article 89-3 of the Accounting Standard for Revenue Recognition, therelated footnote information for the year ended March 31, 2021 in Note
19 “Revenue Recognition” has been omitted.

(Accounting Standard for Fair Value Measurement)
The Group has applied the “Accounting Standard for Fair Value
Measurement” (ASBJ Statement No. 30, July 4, 2019, hereinafter, “Fair
Value Measurement Standard”) and other standards from the beginningof the year ended March 31, 2022, and in accordance with the transitional
treatment provided in Paragraph 19 of the Fair Value Measurement
Standard and Paragraph 44-2 of the “Accounting Standard for Financial
Instruments” (ASBJ Statement No. 10, July 4, 2019), the Group will prospectively apply the new accounting policy stipulated by the “Fair Value
Measurement Standard”, etc.

There is no effect of the application of accounting standards on the consolidated financial statements.
The Company disclosed information on items such as the breakdownof the fair value of financial instruments by level of fair value in Note
5, “Financial Instruments.” However, in accordance with the transitional
provisions stipulated in paragraph 7-4 of the “Implementation Guidanceon Disclosures about Fair Value of Financial Instruments” (ASBJ
Guidance No. 19, July 4, 2019), the related notes for the year ended
March 31, 2021 have been omitted.

4. U.S. Dollar Amounts
The U.S. dollar amounts in the consolidated financial statements havebeen translated from yen solely for convenience and, as a matter ofarithmetic computation only, at ¥122.39 = U.S. $1.00, the exchange rate
prevailing on March 31, 2022. This translation should not be construed

as a representation that the yen amounts have been, could have been,or could in the future be, converted into U.S. dollars at the above or any
other rate.

5. Financial Instruments(a) Status of Financial Instruments
The Group manages fund surpluses only through short-term financial
assets. In addition, the Group currently raises capital through bank borrowings and bond. Derivative transactions are not used for speculation,but only used to hedge various risks as addressed below.
In accordance with the internal business management rules of theCompany for managing credit risk arising from notes and accounts
receivable, each business section and the sales supervisory department
monitor credit worthiness of their customers periodically, and monitor
due dates and outstanding balances. Subsidiaries of the Company also
manage credit risk in accordance with the Company’s business management rules.
Investments in securities are exposed to market risk. Those securities
are composed of mainly the shares of common stock of other companies with which the Group has business relationships. The finance andaccounting department, on a quarterly basis, reviews the fair value ofsuch financial instruments.
Trade payables, such as notes and accounts payable, have payment due
dates within one year.
Short-term loans are raised mainly in connection with operating activities, and long-term loans are taken out principally for the purpose of
making capital investments. Loans with variable interest rates is exposed

to interest-rate fluctuation risk. Interest-rate swaps are used to hedge therisk of interest rate and foreign currency exchange rate fluctuations on
the Group’s long-term loans denominated in foreign currencies. Bond isissued for the purpose of paying off loans and raising working capital.
Derivative transactions are not used for speculation, but only used to
manage various market risks and to reduce those risks.
Further information regarding the method of hedge accounting can befound in Note 1(s).
Trade payables, short-term loans and long-term loans are exposed toliquidity risk. The Company makes efforts to facilitate financing andensure diverse sources of financing. Each component of the Group also
prepares monthly cash flow plans to manage liquidity risk.
(b) Fair Value of Financial Instruments
Carrying value, fair value and the difference between them for financial
instruments on the consolidated balance sheets as of March 31, 2021
and 2022 are shown in the following table. The financial instruments forwhich it is extremely difficult to determine the fair value as of March
31, 2021, and unquoted securities as of March 31, 2022 in the amountsof ¥78 million and ¥69 million ($563 thousand), respectively, are notincluded in investments in securities shown in the following table.

Millions of yen

2022

2021
Carrying
value

Carrying
value

Fair value

Difference

Notes and accounts receivable
Notes receivable
Accounts receivable
Electronically recorded monetary claims
Investments in securities
Total assets¥ 28,301——
5,220
21,271¥ 54,793¥ 28,301——
5,220
21,271¥ 54,793

Fair value

¥ —
—
—
—
—
¥ —

¥

—
4,335
23,565
6,526
14,779¥ 49,207

¥

—
4,335
23,565
6,526
14,779¥ 49,207

¥ —
—
—
—
—
¥ —

Notes and accounts payable
Short-term loans
BondLong-term loans (*2)
Total liabilities¥ 22,481
3,627
7,000
26,459¥ 59,567¥ 22,481
3,627
6,975
26,553¥ 59,637

¥ —
—
(24)
93
¥ 69

¥ 25,211
6,086
7,000
24,030¥ 62,328¥ 25,211
6,086
6,953
24,123¥ 62,374

¥ —
—
(46)
93
¥ 46

Difference

Integrated Report 2022 / SEKISUI KASEI

68

Other Information

Notes to Consolidated Financial Statements
Thousands of U.S. dollars

2022
Carrying
value

Fair value

Difference

Notes and accounts receivable
Notes receivable
Accounts receivable
Electronically recorded monetary claims
Investments in securities
Total assets$—
35,419192,540
53,321
120,753$ 402,050$—
35,419192,540
53,321
120,753$ 402,050$

Notes and accounts payable
Short-term loans
BondLong-term loans (*2)
Total liabilities$ 205,989
49,72657,194
196,339$ 509,257$ 205,989
49,72656,810197,099$ 509,633

$

$

—
—
—
—
—
—

—
—
(375)
759
$ 375

(*1) Cash and deposits are omitted in the table above as fair value of cash is the same as the carrying value, and deposits are settled within a short term and their fair value approximates the carrying value.
(*2) Includes current portion of long-term loans of ¥5,558 million and ¥10,166 million ($83,062 thousand) as of March 31, 2021 and 2022, respectively.

The redemption schedule as of March 31, 2022 for bank deposits, included in cash and cash equivalents and short-term investments presented in the
consolidated balance sheet, and notes and accounts receivable is summarized as follows:
Millions of yen

2022
Bank deposits
Notes receivable
Accounts receivable
Electronically recorded monetary claims
Total

Within 1 year

Over 1 year
within 5 years

Over 5 years
within 10 years

Over 10 years¥ 10,490
4,335
23,565
6,526¥ 44,918

¥ —
—
—
—
¥ —

¥ —
—
—
—
¥ —

¥ —
—
—
—
¥ —

Within 1 year

Over 1 year
within 5 years

Over 5 years
within 10 years

Over 10 years$ 85,709
35,419192,540
53,321$ 367,321

$ —
—
—
—
$ —

$ —
—
—
—
$ —

$ —
—
—
—
$ —

Thousands of U.S. dollars

2022
Bank deposits
Notes receivable
Accounts receivable
Electronically recorded monetary claims
Total(c) Breakdown of Fair Value of Financial Instruments by Level
Financial instruments are classified into the following three levels based on the observability and materiality of the inputs used to calculate fair value.
Level 1: Fair value calculated based on an unadjusted quoted price in an active market for an identical asset or liability.
Level 2: Fair value calculated using inputs observable directly or indirectly other than Level 1 inputs
Level 3: Fair value calculated using significant inputs that are unobservable
When multiple inputs that have a significant impact on the calculation of fair value are used, fair value is classified to the level with the lowest priority
in the calculation of fair value among the levels to which each of those inputs belongs.
Financial instruments recorded at fair value in the consolidated balance sheet as of March 31, 2022 are shown in the following table.
Millions of yen

2022
Fair ValueClassification

Level 1

Investment in securities
Total¥ 14,779¥ 14,779

Level 2

Level 3

¥ —
¥ —

¥ —
¥ —

Total

¥ 14,779¥ 14,779

Thousands of U.S. dollars

2022
Fair Value

69

Classification

Level 1

Investment in securities
Total$ 120,753$ 120,753

Integrated Report 2022 / SEKISUI KASEILevel 2$ —$ —Level 3

$ —
$ —

Total

$ 120,753$ 120,753

Financial instruments other than financial instruments recorded at fair value in the consolidated balance sheet as of March 31, 2022 are shown in thefollowing table.
Millions of yen

2022
Fair ValueClassification

Level 1

Level 2

Level 3

Total

Notes receivable
Accounts receivable
Electronically recorded monetary claims
Total assets

¥ —
—
—
¥ —

¥ 4,335
23,565
6,526¥ 34,427

¥ —
—
—
¥ —

¥ 4,335
23,565
6,526¥ 34,427

Notes and accounts payable
Electronically recorded monetary claims
Short-term loans
BondLong-term loans
Total liability

¥ —
—
—
—
—
¥ —

¥ 16,065
9,145
6,086
6,953
24,123¥ 62,374

¥ —
—
—
—
—
¥ —

¥ 16,065
9,145
6,086
6,953
24,123¥ 62,374

Thousands of U.S. dollars

2022
Fair ValueClassification

Level 1

Level 2

Level 3

Total

Notes receivable
Accounts receivable
Electronically recorded monetary claims
Total assets

$ —
—
—
$ —

$ 35,419
192,540
53,321$ 281,289

$ —
—
—
$ —

$ 35,419
23,565
6,526$ 34,427

Notes and accounts payable
Electronically recorded monetary claims
Short-term loans
BondLong-term loans
Total liability

$ —
—
—
—
—
$ —

$ 131,260
74,72049,72656,810197,099$ 509,633

$ —
—
—
—
—
$ —

$ 16,065
74,72049,72656,810197,099$ 509,633(*) Description of valuation techniques used and valuation inputs related to the calculation of fair value

Investments in securities
Listed securities are valued based on quoted prices. Since listed securities are traded on active markets, the fair value of listed securities isclassified as Level 1.
Notes receivable, accounts receivable, and electronically recordedmonetary claims
The fair value of notes receivable, accounts receivable, and electronically recorded monetary claims are classified by a certain period tomaturity. The fair value of each item of those assets is calculated using
the discounted present value method based on the amount, period tomaturity and interest rate that takes into account the credit risk, and thusclassified as Level 2.
Notes and accounts payable, electronically recorded obligations andshort-term loans
The fair value of notes and accounts payable, electronically recorded

obligations and short-term loans are classified by a certain period tomaturity. The fair value of each item of those liabilities is calculated using
the discounted present value method based on its future cash flow, theperiod to maturity and interest rate that takes into account the credit
risk, and thus classified as Level 2.
Bond
The fair value of bond is calculated based on prices and yield information published by industry associations and is classified as Level 2.
Long-term loans including current portion of long-term loans
The fair value of long-term loans including current portion of long-termloans is calculated using the present value method based on the total
amount of principal and interest rate that takes into account the remaining term of the loans and credit risk, and is classified as Level 2.

Integrated Report 2022 / SEKISUI KASEI70

Other Information

Notes to Consolidated Financial Statements
6. Investments in Securities
Marketable securities classified as other securities as of March 31, 2021 and 2022 were as follows:
Millions of yen

2022

2021
Securities whose carrying value exceeds their acquisition cost:
Equity securities
Securities whose acquisition cost exceeds their carrying value:
Equity securities
Total

Acquisition
cost

Carrying
value

Unrealized
holding gain

Acquisition
cost

Carrying
value

Unrealized
holding gain

¥ 4,338¥ 21,271¥ 16,933¥ 4,073¥ 14,779¥ 10,7060¥ 4,338

0¥ 21,2710¥ 16,9330¥ 4,0730¥ 14,779(0)¥ 10,706

Thousands of U.S. dollars

2022
Securities whose carrying value exceeds their acquisition cost:
Equity securities
Securities whose acquisition cost exceeds their carrying value:
Equity securities
Total
Unlisted equity securities other than securities of affiliates in the amount of¥42 million as of March 31, 2021 are not included in equity securities in theabove table since it is extremely difficult to determine their fair value. Also

Acquisition
cost

Carrying
value

Unrealized
holding gain

$ 33,278$ 120,753$ 87,4740$ 33,2780$ 120,753(0)$ 87,474

unlisted equity securities other than securities of affiliates in the amount of¥33 million ($269 thousand) as of March 31 2022 are not included in equity
securities in the above table since they are unquoted securities.

The proceeds from sales of, and gross realized gain on investments in securities for the years ended March 31, 2021 and 2022 are summarized as follows:
Millions of yen

Proceeds from sales
Gross realized gain

Thousands of U.S. dollars

2022

2021
¥ 1,014
857

¥ 581
445

2022
$ 4,747
3,635

7. Inventories
Inventories as of March 31, 2021 and 2022 were composed of the following:
Millions of yen

Merchandise, finished goods and semi-finished goods
Work in process goods
Raw materials and supplies
Total

71

Integrated Report 2022 / SEKISUI KASEI

Thousands of U.S. dollars

2021

2022

2022

¥ 7,670
1,481
4,172¥ 13,324¥ 8,633
1,785
4,756¥ 15,175$ 70,536
14,58438,859$ 123,988

8. Short-Term Loans and Long-Term Debt
Short-term loans as of March 31, 2021 and 2022 represented loans in
the form of deeds and overdrafts at interest rates ranging from 0.35% to4.85% and from 0.356% to 4.71% per annum, respectively.

Long-term debt as of March 31, 2021 and 2022 were composed of the following:
Millions of yen

2022

2022

¥ 20,511¥ 16,441$ 134,332

822

755

6,168

4,507
619
7,000
33,459(5,558)¥ 27,900

6,446
386
7,000
31,030(10,166)¥ 20,863

52,667
3,153
57,194
253,533(83,062)$ 170,463

2021
Unsecured loans from banks and insurance companies, payable in Japaneseyen, at rates ranging from 0.095% to 0.50% and variable rates
Unsecured loans from banks, payable in U.S. dollars,
at rates from 1.74% to 2.48% and variable rate.
Unsecured loans from banks, payable in Euro,at rates ranging from 0.25% to 1.24% and variable rates
Unsecured loans from banks, payable in Baht, at a rate of 2.575%
Unsecured bonds, payable in Japanese yen at a rate of 0.5%, due 2026
Total
Less current portion

Thousands of U.S. dollars

The aggregate annual maturities of long-term debt subsequent to March 31, 2022 are summarized as follows:
Millions of yen

Thousands of U.S. dollars

Years ending March 31,

2022

2022

2023
2024
2025
2026
2027
2028 and thereafter
Total¥ 10,166
5,040
4,603
1,185
8,988
1,045
¥ 31,030$ 83,062
41,17937,6099,682
73,4378,538$ 253,533

9. Pledged Assets and Secured Liabilities
Assets pledged as collateral for liabilities as of March 31, 2021 and 2022 are summarized as follows:
Millions of yen

2021
Land
Buildings

¥ 166
49
¥ 215

Thousands of U.S. dollars

2022
¥ 166
47
¥ 213

2022
$ 1,356384$ 1,740

Liabilities secured by these assets as collateral consist of ¥7 million and ¥7 million ($57 thousand) of short-term loans and ¥9 million and ¥1 million ($8thousand) of long-term loans as of March 31, 2021 and 2022, respectively.

Integrated Report 2022 / SEKISUI KASEI72

Other Information

Notes to Consolidated Financial Statements
10. Income Taxes
Income taxes applicable to the Company and its domestic subsidiaries
consist of corporation, enterprise and inhabitants’ taxes. The statutory

tax rate in Japan for the years ended March 31, 2021 and 2022 was, in theaggregate, approximately 30.6%.

Reconciliation of the statutory and effective tax rates for the year ended March 31, 2021 as a percentage of profit before income taxes is presented
as follows:

2022

2021
Statutory tax rates
Non-deductible expenses
Per capita portion of inhabitants’ taxes
Tax credit of research and development costs
Tax rate differences of overseas subsidiaries
Loss on business withdrawal of a subsidiary
Retained earnings of overseas subsidiaries
Amortization of goodwill
Impairment loss
Other
Effective tax rates

—%
—
—
—
—
—
—
—
—
—
—%

30.6%
1.4
1.7
(13.2)
38.8
14.7
4.2
2.8
—
2.5
83.5%

Presentation of reconciliation of the statutory and effective tax rates for the year ended March 31, 2022 is omitted because the Group recorded a loss
before income taxes.
Deferred income taxes reflect the net tax effect of the temporary differences between the carrying amounts of the assets and liabilities for financial
reportable purposes and the corresponding amounts for income tax purposes. The significant components of the Group’s deferred tax assets andliabilities as of March 31, 2021 and 2022 are summarized as follows:
Millions of yen

Deferred tax assets:
Liabilities for retirement benefits
Tax loss carryforwards
Provision for bonuses to employees
Unrealized profit on intercompany transactions
Impairment loss on property, plant and equipment
Loss on devaluation of inventories
Acquisition related cost of acquired companies
Other
Gross deferred tax assets
Valuation allowance for tax loss carryforwards
Valuation allowance for temporary differences
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Differences on land revaluation
Net unrealized holding gain on securities
Gain on marketable securities contributed to employees’ retirement benefit trust
Assets for retirement benefits
Customer related assets
Other
Total deferred tax liabilities
Net deferred tax liabilities

Thousands of U.S. dollars

2021

2022

¥

¥

—
3,231
344
508
62
85
93
495
4,819
(3,029)(313)(3,342)
1,477

—
3,907
338
532
1,074
98
93
578
6,622
(3,733)(1,344)(5,078)
1,544

(999)
(3,264)
(146)
(148)
—
(573)
(5,132)¥ (3,587)(923)(5,217)
(146)
(733)
(313)
(595)
(7,930)¥ (6,453)

2022
$

—
31,922
2,761
4,346
8,775
800
759
4,722
54,105(30,500)(10,981)(41,490)
12,615(8,162)(26,668)(1,192)(1,209)—(4,681)(41,931)$ (29,307)

Note 1: Tax loss carryforwards and related deferred tax assets as of March 31, 2021 and 2022 will expire as follows:
Millions of yen

2021

73

Years ending March 31,

Tax loss carryforwards

2022
2023
2024
2025
2026
2027 and thereafter
Total

¥

Integrated Report 2022 / SEKISUI KASEI

18
17
104
99
42
2,948
¥ 3,231(*1)

Valuation allowance fortax loss carryforwards

¥

(4)
(16)
(103)
(79)
(21)
(2,803)¥ (3,029)

Deferred tax assets for
tax loss carryforwards

¥ 14
1
0
19
21
145
¥ 201

Millions of yen

2022
Years ending March 31,

Tax loss carryforwards

2023
2024
2025
2026
2027
2028 and thereafter
Total

¥

(*1)

Valuation allowance fortax loss carryforwards

20
110
98
42
102
3,532
¥ 3,907

Deferred tax assets for
tax loss carryforwards

¥

(14)
(101)
(87)
(29)
(80)
(3,419)¥ (3,733)

¥

5
8
11
13
21
112
¥ 173

Thousands of U.S. dollars

2022
Years ending March 31,

Tax loss carryforwards

2023
2024
2025
2026
2027
2028 and thereafter
Total

$

(*1)

Valuation allowance fortax loss carryforwards

163
898
800
343
833
28,858$ 31,922

$

(114)
(825)
(710)
(236)
(653)
(27,935)$ (30,500)

Deferred tax assets for
tax loss carryforwards

$

40
65
89
106
171
915
$ 1,413(*1) The tax loss carryforwards in the above table are measured using the statutory tax rates.

11. Retirement Benefit Plans(a) Outline of adopted retirement benefit plans for employees
The Company and its consolidated subsidiaries adopt plans similar to
cash balance pension plans, corporate pension plans (all funded plans)
and retirement lump-sum payment plans as defined benefit plans.
Further, the Company and its consolidated subsidiaries may pay premium benefits to employees on retirement. The Company also has
established retirement benefit trusts. Certain consolidated subsidiaries

adopt defined contribution plans. Certain consolidated subsidiaries
calculate the liabilities for retirement benefits and retirement benefit
expense by using the simplified method which assumes the retirement
benefit obligation to be equal to the benefits payable if all eligible
employees voluntarily terminated their employment at the fiscal year
end for the calculation of liabilities for retirement benefits and retirement benefit expenses.

(b) Defined benefit plans for the years ended March 31, 2021 and 2022(i) Excluding amounts calculated by the simplified method, the changes in the retirement benefit obligation for the years ended March 31, 2021 and2022 were as follows:
Millions of yen

2022

2021
Retirement benefit obligation at the beginning of the year
Service cost
Interest cost
Actuarial loss
Retirement benefit paid
Other
Retirement benefit obligation at the end of the year

Thousands of U.S. dollars¥ 9,013
267
38
99
(670)
25
¥ 8,772¥ 8,772
262
31
114
(617)
33
¥ 8,5962022$ 71,672
2,140
253
93
(5,041)269$ 70,234(ii) Excluding amounts calculated by the simplified method, the changes in plan assets at fair value for the years ended March 31, 2021 and 2022 wereas follows:
Millions of yen

2021
Plan assets at fair value at the beginning of the year
Expected return on plan assets
Actuarial gain (loss)
Contributions by the employer
Retirement benefit paid
Plan assets at fair value at the end of the year

¥ 14,517
236
1,858
387
(658)
¥ 16,341

Thousands of U.S. dollars

2022

2022

¥ 16,341
253(1,937)383(602)¥ 14,438$ 13,315
2,067(15,826)
3,129(4,918)$ 117,967

Integrated Report 2022 / SEKISUI KASEI74

Other Information

Notes to Consolidated Financial Statements(iii) The changes in liabilities for retirement benefits under the simplified method for the years ended March 31, 2021 and 2022 were as follows:
Millions of yen

2022

2021
Liabilities for retirement benefits at the beginning of the year
Retirement benefit expense
Retirement benefit paid
Contribution to defined contribution pension plans
Other
Liabilities for retirement benefit at the end of the year

Thousands of U.S. dollars¥ 3,386
257
(292)
(16)
(39)
¥ 3,295¥ 3,273
436
(304)
(20)
1
¥ 3,3862022$ 27,665
2,099(2,385)(212)(318)$ 26,922(iv) Including the amounts presented calculated by the simplified method, the balance of retirement benefit obligation and plan assets at fair value,liabilities and assets recognized in the consolidated balance sheets for the years ended March 31, 2021 and 2022 were as follows:
Millions of yen

Funded retirement benefit obligation
Plan assets at fair value

Thousands of U.S. dollars

2021

2022

2022

¥

¥

8,794
(14,623)(5,829)3,282(2,547)$ 71,852(119,478)(47,626)
26,815(20,810)

3,608(6,155)¥ (2,547)

29,479(50,290)$ (20,810)

Unfunded retirement benefit obligation
Net amount of liabilities and assets recognized in the consolidated balance sheet

8,856(16,409)(7,552)
3,370(4,182)

Liabilities for retirement benefits
Assets for retirement benefits
Net amount of liabilities and assets recognized in the consolidated balance sheet

3,590(7,772)¥ (4,182)(v) The components of retirement benefit expense (credit) for the years ended March 31, 2021 and 2022 were as follows:
Millions of yen

Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial gain
Retirement benefit expenses calculated by the simplified method
Retirement benefit expense

Thousands of U.S. dollars

2022

2021
¥ 267
38
(236)
(123)
436
¥ 382

¥ 262
31
(253)
(616)
257
¥ (318)2022$ 2,140253(2,067)(5,033)2,099$ (2,598)(vi) The components of retirement benefits liability adjustments included in other comprehensive income (before tax effect) for the years ended March
31, 2021 and 2022 were as follows:
Millions of yen

2021
Actuarial loss (gain)¥ 1,626

Thousands of U.S. dollars

2022

2022

¥ (2,681)$ (21,905)(vii) The components of retirement benefits liability adjustments included in accumulated other comprehensive income (before tax effect) as of March
31, 2021 and 2022 were as follows:
Millions of yen

2021
Unrecognized actuarial gain (loss)¥ 2,201

Thousands of U.S. dollars2022¥ (479)2022$ (3,913)(viii) The plan assets by major category consist of the following:

2021
Bond
Equities
General accounts at life insurance companies
Cash and deposits
Other
Total

75

Integrated Report 2022 / SEKISUI KASEI

19%
49
11
5
15
100%

2022
20%
46
13
6
15
100%

The total pension plan assets include 36% and 27% of the retirement
benefits trust for the corporate pension fund plans as of March 31, 2021
and 2022, respectively.
The expected long-term rates of return on plan assets is determined as aresult of consideration of both the portfolio allocation at present and in
the future, and the long-term rate expected rate of return from multiple
plan assets at present and in the future.

(ix) The assumptions used in accounting for the defined benefit plans for the years ended March 31, 2021 and 2022 are as follows:

2022

2021
Discount rate
Expected long-term rates of return on plan assets
Rates of salary increase

0.4%
1.6%
2.6%

0.4%
1.6%
2.8%

(c) Defined contribution pension plans for the years ended March 31, 2021 and 2022 are as follows:
Millions of yen

Contributions to defined contribution pension plans

Thousands of U.S. dollars

2022

2021

2022

¥ 20

¥ 16

$ 163

12. Shareholders’ Equity
The Corporation Law of Japan provides that an amount equal to 10% of
the amount to be disbursed as distributions of capital surplus (other thanthe capital reserve) and retained earnings (other than the legal reserve)
be transferred to the capital reserve and the legal reserve, respectively,
until the sum of the capital reserve and the legal reserve equals 25% of
the capital stock account. Such distributions can be made at any time byresolution of the shareholders, or by the Board of Directors if certain conditions are met.
Retained earnings include the legal reserve provided in accordance withthe provisions of the Corporation Law of Japan. The legal reserve of
the Company included in retained earnings amounted to ¥1,370 million($11,193 thousand) as of March 31, 2021 and 2022.

Common stock and treasury stock
Movements in shares of common stock and treasury stock during the years ended March 31, 2021 and 2022 are summarized as follows:

2021
Number of shares
April 1, 2020

Common stock
Treasury stock

46,988,109
1,697,882

Increase

Decrease—
250,075—
96,998March 31, 2021

46,988,109
1,850,959

The increase in treasury stock consists of 250,000 shares due to purchase of shares based on the resolution of the Board of Directors meeting, and 75
shares due to the purchase of fractional shares of less than one voting unit.
The decrease in treasury stock consists of 68,000 shares due to allotment under the restricted stock-linked remuneration system, 28,998 shares due to
exclusion of an affiliate from the scope of applying the equity method.

2022
Number of shares
April 1, 2021

Common stock
Treasury stock

46,988,109
1,850,959

Increase

Decrease—
7—56,700March 31, 2022

46,988,109
1,794,266

The decrease in treasury stock consists of 56,700 shares due to allotment under the restricted stock-linked remuneration system.

13. Land Revaluation
In accordance with the “Law Concerning Revaluation of Land” promulgated on March 31, 1998, land used for business was revalued as of March
31, 2002, and the related unrealized gain was reported as “Surplus arisingfrom land revaluation” after deducting the relevant tax effect. The method
followed for this revaluation was determined in accordance with the “Land
Revaluation Tax Law” as stipulated in the “Enforcement Act Concerning

Land Revaluation” and other regulations.
The carrying values of ¥9,545 million and ¥9,545 million ($77,988 thousand)for the purpose of land revaluation exceeded the land’s estimated market
values by ¥3,594 million and ¥3,552 million ($29,021 thousand) as of March
31, 2021 and 2022, respectively.

Integrated Report 2022 / SEKISUI KASEI76

Other Information

Notes to Consolidated Financial Statements
14. Other Comprehensive Income
Reclassification adjustments and tax effects on components of other comprehensive income for the years ended March 31, 2021 and 2022 were as follows:
Millions of yen

Net unrealized holding gain (loss) on securities:
Gain (loss) arising during the year
Reclassification adjustments
Before tax effectTax effectNet unrealized holding gain (loss) on securities
Translation adjustments:
Gain arising during the year
Reclassification adjustments
Before tax effectTax effectTranslation adjustments
Retirement benefits liability adjustments:
Gain (loss) arising during the year
Reclassification adjustments
Before tax effectTax effect
Retirement benefits liability adjustments
Total other comprehensive income (loss)

Thousands of U.S. dollars

2022

2022

¥ 4,630(842)
3,787(1,153)2,633¥ (5,965)(404)(6,369)1,952(4,417)$ (48,737)(3,300)(52,038)
23,890(36,089)

640
—
640
—
640

720
—
720
—
720

5,882
—
5,882
—
5,882

1,783
(156)
1,626
(497)
1,128
¥ 4,402(2,065)(616)(2,681)821(1,860)¥ (5,557)(16,872)(5,033)(21,905)
6,708(15,197)$ (45,404)2021

15. Research and Development Costs
Research and development costs included in selling, general and administrative expenses for the years ended March 31, 2021 and 2022 amounted to¥2,655 million and ¥2,784 million ($22,746 thousand), respectively.

16. Impairment Loss
Impairment loss was not recorded for the year ended March 31, 2021.
The Group recorded impairment loss on the following asset groups for the year ended March 31, 2022.
i) Overview of asset groups for which impairment loss has been recognized.

Use

Main location

Asset category

Business assets (Form)Business assets (Trim)Business assets (Foamed molding)
Other

Czech Republic
PolandGermany—

Machinery and tangible leased assets
Machinery and tangible leased assets
Machinery and tangible leased assets
Goodwill and intangible assetsii) Background of recognition of impairment loss
Proseat Group, consolidated subsidiaries in Europe, have been
affected by rising prices from the end of last fiscal year for raw materials used in the automotive parts and materials, which is a core business, as well as a significant decrease in orders due to the impact of
reduced production because of a shortage of semiconductors for aEuropean-based automotive manufacturer.
As a result of updating the expected timing of market recovery in

77

Integrated Report 2022 / SEKISUI KASEIMillions of yen

Thousands of U.S. dollars

2022

2022

¥

895
1,922
1,416
2,173

$ 7,312
15,703
11,56917,754

Europe taking into account the facts and circumstances above, theGroup determined that there was no possibility of recovery overthe estimated period of future cash flows. Accordingly, the Group
reduced the carrying amount of goodwill originally recorded when
the Company acquired Proseat Group in February 2019, and the carrying amount of fixed assets held by the Proseat Group to the recoverable amounts, and the reduction was recorded as “impairment
loss” in the extraordinary loss.

iii) Amount of impairment loss and breakdown by type of assets
An impairment loss of ¥6,407 million ($52,349 thousand) was recorded and its major components are as follows:
Millions of yen

Thousands of U.S. dollars

2022

2022

Building
Machinery
Land
Tangible leased assets
Other tangible assets
Goodwill
Other intangible assets
Totaliv)Grouping method of assets
The Group categorizes assets for business use mainly based on theclassification for management accounting units. When there are indications of impairment of goodwill or shared assets, the Company assess
recognition of impairment loss by grouping in a larger units including
goodwill or shared assets to related multiple assets or asset groups.

¥

234
1,297
16
2,432
185
1,137
1,103
¥ 6,407$ 1,911
10,597130
19,870
1,511
9,289
9,012
$ 52,349v) Calculation method of recoverable amountThe recoverable amount is measured at the value in use and is calculated based on the future cash flows discounted by the rates from
10.8% to 14.3%. However, in the event the value in use was negative,
the carrying amount is reduced to the memorandum value.

17. Derivatives and Hedge Accounting
The estimated fair value of derivative instruments outstanding as of March 31, 2021 and 2022 for which hedge accounting has been applied issummarized as follows:
Millions of yen

2021
Notional amount
Total

Interest-rate currency swaps hedging long-term loans,accounted for by special treatment:
Receivable / floating and U.S. dollar
Payable / fixed and Japanese yen

Maturing after one year

¥ 991

Fair value

¥ 371

(*)

Millions of yen

2022
Notional amount
Total

Interest-rate swaps hedging long-term loans,accounted for by special treatment:
Receivable / floating and U.S. dollar
Payable / fixed and Japanese yen

Maturing after one year

¥ 1,030

Fair value

¥ 128

(*)

Thousands of U.S. dollars

2022
Notional amount
Total

Interest-rate swaps hedging long-term loans,accounted for by special treatment:
Receivable / floating and U.S. dollar
Payable / fixed and Japanese yen$ 8,415

Maturing after one year

$ 1,045

Fair value(*)(*) Because interest-rate currency swaps and interest-rate swaps accounted for by the special treatment for hedge accounting are accounted for applying swap rates to underlying
long-term loans, their fair value is included in that of the hedged long-term loans disclosed in Note 5.

Integrated Report 2022 / SEKISUI KASEI

78

Other Information

Notes to Consolidated Financial Statements
18. Amounts per ShareYen

Profit (loss) attributable to owners of parent
Net assets
Cash dividends
Profit (loss) attributable to owners of parent per share has been computed based on the profit (loss) attributable to owners of parent available for distribution to shareholders of common stock and the weighted-average number of shares of common stock outstanding during theyear. Diluted profit (loss) attributable to owners of parent per share has
not been presented for the years ended March 31, 2021 and 2022 sinceneither the Company nor any of the consolidated subsidiaries had any

U.S. dollars

2021

2022

¥

¥ (130.99)
1,272.86
22.00

24.86
1,549.84
21.00

2022
$ (1.07)
10.40
0.09

potentially dilutive shares as of March 31, 2021 and 2022.
The amounts per share of net assets have been computed based on thenumber of shares of common stock outstanding at the year end.
Cash dividends per share represent the cash dividends declared as
applicable to the respective years together with the interim cash dividends paid.

The financial data used in the computation of profit (loss) attributable to owners of parent per share based on the above method for the years ended
March 31, 2021 and 2022 is summarized as follows:
Millions of yen

Profit (loss) attributable to owners of parent
Adjusted profit (loss) attributable to owners of parent available for distribution to common stockholders

Thousands of U.S. dollars

2022

2022

¥ 1,126¥ (5,917)$ (48,345)

1,126(5,917)(48,345)

2021

Thousands of shares

2022

2021
Weighted-average number of shares of common stock outstanding

45,17645,299The financial data used in the computation of net assets per share based on the above method as of March 31, 2021 and 2022 is summarized as follows:
Millions of yen

Total net assets
Deductions from total net assets:
Non-controlling interests
Total net assets available to owners of parent

Thousands of U.S. dollars

2022

2022

¥ 70,657¥ 58,242$ 475,872

702¥ 69,955

717¥ 57,525

5,858$ 470,013

2021

Thousands of shares

2021
Number of shares of common stock used in the calculation of net assets per share

79

Integrated Report 2022 / SEKISUI KASEI

45,1372022
45,193

19. Revenue Recognition
Disaggregation of revenue from contracts with customers for the year ended March 31, 2022 is as follows
Millions of yen

2022
Human LifeJapan
EuropeAsia
Other
Revenue from contracts with customers
Other revenue
Total¥ 49,391—
137
1
49,530—¥ 49,530

Industry¥ 21,801
30,254
13,561
2,419
68,036—¥ 68,036

Total¥ 71,193
30,254
13,6982,420
117,567—¥ 117,567

Thousands of U.S. dollars

2022
Japan
EuropeAsia
Other
Revenue from contracts with customers
Other revenue
Total
Information that provides the basis for understanding the revenue
from contracts with customers
The Group identifies distinct goods or services included in contracts withcustomers and identifies performance obligations as a unit of transaction.
(a) Sales of merchandise and products
The Group’s main business consists of manufacturing and sales of products in
the Human Life segment and Industry segment. The Group recognizes revenue from the sale of these products upon delivery to the customer, since thecustomer obtains control over such products and the performance obligation
is fulfilled upon delivery of the products. Revenue is measured at an amountafter deducting sales returns, discounts and rebates from the transaction pricein the contract with the customer.
The Group receives a consideration for a transaction within one year after
fulfilling the performance obligations, and the consideration does not include
a significant financing component.

Human Life

Industry

Total$ 403,554—
1,119
8
404,689—$ 404,689$ 178,127
247,193
110,801
19,764555,895—$ 555,895$ 581,689
247,193111,920
19,772960,593—$ 960,593

Information to understand the amount of revenue for current year
and the following years
Contract assets mainly consists of revenue recognized prior to billing
customers.
Contract liabilities mainly consists of consideration received from customers before delivering products.
The amount of contract liabilities at the beginning of the fiscal year
included in the revenue recognized for the fiscal year ended March 31,
2022 is not material. The amount of the revenue recognized for the year
ended March 31 2022, whose obligations were satisfied in the past periods is immaterial.

(b) Agent transactions
When the Group’s performance obligation is to arrange for the provision of the specified good or service by another party, the Group, as anagent in the transaction, recognizes revenue in the amount of the fee orcommission or the net amount of consideration as an agent.

Integrated Report 2022 / SEKISUI KASEI80

Other Information

Notes to Consolidated Financial Statements
20. Segment Information(a) Outline of segment information
The Group’s business mainly involves the manufacturing and sales ofplastic products. The Company has established departments basedon product markets or product function for global development in
the two fields of “Human Life” and “Industry.” Each department has
works closely with subsidiaries to plan overall strategies and operate
its business.
Accordingly, the Group’s reportable segments are “Human Life” and“Industry.”
These reportable segments of the Group are components for which discrete financial information is available and whose operating results are
regularly reviewed by the Board of Directors to make decisions about
resource allocation and to assess performance.
The main products for Human Life Segment are boxes/trays for agricultural/fishery products, food containers, housing and civil engineering
materials, etc., while the main products for Industry Segment are automobile components, digital consumer electronics components, packaging materials, and other related products.

(b) Calculation methods used for sales, income, assets and otheritems of each reportable segment
The accounting policies of the segments are substantially the same as
those described in significant accounting policies in Note 1.
Segment income represents ordinary income, which consists of operating income and non-operating income/expenses. Non-operating
income/expenses mainly include interest income, dividend income,interest expense, equity in losses of an affiliate. Intersegment sales arerecorded at the same price used in transactions with third parties.
(Application of Accounting Standards for Revenue Recognition and its
Implementation Guidance)
The Group has applied the “Accounting Standard for Revenue Recognition”(ASBJ Statement No. 29, March 31, 2020) and “Implementation Guidanceon Accounting Standard for Revenue Recognition” (ASBJ Guidance
No. 30, March 31, 2020) from the beginning of the year ended March
31, 2022. Although segment sales in the Human Life segment and theIndustry segment for the year ended March 31, 2022 decreased by ¥8,432
million ($68,894 thousand) and ¥3,872 million ($31,636 thousand), respectively, there was no impact on profit or loss.

(c) Information on sales, income, assets and other items of each reportable segment
Information by reportable segment for the years ended March 31, 2021 and 2022 is as follows:
Millions of yen

2021
Reportable segments
Human Life

Sales, income and assets by reportable segments:
Sales to third parties
Inter-segment sales and transfers
Total
Segment income / (loss) (*2)
Segment assets
Other items:
Depreciation and amortization
Amortization of goodwill
Interest income
Interest expense
Equity in loss of an affiliate
Increase in property, plant and equipment and intangible assets

81

Integrated Report 2022 / SEKISUI KASEIIndustry

Total

Adjustments andeliminations (*1)

Consolidated¥ 53,470
549¥ 54,020¥ 3,754¥ 70,626¥ 65,381
115¥ 65,496¥ (957)¥ 65,630¥ 118,851
665¥ 119,516¥ 2,797¥ 136,257

¥

—
(665)
¥ (665)¥ (840)¥ 22,182¥ 118,851—¥ 118,851¥ 1,956¥ 158,439¥ 1,869
—
0
0
9
1,220

¥ 3,642
168
17
244
—
3,538

¥

¥

¥

5,511
168
17
245
9
4,759

705
—
0
128
—
618

6,217
168
17
373
9
5,377

Millions of yen

2022
Reportable segments
Human Life

Sales, income and assets by reportable segments:
Japan
EuropeAsia
Other
Revenue from contracts with customers
Other revenue
Sales to third parties
Inter-segment sales and transfers
Total
Segment income / (loss) (*2)
Segment assets
Other items:
Depreciation and amortization
Amortization of goodwill
Interest income
Interest expense
Increase in property, plant and equipment and intangible assets

Industry

Total

Adjustments andeliminations (*1)

Consolidated¥ 49,391—
137
1
49,530—49,530611¥ 50,141¥ 3,376¥ 66,050¥ 21,801
30,254
13,561
2,419
68,036—68,036133¥ 68,170¥ (1,777)¥ 59,708¥ 71,193
30,254
13,6982,420
117,567—
117,567745¥ 118,312¥
1,598¥ 125,758

¥

—
—
—
—
—
—
—
(745)
¥
(745)
¥
(196)
¥ 17,549¥ 71,193
30,254
13,6982,420
117,567—
117,567—¥ 117,567¥
1,401¥ 143,308¥ 1,903
—
0
0
1,229

¥ 3,535
128
11
264
1,856

¥

¥

¥

5,438
128
12
264
3,086

738
—
1
121
739

6,176
128
13
386
3,825

Thousands of U.S. dollars

2022
Reportable segments

Sales, income and assets by reportable segments:
Japan
EuropeAsia
Other
Revenue from contracts with customers
Other revenue
Sales to third parties
Inter-segment sales and transfers
Total
Segment income / (loss) (*2)
Segment assets
Other items:
Depreciation and amortization
Amortization of goodwill
Interest income
Interest expense
Increase in property, plant and equipment and intangible assets

Total

Adjustments andeliminations (*1)

Consolidated

Human Life

Industry$ 403,554—
1,119
8
404,689—404,689
4,992$ 409,682$ 27,583$ 539,668$ 178,127
247,193
110,801
19,764555,895—
555,895
1,086$ 556,989$ (14,519)$ 487,850$

581,689
247,193111,920
19,772960,593—
960,593
6,087$ 966,680$
13,056$ 1,027,518

$

—
—
—
—
—
—
—
(6,087)$ (6,087)$ (1,601)$ 143,385$$ 15,548—00
10,041$ 28,883
1,045
89
2,157
15,164$$$44,431
1,045
98
2,157
25,214

6,029
—
8
988
6,038

581,689
247,193111,920
19,772960,593—
960,593—$ 966,680$
11,447$ 1,170,912
50,461
1,045
106
3,153
31,252(*1) Adjustments and eliminations in the preceding tables were as follows:(i)	Segment income in the amounts of (¥840 million) and (¥196 million) ($1,601 thousand) for the years ended March 31, 2021 and 2022, respectively, consisted of elimination ofinter-segment transactions in the amounts of ¥1 million and ¥1 million ($8 thousand), and un-allocated expenses in the amounts of (¥842 million) and (¥198 million) ($1,617
thousand), respectively.
(ii)	Segment assets in the amounts of ¥22,182 million and ¥17,549 million ($143,385 thousand) for the years ended March 31, 2021 and 2022, respectively, mainly consisted ofinvestments in securities and assets related to administrative departments and the Central R&D Laboratory owned by the Company.
(iii)	Depreciation and amortization in the amounts of ¥705 million and ¥738 million ($6,029 thousand) for the years ended March 31, 2021 and 2022, respectively, include amortization of long-term prepaid expenses. In addition, these amounts mainly consisted of depreciation of assets related to administrative departments and the Central R&D
Laboratory owned by the Company.
(iv)	Increase in property, plant and equipment and intangible assets in the amounts of ¥618 million and ¥739 million ($6,038 thousand) for the years ended March 31, 2021 and 2022,
respectively, mainly consisted of assets related to the Central R&D Laboratory owned by the Company.
(*2) Segment income was adjusted for the ordinary income as described in “(b) Calculation methods used for sales, income, assets and other items of each reportable segment.”

Integrated Report 2022 / SEKISUI KASEI82

Other Information

Notes to Consolidated Financial Statements(d) Geographical information
Sales to third parties by countries or areas grouped according to geographical classification for the years ended March 31, 2021 and 2022 were summarized as follows:
Millions of yen

Japan
Europe
Asia
Other
Total

Thousands of U.S. dollars

2021

2022

2022

¥ 78,589
26,352
11,6062,303¥ 118,851¥ 71,193
30,254
13,6982,420¥ 117,567$ 581,689
247,193111,920
19,772$ 960,593

Property, plant and equipment by countries or areas grouped according to geographical classification as of March 31, 2021 and 2022 were summarized as follows:
Millions of yen

Japan
Europe
Asia
Other
Total

Thousands of U.S. dollars

2021

2022

2022

¥ 46,679
8,331
4,471
1,949
¥ 61,432¥ 45,016
4,159
4,506
1,970
¥ 55,652$ 367,807
33,98136,816
16,096$ 454,710(e) Information by major customer
The information by major customer for the years ended March 31, 2021 and 2022 was summarized as follows:
Millions of yen
Customer

Related segment

FP Corporation

Human Life

Thousands of U.S. dollars

2022

2022

¥ 15,467$ 126,374

Adjustments andeliminations

Consolidated¥—¥ 6,407

Adjustments andeliminations

Consolidated$—$ 52,349

Adjustments andeliminations

Consolidated

2021¥ 15,546(f) Information of Impairment Loss on Fixed Assets by Reporting Segment
Millions of yen

2022
Human life

Impairment Loss¥—

Industry¥ 6,407
Thousands of U.S. dollars

2022
Human life

Impairment Loss$—

Industry$ 52,349(g) Information on Amortization of Goodwill and Unamortized Balances by Reporting Segment
Millions of yen

2021
Human life

Amortization of goodwill
Unamortized balance of goodwill¥ ——Industry

¥

168
1,236

¥ —
—

¥

168
1,236

Millions of yen

2022
Human life

Amortization of goodwill
Unamortized balance of goodwill

83

Integrated Report 2022 / SEKISUI KASEI¥——Industry¥ 128—

Adjustments andeliminations

Consolidated

¥—
—

¥ 128
—

Thousands of U.S. dollars

2022
Human life

Amortization of goodwill
Unamortized balance of goodwill

Industry$——

Adjustments andeliminations

Consolidated$——$ 1,045—$ 1,045—

21. Subsequent Events(Distribution of retained earnings)
Distribution of retained earnings of the Company, which has not been reflected in the consolidated financial statements for the year ended March 31,
2022 was approved at a shareholders’ meeting held on June 23, 2022.
Millions of yen

Thousands of U.S. dollars

2022

2022

Cash dividends (¥7 (U.S. $0.05) per share)¥ 316$ 2,581(Acquisition of additional shares of subsidiaries)
On April 28,2022, the board of directors of the Company resolved that the Company would acquire all shares of Proseat Europe GmbH, a consolidated
subsidiary of the Company, and the acquisition was completed on May 20, 2022.
(a) Names and business description of companies in business combination.
(i)	Name of the company: Proseat Europe GmbHBusiness description:
Management of Proseat Group Policies and Administration(ii) Date of the business combination
May 20, 2022(iii) Legal form of the business combination
Share acquisition from non-controlling shareholders(iv) Company name after the business combination
Unchanged(v) Other matters related to the outline of the transaction
Additional acquisition due to the exercise of a put option from Recticel NA/SA, a non-controlling shareholder of Proseat Europe GmbH.
(b) Outline of the accounting treatment to be applied
The Company will treat this as a transaction with non-controlling shareholders under common control in accordance with the Accounting Standard
for Business Combinations (ASBJ Statement No.21, January 16, 2019), and the Guidance on the Accounting Standard for Business Combinations andAccounting Standard for Business Divestitures (ASBJ Guidance No.10 January 16,2019)(c) Matters concerning the acquisition of additional shares of subsidiary
Acquisition cost of the acquired company and breakdown by consideration for acquisition
Consideration for acquisition: Cash and deposits of 1€
Acquisition cost: 1€(d) Matters concerning changes in equity of the Company related to the transaction with non-controlling shareholders(i) Major components of changes in capital surplus and retained earnings
The acquisition of additional shares of a subsidiary(ii) Decrease in capital surplus and retained earnings due to the transactions with non-controlling shareholders
Not yet determined.

Integrated Report 2022 / SEKISUI KASEI84

Other Information

11 Years Summary
Fiscal Year

2011

2012

2013

2014*2

2015

101,350

101,784

109,923

113,660

101,559

Operating Income

2,271

1,152

2,124

3,930

5,118

Ordinary Income

2,107

1,237

2,206

4,180

4,862

744

926

1,264

2,530

3,147

Capital Expenditures

5,059

6,849

3,434

5,908

4,424

Depreciation and Amortization

3,848

3,940

3,856

3,999

3,937

Research and Development Costs

2,261

1,993

1,936

1,877

1,856

Total Assets

101,889

105,562

110,687

116,201

114,892

Total Net Assets

48,91150,92954,03658,27558,800Interest-bearing Debt

17,06818,492

18,566

19,467

18,274Net Income

15.84

19.72

26.96

54.14

67.34

Net Assets

1,021.26

1,063.68

1,136.52

1,231.36

1,243.30

12.00

8.00

14.00

18.00

24.00

Operating Income Ratio (%)

2.2

1.1

1.9

3.5

5.0

ROE (%)

1.6

1.9

2.5

4.6

5.4

ROA (%)

2.1

1.2

2.0

3.7

4.2

Equity Ratio (%)

47.1

47.4

48.0

49.5

50.6

No. of Employees as of March 31

1,757

1,813

1,833

1,859

1,895

No. of Employees in Japanas of March 31

1,587

1,646

1,609

1,539

1,545

No. of Employees outside Japanas of March 31

170

167

224

320

350

Ratio of Women (%)*4

N.A.

N.A.

N.A.

N.A.

16.9

Millions of yen

Net Sales

Net Income Attributable to
Owners of the Parent

Per Share Data*3 :Cash Dividends

Other Data (financial) :Other Data (non-financial) :*1 U.S. dollar amounts represent translations of Japanese yen, for readers’ convenience only, at the rate of ¥121.66 = U.S.$1.00, the prevailing exchange rate at
March 31, 2022.
*2 In order to synchronize accounting periods of overseas Group companies with the accounting period in Japan beginning in FY2014, the FY2014 results foroverseas Group companies are based on a 15-month accounting period.
*3 SEKISUI KASEI Co., Ltd. consolidated its common share at the ratio of two shares to one, effective on October 1, 2016.
*4 Excluding subsidiaries in Europe and the Americas that are not publicly listed.

85

Integrated Report 2022 / SEKISUI KASEI

2016

2017

2018

2019

2020

2021

2021

Millions of yen

Thousands of
U.S. dollars*1

102,398

112,101

112,593

136,155

118,851

117,567$ 966,357

5,401

5,284

4,784

3,725

2,091

1,463

12,025

5,049

5,154

4,776

3,391

1,956

1,401

11,515

3,404

3,448

3,129

2,323

1,126

(5,917)(48,635)

5,836

7,762

7,368

5,261

5,377

3,825

31,440

3,591

4,087

4,517

6,071

6,217

6,176

50,764

1,916

2,104

2,145

2,769

2,655

2,784

22,883

119,670

131,774

152,845

149,103

158,439

143,308$ 1,177,938

61,363

66,145

66,771

67,21770,65758,242478,727

18,42419,09635,22939,58341,704

41,588341,837

Yen

U.S. dollars*1

73.03

75.33

69.09

51.29

24.86

(130.99)$(1.08)

1,322.14

1,444.28

1,439.43

1,450.32

1,549.84

1,272.86

10.46

24.00

27.00

30.00

30.00

21.00

12.00

0.10

5.3

4.7

4.2

2.7

1.8

1.2

5.7

5.5

4.8

3.6

1.6

(9.3)

4.3

4.1

3.4

2.2

1.3

0.9

50.7

49.6

42.7

44.1

44.2

40.1

2,011

2,101

3,881

3,855

3,808

3,658

1,633

1,680

1,723

1,695

1,676

1,726

378

421

2,158

2,160

2,132

1,932

18.1

18.9

20.7

19.9

26.9

28.5

Integrated Report 2022 / SEKISUI KASEI86

Other Information

Our Group Network
Overseas Subsidiaries 21 Companies

17 ●
12
●
16
●
20 21
13 14 15●
18●●●
●
●

10
●

❸

19
●

❶

11
●

❹❺❻
❼

❷

❾

❽

❼ Sekisui Kasei Hong Kong Trading Co., Ltd.

❶ Sekisui Kasei Korea Co., Ltd.
❷ Sekisui Kasei Taiwan Co., Ltd.
❸ Sekisui Kasei Tianjin Co., Ltd.

❹ Sekisui Kasei Suzhou Co., Ltd.
❺ Sekisui Kasei Shanghai International
Trading Co., Ltd.
❻ Sekisui Kasei Shanghai Precision Forming Co., Ltd.

❽ PT. Sekisui Kasei Indonesia❾ Sekisui Kasei (Thailand) Co., Ltd.
10 Sekisui Kasei U.S.A., Inc.
●

11 Sekisui Kasei Mexico S.A. de C.V.
●
12 Sekisui Kasei Europe B.V.
●
13 Proseat Europe GmbH●

14 Proseat GmbH + Co. KG●

15 Proseat Verwaltung GmbH●
16 Proseat Schwarzheide GmbH●
17 Proseat LLP●

18 Proseat SAS●

19 Proseat Foam Manufacturing, S.L.U.
●
20 Proseat Mladá Boleslav s.r.o.
●
21 Proseat Sp.zo.o●

Domestic Subsidiaries 18 Companies❶❶ Sekisui Kasei Hokkaido Co., Ltd.
❷ Sekisui Kasei Tohoku Co., Ltd.
❸ Sekisui Kasei Toubu Co., Ltd.

18●

❹ Sekisui Kasei Urethane Co., Ltd.
❺ Sekisui Kasei Kanto Co., Ltd.
❷❻ Sekisui Kasei Gunma Co., Ltd.

❼ Sekisui Kasei Saitama Co., Ltd.

❽ Shonan Sekisui Kogyo Co., Ltd.

❾ Sekisui Kasei Yamakyu Co., Ltd.
❻❺❹❸
❼
❾ ❽
10
12 ●
11 ●
14 ●
●
15
13 ●
●
16
●
17
●

10 Sekisui Kasei Chubu Co., Ltd.
●
11 Sekisui Kasei Omi Co., Ltd.
●

12 Sekisui Kasei Shiga Co., Ltd.
●
13 Sekisui Kasei Sakai Co., Ltd.
●

14 Sekisui Kasei Kansai Co., Ltd.
●
15 Sekisui Kasei Tenri Co., Ltd.
●

16 Sekisui Kasei Seibu Co., Ltd.
●
17 Sekisui Kasei Oita Co., Ltd.
●

18 Sekisui Kasei Okinawa Co., Ltd.
●

87

Integrated Report 2022 / SEKISUI KASEIOther Information

Company Profile(As of March 31, 2022)

Business Lines in Each Segment

Company
name

SEKISUI KASEI CO., LTD.

Head office

2-4-4 Nishi-tenma Kita-ku, Osaka, Japan

Headquarters

2-7-1 Nishi-Shinjuku Shinjuku-ku, Tokyo, JapanFounded

October 1, 1959

Paid-in capital

16,533 million yen

President

Masato Kashiwabara

Number of
employees

425 (non-consolidated)
3,658 (consolidated)

Consolidated
subsidiaries(Japan)18 companies(Overseas) 21 companies

Equity method
affiliates

None

Fiscal year

Ended March 31

Industry

Automotive components, packaging
materials for transporting automotive parts,
Market/industrial components,
Applicationindustrial packaging, electric part materials,
medical and health care materials
Major
Products

Human
Life

Agricultural and marine product containers,
Market/food containers, distribution materials,
Application construction materials, civil engineering
materials
Major
Products

Stock Information

PIOCELAN, LIGHTLON, NEOMICROLEN,
CELPET, TECHPOLYMER, ST-gel,
TECHEATER, ELASTIL, FOAMAC, ST-LAYER,
ST-Eleveat, other foamed/molded products

ESLEN Beads, ESLEN Sheet, ESLEN Wood,
INTERFOAM, other foamed/molded products,
ES Dan Mat, ESLEN Block, etc.

(As of March 31, 2022)

Major Shareholders

Basic Information
Ordinary general
meeting of shareholders

June

Record dateOrdinary general meeting of shareholders: March 31
Year-end dividend: March 31
Interim dividend: September 30

Listings

First section, Tokyo stock exchange

Securities code

4228

Common stock—issued

Percentage
Number ofof
Shares Held
Ownership(thousands)
(%)

Name

SEKISUI CHEMICAL CO., LTD.

9,855

21.81

The Master Trust Bank of Japan, Ltd.

3,567

7.89

46,988,109 shares

The Dai-ichi Life Insurance Company, Limited

2,576

5.70

Number of shareholders

8,804

Employees’ Shareholding

1,894

4.19

Transfer agent

Mitsubishi UFJ Trust and Banking Corporation

Independent auditor

Ernst & Young ShinNihon LLC

Sekisui Jushi Corporation

1,419

3.14

Daido Life Insurance Company

1,418

3.14

FP Corporation

1,348

2.98

1,327

2.94

Denka Company Limited

1,250

2.77

600 Partners Shareholding
Business

1,138

2.52

Breakdown of Shareholder
Financialservices provider

Foreign investors

8.9%

1.5%

Financial institutions

Domestic companies
and others

25.1%

35.4%

Individuals and others

MUFG
Bank Ltd.
(Yen)
800

Stock price (left axis)

Trading volume (right axis)

Note:	T he Company maintains 1,794,000 shares of treasury stock, which dose not400
include the holdings of the major shareholders in the above list.

29.1%

200

Note: Calculated after deducting treasury stock holdings of 1,794 thousand shares

0
April
2020

Stock Price/Trading Volume
(Yen)
800

Stock price (left axis)

July

OctoberJanuary2021

Apr(Thousand shares)
8,000

Trading volume (right axis)

600

6,000

400

4,000

200

2,000
0

0
April
2020

July

OctoberJanuary
2021

April

July

OctoberJanuary2022

Integrated Report 2022 / SEKISUI KASEI88

You can find the latest information of corporation,
shareholder and investor relations as well as detailsof our products and green activities on the Website of
SEKISUI KASEI.
https://www.sekisuikasei.com/en/

SEKISUI KASEI CO., LTD.
Contact
Investor and Public Relations Dept.
Corporate Strategic HQ.
2-7-1 Nishi-Shinjuku, Shinjuku-ku,
Tokyo 163-0727, Japan
Tel. +81-3-3347-9711
Integrated Report 2022

2210SD410.3-0

Published in October 2022

Easy-to-read universal design fonts areused in this report.