DAIKEN GROUP REPORT 2019

DAIKEN GROUPREPORT 2019

Toward the future going beyond the functions of yesterday

DAIKEN CORPORATIONHead Office
14F Nakanoshima Festival Tower West,3-2-4 Nakanoshima, Kita-ku, Osaka 530-8210
Issued in September 2019.

DAIKEN CORPORATION

Group Corporate Philosophy
Company mission[Our Mission]

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

Company vision[Our 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 and Strengths
Product Development Uses Strengths
Process of Creating Value
Value Creation by Businesses

The scope of report
DAIKEN CORPORATION and Daiken GroupESG Information
1
3
5
7
9

G: Governance
G: Directors and Audit and Supervisory Board Members
S: Social
E: Environment

33
39
41
45

Interview with Top Management
Positioning of the Long-Term Vision and
New Medium-Term Management Plan
Looking Back on previous Medium-Term Management
Plan GP25 1st Stage
Medium-Term Management Plan GP25 2nd Stage
Special Interview on SDGs
1

DAIKEN GROUP REPORT 2019

13
17
19
21
29

Summary of BusinessHighlight of Data
Ten-Year Financial Summary
Financial Statements
Stock Information
Company Information

Eligible period
FY2019(April 1, 2018 to March 31, 2019)*Some contents include information other than
the above period.

Data
Vision and Strategy of Value Creation*Environment data differs in scope.

49
51
53
55
58
59

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

Message to stakeholders
In fiscal 2019, we completed the final fiscal year of the three-year
medium-term management plan GP25 1st Stage, which was the firststep in the realization of the long-term vision GP25, which envisions ourgoal for 2025. In addition to the new home market, which has been our
primary field, we achieved the enhancement of new product proposals,
executed proactive M&A, and strengthened R&D as the foundation for
expansion into the non-housing, global, and other new markets. In themeantime, requirements have been identified for continuously meetingthe expectations of clients and achieving customer satisfaction.
In fiscal 2020, the GP25 2nd Stage was started as the new medium-term
management plan that envisions our next growth strategies. In a rapidlychanging business environment, we will leverage our strengths inindustrial materials and technologies to further enhance achievementsfrom the 1st Stage and strengthen our foundation by responding torequirements as opportunities for reform through the pursuit of aresolution to the social issues that have always been our goal since ourestablishment. In this manner, we will continuously endeavor to improve
corporate value so that we remain the choice of customers and supportedby the stakeholders at all times. We sincerely ask for your continuous
support.
Representative director,
President

Editorial Policy
This report focuses on the resolution of social issues throughbusiness, which we regard as the key to achieving our targets, andprovides an overview of the creation of value by our company. In
addition, the report outlines the growth strategies described in the
new medium-term management plan that started in fiscal 2020, as
well as the initiatives for the enhancement of the managementfoundation focused on ESG. We had a special interview inviting
external experts at the time of opening the R&D center. This
interview shares the philosophy of the management executives,
along with how SDGs will be proactively incorporated into R&D
activities and how new value creation will be pursued for the future.
We hope that this report helps stockholders, investors, and otherdiverse stakeholders deepen their understanding of our
medium-term and long-term initiatives for the enhancement ofcorporate value and that the report provides a new opportunity for
dialog. Please visit our website for details of the ESG information
including environmental data.

About cover design

DAIKEN GROUPREPORT 2019

Toward the future going beyond the functions of yesterday

DAIKEN CORPORATIONThe circles in three colors represent ourbusiness model, which consists of the threecore businesses (industrial materials, building
materials, and engineering), supported bytechnology, creativity, and passion as the threeelements of the mission of our group and ourphilosophy as the source of continuous
strength. The three arrows represent thethree-step medium-term management plan for
the realization of our long-term vision. To
become an all-embracing company for building
materials, as our corporate image in thelong-term vision, and Toward the future going
beyond the functions of yesterday, allemployees in the group share the same goals
to accelerate growth strategies as symbolized
by this design.

DAIKEN GROUP REPORT 20192

Foundation of Value Creation

Historical Development of Value
Creation and Strengths 1965

1970
WPC
Developed a technology
to harden wood veneers
by injecting resin into
the grains of the wood
called WPC

Launched a plywood flooring
applied to a decorative veneer
soaked into resin plywood

Ever since foundation, The Daiken Group has beendeveloping a wide variety of products to help

Flooring

customerʼs daily life though our technological

1970

1971

Launched thefirst WPC productinnovations which always meet social issues andIntegrated storage
furnitureneeds. The Group effectively uses all thestrengths acquired in our history and aims to

Cabinetgrow into a housing material manufacturer
that becomes an all-embracing company forbuilding materials and thus creates new

1973

1949
1955

Promoted
making doors
fancy andcreated theindustry standardof modern design

Launched plywood for home
appliance-related cabinets

1946

1982
Launched our first soundproof
products

Housingequipment

Special plywood
Developed special
plywood for vehicles towhich durability and water
resistance were given by thetechnological developmentof adhesives

1983
Launched an integrated
kitchen1990

Cladding

Launched wood fiber
cement siding
Launched a roofing material

1973
Launched an inner part of atatami mat

Tatamimats

1996
Tatami facing

1958

1974

Launched our first insulation board
product

Launched a heatinsulation sheathing

Insulation
board

Startedmanufacturing
Tatami facingthat usedmachine-madeWashi paper
and that was
excellent inmaintenance1960
Launched a ceiling material
for general houses

1958

1977

Insulation board
Startedmanufacturing
Insulation boards,
wood fiberboards
utilizing lumber
sewing waste
and constructionwaste

Dai-Lotone

1944
1945

3

1954

Established Nagoya plant for manufacturing
special plywood

1958

Built Okayama plant andstarted manufacturing
Insulation board

Founded Daiken Mokuzai Kogyo Co., Ltd., at the Inami plant inToyama acquiring all the business of the Forestry Department
at Daiken Co., Ltd.

DAIKEN GROUP REPORT 2019

Started manufacturing DaiLite, a mineral fiberboard
using an unused resource
Shirasu (volcanic ash) androck wool

Dai-Lotone

Sanko Kabushiki Kaisha, Ltd., Kureha Cotton
Spinning Co., Ltd., and Daido Boeki Kaisha, Ltd.
merged to form Daiken Co., Ltd.

Foundation

Dai-Lite

1964

1969
Interior
projects

Established interior
projects department

1984
An interior projects company
Established DAIKEN ENGINEERINGCORPORATION

History of DAIKEN CORPORATION
C. Itoh & CO., Marubeni Shoten, Ltd.,and Kishimoto Shoten, Ltd. havemerged to form Sanko Kabushiki
Kaisha1997

Launched the Dai-Lotone that
improved workability by adding
tongue and groove to the edges

Startedmanufacturing
Dai-Lotone, noncombustible ceilingmaterials using rockwool, which is a
byproduct of steel
production

1941

Improved theconsistent service
structure forsoundproofing forhousesSound
products

Door

Plywood

1945
Foundation

Sound products

Doorvalue.

Launched
plywoodfor vehicles
and marine
vessels

1982

Launched the first housing
equipment Cabinet set anddeveloped from a single
product toan integrated
product

Expansion

1967

Changed the company nameto DAIKEN CORPORATION

1970

●

Started manufacturing WPC flooringat the Nagoya plant●

Established Toyama plant for
manufacturing special plywood

1977

Expanded insulation board business
Built Takahagi plant

1987

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

1989

●

Started manufacturing housing
products, such as doors and stairs,
at the Inami plant●

Started manufacturing of cladding
at the Takahagi plant

Growing2015
Trinity

2010

2008

Launched an integrated
electric floor heating

Launched a flooringfor pets

hapia
Launched the hapia
series that pursue
texture

1997

2016

Rolled out industriallymass-produced doors

2014

1987
Launched a soundproof flooring

2007
Discontinued
manufacturing of
plywood1987

2016
Launched decorative acoustic
panels for offices

Vision and Strategy of Value Creation

A wide sliding door
that can be easily
accessed by awheelchair.

Launched door for kindergartensand childcare facilities

Engineering business2017

Launched door that
Launched door forconsidered the lives of the commercial stores
elderly

Industrial materials business

2013

2013

Launched Living door that responded
to the total coordination demand

Building materials business

1989

Started selling a high-function
flooring that corresponded to theheavyweight floor impact soundLaunched a storage furniture that could bearranged based on freewheeling thinking

Attractive cabinet
pursuing design

Capabilities to perform
installation work by making use of
the functions of building materials

2015

MiSEL

Capabilities to develop uniqueindustrial materials

Launched a composite
base material with MDF

Capability to develop building materials withhigh added value and capability to propose
total plans for interior spaces

2008

1996

1986

Launched domestic
softwood plywoodbase material

Launched a washing stand
2002
Withdrew from Bath and Kitchen business

1989
Launched a modular bathroom

2004
Transferred the exterior material business

2001
Started rolling out a product in which tatami
board laminated with tatami facing

Tatamifacing2014

2017

Launched interiortatami mats

Launched tatami
mats having fire
retardant function

2000

Foundation of Value Creation

1987

Daikenʼsstrengths

Threedimensional
high design
flooring

Launched laying tatami mats

Woody
fibers

2004

1996

2009

2015

Launched CUSTOMWOOD,
softwood MDF (Radiator Pine)

MDF

2015

1996

2005

2007

Launched TEKWOOD,
hardwood MDF

Launched TEKWOOD XM
type, special MDF for flooringbase materials

Launched humidity
conditioning wall materials

Launched Dai-Lite decorative
board

2004

2018
Launched ceiling materials
for medical and welfare
facilities

GRAVIO
Launched the GRAVIO
series, decorative wallmaterials that were DaiLite base materials

2018

GRAVIO EDGE

Launched an anti-seismic
modification kit

A non-combustible wall material
with a deep carved design that
produces a high-quality spaceand offers excellent workability

Launched a bearing base material of which
the plane supports the house walls

2000

1999

Established DAIKEN SARAWAK SDN.
BHD. in Malaysia for MDF manufacture

Integrated the interior projects
department into DAIKENENGINEERING CORPORATION

2002

Built interior doors production line
at the Inami plant

1996

Implemented Tatami facing and Dai-Lite
production lines at the Okayama plant

2010
Purchased an interior
projects company,
Sankei Corporation●

Alliance with TOTO Ltd. and YKK AP Inc. forremodeling business●

Established DAIKEN Industries (Ningbo) Corporation

2005

2016
Purchased an apartment renovationcompany, PAC SYSTEM Co., Ltd.

2010
2012

Purchased MDF manufacturer in Malaysia andestablished DAIKEN MIRI SDN. BHD.

2009

Alliance with Panasonic Corporationin
production and procurement

Business and capital alliance with
HOKUSHINCo., Ltd., for MDF production
and supply

2015

●

Purchased MDF manufacturer in New Zealandand established DAIKEN SOUTHLAND
LIMITED●

Established Daiken R&D center●

Capital and business alliance with ITOCHU
Corporation

Established interior doors manufacturing company
PT. DAIKEN DHARMA INDONESIA in Indonesia●

Purchased MDF plant in New Zealand andestablished DAIKEN NEW ZEALAND LIMITED●

Integrated flooring business of the Nagoya plant in the Mie plant

Selection and Concentration

2018

Data

Purchased aninterior projects
company, Koukou
Sangyo Corporation

1995

Started proposing an anti-seismic
ceiling construction technique

2016

2006

1997

Launched TEKWOOD-A,
MDF made from plantationacacia tree

ESG Information

Started manufacturing
MDF that utilized residual
wood offcuts as the mainmaterial

1994

Launch soil
conditioner DW
fiber

Launched formaldehyde
absorbing protection board
for housing construction sites

MDF

Dai-Lite2017

New Challenge Challenge to achieve the long-term vision GP25
DAIKEN GROUP REPORT 20194

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 andcommercial facilities.

Industrial Materials Business

Daikenʼs strengths

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 in our daily lives bymaking full use of wood and mineral resources from a sustainable perspective.

Effective use of wood materials

Capabilities todevelop uniqueindustrial
materials

Effective use of mineral materials

MDF

Tatami facing

Dai-Lotone

Dai-Lite

Wooden fiberboard using
none-used wooden waste
for main raw material andmolded into a board

Wooden fiberboard
using cut-off materials
from saw mills andmolded into a board

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 unused resource,
Shirasu (volcanic ash),and rock wool

Machine-made JapaneseWashi paper (strings)

Rock wool

Rock wool and Shirasu

Overview

Insulation board

Wood chips

Wood chips

Features andFunctions

Dimensional stability
Surface smoothness■ Workability■ Water resistance

■

■

■

■

■

■

■

■

■

■

Heat insulation
Moisture conditioning■ Cushioning properties■ Lightweight

Inner part of a tatami mat

Materials for flooring

Major applications

Insulation board

Water resistance
Water repellent■ Moisture conditioning■ Color variations

Tatami mats

For houses

Ceiling materials

For houses

MDF

Protection board

Base materials forbuilding and furniture

Wall base materials

Base material for houseexternal walls

Wall materials

For accommodation

DAIKEN GROUP REPORT 2019Non-combustibility
Lightweight■ High strength■ Workability■ Moisture permeability■ Insect repellent■ Antiseptic(Substrate of door, storage,
and window
frame)

MDF

5

Non-combustibility
Lightweight■ Sound absorbing■ Workability

For officeNon-combustible wallmaterials

Building Materials Business

Daikenʼs strengths

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.

住宅向け
For houses

公共・商業施設向け
For public spaces and commercial facilities

Door
CabinetA flooring for heavy duty areas

A lineup that is particular
about surface texture, damage
resistance, long-lasting beauty,
design, high function, highperformance, etc.

A complete line of flooring thatcan be used in heavy duty areas,
including those made of natural wood
resistant to damage, sound-proofing
materials, and those that reduce theimpact when a person falls

Great range of design andvariations

Functional door suitable forfacility applications

Interior door which is highly
functional and easy to use, andcan be coordinated 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 andother features to fit for individual
spacesVision and Strategy of Value Creation

Flooring

A flooring of ultimate beauty

Cabinets mitigate the various risks
to users for comfortable use

Creating comfortable soundenvironment

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

ESG Information

Sound productsSpace for enjoying sound

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

Daikenʼs strengths

Our project

Nippon Seinenkan, Japan Sport Council Head Office

Data

Capabilities to perform
installation work by
Total support for creation of spaces from supply of building materials throughmaking use of theinstallation work
functions of building
materials
The Daiken Groupʼs 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.

Kansai University

Foundation of Value Creation

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

Capability to develop
building materials withhigh added value andcapability to propose
total plans forinterior spaces

Recital Hall at Nagano City Arts Center

DAIKEN GROUP REPORT 20196

Foundation of Value Creation

Process of Creating Value
The Daiken Group aims for the realization of a sustainable society and the creation of
economic and social value by contributing to solving social issues, such as Sustainable
Development Goals (SDGs) through business activities that make use of our uniquestrengths. The Group also united CSR activities based on Environment, Social, andGovernance (ESG) to make our businesses robust.

Growth strategy and enhancementof the management foundation
Business and market strategies

Industrial materials
business

Global market
Public andcommercial buildings

Building materials
business

Industrial materials

Creation of economic
Creating shared value (CSV) by• Promoting the use ofdomestic timber• Recycling of wood
resources• Reduction of CO2 emissions• Creating a safe, secure,
healthy, and comfortable
space• Effective utilization ofunused resources• Promotion of anti-seismic
performance• Saving construction
time and work

R&D andInnovation
P.25

Home renovation market

Social issues and needs

Engineeringbusiness

SDGs*

Domestic newhome market

Strengthen the foundation
Optimized financial
foundation

Financial affairs

Business
infrastructureManagement foundation

ESG (CSR) activities• Realization of low-carbon
society• Building a
recycling-oriented society• Measures for water
resources• Measures for biodiversity• Conservation of tropicaltimber• Decrease in labor force• Promotion of diversity• Promotion of workstylereform• Development of local
communities• Revitalization of thedomestic forest products
industry• Preparation for natural
disasters• Improvement of the safe,
secure, healthy, andcomfortable living
environment• Response to thesuper-aging society

7

DAIKEN GROUP REPORT 2019

E

P.45

Environment

S

P.41

SocialG

Medium-Term
ESG Plan
P.27

P.33

GovernanceGroup Conduct Guidelines

Introduce management resources

2
P
G

2
5

Management goals
Financial indicators• Net sales

225 billion yen• Operating profit

12 billion yen

Daiken businesses• Operating profit ratio

5.3%• Profit attributable toowners of parent

7 billion yen

• ROE

10%

• ROA

7%

• Shareholder equity ratio

40%

Achieve thevision of the Group
Corporate Philosophy• Dividend payout ratio 30% or moreFoundation of Value Creationand social value

Nonfinancial indicators(compared to fiscal 2014)●

Total diversity index*●

Serious quality accidents
and violations

+20pt
０

*Our own indices in which the eight diversity items,
such as the female manager ratio, were indexed
as compared to fiscal 2019●of value creation

Degree of penetration of the +10pt
Group Corporate Philosophy**Our own indices in which employees’ understanding,sharing, and practice of the group corporate philosophy
were indexed as compared to fiscal 2018

Firm andflexible business
infrastructure* SDGse

1 No poverty

es
Inv

tm

t to
en

b

uild

a
t
S

rth

th

ou
ef

n

ti
da

on

fu
for

on

ati

al
rv

u

re
ec

ESG Informationegenhanced by ESGdnAchieve the Long-Term
Vision GP25

Vision and Strategy of Value Creation

Total CO2 emissions in Japan (26%)●

2 Zero hunger
3 Good health and well-being
4 Quality education
5 Gender equality
6 Clean water and sanitation
7 Affordable and clean energy
9 Industry, innovation and infrastructureData

8 Decent work and economic growth
10 Reduced inequalities
11 Sustainable cities and communities
12 Responsible consumption and production
13 Climate action
14 Life below water
15 Life on land
16 Peace, justice and strong institutions
17 Partnerships for achieving the goals

DAIKEN GROUP REPORT 20198

Foundation of Value Creation

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

01

Promotion of the use of domestic timberSocial issues and needs
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 1

Promotion of the use of domestic timber with special MDF that offers excellent water resistance
The Daiken Group took advantage of the expertise cultivated as the leading
flooring manufacturer and Daiken's unique MDF technology that offers
excellent water resistance and surface smoothness and developed flooringbase materials combined with domestic wood. The group had made many
improvements and increased the use of domestic timber for flooringmaterials, which was approx. 4% in fiscal 2015, to approx. 33% in fiscal
2019. The group will continuously proceed with product development thatwill draw out the appeal of domestic timber and further promote the use ofdomestic timbers.

Cross-section image of flooringmaterial made fromdomestic timber

Utilization of domestic timber for flooring materials

4

Fiscal 2015

Approx.

33

Fiscal 2019%

Approx.

Daiken’s special MDF
Domestic timber plywood%

Daiken’s strengths and value creation 2

Expanding the scenes to utilize domestic timbers with the wood hardening technology
With Daiken’s unique WPC* technology to harden wooden tissues by injecting plastic
resin into and filling the tissues, it has become possible to offer flooring with excellent
surface strength that uses domestic natural wood for surface decorative materials.
Because many domestic tree species are soft materials, low durability in using themas flooring was an issue, but by taking advantage of this technology, we will expand
the use of domestic timber while meeting the needs of using local materials.
*WPC = An abbreviation of Wood Plastics Combination

22

Results of the commercialization of local
materials with the WPC technology

Mechanism of the WPC technology

Inject plastic resin into surface woodfor flooring and harden it

9

DAIKEN GROUP REPORT 2019

By filling plastic resin, it demonstrates strength
against dents and scratches

Case of adopting WPC flooring

prefectures

Recycling of wood
resources

03

Reduction of CO2
emissionsSocial issues and needs
Considering the adoption of two closely linked SDGs and the Paris Climate Agreement, the crucial challenge for the world is tocreate a recycling-oriented society that effectively uses limited resources and promote measures against the climate change
associated with global warming.

Prolongation of the carbon fixation period by using wood resources for materials
The Daiken Group has been manufacturing materials that effectively use wood resources, such as MDF using cutoff materials from sawmills
and insulation boards reusing construction waste that used to be discarded or used as fuel. Trees have a function to absorb CO2 in theatmosphere in the growth process and keep storing it by fixing it ascarbon. Using wood as materials as long as possible instead of

The amount of carbon fixation by MDF and insulation board

burning will not only reduce waste but also keep storing carbon in

Fiscal 2019

wood, and as a result, it will lead to reducing CO2 emissions to theatmosphere. Our group focuses on this function, continues to usewood resources in a wide variety of scenes as materials with zerowaste, and contributes to the formation of a recycling-oriented

Approx.

998,000

Vision and Strategy of Value Creation

Daiken’s strengths and value creation

Foundation of Value Creation

02

t-CO2/year

society and the prevention of global warming.

* Reference: fiscal 2019
CO2 emissions from domestic production bases: 96,600t-CO2/year

Fiscal 2019
Approx.

859,000
t-CO2/year

ESG Information

The amount of carbon fixation
by MDF

Wood chips
Residual wood
offcuts

Use of wood
resources
ForestFelled trees

as materials
Construction waste

Insulation board

MDF

Data

Nursery tree

LumberBuilding
materials

Demolition

The amount of carbon fixation
by Insulation board

139,000

Fiscal 2019
House

Approx.

t-CO2/year

DAIKEN GROUP REPORT 201910

大建工業とは？
Foundationof Value Creation

04

Creating a safe, secure, healthy, and comfortable space

Social issues and needs
Japanese 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 1

30,000

Product variations

Creating a safe space to live together with the elderly
Daiken is committed to manufacturing from the perspective of all users,
including elderly people, their families, and caregivers. We developed moreproducts based on our ideas and technologies proven through our work andApprox.

in accordance with universal designs. We have comprehensive product lines

items

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.

Case of adopting products for residential homes thatare considerate of nursing needs and home care

Ceiling material that makes it
easy to hear sound and has
deodorization function

Humidity conditioning wallmaterial that maintains
comfortable humidity

Building material withantivirus function

Social issues and needs
With the increase in the female employment rate in recent years, entrance applications to childcare facilities have increased,
and the number of children on the waiting list in fiscal 2019 was 47,198 (as of October 1, 2018), which was still at a high level.
While the cases of leaving children aged 0 to 3 in childcare facilities have been increasing more than ever, a design that ismore considerate of safety and the environmental aspect is required for these facilities. Lack of human resources engaged inchildcare is also one of the major causes of the problem of children on the waiting list, and it is imperative to reduce nurseryteachers’ burden and create a pleasant working environment.

Daiken’s strengths and value creation 2

Creating spaces where children can spend the time safely
We thoroughly examined the performance required for the area around a door in a childcare facility where

The door dedicated tokindergartens and childcare

the risk of injury is particularly high and developed the door dedicated to kindergartens and childcare

facilities won the Kids’ Design

facilities, while taking advantage of the expertise in door manufacturing cultivated from past houses andAward* (Fiscal 2018)

elderly facilities. We will support a wide variety of problem solutions required for childcare facilities, suchas safety, comfort, and a reduction in the burden of nursery teachers, using Daiken’s unique technologies
and diverse products.

Doors that consider safety byassuming that children use them

11

DAIKEN GROUP REPORT 2019

Tatami mats made frommachine-made Washi paper thatare stain-resistant and highly
water-resistant, durable, andresistant to fungus

Meshed cushion on theback of flooring
disperses the impact andreduces the risk ofgetting injured

Decorative flooring
dedicated to washroom thatis not slippery when getting
wet* Design category that will contributeto the safety and security of children

05

06

Promotion of antiseismic performance

Social issues and needs
Japan 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 seismic resistanceratios and promotes the upgrading of houses and buildings.

Daiken’s strengths and value creation

Number of households installing
Dai-Lite (cumulative)

Approx.

880,000

Daiken developed Dai-Lite, the world's first new industrial material using an unused resource, Shirasu(volcanic ash) as the major raw material. It has all of the performance required for an inorganic bearing*Reference: Number of wooden
surface, such as lightweight, high strength, high durability, fireproof, and workability, that could not be
independent house starts
realized with conventional inorganic materials. Daiken has contributed to a recycling-oriented society byApprox. 390,000 (fiscal 2019)
finding value in a resource that was untapped and by expanding applications as the product and bybecoming popular as the leading
brand for an inorganic bearing
surface for houses, and it hascontributed to improving aseismic
performance of Japanese wooden
houses. By promoting the lineup of
the anti-seismic products forexisting houses, it promotes further
Dai-Lite
Anti-seismic wall
Shirasu, an unused resource available in natural world
upgrading of the anti-seismic
performance of wooden housing.

Saving construction time and work

Social issues and needs
Because of the special demand for the restoration projects and Tokyo Olympics and Paralympics, in addition to decreasing
productive-age population ratio associated with the low birthrate and longevity, a shortage of workers has become an
aggravated problem in the construction industry. While the Building Standards Act revised after the Great East Japan
Earthquake requires higher aseismic performance of the ceilings of large public buildings, there was an issue that it requires
much time and labor in making existing ceilings anti-seismic.

Daiken’s strengths and value creation

Contributing to the anti-seismic ceiling by developing
the labor-saving construction techniqueApprox.

25

Flooring for renovation thatcan be easily constructed ina short construction period

%

Data

To respond to the growing needs of making the ceiling anti-seismic after the Great
East Japan Earthquake, Daiken developed a unique new construction technique,which makes it possible to make the ceiling anti-seismic with the saving construction
time and work. With this construction
technique, we could reduce construction timeand labor by approx. 25% compared to making
the conventional ceiling anti-seismic. We will
aim to further realize the saving construction
time and work for not only ceilings but also
Our own anti-seismic ceilingbuilding materials for renovation from the construction techniqueperspective of a new construction technique.

Rate of reduction of construction timeand labor compared to making
the conventional ceiling
anti-seismic:

ESG Information

07

Vision and Strategy of Value Creation

Promotion of anti-seismic performance of wooden houses
using non-combustible materials that offer excellent durability

Foundation of Value Creation

Effective use of unused
resources

MiSEL
Wall cabinet corresponding tothe on-board construction
technique that can omit substrate
work and shorten the construction
periodDAIKEN GROUP REPORT 201912

Vision and Strategy of Value Creation

Interview with Top Management
Toward becoming an
all-embracing company forbuilding materials

Acceleration of the growth strategy toachieve the long-term vision GP25
Representative director,
President

our short comings in material procurement, order placement andAt the completion of the previous medium-term
management plan

receiving systems, which caused considerable problems for

Q Could you summarize the achievements and require-

operating profit of 7 billion yen, ordinary profit of 7 billion yen, andments of the previous medium-term management plan

ROE of 8% primarily due to the issues above. We must sincerely

GP25 1st Stage?

face these issues and take the initiative to convert these problems

customers. We failed to achieve some of the managerial targets of

into strengths. Therefore, we strengthened the organizational
The previous medium-term management plan GP25 1st Stage

structure by establishing the IT and Logistics Division across all

was designed for the first three years when we set out to realize thedepartments in February 2019. In addition to implementing

long-term vision GP25 for ten years into the future, on the 70th

short-term corrective and improvement actions as basic measures,

anniversary of the Company. While some quantitative targets

we will fundamentally review our systems from the medium-term

remain unachieved, we achieved a profitable structure by improv-

and long-term viewpoints, thereby optimizing our supply systems

ing the average return on investment (ROE) to 10% level and an

ranging from order placement and receiving systems to logistics.

operating profit ratio of 4% level over the three years of the plan. As
a result, we achieved the highest ever operating profit, ordinary
profit, and net profit in the first year. Over the course of the last year,

Initiatives in the three priority markets

we attained the managerial targets for sales and net profit, which

Q How do you feel achievements in the three priority

we consider impressive achievements. I believe that “taking the firstmarkets for reform into business management that will

step to become an all-embracing company for building materials”

be less dependent on new housing construction starts

as our corporate image and long-term vision has been established.

in Japan?

This has been achieved through M&A that raised the presence of
MDF as the core of our industrial materials business, aggressive■Public and commercial buildings

investments that led to the development of new applications,

We focused on public and commercial buildings as a priority

enhanced product lines for public and commercial buildings, themarket because the new home market in Japan as our convention-

opening of an R&D center, and other initiatives.

al mainstay is expected to shrink. We failed to achieve the final

On the other hand, our greatest problem over the past year was

13

DAIKEN GROUP REPORT 2019

targets, but our sales steadily increased over the past three years.

tion companies and other reasons. Therefore, we also started thecondominium refurbishment business in the metropolitan district inbelieve that real achievements were made. In the metropolitan

October 2016 as an initiative to expand construction projects indistrict, we opened a technical space targeted at customers who

addition to the sale of products. With the expansion of thewere professional users, which established a flow on effect to theengineering business, we are also promoting the development ofhome renovation market. We also proactively marketed new

products with a short construction period and small construction

products, such as doors for the elderly, kindergartens, and nurser-

projects linked to the functionalities provided by manufacturers.
These initiatives are gradually taking effect. We have also madematerials using the proprietary non-combustible material Dai-Litesteady achievements in other areas including the opening of R&D

as flagship products. These new products completed our portfolio

center for strengthening and accelerating R&D activities, which isof functional building materials that could be used in multiple

essential for the medium-term and long-term growth strategies,

situation for use in various facilities. This achievement will lead to

reducing CO2 emissions by proactively utilizing wood biomass

future expansion.

boilers from the ESG viewpoint, and promoting diversity measuresthat include workstyle reforms and enhanced opportunities for■Global market

female employees.

If we only look at the figures, we have certainly made progress inRegarding finance, we succeeded in increasing our financial

global market as was planned in the 1st Stage. However, oursoundness by generating additional cash from profits for new

progress is steady in some aspects but has problems in others.

investment over and above our M&A requirement and purchase of

The steady aspects include the industrial materials business where

new equipment. I think it is worth stating that we are currently

we focused on MDF for which we newly acquired a new plant inenjoying the strongest financial structure experienced over the past

New Zealand. The new structure now consists of four plants̶two

10 years or so.

in Malaysia and two in New Zealand, which will increase production
by 30% and expand sales channels overseas. Sales to Japan alsoCo., Ltd. establishing Daiken as the dominant MDF supplier in

Positioning of the new medium-term management plan

Japan.

Q What do you want to achieve over the three years ofincreased, and our market share in Japan including HOKUSHIN

Conversely expansion was delayed in Indonesia and China.

Vision and Strategy of Value Creationies; floor materials using local materials; and well-designed wall

Foundation of Value Creation

Taking into account shifts in the sales force were delayed
because of relatively steady sales of the new home market, I

the new medium-term management plan GP25 2ndStage?

systems have been established in plants, and we have steadily

Please share how you position the plan and its key

advanced toward production increases. In the coming years, wepoints.

will establish a structure to achieve increased sales and profitability
through collaboration with local companies. In China, continued

In the first year of the GP25 2nd Stage, the consumption tax will be

improvement would be implemented according to how theraised in October 2019, which will undoubtingly lead to a significant

Chinese market develops. We will continue to provide products to

reduction in new housing starts. To change this high risk into an

Japanese companies and promote increased sales throughopportunity, we wish to position the 2nd Stage as a three-year

agents. We will use ITOCHU Corporation network with which weperiod of acceleration of growth strategies and will pursue targeted

established a capital and business alliance in September 2018 tosales of 225 billion yen and operating profit of 12 billion yen. The

address the above problems and expand into global markets.

targeted profit and sales are the highest since foundation. Our final

ESG Information

While profitability has yet to be realized in Indonesia, manufacturing

target of 250 billion yen in the long-term vision, we will substantially■Home renovation market

upgrade our stage.
To this end, we will make aggressive investments to expand theshortfall in new home sales, but these two markets are actuallybusiness scale and strengthen profitability by leveraging cash

correlated as the data suggests. From this viewpoint, we

generated 1st Stage.

implemented measures in a slightly different aspect for the renovation market.
One of the measures was to shift focus from building new todecorating styles and renovation of living in showrooms that we

In the meantime, we have undertaken business activities that

Data

The home renovation market has been considered to replace theemphasize CSR and ESG. We will further pursue the resolution ofsocial issues through business in the 2nd Stage through enhanced
corporate values.

jointly operate at eight sites in Japan with TOTO Ltd. and YKK AP

In this sense, we will clarify the relationship between our

Inc. This shift from things to styles has taken root as a new form ofbusinesses and SDGs as global standards for social issues, withproposal making. It cannot be denied that growth has been slow if

each employee undertaking activities emphasizing that relation-

we only look at the sales of products because the number of direct

ship.

customers is decreasing from the lack of successors to construc-

DAIKEN GROUP REPORT 201914

Vision and Strategy of Value Creation■Domestic market

Accelerating growth strategies

Even though the new house market is shrinking, we will increase

Q What growth strategies do you have for the global

revenue in the domestic market by increasing sales of competitivemarket and for the domestic market?

products including floor materials where we have a dominant share.
This expansion will be into public and commercial buildings and the■Global market

home renovation market. Among other domestic markets, public

The core of growth strategies in the global market will be expansion

and commercial buildings will be a priority. Based on the productof the industrial materials business in global market, in particular

portfolio developed in the 1st Stage, we will categorize facilities into

North America. We recently invested in the LVL and veneer

four groups: elderly and healthcare facilities, where steady demandbusinesses in North America. ITOCHU Corporation originallyis expected due to the aging population; public, educational, andlaunched these businesses, established their local positions, andkindergarten/nursery facilities that need to be renovated at certain

produced solid achievements. I believe that when our company

intervals; accommodations and commercial facilities that will be in

joins these businesses, enhanced efficiency can be gained as ahigh demand by inbound tourists; and buildings and offices that are

manufacturer, and opportunities can be found to expand throughcontinuously developed in urban areas. We will pursue expansion

innovative ideas, such as the development of new products. The

by proposing functional building materials for floors, walls, ceilings,

U.S. housing market is the largest in the world and supplies

and doors for each group and category.

approximately 1.2 million homes annually according to recent data.

In addition, through the full-scale expansion of the joint venture

Taking into account the floor area per home and substantial market

with TO Holdings Corporation, we will broaden the range of

growth, this provides scaling of two to three times current market

proposals by including solid floor materials that have not tradition-

share. In addition, the population is expected to increase byally been part of our market range. This will enhance businessapproximately two million per year, which is rare among developed

opportunities, due to the on-going requirement because of thecountries. Demand for LVL is mostly linked to the number of

persistent need for solid floor materials, particularly by educational

housing construction starts in the United States which in turn isfacilities. In these initiatives for expansion, we will proactively utilize

influenced by long-term interest rates and housing starts. While

external resources, including M&A and collaboration with otheruncertainties remain in the short-term, stable demand can becompanies, without relying on internal resources alone.

expected over the medium and long-term. It is also a characteristicthat most houses are constructed of wood and therefore have ahigh correlation to the industrial materials and building materials

Enhancement of the management foundation

businesses that we operate in Japan. Our business model incorpo-

Q The policy states the enhancement of the management

rates technology and added value industrial materials. Daiken willfoundation from the three perspectives of businessexpand in the North America market by deploying this business

infrastructure, financial, and ESG.

model.

Please share your ideas from each perspective.

We will focus on industrial materials and expect to expand into
the building materials business. We continue to pursue opportuni-■Restructure business infrastructureties for expansion in the MDF market in North America. By promot-

This is included in our policy as a requirement due to the issues we

ing these initiatives, we plan to increase the share of global market

encountered in material procurement, order placement and sales

sales from 11% to about 23%.

recovering over the past fiscal year. Through these problems, werecognized the importance of IT supply systems and logistics that
operate every day. Through this experience, we will review ourfoundation to be continuously chosen in the 2nd Stage.
The specific initiative is to establish systems that enhanceservice to customers. We have aimed at systems that are easy touse by customers, but they need to be upgraded to achieveenhanced convenience. Such upgraded systems will become
powerful tools in strengthening the relationship with customers. We
will identify all requirements and establish optimal systems that
range from IT and logistics functions to manufacturing in pursuit ofincreased competitiveness in the medium and long-term. In themeantime, we will reduce the workforce for routine internal operations by proactively using AI, IoT, and other advanced technologies
so that we can place human resources in new positions that
become necessary through the development of new businesses
and markets.

15

DAIKEN GROUP REPORT 2019

Interview with Top Management

term. In addition, the highest priority will be placed on enhanced

In the 1st Stage, we invested in large-scale M&A and new products,

opportunities for female employees in everyday operations, as was

as well as in the opening of an R&D center and other initiatives thatthe care in 1st Stage. In the 2nd Stage, targets will be set andwill lead to growth. While maintaining the dividend payout ratio of atbalanced from a multitude of perspectives. This will include harmo-

least 30% as a return to stockholders, we improved the capital

ny with long-term care requirements and security of employment

adequacy ratio and D/E ratio, thereby strengthening our financial

for veteran employees assessed on an impartial and bias freestructure.

manner.
Regarding governance, the dissemination of the group corpo-

stage and further enhance our cash position. Based on cashrate philosophy was selected, in addition to compliance and risk

generation through these initiatives, we will invest 5 billion yen per

management. Our company faces a historic turning point where

year on average for normal maintenance and renewal, and 40

the domestic new home market as our conventional market willbillion yen in strategic initiatives for the North American industrial

start shrinking. We must survive this severe market environment bymaterials business. Through these investments of 55 billion yen in

realizing our long-term vision and growth strategies as presented

total, we will pursue further growth and infrastructural establish-by the medium-term management plan. To this end, it is essential

ment. According to our plan and despite these investments, if wethat all employees in the group participate and exercise their skills.

improve profitability and asset efficiency as targeted, we will

The mission of the group corporate philosophy is that We will

maintain the dividend payout ratio of at least 30% large andcreate a wonderful future with our technology, ideas, and passion.

achieve a D/E ratio of about 0.5 times with a capital adequacy ratio

Create a wonderful future here signifies the realization of a sustain-of approximately 40%. Large investments will exhaust our operat-

able society and our contribution to SDGs as social issues.

ing cash flow. We will need to draw down on corporate bonds andDissemination of the group corporate philosophy to each employ-loans to cover the short fall.

ee will provide the basis for our contribution to the resolution ofsocial issues and for the success of our business. Unfortunately,■Practice of ESG management

this philosophy was not fully disseminated throughout our group in

We have proactively promoted ESG. Particularly in the environmen-

the 1st Stage. We will seek further dissemination in the 2nd Stage

tal space, I believe that business activities since our foundation,

until the philosophy takes root and employees understand not only

such as CO2 emissions reduction, timber recycling, and thethe literal phrase but also that it is at the core of Daiken groupcascading use of wood products, have contributed to the environ-corporate philosophy.

Vision and Strategy of Value Creation

In the 2nd Stage, we plan to improve profitability for the next

Foundation of Value Creation■Optimize our financial foundation

ment. In this regard, we will continue to promote these initiatives

target announced by the Japanese government based on the Paris

Toward the achievement of the new medium-term
management plan

Agreement, a reduction of 26% from fiscal 2014 by 2030, but in

Q Please share your mind about the new medium-term

As a specific initiative, we intend to achieve the CO2 reduction

fiscal 2022 the final year of the 2nd Stage, which is earlier thanmanagement plan GP25 2nd Stage.

ESG Information

rather than implementing any new measures, at this stage.

requested by the government, as our contribution to countermeasures for the most significant climate change risks. In addition toI regard the 2nd Stage as the most important stage for the realiza-

high public interest in water resources, chemical substances,tion of the long-term vision. First, we must definitely attain thewaste, and compliance with environmental laws, we have also

targets in the 2nd Stage by pushing forward the achievements

selected environmental contribution in fields that characterize ourmade in the 1st Stage. Our ultimate goal is the long-term visionbusinesses, such as carbon fixation through the wood industrial

GP25 be attained in fiscal 2026. Toward its realization, we must takematerials business, and the increased share of use of domestic

an additional leap in the 3rd Stage, which will start in fiscal 2023. In

timbers in materials for flooring manufacturing.

this sense, we need not only attain the targets of the 2nd Stage but

In social aspects, we would like to focus on product quality andalso steadily sow seeds for the next leap in the 3rd Stage.
One of the requirements to this end is to find the fourth pillar after

the social responsibilities of a manufacturer, the guaranteeing ofindustrial materials, building materials, and engineering. At present,

product quality is particularly important for customers. We will

our company mainly operates businesses in the new housing andstrengthen the structure by ensuring we continuously and promptly

renovation markets in Japan. In the global market we operate in the

respond to public and customer quality and safety concerns. For

public and commercial buildings, industrial materials and building

human resources, we selected diversity, workstyle reforms, humanmaterials market. I believe that now opportunities exist in aligned

resource development, and occupational safety and health as thebusiness. We will define and enhance our direction over the next

four aspects we will promote. Particularly in human resource

three years using our strength and experience achieved through 70

development, we will not only promote skill upgrading but also

years trading. Through these measures, we plan to achieve oursubstantially enhance training programs in particular for executive

long-term vision of the highest level of sales and profit sincemanagers who will be with the business over the medium to longfoundation.

DAIKEN GROUP REPORT 2019

Data

human resources, which are vital elements for a manufacturer. As

16

Vision and Strategy of Value Creation

Positioning of the Long-Term Vision and New
Medium-Term Management Plan
In 2015, the year of the 70th anniversary of DAIKEN CORPORATION, we establishedthe long-term vision GP25, describing our ideal situation in 10 years.
To further accelerate growth strategies toward the realization of the vision, we

GP25 3rd Stage

launched a new medium-term management plan GP25 2nd Stage in fiscal 2020.

Fiscal 2023-2026

All employees of the Group are working together to make progress toward steadily

Grow & Glow
Become an all-embracing
company for building materials

achieving the goals.

New Medium-Term
Management plan

GP25
2nd Stage

FY
2022

Fiscal 2020 to 2022
Accelerate growth strategies
to become an all-embracing
company for building
materials

FY
2020

Previous Medium-Term
Management Plan

GP25 1st Stage
Fiscal 2017-2019
The first step toward an
all-embracing company forbuilding materials
17

DAIKEN GROUP REPORT 2019

FY
2021

2025

Significance of Existence and Ambitions

GP25

Grow
transform into an enterprisethat meets the expectationsof customers and markets
better society.

Enrich peoplesʼ minds by creating more comfortable andsecure spaces

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

1

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

2

Continue to challenge new business areas and grow the
fourth pillar

3

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

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

5

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

Business domains, markets, and sectors targeting the long-term vision GP25
From the current image as a housing materials manufacturer to the following:● Supply building materials and industrial materials for building materials as well as
construction
Toward becoming an all● Expand business areas from housing to public and commercial buildings, andembracing company forindustrial materials
building materials● Expand into global market

Business domains

Industrial materials

New markets

ESG Information

New business

Public and commercial buildings

DomesticEngineering businessHousing market

GlobalBuilding materials business

Markets and sectors
Becoming asustainable society

Creating theenvironment thatenriches peopleʼs lives

Industrial materials business

Vision and Strategy of Value Creation

while contributing to a

2

How we should be in 2025

Grow／Glow Plan 25

The Group will work to

Contribute to the building of a sustainable society by
efficiently using limited resources

Foundation of Value Creation

Long-Term Vision

1

CSR Basic Policy
VisionContribute to the realization of a sustainable society by creating values shared with society throughactivities for ecology and improvements in the quality of spacecompetitiveness to realize GP25

PolicyData

1 With CSR and CSV* as the key axes, we will improve our corporate value and enhance our
2 Using CSR as an activity to enhance our ability to respond to and earn the trust of society, we will

systematically pursue CSR with our responses to the environment, society, and governance as key axes
3 Positioning CSV* as one of our management strategies, we encourage activities voluntarily andactively through the whole business process* Daikenʼs CSV is defined as finding solutions to social issues through the provision of common values capitalizing on Daikenʼs uniqueness.

1 Building a sustainable society

CSV Theme

2 Providing secure, safe, and comfortable spaces
3 Comprehensive use of wood building materials̶encouraging the use of cascading

DAIKEN GROUP REPORT 201918

Vision and Strategy of Value Creation

Previous Medium-Term Management Plan

Looking Back on GP25 1st StageIn fiscal 2019, we completed the final fiscal year of the medium-term management plan GP25 1st Stage, which was the first step
toward the realization of a long-term vision GP25. While steadily proceeding with the establishment of the foundation that we
aimed as the 1st Stage, there were still some issues remained in the business infrastructure. We will make use of the foundation
we established in the 1st Stage, lead the issues to innovative changes, and make progress toward the next stage of growth.

Summary of the previous medium-term management plan GP25 1st stage (fiscal 2017-2019)■

As for the management goals, we achieved the goals in terms of net sales and net profit.

■

As for operating profit, we increased profitability over the past three years and achieved the goal for two
consecutive years; however, issues had come to the surface in raw material procurement and the orderingand order receiving system, and we could not achieve the goal in the final fiscal year and issues remainedin the business infrastructure.

■

We actively made investments, such as M&A to enhance industrial materials business, expansion of the
product lineup by launching products on a large scale, establishment of the R&D center, and the addition of
the biomass boiler, and steadily executed measures to lead to the next stage of growth.

■

Regarding shareholder return, we followed the policy of the dividend payout ratio at 30% or more andimproved shareholder return.

Status of achievement of management goals(¥100 million)
Management goals

Benchmark

Goal

Fiscal 2016

Fiscal 2019

Net sales
Operating profit

ResultFiscal 2017

Fiscal 2018

Fiscal 2019

1,681

1,800

1,688

1,705

1,829

55

70

85

75

57

Ordinary profit

52

70

90

87

68

Profit attributable to owners of parent

39

43

51

58

44

ROE

9.8％

8％

11.7％

11.7％

7.8％

Dividend payout ratio

30.4％

30% or more

30.1％

30.3％

42.4％

Topics in GP25 1st stage

19

Launched GRAVIO EDGE,
a new flagship product toreinforce wall materials

Added the woody biomass boiler that
actively uses renewable energy

Established Daiken R&D center, whichis the place for co-creation toward therealization of the long-term vision

In June, 2018, to enhance our proposal
capabilities for interior spaces, welaunched GRAVIO EDGE, a deep carvedstyle non-combustible wall material using
our unique non-combustible material
Dai-Lite as part of wall materials business. This material will produce a highquality space as accent walls in livingrooms and bedrooms in houses, entrance
halls of public and commercial facilities.

In July 2016, we aimed to reduce environmental burden in the production process
and added a biomass boiler in the
Okayama plant, which was in the largest
scale in our company. By shifting from
LNG (natural gas) that had been used towoody biomass energy, which is renewable energy, greenhouse gas emissions(CO2) have been reduced.

In October 2018, we established the
Daiken R&D center on the premises of the
Okayama plant as the R&D base. For our
unique R&D and as the place forco-creation to create technologies withvarious external partners, we will
strengthen and accelerate R&D capabilities toward the realization of the longterm vision GP25.

DAIKEN GROUP REPORT 2019

Status of the efforts on the focused three markets (results and issues)
In preparation for the decrease in new housing starts in the future and to transform into the management structure that ismarket as the three priority markets and have made progress in efforts for expansion.

(¥100 million)

Net sales for threepriority markets

Benchmark

Goal

Fiscal 2016

Fiscal 2019

Fiscal 2017

Fiscal 2018

Fiscal 2019

Public and commercial buildings

166

285

168

199

211

Global market

96

143

110

123

192

Home renovation market
Total

283

299

288

290

284

545

727

566

612

687

Public and commercial buildings

Global market

Home renovation market

Results■

Expansion of the product lineup including
the new flagship wall material product■

Proposals of making use of the showrooms
for professional users and development of
the activities to incorporate specifications
New development into solid wood flooring
through business alliance

IssuesResults■

Enhancement of the supply system andexpansion of sales channels by adding the
MDF plant in New Zealand in our group■

Condominium renovation businessdeployment (Cooperation with the
product development for renovation)■

Increase in industrial materials sales bydeveloping sales channels■■

Making a decision on the investment in the
North American industrial materials business

Improvement of the eight-base system
for the TDY collaborated showrooms thatcover major cities

IssuesIssues■Non-achievement of the expansion of
construction areas and capabilities■

Sluggish growth of building materials
business in China and Indonesia■

Delay in shifting sales from the housing
market■Development of management humanresources in the global market

Medium-term management plan goal

285

166

(2)

+18

+22

+6 211

Medium-term management plan goal

+71

Fiscal 2019

Fiscal 2016 Industrial
materials
business

+3

0

(7)

(21)

+24

299
284
+5

+21 192

Medium-term management
plan goal

143

Building Engineering Other
materials businessbusiness

Fiscal 2019

Fiscal 2016 Industrial
materials
business

Building Engineering Other
materials businessbusiness

Fiscal 2019

Enhancement of overseas industrial materials
business deployment
Addition of the MDF plant in New Zealand in our groupAppealed attractiveness of remodelingin a large-scale fair
TDY Remodeling Collection 2018 was held

In addition to the improvement of the
product for elderly facilities, we actively
introduced new products, such as thedoor for kindergartens and childcare facilities, and for commercial stores towhich functions required for each facility,
such as safety and durability, are given
and broadened the range of our proposals.

In April, 2018, we added DAIKEN
SOUTHLAND LIMITED in New Zealand in
our group, which was the fourth base as
our groupʼs MDF plant. By enhancing the
supply system and expanding sales channels to the global market in addition tosynergy with DAIKEN NEW ZEALAND
LIMITED, which is an MDF plant in the
country, we further improved the presenceof MDF business, which is a core of industrial materials business.

In May, 2018, we took advantage of thealliance with TOTO Ltd. and YKK AP Inc.
and held a large-scale TDY RemodelingCollection 2018 at Makuhari Messe in order for people to experience attractiveness of remodeling. By combining thefairs concurrently held in the collaborated
showrooms across Japan by the threecompanies of TDY, a total of approx.
50,000 persons visited.

DAIKEN GROUP REPORT 2019

Data

Expansion of the interior door series
with the functions required
for each facility

ESG Information

Building Engineering Other
materials businessbusiness

Expansion of the products for renovation
and brand power

283

96

Fiscal 2016 Industrial
materials
business■

Vision and Strategy of Value Creation

Results■

ResultFoundation of Value Creation

insulated from the influence of the decrease, we set the public and commercial building field, global market, and home renovation20価値創造の最大化に向けて
Visionand Strategy of Value Creation

Medium-Term Management Plan GP25 2nd Stage
Basic policy and management goals
Basic policy
Based on firm management foundation, pursue the resolution of social issues through ourbusiness, thereby accelerating growth strategies toward becoming an all-embracing
company for building materials.
Domestic: Review of the business (market) portfolio
Global: Expand the business through aggressive
investments and entry into new markets

Ⅰ. Accelerating growthstrategies
Ⅱ. Enhancement of
the managementfoundation

Optimize our financial foundation
2 Restructure firm and flexible business infrastructure
3 Practice of ESG management
1

Management goals
Ⅰ. Accelerating growth strategies(¥100 million)

BenchmarkFiscal 2019

Forecast
Fiscal 2020

Goal
Fiscal 2022

Increase /Decrease

Net sales

1,829

2,100

2,250

+421

Domestic market

1,637

1,720

1,730

+93

Global market

192

380

520

+328

57

104

120

+63

3.1%

5.0％

5.3%

+2.2pt

44

60

70

+26

Operating profit
Operating profit ratio
Profit attributable to owners of parent

Ⅱ. Enhancement of the management foundation
Goal
Fiscal 2022

Financial indices
Efficiency

ROE

10%

ROA

7%

Shareholder equity ratio

40%

Shareholder return Dividend payout ratio

30% or moreSoundness

Goal
Fiscal 2022

Non-financial indicesE
S
G

Total CO2 emissions in Japan*1(26％)

Total diversity index*2+20pt

Serious quality accidents and violations

0

Degree of penetration of the group corporate philosophy*3+10pt*1: Compared to fiscal 2014 *2: Our own indices in which the eight diversity items, such as the female manager
ratio, were indexed as compared to fiscal 2019 *3: Our own indices in which employeesʼ understanding, sharing,and practice of the group corporate philosophy were indexed as compared to fiscal 2018

Net sales

Operating profit

GP25 2nd Stage(¥100 million)
2,500

2,000

1,500

2,100

GP25 1st Stage

1,688
85

1,705

1,829
104

2,250

Long-Term
Vision GP25

2,500
150

120

100

75
57

1,000

50
500

Fiscal 2017
Results

21

DAIKEN GROUP REPORT 2019

Fiscal 2018
Results

Fiscal 2019
Results

Fiscal 2020
Forecasts

Fiscal 2022
Goals

Fiscal 2026
Goals

Ⅰ. Accelerating growth strategies
Strategies and goals by business segment
Industrial materials business(¥100 million)

2,500

2,250

Globally expand the markets and applications by taking advantage ofsustainability and functionality and maximize the fixed asset efficiency■ Invest in the North American wood industrial materials business (LVL/veneer)and expand into the North American market

2,000■ Pursue optimization of the production system■ Accelerate application development centering on the resolution of social issues

Engineering

（10％）
1,500

Building materials business
By taking advantage of the industrial materials business and functionaland construction saving-type building materials, increase our share in the
housing market and expand in the public and commercial building fields

282（13％） business

+102

135
180

●

Other

950 Building
materials（42％） business

+56

894
1,000

（49％）

■ Further expand the differentiated products that can keep getting chosen■ Expand the product/sales networks by actively utilizing M&A and external

resources

900 Industrial
materials（40％） business

500

+282

618

Engineering business（34％）

Expand the construction domains, areas, and order sources by M&A
and cooperation with other companies■ Expand the construction companyʼs business targeting the priority markets

Fiscal 2019
Results(public and commercial buildings, remodeling, and renovation)

Vision and Strategy of Value Creation

Start the non-combustible business for wood materials● Consider commercialization of wood material use for the agricultural andgardening markets● Consider commercialization of new wood materials

1,829

118

Foundation of Value Creation

Business and market strategies

Fiscal 2022
Goals

Market strategies and goal(¥100 million)

2,500

Global

Accelerate global expansion with a focus on the industrial
materials business through aggressive investments

2,250■ Invest in the North American wood industrial materials business (LVL/

veneer) and expand into the North American market■ Continuously expand wood industrial materials with a focus on MDF■ Put the Chinese and Indonesian building materials businesses on apath toward stable growth and shift to the growth strategy

2,000

Public and commercial buildings

1,500

other companies and M&A

（12％）

355

Industrial materials■ Focus on application development for the new markets and fields

1,000

284

+93

1,730

Home
renovation（17％） market

376

Data

Domestic

materials and R&D products

metropolitan area
■ Focus on the expansion of the products for renovation, such as
construction savings and waste savings

Domestic market（16％）

Home renovation market■ Expand the renovated properties and renovation work in the Tokyo

355 Industrial（16％） materials（19％）■ Promote the development of and search the applications of new

Expand in the renovation market from a perspective ofdevelopment of functional products and methods

Global

312 Public andcommercial（14％） buildings

211■ Expand the product and sales networks, including cooperation with

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

+328

（11％）

■ Expand the product lineup (The medical field will be the new focused target)

logistics, correspondence of drawings, and the sales structure

1,829（23％） market

192

Expand investments including M&A and accelerate growth■ Improve infrastructure for the expansion of the markets, such as

520

ESG Information

Global market

1,637
500

775
（42％）

Domestic
new home（30％） market

Fiscal 2019
Results

Fiscal 2022
Goals

675

Domestic new home market
Restructure the sales structure in response to changes in themarket and customer needs, and increase our share■ Continuously enhance the products and proposals from the perspectiveof functionality, such as soundproofing and construction work saving■ Enhance the collaborative system with key distribution companies aswell as a system to make proposal to key customers

DAIKEN GROUP REPORT 201922

Vision and Strategy of Value Creation

Development into North American wood industrial materials business
Objectives and background
With a view to expansion in the global market and enhancement of industrial materials business aimed in the long-term vision GP25, ourcompany respectively acquired a 51% stake in CIPA Lumber Co. Ltd. (CIPA), which is a veneer plant in British Columbia, Canada, and is a
consolidated subsidiary of ITOCHU Corporation that we are in the capital and business alliance with and PACIFIC WOODTECH CORPORATION(PWT), which is an LVL plant in Washington, U.S.A., and added them as our group companies in June 2019. CIPA was established as a sawmill in 1968, which was a joint venture between ITOCHU Corporation and the local capital. Later, it became a 100%-owned company of
ITOCHU Corporation in 1978 and started the current veneer business in 1993 after the transformation of business. PWT was established in1998 as the LVL manufacturing base to effectively use the veneers manufactured by CIPA. ITOCHU Corporationʼs policy to want to enhance
the production and development aspects in order to expand profits by further expanding CIPAʼs and PWTʼs businesses and improving productivity and our policy that we have been considering to acquire new products to expand global business and expand into a new market
matched, and we have decided to proceed with joint business development in the North American market.

VancouverSeattleCIPA Lumber Co. Ltd. (CIPA)
Founding

April 30, 1968

Location

Delta City, British Columbia, Canada

Capitalstock

23 million Canadiandollars (1.995 billion yen)
(At a rate of 85 yen per
Canadian dollar)

PACIFIC WOODTECH CORPORATION (PWT)

Business Veneer manufacturing and wood
description material sorting

Founding

January 7, 1998

Location

Burlington City, Washington, U.S.A.

Capitalstock

26 million U.S. dollars (2.86 billion yen)
(At a rate of 110 yen per U.S. dollar)

Business
Manufacturing and sale ofdescription structural LVL and Wood I-Joist

Business description and future development
CIPA manufactures LVL made from high-strength Douglas fir(Oregon pine) and veneer for plywood. PWT purchases veneer from CIPA and other companies, and manufactures LVL.
Furthermore, they manufacture I-Joist, a structural material
made by processing LVL, and these products are widely used forwooden houses in North America and Australia, such as being
used for flooring for wooden construction, joists, and bridging
joists that support ceilings. Our company has an advantage that
we will be able to expand into the North American wooden housing market where we can expect stable growth while controllingthe investment risk because of the joint business developmentwith ITOCHU Corporation that had managed both companies
for years. Because of the addition of CIPA and PWT in our groupthis time, a new product of LVL is added and we will expand
into the trading area, the North American market, which is theworldʼs largest wooden housing market. We will set these businesses as the point of origin in expanding in the North American
market and by conducting active business development, we will
drastically proceed with the globalization of the industrial materials business and the sales expansion in the global market.

23

DAIKEN GROUP REPORT 2019

We will take advantage of our strengths that we have expandedbusinesses by introducing technologies in industrial materials
and increasing added value, increase added value in the North
American industrial materials business as well, take advantageof the affinity with interior building materials for wooden houses
that we have worked in Japan, and by eyeing the development
into building materials business, we will pursue the possibility ofbusiness expansion in the future.

Sales goals in the global market and North American market(¥100 million)
600
500■ Global market

520■ Of which the North American market
380

400

300

300
200
100
0

200

192

20
2019
Result2020
Forecast

2022 (Fiscal year)
GoalFoundation of Value Creation

Business flow
Veneer manufacturing (CIPA)
Veneer: Thin wood board made by cutting a log in manner

Veneer manufacturing process

Cutting

VeneerLaminate and glue
veneers together

LVL

Vision and Strategy of Value Creationof rotary cutting (Thin board that is 2-4 mm thick: veneer) Thisis used for manufacturing plywood and surface decorative
materials for furniture and building materials. Douglas fir(Oregon pine) hewed out from forest that is appropriately
managed to ensure sustainable wood supply is used as theraw material. It is rich in cumulative dosage, the trunk isstraight grain, and it offers excellent uniformity and highdurability; therefore, manufacturing LVL with high strength will
become possible.

LVL manufacturing (PWT)
Laminated Veneer Lumber (LVL): A fabricated wood

LVL manufacturing process

product manufactured by laminating veneers all parallelized in
the fiber direction and gluing them together. It has
advantages, such as dimensional stability, being excellent inaccuracy, being able to obtain long size materials, stable
quality, and being able to offer products in dimensions
according to use applications, and is used for posts andbeams of a house, frame materials for furniture, staircase set,door frames, and door cores.

I-Joist: A structural material, which is a composite material of
Oriented Strand Board (OSB): A structural wooden board madeby laying a thin rectangular wood piece cut from raw wood
upon another in a way that the surface layer and core layercross at right angles in the fiber direction and compressed athigh temperature, LVL, and lumber. Its structure is that squarelogs are combined on the both edges of an OSB reinforcing
board and PWT uses LVL that they manufacture as square logs.
By making it a composite member, it will have higher strengthand accuracy than solid wood with the same dimensions. It islightweight, offers excellent workability, and is used as the
structural material mainly for floor framing and roof framing.

ESG Information

I-Joist manufacturing (PWT)
I-Joist manufacturing process

Major applications in the North American housing market
Data

I-Joist rafters
I-Joist

LVL header

LVL beams

The scene of I-Joist work

DAIKEN GROUP REPORT 201924

Vision and Strategy of Value Creation
価値創造の最大化に向けて

Research & Development
Core mission●

Create new business that will become the fourth pillar after industrial materials, building materials, and engineering using newtechnology development focusing primarily on the resolution of social issues●

Develop the existing businesses and newly conduct advanced R&D to use as the driving force for business expansion
Embody the product strategies fused together with each business’ strengths●<Focused measures>
Utilize R&D center and promote co-creation with those outside the company (Open innovation)
Expand investments in R&D■ With the company-wide medium- to long-term development direction, promotecompany-wide product development■■

Industrial materials

Building materials

Further improvement of the existing industrial
materials and development of industrial materials
that will become a key to capturing new markets

Development of new secure and safe building
materials that will be needed by society
in the futureHigh functionality of the wooden boards and inorganic
boards● Wood building material utilization development in the
new field● Technology development to use unused resources● R&D of industrial materials for new markets other thanbuilding materials

Development of environment-conscious building
materials● Development of new construction technique for building
materials● Development of high functional paints and painting
technology● Adding a high value to wood building materials●●

R&D theme
Promote R&D that will contribute to asustainable society by working on Ecology andQualitative improvement of a space

Spatialenvironment

Assay
evaluation

Development of spaces and building materials
that will realize a comfortable life

Various measurements and analyses of spaces
and building materials using the expertise
cultivated in R&D

Development of energy-saving and indoor environment
improvement technologies● Simulation of the thermal, humidity, andcross-ventilation environment● Development of the indoor air quality improvement
technology●

25

DAIKEN GROUP REPORT 2019

Measurement of air quality
Building materials’ heat generation test
● Sound insulation performance evaluation● Asbestos analysis● Measurement of ticks and fungi●●

Ⅱ. Enhancement of the management foundation
Foundation of Value Creation

Optimize our financial foundation
Investments toward the enhancement of growth and foundation
Make it a top priority implement growth investments toward the realization of the long-term vision GP25
Select investments by reflecting risk and return as well as the cost of capital● Aggressively utilize advanced technologies such as AI and IoT, to lead for improvements in efficiency and productivity●●

Shareholder return

Fund in Hand, etc.

Operating Cash Flow
45 billion yen(Three-year cumulative total)
Domestic: 10 billion yen

New business:

3 billion yen

Expanding market:
3 billion yen
Infrastructure:
4 billion yen
R&D
Operational efficiency system●
Ordering and order receiving/
logistic systems●

Regularinvestments

Maintenance and update: 15 billion yen(5 billion yen/year)●

Vision and Strategy of Value Creation

Strategic
investments

Global: 30 billion yen

North American business:
20 billion yen
Industrial materials business:
10 billion yen

Optimize our financial foundation■ＲＯＡ：7%

Soundness goal

■ＲＯＥ：10%■Shareholder equity ratio: 40% ■D/E ratio: 0.5 times

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

Balance sheet management to maintain the optimum balance●

Procurement of funds for investment that will support growth

ESG Information

Efficiency goal

Target balance sheet
Liabilities(¥100 million)

Liabilities

Investment 550

Interest-bearing
debts
314

1,303
Total assets

Shareholder
equity407
Net assets

Fiscal 2016 (results)

Interest-bearing
debts
307
D/E ratio
0.77
Shareholder
equity ratio
31.3%

1,601
Total assets

Shareholder
equity589
Net assets

Fiscal 2019 (results)

Regularinvestments 150

D/E ratio
0.5

D/E ratio
0.52
Shareholder
equity ratio
36.8%

Interest-bearing
debts
370

Data

Strategic
Investments 400(Global: 300)
(Domestic: 100)

Liabilities

Shareholder
equity730

1,800
Total assets

Shareholder
equity ratio
40%

Net assets

Fiscal 2022 (target)

DAIKEN GROUP REPORT 201926

Vision and Strategy of Value Creation

Practice of ESG management
The background and idea of the formulation
In formulating the medium-term management plan GP25 2nd Stage, we determined the areas and themes of
ESG that are particularly considered to be important in achieving management strategies through deliberations
in various projects and the CSR committee while being based on the expectations from stakeholders, our vision,and values that we consider important. For each theme, we set specific goals toward fiscal 2022, which is the
final fiscal year of the medium-term management plan, will proceed with our efforts, and lead to the enhancementof the management foundation. To further improve the linkage, we set important items in each ESG theme as thenon-financial management goals for the medium-term management plan GP25 2nd Stage.

Stakeholders’expectations

Our vision andimportance inmanagement
strategies

Policies established and revised

CSR (ESG)-related policy structure in fiscal 2019
Field

PolicyCSR (ESG)

E

Environment

CSR Basic Policy
Daiken Group Environment Policy

Product quality and safety Basic Policy on Product Safety
Fair transactions

Daiken Procurement PolicyGroup Conduct Guidelines (item 2)

Consideration in the department promoting each theme and various projects

Daiken Diversity Promotion Policy (Established)

S

Human resources

Daiken Workstyle Reform Promotion Policy (Established)
Daiken Human Resource Development Policy (Established)<CSR Committee> Deliberations on CSR-related policy improvement

Daiken Safety Basic Policy (Revised)<CSR Committee> Selection of important themes and setting goals<The Board> Deliberations and approvals that are in
conjunction with the medium-term management planG

Human rights

Daiken Human Rights Policy (Established)

Coexistence withlocal communities

Daiken Social Contribution Activity Policy (Established)

Governance

The Basic Policy on Corporate Governance
The Basic Policy on the Building of the Internal
Control System

Medium-Term ESG Plan
Field

E

SocialRealization of low-carbon society

Aggressive approach to greenhouse gas reductions

Contribution for a recycling-oriented society

Pursuit of the material and thermal recycle of woody resources

Reduction of environmental burden

Reduction of environmental burden in business processes

Consideration of biodiversity

Promoting the use of domestically produced wood

Environment management

Continuous improvement of the environmental management system

Product quality and safety

Quality and technological capabilities to keep responding to confidence

Promotion of CSR procurement
Fairtransactions Ensuring fair competition andtransactions

Maximization of added value by collaborating with suppliers

Promotion of diversity
Promotion of workstyle reform
Enhancement of the humanresources development
Enhancement of theoccupational safety and health

Fusion of diverse skills and ideas
Pursuit of highly productive job performance
Development of human resources who will play roles in the
new market expansion and medium- to long-term growth
Improvement of the safe working environment that will
become the foundation of successHuman
resources

Promotion of risk management

Promotion of support for human rights that is significant froma global perspective
Establishment of stable business foundation supported by
local communities
All employees share the group corporate philosophy andrealize the growth strategies
Reconstruction of the supply system that the markets willkeep choosing

Strict compliance

A high sense of ethics that will be trusted by the markets

Human rights
Coexistence with local communities

G
27

Governance

DAIKEN GROUP REPORT 2019

Focused points in management strategies

Enhancement of the governance system

Set a target for each itemS

Environment

Area and theme

E

Greenhouse gas emissions reduction

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

Promotion of the use of renewableenergyRenewable energy utilization ratio: 50% or more

Promotion of carbon fixation

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

Promotion of recycle and conversionof waste into valuables

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

Promotion of effective use ofwater resources

Water resource input: 3% reduction (As compared to fiscal 2019)

Appropriate management andreduction of chemical substances

Release amount of substances subject to the PRTR law: 70% reduction(As compared to fiscal 2019)

Procure wood in a biodiversity
friendly way

Utilization of domestic timber for flooring materials: 45%

Strengthen environmental risk
management

Number of environmental accidents and violations: 0(Those with administrative guidance or penal charge)

Enhancement of the Quality
Control Structure

Serious product accidents: 0
Product safety and quality improvement education execution rate: 100%
Product audit implementation cover rate: 100%

Fair transactions

Rate of acquisition of the agreement on the CSR procurement
standards at home and abroad: 100%
Serious violations of the Anti-Monopoly Act and Subcontract Act: 0

Promotion of diversity

Total diversity index*1: +20 pt

Promotion of workstyle reform

Total work time reduction rate: 3%
Rate of taking annual paid leave: 70%
Employee satisfaction*2: +5 pt

Enhancement of the humanresources development

Job separation rate within three years: Within 15%
Young employees’ career plan training attendance rate: 100%
Focused market enhancement program attendance rate: 50%
Management staff training program attendance rate: 70%

Enhancement of the occupationalsafety and health

Serious disaster: 0
Plant mutual safety diagnosis execution rate: 100%

Human rights promotion activities

Human rights enlightenment training attendance rate: 100%
Supervisor harassment training execution rate: 100%Social contribution activities bycooperating with local communities

Holding of the event planned by cooperating with local communities:
Once a year in each group production baseEnhancement of the governancesystemGroup corporate philosophy penetration program execution rate: 100%
Degree of penetration of the group corporate philosophy*3：+10pt

Promotion of risk management

System BCP 3-year proactive measure completion rate: 100%
Procurement BCP 3-year proactive measure completion rate: 100%

Strict compliance

Serious compliance violations: 0
Compliance consciousness degree*4: +5pt

Environment

S

SocialESG Information
Data

G

Goal

Vision and Strategy of Value Creation

Theme

Foundation of Value Creation

Field

Governance*1: Our own indices in which the eight diversity items, such as the female manager ratio, were indexed compared to fiscal 2019
*2: Our own indices in which employees’ actual feeling for satisfaction and job satisfaction in the workplace were indexed compared to fiscal 2020
*3: Our own indices in which employees’ understanding, sharing, and practice of the group corporate philosophy were indexed compared to fiscal 2018
*4: Our own indices to measure employee’s compliance consciousness degree from the perspectives of legal compliance, a sense of ethics, structure, and corporate culture compared to fiscal 2020

DAIKEN GROUP REPORT 201928

Vision and Strategy of Value Creation

Special Interview on SDGs

Pursuing New Value Creation
by Leveraging SDGs
Masanori
Okuda
Representative director,
President

Mr. Hidemitsu
SasayaVisiting Professor, The Graduate
School of Information &Communication
CSR/SDG Consultant

Since the adoption of SDGs by the United Nations in 2015, expectations haveincreased for contributions by companies through business activities for the
resolution of social issues on a global scale, such as environmental problems. We

Masanori Okuda
Representative director,
President

invited Mr. Hidemitsu Sasaya (title omitted hereinafter), a consultant knowledgeable
in SDGs, to the Daiken R&D center, our R&D facility that opened in October 2018, to
speak with Masanori Okuda, our representative director, president, concerning
future contributions to SDGs through business activities and how to turn suchcontributions into improvements in corporate value.

Maintaining attitude to face social issues
since foundation

not generated suddenly but were crystallized as a summary of along history. This process overlaps the long course that the DAIKENCORPORATION has taken since its foundation during which thecompany has pursued the resolution of various social issues.

29

Okuda: Our company was founded in Toyama in September 1945

Okuda: The first business that our company handled was plywood.

soon after the end of World War II. The company started with the

We developed technology to improve water resistance and durability

wood processing business in the hope of contributing to Japan's

in order to use plywood in vehicles and vessels, and primarily

restoration from post-war devastation by using wood as a material

handled special plywood that overcame the weakness of wood.

to replace iron, which was in short supply in those days. Since ourSubsequently, in 1958, we established a plant for the use of unused

foundation, our goal was to use wood as a valuable resource without

resources in Okayama City, where this R&D center is located, for

any waste. Through the effective use of scrap wood from demolishedthe expansion into new businesses. Wood fiberboard and Insulation

houses, and offcuts, we developed a technology that would createboards (IB) that we produced here use scrap wood from demolished

new added value. Therefore, I think our company has been pursuinghouses, and offcuts, thereby extending the carbon fixation period

SDGs since its origin without knowing it.

and contributing to the SDGs 17 “Responsible consumption andSasaya: SDGs consist of 17 global goals toward the realization

production” and the SDGs 13 “Climate action”. Our Dai-Lotone,of a sustainable world based on the analysis of global issues thatwhich uses slag as a by-product from steel manufacturing also

have become increasingly more serious. These 17 goals are clearly

contributes to SDGs 12, while Dai-Lite, which uses the volcanic ash

the pursuit of respect for humans, protection of the global environ-called Shirasu as a raw material, links to SDGs 11 “Sustainable cities

ment, and other themes through partnerships. These goals wereand communities” because it contributes to quake-proof housing. In

DAIKEN GROUP REPORT 2019

Foundation of Value Creation

Visiting Professor, The Graduate School ofInformation & Communication
CSR/SDG Consultant
Graduated from the University of Tokyo, Faculty of Law.
Entered the Ministry of Agriculture and Forestry in 1977.
Took office as Ministerial Deputy Director of the Ministryof the Environment in 2005 as Ministerial Deputy Directorof the Ministry of Agriculture, Forestry and Fisheries in2006, and as Director-General of the Kanto Regional
Forest Office in 2007, and retired in 2008. Entered ITO
EN, LTD. in 2008, took office as Director from 2010 to2014, as Managing Executive Officer from 2014 to 2018,as Corporate Advisor from 2018, and retired in April 2019.
Assumed the present position in April 2019.

Sasaya: It is natural that there are commonalities between SDGs

to SDGs.

and businesses that have been promoted under a social philosophy.

Sasaya: The 17 SDGs were presented in a clear and orderly form to

DAIKEN CORPORATION may well be surprised that SDGs have notyour company that originally had a SDGs-oriented attitude. A look atbeen defined much earlier.

ESG Information

this way, many of our present businesses and products are linked

Vision and Strategy of Value Creation

Mr. Hidemitsu Sasaya

the relationship between the businesses of DAIKEN CORPORATION
and SDGs will enable the recognition of its business value andprovide stakeholders with an opportunity to learn of the potential of

Leading innovations at the R&D center

the company.
Sasaya: While sustainability is extremely important in business, there

businesses, but the concept of SDGs to contribute to the resolution ofis one more "S" that is critical: Scaling. Good practice needs to besocial issues toward sustainability seems to match our past initiatives

expanded. In Japan, there is the idea of good for everyone, which

and future goals. As stated in our group corporate philosophy: We

urges that business should be good for the seller, good for the buyer,

will create a wonderful future with our technology, ideas, and passion,and good for the public. I propose a version of good for everyone,and As a company respected by everyone, we will give the highest

adding output to the concept above. Through outputs, partners who

priority to harmonizing an affluent society with the environment. This isshare the same idea gather, and their gathering leads to innovation.

why we must make continuous efforts to contribute to a sustainable

The R&D center is equipped with an exhibition space under thesociety and enhance public trust. The recognition of SDGs clarifies theconcept of open innovation, which presents outputs concerning

measures that our company should implement at present and into theyour products and technological power.

future.

Okuda: When the R&D center first opened, experts were invited fromDAIKEN GROUP REPORT 2019

Data

Okuda: SDGs had yet to be defined when we started the individual30

Vision and Strategy of Value Creationencouraged to leverage SDGs in diverse ways, such as presenting
ideas for development, sharing visions with partners, and examining
the sustainability of business models.

Establish a research environment andmaximize the value of human resources
Sasaya: Through what you said, I recognized that DAIKENCORPORATION has further motivated technological development
R&D center

personnel by establishing the R&D environment in the R&D center. In
the center, I found a board on which each researcher of the center

universities across Japan to tour the inside of the facilities. In the
coming years, we plan to invite students and dispatch our researchers to universities, thereby deepening exchanges and leading totechnological innovation that will create new value through industryadministration-academia collaborations.
Sasaya: Okayama City, where the R&D center is located, has been
selected as one of the SDGs Future Cities, which promote initiatives for the attainment of SDGs. Interested persons frequently visit
the city from other countries. The high technology of the DAIKENCORPORATION will be recognized by such people through promotional measures. I believe that the DAIKEN CORPORATION has established an environment for leading to open innovations through theincreased output power.
Okuda: In terms of innovation, we expect R&D and businessactivities to indicate specific resolutions to be developed toward
the goals specified in the SDGs. I hope that the R&D and businessdepartments will identify goals toward which our company
can exercise its strengths, think outside the box, and pursue
development with a challenging spirit. Development personnel arestated their future ideals. It is wonderful that you are proceeding
toward the future with a participatory approach that enhances
motivation. The efficient use of human resources is essential for fully
exercising technological expertise and for creating business models
with high added value. It will require an environment that is pleasant
to work in as well as proper governance. I hope that you will continue
to establish a suitable infrastructure.
Okuda: I also believe that human resources are at the center of innovative movements leveraging SDGs. I urge employees to deepen
their ties to society, absorb a wide variety of knowledge, and promote
development that will facilitate social participation. We established the
R&D center, provided an environment, and defined milestones. The
development team is moving toward those milestones. I expect thatthey will maintain a challenging spirit to move further ahead withoutdwelling on these checkpoints.
Sasaya: I consider DAIKEN CORPORATION to have high humanresource power. I hope that you will emphasize the process in whichyou, President Okuda, will visualize your philosophy, formulate theflow for value creation, and disseminate it to individual departments.
According to the latest survey, SDGs have been disseminated to
60% of corporate management executives but only to about 20% of
middle managers and employees. SDGs will become the mainstreamof society. I hope that the president will share direct messages sothat the understanding of SDGs will be further deepened throughout
the DAIKEN CORPORATION.
Okuda: Business activities are promoted by humans not by anythingelse. Our company invests in humans and endeavors to maximize
human resource value. I believe that contribution to the resolution ofsocial issues by the company will lead to improved corporate value.
Sasaya: Partnerships for the goals and the spirit of harmonization
as represented by SDGs 17 will enable people to connect to diverse
issues and enhance their motivation for work.
Okuda: I strongly hope that all employees recognize suchpartnerships and that we can proceed hand in hand.

31

DAIKEN GROUP REPORT 2019

Special Interview on SDGs

Foundation of Value Creation

Expand future-oriented business throughdevelopment under SDGs
Sasaya: DAIKEN CORPORATION has already been linked tosocial issues through SDGs. I suppose that you have come tothe stage where you should consider how to enhance such links.
In the ongoing process of global expansion, it is recommended toeffectively leverage SDGs for visualization. Because SDGs are acommon global language, they will facilitate the sharing of your vision
with global partners. You will be more easily accepted as a company
Okuda: Regarding global expansion, we have two plants in New
Zealand that manufacture wood fiberboard MDF. We will examine
how limited local wood resources can be leveraged. The longer
more extended the carbon fixation period will become. Therefore,

yesterday and enhanced functions. Leading social issues up until

I believe that the expansion of this business will contribute to theyesterday toward resolution with new functions - SDGs and DAIKEN

prevention of global warming. We will further expand such wood

CORPORATION share the same future-oriented approach.

material businesses overseas.

Okuda: As an example of a specific initiative for the future, we

Sasaya: The technological power that DAIKEN CORPORATION has

are promoting the development of culture soil by applying wood

accumulated over its long history, as well as its business models forprocessing technology. This initiative is aimed at replacing culture soil

industries of high added value based on that technological power,

for plants with wood chips as a material for wood fiberboard. If such

will definitely be accepted throughout the world. The Tokyo Olympics

a material can be used for greening infertile deserts, it will contributeand Paralympics are drawing near. Sustainability is particularly

to SDGs 2, “Zero hunger”. If, for another example, Japanese paperemphasized in these SDGs-oriented Olympics/Paralympics, andused for the surface of tatami mats can be processed for othersustainability is required for energy sources and materials to be used.

purposes, it will lead to deplasticization and may contribute to SDGs

Interest in SDGs will substantially rise among the general public.

14 “Life below water”.

Along with the Osaka, Kansai Expo 2025, it will become a good

Sasaya: SDGs have leverage points that will lead to the resolution

opportunity to advertise business expansion linked to SDGs throughof more than one issue. In the case of DAIKEN CORPORATION,

such international events.

SDGs 9 “Industry, Innovation, and Infrastructure” and SDGs 17

Okuda: While SDGs are set for 2030, I do not regard it as the year

“Partnerships for the goals” will be its leverage points. Innovationsof the goal. Our company will celebrate its 80th anniversary in 2025,

led under SDGs 9 will be linked to solutions to various goals and willwhen the Osaka, Kansai Expo 2025 will be held. We will also target

be extensively distributed through partnerships under SDGs 17. In

at the 100th anniversary beyond that. We must envision our goal to-this way, I hope that DAIKEN CORPORATION will increasingly be-ward those major milestones. Strategies for the next stage of devel-

come an all-embracing company for building materials on a global

opment are required, while the market environment has substantiallybasis.

changed with new housing starts on a declining trend in Japan. At

Okuda: I believe that SDGs will become the very themes ofpresent, our focus is on the expansion from industrial materials todevelopment in coming years. It depends on the ideas andbuilding materials. When we are headed toward a new market, we

enthusiasm of individual members of the group, including me atshould return to industrial materials as our starting point and continu-

the top, executive officers, heads of departments, and employees,

ously face social issues and needs in the new era. It is also possible

how those social issues and needs can be identified and leveraged.

that a substantially different business will become our core businessWe would like to further deepen the existing technologies, promotefurther shifting away from building materials.

development activities that will contribute to society, and enhance

Sasaya: DAIKEN CORPORATION has the power of technologicalour corporate value through the resolution of social issues.

innovation to create new products based on its accumulated

Thank you for time.

Datainnovation. This phrase is amphibious, meaning both history up until

ESG Information

wood is used in the form of wood fiberboard without burning, the

Vision and Strategy of Value Creationthat proactively leverages SDGs.

technology. Its corporate message, Toward the future going beyond
the functions of yesterday, represents your power of technological

DAIKEN GROUP REPORT 201932

ESG Information

Governance
Basic Approach

In pursuit of optimal corporate governance that will result in sustainableimprovements 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 enrich a management
system, an organizational system, and an internal control system, and take the basic approach that always seeks to optimize
corporate governance, and we constantly work to improve it. Based on the basic policy on corporate governance establishedin 2015, we are making constant improvements to respond to the ever-changing business environment surrounding the groupin 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 the 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.
Introduction of the transfer restricted stock-based
compensation system.

2019

Reduced the number of directors from 9 to 7.

Quick Reference of Corporate Governance Organization
Main items

Details

Design of the organization

Company with Board of company audit & supervisory board members

Number of Directors (outside directors)

7 (2)Number of audit & supervisory board members(outside audit & supervisory board members)

4 (2)Number of the Board convened (fiscal 2019)15 times(Average attendance rate of outside directors)(100%)(Average attendance rate of outside audit & supervisory board members) (97%)
Number of audit & supervisory board convened (fiscal 2019)14 times(Average attendance rate of outside audit & supervisory board members) (100%)
The term for directors

1 year

The executive officer system

Adopted●Voluntary committee of the Board

Auditors

33

DAIKEN GROUP REPORT 2019●

Nomination and remuneration committee: Deliberate on human affairs and the
remuneration of directors and executive officers
Number of the committee convened in fiscal 2019: 4 times
Corporate governance committee: Evaluate the effectiveness of the Boardand deliberate the matters related to establishment of the governance system
Number of the committee convened in fiscal 2019: 3 times

Gyosei & Co.

Shareholders (General meeting of shareholders)
Selection dismissal

Disclosure and dialog

Selection dismissal

Consultation

Report

The Board(including two outside directors)(Committee chairperson and majority of themembers are independent directors)

Audit & Supervisory
Board

Representative director

ReportingFour audit & supervisoryboard members

Consultation

ReportProposal for
selection dismissal

Audit

Nomination and remuneration committee(including two outside audit &supervisory board members)

Corporate governance committee(Committee chairperson and majority of themembers are independent directors)

Reporting

Auditors

ReportingExecutive directors committee
Approval and instruction
Audit

Headquarters, respective departments,
and affiliated companies

Accounting audit

Cooperation

Monitoring, supervising, and important decision-making
Chairperson/Committee chairperson

Department
responsible forinternal control

Supervision, selection/dismissal, and instruction

Auditing

Business execution and decision-making

Inside directors and audit & supervisory board members

Business execution

Vision and Strategy of Value Creation

Seven directors

Selection dismissal

Foundation of Value Creation

Corporate Governance Framework

Outside directors and audit & supervisory board members

Outside Directors and Audit & Supervisory Board Members

Fiscal 2019

Outside director

Reason for selection

Koji
MizunoHe actively provides advice and suggestions supported by the highexpertise as a professor and contributes to securing appropriate
decisions by the Board. Also, his affluent knowledge about
corporate management is considered essential for the improvementof governance of the company.

12/12(100%)−

15/15(100%)−

KiyoshiFurubeHe has been involved in the management of TOTO as a director fora long period of time and actively provides advice and suggestions
based on his rich experience. Also, his affluent experience and wide
range of knowledge about corporate management is considered
to contribute to improving our corporate value. He is from TOTO,
which is our client company, but the percentages of the transaction
amounts with the said company in consolidated sales or purchaseamount in the current fiscal year are less than 1% respectively.

8/9
(88%)

−

15/15
(100%)−

Masafumi
Inoue

He is considered to use his high expertise as a professor, experienceand wide range of knowledge 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%)

14/15
(93%)

14/14
(100%)

Yuko
KatsuoIn addition to her high expertise as a professor in the Departmentof Economics, she held several positions as a committee memberin the Ministry of Finance, Financial Services Agency, etc. andis considered to reflect her affluent knowledge on finance andaccounting cultivated through such experiences into the audits ofour company.

−

−

12/12
(100%)

10/10(100%)

Audit &
Audit &The Board supervisory The Board supervisory
board
board

Data

Outside audit & supervisoryboard member

Name

ESG Information

Attendance
Fiscal 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 201934

ESG Information

The Effectiveness Evaluation of The Board
The past effectiveness evaluations of the Board and improvement responses for the issues
To increase the effectiveness of the Board and to improve corporate value, the Daiken Group has implemented the effectiveness evaluation of the Board oncea year since March 2016, and three years have passed. The results of analyzing and evaluating the effectiveness of the Board in each period confirmed thateach director and audit & supervisory board member are committed to presenting and deliberating their opinions actively while ensuring the independencewith diverse perspectives and four independent outside directors. The Board maintains the effectiveness of important decision-making in management andsupervision of business execution properly. On the other hand, regarding the issues that had been confirmed in each period in aiming for more effective Board
operation, they have been continuously put effort into the improvement responses.

Fiscal year ended March 2016

Issues

Improvement responses

1

Regarding management strategies and various important policies,
conduct more effective engagements in the PDCA process throughthe annual or interim evaluations and verifications.

2

Improve the provision of training opportunities for directors and audit& supervisory board members.

3

In order for the outside directors to be able to deepen theirunderstanding on our businesses and sufficiently examine agendas
beforehand, improve information provision.

To measure the degree of penetration of the group corporate philosophy
established in April 2017, a survey on the degree of penetration was implemented
in January 2018. After reporting the results to the Board in March 2018, issues forthe penetration were confirmed and measures, such as the enhancement of thetransmission, were executed.
The Director Human Resource Development Program was set in June 2016 andtraining for new and incumbent directors was implemented. Nomination andremuneration committee is also involved in the selection of executive officers, and thepersonnel rotation for the development of the next generation has been implemented.
Matters to deliberate in the management meeting are reported to outside
directors in the regular debrief session by the Corporate Planning Department andthe said matters are reported to outside audit & supervisory board member in theaudit & supervisory board by the said department.

4

Improve feedbacks to the Board regarding information obtained fromIR activities, CSR activities, etc.

To feed back the opinions obtained in dialogs with investors, the director responsible for IR
has been continuously reporting IR activities in the Board (scheduled for once a quarter).

Fiscal year ended March 2017

Issues

Improvement responses

1

Evaluate the degree of penetration and progress of important issues inregard to the management strategies and various important policies,
etc. in the Board.

Based on the survey on the degree of penetration implemented in January 2018,
we started operating group corporate philosophy penetration program in August
2018 to improve the degree of penetration.

2

In deliberating important agendas, improve information provision tothe outside directors in order for them to deepen their understandingon the effects, risks, and issues beforehand and further deepen
discussions in the Board.

We have been improving the information provision to deepen discussions in regard
to high-risk acquisition cases, such as conducting deliberations in the Board held
several times, in addition to distribution of materials including deliberation results on theexecutive officer side and prior explanations.

3

Improve the support system in order for the directors and audit& supervisory board members to be able to actively collectinformation in and outside the company.

To secure sufficient verification time, we hold an office visit for the outside
directors in order for them to deepen their understanding on businessdescriptions in addition to the distribution of the Board materials at least one week
before and continuous implementation of the regular debrief session.

Fiscal year ended March 2018

Issues

Improvement responses

1

Enhance the Boardʼs involvement particularly in the CA process(analyses, issue organization, and execution of countermeasuresand improvement measures) in the PDCA process in the
management strategies.

In the process to formulate the new medium-term management plan fromfiscal 2020, we reported the results and issues of the previous medium-term
management plan in the Board and deliberated from the draft stage the businessand market strategies as well as the concept of the enhancement of the
management foundation.

2

Review decision-making authority, delegate part of the matters to beresolved concerning decision-making to the executive officer side,and improve the Boardʼs supervisory function.

To streamline the Board, the Boardʼs rules have been revised, and the scope tobe delegated to the executive officer side has partly been expanded in fiscal 2020.

3

For stakeholders including shareholders, improve the structure topromote a constructive dialog and transmit helpful information.

In creating the integrated report, the Board has been actively involved, such as
implementing a questionnaire survey to the directors, individual meeting withoutside directors, from the fiscal 2019 edition.

Results of the Board effectiveness evaluation in the fiscal year ended March 2019 and response to the future issues
The Boardʼs effectiveness evaluation implemented in the fiscal year ended March 2019 confirmed that each director and audit & supervisory board member are committed to representing and deliberating their opinions actively while ensuring the fairness and transparency with diverse perspectives and four independent outside directors. The Board maintains the effectiveness of important decision-making in management and supervision of business execution properly. In particular, we improved
prior information provision to outside directors, and important agendas were explained several times on the Board; therefore, we evaluated that sufficient discussions
were made before making decisions. On the other hand, future issues to further enhance the effectiveness of the Board were confirmed, such as the need for further
involvement in internal control and risk management in the entire group, including subsidiaries, and evaluation monitoring for information provision to stakeholders.

Future issues and response
1 Enhance involvement, such as conducting specific verifications, by the Board in regard to internal control and risk management in the entire group including subsidiaries.
2 To improve information transmission to stakeholders, such as shareholders, the Board will monitor the evaluations by the recipients of the information.
3 To be effectively involved in the PDCA process for the management strategies, review report content, such as execution of operation, by the Board.

35

DAIKEN GROUP REPORT 2019

Governance

Message fromthe outside director

By fulfilling supervisory function,build the effectiveness governancesystem and contribute to sustainableimprovement in its corporate value.

Chair, Corporate governance committee
Chair, Nomination and remuneration committee
Outside Director

DAIKEN GROUP REPORT 2019

Data

2. Effectiveness evaluation and future requirements
The primary future requirement is the development of successors. The nomination and remuneration committee wasengaged in the process, including the selection of executive officers, and allocated officers in an impartial mannerby taking into account the next generation. This is expected to enable the establishment of a successor planning
process, through the broadened horizon for successor
development not only through training but also in practice.
Global expansion through M&A and other means is essential for growth strategies. Under these circumstances,
we recognize that it is also important to bolster local internal control and risk management.
3. Expectations for initiatives in ESG and SDGs
In the new medium-term management plan that started
in fiscal 2020, non-financial managerial targets were set
for the first time. In particular, comprehensive indexes were
specified concerning diversity items, including enhanced
opportunities for female employees, as an effort for target
management. I believe that this effort is worth evaluating
as an attempt to improve corporate value through humanresources.
I also expect that competitive product development will
be accelerated in the contributions for ESG and SDGs,
through R&D activities that are promoted through the
opening of an R&D center. The value of ESG-related initiatives may be difficult to visualize but can be organizedthrough reference to SDGs.
In this way, corporate value will be improved with thevalue created by the company becoming more visible tosociety and consumers.
I will continue to play my role by fulfilling my supervisory function in a balanced way from a broad perspective
and thereby supporting the company's growth strategies
and contributing to sustainable improvement in corporate
value.

ESG Information

1. Characteristics and effects of the effectivenessevaluation of the Board at the company
Over the past few years since 2015, when I took office as
outside director, discussions by the Board of the company
have become increasingly vigorous each year. I believe that
this is primarily due to the effect of the effectiveness evaluation by the Board conducted in a self-evaluation methodby the directors and audit & supervisory board members.
Many opinions are freely stated in the effectiveness evaluation at the company, and all of the provided opinions arereviewed by the Board. Problems are recognized and improved in this process, and the PDCA cycle for operational
improvement has started to proceed.
For example, when an important issue is to be deliberated, preparatory materials are distributed that contain the
results of reviews by the executives so that understanding
can be deepened in advance concerning the significance,
effect, and risk of the managerial strategy. In addition, preliminary briefing sessions may be held in order to provide
adequate information to outside directors and outside audit& supervisory board members. In this manner, I think thatthe company endeavors to promote discussions, rather
than explanations, through deliberations at Board meetings.
The frequent personal meetings with persons in charge alsosuggest the attitude of executives for accountability, which
seems to be another effect of effectiveness evaluation.
In the fiscal year ending in March 2019, there was alarge M&A project to purchase the North American woodindustrial materials business. The final decision was madethrough discussions in repeated sessions by the Board,which concerned the positioning of global business inthe company's future managerial strategies. In this project, they took time to carefully examine the conditions,
including the adequacy of the purchase price, because
the contract provided the transfer of stocks with ITOCHU
Corporation as the company's largest stockholder.

Vision and Strategy of Value Creation

Koji Mizuno

Foundation of Value Creation

Message

36

ESG Information

Executive Remuneration
Policy of Executive Remuneration
1

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

2

The 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 the improvement of medium- to long-term corporate value.

3

The standards and system of remuneration shall be effective enough to secure excellent human resources to whom we canentrust our future.

4

The procedure for determining remuneration shall be transparent, fair, and objective to achieve the responsibilities of
explanations to all stakeholders including shareholders, investors, and employees.

Procedure
The Board has the authority to make decisions on the policy concerning the amounts and the method to calculate executive remunerations, andthe authority is delegated to the representative director meeting by a Board resolution. In determining remuneration, to secure transparency,
fairness, and objectivity, remuneration is determined by the representative director meeting after deliberations and recommendations by
the nomination and remuneration committee in which the independent outside director is a chairperson and independent outside directors
account for more than half of the members.

Composition
Executive remuneration is composed of executive remuneration as fixed remuneration, performance remuneration as the performance-based
remuneration, and stock-based compensation. The proportion of the performance-based remuneration in the remuneration is around 40%
and is designed to fluctuate according to performance.

Performance-based index: Profit attributable to owners of parent

Stock-based compensation

Stock-based compensation
To reflect medium- to long-term performance and corporate value improvement, the transfer restricted
stock-based compensation system has been introduced (excluding outside directors). (Within ¥42
million by a year: Resolution by the 102nd General Meeting of Shareholders held on June 22, 2018)

Performance remuneration

Performance remuneration
Performance-based remuneration based on the company performance and accomplishments/
results in oneʼs responsible field.

Mission remuneration

Mission remuneration
Fixed remuneration to be determined based on oneʼs duty. To ensure the background of themoney amount, the breakdown (representative compensation, supervisor compensation, andexecutive compensation) is organized and determined for each title.

Representative Supervisor
Executivecompensation compensation compensation

Maximum amount of remuneration for Directors: Within ¥35 million per month (Resolution by
the 90th General Meeting of Shareholders held on June 29, 2006)
Maximum amount of remuneration for audit & supervisory board members: Within ¥6 million(Resolution by the 102nd General Meeting of Shareholders held on June 22, 2018)

Executive remuneration for the fiscal year ended March 2019
The total amount of remuneration according to each executive classification, the total amount of remuneration by type, and number of target
executives are as follows.
Executiveclassification

Total amount of
remunerations, etc.
(¥million)

Performance
remuneration

Stock-based
compensation

Retirement
benefits

Number of target
executives

Directors*1

265

144

111

8

–

8

Audit & supervisoryboard members*2

40

40

–

–

–

2

Outside directors

22

22

–

–

–

5

*1: Except for outside directors

37

Total amount of remunerations, etc. by type (¥million)
Missionremuneration

DAIKEN GROUP REPORT 2019*2: Except for outside audit & supervisory board members

Governance

Message from new Outside Audit& Supervisory Board Member

Shingo Ishizaki
Outside Audit & Supervisory Board Member
ProfileApril 1979
April 1998
July 2001

Corporate governance for coming years
Corporate governance refers to corporate management

tives. Therefore, it is important to monitor trends in thesystems aimed at preventing dishonest acts within and bymarket from the perspective of corporate governance.

the company and improving competitiveness and profitability toward increases in long-term corporate value.

Vision and Strategy of Value Creation

Joined Yamaichi Securities Co., Ltd.
Joined Merrill Lynch Japan Securities Company
Joined UFJ Capital Markets Securities(present Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.)
October 2004 Joined Mizuho Securities Co., Ltd. as the general manager of theinvestment bank group
April 2009Managing executive officer of the company above and director of
the Kansai investment bank group
April 2010
Managing executive officer of the company above and director of
the Kansai and West Japan investment bank group
June 2015
Special advisor in Sekisui House, Ltd.
June 2015
Special advisor in Sekisui Plastics Co., Ltd.
April 2018
CEO and president of SI. Management Co., Ltd. (present)
June 2019
Outside Audit & Supervisory Board Member of Daiken (present)

Foundation of Value Creation

Message

In Japan, the national government and Keidanren(Japan Business Federation) proactively promote sustainable development goals (SDGs). In the meantime, activities are taking impetus toward environment, society anda management executive acts in any way that conflicts

governance (ESG) investments, led by the Government

with the interest of stockholders, the stockholders canPension Investment Fund (GPIF). Because DAIKEN

dismiss the management executive in a general stock-

CORPORATION envisions proactive global expansion, it

holdersʼ meeting. Such a system has the effect of con-is extremely important to focus on these aspects.

trolling the behavior of management executives. At the

I will leverage my experience in investment bank op-

same time, governance through the stock market musterations to monitor trends in the market, recognize what

not be forgotten. If a company performs poorly and is notinvestors should learn and understand about a company,

profitable, more stockholders sell its stocks in the mar-and make efforts to establish corporate governance inket. This results in declined stock prices and decreased

DAIKEN CORPORATION that will enable its sustainable

market capitalization. This causes cuts in the rating anddevelopment and response to social trust.

ESG Information

Among the relevant methods, governance throughmanagement organization is well known. For example, if

compromised trust from financial institutions, which will
make funding the company difficult. In this way, governance in this aspect also controls management execu-

Data

Reasons for selection
He has been engaged in investment bank operations at securities companies over many years. We believe that his
abundant knowledge concerning finance and accounting, accumulated through his experience, will contribute tofurther strengthening governance at our company. He satisfies the Independence Assessment Standards established by our company, because there is no potential conflict of interest between him and other general stockholdersof our company, in terms of his human relationship, capital relationship, trade relationship, and other relationships
of interest with our company.

DAIKEN GROUP REPORT 201938

ESG Information

Directors and Audit & Supervisory Board Members (as of July 1, 2019)

Masanori Okuda
Representative Director,
President

Joined Daiken
Executive officer
General manager of Tobu Juken sales
control
April 2008
Senior executive officer
Manager of Juken sales control andgeneral manager of Tobu sales control
June 2008
Director and senior executive officer
April 2009
Director and managing executive officer
Tokyo representative and manager ofJuken sales control
April 2010
General manager of Juken Sales
June 2011
General manager of sales, manager of
new development sales, and generalmanager of the Tokyo office
April 2012
Director and senior managing executive
officer
General manager of the Tokyo office
June 2013
Representative director, senior managing
director
Senior managing executive officer
October 2013 General manager of procurement
innovation and general manager of theTokyo office
April 2014
Representative director, representative
president and executive officer
June 2018
Representative director, president(present)

April 2001

April 1974
April 2007

April 1987
April 1997
April 2004
April 2007
April 2009
April 2010
April 2015

June 2015

Hiroshi Sekino
Director

April 2016
April 2019

June 2019

Takashi Aihara
Representative Director,
Senior Managing Executive Officer

Joined ITOCHU Corporation
Industrial Materials Section, Lumber Department No. 2 (ITOCHU)
Industrial Materials section chief, Wood Materials and Building Materials
Department (ITOCHU)
Loan to ITOCHU Kenzai Corporation
Wood Materials and Building Materials Department, ITOCHU Corporation
Industrial Materials section chief, Wood Materials and Building Materials
Department (ITOCHU)
Acting Manager of Wood Materials and Building Materials, Industrial
Materials section chief, Wood Materials and Building Materials
Department, and Planning and Administration Department, General
Products and Realty
Acting Manager of Wood Materials and Building Materials Department
and Planning and Administration Department, General Products andRealty (ITOCHU)
Loan to ITOCHU Kenzai Corporation
Manager of Construction and Building Material Department, ITOCHU
Corporation (present)
Director, ITOCHU Kenzai Corporation (present)
Director of Daiken (present)

April 1991
March 2006
April 2006
April 2010
April 2011

June 2011
April 2014
June 2015
April 2016

Koji Mizuno
Outside director

April 1980
April 2005
April 2008
April 2010
April 2011
April 2012

Takashi Terubayashi
Audit & supervisory board member

39

DAIKEN GROUP REPORT 2019

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 andmanager of the secretarial office
April 2013
Managing executive officer
Manager of management planningdepartment and manager of thesecretarial office
June 2013
Director and managing executive officer
April 2014
Manager of management planningdepartment, manager of the new
business development office, andmanager of the secretarial office
April 2015
Manager of finance and accounting
April 2017
Director, senior managing executive
officerJune 2017
Representative director, senior managing
director and senior managing executive
officerJune 2018
Representative director, senior managing
executive officer
February 2019 Responsible for IT and logistics reforms
June 2019
Audit & supervisory board member(present)

Professor of School and Graduate Schoolof Law and Politics, KWANSEI GAKUIN
UNIVERSITY
August 2003 Takara Printing Co., Ltd.
Director and manager of IR planning
March 2006 Urban Life Co., Ltd.
Outside audit & supervisory board
memberAugust 2006 Takara Printing Co., Ltd.
Director and executive officer responsible
for IR business development
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, senior managing
director and senior managing executive
officerJune 2018
Representative director, senior managing
executive officer (present)
February 2019 Responsible for business administration(Head Office), ISO, crisis management,
information management, compliance,and IR (present)

April 1980
April 2000

Toshio Fuyuki
Audit & supervisory board member

April 2018

Joined Daiken
Manager of Dai-Lite productdevelopment, Dai-Lite businessdepartment
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)GovernanceTomoaki Kato

Tetsuo Harima
Director, Senior Managing
Executive Officer

April 1977
October 2003
April 2008
June 2008
June 2010
April 2011
April 2012
April 2014

Kiyoshi Furube

April 2017
June 2017

Joined TOTO Kiki Ltd. (present TOTO Ltd.)Manager of sales promotion group in Shikoku (TOTO)
General manager of sales promotion group (TOTO)
Executive officer, general manager of sales promotion group (TOTO)
Director, executive officer, general manager of sales promotion groupand sales control (TOTO)
Director, managing executive officer, responsible for the sales promotion
group (TOTO)
Director, senior managing executive officer, responsible for the sales
promotion group (TOTO)
Representative director, executive vice president, responsible for all sales
related departments (TOTO)
Representative director (TOTO)
Outside director of Daiken (present)
Advisor of TOTO LTD. (present)

Outside director

April 2000

Outside audit &supervisory board member

Full-time instructor, Faculty of
Economics, Gakushuin University
February 2002 Member of performance report project,
Accounting Standards Board of Japan
April 2003
Assistant professor, Faculty of
Economics, Gakushuin University
April 2008
Professor, Faculty of Economics,
Gakushuin University (present)
February 2010 Member of the Evaluation Committee forIncorporated Administrative Agency (independentadministrative institution), Ministry of FinanceActing chairman of the work group of theOrganization for Small and 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 of 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)

April 1979
April 1998

Shingo Ishizaki
Outside audit &supervisory board member

Joined Yamaichi Securities Co., Ltd.
Joined Merrill Lynch Japan Securities
Co., Ltd.
July 2001
Joined UFJ Capital Markets
Securities Co., Ltd. (present Mitsubishi
UFJ Morgan Stanley Securities Co., Ltd.)
October 2004 Joined Mizuho Securities Co., Ltd.
Executive Manager of Investment
Banking Group
April 2009Managing Executive Officer (Mizuho
Securities)
Kansai Investment Banking Group Leader
April 2010
Managing Executive Officer (Mizuho
Securities)
Kansai and Western Japan Investment
Banking Group Leader
June 2015
Special Adviser, Sekisui House, Ltd.
June 2015
Sekisui Plastics Co., Ltd.
Special Adviser
April 2018
System Integration Management Co.,Ltd.
President and Representative Director,
CEO (present)
June 2019
Outside audit & supervisory board
member of Daiken (present)

DAIKEN GROUP REPORT 2019

Data

Yuko Katsuo

Joined Daiken
Manager of Kyushu sales
Manager of Kinki sales
Assistant general manager of Seibu
sales control
April 2010
Assistant general manager of Tobu Juken
sales control
April 2011
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 engineeringbusiness and general manager of special
demand sales
June 2016
Director, managing executive officer
October 2017 General manager of engineeringbusiness, general manager of special
demand sales, and president of DAIKENHOME & SERVICE Co., Ltd.
April 2018
Director, senior managing executive
officer (present)
Responsible for sales in Japan (present)
March 2019 President of DAIKEN ENGINEERINGCORPORATION (present)

ESG Information

Joined Nanto Bank Co., Ltd.
Resigned Nanto Bank
Full-time instructor, Faculty of Management, Otemon Gakuin
University
Assistant professor of the same university
Advisor to the Organization for Small and Medium Enterprises andRegional Innovation (the Independent Administrative Institution)(present)
Outside audit & supervisory board member of Daiken
Assistant professor, Graduate School of Business Administration,
Faculty of Management, Otemon Gakuin University
Outside director of Daiken (present)
Professor, Graduate School of Business Administration, Faculty ofManagement, Otemon Gakuin University
General manager of the Venture Business Study Center of 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)

April 1981
April 2004
April 2006
April 2009

Vision and Strategy of Value Creation

Representative Director,
Senior Managing Executive Officer

Joined ITOCHU Corporation
Manager of wood materials and building
materials department (ITOCHU)
June 2009
Representative director of Daiken
April 2011
ITOCHU Corporation manager of forest
products and general merchandise andchemicals 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, generalmanager of overseas business, and generalmanager of the Tokyo office of Daiken
April 2016
Director and senior managing executive
officer
General manager of overseas andoverseas business and general managerof the Tokyo office
June 2016
Representative director, Senior managing
director and senior managing executive
officer
Responsible for overseas business andApril 2017
general manager of the Tokyo office (present)
June 2018
Director and senior managing executive
officer (present)
February 2019 Responsible for research and development,
information service, and business in Japan(production) (present)
June 2019
Responsible for IT and logistics reforms(present)

Foundation of Value Creation

April 1980
April 2003

40

ESG Information

S Social
Product Quality and Safety
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

Key initiatives

DAIKEN CORPORATION and the companies in the Daiken Group must understand that

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

ensuring product safety is as much a social responsibility as a corporate responsibility andposition it as a crucial management issue. We are working on the provision of products withsafety 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 tocustomers and to respond to accidents involving products.

Providing products that are safe, secure, and useful
to society
2 Establishment and strengthening of the internalorganization
1(restructuring organization, development of documentation, etc.)
3

Provision of information

Initiatives toprovide productsthat can be usedwith confidence●Strengthening of the product quality
and safety inspections●

Review of Quality Standards from theperspective of product safety●

Strengthening of purchasing
management●

Promotion of the implementation of
the user registration system(notes for correct use or handling requirements, etc.)

45Collection and disclosure of information on productaccidents
Report of product accidents(immediately report to relevant authorities under the laws and regulations)

6

Product recall (to prevent further incidents)

7

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

8

Disseminate information and operational assessment

Response in theevent of a productaccident

Initiatives asabove* Improve and maintain the system that can gather
customer information (end user information) incase of an emergency or product accident●

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

(thorough understanding of laws and regulations 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 departmentsʼ activities by 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

Executive officer in charge of quality assurance

Product Safety Action Plan

❶ Review
results❺ Awareness,
Implementation

Department responsible for product safety(Quality Assurance Department)

The Group

41

DAIKEN GROUP REPORT 2019

❷ Submit and review❹ Instruction forimprovement❸ Reporting

Executive officer in charge of crisis management❶ The department must review whether the operation is following the
Product Safety Action Plan (hereinafter referred to as the “Plan”)
that was established by the Daiken Group and submit the report ofits 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 crisis 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 shallprovide the instructions necessary for improvements of the Plan.
❺ The department responsible for product safety shall notify the instructions the entire Group to operate the modified Plan.

Promotion of CSR Procurement
The Daiken Group states that the Promotion of CSR procurement is one of the important commitments under the procurement
policy which was established in 2015. We aim to provide products and services meeting the expectations of our customers and for asustainable society in which people and the environment can coexist. Under these circumstances, we are implementing procurement
activities with the cooperation of our business partners based on the following fundamental concepts.

Foundation of Value Creation

Supply Chains

CSR Procurement Policy and Standards

Compliance with laws andregulations
2 Fair and even-handed transactions
3 Sharing excellent value
4 Promotion of green procurement
5 Promotion of CSR
procurement
6 Relationship of trust andco-prosperity

CSR Procurement Standards

Green Procurement Standards

Respect for human rights
Compliance with laws andregulations
3 Occupational safety andhealth4 Fair transactions
5 Information management
6 Coexistence with society

112

Environmental management
system
2 Chemical substancemanagement
3 Wood from legitimate
sources

Vision and Strategy of Value Creation

Procurement Policy
1

Suppliers

The Daiken Group has been carrying out the CSR questionnaire for suppliers
following the Procurement Policy and CSR Procurement Standards since fiscal
2016. We expanded the scope of the questionnaire in fiscal 2019 from four
plants in Japan to manufacturing subsidiaries in Japan in which 363 companies
subjected to Green procurement standards (235 companies in the previousyear) were targeted and carried out the questionnaire. Questionnaire results are
fed back to suppliers and for the companies where the evaluation points havebeen continuously low, we encourage them for correction and improvement.
With their cooperation, we will work together and promote procurement activities that consider CSR in the future.

ESG Information

Carry out the CSR questionnaire for the plants andmanufacturing subsidiaries in Japan

Sample of CSR questionnaire

Example of feedback to the CSR
questionnaire results

Customers

The Daiken Group holds an annual management policy briefing session tostrengthen relations with business partners, suppliers, and logistics companies. In fiscal 2019, the session was held in 11 venues across Japan and 245
people from 161 major business partners participated in the briefing session
held in Tokyo in June. From the Daiken Group, 39 people, including President
Okuda, executive officers, and department managers, attended. President
Okuda explained about the management policy in fiscal 2019 and the initiative for workstyle reform, etc. and then Marketing Department promoted new
products in fiscal 2019. After that, a meeting was held to exchange information between our business partners to deepen communication.

Data

Management policy briefing session to strengthen thepartnership with our business partners

Management policy briefing session

DAIKEN GROUP REPORT 201942

ESG Information

Human Resources
Basic Approach
In order for our employees to be able to feel Happy to be the members of our group, the Daiken Group aims to be acompany where every one can fully exercise their diverse values and abilities and has been promoting initiatives from theperspectives of Workstyle reform, Promotion of diversity, and Human resource development. By continuously promoting
initiatives from these three perspectives, we will create a virtuous cycle and lead to maximization of human resource value
through the improvement of individual performance and improvement of the entire groupʼs corporate value.

By proceeding with productivity
improvement and improving
employeesʼ affluent personal life,
enhance each oneʼs accomplishment
and job satisfaction and realize thecompanyʼs growth strategy.

Diverse human resources organicallyfuse their skills, ideas, and values
and use them as the companyʼsdriving force to develop new markets
and new businesses.

Improvementof corporate
value
Workstyle reform
Maximizationof human
resource value

Promotion ofdiversity

Human resource
development

Systematically proceed with thedevelopment of human resources
who will respond to the new market
expansion and the management
layer who will support the mediumto long-term growth strategies.

Promotion of diversity
To be able to respond to the stakeholdersʼ expectations and further
contribute to society, the Daiken Group aims to become a company
where human resources having a wide variety of characteristics
and values can fully exercise their abilities and keep creating newvalue and focuses on the promotion of diversity. Particularly inrecent years, we have held an exchange meeting as the place
to foster career awareness in order for women who are the mostfamiliar persons to be able to further exercise their abilities andimplemented skill improvement training intended for our employees
who had fewer opportunities for training as well as leader candidate
development training. Because the work-life balance is important in
womenʼs active participation, we also focus on providing support
for maintaining the balance. Regarding childcare, we distribute a
guidebook that focuses on the ways of working after returning towork and implement interviews with those who took childcare leave
with their superiorʼs present. Regarding nursing care, we publisheda guidebook that encourages advance preparations. Furthermore,
we continue to hold briefing sessions to promote co-workersʼ

Female employees meeting

43

DAIKEN GROUP REPORT 2019

understanding of the support system for work and family-lifebalance and keep Ikuboss declarations by the President, executive
officers, and all managerial positions to cultivate a corporate culture
where it is easy for everyone to play active roles. In the future, we will
promote initiatives for young employees to grow with a medium- tolong-term perspective and keep playing active roles by providing
opportunities for them to think about their careers.

Leader candidate development training

Work and nursing
care balance support
guidebook

Project to promote womenʼs active participation

Work and childcarebalance support
guidebook

Guidebook topromote formen to take achildcare leave

S Social

The past key initiatives

if they have a time constraint due to childcare, nursing care, etc.
With a view to breaking away from conventionalized behaviors
and improving the free and flexible power of ideas and self-management skills, we started an initiative for a casual day where
employees come to work in casual clothes every Friday in fiscal
2019 and have been putting effort into the promotion of a worklife balance from the perspective of awareness. In the future, wewill implement the improvement of not only the ways of working
but also the ways of taking a leave of absence and work on thesematters for everyone to have time to refresh themselves and exhibit their higher performance in work.

Establishment of the Daiken Workstyle reform declaration
Payment of the personal
development incentive
Established the Workstylereform promotion office

Setting of flexible working hours

Commencement of the
110 campaign

Realization of
Daiken workstyle reform

Lending smartphones

Introduced the hourly paid
leave system

Started automatic PC
shut-down
Ikuboss declarations

Ikuboss declarations

Established the Workstylereform promotion projectTransmitted the Presidentʼs message“Toward the realization of theworkstyle reform”

Female employees
meeting

Trial of the satellite office

Implementation of the Casual day

Ikuboss Guide

Human resource development

Training by rank

Department
head
class

Training for department
heads by theme
Training for new
department heads

Managerial
positionclass

Follow-up training forthe managerial position
New manager/
coaching training

Training by theme

Training by job type
Manufacturing technology

Enhancement of thedevelopment of the
management layer

Training toward the
expansion of the
focused markets

Basic training for
management

Manufacturing
manager training

Training for thosepromoted to G2/A3
ranks

Young
employees

Logical thinking training

Training to solve
manufacturing
problems

Step-up/follow-up training for
those who are in the first to
third year of their employment

Follow-up training foryoung manufacturing
employees

New employee
orientation (Basics andpractical operations)

Manufacturing
technology-related new
employee orientation

Sales skill
enhancement
training(Application)

Sales skill
enhancement
training(Basics)

Female manager
training
Female leader
candidatedevelopment training

Data

Middle level
Team
Leaderclass(Promotion of women’s
active participation)

Sales

Leadership theories
and practical training

Responsible
personclass

Training to solve manufacturing
problems

Senior management
candidate developmenttraining

New establishment/Expansion

Training for the persons who are exclusively in charge of focused markets

Under the principle that the development of autonomous humanresources is essential in accelerating growth strategies andrealizing sustainable corporate value improvement, we set training
aimed at acquiring a wide variety of knowledge and skills in asystematic manner according to service years, ranks, and job
types. In fiscal 2019, we newly implemented training specific tothe strengthening of sales skills and strengthened the capabilities
to propose plans. Amid the situation where changes in society willfurther accelerate, we will aggressively invest in human resourcesby expanding training by job type to acquire the expertisenecessary for the expansion of focused markets and the training
by theme to enhance development of the management layer who
will support medium- to long-term growth.

Key training structure

ESG Information

2015-

Training for the persons who are exclusively incharge of focused markets

Vision and Strategy of Value Creation

The Daiken Group promotes workstyle reform in order for everyone to be able to keep working with a feeling of rewards and job
satisfaction and to feel happy to work in our group. We established the workstyle reform promotion project under the declaration by the top management in 2015, restricted long working
hours by automatic PC shut-down before 7:00 a.m. and after
7:30 p.m., and launched a working team for each office organization to solve issues. By lending mobile PCs and smartphones,
flexible responses in the visiting destination became possible.
Other than project activities, we started the review meeting for
a new sales style as the workstyle reform specific to the sales
position where sales staff can continue their sales position even

Foundation of Value Creation

Workstyle reform

Basic training
for productknowledge

DAIKEN GROUP REPORT 201944

ESG Information

E Environment
Initiatives Based on The Fifth Medium-Term Management Plan (Fiscal 2017 - 2019)
Theme and content

Eco-friendly
products

Development of ecofriendly Number of new products five items/year
products that contribute to
reducing the environmental
burdenIntroduce carbon fixation by usingwood

Fixation through the
supply of recycled woodboardsVolume of carbon fixation (CO2 equivalent)
800,000 t-CO2/year

Reduce CO2* emissions fromenergy sources

Reduction of emissions
by the domestic
production sites

Discharge rate 62.5 (t-CO2/¥100 million)
or below

Contribution
for building a
low-carbon
society

Promote the 3Rs* to reduce thevolume of waste destined for final
disposal

E(CO2 emission factors from electricity generation isfixed at the value of fiscal 2014)8 items

998,000t-CO2/year(breakdown)
MDF: 859,000 t-CO2/
year
IB: 139,000t-CO2/year
55.0 (t-CO2/¥100
million)(CO2 emission factor forelectric power is fixed atthe value of fiscal 2014)

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

Total emissions 110,000 t-CO2 or below/
year

Reduction of emissions
from logistics andtransport divisions(Improved modal shift rateand loading rate)

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

Reduction of emissions
from sales andadministrative divisions(Thorough implementationof energy-saving measures)

CO2 emissions 1,500 t-CO2 or below

Promotion of recycle andconversion of waste into
valuables

Final disposal rate (ratio of volume disposed 7.6%of in landfill outside the company): 5% or
below

Material recycle ofconstruction waste wood

Ratio of old material: 90%

Use of wood biomassenergy (internal use)

Input amount of woody biomass energy
1,350×1012J
Use of fuel chip
95,000 t/year
Reduction of heavy oil (heat quantity
equivalent) 35,000 kl/year(CO2 emission factors from electricity generation
are fixed at the value of fiscal 2014)

100,600t-CO2(CO2 emission factors
from electricity generation
are fixed at the value offiscal 2014)50.2 kl/million ton-kilo

1,760t-CO2*Reduce, Reuse, and Recycle

Contribution
to creatinga recyclingorientedsociety

Introduce the cascading use ofwood

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

Procure wood in a biodiversity
friendly way

Contribution
for biodiversity

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

1,440×1012J
100,000 t/year
37,000 kl/year

11.3%

Coverage of applicable companies (consent
99%
acquisition rate)
100%

Identify, prevent, and minimize
environmental risks

Operation and continuous
improvement of environment
management system

Environmental accident/violation: 00

Environmental education

Industrial waste training sessione-learning by year
System operation

Completion of
implementation

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

DAIKEN GROUP REPORT 2019

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

90%

Strengthen cooperation with supply Dissemination and proper
management of green
chainsprocurement in the supply
chain

45

ResultFiscal 2019

Contribution for achieving sales
targets in the final year of themedium-term plan (fiscal 2019) byexpanding ecofriendly products
and their sales*CO2 emitted by the combustion of fuels
or the use of electricity or heat supplied
by a third party

Environment

Goal
Fiscal 2019

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

Introduced amanagement systemand started operation
with the new system

3

3

3

3

3

36

36

35

35

35

20

19

14

13

12

41

42

48

50

50

2016

2017

2018

Electricity

Heavy oil, etc.

100
80
60
40
20
0

2015
Biomass

Recycling of waste materials(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

2019

(Fiscal year)

Breakdown of waste processing
Final volume disposed of in landfill

8%

Simpleincineration

2%

Valuables

10%

RecyclingAmount ofwaste generated

90%

48,600 t
Use of heat25%

(reused as energy)

Use for materials

55%(reused as ingredients)

ESG Information

The Daiken Group aims to realize a recycling-oriented society and puts effort into recycling the waste, such as reusing defectives, generated in the manufacturing process
as product materials, using those that cannot be used for
product materials for heat. With these efforts, the amountof waste generated in fiscal 2019 was 48,600 tons and therecycling rate was 90%. We continue to further improve therecycling rate.

LNG

Vision and Strategy of Value Creation

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 greenhousegas emissions. We also installed our largest biomass boiler
at the Okayama plant in July 2016 leading to an increasein biomass energy to 50% of the total energy used in the
production sites in Japan for fiscal 2019. With these efforts,
we were able to reduce greenhouse gas emissions by 23%
compared with fiscal 2014.

Trends in the energy used in production sites in Japan（% ）Foundation of Value Creation

Initiatives for prevention of global warming

Environmental education

Data

To appropriately conduct waste management without legal violations from the perspective of strengthening environmental compliance and risk management, the Daiken
Group periodically holds the Basic Waste Management
Seminar by inviting an external lecturer. In fiscal 2019, a totalof 92 persons in charge of waste management from eachdepartment participated in the seminar. Also, we have been
continuously implementing the e-learning type training on
the Waste Management and Public Cleansing Law intended
for the employees with up to 5 years of employment every
year. We will establish appropriate waste management.

The scene of the Basic waste management seminar

DAIKEN GROUP REPORT 201946

ESG Information

Special feature

Pursue new possibilities of the industrial materials
business by comprehensively using wood in cooperation
with local communities
Our company was established and started wood processing in 1945, and from 1958, we have been manufacturing the woodfiberboard Insulation board for which wood chips, such as residual wood offcuts, are effectively used in order to fully use wood as theprecious resource at our flagship Okayama plant. We have been developing business activities centered on the industrial materials
business that uses the wood resource as the raw material, such as developing MDF in the overseas plants in Malaysia and New
Zealand.
By taking the opportunity of the 70th anniversary of its foundation in 2015, we upheld “Contribute to the building of a sustainable
society by efficiently using limited resources” as one of the elements in the significance of our existence philosophy for the long-term
vision GP25 in which our vision in 2025 was drawn, have been actively promoting the use of domestic timbers that are particularly
requested by the state policy, and pursing the possibilities of new use application development through the comprehensive use ofwood toward the expansion of the industrial materials business.
As one of these initiatives, we established the Nichinan Total Cascading Use of Wood commercialization study project in November
2016 with Nichinan, Tottori Prefecture, that has been actively putting effort into the forestry industry and the wood processing industry,
Nichinan Forestry Cooperative, and Orochi Co., Ltd., which is a local LVL manufacturer. As the first business project, we developed asoil improvement additive DW fiber and started proposing it in May 2017. Furthermore, as the second business project, we establishedNichinan Daiken Co., Ltd. in March 2019, which is a company to process veneers for LVL, and started new development.

First project

May 2017 Developed a soil improvement additive DW fiber and started proposing it

A soil improvement additive DW fiber is a soil improvement additive made of timber offcuts (wood chips) that are generated in
manufacturing LVL by Orochi Co., Ltd., using wood that the Nichinan forestry cooperative hewed out and that are fibrillated and towhich fulvic acid is added. It contributes to the greening of the soil and crop growth promotion, as well as post-disaster reconstruction,such as greening of the inclined plane after landslides and the regeneration of protective forest from tides and salty winds.
After about six months

Case of greening by DW fiber

Second project March 2019

Established Nichinan Daiken Co., Ltd., a company thatprocesses veneer for LVL

At Nichinan Daiken Co., Ltd., a plant will be newly established in
Nichinan and business to give rot-proof and ant-proof treatment toveneers to be used for LVL as the previous process for LVL to be
manufactured by Orochi Co., Ltd., will start. In the future, we willconsider introducing facilities for non-combustible LVL andnon-combustible wood, further develop use applications, and expand
the industrial materials business. With these business deployments, wewill enhance cooperation with local communities and contribute torevitalization of the local industry.

47

DAIKEN GROUP REPORT 2019

Soil improvement additive DW fiber

The scene of a signing ceremony for an agreement on theestablishment (The second person from the right is President Okuda)

E Environment

Regional precious wood resources will create value in various scenes
by fresh ideas, technologies, and partnerships.

Conservation of forests

Promotion of the useof domestic timber

Business base for total cascading of wood

Felled trees

By developing wood products
to which new value is added,
promote the use ofdomestically produced wood

Tree planting

Operation and management by the forest owner’s cooperative

Materials A, B

Materials C, D

Research instituteRegional development
Revitalization of the forest
products industry using local
resources will contribute to
the development of local
economy and employment
creation●●

Orochi Co., Ltd.

Wood fiber Chip manufacturing
plant
plant

Boiler●Development of tree
trimming andplanting techniquesand human resources
Utilization
development
Development of
products with highly
added value

Vision and Strategy of Value Creation

Appropriate management andoperation of forest resources
will grow healthy forests andcontribute to ecosystemconservation

Foundation of Value Creation

Development image of the total use of wood through regional cooperation

Use of renewable energy
ESG Information

Use residual wood offcuts oflumber manufacturing as thefuel for the biomass boiler
and fully and effectively use
the resource

Increase in the population

Greening promotion

Disaster restoration
DW fiber’s soil buffering
action will transform soil tothe environment appropriate
for plant growth and improvesalt balance

DW fiber will promote soil
aggregation, help roots grow,and promote crop growth

DAIKEN GROUP REPORT 2019

Data

DW fiber’s excellent
water-holding property andwater permeability will improve
plant growing environment andpromote greening

Promotion of crop growth

48

Data

Summary of BusinessIndustrial materials business

While achieving increased revenues due to the new consolidation effect of the MDF plant in New Zealand, profits declined due to the
influences of the raw material price increase and troubles in procurement
Sales breakdown bybusiness sector

Net sales

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

80,0005,000

60,00033.8%

56,408 55,354

61,843（%）
Operating profit
Operating profit ratio

10.0

4,000

8.0
3,326

3,000

6.0
5.9

40,000

1,955

2,000

3.5

20,000

1,000

4.0

1,132

2.0

1.8
0

2017

2018

2019

0

(Fiscal year)

Production plants
Okayama plant
Takahagi plant

2017

2018

2019

0.0

Subsidiaries part of the Group
Dai-tac Corporation
Aizu Daiken Corporation.
DAIKEN NEW ZEALAND LIMITED (New Zealand)
DAIKEN SOUTHLAND LIMITED (New Zealand)
DAIKEN SARAWAK SDN. BHD. (Malaysia)
DAIKEN MIRI SDN. BHD. (Malaysia)
Nichinan Daiken Co., Ltd.
C&H Co., Ltd.
Eco-Techno Co., Ltd.

(Fiscal year)

Building materials businessAlthough revenues increased by flooring, door, and acoustic products, etc., profits declined due to the increases in raw materials
prices and logistics costs as well as system problems.
Sales breakdown bybusiness sector

Operating profit/Operating profit ratio

Net sales(¥million)

100,000

87,260 86,853

89,48580,00048.9%

Operating profit
Operating profit ratio （%）(¥million)

5,000
4,500

10.0

4,598

4,000
3,000

40,0002,000

20,000

1,000

0

2017

2018

2019

0

(Fiscal year)

Subsidiaries part of the Group

8.0

3,189
60,000

Production plants
Inami plant
Mie plant

6.0
5.3

5.2

4.0

3.6

2017

2018

2019

2.0

Daifit Co., Ltd.
Dai-wood Corporation
Setouchi Kakoh Co., Ltd.
Toyama Juki Co., Ltd.
DAIKEN Industries (Ningbo) Corporation (China)
DAIKEN (Shanghai) Corporation (China)
PT. DAIKEN DHARMA INDONESIA (Indonesia)

0.0(Fiscal year)

Engineering businessProfits increased by the expansion of renovation business and revenues increased by the increased profitability of interior finishingwork for office buildings, etc.
Sales breakdown bybusiness sector

9.9%Operating profit/Operating profit ratio

Net sales(¥million)(¥million)

40,0002,000

30,0001,500

18,06320,00016,4581,000

13,612
10,000

0

500

2017

2018

(Note) Other Daiken businesses account for 7.4% in addition to the above.

49

DAIKEN GROUP REPORT 20192019

(Fiscal year)

0

Operating profit（%）
Operating profit ratio

8.0

5.6

3.1
427

2017

3.2

1,015 4.0

528

2018

6.0

2.0

2019

0.0

(Fiscal year)

Subsidiaries part of the GroupDAIKEN ENGINEERING CORPORATION
Koukou Sangyo Corporation
Sankei Corporation
DAIKEN HOME & SERVICE CORPORATION
Smileup Co., Ltd.
PAC SYSTEM Co., Ltd.

Forecasts for fiscal 2020

Regarding sales of the industrial materials business, there was a

In fiscal 2020, the building materials business is forecasted to post

decrease in the shipping volume associated with the suspension¥82,900 million, up 34.1%. We will increase sales by strengtheningof orders for Dai-Lite and Dai-Lotone due to the influence ofproposals of tatami facing and wall materials, such as Dai-Litetroubles in procurement but due to the new consolidation effectbase materials, in public and commercial buildings, in addition toof adding an MDF plant “DAIKEN SOUTHLAND LIMITED” in New

the effect of new consolidation of North American industrial

Zealand in April 2018, revenues increased. Regarding profits, wematerials business that will be newly developed from fiscal 2020.

Foundation of Value Creation

Commentary and results for fiscal 2019

could not fully absorb the increases in raw material prices forwood chips and logistics costs through streamlining and cost
reductions. Besides, we also incurred the cost caused by the2019, net sales amounted to ¥61,843 million (up 11.7%
year-on-year), and operating profit amounted to ¥1,132 million(down 42.1% year-on-year).

Commentary and results for fiscal 2019

Forecasts for fiscal 2020

Regarding sales of the building materials business, there wereIn fiscal 2020, the building materials business is forecasted to post

influences, such as delay in delivery caused by the ordering and¥93,800 million, up 4.8%. While a decrease in new housing starts

order receiving system problems, but because sale of new

in Japan is expected after the consumption tax increase that is

products, soundproof related products, and flooring was on ascheduled in October 2019, we will increase our share in the newgood note and sales of Omoiyari door, an interior door for elderly

home market and expand in the public and commercial buildings

facilities, kindergartens, and childcare facilities, expanded,

including the new consolidation of solid flooring materials business.

Vision and Strategy of Value Creation

troubles in procurement and profits declined. As a result, in fiscal

revenues increased. Regarding profits, we strived to secure profits
by streamlining and expanding sales of the new products against
ESG Information

the increases in raw materials prices and logistics cost; however,
we could not fully absorb all of these increases in this fiscal year. In
addition, we incurred the cost caused by system problems, andprofits declined. As a result, in fiscal 2019, net sales amounted to¥89,485 million (up 3.0% year-on-year), and operating profit
amounted to ¥3,189 million (up 30.6% year-on-year).

Forecasts for fiscal 2020

Regarding engineering business, because orders of interior

In fiscal 2020, the engineering business is forecasted to post net

finishing work for buildings and condominiums mainly in thesales of ¥19,600 million, up 8.9%. Because the order receiving

Tokyo metropolitan area expanded and sales of condominium

status for interior finishing work for office buildings has beenrenovation business were on a good note, revenues increased.

going well and with the new consolidation of a renovation

Regarding profits, we responded to the surge in personnel costs

company and strengthening of condominium renovations, we willcaused by the shortage of skilled craftsmen by securing skilled

expand sales.

Data

Commentary and results for fiscal 2019craftsmen and optimizing management for each construction siteand profits increased. As a result, in fiscal 2019, net sales were¥18,063 million (up 9.8% year-on-year), and operating profit was¥1,015 million (up 92.3% year-on-year).

DAIKEN GROUP REPORT 2019

50

Data

Highlight of Data
Financial indicators
Net sales/Gross profit margin

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

200,000

168,833

168,141

168,841

170,581

182,962100(¥million)（%）

10,000

10.0

8,532

150,000

75

100,000

50

8,000

4,000

50,000

24.2

25.8

25.0

23.9

25

5,733

5,586

6,000

22.0

8.0

7,519

5.1

3,452

4.0

4.4

3.3

2,000

6.0

3.1

2.0

2.0

0

2015

Net sales

2016

2017

2018

2019

0

Gross profit margin

（%）

9,033

10.0

8,760

8,000

0

2.8

3.1

2015

2016

8.0

3.7
2.0

2017

2018

2019

0

（%）

132,171140.776

6.9

3.4

6.0

4.5

2015

4.0

4.0

2.0

2016

2017

2018

2019

80

74
64

40

37.5

30.1

0

（%）

74

50

30.3

2016

2017

2018

2019

DAIKEN GROUP REPORT 2019

2015

2016

2017

60,000

5.0

2019

2018

0
(Fiscal year)

ROE (Return on equity)

20,000（%）

60

46,61450,00040,00058,90454,24440,57329.9

50

40,789

31.3

40
35.3

38.5

36.8

30
20
10

10,000
0

2015

2016

2017

0

2019

2018

(Fiscal year)

Shareholder equity ratio(¥million)(¥)

70,00060,54560,00030

40,00020

30,000032,931
1,355

37,842

2,154

2,061

3,000
2,500

2,512

2,000
1,500

1,570

1,000
500

10,00003,500

56,03949,67550,000(Fiscal year)

Dividend payout ratio
Cash dividends per share
We set a target of our dividend payout ratio of 30% or more.

51

40

10

2015

7.8

7.0

(¥million)

20,000

20

0

10.0

11.7

Market capitalization/Stock price at the end of the period

42.4

50
30.4

11.7

Shareholder equity

(¥)

33.6

0

(Fiscal year)

Cash dividends per share/Dividend payout ratio

60

1,500

ROA (Return on assets)

Total assets

2,736

30,00030,000
0

10.0
8.0

6.4

90,00060,00015.0

Shareholder equity/Shareholder equity ratio

160,158

120,000

4,402

9.8

(Fiscal year)(¥million)

130,315

20.0

3,988

Profit attributable to owners of parent

180,000

135,596

4,500

4.0

5.1

Total assets/ROA (Return on assets)

150,000

（%）

5,895

6,000

Ordinary profit ratio

Ordinary profit(Fiscal year)

Operating profit ratio(¥million)

3,000

5.4

2,000

0

2019

2018

6.0

5,281

4,000

2017

5,132

6,838
4,648

2016

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

10,0002015

Operating profit

Ordinary profit /Ordinary profit ratio

6,000

0

(Fiscal year)

2015

2016

Market capitalization

2017

2018

0

2019 (Fiscal year)

Stock price at the end of the periodNumber of employees in Japan and overseas

Input of woody biomass energy/Percentage of use*2,3
Input（×1012J）(Persons)

4,000
3,000

3,191

3,060

3,071

3,073

890

829

826

825

1,500

1,012
1,000

2,301

2,231

2,245

2,248

2,275

2015

2016

2017

2018

2019

Number of employees in Japan

1,140

40.8

42.3

1,370

1,433

1,440

48.2

49.6

50.1

0

(Fiscal year)

Number of overseas employees

2015

2016

2017

Emissions (1,000 t-CO2)

2019

116.1

80

49.8

100

53.9

40

100

68.7

113.2
67.3

102.3
60.6

97.9
57.4

96.6
52.8

50

2015

2016

2017

2018

0

2019

(Fiscal year)

Acquisition rate of paid holidays

1.0

1.45

1.06

1.15

2018

2019

Sales per unit

Percentage of amount in landfill (%)

8.2

7.6

1.02

10

7.2

60

1.22

7.5

8

5.7

1.20

6

40

0.82
20

0.5

42.2

47.5

49.6

48.8

48.6

2015

The Daiken Group

2016

2017

2018

Manufacturing average

0

2019

(Fiscal year)

All-industry average

4
2

0.42
0

0

(Fiscal year)

Amount generated (1,000 tons)

1.66

1.06
0.78

2017

ESG Information

1.5

2016

80

1.83
1.63

50

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

2.0

1.61

2015

Greenhouse gas emissions

Rate of lost-worktime injuries*2

1.66

75

25

20
0

0

(Fiscal year)

Sales per unit (t-CO2/¥100 million)

150

51.8

2018

Greenhouse gas emissions/Sales per unit*2,4,5

100

49.5

50

Percentage of use

Input of woody biomass energy

（%）

49.5

75

25

500

Acquisition rate of paid holidays*1

60

1,162

Vision and Strategy of Value Creation

0

100

3,287

2,000

1,000

Percentage of use（%）

2,000

Foundation of Value Creation

Nonfinancial indicators

2015

2016

Amount of waste generated

2017

2018

2019

0

(Fiscal year)

Percentage of waste disposed of in landfills*1. The data for fiscal 2015 include four subsidiaries absorbed in the absorption-type merger in April 2015.
*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

Data*2. Total value at the Daiken Groupʼs production bases in Japan.

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 generated.

For more 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 2019

52

Data

Ten-Year Financial Summary(¥million)

6,000
Profit attributable to owners of parent
ROE (Return on equity)

5,000

4,000

3,000

2,000

4.1

3.8
2.6

1,000

0

1.6

1,375

511

874

(¥million)

Fiscal 2010

Fiscal 2011

Fiscal 2012

Fiscal 2013

Net sales

140,936

141,506

151,209

158,153

Cost of sales

104,325

102,345

113,189

119,121

Gross profit

36,61039,161

38,02039,031

Selling, general and administrative expenses

33,60034,81233,47734,327

Operating profit

3,010

4,349

4,542

4,703

Ordinary profit

2,819

4,373

4,600

5,669

Profit before income taxes

79

3,464

1,893

2,373

Profit attributable to owners of parent

511

1,375

874

1,318

ROE (Return on equity)

1.6%

4.1%

2.6%

3.8%

ROA (Return on assets)

2.3%

3.6%

3.8%

4.4%

Gross profit margin

26.0%

27.7%

25.1%

24.7%

Selling, general and administrative expenses ratio

23.8%

24.6%

22.1%

21.7%

Operating profit ratio

2.1%

3.1%

3.0%

3.0%

Ordinary profit ratio

2.0%

3.1%

3.0%

3.6%

Cash flows from operating activities

3,141

4,438

9,074

2,624

Cash flows from investing activities(3,286)(2,618)(3,218)(2,033)

Cash flows from financing activities

1,135(7,095)(1,929)224

Free cash flows

(145)

1,819

5,856

591

Capital investments

2,785

3,765

2,758

4,036

Depreciation

4,197

4,574

4,217

4,107

R&D expenses

1,471

1,464

1,470

1,453

Total assets

123,862

115,969

125,469

131,618

Net assets

36,66336,83936,94939,870Shareholder equity

33,21333,30633,56936,002

Shareholder equity ratio

26.8%

28.7%

26.8%

27.4%

Interest-bearing debts

39,40733,72032,86534,506

1.19

1.01

0.98

0.96

Book value per share (BPS) (¥)

1,302.61

1,327.08

1,337.57

1,434.53

Earnings per share (EPS) (¥)

20.04

54.41

34.83

52.53

Dividend per share (¥)

25.00

31.25

37.50

37.50

Dividend payout ratio

124.8%

57.4%

107.7%

71.4%

D/E ratio (multiple)

638

786

941

941

Market capitalization

32,76438,65035,88832,249

Employees (Consolidated) (Persons)

3,255

3,189

3,183

3,194

Total dividend(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 for ease 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)

53

1,318

DAIKEN GROUP REPORT 2019

（％）
15.0

11.7

12.5

9.8

10.0

7.8
7.0

7.0

5,895
5,132

7.5

4,402
5.0

3,988
2,546

Foundation of Value Creation

11.7

2,736
2.5

Fiscal 2016

Fiscal 2017

Fiscal 2018

Fiscal 2019180,392

168,833

168,141

168,841

170,581

182,962

137,693

131,657

127,452

125,201

127,946

139,289

42,69937,17540,68943,64042,63543,67339,12133,72235,10235,10835,11637,940

3,577

3,452

5,586

8,532

7,519

5,733

5,025

4,648

5,281

9,033

8,760

6,838

4,617

1,373

6,875

7,247

8,342

7,301

2,546

2,736

3,988

5,132

5,895

4,402

7.0%

7.0%

9.8%

11.7%

11.7%

7.8%

3.8%

3.4%

4.0%

6.9%

6.4%

4.5%

23.7%

22.0%

24.2%

25.8%

25.0%

23.9%

21.7%

20.0%

20.9%

20.8%

20.6%

20.7%

2.0%

2.0%

3.3%

5.1%

4.4%

3.1%

2.8%

3.1%

5.4%

5.1%

3.7%

9,299

6,016

10,566

9,158

10,052(5,168)(4,072)(5,972)(4,201)(2,711)(15,079)(1,054)(2,635)(5,486)(6,734)(6,342)

11,165

4,494

5,227

43

6,364

6,447

(5,027)

3,274

3,206

3,508

4,757

3,081

6,586

3,990

4,093

4,068

3,506

3,768

4,134

1,342

1,349

1,430

1,477

1,551

1,592

135,890

135,596130,315132,171

140,776

160,158

41,41944,984

43,83349,08656,97961,741

37,15440,57340,78946,61454,24458,904

27.3%

29.9%

31.3%

35.3%

38.5%

36.8%

34,59934,20431,43826,33821,95230,784

0.93

0.84

0.77

0.57

0.40

0.52

1,480.47

1,669.47

1,692.28

1,933.99

2,250.58

2,264.10

101.46111.70164.67212.96244.60174.55

37.50

37.50

50.00

64.00

74.00

74.00

37.0%

33.6%

30.4%

30.1%

30.3%

42.4％

941

914

1,210

1,542

1,783

1,925

35,26032,93137,842

49,67560,54556,039

3,141

3,191

3,060

3,071

3,073

3,287

DAIKEN GROUP REPORT 2019

Data

2.8%
9,663

ESG Information

Fiscal 2015

Vision and Strategy of Value Creation

0

Fiscal 2014

54

Data

Financial Statements

Consolidated Balance Sheet(¥million)(¥million)

Previous
consolidated
fiscal year

Current
consolidated
fiscal year

Previous
consolidated
fiscal year

Current
consolidated
fiscal year

(March 31, 2018)(March 31, 2019)(March 31, 2018)(March 31, 2019)

Liabilities

AssetsCurrent liabilities

Current assets
Cash and deposits

10,767

16,865

Notes and accounts payable-trade20,62022,902

Notes and accounts receivable-trade
Electronically recorded monetaryclaims-operating
Securities

40,53343,012

Electronically recorded obligations-operating

5,778

7,671

7,499

Short-term loans payable

5,634

5,929

−

15

Current portion of bonds−

400

Merchandise and finished goods

9,126

12,009Current portion of long-term loans payable

2,963

3,414

Work in process

2,996

3,687

Lease obligations

Raw materials and supplies

4,677

5,667

Other

2,153

Allowance for doubtful accounts
Total current assets

6,985

38

37

Accounts payable-other

21,08322,526

2,915

Income taxes payable

603

2,021

(110)

(120)

Accrued consumption taxes

397

60

77,13091,553

2,198

2,120

Provision for bonuses

959

850

Other

3,754

4,002

64,032

71,938

Bonds payable

10,40010,000Long-term loans payable

2,814

10,939

101

62

1,967

1,342

Provision for product warranties

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

8,099

10,744

Total current liabilities

Machinery, equipment and vehicles, net

10,946

13,344Non-current liabilities

Land

13,555

13,735

106

70

2,124

1,416

Lease obligations

Leased assets, net
Construction in progress
Other, net

2,014

2,009

Deferred tax liabilities

Total property, plant and equipment

36,84741,321

Provision for product warranties
Net defined benefit liability

Intangible assets

919

465

3,415

3,508

Goodwill

149

4,473

Negative goodwill

33

23

Software

1,938

1,619

Other

114

137

Other

491

281

19,764

26,478

2,580

6,375

83,797

98,416

Investment securities

19,631

16,761

Net defined benefit asset

2,331

1,795

370

513

1,822

1,795

Capital stock

13,15015,300Capital surplus

11,943

14,071Retained earnings

23,00725,507

Treasury shares(1,430)(1,418)

Total shareholdersʼ equity

46,67053,460

Accumulated other comprehensive income
Valuation difference on available6,897
for-sale securities
Deferred gains or losses on hedges
22

5,161

Foreign currency translation adjustment

245

(176)

Remeasurements of defined benefit plans
Total accumulated othercomprehensive income
Non-controlling interests

409

326

7,574

5,444

2,734

2,837

Total net assets

56,97961,741

Total liabilities and net assets

140,776

160,158

Total intangible assets

Total non-current liabilities
Total liabilities

Investments and other assets

Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets(43)
24,11263,540(34)
20,831
68,528Deferred assets
Bond issuance cost

105

75

Total deferred assets

105

75

140,776

160,158

Total assets

55

DAIKEN GROUP REPORT 2019

Net assets
Shareholdersʼ equity132Consolidated Statements of Income
Current
consolidated
fiscal year

Previous
consolidated
fiscal year(¥million)
Current
consolidated
fiscal year

(April 1, 2018-(April 1, 2017-(April 1, 2018-

March 31, 2019)

March 31, 2018)

March 31, 2019)

Net sales

170,581

182,962

Profit

6,023

4,597

Cost of sales

127,946

139,289

Other comprehensive income

Gross profit

42,63543,673(1,738)35,11637,940

Valuation difference on availablefor-sale securities

2,135

Selling, general and administrative expenses
Operating profit

7,519

5,733

Deferred gains or losses onhedges(57)

103

Interest profit

66

63

Foreign currency translation
adjustment

617

(453)

Dividend income

427

454

Re-measurements of defined
benefit plans, net of tax

1,019

(82)

Rent income

195

178

Dividend income of life insurance

34

48

0

(0)

Amortization of negative goodwill
Share of profit of entities accounted
for using equity method
Exchange gain

10

10

Share of other comprehensive
income of entities accounted forusing equity method

47

52

Total other comprehensive
income3,714(2,170)360

39Comprehensive income

9,738

2,427

Reversal of allowance for doubtful accounts

Comprehensive income
attributable to owners of parent

9,414

2,272

Comprehensive income
attributable to non-controllinginterests

324

154

Non-operating profit

−

1

524

659

1,666

1,506

Interest expenses

191

161

Sales discounts

129

128

Loss on sales of accounts receivable

17

7

Miscellaneous expenses

86

103

Miscellaneous profit
Total non-operating profit
Non-operating expenses

Total non-operating expenses
Ordinary profit

424

401

8,760

6,838

(breakdown)

Vision and Strategy of Value Creation(April 1, 2017March 31, 2018)

Foundation of Value Creation(¥million)
Previous
consolidated
fiscal year

Consolidated Statements ofComprehensive Income

Extraordinary income
423

30

Gain on sales of investment securities

16

165

Compensation income−

953

Total extraordinary profit

440

1,149

ESG Information

Gain on sales of non-current assets

Extraordinary losses
413

Loss on retirement of non-current assets

228

220

Impairment loss

421

−

2

104

200

−

Compensation payments

−

347

Other

1

0

Total extraordinary losses

858

686

Profit before income taxes

8,342

7,301

Income taxes – current

1,065

2,195

−

681

Loss on valuation of investment securities
Provision for product warranties

Income taxes in the past fiscal year
Income taxes – deferred

1,253

(172)

Total income taxes

2,318

2,703

Profit

6,023

4,597

Profit attributable to non-controlling interests

128

195

Profit attributable to owners of parent

5,895

4,402

Data

Loss on sale of non-current assets

DAIKEN GROUP REPORT 2019

56

Data

Financial Statements

Consolidated Statements of Changes
in Net Assets(¥million)

Consolidated Statements of CashFlows(¥million)

Previous
consolidated
fiscal year

Current
consolidated
fiscal year

Previous
consolidated
fiscal year

Current
consolidated
fiscal year

(April 1, 2017March 31, 2018)(April 1, 2018March 31, 2019)(April 1, 2017March 31, 2018)(April 1, 2018March 31, 2019)

8,342
3,768
421
26
228
(419)
(16)
2
35

7,301
4,134
−
29
220
(17)
(165)
104
475

Cash flows from operating activities

Shareholdersʼ equity

Profit before income taxes
Capital stock
Balance at beginning of current period
Issuance of new shares
Balance at end of current period

Depreciation

13,150−13,15013,1502,149
15,300Capital surplus
Balance at beginning of current period
Disposal of treasury shares

11,943

11,9432,117
10
14,071Retained earnings
Balance at beginning of current period
Dividends of surplus
Profit attributable to owners of parent
Balance at end of current period

18,896(1,783)
5,895
23,00723,007(1,902)
4,402
25,507(1,430)(0)(1,430)(0)12(1,418)Treasury shares
Balance at beginning of current period
Purchase of treasury shares
Disposal of treasury shares
Balance at end of current period(1,430)Total shareholdersʼ equity
Balance at beginning of current period
Issuance of new shares
Dividends of surplus
Profit attributable to owners of parent
Purchase of treasury shares
Disposal of treasury shares
Balance at end of current period

Amortization of bond issuance cost
Loss on retirement of non-current assets
Loss (gain) on sales of non-current assets

11,943Issuance of new shares
Balance at end of current period

Impairment loss

42,559−(1,783)
5,895
(0)

−

46,67046,6704,267(1,902)
4,402
(0)
22
53,460Loss (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 bonuses
Increase (decrease) in provision for productwarranties
Increase (decrease) in net defined benefit
liability
Interest and dividend income
Interest expenses
Foreign exchange losses (gains)

Valuation difference on available-for-salesecurities
Balance at beginning of current period
Net changes of items other than shareholdersʼ equity, net
Balance at end of current period(5,457)(2,438)Decrease (increase) in inventories(1,311)(3,914)

Increase (decrease) in notes and accounts
payable-trade
Decrease (increase) in consumption taxes
refund receivable
Increase (decrease) in accrued consumption
taxes

4,972

5,352

(75)

(368)

(310)

(336)

Other

1,483
10,311494(189)(1,457)
9,158

1,117
11,143517(161)(1,446)
10,052

Purchase of property, plant and equipment(3,876)(6,932)

Proceeds from sales of property, plant andequipment

1,809

40
(5)

小計

Cash flows from operating activities

Purchase of investment securities(54)

Proceeds from sales and redemption of
investment securities
Purchase of shares of subsidiaries resulting inchange in scope of consolidation

228

466

−

(8,237)(818)(2,711)(412)(15,079)

(630)

315

4,921
(5,000)400(4,143)(43)−−−
12,200(3,623)
(39)
4,267

97

22

(75)

110

22

132

(194)

245

439

(421)

245

(176)

Other

(609)

409

1,019

(82)

409

326

4,055
3,518

7,574
(2,129)

7,574

5,444

Total accumulated other comprehensive income
Balance at beginning of current period
Net changes of items other than shareholdersʼ
equity, net
Balance at end of current period

Balance at beginning of current period

261
2,734

2,734
102
2,837

Total net assets−

56,9794,267(1,902)
4,402
(0)
22

Net changes of items other than shareholdersʼ
equity, net

3,780(2,026)

Balance at end of current period

56,97961,741

Balance at beginning of current period
Issuance of new shares
Dividends of surplus
Profit attributable to owners of parent
Purchase of treasury shares
Disposal of treasury shares

57

DAIKEN GROUP REPORT 2019

Cash flows from financing activities
Net increase (decrease) in short-term loans
payableProceeds from issuance of bonds
Redemption of bonds
Proceeds from long-term loans payable
Repayments of long-term loans payable
Repayments of finance lease obligations
Proceeds from share issuance
Proceeds from share issuance to noncontrolling shareholders
Purchase of treasury shares
Dividends paid to non-controlling interest

2,472

Balance at end of current period

Cash flows from investing activities

Cash dividends paid

Non-controlling interests
Net changes of items other than shareholdersʼ
equity, net

49,086−(1,783)
5,895
(0)

(517)
161
64

Cash flows from investing activities

Remeasurements of defined benefit plans
Balance at beginning of current period
Net changes of items other than shareholdersʼ
equity, net
Balance at end of current period

629

(494)
191
17

6,897
(1,735)5,161

Foreign currency translation adjustment
Balance at beginning of current period
Net changes of items other than shareholdersʼ
equity, net
Balance at end of current period

(562)

(541)

(52)

Income taxes paid

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

(546)

(47)

Interest expenses paid

4,762
2,135
6,897

0
(76)

Share of (profit) loss of entities accounted forusing equity method
Decrease (increase) in notes and accounts
receivable-trade

Interest and dividend income received
Accumulated other comprehensive income

238Cash flows from financing activities

−

9

(0)
(1,783)(62)(6,342)(0)(1,902)(60)
11,165188(40)

Effect of exchange rate change on cash andcash equivalents
Net increase (decrease) in cash and cash
equivalents
Cash and cash equivalents at beginning of
period293

6,097

10,474

10,767

Cash and cash equivalents at end of period

10,767

16,865

Stock Information (as of March 31, 2019)

Total number of authorized shares

79,643,600

Total number of shares issued

27,080,043

Number of shareholders

（%）
100

3,942 shareholders

Shareholder registry administrator

Sumitomo Mitsui Trust Bank, Limited
80

Major shareholders
Ownership
ratio (%)

9,103,100

35.0

Sumitomo Mitsui Banking Corporation

986,980

3.8

SUMITOMO LIFE INSURANCE COMPANY

931,200

3.6

Japan Trustee Services Bank Ltd. (Trust Account)

824,400

3.2

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

811,200

3.1

DAIKEN CORPORATION Trading-Partner
Shareholding Association

778,000

3.0

Sumitomo Mitsui Trust Bank, Limited

688,000

2.6

Sumitomo Forestry Co., Ltd.

638,200

2.5

Marubeni Corporation

564,388

2.2

Nippon Life Insurance Company

545,669

2.1

ITOCHU Corporation

60

0.69%

0.70%

0.31%

4.26%

4.26%

3.93%

6.75%

7.48%

6.15%

15.55%

14.60%

13.96%

33.03%

30.11%

29.43%
Securities companies
Treasury stock
Foreign institutions and others

40

Individuals and others
Financial institutions
Other Japanese companies

20(Note) 1. DAIKEN CORPORATION is in possession of 1,063,389 treasury shares.
However, the Company is excluded from the above list of major shareholders.
2. The ownership ratio is calculated excluding the treasury stock.

0

39.72%

201742.85%

201846.22%

Vision and Strategy of Value Creation

Number of
SharesNameFoundation of Value Creation

Breakdown of shares by type ofshareholder

Stock information

2019 (End of the period)

Trend of stock price/market capitalization/PER/PBR (for last 10 years)
605

560

496
386

300

358

327

378

352

322

ESG Information

400

Marketcapitalization(¥100 million)

329

200

100

TOPIX

Stock price of DAIKEN CORPORATION

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019 (Fiscal year)

High (¥)

1,385

1,615

1,635

1,450

1,530

1,635

2,050

2,349

3,150

2,844

Low (¥)

745

885

1,045

830

1,135

1,180

1,130

1,918

1,950

1,747

Stock price atthe end of theperiod (¥)

1,285

1,540

1,430

1,285

1,405

1,355

1,570

2,061

2,512

2,154

PER (multiple)

64.14

28.30

41.06

24.46

13.85

12.13

9.53

9.68

10.27

12.34

PBR (multiple)

0.99

1.16

1.07

0.90

0.95

0.81

0.93

1.07

1.12

0.95

Data

* Figures of stock price of DAIKEN CORPORATION and TOPIX are indexed, based on the data of closing prices on March 31, 2009=100.

0(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 figures were also consolidated retrospectively for ease of comparison.

DAIKEN GROUP REPORT 2019

58

Data

Company Information (as of July 1, 2019)
Company name

DAIKEN CORPORATION

Registered Head Office

1-1, Inami, Nanto City, Toyama, JapanFounding

September 26, 1945

Operational Headquarters

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

Capital stock¥15,300,000,000

Tokyo Office

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

Stock exchange listings

The first section of Tokyo
Stock Exchange

Major sales offices

Security code

7905

Sapporo, Sendai, Tokyo, Saitama, Kanazawa,
Niigata, Nagoya, Osaka, Hiroshima, Takamatsu,
Fukuoka and Singapore

Setting day

March 31

Production Plants

General meeting ofshareholders

June

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

Takahagi plant

In Japan
TDY Sapporo
Daifit Co., Ltd.

Inami plantTokyo office

Nichinan Daiken Co., Ltd.

Daiken R&D center

Aizu Daiken Corporation.
Toyama Juki Co., Ltd.
Eco Techno Co., Ltd.
TDY Kanazawa
Koukou Sangyo Corporation

Dai-tac Corporation

Sankei Corporation
TDY Tokyo
PAC SYSTEM Co., Ltd.

Okayama plant
TDY Osaka

TDY Nagoya

Mie plant

TDY Hiroshima
TDY Takamatsu
TDY Fukuoka

C&H Co., Ltd.

DAIKEN HOME & SERVICE CORPORATION
Smileup Co., Ltd.

59

DAIKEN GROUP REPORT 2019

Dai-wood Corporation
Operational headquarters
Osaka office

Setouchi Kakoh Co., Ltd.

DAIKEN ENGINEERING CORPORATION

ReformQ Co., Ltd.

Production baseIndustrial Materials Business

Building Materials BusinessEngineering Business

TDY Collaboration Show RoomYou can see products from three companies in the same place: Daikenʼs floorings, interior building materials
such as doors, TOTOʼs kitchens and bathrooms, and YKK APʼs windows and exteriors.

CIPA Lumber Co.Ltd.
(Delta, British Columbia, Canada)

Foundation of Value Creation

Subsidiaries part of the Group

Overseas
Vision and Strategy of Value Creation

DAIKEN (Shanghai) Corporation(Shanghai City, China)

PACIFIC WOODTECH CORPORATION(Burlington, Washington, the U.S.A.)

DAIKEN Industries (Ningbo)
Corporation(Zhejiang Province, China)

ESG Information

Singapore branch

DAIKEN MIRI SDN.BHD.
(Sarawak State, Malaysia)

Indonesia office

PT.DAIKEN DHARMA INDONESIA(Jawa Timur Province, Indonesia)
DAIKEN SARAWAK SDN.BHD.
(Sarawak State, Malaysia)

Data

DAIKEN SOUTHLAND LIMITED(Mataura Gore City, New Zealand)

DAIKEN NEW ZEALAND LIMITED(Rangiora City, New Zealand)

DAIKEN GROUP REPORT 201960

DAIKEN GROUP REPORT 2019

DAIKEN GROUPREPORT 2019

Toward the future going beyond the functions of yesterday

DAIKEN CORPORATIONHead Office
14F Nakanoshima Festival Tower West,3-2-4 Nakanoshima, Kita-ku, Osaka 530-8210
Issued in September 2019.

DAIKEN CORPORATION