Daiken Group Report

DAIKENGROUPREPORT2018

Toward the future going beyond
the functions of yesterday

DAIKEN CORPORATION

Group Corporate Philosophy
Company mission[Our Mission]

We will create a wonderful futurewith our technology, ideas, and passion.

Company vision[Vision]As a company respected by everyone,
we will give the highest priority to harmonizing an affluent society
with the environment by offering new valuethat exceeds people’s expectations.

Company values[Our Values]

We pledge the following:• Ensure harmony between the environment, society, and people.
• Be careful of safety, security, health, and comfort.
• Courageously accept the challenges of new ideas.
• Promptly respond to changes and opportunities.
• Be sincere at all times.

CONTENTS
Foundation of Value Creation
Group Corporate Philosophy
Historical Development of Value Creation
Product Development Uses Strengths
Process of Creating Value
Value Creation by Businesses

ESG Information
1
3
5
7
9

Vision and Strategy of Value Creation
Interview with Top Management
Medium-Term Management Plan toAchieve the GP25 Long-Term Vision
Summary of BusinessInitiatives in 3 Priority Markets

1

DAIKEN GROUP REPORT 2018

Daiken's CSR
GovernanceSocialEnvironment

25
27
35
39

Data
11
17
19
21

Highlight of Data
Ten-Year Financial Summary
Financial Statements
Company Information/Stock Information

43
45
47
53

The scope of report
Daiken Corporation and Daiken Group* Environment data differs in scope.

Eligible period
Fiscal 2018 (April 1, 2017- March 31, 2018)* Some contents include information other than
the above period

Reference guidelines
International Integrated Reporting Council(IIRC)The International Integrated Reporting
Framework[Disclaimer for future prospect]
The forecasts and estimates shown in this report are
based on information available at the time of thereport’s issuance. Plans and figures depicting thefuture do not imply a guarantee of actual outcome.

Foundation of Value Creation

Message to stakeholders
The year 2017 was the first year of the mission in which theestablished the new group corporate mission that responds toglobalization and the diversification of human resources.
We are now expecting a dramatic change in the management
environment. All employees in the group have pledged and aredetermined to work together to become “a company loved byeverybody” by gathering our technology, ideas, and passion tocontribute to a future filled with smiles.

Vision and Strategy of Value Creation

previous management philosophy evolved and where we

In this report, we will introduce the essence of the past, present,
and future of Daiken so that you—the stakeholders—canunderstand the efforts of our group.
support us in the future.

ESG Information

We hope you will enjoy reading this report and will continue toRepresentative director
President and executive officer

In this third integrated report, we will introduce our advantages
through the long history, our efforts for solving social problems
through business activities, and medium- to long-term growthstrategies as a series of value creation stories. Also, we tried to makethe report showing real Daiken by improving the pages about
governance such as expanded top interview, a message from a newoutside audit, and a face-to-face meeting with outside directors.
We hope this report would help a wide range of stakeholders
such as shareholders and investors understand corporate values
and growth potential of Daiken. Please visit our website for details of
ESG information on environmental data.

Data

Editorial Policy

About cover design
Three arrows on the cover mean Daiken’s three corebusinesses (industrial materials, building materials,
engineering), priority three markets in the medium-term
management plan (public and commercial buildings,
global markets, home renovation market), andthree-stage medium-term management plan toward theachievement of the long-term vision. Through these
efforts, we will deploy our business from houses to
non-houses and from Japan to overseas. The cover
design shows our growth to an all-embracing company
for building materials and the future vision reflected inour corporate message toward the future going beyond
the functions of yesterday.

DAIKEN GROUP REPORT 2018

2

Foundation of Value Creation

Historical Development of Value Creation
Ever since foundation, The Daiken Group has been developing a wide variety of products
to help customer’s daily life though our technological innovations which always meets
social issues and needs.
The Group effectively uses all the strengths acquired in our history and aims to growinto a housing material manufacturer that becomes an all-embracing company forbuilding materials and thus creates new value.

Fiscal 1973

1.855

Fiscal 1988

1.728

M houses

Fiscal 1997

1.63

M houses

1973
First oil crisis

Changes in net sales,
operating profit, and numberof housing starts

M houses

1979
Second oil
crisis1997
Consumption
tax increase(3% to 5%)

1989
Consumption
tax deployment(3%)

Net sales

1995
Great Hanshin
earthquake

Fiscal 1992

Operating profit

1.342

Number of housing starts

M houses

Fiscal 1984

Fiscal 1963

0.603

1.134

1964
Tokyo Olympic
Games

Fiscal 1999

1.179

M housesM housesM houses1945
End of the Second World War

Foundation
45 46 47 48 49 50 51 52 53 54 55 56 57Expansion
58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 Growing
85 86 87 88 89
1941
Itochu Corporation, Marubeni
Shoten, Ltd., and Kishimoto
Shoten have combined to form
Sanko Kabushiki Kaisha

1958
Built Okayama plant andstarted manufacturing
Insulation board

1944
Sanko Kabushiki Kaisha, Kureha
Boseki Kabushiki Kaisha, andDaido Boeki combined to form
Daiken Co., Ltd.

1964
Startedmanufacturing
Dai-Lotone at the
Okayama plant

1945
Founded Daiken Mokuzai Kogyo
Co., Ltd., acquiring all the businessof the Forestry Department at
Daiken Sangyo Co., Ltd.

1954
Established Nagoya plant
for manufacturing special
plywood

1973
Startedmanufacturing
Boards for tatami
mats at the
Okayama plant

DAIKEN GROUP REPORT 2018

Insulation board using
residual wood offcuts andconstruction waste

92

93

94

95

1996
Implemented
Tatami facing
production lines
at the Okayama
plant

96

97

98

99

1996
Implemented the
Dai-Lite productionlines at the Okayama
plant

1994
Established Daiken Sarawak Sdn Bhd.
in Malaysia for MDF manufacture

1970
Started manufacturing WPC
flooring at the Nagoya plant

1970
Established Toyama
plant for manufacturing
special plywood

3

91

1967
Changed the company
name to DAIKENCORPORATION

1969
Established Interior
Projects Department

Technological developmentof adhesives gives special
plywood water resistanceand durability

90

1977
Expanded insulation board
business
Built Takahagi plant

1987
Expanded flooring business
Established Mie Daiken
Co., Ltd. (currently, Mieplant)

1989
Started manufacturing
housing products, suchas doors and stairs, at theInami plant

1995
Built interior doors
production line at the Inami
plant

1984
Established Daiken
Engineering Corporation forinterior projects
1989
1982
Started housing
Startedequipment
manufacturing ofbusiness, including cladding at the
kitchen facilities
Takahagi plant

Dai-Lotone, non-combustible
ceiling materials using rockwool, a byproduct from ironmanufacturing

1999
Purchased an interior
projects company,
Koukou Sangyo
Corporation
1989
Started manufacturingof roof materials at the
Okayama plant

WPC flooring with durability
to overcome the weaknessof woodvis
ion

Fiscal 2018
Net salesterm¥170.5 billion
Operating profit

c
To a

ve
hi e

GP25
1st Stage

the

25
P
G

GP25
3rd Stage
Medium-Term
Management Plan
Fiscal 2023 to 2026

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

Fiscal 2007

1.285

A housing material manufacturer
becomes an all-embracing company
for building materials

M houses

2014
Consumption
tax increase(5% to 8%)

2008
Financial crisis

Fiscal 2018

0.946
2011
The Great
East Japan earthquake

Fiscal 2010

M houses

Fiscal 2026

0.775

0.6 M houses

M houses

Vision and Strategy of Value Creation

Medium-Term
Management Plan
Fiscal 2017 to 2019

Foundation of Value Creation¥7.5 billionngol(forecast)

00

Selection
01
02 03 and04 Concentration
05 06
07 08

2005
Purchased MDF manufacturer in
Malaysia and established Daiken
Miri Sdn Bhd.
2002
Alliance with TOTO Ltd.
and YKK AP Inc. for remodeling business

12

13

2009
Purchased MDF plant in New
Zealand and established Daiken
New Zealand Limited

2002
Established Daiken
Industries (Ningbo)
Corporation

Challenge to achieve the long-term vision of GP25
14 New
15 Challenge
16
17
2018
Implemented the production line
for Dai-Lite deeply embossed noncombustible wall material at the
Okayama plant

2009
Integrated flooringbusiness of the
Nagoya plant in the
Mie plant

2012
Business and capitalalliance with Hokushin Co.,
Ltd., for MDF production
and supply

2010
Alliance with PanasonicElectric Works (currently,
Panasonic Corporation) in
production and procurement

2018
Purchased MDF manufacturer in
New Zealand and established Daiken
Southland Limited

2015
Established interior doors manufacturing
company
PT. Daiken Dharma Indonesia in Indonesia
2016
Purchased an apartment
renovation company, Pac System
Co., Ltd.

2007
Ended plywood production at the
Toyama plant

Tatami facing with superior
maintenance using machinemade Japanese Washi paper[Daiken’s strengths]

Capabilities todevelop uniqueindustrial materials

Capability todevelop building
materials with highadded value andcapability to propose
total plans forinterior spaces

Capabilities toperform installation
work by making use of
the functions ofbuilding materials

Data

2010
Purchased an interior projects
company, Sankei Corporation

2004
Transferred the
cladding business to
Nichiha Corporation

MDF using residual wood offcuts as the main raw material

11

2007
Expanded insulation board business
Purchased Kaihatsu Board Co., Ltd.

2000
Integrated the Interior Projects
Department into Daiken
Engineering Corporation
2000
Withdrawal from roofmaterials business
Withdrawal from housing
equipment business

10

ESG Information

2004
Transferred theinsulation board
business from
Nichiha Corporation

09

Dai-Lite, an inorganic
Interior materials, including
material incorporating thea door that anyone canunused resource Shirasu
use safely with security for(volcanic ash) and rock wool
health and comfort
DAIKEN GROUP REPORT 2018

4

Foundation of Value Creation

Product Development Uses Strengths
The Daiken Group cultivated its technologies throughout our seventy-year history and continues to offer products that are valuable
for society and customers.
Our diverse product lineup, with its excellent features, is used in a wide range of scenarios in houses and public and commercial
facilities.

Industrial Materials Business
Developing and offering highly functional industrial materials
The Daiken Group offers various functional industrial materials having non-combustibility, anti-seismic
thermal insulation, sound insulation, humidity conditioning, and various other features required inour daily lives by making full use of wood and mineral resources from a sustainable perspective.

Effective use of wood materials
Insulation board
Wooden fiberboard
using none-usedwooden waste formain raw material[Daiken’s strengths]

Capabilities todevelop uniqueindustrial materials

Effective use of mineral materials
Tatami facing

Dai-Lotone

Dai-Lite

Wooden fiberboard
using cut-off materials
from saw mills

Tatami mat surface
made from straw twisted
Japanese “Washi”
paper and resign
coating

Mineral fiberboard
using slug wool whichis by product of steel
production

An inorganic material
molded into a board
using an untappedresource, Shirasu(volcanic ash), and rockwool

Rock wool

Rock wool and Shirasu

Overview

MDF

Wood chips

Features andFunctions

Heat insulation
Moisture conditioning● Cushioning properties● Lightweight

Dimensional stability
Surface smoothness● Workability● Water resistance

●

●

●

●

Inner part of atatami mat

Major applications

Insulation board

Protection board

Machine-made JapaneseWashi paper (strings)

Wood chips

Materials for flooring

MDF

Water resistance
Water repellent● Moisture conditioning● Color variations

●

●

●

Tatami mats

For houses

Ceiling material

For houses

Wall base material

Base material for houseexternal walls

Wall materials(Substrate of door, window, and window frame)

For accommodation

DAIKEN GROUP REPORT 2018

Non-combustibility
Lightweight● High strength● Dimensional stability● Workability● Surface smoothness● Moisture permeability●

Base materials forbuilding and furniture

MDF

5

Non-combustibility
Lightweight● Sound absorbing● Workability● Insect repellent● Antiseptic●●

For officeNon-combustible wallmaterial

Building Materials Business
Developing and providing building materials best suited for the interior ofvarious buildings

For houses

Capability todevelop building
materials with highadded value andcapability to propose
total plans forinterior spaces

For public spaces and commercial facilities

Flooring
Cabinets

A floor that secures yoursteps

A complete line up with particularly
sophisticated design, high functionality
and performance, also having highquality surface texture, scratch
resistance, and long-lasting beauty

A complete line up of light and heavy
traffic flooring, including decorative
natural wood with scratch resistance,and sound-proof and shock
absorbing flooring

Great range of design andvariations

Feature of door fitting
specific situation

Interior door which is functionallyand easy to use, and can becoordinated flexiblyInterior doors with particularfunctionality for the nursing homes,
kindergartens, childcare facilities,
and stores

Storage improvement

Cabinets inspired byconsideration to users

A complete line up of cabinets
equipped with abundant storage
capacity, space-saving and otherfeatures to fit for individual spaces

Vision and Strategy of Value Creation

Door

A flooring of ultimate
beautyFoundation of Value Creation

The Daiken Group offers high-performance building materials, that form spaces focusing on safety,
peace of mind, health, and comfort to be used for housing, public spaces, and commercial facilities.

[Daiken’s strengths]

Cabinets mitigate the various risks tousers for comfortable use

A complete line up to meet thesound quality needs of a variety ofvenues, including home theaters,
musical instrument practice rooms,
and audio rooms

A complete line up suitable forsound-proofing and other specificpurposeEngineering Business

ESG Information

Sound products

Creating comfortablesound environment

Space for enjoying sound[Daiken’s strengths]

Total support for the creation of spaces from supply of building materials
through installation work

Data

The Daiken Group’s major projects are interior construction for public spaces and commercial
facilities, including schools, event venues, office buildings, and apartment buildings, to create
spaces that optimize the performance of industrial and building materials.

Capabilities toperform installation
work by making use of
the functions ofbuilding materials< Our project >Kansai University

Nippon Seinenkan, Japan Sport Council Head Office

Recital Hall at Nagano City Arts Center

DAIKEN GROUP REPORT 2018

6

Foundation of Value Creation

Process of Creating Value
The Daiken Group businesses utilize our unique strengths for building a sustainable society and creating new value for society withour contributions in solving issues such as Sustainable Development Goals (SDGs).
The Group also united CSR activities based on Environment, Social, and Governance (ESG) to make our businesses robust.

Integration of CSR activities in businesses

Business activities
Daiken’s strengths
Capability todevelop building
materials with highadded value andcapability to propose
total plans forinterior spaces

Capabilities todevelop uniqueindustrial materials

Capabilities toperform installation
work by making use of
the functions ofbuilding materials

Daiken’s businesses
Industrial materials business
Building materials businessSocial issues
and needs
Building a carbonless society● Building a recycling-oriented
society●

Measures for water resources
Measures for biodiversity● Conservation of tropicaltimberEngineering businessIndustrial
material
production

Sale ofindustrial
materials

Procurement Industrialof rawmaterialmaterials
development Building
Production
materialof building
development materials

Sale ofbuilding
materials

Procurementof materials

Interior
projects andrenovations●●

Decrease in labor force
Promotion of diversity● Promotion of workstyle reform●●●

Development of local
communities●

Revitalization of Japanese
forestry●

Preparation for natural
disasters●

Safe, secure, healthy, andcomfortable living
environments●

Response to the super-aging
societyMedium-term management plan
Medium-term CSR activity plan, Medium-term environment plan
CSR activities

E

Environment

S

SocialG

GovernanceGroup conduct guidelines

Investment to build the foundation for further value creation

7

DAIKEN GROUP REPORT 2018

Value creation for society

Promoting the use of domestically
produced wood
● Creating a safe, secure, healthy,
and comfortable space● Promotion of earthquake-resistance● Effective utilization of untapped resources● Recycling of wood resources● Reduction of CO2 emissions● Reduction of construction work●

Sustainable Development Goals (SDGs) are global goals
adopted by the United Nations in 2015 to create thefuture we want in 2030. Seventeen goals and 169
targets are set as common goals for internationalsocieties to achieve a sustainable world. The Daiken
Group will contribute to solve these issues through ourbusiness activities.

Reduction of greenhouse gas● Use of renewable energy● Proper management of water resources● Reduction of waste● Proper management of chemical substances●E

1. No poverty

10. Reduced inequalities

2. Zero hunger

11. Sustainable cities and

3. Good health and well-being
4. Quality education
5. Gender equality
6. Clean water and sanitationand production
13. Climate action

7. Affordable and clean energy 14. Life below water
8. Decent work and economic
growth
9. Industry, innovation andinfrastructure

15. Life on land
16. Peace, justice and strong
institutions
17. Partnerships for the goals

ESG Information

Ensuring the quality and safety of products
Practice of fair trading● Activities of diverse human resources● Promotion of work-life balance● Fostering the next generation of humanresources● Maintaining a safe working environment● Communication with local community

communities
12. Responsible consumption●●

S

Vision and Strategy of Value Creation

SDGs

Foundation of Value Creation

Creating shared value (CSV)
by Daiken businesses

Contribution to the SDGs

Achieve thelong-term vision

Achievethe visionsof the group
corporatephilosophy
Data

●
●

G

Thorough compliance
Development of trust with shareholders andinvestors

DAIKEN GROUP REPORT 20188

Foundation of Value Creation

Value Creation by Businesses
The Daiken Group delivers value to society by operating businesses that utilize our unique industrial materials and technologies to
respond to a variety of social issues and needs.

01
SocialissuesPromotion of the use of domestic wood
Japan is one of the world's most forested countries with about two-thirds of the land covered in forest. Therefore, domestic
wood should be more actively used in order to foster healthy forests that fulfill various needs such as absorbing CO2 andprevention of landslide disasters. The Japanese government is aiming to increase wood self-sufficiency to 50% by 2025.

Daiken’s strengths and value creation
Daiken developed flooring base materials using our expertise as
the world’s largest manufacture of flooring materials and Daiken’s
own MDF technologies that give rise to excellent water resistanceand surface smoothness. After the development, we made many
improvements in materials, and it increased the utilization ofdomestic wood to about 30% in fiscal 2018 from about 4% in
fiscal 2015. We continue to develop products to bring out thecharms of domestic wood in order to promote further leverage.

Cross-section image of flooring material
made from domestic wood

Utilization of domestic wood for flooring materials
Fiscal 2015

Approx.

4%

30

Fiscal 2018

Approx.

Daiken’s special MDF
Domestic wood plywood%

02

Creating a safe space to live together with the elderly

SocialissuesJapanese society is more rapidly aging than other developed countries and becoming a super-aging society with one in four
people aged 65 or over. It is expected that the elderly population will reach about 40% in 2060. There is also concern aboutsocial problems with old people providing care for old people. So, the living environment of the future must be safe, secure,
healthy, and comfortable.

Daiken’s strengths and value creation
Daiken is committed to manufacturing from the perspective of allusers, including elderly people, their families, and caregivers. We
developed more products based on our ideas and technologies
proven through our work and in accordance with universal
designs. We have comprehensive product lines for residential
homes that are considerate of nursing needs and home care.
Daiken pursues the creation of excellent and pleasant spaces
using products that are safe, secure, and functional for peoples’
lives.

9

DAIKEN GROUP REPORT 2018

Product variations of the Omoiyari (Caring) series

Approx.

30,000items

Upgrading Japan’s earthquake protection

SocialissuesJapan has been devastated by earthquakes many times, including the Great Hanshin-Awaji Earthquake and the Great East
Japan Earthquake. Large earthquakes, such as the Tokyo Metropolitan earthquake and the Nankai trough earthquake, arepredicted with high probability to occur in the near future, and the Japanese government has set a target for earthquake
resistance ratios and promotes the upgrading of houses and buildings.

Daiken’s strengths and value creation

Inorganic bearing surface, Dai-Lite

Vision and Strategy of Value Creation

Daiken developed Dai-Lite, the world's first new industrial material using
an untapped resource, Shirasu (volcanic ash) as the major raw material. It
has all of the performance required for an inorganic bearing surface, suchas lightweight, high strength, high durability, fireproof, and workability, that
could not be realized with conventional inorganic materials. Dai-Lite is
being installed more often as it is the best brand of inorganic bearing
surface for wood-frame housing. Number of households
Consequently, it is contributing to installing Dai-Lite (cumulative)
the improvement of the anti-seismic
Approx.
performance of Japanese houses. It
also strengthens the earthquake
resistance of existing houses topromote further upgrading of the
housing stock.

800,000

04

Reduction of CO2 emissions by recycling of wood resources
Considering the adoption of two closely linked SDGs and the Paris Climate Agreement, the crucial challenge for the world is
to create a recycling-oriented society that effectively uses limited resources and promote measures against the climatechange associated with global warming.

Daiken’s strengths and value creation

Image of wood
resources recycling

Wood chips

Using residual
wood offcuts andconstruction waste
Residual wood offcuts
Construction waste

Data

The Daiken Group manufactures industrial materials that utilize
wood resources, including MDF, which uses wood offcuts as raw
materials and insulation boards re-using wood discarded or used
as fuel. Wood is a valuable resource that would be sustainable if
replanted after logging unlike other resources. It can be used as amaterial for a long period of time by recycling for re-use, and it
enables the reduction of waste as well as continuing to fix carbon,
which leads to the reduction of CO2 emissions. We will continue topursue the possibility of recycling wood resources and contributeto the building of a recycling society as well as the prevention of
global warming.

ESG Information

SocialissuesFoundation of Value Creation

03

MDF
insulation board

The amount of carbon fixation by MDF and insulation board

749,000

t-CO2/year

DAIKEN GROUP REPORT 201810

Vision and Strategy of Value Creation

Interview withTop Management

After finishing the second year of the medium-term management planQ

In fiscal 2018, we completed the second year of
the three-year medium-term management plan
GP25 1st Stage. Please describe the achievements
and future issues.

■Public and commercial buildings

In terms of public and commercial buildings, we were able toachieve the following four items: (1) proposing domestic flooringwood with enhanced scratch resistance through our original WPCtechnology, (2) expanding orders for user-friendly, safe doors fornursing homes and kindergartens/nurseries, (3) increasing the sales

After finishing two years of the plan, we greatly improvedof tatami mats using machine-made Japanese paper with excellent

profitability by successful streamlining, cost reduction, and themaintenance for accommodation facilities, and (4) expanding

introduction of new products. As a result, we achieved four oforders for interior projects mainly in the Tokyo metropolitan area.

the management goals in the medium-term management plan

However, we also found three issues: (1) deciding on the areas

GP25 1st Stage in the first fiscal year, namely sales profit,

of social issues and the needs for which our advantages can beordinary profit, net profit, and ROE. I find this to be a great

used, (2) an insufficient number of products for proposals, and (3)achievement. We are expecting a decrease in the number ofincreasing the areas of installation work.

new houses in the future.
In addition to achieving the figures in the management goals,

11

Public and commercial buildings cover a wide range of work.
Product development and proposal methods are totally different

it is important to shift our focus to cover this decrease bydepending on the building genre. I find these issues challenging.

positioning public and commercial buildings, global markets,

However, I think we should learn from the themes where we haveand the home renovation market as the three priority markets.

succeeded so far. Let’s look back and consider previous successful

DAIKEN GROUP REPORT 2018

Toward becoming an all-embracing
company for building materials
1st Stage and shift to the 2nd Stage for the next period.

Foundation of Value Creation

Achieve the goals of the medium-term management plan GP25

Representative director
President and executive officer
Vision and Strategy of Value Creation
ESG Information

projects. We were able to succeed by making proposals that offer

specific proposals.

new value using our technologies while paying attention to social

Our engineering business is mainly for ceiling work of officeissues and needs and listening to opinions from the market, such asbuildings, but I think we can further increase businesspromoting the use of domestic wood, responding to theopportunities by expanding the area of the installation work to copesuper-aging society, countermeasures for the falling birthrate,with a variety of different projects.

improving the environment for working women, solving problems of■Global markets

waiting lists for nursery schools, and insufficient accommodation
facilities due to an increase in inbound tourists.

manufacturing bases in Malaysia and New Zealand show steady
performance in the Southeast Asian and North American markets.

advantages and intensively inject management resources. We

For the building material business, the export of highly

want to increase good cooperative activities within the company

functional flooring materials for China is increasing. Together withthrough the collection of the opinions of designers and owners

products manufactured in the local factory, we can propose athrough the Market Development Division, where staff are working

variety of products ranging from high-grade to ordinary.

toward the adoption of our products, product development by the

In addition, in August 2016, we established a new factory for

Manufacturing Division, effective emphasis and the promotion ofinterior doors in Indonesia to respond to markets with growing

value by the Marketing Division, and community-based proposal

demand in emerging countries.

activities by the Sales Divisions of the nationwide branch offices.

Our future issues are as follows: (1) pursuing the potential of theBased on these efforts, we need to increase our product items forindustrial material business in addition to MDF, and (2) reinforcing

DAIKEN GROUP REPORT 2018

Data

We should decide on the areas where we can use ourRegarding the industrial material business, sales of the MDF with

12

Vision and Strategy of Value Creationand expanding the basis of the building material business in China

major cities in Japan. In addition, we have been working toward theand Indonesia. Seeing the development of the industrial material

expansion of easy-to-install, labor-saving products, such as thebusiness in global markets, we export some ceiling materials, but

flooring installed over existing floors and sliding doors installed

our business is currently focused on the MDF. For further

without damaging existing walls.

expansion, we should comprehensively assess the needs andA condominium renovation company joined our group in

securement of raw materials by country and region and consider

October 2016 for the development of new business. As a building

developing another industrial material business.

material manufacturer, we now participate in the renovation

Regarding the building material business, China is still halfway
from the perspective of scale and profitability. We will further

business. We will develop products that help shorten the work
period.

strengthen cooperation with agents in each country by operating

However, when looking at the entire home renovation market,

joint showrooms in major cities and expand the market bysales of products are growing very slowly except for new

providing some products exported from Japan to make the most ofrenovation projects. I think we should cope with the lack of skilled

the made-in-Japan brand. We initially faced difficulties at a door

workers and increase easy-to-install products for renovation,

factory in Indonesia in terms of production capability, but now

reinforce the cooperation of the TDY alliance, and develop demand

things are on the right track. We will expand the market byfor renovation.

increasing orders from local developers and Japanese companies,
as well as by exporting products to other countries from Indonesia.

■Home renovation market

We deploy our business in the home renovation market mainly

based on the alliance with TOTO and YKK AP. We have been
accelerating the deployment of collaboration showrooms sinceApril 2016 in Kanazawa and Takamatsu, as well as in Sapporo in
July 2017. We have completed the eight-base system covering

13

DAIKEN GROUP REPORT 2018

Finish in the final year of the medium-term management plan

Q

Fiscal 2019 is the final year of the medium-term
management plan GP25 1st Stage. We see thefactors of increasing costs in a variety of aspects,
in addition to a decrease in the number of newhouse construction projects. How will you finish
the final fiscal year?

Interview with Top Management

Foundation of Value Creation■ Decrease in the number of new house construction
projects and increase in raw material prices
Regarding the market environment, the number of new house
construction projects in fiscal 2018 decreased the previous year
after July, and the number continued to drop and was less than theprevious year for nine consecutive months up to March 2018,indicating a slowdown. After the second half, we faced cost
increases that affected our performance, such as energy,adhesives, imported plywood, and transportation costs. The
tendency for cost increases will continue in fiscal 2019, and thesituation is expected to worsen. Although we have been copingwith streamlining and cost reductions mainly in plants, it has
our efforts alone. Because of this situation, we cannot help but
increase the prices of some products, so we are now asking ourcustomers for their understanding.

■Proposing new value by large-scale introduction of new
products
The most important objective for a manufacturer is to provide new
producing about 800,000 m³ per year, an increase of 30%,

products on a large scale in June 2018. We changed 70% of thethrough two plants in New Zealand, two plants in Malaysia, andproducts in the previous product catalog to new products,

Hokushin, a cooperative factory in Japan. I think we should quickly

increased the product lineup by 30%, and reinforced our

maximize the synergy effect in the entire group by optimizing thecapabilities to propose plans for both housing and public andproduction items while making the most of the characteristics ofcommercial buildings. We will increase our market share in theeach plant.

new house construction market mainly with these new products

As a result of the acquisition, we took over their sales routes forand will widen the range of our proposals in terms of public andoverseas, so we can expand our sales routes in the global markets.

commercial buildings.

In addition, about a quarter of their products are for the Japanese

In particular, we positioned Gravio Edge, a deeply embossed

market; thus, our market share of MDF will be about 50% in

non-combustible wall material using the original incombustible

Japan, which secures our position as the No.1 MDF manufacturer

material Dai-Lite, as a strategic product to reinforce our proposal

in Japan, and we were able to enhance the existence of our MDF

capabilities for walls, which have been less of a focus in the interiorbusiness. Through these efforts, we have to achieve all five of thespace before. For houses, we will widen our proposal range as

management goals of sales profit, ordinary profit, net profit, ROE,

accent walls for entrances, living rooms, and main bedrooms

and the sales target of 180 billion yen in the medium-term

matched with flooring and interior doors in the high-grade space,management plan and move on to the medium-term management

and for non-residential buildings, we will emphasize our goodplan for the next period under the best conditions.

ESG Information

value to customers. As one specific proposal, we introduced new

Vision and Strategy of Value Creation

reached the level that cost increases cannot be absorbed throughdesign that gives the entrance hall a luxurious atmosphere. This

ESG and CSR

and easy to process because of the features of Dai-Lite. I believe it

Qcontributes to saving work skills in the building industry, which isfacing a lack of skilled workers.

■Maximizing the synergy effect of acquired New Zealand
MDF plant as soon as possible

Data

product offers not only a good design but also workability. It is light

The momentum for ESG investment is increasing.
Please let us know about efforts for ESG and CSR.

■Environment (E)Our company started its history in timber processing, so we havebeen taking over the DNA of using wood without leaving any waste

We will establish a solid cooperative relationship as a group withas precious materials. Based on this idea, we have been dealing in

the New Zealand MDF plant that we acquired in April 2018. After

Insulation boards using wood chips processed from wood waste

this acquisition, we established the MDF manufacturing systemand tree thinning since the 1950s. Today, we make efforts to

DAIKEN GROUP REPORT 201814

Vision and Strategy of Value Creation

effectively use wood materials by increasing the rate of use of oldworker gatherings, recruit more female new graduates, and provide

wood produced at the time of house demolition.

training courses for female managerial post candidates. It is essential

Based on the idea of effectively using limited materials, wefor our human resources to actively participate in the company as

developed Dai-Lotone (ceiling material) from a byproduct produced

sources of intelligence, particularly in the time of reforms. I think,after extracting iron from iron ore and Dai-Lite using the volcanic ash

from that perspective, we will emphasize efforts that changeof the Shirasu plateau in Kagoshima, which sometimes causes

awareness by sharing the medium- and long-term plans, which givedebris flows in the area. We regard these industrial materiala specific image of future improvements. At the shareholders

businesses as some of our core businesses, and we have been

meeting in June 2018, we appointed Ms. Yuko Katsuo as a female

seriously working toward environmental issues since our foundation.

external auditor. I expect that she will make some changes within the

We also proactively make efforts to reduce the environmental

company if we actively provide her with opportunities to exchangeburden in the process of production. We installed woody biomass

opinions with our employees.

boilers to use the unusable chips and wood waste produced in the■Governance (G)manufacturing process in our nine group plants in Japan andestablished a system where about half of the energy for the plants

Regarding governance, to secure more transparent management,
we established the corporate governance committee as anin Japan is covered by renewable energy. Thus, we have been

arbitrary advisory committee comprising a majority of independent

greatly contributing to reducing CO2 emissions.

outside executive officers that include the committee chairperson,

Nowadays, water resource issues are attracting attention

as well as the nomination and remuneration committee where ouraround the world. We use water mainly in the plants manufacturing

employees actively discuss matters with members from outside

insulation boards. We have been making efforts for water resource

organizations. In addition, discussions are not only held in theissues by installing circulation and clarification equipment tomeetings. There are more opportunities to provide information andprevent contamination, as well as minimizing water usage. We

exchange opinions. I find these opportunities very effective.

introduced the latest model of clarification equipment in fiscal

A series of efforts for ESG forms an inseparable basis for2018 to reinforce the system. I think we should make serious

supporting business activities. I welcome the tendency where theefforts for environmental issues, even if they are not directlycompany values are comprehensively evaluated based not only on
financial information but also on the corporate philosophy andobservable by customers.

non-financial information, such as ESG, because what we have■Social (S)valued is evaluated from a fresh perspective.

Regarding society, we make efforts by establishing priority issues

Taking the growing momentum for ESG investment and being

in the medium-term CSR Activity Plan: quality, using humanaware of the fusion of our business activities, ESG, and CSR, we

resources,

will accelerate our efforts more than before.

even-handed

dealings,

coexistence

with

the

community, and human rights.
First, let me talk about quality, the foundation of a manufacturer.
We work hard to ensure that we provide high quality, safe products
and services to customers. In particular, we focus on workstylereform to create a workplace where employees can work positively

Efforts for SDGs

Q

As global social issues, we are asked to respondto SDGs. Please let us know what you think about
these issues.

and enthusiastically, and promote diversity where a variety ofhuman resources participate in great activities and contribute toI think the ultimate meaning of the existence of a company is to

the growth of the company, which is described as the basic policy

solve social issues through the business.

in the medium-term management plan.

established under the leadership of the United Nations. These

actively involved in the company. Although the proportion ofthemes cannot be avoided when we aim at a sustainable society.

women in managerial posts, which tends to attract outside

At Daiken, we started to figure out how our current businessattention, is still low, we should not put too much emphasis on
increasing this number. That will not bring good results to thecompany or female workers.
We place a high priority on preparing the basic circumstances

15

SDGs are “global standards for social issues to be solved” as

We also think women, our working partners, should be more

activities are linked to SDGs.
It is important for the board members—including themanagerial layer executive officers and me—to recognize thechanges occurring globally and what is required of companies.

where female workers can be more actively involved in the company.

Then, we need to connect the issues to the surrounding themes or

We invite external presenters for lecture meetings, organize female

duties of each employee from the manager of a division to an

DAIKEN GROUP REPORT 2018

Interview with Top Managementadministrative position and from the administrative position to theFoundation of Value Creation

employees in each workplace. For this effort, we have started to
discuss the direction in the CSR committee and share the information
at meetings where managers gather from nationwide divisions.
Regarding the specific efforts of the company, we will set related
themes in the currently prepared medium-term management planfor the next period, the medium-term CSR Activity plan for the next
period, and the medium-term environment plan, clarify the policy
and promotion system if necessary, and promote our efforts.
To spread SDGs to the level of sites in the company, we willdevelop activities that provide an opportunity to adopt SDGs for thetheme of the medium- and long-term research and development

Vision and Strategy of Value Creation

with young employees responsible for development.

Establishment of medium-term management plan for next period

Q

Please let us know what you think of themedium-term management plan GP25 2nd Stage
starting from fiscal 2020.

The most important thing is to finish the 1st Stage completely. I
cannot tell you the details of the 2nd Stage because it is currently
being prepared. I think the 2nd Stage, the medium-term
management plan for the next period, is the stage in which we will
be tested as to whether we can achieve GP25, the long-term vision
for fiscal 2026.

ESG Information

In the 1st Stage, we developed our business in new markets
using existing management resources. However, in the 2nd Stage,in addition to expanding the three existing businesses, industrial
materials, building materials, and engineering, we will work toward
establishing a new business that will be the fourth pillar for us.
To do so, we need to decide on a large-scale investment projectin addition to the current management resources.
Therefore, in April 2018 we established the Management
Strategy Office, a special organization that strategically works
toward new business and M&As. I will stick to the idea that the
fourth pillar will have been established by the end of the third yearof the 2nd Stage.
What we have to pay attention to financially is how we effectively

Data

use and maximize cash flow and decide whether the return on
capital costs is appropriate or not.
So, I think we should clarify not only the targets of sales, profit,
and ROE, but also the balance sheet and cash use policy in themedium-term management plan for the next period.
We should also have a clear image that expansion of thebusiness as a new pillar will help us understand the social issues
and needs and eventually lead to achieving our corporate
philosophy and the long-term vision. This will lead to thesustainability of society, as well as our business activities.

DAIKEN GROUP REPORT 201816

Vision and Strategy of Value Creation

Medium-Term Management Plan to Achieve the
In 2015, the year of the 70th anniversary of Daiken Corporation, we established the long-term vision, GP25, describing our ideal situationin 10 years. Fiscal 2018 is the second year of the GP25 1st Stage of the three-year midterm management plan, which will be the firststep towards achievement. All employees of the Group are working together to make progress toward gradually achieving the goals.

Basic Policy

The first step toward an all-embracing company for building materials●

Endeavor to further strengthen current businesses and develop the foundations for new businesses as the key to growth●

Proactively develop environmental-related technologies for ecological materials, energy savings, and domestic wood utilization●

Actively introduce management resources to the priority markets of public and commercial buildings and global markets●

Maximize the synergy of manufacturer and engineering to enhance profitability●

Create a work environment where employees can work with enthusiasm and foster the human resources
who will play important roles in the future●

Define diversity is as one of the management strategies, and the ability delivered bya variety of human resources is to be the engine of growth●

Strengthen governance to enhance corporate value over the medium andlong term

FY2018Business and market strategies in the 1st Stage
Business strategies
Industrial materials business
Development of new industrial materials
Development of new markets and customers fromthe development of new applications
Stable procurement of wood chips andcomprehensive wood utilization●●

Medium-Term
Management Plan FY2017

GP25 1st Stage
Fiscal 2017 to 2019●

Building materials business
Deployment of flooring and wall materials using
domestic wood
Development of new products corresponding tochanges of lifestyle
Development of energy-saving building materials
Further use of the advantages of construction
efficiency and industrial materials

●

●

●
●

Engineering business
Expansion of the construction areas anddevelopment of a combined order receipt system
Enhance the remodeling proposal and expansion of
the remodeling service area●●

FY201617(¥100 million)

BenchmarkFiscal 2016
Results

GP25 1st Stage
Final year
Goals

1st year
Fiscal 2017
Results

Net sales

1,681

1,800

1,688

Operating profit

55

70

85 Achieved

75 Achieved

78

Ordinary profit

52

70

90 Achieved

87 Achieved

88

Profit attributable toowners of parent

39

43

51 Achieved

58 Achieved

59

ROE

9.8%

8% or more

11.7% Achieved

11.7% Achieved

10.5%

DAIKEN GROUP REPORT 2018

2nd year
Fiscal 2018
Results

1,705

3rd year
Fiscal 2019
Forecasts

1,800

GP25 Long-Term Vision

Grow/Glow Plan 25

Fiscal 2023 to 2026

2nd Stage
Fiscal 2020 to 2022

FY2019Grow

Glow

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

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

1. Contribute to the building of a sustainable society by efficiently
using limited resources
2. Enrich peoples’ minds by creating more comfortable and secure
spacesMarket strategies
Public and commercial buildings
Development using technologies for wood andnon-combustible products
Strengthen construction ability and work force●

How we should be in 2025:●

Vision and Strategy of Value Creation

Significance of Existence and Ambitions

Foundation of Value Creation

3rd Stage

2025
GP25 Long-Term Vision

1. Leading global company for industrial materials, building
materials, and engineering

Global markets
Development of industrial and building materials thatmeet local needs
Establishment of local manufacturing, sales, andconstruction systems●

2. Continue to challenge new business areas and grow the fourthpillar

●●

4. Company culture that admires challenges, and systemestablished to support challenges

Industrial materials
Expand industrial materials technology making
effective use of untapped resources
Promotion of development for the next step●

5. Governance is strengthened to support sustainable growthand improvement of medium-to long-term corporate value●

ESG Information

3. Earn a great reputation among professionals for
consumer-oriented product development, proposal
capabilities, problem-solving skills, and organizational strength

Home renovation market
Proposal by TDY* for future living
Grow in the renovation market●

New home market
New value proposal meeting lifestyle and local
community needs●* The three companies TOTO Ltd., Daiken, and YKK AP Inc.

Business domains, markets, and sectors targeting GP25
Long-Term VisionAll-embracing company
for building materials

Business domains

New businessHousing market
Public and commercial buildings
Industrial materials

Japan

Engineering business

Markets and sectors

GlobalBuilding materials business

Becoming asustainable society

Creating the environmentthat enriches people’s
lives

Industrial materials business

Data

From the current image as a housing materials manufacturer to the following:
Supply building materials and industrial materials for building materials aswell as construction● Expand business areas from housing to public and commercial buildings,
and industrial materials● Expand into global markets●

New markets

DAIKEN GROUP REPORT 201818

Vision and Strategy of Value Creation

Summary of BusinessIndustrial Materials Business
Sales breakdown
by business sector

Sharp profit drop caused by decrease
in income and increase in costs

Net sales

Operating profit/Operating profit ratio(¥million)(¥million)

80,0005,000（%）
Operating profit
Operating profit ratio

10.0

Production plants
Okayama plant
Takahagi plant

56,408 55,354

60,000

32.5%

8.0

4,000
3,326

6.0

3,000
5.9

40,000
2,000

1,955

Eco Techno Co., Ltd.
Daiken New Zealand Limited (New Zealand)

2.0

1,000

Aizu Daiken Kako K.K.
C&H Co., Ltd.

4.0

3.5

20,000Subsidiaries part of the Group
Dai-tac Corporation

Daiken Southland Limited (New Zealand)
Daiken Sarawak Sdn Bhd. (Malaysia)

0

2017

0

2018 (Fiscal year)

2017

0.0
2018 (Fiscal year)

Daiken Miri Sdn Bhd. (Malaysia)

Profit growth by improvements in profitability,

Building Materials Business a year-on-year decline in sales
Sales breakdown
by business sector

Net sales

Operating profit/Operating profit ratio(¥million)(¥million)

100,000

5,000
4,500

87,260 86,853

10.0

4,000

60,000

5.3

6.0
4.0

40,000
2,000

2017

0

2018 (Fiscal year)

Engineering BusinessInami plant
Subsidiaries part of the Group

2.0

2017

Dai-wood Corporation
Setouchi Kakoh Co., Ltd.

3,000

0

Production plants
Mie plant

Daifit Co., Ltd.
5.2

20,000

Sales breakdown
by business sector

4,598

8.0

80,00050.9%

Operating profit
Operating profit ratio （%）

Toyama Juki Co., Ltd.
Daiken Industries (Ningbo) Corporation (China)
Daiken (Shanghai) Corporation (China)
PT. Daiken Dharma Indonesia (Indonesia)

0.02018 (Fiscal year)

Double-digit growth in sales and income due to increasein construction demand

Net sales

Operating profit/Operating profit ratio(¥million)(¥million)

40,000Operating profit（%）
Operating profit ratio

10.0

1,000

Subsidiaries part of the Group
Daiken Engineering Corporation
Koukou Sangyo Corporation

9.6%

8.0

800

30,000

Daiken Home & Service Corporation
600

20,00016,458
13,612

10,0000

Sankei Corporation

400
200

2017

2018 (Fiscal year)

0

427

3.1

2017

528

6.0

3.2

4.0

Smile-Up Corporation
Pac System Co., Ltd.

2.0
0.0
2018 (Fiscal year)(Note) 1. Other Daiken businesses account for 7.0% in addition to the above.
2. In fiscal 2019, the segments of ecological based business and dwelling space business are included in industrial materials business and building materials business, respectively.

19

DAIKEN GROUP REPORT 2018

Forecasts for fiscal 2019

Industrial materials business revenues were increased by the
spread of the inorganic bearing surface, Dai-Lite, with adecline in the MDF used for building materials, furniture, andinsulation boards used for tatami mats and flooring, which
resulted in a decrease in overall sales.
Operating profit declined as a reflection of lower sales andan increase in materials and energy costs.
As a result, in fiscal 2018, net sales amounted to ¥55,354
million (down 1.9% year-on-year), and operating profit
amounted to ¥1,955 million (down 41.2% year-on-year).

For fiscal 2019, the industrial materials business is projected
to have net sales of ¥63,100 million, an increase of 14.0%
from fiscal 2018. We plan to enhance sales with the effect ofconsolidation of the New Zealand MDF factory, an acquisition
that was completed in April 2018, and customer approacheswith the deeply embossed non-combustible wall material
Gravio Edge launched in June 2018.

For fiscal 2019, the building materials business is projected tohave net sales of ¥89,000 million, an increase of 2.5% from fiscal
2018. With the launch of a new product in June 2018, which
renewed our flagship series of interior materials to increase themarket share in new housing, we will endeavor to expand ourbuilding materials business in our prioritized markets in the publicand commercial buildings field and in global markets.

Commentary and results for fiscal 2018

Forecast for fiscal 2019

Engineering business revenues increased from the higher
demand for interior construction of buildings and offices,
expanding the scope of construction, and sales of theapartment renovation company, purchased in October 2016,
contributed to fiscal 2018.
Operating profit increased from recruiting skilled workers
and strengthening the management structure for each
worksite in spite of surging personnel costs due to the shortageof skilled workers.
As a result, in fiscal 2018, net sales were ¥16,458 million(up 20.9% year-on-year), and operating profit was ¥528
million (up 23.6% year-on-year).

For fiscal 2019, the engineering business is projected to have
net sales of ¥17,000 million, an increase of 3.3% from fiscal
2018. We will expand our interior work of office buildings in
the latter half of the fiscal year and continuously strengthen
the development toward the condominium renovation
business.

ESG Information

Forecast for fiscal 2019

Building materials business revenues increased in the publicand commercial buildings fields and the revenues frombuilders and rental housing increased even in the lower
Japanese housing market, but a sharp fall in sales to small andmedium sized engineering firms was greater than we
expected, resulting in overall sales for this business being
lower than the previous fiscal year.
Operating profit remained the same as the previous fiscal
year with streamlining and cost reductions due to the increase
in self-manufacture and despite the rise in raw material prices.
As a result, in fiscal 2018, net sales amounted to ¥86,853
million (down 0.5% year-on-year), and operating profit
amounted to ¥4.598 million (up 2.2% year-on-year).

Vision and Strategy of Value Creation

Commentary and results for fiscal 2018

Foundation of Value Creation

Commentary and results for fiscal 2018

Data

DAIKEN GROUP REPORT 201820

Vision and Strategy of Value Creation

Medium-Term Management Plan

Market Strategy

Initiatives in 3 Priority Markets
Social situation and market environment
The new housing market in Japan, which we saw as the major market for manufacturers of residential building materials, isdramatically affected by the declining birth rate and aging population and the decrease in population and the number of
新設住宅着工戸数の推移
households. As a risk scenario for the long-term vision, we assume that the number of new housing starts will decrease fromthe current 0.9 million houses to 0.6 million houses by 2025.
Changes in number of housing starts

Initiatives in the new housing market
To be the most selected company withstrengthened product quality and proposal
capabilities to increase market share

Fiscal 2018

0.946
M housesLong-term visionrisk scenario

Initiatives in 3
Priority Markets

Fiscal 2026

0.6 M houses(forecast)Response to risk scenarios
Expanding in 3 priority markets
In order to accomplish further growth in such a market environment, we focus on three priority areas that we should
continuously expand, the public and commercial buildings market, global markets, and home renovation market, during
the GP25 1st Stage of the medium-term management plan (fiscal 2017 to 2019) as a first step toward realizing thelong-term vision. Economic growth in Japan is expected to increase demand for robust construction related to the Tokyo
Olympic and Paralympic Games and inbound growth, as well as renovation demand based on the stock-oriented housing
policy. Abroad, economic growth in ASEAN member countries is expected. The Daiken Group will continue to capitalize
on its unique strengths and promote initiatives to expand sales for the needs of these markets.

Opportunities and demands in 3 Priority Markets
Public and commercial buildings
Tokyo Olympics and Paralympic
Games● Growth in inbound and tourism
fields● Regional revitalization, compact
city● Childcare shortage issues● Super-aged society●

21

DAIKEN GROUP REPORT 2018

Global markets
Economic development inemerging countries in Asia
● Growing needs for improved living
environment● Advancement of Japanesecompanies● Sustainable materials andconstruction materials●

Home renovation market
Stock-oriented housing policy
Preparation for home care
● Development of various ways ofliving● Unoccupied property solutions● Expansion of the market forsecondhand houses●●

Initiatives in 3 Priority Markets

Public and Commercial Buildings

Daiken’s strengths●

Non-combustible wall materials and anti-seismic ceilings required by public spaces and commercial facilities●

Tatami mats with durability and superior maintenance using Daiken-specific machine-made Japanese Washi paper●

WPC flooring processing technology to enhance scratch resistance and durability to overcome the weakness ofdomestic wood (e.g., cedar, cypress), which is soft and easily scratched●

Capabilities to develop new materials meeting the requirements of nursing homes, kindergartens, and childcare
facilities●

Make-to-order manufacturing system for custom order minimum of just one door●

Capabilities to perform installation work by Daiken’s engineering business with a proven track record providing interior
finishing work for office buildings and public and commercial facilities●

Acoustics consultancy to make comfortable acoustic environments in meeting rooms and halls

In fiscal 2018, the revenues in the public and commercial
buildings market were ¥19,849 million (up 18.1 % year-on-year).
The revenues of the industrial materials business increased by¥425 million because of the growth of the market for our unique
tatami mats with superior maintenance for accommodation andcommercial facilities. The revenues of the building materials
business increased by ¥820 million because of an increase inorders for flooring suitable for shoes for public facilities, including
schools and libraries, commercial facilities, including shops andhotels, and orders of doors for nursing homes, kindergartens, andchildcare facilities. Furthermore, the revenues of the engineeringbusiness significantly increased by ¥1,992 million because of anincrease in interior construction orders for office buildings. Sales
in the public and commercial buildings market were growing in
all three business segments.

For fiscal 2019, the public and commercial buildings market
is projected to have net sales of ¥22,000 million, which is anincrease of 10.8% from fiscal 2018. In addition to the initiatives
that we implemented in fiscal 2018, we will promote customer
approaches with our new products, including the deeply
embossed non-combustible wall material Gravio Edge, using DaiLite as the base material, launched in June 2018. In particular,
we aim to increase sales by proposing our functional building
materials that can meet the requirements of nursing homes,
medical service facilities, kindergartens, childcare facilities, andaccommodations.

Data

Forecast for fiscal 2019

ESG Information

Results for fiscal 2018

Vision and Strategy of Value Creation

The construction demands for public spaces and commercial facilities are expected to remain robust; the Tokyo Olympic andParalympic Games, metropolitan area re-development projects, increased construction of accommodation facilities for inboundgrowth, increased demand for nursing facilities due to the advent of the super-aging society, redevelopment of medical andeducational facilities associated with regional revitalization or compact cities, and increased construction of childcare facilities tosolve the childcare shortage issues mainly in the Tokyo metropolitan area. In addition, the Act on the Promotion of the Utilizationof Wood in Public Buildings was established by the Japanese government and is boosting the use of timber materials forbuildings. In consideration of these market environments, we continue to expand sales using our proposal capabilities based on
our unique materials and the technologies that we have built as a housing material manufacturer, such as safe, secure, healthy,
and comfortable living environments, non-combustible materials, domestic wood, and tatami mats with superior maintenanceusing machine-made Japanese Washi paper. We also utilize our capabilities to perform installation work for office building
interior construction in our engineering business.

Foundation of Value Creation

Market environment and business strategies

Changes in net sales in public and commercial buildings
Year-on-Year

18.1％ up19,849(¥million)

25,00020,00016,576

16,8042016

2017

22,00015,00010,0005,000
0Deeply embossed non-combustible wall material, Gravio Edge

20182019 (Fiscal year)
Forecast

DAIKEN GROUP REPORT 201822

Vision and Strategy of Value Creation

Initiatives in 3 Priority Markets

Global Markets
Market environment and business strategies
For the industrial materials business, we will strengthen global sales of the MDF manufactured in plants located in New
Zealand and Malaysia while the need for sustainable materials is rising because of global warming and the depletion oftropical timber resources. For the building materials business, the quality of the living environment is improving in China
where there is a huge market. The expansion of housing demand is expected to continue in ASEAN member countries.
We will continue to provide our products, manufactured in plants located in China and Indonesia, which meet local needs
using our development skills and technologies that we have cultivated as a Japanese housing material manufacturer.
Daiken’s strengths●

Four manufacturing plants in Malaysia and New Zealand produce the MDF with different species and performance●

Establishment of plantation projects in Malaysia and tree utilization technology●

Global distributor network for export sales of ceiling material, Dai-Lotone●

High-performance building materials used in the Japanese housing markets andthe technological capabilities to produce them●Production sites in China and Indonesia using Japanese quality production andconstruction technologies

Daiken Miri Sdn Bhd. (Malaysia)

Daiken Group Global Network
Daiken (Shanghai) Corporation (China)

Daiken Sarawak Sdn Bhd. (Malaysia)
Daiken Industries (Ningbo) Corporation (China)

Singapore branch

Daiken New Zealand Limited (New Zealand)
PT. Daiken Dharma Indonesia (Indonesia)

Daiken Southland Limited (New Zealand)

Results for fiscal 2018
In fiscal 2018, the revenues in the global markets were ¥12,278
million (up 11.9% year-on-year). The revenues of the industrial
materials business increased by ¥91 million because of global salesof MDF remaining strong in North America and Southeast Asia.
The revenues of the building materials business increased by ¥429
million with the contribution of the growth of floor materials exports
to China and other countries. For other global markets, the revenues
increased by ¥781 million because of the increasing inquiries about
distribution of our industrial materials through new sales channels
having an understanding of local needs.

Changes in net sales in global markets(¥million)

20,000Year-on-Year

11.9％ up

15,00010,00018,000

10,228

10,97720162017

12,278

5,000
0

2018

2019 (Fiscal year)
Forecast

Forecast for fiscal 2019
For fiscal 2019, the global markets are projected to have net sales of ¥18,000 million, which is an increase of 46.6% from fiscal 2018. For theindustrial materials business, we aim for early maximization of the synergies with the MDF plant in New Zealand, Daiken Southland Limited,which joined the Daiken Group in April 2018. We expect the global sales channels for their MDF will expand by our taking over the commercial
rights. Although, we have already established the largest market share in Japan, we will enhance our presence in the global markets for MDF.
For the building materials business, we plan to enhance sales by strengthening sales in China and by expanding the export of flooring materials
from Japan.

23

DAIKEN GROUP REPORT 2018

Initiatives in 3 Priority Markets

Home Renovation Market

Daiken’s strengths●

Product lines and the proposal capabilities to offer total coordination of interior materials●

Comprehensive alliance with TOTO and YKK AP for remodeling●

TDY collaboration showroom deployed in eight major cities in Japan to offer a one-stop service for new space creation●

Short construction period suitable for renovation, product development capabilities with reduced construction work●

Make-to-order manufacturing system for custom order minimum of just one door●

Make-to-order manufacturing system for materials and construction by collaboration with group companies working on
renovation

Forecast for fiscal 2019

In fiscal 2018, the revenues in the home renovation market
were ¥28,975 million (up 0.6% year-on-year). The entire Groupstruggled to grow our sales in the severity of this market and the
new housing market. The revenues of the industrial materials
business decreased by ¥557 million because of declining demand
for tatami mats and the revenues of the building materials businessdecreased by ¥647 million because of the overall slowing downof sales of interior building materials such as flooring and doors,etc. On the other hand, the revenues of the engineering businessincreased by ¥1,184 million. The apartment renovation sales madeby Pac System Co., Ltd., having joined the Daiken Group in October
2016, contributed to fiscal 2018. As a result, we could maintain theoverall revenues in the home renovation market at the same level
as the previous year.

For fiscal 2019, the home renovation market is projected to have
net sales of ¥30,100 million an increase of 3.9% from fiscal
2018. The Daiken Group will promote the introduction of ourrenovation products, including the new product launched inJune 2018, and we will introduce the excellence of renovationand creation of new value for our customers, and stimulate new
demand given the opportunities at the large-scale exhibition,
TDY Remodeling Collection 2018, jointly held by our partners
TOTO and YKK AP in May 2018.

ESG Information

Results for fiscal 2018

Vision and Strategy of Value Creation

In Japan, the birth rate is declining, and population aging is continuing, so the number of households is expected to peak in
2023. In contrast, the stock of dwellings is expected to exceed the number of households and cause unoccupied property
issues. Based on these changes in the demographic and social environments, the Japanese government has changed the
housing policy from building new housing to more effectively use existing dwelling stocks. In addition, the Basic Act for
Housing, which was prescribed by the Ministry of Land, Infrastructure and Transport, states that revitalization of existing
housing and renovation are key measures. Also, the act established the target for the expansion of the home renovation
market from ¥6.8 trillion in fiscal 2017 to ¥12 trillion in fiscal 2026 and introduced a government subsidy system to support
renovation projects. In these market environments, the Daiken Group will introduce the excellence of renovation andcreation of new value and create new demands with our comprehensive product lines of interior materials for floors, walls,
and doors, and the TDY alliance partnership. We will also grow the sales for housing and apartment renovation by exerting
the synergies of our engineering business.

Foundation of Value Creation

Market environment and business strategies

Data

Changes in net sales in home renovation market
Year-on-Year(¥million)

35,00030,00028,701

0.6％ up 28,975
28,80930,10025,00020,00015,00010,0005,000
0TDY Remodeling Collection 2018

2016

2017

2018

2019 (Fiscal year)
Forecast

DAIKEN GROUP REPORT 201824

ESG Information

Daiken’s CSR
CSR Basic Policy
Contribute to the realization of a sustainable society by creating values sharedwith society through activities for ecology and improvements in the quality of

Visionspace

1

With CSR and CSV* as the key axes, we will improve our corporate value andenhance our competitiveness to realize GP25.

2

Using CSR as an activity to enhance our ability to respond to and earn thetrust of society, we will systematically pursue CSR with our responses to the

Policyenvironment, society, and governance as key axes.
3

Positioning CSV* as one of our management strategies, we encourage
activities voluntarily and actively through the whole business process.

* Daiken’s CSV is defined as finding solutions to social issues through the provision of common values capitalizing on
Daiken’s uniqueness.

CSV Theme

1

Building a sustainable society

2

Providing secure, safe, and comfortable spaces

3

Comprehensive use of wood building materials—encouraging the use ofcascading

CSR Activity Promotion System
CSR Committee

Chairperson:
Representative director, president, and executive
officer

Determines and approves the policy

CSR Activity Promotion
Promotes the medium-term CSR activity plan
Submits reports to the CSR Committee (Disseminates information group-wide)

CSR promotion
departments

CSR promotion
departments

Daiken Group25

DAIKEN GROUP REPORT 2018

CSR promotion
departments

CSR promotion departments:
Audit Department, General Affairs and Personnel
Department, Public Relations Department, Legal
Affairs Department, Quality Assurance Department,
Comprehensive Research and Development Center,
Marketing Department, Domestic Operation Planning
Department, Domestic Sales Planning Department,
and Overseas Operation Planning Department
Secretarial affairs division:
Management Planning Department

Medium-Term CSR Activity Plan (for fiscal 2017-2019)○• Promote company-wide CSR activities
under the leadership of the CSR
Committee.

• Hold the CSR Committee meeting five times a year. Discuss anddetermine priority issues of CSR and environment plan for the next period
and disclosure of the policy including the integrated report.

Risk management• Develop, update, and manage BCPs
(business continuity plans).

• Continue the progress management of BCPs for important bases.

Governance• Establish optimal corporate governance.

• Evaluate the effectiveness of the Board. Analyze the results and disclose
them to the outside.
• Survey dissemination of the group corporate philosophy.

○

Compliance• Reinforce the compliance system.
• Further improve compliance education.
• Develop and implement thewhistleblowing system.

• Strengthen the management system with the cooperation of the Legal
Affairs Department and Audit Department.
• Complete the response to the revised Act on the Protection of Personal
Information.
• Complete the systemization of whistleblowing contact.

○

GovernanceConsumerissues• ISO 9001: Certify the transfer to 2015 version.
• Check the operation status by internal audit.
• Provide QEMS (quality and environment management system) usage
training (4 times).
• Number of user registrants: 11,550

Providing products andservices that give highcustomer satisfaction• Reinforce our ability to collectinformation by strengthening contact
points with consumers.
• Reinforce the system to encourage
consumer-centric new productdevelopment.

• Release the paid repair and inspection contact on website.
• Held meetings and prototype evaluation meetings which widely
incorporated consumer information, market researches, etc.

Enhancing communication
with customers• Enhance face-to-face communication
with customers in the showrooms andat exhibitions.

• Participate in the Workstyle Reform Expo for the first time.
• Opened the TDY Sapporo collaboration showroom.

○• Enhance communication withcustomers through sales activities.

• Provide policy meetings (nine places).
• Carry out events in cooperation with TDY.

○

• Enhance communication withcustomers through websites, etc.

• Release a renewed website (June).

○• Enhance communication withshareholders and investors.

• Organize financial results briefing for institutional investors (continued).
• IR site was selected as an excellent site by third parties.

○

Protecting personal
information• Ensure strict management of personal
information.

• Confirm the appropriate operational status through the possession andmanagement status survey.

○

Ensuring fair competition
and transactions• Ban all transactions with antisocial
forces.

• Maintained the conclusion of the said contract with all business partners.

○

Protecting intellectual
property• Continue to provide education on
intellectual property.

• Implemented intellectual property operation promotion meetings andstudy groups with the development department.
• Hold e-learning programs.

○

Promoting CSR procurement • Develop and implement CSR
procurement rules.

• Complete repair of the CSR investigation system and conduct investigationof actual conditions.

○

Promoting life-workbalance• Encourage employees to reduceoverwork and cut long working hours.

• Introduce the time unit annual paid leave system.
• Introduce a time limit for using PC.
• Repair the system of the attendance check through PC logs.

△

Promoting diversity• Implement human resources
development programs intended topromote the empowerment of female
employees and develop a working
environment that meets this purpose.

• Provide managerial post training with the theme of promoting women
empowerment.
• Provide training for improving female workers’ skills.
• Organize female workers’ gatherings.
• Acquired Kurumin certification.

○• Develop global human resources.

• Employ foreign students.
• Continued to hold language training programs for new employees.

○• Formulate human resource
development programs that facilitatecareer development and capacity
building for employees.

• Provide training by post layer and training for newly promoted directors.
• Newly provide follow up training for 3rd year employees.
• Provide training for developing sales personnel.

○

Improving the safety andhealth system• Encourage and strengthen efforts tocreate a safer working environment.

• Reinforce safety measures based on the diagnosis according tocharacteristics of plants.
• Provide training for supervisors.

○

Raising awareness ofhuman rights• Continue education to raise awarenessof human rights.

• Provide information about general human rights at the time of new
employee training.
• Provide harassment prevention training for managers.

△• Participate in local communities.

• Carry out interaction, support, cleaning activities, and factory visit forpeople in each community.
• Held regional exchanges through the events at showrooms.
• Contributed funding to the Malaysia scholarship.

○• Continue tree planting activities in
Malaysia.

• Logging (351.77 ha/year), secondary forestation (21.88 ha/month).
• Carry out forestation (84.91 ha) in the added forestation area.

○• Promote the comprehensive use ofdomestic wood.

• Proposed the use of locally grown wood across the country.
• Launch DW fiber (soil improvement additive) using domestic wood chips.

○

Reinforcing humanresources development

Respect
for humanrightsCommunity Community involvement
involvement
anddevelopment
Social contribution

○

○

Data

Improving product quality• Reinforce the quality management
and ensuring product safetysystem based on quality ISO standards.
• Reinforce the system to reduce
quality-related problems and continue
implementing measures to prevent thereoccurrence of similar problems.
• Strengthen the quality traceability
system.

ESG Information

Labor
practices○

Vision and Strategy of Value Creation

Fair
operatingpractices

Social

Self-assessment

Management CSR management
area

G

S

Business results for fiscal 2018

Foundation of Value Creation

Key items◎The level significantly exceeded the target ○Achieved the target △Did not achieve the target ×The level significantly below the target

Please refer to the medium-term environment plan (p. 40) for our environmental efforts.

DAIKEN GROUP REPORT 201826

ESG Information

G Governance
Basic Approach

In pursuit of optimal corporate governance that will result in sustainable improvements in our
corporate value
Under the Group Corporate Philosophy, the Daiken Group is committed to sustainable improvements in corporate value for all
shareholders and stakeholders. In order to achieve efficient, sound, and transparent management, we take the basic approachthat always seeks to optimize corporate governance, and we constantly work to improve it. Based on the Basic Policy on
Corporate Governance established in 2015, we are making constant improvements to respond to the ever-changing businessenvironment surrounding the group in the ceaseless pursuit of the optimal corporate governance system.

Key Initiatives for the Reinforcement of Corporate Governance
2002

Made the shift to the chief executive officer system.

2003

The Compliance Committee was established.

2008

Reorganized to the Risk & Compliance Management
Committee for reinforcement.

2010

Reduced the number of directors from 11 to 9.

2011

Outside directors are selected.

2012

The term for directors was reduced from two years to one year.

2015

Outside directors increased from one to two.
The Basic Policy on Corporate Governance was established.
The Nomination and Remuneration Committee and the
Corporate Governance Committee were established.

2016

The effectiveness evaluation of the Board was started.

2018

A female outside Audit & Supervisory Board Member was
selected.

Quick Reference of Corporate Governance Organization
Main items

Details

Design of the organization

Company with board of company audit & supervisory board members

No. of Directors (outside directors)

9 (2)No. of Audit & Supervisory Board Members(outside Audit & Supervisory Board Members)
Number of the board convened (fiscal 2018)(Average attendance rate of outside directors)(Average attendance rate of outside Audit & Supervisory Board Members)
Number of audit & supervisory board convened (fiscal 2018)(Average attendance rate of outside Audit & Supervisory Board Members)

12 times(95%)(100%)
13 times(100%)The term for directors

1 year

The executive officer system

AdoptedVoluntary committee of the Board• Nomination and Remuneration Committee: Deliberate on human affairs and the
remuneration of directors and executive officers• Corporate Governance Committee: Evaluate the effectiveness of the Board anddeliberate the matters related to establishment of the governance system

Auditors

Gyosei & Co.

4 (2)Corporate Governance Framework
Shareholders (General meeting of shareholders)Disclosure and dialog

Selection dismissal

Board
Nine directors(including two outside directors)

Consultation

Selection dismissal

Nomination and remuneration committee(majority of members are independent directors)

Corporate governance committee

Report(majority of the members are independent directors)

Representative director

Approval and instruction
Headquarters, respective departments,
and affiliated companies
Monitoring, supervising, and important decision-making

27

DAIKEN GROUP REPORT 2018

Audit

Four Audit & Supervisory
Board Members(including two outside Audit &Supervisory Board Members)

Reporting

Auditing

Accounting audit

Cooperation
Business execution and decision-making

Business execution

Auditors

Executive Director Committee

Audit

Reporting

Reporting
Department responsiblefor internal control

Supervision, selection/dismissal,
and instruction

Selection dismissal

Audit & Supervisory Board Proposal for selection dismissal

Assessment Results for the Effectiveness of the Board

Large categories of thequestionnairea. Roles and responsibilities of the Board
b. The composition of the Board
c. Deliberation of the Board
d. System for promoting dialog with shareholderse. Overall governance system

A summary of the analysis
and assessment results

The results confirmed that each director and audit & supervisory board member of the Board are committed topresenting and deliberating their opinions actively while ensuring fairness and transparency from diverse perspectives
and four independent outside directors. The Board maintains the effectiveness of important decision-making inmanagement and supervision of business execution thoroughly. In particular, regarding decision-making of importantmatters, including acquisitions, the independent outside directors and audit & supervisory board members were
provided with opportunities where information was given to help them to understand effects, risks, and issues, and thediscussions were carried out several times by the Board. Thus, they were effectively involved in the decision-making
process. At the same time, future issues were found, such as involvement of the PDCA process in management
strategies, including a medium-term management plan, improvement in the quality of discussions at the Board, anddiscussions about how the Board should be in the future.

Outside Directors and Audit & Supervisory Board Members
AttendanceOutside Audit &Supervisory Board
MemberAudit &
Supervisory
Board

Koji Mizuno

He actively provides advice and suggestions supported by the high expertise as a professor
and contributes to securing appropriate decisions by the Board. Also, his affluent knowledge
about corporate management is considered essential for the improvement of governance ofthe company.

12/12(100%)−

KiyoshiFurubeHe has been involved in the management of TOTO as a director for a long period of timeand actively provides advice and suggestions based on his rich experience. Also, his affluent
experience and wide range of knowledge about corporate management is considered tocontribute to improving our corporate value. We have concluded the comprehensive
business alliance with TOTO and have a business relationship with TOTO including sales;
however, it is general business for both companies.

8/9
(88%)

−

Akio
Hasunuma

He is considered to use his rich experience and wide range of knowledge from a longcareer as a chief executive officer in the audits of the company. We have concluded acomprehensive business alliance with TOTO, and have business relationship with TOTO
including sale; however, it is general business for both companies.

12/12(100%)

13/13(100%)

Masafumi
Inoue

He is considered to use his high expertise as a professor, experience and wide range ofknowledge as an examiner of the Cabinet Office and a research officer of the Ministry of
Education, Culture, Sports, Science and Technology in the audits of our company.

12/12(100%)

13/13(100%)

Reason for selection

Data

Outside Director

The BoardName

ESG Information

Based on the analysis and evaluation results, we particularly focus on and work toward the following issues.
(1) Among the PDCA process in the management strategies, strengthen the involvement of the Board particularly regarding
CA processes (analysis, sorting out issues and implementing measures, implementing improvement measures)
Future issues and response
based on the analysis and (2) Review the approving authority, delegate part of resolution matters concerning decision-making to the management,
and improve the supervising function of the Board
evaluation results(3) Improve the system to promote constructive dialog and provide useful information with stakeholders including
shareholders

Vision and Strategy of Value Creation

Assessment procedure

The questionnaire about the effectiveness of the Board was distributed to nine directors (including two outside
directors) and four auditors (including two outside auditors), and the responses were collected. The responses of
directors and audit & supervisory board members were analyzed by the Board, and future issues were discussed.
Also, the evaluation results were discussed by the corporate governance committee where the majority of members
are outside directors and audit & supervisory board members.

Foundation of Value Creation

To increase the effectiveness of the Board and to improve corporate value, the Daiken Group implemented the analysis andassessment of the effectiveness of the Board in March 2018.

* All outside directors and audit & supervisory board members have no conflicts of interest with our general shareholders with regard to personal relationships, capital relationships,
business relationships, and other interests with us, and they meet the Judgment Criteria for Independence as stipulated by Daiken.

DAIKEN GROUP REPORT 201828

ESG Information

Executive Remuneration
We revised the remuneration policy in June 2018 so that shareholders and investors can further understand executive remuneration.

Policy of Executive Remuneration
1

The remuneration system shall be based on the practice of the group corporate philosophy.

2T he remuneration system shall be designed reflecting the long vision (GP25) and the medium-term
management plan, prevent too great an emphasis on short-term inclinations, and motivate theimprovement of medium- to long-term corporate value.

3T he standards and system of remuneration shall be effective enough to secure excellent humanresources to whom we can entrust our future.

4T he procedure for determining remuneration shall be transparent, fair, and objective to achieve
the responsibilities of explanations to all stakeholders including shareholders, investors, andemployees.

Basic
PolicyProcedure
Regarding executive remuneration, the total frame of remuneration is determined at the general shareholders’ meeting. The executive
remuneration is composed of mission remuneration as determined by the post, performance remuneration as determined by the performanceof the company and the achievement and results made in the responsible area, and stock-based compensation. The detailed regulations of
the procedure related to the remuneration are stipulated by the Board.
The remuneration of executive officers consists of mission remuneration as determined by the post, performance remuneration as determinedby the performance of the company and the achievement and results made in the responsible area, and stock-based compensation.
Regarding the remuneration of directors and executive officers, the proposal for consideration made by the representative board is deliberated
and recommend by the nomination and remuneration committee comprising a majority of independent directors, and the remuneration isdecided based on the results.

Composition
In order to link the company’s performance with the executive remuneration, we set up the performance remuneration that reflects
the performance of a sole financial year and stock-based compensation that reflects the medium- to long-term performance andimprovement in corporate value. Also, regarding mission remuneration, the breakdown (representative compensation, supervisor
compensation, and executive compensation) is provided for each post to clarify the background of the amount.
Annual income

Composition of remuneration of directors(except for outside directors)

Director (except for outside directors) remuneration (image)

Performance remuneration

Performance remuneration

Stock-based compensation

Stock-based compensation

Mission remuneration
Mission remuneration
Representative Supervisor
Executivecompensation compensation compensation

50

100

Profit attributable to owners of parent (¥100 million)

29

DAIKEN GROUP REPORT 2018

G GovernanceYuko Katsuo

Outside Audit & Supervisory
Board Member
ProfileToward a governance system serving as a foundation for a brilliant sustainable futureDatain establishing the accounting standards.
I was involved in preparing the concept framework at
the Accounting Standards Board of Japan (ASBJ) and in
preparing the introduction guidelines of the International
Financial Reporting Standards (IFRS) at the BusinessAccounting Council of the Financial Services Agency. Asa member of the advisory committee on economics, I
was involved in deliberating the approval of establishingdepartments of universities at the Ministry of Education,
Culture, Sports, Science and Technology. I also preparedaccounting examination subjects as a member of the realestate appraiser examination board at the Ministry of Land,
Infrastructure, Transport and Tourism, and assessed theperformance of the Organization for Small & Medium
Enterprises and Regional Innovation as a member (acting
chairman) of the Evaluation Committee for Incorporated
Administrative Agencies at the Ministry of Finance. At
Gakushuin University, I was responsible for PR strategies andrisk management for the entire university as a vice president.
I strongly hope that with my accumulated knowledge
and experience, I will be able to contribute to establishinga governance system that enables Daiken to achieve wellbalanced, sustainable growth. I will do my best for Daiken’s
development as a company that continues to be brilliant in
the next stage.

ESG Information

The corporate governance code was revised in June thisyear, which is expected to accelerate changes in corporate
governance in Japan. Daiken has already established thenomination and remuneration committee and the corporate
governance committee, which comprise a majority of
independent directors. It is said that Daiken maintains
a certain standard in terms of corporate governance.
However, the newly revised guidelines stipulate objectivity
in the selection and dismissal of top management and theunderstanding capital costs, which we need to respond to assoon as possible. Furthermore, with the background of theexistence of the ESG investment, which is said to occupy 30%of the world’s outstanding assets under management, we are
required to respond to many aspects, including presenting
clear management policies and investment strategies,
as well as reviewing cross-shareholdings. In addition toconsideration toward investors, we have to carefully takecare of other stakeholders, such as considering employees
who are the source of the organization’s energy, coexistencewith the community where we operate our plants, and paying
close attention to our business partners. We should recognize
the roles of our company as a member of society and choose
the appropriate corporate behavior.
I am an expert in financial accounting, have been studying
income concepts as my specialty, and I have been involved

Vision and Strategy of Value Creation

April 2000
Full-time instructor, Faculty of Economics, Gakushuin University
February 2002 Member of performance report project, Accounting Standards Boardof Japan
Assistant professor, Faculty of Economics, Gakushuin University
April 2003
Professor, Faculty of Economics, Gakushuin University (present)
April 2008
February 2010 Member of the Evaluation Committee for Incorporated Administrative
Agency (independent administrative institution), Ministry of FinanceActing chairman of the work group of the Organization for Small &Medium Enterprises and Regional Innovation of the same committee
February 2012 Temporary member of the Business Accounting Council, theFinancial Services Agency
Subcommittee of establishment of university, council ofApril 2012
establishment of university and incorporated educational institution,
Ministry of Education, Culture, Sports, Science and Technology
Member of the advisory committee of economics
April 2014
Vice president, Gakushuin University
June 2018
Outside Audit & Supervisory Board Member of Daiken (present)

Foundation of Value Creation

Message from New Outside Audit & Supervisory Board Member

Reasons for selection
In addition to her advanced expertise as a professor, it is felt she will use her rich experience and wide range
of knowledge acquired through working as a committee member at the Ministry of Finance and Financial
Services Agency. Furthermore, she has no conflicts of interest with our general shareholders in terms of personal
relationships, capital relationships, business relationships, and other interests with us, and meets the Judgment
Criteria for Independence as stipulated by Daiken.

DAIKEN GROUP REPORT 201830

ESG Information

Outside Director

Face-to-face talkAiming to be one step ahead of
the global standards

Judging as an outsider withan objective perspective

Koji Mizuno

Kiyoshi Furube Outside Director

Outside Director

Let us know your assessment of Daiken Group’s
management organization.

committees, I frequently exchange information with thedepartment of the office before the committee meetings. We
sometimes have such opportunities three times or more amonth. I sometimes ask them to come to the university and

Mizuno: Basically, many active opinions are expressed at

discuss various issues for a few hours. I think the discussions

Board meetings. They also provide us, the outside directors,

at the committee are active due to such careful preparations.

with plenty of opportunities to ask questions and express ouropinions. I find the management organization very open, andFurube: The fact that the chairman is an outside director means

I evaluate the organization highly. Furthermore, because of thethat we have an open Board. The attitude of adopting opinions

recent tendency for corporate governance innovation, Daiken

from outside the company is an excellent aspect of Daiken’s

is trying hard to make further improvements. I expect that we

corporate culture.

will be able to have freer and more vigorous discussions in the
future.

Mizuno: Another characteristic of Daiken is that many opinions
are expressed in the evaluation of the effectiveness of the Board.

Furube: I was appointed as outside director in June 2017. When

Regarding the questionnaire on effectiveness, it is commonly

I saw the active discussions of the Board, I had the impression

thought that a number of items are required to be evaluatedthat Daiken had a very open management organization. Since

multilaterally. However, we dared not increase the items, but

management has the attitude of accepting various opinions, anrather improved the free answer sections. This is because

open atmosphere is created. When the discussions become

we can expect various opinions in Daiken, even if we do notheated, the agenda sometimes gets delayed, but this shows that

increase the items. Based on the opinions, we have active

Board meetings are not carried out according to a scenario but

discussions at the aforementioned CG committee and evaluate

function as a place of discussion.

the effectiveness of the Board. Accordingly, I can say the efforts
for the evaluation of effectiveness is one step ahead of other

Mizuno: They have very active discussions at the nomination
and remuneration committee and the corporate governancecommittee (“CG committee”). As the chairman of both

31

DAIKEN GROUP REPORT 2018

companies.

G Governance
The evaluation of the effectiveness of the Board
was performed in fiscal 2017. Please let us
know the issues extracted from the evaluationand the efforts for fiscal 2018.

effectiveness for fiscal 2017 was performed, and the issues

employees in the entire group, it becomes a true philosophy. To
achieve this, I will pay attention to the leadership of the Board.

Please let us know the future of the Board andthe roles the outside directors played in the
Board.

were extracted. It was the time to decide about the acquisition of
an MDF plant in New Zealand. I remember that the discussions

Furube: The most important thing for an outside director is tobecame heated. I was impressed that they tried to make ahave the eyes of an outsider. I keep it in mind that I should

decision as a company after having thorough discussions. This

always make efforts to learn the conventional wisdom of theis one of the effects brought about by the introduction of theworld and what is required by the world from the perspective

effectiveness evaluation.

of an outsider. Inside directors tend to use in-house jargon orFoundation of Value Creation

Furube: I was appointed at the time when the evaluation ofis universal for the company. When it is disseminated to all

make decisions based on in-house conventions. The place ofdiscussion or decision-making is not affected by in-house logic,

the evaluation of effectiveness, there was a primitive issue thatand objectivity is maintained if there are outside directors.

materials for the Board were distributed too late. Many members

The role of outside directors is to give a feeling of tension tocomplained that they could not prepare in advance because

inside directors, and our attendance should improve the Board.

the materials were distributed just before the meeting. Based

Speech that outsiders can understand is required when making

on this opinion, in fiscal 2017, the materials were distributed

explanations to various stakeholders, including shareholders

one week before the meeting. In fiscal 2018, information was

and investors. So, I ask questions without hesitation and makeprovided to more places, and important matters were explained

counterarguments. If they can make us understand, then theycarefully at a separate opportunity. Over the last two years, thecan make the people around the world understand. I try not to

speed, quality, and volume of information were greatly improved.

be too involved inside, and I keep some distance as an outsider
and continue discussions to improve Daiken.

After the evaluation of the effectiveness of
the Board in fiscal 2018, some issues were
provided. Please let us know the priority points
to be responded to this fiscal year.

Vision and Strategy of Value Creation

Mizuno: Regarding the information aspect, in fiscal 2016 before

Mizuno: Our questions are also the questions of stakeholders. I
think our role as outside directors is to actively express opinions
as the spokespeople of stakeholders. Furthermore, as ismentioned in the contents of the revised corporate governancenext generation in each division in a well-balanced manner. At

dialog and improve the organization to distribute useful

Board meetings, everybody can speak up. I think that the spirit

information to stakeholders including shareholders. We

of President Okuda, “Speak up freely,” is well understood by thestarted our discussions with “What information is useful

directors. This good atmosphere should be spreading further,for stakeholders?” Also regarding the PDCA cycle of theand I want the managers who connect sites and directors tomanagement strategies, we think Plan and Do were successfully

speak up. Increasing opportunities for employees to speak up on

conducted, but there is some room for improvement in terms ofsites will be effective for the development of human resources.

ESG Information

code, I think it is important to develop director candidates of the
Mizuno: One newly extracted issue is to promote constructive

Check and Act. In particular, when we discuss the medium-term
management plan for the next period, we have to thoroughly

Furube: Currently, we are working toward the transfer of authority

evaluate and analyze what we achieved and what we failed toand reinforcing the supervising function of the Board. I think it

achieve in the current medium-term management plan andwill lead to the development of human resources for the director

make a plan with better effectiveness. I do not want Daiken

candidates of the next generation.

generally required but to aim to achieve corporate governanceMizuno: I want Daiken to go one step ahead of the global

at a higher level and eventually improve corporate value.

standards. To achieve this goal, I will reinforce the monitoring ofData

to be satisfied with simply clearing items and figures that areoverseas where Daiken is aiming to expand its business in the
Furube: I think the dissemination of the group corporate

future and supervising quality issues that have recently had aphilosophy is important. To make the philosophy the flesh andnegative impact on other companies. I have repeated my terms

blood of the company, each employee needs to understandas an outside director. I am not worth being in the post if I do not

it. One year has passed since its establishment, and I had aachieve my expected duties. To lead Daiken to the place wherereport about the dissemination survey. We need to think of ait should be, I will do my duties with a sense of mission.

specific process to disseminate it further, such as setting up
the schedule. Unlike the management plan, the philosophy

DAIKEN GROUP REPORT 201832

ESG Information

Directors and Audit & Supervisory Board Members(as of 22 June, 2018)

Masanori Okuda
Representative Director, President, and Executive Officer
April 1974
April 2007
April 2008
June 2008
April 2009
April 2010
June 2011

Joined Daiken
Executive officer
Senior executive officer
Director and senior executive officer
Director and managing executive officer
General manager of Juken Sales
General manager of sales, manager of new development
sales, and general manager of the Tokyo office
April 2012
Director and senior managing executive officer
General manager of the Tokyo office
Representative director (present)
June 2013
Senior managing director and senior managing executive
officer
October 2013 General manager of procurement innovation and generalmanager of the Tokyo office
April 2014
Representative president and chief executive officer
June 2018
Director, president, and executive officer (present)

Takashi Terubayashi
Representative Director, Senior Managing Executive Officer
April 1980
April 2005
April 2008
April 2010
April 2011
April 2012
April 2013
June 2013
April 2014
April 2015
April 2017
June 2017
April 2018
June 2018

Joined Daiken
Manager of Hokkaido sales
Manager of marketing department
Manager of general affairs and HR
Executive officer
Senior executive officer
Manager of general affairs and HR and manager of thesecretarial office
Managing executive officer
Manager of management planning department andmanager of the secretarial officeDirector and managing executive officer
Manager of management planning department, manager of the new
business development office, and manager of the secretarial office
Manager of finance and accounting
Director and senior managing executive officer
Representative director (present)
Senior managing director and senior managing executive officer
Responsible for Japanese business (manufacturing) (present)
Director and senior managing executive officer (present)

Tadahiro Kiyosu
Director
April 1988
Joined Itochu Corporation
April 1996
Chip 1st section, Chip department (Itochu)
October 2000 Acting chief of Asia and Pacific area, Chip department (Itochu)
April 2001
Itochu Australia (stationed in Sydney)
May 2004
Itochu Corporation Section chief of chip, Paper chip
department
April 2008
Operation department (Itochu)
April 2011
Itochu Singapore (stationed in Singapore)
April 2014
Itochu Corporation ASEAN, southwest Asia
Chief of Living life/information group (stationed in
Singapore) and Itochu Singapore
Acting manager of Forest Products & General
April 2016
Merchandise Department No. 1 (Itochu)
April 2017Manager of Forest Products & General Merchandise
Department No. 3 (Itochu)
April 2018
Manager of Forest Products & General Merchandise
Department No. 1 (Itochu) (present)
June 2018
Representative director (present)

Kikuo Imamura

Toshio Fuyuki

Audit & Supervisory Board Member

Audit & Supervisory Board Member

March 1971
April 2005
April 2008
April 2010
April 2011
June 2013
June 201533

DAIKEN GROUP REPORT 2018

Joined Daiken
Manager of accounting
Executive officer
Senior executive officer
Managing executive officer
Director and managing executive officer
Audit & Supervisory Board Member(present)

April 1980
April 2000

Joined Daiken
Manager of Dai-Lite product development,
Dai-Lite business department
April 2003
Manager of R&D center
April 2010
Executive officer
Manager of Seibu eco business, eco
business department and president of
Okayama Daiken
April 2011
Senior executive officer
General manager of eco business andmanager of Seibu eco business
April 2013
Managing executive officer
October 2013 Manager of development planning
April 2014
Manager of general R&D center
April 2015
Manager of quality assurance
June 2017
Audit & Supervisory Board Member(present)

G GovernanceTakashi Aihara

Tomoaki Kato

Representative Director, Senior Managing
Executive Officer

Representative Director, Senior Managing Executive Officer

Tetsuo Harima

Tatsuo Shibuya

Director, Senior Managing Executive Officer

Director

April 1981
April 2004
April 2006
April 2009
April 2010
April 2011

April 1978
April 2001
April 2009
April 2010
April 2011

Joined Daiken
Manager of Kyushu sales
Manager of Kinki sales
Assistant general manager of Seibu sales control
Assistant general manager of Tobu Juken sales control
Executive officer
Manager of Juken sales control
April 2012
Senior executive officer
April 2013
Managing executive officer
October 2013 General manager of eco business
April 2015
General manager of engineering business andgeneral manager of special demand sales
June 2016
Director and managing executive officer
October 2017 General manager of engineering business,
general manager of special demand sales, andpresident of Daiken Home & Service Co., Ltd.
April 2018
Director and senior managing executive
officer (present)
Responsible for sales in Japan (present)

April 2012
June 2012
April 2014
April 2015
April 2016
June 2016
June 2017
April 2018

Joined Daiken
Manager of Tokyo sales
General manager of Tobu sales
Executive officer
Senior executive officer
Manager of building equipment business
Managing executive officer
Director and managing executive officer
General manager of living space business and general manager ofprocurement innovation
General manager of Japanese business and general manager ofprocurement innovation
Director and senior managing executive officer
Responsible for Japanese business and manager of SR sales
promotion
Representative director
Senior managing director and senior managing executive officer
Director and senior managing executive officer
Representative director (present)

Kiyoshi Furube

Outside Director

Outside Director

April 1991
March 2006
April 2006

April 1977
Joined Toto Kiki Ltd. (present TOTO LTD.)
October 2003 Manager of sales promotion group in Shikoku (TOTO)
April 2008
General manager of sales promotion group (TOTO)
June 2008
Executive officer, general manager of sales promotion group(TOTO)
June 2010
Director, executive officer, general manager of sales promotion
group and sales control (TOTO)
Director, managing executive officer, responsible for the sales
April 2011
promotion group (TOTO)
April 2012
Director, senior managing executive officer, responsible for thesales promotion group (TOTO)
April 2014
Representative director, executive vice president, responsible forall sales related departments (TOTO)
April 2017
Representative director (TOTO)
June 2017
Outside representative director of Daiken (present)
Advisor of TOTO LTD. (present)

April 2010
April 2011
June 2011
April 2014
June 2015
April 2016

April 2018

Joined Nanto Bank Co., Ltd.
Resigned Nanto Bank
Full-time instructor, Faculty of Management,
Otemon Gakuin University
Assistant professor of the same university
Advisor of the Organization for Small & Medium
Enterprises and Regional Innovation (theIndependent Administrative Institution) (present)
Outside Audit & Supervisory Board Member of Daiken
Assistant professor, Graduate School of Business
Administration, Faculty of Management, Otemon
Gakuin University
Outside representative director of Daiken (present)
Professor, Graduate School of Business Administration,
Faculty of Management, Otemon Gakuin University
General manager of the Venture Business Study Centerof the same university (present)
Dean and professor, Faculty of Management, Otemon
Gakuin University (present)
Professor, Graduate School in Economics and Business
Administration of the same university (present)

Yuko Katsuo

Outside Audit & Supervisory Board Member

Outside Audit & Supervisory Board Member

April 1992

April 2000
Full-time instructor, Faculty of Economics, Gakushuin
University
February 2002 Member of performance report project, AccountingStandards Board of Japan
Assistant professor, Faculty of Economics, Gakushuin
April 2003
University
April 2008
Professor, Faculty of Economics, Gakushuin University(present)
February 2010 Member of the Evaluation Committee for Incorporated
Administrative Agency (independent administrative
institution), Ministry of FinanceActing chairman of the work group of the Organizationfor Small & Medium Enterprises and Regional
Innovation of the same committee
February 2012 Temporary member of the Business Accounting
Council, the Financial Services Agency
April 2012
Subcommittee of establishment of university, council ofestablishment of university and incorporated educational
institution, Ministry of Education, Culture, Sports,
Science and Technology
Member of the advisory committee of economics
Vice president, Gakushuin University
April 2014
June 2018
Outside Audit & Supervisory Board Member of Daiken (present)

Special researcher of the Japan Society for the Promotionof Science (Wood research center of Kyoto University)
January 1994
Assistant, Kyoto University (Wood science research center)
April 2004
Assistant, Kyoto University (Sustainable humanosphereresearch center)February 2005 Assistant professor, Tokyo University (Asian Natural
Environmental Science Center)
November 2006 Senior policy examiner of the Cabinet Office (c/o thepolicy control officer [Science and technology policy])
April 2007
Assistant professor, Tokyo University (Asian Natural
Environmental Science Center)
November 2011 Specially appointed researcher of the strategy center,
the Center for Low Carbon Society Strategy (theIndependent Administrative Institution)
Visiting researcher of the Science and Technology
April 2012
Research Center, Ministry of Education, Culture, Sports,
Science and Technology
September 2014 Specially appointed researcher of the strategy center,
the Center for Low Carbon Society Strategy (theIndependent Administrative Institution)
June 2015
Outside Audit & Supervisory Board Member of Daiken (present)
February 2016 Professor, Tokyo University (Assistant professor, Tokyo University(Asian Natural Environmental Science Center) (present)

DAIKEN GROUP REPORT 2018

Data

Masafumi Inoue

ESG Information

Koji Mizuno

Vision and Strategy of Value Creation

April 1980
April 2003
June 2009
April 2011

Professor of School & Graduate School of Law
and Politics, Kwansei Gakuin University
August 2003 Director and manager of IR planning of Takara
Printing Co., Ltd.
March 2006 Outside auditor of Urban Life Co., Ltd.
August 2006 Director and executive officer responsible for IR
business development of Takara Printing Co., Ltd.
February 2008 Registered lawyer (Tokyo Bar Association) (present)
June 2010
Outside Audit & Supervisory Board Member of Daiken
January 2011 Member of the ninth tender monitoring
committee, Ministry of Finance
April 2011
Member of the Committee of Monitoring Mint
Contracts (Independent Administrative Institution)
June 2011
Outside director
June 2017
Representative director (present)
Representative director, Senior managing
executive officer
Responsible for business administration (HeadApril 2018
office), ISO, risk management, information
management, compliance (present)
June 2018
Director and senior managing executive officer (present)

Foundation of Value Creation

Joined Itochu Corporation
Manager of wood materials and building materials department (Itochu)
Representative director of Daiken
Itochu Corporation Manager of forest products & generalmerchandise and chemicals management plan department
March 2012 Resigned Itochu
April 2012
Director and managing executive officer of Daiken
October 2012 General manager of MDF business, general manager of overseas
business, and manager of overseas sales
June 2013
Outside director of Hokushin Co., Ltd.
April 2014
General manager of MDF business, general manager of overseas
business, and general manager of the Tokyo office
April 2016
Director and senior managing executive officer
General manager of overseas and overseas business and generalmanager of the Tokyo office
June 2016
Representative director (present)
Senior managing director and senior managing executive officer
Responsible for overseas business and general manager of theApril 2017
Tokyo office (present)
April 2018
Responsible for research and development and information
business (present)
June 2018
Director and senior managing executive officer (present)

April 2001

34

ESG Information

S Social
Customers

Initiatives for Product Safety
The Daiken Group has established the Basic Policy on Product Safety to ensure that all employees are thoroughly committed to
product safety and are actively engaged in providing products to customers for safe use.

Basic Policy on Product Safety
Daiken Corporation and the companies in the Daiken Group must understandthat ensuring product safety is as much a social responsibility as a corporate
responsibility and position it as a crucial management issue. We are working on
the provision of products with safety features that can be used with confidence
after the establishment of the Basic Policy on Product Safety below. In addition,
we strive to honestly and sincerely fulfill our accountability to customers and torespond to accidents involving products.
1
2

Providing products that are safe, secure, and useful to society
Establishment and strengthening of the internal organization(restructuring organization, development of documentation, etc.)

3

Provision of information

Initiatives to provide
products that can beused with confidence(notes for correct use or handling requirements, etc.)

Collection and disclosure of information on product accidents
Report of product accidents
Response in the event of(immediately report to relevant authorities under the laws)
a product accident
6 Product recall (to prevent further incidents)
4

Key Initiatives
A review is conducted once a year to verify
whether the Basic Policy on Product Safety isproperly implemented.

●

Enhance safety reviews●

Review of Quality Standards from theperspective of product safety●

Strengthening of purchasing management●

Promotion of the implementation of theuser registration system

57Formulation of measures to prevent recurrences(investigate the cause, develop measures to prevent recurrences,and take corrective action)

8*Improve and maintain the system that can gather
customer information (end user information) in case ofan emergency or product accident

Disseminate information and operational assessment

Initiatives as above●

Thorough awareness by all employees*Inform them through e-learning or other ways

(thorough understanding of laws and essential policies)

Structure to Promote Product Safety
The Daiken Group established the system to conduct annual reviews performed by the department responsible for product safety
and monitor the status of each departments’ activities in following their Product Safety Action Plans in order to continue to provide
safe and highly reliable products and services. Then, the Risk and Compliance Management (RCM) committee and the Daiken
Quality Assurance committee instruct the departments to review and modify their Product Safety Action Plans.
RCM committee and Daiken Quality
Assurance committee

DAIKEN GROUP REPORT 2018

❶Review
results❺Awareness, Implementation

Product Safety Action Plan
Department responsible for product safety(Quality Assurance Department)

The Group❷Submit and review❹Instructionfor
improvement❸Reporting

35

Executive officer in chargeof risk management
Executive officer in chargeof quality assurance❶ The department must review whether the operation is following the
Product Safety Action Plan (herein after referred to as the “Plan”) thatwas established by the Daiken Group and submit the report of its results
to the department responsible for product safety (Quality Assurance
Department).
❷ The department responsible for product safety shall summarize thereports from each department and submit it to the executive officers incharge of risk management and quality assurance for review.
❸ The department responsible for product safety shall summarize thereview results and then report the measures to improve the Plan to theRCM committee or Daiken Quality Assurance committee.
❹ The RCM committee or Daiken Quality Assurance committee shall provide
the instructions necessary for improvements of the Plan.
❺ The department responsible for product safety shall notify the entire
Group to operate the modified Plan.

Suppliers

The Daiken Group states that the Promotion of CSR Procurement is one of the important commitments of the Medium-Term CSR
Activity Plan. We aim to provide products and services meeting the expectations of our customers and for a sustainable society inwhich people and the environment can coexist. Under these circumstances, we are implementing procurement activities with thecooperation of our business partners based on the following fundamental concepts.

Foundation of Value Creation

Promotion of CSR Procurement

CSR Procurement Policy and Standards
CSR Procurement Standards

1Compliance with laws andregulations

1

Respect for human rights

2

Fair and even-handed
transactions

2

Compliance with laws andregulations

3

Sharing excellent value

Occupational safety and health34Promotion of green procurement

Fair transactions

4

5

Promotion of CSR procurement

Information management

5

6

Relationship of trust and coprosperity

Coexistence with society

6

Green Procurement Standards
1

Environmental management
system2

Chemical substancemanagement

3

Wood from legitimate sources

Vision and Strategy of Value Creation

Procurement Policy

CSR questionnaire for suppliers to domestic plants
ESG Information

The Daiken Group has been carrying out the CSR questionnaire forsuppliers following the Procurement Policy and CSR Procurement
Standards since fiscal 2016. For fiscal 2018, the questionnaire wasdistributed to 235 suppliers of four plants. The survey results will
be provided to the respondents. We will ask our suppliers to correct
problems or make the necessary improvements if the evaluation score iscontinuously low. We will continue to implement the survey widening the
respondents, including our Group companies, to make improvements aspart of our efforts to further promote CSR procurement.

Sample of CSR questionnaire

Example of feedback to the CSR
questionnaire results

Management policy briefing session to strengthen
the partnership with our business partners
Data

The Daiken Group holds an annual management policy briefing session
to strengthen relations with business partners, suppliers, and logistics
companies. In fiscal 2018, nine sessions were held in different locations
all over Japan. In June, one of the sessions was held in Osaka, and 125
people from 88 major customers attended. From the Daiken Group, 24
people, including President Okuda, executive officers, and department
managers, attended. President Okuda explained the corporation’s
direction under the medium-term management plan, management policy
for fiscal 2018, and the workstyle change project. Other departments
also presented their policies and shared their information. After that, ameeting was held to exchange information between our business partners
to deepen communication.

Management policy briefing session

DAIKEN GROUP REPORT 201836

ESG Information

Employees
Work-life balance

Joined Ikuboss Corporate Alliance and started Ikuboss
Declarations
In October 2017, Daiken Corporation started Ikuboss Declarations in which all managers
declare their concrete initiatives to promote the improvement of the work–life balanceand diversity in the workplace. The Ikuboss campaign website was launched to share the
Ikuboss Declarations of all managers and the Ikuboss Guidebook. In addition, we joined a
corporate alliance, the Ikuboss Alliance, to foster the ideal boss of the new era. (joined as
the 167th member) The signing ceremony was held in October. It was also the opportunity
to exchange information for the effective utilization of the Ikuboss Declarations.

Signing Ceremony* An Ikuboss is a supervisor or a manager who supports the private lives and careers of their subordinatesand enjoys a good work-life balance themselves while achieving the targets (profit, etc.) of the organization.
(Advocate: Non-profit Organization Fathering Japan) Daiken Corporation defines the meaning of Ikuboss
as a “go one step ahead (Iku in Japanese)” boss.

Diversity management

Female employees meeting to promote active participation
in work
We held the First Female Employees Meeting in the Osaka and Tokyo Offices inMarch 2018 to promote their active participation in work and reduce their problems
by exchanging useful information with each other. A total of 179 female employees
participated. President Okuda gave a message, speeches were given by external lecturers,
and participants joined work groups to exchange opinions. We received opinions fromfemale employees participating in the meeting who said it was a good opportunity torealize how they want work to be in future, which means that it was a fruitful meeting
where they could communicate face-to face.

Female Employees Meeting

Occupational safety and health

Daiken Engineering Safety Convention pledging zero
occupational accidents
The 41st Daiken Engineering Safety Convention was held in April 2017. About 350
people participated, including members of the Health and Safety Cooperation Association
involved in construction work. During this convention, a visiting lecturer delivered aspeech about safety in the workplace, the safety awards ceremony was held, and allparticipants made the safety declaration to recognize the importance of safety. We will
endeavor to eradicate labor accidents.

Daiken Engineering Safety Convention

Occupational health and safety

Mutual safety checks and case study presentation toenhance safety awareness
The Daiken Group Mutual Safety Diagnosis is implemented in 14 plants every yearwith the aim of improving safety at our production sites. In February 2018, we held the
Daiken Small Group Case Study Presentation. The teams selected from all eleven plants
in Japan and the Daiken Miri Sdn Bhd. plants in Malaysia participated and presentedcase studies of 6S and Productive Maintenance (PM) activities by small groups. Daiken
will pledge to continue mutual safety diagnoses and improve our awareness of safety at
production sites through the activities implemented by small groups.

37

DAIKEN GROUP REPORT 2018

Worksite diagnosis for mutual safety checks

S Social

Local Community
Foundation of Value Creation

Overseas

Regional contribution to support students studying
wood in Malaysia

Vision and Strategy of Value Creation

Our Group companies in Sarawak State in Malaysia, Daiken Sarawak Sdn
Bhd. and Daiken Miri Sdn Bhd., manufacturing MDF using wood chips as themain raw material, established a scholarship system, Daiken Scholarships, in2007 to support students who are studying wood in their state. They supported
twenty students in total by 2016 jointly managed with the local Timber
Association. In fiscal 2018, they selected three students and held a ceremonyin Kuching, Sarawak State, in July, and in Miri, Sarawak State in August. In
order to contribute to the promotion of timber-related business in Malaysia, wewill continue our activities rooted in local communities.

Daiken Scholarships Ceremony

Japan

Forest Foster Parent Promotion Program
Contributing to the enrichment of the forest through aResidents’ Forest Development Project

Activities of the Forest Foster Parent Promotion Program

ESG Information

In July 2017, staff from the Mie and Inami plants participated in a workshop in
Nagano Prefecture held by the Forest Foster Parent Promotion Program. The
concept of this program is the promotion of forest development through a new
approach to the utilization of forests by collaboration between companies, regions,and governments. We agreed to the purpose of the program and participatedin support activities as a Forest Foster Parent. In Toyama Prefecture, where
the Inami plant is located, the 5th Residents’ Forest Development Project wasstarted in November 2017 by the Vibrant Workplace Building Team comprising
members from each department in the plant. The participants cut grass andcleared away the remaining trees in the plantation area. We will contribute to
the development of a better environment for our future while participating involunteer activities aiming to coexist with local communities.

Shareholders and Investors
Proper information disclosure

Well-received website for shareholders and investors

2017

Data

Our website for shareholders and investors was selected as an Excellent Website
in the overall ranking of all Japanese listed companies' websites in 2017 by
Nikko Investor Relations Co., Ltd. A total of 3,713 listed companies’ websites
were evaluated for the three aspects of clarity, ease of use, and disclosure
quality. We had completely renewed our website in June 2017, and the menufunctions and smartphone pages for access by individual investors received
high ratings for clarity and ease of use. We will continue to further improveinformation disclosure for shareholders and investors on our website.
Well-received website for shareholders and investors

DAIKEN GROUP REPORT 201838

ESG Information

E Environment
Daiken Group Environment Policy
The Daiken Group recognizes the important duty to engage in environmental issues as we carry out ourbusiness activities, and we are committed to the building of a sustainable society that is friendly to the
Earth and its people. To deliver long-term sustainability, we will maintain our Environmental Management
System with our progressive efforts.
●

●

●

●

●

Building a recycling-oriented society
We are committed to the effective use of wood resources and untapped resourcesin developing, producing, and selling our ecological products as part of our efforts torealize a recycling-oriented society.
Minimize environmental burden
We strive to reduce emissions of greenhouse gases, waste, and chemicals in all
our business activities and efforts to promote conservation of the environment andprevention of pollution.
Contribution to biodiversity
We will promote the procurement of wood resources with consideration for biodiversity.

Compliance
We will continue to be a company trusted by our customers and society by complying
with laws, regulations, and company regulations related to our business activities.
Communications
We strive to disseminate information proactively and enhance communication withvarious groups in society.

Environment Management
Basic Approach
The Daiken Group is continuously striving to improve our environmental activities throughout the Group withthe formulation of the medium-term environment plan to achieve our environmental policy while optimizing theEnvironment Management System (EMS). Furthermore, for efficient operation, we promote and develop the Quality
and Environmental Management System (QEMS) to be integrated with the Quality Management System (QMS).
Structure to Promote Environment Management
Executive Directors’ Meeting

CSR Committee
Departmental QEMS Management Officer

President

QEMS Management Officer of Each Affiliated Company
QEMS Management Officer
Department Responsible for Environmental Management (Corporate Planning Division)
QEMS Internal Audits Team39

DAIKEN GROUP REPORT 2018

Fifth Medium-Term Environmental Plan (for fiscal 2017–2019)

Eco-friendly
products

Contribution for achieving sales targets
in the final year of the medium-termplan (fiscal 2019) by expanding ecofriendly products and their sales

5 items

Amount of carbon fixation (CO2 equivalent)
800,000 t-CO2/year

749,000 t-CO2/year(breakdown)
MDF: 608,000 t-CO2/
year
IB: 141,000 t-CO2/year

Reduction of emissions by
the domestic production
sites

Discharge rate 62.5 (t-CO2/¥100 million) or
below(CO2 emission factors from electricity generation
is fixed at the value of fiscal 2014)60.4 (t-CO2/¥100 million)(CO2 emission factors
from electricity
generation is fixed at thevalue of fiscal 2014)

Promotion of energy
savings through theintroduction of energysaving equipment andimprovement of efficiency
in equipment operation

Total emissions 110,000 t-CO2 or below/year(CO2 emission factors from electricity generation
is fixed at the value of fiscal 2014)

103,000 t-CO2(CO2 emission factors
from electricity
generation is fixed at thevalue of fiscal 2014)

Reduction of emissions
from logistics and transport
divisions (Improved modal
shift rate and loading rate)

Unit of energy use
44.7 kl/million tkm or below(reduction by more than 1% in annual average)

46.8 kl/million tkm

CO2 emissions 1,500 t-CO2 or below
Reduction of emissions
from sales andadministrative divisions(Thorough implementationof energy-saving measures)

E

Final disposal rate (proportion by volume
disposed of in landfill outside the company) 5%
or below

7.5%

Introduce the cascading use of wood

Material recycle ofconstruction waste

Ratio of old material/virgin material: 90%

93%

Use of wood biomassenergy (internal use)

Input amount of wood biomass energy
1,350×1012J
Use of fuel chip
95,000 t/year

Promotion of shift tobiomass energy and othereco-friendly energy fromheavy oil, LNG, etc.

Reduction of heavy oil (heat quantity equivalent) 37,000 kl/year
35,000 kl/year

Procure wood in a biodiversity friendly
way

Improvement in the rateof use of certified wood,domestically produced
wood, planted trees, andrecycled board, etc.

Use rate of non-certified natural plywood: 15%or below

11.7%

Strengthen cooperation with supply
chainsDissemination and proper
management of green
procurement in the supply
chain

Coverage of applicable companies (consent
acquisition rate) 100%

96%

Identify, prevent, and minimize
environmental risks

Operation and continuous
improvement ofenvironment management
systemEnvironmental accident/violation 00

Environmental education

Industrial waste training sessione-learning by year

Completion of
implementation

Establishment andoperation of a system forappropriate managementof chemical substances(The introduction of amanagement system isconsidered)

System operation

Introduced amanagement system andstarted operation with
the new system

Contribution
to creatinga recyclingoriented society

Contribution forbiodiversity

Strengthen
environmental
Improve our ability to satisfy regulations
risk management
governing chemical substances

1,433×1012J
101,000 t/year

DAIKEN GROUP REPORT 2018

Data

Promote the 3Rs* to reduce the volume Promotion of recycle andconversion of waste intoof waste destined for final disposal
valuables*Reduce, Reuse, and Recycle

ESG Information

Environment

1,600 t-CO2

Vision and Strategy of Value Creation

Contribution forbuilding a lowcarbon society

ResultFiscal 2018

Number of new products five items/year

Development of ecofriendly products that
contribute to reducing theenvironmental burden

Introduce carbon fixation by using wood Fixation through the supplyof recycled wood boards

Reduce CO2* emissions from energy
sources* CO2 emitted by the combustion offuels or the use of electricity or heat
supplied by a third party

Goal
Fiscal 2019

Foundation of Value Creation

Theme and content

40

ESG Information

TOPICS

Soil improvement additive, DW fiber, using cascading domestic
wood, contributes to building a low-carbon society
The Daiken Group stated three policies: becoming a sustainable society, expansion of the use of domestic wood, and thecomprehensive utilization of wood. In order to achieve these policies, we have developed the soil improvement additive,
DW fiber, in collaboration with JCE Co., Ltd., by utilizing our strength in material development technologies. DW fiber has
been used for a variety of purposes, including the project of total cascading of wood that is carried out in Nichinan-cho,
Tottori Prefecture, and is attracting attention as a new approach to environmental conservation.

A new material to create new value
based on effective use of resources
DW fiber is a coarse, fibrous soil improvement additive
created from domestically produced wood chips where
their fibers are loosened by adding fluvic acid, whichfacilitates the growth of plants. By mixing soil with DW
fiber, which has excellent water retention, permeability
and contains fluvic acid, the growth of plants is
facilitated, the soil environment is improved, salt
damage is prevented, and landslides in mountainous
areas are prevented by afforestation. Its capabilities
can be used in various situations. In addition, the woodmaterial can also decrease the environmental burden.
The raw material of DW fiber is mainly wood offcuts
and untapped resources generated while processing
wood. It contributes to the cascading use of wood
resources and the revitalization of forestry in Japan.
On March 20, 2018, the Daiken Group’s initiatives
were jointly awarded with JCE Co., Ltd., the Gold prize inthe corporation category of the Japan Resilience Award(2018), which commends advanced activities for thebuilding of a resilient society for the next generation.

Conservation of forests
Contribute to conservation offorests by effectively using the wood
produced in Japan.

DW fiber

Quality

Environment

Contribute to the improvementof the physical and chemical
quality for excellent
performance.

Contribute to theimprovement of theenvironment by utilizing therecycled resources madefrom Japanese wood chipand fluvic acid.

Conceptual image of greening

PICK UPBusiness base for total cascading of wood in Nichinan-cho, Tottori
We launched a project for the total cascading ofwood by using DW fiber with Nichinan-cho in Tottori
Prefecture. We purchase wood offcuts that are
generated when producing LVL* from the local LVL
manufacturer, Orochi Co.,Ltd., to produce the DW
fiber. The DW fiber is sold to construction companies
through Sansui Navico, a group company of JCE
Co., Ltd., and is used to improve coastal forests
and the greening of roads all over Japan to support
reforestation and local forestry.

Conceptual image of commercializing total cascading of wood
Operation and management by
the forest owner’s cooperative
Tree trimming/planting
Tree trimming/planting
Tree trimming/planting
Industrial complex of woods

Increase in
the population

DAIKEN GROUP REPORT 2018

・Development of tree
trimming and planting
techniques andhuman resources
・Utilization development
・Development ofReturning products with higha portion added value

Research
instituteBusiness base fortotal cascading of wood

*LVL: Laminated Veneer Lumber
An engineered wood product that is laminated with multiple layers of a single board aligned with the fiber direction

41

Materials C, D
Materials A, B

of profits

EnvironmentE

In the past, the Daiken Group has shifted from fossil fuels, such as heavy oil, to biomass energy fueled by wood chips
derived from building scraps in order to reduce greenhouse gas emissions. We also installed our largest biomass boiler
at the Okayama plant in July 2016 leading to an increase in biomass energy to 50% of the total energy used in the
production sites in Japan for fiscal 2018. With these efforts, we were able to reduce greenhouse gas emissions by 20%
compared with fiscal 2014.
Trends in the energy used in production sites in Japan
（%）
100

80

3

3

3

3

36

36

36

35

35

19

20

19

14

13

41

41

42

48

60

40

20

0

Recycling of waste materials

2015

LNG

2016

Electricity

2017

Breakdown of waste processing
Final volume disposed in landfill

Valuables

8%9%Simple incineration

1%

Recycling91%

Amount ofwaste generated

48,800 t
Use for heat

Use formaterials

23%

59%

(reused as energy)(Note) Recycling rate = Amount of recycled resources/Total amount of waste generated x 100(%)
Amount of recycled resources = Valuable + Use for materials + Use for heat

Effective use of recycling/untapped resources(reused as ingredients)

Current rate of using recycled resources in products
（%）
100

26

26

22

21

60

6
4

8
5

9
5

11
5

12
5

63

62

61

62

63

2014

2015

2016

2017

2018 (Fiscal year)

40

20

0

Recycled resources (wood chip, rock wool, etc.)
Re-afforestation resources (planted tree plywood)

Data

26
80

Recycling/untapped resources

The Daiken Group is committed to the effective use ofwood resources and untapped resources in developing andproducing its products as part of our efforts to develop asustainable society. In fiscal 2018, the utilization of recycledmaterials was 63%, and untapped resources were 5% of
the raw materials used for manufacturing. In addition, we
prioritized the use of environmentally friendly wood, suchas plywood made from planted trees, thus we improved theutilization ratio of plantation resources to 12%. We continue
to strive to use sustainable resources.

2018 (Fiscal year)

Heavy oil, etc.

ESG Information

The Daiken Group is aiming to develop a recycling-oriented
society and is recycling waste by reusing the wood offcuts
and defective products generated during the manufacturing
process for the product materials.
In fiscal 2018, the waste emissions generated during
the manufacturing process were 48,800 metric tons.
We promoted their use as materials or for heating, which
resulted in simple incineration being reduced to 1% and therecycling rate reaching 91%.
We continue to further improve the recycling rate.

2014

Biomass

Biomass boiler in the Okayama Plant

50

Vision and Strategy of Value Creation

3

Foundation of Value Creation

Initiatives for prevention of global warming

Untapped resources (Shirasu)
Other

DAIKEN GROUP REPORT 2018

42

Data

Highlight of Data
Financial Indicators
Net sales/Gross profit margin

Operating profit/Operating profit to net sales（%）(¥million)

200,000

180,392

168,833

168,141

168,841

170,581100（%）(¥million)

10,000

10.0

8,532

150,000

75

100,000

50

8,000
5,586

6,000

25.0

50,000
23.7

0

2014
Net sales

24.2

25.8

2015
2016
Gross profit margin

2017

22.0

4,000
25

0
2018 (Fiscal year)（%）(¥million)

9,033

8,760

8,000
6,000

4,648

5.4

0

2.8

2.8

3.1

2014

2015

2016

Ordinary profit

5.1

2.0

135,596130,3152017

0.02018 (Fiscal year)

132,1716.9

142,0243.8

30,0000

2014
Total assets

3.4

2017

(¥)

80

40

6.4

8.0

50,000

6.0

37.5

（%）

50

40

30.1

30.3

30
20
10

2014
2015
Cash dividends per share

2016
2017
Dividend payout ratio

We set a target of our dividend payout ratio of 30% or more.

43

40,00020,000DAIKEN GROUP REPORT 2018

2,546

2,736

3,988

12.0
9.0
6.0
3.0

2014
2015
2016
Profit attributable to owners of parent

0.0
2017
2018 (Fiscal year)
ROE (Return on equity)

54,24437,15440,789

27.3

29.9

31.3

0

（%）

60

50

46,61440,573

40
35.3

38.2

30
20

10,000

10
2014
2015
2016
2017
Shareholder equity ratio
Shareholder equity

0
2018 (Fiscal year)(¥million)(¥)

70,00060,54560,00040,00030,00020,00020

0

7.0

49,67550,000

50
30.4

7.0

5,895

5,132

（%）

Market capitalization/Stock price at the end of the period

64
33.6

9.8

30,0000.0
2018 (Fiscal year)

74

37.5

0

60,000

2.0

37.0

0.0
2018 (Fiscal year)

2,000(¥million)

Cash dividends per share/Dividend payout ratio

60

4,000

10.0

4.0

2015
2016
ROA (Return on assets)

2017

11.7

6,000

（%）

4.0

60,0002015
2016
Operating profit ratio

Shareholder equity/Shareholder equity ratio

120,000
90,000

4.0
2.0

8,000

Ordinary profit to net sales(¥million)

135,890

2014
Operating profit

4.4

2.0

(¥million)

4.0

Total assets/ROA (Return on assets)
150,000

0

2.0

11.7

6.0

5,281

4,000
2,000

10.0
8.0

5,025

5.1

3,452

Profit attributable to owners of parent/
ROE (Return on equity)

Ordinary profit/Ordinary profit to net sales
10,000

3,577

8.0
6.0

3.3

2,000

7,519

0
2018 (Fiscal year)

35,2601,405

32,931
1,355

1,570

2,061

2,500
2,000
1,500
1,000
500

10,000037,842

2,512

3,000

2014
2015
Market capitalization

0
2016
2017
2018 (Fiscal year)
Stock price at the end of the period

Nonfinancial Indicators
Input of woody biomass energy/Percentage of use*2,3(Persons)

Input（×1012J）

3,141

3,191

3,060

3,071

3,073

891

890

829

826

825

3,000

1,500
1,270

1,370
1,162

2,250

2,301

2,231

2,245

500
0

1,140

40.8

42.3

48.2

49.6
25

2014
2015
2016
Input amount of wood biomass energy020172018 (Fiscal year)
Percentage of use

Greenhouse gas emissions/Sales per unit*2,4,5
Emissions(1,000 t-CO2)

（%）

100

Sales per unit
(t-CO2/¥100 million)

100

150
125.7

80

116.1

113.2

100
49.2

49.5

49.5

51.8

69.7

49.8

40

68.7

67.3

102.3

100.1

75

60.6

58.7

50

50
25

20
0

2014

2015

2016

2017

0

2018 (Fiscal year)

Acquisition rate of paid holidays

2016

1.63

1.66

10.0

8.1

8.2
7.2

60

1.5
1.45
0.94

1.06
1.06

0.45

1.15

0.78

1.02

0.82

5.7

53.5

40

49.6

42.2

7.5
48.8

20
0

8.0
6.0
4.0

47.5

2.0

0.42

2014
2015
2016
2017
2018 (Fiscal year)
Rate of lost-worktime injuries
Manufacturing averageAll-industry average

ESG Information

1.58

1.61

0
2018 (Fiscal year)

Percentage of amount in landfill
（%）

80
1.66

2017

Sales per unit

Amount generated(1,000 tons)

2.0

0

2015

Amount of waste disposed of/Percentage of waste disposed of in landfills*2,6

（%）

0.5

2014

Greenhouse gas emissions

Rate of lost-worktime injuries*2

1.0

Vision and Strategy of Value Creation

2014
2015
2016
2017
2018 (Fiscal year)
Number of overseas employees
Number of employees in Japan

75

50
41.4

2,248

Acquisition rate of paid holidays*1

60

1,433

1,000

2,000

0

100

2,000

4,000

1,000

Percentage of use（%）

Foundation of Value Creation

Number of employees in Japan and overseas

2014
2015
2016
2017
Amount of waste disposed ofPercentage of waste disposed of in landfills

0.02018 (Fiscal year)

Data*1. The data for fiscal year 2014–2015 include four subsidiaries absorbed in the absorption-type merger in April 2015.
*2. Total value at the Daiken Group’s production bases in Japan.
*3. Woody biomass energy input as a percentage of total energy input.
*4. As the emission coefficient of electricity use associated with the calculation of greenhouse gas emissions, the real emission coefficient for the relevant fiscal year by electric power suppliers was used,provided that the latest figures were used when the real emission coefficients were undisclosed.
*5. Greenhouse gas emissions as a percentage of net sales.
*6. Waste disposed of in landfills as a percentage of the amount of waste disposed of.

For more detailed information, please visit the following websites. (Japanese only)
Financial Indicators

https://www.daiken.jp/company/ir/

Nonfinancial Indicators

https://www.daiken.jp/company/csr/

DAIKEN GROUP REPORT 2018

44

Data

Ten-Year Financial Summary(¥million)
6,000

Profit attributable to owners of parent
Return on equity (ROE)

5,000

4,000

3,000

4.1

2,000

1,000

1.8

1.6

0

598

511

(¥million)

2.6
1,375

874

Fiscal 2009

Fiscal 2010

Fiscal 2011

Fiscal 2012

Net sales .........................................................................

150,325

140,936

141,506

151,209

Operating profit ...............................................................

1,830

3,010

4,349

4,542

Ordinary profit .................................................................

1,331

2,819

4,373

4,600

Profit attributable to owners of parent ........................

598

511

1,375

874

Return on equity (ROE) (%)...........................................

1.8%

1.6%

4.1%

2.6%

Return on assets (ROA) (%) ..........................................

1.0%

2.3%

3.6%

3.8%

Operating profit ratio (%) ..............................................

1.2%

2.1%

3.1%

3.0%

Ordinary profit to net sales (%)....................................

0.9%

2.0%

3.1%

3.0%

Cash flows from operating activities ...........................

1,805

3,141

4,438

9,074

Cash flows from investing activities ............................

(2,897)(3,286)(2,618)(3,218)Cash flows from financing activities............................

(1,793)

1,135(7,095)(1,929)

Free cash flows...............................................................

(1,091)

(145)

1,819

5,856

Capital expenditures ......................................................

2,934

2,785

3,765

2,758

Depreciation....................................................................

4,054

4,197

4,574

4,217

R&D expenses.................................................................

1,526

1,471

1,464

1,470

Total assets .....................................................................

125,080

123,862

115,969

125,469

Net assets........................................................................

34,562

36,66336,83936,949

Shareholder equity.........................................................

31,52033,21333,30633,569

Shareholder equity ratio (%)........................................

25.2%

26.8%

28.7%

26.8%

Interest-bearing debts ...................................................

36,48839,40733,72032,865

Debt-equity ratio (multiple) ..........................................

1.16

1.19

1.01

0.98

Book value per share (BPS) (¥) ...................................

1,233.28

1,302.61

1,327.08

1,337.57

Earnings per share (EPS) (¥) ........................................

23.18

20.04

54.41

34.83

Dividend per share (¥)...................................................

31.25

25.00

31.25

37.50

Dividend payout ratio (%) .............................................

134.7%

124.8%

57.4%

107.7%

Total dividend .................................................................

806

638

786

941

Employees (Consolidated) (Persons)...........................

3,252

3,255

3,189

3,183

(Note) 1. The Company consolidated shares at a rate of one share per five as of October 1, 2016. The past figures were also consolidated retrospectively forease of comparison.
2. For more information about our financial statements, please refer to our securities report posted on our website.
https://www.daiken.jp/company/ir/document/
3. Free cash flows = Cash flows from operating activities + Cash flows from investing activities
4. Debt-equity ratio = Interest-bearing debts / shareholder equity (multiple)

45

DAIKEN GROUP REPORT 2018

5,895 （％）
15.0
11.7

9.8
7.0

10.0

7.0

7.5

5,132
3,988

3.8
2,546

12.5

Foundation of Value Creation

11.7

5.0

2,736
2.5
0

Fiscal 2013

Fiscal 2014

Fiscal 2015

Fiscal 2016

Fiscal 2017

Fiscal 2018

158,153

180,392

168,833

168,141

168,841

170,581

4,703

3,577

3,452

5,586

8,532

7,519

5,669

5,025

4,648

5,281

9,033

8,760

1,318

2,546

2,736

3,988

5,132

5,895

3.8%

7.0%

7.0%

9.8%

11.7%

11.7%

4.4%

3.8%

3.4%

4.0%

6.9%

6.4%

3.0%

2.0%

2.0%

3.3%

5.1%

4.4%

3.6%

2.8%

2.8%

3.1%

5.4%

5.1%

9,299

6,016

10,566

9,158(4,072)(5,972)(4,201)(2,711)224(1,054)(2,635)(5,486)(6,734)(6,342)

591

4,494

5,227

43

6,364

6,447

4,036

3,274

3,206

3,508

4,757

3,081

4,107

3,990

4,093

4,068

3,506

3,768

1,453

1,342

1,349

1,430

1,477

1,551

131,618

135,890

135,596130,315132,171

142,024

39,87041,41944,984

43,83349,08656,97936,00237,15440,57340,78946,61454,244

27.4%

27.3%

29.9%

31.3%

35.3%

38.2%

34,506

34,59934,20431,43826,33821,952

0.96

0.93

0.84

0.77

0.57

0.40

1,434.53

1,480.47

1,669.47

1,692.28

1,933.99

2,250.58

52.53

101.46111.70164.67212.96244.60

37.50

37.50

37.50

50.00

64.00

74.00

71.4%

37.0%

33.6%

30.4%

30.1%

30.3%

941

941

914

1,210

1,542

1,783

3,194

3,141

3,191

3,060

3,071

3,073

DAIKEN GROUP REPORT 2018

Data

9,663

(5,168)ESG Information

2,624(2,033)

Vision and Strategy of Value Creation

1,318

46

Data
Financial Statements

Consolidated Balance Sheet(¥million)

Previous consolidated fiscal year

Current consolidated fiscal year

(March 31, 2017)(March 31, 2018)

Cash and deposits ............................................................................................

10,474

10,767

Notes and accounts receivable-trade ...........................................................

37,77240,533

Electronically recorded monetary claims-operating ....................................

4,223

6,985

Securities ............................................................................................................

19−

Merchandise and finished goods ...................................................................

7,455

9,126

Work in process .................................................................................................

3,546

2,996

Raw materials and supplies ............................................................................

4,339

4,677

Deferred tax assets ...........................................................................................

2,425

1,400

Other ...................................................................................................................

2,209

2,153

Allowance for doubtful accounts ....................................................................

(110)

(110)

Total current assets ...........................................................................................

72,35678,530AssetsCurrent assets

Non-current assets
Property, plant and equipment
Buildings and structures, net .....................................................................

8,497

8,099

Machinery, equipment and vehicles, net .................................................

10,982

10,946

Land ................................................................................................................

14,254

13,555

Leased assets (net).......................................................................................

148

106

Construction in progress .............................................................................

451

2,124

Other (net) ......................................................................................................

1,768

2,014

Total property, plant and equipment .........................................................

36,10336,847

Intangible assets
Goodwill ..........................................................................................................

195

149

Software ..........................................................................................................

2,229

1,938

Other ...............................................................................................................

312

491

Total intangible assets ..................................................................................

2,738

2,580

Investment securities ...................................................................................

16,471

19,631

Net defined benefit asset ............................................................................

1,776

2,331

Investments and other assets

Deferred tax assets .......................................................................................

207

218

Other ...............................................................................................................

2,505

1,822

Allowance for doubtful accounts ...............................................................

(41)

(43)

Total investments and other assets ...........................................................

20,91923,960Total non-current assets ..................................................................................

59,76063,388

54

105

Deferred assets
Bond issuance cost ..........................................................................................

47

Total deferred assets ........................................................................................

54

105

Total assets .............................................................................................................

132,171

142,024DAIKEN GROUP REPORT 2018(¥million)

Current consolidated fiscal year

(March 31, 2017)(March 31, 2018)

Liabilities
Current liabilities
21,00020,620

3,405

5,778

Short-term loans payable ................................................................................

6,232

5,634

Current portion of bonds .................................................................................

5,000

−

Current portion of long-term loans payable ..................................................

4,143

2,963

Lease obligations ...............................................................................................

43

38

Accounts payable-other ...................................................................................

17,82921,083

Income taxes payable ......................................................................................

1,088

603

Accrued consumption taxes ...........................................................................

707

397

Provision for bonuses .......................................................................................

2,153

2,198

Provision for product warranties ....................................................................

1,108

959

Other ...................................................................................................................

2,856

3,754

Total current liabilities ......................................................................................

65,56964,032

Bonds payable ...................................................................................................

5,400

10,400Long-term loans payable .................................................................................

5,378

2,814

Non-current liabilities

139

101

Deferred tax liabilities .......................................................................................

1,633

3,215

Provision for product warranties ....................................................................

1,316

919

Net defined benefit liability .............................................................................

3,401

3,415

Negative goodwill ..............................................................................................

43

33

Other ...................................................................................................................

201

114

Total non-current liabilities ..............................................................................

17,51521,013

Total liabilities .......................................................................................................

83,08485,045

Capital stock ......................................................................................................

13,15013,150Capital surplus ...................................................................................................

11,943

11,943

ESG Information

Lease obligations ...............................................................................................

Vision and Strategy of Value Creation

Notes and accounts payable-trade ................................................................
Electronically recorded obligations-operating ..............................................

Foundation of Value Creation

Previous consolidated fiscal year

Net assets
Shareholders’ equity

18,89623,007

Treasury shares .................................................................................................

(1,430)(1,430)Total shareholders’ equity ................................................................................

42,55946,670

4,762

6,897

Accumulated other comprehensive income
Valuation difference on available-for-sale securities ...................................
Deferred gains or losses on hedges ...............................................................

9722

Foreign currency translation adjustment ......................................................

(194)

245

Re-measurements of defined benefit plans .................................................

(609)

409

Total accumulated other comprehensive income .......................................

4,055

7,574

Non-controlling interests ......................................................................................

2,472

2,734

Total net assets ......................................................................................................

49,08656,979Total liabilities and net assets .............................................................................

132,171

142,024DAIKEN GROUP REPORT 2018

Data

Retained earnings .............................................................................................

48

Data

Consolidated Statements of Income(¥million)

Previous consolidated fiscal year
(April 1, 2016March 31, 2017)

Current consolidated fiscal year
(April 1, 2017March 31, 2018)

Net sales .................................................................................................................

168,841

170,581

Cost of sales ...........................................................................................................

125,201

127,946

Gross profit ..............................................................................................................

43,64042,635

Selling, general and administrative expenses ...................................................

35,10835,116

Operating profit ......................................................................................................

8,532

7,519

Non-operating profit
Interest profit ......................................................................................................

69

66

Dividend income ...............................................................................................

374

427

Rent income ......................................................................................................

187

195

Dividend income of life insurance .................................................................

46

34

Amortization of negative goodwill ...................................................................

10

10

Share of profit of entities accounted for using equity method ..................

46

47

Exchange gain ...................................................................................................

−

360

Reversal of allowance for doubtful accounts ...............................................

2−

Miscellaneous profit .........................................................................................

460

524

Total non-operating profit ................................................................................

1,197

1,666

Interest expenses ..............................................................................................

245

191

Sales discounts ..................................................................................................

138

129

Loss on sale of trade receivables ...................................................................

35

17

Foreign exchange losses .................................................................................

176−

Miscellaneous expenses ..................................................................................

100

86

Non-operating expenses

Total non-operating expenses .........................................................................

695

424

Ordinary profit .........................................................................................................

9,033

8,760

Extraordinary income
Gain on sales of non-current assets ..............................................................

30

423

Gain on sales of investment securities ..........................................................

95

16

State subsidy ......................................................................................................

412−

Compensation income .....................................................................................

90−

Total extraordinary profit ..................................................................................

628

440

Extraordinary losses

49

Loss on sale of non-current assets ................................................................

11

4

Loss on retirement of non-current assets .....................................................

516

228

Loss on reduction of non-current assets .......................................................

412−

Impairment loss.................................................................................................

1,181

421

Loss on sales of investment securities ..........................................................

1−

Loss on valuation of investment securities ...................................................

204

2

Provision for product warranties.....................................................................

−

200

Other ...................................................................................................................

871

Total extraordinary losses .................................................................................

2,414

858

Profit before income taxes ....................................................................................

7,247

8,342

Income taxes – current .........................................................................................

1,234

1,065

Income taxes – deferred .......................................................................................

451

1,253

Total income taxes .................................................................................................

1,685

2,318

Profit ........................................................................................................................

5,562

6,023

Profit attributable to non-controlling interests ..................................................

429

128

Profit attributable to owners of parent ................................................................

5,132

5,895

DAIKEN GROUP REPORT 2018

Financial Statements

Consolidated Statements of Comprehensive
Income(¥million)(April 1, 2016March 31, 2017)

Profit ........................................................................................................................

Current consolidated fiscal year
(April 1, 2017March 31, 2018)

6,023

Valuation difference on available-for-sale securities ...................................

1,350

2,135

Deferred gains or losses on hedges ...............................................................

(111)

(57)

Foreign currency translation adjustment ......................................................

(897)

617

Re-measurements of defined benefit plans, net of tax ..............................
Share of other comprehensive income of ..........................................
entities accounted for using equity method
Total other comprehensive income ................................................................

954

1,019

0

0

1,295

3,714

Comprehensive income..........................................................................................

6,857

9,738

Comprehensive income attributable to owners of parent ..........................

6,712

9,414

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

144

324

(breakdown)

Vision and Strategy of Value Creation

5,562

Other comprehensive profit

Foundation of Value Creation

Previous consolidated fiscal year

ESG Information
Data
DAIKEN GROUP REPORT 2018

50

Data

Consolidated Statements of Changes in Net
AssetsPrevious consolidated fiscal year
(April 1, 2016March 31, 2017)(¥million)
Current consolidated fiscal year
(April 1, 2017March 31, 2018)

Shareholders’ equity
Capital stock
Balance at beginning of current period..................................................................
Balance at end of current period ...........................................................................
Capital surplus
Balance at beginning of current period..................................................................
Change of scope of consolidation ..........................................................................
Balance at end of current period ...........................................................................

13,15013,15013,15013,15011,655288
11,943

11,943Retained earnings
Balance at beginning of current period..................................................................
Cumulative effects of changes in accounting policies.............................................
Dividends of surplus .............................................................................................
Profit attributable to owners of parent ....................................................................
Balance at end of current period ...........................................................................

15,143(205)(1,175)
5,132
18,896(1,783)
5,895
23,007(1,429)(1)(1,430)(1,430)(0)(1,430)38,519(205)(1,175)
5,132
(1)
288
42,55942,559(1,783)5,895(0)Valuation difference on available-for-sale securities
Balance at beginning of current period..................................................................
Net changes of items other than shareholders’ equity, net .....................................
Balance at end of current period ...........................................................................

3,413
1,349
4,762

4,762
2,135
6,897

Deferred gains or losses on hedges
Balance at beginning of current period..................................................................
Net changes of items other than shareholders’ equity, net .....................................
Balance at end of current period ...........................................................................

163
(66)
97

97
(75)
22

Treasury shares
Balance at beginning of current period..................................................................
Purchase of treasury shares ..................................................................................
Balance at end of current period ...........................................................................
Total shareholders’ equity
Balance at beginning of current period..................................................................
Cumulative effects of changes in accounting policies.............................................
Dividends of surplus .............................................................................................
Profit attributable to owners of parent ....................................................................
Purchase of treasury shares ..................................................................................
Change of scope of consolidation ..........................................................................
Balance at end of current period ...........................................................................

11,94318,896−−−

46,670

Accumulated other comprehensive income

Foreign currency translation adjustment
Balance at beginning of current period..................................................................
Cumulative effects of changes in accounting policies.............................................
Net changes of items other than share-holders’ equity, net ....................................
Balance at end of current period ...........................................................................
Re-measurements of defined benefit plans
Balance at beginning of current period..................................................................
Net changes of items other than shareholders’ equity, net .....................................
Balance at end of current period ...........................................................................

257
205
(657)
(194)

(194)

(1,563)
954
(609)

(609)
1,019
409

Total accumulated other comprehensive income
Balance at beginning of current period..................................................................
Cumulative effects of changes in accounting policies.............................................
Net changes of items other than shareholders’ equity, net .....................................
Balance at end of current period ...........................................................................

2,269
205
1,579
4,055

4,055

3,043
(571)
2,472

2,472
261
2,734

43,833(1,175)
5,132
(1)
288
1,008
49,08649,086(1,783)
5,895
(0)

−

439
245

−

3,518
7,574

Non-controlling interests
Balance at beginning of current period..................................................................
Net changes of items other than shareholders’ equity, net .....................................
Balance at end of current period ...........................................................................

Total net assets
Balance at beginning of current period..................................................................
Dividends of surplus .............................................................................................
Profit attributable to owners of parent ....................................................................
Purchase of treasury shares ..................................................................................
Change of scope of consolidation ..........................................................................
Net changes of items other than shareholders’ equity, net .....................................
Balance at end of current period ...........................................................................

51

DAIKEN GROUP REPORT 2018

−

3,780
56,979Financial Statements

Consolidated Statements of Cash Flows(¥million)(April 1, 2016March 31, 2017)

Current consolidated fiscal year
(April 1, 2017March 31, 2018)

Cash flows from operating activities
Profit before income taxes ...................................................................................
Depreciation .........................................................................................................
Impairment loss....................................................................................................
Amortization of bond issuance cost .....................................................................
Loss on retirement of non-current assets ............................................................
Loss (gain) on sales of non-current assets ..........................................................
Loss (gain) on sales of investment securities ......................................................
Loss (gain) on valuation of investment securities................................................
Amortization of goodwill .......................................................................................
Increase (decrease) in allowance for doubtful accounts ....................................
Increase (decrease) in provision for product warranties .....................................
Increase (decrease) in net defined benefit liability .............................................
Interest and dividend income ..............................................................................
Interest expenses .................................................................................................
Foreign exchange losses (gains)..........................................................................
Share of (profit) loss of entities accounted for using equity method ..................
Decrease (increase) in notes and accounts receivable-trade .............................
Decrease (increase) in inventories.......................................................................
Increase (decrease) in notes and accounts payable-trade .................................
Decrease (increase) in consumption taxes refund receivable ............................
Increase (decrease) in accrued consumption taxes ...........................................
Other .....................................................................................................................
Subtotal.................................................................................................................
Interest and dividend income received ...............................................................
Interest expenses paid .........................................................................................
Income taxes paid ................................................................................................

(3,893)
375
(1)
485
(157)
(1,009)(4,201)(3,876)
1,809
(54)
228
−
(818)
(2,711)(1,803)−−1,600(4,883)(44)(1)(1,175)
(18)

(630)
4,921
(5,000)400(4,143)(43)(0)(1,783)
(62)

(408)
0
(6,734)(290)(660)
11,134
10,474−(6,342)
188
293
10,474
10,767

Cash flows from investing activities..........................................................................
Purchase of property, plant and equipment........................................................
Proceeds from sales of property, plant and equipment ......................................
Purchase of investment securities .......................................................................
Proceeds from sales and redemption of investment securities ..........................
Purchase of shares of subsidiaries resulting in change in scope of consolidation ......
Other, net ..............................................................................................................
Net cash provided by (used in) investing activities .............................................

ESG Information

Cash flows from operating activities.....................................................................

8,342
3,768
421
26
228
(419)
(16)
2
35
2
38
(546)
(541)
(494)
191
17
(47)
(5,457)(1,311)
4,972
(75)
(310)
1,483
10,311494(189)(1,457)
9,158

Vision and Strategy of Value Creation

Increase (decrease) in provision for bonuses ......................................................

7,247
3,507
1,181
28
516
(18)
(94)
204
14
(124)
411
(645)
(230)
(444)
245
48
(46)
(4,600)
1,352
378
(98)
176
2,288
11,297
444
(248)
(927)
10,566

Foundation of Value Creation

Previous consolidated fiscal year

Cash flows from financing activities .........................................................................
Net increase (decrease) in short-term loans payable .........................................
Proceeds from issuance of bonds .......................................................................
Redemption of bonds ...........................................................................................
Proceeds from long-term loans payable ..............................................................
Repayments of long-term loans payable .............................................................
Repayments of finance lease obligations ............................................................
Cash dividends paid .............................................................................................
Dividends paid to non-controlling interest ...........................................................
Payments from changes in ownership interests in subsidiaries........................
that do not result in changes in the scope of consolidation
Other, net...............................................................................................................
Net cash provided by (used in) financing activities ............................................
Effect of exchange rate change on cash and cash equivalents ................................
Net increase (decrease) in cash and cash equivalents ............................................
Cash and cash equivalents at beginning of period ...................................................
Cash and cash equivalents at end of period .............................................................

Data

Purchase of treasury shares ................................................................................

−DAIKEN GROUP REPORT 2018

52

Data

Company Information (as of July 1, 2018)
Company NameDAIKEN CORPORATION

Registered Head Office

1-1 Inami, Nanto City, Toyama, JapanFounding

September 26, 1945

Operational Headquarters

3-2-4 Nakanoshima, Kita-ku, Osaka, Japan

Paid-in capital¥13,150,039,080

Tokyo Office

3-12-8 Sotokanda, Chiyoda-ku, Tokyo, Japan

Stock exchange listings

The first section ofTokyo Stock Exchange

Major Sales Offices

Sapporo, Sendai, Tokyo, Saitama, Kanazawa, Nagano, Na-goya,
Osaka, Hiroshima, Takamatsu, Fukuoka and Singapore

Production Plants

Inami Plant (Nanto City, Toyama Prefecture)
Okayama Plant (Minami-ku, Okayama City)
Takahagi Plant (Takahagi City, Ibaraki Prefecture)
Mie Plant (Tsu City, Mie Prefecture)

Security code

7905

Setting day

March 31

General meeting ofshareholders

June■ Our bases
In Japan

Subsidiaries part of the Group❶ Dai-tac Corporation❾ Daiken Engineering Corporation❸ C&H Co., Ltd.

11Sankei Corporation❷ Aizu Daiken Kako K.K.
❹ Eco Techno Co., Ltd.

10Koukou Sangyo Corporation

TDY Sapporo

12Daiken Home & Service Corporation❺ Daifit Co., Ltd.

❻ Dai-wood Corporation❼ Setouchi Kakoh Co., Ltd.

13Smile-Up Corporation■TDY Collaboration Show RoomYou can see products from three companies inthe same place: Daiken’s floorings, interiorbuilding materials such as doors, TOTO’s
kitchens and bathrooms, and YKK AP’s
windows and exteriors.

14Pac System Co., Ltd.

❷❽ Toyama Juki Co., Ltd.

TDY Kanazawa
Takahagi Plant❺

Inami Plant❽

Tokyo office

TDY OsakaComprehensive Researchand Development Center
Okayama Plant❻❶

TDY Fukuoka❹

TDY Tokyo❼
TDY Hiroshima
TDY Takamatsu

TDY Nagoya❻❾

Overseas

Mie Plant
Operational Headquarters
Osaka office❺❸

Singapore branch❹❸
Subsidiaries part of the Group

Indonesia office❼❶ Daiken New Zealand Limited (Rangiora City, New Zealand)❷ Daiken Southland Limited (Mataura Gore City, New Zealand)❸ Daiken Sarawak Sdn Bhd. (Sarawak State, Malaysia)❹ Daiken Miri Sdn Bhd. (Sarawak State, Malaysia)❺ Daiken Industries (Ningbo) Corporation (Zhejiang Province, China)❻ Daiken (Shanghai) Corporation (Shanghai City, China)❼ PT. Daiken Dharma Indonesia (Jawa Timur Province, Indonesia): Industrial materials business

53

DAIKEN GROUP REPORT 2018

: Building materials business: Engineering business❶❷Stock Information (as of March 31, 2018)■ Stock information■ Breakdown of shares by type of shareholder
79,643,600

Total number of shares issued

25,175,043

Number of shares per unit

100

（%）

100

Number of shareholders

3,909 shareholder

Shareholder registry administrator

Sumitomo Mitsui Trust Bank, Limited

80

0.57%

0.69%

0.70%

4.26%

4.26%

4.26%

6.54%

6.75%

7.48%

17.36%

15.55%

14.60%

33.03%

30.11%

Foundation of Value Creation

Total number of authorized shares■ Major shareholders
Name

Number of Shares Ownership ratio (%)

ITOCHU Corporation

7,198,100

29.86

Sumitomo Mitsui Banking Corporation

986,980

4.09

Sumitomo Life Insurance Company

931,200

3.86

757,200

3.14

Sumitomo Mitsui Trust Bank, Limited

688,000

2.85

The Master Trust Bank of Japan, Ltd. (Trust Account)

639,100

2.65

Sumitomo Forestry Co., Ltd.

638,200

2.65

Japan Trustee Services Bank Ltd. (Trust Account)

607,800

2.52

Marubeni Corporation

564,388

2.34

Nippon Life Insurance Company

545,669

2.26

31.41%

Securities companies
Treasury stock
Foreign institutions andothers40

Individuals and others
Financial institutions
Other Japanesecompanies

20

39.72%

39.86%

42.85%

0(Note) 1. Daiken Corporation is in possession of 1,072,400 treasury shares.
However, the Company is excluded from the above list of major shareholders.
2. The ownership ratio is calculated excluding the treasury stock.

2016

2017

2018

(End of the period)■ Trend of stock price/market capitalization/PER/PBR (for last 10 years)
Marketcapitalization(¥100 million)

605

250

150

ESG Information

496

300

386
327

200

Vision and Strategy of Value Creation

Daiken Corporation Trading-Partner
Shareholding Association

60

358

322

378

352

329

204

100

50
TOPIX

Stock price of Daiken Corporation*Figures of stock price of Daiken Corporation and TOPIX are indexed, based on the data of closing prices on March 31, 2008 =100.

0

2010

2011

2012

2013

2014

2015

2016

2017

2018

High (¥)

1,100

1,385

1,615

1,635

1,450

1,530

1,635

2,050

2,349

3,150

Low (¥)

620

745

885

1,045

830

1,135

1,180

1,130

1,918

1,950

Stock price at the endof the period (¥)

800

1,285

1,540

1,430

1,285

1,405

1,355

1,570

2,061

2,512

PER (multiple) 34.51

64.14

28.30

41.06

24.46

13.85

12.13

9.53

9.68

10.27

PBR (multiple) 0.65

0.99

1.16

1.07

0.90

0.95

0.81

0.93

1.07

1.12

(Fiscal year)

Data

2009

(Note) 1. Market capitalization = Stock price at the end of the period (Total number of shares issued – Number of treasury shares at the end of the period)
2. PER (price earnings ratio) = Stock price at the end of the period / Net income per share (multiple)
3. PBR (price book value ratio) = Stock price at the end of the period / Net assets per share (multiple)
4. The Company consolidated shares at a rate of one share per five as of October 1, 2016. The past fig-ures were also consolidated retrospectively for ease of comparison.

DAIKEN GROUP REPORT 201854

DAIKEN CORPORATIONHead Office
14F Nakanoshima Festival Tower West,3-2-4 Nakanoshima, Kita-ku, Osaka 530-8210
https://www.daiken-ad.com/en/

Issued in September 2018.