DAIKEN GROUPREPORT 2021
Integrated Report

DAIKEN CORPORATIONCorporate Message

Toward the future exceeding
the functions of yesterday
Since its establishment, the Daiken Group has developed a multitude of products
by capitalizing on limited resources and listening to our customers’ needs.
Today we have evolved into a company where our e orts have accrued to provide
first rate building materials and comfortable spaces for our customers.
We will continue to strive towards a sustainable future where people can enjoy
pleasant living spaces and lead spiritually rich lifestyles.
In pursuit of new possibilities, we will transcend the past by developing
innovative functions towards a brighter tomorrow.

CONTENTS
Daiken Group's Value Creation
Corporate Message...................................1
Daiken Group in Figures............................2
Daiken Group’s Goal .................................3Interview with Top Management...............5
History of the Daiken Group ...................11
Product Development Uses Strengths ...13
Process of Creating Value.......................15
Business Models and Strengths.............17
Risks, Opportunities, and MaterialIssues (Materiality).................................. 19
Pursuit of Sustainable Use of Wood
Resources................................................21
Special Feature: New Application and
Deployment of Domestic Timber in
Cooperation with Local Communities ....23
Creating Shared Value (CSV) by Daiken
Businesses...............................................25

1

DAIKEN GROUP REPORT 2021

Strategy for Value Creation
Progress of the Medium-Term
Management Plan Toward Realization of
the Long-Term Vision ..............................29
Strategies by Business Segment andMarket ......................................................31
Summary of Businesses .........................33
Differences Between the Management
Goals in the Medium-Term Management
Plan and the Performance Forecast.......35
Initiatives for Priority Markets.................36
Global Markets .....................................37
Public and Commercial Buildings .......39
Home Renovation Market ....................41
Research and Development....................43
Financial Strategies.................................45

Foundation Supporting Value Creation
Practice of ESG Management ................47

E Environment .........................................49
S Social....................................................51
G Governance .........................................55
Directors ..............................................67

Data
Eleven-Year Financial Summary .............69
ESG Data .................................................71
Capital Policy/Shareholder Return .........73
Stock Information ....................................74
Company Information..............................75

Sales Composition by Business and Market (Fiscal 2021)
Others5%

Engineering business

10 %Industrial materials
business

41%

23%
37%

Domestic market

77%

Net sales

199.2
billion yen

Building materials
business

Global markets

12%

16%

45 %

12%
Public and commercial buildings
Industrial materials
Home renovation market
Domestic new home market

Daiken Group in Figures (Fiscal 2021)
Operating profit

8.7

Profit attributable to owners of parent

5.6

billion yen

ROEMarket Capitalization

Dividend

9.1%

Foundation

70

32.4％

Dividend yield

3.2％

57.4

*As of March 31, 2021

3,852

Production baseJapan

*As of March 31, 2021
Japan

2,449

billion yen*As of March 31, 2021

Number of employees

September1945

yen per share

Dividend payout ratio

billion yen

Overseas

1,403

Overseas

12
8 6
bases

bases incountries

Editorial Policy
Since fiscal year 2017, the Daiken Group has issued the Daiken Group
Report as an annual integrated report for stakeholders in order toenhance the understanding of our initiatives for the improvement of
medium-term and long-term corporate value based on both financial andnon-financial indicators. This report clarifies the strengths of the group,
which have been accumulated over its history by incorporating the inputs
received through dialogs with stakeholders. The report also identifies therisks and opportunities that may significantly influence the medium-termand long-term management strategies of the group, along with theexternal environment and background trends, as well as features andinitiatives concerning the material issues (materiality) to be prioritized.
Please visit our website for more detailed environmental data and other
ESG information.

Company Information
DAIKEN CORPORATION and the Daiken Group*Environmental information differs in scope.
Eligible Period
Fiscal 2021 (April 1, 2020, to March 31, 2021)*Some sections include information other than the above fiscal period.
Reference Guidelines• International Integrated Reporting Council (IIRC): The International
Integrated Reporting Framework• ISO26000[Disclaimer regarding future prospects]
The forecasts and estimates in this report are 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.

DAIKEN GROUP REPORT 2021

2

Daiken Group’s Goal
To have a concept in common with all of the Group’s employees and adjust the direction to move forward, the Daiken Grouphas established the group corporate philosophy, which consists of the three elements of the Company mission [Our Mission],
Company vision [Our Vision], and Company values [Our Values]. To achieve the philosophy, we will aim for the sustainableimprovement of corporate value by uniting our business activities and CSR activities.

Group Corporate Philosophy
Company mission

Company vision

Company values

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

As a company respected by everyone,
we will give the highest priority toharmonizing an affluent society withthe environment by offering new valuethat exceeds people’s expectations.

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

- Our Mission -- Our Vision -ent

Our Mission

Company vision
Our Vision

Company values
Our Values

To
wa
rd

sp
e

cifi

cd

ev
elo
pm

Company missionofon yisi phe v soth hiloofn eP
tio atza or
ali rp
re Co
rd up
wa ro
To e Gth

The system of practicing the group
corporate philosophy

Business Activities

CSR Activities

Activities consistent with CSR

Realized throughbusiness activities

Long-Term Vision

CSR Basic Policy

Medium-Term Management Plan

Medium-Term ESG Plan

Annual Management PolicyGroup Conduct Guidelines

3

DAIKEN GROUP REPORT 2021

- Our Values -2025Long-Term Vision

GP25

Significance of Existence and Ambitions
1 Contribute to the building of a sustainable society by

efficiently using limited resources
2 Enrich peoples’ minds by creating more comfortable

and secure spaces

Grow／Glow Plan 25

How We should be in 2025
materials, and engineering

Grow

Glow

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

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

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
4 Company culture that admires challenges, and systemestablished to support challenges
5 Governance is strengthened to support sustainable growth

Toward becoming an
all-embracing company
for building materials

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

Public and commercial buildings
Industrial materials

Domestic

New business

GlobalEngineering business

Becoming asustainable society

Creating the environmentthat enriches
people’s lives

Building materials businessHousing market

New markets

Foundation Supporting Value Creation

Markets andsectors

Business domains

Strategy for Value Creationand improvement of medium-to long-term corporate value

Industrial materials business

Daiken Group's Value Creation

1 Leading global company for industrial materials, building

Data

CSR Basic Policy
VisionContribute to the realization of a sustainable society by creating values shared with society through activities
for “Ecology” and “Improvements in the quality of space”
1 With CSR and CSV* as the key axes, we will improve our corporate value and enhance ourcompetitiveness to realize GP25.
2 Using CSR as an activity to enhance our ability to respond to and earn the trust of society, we will

Policies

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 and actively

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

1 Building a sustainable society

CSV Theme

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

DAIKEN GROUP REPORT 2021

4

Representative Director,
President

5

DAIKEN GROUP REPORT 2021

Interview with Top Managementwith technology, ideas, and passion.
What were the achievements and issues
in fiscal year (FY) 2021, the second year of
the medium-term management plan GP25
2nd Stage?

for sale and steadily expanded apartment renovations in

FY 2021 started with the uncertainties caused by theproving the effect of our efforts in the North America business,spread of COVID-19. Substantial changes were required inwhich went into full-scale operation through the M&A in FY

the business environment and in the behavior and recognition

2020. As a result, our overseas net sales increased moreof people throughout the year, including lockdowns aroundthan fourfold from FY 2016, when the long-term vision GP25

the world, declarations of the states of emergency in Japan,

was launched. The share of overseas sales as part of overall

postponement of the Tokyo 2020 Olympic and Paralympic

sales increased from 6% to 23%, which represents steadyGames, and the shift to working from home.

progress in the revision of the business and market portfolio

Qtheir families. At the same time, we fully recognized that ouras one of the basic policies for the 2nd Stage.
P4Long-Term Vision GP25
Medium-Term Management Plan GP25
2nd Stage
Strategies by Business Segment andMarketP30
P31-32▲

including customers, business partners, employees, andproducts through intra-group cooperation were successful,▲the prevention of the spread of infection for all stakeholders,

US housing market, our steady supply and input of new▲place the utmost priority on the assurance of safety andthe metropolitan area. Because of the rapid recovery of thewould like to express our gratitude to such people.

On the other hand, we have observed two issues.

Datadaily lives depend on healthcare professionals and the manyother professionals who provide support for society. We

Foundation Supporting Value Creation

Under these circumstances, our business activities

Strategy for Value Creationmaterials that consistently pursues resolutions to social issues

Daiken Group's Value Creation

Toward becoming an all-embracing company for building

The first issue is the decreased profitability of MDF as

FY 2021 is the second year of the GP25 2nd Stage, thethe mainstay of the industrial materials business. MDF is

three-year medium-term management plan as the second

the base material for buildings and furniture and signifies

step toward the achievement of GP25, which explains ourwood fiberboard molded with residual wood offcuts fromgoals for 2025. We just passed the turning point. At theafforested trees. We produce MDF at two plants in New

beginning of the fiscal year, the impact of COVID-19 was

Zealand and two plants in Malaysia. For MDF, multipurpose

particularly significant overseas. We faced many restrictions

product selling prices have not recovered because of thewith the plant in New Zealand stopping operation for about

difficulty in differentiating from competitors and because of

one month due to the lockdown, and the plant in the United

the deteriorated market triggered by US-China trade friction,

States forced to reduce production by 60%. However,coupled with the decreased demand caused by COVID-19,

economic activities gradually restarted in the second quarter

which urgently calls for an improvement in profitability. The

going forward. In Japan, we strengthened proposals forother issue is the lower growth in public and commercial

home builders to enhance our presence in detached houses

buildings than our initial expectations despite focused efforts

DAIKEN GROUP REPORT 2021

6

Interview with Top Managementin the non-housing market. Demand for accommodation

environment in response to the rapid increase of online

and commercial facilities rapidly decreased after the loss

meetings. We developed building materials with an antiviralof inbound tourists with people staying home due to thefunction in 2011 and released them in 2012 ahead of otherspread of COVID-19. The impact was particularly significant

companies in the industry. We see greater possibilities for an

for tatami mats since orders had been increasing with theincrease in the sales of these products to elderly facilities,

evaluation of their functionality, including durability and easy

medical facilities, and other institutions. As the ambience

maintenance, and as Cool Japan products.

where people spend daily lives become more essential thanever, we will expand our scope of business and develop

Q

FY 2022 will be the final year of the mediumterm management plan GP25 2nd Stage.
How will it finish?
Despitesubstantialchangesintheproposals as a manufacturer that contributes to production
from the viewpoint of providing a safe, secure, healthy, andcomfortable ambience.

external

In our global business, North America will remain a profit

environment, which had not been expected at the time ofdriver as the largest market in the world for wood housing.

medium-term management planning, our basic strategies

New housing starts in the US decreased to an annual rate ofwill not change for FY 2022. We will continue to increase

approximately 1.0 million in April and May 2020 but rapidly

market share in the new housing market and make up forrecovered to more than 1.5 million in July onward and has

the decrease in the overall markets of home renovation

remained steady. The number of new housing starts is nearlyand non-housing public and commercial buildings, thereby

twice that of Japan, and the demand in North America ismaintaining the revenue structure in Japan while pursuing

extremely large considering residence areas. In addition,

global growth. At the same time, we will carefully adapt tothe population will continue to increase by more than 2changes from the initial expectations and adjust our plans

million every year on a medium-term and long-term basis,to grasp new demand by strengthening proposals for thewhich suggests robust housing needs. We will endeavor to

new needs that have emerged because of COVID-19. Ourmaintain a steady supply by leveraging our integrated supply

performance forecast* as a commitment to shareholders

structure from the veneer plant in Canada with its abundantand investors this fiscal year is set at 204 billion yen in net

forest resources to the LVL plant in the US, while increasing

sales, the highest target since consolidation, 10.0 billion yen

the share of the high-added value products of preservativein operating profit, and 6.0 billion yen in profits attributable

LVL and high-strength LVL in the product mix, thereby

to owners of the parent. These figures for the performance

effectively grasping the vigorous demand in the market.

forecast are different from the management goals in the

We will pursue rationalization and streamlining for MDF

medium-term management plan but will be maintained asby restructuring plants as a manufacturer. For any rapid cost

stretch goals to be pursued toward the achievement of theincreases that cannot totally be offset, we will incorporate

further long-term vision GP25. *Forecast on May 14, 2021

the increase into selling prices through discussions with

P36▲

Initiatives for Priority Markets

P35▲

Differences between the management goals
in the medium-term management plan andthe performance forecast

customers. We will also accelerate the development ofspecialty MDF with high added value by leveraging ourtechnological power and improve our product mix, thereby
improving profitability. Ultra-lightweight MDF, which was

As specific initiatives in Japan, we will continue to offer

developed at our plant in New Zealand, has been popular

proposals both in new housing and in the renovation market,

with customers in the US and other countries. Throughincluding the input of new products, by identifying specific

our plant in Malaysia, we are also promoting proposals

changes in the required housing functions of securing

for the MDF fully produced with acacia chips from trees

workspace, preventing sound leaks and resonance, andafforested by our company over 20 years. Because MDF

achieving an ambience of comfort where people spend

offers excellent size stability, we are expanding its application

longer hours since working from home will become more

to new uses from conventional flooring to use as a basecommon, whereas new housing starts will continue tomaterial for interior doors. MDF is capable of effectively

decrease. The Japanese government launched incentive

using wood materials. Although it is impacted by market

programs that include the green housing point system,

conditions on a short-term basis, it has high potential withwhich is applicable to many of our products. We will also

global demand expected on a medium-term and long-term

strengthen our proposals in this aspect. In public andbasis. We will expand its application and propose substitutecommercial buildings, we will increase the number of sales

demand by sharing its value as a sustainable material withrepresentatives at local branches to strengthen our sales

our customers.

structure. Because office functions are being reviewed

7

DAIKEN GROUP REPORT 2021

Home renovation market

P37-38
P39-40
P41-42▲layout and application and improvements to the soundPublic and commercial buildings▲

will proactively offer proposals concerning changes to the

Global markets
Initiatives
for Priority
Markets▲

as work styles become increasingly more diversified, weDaiken Group's Value Creation

In FY 2021, we invested in carefully selected BCP
measures, safety measures, and IT systems linked toQ

Next, what is the approach concerning
ESG management and sustainability?
First, what are the initiatives for
E: Environment?

the enhancement of the management foundation but

As an environmental initiative, we set the reductionsuspended growth investments that assumed sales

rate for CO2 emissions as one of the management goals

increases while prioritizing cash flow in the midst ofunder the medium-term management plan. In FY 2021,

uncertainties

causedbythe

COVID-19

our domestic CO2 emissions were reduced by 35%
versus FY 2014 from a production decrease combined

investments, including M&A, for favorable items thatwith the stable use of renewable energy, which focused

will contribute to medium-term and long-term growth

on wood biomass boilers that had synergistic effects

strategies and increased competitiveness, while we willwith our main business. Therefore, we will be able tocarefully monitor trends in material and resource inflation.

achieve a reduction of 26% as our initial goal for FY

Our focused investment target is the global industrial

2022. We will set a stretched reduction target in thematerials business with the key areas of North America andnext medium-term management plan with the goal of

Asia. In North America, we are considering an expansion

making an additional contribution under the carbon

into new products that will exercise synergistic effects

neutrality target for 2050 and a new reduction target by

by utilizing sales channels for LVL. We will increase the2030 as set by the Japanese government. We will also

capacity of MDF and further enhance our presence in Asia

examine the introduction of in-house carbon pricing as

and other regions.

an internal investment decision and business evaluationin consideration of the substantial influence of thesestrengthen management on the balance sheet of eachelements on our business activities. Among these efforts,

manufacturing division, thereby achieving the balance

we will promote information disclosure in accordance withsheet goal targets in the medium-term management

the Task Force on Climate-Related Financial Disclosuresplan. In FY 2021, we generated cash by reducing cross-(TCFD) as part of the revised Corporate Governanceshareholdings with key business partners. We plan to

Code 2021.

steadily reduce cross-shareholdings from the viewpoint of

At the same time, as the momentum increases

asset rationalization down to a share of approximately 10%

for a circular economy, we believe it is necessary to

versus net assets.

fundamentally review our processes from development

We will enhance shareholder return with a dividendand procurement from the viewpoint of reducing after-

payout ratio of 30% or higher and provide stable dividends

sales product disposal based on our experience inas the basic policy by balancing investments for medium-business and our contributions to a resource-recycling

term and long-term growth with financial soundness.

society.
Recycling of Waste Materials

P73

Initiatives toward the CO2 Emissions
Reduction

P49▲

P45-46

P50▲▲

Capital Policy/Shareholder Return▲

Financial strategies

Data

We will continue to reduce cross-shareholdings andFoundation Supporting Value Creation

pandemic.

However, we have not changed our approach to proactive

Strategy for Value Creation

What are the investment approach and key

Q points in financial strategies?

DAIKEN GROUP REPORT 2021

8

Interview with Top Management

Q What is the priority regarding S: Society?

and upgrade health management as the foundation of humanAmong the many requirements under S: Society, theresources to exercise their skills and reach their potential.

highest priority is placed on human resources. Human

We have supported employees in quitting smoking and paid

resources are the source of technology, ideas, and passion,

allowances to employees with a proactive attitude toward

which comprise the mission in our group corporate

health promotion. We will continue promoting these initiatives

philosophy. We believe that the maximization of the value ofto bring smiles to employees and their families as the source

human resources will lead to improvements in our corporateof their energy.

resource development in order to provide a workplace where
employees are happy. With regard to diversity, we promote a
workplace environment where human resources with diverse
personalities and values can fully achieve their potential with

Human Resources

P51-53▲value. We promote diversity, work-style reform, and humangovernance structure has been reformed
Q The
lately. What is the plan for G: Governance?

a particular focus on female employees as the most familiar

With the approval of shareholders on June 25, 2021,

goal. However, the promotion of females to managers andwe became a company with an audit and supervisory

directors, an indicator that draws external attention, iscommittee. The aims are to strengthen the supervisory

insufficient, and we consider it an important requirement. We

function of the Board of Directors, expedite the decision-

have enhanced the systems to support the combination of

making process, and develop and upgrade the next

work with childcare and long-term care, provided training

generation of management. Under the new structure,opportunities, and reformed the corporate culture to help

directors and audit and supervisory board members werefemale employees. As the share of female recruits has been

reduced from 12 to 9, and their independence was secured

increasing recently, we expect that these initiatives will takewith outside directors accounting for more than one-third

effect on a medium-term basis.

of the members. The operating structure also changed in

Regarding work-style reform, the COVID-19 pandemic

April with the establishment of the position of operating

destroyed fixed ideas concerning the place, time, and method

officer. By clarifying the division of roles with executiveof work while making work from home and remote work more

officers, we will flexibly and proactively allocate and promotecommon. In our company, we regard these movements not

human resources to executive officers from the viewpoint

as provisional countermeasures against COVID-19 but as theof leadership development so that they can undertakenew normal, and we will establish flexible work styles as regularreform and growth in the allocated business domains by

parts of the system and culture so that employees amidst theserving in key positions in the R&D division, manufacturing

life events of childcare and long-term care can exercise theirdivision, sales division, and administrative division. We will

skills and potential as the source of corporate growth without

also further enhance the governance system by responding

interruption. We will also focus on the development of global

to the revised Corporate Governance Code 2021 and byhuman resources as we pursue expansion from the domestic

envisioning market reorganization under the Tokyo Stockhousing market to the non-housing market and to the global

Exchange in FY 2023.

The COVID-19 pandemic has renewed our recognition of

DAIKEN GROUP REPORT 2021

Governance

P55-68▲market.

9

the importance of life and health. We will further strengthen

Daiken Group's Value Creation

and building materials for the ambience of life based on thefunctions of wood as a recyclable resource.
Recently, we received feedback through discussions withterm and long-term strategies are formulated with a focus

investors, for example, "It seems that the felling and utilization

on changes and a return to the origin by reconfirming ourof trees are misunderstood as unfavorable conducts," andstrengths and envisioning the post-COVID-19 era. We have

"It would be favorable if DAIKEN CORPORATION could befour major strengths: (1) research and development capabilities

introduced in a more understandable way as a company that

accumulated since our foundation to pursue the possibilities

contributes to carbon neutrality, featuring its commitmentof sustainable industrial materials and a safe, secure,to the diverse use of wood." This feedback renewed ourhealthy, and comfortable ambience; (2) product deployment

recognition of the importance of clarifying the significance of

capabilities to create industrial and building materials withbusinesses that we had taken for granted and communicatinga variety of features that differ from industrial materials,

it to shareholders, investors, customers, the entire industry,

thereby proposing new lifestyles and industrial standards;

and other stakeholders.
Based on these ideas, we began to examine theclients, including the housing industry, construction industry,

commercialization of new wood materials to fully use

and various manufacturers; and (4) an integrated systemdomestic timber, which requires early utilization following

for developing industrial and building materials, as well as

the felling of the trees, by leveraging our technology. We

installation work and construction for creating ambiences.

have endeavored to reduce the use of natural lauan wood,

To pursue the sustainable improvement of corporate value

for which protection has been urged because of concerns

through these strengths, we redefined materiality (material

with regard to depletion. In the coming years, we intend toissues to cope with) by identifying risks and opportunities thateliminate the use of natural lauan wood by commercializing

may have a significant influence on our medium-term andthese new materials. Although many issues need to belong-term management strategies. One of them is the pursuit

resolved, we will continuously endeavor to achieve aof the sustainable use of wood resources. Our company

resolution by joining technology, ideas, and passion in ourhas been engaged in this materiality as a key business sincecompany and jointly creating value through cooperation with

our foundation. This pursuit also leads to countermeasuresvarious stakeholders.

against climate change and contributions to the SDGs, which
are urgent global issues.
Wood as a product absorbs CO2, fixates it as carbon,function of forests can be maximized. Since our foundation,

P17-18Business Models and Strengths
Risks, opportunities, and material issues(materiality)
Pursuit of Sustainable Use of Wood
ResourcesP19-20
P21-22▲an increasing amount of carbon by using industrial materials

P15-16

Process of Creating Value▲

we have achieved comfortable lives for people and preserved

P3Group Corporate Philosophy▲

accordance with the growth cycle, the CO2 absorption

ask for your continued support.

▲

By appropriately felling wood and planting new trees in

We will continue endeavoring to stay a company that
contributes to society through these businesses. We sincerely▲

and continuously preserves it in the growth process.

Data(3) a customer base with a wide variety of professional

Foundation Supporting Value Creation

In the integrated report for the last year, our medium-

Strategy for Value Creation

what is the medium-term and longQ Finally,
term direction of DAIKEN CORPORATION?

DAIKEN GROUP REPORT 2021

10

History of the Daiken Group

1970
WPC

Ever since foundation, The Daiken Group has been developing a

Developed a technology toharden wood veneers byinjecting resin into the grains of
the wood called WPC

wide variety of products to help customer's daily life through ourtechnological innovations which always meet social issues andneeds. The Group effectively uses all the strengths acquired in our
history and aims to grow into a housing material manufacturer
that becomes an all-embracing company for building
materials and thus creates new value.

Flooring

1971

CabinetIntegrated storage furniture

Door

Launched the first housing equipment
Cabinet set and developed froma single product to an integrated
product

Sound products

1945 Foundation
Plywood
Housing equipment

Special plywood

Tatami matsDeveloped special
plywood for vehicles towhich durability and water
resistance were given by thetechnological developmentof adhesives

1982

Sound products

Door

Cladding

1946

1973

Improved theconsistent service
structure forsoundproofing forhousesPromoted making
doors fancy andcreated the industry
standard of modern
designInsulation board

Dai-Lotone

1958

Insulation board
Started manufacturing
Insulation boards, woodfiberboards utilizing
lumber sewing waste, andconstruction demolition timber

Net sales (¥100 million)

2,500

1964

1997

Interior projects

Dai-Lite

Dai-Lotone

Started manufacturing DaiLite, an inorganic materialusing an unused resource
Shirasu (volcanic ash) andslag wool

Started manufacturing DaiLotone, non-combustible
ceiling materials using slag
wool, which is a byproductof steel production

2,000

1,500

Trends in Net Sales, Operating Profit, and Number of Domestic New Housing Starts

1,000

Net sales
Operating profit
Number of domestic new housing starts

500

01945 1946 1947 1948 1949 1950
1951 1952 1953 1954 1955 1956 1957 1958 1959 1960
1951
19611961 1962 1963 1964 1965 1966 1967 1968 1969 1970
19711971 1972 1973 1974 1975 1976 1977 1978 1979 1980
19811981 1982 1983 1984 1985 1986

Foundation

1941

C. Itoh & CO., Marubeni Shoten, Ltd., andKishimoto Shoten, Ltd., have merged toform Sanko Kabushiki Kaisha, Ltd.

1944
History

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

1945

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

11

DAIKEN GROUP REPORT 2021

Expansion

1954

Established Nagoya plant for
manufacturing special plywood

1958
Built Okayama plant and started
manufacturing insulation board

Growing

1967

Changed the company name to
DAIKEN CORPORATION

1969

Established interior projects
department

1970• Started manufacturing WPC
flooring at the Nagoya plant• Established Toyama plant for
manufacturing special plywood

1977

1989

1984

•S
 tarted manufacturing housing
products, such as doors andstairs, at the Inami plant•S tarted manufacturing of
cladding at the Takahagi plant

Expanded insulation board
business
Built Takahagi plant

Established an interior projects
company, DAIKEN ENGINEERINGCORPORATION

1987

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

1994
Established DAIKEN SARAWAK
SDN. BHD. in Malaysia for MDF
manufacture

1995

Built interior doors production
line at the Inami plant

2008

2015

MiSEL

Three-dimensional
high design flooring

Attractive cabinet
pursuing design

Features and Strengthsof the business

1996

Building materials
business

2014

Started manufacturing
Tatami facing thatused machine-madeJapanese paper andthat was excellent inmaintenance

A wide sliding door thatcan be easily accessedby a wheelchair

2013

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

hapia

Launched the hapia
series that pursue
texture2007 Discontinued manufacturing of plywood
2002 Withdrew from Bath and Kitchen business

LVL

Daiken Group's Value Creation

Tatami facing

2004 Transferred the exterior material business

Tatami facing

1996
MDF

2018

Started manufacturing
MDF that utilized residual
wood offcuts as the mainmaterial

MDF

Industrial materials
business
Capabilities todevelop uniqueindustrial materials

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

Dai-Lite

Strategy for Value Creation

Woody fibers

Engineering business

2016
GRAVIO
Launched the GRAVIO
series, decorative wallmaterials that were
Dai-Lite base materials

200

Housing starts(10,000 houses)

Goal of
GP25 2nd
Stage

Goal of Operating profit
Long-Term (¥100 million)
VisionGP25
150Foundation Supporting Value Creation

Capabilities to perform installation
work by making use of thefunctions of building materials

100

Data

50

1st

2nd

3rd

Medium-Term Management Plan
1987 1988 1989 1990
19911991 1992 1993 1994 1995 1996 1997 1998 1999 2000
20112011 2012 2013 2014 2015
20162016 2017 2018
20012001 2002 2003 2004 2005 2006 2007 2008 2009 2010

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

1999
Purchased an interior projects
company, Koukou Sangyo Corporation

2000
Integrated the interior projects
department into DAIKENENGINEERING CORPORATION

2002

2010

2018

2005

2012

2019

•A
 lliance with TOTO Ltd. and YKK AP Inc.
for remodeling business•E stablished DAIKEN Industries (Ningbo)
Corporation

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

2009

• Purchased MDF plant in New Zealandand established DAIKEN NEW ZEALAND
LIMITED• Integrated flooring business of the Nagoya
plant in the Mie plant0(Fiscal year)

New Challenge Challenge to achieve the Long-Term Vision GP25

Selection and Concentration

1996

2019 2021
2020 2021 2022 2023 2024 2026
2025

• Alliance with Panasonic Corporation in
production and procurement• Purchased an interior projects company,
Sankei Corporation
Business and capital alliance with HOKUSHIN
Co., Ltd., for MDF production and supply

2015

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

2016

Purchased an apartment renovation company,
PAC SYSTEM Co., Ltd.

• Purchased MDF manufacturer in New Zealand and established
DAIKEN SOUTHLAND LIMITED• Established Daiken R&D center• Capital and business alliance with ITOCHU Corporation• Purchased a veneer plant, CIPA Lumber Co., Ltd. in Canada andan LVL plant, PACIFIC WOODTECH CORPORATION in the U.S.A.
• Purchased a renovation company ReformQ Co., Ltd.
• Purchased T.O FLOORING CO., LTD., that works on solid woodflooring

2020

Started production at Nichinan Daiken Co., Ltd., a company thatprocesses veneers for LVL

DAIKEN GROUP REPORT 2021

12

Product Development Uses Strengths
The Daiken Group cultivated its technologies throughout a history of more than 75 years and continues to offer products thatare valuable for society and customers. Our diverse product lineup, with its excellent features, is used in a wide range of
scenarios in houses and public and commercial facilities.

Industrial materials businessFeatures and Strengthsof the business

Developing and offering highly functional industrial materials
The Daiken Group offers various functional industrial materials having non-combustibility,
anti-seismic, thermal insulation, sound insulation, humidity conditioning, and various otherfeatures required in our daily lives by making full use of wood and mineral resources froma sustainable perspective.
Overview
Insulation board
Wooden fiberboard
using construction
demolition timber for
main raw material andmolded into a board

Effective use of wood materials

Wooden fiberboard
using residual wood
offcuts for main raw
material and molded
into a board

木材チップ

Protection board

Materials for flooring• Dimensional
stability• Surfacesmoothness• Workability• Water resistance MDF

Base materials forbuilding and furniture(Substrate of door, storage,
and window
frame)MDF

Wood fibers

LVL
A fabricated wood
product manufactured bylaminating veneers cut
from a log all parallelized
in the fiber direction andgluing them together• Dimensional
stability• High strength• Workability

Tatami facing madefrom straw twisted
machine-madeJapanese paper strings
and a resin coating

Machine-made Japanese paper

Tatami mats

For houses

Effective use of mineral materials

Slag wool

Dai-Lite

Slag wool and Shirasu

For accommodation

Ceiling materials• Non-combustibility• Lightweight• Sound absorbing• Workability

Mineral fiberboard
molded into a board
using slag wool as a
byproduct of steel
production

DAIKEN GROUP REPORT 2021

Structural material

LVL• Light resistance• Water repellent• Moisture
conditioning• Color variations

Dai-Lotone

An inorganic material
molded into a board
using an unused
resource, Shirasu(volcanic ash), andslag wool

I-JoistVeneerTatami facing

13

Inner part of a tatami mat

Insulation board

Wood chips

MDF

Major Applications

Features and Functions• Heat insulation• Moisture
conditioning• Cushioning
properties• Lightweight

Capabilities todevelop uniqueindustrial materials

For houses• Non-combustibility• Lightweight• High strength• Workability• Moisturepermeability• Insect repellent• Antiseptic

Wall base materials

For officeWall materials

Base material for house external walls Non-combustible wall material

Building materials businessFeatures and Strengths of the business

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

Capability to develop
building materials
with high added value
and capability topropose total plansfor interior spaces

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, andcommercial facilities.
Door

A flooring of ultimate beauty

Great range ofdesign and variations

For houses

A lineup that is particular
about surface texture and thatoffers scratch resistance,long-lasting beauty, good
design, high function, and highperformance

A complete line of flooring that canbe 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

Storage improvement

Space for enjoying soundInterior door that is highly
functional and easy to use andcan be coordinated flexibly

A complete lineup of cabinets
equipped with abundantstorage capacity that isspace-saving and offers otherfeatures to fit individual spaces

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

Functional door suitablefor facility applications

Cabinets inspired byconsideration to users

Creating a comfortablesound environment

Interior doors with particularfunctionality for nursing
homes, kindergartens,
childcare facilities, medical
facilities, and stores

Cabinets mitigate the various
risks to users for comfort
during use

A complete lineup suitable forsound-proofing, echo
reduction, and other specificpurposes

Strategy for Value Creation
Foundation Supporting Value Creation

For public spaces and commercial facilities

A flooring for heavy duty areas

Sound products

CabinetDaiken Group's Value Creation

Flooring

Engineering businessFeatures and Strengthsof the business

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

Capabilities toperform installation
work by making useof the functions ofbuilding materials

Data

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

Our project
Tokyo Metropolitan Government Building

Kyoto Station Building

Kansai University

DAIKEN GROUP REPORT 2021

14

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 the Sustainable Development Goals (SDGs), through business activities that make use of ourunique strengths. The Group also united CSR activities based on the Environment, Social, and Governance (ESG) to make thefoundation of our businesses robust.

Growth strategy and enhancement of
the management foundation

Social issues andneeds(External environment and trends)

Pursuit of the resolution of social issues
Ⅰ. Accelerating growth strategies

Risks Opportunities

Material issues(Materiality)P19-20Source of value
creation
Financial foundation
Shareholders’ equity:
60.8 billion yen
Interest-bearing debts:
35.5 billion yen

Strength (4)Integrated
systemStrength (3)Customerbase
Strength (2)Product
deployment
capabilities
Strength (1)Research anddevelopment
capabilities

Markets andCustomers

Business
Strategies

Installation Workand Construction

Industrial materials
business

Sales

Building materials
business

Production

Global markets
Public andcommercial buildings
Industrial materials
Home renovation
marketEngineeringbusiness

Development ofbuilding materials

MarketStrategies

Domestic new homemarket

P31-32Development ofindustrial materials

Feedback to newvalue creation

Research anddevelopment

Production system
Business models and strengths

Capital investments:
3.6 billion yen
Production bases:  20 bases

Research and development
R&D expenses for the R&D
center: 
1.4 billion yen

Human resources

Ⅱ. Enhancement of the Management Foundation

Financial affairs

Business infrastructure

Consolidated number of
employees: 
3,852
The nationwide branch andsales office networks, as well as
dedicated sales personnel bymarket and customer
Eight group companies’ installation
work management system

Customer baseA wide variety of customers
ranging from the housing andconstruction industries to various
manufacturers

Natural resources
Total energy input:
2.667 million GJ
Water resource input:
1.799 million t

Input management
resources

15

DAIKEN GROUP REPORT 2021

P17-18

ESG (CSR) activities

E Environment
S Social
G GovernanceP49-50
P51-54

Medium-Term
ESG PlanP47-48

P55-68Group Conduct GuidelinesTargetCreation of economic and social value

P13-14▲

Product Development UsesStrengths

P3

Medium-Term
Management Plan

Long-Term Vision(Fiscal 2020-2022)
Management goals

Grow/Glow Plan 25
in 2025

P29-30P4

GP25 2nd Stage▲▲

Strategy for Value Creation▲

Creating shared value (CSV) by
Daiken businesses P25-28

GP25

Financial indicators• Net sales

225 billion yen• Operating
profit12 billion yen• Operating
profit ratio

5.3％

●

 romoting the use ofP
domestic timber●Recycling of wood resources●

Reduction of CO2 emissions●

 reating a safe, secure, healthy,Cand comfortable space● ffective utilization ofE
unused resources• ROE10％• ROA

7％●

Promotion of anti-seismic performance40％●

 evelopment of labor saving type products
Dand techniques• Shareholder
equity ratio• Dividend
payout ratio

30% or more

7 billion yen• Profit
attributable toowners of parent

GP25

3rd Stage(Fiscal 2023-2026)(Compared to fiscal 2014)

P50

+20pt

*Our own indices in which the eight
diversity items, such as the female
manager ratio, were indexed ascompared to fiscal 2019

P52

• Serious quality
accidents and violations

Management foundation enhanced by
ESG

Data

• Total diversity index*▲

Firm and flexible
business
infrastructure

(26％)
▲

Optimized financial
foundation• Total CO2 emissions
in japanFoundation Supporting Value Creation

Medium-Term
Management Plan

Non-financial Indicators
Strengthen the foundation ofvalue creation

Daiken Group's Value Creation

Achieve thevision of theGroup Corporate
Philosophy

０• Degree of penetrationof the Group Corporate+10pt
Philosophy*▲*Our own indices in which employees’
understanding, sharing, and practice ofthe group corporate philosophy wereindexed as compared to fiscal 2018
P66

DAIKEN GROUP REPORT 2021

16

Business Models and Strengths
The Daiken Group makes use of the four strengths of (1) research and development capabilities to pursue the possibilities
of sustainable industrial materials and a safe, secure, healthy, and comfortable space; (2) product deployment
capabilities to create industrial and building materials having various features; (3) a customer base that has long been
built with a wide variety of professional customers; and (4) an integrated system to engage in the development ofindustrial and building materials as well as the installation work and construction for creating spaces and is committed
to sustainable value creation.

Strength (4)Integrated
SystemEngaging in the development, installation, andconstruction of industrial and building materials• Industrial and building materials do not function as is and the installation work and construction are required in order for them to deliver performance.
• Daiken not only sells products, such as industrial and building materials, but is engaged in
the installation work, construction, and creation of spaces in the three domains of interior
projects for office buildings and public facilities, home renovation work, and apartment
renovation by cooperating with the group companies engaged in the installation work andconstruction.
• By consistently engaging in the industrial and building materials located in the upstream partas well as the installation work and construction to create spaces, our entire value chain can
provide value.
• We link the needs obtained in the installation work and construction sites with the development of labor-friendly type products and techniques.

Realization of high-quality andstable supply at our group’s plants
Slag wool and Shirasu Dai-Lotone

Production

Engineering business

Pursue the possibilities of sustainable
Strength (1)Research and devel- industrial materials and a safe, secure,opment capabilities healthy, and comfortable space• DAIKEN CORPORATION was founded soon after the war with an eye
toward the effective use of timber as precious resources and the contribution to society through postwar reconstruction.
• We conduct research and development based on the two ideas of (1)overcoming weaknesses and extracting the beauty of timber and (2) using
timber with zero waste as the technology to effectively use timber.
• As the expansion of applications to something other than timber, we havealso proceeded with the technological development to apply technology tohandle wood fibers and utilize unused mineral resources.
• Furthermore, as the field to make useof materials and technologies wehave created, we have been expanding the applications above into
research and development to pursue
spaces where people can spend thetime safely, securely, healthfully, andDaiken R&D Center
comfortably.

Provide new functions toincrease added value

Development ofIndustrial materials

Research anddevelopment

17

DAIKEN GROUP REPORT 2021

Development of
Building materials

Markets and Customers

Public Spaces

Living Spaces

Installation Workand Construction

Relationships of trust with professionalcustomers

Nationwide branch and sales office networks
Dedicated sales structure by market and customer

Sales

ine
B us
De

vel

D
al
n e r to r
G e nt ra c
Co

r

nO
esi g

D
ffice/

n e rs , C li en t s , a n d G e n e r a

e si g n e

R e n o v a ti o n B u i l d i n g
c o m p a n y c o n tr a c t o r
D i s t ri b u t o rr

Ho m eB u il d e
r

l Us

e rs

Hou
manu sing
factu
rers

The Daiken GroupV
man arious
ufac
ture
rs

Create a new standard with functional products• By utilizing industrial materials that made use of timber, which is a renewable resource, and sustainable resources, such as
volcanic ash as an unused resource, the Daiken Group has the capabilities to create a new standard with our products having thefunctions that make the spaces where people spend their daily lives safe, secure, healthy, and comfortable.
• With the technology cultivated in special plywood, which is the business at the time of the establishment of the company, wedeveloped industrial materials that made use of wood and mineral resources and by using these industrial materials as basematerials, we have been expanding into the deployment of building materials with increased added value.
• These product deployment capabilities have become our response capabilities, leading to the sustainability of our business.
Flooring

Door

Technological development that will lead to the promotion of the use of domestic timber

CabinetWPC Processing Technology

Specialplywood

Expansion fromindustrial materials
to building materials

Expand to the basematerials for flooring by
developing special MDF

Expand as thebase materials

Dai-Lotone
Ceiling materials Wall materials

Expand tounused resources(volcanic ash)

Expand to sound products
from the acoustic board
technology

Dai-Lite
Wall base materials Wall materials
Eaves

Insulation board
Use application
development thattakes advantage ofthe features ofwooden fiberboards

Protection board
Inner part ofa tatami mat

Road joint

Louver materials

Woody fibers
Deploy tatami facing thatmakes use of machinemade Japanese paper

Tatami facing

MDF

DW fiberBase materials for building and furniture

GLOW EARTH

Expand to fiberboards ofdifferent specific gravities

LVL

Industrial materials business

Product
deployment thattakes advantage ofthe technology to use
timber with zerowaste

Special MDF

Expand to mineral
resources (slag wool)

Expansion toindustrial
materials

StairsConstruction materials

Data

WPC: The abbreviation for Wood
Plastics Combination

Decorative surface
materials

Base materials

Expansion tobuilding
materials

Special MDF for base materials for flooring

Sound products

Building materials business

Product
deployment that
overcomes the
weaknesses of andextract the beautyof timberFoundation Supporting Value Creation

Strength (2)Product Deployment
Capabilities

op e

ss O w

Strategy for Value Creation• The Daiken Group has built relationships of trust with a wide variety of professionalcustomers ranging from the housing and construction industries to various manufacturers through long standing dealings.
• By not only reflecting such needs and information obtained from customers in theinitiatives for daily improvements, such as quality and usability, but also feedingback to the development of next industrial and building materials and R&D, we continue to provide new value.
Key Customers

Daiken Group's Value Creation

Strength (3)Customer
Base

DAIKEN GROUP REPORT 2021

18

Risks, Opportunities, and Material Issues (Materiality)
In addition to the risks and opportunities that are likely to have a significant impact on the Daiken Group’s medium- to longterm management strategies, we have identified material issues (materiality) to preferentially address, based on such risks
and opportunities, the following. In identifying such themes, we made decisions by reflecting the Board’s opinions throughdeliberations in various management meetings, such as the CSR Committee. We also link the material issues (materiality) topreferentially address the policies in the medium-term management plan and medium-term ESG plan, as well as the focusedmeasures, and proceed with the initiatives after setting the goals.

Social Issues and Needs(External environment and trends)

Risks and Opportunities

Request for decarbonization
Climate change and global warming
Biodiversity
Forest conservation and regulations over illegal logging

Difficulty in procuring woody resources

Needs for industrial materials using sustainable
wood resources
Needs for shifting to alternative resources

Resource depletion

The Japanese government’s growth strategy

Needs for spaces where the elderly and children canspend time with peace of mind
Regional revitalization and compact cities

Green growth strategy and carbon neutrality
Construction of a housing circulation system toward adecarbonized society

Formation of a good housing stock

Digitization and DX

Resilient urban development and redevelopment projects

National land toughening and improvement of the nextgeneration infrastructure

Inbound demand

Realization of a tourism-oriented country

New normal as a result of the COVID-19 crisis
Spread of infectious disease
Disruption of business activities and supply chains
Threat of natural disasters
Lack of human resources
Low birthrate and longevity in JapanA decrease in population and a decrease in the number ofhouseholds
Depopulation
A decrease in productive-age population
Acceleration of women’s participation in society

A worldwide increase in population

Request for sustainable management*Details of the risks associated with businesses are described in the securities report.

19

DAIKEN GROUP REPORT 2021

Expansion of the opportunities where diverse humanresources exercise their abilities
Needs for the development of products and techniques
to supplement the lack of skilled construction workers
A decrease in the number of domestic new housing
startsContinuous expansion of demand for the highquality living environment in the overseas growing
markets
Management ability that responds to the risks andopportunities and increases corporate value

Process to identify the risks, opportunities, and material issues (materiality)
Analysis and organization of external environments
Extraction and organization of risks and opportunities that are likely to have a significant impact on the medium- to long-term management strategies
Evaluation and prioritization based on the degree of importance in terms of management (Our management strategies’ and stakeholders’ expectations)
Identify the material issues (materiality) to preferentially address (Deliberations in various management meetings  The Board)
Formulation and implementation of the specific initiatives for the material issues (materiality)
Progress management and a periodic review (Various management meetings  The Board)

Contribution to a
Decarbonized Society

Initiatives for the Material Issues (Materiality)

E
E

Greenhouse gas emissions
reduction
Promotion of the use ofrenewable energy

Practice of ESG Management
E: Environment▶P49-50

Daiken Group's Value Creation

Material Issues (Materiality)

Promotion of the use of domestic
timberRecycling of wood resources
Reduction of CO2 emissions
Contribution for a recyclingoriented society

Effective utilization of unused
resources
Creating a safe, secure,
healthy, and comfortablespace▶P25-28

Promotion of anti-seismic
performance
Development of laborsaving type products andtechniques

Productivity Improvement in
Construction Sites

Promotion of Risk
management

Product Quality and Safety

Enhancement of the BCPS

Reinforcing human resources
development

S
S

Promotion of diversity
Promotion of workstyle reformS

Enhancement of theoccupational safety and healthS

Enhancement of the Quality
Control Structure

Practice of ESG Management
G: Risk management▶P65

Practice of ESG Management
S: Human resources▶P51-53

Data

Human Resources

G

Foundation Supporting Value Creation

Realization of the Affluent
Living Environment

Creating shared value (CSV) by
Daiken businesses

Strategy for Value Creation

Pursuit of Sustainable Use of Wood
Resources

Practice of ESG Management S: Quality▶P54

Expansion into priority markets
Review of the Market
Portfolio

Enhancement of theGovernance System

Global markets
Public and commercial buildingsHome renovation market

G

Practice of the visionof the Group Corporate
Philosophy

Initiatives for priority markets▶P36-42

Practice of ESG Management
G: Initiatives toward the Penetration of
the Group Corporate Philosophy▶P66

DAIKEN GROUP REPORT 2021

20

Pursuit of Sustainable Use of Wood Resources
DAIKEN CORPORATION was founded with an eye toward the effective use of timber as precious resources and contribution tosociety. Since the foundation of the company, we have refined technologies to overcome the weaknesses of timber and use timberwith zero waste and developed industrial and building materials offering a wide variety of functions. Trees function to absorb CO2
during the growth process, to fix it as carbon, and to keep storing it by continuing to use them as materials. While countermeasuresfor climate change have become a pressing global issue due to the emissions of greenhouse gases, such as CO2, the importanceof protecting, growing, and making use of forests that have the function to absorb CO2 has been increasing. Since timber is arenewable resource, it can contribute to the realization of a sustainable society and carbon neutrality by creating the cycle toappropriately manage and use forests. By pursuing the sustainable use of wood resources from the three perspectives of (1) use
of appropriately managed timber, (2) use of timber to protect forests, and (3) use of timber with zero waste, we continue to createsocial and economic value.

Photosynthesis

C Fix as carbon

CO2
CO2

CO2

CO2

CO2

Grow

Use

CO2

Lumber, laminated lumber, and CLT

Maturity

CO2

The cycle to keep
Growth protecting andmaking use
of forest

CO2
CO2

CO2

CO2

Felled trees

Plywood

Logs

Maximize the CO2
absorptive function bymoderately felling
trees CO2 O2 O2Tree planting

CO2

Wood offcuts

O2

Base materials

O2

Promotion ofgreening andgrowth

O2

CO2

Aged
forestWood chips(Virgin)

MDF

Amount ofabsorption/emissions

Amount of absorption
by photosynthesisBasematerials

Emissions by breathing
Fixed carbon content

Wood chips(Recycled)

Tree age*From the frequently asked questions
on the Forestry Agency’s website

Growing forest has the function to absorb
more CO2 than matured forest. By adequately
felling trees according to the forest growth
cycle and newly planting trees, it will become
possible to maximize the CO2 absorptivefunction of a forest.

Greening andimprovementof soil

Agricultureandhorticulture

DAIKEN GROUP REPORT 2021

Tatami mats

Insulation board
Protection board
DW fiber

Woody fibers

21

LVL

Veneer

Timber fromforest thinning

Young
forestCO2

Lamination

Nursery tree

Plant

O2

CO2

Industrial materials business

GLOW EARTH

Business activities to continue to use abuilding materials that maximize the vContributing to carbon neutrality by pursuing the sustainable use of wood resources
Three perspectives for realizationof timber to protect
2 Use
forestsof timber with zero
3 Use
waste

By keep using timber as materials, it becomes possible to keep storing fixed carbon

C Store as carbon

CO2

Strategy for Value Creation

Public spaces andliving spaces

House
Building

Emitted CO2 isabsorbed byforests

CO2
CO2
Demolition

Flooring

as materials, such as industrial andvalue of timber, for a long time

Waste
incineration

Data

Doors, cabinets, stairs,
and construction materials

Foundation Supporting Value Creation

Building materials business

Timber fromdemolished buildings

Daiken Group's Value Creationof appropriately
1 Usemanaged timber

DAIKEN GROUP REPORT 2021

22

The cycle tocontinue to use as
materials for a longtime without burning
them

Carbon content that forest can store is limited. By expanding the scenes to use timber as various
materials, it will become possible to store more carbon while enriching people’s living spaces.

Special Feature

New Application and Deployment of Domestic Timber in
Cooperation with Local Communities
The Daiken Group has positioned the pursuit of sustainable use of wood resources as an important theme (materiality).
While deepening the cooperation with those in local communities having appropriately managed abundant forest resources
following the long-term vision GP25 to aim for business expansion into new fields without being bound by conventional ideas,
we challenge the new application deployment to use up domestic timber for which the time for cutting has arrived and that
requires the promotion of use.
Technologies cultivated since the foundation of
the company to effectively use timber(1) Technology to overcome the weaknesses ofand extract the beauty of timber(2) Technology to use timber with zero waste

2016
Started tocomprehensively use
timber by cooperatingwith local communities

Developed industrial andbuilding materials usingwood fibers

We established the Nichinan Total Cascading Use of Wood commercialization study project in November 2016 with Nichinan,
Tottori Prefecture, Nichinan Forestry Cooperative, and Orochi Co., Ltd., which is a local LVL manufacturer. We comprehensively
use abundant forest resources in Nichinan without waste by using our wood processing technology and work to revitalize theforestry industry and local industries through the maintenance and management of forests.

Development image of the total use of wood through regional cooperation.

Business Base for Total Cascading of WoodUse ofRenewable Energy

Conservation of Forests
Appropriate management
and operation of forest
resources will grow healthy
forests and contribute to
ecosystem conservation

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

Felled trees
Tree planting

Operation and management by the forest owner’s cooperative
Materials A, B

Materials C, D

Research InstituteGreening Promotion

Development of tree
trimming and planting
techniques and humanresources● Utilization development● Development of productswith highly added value●

DW fiber’s excellent waterholding property and water
permeability will improve
plant growing environment
and promote greening

Orochi Co., Ltd.

Promotion of Crop Growth
DW fiber will promote soil
aggregation, help roots grow,and promote crop growth

Wood fiber plantChipmanufacturing plant

Promotion of the useof domestic timber
By developing wood products towhich new value is added, promote
the use of domestic timber

BoilerDisaster Restoration

Regional Development

DW fiber’s soil buffering action willtransform soil to the environment
appropriate for plant growth andimprove salt balance

Revitalization of the forest products
industry using local resources willcontribute to the development of local
economy and employment creation

Participated in the Awaji Bamboo Resource Utilization Project
In October 2020, we participated in the Awaji Bamboo Resource Utilization Project for the purpose of promoting the utilizationof bamboo resources on Awaji Island, Hyogo Prefecture. We aim to develop and commercialize fibers using bamboo resourceson Awaji Island through the industry-government-academia cooperation involving five parties participated in the project. By not
only deploying DW fiber’s tree species but also expanding the use of bamboo-mixed fibers, our group will contribute to building
the bamboo resource circulating system from supply to consumption of bamboo resources and regional revitalization.

23

DAIKEN GROUP REPORT 2021

Disseminate the initiatives for the comprehensive useof timber in other regions

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

2021
Expanded into the fields ofagriculture and horticulture materials
Wood culture medium GLOW
EARTH

2017
Expanded into the fields of civilengineering and landscaping
Soil improvement additive DW fiber

After about
six months

Case of greening by DW fiber*DW fiber has been registered in the New
Technology Information System (NETIS) by the
Ministry of Land, Infrastructure, Transport andTourism.
Registration number: KT-170110-A

Foundation Supporting Value Creation

As the first case of the Total Cascading Use of Woodcommercialization study project, we started proposing
the soil improvement additive DW fiber in May 2017.
DW fiber is a soil improvement additive with the pointof view to utilize timber without being wasted and madeof timber offcuts that are generated in manufacturing
LVL by Orochi Co., Ltd., using wood that the Nichinan
Forestry Cooperative hewed out and fibrillated and towhich fulvic acid with plant growth-promoting effects isadded. With DW fiber, we expanded into the fields ofcivil engineering and landscaping for the first time, andit contributes to the greening of soil and crop growthpromotion, as well as post-disaster reconstruction, suchas regeneration of protective forest from salty winds.

Strategy for Value Creation(1) Soil improvement additive DW fiber

Soil improvement additive DW fiber(2) Wood culture medium GLOW EARTH

Wood culture medium GLOW EARTH

Traceability has been secured by actively
using domestic timber
While the active use of domestic timber for the purpose of soundly
protecting forest resources in Japan has been requested, it has
secured the features, such as quality stability and lightweight structurethat are unique to domestic wood chip materials, and traceability,
such as where timber comes from and the processing route.

Data

As the second case in which our wood processing technology cultivated in DW
fiber was applied, we started proposing the wood medium culture GLOW EARTH
in January 2021. GLOW EARTH for which we established the technology with
an approach different from DW fiber that has plant growth promotion action
is a wood medium culture that can create an optimal cultural environment bymaking factor substances that inhibit the growth of plants harmless.
We have realized the resource circulation that wood harvested in a forest
becomes the culture medium, helps the growth of the next plants as the
agricultural and horticultural material, and returns to the soil again. Regarding
our first entry into the field of agricultural and horticultural materials with GLOW
EARTH, we will foster this as a bud leading to the expansion of the businessdomain.

Daiken Group's Value Creation

Deliver the potential of wood fibers anddisseminate use applications in the new field

Cases of Adoption
In the miniature Phalaenopsis orchid
COCOLAN* business that Daiwa House
Industry Co., Ltd., has been deploying, GLOW
EARTH was adopted as the culture medium
based on the points, such as its high quality,
stability, lightweight, good touch feeling, andmanageability unique to domestic materials.

GLOW EARTH that partially used Timber fromthe Cultivated Forest* originated from the
Natural Water Sanctuary activities across Japan
conducted by Suntory Group was adopted as
the culture medium for the Suntory Flowers Ltd.
vegetable seedling product Honki Yasai Ready To
Harvest.

*
COCOLAN culture business: Daiwa House
Industry Co., Ltd., constructed a cultural
facility using their unique technology in theircompany housing complex in Miki City, Hyogo
Prefecture, for the purpose of building a new
relationship with the local community, such as
local employment creation, through cultivationof miniature Phalaenopsis orchid COCOLAN.

*Timber from the Cultivated Forest: Suntory Group
refers to timber originated from the activities tocultivate sustainable water and forests as Timberfrom the Cultivated Forest.
The Daiwa House Industry Co., Ltd.,
miniature Phalaenopsis orchid COCOLAN

The Suntory Flowers Ltd.
vegetable seedling product Honki
Yasai Ready To Harvest

DAIKEN GROUP REPORT 2021

24

Creating Shared Value (CSV) by Daiken 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 timber
Promote the use of domestic timber with special MDF that offers excellent water resistanceSocial 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 timber should be more actively used in order to foster healthy forests that fulfill various
needs, such as absorbing CO2 and prevention of landslides. The Japanese government is aiming to increase
wood self-sufficiency to 50% by 2025.

Daiken's strengths and value creation 1
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, proceeded with the development of base materials forflooring combined with domestic timber, and has made many improvements. Because of the shift, we newly promoted for our primary
products in the fiscal 2021, utilization of domestic timber for base materials for flooring, which was approx. 4% in the fiscal 2015,
increased to approx. 47%. The group will continuously proceed with product development that will draw out the appeal of domestic
timber and further promote the use of domestic timber.
Cross-section image of base material
for flooring made fromdomestic timber

47

Fiscal 2021

Utilization of domestic timber forbase materials for flooring（%）

Approx.

50

%

41

40

33

30

30

23

20
10
0

11
4
2015

Daiken’s special MDF
2016

2017

2018

2019

2020

Plywood made ofdomestic timber

2021(Fiscal year)

Expanding the scenes to utilize domestic timbers with the wood hardening technology
Daiken's strengths and value creation 2
With Daiken’s unique WPC* technology to harden woodtissues 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 decorative
surface materials. Because many domestic tree species aresoft materials, low durability in using them as flooring was an
issue, but by taking advantage of this technology, we will
expand the use of domestic timber while meeting the needs ofusing local materials.

Results of the commercialization of local materials
with the WPC technology

23

prefectures

Case of adopting WPC flooring

Mechanism of the WPC technology*WPC = The abbreviation for Wood Plastics Combination

Inject plastic resin into surface wood for
flooring and harden it

25

DAIKEN GROUP REPORT 2021

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

Recycling of

02 wood resources

Reduction of

03 CO2 emissions

Prolongation of the carbon fixation period by using wood resources for materials
Social issues and needs

Daiken's strengths and value creation
The Daiken Group has been manufacturing materials that effectively use wood resources, such as MDF using cutoff materials fromsawmills, and insulation boards reusing construction demolition timber that used to be discarded or used as fuel. Using wood asmaterials as long as possible instead of burning will not only reduce waste but also keep storing carbon in wood, and as a result, it
will lead to reducing CO2 emissions into the atmosphere. Our group focuses on this function, continues to use wood resources in awide variety of scenes as materials with zero waste, and contributes to the formation of a recycling-oriented society and the preventionof global warming.

Fiscal 2021

1,031,000

Fiscal 2020

Approx.

Approx.

t-CO2/year

t-CO2/year*Reference: Total CO2 emissions in Japan in the fiscal 2021 was 82,500 t-CO2/year

Foundation Supporting Value Creation

Wood chips
Residual wood
offcuts
Nursery tree

Use of wood
resources as
Forestmaterials

Felled trees

Strategy for Value Creation

996,000

The amount of carbon fixation by MDF and insulation board (CO2 equivalent)

Daiken Group's Value Creation

Considering the two closely linked SDGs and the Paris Climate Agreement, the crucial challenge for the world
is to create a recycling-oriented society that effectively uses limited resources and to promote measuresagainst climate change associated with global warming.

Insulation board

Construction
demolition timber

Data

Demolition

MDF

Building
materials

LumberHouse

The amount of carbon fixation by insulation board(CO2 equivalent)
Fiscal 2020
Approx.

140,000
t-CO2/year

The amount of carbon fixation by MDF (CO2 equivalent)
Fiscal 2021

Fiscal 2021

136,000

Approx.

t-CO2/year

Fiscal 2020
Approx.

891,000
t-CO2/year

859,000

Approx.

t-CO2/year

DAIKEN GROUP REPORT 2021

26

04 Creating a safe, secure, healthy, and comfortable space
Creating a safe space to live together with the elderly
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% by 2060. Thereis also concern about social problems with elderly people providing care for elderly people. So, the living
environment of the future must be safe, secure, healthy, and comfortable.

Daiken's strengths and value creation 1
Based on our ideas and technologies for living spaces proven throughour work, Daiken is committed to manufacturing from the perspective of
all users, including elderly people, their families, and caregivers. In recent
years, by improving the mechanism that can finely respond to the needs
that vary according to facilities, such as elderly facilities, houses that areconsiderate of home care, etc., we have been deploying comprehensive
product lines. Daiken pursues the creation of excellent and pleasantspaces that are safe and secure for people’s lives and have functionality,
such as making it easy
to listen toconversations, theresponse to theantiviral function forwhich the needs have Cases of adopting the building Moisture conditioning wallmaterials from the Omoiyari
material that creates abeen increasing, etc.
Series for the living spaces
where elderly people live

comfortable indoor
environment

425

Omoiyari Door Sales
Volume Growth Rate

Fiscal 2021

（%）

500

%

437

400

321
265

300
200

100

131

174

198

2016

2017

100
0

2014

2015

2018

2019

2020

2021
(Fiscal year)

Calculated on the basis of the Omoiyari door sales volume in fiscal 2014

Creating spaces where children can spend the time safely
Social issues and needs
While cases of leaving children aged 0 to 3 in childcare facilities have been increasing more than ever with theincrease in the female employment rate in recent years, a design that is more considerate of safety and theenvironmental aspect is required for these facilities. Lack of human resources engaged in childcare is considered
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
We thoroughly examined the performance required for the area around a door in a childcare facility where the risk of injury is particularlyhigh and developed the door dedicated to kindergartens and childcare facilities, while taking advantage of the expertise in door
manufacturing cultivated from past houses and elderly facilities. We also provide spaces where children who are in the auditory andlinguistic developmental stage can optimally spend time through our products having the sound absorbing feature that can reducenoise. We will support a wide variety of problem solutions required for childcare facilities, such as improvement of safety and comfort
and further reduction in the nursery teachers’ burden by using Daiken’s unique technologies and diverse products.

Won the Kids Design Award

Doors that consider safety by High-performance ceiling materials Sound absorbing panel forhaving excellent sound absorbing, ceiling of which the color andassuming that children use
moisture conditioning, andshape can be specially ordered
them
formaldehyde absorbing features

27

DAIKEN GROUP REPORT 2021

(Fiscal 2018)(Fiscal 2017)* Designs to contribute to the safety and security from children

Effective utilization
05 of untapped resources

Promotion of anti-

06 seismic performance

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

Daiken's strengths and value creation

Number of households installing Dai-Lite(cumulative) *Estimated by our company
Approx.

Approx.

960,000

920,000(As of the end of March 2021)

Dai-Lite MS

Anti-seismic wall

(As of the end of March 2020)

Strategy for Value Creation

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 surface, such as lightweight, high strength, high durability,
fireproof, and workability, that could not be realized with conventional inorganic materials. Daiken has contributed to a
recycling-oriented society by finding value in a resource that was untapped, by expanding applications as the product, and bybecoming popular as the leading brand for an inorganic bearing surface for houses, and it has contributed to improving the aseismic
performance of Japanese wooden houses. By expanding the anti-seismic products for existing houses, it promotes further upgradingof the anti-seismic performance of wooden housing.

Daiken Group's Value Creation

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

Shirasu, an unused resource available in the natural
world

Contributing to the anti-seismic ceiling by developing the labor-saving construction techniqueSocial issues and needs
Because of the special demand for the restoration projects and various redevelopment projects, 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 ceiling anti-seismic.

To particularly respond to the needs of making the ceilings of large public facilities
Rate of reduction of construction time and laboranti-seismic after the Great East Japan Earthquake, Daiken developed a unique ceilingcompared to making theconventional ceiling anti-seismic:
construction technique that makes it possible to make the ceiling anti-seismic with the*Estimated by our company
saving construction time and work. With this construction technique, we reduced theApprox.
%construction time and labor by approx. 25% compared to making the conventional
ceiling anti-seismic. We also developed a ceiling system exclusively for hallways, which
will become the evacuation routeat the time of disaster.
We will aim to further realize thesaving construction time andwork for not only ceilings but
also building materials forrenovation from the perspective
Our own anti-seismic ceiling construction techniqueFlooring for renovation that can beWall cabinet corresponding to theof a new construction
easily constructed in a shorton-board construction technique that
construction period
can omit substrate work and shorten
technique.

Data

Daiken's strengths and value creation

Foundation Supporting Value Creation

07 Development of labor saving type products and techniques25

the construction period

DAIKEN GROUP REPORT 2021

28

Progress of the Medium-Term Management Plan
Toward Realization of the Long-Term Vision
As the roadmap toward the realization of the long-term vision GP25 that drew how we should be in 2025, the Daiken Group has
set the medium-term management plan in three steps. In the medium-term management plan GP25 2nd Stage that started fromfiscal 2020, we have set management goals for both the financial and non-financial aspects and have been developing measureswith the policies of I “Accelerating growth strategies” and II “Enhancement of the management foundation” as key axes.

Medium-Term Management Plan GP25 1st Stage (Fiscal 2017-2019)
The first step toward an all-embracing company for building materials

Basic policy● Endeavor to further strengthen current businesses and develop the foundations for new businesses as the key to growth● Proactively develop environmental-related technologies for ecological materials, energy savings, and domestic wood utilization● Actively introduce management resources to the priority markets of public and commercial buildings and global markets● Maximize the synergy of manufacturer and engineering to enhance profitability● Create a work environment where employees can work with enthusiasm and foster the human resources who will play

important roles in the future● Define diversity is as one of the management strategies, and the ability delivered by a variety of human resources is to be theengine of growth● Strengthen governance to enhance corporate value over the medium and long term

Results achieved against management goals(¥100 million)

BenchmarkFiscal 2016
Net sales

Fiscal 2017

Results
Fiscal 2018

Fiscal 2019

Goals
Fiscal 2019

1,681

1,688

1,705

1,829

1,800

Operating profit

55

85

75

57

70

Ordinary profit

52

90

87

68

70

Profit attributable to owners of parent

39

51

58

44

43

ROE

9.8%

11.7%

11.7%

7.8%

8%

Dividend payout ratio

30.4%

30.1%

30.3%

42.4%

30% or more

Achievements and issues■ 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 ordering and order receiving system, and we
could not achieve the goal in the final fiscal year and issues remained in 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 and improved shareholder
return.

Enhancement of the overseas expansionof industrial materials business
Purchased an MDF plantin New Zealand

29

DAIKEN GROUP REPORT 2021

Expansion and improvement of
the interior door series having
the functions required by facility

Active use of renewable energy
Installation of additional biomass
boilers

Establishment of the Daiken R&D
Center, which is the place forco-creation toward therealization of the long-term vision

Long-Term Vision

Medium-Term Management Plan

GP25

GP25 3rd Stage (Fiscal 2023-2026)

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

Accelerate growth to become an all-embracing company for building materials
Basic policy
Based on firm management foundation, pursue the resolution of social issues through our business, thereby
accelerating our growth strategies toward becoming an all-embracing company for building materials.
Domestic: Review of the Business (Market) Portfolio
Global: Business expansion through proactive investments andentry into new markets

I. Accelerating growth strategies

Daiken Group's Value Creation

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

1 Optimize our financial foundation

II. Enhancement of the Management Foundation

2 Restructure firm and flexible business infrastructure

Progress against management goals
I. Accelerating growth strategies(¥100 million)

Results
Fiscal 2020
Net sales

Fiscal 2021

Goals
Fiscal 2022

2,024

1,992

2,040

83

87

100

120

4.1%

4.4%

4.9％

5.3%

54

56

60

70

Operating profit
Operating profit ratio

Forecast
Fiscal 2022

Profit attributable to owners of parent

2,250

Strategy for Value Creation

3 Practice of ESG Management* Forecast on May, 14

Financial Indicators
Results
Fiscal 2020

Forecast
Fiscal 2022

Fiscal 2021

Goals
Fiscal 2022

ROE

9.5%

9.1%

8.6%

ROA

5.5%

5.8%

6.0%

7%

Soundness

Shareholder equity ratio

32.7%

39.4%

41.0%

40%

Shareholder return

Dividend payout ratio

33.4%

32.4%

34.7%

30% or more

Efficiency* Forecast on May, 14

Non-financial Indicators

Results
Fiscal 2020
E
S

Goals
Fiscal 2022

Fiscal 2021

Total Domestic CO2 Emissions*1

(28%)

(35%)

(26%)

Total diversity index*2

+19pt

+19pt

+20pt

Serious quality accidents and violations
Degree of penetration of the Group Corporate Philosophy*3

1

1

0

+4pt

ー

+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 employees’ understanding, sharing, and practice of the group corporate philosophy were indexed as compared to fiscal 2018

Data

G

10%

Foundation Supporting Value Creation

II. Enhancement of the Management Foundation

Fiscal 2021 Summary■ In fiscal 2021, which was the second year of the medium-term management plan, the domestic market suffered harsh conditions dueto the impact of the downturn associated with the consumption tax increase that lasted until the first half of the year, followed by the
impact of the COVID-19 pandemic. On the other hand, in the global markets, revenues decreased as a whole. Although the two North
American companies, which became group companies through M&As in fiscal 2020 could expand sales in the strong US housing
market, they could not cover the decrease in revenues in the domestic market.
■ Thereby, the ratio of sales in the global markets that are positioned as the priority markets increased to 23% from 18% in the previous
fiscal year, and we could steadily proceed with the review of the business (market) portfolio upheld in the basic policy of the mediumterm management plan.
■Regarding operating profit, we secured an increase in profits and achieved the highest profits since consolidation. It is the result of
our commitment that we strived for streamlining, cost reductions, and a reduction of sales and general administrative expenses in
addition to the fact that profits increased in the US market where sales were good, although profits decreased because of a decrease
in revenues in the domestic market.
■ For non-financial goals, total domestic CO2 emissions decreased by 35% compared to fiscal 2014 due to the impact of a decrease of
production, in addition to the stable operation of biomass boilers, and we could achieve the goal for fiscal 2022 ahead of schedule.

DAIKEN GROUP REPORT 2021

30

Strategies by Business Segment and Market
Strategies and Progress by Business Segment
Sales by Business(¥100 million)
2,500

2,250
2,024

2,000

1,829
Other

1,500

Engineering business

1,681

135

92

217

（11％）

180

115
139（8％）

88

92

235

205

282

（13％）

（12％）

（10％）

894

923

886

（47％）

（45％）

（45％）

Building materials
business

（51％）

862

（49％）

Industrial materials
business

563

765

（34％）

（38％）

（41％）

（39％）

（34％）

618

2016
Results

2019
Results

2020
Results

2021
Results2022
Forecast on May. 14

500

0

118

（10％）

949

1,000

2,040

1,992

794

806

950

（42％）

900

（40％）

2022 (Fiscal year)
Goals

Strategies by Business Segment
Progress in Fiscal 2021

Industrial materials business
Globally expand the markets and applications bytaking advantage of sustainability and functionality andmaximize the fixed asset efficiency■ Invest in the North American wood industrial materials business(LVL/veneer) and expand into the North American market■ Pursue optimization of the production system■ Accelerate application development centering on the

resolution of social issues● Start the non-combustible business for wood materials● Consider commercialization of wood material use for the
agricultural and gardening markets● Consider commercialization of new wood materials● Improvement of profitability by the stable supply throughenhanced cooperation of the two North American companies andby expanding the sales of the products with high added value,such as antiseptic LVL and high-strength LVL● Expansion of the use application of MDF made of 100%plantation acacia timber into building materials● Expansion of the non-combustible product lineup of Dai-Litebase materials● Establishment of a preparation room toward the consideration ofcommercialization of the new wooden boards

Building materials business
By taking advantage of the industrial materials business,
as well as functional and construction saving-type building
materials, increase our share in the housing market andexpand in the public and commercial building fields● An increase in our share of flooring centering on high design■ Further expand differentiated products that can keep getting● Introduction of new products that correspond to changing

chosen■ Expand the product/sales networks by actively utilizing M&A

products that are our unique technology● Expansion of the product lineup having an antiviral function of

BIOTASK
lifestyles during the COVID-19 crisisand external resources

Engineering business
Expand the construction domains, areas, and ordersources by M&A and cooperating with other companies■ Expand the construction company’s business targeting thepriority markets (public and commercial building, remodeling,
and renovation)

31

DAIKEN GROUP REPORT 2021

● Expansion of the sale of and increased profitability of apartment

renovation business in the Tokyo metropolitan area
● An increase in orders for renovation work in line with the market

recovery after the 2Q● Expanded the orders of construction work by cooperating with

ITOCHU Corporation GroupStrategies and Progress by Market
Sales by Market

Daiken Group's Value Creation(¥100 million)
2,500

2,250
2,024
2,000

1,500

Global markets
Public andcommercial buildings
Industrial materials
Home renovation
market365

1,681
102（6％）
165

（12％）

（13％）

355

284

211

（10％）

357

（19％）

（21％）

287

（17％）

Domestic newhome market

262

1,659
Domestic 284
1,637 317
market （16％） （89％） （16％） （82％）
1,579

0

786

（42％）

775

（39％）

2016
Results

2019
Results

2020
Results

756

312

237

（14％）

（45％）

（25％）

（23％）

（13％）

246

187

（16％）

355

（16％）

（9％）

（12％）

312

（14％）

264

（12％）

（94％）
500

502

462

（18％）

（11％）

520

（23％）

1,529

（77％）

332

（16％）

376

1,538

（75％） （17％）

755

730

1,730

（77％）

675

（37％）

（37％）

（30％）

2021
Results2022
Forecast on May. 14

2022
Goals

(Fiscal year)

Global markets
Global

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

Public and commercial buildings
Expand investments, including M&A, and accelerate growth■ Expand the product lineup (The medical field will be the new focused target)■ Improve infrastructure for the expansion of the markets, such as

logistics, correspondence of drawing, and the sales structure■ Expand the product and sales networks, including cooperation
with other companies and M&A

Domestic

Cover the decrease in these for housing with application
development and expand industrial materials business■ Focus on application development for the new markets and fields■ Promote the development of and search the applications of newmaterials and R&D productsHome renovation market
Expand in the renovation market from a perspective ofdevelopment of functional products and methods■ Expand the renovated properties and renovation work in theTokyo metropolitan area
■ Focus on the expansion of the products for renovation, such as
construction savings and waste savings

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

that continues to be favorable● Expansion of the MDF sales channels for overseas

P37-38countries● An increase in door sales in the Indonesian plant due
to the growth in demand from the UK● An increase in the number of adoption of doors for

elderly facilities, medical facilities, and offices● Enhancement of the proposals with functional

products, such as non-combustible, the antiviralfunction, and improvement of the sound environment● Enhancement of the contact points with customers
using the web tools

P39-40

Data

Industrial materials

Progress in Fiscal 2021

Foundation Supporting Value Creation

Strategies by Market

Strategy for Value Creation

1,000

1,829
192

2,040

1,992

● Launch of GLOW EARTH, the wood culture medium forthe agriculture and horticulture markets● Expansion of the adoption of the soil improvement

additive DW fiber● Development of the new wooden board● Development of labor-saving type products toward

the reduction of the renovation work time
● Enhancement of proposals for specialized remodelingcompanies

P41-42● Expansion of the apartment renovation and renovation

work in the Tokyo metropolitan area
● Expansion of sales to builders targeting first-time homebuyers that are increasing their presence in the market● Promotion of the use of domestic base materials forflooring● Expansion of the adoption of non-combustible wallmaterials with deeply carved designs

DAIKEN GROUP REPORT 2021

32

Summary of Businesses
Industrial materials business
Sales Breakdown by Business Sector

Net sales

Operating Profit/Operating Profit Ratio
Operating profit(¥million)

100,000

40.5%

（%）

5,000

80,00060,000Operating profit ratio(¥million)

76,58980,692

61,843

10.0

4,000

8.0

3,732

3,000

55,3546.0
2,503

40,0002,000

20,000

1,000

1,955

3.5

4.6
4.0

3.3
1,132

2.0
1.8

0

2018

2019

2020

2021

0

(Fiscal year)

2018

2019

2020

0.0

2021

(Fiscal year)

Building materials business
Sales Breakdown by Business Sector

Net sales

Operating Profit/Operating Profit Ratio
Operating profit(¥million)

Operating profit ratio(¥million)

100,000

94,93886,85389,485

（%）

4,955

5,000

10.0

4,598

88,69780,0004,000

60,0003,000

40,000

2,000

4,076

8.0

3,189

44.5%

5.3

6.0

5.2

4.6
4.0

3.6
20,000

0

1,000

2018

2019

2020

2021

0

(Fiscal year)

2.0

2018

2019

2020

0.0

2021

(Fiscal year)

Engineering business
Sales Breakdown by Business Sector

Net sales

Operating Profit/Operating Profit Ratio
Operating profit(¥million)

50,000DAIKEN GROUP REPORT 2021

8.0

5.6

30,00021,71320,000

0

33

10.0

1,500

16,45818,063

20,542

1,000

500

2018

2019

2020

2021

(Fiscal year)

0

6.0

1,015

4.0

3.2

10,000*Other Daiken businesses account for 4.7% in addition to the above.

（%）

2,000

40,000

10.3%

Operating profit ratio(¥million)

2.8

528

2018

613

2019

2020

508

2.5

2021

(Fiscal year)

2.0

0.0

Results in Fiscal 2021

Production Plants

Subsidiaries part of the Group

Okayama Plant
Takahagi Plant

Dai-tac Corporation
Aizu Daiken Corporation
Nichinan Daiken Co., Ltd.
Eco Techno Co., Ltd.
DAIKEN NEW ZEALAND LIMITED (New Zealand)
DAIKEN SOUTHLAND LIMITED (New Zealand)
DAIKEN SARAWAK SDN. BHD. (Malaysia)
DAIKEN MIRI SDN. BHD. (Malaysia)
CIPA Lumber Co., Ltd. (Canada)
PACIFIC WOODTECH CORPORATION (USA)

Rankings of the Building Materials and Equipment Manufacturersthat the Readers Want to Adopt in 2020 by Nikkei Home Builder
First place in the Inorganic Bearing Surface
Category*1
読者を対象に、建材･設備メーカーの製品採用意向等をアンケート調査2020年12月号

Production Plants

Subsidiaries part of the Group

Inami Plant
Mie Plant

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

Rankings of the Building Materials and Equipment Manufacturersthat Readers Want to Adopt in 2020 by Nikkei ArchitectureFirst place in
the Composite
Flooring Category*2

読者を対象に、建材･設備メーカーの製 品 採 用 意
向 等 をアンケ ート調 査
2020年11⽉26⽇号

The November 26, 2020 issue

Subsidiaries part of the GroupData

Net sales in the engineering business in fiscal 2021 amounted
to ¥20.542 billion (down 5.4% year-on-year). In addition to anincrease due to the inclusion of ReformQ Co., Ltd. and T.O
FLOORING CO., LTD.’s performance (construction work) fromthe beginning of this period that was included in the consolidated income statement after the second quarter of the previous
period, we also had an increase due to the fact that apartment
renovation in the Tokyo metropolitan area was favorable; however, because of the decreased demand for interior projects forbuildings and offices, revenues decreased by ¥1.17 billion.
Regarding operating profit, although apartment renovation sales
increased and profitability improved, the impact of decreased
sales of interior projects for buildings and offices was significant,our revenues decreased by ¥104 million.

読者を対象に、建材･設備メーカーの製 品 採 用 意
向等をアンケート調査
2020年11⽉26⽇号*We also won the first place in the Composite Flooring Category in the Rankings of the
Building Materials and Equipment Manufacturers 2020 in the December 2020 issue of
the Nikkei Homebuilder.

*2 A questionnaire survey for the readers in regard to their intention to adopt building materials and equipment manufacturers’ products

Results in Fiscal 2021

First place in the
Home Interior
Door Category*2

Foundation Supporting Value Creation

Net sales in the building materials business in fiscal 2021 amounted to ¥88.697 billion (down 6.6% year-on-year). We had an increase in net sales as we included T.O FLOORING CO., LTD.’s(products) performance in the beginning of this period that was
included from the third quarter in the previous period, in addition to the increase in adoption of doors and sound products for
public and commercial buildings, but because of the downturn
associated with the consumption tax increase that lasted until
the second quarter coupled with the impact of the COVID-19
pandemic, sales of flooring and doors for new homes and renovations decreased, and revenues decreased by ¥6.241 billion.
Regarding operating profit, although we strived for streamlining
and cost reductions, we could not absorb the impact of decreased profits due to a decrease in revenues, and revenues decreased by ¥878 million.

The December 2020 issue

Strategy for Value Creation*1 A questionnaire survey for the readers in regard to their intention to adopt building materials and equipment manufacturers’ products

Results in Fiscal 2021

Daiken Group's Value Creation

Net sales in the industrial materials business in fiscal 2021 amounted
to ¥80.692 billion (up 5.4% year-on-year). In addition to the deteriorated market conditions caused by the US-China trade friction that continued from the first half of the year, we were affected by decreased
MDF sales associated with decreased demand at home and abroad
due to the influence of the COVID-19 pandemic and the decreased
tatami mat orders associated with a sharp deceleration in inbounddemand, but because LVL sales in the US were favorable after thesecond quarter, in addition to the increase due to the inclusion of
CIPA’s and PWT’s performance in the beginning of this period thatwas included in the consolidated income statements from the second
quarter of the previous period, revenues increased by ¥4.103 billion.
Regarding operating profit, as we streamlined and reduced costs
to respond to the impact of decreased profits due to a decrease inrevenues in the products in the existing businesses and strived tostabilize raw wood procurement, and as CIPA’s and PWT’s profitability improvement due to the recovery of the US housing market after
the second quarter contributed, revenues increased by ¥1.228 billion.

DAIKEN ENGINEERING CORPORATION
Koukou Sangyo Corporation
Sankei Corporation
DAIKEN HOME & SERVICE CORPORATION
Smileup Corporation
ReformQ Co., Ltd.
PAC SYSTEM Co., Ltd.
T.O FLOORING CO., LTD. (construction)

DAIKEN GROUP REPORT 2021

34

Differences Between the Management Goals in the MediumTerm Management Plan and the Performance Forecast
Because of the reconsideration of MDF transactions, in addition to the changes in the external environment, such as theimpact of the COVID-19 pandemic that was not assumed in the beginning of formulating the medium-term management plan
GP25 2nd Stage, as well as the impact of the US-China trade friction, our forecasts for net sales will be ¥21 billion lower, andoperating profit will be ¥2 billion lower than the management goals in the performance forecast in fiscal 2022 released on May
14, 2021.
Key Factors
Impact of the US-China trade friction

Reconsideration of MDF transactions■ A sharp deceleration in inbound demand■ Delayed recovery of selling prices due to■ Sale of a domestic MDF sales subsidiary■ Postponement of the Tokyo Olympic anddeteriorated MDF market conditions

Impact of the COVID-19 pandemic■ An increase in use of MDF within the group

Paralympic Games■ M&A for an company not executed as planned

Medium-Term
Management Plan
GP25 2nd Stage(¥100 million)
2,500

Net sales

Management goalin fiscal 2022: 2,250

Released on
May 14, 2021

Difference between the management
goals in the medium-term management
plan and the performance forecast

Performance
forecast: 2,040

(210)

2,250
1,992

2,000

Global markets
1,500

Public andcommercial buildings
Industrial materials

1,000Home renovation
market

462

（23％）

237

（12％）

246

（12％）

312

（16％）

2,040

502

(18)

520

（23％）

（25％）

(48)

312

264

（13％）

187

（9％）

332

（16％）

（14％）

355

（16％）

(168)

376

（17％）

(44)
500

Domestic newhome market

730

（37％）

755

（37％）

675

（30％）

+80
0

2021
Results2022
Forecast

2022
Goals

Operating profit Management goal in fiscal
2022: 120

(Fiscal year)

Performance
forecast: 100(20)

Future Response
Firmly maintain the basic strategies in the mediumterm management plan GP25 2nd Stage
Maintain the initial management goals
as the stretch goals■ Enhancement of the proposals for the new needs

that became apparent due to the COVID-19 crisis■ Investments in the enhancement of the managementfoundation, such as the response to DX■ Investments to further expand in the global markets

and increase medium- to long-term competitivenessFor these circumstances, while firmly maintaining the basic strategies in the medium-term management plan GP25 2nd Stage,
we will respond to the changes from the initial assumptions, such as the enhancement of proposals that capture the needs that
became apparent during the COVID-19 crisis, and restructuring in plants toward the improvement of MDF’s profitability. While actively investing in DX, such as the core system, the improvement in logistical efficiency, and the expansion of digitized sales tools,
we will also actively make investments that will enhance our medium- to long-term presence, such as continuously proceedingwith the consideration of the next development of LVL in North America and M&As that will enhance MDF’s presence, aimed atfurther expanding business on a global scale. Therefore, the management goals in the medium-term management plan GP25 2ndStage will remain as the stretch goals, and the performance forecasts released on May 14, 2021 are positioned as our responsible
figures to present to the shareholders and investors based on the business environment under the present circumstances.

35

DAIKEN GROUP REPORT 2021

Initiatives for Priority Markets
While a decrease in new housing starts in Japan is expected in the future, we will accelerate our growth strategies, aiming at
expanding the global markets, public and commercial buildings, and the home renovation market that we position as the priority
markets, in addition to the increase in our share in the new home market. By proactively investing our management resourcesin these priority markets, we will proceed with the reform to become a company that will keep growing even in the situation of
decreased domestic new housing starts.

(Unit: 100 million yen/10,000 homes)(Unit: 100 million yen)200
Net sales (100 million yen)on the right axis

3,000

To achieve the Long-TermDomestic new housing starts(10,000 homes) on the left axis
Vision GP 25

Operating profit (100 million yen)on the left axis

180

Goal of GP25
2nd Stage
2,250
Forecast on May. 14
2,040
1,992

160

140

2,500

2,500

2,000

Daiken Group's Value Creation

To become a company that will keep growing even in the situation of decreased domestic new housing starts

120

120

1,500

87

80

81
1,000

60

40
500
20

1st

2nd

Strategy for Value Creation

100

100

3rd

Medium-Term Management Plan

0

26
20

22

22

20

21

20

20

20

19

20

18

20

17

20

16

20

20

11
20

06
20

01
20

96
19

91
19

86
19

(Fiscal year)

Increase our share in the new homemarketExpansion in the priority markets Opportunities and needs in the three markets
Global markets

Home renovation market

into the housing market in theUSA, which is the world’s largest wooden
housing market and where continuous population growth is expected■ Increasing demand for MDF associated with
the illegal logging of natural wood and the rising needs of sustainable industrial and building materials■ Improvement of quality of the living environment in emerging countries and the risingneeds of high value-added products■
Promotion of the use of wood in build-■
Demand associated with the responses

ings and the use of domestic timber andlocal timber by the Act for Promotion of
Use of Wood in Public Buildings, etc.
■
The rising needs of antiviral products
due to the COVID-19 pandemic■Response to improve the sound environment in offices due to the penetrationof Web meetings

to the new normal as a result of the
COVID-19 crisis■ Demand associated with the responses tothe construction of the housing circulation
system toward a decarbonized society■The rising needs of labor-saving typeproducts associated with the decrease in
the number of construction workers

P37-38

P39-40

P41-42■E
 xpansion

Data

Public and commercial buildings

Foundation Supporting Value Creation

19

81

0

■ Key investments toward the expansion in the priority markets
GP25 1st Stage
Fiscal 2017

Global markets

Fiscal 2018

GP25 2nd Stage
Fiscal 2019

Fiscal 2020

Fiscal 2021

Fiscal 2022

Enhancement of the MDF supply system (Purchased DSL in New Zealand)
Distribution of the wood material business in North America (Purchased CIPA and PWT)
Door production facility expansion and reinforcement for special order items

Public andcommercial buildings

Launch of a new Dai-Lite wall material product

Expansion and reinforcement of the production capacity

Tatami facing production facility expansion and reinforcement
Distribution of the solid wood flooring business (Purchased T.O FLOORING CO., LTD.)

Home renovation
marketDistribution of the apartment renovation business (Purchased PAC SYSTEM Co., Ltd.)
Enhancement of renovation work in the Tokyo metropolitan area (Purchased ReformQ Co., Ltd.)DAIKEN GROUP REPORT 2021

36

Initiatives for Priority Markets

Global Markets
In addition to the sales of MDF
produced in Malaysia and New
Zealand to Southeast Asia,
Oceania, North America, andChina, the industrial materials
business expands the sales by
the North American woodmaterials with a focus on veneer
and LVL produced in Canada
and the USA. The building
materials business has been
deploying interior doors in China,
which has a huge market size,and Indonesia, where housing
demand expansion is expected.

Fiscal 2021
■ Sales Breakdown by Foreign Geographic Area

China

4%

Other

8%

Fiscal 2020
Other 5%

Oceania

China 6%

Fiscal 2019
Other
12%
China
14%

13%

North America

10%

19.2

36.5

billion yen

SoutheastAsia

billion yen

11%

Oceania
North
AmericaSoutheast
Asia

46.2

billion yen

NorthAmerica

21%

47%

56%

Southeast Asia

49%

29%

Oceania
14%

Veneer/LVL 0%
MDF
80%
Other
20%

Veneer/LVL 46%
MDF
39%
Other
15%

Veneer/LVL 56%
MDF
31%
Other
13%

Development by MDF
With the system of four plants in the two countries of Malaysia and New Zealand, we are engaged in the production of MDF for which wood
offcuts from timber are effectively used. By taking advantage of tree species and the characteristics of the production lines and cooperation, we
will promote the distribution of products having new value and the further expansion of the sales channels in global markets.

Malaysia

New ZealandTree species: Hardwood

Tree species: Softwood

Brown-colored MDF that effectively uses wood offcuts from the plywood/lumber
plants in Malaysia. It is used for the base materials for flooring that require
excellent water resistance and dimensional stability.

White-colored MDF that uses plantation Pinus radiata timber in New
Zealand. It is used for the base materials for furniture and building materials
that require lightness and smooth surface.

Characteristics

Characteristics

DSK is a mother plant for MDF, which produces highvalue-added special MDF, etc. They are in the two-plantsystem with DMR after M&A in 2005. They developed
MDF that uses 100% plantation acacia timber that they
started to engage in 2002 and proceeded with the
distribution of new use applications.

MDF that is globally recognized with the Customwood
brand. In addition to the product development that
corresponds to the customer needs, such as ultra-lightweight MDF, DNZ and DSL take advantage of theirrespective characteristics of the production lines andoptimize their production items.

DAIKEN (Shanghai) Corporation

MDF(China)DAIKEN NEW ZEALAND LIMITED (DNZ)(New Zealand/from 2009)

Doors, flooring, and construction materials

DAIKEN Industries (Ningbo) Corporation

MDF(China/from 2002)

DAIKEN SARAWAK SDN. BHD. (DSK)(Malaysia/from 1994)

Singapore
BranchMDF

Indonesia
officeDAIKEN MIRI SDN. BHD. (DMR)(Malaysia/from 2005)

MDF

DAIKEN SOUTHLAND LIMITED (DSL)

Sales office(New Zealand/from 2018)

Production baseIndustrial materials business
Building materials business

37

DAIKEN GROUP REPORT 2021

Door

PT.DAIKEN DHARMA INDONESIA(Indonesia/from 2015)

Expansion with wood materials in North America
By purchasing CIPA, a veneer plant in Canada, and PWT, an LVL plant in the USA, in June 2019, we started the full-fledged expansion
into the US market, which is the world’s largest wooden housing market. Based on the manufacture and sales networks for LVL, which isessential as a structural material for wooden houses in the USA, we will further expand into the market by taking advantage of the Daiken
Group’s technological capabilities cultivated in Japan and by deploying higher value-added products.

Business Flow
Veneermanufacturing(CIPA)

Cutting

LVL
Manufacturing(PWT)

I-Joist*Manufacturing

Major applications in the North American housing market(PWT)

I-Joist rafters

LVL

LVL header

VeneerI-Joist

LVL beams*I-Joist: A structural material, which is a composite material of Oriented Strand Board (OSB: a structural wooden board made by laying thin rectangular wood pieces
cut from raw wood upon one another in such a way that the surface layer and core layer cross at right angles in the fiber direction and are then compressed at hightemperature), LVL, and timber.

Antiseptic LVL installed in the wood deck

Strategy for Value Creation

Structural LVL for homes

Daiken Group's Value Creation

Laminate and glue
veneers
togetherI-joist installed as the joist in a home

(USA/from 2019)

Foundation Supporting Value Creation

LVL

PACIFIC WOODTECH CORPORATION (PWT)

Veneer

CIPA Lumber Co., Ltd. (CIPA)(Canada/from 2019)

Data

Results in Fiscal 2021
Net sales in the global markets in fiscal 2021 amounted to¥46.254 billion (up 26.7% year-on-year). In the industrial
materials business, in addition to the increase due to theinclusion of CIPA’s and PWT’s performance in our consolidated income statement in the beginning of this period that was
included from the second quarter in the previous period,
these companies’ LVL sales in the USA did well in and after
the second quarter, and revenues increased by ¥9.073
billion. In the building materials business, sales of doors in
China and Indonesia were stagnant, and revenues
decreased by ¥86 million. In other segments, because of theincrease in inquiries about the stocking and selling of various
industrial materials that we handle to expand sales in the
future, revenues increased by ¥750 million.

An Increase or Decrease in Net Sales
in the Global Markets by Segment(¥million)+9,073

(86)

0

+750

Industrial
materials

Building
materials

Engineering

Other+9,73846,25436,5162020

2021 (Fiscal year)

DAIKEN GROUP REPORT 2021

38

Initiatives for Priority Markets

Public and Commercial Buildings
We take advantage of our unique technologies and expertise in safety,
durability, non-combustibility, as well as the provision of a comfortablesound environment that we have cultivated as a housing material manufacturer in order to proceed with proposals for spaces by product series thatoffer the functions required by each public facility and commercial building.
In fiscal 2021, we expanded antiviral building materials for where demandhas been increasing because of the COVID-19 crisis and a product portfolio that will more comfortably support diverse ways of working. We will
flexibly respond to social changes and needs to further expand into publicand commercial buildings.

Proposals for Spaces with the Product Series
by Facility and Function

Ceiling materials
Non-combustibility

Aseismic performance

Sound absorbing

Moisture conditioning

Lightweight

Ceiling with aseismic performance and moisture
conditioning that realizes a safe, secure, andcomfortable space

Sound absorbing and moisture
conditioning ceiling material

An anti-seismic ceilingconstruction techniqueSound productsSound absorbing

A ceiling system exclusively for hallways

Sound insulation

Arrange sound vibrations andprovide a comfortable soundenvironment according to thefacility characteristics

Non-combustible sound absorbing wall material
Medicalfacilities
Accommodation
facilities
Offices

Sound absorbing panel for ceiling

Schools andeducational
facilities

Publicfacilities

Sound absorbing panel

Kindergartensand childcare
facilities

Elderly
facilities
Commercial
facilities

Improvement of the soundenvironment in offices
With the building materials that focus onsound control, such as ceiling materials thatsuppress sound vibrations and soundproof
doors with a high level of sound insulation, we
realize the sound environment in offices
suitable for new ways of working.

Door

SafetyDurability

Easy maintenance

Doors that pursue safety and durability according to use scenes

Proposals of spaces madewith antiviral building materials

Doors for kindergartens andchildcare facilities

39

DAIKEN GROUP REPORT 2021

Doors for elderly facilities

Doors for public and commercial
facilities

We respond to the rising needs of theantiviral function and expand the
product lineup that enables the proposals for the entire space.

Non-combustibility

Wall materials

Workability

DesignNon-combustible and well-designed walls that decorate spaces

Non-combustible wall material

We realize spaces having a unified design with non-combustible
products, such as walls, ceilings, eaves, and louver materials.
Designed wall materials

Tatami mats made from washi paper have a great range
of design and are best suited for modern spaces

Promoting the use of domestic or
local timber
Accommodation facilities

Commercial facilities

Scratch resistanceSound insulation

Solid wood flooring

SafetyFlooring that produces wood spaces while utilizing local
timberFlooring that can be used in heavy
duty areas

Floors that provide a feeling of the tree’s warmth and are best
suited for nature-oriented facilities

Flooring that reduces the impact
when a person falls

Solid wood flooring that can be usedin heavy duty areas

Foundation Supporting Value Creation

Flooring

We proactively use domestic timber, such as Japanese cedar
and cypress, which were difficult to use in public and commercial buildings, in a wide range of parts, such as wall and ceilingmaterials, by using our unique technologies.

Strategy for Value Creation

maintenance Durability
Tatami mats Easy
Water repellent
Color variations

Daiken Group's Value Creation

Enhancement of the Distributionof Non-combustible Products

Solid wood flooring for gymnasiums andclassrooms

Data

Results in Fiscal 2021
Net sales in public and commercial buildings in fiscal 2021
amounted to ¥23.709 billion (down 9.8% year-on-year). In theindustrial materials business, because demand for tatami
mats in accommodation and commercial facilities decreased,
revenues decreased by ¥853 million. In the building materials
business, orders for the doors and sound products for elderly
and medical facilities expanded, and revenues increased by¥413 million. In the engineering business, demand for interior
projects for office buildings, mainly in the Tokyo metropolitanarea, decreased as it was the year of holding the Tokyo
Olympic and Paralympic Games, although they were
postponed, and revenues decreased by ¥2.139 billion.

(¥million)

An Increase or Decrease in Net Sales in Public
and Commercial Buildings by Segment(2,583)

26,292

(853)

+413

(2,139)2020

Industrial
materials

Building
materials

Engineering

(4)

Other

23,7092021 (Fiscal year)

DAIKEN GROUP REPORT 2021

40

Initiatives for Priority Markets

Home Renovation Market
We have built a system where the entire group can meet a wide variety of needs for renovation througha great range of product lineups for renovation as follows: (1) Proposals for spaces in the TDY
Collaboration Showroom, (2) cooperation with the engineering business that handles construction, and (3) product development and manufacturing from the perspective of the construction
site. By further enhancing the group’s cooperation and promptly responding to changes
over time and the market needs, we will expand into the entire home renovation market.

Product

Integrated System by the Group’s Cooperation

Product lineupand design
coordinate

Labor-Saving Type Products that Realize
Renovation in a Short Time

Production
The build-to-order system forordering specific sizes thatcan finely respond to
customer needs

Development
Development of products thatare easy to renovate from theperspective of the construction
site, such as saving
construction time and work

Proposals Corresponding to the Changing Lifestyles during the COVID-19 Crisis
While working at home has become common and the time spent at home has increased because of the COVID-19 pandemic, theneeds of wanting to realize more convenient and comfortable spaces have been growing. In response to such market needs, wehave enhanced the development of products that secure a workspace with the labor-saving technique and correspond to theimprovement of sound problems, such as sound leakage and reverberation.

Installation of a teleworking space

41

DAIKEN GROUP REPORT 2021

Improvement of sound problems

TDY Collaboration Showroom Distribution

Lineupwith functions
to totally

TDY Collaboration Showroom

a space

Proposal

TDY Sapporo

customers can easily imagine

TDY Kanazawa

360-degree showroom video

the value

TDY Tokyo

TDY Hiroshima
TDY Fukuoka

TDY Nagoya
TDY Osaka
TDY Takamatsu

Provide a completed spacethat maximally brings out

The Group’s Construction System in the Home Renovation
MarketRenovation

Apartment Renovation

DAIKEN HOME & SERVICE CORPORATION
Smileup Corporation● ReformQ Co., Ltd.

●●PAC SYSTEM Co., Ltd.

●Foundation Supporting Value Creation

Installation Workand Construction

product value

Strategy for Value Creation

A one-stop proposal for aspace by the TDY alliance that

Daiken Group's Value Creation

Toward the enhancement of ourcapability to propose remodeling, three companies of TOTO
Ltd., Daiken, and YKK AP Inc.
that have been in an alliancerelationship since 2002 operatecollaboration showrooms ateight sites in Japan.
We have also released a
360-degree showroom video inwhich people can look aroundwithout coming to ourshowroom.

Data

Results in Fiscal 2021
Net sales in the home renovation market in fiscal 2021
amounted to ¥31.266 billion (down 1.6% year-on-year). In
the industrial materials business, demand for renewing
tatami mats decreased and revenues decreased by ¥218
million. In the building materials business, an impact of the
COVID-19 pandemic particularly until the second quarter
was significant, sales decreased in the entire interior building
materials, such as flooring and doors, and revenues
decreased by ¥1.106 billion. In the engineering business, asrenovation work demand in and after the third quarter recovered and apartment renovations in the Tokyo metropolitan
area steadily expanded, revenues increased by ¥769 million.

An Increase or Decrease in Net Sales inthe Home Renovation Market by Segment(511)(¥million)

31,777(218)(1,106)

+769

+44

2020

Industrial
materials

Building
materials

EngineeringOther

31,2662021 (Fiscal year)

DAIKEN GROUP REPORT 2021

42

Research and Development
Research and development
Core Mission●

 reate new business that will become the fourth pillar after industrial materials, building materials, and engineering using newCtechnology 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■

Utilize R&D center and promote co-creation with those outside the company (Open innovation)

Focused ■ Expand investments in R&D
Measures ■ With the company-wide medium- to long-term development direction, promote companywide product development

R&D Theme
The R&D Center works on Ecology and Improvements in the Quality of Space
in four sectors and promotes R&D that will contribute to a sustainable society.

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 safebuilding materials that will be needed by society in the future■ Development of environment-conscious building materials■ High functionality of the wooden boards and inorganic boards■ Development of high functional paints and painting technology■ Development of new construction technique for building materials■ Wood building material utilization development in the new field■ Adding a high value to wood building materials■ Technology development to use unused resources■ R&D of industrial materials for new markets other than building materials

Spatial environment

Assay evaluation

Development of spaces andbuilding materials that will realize a comfortable life

Various measurements and analyses ofspaces and building materials using the expertise cultivatedin R&D■
Developmentof energy-saving and indoor environment improvement
technologies■Analysis by simulation of the thermal, humidity, and cross-ventilation
environment■ Measurement of air quality■ Sound insulation performance evaluation■ Building materials’ heat generation test

■ Asbestos analysis

Co-Creation Activities Centered on Daiken R&D Center
The Daiken R&D Center was established in October 2018 as the base to not only conduct our unique technology development but also
fuse together with a wide variety of technologies in the world, as well as to deploy co-creation activities. While not being able to sufficiently
fulfill its function as the place for communication with stakeholders during the COVID-19 crisis, we view the situation as the opportunity
to establish a new co-creation method and proceed with the initiatives aimed at speeding up the far-sighted research and development
and expanding the domains.
Communication with Stakeholders

Students/Recruitment
 ork experience throughW
online internships■ Interactions with thegeneration that will bear
the future

Local Community
 company that is lovedA
by the local community■ Cooperation with amunicipality■■

Online internship

Manufacturers and Research Institutions
 xpansion of business domains and creation of jointEdevelopment themes by technology exchanges■ Matching between the technological seeds andneeds■

Creation of new
businesses
Expansion of theexisting businesses

Toward the new CNF application distribution, the two companies will cooperate in working on research and development and aim at developing highly
functional and high-quality interior building materials that take advantage of thecharacteristics of CNF, such as lightweight and high strength.

DAIKEN GROUP REPORT 2021

E nhancement of cooperation
Sharing of issues anddiscussions of development
themes■ Capability development
Acquisition of a way of thinking
A video to introduce researchnecessary for research andthemes within the company
development
Tech Channel (From October 2020)■

R&D center

Building materials development that used the Cellulose Nanofibers(CNF) technology jointly proposed with RISHO KOGYO CO., LTD.,
was adopted as the NEDO-subsidized project43

Within the Company

Customers and Suppliers■

 eepening their understanding of our productsDand quality■

Enhancement of the relationship of trust

Concluded a Comprehensive Partnership Agreement with
Okayama University
In December 2020, with a view to implementing collaborative researches, promoting human resource development through interactions among researchers, deepening cooperation, such as mutual support, and contributing toachieving SDGs by solving social issues on a global scale, we concluded acomprehensive partnership agreement with Okayama University.

R&D Center’s Research and Development that Embody the Group Corporate Philosophy

Pursuit of Potential of Sustainable industrial materials
GLOW EARTH born by taking on a new challenge with the long-term
vision being the point of origin

GLOW EARTH

Challenge to CNF to pursue potential of wood fibers toward the future
Cultivation experiment

Strength test

Pursuit of a Safe, Secure, Healthy, and Comfortable Space
Environmental analytical technique to know everything
about factors that create spaces

Data

Thermal image measurement

In addition to the pursuit of the possibilities of industrial materials, we have been proceeding withresearch and development to give a new function to industrial and building materials. We grasp the
spatial environment based on the assay evaluation technology, delve into it from the perspectivesof the temperature, humidity, and sound environment that are essential when people spend time
comfortably, and at the same time, we conduct assay evaluations toward making responses toharmful substances, such as asbestos and formaldehyde. Above all, one of the themes that wehave been particularly focusing on in recent years is temperature and humidity. While further savingof energy in buildings is required toward the realization of a decarbonized society, we have beenproceeding with research projects to simultaneously pursue the comfortableness of livelihood andthe reduction of consumption energy by the functions of industrial and building materials.

Foundation Supporting Value Creation

Furthermore, as the theme toward the future, we have been proceeding with research anddevelopment of cellulose nanofibers (CNF) to use wood fibers at the nano-level. Development of highquality and highly functional industrial and building materials that take advantage of the characteristics
of CNF can be said to be truly the ultimate technology development to utilize timber that we haveaimed for. We take advantage of collaborative researches with a university and the relationship ofcapital and business alliance with ITOCHU Corporation, have realized a collaboration with a company
that had an intention of wanting to widely make use of this technology, and in October 2020, thiswas adopted as the NEDO (practical development of industrial technologies)-subsidized project. For
the fields where plastic or metal is used because timber does not have sufficient strength, if we
can replace such materials with those using CNF in the future, we will be able to more significantly
contribute to a sustainable society. By effectively using wood resources continuously in the future, theDaiken Group will pursue new possibilities with an eye toward the future.

Strategy for Value Creation

In the long-term vision GP25 formulated in 2015, a challenge to a new field without being bound by
conventional ideas was presented, and the R&D Center has accelerated research and development
to realize this and the initiatives toward commercialization. GLOW EARTH that we launched
in January 2021 was born from such initiatives. While exploring new possibilities of timber, weconceived an idea to use wood fibers for cultivating plants and realized the commercialization after
spending about five years for research and development. GLOW EARTH that makes the factor
substances inhibiting the growth of plants harmless using domestic timber as raw material andthat we realized industrial production opened a way to expand into the field of agricultural andhorticultural materials. While agriculture has been becoming sophisticated by utilizing IT in recent
years, as stable quality for medium culture for cultivation is required, we also aim to contribute tostable production of agricultural products by introducing it to large-scale agricultural facilities.

Daiken Group's Value Creation

As a division that embodies the group corporate philosophy with the mission of Creating a Wonderful Future with our Technology, Ideas,
and Passion, the R&D Center has been conducting research and development to pursue the possibilities of sustainable industrial materials
and a safe, secure, healthy, and comfortable space. As the specific themes, we have been focusing on the four fields of industrial materials
and building materials to effectively use timber and discover new functions and possibilities, the spatial environment for people to spend
the time comfortably, and assay evaluations, which form the base of these themes above. Through the initiatives at our companies andco-creation activities that actively utilize open innovations with a wide variety of stakeholders, the center proceeds with research anddevelopment aimed at improving medium- to long-term corporate value and contributing to a sustainable society.

Beyond antivirus and respond to changes over time

Microorganism measurement room in the
R&D Center*The R&D Center has Biosafety level 2
experiment facilities that can handle theinfluenza virus and food poisoning bacteria
and researchers who have high expertiseare working in the facilities.

Antivirus is another theme that we have been focusing on in recent years. We focused on theantiviral function in the wake of the outbreak of the novel influenza in 2009 and started collaborative
research with the Medical School, Okayama University in 2011. In the following year, we put thefunction to practical use as the antiviral function BIOTASK ahead of the industry. With the COVID-19
outbreak, we reviewed the antivirus mechanism and have been proceeding with the initiatives
aimed at contributing to mitigate the threat of virus. Performance that people require for spatialenvironment has changed with times. By grasping the spatial environment from the perspectiveof what performance will be necessary in the future and proceeding with technology developmentof functional building materials that constitute the space, the Daiken Group continues to conduct
researches that will lead to creating a safe, secure, healthy, and comfortable space.

DAIKEN GROUP REPORT 2021

44

Financial Strategies
Investments Toward the Enhancement of Growth and Foundation
Results from Fiscal 2020 to Fiscal 2021 (Two years)

Medium-Term Management Plan (Three-Year) Goals
 ake it a top priority implement growth investments toward the realM
ization of the long-term vision GP25
● 
Select investments by reflecting risk and return as well as the cost ofcapital● Aggressively utilize advanced technologies such as AI and IoT, andlead to the improvement and efficiency of productivity

 ggressive investments in the three markets that are positioned asA
focused markets in the long-term vision GP25
Stringent selection by evaluating the investment effect based on theconsistency and synergy with the growth strategies, as well as thecapital cost (We responded to the uncertainty of the COVID-19 crisisand reduced investments in fiscal 2021.)● Expansion of IT investments toward the improvement of efficiency andproductivity

●

●

●

(¥100 million)

Shareholder
Shareholderreturn
return(¥100 million)

Funds
FundsininHand,
Hand,etc.
etc.

Sales
Salesofof
Investment
InvestmentSecurities
Securities35
35

GlobalGlobal236
236

Domestic
Domestic
100
100

OperatingOperatingCash
CashFlow
Flow
290
290

(50/year)(50/year)

Regular
RegularInvestments
Investments

Regular
RegularInvestments
Investments

Maintenance
Maintenanceandandupdate
update150
150(Cash in)

Shareholder
Shareholderreturn
return3434

Bonds
BondsPayable/Loans
Payable/Loans42
42
Strategic
Strategic
Investments
Investments

OperatingOperatingCash
CashFlow
Flow(Three-year(Three-year
cumulative
cumulativetotal)
total)
450
450

Strategic
Strategic
Investments
Investments

GlobalGlobal300
300

Domestic
Domestic35
35
Maintenance
Maintenanceandandupdate
update6262(Cash out)

(Cash in)

Strategic Investments(Cash out)

Strategic Investments

North American business: 20 billion yen
Industrial materials business: 10 billion yen
Domestic New business: 3 billion yen
Expanding market: 3 billion yen
Infrastructure: 4 billion yen● Research and development● Operational efficiency system● Ordering and order receiving/logistic systems
GlobalFiscal 2020

GlobalM&A of wood industrial materials business in North America:
Productivity improvement of the MDF business: 22.5 billion yen
Domestic M&A of solid wood flooring business and renovation business:
Productivity improvement of building materials business and IT system: 2.5 billion yen
Enhancement of cooperation in the North American business groupand productivity improvement of the MDF business: 1.1 billion yen
Domestic Additional acquisition of the stocks of a renovation businesssubsidiary and IT system: 1 billion yen
GlobalFiscal 2021

*M&A investments include interest-bearing debt of the acquiring company, but not cash or deposits.

Initiatives for reduction of cross-shareholdings
As one of the initiatives toward the realization of the Target Balance Sheet assumed in the financial indices upheld in the medium-term
management plan, by aggressively making investments for the medium- to long-term growth and pursuing asset efficiency, we havebeen reducing cross-shareholdings. In fiscal 2021, we sold seven stock names for the amount of 2.4 billion yen (including partial sellingof stocks).
Trends in Cross-Shareholdings(¥100 million)

Fiscal 2018 Fiscal 2019 Fiscal 2020 Fiscal 2021
Outstanding balance inthe balance sheet

Listed

183

154

112

129

Unlisted

1

1

1

1

Total

184

155

114

130

Sale Value

-

(4)

(11)

(24)

Acquisition Cost

0

0

0

0

Reduction

(4)

(11)

(24)

25

24

19

18

Unlisted

25

24

24

22

Total
Reduction
Decrease
(4)

50

48

43

(2)

(6)

0 (24)

1

Outstanding balance in the balance sheet
Proportion of Total Assets
Proportion of Net Assets(¥100 million)

200

Number of Stock Names
160

0

Listed

184

32.4

120

Increase155
25.2
Reduction

Total Assets 80
13.1

Proportion of Total Assets
40

9.7

Net Assets

Reduction
1

(11)

1

114

0

DAIKEN GROUP REPORT 2021

2019

Reduction
(2)

130

(5)

50
40

40

0
30

1,706

20 1,725

13.1%

9.7%

6.7%

7.6%

32.4%2020

617

7.6

629

10

32.4

50

Reduction

(4)
155

25.2

80

Reduction

40

130

30

18.1

17.0

20

6.7

7.6

10

2020

2021

Reduction

(11)

(24)

50

45

114

40

9.7

0

2018

(Stock Name)

50

2019

0

Total Number of Stock Names

Reduction
50(Fiscal year)

(2)
48

45

Reduction

(5)
43

40

Reduction

(3)
40

35

767

0
25.2% 2021 18.1%(Fiscal year) 17.0%(Stock Name)

50

13.1

40

(3)

1,601 17.0

6.7

184

120

(3)

1,40718.1

569

Proportion of Net Assets
2018

45

0

（％）

160

（％）

Outstanding balance in the balance sheet
Proportion of Total Assets
Proportion of Net Assets(¥100 million)

200

30

2018

2019

2020

2021

(Fiscal year)

35

30

201

Target Financial Indices
Efficiency Goal
ROA:

7%

ROE:

Soundness Goal

10%

Shareholder equity ratio:●●

Trends in ROA* and Total Assets

Trends in Shareholder Equity and Shareholder Equity Ratio（％）

Total assets
Total assets
ROA (Returnon(Returnassets)on assets)
ROA(¥100 million)(¥100 million)（％）

1,800 1,800
1,706
Total1,601
assetsTotal1,601
assetsROA (Return
ROA
on(Returnassets)on assets)(¥100 million)(¥100 million)

1,725
1,706

10
1,725

1,706
1,601

1,725
1,706

10
1,725
8

10
8

5.5

5.8
5.5

5.8 8
6

8
6

4.5
5.5

5.8
5.5

5.8

1,800
1,500

1,800
1,500

1,500
1,200

1,500
1,200

1,200
900

1,200
900 4.0

4.06.9

900
600

900
600 4.0

4.0

600
300

600
300

1,321
1,303

1,303

6.9
1,321
1,303

1,407
1,601

6.4
1,407
6.9
1,321

6.4
1,407

6.4
6.9

6.4
4.5
4.5

（％）

4.5

300
0

10

（％）

6
4

6
4

4
2

4
2

2
0

2
0

2016 20162017 20172018 20182019 20192020 20202021 (Fiscal
2021
year)
(Fiscal year)*ROA 0(Returnon0(Returnassets)on= Ordinary/ Average
assetsat thebeginningand end and end*ROA
assets) =profit
Ordinary
profit total/ Average
total
assetsat the beginning
0
0
2016
2016
2017
2017
2018 20182019 20192020 20202021 (Fiscal
2021
of the periodx 100(%) x 100of theperiod(%)year)(Fiscal year)

Shareholder
equityShareholder
equityShareholder
equity ratioequity ratio
Shareholder(¥100 million)(¥100 million)

（％）

700
700
Shareholder
Shareholder
equityequity680
Shareholder
Shareholder
equity ratioequity ratio(¥100 million)(¥100 million)
589
589
600
600
680
700
700
557
557
542
542
500
600

500
600

400
500

400
500

300
400

31.3
300 407
400

200
300

200 31.3
300

100
200

100
200

0
100

0
100

0

0

466
407

466
542

407
466
35.3

38.5
466
35.3

407
31.3
35.3
31.3

38.5
35.3

589

36.8
542
38.5
36.8
38.5

2017
2016

2018
2017

2019
2018

2020
2019

2016

2016
2017

2017
2018

2018
2019

2019
2020

（％）

39.4

589

557
36.8
32.7
36.8
32.7

2016

68060

557

32.7
39.4
32.7

（％）

60

（％）

68050
60

60
50

39.4
50
40

50
40

39.4
40
30

40
30

30
20

30
20

20
10

20
10

10
10
0
0
2021 (Fiscal
2020
2021
year)
(Fiscal year)
00
2020
2021 (Fiscal
2021
year)
(Fiscal year)*ROA (Return*ROA
on(Returnassets)on= Ordinary
assets) =profit
Ordinary/ Average
profit total/ Average
assetstotal
at theassetsbeginningat the beginningand end and endof the periodof thex 100
period(%) x 100 (%)

Trends in ROE*
andProfitAttributableof Parent
Profit attributable
toOwners
owners toof owners
parentProfitto
attributableof parent
ROE (Returnon(Returnequity) on equity)
ROE（％）(¥100 million)(¥100 million)

60

58
60 ROE (Return58attributable
ProfitProfit attributableto owners toof owners
parentROEon(Returnequity) on equity)
56 of parent
5620(¥100 million)(¥100 million)

60
50

60
50

50
40

50
40 39

39

40
30

39
40
30
9.8
30
20
9.8

39

30
20

20
10

10
0

10
0
2016

51

51

51

11.7

11.7
9.8

58

58
44

11.7
11.7

11.744

11.7
11.7

11.7
7.8
7.8

9.8

54

54

44 54

54

56

44

9.5
7.8
9.5
7.8

（％）

（％）

5620
15

20

2018
2017

2019
2018

2020
2019

15

9.59.1

15
9.110

15

9.59.1

9.110

10

5

5

5
2017
2016

20

10

5

0
0
2021 (Fiscal
2020
2021
year)
(Fiscal year)

Trends in the D/E Ratio*, Net D/E Ratio* and Interest-Bearing Debts

Interest-bearing
debts
Interest-bearing
debts (times)
D/E ratio D/E ratio
Net D/E ratio
Net D/E ratio(¥100 million)(¥100 million)(times)

1.0

500

500

500
400

500 0.77
400

0.77

400
300

314
400 0.77
300

0.77
314
0.57

0.57

307

314

314
263
0.57

263
0.57
219

307
219
0.52

263

263
0.40
219

0.40
219
0.52

1.0

Interest-bearing
Interest-bearing
debts
debts (times)
D/E ratio D/E ratio
Net D/E ratio
Net D/E ratio(¥100 million)(¥100 million)
438
438

300
200

300 0.50
200

200
100

200
100

100
0

100
0

0.50

0.50

0.50
0.34
0.34

438

0.34
0.40
0.21
0.34
0.21

0.40
0.24
0.21
0.24
0.21

0.79

307

0.79
0.52
0.48
0.52
0.48
0.24
307

438
355
0.79
0.52
355
0.79
0.52
0.48
0.27

0.48
0.27

0.24

(times)

1.0
0.8
355

1.0
0.8

0.8
0.52
0.6
355

0.8
0.6

0.52
0.6
0.4
0.27

0.6
0.4

0.4
0.27
0.2

0.4
0.2

0.2
0

0.2
0

*ROE 0(Return
on0
equity) on= Profit
attributableto owners toof owners
parent /ofAverage
equity*ROE(Returnequity)= Profit attributableparent shareholder/ Average shareholder
equity
0
0
2016
2016
2017
2018
2018
2019 20192020 20202021 (Fiscal
2021
at the beginningandend ofandtheperiodx2017
100(%) x 100at the beginningendof theperiod(%)year)(Fiscal year)

2016 20162017 20172018 20182019 20192020 20202021 (Fiscal
2021
year)
(Fiscal year)*Debt-equity
ratio
debts / shareholder
equity (times)*Debt-equity
ratio = Interest-bearing
debts / shareholder
equity (times)
0000 = Interest-bearing*Net D/E ratio
= D/E
Net
interest-bearing
debts2017(interest-bearing
debts - cash
deposit)/ Shareholder
equity(times)
2016
2016
2017
2018
2018
2019
2019
2020
2020
2021/ Shareholder
2021
*Net
ratio = Net
interest-bearing
debts (interest-bearingdebts- cashdeposit)equity (times)(Fiscalyear)(Fiscalyear)*ROE (Return*ROE
on(Returnequity) on= Profit
equity)attributable= Profit attributableto owners toof owners
parent /ofAverage
parent shareholder/ Average shareholder
equityequityat the beginningand end ofandthe end
periodx 100(%) x 100 (%)
at the beginningof theperiod*Debt-equity*Debt-equity
ratio = Interest-bearing
ratio = Interest-bearing
debts / shareholder
debts / shareholder
equity (times)
equity (times)*Net D/E ratio
*Net
= D/E
Net interest-bearing
ratio = Net interest-bearing
debts (interest-bearing
debts (interest-bearing
debts - cashdebts
deposit)- cash/ Shareholder
deposit) / Shareholder
equity (times)
equity (times)

Target Balance Sheet
In fiscal 2019, as we executed M&A toward expansion into the priority markets, indices expressing financial soundness decreased, but asa result of reducing interest-bearing debts by using cash managed to raise from operating cash flow that we had steadily accumulated andreducing cross-shareholdings, the D/E ratio in fiscal 2021 decreased from 0.79-fold to 0.52-fold and the shareholder equity ratio increased
from 32.7% to 39.4%. We will continuously aim for landing on the target balance sheet and promote optimal BS management.

Foundation Supporting Value Creation

20
10

51

（％）

Strategy for Value Creation

300
0

1,303

1,407
1,321

BS management with optimum balance
Procurement of funds for investment that will support growth
Daiken Group's Value Creation

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

40% D/E ratio: 0.5-fold(¥100 million)

Liabilities

168

Cash Deposit

168

Liabilities

Cash Deposit

174

Data

Cash Deposit

Liabilities

Liabilities

Investment 550
Investment 291
Interest-bearing
debts

307

Strategic
Investments 250(Global: 225)
(Domestic: 25)

Investment 42
Interest-bearing
debts

438

Regular Investments 41

Shareholder
equity589
1,601

Total Assets Net Assets

1,706

Total Assets

Strategic
Investments 21(Global: 11)(Domestic: 10)

Interest-bearing
debts

355

Shareholder
equityShareholder
equityShareholder
equity

557

680
1,725

Total Assets

370

Regular Investments 150

Regular Investments 21

Net Assets

Interest-bearing
debts

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

Net Assets

Fiscal 2019 Results

Fiscal 2020 Results

Fiscal 2021 Results

D/E ratio: 0.52

D/E ratio: 0.79

D/E ratio: 0.52

Net D/E ratio: 0.24

Net D/E ratio: 0.48

Net D/E ratio: 0.27

Shareholder equity ratio: 36.8%

Shareholder equity ratio: 32.7%

Shareholder equity ratio: 39.4%

730

1,800

Total Assets
Fiscal 2022

Net Assets
TargetD/E ratio: 0.5
Shareholder equity ratio: 40%

DAIKEN GROUP REPORT 2021

46

Practice of ESG Management
In formulating the medium-term management plan GP25 2nd Stage, we determined the ESG domains and themes that are considered particularly
important in achieving management strategies through deliberations in various projects and the CSR committee. For each theme, we set specificinitiatives and goals toward fiscal 2022, which is the final fiscal year of the medium-term management plan, as the medium-term ESG plan, will
promote the plan integrally with the medium-term management plan, and lead to the enhancement of the management foundation. To further
improve the linkage, we set important items in each ESG theme as the non-financial management goals for the medium-term management plan.

The Medium-Term ESG Plan (Fiscal 2020-2022)
Field

PolicyArea and Theme

Focused Points in Management Strategies

Realization of low-carbon
societyAggressive approach to greenhouse gas
reductions

Theme
Greenhouse gas emissions
reduction*1
Promotion of the use ofrenewable energy
Promotion of carbon fixation

E

Contribution for arecycling-oriented society
Environment

Pursuit of the material and thermal
recycle of woody resources

Daiken Group Environment Policy

Promotion of effective use ofwater resources

Environment

Product
Quality and
SafetyFair
Transactions

S

Human
Resources

SocialReduction ofenvironmental burden

Reduction of environmental burden inbusiness processes

Appropriate management
and reduction of chemical
substances

Consideration of
biodiversity

Promotion of the use of domestic timber

Procure wood in a
biodiversity friendly way

Environment management

Continuous improvement of theenvironmental management system

Strengthen environmental
risk management

Basic Policy on Product Safety

Product Quality and Safety

Quality and technological capabilities tokeep responding to confidence

Enhancement of the quality
control structure*1

Daiken Procurement Policy
Cartel and bid-rigging prevention
standards

Promotion of CSR
procurement
Ensuring fair competition
and transactions

Maximization of added value bycollaborating with suppliers

Fair Transactions

Daiken Diversity Promotion Policy

Promotion of diversity

Fusion of diverse skills and ideas

Promotion of diversity*1

Daiken Workstyle Reform
Promotion Policy

Promotion of workstylereformPursuit of highly productive job
performance

Promotion of workstylereformDaiken Human Resource
Development Policy

Reinforcing humanresources development

Development of human resources who willplay roles in the new market expansion andmedium- to long-term growth

Reinforcing human resources
development

Daiken Safety Basic Policy

Enhancement of theoccupational safety andhealthImprovement of safe working
environments that will become thefoundation of success

Enhancement of theoccupational safety andhealthHuman Rights

Promotion of support for humanrights that is significant from a global
perspective

Human rights promotion
activities

Human Rights Daiken Human Rights Policy
Coexistencewith Local
Communities

G

Promotion of recycle andconversion of waste into
valuables

GovernanceSocial contribution activities

Daiken Social Contribution Activity Coexistence with Local
Communities
PolicyEstablishment of stable businessby cooperating with local
foundation supported by local communities

Basic Policy on Corporate
GovernanceAll employees share the group corporate
philosophy and realize the growthstrategies

Enhancement of theGovernance Systemcommunities

Enhancement of theGovernance System*1

Basic Policy on the Building of the Promotion of Risk
Internal Control Systemmanagement

Reconstruction of the supply system that Promotion of Risk
the market will keep choosing
management

Compliance Code of Conduct

A high sense of ethics that will be trusted
Strict Complianceby the markets

Governance
Strict Compliance*1: Set as the non-financial management goals in the medium-term management plan *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
compared to fiscal 2018 *5: Our own indices to measure employees’ compliance consciousness degree from the perspectives of legal compliance, a sense of ethics, structure, and corporate culture as compared to fiscal 202047

DAIKEN GROUP REPORT 2021

Structure to Promote CSR (ESG)CSR Committee

Deliberations on and approval of policies andimportant items concerning CSR (ESG)CSR Activity Promotion
CSR Promotion Departments
Company-wide promotion of the medium-term ESG planand progress report to the CSR Committee

Each Department/Group Company

Committee Chairperson
Representative Director, President
CSR Promotion Departments
General Affairs and Human Resources Department,
Legal Department, Quality Assurance Department,
Information System Department,
Domestic Business Planning Department, andGlobal Business Planning Department
Secretariat
ESG Promotion Department and Corporate
Planning Department

Progress of the medium-term ESG plan olicy to formulate the medium-term ESG plan for the nextPterm
● Promotion of health and productivity management● Results of the surveys on the measures to penetrate andthe degree of penetration of the group corporate philosophy● Results of the surveys on the CSR Procurement Standards● External ESG evaluation and response to the issues● External evaluation of the integrated report and the
production policy in 2021●●

28% reduction (As compared to fiscal 2014)
Executed reduction measures, such as
production rationalization, etc.

Renewable energy utilization ratio: 50% or more

50％
50％
Maintained the target level through the stable Maintained the target level through the stable
operation of biomass boilers
operation of biomass boilers

Amount of carbon fixation by the wood industrial materials
business (MDF and insulation board) 1,100,000 t-CO2/year

1,031,000 t-CO2/year+3% year-on-year through the increase inproduction of MDF

996,000 t-CO2/year-9% year-on-year through the decrease inproduction of MDF due to the lockdown in New
ZealandFinal disposal rate (ratio of volume disposed of in landfill
outside the company): 5% or below

7.2%
Improved by 0.4 pt year-on-year bypromoting the material use of waste

5.9%
Improved by 1.3 pt year-on-year by promoting thematerial use of waste

Water resource input: 3% reduction (As compared tofiscal 2019)4% reduction
Reduced by the water-saving measures, suchas recycling of wastewater from production
processes

7% reduction
Improved by 3 pt year-on-year by reducing theloss in using water when starting production
processes each time

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

0.4% increase
A reduction to achieve the target is planned in
the next fiscal year by changing to the substitutematerials

54% reduction
Significant reduction by abolishing the use of
methylene chloride through the establishment of
the product specification change

Utilization of domestic timber for base materials forflooring: 45%

41%+8 pt year-on-year by promoting the switchfrom tropical hardwood plywood

47%+6 pt year-on-year by promoting the switch fromtropical hardwood plywood

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

0 (continued)
Maintained 0 cases by operating andcontinuously improving the environmental
management system

0 (continued)
Maintained 0 cases by operating and continuously
improving the environmental management system

Serious product accidents: 0
Product safety and quality improvement education execution rate:
100%
Product audit implementation cover rate: 100%1
100%75% (postponed the plan due to the COVID-19)

1
100%
100%

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

Japan: Acquisition completed 100%
Global: Collected information to start thedevelopment
0 (continued)

Japan: Acquisition completed 100%
Global: Prepared a proposed revision for the CSR
survey slip
0 (continued)

Total diversity index*2: +20 pt+19 pt by the promotion of taking childcare
leave among male employees

Maintained the +19 pt level by the promotion oftaking childcare leave among male employees

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

1.4% reduction
64.9% (+11 pt year-on-year)
55.4 pt (The results of the first survey will be set
as benchmarks.)

6.6% reduction (There was also an impact of
COVID-19)
65.8% (+0.9 pt year-on-year)
56.7% (+1.3 pt year-on-year)

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%

18.9%: Executed follow-up training for young employees
100%: Started to hold medium- to long-term career training
18%: Executed basic training by product42%

20.3%: Executed follow-up training for young employees whoare in the first to second year of employment
100%: Career training for the employees who are in the thirdyear of employment
25%: Skill training for young sales workers
51%: Training for new managers

Serious disaster: 0
Plant mutual safety diagnosis execution rate: 100%0 (continued)
0 (continued)
100%: Executed the employee capability surveys 100% (in Japan): Not executed in the overseas
at two plants in Japan by the external experts
countries due to the impact of COVID-19

Human rights enlightenment training attendance rate: 100%
Supervisor harassment training execution rate: 100%

Information collection to set the training
menus
100%

Holding of the event planned by cooperating with local
communities: Once a year in each group production base

A total of 126 events held in 17 bases among abroad(Several plans were postponed or cancelled due
20 bases at home and abroad

Group corporate philosophy penetration program execution
rate: 100%
Degree of penetration of the group corporate philosophy*4: +10 pt

100%+4 pt (Benchmark: 52 pt)

The rate of progress of the Measures to Penetrate
the Group Corporate Philosophy: 90%
It was not executed in this fiscal year as thesurvey is conducted every two years

System BCP 3-year proactive measure completion rate: 100%
Procurement BCP 3-year proactive measure completion rate:
100%40%: Started to deploy the project toward theresolution of issues
Executed re-evaluation, including the secondary
suppliers

80%
Updated information and set priorities for BCP
response status and countermeasures, etc.

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

0 (continued)
61.0 pt (The results of the first survey will be
set as benchmarks.)

0 (continued)
62.6% (+1.6 pt year-on-year)

Data

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

Foundation Supporting Value Creation

Results in Fiscal 2021
35% reduction (As compared to fiscal 2014)
Renewing energy-saving facilities and the impactof reduction measures, such as production
rationalization, etc. and a decrease in production

Strategy for Value Creation

Results in Fiscal 2020

Daiken Group's Value Creation

Goals■ Number of the CSR Committee convened in fiscal 2021: 4■ Key deliberation items:

Development of the new education content
100%
Held in 17 bases among 20 bases at home andto the impact of COVID-19)

employees’ actual feeling for satisfaction/ job satisfaction in the workplace were indexed as compared to fiscal 2020

*4: Our own indices in which employees’ understanding, sharing, and practice of the group corporate philosophy were indexed as

DAIKEN GROUP REPORT 2021

48

E Environment
Environment management
Basic Approach
Toward the realization of the Daiken Group Environment Policy, the Daiken Group has formulated the mediumterm ESG plan and raises the level of environmental activities in the entire group while improving the Environment
Management System (EMS). To efficiently operate it integral with the Quality Management System (QMS), we
promote and deploy activities as the Quality and Environment Management System (QEMS).

Structure to promote Environment Management
President

CSR Committee■ Chairperson: Representative Director, President

QEMS Manager■ Secretariat: ESG Promotion Department and Corporate

Secretariat: Quality Assurance Department
and ESG Promotion Department

Planning Department(Key Agendas Concerning Environment in Fiscal 2021)
Results and progress of the medium-term ESG plan
(Environment)● Response to the climate change-related issues (Reportingof the scope 3 calculation results)

QEMS Internal Audit Team●

Each Department/Group Company
QEMS Manager

ISO 14001 Certificate Acquisition Status (As of the end of March 2021)(1) The percentage of the offices that acquired the certificate in all offices inJapan: 91.1% (Based on the consolidated number of employees)(2) The percentage of the offices that acquired the certificate in all overseas
offices: 61.1% (Based on the consolidated number of employees)

37 offices and plants at 9 companies

5 offices and plants at 5 companies

Initiatives for the Reduction of Chemical Substances
The Daiken Group has upheld the appropriate management andreduction of chemical substances in the medium-term ESG plan asa theme and has set the goal to reduce the release amount of substances subject to the PRTR law by 70% in fiscal 2022 as comparedto fiscal 2019. Regarding methylene chloride that became subject to
the PRTR law in October 2020, we could totally abolish the use inproduction processes in our group as the establishment of technology for the product specification change has completed. With this,the release amount of the substances subject to the PRTR law infiscal 2021 decreased by 54% as compared to fiscal 2019. We willcontinually put effort into the reduction of other target substances andpromote the reduction of environmental burden in the entire group.

Trend of the Release/Transfer Amount of the Substances Subject to the
PRTR Law/Methylene Chloride
（ t）

60
50

Release/transfer amount of the substances subject to the PRTR law
Release/transfer amount of methylene chloride

52 51
38 37

40
30

32 32

20

8

10
0

2014

2015

2016

5

2017

10

13
7

8

2018

2019

13

8

2020

6

2

2021
(Fiscal year)

Recycling of Waste Materials
The Daiken Group aims to realize a recycling-oriented society andputs effort into recycling waste, such as reusing the defectives generated in the manufacturing process as product materials to the extent
possible, and using those as fuel for production, if not suitable formaterial itself. In fiscal 2021, by promoting the initiative to increase
the use of waste for materials at the Okayama plant, in addition to thepromotion of use as fuel for production by stably operating biomass
boilers, the recycling rate of waste materials was 91%, which led to
the reduction of the final volume disposed of in landfills. We continue
to further improve the recycling rate.
Note)
Recycling rate = Amount of recycled resources / Amount of waste generated x 100 (%)
Amount of recycled resources = Valuable + Use for materials + Use for heat

49

DAIKEN GROUP REPORT 2021

Amount of Waste Generated and Breakdown of Waste Processing (Fiscal 2021)
Final volume disposed of in landfill

6%

Valuables

9%

Simple incineration

3%

RecyclingAmount ofwaste generated

43,700 t
Use for heat29%

(reused as energy)

91%
Use for materials

53%(reused as ingredients)

Initiatives toward the CO2 Emissions Reduction
As a response to the worldwide climate change risks, the Japanese government upholds the target of reducing greenhouse gas emissions by
26% (compared to fiscal 2014) by fiscal 2031 based on the Paris Agreement in fiscal 2016. To positively contribute to this target, our company
positioned the reduction of CO2 emissions in our business activities as the highest priority issue, accelerated the target that we initially aimed
to achieve in the final fiscal year (fiscal 2026) of the long-term vision GP25, and set the target to achieve it in fiscal 2022, which is the final fiscal
year of the medium-term management plan GP25 2nd Stage. On the other hand, in the wake of the new reduction target set by the Japanese
government in fiscal 2022, we will continuously promote the initiatives in the medium-term management plan for the next term in order for ourcompany to aim for further contribution.
Daiken Group's Value Creation

Utilization of Renewable Energy that is Linked to the Business Activities

Total CO2 emissions in Japan*1

Input of Woody Biomass Energy/Percentage of Use*2,3
Percentage
Percentage
of use of woodyof use ofbiomass
woody energy
biomass energy
Input of woody
Input ofbiomass
woody energy
biomass energy

Total
CO2Totalemissions
CO2 emissions
in Japan in Japan
Rate of reduction
Rate of reduction(Compared(Compared
to fiscal 2014)
to fiscal 2014)(1,000 t-CO
(1,000
t-CO
2)
2)

150

150

12
Input (x 10
Input
J) (x 1012J)

35％ 35％26％ 26％

100

50

127.1
50

0

2000

1500

1500
1,181

0
2014

127.1
117.4

2015
2014

117.4
114.8

2016
2015

114.8
103.9

2017
2016

103.9
99.3

2018
2017

99.3
93.9

2019
2018

91.1
93.9

2020
2019

91.1
82.5

94.0
82.5

94.0

1000

1000 42

500

500

0

0

year) (Fiscal year)
2021
2020 2021
2022 (Fiscal2022
Goals Goals
ResultsResults*1: Regarding the emission factor in electricity use associated with the calculation of greenhouse gas
emissions, the actual emission factor in the said fiscal year by electric power supplier is used. However,
if it is not released, we use the most recent factor.

2016

Percentage
Percentage
of use (%)of use (%)

100
75

1,370
1,181

1,433
1,370

1,440
1,433

1,452
1,440

1,452
1,331

1,331 75

48

48 50

50 50

50 50

50 50

50

42

2016
2017

2017
2018

2018
2019

2019
2020

50

50

25

25

0
year) (Fiscal year)
2020
2021 (Fiscal
2021

0*2: Total value at the Daiken Group’s production bases in Japan.
*3: Woody biomass energy input as a percentage of total energy input.

Domestic Production Bases where a Woody Biomass Boiler is Installed
Industrial materials business
Building materials business100

Yubari Plant, T.O FLOORING CO., LTD.

Foundation Supporting Value Creation

100

2000

Strategy for Value Creation

Regarding MDF and the insulation boards that are the primary products in the industrial materials business, we use wood chips from offcuts
and demolished houses as primary raw materials based on the idea of the pursuit of using timber as a material to the extent possible. Furthermore, we use wood chips, which cannot be used as product raw materials, as fuel for woody biomass boilers as the necessary heat sourcein the manufacturing process. Likewise in the building materials business that manufactures doors and flooring materials by processing woodmaterials, offcuts and wood powder generated in the manufacturing process are used as fuel. Our group puts effort into reducing CO2 emissions by using renewable energy linked to these business activities. Woody biomass boilers (13 units) have been introduced to 9 bases outof 12 production bases in Japan, such as the Okayama plant and the Takahagi plant, which are the primary plants for the industrial materials
business. By striving for stable operation, we increase the renewable energy ratio to 50%, which leads to the reduction of CO2 emissions. In
fiscal 2021, because of the impact of the decrease in production due to the COVID-19 pandemic mainly in the first half of the year, in addition
to these initiatives, emissions decreased by 35% as compared to fiscal 2014 and we achieved the 26% reduction, which was the goal in fiscal
2022, a year ahead of schedule.

Inami Plant
Aizu Daiken Corporation
Data

Dai-wood Corporation

Daifit Co., Ltd.

Takahagi Plant

Mie Plant

Number of Woody Biomass Boilers Installed

Setouchi Kakoh Co., Ltd.
Okayama Plant

13 units in 9 bases
DAIKEN GROUP REPORT 2021

50

S Social
Human Resources
In order for our employees to be able to feel happy to be the members of our group, the Daiken Group has been promoting the initiatives from the perspectives of the Promotion of Diversity, Workstyle Reform, and Human Resource Development aimed at becoming
the company where every employee can fully exercise their diverse values and abilities. While COVID-19 pandemic continues, we
re-realized that our employees’ health is the source of corporate management and have newly started the initiatives for health andproductivity management. By continuously deploying the measures from four perspectives, we will lead to producing the favorable
cycle, maximizing human resource value by improving individual performance, and improving the entire group’s corporate value.

Basic Approach

By proceeding with productivity improvement
and improving employees’ affluent personal
life, enhance each one’s accomplishment
and job satisfaction and realize thecompany’s growth strategy.

Improvement ofCorporate Value
Workstyle Reform
Maximization of Human
Resource
Value

Diverse human resources
organically fuse their skills,
ideas, and values and use
them as the company’s driving
force to develop new markets
and new businesses.

Promotion ofDiversity

Systematically proceed withthe development of humanresources who will respond to
the new market expansion andthe management layer who will
support the medium- to longterm growth strategies.

Human Resource
Development

Promotion of Health and Productivity Management

Based on the idea that our employees’ health is the essential foundation for the group’s sustainable growth and development, theDaiken Group tries to improve every employee’s awareness of health and has started the initiatives toward the preservation andimprovement of mental and physical health. In fiscal 2021, we newly formulated the Daiken Health and Productivity Management
Policy, improved the health and productivity management promotion system in which the president is the responsible person, anddeploys measures by cooperating with the Workstyle Reform Promotion Project. As the first initiative, we implemented the Quit
Smoking Challenge to encourage our employees to quit smoking, and 70 employees among 88 participants could declare quitting
smoking. With a view to obtaining the certification of the Certified Health & Productivity Management Outstanding Organizations, wewill put effort into setting indices to measure the effect of measures and actively supporting our employees who are putting efforts
into health-promoting activities.

Implementation of the Next-Generation Sales Recommendation ProjectAs a new initiative to link the three elements of the Promotion of Diversity, Workstyle Reform, and Human Resource Development and to
maximize human resource value, we launched the Next-Generation Sales Proposal Project by the female sales employees in May 2019. In
July 2020, they conducted the Proposals of the Next-Generation Sales Style to the Management Executives as the final step. In their final
proposals, the proposals toward the realization of the sales style where anyone can exercise their skills were announced, such as operational
efficiency by introducing the split of the work-type model, productivity improvement by enhancing the mutual follow-up system, and reformof the ways to take leave. We will deploy their recommendations to other departments, move on to the execution phase, and launch moremeasures to broaden the project base from the sales division to other divisions to lead to company-wide reforms.
Fiscal 2020

Fiscal 2021

Pursuit of the ideal state and consideration of trial
themesPresentation toward
the trial execution

Presentation of proposals to the management
executives

Prioritization andbrush-up

Verification of the trial
content and effectiveness measurement(5)
Trial execution(4)

Consideration of thesolutions

DAIKEN GROUP REPORT 2021

(3)

Setting of the themes
and causal analyses

51

(2)

Recognition of the
gap and extractionof the issues

The scene of final proposals(1)

Trial and proposals for realization

Proposals of thenext-generation sales
stylePromotion of diversity
The Degree of Attainment of Each Item in the Total Diversity Index
The female full-time employee ratio
120%
The percentage of male
employees taking
100%
childcare leave*
80%

The employment rate ofpersons with disabilities

60%
40%
20%

The reemployment rateof retired persons

The female
manager ratio

0%

Fiscal 2019

The percentage
of leaving work
to careFiscal 2021

The female
director ratio

Fiscal 2020

Young employees’ careerplan training attendance rate

Fiscal 2022 Goals

Daiken Group's Value Creation

In the medium-term ESG plan, we set the Total Diversity Index
in which the eight diversity items were indexed as our own
indices and manage the targets. The total index in fiscal 2021
was 71 pt, up 19 pt from fiscal 2019, which is a benchmark,but it resulted in maintaining the same level as the previous
year. “Among these indexes, the percentage of taking paternity
leave shows improvement as a result of intense information
sharing about our leave-system to all employees.” While thefemale manager ratio decreased, the female full-time employee ratio increased as the number of newly graduated females
hired increased and the results of the initiatives with an eye toward the medium- to long-term corporate value improvement
started to emerge. With a view to comprehensively improve
the level, we will steadily proceed with the measures.

*“The percentage of male employees taking childcare leave” in the Total Diversity Index is calculated based on the three-year total value to measure the progression rate over the years.

Past Key Initiatives
Establishment of the Daiken Workstyle
Reform Declaration
Payment of the personal
development incentive
Established the Workstyle
Reform Promotion OfficeStarted automatic PC shutdown
Established the Workstyle
Reform promotion project

Trial of the satellite officeFemale employees
meeting

Setting of flexible working hours

Commencement of the
110 Campaign*

Realizationof Daiken
workstylereformLending smartphones
Institutionalization ofworking at home

Introduced the hourly paid
leave system

Implementation of theemployee satisfaction survey

Ikuboss declarations

Foundation Supporting Value Creation

The Daiken Group launched the Workstyle Reform Promotion Project in 2015 and has been putting effort into the promotion of workstylereform. While the shift to new workstyles has accelerated due to the COVID-19 pandemic in fiscal 2021, we have proceeded with creating themechanism to realize diverse workstyles, such as lending of smartphones, trial of teleworking, including working at home, etc. As a result, under the issuance of the state of emergency in April 2020, we could flexibly respond to the social change as we could maintain the structure that
80% or more of our employees worked at home in the business bases, such as Tokyo and Osaka. With the introduction of the working at homesystem, we also promoted the active use of online tools. By maximally using the advantages of online tools not only when working at home but
also when conducting sales activities and holding a seminar, we are aimed at the promotion of workstyle reform and productivity improvement.

Strategy for Value Creation

Promotion of workstyle reform

Trial of working at home
President’s message Toward theRealization of Workstyle Reform
was transmitted

Implementation of Kids’ Day
Implementation of the Casual Day

Data

Ikuboss Guide

From 2015*110 Campaign: The campaign concerning a drinking party to have the first party only and finish by 10 p.m.

Implementation of the employee satisfaction survey
In the medium-term ESG plan, we set Employee Satisfaction as our own
index in fiscal 2020 and manage the targets. We also quantify the Degreeof Actual Feeling of Job Satisfaction through an annual survey and by
grasping our employees’ view on work and anxiety factors about work,
and we make use of the results for Creating Pleasant Workplaces and aim
to improve the entire workplace’s satisfaction. Satisfaction in fiscal 2021
was 56.7%, up 1.3 pt from fiscal 2020, which is a benchmark. We analyze
the survey results from various perspectives, such as the responses to
COVID-19 and factors associated with the divisions’ characteristics, andreflect the results of the analysis to our future measures.

Employee satisfaction

55.4％
Fiscal 2020
Benchmark56.7％

Fiscal 2021
Results

60.0％

Fiscal 2022
Goals

DAIKEN GROUP REPORT 2021

52

Enhancement of the human resources development
Believing that cultivating autonomy in our employees is a key for our further growth and persistent corporate value improvement, we have provided various training chances for our employees to acquire the skills or knowledge needed for their each service years, ranks, and job types.
In fiscal 2021, we newly incorporated the online training method due to the COVID-19 pandemic and by continuing opportunities for learning,
we worked to improve and develop our employees’ capabilities. In addition to the use of advantages unique to online training, which is lessaffected by time and place, we concurrently conduct practice in group training and expand and improve the training programs.
Training by Rank
Department
head class

Sales

Senior management candidate
development training

Manufacturing technology

Enhancement of the developmentof the management layer

Training for department heads by theme

Training for new department heads

Female leader development program

Leadership enhancement program

Middle level teamleader class

Basic training for management

Training for female leader candidates

Training for those promoted

OJT leader training

Logical thinking training
Step-up training for those who arein the third year of employment

Responsible
person class

Follow-up training for those who arein the second year of employment
Follow-up training for those who arein the first year of employment

Enhancement of thedevelopment/following-up
of young employees

New employee orientation

Sales skill
enhancement training(application)
Training for the persons whoare exclusively in charge

Manufacturing
technology training forthe leader class

Basic training by product

Manufacturing technology
training for the
responsible person class

Sales skill
enhancement training(basics)

Follow-up training foryoung manufacturing
employees

Lecture on the basic
knowledge of wooden
conventional houses

Training before
joining the company

Language education

Focused market
enhancement program

Training for new managers

Correspondence education

Training to enhance
management capabilities

Dispatching to an external business school

Department head candidate
development training

Managerial
position class

Personal
Development

Training by Job Type

Training by Theme

Fair Transactions
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 a sustainable society
in which people and the environment can coexist. Under these circumstances, we are putting effort into CSR procurement with the cooperation of our business partners.

CSR Procurement Policy and Standards
Procurement Policy

CSR Procurement Standards

Green Procurement Standards❶ Compliance with laws and regulations❷ Fair and even-handed dealings❸ Sharing excellent value❹ Promotion of green procurement❺ Promotion of CSR procurement❻ Relationship of trust and co-prosperity❶ Respect for human rights❷ Compliance with laws and regulations❸ Occupational safety and health❹ Fair transactions❺ Information management❻ Coexistence with society❶ Environmental management system❷ Chemical substance management❸ Wood from legitimate sources

Carry out the CSR questionnaire for the supplier of the plants and manufacturing subsidiaries in JapanThe Daiken Group has been carrying out the CSR questionnaire for suppliers following theProcurement Policy and CSR Procurement Standards since fiscal 2016. In fiscal 2021, we carriedout the questionnaire for 389 suppliers (384 suppliers in the previous year) and received answers
from all suppliers. Questionnaire results are fed back to suppliers and for the companies where
the evaluation points have been continuously low, we encourage them to make corrections andimprovements, work together, and promote CSR procurement.
Sample of CSR questionnaire

53

DAIKEN GROUP REPORT 2021

Example of feedback to
the CSR questionnaire
results

S Social

Enhancement of the Quality Control Structure
Initiatives for Product Safety

Basic Policy on Product Safety
DAIKEN CORPORATION and the companies in the Daiken Group must understand that ensuring product safety is as much a social responsibility as a corporate responsibility and position it as a crucial management issue. We are working on the provision of products with safety
features that can be used with confidence after the establishment of the Basic Policy on Product Safety below. In addition, we strive to honestly
and sincerely fulfill our accountability to customers and to respond to accidents involving products.
 roviding products that are safe, secure,❶P
and useful to society stablishment and strengthening of the❷Einternal organization (restructuring organization,
development of documentation, etc.)

report to relevant authorities under the laws)❻ Product recall (to prevent further incidents)

 ormulation of measures to prevent❼F
recurrences (investigate the cause, develop measures
to prevent recurrences, and take corrective action)

 isseminate information and operational❽D
assessment (thorough understanding of laws andessential policies)

handling requirements, etc.)

Initiatives to provide products thatcan be used with confidence

Response to the event of a productaccident

Common initiatives

Key Initiatives●

 trengthening of the product quality andSsafety inspections●

 eview of Quality Standards from theRperspective of product safety●

Strengthening of purchasing management●

 romotion of the implementation of thePuser registration system●

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

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

The Daiken Group established the system to conduct annual reviews performed by the department responsible for product safety andmonitor the status of each department’s activities by following their Product Safety Action Plans in order to continue to provide safeand highly reliable products and services. Then the Risk and Compliance Management Committee and the Daiken Quality AssuranceCommittee instruct the departments to review and modify their Product Safety Action Plans.
Risk and Compliance Management Committee
and Daiken Quality Assurance Committee

results

 eview❶R❺ Awareness,
Implementation

Each Department/Group Company❷ The department responsible for product safety shall submit thesummarized results in (1) to the executive officers in charge of crisis
management and quality assurance for review.
❸ The department responsible for product safety shall summarize thereview results in (2) and then report the measures to improve theProduct Safety Action Plan to the Risk and Compliance Management
committee or Daiken Quality Assurance committee.

Data

Product Safety Action Plan
Department responsible for product safety(Quality Assurance Department)❷ Submit and review❹ Instruction forimprovement❸ Reporting

Executive officer in charge ofcrisis management
Executive officer in charge of
quality assurance❶ Each department and group company must review whether theoperation is following the Product Safety Action Plan and submit thereport of its results to the department responsible for product safety(Quality Assurance Department).

Foundation Supporting Value Creation

Structure to Promote Product Safety

Strategy for Value Creation

 rovision of information (notes for correct use or❸P ollection and disclosure of information❹C
on product accidents
 eport of product accidents (immediately❺R

Daiken Group's Value Creation

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

❹ The Risk and Compliance Management committee or Daiken Quality
Assurance Committee shall provide the instructions necessary for
improvements of the plan.
❺ The department responsible for product safety shall provide theinstructions to each department and group company.

Regarding the product accident in Hori Kotatsu Unit that occurred in fiscal 2021
In March 2021, a Kotatsu heater’s controller part in our Hori Kotatsu Unit Zataku Series Dento Wazataku, which was sold in the Shinetsu
region in December 2012, melted and caused a fire (scorching) that burned the surrounding area. As this accident fell under the category ofa serious product accident based on the Consumer Products Safety Act, we reported it to the Consumer Affairs Agency. In addition to ourinternal investigation, we have been fully cooperating with the National Institute of Technology and Evaluation (NITE) to clarify the cause of theaccident. We will proceed with appropriate responses, such as information disclosure, etc.

DAIKEN GROUP REPORT 2021

54

G Governance
Masanori Okuda
Representative Director,
President

Discussion

Yuko Asami

Outside Director,
Audit and Supervisory
Committee Member

Governance to Maintain Perpetual Prosperity
With the approval obtained at the general meeting of shareholders on June 25, 2021, DAIKEN CORPORATION became acompany with an audit and supervisory committee. Masanori Okuda as the representative director and president, and Yuko
Asami, appointed the new outside director and Audit and Supervisory Committee Member, discussed governance so thatDAIKEN CORPORATION could maintain perpetual prosperity under the new structure. In the discussion, they exchanged opinions concerning the requirements of Daiken from the viewpoint of an outside director, the significance of the latest reorganization,and key points in the formulation of the next medium-term management plan.

the viewpoint of an outside
1 fromdirector:
Okuda Director Asami served as an Outside Audit & Supervisory

Board Member for three years from June 2018 and has been
appointed a new outside director and Audit and Supervisory
Committee Member. What is your honest impression of DAIKENCORPORATION over the last three years?

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DAIKEN GROUP REPORT 2021

Main business directly contributing to ESG and SDGs
Asami I feel that Daiken is an earnest company, both in a positive way and in a negative way. In a positive way, the businesssince its foundation has environmental considerations. It isextremely appealing that Daiken's main business has a sustainable effect, and not only has an ESG perspective but also
directly contributes to the SDGs; therefore, Daiken's business
operations consist of numerous environmental considerations.
With regard to product development, the company sincerely
pursues quality and safety in the invisible details and seeks
ways to minimize its environmental impact. It is persuasive that
Daiken is known for its high technological strength because
the company can achieve such aims in reality.

Okuda Thank you. I would like to hear your opinion concerning
governance in more detail later.

Need for strengthening ESG dialog with shareholders andinvestors

Asami It is worth evaluating that you promoted a female to an
operating officer position that was newly established in thelatest governance reorganization. However, it is not sufficient tosimply focus on promoting females in order to enhance diversity. The life events of child care, long-term care, and the transfer of spouses not only affect females. Systems will be required
to help all employees work in diverse work styles, regardless ofgender, age, nationality, years of service, and life stage.
Okuda It will be essential for Daiken's sustainable growth toestablish systems and a corporate culture where employees
facing major life events can continue working without interrupting their careers. Based on this recognition, we have established systems to help employees continue working regardlessof time and place, considering that conventional fixed ideas
have been reset in the COVID-19 situation.

Data

Okuda I recognize that requirement as well. When we propose
or market our products, we would like to publish the spirit
and concept of the background to development, as well as
the new value brought to society by our products in a more
understandable way. By doing so, we will have increased
opportunities for value co-creation with stakeholders. We havealso strengthened dialogs with shareholders through a reorganization in FY 2022 in which the IR Office that had been under
the Management Planning Department became independent
in order to facilitate cross-organizational activities under theofficer in charge. We would like to proactively advocate theseconcepts and efforts for evaluation by ESG-minded investors.

Establishing mechanisms to support continuous
activeness in all life stages

Foundation Supporting Value Creation

Asami On the other hand, there are two major requirements
in my opinion. One is that the company has yet to advocate
its contribution to the ESGs and SDGs to stakeholders in aclear and understandable manner, which is probably a negative aspect of Daiken's earnestness. Because Daiken is a listedcompany with global business activities, the company should
work to acquire a broader understanding of its own strengths,
rather than remaining complacent about being only known to aselect few. I am also afraid that there are too few dialogs withinvestors.

Okuda Like you said, our efforts are only halfway completed
and need to be accelerated. I believe that diversity signifies
the enhancement of the competitiveness of an organization byhelping human resources with diverse personalities and values
exchange opinions, regardless of age, gender, race, or religion.
At Daiken, we first focus on promoting female employees as
the most familiar goal. We promoted one female to an operating officer position, which was newly established this fiscal
year. However, the low percentage of females in managerial
positions remains a major issue. We are implementing steady,solid initiatives, though the effects have yet to be seen in thenumbers. Recently, increasing numbers of female employees are entering the company and forming a broader base. I
expect that the bottom-up initiatives driven by these younger
generations will reform DAIKEN CORPORATION in the next fiveto ten years.

Strategy for Value Creation

Asami Another positive aspect of Daiken's earnestness canbe found in its governance. Daiken’s attitude to improve thetransparency of management and strengthen corporate governance is worth evaluating as exemplified by the establishmentof a nomination and remuneration committee in 2015, where amajority of the members are independent outside directors.

Although promoting diversity is included in the top policies, I
am afraid that it is far from satisfactory. This is quite regrettablebecause other ESG initiatives are making progress. I thinkthat the president is providing leadership, but how far has theimportance of diversity infiltrated throughout the company?
The establishment of a structure to accept diverse work styles
has also been delayed, which means you will not make it intime by proceeding at the present rate. Stronger accelerationis requested.

Daiken Group's Value Creation

Okuda Thank you. Our inherited business is based on theeffective use of wood and contributes to the global momentum
toward carbon neutrality. I believe that our roles are becoming
increasingly more important. I have placed extreme importanceon sustainability and the ESGs. When I started formulating thelong-term vision GP25 immediately after appointment as thepresident, I stipulated the significance of the existence andambitions for sustainability. I also formulated the medium-term
ESG plan linked to the current medium-term management plan
GP25 2nd Stage, and included non-financial items in the management goals, thereby implementing proactive ESG measures
as part of the management strategies.

to a company with an audit and2 Shiftsupervisory committee

Accelerated promotion of diversity is a major requirement
Asami The other requirement is the delay in promoting diver-sity. I think urgent improvement is required for this point.

Okuda Recently, we shifted to a company with an audit andsupervisory committee, combined with changes in the operating structure, aiming to 1) strengthen the supervisory function

DAIKEN GROUP REPORT 2021

56

of the Board of Directors, 2) accelerate the decision-making
process, and 3) develop next-generation leaders. In addition,a major purpose is to upgrade our basic human resource
strengths, including diversity as you mentioned, while refreshing awareness across the company. Director Asami, what isyour view of the latest reorganization?

Making the reorganization a starting point for further
governance reform
Asami In April 2022, the Tokyo Stock Exchange will reorganize its market segments. Will the DAIKEN CORPORATION
compete in the prime market or be included in the standard
market? You must first recognize that the company's commitment to the business model is being tested, in addition to
governance reform. DAIKEN CORPORATION targets the prime
market. It is a highly attractive market from an international
perspective, where excellent companies representative ofJapan are collected for investment. "Governance" here refers
to more than corporate governance. It is governance in thetrue sense of the word, entailing diversity, the development ofcore human resources, and reform of the business model. It
will be important for DAIKEN CORPORATION must initiate proactive reforms to continue operating vigorously and perpetually
into the future through the latest governance reform rather thanregarding it as an obligation.
Okuda You mean that improvements will be achieved by transforming the reorganization as the starting point, rather than
implementing reorganization to pursue improvement. I definitely
wanted to avoid making the latest reorganization a mere formality but make it the start of upgrading the culture of DAIKENCORPORATION through this reorganization.

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DAIKEN GROUP REPORT 2021

Enhancing group governance in accordance with M&A
strategies
Asami President Okuda's enthusiasm and passion for effective governance reform were seen in the review process for theshift to a company with an audit and supervisory committee
through repeated communication sessions with the secretariat.
Changing the system does not mean improvement in andof itself. I think it is worth considering that top management
has announced a serious commitment to reorganization as
the start of governance reform. I served as an Outside Audit
and Supervisory Board Member for the past three years andwas newly appointed an Audit and Supervisory Committee
Member. From my viewpoint, the quality of internal controls
and audits will be enhanced through the direct control of
the Internal Audit Department by the Audit and Supervisory
Committee. Group governance is particularly important in promoting M&A strategies. It is important to strengthen cooperation between the Audit and Supervisory Committee and theInternal Audit Department at the time of recognization, thereby
further strengthening your system.
Okuda Net sales in global markets have increased and now
represent about one-quarter of overall sales, and I have recognized the need for strengthening group governance. I would
like to further enhance the effectiveness of governance.

Linking governance system reform to the development of
next-generation human resources
Asami Another point to consider is that the reorganization was
implemented in combination with the reform of the operating
structure for the development of the next generation of leaders.

Daiken Group's Value Creation

Okuda During this fiscal year, we will formulate the medium-

term management plan GP25 3rd Stage as the final phase

Asami There are three key points: diversity that I mentioned
earlier, the direction of business and market strategies, andresearch and development. The direction of business andmarket strategies based on the ongoing long-term vision
GP25 seems reasonable. However, we must have a visible
landscape through the 1st- and 2nd-stage medium-term
management plans. For example, the scope of non-housing
public and commercial buildings is broad. Which part of it will
you target? Which items will you focus on from the viewpointof growth potential, exercising of technological power, sales
channels, and other strengths and advantages of DAIKENCORPORATION? Will you centralize or decentralize? It will benecessary to set a clear, advanced policy. For global markets,
will you continue to operate in the present key regions ofNorth America, Southeast Asia, China, and Oceania? Would
you rather focus on areas where the market has high growthpotential and the company can leverage its strengths? For the
long-term of the next10 and 20 years, what position will you
aim to acquire in each market? Regarding global strategies,
you will also need to establish value chains ranging from R&D
to procurement, production, sales, and installation work, andconstruction, and to further clarify the directions of the allocation of managerial resources, including human resources in thecorporate department. These will require discussions.

Data

the Next Medium-Term
3 Formulating
Management Plan

Further clarifying key areas in business and market
strategies

Foundation Supporting Value Creation

Okuda You are absolutely right. We will endeavor to maintain
optimal membership on the Board of Directors according
to the changes in the business environment. In addition, we
will also have further discussions concerning the desirable
status of executive officers and operating officers by establishing and using the skill matrix listed in the revised Corporate
Governance Code 2021, as well as examining the sustainable enhancement of corporate value by the GovernanceCommittee, which undertakes the nomination and remuneration functions. By specifying and visualizing the skills requiredof these officers and the training menu to fill any gaps, it will beeasier for division directors and other managers to develop a
clear image of the experience and skills that they need, thereby
facilitating their development as future leadership candidates.
The succession planning aimed at the development of the next
generation of leaders is also an important requirement that I
would like to discuss at the Governance Committee by engaging Director Asami and other outside directors.

in the achievement of the long-term vision GP25. We havealready started drafting the plan. Director Asami, what particular points would you like the Board of Directors to focus on?

Strategy for Value Creation

Of course, the Board of Directors is important in corporate
management, but its primary function is supervision. To reformgovernance, it is desirable to include the operating positions
that undertake actual management into the scope of reform. I
expect that management agility will be achieved, and an environment will be established to support appropriate risk taking
by the operating officers. It will be necessary to develop the
newly appointed operating officers as the next generation ofleaders by implementing systematic training.

Okuda Regarding the business and market directions, we will
discuss the material issues (materiality) and crystallize what weshould cope with, how we should grasp medium-term and long-

DAIKEN GROUP REPORT 2021

58

term changes in the external environment and social requirements from the viewpoint of sustainability, and discover solutions by upgrading the strengths of DAIKEN CORPORATION.
Subsequently, we will identify the areas that we should emphasize among the three existing businesses (industrial materials, building materials, and engineering) and the products thatcompose the respective businesses, as well as the directionof the business as the fourth pillar. We will prioritize strategies
for the domestic market where we have operated relatively
smoothly. At the same time, we will further specify product andarea strategies for the global market and incorporate thosestrategies into the next medium-term management plan.

Continuously contributing to the resolution of social
issues through our R&D capabilities
Asami Research and development is the source of Daiken's
competitiveness and reputation for high technological strength.
I think R&D is the most important among a number of Daikenstrengths. To ensure that this strength remains effective andstrong, it is crucial to establish an environment to develop
human resources that will help maintain continuous improvement and maximize this technological strength. To this end, I
suggest the immediate reallocation of managerial resources.
I would not deny the use of M&As as a means of growth, but
present investments are unevenly focused on global operations and construction. I recommend strengthening investments and M&As to enhance R&D and organic growth (growththat utilizes internal managerial resources). For example, theindustrial materials business in North America makes a larger
contribution to profit, but decreasing profitability is a concern inthe shrinking domestic market. This seems extremely wasteful
because the company has high potential. For example, moreproactive investments and M&As should be made to acquire
technology for increasing the added value in the domestic
industrial materials business, for achieving substantial cost
reductions, and for accelerating the reduction of environmental
impacts and the development of more sustainable and demineralized products. On the other hand, the company must
examine exit strategies in the early stage of investments thatare not likely to achieve organic growth from the viewpoint of
medium-term and long-term risks. Over the past several years,
you have been strengthening R&D strategies based on social
requirements by incorporating the viewpoints of the ESG and
SDGs backed by the group corporate philosophy. I hope that
this movement will be accelerated.
Okuda Over our history, R&D achievements contributed ateach turning point for business expansion. During its foundation, the company established a business base with thetechnology of blending adhesives to overcome the weaknessof wood. A few examples are special plywood as the basis of
our present building materials business and insulation board
using wood fibers that caters to various applications remaining in our product portfolio for more than 60 years. Dai-Lite is

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DAIKEN GROUP REPORT 2021

an industrial material developed for quakeproof housing basedon the innovation of using volcanic ash, an unused resource
abundantly present in Japan as a country of frequent volcano
eruptions and earthquakes. Our intention to contribute tosociety by grasping the social requirements and proposing
solutions through our business has not changed. We will continue to proactively strengthen research and development as
the driving force for this purpose.
Asami The revised Corporate Governance Code 2021 requires
the Board to effectively supervise the implementation of management strategies to sustainable growth. Research anddevelopment are areas that definitely contribute to sustainable growth from the medium-term and long-term perspectives. In addition to maintaining and developing the present
R&D Department, we must include human resources familiar
with R&D and business among the executive managers. The
Governance Committee will proactively participate to ensure
these points.
Okuda Thank you. Our research and development activities are
becoming more future oriented. We are entering new fields freeof traditional ideas, starting from the long-term vision GP25. At
the R&D Center established in 2018, open innovations are proactively employed. Through communication with investors, theinsufficiencies of R&D expenses have been pointed out. In theformulation of the next medium-term management plan, we
will have further discussions on R&D strategies for the next 10
years and further toward our 100th anniversary and promote
the reallocation of managerial resources.

Discussion at Board of Directors Meetings is the Essenceof Group Corporate Philosophy
Asami We should have more in-depth discussions concerning
the acceleration of diversity as I mentioned earlier.
Okuda Yes. We will discuss the medium-term and long-term
direction of human resource strategies, including the age,
job type and career mix, promotion of female and mid-career
employees, and employment of global human resources.
Toward the achievement of that directional goal, we will establish practical systems as soon as possible. I also recognize thethree key points that Director Asami pointed out as extremely
important—R&D, diversity, and business and market directions.
Our mission under the group corporate philosophy declares,"We will create a wonderful future with our technology, ideas,
and passion." "Technology" here is based on research anddevelopment, while "ideas" are supported by diversity (diverse
human resources). Business and market directions are where
we should drive the joined force and "passion" of our group.
The Board will discuss these points as key requirements ofmanagement and navigate the group as a company that contributes to a wonderful future.
Thank you for today.

G GovernanceOutside Director's Message
Maintaining the Board of Directors that is willing to change in order to enhancemedium-term and long-term corporate value

Daiken Group's Value Creation

Shingo Ishizaki
Outside Director, Audit andSupervisory Committee Member

Believing that Daiken will upgrade its inherited strengths as a contributor to a
recycling-oriented society

Kiyoshi Mukohara
Outside Director, Audit andSupervisory Committee Member

Foundation Supporting Value Creation
Data

I have recently been appointed a new Audit and Supervisory Committee Member. I served as
an outside Audit and Supervisory Board Member over the past year and recognized that DAIKENCORPORATION was sincerely promoting improvements to corporate governance. With this attitudedisseminated throughout the company, my impression is that Daiken has an extremely high awarenessof corporate governance. Although I was confident that audit & supervisory board members at companies with an audit & supervisory board were adequately checking the companies in Japan, I agreed
to the recent decision by DAIKEN CORPORATION to shift to a company with an audit and supervisorycommittee, considering it a movement to further strengthen governance.
My roles and responsibilities have become heavier in line with this movement, and I would like tocontinue contributing to the company in an independent position, leveraging my view of companies,
evaluations of businesses, practical experience in business finance and M&As, and expertise based ona long-term securities agency, which I acquired from my work at financial institutions.
The revised Corporate Governance Code 2021 featured a response to sustainability requirements
as one of the key items. Social requirements for ESG and SDGs will become increasingly greater.
DAIKEN CORPORATION's business originated in the effective use of wood, and the company is highly
aware of the importance of natural resources and the environment as a corporate culture that has been
inherited since its foundation. I believe that now is the time when Daiken should upgrade these inheritedstrengths by pursuing and achieving the harmonization of business development, in addition to its social
contribution, as a conscious and proud contributor to a recycling-oriented society. I am determined toprovide the maximum support for upgrading and enhancing Daiken's inherited strengths.

Strategy for Value Creation

In 2019, the Business Roundtable, an economic association of the largest scale in the US,
declared its commitment to all stakeholders by reviewing its conventional shareholder-first policy.
Through this statement, the association urged that companies should, while pursuing economic
benefit, consider employees, shareholders, business partners, creditors, and local communities
and contribute to social prosperity and success, as well as the resolution of social and environmental issues. Coping with major social issues in cooperation with the government and society will leadto the restructuring of capitalism. At the same time, global investors are focusing on ESG investments and advancing investment strategies that generate shared value by stating clear purposes,
rather than adhering to the maximization of profit and the shareholder-first policy.
At present, there is a general concern that boards of directors in Japan lack influential outside
directors and that they are reluctant to take the risk of leading reforms due to the solid positions of internal officers. On the other hand, research results indicate that youths emphasize social
contributions by companies as a condition for job hunting. Considering the future, I think that an
important task for outside directors is to maintain boards of directors that can discuss strategies
for enhancing corporate value from the medium-term and long-term perspectives. As directors, weshould bear in mind that the greatest risk is taking no action.

Reasons for Appointment of Outside Directors as Audit and Supervisory Committee Members
Name

Shingo Ishizaki

Yuko Asami(family register name:Yuko Katsuo)

Kiyoshi Mukohara

Reasons for appointment and expected roles (overview)

Engaged in investment bank operations at securities companies for many years and possesses financial expertise acquired through his
experience. Expected to play supervisory and advisory roles in the execution of duties by directors from a specialized perspective basedon the stated expertise, especially in finance and accounting.
A professor at the Faculty of Economics, Gakushuin University and served as a committee member for the Ministry of Finance and the
Financial Services Agency, demonstrating adequate expertise in finance and accounting. Expected to play supervisory and advisory rolesin the execution of duties by directors from a specialized perspective based on the stated expertise, especially in corporate accounting. No
experience in the engagement in corporate management other than serving as an outside director, but is considered capable of properly
executing the duties of an outside director (Audit and Supervisory Committee Member) for the reasons stated above.
Engaged in the management of financial institutions for many years and possesses abundant financial and managerial expertise acquired
through experience. Expected to play supervisory and advisory roles in the execution of duties by directors from a specialized perspective
based on the stated expertise, especially in corporate management. History of working at Sumitomo Mitsui Trust Bank, Limited, a major
lender of DAIKEN CORPORATION, but resigned as a director of the lender for six years.

*1: The three directors above satisfy the criteria for independence assessment specified by the company and have been registered in compliance with the regulations of the Tokyo Stock Exchange.
*2: The three directors above are members of the Governance Committee and are engaged, from an objective and neutral standpoint, in the selection of directors for the company and the determination of executive remuneration and governance structure.

DAIKEN GROUP REPORT 2021

60

Corporate Governance
Key Initiatives for the Enhancement of Corporate Governance
2002
2003
2008
2010
2011
2012
2015

2021

Made the shift to the chief executive officer
systemThe Compliance Committee was established.
Reorganized to the Risk & ComplianceManagement Committee for reinforcement.
Reduced the number of directors from 11 to 9.
Outside directors are selected.
The term for directors was reduced from two
years to one year.
Outside directors increased from 1 to 2.
The Basic Policy on Corporate Governance wasestablished.

2015
2016
2018

2019
2020

The Nomination and Remuneration Committee
and the Corporate Governance Committee were
established.
The effectiveness evaluation of the Board was started.
A female outside Audit & Supervisory Board member
was selected.
Introduced the transfer restricted stock-based
compensation system.
Reduced the number of directors from 9 to 7.
Outside directors increased from 2 to 3 (3/8)· Enhanced the Board’s supervisory function and made a shift to the Company with Audit and Supervisory
Committee for the purpose of acceleration and efficiency of business execution· Clarified the Executive Officer system’s management responsibilities and roles and introduced the Operating
Officer· Revised the executive remuneration system and improved the remuneration system for the directors who are
the Audit and Supervisory Committee Members· Integrated the Nomination and Remuneration Committee and the Corporate Governance Committee andreorganized to the Governance Committee

Corporate Governance Framework
Shareholders (General meeting of shareholders)Election and dismissal

Election and dismissal

The Board

Election and dismissal

Governance committee

Supervision andelection/dismissal

Audit and Supervisory Committee
Audit and supervision
Audit

Executive Board Member

Instruction andreporting

Supervision and election/dismissal

Executive directors committee
Decision-making, approval, and instruction

Executive Officer/Operating Officer

Audit

Headquarters, respective departments, andaffiliated companies
Monitoring, supervising, andimportant decision-making

Auditing

Internal audit
division

ReportingAccounting
audit

Business execution anddecision-making

Election/
dismissal,
determinationof agendas, Reporting
and the rightof dismissal

Auditors

Business execution

Points of the Structure61●

As the advisory organization for the Board, the Governance Committee has been established that deliberates particularly important items, such as the nomination of and remuneration for directors and executive officers, improvement of
the effectiveness of the entire Board, and building of the governance structure, etc.

●

The Governance Committee has the structure that the committee chairperson and a majority of the members are independent outside directors.

●

By setting up the internal audit division as an organization directly controlled by the Audit and Supervisory Committee,
the structure enhances the audit function.

DAIKEN GROUP REPORT 2021

G Governance
Structural Change toward the Further Improvement of Corporate GovernanceWe introduced the Executive Officer system within the framework of the company with the Board and company Audit & Supervisory Board
Members in 2002 and have conducted smooth and efficient management by separating decision-making in the Board and business execution by
the Executive Officers. While companies are required to implement further sophistication of governance and concurrently required to implement
for more speedy execution of management strategies under the rapidly changing business environment, we have made the shift to a Company
with an Audit and Supervisory Committee and newly introduced the Operating Officers and the business execution system for the purpose ofacceleration and efficiency of business execution based on the enhancement of the Board’s supervisory function and decision-making.

Purpose of the ShiftBy establishing the Audit and Supervisory Committee, which consists of non-executive Board members who have the voting right in the Boardand in which majority of the members are outside directors, we separate business execution and supervision, enhance the Board’s supervisory
function, and further improve corporate governance.
(Before the shift)(After the shift)Company with Board of company Audit & supervisoryboard members

Company with Audit and Supervisory Committee

The Board

The Board

Audit & Supervisory Board

Audit and Supervisory Committee
Audit and Supervisory
Committee Member: 5

Audit & Supervisory
Board Members: 4

Term Directors (Except for Directors who are the Audit and Supervisory
Board Members): 1 year
Directors who are the Audit and Supervisory Board Members: 2 years

Term Directors: 1 year / Audit and Supervisory Board
Members: 4 years

Governance committee(Committee chairperson and majority of the members are independent outside directors)

Deliberate on human affairs and the remuneration of directors andexecutive officers
Number of committee meetings convened in fiscal 2021: 5 times(Key roles/deliberation items)• Proposal for election and dismissal of the director in the general meeting ofshareholders and election and dismissal of the Executive Officer• Plan for the successors of the directors and executive officers• Remuneration for directors* and executive officers, the method of
evaluation, and remuneration calculation standards, etc.
• Evaluation of the effectiveness of the entire Board• Establishment, revision, and abolition of the policy and rules onprocedures, etc. for the governance system• Establishment, change, and abolition of the procedures, etc. for atransaction between related parties• Analysis and countermeasures if opposition votes exceeded the standard
in the resolution of the general meeting of shareholders• Necessity and rationality, etc. when examining the capital policy thatdamages the common benefit of the shareholders*Except for the directors who are Audit and Supervisory Committee Members

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

Deliberate the matters concerning the improvement of theeffectiveness of the Board and the building of the governance system
Number of committee meetings convened in fiscal 2021: 4 times

Chairperson/Committee
chairperson

Inside directors and Audit &supervisory board members

Foundation Supporting Value Creation

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

Strategy for Value Creation

Directors: 9

Directors: 8

Daiken Group's Value Creation

Shift to the Company with Audit and Supervisory Committee

Outside directors and Audit &supervisory board members

Data

Change in the Business Execution System
Purpose of Change
By clarifying management responsibilities and roles of the Executive Officer system and separating Executive Officers and Operating Officers, we
accelerate and streamline decision-making on management and business execution. In conjunction with this, we proceed with the maximizationof human resource value by flexibly allocating human resources in the Operating Officer layer and developing the next-generation leaders.
(Before the change)(After the change)

Executive Officers: 22

Executive Officers: 13 (Of which Executive Board Members: 3)(Of which Executive Board Members: 4)

Operating Officers: 10

Executive Officer

They make and execute decisions on management under authority and responsibility delegated fromthe Board and Executive Directors Committee and play the role of promoting our company’s growth andreform from the perspective of the total company optimization as the strategic function.

Operating officer

They undertake business operation in their responsible businesses and domains and execute operations
toward the realization of reform and growth. They are positioned to develop the next-generation leaders.

DAIKEN GROUP REPORT 2021

62

The effectiveness evaluation of the Board
To increase the effectiveness of the Board and to improve corporate value, the Daiken Group has implemented the effectiveness evaluation of
the Board once a year since the end of fiscal 2016. Based on the self-assessment by all directors and Audit & Supervisory Board members
and deliberations at the Corporate Governance Committee in which the chairperson and majority of the members are independent outside
directors, the effectiveness of important decision-making in management and proper business execution has been confirmed to be sufficiently
secured. The issues to work on for more effective Board operations have been extracted, and they have been continuously putting effort into
the improvement of responses.

Key Issues and Responses
Fiscal 2016 to fiscal 2019: GP25 1st Stage
Deliberations to review the Management
Philosophy and revise it as the Group Corporate
Philosophy

Continue to periodically implement the survey toconfirm the penetration status and issues

The first survey on the degree of penetration of the Group
Corporate Philosophy was implemented. Issues in thepenetration was confirmed and measures were executed

Effective involvement in the PDCA process throughannual or interim evaluations and verifications for
management strategies and policies

Developmentof theManagement
Strategies/
Policie

Fiscal 2020 to fiscal 2022: GP25 2nd Stage

Establishment of the Group
Corporate Philosophy

Consideration and determination of the measures to penetrate philosophy
Started to operate the systematized Group
Corporate Philosophy Penetration Program

Execution of the evaluations of the degree ofpenetration of the management strategies andpolicies as well as the progress of important issues
Enhancement of the Board’s involvement particularlyin the CA process (analyses, issue organization, andexecution of countermeasures) in the PDCA process
in the management strategies

Results and issues of the previous mediumterm management plan were reported in theprocess to formulate the new medium-term
management plan. The business and market
strategies, as well as the concept of theenhancement of the management foundation,
were deliberated from the draft stage
Review of the reporting content, suchas the execution of operation, toward
the effective involvement in the PDCA
process for management strategies

Continuous operation

Implement rolling for each fiscal year based on the changes and forecasts ofthe business results and management environment in the past fiscal year

Reviews of the PDCA process are
executed, so that the progress concerning
the important items of the medium-term
management plan can be easily grasped
Enhancement of the monitoring ofimportant cases

Directors’
Knowledge
and Abilities

Improvement of the provision oftraining opportunities for directors
and Audit & supervisory board
members

ImprovementofDiscussions

Enhancementof theSupervisory
Functionand RiskManagement

1

Continuous operation

Reporting of the matters to deliberate in the
management meeting to outside directors in the regulardebrief session and to outside Audit & supervisoryboard members in the Audit & supervisory board

Since then, regular holding has been continuing

Improvement of the information provision to outside
directors and audit & supervisory board members topromote their understanding in advance in deliberations

Improvement of the information provision, such as deliberation
results on the executive officer side, and implementation ofdeliberations several times in regard to high-risk acquisition cases

Improvement of the support system in orderfor the directors and Audit & supervisoryboard members to be able to actively collectinformation in and outside the company

Thorough implementation of the prompt distributionof materials

Improvement of the supervisory function bydelegating part of decision-making to the
executive officer side

Periodic reporting

Continuous operation

The Nomination and Remuneration Committee was involved inhuman affairs of the directors to develop the next generation

Improvement of the information provision to deepen
outside director and audit & supervisory board members’
understanding of our businesses and that they could
sufficiently review agendas of the Board in advanceContinuous operation

Enhancement of the monitoring
after acquisition

The Director Human Resource Development Program was set
and its operation started

2

Since then, continuously implementing thisSince then, continuously implementing thisHolding of an office visit for the outside directors andaudit & supervisory board members
Review of the regulations of decision-making authority

Revised the Board’s rules and expanded the scope tobe delegated to the executive officer side

Since then, these have been continuing

Shift to the Company with Audit and Supervisory Committee
Enhancement of the Board’s involvement in the group-based risk
management

Review of important risks

Improvement of the feedbacks of IR activities
Since then, periodic implementation on a quarterly basis has been continuing

Periodic implementation of the reporting of IR activities

Improvementof a Dialog
withStakeholders

Improvement of the structure topromote a constructive dialog andtransmit helpful information forstakeholders including shareholders

In creating the integrated report, aquestionnaire survey of the directors andindividual meetings were implemented,
and the Board has been actively involved
To improve information transmission
to stakeholders, such as
shareholders, evaluations by therecipients of the information weremonitored by the Board

Issue

Since then, periodic implementation of an opinion hearing questionnaire
survey and production meeting has been continuing

Evaluations by the investors weremonitored by the Board andevaluations from external institutions
improved by reflecting them in the
integrated report and on the website

External opinions are continued to be reflected on
the integrated report creation policy

Deepening of the discussions on the responses tothe opinions by shareholders and investors

Since then, these havebeen continuing

Discussions on the reduction of cross-shareholdings
toward the improvement of stock liquidity

Response

Results of the Evaluation in Fiscal 2021 and Response to Future Issues
The Board’s effectiveness evaluation implemented in fiscal 2021 reported that opinions are being represented and deliberated actively by eachdirector and Audit & Supervisory Board Member while ensuring the fairness and transparency with diverse perspectives and five independent
outside directors (director and Audit & Supervisory Board Member). The Board sufficiently maintains the effectiveness of important decisionmaking in management and supervision of proper business execution. In particular, we have been improving support for outside directors, suchas provision of information on the management meeting, opportunities to have an interview with management executives and department heads,
which are evaluated to contribute to active discussions toward the medium- to long-term growth. In considering the shift to the company with an
Audit and Supervisory Committee and reviewing the executive remuneration system associated with the introduction of Operating Officers, theAdvisory Committee in which the majority of the members are outside directors are evaluated to contribute to the fairness and transparency of theBoard and contributed to the improvement of discussions toward the improvement of our corporate governance by their recommendations fromdiverse perspectives. To further improve the effectiveness of the Board, we will proceed with the responses to the following issues.

63

1 Improvement of Discussions on the Succession Plan

2 Focused Discussions on Management Strategies (1-3 below)

Checking the Board’s strengths and weaknesses using the skills
matrix and further improvement of discussions on the succession
plan based on the checking results

1. Reconfirmation of risks and opportunities, as well as importantmanagement issues (materiality) based on the rapid environmental
change, such as the COVID-19 crisis, etc.
2. Updating of the long-term vision (from fiscal 2017 to fiscal 2026)
3. Formulation of the medium-term management plan for the nextterm (from fiscal 2023 to fiscal 2026)

DAIKEN GROUP REPORT 2021

G Governance

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-term 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.

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

Composition
Executive remuneration is composed of mission 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 for the directors (except for the director who is an Audit and Supervisory Committee Member and outside director) is around 40% and is designed to fluctuate according to performance.
In shifting to the company with Audit and Supervisory Committee, we have revised the executive remuneration system as well. We organized
the maximum amount of executive remuneration and set Audit and Supervisory Committee member compensation in order to clarify the rolecompensation for the Audit and Supervisory Committee Members. To increase the linkage with management indices in the medium-term
management plan, we reviewed the performance-based indices as well.
Before Revision
After Revision*3

Within the annual amountof 42 million yen*1

Operating profit: 50%

Profit attributable to owners of parent

Profit attributable to owners of parent: 50%

Director (Except for outside directors)

Director (Except for directors who are Audit andSupervisory Committee Members and outside directors)

Stock-based compensation

Stock-based compensation

Performance remuneration

Performance remuneration
Within the monthly amountof 35 million yen*2(Within the annualized
amount of 420 million yen)

Within the annual
amount of 300
million yen

Mission remuneration
Mission remuneration
Representativecompensation

Within the annual
amount of 30
million yen

Representativecompensation

Executivecompensation

Executivecompensation

Supervisor
compensation

Supervisor
compensation

Foundation Supporting Value Creation

Performance-Based
Indices

Strategy for Value Creation

The Board has the authority to make decisions on the policy concerning the amounts and the method of calculating executive remuneration, and theauthority is delegated to the Board of Representative Directors by a Board resolution. The reason for delegation was because we judged that theBoard of Representative Directors would be suited to evaluate each director’s responsible division while taking into consideration the entire company’sbusiness performance, etc. In determining remuneration, to secure transparency, fairness, and objectivity, remuneration is determined by the Board ofRepresentative Directors after deliberations and recommendations by the Nomination and Remuneration Committee (Governance Committee after
the General Meeting of Shareholders on June 25, 2021) in which the chairperson and majority of the members are independent outside directors.

Daiken Group's Value Creation

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

Director who is the Audit andSupervisory Committee Member

Supervisor
compensation

Within the annual
amount of 108
million yen

Data

Mission remuneration
Audit and Supervisory
Committee member
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.
(Except for directors who are Audit and Supervisory Committee Members and outside directors)
Performance remuneration Performance-based remuneration based on the accomplishments/results in company performance
Fixed remuneration to be determined based on one’s duty. To ensure the background of the money amount, the breakdown (Audit and Supervisory Committee
Mission remuneration
Member compensation in addition to representative compensation, supervisor compensation, and executive compensation) is organized and determined.
*1: Resolution by the 102nd General Meeting of Shareholders held on June 22, 2018 *2: Resolution by the 90th General Meeting of Shareholders held on June 29, 2006
*3: Resolution by the 105th General Meeting of Shareholders held on June 25, 2021

Executive Remuneration for the Fiscal Year Ended March 2021
The total amount of remuneration to each executive classification, the total amount of remuneration by type, and number of target executives
are as follows.
Executive Classification
Director*1
Audit & supervisory board
members*2
Outside Directors and Audit &supervisory board members

Total Amount of
Remunerations, etc.
(1 million yen)

Total Amount of Remunerations, etc. by Type (1 million yen)
Mission remuneration Performance remuneration Stock-based compensation Retirement Benefits

Number of Target
Executives

232

115

108

9

–

5

40

40

–

–

–

2

30

30

–

–

–

6

*1: Except for outside directors *2: Except for outside Audit & supervisory board members*3: The total amount of remunerations, etc. above is based on the standards before revision by the resolution by the 105th General Meeting of Shareholders held on June 25, 2021.

DAIKEN GROUP REPORT 2021

64

Risk Management/Compliance
At the Daiken Group, the Risk Management Rules have been stipulatedby the Board to appropriately manage risks and ensure continuous andstable development of businesses. In addition, as an organization that
discusses and approves the issues and countermeasures associatedwith the promotion of risk management of the entire company, the Risk
and Compliance Management Committee with the Representative
Director as the chairperson has been established.
As for risk management, we establish responsible departments according to risk types to extract, analyze, and evaluate risks at the departments. In addition, we strive to increase effectiveness in preventing risks
by continuously following the PDCA, including reviewing the implementation of countermeasures and the risk evaluations in each fiscal year.
Regarding compliance, the department responsible for legal affairs regularly plans and executes education and training, as well as enlightenment
activities, and establishes a culture to comply with law and regulations.

System to Promote Risk Management and Compliance

The Board(Risk Management Rules: Resolution by the Board)

Risk and Compliance Management Committee
Building of the group-wide risk management and compliance systems andoverall management of the promotion plans
Chairperson: Representative Director
Secretariat: Corporate Planning Department and Legal Department

Departments Responsible
for Risks

Department Responsible forLegal Affairs

Each Department/Group Company

Number of Risk & Compliance Management Committee convened in fiscal 2021: 4
Key Deliberation Items
Risk Management

Compliance● Consideration of the important risk measures and analysis/evaluation of● Establishment of the Compliance Code of Conduct● Personal information management status

the influence degree● Revision of the Infectious Disease Countermeasure Manual● Guidelines for operating Social media● Response to the BCP for raw material procurement● Disclosure of the risks associated with businesses● Risk hedge status of nonlife insurance

Strict Compliance
Establishment and Thorough Dissemination of the Compliance Code of Conduct
For the purpose of fulfilling social responsibility as a company and earning
the trust of stakeholders by improving allgroup employees’ awareness and understanding of compliance, we have established the Compliance Code of Conductin October 2020. This Code of Conduct
specifically stipulates how every employee
in the group should act in their respective
daily operations and activities. Through inhouse education, etc. based on this Codeof Conduct, we will fulfill social responsibility as a company that is trusted by the
stakeholders.

Items Stipulated in the Compliance Code of Conduct
1. Community Involvement(1) Compliance with Laws and Corporate
Ethics(2) Ensuring Transparency of Donations(3) Response to Anti-social Forces and Groups(4) Protection of the Environment

2. Customer Trust(1) Response to Safety(2) Improving Customer Satisfaction and
Trust(3) Sincere Sales Activities(4) A ppropriate Displays in Advertisements(5) M anagement and Protection of Customer
Information

3. Relationship of Trust with Business
Partners(1) Promotion of Free Competition(4) Gifts and Entertainment(2) Appropriate Transactions with Suppliers (5) CSR Procurement(3) Prohibition of Infringement of Rights(6) C ompliance in Overseas Business

4. Gaining the Understand and Supportof Shareholders and Investors(1) Disclosure of Management Information(2) Prohibition of Insider Trading(1) Respect for Human Rights andPrevention of Discrimination(2) Prevention of Harassment(3) Utilization of Internal Reporting(4) R espect for Privacy, Protection of Personal
Information(5) Ensuring Workplace Safety and Hygiene(6) E nsuring a Comfortable Working
Environment(1) Fair and Transparent Business(3) M anagement and Proper Use of Corporate
Property(4) Intellectual Property

5. Work Attitude

6. Protection of Corporate Assets andOperations
Information(2) Confidential Information Management

Promotion of Risk management
Initiatives toward the Enhancement of the Raw Material Procurement BCP
Based on the experience in the Great East Japan Earthquake and in addition to the BCP responses in our group’s production and businessbases, we have continuously worked to make improvements for the procurement of raw materials, which are essential for the stable supply of
products, such as multiple purchases and product development assuming the change of the specification to replacement goods, while eliciting cooperation from suppliers. In fiscal 2021, while applying a lesson learned from the procurement problems that occurred in fiscal 2019,
we implemented re-examinations of the BCP concerning procurement items, such as raw materials, and put effort into the enhancement of
our responses in all divisions.
Raw Material Procurement BCP Enhancement Process
Company-wide risk management and promotion of the BCP(Risk and Compliance Management Committee)

Response to the BCP by the manufacturing divisions

Making rules for the raw material procurement BCP by the Disaster
Countermeasure BCP Manual

Compilation of a database of raw material procurement andperiodic check of the responses to the BCP on a fiscal year basis

Conduct periodic reporting about response to importantrisks in the Risk & Compliance Management Committee
and check the status of the company-wide initiatives

Key Examinations and Countermeasures
Confirmation of the BCP response status in suppliers
Multiple purchase

Optimization of the inventory levels

Development assuming the change of the specification to replacement goods

65

DAIKEN GROUP REPORT 2021

G GovernanceInitiatives toward the Penetration of the Group Corporate Philosophy

Deployment of the Measures to Penetrate the Group Corporate Philosophy
Based on the results of the Survey on the Penetration of the Group Corporate Philosophy that is implemented to the group’s employees, wedeploy the penetration measures from the three perspectives of transmission, sharing, and evaluation. By following the Penetration Cycle ofTransmission, Sharing, and Evaluation, we promote the penetration of philosophy in daily operations and conduct a review to make the measures more effective by monitoring the degree of penetration on a regular basis.

+4pt

52 pt

56 pt

Fiscal 2018
BenchmarkFiscal 2020
Results

62 pt
Fiscal 2022
Goals

Initiatives in Fiscal 2021
Transmission(1) Continuous Transmission by the Top Management(2) A special feature of philosophy in the company magazine
Unique initiatives by the departments executing
operations while viewing the group corporate
philosophy as familiar philosophy were publishedas special features in our company magazine
on a biannual basis. By publishing such special
features in the company magazine, we transmit
good cases of practicing philosophy to all group
employees.

Transmission

Provision of information toreform in the way of thinking

Sharing

Setting of a place to think anddiscuss about philosophy

Evaluation

Sharing

For the purposes of thinking what the actions to practice group corporate philosophy would be, creating an opportunity to have discussions,promoting the understanding of the group corporate philosophy, andcultivating culture where the practice of philosophy is praised, we havehold the Daiken Award that collects and honors cases of practicing thephilosophy in daily operations since 2020. In fiscal 2021, which was thesecond time, 399 employees on 53 teams
that exceeded the previous fiscal year participated. By expanding the opportunities
to discuss philosophy through the Award,
honoring good cases born in the Award,
and sharing them within the company, we
The scene of the award
will accelerate a virtuous cycle of the pen- presentation ceremony
etration of the group corporate philosophy.

With a view to being aware of the group corporate philosophy and creating an opportunity to review one’s own behavior, we have held Philosophy
Sharing workshops in the training for each rank for young/middle level
employees and new managers from fiscal 2019. In the workshop, they
check the group corporate philosophy and group conduct guidelines
with their behavior in daily operations and discuss/share their behavior and situations where they practice the philosophy. In fiscal 2021,
we continuously held the workshop by shifting to an online format, and85 employees attended the workshop. We will deploy outputs from theworkshop to the measures to further transmit the philosophy.

DAIKEN GROUP REPORT 2021

Data

Setting of a place to praise and honor
someone practicing philosophy

Philosophy
Penetration
Cycle
Evaluation

Special feature page inthe company magazine

Foundation Supporting Value Creation

In the distribution of videos of the companywide department manager meeting and on theanniversary of foundation, the President himself
transmits his thoughts on the corporate philosophy as a message. The top management always
has technology, ideas, and passion upheld inTransmission by the top
philosophy and is committed to take the initia- management
tive in putting into practice toward the creation of
corporate culture to take on a challenge.

Strategy for Value Creation

We implement the Survey on the Penetration of the Group Corporate
Philosophy on a biennial basis. We uphold the goal of achieving +10 pt
from the benchmark in fiscal 2018 in fiscal 2022, which is the final fiscal
year of the medium-term management plan GP25 2nd Stage and havebeen deploying measures.

Degree of Penetration of the Group Corporate Philosophy

Daiken Group's Value Creation

While globalization and diversification of human resources progress, in order to realize the further growth as a company, it is important that all
employees share the common mission, company vision, and values that we consider important and align the direction to go. So, our group
aimed for the enhancement of management based on the sustainable improvement of corporate value and philosophy, evolved the past
management philosophy in April 2017, and established the Group Corporate Philosophy. To realize the growth strategies particularly drawn
in the long-term vision and medium-term management plan, it is imperative that all group employees practice the vision upheld in the group
corporate philosophy, such as technology, ideas, and passion, challenges of new ideas, and prompt responses to changes and opportunities,
and move into action. Under these viewpoints, we set the degree of penetration of the group corporate philosophy as a non-financial management goal in the medium-term management plan GP25 2nd Stage that started in fiscal 2020 and have been proceeding with the initiatives toimprove the degrees of penetration and practice.

66

Directors(As of June 25, 2021)

Director (Except for the director who is an Audit and Supervisory Committee member)

Masanori Okuda
Representative Director,
President
Governance●Attendance at the Board: 12/12 (100%)●

Number of shares owned: 40,110

Tomoaki Kato
Representative Director, Senior
Managing Executive Officer●

Attendance at the Board: 12/12 (100%)●

Number of shares owned: 34,460

Tetsuo Harima
Representative Director, Senior
Managing Executive Officer●

Attendance at the Board: 12/12 (100%)●

Number of shares owned: 18,560

Hiroshi Sekino
Director

67

DAIKEN GROUP REPORT 2021●

Attendance at the Board: 12/12 (100%)●

Number of shares owned: 0

Apr. 1974 Joined the Company
Apr. 2007 Executive Officer
General Manager of Tobu Juken Sales Control
Apr. 2008 Senior Executive Officer
General Manager of Juken Sales Control and General Manager of Tobu Sales Control
June 2008 Director, Senior Executive Officer
Apr. 2009 Director, Managing Executive Officer
Tokyo Representative and General Manager of Juken Sales Control
Apr. 2010 General Manager of Juken Sales
June 2011 General Manager of Sales, Manager of New Development Sales, and General Manager of
the Tokyo Office
Apr. 2012 Director, Senior Managing Executive Officer
General Manager of the Tokyo Office
June 2013 Representative Director, Senior Managing Director, and Senior Managing Executive Officer
Oct. 2013 General Manager of Procurement Innovation and General Manager of the Tokyo Office
Apr. 2014 Representative Director, Representative President and Executive Officer
June 2018 Representative Director, President (present)

Apr. 1980 Joined ITOCHU Corporation
Apr. 2003 General Manager of Wood Products & Materials Department
June 2009 Director of the Company
Apr. 2011 General Manager of Planning & Administration Department, Chemicals, Forest Products &General Merchandise Company of ITOCHU Corporation
Mar. 2012 Retired from ITOCHU Corporation
Apr. 2012 Director, Managing Executive Officer of the Company
Oct. 2012 General Manager of MDF Business, General Manager of Overseas Business, and Managerof Overseas Sales
June 2013 Outside Director of HOKUSHIN Co., Ltd.
Apr. 2014 General Manager of MDF Business, General Manager of Overseas Business, and General
Manager of the Tokyo Office of the Company
Apr. 2016 Director, Senior Managing Executive Officer
General Manager of Overseas Business, and General Manager of the Tokyo Office
June 2016 Representative Director, Senior Managing Director, and Senior Managing Executive Officer
June 2018 Representative Director, Senior Managing Executive Officer (present)
Apr. 2020 General Manager of Overseas Business, General Manager of Asia Business, General
Manager of North America Business, and General Manager of the Tokyo Office
Apr. 2021 Responsible for Overseas Business, information management, IR, R&D, andCommunications (present)
June 2021 Responsible for Head Office, Overseas Business, crisis management, information
management, IR, R&D, and Communications (present)

Apr. 1981 Joined the Company
Apr. 2011 Executive Officer
General Manager of Juken Sales Control
Apr. 2012 Senior Executive Officer
Apr. 2013 Managing Executive Officer
Oct. 2013 General Manager of Eco Business
Apr. 2015 General Manager of Engineering business and General Manager of Special Demand Sales
June 2016 Director, Managing Executive Officer
Oct. 2017 General Manager of Engineering business and General Manager of Special Demand Sales
President of DAIKEN HOME & SERVICE CORPORATION
Apr. 2018 Director, Senior Managing Executive Officer of the Company
Mar. 2019 President of DAIKEN ENGINEERING CORPORATION
Apr. 2020 General Manager of Domestic Business of the Company
June 2020 Representative Director, Senior Managing Executive Officer (present)
Apr. 2021 Responsible for Domestic Business
General Manager of the Tokyo Office (present)

Apr. 1987
Apr. 1997
Apr. 2004
Apr. 2007
Apr. 2009
Apr. 2010
Apr. 2015

Joined ITOCHU Corporation
Industrial Materials Section, Lumber Department No. 2
Chief of Industrial Materials Section of Wood Products & Materials Department
Seconded to ITOCHU Kenzai Corporation
Wood Products & Materials Department of ITOCHU Corporation
Chief of Industrial Materials Section of Wood Products & Materials Department
Acting Manager of Wood Products & Materials Department, Chief of Industrial Materials
Section of Wood Products & Materials Department, and Planning and Administration
Department, ICT, General Products & Realty Company
June 2015 Acting Manager of Wood Products & Materials Department, and Planning and
Administration Department, ICT, General Products & Realty Company
Apr. 2016 Seconded to ITOCHU Kenzai Corporation
Apr. 2019 General Manager, Construction & Building Material Department of ITOCHU Corporation
Director of ITOCHU Kenzai Corporation (present)
June 2019 Director of the Company (present)
Apr. 2021 Senior Officer, Construction & Real Estate Division of ITOCHU Corporation (present)

G Governance
Governance

Governance Committee members*Attendance in the Board as well as the Audit & supervisory board is the status in fiscal 2021.
*The number of shares owned is the number as of the end of March 2021.

Director who is an Audit and Supervisory Committee Member
Apr. 2001 Professor of School and Graduate School of Law and Politics, KWANSEI GAKUIN
UNIVERSITY
Aug. 2003 Director and Manager of IR Planning of Takara Printing Co., Ltd.
Director, Audit and Supervisory
Mar. 2006 Outside Audit & Supervisory Board Member of Urban Life Co., Ltd.
Committee Member (Full-time)
Aug. 2006 Director and Executive Officer responsible for IR business development of Takara Printing Co., Ltd.
Feb. 2008 Registered lawyer (present)
June 2010 Outside Audit & Supervisory Board Member of the Company
Jan. 2011 Member of the Ninth Tender Monitoring Committee of Ministry of Finance
Apr. 2011 Member of the Committee of Monitoring Mint Contracts (Independent Administrative
Institution)
June 2011 Outside Director of the Company
June 2017 Representative Director, Senior Managing Director, and Senior Managing Executive Officer
June 2018 Representative Director, Senior Managing Executive Officer
Apr. 2021 Responsible for the Head Office and crisis management● Attendance at the Board: 12/12 (100%)
June 2021 Director, Audit and Supervisory Committee Member (full-time) (present)● Number of shares owned: 11,060

Takashi Aihara

Director, Audit and Supervisory
Committee Member (Full-time)

 ttendance at the Board: 12/12
A(100%)●

 ttendance at the Audit &A
Supervisory Board: 13/13 (100%)●

Number of shares owned: 14,110

Shingo Ishizaki

Independent
GovernanceCommittee Chairperson●

 ttendance at the Board: 12/12
A(100%)●

 ttendance at the Audit &A
Supervisory Board: 3/3 (100%)●

Number of shares owned: 0

Yuko Asami(Name in the family registration: Yuko Katsuo)

Outside Director, Audit andSupervisory Committee
MemberIndependent

 ttendance at the Board: 11/12
A
(92%)

●

 ttendance at the Audit &A
Supervisory Board: 12/13 (92%)●

Number of shares owned: 0

Kiyoshi Mukohara
Outside Director, Audit andSupervisory Committee
MemberIndependent
Governance●Attendance at the Board: 9/10 (90%)●

 ttendance at the Audit &A
Supervisory Board: 10/10 (100%)●

Number of shares owned: 0

Full-time instructor, Faculty of Economics, Gakushuin University
Member of performance report project, Accounting Standards Board of Japan
Assistant Professor, Faculty of Economics, Gakushuin University
Professor, Faculty of Economics, Gakushuin University (present)
Member of the Evaluation Committee for the Incorporated Administrative Agency (independent administrative institution), Ministry of FinanceActing chairman of the working group of the Organization for Small and Medium Enterprises and Regional Innovation of the same committee
Feb. 2012 Temporary member of the Business Accounting Council, Financial Services Agency
Apr. 2012 Member of the advisory committee of economics, subcommittee of the establishment of the university, council of the establishmentof the university and incorporated educational institution, Ministry of Education, Culture, Sports, Science and Technology
Apr. 2014 Vice President, Gakushuin University
June 2018 Outside Audit & Supervisory Board Member of the Company
Apr. 2019 Chairperson and Professor, Graduate School of Management, Gakushuin University (present)
June 2019 Member of the Certified Public Accountants and Auditing Oversight Board, Financial Services Agency (present)
Member of Standards Advisory Council, Financial Accounting Standards Foundation (present)
Dec. 2019 Japan Society for the Promotion of Science, Member of the Committee on Grants-in-Aid for Scientific Research (present)
Jan. 2020 Examiner of Certified Public Tax Accountant Examination, National Tax Agency (present)
Sep. 2020 Auditor of Ibaraki University (present)
June 2021 Outside Director, Audit and Supervisory Committee Member of the Company (present)

Data

Governance●

Apr. 2000
Feb. 2002
Apr. 2003
Apr. 2008
Feb. 2010

Foundation Supporting Value Creation

Outside Director, Audit andSupervisory Committee
MemberApr. 1979 Joined Yamaichi Securities Co., Ltd.
Apr. 1998 Joined Merrill Lynch Japan Securities Co., Ltd.
July 2001 Joined UFJ Capital Markets Securities Co., Ltd. (present Mitsubishi UFJ Morgan Stanley
Securities Co., Ltd.)
Oct. 2004 Joined Mizuho Securities Co., Ltd.
Executive Manager of Investment Banking Group
Apr. 2009 Managing Executive Officer and Kansai Investment Banking Group Leader
Apr. 2010 Managing Executive Officer and Kansai and Western Japan Investment Banking Group Leader
June 2015 Special Adviser of Sekisui House, Ltd.
Special Adviser of Sekisui Plastics Co., Ltd.
Apr. 2018 President and Representative Director of SI.Management Co., Ltd. (present)
June 2019 Outside Audit & Supervisory Board Member of the Company
June 2020 Outside Director of the Company
Apr. 2021 Adviser of Asahi Broadcasting Group Holdings Corporation (present)
June 2021 Outside Director, Audit and Supervisory Committee Member of the Company (present)

Strategy for Value Creation●

Apr. 2012 Senior Executive Officer
Manager of General Affairs and HR and Manager of the Secretarial Office
Apr. 2013 Managing Executive Officer
Manager of Management Planning Department and Manager of the Secretarial Office
June 2013 Director, Managing Executive Officer
Apr. 2014 Manager of Management Planning Department, Manager of the New Business Development
Office, and Manager of the Secretarial Office
Apr. 2015 Manager of Finance and Accounting
Apr. 2017 Director, Senior Managing Executive Officer
June 2017 Representative Director, Senior Managing Director, and Senior Managing Executive Officer
June 2018 Representative Director, Senior Managing Executive Officer
June 2019 Audit & Supervisory Board Member
June 2021 Director, Audit and Supervisory Committee Member (full-time) (present)

Daiken Group's Value Creation

1980 Joined the Company
Takashi Terubayashi Apr.
Apr. 2011 Executive Officer

Apr. 1975 Joined The Sumitomo Trust and Banking Company, Limited (present Sumitomo Mitsui Trust
Bank, Limited)
June 2006 Director and Managing Executive Officer
June 2008 Representative Director and Senior Managing Executive Officer
Apr. 2011 Representative Director and Deputy President Executive Officer
Representative Director and Deputy President of SUMITOMO MITSUI TRUST HOLDINGS, INC.
Apr. 2012 Representative Director, Deputy Chairman of Sumitomo Mitsui Trust Bank, Limited
Representative Director of SUMITOMO MITSUI TRUST HOLDINGS, INC.
Apr. 2015 Corporate Advisor of Sumitomo Mitsui Trust Bank, Limited
June 2015 Retired from Director of SUMITOMO MITSUI TRUST HOLDINGS, INC.
June 2016 Outside Audit & Supervisory Board Member of Rengo Co., Ltd.
Apr. 2018 Executive Advisor of Sumitomo Mitsui Trust Bank, Limited
Mar. 2019 Advisor of Sumitomo Mitsui Trust Research Institute Co., Ltd. (present)
June 2020 Outside Audit & Supervisory Board Member of the Company
June 2021 Outside Director, Audit and Supervisory Committee Member of the Company (present)

DAIKEN GROUP REPORT 2021

68

Data

Eleven-Year Financial Summary(¥million)

6,000

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

5,000

4,000

7.0

3,000

2,000

4.1

3.8
2.6

1,000

1,375

874

2,546
1,318

0
(¥million)

Fiscal 2011

Fiscal 2012

Fiscal 2013

Fiscal 2014

Net sales

141,506

151,209

158,153

180,392

Cost of sales

102,345

113,189

119,121

137,693

Gross profit

39,161

38,02039,031

42,699Selling, general, and administrative expenses

34,81233,47734,327

39,121

Operating profit

4,349

4,542

4,703

3,577

Ordinary profit

4,373

4,600

5,669

5,025

Profit before income taxes

3,464

1,893

2,373

4,617

Profit attributable to owners of parent

1,375

874

1,318

2,546

ROE (Return on equity)

4.1%

2.6%

3.8%

7.0%

ROA (Return on assets)

3.6%

3.8%

4.4%

3.8%

Gross profit margin

27.7%

25.1%

24.7%

23.7%

Selling, general, and administrative expenses ratio

24.6%

22.1%

21.7%

21.7%

Operating profit ratio

3.1%

3.0%

3.0%

2.0%

Ordinary profit ratio

3.1%

3.0%

3.6%

2.8%

Cash flows from operating activities

4,438

9,074

2,624

9,663

Cash flows from investing activities(2,618)(3,218)(2,033)(5,168)Cash flows from financing activities(7,095)(1,929)224(1,054)

Free cash flows

1,819

5,856

591

4,494

Capital investments

3,765

2,758

4,036

3,274

Depreciation

4,574

4,217

4,107

3,990

R&D expenses

1,464

1,470

1,453

1,342

Total assets

115,969

125,469

131,618

135,890

Net assets

36,83936,94939,87041,419

Shareholder equity

33,30633,56936,00237,154

Shareholder equity ratio

28.7%

26.8%

27.4%

27.3%

Interest-bearing debts

33,72032,86534,506

34,599

1.01

0.98

0.96

0.93

1,327.08

1,337.57

1,434.53

1,480.47

Earnings per share (EPS) (¥)

54.41

34.83

52.53

101.46

Dividend per share (¥)

31.25

37.50

37.50

37.50

Dividend payout ratio

57.4%

107.7%

71.4%

37.0%

D/E ratio (times)
Book value per share (BPS) (¥)

786

941

941

941

Market capitalization

38,65035,88832,24935,260

Employees (Consolidated) (Persons)

3,189

3,183

3,194

3,141

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-ad.com/en/ir/
3. Free cash flows = Cash flows from operating activities + Cash flows from investing activities
4. Debt-equity ratio = Interest-bearing debts / shareholder equity (times)

69

DAIKEN GROUP REPORT 2021

（％）
15.0

11.7

12.5

11.7

9.1

10.0

7.8

7.0

7.5

5,895

5,447

5,132

5,620
5.0

4,402

3,988
2,736

Daiken Group's Value Creation

9.5

9.8

2.5

Fiscal 2016

Fiscal 2017

Fiscal 2018

Fiscal 2019

Fiscal 2020

Fiscal 2021

168,833

168,141

168,841

170,581

182,962

202,481

199,210

131,657

127,452

125,201

127,946

139,289

151,442

148,328

37,17540,68943,64042,63543,67351,03850,88133,72235,10235,10835,11637,94042,653

42,102

3,452

5,586

8,532

7,519

5,733

8,384

8,779

4,648

5,281

9,033

8,760

6,838

9,108

9,935

1,373

6,875

7,247

8,342

7,301

8,871

10,970

2,736

3,988

5,132

5,895

4,402

5,447

5,620

7.0%

9.8%

11.7%

11.7%

7.8%

9.5%

9.1%

3.4%

4.0%

6.9%

6.4%

4.5%

5.5%

5.8％

22.0%

24.2%

25.8%

25.0%

23.9%

25.2%

25.5％

20.0%

20.9%

20.8%

20.6%

20.7%

21.1%

21.1％

2.0%

3.3%

5.1%

4.4%

3.1%

4.1%

4.4%

2.8%

3.1%

5.4%

5.1%

3.7%

4.5%

5.0％
12,254

6,016

10,566

9,158

10,052

16,807(5,972)(4,201)(2,711)(15,079)(17,863)(910)(2,635)(5,486)(6,734)(6,342)

11,165

1,468(11,369)

5,227

43

6,364

6,447

(5,027)(1,056)

11,344

3,206

3,508

4,757

3,081

6,586

5,490

3,697

4,093

4,068

3,506

3,768

4,134

5,079

5,563

1,349

1,430

1,477

1,551

1,592

1,491

1,452

135,596130,315132,171

140,776

160,158

170,638

172,553

44,984

43,83349,08656,97961,741

62,97576,771

40,57340,78946,61454,24458,90455,77868,043

29.9%

31.3%

35.3%

38.5%

36.8%

32.7%

39.4％

34,20431,43826,33821,95230,78443,87635,508

0.84

0.77

0.57

0.40

0.52

0.79

0.52

1,669.47

1,692.28

1,933.99

2,250.58

2,264.10

2,142.99

2,612.54

111.70164.67212.96244.60174.55209.32215.83

37.50

50.00

64.00

74.00

74.00

70.00

70.00

33.6%

30.4%

30.1%

30.3%

42.4％

33.4%

32.4％

914

1,210

1,542

1,783

1,925

1,821

1,823

32,93137,842

49,67560,54556,03944,14357,402

3,191

3,060

3,071

3,073

3,287

3,807

3,852

DAIKEN GROUP REPORT 2021

Data

9,299
(4,072)

Foundation Supporting Value Creation

Fiscal 2015

Strategy for Value Creation

0

70

Data

ESG Data

E Environment
Total energy input

2017

2018

2019

2020

2021 year)

1,000 GJ
(Heat quantity
equivalent)

2,841

2,888

2,874

2,914

2,667

48

50

50

50

50

2,124

2,041

1,943

1,865

1,799

1,664

1,572

1,455

1,381

1,331

1,000 t

49.6

48.8

48.6

47.5

43.7

％

7.2

7.5

7.6

7.2

5.9

t

8

10

13

13

6

39.2

36.1

35.4

35.4

31.2

％

Percentage of renewable energy
Effective use of water
resources

Quantity of water intakeGroupproduction
bases in Japan

Discharge of drainage

1,000 m3

Amount generated
Waste, etc.

Percentage of final volume
disposed of in landfill
Chemical substances (Substances Emissions/Transfer
subject to the PRTR law)volumeScope 1 (Direct emissions)Greenhouse gas

Scope 2 (Indirect emissions)*

Scope 1,2 Total*Group
consolidation inJapan(Fiscal

Unit

Scope

1,000 t-CO2

64.7

63.2

58.6

55.7

51.3

103.9

99.3

93.9

91.1

82.5

2019
Greenhouse Gas (Scope 3) Scope: Group consolidation in Japan

Emissions(1,000 t-CO2)

2020

2021 (Fiscal year)

Percentage Emissions Percentage Emissions Percentage(%)(1,000 t-CO2)(%)(1,000 t-CO2)(%)

Category 1
Purchased goods and services

Emissions associated with the activities up to the
production of materials concerning the materials/parts
one’s company purchased and purchased products/sale

763.6

65.2

794.9

65.6

720.1

66.0

Category 2
Capital Stock

Emissions associated with the construction/productionof the capital goods one’s company purchased

19.7

1.7

12.4

1.0

9.9

0.9

Category 3
Fuel and energy-related activities(not included in Scope 1 and 2)

Emissions associated with the extraction of resources,
production, and transport of fuel and electricity thatone’s company purchased

8.6

0.7

16.8

1.4

15.3

1.4

Category 4
Upstream transportation anddistribution(1) E missions associated with the logistics(transportation, cargo handling, and storage) of the
products and services purchased in the reporting
fiscal year from the supplier to one’s company(2) E missions (emissions associated with the logistics
that one’s company bears the cost) associated withthe logistics services (transportation, cargo handling,and storage) other than (1) purchased in the reporting
fiscal year

117.3

10.0

130.3

10.8

119.6

11.0

Category 5
Waste generated in operations

Emissions associated with the transportation anddisposal of waste generated in one’s company

3.1

0.3

3.2

0.3

3.1

0.3

Category 6
Business travel

Emissions associated with the employees’ businesstravels

0.3

0.0

0.3

0.0

0.3

0.0

Category 7
Employee commuting

Emissions associated with the transfer when employees
commute to the office

0.8

0.1

0.8

0.1

0.8

0.1

Category 8
Upstream leased asset

Emissions associated with the operation of the leased
asset that one’s company is leasing (Excluding the caseof being calculated in the Scope 1 or 2)

－

－

－

－

－

－

Category 9
Downstream transportation anddistribution

Emissions (limited to those for which one’s company
does not bear the cost) associated with the logistics(transportation, cargo handling, storage, and sale) of the
products sold by one’s company to the final consumer

13.6

1.2

13.0

1.1

11.6

1.1

Category 10
Processing of sold products

Emissions associated with the processing of theintermediate products by the business operator

19.9

1.7

21.9

1.8

20.2

1.9

Category 11
Use of sold products

Emissions associated with the use of the products by
the user (consumer/business operator)

41.1

3.5

36.7

3.0

28.6

2.6

Category 12
End-of-life treatment of soldproducts

Emissions associated with the treatment in waste
disposal by the user (consumer/business operator)

89.6

7.6

90.3

7.5

78.9

7.2

Category 13
Leased asset (Downstream)

Emissions associated with the operation of the leased
asset that is being leased

－

－

－

－

－

－

Category 14
Franchises

Emissions in franchisees

－

－

－

－

－

－

Category 15
Investment

Emissions related to investment management

－

－

－

－

－

－

1,077.7

92.0

1,120.6

92.5

1,008.5

92.4

Scope 1 (Direct emissions)

35.4

3.0

35.4

2.9

31.2

2.9

Scope 2 (Indirect emissions)*

58.6

5.0

55.7

4.6

51.3

4.7

1,171.7

100.0

1,211.8

100.0

1,091.0

100.0

Scope 3 Total

Scope 1, 2, and 3 Total**Regarding the emission factor for electricity use associated with the calculation of greenhouse gas emissions, the actual emission factor in the said fiscal year by electric power supplier is used. However, if
the factor is not released, the most recent value is used.

71

DAIKEN GROUP REPORT 2021

S Social
Number of employees
Scope

Unit

(Fiscal

2017

2018

2019

2020

2021 year)

3,071

3,073

3,287

3,807

3,852

2,245

2,248

2,268

2,411

2,449

Global

826

825

1,019

1,396

1,403

Average age

41.2

41.4

41.6

41.6

41.6

37.5

37.7

38.6

38.8

38.8

42.2

42.2

42.4

42.4

42.4

17.6

17.7

17.7

17.5

17.6

11.1

11.5

11.6

11.6

11.4

19.3

19.3

19.3

19.2

19.4

The female employee ratio

18.9

19.5

20.2

21.9

23.6

The ratio of female employees hired

37.5

34.0

20.3

34.0

29.0

0.64

0.62

1.04

1.23

1.62

10

5

12

28

17

8

0

7

20

7

2

5

5

8

10

％

100

100

100

100

100

Non-consolidated

％

2.10

1.80

2.03

1.95

1.96

Non-consolidated

％

51.8

49.8

53.9

64.9

65.8

Group production basesin Japan*

％

100

100

100

100

100

Japan

Group consolidation

Age

FemaleMale
Average length of service

Persons

Non-consolidated

FemaleYear

Male

Daiken Group's Value Creation

Number of employees (Consolidated)

Women’s Active Participation

Non-consolidated％

Childcare Leave
Number of employees taking childcare leave
Male
FemalePersons
Non-consolidated

The rate of returning to work from childcare
leave

Strategy for Value Creation

The female manager ratio (positions equivalent
to section chief or higher)

Employment of the Persons with Disabilities
The employment rate of persons withdisabilities

CSR Procurement
The rate of acquisition of the agreement on
the CSR procurement standards*Four production bases in Japan from fiscal 2017 to 2018 and the group production bases in Japan from fiscal 2019 to 2021

Occupational Safety
The Rate of lost-worktime injuries
The plant mutual safety diagnosis execution rate

Group production basesin Japan

-

0.42

0.82

1.22

0

1.65

%

100

100

100

100

100

2017

2018

2019

2020

2021 year)

9

9

9

7

8

2

2

2

2

3

Times

12

12

15

13

12

％

100

95

100

100

100

Times

14

13

14

14

13

％

100

100

100

97

96

Total/persons

516

3,276

863

1,337

1,471

Case

4

1

6

14

8

G GovernanceFoundation Supporting Value Creation

Annual Paid Leave
Acquisition of paid holidays

Director Composition

Number of Outside Directors

Unit

Non-consolidated

Persons(Fiscal

Data

Number of Directors

Scope*The number of persons are the figures as of the end of June in each fiscal year

Status of the Board Convened
Number of the Audit & Supervisory Board
convened

Non-consolidated

Attendance rate of Outside Directors

Attendance rate of Outside Directors
Number of the Audit & Supervisory Board
convened
Attendance rate of Outside Audit &Supervisory Board Members

Non-consolidated

Compliance
Number of participants in compliance training
Number of whistle-blowing

Non-consolidated

DAIKEN GROUP REPORT 2021

72

Data

Capital Policy/Shareholder Return
Basic policies for capital and shareholder distributions
 ur capital policy is based on striving for effective management that places emphasis on return on equity (ROE) whileO
being aware of the capital cost and improving corporate value by improving shareholder return and optimizing thebalance between financial soundness and strategic investments.
● For shareholder distributions, the goal is a dividend payout ratio of at least 30% while maintaining a stable dividend andaiming for the distribution of earnings linked with results of operations.
● Decisions about the repurchase of stock will be made based on the current level of capital, the market environment andother applicable considerations.
● Shareholders’ equity will be effectively used for the improvement of production, sales and construction systems as well
as for new businesses, global operations and other activities in order to achieve medium- and long-term growth andbuild a solid foundation for business operations.
●Trends in the Dividend and Dividend Payout Ratio
(¥)

100

Dividend per share (¥)（％）

Dividend payout ratio (%)

50

42.4
80

60

40

We continued shareholder returns based on the policy ofthe dividend payout ratio at 30% or more

30.4

30.1

34.7

33.4

30.3

32.4
30

40

74.00

80.00

74.00

70.00

20

70.00

64.00
50.00
20

0

10

2016

2017

2018

2019

2021

2020

GP25 1st Stage

2022

Forecast on May. 14(Fiscal 0
year)

GP25 2nd Stage(Note) 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.

Total Shareholder Return(For last 5 years)

250

200

150

100

50
DAIKEN CORPORATION

02017.320172018.320182019.320192020.32020

2021.32021

DAIKEN CORPORATION (%)

135.4

168.8

150.7

126.0

162.8

Including dividend
TOPIX
（％）

114.7

132.9

126.2

114.2

162.3

(Note)
1. Total shareholder return: This expresses the total investment return for a shareholder that combines the amount of the stock price increase and dividend.
2. The graph above indicates values up to the end of fiscal 2021 by indexing the end of fiscal 2016 as 100.
3. Figures in the table above are calculated using the calculation formula by the Cabinet Office and are the values as of the end of each fiscal year from fiscal 2017 to fiscal 2021.

73

TOPIX
(Fiscal year)

DAIKEN GROUP REPORT 2021

2022.31.0
1.0

Stock Information (As of March 31, 2021)
Stock Information
0.8

Breakdown of shares by type of shareholder

0.8

Total number of authorized shares
Total number of shares issued
Number of shareholders

79,643,600（%）

27,080,043

100

3,825 shareholders

Shareholder registry administrator

0.31%

0.30%

0.53%

3.93%

3.88%

3.82%

6.15%

5.96%

6.61%

13.96%

14.45%

14.93%

29.43%

29.80%

28.73%

46.22%

45.61%

45.38%

Sumitomo Mitsui Trust Bank, Limited
Daiken Group's Value Creation

80

Major Shareholders
Ownership
Ratio (%)

ITOCHU Corporation

9,475,300

36.4

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

1,264,000

4.9

Sumitomo Mitsui Banking Corporation

986,980

3.8

SUMITOMO LIFE INSURANCE COMPANY

931,200

3.6

Custody Bank of Japan, Ltd. (Trust Account)

831,000

3.2

DAIKEN CORPORATION Trading-Partner
Shareholding Association

777,000

3.0

DAIKEN CORPORATION Employee
Shareholding Association

659,667

2.5

Sumitomo Mitsui Trust Bank, Limited

619,200

2.4

Marubeni Corporation

564,388

2.2

Nippon Life Insurance Company

545,669

2.1

60

40

20

Securities companies
Treasury stock
Foreign institutions and others
Individuals and others
Financial institutions
Other Japanese companies

0

2019

2020

2021 (End of the period)

Trend of Stock Price/Market Capitalization/PER/PBR(For last 10 years)

MarketMarketcapitalization
capitalization(¥100 million)

605(¥100 million)

496

250
250

358
200
200

322

352

574

560
441

378
329

Data

150
150

Foundation Supporting Value Creation(Note) 1. DAIKEN CORPORATION is in possession of 1,035,274 treasury shares. However, the Company
is excluded from the above list of major shareholders.
2. The ownership ratio is calculated excluding the treasury stock.

Strategy for Value Creation

Number of
Shares

Name

100
100
Stock price of DAIKEN CORPORATION
Stock price of DAIKEN CORPORATION

50
50

TOPIX
TOPIX

*Figures of stock price of DAIKEN CORPORATION and TOPIX are indexed as 100, based on the data of closing prices on March 31, 2011.
*Figures of stock price of DAIKEN CORPORATION and TOPIX are indexed as 100, based on the data of closing prices on March 31, 2011.

0
0(Fiscal year)

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

High (¥)

1,635

1,450

1,530

1,635

2,050

2,349

3,150

2,844

2,291

2,379

Low (¥)
Stock price atthe end of theperiod (¥)
PER (times)

1,045

830

1,135

1,180

1,130

1,918

1,950

1,747

1,316

1,523

1,430

1,285

1,405

1,355

1,570

2,061

2,512

2,154

1,696

2,204

41.06

24.46

13.85

12.13

9.53

9.68

10.27

12.34

8.10

10.21

PBR (times)

1.07

0.90

0.95

0.81

0.93

1.07

1.12

0.95

0.79

0.84

(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 (times)
3. PBR (price book-value ratio) = Stock price at the end of the period / Net assets per share (times)
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 2021

74

Data

Company Information (As of March 31, 2021)
Japan
Yubari Plant, T.O FLOORING CO., LTD.
Inami Plant

Daifit Co., Ltd.
TDY Sapporo
Nichinan Daiken Co., Ltd.

Takahagi Plant

Tokyo Office

Daiken R&D Center

Aizu Daiken Corporation

Okayama Plant

Toyama Juki Co., Ltd.
Eco Techno Co., Ltd.
TDY Kanazawa
Koukou Sangyo Corporation
Sankei Corporation
Dai-tac Corporation

TDY Tokyo
TDY Nagoya

TDY Osaka
Setouchi Kakoh Co., Ltd.

PAC SYSTEM Co., Ltd.
ReformQ Co., Ltd.

TDY Hiroshima
T.O FLOORING CO., LTD.

TDY Takamatsu
TDY Fukuoka

Mie Plant
Dai-wood Corporation
Operational Headquarters Osaka office

DAIKEN ENGINEERING CORPORATIONDAIKEN HOME & SERVICE CORPORATION
Smileup Corporation

Subsidiaries part of the Group

Production baseIndustrial materials business

TDY Collaboration Showroom
You can see products from three TDY companies in the same place: Daiken's floorings, interior building materials
such as doors, TOTO's kitchens and bathrooms, and YKK AP's windows and exteriors.

75

DAIKEN GROUP REPORT 2021

Building materials businessEngineering businessDAIKEN CORPORATIONFounding

September 26, 1945

Capital Stock15.3 billion yen

Stock exchange
listings

First Section, Tokyo Stock Exchange

Security code

7905

Setting day

March 31

General Meetingof Shareholders

June

Registered Head
Office1-1 Inami, Nanto City, Toyama, Japan

Operational
Headquarters
Osaka office

3-2-4 Nakanoshima, Kita-ku, Osaka, JapanTokyo Office

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

Major Sales
Offices

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

Production Plants Inami Plant (Nanto City, Toyama Prefecture)
Okayama Plant (Okayama City)
Takahagi Plant (Takahagi City, Ibaraki Prefecture)
Mie Plant (Tsu City)

GlobalDaiken Group's Value Creation

Company NameDAIKEN (Shanghai) Corporation (China)

CIPA Lumber Co., Ltd.
(Canada)Strategy for Value Creation

PACIFIC WOODTECH CORPORATION (USA)Foundation Supporting Value Creation

DAIKEN Industries (Ningbo)
Corporation (China)

Singapore Branch
DAIKEN MIRI SDN. BHD.
(Malaysia)
Indonesia office

Data

DAIKEN SARAWAK SDN. BHD.
(Malaysia)

PT. DAIKEN DHARMA INDONESIA(Indonesia)

DAIKEN SOUTHLAND LIMITED(New Zealand)

DAIKEN NEW ZEALAND LIMITED(New Zealand)

DAIKEN GROUP REPORT 2021

76

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

Issued in September 2021