Results of Operations
for the Fiscal Year Ended March 31, 2019 (Fiscal 2019)

May 22, 2019
DAIKEN CORPORATION(Security Code: 7905)

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Contents

1. Fiscal 2019 Financial Results
4■Fiscal 2019 Financial Results・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・
5■Fiscal 2019 Business Segment Results・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・
6■Fiscal 2019 Changes in Operating Profit ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・■Fiscal 2019 Three Priority Markets Sales (Public and Commercial Buildings, Global Markets, Home Renovation Market)・ 7-9■Fiscal 2019 Consolidated Statement of Income, Consolidated Balance Sheet, Consolidated Statement of Cash Flows・・・ 10-12

2. Medium-Term Management Plan GP25 2nd Stage (Fiscal 2020 to 2022)■Long-Term Vision GP25 (The Daiken Group’s Goals for 2025) ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・■Positioning of the Medium-Term Management Plan GP25 2nd Stage ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・■Previous Medium-Term Management Plan GP25 1st Stage: Status of the Achievement of the Management Goals ・・・・・・・・・・■Medium-Term Management Plan GP25 2nd Stage Basic Policy ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・■Management Goals ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・■Strategies and Goals by Business Segment ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・■Market Strategies and Goals・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・■Start of North American Wood Materials Business ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・■The U.S. Housing Market and Outlook for Demand ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・■Enhancement of the Management Foundation ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・■Investments Toward the Enhancement of Growth and Foundation, and Optimize Our Financial Basis ・・・・・・・・・・・・・・・■Capital Policy/Shareholder Return ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・■Practice of ESG Management ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・■Process of Creating Value ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・

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3. Fiscal 2020 Forecast■Fiscal 2020 Forecast・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・■Fiscal 2020 Changes in Operating Profit (Forecast) ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・■Fiscal 2020 Business Segment Sales Forecasts ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・■Fiscal 2020 Market Category Sales Forecasts ・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・・
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Fiscal 2019
Financial Results

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Fiscal 2019 Financial Resultsu Net sales increased 7.3% while the housing starts increased 0.7%
u Operating profit was down 23.8% because of higher expenses and the impact of problems
involving procurement activities and IT systems
u The dividend per share was unchanged at 74 yen as in the initial forecast(Unit: million yen)
Net sales

Fiscal 2018
(Result)

Fiscal 2019
(Result)

YoY change

170,581

182,962+7.3%

Operating profit

7,519

5,733

-23.8%

Operating profit ratio

4.4%

3.1%

-1.3ptOrdinary profit

8,760

6,838

-21.9%

Profit attributable to owners ofparent

5,895

4,402

-25.3%

Earnings per share (yen)244.60174.55-70.05

Dividend per share (yen)

74

74

±0

Dividend payout ratio

30.3%

42.4%

+12.1pt

ROE

11.7%

7.8%

-3.9pt4
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Fiscal 2019 Business Segment Resultsu Industrial Materials Business: Sales increased due to the new consolidation of the New Zealand MDF plant but
profit decreased because of the higher cost of wood chips, petrochemicals and other raw materials and theimpact of problems involving procurement activities
u Building Materials Business: Sales of floor, door, soundproofing and other products increased as housing
starts were strong and materials were increasingly used at public and commercial building projects. But thehigher cost of raw materials and logistics and the impact of IT system problems caused profit to decline
u Engineering Business: Sales increased due to growth of the renovation business and profit increased becauseof higher profit margins at interior projects at office and other buildings
Net sales(Unit: million yen)

Fiscal 2019
(Result)

Operating profit
Fiscal 2019
(Result)

YoY change

YoY change

Industrial Materials Business

61,843+11.7%

1,132-42.1%

Building Materials Business

89,485

+3.0%

3,189

-30.6%Engineering Business

18,063

+9.8%

1,015

+92.3%

Others13,569+13.9%

395-9.4%

182,962

+7.3%

5,733

-23.8%Total

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Fiscal 2019 Changes in Operating Profitu Higher expenses: Increase in prices of imported plywood, wood chips, energy, petrochemicals and other raw
materials
u Higher cost of logistics: Higher cargo transportation rates
u Streamlining/cost reduction: Reexamination of all categories of items purchasedu Higher selling prices to reflect higher expenses: Prices of industrial materials and flooring materials made ofimported plywood were increasedu Change in sales/composition: Impact of procurement and IT system problems
u New consolidation: New consolidation of the New Zealand MDF plant(Unit: million yen)

-2,100
-200

7,519

Hi
gh

増
費
流
物

5,733

+600

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(R al 2es 0 1
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-186

+800
-900

Fis

+200

Fis

ca

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Fiscal 2019 Public and Commercial Buildings Salesu Industrial Materials Business: Sales increased due to an increase in the use of Dai-Lite wallmaterials
u Building Materials Business: Sales increased because orders increased for flooring materials anddoors
u Engineering Business: Second half recovery in orders for interior finishing work at office and otherbuildings raised sales(Unit: million yen)

Fiscal 2018
(Result)

Public and commercial
buildings

Fiscal 2019
(Result)
19,849YoY change (amount)
21,158+199

YoY change+1,309

+6.6%

+45

+797
+268
21,158
19,849Fiscal2018'18/3期(Result)（実績）

Industrial
Materials
素材

Building
Materials
建材

Engineering
エンジニアリング

Othersその他'19/3期
Fiscal2019(Result)（実績）

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Fiscal 2019 Global Markets Salesu Industrial Materials Business: Sales increased due to the new consolidation of the New Zealand
MDF plantu Building Materials Business: Sales decreased due to sluggish growth of sales in China andIndonesiau Others: More purchasing and sales of industrial materials for creating new sales channels(Unit: million yen)

Fiscal 2018
(Result)

Global markets

Fiscal 2019
(Result)
12,278YoY change (amount)
19,241-58

0

YoY change+6,964+56.7%+840+6,181

19,241

12,278
Fiscal 2018
(Result)

Industrial
Materials

Building
Materials

Engineering

OthersFiscal 2019
(Result)

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Fiscal 2019 Home Renovation Market Salesu Industrial Materials Business: Sales decreased due to lower sales of tatami matsu Building Materials Business: Sales decreased due to weaker sales of flooring materials, door andother interior building materials
u Engineering Business: Sales increased due to growth of the renovation business(Unit: million yen)

Fiscal 2018
(Result)

Home renovation market

Fiscal 2019
(Result)
28,975

YoY change (amount)
28,429

-399

-546

-1.9%

+18
-1,090+924

28,975'18/3期
Fiscal2018(Result)（実績）

YoY change

28,429Industrial
Materials
素材

Building
Materials
建材

Engineering
エンジニアリング

Othersその他'19/3期
Fiscal2019(Result)（実績）

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Fiscal 2019 Consolidated Statement of Income(Information about non-operating profit (expenses) and extraordinary income (losses))(Unit: million yen)

Fiscal 2018
(Result)

Fiscal 2019
(Result)

YoY change

Net sales

170,581

182,962+12,381

Gross profit

42,63543,673+1,038

SG&A expenses

35,11637,940+2,824

Operating profit

7,519

5,733

-1,786

Non-operating profit (expenses)+1,242+1,105-137

Ordinary profit

8,760

6,838

-1,922Extraordinary income (losses)

-418

+463

+881

Profit before income taxes

8,342

7,301

-1,041

Total income taxes

2,318

2,703

+385

Profit

6,023

4,597

-1,426

128

195

+67

5,895

4,402

-1,493

Profit attributable to noncontrolling interests
Profit attributable to owners ofparentExchange rate (yen)Fiscal 2018
(Result)

Fiscal 2019
(Result)◆Non-operating profit (expenses) -137
<Major factors>
Foreign exchange losses-321
Dividend income+27Interest expenses+30◆Extraordinary income (losses) +463
<Major factors>
Gain on sales of investment securities+165
Compensation income+953
Loss on retirement of non-current assets-220
Loss on valuation of investment
securities-104
Compensation expenses-347

YoY change

USD

106.26110.92

+4.66

NZD

79.15

75.45

-3.70

MYR

26.59

27.18

+0.59

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Fiscal 2019 Consolidated Balance Sheet (Major components)(Unit: million yen)

Fiscal 2018
(Result)

Fiscal 2019
(Result)

YoY change

Cash and deposits

10,767

16,865+6,098Notes and accounts
receivable-trade47,51850,511+2,993Inventories

16,79921,363+4,564

Other current assets

2,043

2,795

+752

Total current assets

77,13091,553+14,423

Property, plant andequipment

36,84741,321+4,474

Intangible assets

2,580

6,375

+3,795Investments and other assets

24,112

20,831-3,281

Total assets

140,776

160,158+19,382

Notes and accounts payable

26,39830,573+4,175

Bonds and loans payable

21,81130,682+8,871Other current/non-current
liabilities

35,581

37,153+1,572

Total liabilities

83,797

98,416+14,619

Total shareholders’ equity

46,67053,460+6,790Total net assets

56,97961,741+4,762

Total liabilities and net assets

140,776

160,158+19,382

ROA (Return on assets)

6.4%

4.5%

-1.9ptShareholder equity ratio

38.5%

36.8%

-1.7ptDebt-equity ratio (multiple)

0.40

0.52

+0.12

◆Notes and accounts receivable+2,993<Major factors>
Sales as other receivables were held
◆Inventories<Major factors>
New consolidation
Work in process
Apartment renovation+4,564+2,317+437+359◆Property, plant and equipment+4,474<Major factors>
Acquisition/construction in progress +5,877
New consolidation+2,543
Depreciation-3,366
Exchange rate changes, etc.
-580
◆Intangible assets+3,795<Major factors>
Increase in goodwill due to newconsolidation+4,370◆Investments and other assets-3,281<Major factors>
Decrease in valuation difference on
investment securities-3,097◆Notes and accounts payable+4,175<Major factors>
Purchases as other payables were held
◆Bonds and loans payable+8,871<Major factors>
Procurement of funds for acquisition andother reasons◆Total net assets+4,762<Major factors>
Issuance of shares+4,26711
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Fiscal 2019 Consolidated Statement of Cash Flows (Major components)
Fiscal 2018
(Result)(Unit: million yen)

Fiscal 2019
(Result)

Operating cash flow

+9,158+10,052

Investing cash flow

-2,711-15,079

Free cash flow

+6,447-5,027

Financing cash flow

-6,342+11,165

Cash and cash equivalents
at end of period

10,767

16,865

Capital expenditures

3,081

6,586

Depreciation

3,768

4,134

15,00010,00011,165

10,052

9,158
6,447

5,000
0
-5,000-5,027-2,711-6,342-10,000-15,000◆Operating cash flow
+10,052<Major factors>
Profit before income taxes+7,301
Depreciation+4,134
Changes in notes and accounts
receivable/payable-trade+2,914
Increase in inventories-3,914
Income taxes paid
-1,446◆Investing cash flow
-15,079<Major factors>
Purchase of property, plant andequipment-6,932
Purchase of shares of subsidiaries
resulting in change in scope of
consolidation-8,237◆Financing cash flow
+11,165<Major factors>
Increase in bonds and loans payable+8,892Issuance of shares+4,267
Cash dividends paid
-1,902-15,079-20,000
Fiscal 2018
(Results)
Operating cash flow

Investing cash flow

Fiscal 2019
(Results)
Financing cash flow

Free cash flow

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Medium-Term Management Plan GP25 2nd Stage(Fiscal 2020 to 2022)

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Long-Term Vision GP25 (The Daiken Group’s Goal for 2025)

2025

Significance of Existence and Ambitions

Long-Term Vision GP25

1.Contribute to the building of a sustainable society by efficiently using limited resources
2.Enrich peoples’ minds by creating more comfortable and secure spaces

Grow/Glow Plan 25

Grow

Glow

The Group will work totransform into an enterprisethat meets the expectationsof customers and markets
while contributing to a better
society.

The Group will work tobecome
an enterprise that people rate
highly for its attractive working
environment and as a place
where employees can work
positively andenthusiastically.

How we should be in 2025:
1. Leading global company for industrial materials, building materials, and engineering
2. Continue to challenge new business areas and grow the fourth pillar
3. Earn a great reputation among professionals for consumer-oriented productdevelopment, proposal capabilities, problem-solving skills, and organizational strength
4. Company culture that admires challenges, and system established to support challenges
5.Governance is strengthened to support sustainable growth and improvement of medium-to longterm corporate value

Business domains, markets, and sectors targeting Long-Term Vision GP25
From the current image as a housing materials manufacturer to the following:● Supply building materials and industrial materials for building materials as well asconstruction● Expand business areas from housing to public and commercial buildings, and industrial materials● Expand into global markets

Toward becoming on
all-embracing company
for building materials
Markets and sectors

Industrial materials businessHousing market

New business

DomesticEngineering business

GlobalBuilding materials business

Becoming asustainable
society

Creating theenvironment thatenriches people’s lives

Business domains

Public and commercialbuildings
Industrial materials

New markets

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Positioning of the Medium-Term Management Plan GP25 2nd Stage15
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Previous Medium-Term Management Plan GP25 1st Stage:

Status of the Achievement of the Management Goals
n We achieved the sales and net profit goals and we continued to distribute earnings to shareholders based on the policy of adividend payout ratio of at least 30%
n There was an operating profit for two consecutive years following the consolidation, including record-high earnings, but unable
to be profitable in the plan’s final fiscal year
n Regarding sales for three priority markets, sales of global markets reached the goals. We could not achieve the goals in the publicand commercial building despite higher sales for three consecutive fiscal years. The home renovation market did not reach thegoals.
(Unit: 100 million yen)
ResultGoal

ResultFiscal 2016

Fiscal 2019

Fiscal 2017

Fiscal 2018

Fiscal 2019

Management Net sales
goals
Operating profit

1,681

1,800

1,688

1,705

1,829

55

70

85

75

57

Ordinary profit

52

70

90

87

68

Profit attributable toowners of parent

39

43

51

58

44

ROE

9.8%

8%

11.7%

11.7%

7.8%

Dividend payout ratio (%)

30.4%

30% or more

30.1%

30.3%

42.4%

166

285

168

199

211

96

143

110

123

192

Home renovation market

283

299

288

290

284

Total

545

727

566

612

687

Net sales for Public and commercial
buildings
three priority
Global markets
markets

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Basic Policy
Basic policy
Based on firm management foundation, pursue the resolution of social issues
through our business, thereby accelerating growth strategies toward becoming an
all-embracing company for building materials.
I. Accelerating growth strategies
Japan: Review of the business (market) portfolio
Global: Expand the business through aggressive investments andentry into new markets
II. Enhancement of the management foundation
1. Optimize our financial foundation
2. Restructure firm and flexible business infrastructure
3. Practice of ESG management

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Management Goals
Management goals
I. Accelerating growth strategies(Unit: 100 million yen)
Net sales
Domestic market
Global market

Operating profit
Operating profit ratio
Profit attributable toProfitowners of parent

Fiscal 2019
Result
1,829
1,637
192
57
3.1%

Fiscal 2020
(forecast)
2,100
1,720
380
104
5.0%

Fiscal 2022
Target
2,250
1,730
520
120
5.3%

Increase/
Decrease
+421
+93
+328
+63
+2.2pt

44

60

70

+26

II. Enhancement of the management foundation
Financial indices (Fiscal 2022)
Efficiency

ROE

Non-financial indices (Fiscal 2022)
10%

ROA

7%

Soundness

Shareholder equity ratio

40%

Shareholder
returnDividend payout ratio (%)

30% or moreE

Total CO2 emissions in Japan*1*2

S
G

Total diversity index
Serious quality accidents andviolations
Degree of penetration of the Group
Corporate Philosophy*3-26%+20 pt0+10 pt*1: Compared to fiscal 2014
*2: Our own indices in which the eight diversity items, such as the female manager ratio,
were indexed as compared to fiscal 2019
*3: Our own indices in which employees’ understanding, sharing, and practice of the Group
Corporate Philosophy were indexed as compared to fiscal 201818
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Strategies and Goals by Business Segment
Industrial materials business
Globally expand the markets and applications by taking
advantage of sustainability and functionality and maximize thefixed asset efficiency
Invest in the North American wood industrial materials business(LVL/veneer) and expand into the North American market
Pursue optimization of the production system
Accelerate application development centering on the resolution ofsocial issues
Start the non-combustible business for wood materials
Consider commercialization of wood material use for the
agricultural and gardening markets
Consider commercialization of new wood materials

Building materials business
By taking advantage of the industrial materials business andfunctional and construction saving-type building materials,
increase our share in the housing market and expand in the publicand commercial building fields
Further expand the differentiated products that can keep
getting chosen
Expand the product/sales networks by fully utilizing M&A andexternal resources

Engineering business
Expand construction domains, areas and sources of orders by using
M&A and cooperation with other companies
Expand the construction company’s business targeting thepriority markets (public and commercial buildings, remodeling, andrenovation)

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Market Strategies and Goals
Global markets
Accelerate global expansion with a focus on the industrial
materials business through aggressive investments

Invest in the North American wood industrial materials business(LVL/veneer) and expand into the North American market
Continuously expand wood industrial materials with a focus on MDF
Put the Chinese and Indonesian building materials businesses on a path
toward stable growth and shift to the growth strategy

Public and commercial buildings
Expand investments including M&A and accelerate growth
Expand the product lineup (The medical field will be the new focused target)
Improve infrastructure for the expansion of the markets, such as
logistics, correspondence of drawings, and the sales structure.
Expand the product and sales networks, including cooperation withother companies and M&A

Industrial materials
Cover the decrease in these for housing with application
development and expand industrial materials business
Domestic market

Focus on application development for the new markets and fields
Promote the development of and search the applications of newmaterials and R&D productsHome renovation market
Expand in the renovation market from a perspectiveof development of functional products and methods

Expand the renovated properties and renovation work in the Tokyo
metropolitan area
Focus on the expansion of the products for renovation, such as
construction savings and waste savings

Domestic new home market
Restructure the sales structure in response to changes in
the market and customer needs, and increase our share

Continuously enhance the products and proposals from the perspectiveof functionality, such as soundproofing and construction work saving.
Enhance the collaborative system with key distribution companies
as well as a system to make proposal to key customers

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Start of North American Wood Materials Business
The long-term vision includes the goal of speeding up global growth and the expansion of overseas markets in the industrial
materials business. To accomplish this goal, Daiken made CIPA, which operates a Canadian veneer factory and was an Itochu
consolidated subsidiary, and PWT, which operates a U.S. LVL(*) factory, subsidiaries. This established a base to start a woodmaterials business in North America to serve the North American wood housing market, the largest in the world.

VancouverSeattleCIPA Lumber Co. Ltd. (CIPA)
Established:
Location:
Capital:Business:

April 30, 1968
Delta, British Columbia, Canada
23,000 thousand CAD(1,955 million yen)
Manufacture of veneers,
lumber sorting

Yen translations of capital use exchange rates of 85 yen（ ）内の資本⾦の円表⽰は、1加ドル85円、1⽶ドル110円で換算
to theCanadian dollar and 110 yen to the U.S. dollar.

PACIFIC WOODTECH CORPORATION (PWT)
Established: January 7, 1998
Burlington, Washington, USA
Location:
26,000 thousand USD
Capital:(2,860 million yen)
Manufacture and sales ofBusiness:
structural LVL and wood I-joists* Laminated veneer lumber: An engineered wood product made by cutting logs into thin sheets and then stacking and bonding the sheets withfibers parallel. Used for home columns, beams and other structural elements and for the fabrication of furniture and building materials.

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The U.S. Housing Market and Outlook for Demandn Currently, annual housing starts in the U.S. are about
1.2 million(Thousands)

This is about 20% higher than the 950,000 starts inJapan but U.S. housing starts are two to three times
more than in Japan in terms of floor area

200
2,000

n Single-family houses are 60% of all U.S. housing starts
and almost all are wood-frame structures, making the
U.S. the world’s largest wood-frame house market
n LVL, which is produced by PWT, is a vital material forthe production of beams and other structuralcomponents of U.S. woof-frame houses
n The health of the U.S. economy, changes in mortgage
and other long-term interest rates and other factors
have a short-term impact on housing starts

U.S. 住宅着⼯件数推移
Housing Starts
⽶国

250
2,500

150
1,500
100
1,000

500
50
0
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

住宅着⼯数
Housing
starts1967-2016年平均件数
Average for 1967 to 2016

Source: Daiken based on Federal Reserve Bank of St. Louis data

U.S. Population Growth and Forecast
1980

n The U.S. is one of the few advanced countries that
expects the population to continue to grow (by about 2
million annually). As a result, medium to long-term
housing demand will probably be stable

1990

n Daiken believes there is potential for medium andlong-term growth in the U.S. housing market by using
industrial and building materials technology and otherJapanese expertise along with collaboration with
Itochu

2030

2000
2010
2020

2040
2050

50

228
238
250
266
282
296
310
319
331
343
354
365
374
382
391
100
150
200
250
300
350
400
(Unit: Millions)
Source: U.N. statistics (average)

22
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Enhancement of the Management Foundation
To steadily push ahead with the growth strategy, enhance of the management foundation fromthe three perspectives of financial soundness, business infrastructure, and ESG.

Optimize our financial foundation
To support investments toward the growth andenhancement of the foundation, place emphasis on
efficiency and soundness and optimize our financial position

Enhancement of the management foundation
Practice of ESG management

Restructure firm and flexible business infrastructure

Toward the enhancement of the managementfoundation that supports the growth strategy, practicesustainable ESG management centering on theMedium-term ESG plan

To be a company that will be continually chosen, establish
IT, logistics, and supply systems that are strategic andoptimal from medium- and long-term perspectives andrestructure firm and flexible business infrastructure23
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Investments Toward the Enhancement of Growth and Foundation,
and Optimize Our Financial Basis
Investments toward the enhancement of growth and foundationn Make it a top priority to implement growth investments toward the realization of the long-term vision GP25n Select investments by reflecting risk and return as well as the cost of capitaln Aggressively utilize advanced technologies such as AI and IoT, to lead for improvements in efficiency andproductivity

Optimize our financial foundation
Efficiency goal
・ROA: 7%

・ROE: 10%

□ Improvement of the fixed asset turnover ratio (Reduction in
inefficient assets and stringent selection of capital investment)□ Improvement of the working capital turnover ratio (Inventory
optimization that gives consideration to BCP)

Soundness goal・Shareholder equity ratio: 40%

・ D/E ratio: 0.5 times□ Balance sheet management to maintain the optimum balance□ Procurement of funds for investment that will support growth24
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Capital Policy/Shareholder Return
Basic policies for capital and shareholder distributionsn By striving for efficient management that places emphasis on ROE, improving shareholder return, andoptimizing the balance between financial soundness and strategic investment, improve corporate value.
n For shareholder distributions, the goal is a dividend payout ratio of at least 30% while maintaining a stabledividend and aiming for the distribution of earnings linked with results of operations.
n Decisions about the repurchase of stock will be made based on the current level of capital, the market
environment and other applicable considerations.
Shareholders’ equity will be effectively used for the improvement of production, sales and construction
systems as well as for new businesses, global operations and other activities in order to achieve medium- andlong-term growth and build a solid foundation for business operations.

25
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Practice of ESG Management
To accomplish the goals of the medium-term management plan GP25 2nd stage, the medium-term ESG plan wasformulated to include critical items for building a stronger business foundation. Daiken has set goals toward the
medium-term plan’s final fiscal year, and is dedicated to working in a unified fashion by further improving linkage.

Key themes and goals in the medium-term ESG plan (fiscal 2020-2022)

E

S

Greenhouse gas emissions reduction

Total greenhouse gas emissions in Japan
Fiscal 2022: 26% reduction (As compared to fiscal 2014)

Promotion of carbon fixation

Amount of carbon fixation by the wood material business:
1,100,000 t-CO2/year

Promotion of the use of renewable energy

Renewable energy utilization ratio: 50% or more

Procure wood in a biodiversity friendly way

Utilization ratio of the domestic timber for floor base materials: 45%

Enhancement of the quality control structure

Serious product accident: 0
Product audit implementation cover ratio: 100%

Promotion of workstyle reform

Rate of taking annual paid leave: 70%

Promotion of diversity

Indexation of the eight diversity items,
such as the female manager ratio: +20 pt

Reinforcing human resources development

Ｇ

Enhancement of the governance system
Promotion of risk management
Thorough compliance

Young employees’ career plan training attendance rate: 100%
Management staff training program attendance rate: 70%
Degree of penetration of the Group Corporate Philosophy: +10 pt
Group Corporate Philosophy penetration program execution rate
: 100%
Procurement and system BCP 3-year proactive measurecompletion rate: 100%
Serious compliance violations: 0

26
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Process of Creating Value■ By pursuing the resolution of social issues through business activities, we aim to create economic and social value.
■ Strengthen the business foundation from three perspectives of financial soundness that supports business operations,the business infrastructure and ESG.
Medium-Term Management Plan 「GP25 2nd Stage」
Growth strategy and enhancement of the
management foundation

Social issues and needs

Business and market strategies

Creating shared value (CSV)
by Daiken businesses

Global markets●Promoting the use of domestic timber

Industrial materials
business

Public and commercial
buildings

Building materials
business

・Realization of low-carbon society
・Building a recycling-oriented
society・Measures for water resources
・Measures for biodiversity
・Conservation of tropical timber・Decrease in labor force
・Promotion of diversity
・Promotion of workstyle reform・Development of local communities
・Revitalization of the domestic forest
products industry
・Preparation for natural disasters
・Improvement of the safe, secure,
healthy, and comfortable living
environment
・Response to the super-aging society

Creation of economic and social value

Industrial materials
Home renovation market

Engineering business

Domestic new homemarketFinancial affairs

Business infrastructure●Creating a safe, secure, healthy, andcomfortable space●Promotion of anti-seismic
performance●Effective utilization of unused
resources●Recycling of wood resources●Reduction of CO2 emissions●Saving construction time and work

Management goals

Financial
indices

Foundation of value creation
Optimized financial
foundation

Firm and flexible
business infrastructure

Non-financial
indices

ESG (CSR) activities

Medium-Term ESG Plan

Management foundation enhanced by ESG

Investment to build the foundation for further value creation27
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Fiscal 2020
Forecast

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28

Fiscal 2020 Forecastu Forecast 14.8% sales growth in part because of the new consolidations
u Forecast 81.4% operating profit growth as streamlining/cost reduction, higher selling prices andthe new consolidations offset the higher cost of raw materials and logistics. Earnings will also
benefit from the end of problems that occurred in fiscal 2019
(Unit: million yen)

Fiscal 2019
(Result)

Net sales

Fiscal 2020
(Forecast)Fiscal 2022
(Medium-term
management plan target)

YoY change

182,962

210,000+14.8%

225,000

Operating profit

5,733

10,400+81.4%

12,000Operating profit ratio

3.1%

5.0%

+1.9pt5.3%

Ordinary profit

6,838

11,100+62.3%-

Profit attributable to ownersof parent

4,402

6,000

+36.3%

7,000

Earnings per share (yen)174.55230.62+56.07-

Dividend per share (yen)

74

70

-4

-

Dividend payout ratio

42.4%

30.4%

-12.0pt

30% or more

ROE

7.8%

9.8%

+2.0pt10%29
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Fiscal 2020 Changes in Operating Profit (Forecast)u Higher expenses: Increase in prices of imported plywood, wood chips, petrochemicals and other materials
u Higher cost of logistics: Higher cargo transportation rates and storage feeu Streamlining/cost reduction: Reexamination of all categories of items purchasedu Higher selling prices to reflect higher expenses: Mainly in the building materials business to offset the higher
cost of raw materials and logistics
u Change in sales/composition: Improved due to the end of the impact of procurement and IT system problems
in fiscal 2019u New consolidation: Overseas industrial materials business, solid flooring materials business in Japan,
renovation business, LVL sheet processing business(Unit: million yen)

-233
+2,400+2,000+1,400-1,000増費流物

Hiof ghelo r cgis os
tic t
s

ns
es

pe

ex

ca

Hi
gh

Fis

ップ
ア
ト
コス

er

Fis
c
(R al 2es 0 1
ul 9
t)

…
19
0
l2

+1,100

/
g t
g…
s/差
lin 転e嫁in化 onl理nale成n
e のfl c es
l合i ctissin ・構itio
er oへre ens
am u
e
h
減s
価
t
rt e redggp
n 増 poS st
Hi c売es ex
a
上
h
m
i
r
C 売 cocopr g he
i
h

Ne

w

結
on
連ti
a
規
id
ol
s新
n
co

n
増
e i nses費sa
re経 xpec他
Iそnの r e
he
ot

…
20
0
l2

Fis
(F cal
or 20
ec 2
as 0
t)

-1,000

5,733

10,400Fis

ca

30
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Fiscal 2020 Business Segment Sales Forecasts
u Industrial Materials Business: New consolidation of the North American wood materials businessand higher sales of tatami facing, Dai-Lite wall materials and other productsu Building Materials Business: New consolidation of the solid flooring materials business and higher
sales involving public and commercial buildingsu Engineering Business: Increase in interior project orders, new consolidation of the renovation
business, increase in renovation sales(Unit: million yen)

Fiscal 2019
(Result)

Fiscal 2020
(Forecast)Fiscal 2022
(Medium-term
management plan target)

YoY change

Industrial Materials Business

61,84382,930+34.1%

90,000

Building Materials Business

89,48593,820+4.8%

95,000Engineering Business

18,063

19,670+8.9%

28,200

Others13,56913,580+0.1%

11,800182,962

210,000+14.8%

225,000

Total

31
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Fiscal 2020 Market Category Sales Forecastsu Global markets: Higher sales due to new consolidation of North American wood materials businessu Public and commercial buildings: Higher sales of functional building materials for all types ofbuildings and new consolidation of the solid flooring materials businessu Home renovation market: Higher sales mainly because of new consolidation of a renovationcompany and growth of the renovation business(Unit: million yen)
Upper: sales Lower: composition
Global markets
Public and commercial buildings
Industrial materials
Home renovation market
Domestic new home market
OthersDomestic market
Total

Fiscal 2019
(Result)

Fiscal 2020
(Forecast)Fiscal 2022
YoY change(Medium-term
management plan target)+97.5%
52,00019,241

38,000

10.5%

18.1%

+7.6pt23.1%

21,15825,000+18.2%

31,200

11.6%

11.9%

+0.3pt13.9%

35,59036,000+1.2%

35,500

19.5%

17.1%

-2.3pt15.8%

28,42932,500+14.3%

37,600

15.5%

15.5%

-0.1pt16.7%

77,52277,500-0.0%

67,500

42.4%

36.9%

-5.5pt

30.0%

1,023

1,000

-2.2%

1,200

0.6%

0.5%

-0.1pt0.5%

163,721

172,000+5.1%

173,000

89.5%

81.9%

-7.6pt76.9%

182,962

210,000+14.8%

225,000

100.0%

100.0%-

100.0%

32
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Toward the future going beyond the functions of yesterdayThis presentation is intended to provide information and does not solicit an action of any kind.
This presentation (including forecasts) was created by Daiken based on information that was currently
available. This presentation includes risks and uncertainties and Daiken provides no guarantee that
information is reliable or complete.
Please use this information based on your own judgment.
Daiken is not responsible for any losses that may result from investment decisions that relycompletely on the forecasts, targets and other information in this presentation.

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