DAIKEN GROUPREPORT 2020
Integrated Report

DAIKEN CORPORATIONCONTENTS
Strategy for Value Creation

Daiken Group's Value Creation
Message to stakeholders
Daiken Group’s Goal
Process of Creating Value
Historical Development of Value
Creation and Strengths

135

Product Development Uses Strengths

7911Creating shared value (CSV) by
Daiken businesses

13

The Daiken Group at a Glance

Interview with Top Management

DAIKEN GROUP REPORT 2020

17

Development of the Medium-Term
Management Plan GP25 2nd Stage 23
Ⅰ. Accelerating growth strategies
Strategies and progress bybusiness/market● Summary by business● Initiatives for priority markets● Research and development
●

25
27
29
35

Discussion with President andOutside Directors

G Governance
S Social
E Environment

37

Restructure firm and flexible
business infrastructure● Optimize our financial foundation● Practice of ESG Management

38
39
41

47
51
61
65

Data
Eleven-Year Financial Summary
ESG Data

Ⅱ. Enhancement of theManagement Foundation●

1

ESG Serving as a Foundation of Value Creation

Financial Statements
Stock Information
Company Information

67
69
71
74
75

Message to stakeholders
Fiscal year (FY) 2020 was the first year of the three-year medium-term management Plan GP25 2nd Stage,
which was started to accelerate the growth strategies for achieving the long-term vision GP25;
consequently, our group steadily promoted measures for coping with the expected decrease in new housing
starts, which included full-scale deployment in North America through mergers and acquisitions.
Therefore, we strengthened proposals for functional building materials in public and commercial
non-housing buildings.
However, a major change took place in the second half of the fiscal year as a result of the COVID-19
pandemic, which made it impossible to execute even former everyday business practices, not to mention
restrictions on the business activities of our group. We recognized afresh the importance of personal
relationships and that daily life was supported by a variety of different people.
Since the foundation of the company, our goal has been to contribute to people and society by providing
industrial materials, building materials, and spaces that are equipped to offer a variety of different
functions. We are more determined than ever as a company to continue to support the everyday activitiesof people by producing spaces that enable safer, more secure, healthier, and more comfortable lives for all
the people around us; therefore, we must identify changes amidst the uncertainties of the COVID-19
pandemic and further upgrade our technologies, ideas, and passion for that purpose.
Our company will celebrate its 75th anniversary in FY 2021. This year is also the turnaround point for the
long-term vision GP25, which is targeted for our 80th anniversary. During this milestone year, I, as thepresident, will play a leading role in navigating the business environment so that our company willcontinuously contribute to society through business based on a renewed gratitude for the relationships
with the stakeholders that support the daily business of our group. We sincerely ask for your unchanged
support.

Representative Director,
President

Editorial Policy

Company Information

Based on the two policies in the medium-term management plan GP25 2nd

DAIKEN CORPORATION and the Daiken Group*Environmental information differs in scope.

Stage, I. "Accelerating growth strategies" and II. "Enhancement of the
management foundation," the Daiken Group Report 2020 explains the key
measures aimed at medium-term and long-term corporate valueenhancement, including the strengths that our group developed over time
and the contributions to the resolution of social issues through our businessboth in the financial and nonfinancial aspects. In the preparation of thisreport, we endeavored to enrich its content so that readers could better
understand our group by referring to input from shareholders, investors, andother stakeholders with increased financial information and statements
concerning risk recognition. Please visit our website for details of the ESG
and environmental information.

Eligible Period
Fiscal 2020 (April 1, 2019, to March 31, 2020)*Some contents include information other than the above
period.
Reference Guidelines
International Integrated Reporting Council (IIRC):
The International Integrated Reporting Framework● ISO 26000●[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 20202

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
Group has 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 forthe sustainable improvement of corporate value by uniting our business activities and CSR activities.

Group Corporate Philosophy

Company mission

Company vision

Company values【Our Vision】【Our Values】

We will create a wonderful future

As a company respected bywith our technology, ideas,

everyone, we will give the highest

and passion.

priority to harmonizing an affluent

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

【Our Mission】

society with the environment byoffering new value that exceeds
people’s expectations.

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 2020

2025
Long-Term Vision

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

GP25

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

and secure spaces

Grow／Glow Plan 25

How We should be in 2025
materials, and engineering

Grow

Glow

2 Continue to challenge new business areas and grow the

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.

oriented product development, proposal capabilities,
problem-solving skills, and organizational strength

fourth pillar
3 Earn a great reputation among professionals for consumer-

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

VisionData

CSR Basic Policy

ESG Serving as a Foundation of 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

Contribute 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.
Policies

2 Using CSR as an activity to enhance our ability to respond to and earn the trust of society, we will

systematically pursue CSR with our responses to the environment, society, and governance as key axes.
3 Positioning CSV* as one of our management strategies, we encourage activities voluntarily 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 20204

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

Social issues
and needs
SDGs

Growth strategy and enhancement of
the management foundation
Ⅰ. Accelerating growth strategies

Business Strategies

Industrial materials
business•M easures for water
resources

Building materials
business

Industrial materials

Home renovation market•M easures for biodiversity•C onservation of tropicaltimberGlobal markets
Public and commercial
buildings• Realization of low-carbon
society•B uilding a
recycling-oriented society

Market Strategies

Engineering business

Domestic new homemarket•D ecrease in labor force•P romotion of diversity•P romotion of workstylereform•D evelopment of local
communities•R evitalization of thedomestic forest products
industry•P reparation for natural
disasters• Improvement of the safe,
secure, healthy, andcomfortable living
environment•R esponse to thesuper-aging society

Ⅱ. Enhancement of the Management Foundation

Financial affairs

Business infrastructure

ESG (CSR) activities

E Environment
S Social
G Governance

P44
P65

Medium-Term
ESG Plan

P45
P61

P43
P51

P42

Group Conduct Guidelines
Introduce management resources

5

DAIKEN GROUP REPORT 2020

Medium-Term Management Plan

Creating shared value (CSV)
by Daiken businesses(Fiscal 2022)

Financial indicators• Net sales

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

5.3％

7 billion yen• Profit
attributable toowners of parent• ROE

10％7％• Shareholder
equity ratio40％• Dividend
payout ratio

30% or more

P35

Strengthen the foundation of value creation

Optimized financial
foundation

Firm and flexible
business
infrastructure•T otal CO2 emissions
in japan(26％)(Compared to fiscal 2014)• Total diversity index*+20pt*Our own indices in which the eight
diversity items, such as the female
manager ratio, were indexed ascompared to fiscal 2019

• Serious quality
accidents and violations

Data

Management foundation enhanced
by ESG

Nonfinancial Indicators

Achieve theLong-Term
Vision GP25

ESG Serving as a Foundation of Value Creation• ROA

Strategy for Value Creation

R&D
Innovation

Management goals

Achieve the vision of the Group Corporate Philosophy• Promoting the use ofdomestic timber• Recycling of wood resources• Reduction of CO2 emissions• Creating a safe, secure, healthy,
and comfortable space• Effective utilization of unused
resources• Promotion of anti-seismic
performance• Saving construction time andwork

Daiken Group's Value Creation

Creation of economic andsocial value０• Degree of penetration +10pt
of the group corporate
philosophy*

Investment to build the foundation
for further value creation*Our own indices in which employees’
understanding, sharing, and practice of
the Group Corporate Philosophy wereindexed as compared to fiscal 2018

DAIKEN GROUP REPORT 20206

Historical Development of Value
Creation and Strengths
Ever since foundation, The Daiken Group has been developing awide variety of products to help customer's daily life though 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.

1970
WPC

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

Flooring

1971

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

Door

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

Sound products

Door

Cladding

1946

1982

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 waste

Net sales (¥100 million)

2,500

Interior projects

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

1964
Dai-Lotone
Started manufacturing DaiLotone, non-combustible
ceiling materials using slag
wool, which is a byproductof steel production

2,000

1997
Dai-Lite

1,500

Trends in Net Sales, Operating Profit, and number of new Housing Starts

1,000

Net sales
Operating profit
Number of new housing starts

500

0
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
1945 1946 1947 1948 1949 1950
1951 1952 1953 1954 1955 1956 1957 1958 1959 1960

Foundation

History of DAIKENCORPORATION

7

Expansion

Growing

1941

1954

1967

1977

1989

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

Established Nagoya plant for
manufacturing special plywood

Changed the company name to
DAIKEN CORPORATION

1958

1969

Expanded insulation board
business
Built Takahagi plant• Started manufacturing housing
products, such as doors andstairs, at the Inami plant• Started manufacturing of
cladding at the Takahagi plant

1944
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.

DAIKEN GROUP REPORT 2020

Built Okayama plant and started
manufacturing insulation board

Established interior projects
department

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

1984
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
manufactur

1995
Built interior doors production
line at the Inami plant

2008

2015

MiSEL

Three-dimensional
high design flooring

Attractive cabinet
pursuing design

Daiken’s Strengths

2014

Tatami facing

A wide sliding door thatcan be easily accessedby a wheelchair

Started manufacturing
Tatami facing thatused machine-madeJapanese paper andthat was excellent inmaintenance2013

Building materials
business
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

1996

2004 Transferred the exterior material business

Tatami facing

1996

Industrial materials
business

MDF

2018

Started manufacturing
MDF that utilized residual
wood offcuts as the mainmaterial

MDF

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

Goal of LongTerm Vision GP25

Goal of GP25 2ndStage

Housing starts(10,000 houses)
Operating profit(¥100 million)

ESG Serving as a Foundation of Value Creation

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

200
150

Data

100
50

1987 1988 1989 1991
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2001
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20112010 2011 2012 2013 2014 2015 2016 2017 2018

New Challenge

Selection and Concentration
1996

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 DAIKEN ENGINEERING CORPORATION

2002

2010

2005

2012

•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 plant

Challenge to achieve the Long-Term Vision GP25

• 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

0(Fiscal year)
20192021
2020 2021 2022 2023 2024 2025

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

2018

• Purchased MDF manufacturer in New Zealand andestablished DAIKEN SOUTHLAND LIMITED• Established Daiken R&D center• Capital and business alliance with ITOCHU Corporation

2019• Purchased a veneer plant, CIPA Lumber Co., Ltd.
in Canada and an LVL plant, PACIFIC WOODTECHCORPORATION in the U.S.A.
• Purchased a renovation company ReformQ Co., Ltd.
• Purchased T.O FLOORING CO., LTD., that works onsolid wood flooring

DAIKEN GROUP REPORT 2020

8

The Daiken Group at a Glance (Fiscal 2020)
The Daiken Group Expressed in Figures

Operating profit

Net sales

202.4
Fiscal 2020

Fiscal 2019+10.7%
182.9
billion yen
ROE

Fiscal 2019

5.7 +46.3%

billion yen

billion yen

Dividend/Dividend payout ratio

9.5

%

8.3
Fiscal 2020

70
33.4

yen per sharebillion yen

Market capitalization

44.1

billion yen*As of March 31, 2020%

Number of employees

Foundation

September

1945

3,807

Japan

Japan

2,332
1,475

12
8 6

bases

*As of March 31, 2020

Overseas

E SG
Overseasbases in

34.6

The ratio of female employees hired

CO2%

Rate of reduction of CO2 emissions

25(Non-consolidated data)

3 8

Outside Director（37.5%）%The percentage of male employees
taking childcare leave

52.6

%

(Non-consolidated data)

DAIKEN GROUP REPORT 2020

countries*As of June 26, 2020

(Compared to fiscal 2014)

9

Production base

The percentage of attendance on
the Board by Outside Directors

100%Business flow
The Daiken Group is consistently engaged in the development, production, installation, and construction of various

Sales Composition Ratio by Market

Clients/General Users

Other
Domestic
market82%

0.4% 18.0%
38.8%

Domestic newhome market

13.0%

14.1%
15.7%

Global markets
Public andcommercial
buildings
Industrial
materials

Home renovation
marketDeveloper

Constructor

Renovationcompany

Building
contractor

Builder
Housingcompany

Various
manufacturers

GeneralContractor

Distributor
Strategy for Value Creation

Sales Composition by Business Segment

Engineering business

21.7

Daiken Group's Value Creation

functional industrial and building materials.

10.7Interior projects%

Renovation work

Apartment renovation

billion yen
Flooring

CabinetBuilding materials
business

94.9

46.9

Sound products%

Share indomestic flooringbillion yen

No.1(Estimated by our company)

Insulation board

Industrial materials
business

76.5

LVL

37.8

%

billion yen

Tatami facing

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
2019年11月28日号

First place in the HomeInterior Door 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
2019年11月28日号

Rankings of the Building Materials and Equipment
Manufacturers that the Readers Want to Adopt in2019 by Nikkei Home Builder
First place in the Inorganic Bearing Surface 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
2019年12月号

Dai-Lotone
Dai-Lite

Data

MDF

First place in the Composite
Flooring Category*1

ESG Serving as a Foundation of Value Creation

Door

Rankings of the Building Materials
and Equipment Manufacturers that
Readers Want to Adopt in 2019 by
Nikkei Architecture

Share indomestic MDF

No.1(Estimated by our company)

Share indomestic insulation
board

No.1

(Estimated by our company)

Other Daiken businesses account for 4.6% or 9.2 billion yen in addition to the above.
*1: A questionnaire survey for the readers in regard to their intention to adopt building materials and equipment manufacturers’ products. The November
28, 2019, issue*2: A questionnaire survey for the readers in regard to their intention to adopt building materials and equipment manufacturers’ products. The December
2019 issue

DAIKEN GROUP REPORT 202010

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

Industrial Materials Business

Daiken’s Strengths

Developing and offering highly functional industrial materials
The Daiken Group offers various functional industrial materials having non-combustibility,
anti-seismic, thermal insulation, sound insulation, humidity conditioning, and various otherfeatures required in our daily lives by making full use of wood and mineral resources froma sustainable perspective.
Overview
Insulation board
Wooden fiberboard
using none-usedwooden waste for main
raw material andmolded into a board

Effective use of wood materials• Dimensional
stability• Surfacesmoothness• Workability• Water resistance

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

Protection board

Materials for flooring

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

MDF

木材チップ
MDF

Wood chips

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 2020

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

11

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 Business

Daiken’s Strengths

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 damage resistance,long-lasting beauty, good
design, high function, and highperformance

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, and stores

Cabinets mitigate the various
risks to users for comfort
during use

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

Daiken’s Strengths

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

Data

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

Capabilities toperform installation
work by making useof the functions ofbuilding materials

ESG Serving as a Foundation of Value Creation

Engineering Business

Strategy for Value Creation

For public spaces and commercial facilities

A flooring for heavy duty areas
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

Sound products

CabinetDaiken Group's Value Creation

Flooring

Our project
Tokyo Metropolitan Government Building

Kyoto Station Building

Kansai University

DAIKEN GROUP REPORT 202012

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 Promoting 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 and developed base materials for flooring combined withdomestic timber. The group had made many improvements and increased the use of domestic timber for flooring materials, which wasapprox. 4% in fiscal 2015, to approx. 41% in fiscal 2020. The group willcontinuously proceed with product development that will draw out the
Cross-section image of base material for
flooring made fromappeal of domestic timber and further promote the use of domestic timber.
Utilization of domestic timber forbase materials for flooring

Fiscal 2020

（%）

50

Approx.

40

33

30

30

41

domestic timber

%

23

20
10
0

11

Daiken’s special MDF

4
2015

2016

2017

2018

2019

Plywood made ofdomestic timber2020 (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 commercializationof local materials with the WPCtechnology

23

prefectures

Mechanism of the WPC technology

Case of adopting WPC flooring*WPC = The abbreviation for Wood Plastics Combination

Inject plastic resin into surface wood for flooringand harden it

13

DAIKEN GROUP REPORT 2020

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

Recycling of

02 wood resourcesof
03 Reduction
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 waste that used to be discarded or used as fuel. Trees function to absorb CO2
in the atmosphere during the growth process and to keep
storing it by fixing it as carbon. Using wood as materials
waste but also keep storing carbon in wood, and as aresult, it will lead to reducing CO2 emissions into theatmosphere. Our group focuses on this function,

Approx.

continues to use wood resources in a wide variety of

998,000

t-CO2/year

Fiscal 2019scenes as materials with zero waste, and contributes tothe formation of a recycling-oriented society and theApprox.

prevention of global warming.

t-CO2/year*Reference: Total CO2
emissions in Japan in fiscal
2020 was 95,300 t-CO2/year

ESG Serving as a Foundation of Value Creation

Wood chips
Residual wood
offcuts
Nursery tree

Use of wood
resources as
ForestFelled trees

materials

Insulation board

MDF

Construction
waste
Building
materials

Demolition

Strategy for Value Creation

1,031,000

The amount of carbon fixation by MDF and insulation board (CO2 equivalent)
Fiscal 2020

as long as possible instead of burning will not only reduce

Daiken Group's Value Creation

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

Lumber

Data

House

140,000

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

Approx.

139,000

t-CO2/year

Approx.

Fiscal 2019

Approx.

t-CO2/year

891,000

The amount of carbon fixation by MDF (CO2 equivalent)
Fiscal 2020

859,000

t-CO2/year

Fiscal 2019

Approx.

t-CO2/year

DAIKEN GROUP REPORT 202014

04 Creating a safe, secure, healthy, and comfortable space
Creating a safe spaces 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 infour people aged 65 or over. It is expected that the elderly population will reach about 40% by 2060. There is 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 through ourwork, Daiken is committed to manufacturing from the perspective of allusers, including elderly people, their families, and caregivers. In recent year,
by improving the mechanism that can finely respond to the needs that vary
according to facilities, such as elderly facilities, houses that are considerateof home care, etc., and having comprehensive product lines, our products
have been widely adopted. Daiken pursues the creation of excellent andpleasant spaces using
products that are safe
and secure for people’s
lives and have functionality, such as indoor
moisture conditioning, Cases of adopting the building Moisture conditioning wallmaterial that creates amaking it easy to listen materials from the Omoiyari
Series for the living spaces
comfortable indoor environment
to conversations, etc.
where elderly people live

437

Omoiyari Door Sales
Volume Growth Rate

Fiscal 2020

%

（%）

500
400

321
265

300
200

100

131

174

198

2016

2017

100
0

2014

2015

2018

2019

2020 (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 the increasein the female employment rate in recent years, a design that is more considerate of safety and the environmental aspect
is required for these facilities. Lack of human resources engaged in childcare is considered one of the major causes ofthe problem of children on the waiting list, and it is imperative to reduce nursery teachers’ burden and create a pleasantworking 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 particularly high and developed the door dedicated to kindergartens andchildcare facilities, while taking advantage of the expertise in door manufacturing cultivated from pasthouses 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 soundabsorbing feature that can reduce noises. We will support a wide variety of problem solutions requiredfor childcare facilities, such as improvement of safety and comfort and further reduction in the nurseryteachers’ burden by using Daiken’s unique technologies and diverse products.

Doors that consider safety byassuming that children use them

15

DAIKEN GROUP REPORT 2020

Meshed cushion on the back offlooring disperses the impact andreduces the risk of getting injured

High-performance ceiling materials
having excellent sound absorbing,moisture conditioning, andformaldehyde absorbing features

Sound absorbing panel for ceilingof which the color and shape canbe specially ordered

The door dedicated to kindergartensand childcare facilities won the Kids
Design Award* (Fiscal 2018)*Design category that will contributeto the safety and security of children

Effective utilization of

05 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.

880,000 920,000
Approx.

(As of the end of March 2019)(As of the end of March 2020)

Dai-Lite

Anti-seismic wall

Shirasu, an unused resource available in thenatural 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.

construction period

Data

25

To particularly respond to the needs of making the ceilings of large public facilities
Rate of reduction of construction timeanti-seismic after the Great East Japan Earthquake, Daiken developed a uniqueand labor compared to making theconventional ceiling anti-seismic:
ceiling construction technique that makes it possible to make the ceiling
anti-seismic with the saving construction time and work. With this construction
Approx.
%*Estimated by our company
technique, we reduced the construction time and labor by approx. 25%
compared to making theconventional ceiling anti-seismic.
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 theeasily constructed in a shorton-board construction technique thatof a new construction technique.

ESG Serving as a Foundation of Value Creation

07 Saving construction time and work

Daiken's strengths and value creation

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 the Great
East Japan Earthquake. Large earthquakes, such as the Tokyo metropolitan earthquake and the Nankai troughearthquake, 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.

can omit substrate work and shorten
the construction period

DAIKEN GROUP REPORT 202016

Interview with Top Management

Representative Director,
President

17

DAIKEN GROUP REPORT 2020

Daiken Group's Value Creation

Toward becoming an allembracing company forbuilding materials
To achieve the Long-Term Vision GP25,
contribute to society by returning to our roots
and leveraging the changes as opportunities

spread of the COVID-19 infection, andhow have you coped with it?

when this interview was held, the Countermeasures
Office was established, and I will serve as the director. Under the integrated management systems
combining Japan and overseas, we are continuing

tremendous influence on social and economic ac-tions to prevent the spread of the infection. The

tivities. We are deeply grateful for the daily support

key business production bases in Japan are con-of healthcare professionals on the frontlines andtinuously operating with partial production adjust-other persons working to prevent the spread of thements. Among the overseas bases, the MDF plants

infection. How the situation will develop remains un-

in New Zealand stopped operations for about one

certain. Our company will continue to place its high-month from late March until the end of April due

est priority on guaranteeing the safety of customers,

to the nationwide lockdown. The LVL plant in thebusiness partners, employees and their families,

United States was forced to reduce operations by

and all other stakeholders to prevent the spread

approx. 40% to 60%. The impact has been greaterof the infection and minimize the impact from theoverseas than in Japan with restrictions placed oncrisis. Under these circumstances, we were fortu-

other plants in Malaysia, China, and Indonesia. At

nate in that the influence on our performance for FY

the business offices in Tokyo, Osaka, and other re-2020 was limited. In the early phase of the crisis

gions, we switched to remote working, in principle,

from February to March 2020, there were concerns

after the declaration of the state of emergency by

about the procurement of parts and materials fromthe Japanese government, and we maintained op-

China due to the major impact of the spread of theerations of 80% or higher. Urgent measures were

infection. However, after strengthening our BCP

implemented, but our structures, which had been

structures following the procurement problems ingradually established from the viewpoints of BCP

FY 2019, we fulfilled our responsibility as a manu-

and work style reform, took effect. The impact on

facturer for a stable supply for the end-term increase

sales and orders was limited at the beginning of thein demand for housing and building materials.

term in April, but difficulties are increasing with each

Since the start of FY 2021, the situation has beenpassing month. The influence on housing and build-difficult because of rapid and continuous changes.

ing materials emerges two or three months after the

Regarding company-wide measures up to June

start of construction. Therefore, we are establish-

DAIKEN GROUP REPORT 2020

Databusiness as much as possible, while taking precau-

ESG Serving as a Foundation of Value Creation

The worldwide spread of COVID-19 has had aStrategy for Value Creation

Q What has been the influence of the18

ing production structures to flexibly adapt to any

enhance the range of housing proposals. At thechanges in demand in preparation for a rapid de-same time, we will expand sales channels to com-crease in demand expected in Q2 and after.

mercial nonresidential facilities and examine expansion into other industrial materials and buildingQmaterials by leveraging the resources of ITOCHUFY 2020 was the year to start themedium-term management plan GP25
2nd Stage. What were the achievements
and problems in the first year?

Corporation with which we established a capitaland business alliance in 2018. In this way, we will
formulate medium-term and long-term strategies
to pursue further expansion into North America.

The two achievements were the steady prog-

In the public and commercial buildings segment,

ress in the review of the market portfolio amidst

we started full deployment of solid wood flooring

the downward trend of new housing starts and thebusiness, which had been missing from our prod-

M&As aimed at strengthening key markets. As had

uct lines. We will strengthen proposals with a focus

been expected, new housing starts slowed follow-

on educational facilities (such as gymnasiums anding the increase in the consumption tax in Octoberclassrooms) that have persistent needs for solidof FY 2020. Because of last-minute demand, there

wood flooring. In the meantime, we are promoting

was a steady trend in the first half of an increase ina major shift in the sales structures from housing

owned houses and detached houses year-on-year.

as the main target toward public and commercial

However, performance throughout the fiscal year

buildings. We hope to strengthen proposals for

was poor at -7.3% due to the reactionary decrease

public and commercial buildings and thereby ac-

in the second half. Nevertheless, we maintained in-celerate sales increases.

creased income in the building materials businessOn the other hand, the performance of the MDF

for the new housing market by 6% by strength-

was a problem because the mainstay in the indus-

ening deployment in public and commercial non-trial materials business was stagnant because ofresidential buildings and the home renovation mar-the deteriorated global market conditions triggered

ket. We felt confident that we could increase ourby the US-China trade friction and other factors.

presence by proposing differentiating products to

As market conditions deteriorate, price competi-

acquire increased market share and by steadily re-tion occurs in general-purpose products, which inviewing our market portfolio despite the downturn

turn results in selling price declines and other im-in new housing starts. Another achievement waspacts. However, we received stable orders for spe-that we implemented M&A measures in three key

cial MDF for use as materials for flooring with theirmarkets (global markets, public and commercial

waterproof quality and dimensional stability highlybuildings, and the home renovation market).
In

the global markets, we took a substantial

step by managing to enter North America, where
the market size is large, medium-term to long-term
growth is expected, and mainly wooden construction is used, an area of particular strength for us.
We will promote sales in North America by focusing on the existing housing LVL for the time being. In the future, we will introduce products withhigh added value and additional functions (suchas preservative and noncombustible materials) to19

DAIKEN GROUP REPORT 2020

Interview with Top Management

rated by customers. It has become clear that prod-crisis of 2008, we were faced with tough market

ucts with high added value and functionality are

conditions where new housing starts for the fiscal

less vulnerable to deteriorated market conditions.

year decreased by approx. 25% from 1.03 million

In

product lines include many other differentiating

restructuring since early 2000, including withdrawal

products from our company, such as tatami fac-from the housing equipment (such as kitchens),

ings with high durability compared to convention-

roof materials, exterior materials, and plywood seg-

al rushes by processing machine-made Japanesements as one of the founding businesses. On thepaper, sound absorption products that resolve

other hand, we took the opportunity of incorporat-

residential sound problems, and the flooring ma-

ing the MDF plants in New Zealand into our groupterial with its improved appearance design based

to expand our industrial materials business. We

on unique technology. We will establish structures

leveraged the expanded capacity to divide produc-

and further develop more products and applica-tion based on the advantages of plant lines with thetions.

New Zealand plants engaged in the mass production of general-purpose products and the Malaysia

Q What is your direction toward theachievement of the medium-term
management plan GP25 2nd Stagethrough to FY 2022?

plants specializing in the production of special MDF
for flooring with high added value, which supports
our business as a product that is less vulnerable toStrategy for Value Creation

to 0.77 million. We had been promoting business
Daiken Group's Value Creation

addition to special MDF for flooring, ourthe recent deteriorated market conditions. We also
shifted toward productivity improvement in floor materials, which had faced difficulties though they wereamidst the uncertainties that we face. We are es-

key products in the building materials business, by

tablishing structures to achieve robust immediate

integrating the functions of the Nagoya plant, which

operations by suspending capital investment that

had been a key plant since our foundation, into theassumes production increases, overall inspection

present Mie plant with renovated equipment. Floorand selection of expenses, further pursuit of as-

materials have been revitalized as the core of ourset efficiency, and an improved standard for short-building materials business.
Similarly , we will take this opportunity during thesuing risk preparedness, we must be careful not tocurrent COVID-19 crisis to accelerate the review

quit investments altogether by selectively review-of our business portfolio. We had assumed thating expenses. We must also be careful not to misswe could proceed from the 2nd Stage to the 3rd

opportunities. If we only prepare, business may

Stage in steps under the risk scenario of a gradualshrink and diminish. To avoid cutting off the branchdecrease in new housing starts, but we will accel-that has important buds for the future, we must

erate the decisions on the reduction or withdrawal

identify the essential factors of medium-term andfrom business segments that are no longer viable. In

long-term competitiveness and corporate value

the meantime, as in the financial crisis, we will pro-enhancement. As a member of top management,

actively invest capital resources into business seg-

I would like to make decisions by looking at bothments that maintain competitiveness and businesssides and take action to attack or to defend as

segments that represent the source of new growth.

necessary.

M&As under highly uncertain circumstances will re-

We need to prepare for risks, monitor changes

quire more difficult decisions but can be concluded

amidst uncertainties, and implement the necessary

under more advantageous conditions. We will care-measures at the appropriate times. In the financial

fully identify opportunities for M&As, while leveraging

DAIKEN GROUP REPORT 2020

Data

term liquidity to manage the risks. While thus pur-

ESG Serving as a Foundation of Value Creation

First, we need to identify risks and opportunities

20

a financial structure that has improved compared to

no longer involve commuting, and remote work willthose days.

become common for people in different places, in-Under these circumstances, attaining the goals

cluding homes and satellite offices. There will also

set in the medium-term management plan GP25

be a shift from sales activities in person to more

2nd Stage will naturally be difficult toward FY 2022

online-based activities, thereby reducing the timein consideration of decreases in demand and ex-

required for travel. The saved time can be used for

isting businesses. However, there has been no

market analysis, proposals that match customer

change in the concept of reforming our businessneeds, the formulation of enhanced sales plans,

and the market portfolio and implementing steadyand otherwise increasing added value. Office tasks

measures to become an all-embracing company

can be performed from home, which can increase

for building materials as reflected in our corporate

concentration and productivity for certain jobs.

image in the long-term vision, despite the decreas-

This signifies that employees who are in the midst

es in new housing starts, as our basic attitude inof life events (such as childrearing and long-term

the medium-term management plan. At present,care) can find increased opportunities to reach

we will not modify our management goals in con-their potential.

sideration of the new possible steps based on op-

Lifestyles will become more online-based in a

portunities amidst the uncertainties. We would likevariety of different ways. Because it will no lon-

to find the seeds of the next-generation businessger be necessary to live in urban areas close toas the potential fourth pillar after industrial materi-offices, trends may emerge for people to moveals, building materials, and engineering, which will

to remote areas or to live in spacious detachedlead to the resolution of social issues in a Daiken-

houses in suburban areas. In offices, space will

like manner toward the start of the GP25 3rd Stagebe required to minimize physical contact while

in FY 2023 as the final step in achieving our long-pursuing comfort and functionality, Web meetingsterm vision.

will become more common, and new demandI

believe that it will entirely depend on the

may emerge for personal booths for those pur-strength of human resources to create somethingposes. At home, space will be required for remote

new in response to changes in the external envi-

deskwork and for soundproof functions in orderronment and to establish a relationship of trust withto coexist with family activities. As antiviral mea-

customers and other stakeholders. While worksures, we have proposed products equipped withstyles change from the influence of COVID-19, we

BIOTASK, an antiviral that was developed follow-

will strengthen investments in human resources

ing the emergence of the pandemic influenza inand establish a workplace environment where all

2012. We will contribute to society by promoting

employees can achieve optimal performance andproduct development with an expanded scope of

exercise their skills.

application with an antiviral function. We also released a series of building materials for medical

Q What will be your medium-term andlong-term management strategies in the
post-COVID-19 era?

facilities in the last fiscal year, but the existing lines
are clearly not satisfactory. This means we havethe need and the reason to develop new productsthat will help professionals working on the front-"Changes" and "return to our roots" will be key

21lines of saving lives.

terms. The two perspectives for change are as fol-

A company cannot be continuously selected bylows: changes in work styles and changes in life-

simply conducting business as usual. Personnel

styles. For the changes in work styles, work will

within the company must always ask themselves

DAIKEN GROUP REPORT 2020

Interview with Top Management

resources originating from the wood processing

A company must demonstrate adaptability and thebusiness and to create a safe, secure, healthy,

agility to provide new value in response to chang-and comfortable space by expanding businesses in a post-COVID-19 society. This is exactly the

into functional industrial materials and into build-practice of endeavoring to improve customer trust

ing materials with higher added value—these are

and satisfaction by grasping changes in the needs

the roots and the fundamental concepts to whichof society in advance, while providing products,

we must adhere. While the influence of COVID-19

technologies, and services that are safe, secure,remains the focus, this does not mean that other

healthy, comfortable, and appealing as mentioned

social issues (such as climate change, frequentin our group conduct guidelines. Our true value will

earthquakes, and resource depletion) disappear.

be assessed.

Amidst the increasing uncertainties, it will become

our roots." Amidst the increasing uncertainties of

pursue more essential contributions to the reso-

the COVID-19 crisis, we must return to our roots.

lution of social issues through our business ac-

Our company celebrates its 75th anniversary intivities. Based on the roots and the business con-

September 2020. From the foundation of thecepts to which our company has adhered sincecompany immediately following World War II to

its foundation, we will examine ways that we cantoday, there have been difficult managerial crises.

contribute to society in the coming years, includ-

I believe that our company survived and grew be-

ing the reconfirmation of Daiken's strengths.

cause it knew its roots. To contribute to a sustain-

These efforts will contribute to a sustainable soci-able society through the effective use of limited

ety and the SDGs.

ESG Serving as a Foundation of Value Creation

more important to return to our roots in order toStrategy for Value Creation

In conclusion, I would like to mention "return to

Daiken Group's Value Creation

whether they are better than they were yesterday.

Data

DAIKEN GROUP REPORT 202022

GP25 2nd Stage
Development of the Medium-Term
Management Plan GP25 2nd StageAs the roadmap toward the realization of the long-term vision GP25 that drew how we should be in 2025, the medium-term management plan
GP25 2nd Stage that started in fiscal 2020 has set management goals for both the financial and nonfinancial aspects and has been developing
measures with the policies of I. “Accelerating growth strategies” and II. “Enhancement of the management foundation” as key axes. We willkeep on challenging of becoming an all-embracing company for building materials as our corporate image in the long-term vision.

Toward becoming an all-embracing company for building materials
Fiscal 2026

To achieve the Long-Term

Long-Term Vision

Vision GP25

Fiscal2023 to 2026

Fiscal2020 to 2022

GP25

Medium-Term Management Plan

GP25 3rd Stage
Grow & Glow
Become an all-embracing
company for building materials

Fiscal2017 to 2019

Medium-Term Management Plan

GP25
2nd Stage
GP25 1st Stage
Previous Medium-Term
Management Plan

The first step toward an
all-embracing company forbuilding materials

Accelerate growth to become
an all-embracing company forbuilding materials

Basic Policy of the Medium-Term Management Plan GP25 2nd Stage
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.

23

Ⅰ. Accelerating growthstrategies

Domestic: Review of the Business (Market) Portfolio

P25

Global:	Business expansion through proactive
investments and entry into new markets

P29

Ⅱ. Enhancement of theManagement Foundation

1

Optimize our financial foundation

P39

2

Restructure firm and flexible business infrastructure

P38

3

Practice of ESG Management

P41

DAIKEN GROUP REPORT 2020

eManagement Goals and Progress
Ⅰ. Accelerating growth strategies(¥100 million)

Results
Fiscal 2019

Results
Fiscal 2020

Goals
Fiscal 2022

Increase/Decrease

1,829

2,024

+195

2,250

Of which the domestic market

1,637

1,659

+22

1,730

Public and commercial buildings

211

262

+51

312

Home renovation market

284

317

+33

376

Of which the global market

192

365

+172

520

Operating profit

57

83

+26

120

3.1%

4.1%

+1.0pt

5.3%

44

54

+10

70

Operating profit ratio
ProfitDaiken Group's Value Creation

Net sales

Financial affairs
Results
Fiscal 2019

Results
Fiscal 2020

Goals
Fiscal 2022

Increase/Decrease

7.8%

9.5%

+1.7pt

10%

ROA

4.5%

5.5%

+1.0pt7%

Soundness

Shareholder equity ratio

36.8%

32.7%

(4.1pt)40%

Shareholder return

Dividend payout ratio

42.4%

33.4%

(9.0pt)30% or more

Nonfinancial Indicators
Goals
Fiscal 2022

Results
Fiscal 2020
E

Total CO2 emissions in Japan*1

(25%)

(26%)

Total diversity index

+19pt

+20pt

*2

S

Serious quality accidents and violations

G

Degree of penetration of the Group Corporate Philosophy*3

1

0

+4pt

+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

ESG Serving as a Foundation of Value Creation

ROE

Efficiency

Strategy for Value Creation

Ⅱ. Enhancement of the Management Foundation

Fiscal 2020 SummaryIn fiscal 2020, which was the first year of the medium-term management plan, while a decreasing trend in new housing starts
was expected after the consumption tax increase in October 2019, we proactively made investments toward the accelerationof our growth strategies, such as implementing M&A to expand our share in the global markets, public and commercial buildings,
and the home renovation market, all of which are positioned as the focused markets.

■ ecause we could expand our building materials business in the both markets of the housing market and non-housing publicBand commercial buildings, in addition to the new consolidation effects by M&A, our net sales reached a record high sinceconsolidation.

■

 egarding our operating profit, profits increased because of the successful streamlining and cost reduction that we worked onRfor increases in the costs of the raw material prices and the logistics costs, in addition to the profit contribution from M&A. Thus,
we raised the level as the first step toward the achievement of management goals of the medium-term management plan.

■ or the nonfinancial goals, we reduced the total CO2 emissions in Japan by 25% compared to fiscal 2014 by trying to stablyF
operate the biomass boilers and increasing the degree of penetration of the group corporate philosophy by steadily developing
the penetration program, and promoted the initiatives toward the enhancement of the management foundation with themedium-term ESG plan as the key axis.

DAIKEN GROUP REPORT 2020

Data

■

24

GP25 2nd Stage
Ⅰ. Accelerating growth strategies

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

2,250
2,024

2,000

Other
Engineering business
1,500

Building materials business
1,000

92

1,829
135

180

217

＋36

（11％）

＋54

（47％）

＋147

（38％）

0

（13％）

（10％）

894

950

949

（42％）

765

（40％）

Fiscal 2020
Results

Fiscal 2022
Goals

（49％）

500

Industrial materials business

118

282

618

（34％）

Fiscal 2019
Results

900

Strategies by Business Segment
Industrial materials business
Globally expand the markets and applications by taking advantage ofsustainability and functionality and maximize the fixed asset efficiency■ Invest in the North American wood industrial materials business (LVL/veneer)and expand into the North American market■ 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 andgardening markets• Consider commercialization of new wood materials

Building materials business
By taking advantage of the industrial materials business, as well as functionaland construction saving-type building materials, increase our share in the
housing market and expand in the public and commercial building fields■ Further expand differentiated products that can keep getting chosen■ Expand the product/sales networks by actively utilizing M&A and external

resources

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

Topics25

Progress in Fiscal 2020•P
 urchase of the two North American companies that are
engaged in the LVL and veneer businesses is complete,
and we made the transition to the integration process•P rogress of the cooperation for optimization of
production items in the two MDF plants in New Zealand•E xpansion of the production of tatami facings andenhancement of the proposal capabilities by introducing
new products• An increase in the sales of flooring and facility
expansion and reinforcement toward productivity
improvement• Enhancement of the capability to propose highdesign flooring by our unique technology• Purchased T.O FLOORING CO., LTD., to develop thesolid wood flooring business• Expanded the orders of construction work bycooperating with ITOCHU Corporation Group• Enhanced renovation work in the Tokyo metropolitan
area by purchasing ReformQ Co., Ltd.

Expanded Non-combustible Products

Equipment Expansion and Reinforcement in the
Decorative Sheet Laminating Process at the Mie Plant

To improve design in public and commercial
facilities, we launched a woodgrain pattern
non-combustible louver for interior finishing in August 2019. We further enhanced
our proposal capabilities by expanding the
product lineup that has the performance required for public and commercial facilities,
such as lightweight yet excellent non-combustibility and workability.

In December 2019, to improve productivity
at the Mie plant that produces flooring thatis the flagship product in building materials
business, we implemented the equipment
expansion and reinforcement for the decorative sheet lamination process. With this capital investment, the entire plant’s laminating production capacity has
doubled and further efficient production has become possible.

DAIKEN GROUP REPORT 2020

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

2,024
2,000

Global markets
1,500

Public andcommercial buildings
Industrial materials

1,000

Domestic newhome market

0

＋172

（18％）

211

＋51

（13％）

（11％）
（12％）

355

（19％）

284

（16％）

775

（42％）

(71)
Domestic
market

1,637

（89％）

312

262

（14％）

355

284

（14％）

317

＋33

（16％）

＋11

（39％）

786

Fiscal 2020
Results

Fiscal 2019
Results

520

（23％）

365

（16％）

1,659

（82％）

376

（17％）

1,730

（77％）

Strategy for Value Creation

500

Home renovation market

1,829
192

Daiken Group's Value Creation

2,250

675

（30％）

Fiscal 2022
Goals

Strategies by Market
Global markets

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 withother companies and M&A

Progress in Fiscal 2020•P
 urchase of the two North American companies iscomplete, and we started development to expand
into the North American market with LVL
 nhancement of the sales structure for MDF to be•Esold in North America and China
 oor sales expansion in the plant in Indonesia due•Dto the increase in exports to the UK•E xpanded the product series by facility and function,such as non-combustible and sound products for
medical facilities and offices
 nhancement of the responses to special orders for•E
the Omoiyari series, such as the doors for elderly
facilities, kindergartens, and childcare facilities
 tarted activities to take orders for solid wood•Sflooring at educational facilities centering on T.O
FLOORING CO., LTD.

P29

P31

Industrial materials
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•E nhancement of the organizational structure for new
material utilization development•P romotion of the market development for the
agricultural and gardening markets

materials and R&D products

Data

Domestic■ Promote the development of and search the applications of new

ESG Serving as a Foundation of Value Creation

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 apath toward stable growth and shift to the growth strategy

Home renovation market
Expand in the renovation market from a perspective ofdevelopment of functional products and methods■ Expand the renovated properties and renovation work in the Tokyo
metropolitan area
■ Focus on the expansion of the products for renovation, such as
construction savings and waste savings•E xpansion of the apartment renovation business in
the Tokyo metropolitan area
 xpansion of the sale of interior building materials,•Esuch as flooring, by enhancing cooperation withspecialized remodeling companies

P33

Domestic new home market
Restructure the sales structure in response to changes in themarket and customer needs, and increase our share■ Continuously enhance the products and proposals fromthe perspective of functionality, such as soundproofing andconstruction work saving■ Enhance the collaborative system with key distribution companies
as well as a system to make proposal to key customers•A n increase in adopting soundproof building
materials for houses for rent
 xpansion of orders for interior building materials•Eamong builders

DAIKEN GROUP REPORT 202026

Summary by BusinessIndustrial materials business

Sales Breakdown by Business Sector

Net sales

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

100,000

37.8%

（%）

4,000

8.0

5,000

76,58980,00060,000Operating profit ratio(¥million)

3,326

61,84356,408

10.0

3,000

55,35440,0002,000

20,000

1,000

5.9

6.0

2,503
1,955

4.0

3.3

3.5
1,132

2.0

1.8
0

2017

2018

2019

2020 (Fiscal year)

0

2017

2018

2019

0.0
2020 (Fiscal year)

Building materials business

Sales Breakdown by Business Sector

Net sales

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

100,000

94,93887,2604,500

80,0004,000

60,0003,000

40,000

2,000

（%）

4,955

5,000

89,48586,853Operating profit ratio(¥million)

10.0

4,598

8.0
3,189

46.9%

5.2

6.0

5.2

5.3

4.0
3.6

20,000

0

2.0

1,000

2017

2018

2019

2020 (Fiscal year)

0

2017

2018

2019

0.0
2020 (Fiscal year)

Engineering business

Sales Breakdown by Business Sector

Net sales

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

50,000

0

6.0

5.6

21,713
16,458

2017

1,000

18,063500

10,000DAIKEN GROUP REPORT 2020

8.0

30,00013,612

27

10.0

1,500

20,000*Other Daiken businesses account for 4.6% in addition to the above.

（%）

2,000

40,000

10.7%

Operating profit ratio(¥million)

2018

2019

2020 (Fiscal year)

0

1,015

3.1

3.2

427

528

2017

2018

613

2.8
2019

4.0

2.0

0.0
2020 (Fiscal year)

Production Plants

Results in Fiscal 2020

Takahagi Plant
Subsidiaries part of the Group
Dai-tac Corporation
Aizu Daiken Corporation
Nichinan Daiken Co., Ltd.
C&H 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)

Daiken Group's Value Creation

Net sales in the industrial materials business in fiscal 2020
amounted to ¥76.589 billion (up 23.8% year-on-year).
Although we struggled to sell MDF because of sluggish demand in Asia, our revenues increased by ¥14.745 billion because sales of tatami facings were good and CIPA Lumber
Co. Ltd., and PACIFIC WOODTECH CORPORATION in North
America that work in the LVL and veneer businesses were included in the scope of consolidation.
Regarding operating profit, we were affected by the profit
drop due to the intensified competition in the MDF market, but
because of streamlining, cost reductions, passing on part of
the rising costs to selling prices, and the above-mentioned
new consolidation, profits increased by ¥1.371 billion.

Okayama Plant

CIPA Lumber Co., Ltd. (Canada)
PACIFIC WOODTECH CORPORATION (USA)Strategy for Value Creation

Production Plants

Results in Fiscal 2020

Mie Plant
Subsidiaries part of the Group
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)

ESG Serving as a Foundation of Value Creation

Net sales in the building materials business in fiscal 2020
amounted to ¥94.938 billion (up 6.1% year-on-year). Our revenues increased by ¥5.453 billion for the following reasons: 1)
We focused on the sales of products that could differentiate
us from other companies in the domestic housing market. 2)
We enhanced proposals for products with functions requiredby facilities, which led to an increase in sales of all interiorbuilding materials. 3) T.O FLOORING CO., LTD., was includedin the scope of consolidation.
Regarding operating profit, as a result of striving to secure
profits, such as streamlining, cost reductions, and passing onpart of the rising logistics costs to selling prices, in addition to
the increase in net sales, profits increased by ¥1.766 billion.

Inami Plant

Subsidiaries part of the Group

Results in Fiscal 2020

DAIKEN ENGINEERING CORPORATION
Koukou Sangyo Corporation

Data

Net sales in the engineering business in fiscal 2020 amounted
to ¥21.713 billion (up 20.2% year-on-year). While interior work
demand for buildings and apartment buildings in the Tokyo
metropolitan area was good, we proceeded with the expansion of the construction areas and ReformQ Co., Ltd., and T.O
FLOORING CO., LTD., were included in the scope of consolidation, and revenues increased.
Regarding operating profit, although we achieved increased
profit by the above-mentioned new consolidation, the profit
ratio declined because of the surge in labor costs caused by
the shortage of skilled craftsmen, and profits decreased by¥402 million.

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

DAIKEN GROUP REPORT 202028

Initiatives for Priority Markets

Global markets
The industrial materials business added LVL as a new product

海外地域別売上構成

Sales Breakdown by Foreign Geographic Area

to the overseas sales of MDF for Southeast Asia, Oceania, andFiscal 2019

China as produced by the four-plant system in Malaysia andFiscal 2020

North America
10%

New Zealand, and started to roll out in the North American
market, which is the world’s largest wooden housing market.

Other
%

5

Other
12%

The building materials business has been expanding the sales

China
%

6

China
14%

of interior doors in China, which has a huge market size, andSoutheast
Asia

49%

Indonesia, where housing demand expansion is expected to

North America

47%

Oceania%13

Southeast Asia

29%

Oceania

continue.

14%

DAIKEN (Shanghai) Corporation

Doors, flooring, and construction materials(China)DAIKEN Industries (Ningbo) Corporation(China/from 2002)

MDF

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

DAIKEN MIRI SDN. BHD.
(Malaysia/from 2005)

MDF

DAIKEN NEW ZEALAND LIMITED
Singapore Branch(New Zealand/from 2009)

Door

PT. DAIKEN DHARMA INDONESIA(Indonesia/from 2015)

Indonesia office

MDF

DAIKEN SOUTHLAND LIMITED(New Zealand/from 2018)

Sales office
Production baseIndustrial materials business
Building materials businessResults in Fiscal 2020
Net sales in the global markets in fiscal 2020 amounted to¥36.516 billion (up 89.8% year-on-year). In the industrial materials
business, the MDF market condition worsened because of thedecrease in overseas demand in Asia, and we had a hard time inoverseas sales, but the new consolidation of the two North American companies made a contribution, and revenues significantly
increased by ¥16.888 billion. On the other hand, in the building
materials business, orders for doors grew at a sluggish pace in
China and Indonesia, and revenues decreased by ¥186 million.
In other segments, because of the increase in inquiries about thestocking and selling of various industrial materials that we handle
to expand sales in the future, revenues increased by ¥572 million.

29

DAIKEN GROUP REPORT 2020

An Increase or Decrease in Net Sales in the Global Markets by Segment(¥million)+17,275+16,888

(186)

0

+572

Industrial
materials

Building
materials

Engineering

Other

36,516

19,24120192020 (Fiscal year)

Development into North American Wood Industrial Materials Business
In June 2019, we completed the purchase of a veneer plant CIPA in Canada, and an LVL plant PWT in the USA, both of which are consolidated subsidiaries of ITOCHU Corporation with which we have a capital and business alliance. We started developing the wood industrial
materials business in North America and expanded into the North American market, which is the world’s largest wooden housing market.
Veneer

CIPA Lumber Co., Ltd. (CIPA)
Founding
Location

Business

Daiken Group's Value Creation

Capital Stock

April 30, 1968
Canada (Delta City, British Columbia)
23 million Canadian stock dollars (1.955 billion yen)
(at a rate of 85 yen per Canadian dollar)
Veneer manufacturing

LVL

PACIFIC WOODTECH CORPORATION (PWT)
Founding
Location
Capital StockBusiness

January 7, 1998
USA (Burlington City, Washington)
26 million U.S. dollars (2.86 billion yen) stock (at arate of 110 yen per U.S. dollar)
Manufacturing and sales of structural LVL andWood I-Joists

While the new housing market in Japan is expected to shrink, we will expand into global markets
that we positioned as focused markets in the long-term vision.

❷ Entry into the world’s largest
wooden housing market

By purchasing two companies that manufacture and have sales networks for LVL, which isessential as a structural material for wooden houses in the USA, we will enter into the North
American market, which is the world’s largest wooden housing market that supplies approx. 1.5
times more houses compared to Japan and a growing market where the population is expected
to increase by 2 million annually.

❸ Pursuit of synergy that takes
advantage of the capability todevelop industrial materials

Our business model incorporates technology and added value industrial materials. Daiken willfurther expand into the North American market by deploying this business model. By capturing
the market with industrial materials as an axis, we will aim for new application deployment.

Business Flow
Veneermanufacturing

LVL Manufacturing(PWT)(CIPA)

I-Joist*Manufacturing(PWT)

Laminate and glue
veneers together

Major applications in the North
American housing market

I-Joist rafters
I-JoistCutting

VeneerESG Serving as a Foundation of Value Creation❶ Expansion into global markets

Strategy for Value Creation

Significance of Acquisition

LVL

LVL header

LVL beams

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

Future Development❶ Enhancement of the supply
system through cooperation
between the two companies

We will enhance the BCP for procurement of wood that is the main raw material and newly establish
a warehouse having the increased quality control level at a site adjoined to PWT’s LVL manufacturing
plant. We will build a system to supply veneers manufactured by CIPA in a more timely manner andenhance cooperation between the two companies.

❷ Expansion of the sales of
items with high added value

We will proceed with the proposals for items with high added value (antiseptic, insect-repelling LVL,
and high-strength beam member) and expand sales.

❸ Cooperation with R&D

We will accelerate cooperation with the Daiken R&D Center in Japan and proceed with thedevelopment of LVL with new functions.

DAIKEN GROUP REPORT 202030

Initiatives for Priority Markets

Public and commercial buildings
We take advantage of our unique technologies and know-how, such as
safety, durability, non-combustibility, and provision of a comfortablesound environment that we have cultivated as a housing material
manufacturer and proceed with proposals for spaces by product series
with the functions required by each facility in public and commercial
buildings. In November 2019, we purchased T.O FLOORING CO.,LTD., and added solid wood flooring that we have not traditionallyhandled in our lineup. Furthermore, we will take advantage of ourstrengths of handling not only the sales of flooring but also construction
and further expand into public and commercial buildings.

Proposals for Spaces with the Product Series
by Facility and Function

Enhancement of the Developmentof Non-combustible Products
We realize spaces having a unified design with
non-combustible products, such as walls, ceilings,
eaves, and louver materials.

Ceiling materials
Non-combustibility

Aseismic
performance

LightweightSound
absorbing

Moistureconditioning

Ceiling with aseismic performance and moisture conditioningthat realizes a safe, secure, and comfortable space

Medicalfacilities

An anti-seismic ceiling construction
techniqueSound absorbing and moisture
conditioning ceiling material

Accommodation
facilities

Offices
Schools andeducational
facilities

Publicfacilities

Sound ProductsSound
absorbing

Elderly
facilitiesSound
insulation

Kindergartensand childcare
facilities

Commercial
facilities

Arrange sound vibrations andprovide a comfortable soundenvironment according to thefacility characteristics

Sound absorbing panel for ceiling

Door
Sound absorbing panel

Non-combustible sound absorbing wallmaterial

31

DAIKEN GROUP REPORT 2020

SafetyDurability

Easy maintenance

Doors that pursue safety and durability according to use scenes

Doors for kindergartens andchildcare facilities

Doors for elderly facilities

Doors for public and commercial
facilities

Wall materials

Non-combustibility

Workability

Results in Fiscal 2020

DesignNon-combustible and well-designed walls that decorate
spacesNon-combustible wall materials

Designed wall materials

Tatamimats

Easy maintenanceDurability

An Increase or Decrease in Net Sales in Public and Commercial
Buildings by Segment(¥million)+5,134Water
repellent

Color variations

Accommodation facilities

+338

2019

Industrial
materials

Building
materials+53

EngineeringOther

26,2922020 (Fiscal year)

Commercial facilities

Damage resistanceSound insulation

SafetyFloorings that produce wood spaces while utilizing local
timberPromoting the use of domestic
or local timber

Flooring that can be used in heavy
duty areas

Solid Wood Flooring

Solid wood flooring that can be used inheavy duty areas

Purchased T.O FLOORING CO., LTD.
Toward the start of the business deployment for solid wood flooring with high needs in educational
facilities, such as schools, we purchased T.O FLOORING CO., LTD., in November 2019.

Significance of Acquisition

Data

Floorsthat provide a feeling of thetree’s warmth and are best suitedfor nature-oriented facilities

Flooring that reduces the impact
when a person falls

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

ESG Serving as a Foundation of Value Creation

Flooring

21,158+2,281Strategy for Value Creation

Tatami mats made from washi paper have a great
range of design and are best suited for modern spaces+2,462

Daiken Group's Value Creation

Net sales in public and commercial buildings in fiscal 2020
amounted to ¥26.292 billion (up 24.3% year-on-year) In the industrial materials business, tatami mats that used machine-madeJapanese paper and are excellent in maintenance have been
widely adopted in accommodation and commercial facilities, andrevenues increased by ¥338 million. In the building materials business, orders for products with the functions required by facilities,
such as doors and flooring for elderly facilities, kindergartens, andchildcare facilities, increased, and revenues increased by ¥2.462
billion. In the engineering business, by purchasing T.O FLOORING
CO., LTD., which is engaged in the solid wood flooring business,in addition to increased orders for interior finishing work, such as
office buildings, revenues increased by ¥2.281 billion.

❶ Expansion into publicand commercial
buildings

While the new housing market in Japan is expected to shrink, we will expand
into non-housing public and commercial buildings that we positioned as thefocused market in the long-term vision, particularly for educational facilities, suchas schools, that have strong needs for solid wood flooring.

❷ Enhancement ofproposal capabilities
by expanding the
product lineup

Our company has the leading share in flooring for houses and will add solid woodflooring that were the only materials we have not handled in our product lineup
and will realize seamless proposal activities by utilizing the sales capabilities ofour company to deploy businesses nationwide. By adding solid wood flooring,
we will also lead to increased orders for the entire interior spaces, such as walls,
ceilings, and doors, centering on solid wood flooring.

❸ Synergy withengineering business

By engaging in not only the sales of flooring but also construction and by
responding to not only new properties but also renewal construction for existing
properties, we will expand into both aspects of materials and construction.

Solid wood flooring for gymnasiums
and classrooms

DAIKEN GROUP REPORT 202032

Initiatives for Priority Markets

Home renovation market
Through a great range of product lineups for renovation, proposals for spaces in the
TDY Collaboration Showroom, cooperation with the engineering business that
handles construction, and product development and manufacturing from theperspective of the construction site, we have built a system where the entire group

Product

can meet a wide variety of needs for renovation. With the purchase of ReformQ Co.,
Ltd., in July 2019, we will further enhance cooperation within the group, such as

Product lineup

expanding the renovation work system in the Tokyo metropolitan area and promoting

and design
coordinate

the development of construction saving-type products by utilizing know-how on
construction, and expand into the entire home renovation market.

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

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

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

Results in Fiscal 2020
Net sales in the home renovation market in fiscal 2020 amounted to ¥31.777 billion (up 11.8% year-on-year) Particularly inthe building materials business, sales increased for all interiorbuilding materials, such as flooring and doors, because of thebuilding materials sales expansion for specialized remodeling

An Increase or Decrease in Net Sales in the Home Renovation
Market by Segment+3,348+1,914(33)
31,777(¥million)+1,30628,429+162

2019

Industrial
materials

companies, and revenues increased by ¥1.306 billion. In theengineering business, because we purchased ReformQ Co.,
Ltd., in July 2019, which widely deploys the renovation business mainly in Tokyo, and enhanced our material and construction order-receiving system in the Tokyo metropolitanarea, revenues increased by ¥1.914 billion.

33

DAIKEN GROUP REPORT 2020

Building
materials

Engineering

Other2020 (Fiscal year)

TDY Collaboration Showroom Deployment

Lineupwith functions
to totallya space

TDY Collaboration Showrooms

Proposal
TDY Sapporo

A one-stop proposal for a space by
the TDY alliance that customers caneasily imagine the value

TDY Tokyo

TDY Hiroshima
TDY Fukuoka

TDY Osaka

Installation Workand Construction

TDY Takamatsu

The Group’s Construction System in the Home Renovation Market
Renovation

Apartment Renovation• DAIKEN HOME & SERVICE CORPORATION• Smileup Corporation• ReformQ Co., Ltd.

• PAC SYSTEM Co., Ltd.

Purchased ReformQ Co., Ltd.

ESG Serving as a Foundation of Value Creation

Provide a completed space thatmaximally brings out productvalue

TDY Nagoya

Strategy for Value Creation

TDY Kanazawa

Daiken Group's Value Creation

Toward the enhancementof our capability topropose remodeling,
three companies of
TOTO Ltd., Daiken, andYKK AP Inc. that havebeen in an alliancerelationship since 2002
operate collaboration
showrooms at eight sites
in Japan.

In July 2019, as a measure toward expansion into the home renovation market, we purchased ReformQ Co., Ltd., with its widespread
renovation business in the Tokyo metropolitan area.

❶ Enhancement of
the renovation work
capability in the Tokyo
metropolitan area

Toward expansion into the home renovation market that is positioned as thefocused market in the long-term vision, we will enhance our renovation work
capability in the Tokyo metropolitan area where the market size is particularly large.

❷ Area development andexpansion of orders
received throughintergroup cooperation

Through cooperation with DAIKEN HOME & SERVICE CORPORATION, a renovationcompany in the group that conducts business mainly in the Kansai and Chukyo areas,
we will enhance our renovation work system to cover the three major metropolitan
areas and expand the orders received by cooperating with PAC SYSTEM Co., Ltd.,
which conducts the apartment renovation business in the Tokyo metropolitan area.

❸ Sharing of know-how
with the developmentof construction savingtype products

By sharing know-how on the installation work and construction sites acquired
through our group companies engaged in remodeling and apartment renovation
with the product development department at DAIKEN CORPORATION, we willdevelop construction saving-type products for remodeling and renovation.

Data

Significance of Acquisition

Our project

DAIKEN GROUP REPORT 202034

Research and development
Core Mission• Create new business that will become the fourth pillar after industrial materials, building materials, and engineering using
new technology 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■

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

Focused ■Expand investments in R&D
Measures ■ With the company-wide medium- to long-term development direction, promotecompany-wide 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 safe building
materials that will be needed by society in the future■ Development of environment-conscious building materials■ High functionality of wooden boards and inorganic boards■ Development of new construction technique for building materials■ Wood building material utilization development in the new field■ Development of high functional paints and painting technology■ Technology development to use unused resources■ Adding a high value to wood building materials■ R&D of industrial materials for new markets other than building materials

Spatial environment

Assay Evaluation

Development of spaces and building materials thatwill realize a comfortable life

Various measurements and analyses of spaces andbuilding materials using the expertise cultivated in R&D■ Development of energy-saving and indoor environment improvement■ Measurement of air quality

technologies■ Analysis by simulation of the thermal, humidity, and cross-ventilation
environment■ Building materials heat generation test
■ Sound insulation performance evaluation■ Asbestos analysis

Message
Development of building materials to which an antiviral function is given contributes to the resolution of social issues
R&D that Pursues the Creation of Optimal Spaces

Development of Products with the Antiviral Function

Our group upholds the concept of “Creating more comfortable andsecure spaces” as the significance of existence and ambitions in thelong-term vision. Under this basic approach, the R&D Center has not
only pursued the spaces where people could comfortably spend timefrom the various perspectives including temperature, humidity, andsound environment, but also continued R&D to respond to hazardous
substances, such as asbestos and formaldehyde, for a long time.
Our characteristic spatial environment improvement technology andassay evaluation technology have supported these research projects
and developments. There are also Biosafety level 2 experiment facilities in the center that can handle the influenza virus and food poisoning bacteria, which is rare for a building materials manufacturer.
Researchers who have highexpertise are working in thefacilities.

Novel influenza that became a global pandemic in 2009 served as thecatalyst for development. There was increasing momentum for the prevention of infectious diseases caused by viruses, and as a new theme,
we started to work on the development of the antiviral function in 2011.
Consideration started from the way of thinking about the prevention ofviral infections by building materials. After a great deal of considerationof the method of verification of the effects, the method of giving thefunction without deteriorating the quality as building materials, and themethod of production that could stably exhibit performance, we established the antiviral function BIOTASK* technology. In 2012, by looking at
upcoming super-ageing society, we have added the new antimicrobial
function called “BIOTASK” for doors or handles
which are frequently touched by users’ hands,
to our “Omoiyari Series (for elderly facilities)” through which we try to create safe, healthy,
and comfortable circumstances for elderlies.
With regard to the products to which BIOTASK
was given, the scope of proposals has been
growing from elderly facilities to public facilities
that many people use, such as kindergartens, Building materials with
BIOTASK (antiviral function)
childcare facilities, and medical facilities.

Microorganism measurement room in the
R&D Center

35

DAIKEN GROUP REPORT 2020

*BIOTASK: Our unique name for the antiviral function

Co-Creation Activities Centered on Daiken R&D Center
The R&D Center was established in October 2018 and has been utilized not only for our unique technology development but also as a place
for communication with various stakeholders, and more than 2,000 people have visited the center during the one and a half years after establishment. We would like to share with the visitors possibilities of innovation that our technologies generate and will deploy co-creation activities
through partnerships that expand from the center.
Communication with Stakeholders

Students/Recruitment
Work experience through internships■

Interactions with the generation that willbear the future■■

Within the Company

 company that is lovedA
by the local community

Enhancement of cooperation■

Sharing of issues and discussions ofdevelopment themes ooperation with aCmunicipality

Capability development■Seminars by inviting external lecturers(Introduction of R&D needs and the way of thinking
necessary for R&D)■■

R&D Center xpansion of business domains
Eand creation of joint development
themes by technology exchanges
 atching between theMtechnological seeds and needs

Creation of new
businesses
Expansion of
the existing
businesses

It decreases the number of specific virus attached onto the products
from the air or hands.
<Illustration>
It decreases the number of
specific virus

An antiviral productAn antiviral product

Right after theattachment of virus

After 24 hours<Comparison of antiviral effects>

10 3
10
10

2

Without antiviral With antiviralprocessing
processing(After 24 hours) (After 24 hours)
KRCES Report #23_0076

Viral Infectivity (TCID 50/ml)

Viral Infectivity (TCID 50/ml)

Test Virus B(Enveloped)

Decreased by
99% or more nhancement of the relationshipEof trust

10 8
10 7
10 6

(Non-enveloped)

Decreased by
99% or more

10 5
10 4
10 3

Without antiviral With antiviralprocessing
processing(After 24 hours) (After 24 hours)
KRCES Report #23_0078

We consider this research and development direction as one of thesuccessful cases, by nicely matching our management strategic
flow—shifting from housing to the non-housing, commercial andpublic construction domain—which is stated in our long-term vision
for 2025.Also, BIOTASK was developed through collaborative
research with the local medical school, Okayama University, andwas the open innovation that the R&D Center strives to achieve, andthe result of R&D through industry-university cooperation. As to thecurrent antiviral function BIOTASK, target viruses and products towhich the function is given are limited, but in order to prepare for the
threat of new infectious diseases in the future, we aim to expand therange of the antiviral function and reduce opportunities to come incontact with viruses in the living environment. While making the bestof the facilities and features of the R&D Center and cooperating withoutside universities and research institutions, we will proceed with
R&D that will lead to the resolution of social issues, such as SDGs,
and contribute to creating a safe,
secure, healthy, and comfortable
space through our proventechnologies.

Data

Test Virus A

10 4

■

The Future Direction and Deployment of R&D<What is the antiviral function?>

10 5

 eepening their understanding ofD
our products and quality

By having them deepen theirunderstanding of our quality
and technological capabilities
that support our products, weenhance our relationship oftrust.
By promoting technology
exchanges with suppliers, weshare the direction to aim forand our values and pursue
better manufacturing.

Through the holding of an
exhibition to introduce
technological seeds fromdifferent business types andfields, we conduct discussions
and reviews toward
co-creation.

10 6

■

ESG Serving as a Foundation of Value Creation

Technology exchange
meetings with
manufacturers

Customers and Suppliers

Strategy for Value Creation

Manufacturers andResearch Institutions

The Manufacturing Divisionand the R&D Center enhancecooperation, which leads tosupport for resolving issues inthe technological aspect that
the Manufacturing Division
has and the extraction ofissues to be addressed in themedium- to long-term.

Daiken Group's Value Creation■

Local Community*Some of our products were not tested for Virus B* [Test laboratory] (General incorporated foundation)• It is the indicator for viral infectivity, and theKitasato Research Center for Environmental Science
effects may differ depending on the conditions.
[Test method] A method with reference to JIS Z 2801 • Antiviral processing is to decrease the numberof specific viruses attached to the surface and is[Test results] 99% of antiviral effect compared to the
not intended as treatment or for the prevention
ones without antiviral processingof disease.

Kei ItoDirector of the R&D
CenterDAIKEN GROUP REPORT 202036

GP25 2nd Stage

Ⅱ. Enhancement of the Management Foundation
As the basic policy that supports the growth strategies to achieve the medium-term management plan GP25 2nd Stage,
we uphold the enhancement of the management foundation. To make the foundation robust to steadily push ahead with thegrowth strategies, we will enhance from the three perspectives of optimize our financial foundation, restructure firm and flexible

business infrastructure, and the practice of ESG management.

Ⅰ. Accelerating growth strategies
Strategies by Business

Strategies by Market

Establishment of the Foundation to Steadily
Push Ahead with the Growth Strategies
Ⅱ. Enhancement of the Management Foundation

Restructure Firm andFlexible Business
Infrastructure

Optimize
our financial
foundation

To be a company that will be
continually chosen, establish
IT, logistics, and supply
systems that are strategic andoptimal from medium- andlong-term perspectives andrestructure firm and flexible
business infrastructure.

To support investments toward
the growth and enhancementof the foundation, placeemphasis on efficiency andsoundness and optimize ourfinancial position.

Practice of ESG
Management
Toward the enhancement of
the management foundationthat supports the growthstrategy, practice sustainable
ESG management centeringon the medium-term ESG
plan.

Progress in Fiscal 2020
■ Re-examination of problems■ Issuance of green bonds■ Improvement of the domesticin the first half of theyear, incorporating theperspectives of external
experts and customers■ Drafting of the medium- tolong-term IT and logistics
concept by the companywide project■ Re-examination of the raw
material procurement BCP

that will be financing
arrangements by ESG
evaluation■ Reduction of crossshareholdings■ Optimization of our cash
position by utilizing thecommitment line

timber ratio in base materials
for flooring■P rogress of the initiatives
for diversity (progress of themeasures to promote the takingof childcare leave among male
employees, and implementationof the next-generation sales
recommendation project)■E xecution of the group corporate
philosophy penetration program■ Transition to the execution■C ontinuous reduction ofphase of the IT and logistics
medium- to long-term
strategy■ Start the reform program
through the three processesof orders received, logistics,
and system infrastructure■ Promotion of logistics withgood standing

cross-shareholdings■ Enhancement of BS
management by business■ Optimal financial
arrangements

Future Measures

37

DAIKEN GROUP REPORT 2020

■ Response to the scope 3 ofgreenhouse gas emissions■ Promotion of flexible

workstyles■ Continuous execution of thegroup corporate philosophy
penetration measures

Restructure Firm and Flexible Business Infrastructure
We caused customers so much trouble because of the problems with the system and raw material procurement that occurred in fiscal
2019. We make sure that we will avoid this kind of situation and proceed with the initiatives for expanding into new markets as upheldin the long-term vision and restructuring the firm and flexible business infrastructure that will support our management foundation in themedium to long term.

Initiatives toward the Realization of the IT and Logistics Medium- to Long-Term Strategy

Key Initiatives in Fiscal 2020

Issue Investigation Phase■ Launch the company-wide project of which theDevelopment in Fiscal 2021

Steps to Embody Countermeasure
Crystallizing Phase■ Contact point with our customers

To the Drafted
Countermeasure
Execution Phase(Order process)■ The flow of goods (Logistics process)■ IT (System infrastructure)Three Processes of the Countermeasures for the Issues
A win-win mechanism to becontinuously chosen by customers

Contact Point with
Customers(Order process)Flow of Goods(Logistics process)A comprehensive and optimal mechanism
from production to delivery to customers

A mechanism that supports the entire
business activities, that is resistant to risks,such as disasters, and that can flexibly
make a response

Initiatives toward the Enhancement of the Raw Material Procurement BCP

Data

Based on the experience in the Great East Japan Earthquake and in addition to the BCP responses in our group’s production and business bases, we have continuously worked to make improvements for the procurement of raw materials, which are essential for the stablesupply of products, such as multiple purchases and product development assuming the change of the specification to replacement
goods, while eliciting cooperation from suppliers. Furthermore, in fiscal 2020, by applying a lesson learned from the trouble in procuringslag wool that occurred in the previous fiscal year, 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 manufacturing divisions. Regarding the items that are particularly
difficult to procure from those other than specific suppliers, we re-examined the inventory levels assuming an emergency and increased
inventory quantities while considering the balance with asset efficiency. As a result of these preparations, we appropriately responded tothe delay in supplying procurement items from China due to the effects of the spread of the COVID-19 from February to March 2020 andcontinued the stable supply to our customers during the busy time toward the end of the period.

ESG Serving as a Foundation of Value Creation

IT(System
infrastructure)

Strategy for Value Creation

Restructure the company-wide project toapply to the on-site level, and examine thecountermeasures for the extracted issues
using three processes.

Representative Director is the leader and extract
issues through detailed case examinations■ Objective investigations by the external experts’knowledge■ Hearings on the effects from our customers■ Investigations of the bottlenecks in the entire
business processes

Daiken Group's Value Creation

For system problems, in fiscal 2020, we started from the thorough investigations of the incidents. Under the company-wide project of which
the Representative Director is the leader, we conducted hearing surveys by soliciting cooperation from our customers for whom we actuallycaused trouble, in addition to external experts’ knowledge. From the latter half of the fiscal year, we have organized the extracted issues into
the following three perspectives: the ordering process, the logistic process, and IT system infrastructure, which sustain the entire process.
Then, we proceeded to consider more detailed measures by each process at the on-site level.In fiscal 2021, we will transition to the execution
phase in order to build countermeasures as the actual mechanism. We aim to build up the system that will lead to enhancing relationships
with our customers from the medium to long-term perspectives, by reforming work styles of not only our employees but also our partner
logistics providers, and relating the concept of manufacturing at plants that are connected in a series of events.

Raw Material Procurement BCP Enhancement Process
Company-wide risk management and promotion of the BCP(Risk & Compliance Management Committee)
Making rules for the raw material procurement BCP by the Disaster
Countermeasure BCP Manual

Regarding response to significant risks
Conduct periodic reporting in the Risk & ComplianceManagement Committee and check the status of thecompany-wide initiatives

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

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

DAIKEN GROUP REPORT 2020

38

Optimize our financial foundation
Investments Toward the Enhancement of Growth and Foundation

Fiscal 2020 Results

Medium-Term Management Plan (Three-Year) Goals• Make it a top priority implement growth investments toward
the realization of the long-term vision GP25
• Select investments by reflecting risk and return as well as thecost of capital• Aggressively utilize advanced technologies such as AI and
IoT, to lead for improvements in efficiency and productivity• Aggressive investments in the three markets that are
positioned as focused markets in the long-term vision• Stringent selection by evaluating the investment effectbased on the consistency and synergy with the growthstrategies as well as the capital cost
• Expansion of IT investments toward the improvement ofefficiency and productivity(¥100 million)

Funds
in Hand, Funds
etc.
in Hand, etc.

Shareholder
Shareholder
returnreturn(¥100 million)

GlobalGlobal300
300

Loss on Sales
Loss on Salesof Investment
of Investment
Securities
11
Securities 11
Shareholder return 18
Shareholder return 18

Strategic
Strategic
Investments
Investments

OperatingOperatingCash Flow
Cash Flow(Three-year
Domestic(Three-year
100Domestic
cumulative total)
100
cumulative total)
450
450

Bonds Payable/
Bonds Payable/
Loans
Loans
130
130

Maintenance
Maintenance Regular
and update
Regularand update Investments
150
Investments
150

GlobalGlobal225
225

Strategic
Strategic
Investments
Investments

OperatingOperatingCash Flow
Cash Flow168
Domestic 25
168
Domestic 25
Maintenance and Regular Regular
MaintenanceandInvestments
Renewal41
Investments
Renewal 41(50/year)(50/year)

Strategic
Investments
Strategic
Investments

Strategic
Investments
Strategic
Investments

Global M&A of wood industrial materials business in North America:
Global M&A of wood industrial materials business in North America:
Productivity improvement of the MDF business:
Productivity improvement of the MDF business:
22.5 billion yen
22.5 billion yen
Domestic M&A of solid wood flooring business and renovation business:
Domestic M&A of solid wood flooring business and renovation business:
Productivity improvement of building materials business and IT system:
Productivity improvement of building materials business and IT system:
2.5 billion yen
2.5 billion yen*M&A investments include interest-bearing debt of the acquiring*M&A investments include interest-bearing debt of the acquiring
company, but not cash or deposits.
company, but not cash or deposits.

Global North American business: 20 billion yen
Global North American business: 20 billion yen
Industrial materials business: 10 billion yen
Industrial materials business: 10 billion yen
Domestic New business: 3 billion yen Expanding market: 3 billion yen
Domestic New business: 3 billion yen Expanding market: 3 billion yen
Infrastructure: 4 billion yen
Infrastructure: 4 billion yen
• R&D
• R&D
• Operational efficiency system• Operational efficiency system• Ordering and order receiving/logistic systems• Ordering and order receiving/logistic systems

Capital Policy/Shareholder Return

Basic policies for capital and shareholder distributions• By striving for efficient management that places emphasis on ROE, improving shareholder return, and optimizing the balance between financial soundness and strategic investment, improve corporate value.
• 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 and build asolid foundation for business operations.
Trends in the Dividend and Dividend Payout Ratio

(¥)

100

Dividend per share (¥)（％）

Dividend payout ratio (%)

50
42.4

80

40

37.0
33.4

33.6
30.4

60

30.1

30.3

30

We continued shareholder returns based on the policy ofthe dividend payout ratio at 30% or more
40

20

0

74.00

37.50

37.50

2014

2015

50.00

74.00

64.00

70.00

10

2016

2017

2018

2019

2020 (Fiscal year)(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.

39

DAIKEN GROUP REPORT 2020

20

0

Target Financial Indices
Efficiency Goal

7%

ROA:

Soundness Goal

ROE: 10%

Shareholder equity ratio:

40%

D/E ratio:

0.5 times•B alance sheet management to maintain the optimum balance•P rocurement of funds for investment that will support growth

Trends in ROA* and Total Assets

Trends in Shareholder Equity and Shareholder Equity Ratio（％）

Total assets
ROA
on (Returnassets) on assets)Total assets(¥100 million)(¥100 million)ROA (Return

1,800

1,800

1,706

1,601
1,601
Total assets
ROA(¥100 million)ROA (Returnon(Returnassets)on assets) Total assets(¥100 million)

1,500
1,800

1,500
1,800

1,200
1,500

1,200
1,500

900
1,200

900
1,200

1,303

1,3031,321

6.9

1,407
1,321

1,601

1,407

6.4

6.4

6.4

（％）

（％）

589
589
Shareholder
equity 557
Shareholder
ratio
Shareholder
equityShareholder
equity ratioequity542
542(¥100 million)(¥100 million)
500
500
589
589
466
466
600
600
36.8557
36.8
542
542
407
407
32.7
38.5
38.5

600

（％）

1,706

108

5.5

5.58
6

86

4.5 5.5

5.5 6
4

64

1,601

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

10

10
8
1,706

1,407

6.4
6.91,407

10
1,706

600

400
500

300
400

31.3
300 407
400

200
300

200 31.3
300

100
200

100
200

20
2
0
year)(Fiscal year)
20192020 (Fiscal
2020

0
100

1000

*ROA0(Return*ROA
on0assets)(Return=on
Ordinary
assets)profit= Ordinary/ Average
profittotal/ Average
assets at
total
theassets
beginningat theandbeginning
end of theandperiodend ofx the
100period0(%) x 1000(%)(Fiscal year)
2020
year)
2016 20162017 20172018 20182019 20192020 (Fiscal

0

0

1,303

1,303 1,321

1,321

6.9

6.9

600
900

600 4.0
900

4.0

300
600

300 4.0
600

4.0

0
300

3000

2016

4.5
4.5

2016
2017

20172018

20182019

4.5

42

4
2

（％）
58
58
60
60
20
Profit attributable
toparentowner
ROE
to owner ofROE (Returnon(Returnequity) on equity)Profit attributable
54 of parent
54（％）(¥100 million)
51
51(¥100 million)
58
58
50
50
60
60
20
44
44
5415
54
51
39
39 51
(¥100 million)(¥100 million)

40
50

30
40

30
40

20
30

20
30

10
20

10
20

0
10

100 2016

0

0

39

9.8
9.8

2016

11.7

11.7 11.7

11.7

9.811.7

11.7 11.7

11.7 7.8

7.8

7.8

7.8

39

9.8

44

44

9.5
9.5

35.3
31.3

38.5

38.5

36.8

36.8

32.7

（％）

40
55750
32.7

50
40

40
30
32.7

40
30

30
20

30
20

20
10

20
10

2016
2017

20172018

20182019100100year) (Fiscal year)
20192020 (Fiscal
2020

2016

20162017

20172018

20182019

0020192020 (Fiscal
2020year)(Fiscal year)

Trends in the D/E Ratio and Interest-Bearing Debts（％）

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

20

500

1.0
438
(times)(times)

（％）

20
15

15
9.5
10

15
10

9.510
5

10
5

500

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

500
400

500
400 0.77

0.77

400
300

314
0.77
400
300

314 0.57
0.77

314

300
200
200
100

300
200 0.50
0.50
200
100

314

263

0.57
263

307

307

1.0

438
0.79

1.0
0.8
438
0.79

1.0
0.8

0.79
0.48

0.8
0.6
0.79
0.48

0.8
0.6

0.48

0.6
0.4
0.48

0.6
0.4

0.4
0.2

0.4
0.2

0.57
0.50

0.57 219

219 0.52
307

307
0.52

263

263 0.40
0.34 2190.40
219 0.52

0.52

0.21
0.40

0.40
0.210.24

0.24

0.21
20172018

0.24
0.21
20182019

0.20
0.2
0.24
0
year) (Fiscal year)
20192020 (Fiscal
2020

0.50 0.34
0.34

0.34

2016
2017

20172018

2018
2019

5
5
0
0
2019
2020 (Fiscal
2020year) (Fiscal year)

100
020162017

2017 2018

20182019

0020192020 (Fiscal
2020year)(Fiscal year)*D/E ratio (Debt-equity*D/E ratio (Debt-equity
ratio): Interest-bearing
ratio): Interest-bearing
debts / shareholder
debts / shareholder
equity (times)
equity (times)
00 =D/E
0 D/E ratio
*Net
*Net
Net ratio
interest-bearing= Net interest-bearing
debts (interest-bearing
debts (interest-bearing
debts - cash
debts
deposit)- cash/ deposit) / 0
20162017
20182019 20192020 (Fiscal
2020year)(Fiscal year)
2016(times)
Shareholder
Shareholder
equityequity(times) 20172018

1000

2016

2016
2017

ratio (Debt-equity
ratio): Interest-bearing
debts / shareholder
equity (times)*D/E ratio *D/E
(Debt-equity
ratio): Interest-bearing
debts / shareholder
equity (times)*Net=D/E= Net interest-bearing
debts (interest-bearingdebts- cash/ deposit) /*Net D/E ratio
Netratio
interest-bearing
debts (interest-bearing
debts - cash
deposit)
Shareholder
equity (times)
Shareholder
equity (times)

Target Balance Sheet
As we executed M&A toward expansion into the focused market, such as the wood industrial materials business in North America, the D/E
ratio increased from 0.52-fold to 0.79-fold and the shareholder equity ratio decreased from 36.8% to 32.7%, and the indices indicating
financial soundness decreased, but by the steady accumulation of the operating cash flow and pursuit of asset efficiency, we aim forthe D/E ratio to be 0.5-fold and the shareholder equity ratio to be 40%, which are upheld as the financial indices in the medium-term
management plan as we promote optimal BS management.
(¥100 million)

Liabilities
Cash Deposit

168

168

Liabilities

Liabilities

Data

Cash Deposit

Investment 550
Investment 291
Interest-Bearing
Debts

307

0.52

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

Net D/E
ratio

RegularInvestments 41

D/E ratio

0.24

Shareholder Equity

589

1,601

Total Assets
Fiscal 2019

Net Assets
Results

ESG Serving as a Foundation of Value Creation

40
50

35.3
466

35.3

50

（％）

2016

*ROA
(Return =onOrdinary
assets) profit= Ordinary
profittotal/ Average
assetsat theandbeginning
end ofxthe
period*ROA (Returnon assets)/ Average
assetstotal
at thebeginning
end of andthe period
100(%) x 100 (%)

Trends in ROE
andProfitAttributable
totoOwnersof Parent
Profit attributable
Profit attributableowner oftoparent
owner of parent
ROE (ReturnROE
on (Return
equity) on equity)

35.3
466
31.3
407

（％）

Strategy for Value Creation

400
500

（％）

50
557

Daiken Group's Value Creation• Improvement of the fixed asset turnover ratio (Reduction in
inefficient assets and stringent selection of capital investment)• Improvement of the working capital turnover ratio (Inventory
optimization that gives consideration to BCP)

438

Total Assets
Fiscal 2020

0.79

Results

370

D/E ratio

0.5

Shareholder
equity ratio

Shareholder Equity

40%

730

Shareholder
equity ratio

32.7%

Net Assets

Interest-Bearing
Debts

RegularInvestments 150

0.48

557

1,706

D/E ratio
Net D/E
ratio

Shareholder Equity

Shareholder
equity ratio

36.8%

Interest-Bearing
Debts

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

1,800

Total Assets
Fiscal 2022

Net Assets
TargetDAIKEN GROUP REPORT 202040

Practice of ESG Management
In formulating the medium-term management plan GP25 2nd Stage, we determined the important themes (materiality) concerning ESG
in achieving management strategies through deliberations in various projects and the CSR committee as based on the expectations fromstakeholders, our vision, and values that we consider important. For each theme, we set specific goals toward fiscal 2022, which is the
final fiscal year of the medium-term management plan, will proceed with our efforts, and lead to the enhancement of the managementfoundation. To further improve the linkage, we set important items in each ESG theme as the nonfinancial management goals for the
medium-term management plan GP25 2nd Stage.

Process to Identify Important Themes (Materiality)
Structure to Promote CSR (ESG)
Stakeholders’expectations

Our vision andimportance inmanagement
strategies

CSR Committee
Determines and approves the policy

CSR Promotion Departments

CSR Promotion Departments
General Affairs and Human Resources
Department, Legal Department, Quality
Assurance Department, IT and Logistics
Department, Domestic Business Planning
Department, and Global Business Planning
Department

The Daiken Group

Secretariat
ESG Promotion Department and Corporate
Planning Department

CSR Activity Promotion
Medium-Term ESG Plan Promotion
Submits reports to the CSR Committee

STEP 1
Consideration in the department
promoting each theme and various
projects
STEP 2<CSR Committee>
Deliberations on CSR-related
policy improvement
STEP 3<CSR Committee>
Selection of important themes andgoals setting
STEP 4<The Board>
Deliberations and approvals that arein conjunction with the medium-term
management plan

Committee Chairperson
Representative Director, President■ Number of the CSR Committee convened in fiscal 2020: 4■ Key deliberation items:• Results of the surveys on the measures to penetrate and the degree of penetrationof the group corporate philosophy• Results of the surveys on the CSR Procurement Standards• External ESG evaluation and response to the issues• Company-wide promotion of the initiatives for SDGs
• External evaluation of the integrated report and the production policy in 2020

CSR (ESG)-Related Policy Structure
Field
CSR (ESG)
E Environment
Product Quality and Safety
Fair Transactions

S Human Resources
Human Rights
Coexistence with Local
Communities

G Governance

PolicyCSR Basic Policy
Daiken Group Environment Policy
Basic Policy on Product Safety
Daiken Procurement PolicyGroup Conduct Guidelines (Item 2)
Daiken Diversity Promotion Policy
Daiken Workstyle Reform Promotion Policy
Daiken Human Resource Development Policy
Daiken Safety Basic Policy
Daiken Human Rights Policy
Daiken Social Contribution Activity Policy
Basic Policy on Corporate Governance
Basic Policy on the Building of the Internal Control System

STEP 5

Selected important themes (Materiality)
Field

E

Environment

S

SocialArea and Theme

Aggressive approach to greenhouse gas reductions

Contribution for a recycling-oriented society

Pursuit of the material and thermal recycle of woody resources

Reduction of environmental burden

Reduction of environmental burden in business processes

Consideration of biodiversity

Promoting the use of domestic timber

Environment management

Continuous improvement of the environmental management system

Product Quality and Safety

Quality and technological capabilities to keep responding to confidence

Fair
Transactions

Promotion of CSR procurement
Ensuring fair competition and transactions

Maximization of added value by collaborating with suppliers

Human
Resources

Fusion of diverse skills and ideas
Promotion of diversity
Pursuit of highly productive job performance
Promotion of workstyle reform
Development of human resources who will play roles in the new market expansion
Enhancement of the human resources
and medium- to long-term growthdevelopment
Enhancement of the occupational safety and health Improvement of safe working environments that will become the foundation of success

Human Rights

G

Governance41

Focused Points in Management Strategies

Realization of low-carbon society

Promotion of support for human rights that is significant from a global perspective

Coexistence with Local Communities

Establishment of stable business foundation supported by local communities

Enhancement of the governance system

All employees share the group corporate philosophy and realize the growth strategies

Promotion of risk management

Reconstruction of the supply system that the market will keep choosing

Strict compliance

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

DAIKEN GROUP REPORT 2020

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

TargetGreenhouse gas
emissions reduction*1

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

Promotion of the use ofrenewable energy

Renewable energy utilization ratio:
50% or more

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

Promotion of carbon
fixation

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

1,031,000 t-CO2/year+3% year-on-year through the increase P14
in production of MDF

Promotion of recycle andFinal disposal rate (ratio of volume disposed of inconversion of waste into landfill outside the company): 5% or below
valuables

Utilization of domestic timber for base materials forflooring: 45%

41%+8 pt year-on-year by promoting theswitch from tropical timber plywood

P13

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

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

P65

P61

Product audit implementation cover rate: 100%1
100%75% (postponed the plan due to the
COVID-19)

Fair Transactions

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

Japan: Acquisition completed 100%
Global: Collected information to startthe development
0 (continued)

P62

Promotion of diversity*1

Total diversity index*2: +20 pt+19 pt because of the promotion oftaking childcare leave among female
employees

P63

Promotion of workstylereformTotal 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 (benchmark setting in the firstsurvey)Enhancement of thehuman resources
development

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

18.9％ Executed follow-up training for P64
young employees
100％ Started to hold medium- tolong-term career training
Executed basic training by
18％
product
42％

Enhancement of theoccupational safety andhealthSerious disaster: 0
Plant mutual safety diagnosis execution rate: 100%0 (continued)
Executed the employee capability
surveys at two plants in Japan by theexternal experts

P63

Human rights promotion
activities

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

Information collection to set thetraining menus
100%

P63

Social contribution
activities by cooperatingwith local communities

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

A total of 126 events held in 17 bases
among 20 bases at home and abroad

P62

Enhancement of thegovernance system*1

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)

P43

Promotion of risk
management

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
the resolution of issues
Executed re-evaluation, including thesecondary suppliers

P38

Strict compliance

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

0 (continued)
61 pt (benchmark setting in the firstsurvey)P56

Serious product accidents: 0

Governance

Data

Procure wood in a
biodiversity friendly way

P69

ESG Serving as a Foundation of Value Creation

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

Strategy for Value Creation

Appropriate management
Release amount of substances subject to the PRTR
and reduction oflaw: 70% reduction (As compared to fiscal 2019)
chemical substances

Enhancement of the
Product safety and quality improvement education
quality control structure*1 execution rate: 100%GP65

4% reduction
Reduced by the water-saving measures, such as recycling of wastewaterfrom production processes

use of water resourcesS

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

P44

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

Environment Promotion of effective

SocialProgress in Fiscal 2020
25% reduction (compared to fiscal
2014)
P44
Executed reduction measures, such as
production rationalization, etc.

Daiken Group's Value Creation

E

Theme

*1: Set as the nonfinancial 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 employees’ actual feeling for satisfaction and 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 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 2020

DAIKEN GROUP REPORT 2020

42

Initiatives for the Promotion of ESG Management

G
Initiatives toward the Penetration of the Group Corporate Philosophy
While globalization and diversification of human resources progress, in order to realize the further growth as a company, it is importantthat 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 growthstrategies 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, andprompt 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 nonfinancial management goal in the medium-term management plan GP25 2nd Stage thatstarted in fiscal 2020 and have been proceeding with the initiatives to improve the degrees of penetration and practice.

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, we formulate andexecute the penetration measures from the three perspectives of transmission,
sharing, and evaluation. By repeating and continuously executing thephilosophy penetration cycle of transmission, sharing, and evaluation, we
promote the penetration, such as the specific practice of philosophy in daily
operations, and conduct a review to make the measures more effective bymonitoring the degree of penetration on a regular basis.
Degree of Penetration of the Group Corporate Philosophy
+4 pt

52 pt

56 pt

Fiscal 2018
BenchmarkFiscal 2020
Results

Provision of
information toreform in theway of thinking

Transmission

Philosophy
Penetration
Cycle
Evaluation

Sharing

62 pt
Fiscal 2022
TargetSetting of a place to praise andhonor someone practicing philosophy

Setting of a place to thinkand discuss about philosophy

Initiatives in Fiscal 2020

Transmission

Sharing

Evaluation

Continuous Transmission by
the Top Management

Philosophy Sharing Workshop

Holding of the Daiken Award

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
Workshop in the training for each rank thatis for young/middle level employees andnew managers from fiscal 2019. They
check the group corporate philosophy andgroup conduct guidelines with their
behavior in their daily operations anddiscuss/share their behavior and situations
where they practice philosophy. Outputs inthe workshop are reflected on the episodes
featured in Rinen Jissen Otasuke Book
(Book Helpful For Practicing Philosophy) to
be utilized as cases that encourage theunderstanding of the connection between
more familiar behavior and philosophy.

In December 2019, with a view to thinking
about “What is the behavior that practices
the group corporate philosophy?” creating
an opportunity to have discussions, and encouraging the understanding of the group
corporate philosophy, we held Daiken
Award. This is intended for all group employees and is to collect the cases that practice
the philosophy in daily operations, and when
we collected the cases from the groups
formed by various volunteers regardless of
their affiliations, 70 teams or 389 employees
participated. Through the participation in theAward, the place where they discuss philosophy expanded. By recognizing and internally sharing good cases, we will accelerate
a virtuous cycle of the penetration of thegroup corporate philosophy.

Philosophy sharing workshop

The place of technical and historical tradition at the
Okayama Plant that won the Daiken Award

In the distribution of videos of the company-wide
department manager meeting and on the anniversary 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 in
philosophy and iscommitted to take theinitiative in putting into
practice toward thecreation of corporate
culture to take on achallenge.
Transmission by the top
management

Publication of Rinen Jissen Otasuke Book
(Book Helpful for Practicing Philosophy)
As a result of the First Survey on the Degree ofPenetration of the group corporate philosophy,
while the degree of employees’ sympathy for philosophy was high, there was an issue extracted
that what the action based on philosophy is has
not been sufficiently shared. Following the survey
results, Rinen Jissen Otasuke Book (Book Helpful
For Practicing Philosophy) that introduced thespecific examples of practical actions that employee could easily recall the connection between daily operations and philosophy was published. By transmitting thespecific methods that philosophy can be applied to daily operations through the practicalepisodes featured in the booklet,
we will promote the penetrationof philosophy.

43

DAIKEN GROUP REPORT 2020

Initiatives for the Promotion of ESG Management

E
Initiatives toward the CO2 Emissions Reduction

Utilization of Renewable Energy that is Linked to the Business Activities

Total CO2 Emissions in Japan(1,000 t-CO2)

Total CO2 Emissions in Japan

Input of Woody Biomass Energy/Percentage of Use*1, 2Rate of reduction (Compared to fiscal 2014)

150

使用比率
（%）
12
Input (x 1060
J)

木質バイオマスエネルギー使用比率

Percentage of use (%)

2,000

25％

100

26％

1,500

100

50

1,140
127.1

117.4

114.8

103.9

99.3

93.9

95.3

94.0

40

42

1,440 50.1% 1,452
1,433
00%
48.2% 49.6%

4850

41.4% 40.8%

500

50

00%75

50

50

42.3%

25

30
0

2014

2015

2016

2017

2018

2019

2020 2022 (Fiscal year)
Results Target

0

0

2016
2014

0
(Fiscal year)
2019 2019 2020
20182020 2022 （年度）実績
目標
Percentage of use of woody biomass energy

2017 2016 2018
2015
2017

Input of woody biomass energy*1. Total value at the Daiken Group’s production bases in Japan.
*2. Woody biomass energy input as a percentage of total energy input.

Domestic Production Bases where a Woody Biomass Boiler is Installed

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

Industrial materials business
Building materials businessInami Plant
Aizu Daiken Corporation

ESG Serving as a Foundation of Value Creation

50

1,000

1,370

Strategy for Value Creation

Regarding MDF and insulation boards that are the primary products in the industrial materials business, we use residual wood chips derived
from wood offcuts and construction waste as primary raw materials based on the idea to pursue using timer 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 thenecessary heat source in the manufacturing process. Likewise in the building materials business that manufactures doors and flooringmaterials by processing wood materials, 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 out of 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.

Daiken Group's Value Creation

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. To positively contribute to this target, ourcompany 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.

Dai-wood Corporation

Daifit Co., Ltd.
Data

Takahagi Plant

Mie Plant

Number of Woody Biomass Boilers Installed

Setouchi Kakoh Co., Ltd.
Okayama Plant

13 units in 9 bases
DAIKEN GROUP REPORT 2020

44

Initiatives for the Promotion of ESG Management

S
Maximization of Human Resource ValueTo realize the growth strategies upheld in the medium-term management plan GP25 2nd Stage, promotion of diversity that fuses skills,
ideas, and values of diverse human resources is imperative. Based on this perspective, we set the Total Diversity Index, which
incorporated eight items, such as the female manager ratio and the rate of taking childcare leave among male employees, as thenonfinancial management goal. To steadily proceed with the promotion of diversity and increase human resource value, we need tolink workstyle reform to create the highly productive working environment and human resource development where each and every
employee continually increases their levels. Based on this idea, our group generates the virtuous cycle by integrally promoting thethree elements of promotion of diversity, workstyle reform, and human resource development and proceed with the maximization ofhuman resource value by improving individual performance and furthermore, the initiatives to improve our 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.

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

Improvement ofCorporate Value
Workstyle Reform

Maximizationof HumanResource
Value

Promotion ofdiversity

Human Resource
Development

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

With the next-generation sales recommendation project
being the point of origin, promote the creation of a working
environment where anyone can exercise their skills
Tetsuo Harima
Representative Director,
Senior Managing Executive Officer

1 The Purpose of Launching the Next-Generation Sales Recommendation Project
We set the practice of ESG management as one of the pillars of
the basic policy in the medium-term management plan GP25
2nd Stage. A company is composed of people, and it is essential in realizing the growth strategies and achieving the goals
that all group employees are active and take on a challenge,
and nothing can be discussed without human resources. In
that sense, human resources play a key role in the S of ESG,
and we set KPIs to measure the level of achievement of therespective three elements of promotion of diversity, workstylereform, and human resource development in the medium-term
ESG plan that is linked to the medium-term management planand proceed with the initiatives toward the achievement of thegoals. In the first year of the medium-term management plan,
we launched the Next-Generation Sales Recommendation
Project as a new initiative to maximize human resource value.

45

DAIKEN GROUP REPORT 2020

Characteristics of this project are that it makes a clear departure from the conventional projects in which executive officers
and department heads are the members and that it takes thebottom-up form consisting of female sales employees. This is
the one developed from the exchange meeting for female employees, which was just for opinion exchanges and sharingof problems, and is for them to clarify the issues to work on
toward the realization of the ideal state while reflecting on theiroperations at their workplaces and lead to the recommendations to management executives toward the resolution of such
issues. Therefore, the process of this project can be said to be
the miniature version of the initiatives toward the maximizationof human resource value to increase their levels while linking
the three elements of promotion of diversity, workstyle reform,and human resource development.

2 Initiatives in the Project
workplaces to prevent the viewpoints from being biased.
In the process to consider solutions, we incorporated ideas
and methods to lead to more workable recommendations,such as using an issue-solving model learned in the external
lecture to be able to plan effective measures. Members who
participated in the project participated in it while performing
their tasks, but the attitude of making efforts with their strong
will and independence that “We will reform our company” wasfostered and cooperation and relationship of trust among themembers were created through discussions and group works,
and I can say that the initiatives could also produce a profoundeffect at the different level from recommendations that are theproject’s deliverables.

Fiscal 2020

Fiscal 2021

Pursuit of the ideal state and consideration of trial themes

(1)

(2)

(3)

(4)

Trial and recommendations for realization(5)

Recommendationsof the nextgeneration sales
style

3 Future Development
put effort into them and moving into specific action will lead
to workplace reform. In the future, we would like to makepresentations on recommendations to the final management
executives based on the results of the verification of trial
content and effectiveness measurement, broaden the projectbase from the sales division to other manufacturing divisions,as well as the staffing division, and make it the point of origin
for the company-wide reforms.

DAIKEN GROUP REPORT 2020

Data

At present, these are the initiatives at the workplace level inthe sales division, but I expect that the changes that started
by taking the opportunity of this project will move responsible
persons in each workplace and receive empathy fromthe members in the workplace and other members in theworkplace who realized the change will further voluntarily
propose the next move, and the flow of moving into action
from something familiar will be created. Directing a spotlighton the issues that one has recognized as issues but has not

ESG Serving as a Foundation of Value Creation

Presentation ofrecommendations to the
management executives

Verification of the trial
content and effectivenessmeasurement

Trial execution

Presentation toward thetrial execution

Prioritization and brush-up

Consideration of the solutions

Setting of the themes andcausal analyses

Recognition of the gap andextraction of the issues

Strategy for Value Creation

Steps of Initiatives in the Next-Generation Sales Recommendation Project

Daiken Group's Value Creation

In fiscal 2020, after launching the project, female sales employees formed three teams and executed a trial project after going
through group works and discussions for a total of five times
in six months. As the first step, they started drawing their nextgeneration sales styles, their ideal state that they aimed for.
After that, they went through (1) recognition of the gap with thepresent status and extraction of issues, (2) setting of themes
and causal analyses, (3) consideration of solutions, and (4)prioritization and brush-up and then, (5) they made presentations toward the implementation of the trial project, and after
approval, they took it to their actual workplaces and started it.
Particularly in extracting issues, we conducted hearings with
their superiors and questionnaire surveys in the respective46

Discussion with President and Outside Directors

Following the general meeting of shareholders on June 26, 2020, a new structure with three outside directors was formed.
The three outside directors used a teleconferencing system to meet with Masanori Okuda, representative director andpresident, on the required governance for sustainable corporate value improvement.

Masanori Okuda

Representative Director, President

Okuda

Koji Mizuno

Following the general meet-ing of shareholders on June 26, a new
structure was formed with three outside directors, including one additional
director. I would like to exchange opin-

Outside Director

1

Kiyoshi Furube
Outside Director

Evaluation of the
management andeffectiveness of theBoardions with you, the outside directors,

Outside Director

I remember that the Board

had a more passive attitude when I
was appointed director. Opinions are
now being exchanged more actively
under President Okuda. My impressionis that the Board has been revitalizedFirst, I would like to hear thein response to the establishment of thecompany under the theme of Required

opinions of Director Mizuno, who has

Stewardship Code and the Corporate

Governance for Sustainable Corporate

been an outside director since 2015

Governance Code in line with the mo-Value Improvement in the Daiken Groupand who has also served as the chair ofmentum for better governance. The

in the coming years amidst the in-

the Corporate Governance Committee

evaluation of the effectiveness of thecreased uncertainties in the businessand the Nomination and Remuneration

Board started at the end of FY 2016.

environment caused by the COVID-19

Committee.

The evaluation was performed not mere-

and invite your frank opinions about the47

MizunoShingo Ishizaki

Okuda

pandemic. Thank you for participating inly through scoring but also with many

this meeting.

opinions supplied in the free description

DAIKEN GROUP REPORT 2020

fields, thereby identifying the necessary
requirements and improvements froma variety of perspectives every year.

2

Business deployment
for future growth

The characteristic of the governance

The review of our businessdium-term management plan. It is now
necessary to accelerate the review rela-of Daiken Corporation is that the Board
has an open atmosphere where im-

Okuda

portfolio is the basic policy of the me-tive to the original schedule because of
the COVID-19 pandemic. It will now be

provements are made every year based

opinions on business deployment andnecessary to make decisions on the se-on vigorous opinions.

R&D for future growth. First, Director

lection and concentration of businessOn the other hand, risk management

Furube, what do you think based on

segments that have ended their roles

and the response to uncertainties fromyour experience as a management ex-

and business segments that need to be

the COVID-19 crisis can be consideredecutive of a housing equipment manu-

further strengthened.

requirements. The Board must then be

facturer?

engaged more strongly in group-widerisk management considering the in-FurubeFor expansion into global mar-kets as one of the growth strategies, itcrease in the number of group compa-

rector in 2017. In the history of Daiken

is essential that we reinforce human re-nies as a result of M&A.

Corporation, my tenure has been syn-source development. While there is nochronized to the transition stage of theeasy way to achieve this goal, it will be

I think it is necessary tocompany covering the two last years

necessary to steadily upgrade human re-strengthen risk management, particular-of the former medium-term manage-

sources according to clarified milestones.

ly overseas, as we pursue globalization.

ment plan and the first year of the pres-Furubeent medium-term management plan.

Okuda

The global market share in

Appreciably, during this period, the com-

terms of sales in FY 2020 increased to

Board and the annual improvementspany acquired the MDF plant in New

18% from 11% compared to the previous

based on the requirements identified

Zealand to expand the industrial materi-fiscal year. The urgent requirement is tothrough the evaluation of effectivenessals business overseas, and the wood

implement the necessary measures in hu-

are worth recognizing. After observa-

materials business in North America

man resources. We have enhanced train-tion for more than a year as an Audit &to gain a firm foothold for globalization,

ing menus with a variety of different items

Supervisory Board member, I think it iswhile implementing proactive measures

as we promoted development throughnecessary to proceed one step deeper

in Japan by increasing product lines tojob rotation. We will further upgrade hu-

into discussions by the Board.

expand public and commercial build-

man resource development through aings and by sharing a sense of urgency

personnel exchange with C. Itoh & Co. as

improvements

throughout the company against the risk

our capital and business ally.

based on the evaluation of the effective-of a decrease in new housing starts. I

ness of the Board have been rated bythink it is also an achievement that mar-outside directors, there remain require-ket share has been effectively increased

essary to pursue new business deploy-ments considering the depth of discus-in the new home market as the existing

ment and R&D that will match the goals

sions. The coming years will present

basis of profitability through strengthenedof Daiken Corporation. Since the early

opportunities for more in-depth discus-

proposals for differentiating products to2000s before the financial crisis, the com-

sions under the selected key themes

selected targets.

pany promoted business restructuring

Okuda

While

the

FurubeToward future growth, it is nec-

ESG Serving as a Foundation of Value Creation

The vigorous opinions of the

IshizakiStrategy for Value Creation

I was appointed outside di-

FurubeDaiken Group's Value Creation

Next, I would like to hear the

Okuda

that may alter our medium-term andlong-term competitiveness and corpoData

rate value, such as the required groupwide risk management that includes
overseas bases.

Masanori Okuda Representative Director, President

DAIKEN GROUP REPORT 202048

concerning consistency with the company's management strategy and thepracticality of the business plan in theimplementation of M&As and then verify that the project will be appropriate
for maximizing corporate value. I also
believe that we should strengthen risk
management and risk control following
any acquisition of a subsidiary. I thinkin-depth discussions are required by the
Board regarding this point.
In this process, it is essential to estab-

Koji Mizuno Outside Director

lish a system that provides accurate
and timely information in an emergency.
through selection and concentration.

hope that R&D initiatives through indus-

Daiken Corporation has establishedIn that process, the company withdrew

try-academia cooperation will be en-rules for escalation and whistleblowing

from several business segments. I sup-hanced. The introduction of ideas andfrom the viewpoints of BCP and compli-

pose that the company made the deci-expertise new to the company will be-ance. As group companies increase andsion to withdraw because it had businesscome the driving force in the creation ofare covered by these rules, it will be nec-

segments to become the next pillars.

something new. It will be necessary toessary to verify that the system functions

To continue boosting the metabolism of

establish a robust position as a technol-

effectively without delay or omission.

business, it will be necessary to cherish aogy-oriented company through effective

culture of consistently creating somethinghuman resource development from thenew. From this perspective, a favorable

medium-term and long-term perspec-

ternet throughout society, it is extremely

trend has been created through the rein-tives.

important that information from all group

With the penetration of the in-companies be provided to the head of-forcement of research and development
In terms of industry-academia

fice in a timely manner. It will be neces-

Center in 2018. The information network

cooperation, we are promoting joint re-sary to establish a system that effec-

is also being expanded under the con-search with universities and the dispatch

tively utilizes IT and collects information

cept of open innovation. The future re-of young researchers to universities. We

efficiently.

quirement will be to find ways to connect

will continuously implement these initia-

the seeds created in the R&D Center totives because the possibility of new ideas

the needs of society.

increases through experience in different

portant means of growth for Daiken

communities.

Corporation. As one of the key require-following the establishment of the R&D

Okuda

MizunoM&As continue to be an im-

For new business deployment,

ments for this fiscal year based on thean examination is in progress to find theevaluation of effectiveness of the Board,Okuda

next-generation business segment as
the fourth pillar after industrial materials,
building materials, and engineering. The

3

Desirable M&A for
growth strategies

the strengthened monitoring of acquisition projects is now highlighted. I consider it necessary to establish a systemfor continuous monitoring, including theexamination has started in areas adjoinWe utilize M&As as a means

gap from the intended effect and syn-business segment because it is difficultof new business deployment and future

ergy and the viewpoint of risk manage-

to promote business in remote areas.

growth. Director Ishizaki has extensive

ment, by proceeding one step further

In this process, technologies originating

experience in investment bank opera-

from the conventional practice of busi-

from the R&D Center have been steadilytions with particular expertise in M&As.

ness reporting.

taking practical shape. While it will take

From that viewpoint, do you have antime before commercialization, we will

opinion about desirable M&As in the

proactively input managerial resources

coming years?

ing building materials as our present

Okuda

Okuda

We have promoted M&As tobolster the three key markets identified
in the long-term vision and the medium-

into initiatives aimed at medium-term andI think M&As are an indispens-

term management plan. In FY 2020,

able means of increasing corporate

three projects were handled regarding

Open innovation is being pro-value. In my experience, it is important

the wood material segment in North

actively promoted by the R&D Center. I

that the Board have deeper discussions

America to expand the global market,

long-term corporate value improvement.
Mizuno49

FurubeDAIKEN GROUP REPORT 2020

Ishizakithe solid wood flooring segment to enhance product lines for proposal making
in public and commercial buildings, andthe renovation segment in the metropolitan area to strengthen building powerin the home renovation market. We willconsistency with the company's management strategy and the practicality ofthe business plan in order to establish
a system for post-acquisition monitor-

Kiyoshi Furube Outside Director

ing incorporating the viewpoints of risk
management and verification of the effect and synergy, thereby clarifying how
the Board should be engaged in impor-

to proactively approach global investors

Management

tant projects.

for enhanced dialogs.

under a new organizational structure in

Planning

Department

riodic meetings with global investors.

Dialog with Shareholders has been re-Such meetings led to future corporate

vised by the Corporate Governancevalue improvements through discus-

Committee and the Board in order tosions from perspectives that differ

clarify my responsibility as the manage-

from Japanese investors and throughment executive and to ensure more

expanded fields of dialog with inves-consistent and continuous initiatives led

Another point of governancetors who emphasize ESG evaluations,by the executive officer for IR. I hope tois that governance has two aspects:

which are also a characteristic of Daiken

effectively communicate our strengths

inner governance representing internal

Corporation.

and direction through these IR activities,

4

Enhanced dialog withshareholders andinvestors for corporate
value improvement

Ishizakicontrol, and outer governance signifying
checks from an external objective view-

while listening to inspirational input fromI also feel the need to strength-shareholders and investors, thereby pro-point. It is necessary for both of theseen IR. To achieve a better understanding

ducing a virtuous circle of dialog for cor-

aspects to function in a balanced man-of the company's mindset and direction

porate value improvement.

ner. At Daiken Corporation, the former

amidst the increasing uncertainties, weseems to be mostly functional, while themust increase the occasions for direct

latter may need additional upgrading. In

dialog with the company's top manage-

this sense, it is necessary to strengthen

ment.

MizunoIR through dialogs with shareholders
and investors to form the core of outside

Summary
Okuda

Amidsttheuncertainties

We hope to continue strength-

caused by the COVID-19 pandemic,

governance. The present activities areening IR. From this viewpoint, we es-

the Board will need to play its role in thelimited inside Japan. It will be necessary

tablished a dedicated IR unit inside theemergency and assume heavier respon-

Okuda

ESG Serving as a Foundation of Value Creation

Initiatives for Promoting Constructive

Strategy for Value Creation

FY 2021. The Policy for Structures andIn my previous job, I had pe-

FurubeDaiken Group's Value Creation

have deeper discussions concerningsibility in navigating business management than during normal times. We will
earnestly examine important requireData

ments, have deeper discussions withspecialized and objective input fromoutside directors, and set the direction
for continuous corporate value improvement.
Thank you very much.

Shingo Ishizaki Outside Director

DAIKEN GROUP REPORT 2020

50

G GovernanceCorporate Governance
Basic Approach
In pursuit of optimal corporate governance that will result in sustainable improvements
in our corporate value
Under the group corporate philosophy, the Daiken Group is committed to sustainable improvements in corporate
value for all shareholders and stakeholders. In order to achieve efficient, sound, and transparent management,
we enrich the management system, the organizational system, and the internal control system, and take the basic approach that always seeks to optimize corporate governance, and we constantly work to improve it. Basedon the basic policy on corporate governance established in 2015, we are making constant improvements to respond to the ever-changing business environment surrounding the group in the ceaseless pursuit of the optimal
corporate governance system.

Key Initiatives for the Enhancement of Corporate Governance
2002

Made the shift to the chief executive officer system

2003

The Compliance Committee was established.

2008

Reorganized to the Risk & ComplianceManagement Committee for reinforcement.

2010

Reduced the number of directors from 11 to 9.

2011

Outside directors are selected.

2012

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

2015

2016
2018

2019
2020

Outside directors increased from 1 to 2.
The Basic Policy on Corporate Governance wasestablished.
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)

Quick Reference of Corporate Governance Organization
Main Items

Design of the organization

Company with Board of company Audit & supervisory board members

Number of directors (outside directors)

8 (3)Number of Audit & supervisory board members(outside Audit & supervisory board members)

4 (2)Number of board meetings convened (fiscal 2020)(Average attendance rate of outside directors)(Average attendance rate of outside Audit &supervisory board members)
Number of Audit & supervisory board meetings
convened (fiscal 2020)(Average attendance rate of outside Audit &supervisory board members)

51

Details

13 times(100%)(97%)
14 times(97%)

The term for directors

1 year

The executive officer system

AdoptedVoluntary committee of the Board• Nomination and Remuneration Committee:
Deliberate on human affairs and the remuneration of directors andexecutive officers
Number of committee meetings convened in fiscal 2020: 3 times• Corporate Governance Committee:
Evaluate the effectiveness of the Board and deliberate the matters related
to establishment of the governance system
Number of committee meetings convened in fiscal 2020: 2 times

Auditors

Gyosei & Co.

DAIKEN GROUP REPORT 2020

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

Election and dismissal

Election and dismissal

ReportNomination and Remuneration Committee

Audit(Committee chairperson and majority of themembers are independent directors)(including two outside
Audit & supervisoryboard members)

Consultation

The Board
Eight directors

Corporate Governance Committee

ReportAudit & Supervisory
Board
Four Audit &supervisory board
members

Daiken Group's Value Creation

Consultation

Election and dismissal

Proposal forelection anddismissal

Reporting(Committee chairperson and majority of themembers are independent directors andaudit & supervisory board member)(including three outside directors)

Approval and instruction

Headquarters,
respective departments,
and affiliated companies

Audit

Accounting audit

Cooperation
Monitoring, supervising, and important decision-making

Business execution and decision-making

Inside directors and Audit & supervisory board members

Business execution

Outside directors and Audit & supervisory board members

Reasons for Selection of Outside Directors and Audit & Supervisory Board Members

Outside Director

Reason for selection

Koji Mizuno

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

Kiyoshi Furube

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

Shingo Ishizaki

He has been involved in the investment banking service at a securities company for a long period of timeand as our outside Audit & supervisory board member since June 2019, he has taken advantage of his
affluent knowledge cultivated through such experience into the audits of our company. Also, his affluent
knowledge on finance and accounting is considered to contribute to improving our corporate value.

Yuko Katsuo

In addition to her high expertise as a professor in the Department of Economics, she held several positions
as a committee member in the Ministry of Finance, Financial Services Agency and is considered to reflect
her affluent knowledge on finance and accounting cultivated through such experience into the audits ofour company.

Kiyoshi Mukohara

He has been engaged in the management of a financial institution for over many years. We believe that
his abundant knowledge concerning finance and management, accumulated through his experience, willcontribute further to Enhancement of the Governance System at our company. He is from Sumitomo
Mitsui Trust Bunk, Limited, which is our major lender, but five years have passed after he resigned from thedirector position at the said lender.

Data

Outside Audit & Supervisory
Board Member

Name

ESG Serving as a Foundation of Value Creation

Chairperson/Committee chairperson

Auditing

Strategy for Value Creation

Executive Directors Committee

Department responsiblefor internal control

Reporting
Supervision, election/dismissal, and instruction

Auditors

Reporting

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

DAIKEN GROUP REPORT 2020

52

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 evaluationof the Board once a year since March 2016. Based on the self-assessment by all directors and Audit and Advisory Board members anddeliberations at the Corporate Governance Committee in which the independent outside director is a chairperson and independent outside
directors and audit & supervisory board members account for more than half of the members, the effectiveness of important decision-making
in management and business execution properly 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 responses.

Key Issues and Responses
Fiscal year ended March 2016 to fiscal year ended March 2018

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
Execution of the evaluations of the degree ofpenetration of the management strategies andpolicies as well as the progress of important issues

Developmentof theManagement
Strategies/
Policies

Fiscal year ended March 2019 Fiscal year ended March 2020 Fiscal year ended March 2021

Establishment of the Group
Corporate Philosophy

Deliberations to review the Management Philosophy
and revise it as the group corporate philosophy

Considerationand determinationof the measures
to penetratephilosophy

Enhancement of the Board’s involvement
particularly in the CA process (analyses, issueorganization, and execution of countermeasures) in
the PDCA process in the management strategies

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

Started to operate thesystematized Group Corporate
Philosophy Penetration Program

Continuous operation

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

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

Review of the reporting content,such as the execution ofoperation, toward the effective
involvement in the PDCA process
for management strategies

Reviews of the PDCA process
are executed, so that the
progress concerning theimportant items of the mediumterm management plan can beeasily grasped

Responded to the further involvement in the important matters, such as investments, as a continued issue

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

Directors’
Knowledge
and Abilities

Improvement of the information
provision to deepen outside director andaudit & supervisory board members’
understanding of our businesses andthat they could sufficiently review
agendas of the Board in advance

Improvementof Discussions

The Director Human Resource
Development Program was set andits operation started

Continuous operation

The Nomination and Remuneration
Committee was involved in human affairs ofthe directors to develop the next generation

Continuous operation

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

Thorough implementation of the prompt
distribution of materials

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

Since then, continuously
implementing thisSince then, continuously
implementing thisHolding of an office visit for the outside
directors and audit & supervisory board
members

Improvement of the supervisory
function by delegating partof decision-making to the
executive officer side

Enhancementof theSupervisory
Functionand RiskManagement

Review of the regulations of decision-making authority
Enhancement of the Board’s
involvement in the group-basedrisk management

Periodic implementation of thereporting of IR activities
Improvement of the structure topromote a constructive dialog andtransmit helpful information forstakeholders including shareholders

Improvementof a Dialog
withStakeholders

Since then, these havebeen continuing

Revised the Board’s rules andexpanded the scope to bedelegated to the executive
officer side

To be the key issue in the next fiscal year as an ongoing case
Improvement of the feedbacks of
IR activities

1

Since then, regular holding
has been continuing

Improvement of the information provision,
such as deliberation results on theexecutive officer side, and implementationof deliberations several times in regard tohigh-risk acquisition cases

Improvement of the information provision
to outside directors and audit & supervisoryboard members to promote theirunderstanding in advance in deliberations

Continuous operation2

Since then, periodic implementation on a quarterly basis has been continuingIn creating the integrated report,
a questionnaire survey of thedirectors and individual meetings
were implemented, and theBoard has been actively involved
To improve informationtransmission to stakeholders,such as shareholders,
evaluations by the recipients of
the information were monitoredby the Board

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

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

Evaluations by the investors
were monitored by the Boardand evaluations from external
institutions improved byreflecting them in the integrated
report and on the website

3

Issue

Response

Results of the Evaluation in the Fiscal Year Ended March 2020 and Response to the Future Issues
The Board’s effectiveness evaluation implemented in the fiscal year ended March 2020 reported that opinions are being represented and deliberated actively
by each director and Audit & supervisory board member while ensuring the fairness and transparency with diverse perspectives and four independent outside
directors. The Board sufficiently maintains the effectiveness of important decision-making in management and supervision of proper business execution. In
particular, we improved support for outside directors, such as provision of information on the management meeting, opportunities to have an interview withmanagement executives, and opportunities to hold an office visit at home and abroad, which are evaluated to contribute to active discussions toward the
medium- to long-term growth. Evaluations by the recipients of the information were monitored and discussed at the Board with regard to the informationtransmission to the stakeholders, such as stakeholders, which are evaluated to lead to the further improvement of information transmission and enhancement of the structure to promote a constructive dialog. On the other hand, we confirmed the future issues to further increase the Board’s effectiveness, suchas (1) enhancement of the after-the-fact monitoring of important issues, such as investments, that the Board made a decision, (2) continuous involvement in
the group-wide internal control and risk management, and (3) deepening of the discussions on the opinions by the stakeholders that are grasped through a
dialog. Regarding these issues, we will proceed with responses as follows.

53

1 Enhancement of the Monitoring ofImportant Issues

2 Enhancement of Group Risk
Management

3 Deepening of the Discussions on the Responses
to the Opinions by Shareholders and Investors

Regarding the important matters, such as
an investment case, enhance monitoring,such as grasping and discussing the change
in the environment and progress of a plan,and enhance involvement in PDCA in the
management strategies.

We will re-evaluate risks based on a rapidchange in the business environment, continuously discuss the risk countermeasures according to the degree of importance, and enhancerisk management.

The Board will grasp the content of opinionsfrom stakeholders that are grasped in dialogs
with shareholders and investors and deepen
discussions on the responses to take.

DAIKEN GROUP REPORT 2020

G Governance
Executive Remuneration
Policy of Executive Remuneration
1 The remuneration system shall be based on the practice of the group corporate philosophy.
2 T he 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 improvementof medium- to long-term corporate value.
whom we can entrust our future.
4 The procedure for determining remuneration shall be transparent, fair, and objective to achieve the responsi-

bilities 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 is around 40%
and is designed to fluctuate according to performance.

Strategy for Value Creation

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

Daiken Group's Value Creation

3 The standards and system of remuneration shall be effective enough to secure excellent human resources to

Performance-based index: Profit attributable to owners of parent

Stock-Based Compensation

Performance Remuneration

Performance Remuneration
Performance-based remuneration based on the company performance and accomplishments/
results in one’s responsible field.

Mission Remuneration

Representative
Supervisor
Executive
Compensation Compensation Compensation

Mission Remuneration
Fixed remuneration to be determined based on one’s duty. To ensure the background of themoney amount, the breakdown (representative compensation, supervisor compensation, andexecutive compensation) is organized and determined for each title.
Maximum amount of remuneration for Directors: Within ¥35 million per month (Resolution by the90th General Meeting of Shareholders held on June 29, 2006)
Maximum amount of remuneration for Audit & supervisory board members: Within ¥6 million permonth (Resolution by the 102nd General Meeting of Shareholders held on June 22, 2018)

ESG Serving as a Foundation of Value Creation

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

Data

Executive Remuneration for the Fiscal Year Ended March 2020
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

Total Amount of
Remunerations, etc.
(¥million)

Total Amount of Remunerations, etc by Type (¥million)
MissionRemuneration

Performance
Remuneration

Stock-Based
Compensation

Retirement
Benefits

Number of Target
Executives

Directors*1

225

109

106

9

–

7

Audit & supervisoryboard members*2

40

40

–

–

–

3

Outside Directors
and Audit &supervisory board
members

22

22

–

–

–

5

*1: Except for outside directors *2: Except for outside Audit & supervisory board members

DAIKEN GROUP REPORT 2020

54

Message
Message from the New Outside Audit & Supervisory Board Member

Contributing to Sustainable Corporate Value Enhancement by
Pursuing Essential Corporate GovernanceKiyoshi Mukohara
Outside Audit & Supervisory Board Member

I am Kiyoshi Mukohara, the newly elected outside audit& supervisory board member as of June 26, 2020. I was
also appointed a member of the Corporate GovernanceCommittee on the same day in order to participate in thecorporate governance system and deliberate on the requirements of Daiken Corporation. My relationship withcorporate governance traces back to 2000, the dawnof the concept in Japan. In those days, I served as thedeputy general manager for securities at a trust bank. I
frequently exchanged information with institutional investors in the US and UK, as well as with consulting companies, on the exercise of voting rights. Through exposure to
the latest information from overseas, I acquired extensive
knowledge on corporate governance. Since then, I havetackled this important theme for nearly 20 years. Discussions regarding corporate governance became vibrant inJapan in the 2010s, which led to the establishment of the
Corporate Governance Code in June 2015. Through mywork involving corporate governance, I learned that corporate governance directs how the company responds tothe expectations of shareholders and how it is inextricably
linked to the exercise of voting rights as the declaration of
the intentions of those shareholders. The essence of corporate governance is how a company adapts to changes
over time through constructive dialogs with shareholders,
while pursuing the sustainable enhancement of corporate
value.
Corporate governance has taken root in the economy
and society of Japan since the establishment of the Corporate Governance Code. In the past few years, a major shift has been made from shareholder capitalism tostakeholder capitalism. In the current COVID-19 situation,

55

DAIKEN GROUP REPORT 2020

some cases have uncovered the disadvantages of too intensely pursuing greater capital efficiency, such as ROE.
In Japan, corporations have adopted a traditional management philosophy that emphasizes "good for everyone" and "the company is a public entity." A mindset similar to multi-stakeholder capitalism has been established
for the sustainable enhancement of corporate value. I
emphasized this attitude as a management executive ofa bank as a public entity while contributing to the sustainable development of society through finance.
In the post-COVID-19 era, balancing the business activities of the company with contributions to a sustainable society will become more important than ever, as
the management policy, by cherishing the relationships
with diverse stakeholders through the concepts of multistakeholder, good for everyone, altruism, and ESG (Environment, Society, and Governance). It will be necessary
to focus on these aspects and set the direction for future
corporate governance.
In this rapidly changing era and environment, I believethat a company that sincerely pursues the best governance will always achieve sustainable growth. Based on
my experience in examining many companies, I consider
the corporate governance system of Daiken Corporationa successful standard. However, corporate governancemust be improved and upgraded through persistent efforts. I am strongly determined to fulfill my responsibility
as the outside audit & supervisory board member by leveraging the expertise and experience that I have accumulated and by dedicating myself to the spirit of corporate governance, while always recognizing its essence.

G GovernanceRisk Management/Compliance
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 and overallmanagement of the promotion plans
Chairperson: Representative Director
Secretariat: Corporate Planning Department and Legal Department

Departments
Responsible for Risks

Department Responsible
for Legal Affairs

Each Department/Group Company

Daiken Group's Value Creation

At the Daiken Group, the Risk Management Rules have been
stipulated by the Board to appropriately manage risks andensure continuous and stable development of businesses.
In addition, as an organization that discusses and approves
the issues and countermeasures associated with the promotion of risk management of the entire company, the Risk andCompliance 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 occurrence of risks by continuously following the PDCA including reviewing the status of
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, andestablishes a culture to comply with law and regulations.

Number of Risk & Compliance Management Committee convened in fiscal 2020: 4
Compliance• Consideration of the important risk measures and analysis/evaluationof the influence degree• BCP responses based on the raw material procurement and systemproblems• Disclosure of the risks associated with businesses• Risk hedge status of nonlife insurance• Results of the survey on the compliance consciousness degree andfuture responses• Matters concerning the results of the execution of compliance training
and the plans for the next term
• Personal information management status

Strategy for Value Creation

Key Deliberation Items
Risk Management

Thorough Compliance
In August 2019, we implemented the Survey on the Compliance Consciousness Degree tothe employees of the group. In this survey, which was the first survey, we made up questions
based on the opinions by the third party, such as the level of understanding of the rules,laws, and regulations, and the awareness of the whistle-blowing system in order to acknowledge the status of employees’ consciousness of compliance and clarify issues that need tobe addressed. As a result of the survey, our group’s consciousness degree was 61 pt (ourown index). In the medium-term ESG plan that started in fiscal 2020, we will implement education and enlightenment activities, such as continuous training, toward the achievement of
the goal of +5 pt using this result as a benchmark. We also implement the survey annuallyand by reflecting the issues in the measures, we will deploy more actual condition-basedand effective measures.

Example of the slip of the Survey on the Compliance
Consciousness Degree

ESG Serving as a Foundation of Value Creation

Implementation of the Survey on the Compliance Consciousness Degree

Execution of Compliance Training
Key Compliance Training System by Rank of Employees and Job Type
Training by Job Type

Training by Rank

(By division/theme)

Executive Officers

Compliance management, etc.

Department Heads

Department management compliance, risk management, BCP,
information management, etc.

Managerial Position
Senior Staff
Member Class

Compliance, labor management, etc.

Data

Across all the Daiken Group companies, we implement
compliance training related to particularly relevantlaws and regulations through group training by rankor e-learning training to be taken according to theyear of joining the company. In fiscal 2020, we addedand expanded a lecture for senior staff members to
be manager candidates and implemented workshops
by department for 19 departments 24 times in total
where menus such as the dissemination of the whistleblowing system and credit management are provided
according to the features of each department. In
the future, we will establish compliance by planningand implementing education and training menus toaddress our group's issues based on the results of
the Survey on the Compliance Consciousness Degree
in fiscal 2020.

Sales Division

Prevention of harassment

Cases of breach of compliance

Manufacturing
Division

Insider trading regulations
Up to the fifth
year sincejoining thecompany

New Employees

External training andgroup training

Anti-Monopoly Act

Waste Disposal andPublic Cleaning Act

Subcontract Act

R&D Division

Intellectual Property Rights (Copyright, trademark right, etc.)
Foreign Exchange and Foreign Trade
Control Law/Export management

Credit management

Act on the Protection of
Personal Information

Product safety

Basic knowledge of compliance

Complaints handling

Compliance, CSR, etc.

Back OfficeGroup Companies

e-learning training and selflearning course using textbooks

DAIKEN GROUP REPORT 2020

56

Risks Associated with Businesses, etc.
Risks associated with businesses that may have a serious impact on our group have been identified as follows. In identifying the risks, they
were determined by the Board’s resolution after deliberations in the Risk and Compliance Management Committee. We have determined thedepartments responsible for each risk, formulated countermeasures that could be assumed to the extent possible, and been serially executing
them; however, not all the risks are covered. As for our group's businesses, the situation may have an impact on our group’s financial condition and business performance if economic activities and markets do not function normally due to the following risks: a risk that is unknownat the present moment, other risks that are not deemed to be important at the present moment, or a risk that will have an immense impact
throughout the entire world (large-scale war, terrorism, natural disaster, pandemic, etc.).

Classification

Disaster/Environment

1
Business Environment

2
Business Operation
System

3
4
57

Risks

Risk Awareness(1) Spread of infectious disease

Impact on production, logistics, sales activities, businessenvironment, and overall business operation due to the spread of
an infectious disease, such as a novel virus.

(2) Occurrence of natural disasters

Impact on production, logistics, and sales activities, as well as thedestruction of infrastructure, disruption of supply chains etc. dueto an earthquake, tsunami, typhoon, etc.

(3) Environment related items

An increase in cost burden and compensation liability associatedwith the environmental laws and regulations(4) Fluctuations in new housing starts and floor areas

Shrinking of the markets due to a decrease in population and adecrease in the number of households associated with the lowbirthrate and longevity(5) Fluctuations in the raw wood and plywood prices

Tightening regulations over illegal logging of tropical hardwood
and fluctuations in the supply demand balance, ocean freight, andforeign exchange(6) Fluctuations in the crude oil and petrochemical
product prices

Situations of the producing countries and the international supply
demand balance
Fluctuations in the petrochemical products, such as paints andadhesives, and the energy cost at the time of production(7) Foreign exchange fluctuations

Fluctuations in tropical timber plywood of which the major
application is the materials for flooring, import transactions fromthe group MDF plants in Malaysia and New Zealand, and theforeign currency transaction adjustment in overseas investments(8) Stock price fluctuations

Booking of the appraisal loss and loss on sale due to a decline in
the prices of holding shares(9) Interest-rate fluctuations

Impact on interest expenses due to interest-rate fluctuations(10) Quality assurance

Generation of the compensation costs for the amount of damage,lowering of the brand image, and customer defection due to
product defects(11) Acquisition and alliance related items

Shortfall of the investment effect by M&A, etc.

(12) Fire and facility trouble in production plants

Disruption of product supply due to fire or a serious facility trouble
in a production plant(13) Intellectual properties

Generation of the litigation cost concerning the intellectual
property right(14) Information security

Occurrence of a compensation of damage and degradation of thebrand image associated with the leakage of the privacy or credit
information of customers(15) System trouble

Occurrence of the delivery delay, additional production cost, loss
on disposal of products, etc. associated with the ordering andorder receiving core system failure(16) Raw material procurement trouble

Occurrence of problems in the supply chain, such as supply
disability due to fire, facility trouble, and disasters, in the supplierof the major raw materials(17) Accounting related items

Booking of impairment loss on non-current assets, introductionof new accounting standards or tax system, or a difference of
opinion with the tax authority concerning tax declaration(18) Regal regulation related items

Stricter legal regulations or permission and approval system in theoverseas production base

*Details of the risks associated with businesses are described in the securities report.

DAIKEN GROUP REPORT 2020

G GovernanceRisk Management Process Flow
Extraction/classification of risks• After extracting and classifying the risks that may have a serious impact on our group, set the
responsible departments that will respond to the risks.

Risk analysis

Responsible departments for each risk comprehensively evaluate the risk from the both•
aspects of the possibility of the risk becoming apparent and the extent of damage when therisk becomes apparent and rank the risk according to the importance.

Risk evaluation (re-evaluation)
Formulation/execution of the risk measures• After reporting the risk response status in the Board, resolve the descriptions in the securities
report.

Response to a Risk
□ Setting of the measures for the infection prevention and the prevention of the spread and setting of the flexible work shifts□ Organization of the response manuals and securing of stockpiles in preparation for a contingency□ Selection of multiple suppliers of raw materials and securing of the BCP inventories□ Practice of the management strategies that are based on the long-term vision and do not rely on new housing starts in Japan□ An increase in our share in the new home market by the differentiated products□ Expansion in the non-housing public and commercial buildings and global markets□ Increase in use of domestic timber by using the special MDF developed with our unique technologie□ Suppression of a rapid impact on the profit and loss by setting about one year, instead of six months, for the condition determination for transaction
prices□ Reflection of the portion that cannot be absorbed by the self-help efforts on the selling prices□ Promotion of both the reduction of greenhouse gas emissions and cost reductions by shifting energy from fossil fuels to woody biomass□ Review holding shares from both the qualitative and quantitative aspects once a year and report the result to the Board□ Reduction of the shares that are judged where the significance of holding is unsatisfactory□ Utilization of financial derivatives for long-term financing that is one year or more in accordance with the stipulations of the Financial Derivatives
Management Regulation□ Operation of the quality management system based on ISO 9001
□ Setting of the rules concerning design development management, product safety inspections, etc.
□ Inspections by the exclusive members centering on the quality assurance division at the Head Office that is independent of the development/
manufacturing division□ Verifications and inspections in the Investment Committee that give consideration to the management strategies, synergy, the market environment,risk factors, the capital cost, etc.
□ Implementation of periodic reviews in the management meeting and the Board for verification of the effects after acquisition□ Disaster Countermeasure BCP Manual, rules, a supervisory organization, in-advance countermeasures, response manuals, and securing of BCP
spare articles□ Implementation of the group-based Plant Mutual Safety Diagnosis that incorporates an objective perspective of other plants□ Risk hedge by nonlife insurance in preparation for unforeseen risks

Data□ Improve the rules concerning intellectual property rights in the rules that manage the design development processes□ Establishment of the dedicated department that will manage intellectual property rights and improvement of the checking system for various R&D
cases and products from the design development phase

ESG Serving as a Foundation of Value Creation□ Switching to domestic timber plywood that is not affected by the foreign exchange rates□ Market fluctuations that cannot be absorbed will be reflected on the selling prices while monitoring the movements of competitors□ Hedging transactions by the foreign exchange reservation in accordance with the stipulations of the Financial Derivatives Management Regulations

Strategy for Value Creation□ Securing of human life safety, countermeasures for key facilities and important systems, organization of the response manuals, and securing ofstockpiles based on the Disaster Countermeasure BCP Manual□ Selection of multiple suppliers of raw materials and securing of the BCP inventories□ Asset protection and risk hedge by nonlife insurance in preparation for the opportunity loss due to business interruption□ Operation of the environment management system based on ISO 14001□ Compliance with legal requirements, such as waste management, and improvement of rules to reduce environmental risks□ Compliance with the environmental rules and execution of internal auditing toward the continuous improvement

Daiken Group's Value Creation

Progress management/monitoring• For important risks, which were ranked high, formulate and execute the risk measures onan annual basis. Report the risk measure execution status to the Risk and ComplianceManagement Committee and conduct progress management.

□ Improvement of the internal rules, such as the Information Management Rules, Personal Information Protection Management Rules, IT Security
Rules, etc.
□ Introduction of various security measure systems, management of access authorizations, and implementation of security education for employees□ Improvement of the organizational structure that will integrally manage the series of mechanisms from order receipt to shipping, delivery, etc.
□ Enhancement of the ordering and order receiving core system’s processing capacity and enhancement of the countermeasures for the backup
function in case of failure□ Formulation of the Disaster Countermeasure BCP Manual□ Selection of multiple suppliers of raw materials and promotion of the countermeasures, such as securing of BCP inventories□ Verifications and inspections of the consistency with the management strategies in the Investment Assessment Committee, the investment effectthat gives consideration to the capital cost, and the safety, quality, environmental consideration, etc.
□ Sufficient consideration by the external experts, such as a tax accountant corporation, and advance referral to the tax authority as needed□ Improvement of the response systems for legal regulations, as well as permission and authorization through the cooperation between the planning
division that integrally manages the global production bases and global business and the legal affairs division at the Head Office

DAIKEN GROUP REPORT 202058

Directors and Audit & Supervisory Board Members(As of June 26, 2020)

Director
Representative Director,
President

Representative Director, Senior
Managing Executive Officer

Masanori Okuda

Takashi Aihara• Attendance at the Board: 13/13 (100%)• Number of the Company’s shares owned:
32,750 shares• Attendance at the Board: 13/13 (100%)• Number of the Company’s shares owned:
7,930 shares

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
ControlJune 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 theTokyo Office
Apr. 2014 Representative Director, Representative President and Executive Officer
June 2018 Representative Director, President (present)

Apr. 2001 Professor of School and Graduate School of Law and Politics, KWANSEIGAKUIN UNIVERSITY
Aug. 2003 Director and Manager of IR Planning of Takara Printing Co., Ltd.
Mar. 2006 Outside Audit & supervisory board member of Urban Life Co., Ltd.
Aug. 2006 Director and Executive Officer responsible for IR business development of
Takara Printing Co., Ltd.
Feb. 2008 Registered lawyer (Tokyo Bar Association) (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 (present)
Apr. 2020 Responsible for Head Office, IT and logistics reforms, ISO, crisis management,
information management, compliance, IR, and R&D (present)

Director

Outside Director

Hiroshi Sekino

Koji Mizuno• Attendance at the Board: 10/10 (100%)• Number of the Company’s shares owned: 0 shares• Attendance at the Board: 13/13 (100%)• Number of the Company’s shares owned:
400 shares

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 Planningand 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 (present)
Director of ITOCHU Kenzai Corporation (present)
June 2019 Director of the Company (present)

Independent
Committee
Chairperson

Committee
Chairperson

Apr. 1991
Mar. 2006
Apr. 2006
Apr. 2010
Apr. 2011

Joined The Nanto Bank, Ltd.
Retired from The Nanto Bank, Ltd.
Full-time Instructor, Faculty of Management, Otemon Gakuin University
Assistant Professor, Faculty of Management
Advisor to the Organization for Small and Medium Enterprises and Regional
Innovation, JAPAN (Independent Administrative Institution) (present)
June 2011 Outside Audit & Supervisory Board Member of the Company
Apr. 2014 Assistant Professor, Graduate School of Business Administration, Faculty ofManagement, Otemon Gakuin University
June 2015 Outside Director of the Company (present)
Apr. 2016 Professor, Graduate School of Business Administration, Faculty ofManagement, Otemon Gakuin University
General Manager of the Venture Business Study Center
Apr. 2018 Dean and Professor, Faculty of Management (present)
Professor, Graduate School in Business Administration and Economics(present)

Audit & Supervisory Board Member
Audit & Supervisory Board Member

Apr. 1980
Apr. 2005
Apr. 2008
Apr. 2010
Apr. 2011
Apr. 2012

Takashi Terubayashi

Toshio Fuyuki• Attendance at the Board: 13/13 (100%)• Attendance at the Audit & Supervisory Board:
10/10 (100%)• Number of the Company’s shares owned:
13,410 shares• Attendance at the Board: 13/13 (100%)• Attendance at the Audit & Supervisory Board:
14/14 (100%)• Number of the Company’s shares owned:
6,000 shares

Joined the Company
Manager of Hokkaido SalesManager of Marketing Department
Manager of General Affairs and HR
Executive Officer
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 Officee
Apr. 2015 Manager of Finance and Accounting
Apr. 2017 Director, Senior Managing Executive Offcer
June 2017 Representative Director, Senior Managing Director, and Senior Managing Executive
OfficerJune 2018 Representative Director, Senior Managing Executive Officer
Feb. 2019 Responsible for IT and logistics reforms
June 2019 Audit & Supervisory Board Member (present)

59

DAIKEN GROUP REPORT 2020

Audit & Supervisory Board Member

Apr. 1980
Apr. 2000
Apr. 2003
Apr. 2010

Joined the Company
Manager of Dai-Lite product development, Dai-Lite Business Department
Manager of the R&D Center
Executive Officer
Manager of Seibu Eco Business, Eco Business Department, and President of
Okayama Daiken
Apr. 2011 Senior Executive Officer
General Manager of Eco Business and Manager of Seibu Eco Business
Apr. 2013 Managing Executive Officer
Oct. 2013 Manager of Development Planning
Apr. 2014 Manager of General R&D Center
Apr. 2015 Manager of Quality Assurance
June 2017 Audit & Supervisory Board Member (present)

G Governance
A member of Nomination and Remuneration Committee

A member of Corporate Governance Committee*Attendance in the Board as well as the Audit & supervisory board is the status in fiscal 2020.
*The number of shares owned is the number as of the end of March 2020.

Representative Director, Senior
Managing Executive Officer

Tomoaki Kato

Tetsuo Harima• Attendance at the Board: 11/13 (85%)• Number of the Company’s shares owned:
27,730 shares• Attendance at the Board: 13/13 (100%)• Number of the Company’s shares owned:
14,130 shares

Outside Director

Independent

Joined the Company
Manager of Kyushu SalesManager of Kinki Sales
Assistant General Manager of Seibu Sales Control
Assistant General Manager of Tobu Juken Sales Control
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 Responsible for business in Japan, General Manager of Domestic Business (present)
June 2020 Representative Director, Senior Managing Executive Officer (present)

Outside Director

Independent

Shingo Ishizaki• Attendance at the Board: 13/13 (100%)• Number of the Company’s shares owned:
200 shares• Attendance at the Board: 10/10 (100%)• Attendance at the Audit & Supervisory Board:
10/10 (100%)• Number of the Company’s shares owned:
0 shares

Outside Audit & Supervisory
Board member

Independent

Apr. 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, CEO of SI.Management Co., Ltd.
(present)
June 2019 Outside Audit & Supervisory Board Member of the Company
June 2020 Outside Director of the Company (present)

Outside Audit & Supervisory
Board member

Independent

Kiyoshi Mukohara• Attendance at the Board: 12/13 (92%)• Attendance at the Audit & Supervisory Board(13/14) (93%)• Number of the Company’s shares owned: 0 shares• Attendance at the Board: • Attendance at the Audit & Supervisory Board: • Number of the Company’s shares owned :0 shares

Data

Yuko Katsuo

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 andMedium 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 establishmentof the university, council of the establishment of 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 (present)
Apr. 2019 Chairperson and Professor, Graduate School of Management, Gakushuin University (present)
June 2019 Financial Services Agency, Member of the Certified Public Accountants andAuditing Oversight Board (present), Financial Accounting Standards Foundation
Member of the Standards Advisory Council (present)
Dec. 2019 Japan Society for the Promotion of Science, Member of the Committee on
Grants-in-Aid for Scientific Research (present)
Jan. 2020 National Tax Agency, Certified Public Tax Accountant Examiner (present)

ESG Serving as a Foundation of Value Creation

Kiyoshi Furube

Apr. 1977 Joined TOTO Kiki Ltd. (present TOTO LTD.)
Oct. 2003 Manager of Sales Promotion Group in Shikoku
Apr. 2008 General Manager of Sales Promotion Group
June 2008 Executive Officer and General Manager of Sales Promotion Group
June 2010 Director, Executive Officer, General Manager of Sales Promotion Group andSales Control
Apr. 2011 Director, Managing Executive Officer, responsible for the Sales Promotion
Group
Apr. 2012 Director, Senior Managing Executive Officer, responsible for the Sales
Promotion Group
Apr. 2014 Representative Director, Executive Vice President, responsible for all sales
related departments
Apr. 2017 Director
June 2017 Outside Director of the Company (present)
Advisor of TOTO LTD.
June 2019 Retired from Advisor of TOTO LTD.

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

Apr. 1981
Apr. 2004
Apr. 2006
Apr. 2009
Apr. 2010
Apr. 2011

Strategy for Value Creation

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 Manager of 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
Apr. 2017 Responsible for overseas business, General Manager of the Tokyo Office (present)
June 2018 Representative Director, Senior Managing Executive Officer (present)
Apr. 2020 General Manager of Overseas Business, General Manager of Asia Businessand General Manager of North America Business (present)

Daiken Group's Value Creation

Representative Director, Senior
Managing 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 TRUSTHOLDINGS, INC.
Apr. 2012 Representative Director, Deputy Chairman of Sumitomo Mitsui Trust Bank,
LimitedRepresentative 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. (present)
Apr. 2018 Executive Advisor of Sumitomo Mitsui Trust Bank, Limited
Feb. 2019 Retired from Sumitomo Mitsui Trust Bank
Mar. 2019 Advisor of Sumitomo Mitsui Trust Research Institute Co., Ltd. (present)
June 2020 Outside Audit & Supervisory Board Member of the Company (present)

DAIKEN GROUP REPORT 2020

60

S Social
Enhancement of the Quality Control Structure
Initiatives for Product Safety
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.

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 withsafety features that can be used with confidence after the establishment of the Basic Policy on Product Safety below. In addition, we strive tohonestly and sincerely fulfill our accountability to customers and to respond to accidents involving products.
 roviding products that are safe, secure,P
and useful to society
2 Establishment and strengthening of theinternal organization
1(restructuring organization, development of documentation,
etc.)

3

Provision of information

 ollection and disclosure of informationC
on product accidents
5 Report of product accidents
4(immediately report to relevant authorities under the laws
and regulations)6

7(investigate the cause, develop measures to prevent
recurrences, and take necessary action)
8

Product recall (to prevent further incidents)(notes for correct use or handling requirements, etc.)

Initiatives to provide products that canbe used with confidence ormulation of measures to prevent
F
recurrences

Response to the event of a
product accident

 isseminate information and operationalD
assessment(Thorough understanding of laws and regulations andessential policies)

Common initiatives

Key Initiatives• Strengthening of the product quality
and safety inspections• Promotion of the implementation of theuser 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• Review of Quality Standards from theperspective of product safety• Strengthening of purchasing
management

Structure to Promote Product Safety
The Daiken Group established the system to conduct annual reviews performed by the department responsible for product safety and monitor
the status of each department’s activities by following their Product Safety Action Plans in order to continue to provide safe and highly reliable
products and services. Then the Risk and Compliance Management Committee and the Daiken Quality Assurance Committee instruct the
departments to review and modify their Product Safety Action Plans.
1 Each department and group company must review whether the

Risk and Compliance Management Committee andDaiken Quality Assurance Committee
improvement

Product Safety Action Plan

results

1 Review

Implementation

5 Awareness,

Department responsible for product safety(Quality Assurance Department)

Each Department/Group Company

2 Submit and review

4 Instruction for

3 Reporting

Executive officer in charge ofcrisis management
Executive officer in charge of
quality assurance

operation is following the Product Safety Action Plan and submit thereport of its results to the department responsible for product safety(Quality Assurance Department).
2 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.
3 The department responsible for product safety shall summarize thereview results in (2) and then report the measures to improve the Product
Safety Action Plan to the Risk and Compliance Management committee
or Daiken Quality Assurance committee.
4 The Risk and Compliance Management committee or Daiken Quality

Assurance Committee shall provide the instructions necessary for
improvements of the plan.
5 The department responsible for product safety shall provide theinstructions to each department and group company.

Regarding the response to the product accident in the Interior Door RS Series Sliding Door
that occurred in fiscal 2020
In April 2019, an accident occurred where a child caught a finger in the gap between glass and the frame of our product Daiken Interior Door RS
Series Sliding Door 06 Design that was sold in the Kyushu region and got injured. As this accident fell under the category of a serious product accident based on the Consumer Products Safety Act, we reported it to the Consumer Affairs Agency, identified the 425 products produced from
July 2014 to July 2015 that may cause a similar accident, and have been promoting awareness and exchanging products (exchange or repair of
417 products (98%) has been completed as of March 31, 2020). Verification results of the accident cause are shared with the entire group, and wethoroughly implement the recurrence prevention measures and strive to enhance our quality control structure.

61

DAIKEN GROUP REPORT 2020

Fair Transactions
Promotion of CSR Procurement

CSR Procurement Policy and Standards
Procurement Policy

CSR Procurement Standards

Green Procurement Standards

1Compliance with laws and regulations

1

Respect for human rights

1

Environmental management system

2

Fair and even-handed dealings

2Compliance with laws and regulations

2

Chemical substance management

3

Sharing excellent value

3

Occupational safety and health3

Wood from legitimate sources

4

Promotion of green procurement

4

Fair transactions

5

Promotion of CSR procurement

5

Information management

6

Relationship of trust and co-prosperity

6

Coexistence with society

The Daiken Group has been carrying out the CSR questionnaire for suppliers following theProcurement Policy and CSR Procurement Standards since fiscal 2016. In fiscal 2020, we carriedout the questionnaire for 383 suppliers (363 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. We will expand the scope of the questionnaire to manufacturing subsidiaries inJapan that we newly purchased, work together, and promote CSR procurement.
Example of feedback to
the CSR questionnaire
results

Social Contribution Activities by Cooperating with Local Communities
Under the ideas of giving the highest priority to harmonizing society with the environment and aiming to become a company that is loved by
the local communities, the Daiken Group has established the Daiken Social Contribution Activity Policy centering on the three initiatives of(1) Building of Relationships with Local Communities, (2) Wood Material-Related Business Development and Contribution to Environmental
Conservation, and (3) Support for Employee Participation. To specifically deploy this policy, we uphold Social Contribution by Cooperating with
Local Communities as the theme in the medium-term ESG plan, particularly set the scheduled execution of activities in the group’s production
bases that have a deep relationship with the local community as a target, and execute initiatives that are rooted in the community. In fiscal
2020, 17 production bases out of 20 bases at home and abroad planned and executed a total of 126 projects.

Cooperation to the Blood Donation Activities
For the purpose of the contribution to stably
securing of blood essential for medical activities,
we have been continuing the activity to call on
employees to cooperate in blood donations, andin fiscal 2020, a total of about 250 employees
at home and abroad participated. In July 2019,
Osaka Prefecture presented a letter of gratitude tous as we actively cooperated in the promotion of blood donation activities.

Eco Walk/Clean and Beautification Activities

Initiatives for Forest ConservationForthepurposesofenhancingcommunication with local residents,
participants’
healthpromotion,andenvironmental beautification, we hold eco
walk events. In fiscal 2020, we held theevent in three regions of Toyama, Ibaraki, andOkayama. Our employees and their families, as well as those from ourbusiness partners and the local municipality, participated in it and walked
to the finish line according to their physical strength and condition while
carrying out the cleaning activity along the course.

As the initiatives for coastal forest
conservation activities, we participate in the
Yumigahama/Hakusha Seishou (a beautiful
stretch of sandy beach dotted with pinetrees) Adoption Program in Tottori Prefecture.
In fiscal 2020, we participated in nursery tree
planting and cleaning activities. We also manufacture DW fiber, which is asoil improvement additive using cutoff materials from timber lumbered in
the prefecture and have been putting effort into greening of soil, promotionof crop growth, and disaster recovery, such as regeneration of protective
forest from tides and salty winds.

DAIKEN GROUP REPORT 2020

Data

Exchanges through a Plant Tour and Work Experience
We execute plant tours and work experience
for local students at home and abroad tohelp them to cultivate their understanding of
manufacturing and view toward occupation
or working. In fiscal 2020, we accepted a
total of about 800 students and provided
opportunities to learn about jobs in theplant and manufacturing.

ESG Serving as a Foundation of Value Creation

Sample of CSR
questionnaire

Strategy for Value Creation

Carry out the CSR questionnaire for the supplier of the plants and manufacturing subsidiaries in Japan

Daiken Group's Value Creation

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 inwhich people and the environment can coexist. Under these circumstances, we are putting effort into CSR procurement with the cooperationof our business partners.

62Enhancement of the Occupational Safety and Health
Mutual Safety Diagnosis at the Production Bases and Small Group Activity Case Presentation
Contest were Implemented
With a view to improving safety awareness at the production bases, the Daiken Group annually
implements The Daiken Group Mutual Safety Diagnosis intended for the production bases at home
and abroad. The Daiken Group Small Group Activity Case Presentation Contest was also held in
February 2020 and 15 teams selected from each production base in Japan, as well as two teams
from the overseas production base of DAIKEN SOUTHLAND LIMITED (New Zealand), participatedin the contest and made presentations about the cases of production maintenance activities andsafety activities by the small groups. We will aim for the improvement of safety at the production
bases through the continuation of mutual safety diagnosis and the initiatives by the small groups.

The scene of the safety diagnosis

Daiken Engineering Safety Convention was HeldIn April 2019, Daiken Engineering, which is our group company working on interior projects, held the43rd Daiken Engineering Safety Convention, and about 330 Safety and Health Cooperative members, our employees, and others participated in it. In addition to the explanations of the fiscal year
goals and activity policy, it served as a place to become aware of the importance of safety throughthe lecture by the lecturer invited from outside the company. We will continue to improve the occupational safety and health.
Daiken Engineering Safety Convention

Promotion of diversity
Target Management by the Total Diversity Index
In the medium-term ESG plan, we set the Total Diversity Index* in which theeight diversity items were indexed as our own indices and manage the targets. The total index in fiscal 2020 was 71 pt, up 19 pt from fiscal 2019, which
is a benchmark. In particular, the facts that the execution rate of the plan forcareer training intended for young employees, which started from fiscal 2020,
was 100% and that the percentage of male employees taking childcare leavesignificantly increased contributed to this. Regarding the taking of childcare
leave by male employees, the outcomes of the initiatives to strive to increase
the percentage of those taking childcare leave, which have been executed, by
issuing a guidebook for the promotion of childcare leave and e-mail newsletters to the target employees produced such a result. We will steadily proceedwith the measures to achieve the goal and raise the overall level.

The Degree of Attainment of Each Item in the Total Diversity Index
The female employee ratio
120%
The employment rate ofpersons with disabilities

The reemployment
rate of retired
persons

100%
80%
60%
40%
20%
0%

The percentage ofleaving work to care*“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.

The percentage ofmale employees
taking childcare leave

The female
manager ratio

The female
director ratio

Young employees’ career plan training attendance rate
Fiscal 2019

Fiscal 2020

Fiscal 2022 goals

Human Rights Promotion Activities
Prevention of Harassment
In October 2019, as part of the initiatives toward the eradication of harassment, we invited an external instructor andheld Harassment Prevention Seminar intended for the directors and department heads and reconfirmed the causesof and countermeasures for harassment problems that the management layer should understand. We also distributed the Harassment Prevention Guidebook that summarized the basic knowledge of harassment and actions totake to all group employees in February 2020. We promoted the understanding of the importance of the eradicationof harassment through the guidebook and disseminated correct definitions and what actions should be taken. We
will promote the creation of vibrant workplaces without harassment.
Harassment Prevention
Guidebook

63

DAIKEN GROUP REPORT 2020

S Social

Promotion of Workstyle Reform
Realization of Diverse Workstyles

Holding of Kids’ Day

The scene of exchanging business cards withthe president

Past Key Initiatives
Establishment of the Daiken Workstyle Reform Declaration
Payment of the personal
development incentive

Started automatic PC shutdown

Ikuboss declarations

Setting of flexible working hours

Lending smartphones

Introduced the hourly paid leave system

Established the Workstyle
Reform promotion project

Realizationof Daiken
workstylereformTrial of the satellite officeCommencement of the 110
Campaign*

Implementation of theemployee satisfaction survey

Ikuboss declarations

Trial of working at home
Implementation of Kids’ Day

President’s message
Toward the Realization of Workstyle
Reform was transmitted

Implementation of the Casual Day

Ikuboss Guide

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

Enhancement of the Human Resources Development
Training by Rank

Training for department heads by theme

Training to enhance
management capabilities

Female leader development program

Basic training for management

Focused market
enhancement program

Training for female leader candidates

Sales skill
enhancement training(application)

OJT leader training

Training for the persons whoare exclusively in charge

Training for those promoted

Basic training by product

Manufacturing
technology training forthe responsible person
class

Sales skill
enhancement training(basics)

Follow-up training foryoung manufacturing
employees

Lecture on the basic
knowledge ofwooden conventional
housesTraining before
joining the company

Logical thinking training

Responsible
person class

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

New employee orientation

Enhancement of thedevelopment/following-up
of young employees

Manufacturing
technology training forthe leader class

Language education

Leadership enhancement program

Personal
Development

Enhancement of the developmentof the management layer

Department head candidate
development training

Training for new managers

Middle level teamleader class

Manufacturing technology

Correspondence education

Managerial
position class

Senior management candidate
development training

Training for new department heads

Training by Job Type
Sales

Data

Department
head class

Training by Theme

Dispatching to an external business school

Under the principle that the development ofautonomous human resources is essential inaccelerating growth strategies and realizing
sustainable corporate value improvement, we
set training aimed at acquiring a wide variety ofknowledge and skills in a systematic manner according to service years, ranks, and job types. In
fiscal 2020, we newly implemented the Mediumto Long Term Career Plan Training intended foryoung employees who have passed a certain
period since joining the company. Training sets
an opportunity to think about one’s career from a
medium- to long-term perspective, in addition to
the re-examination of how one approaches his/her work and re-recognition of one’s issues. We
will expand and improve the training programs,
including fostering of young employees.

ESG Serving as a Foundation of Value Creation

Established the Workstyle
Reform Promotion OfficeFemale employees meeting

Strategy for Value Creation

In December 2019, we invited our employees’ children to the Tokyo Office and held Kids’ Day forthem to understand our company while having fun by going on an office tour, exchanging a businesscard with the president, and handcrafting things using our products. This event was implemented forthe purposes of having our employees’ families supporting the employees on a daily basis deepen
their understanding of our workplace, exchange with co-workers, and re-realize that the respective
employees have families as important as the entire company. With this, we promote the creation of
the workplace atmosphere where it is pleasant to work and that values the employees’ families. We
will plan and execute the initiatives toward the promotion of a work-life balance on a regular basis.

Daiken Group's Value Creation

The Daiken Group launched the Workstyle Reform Promotion Project in 2015 and has been putting effort into the promotion of workstyle reform. Under the declaration by top management, we have focused on the restriction of long working hours, such as introducing the automatic
PC shutdown to change one’s habits such as working overtime. After that, we developed into the promotion of diverse workstyles, such as
lending of smartphones, use of satellite offices, and trial implementation of working at home. These accumulated initiatives also led to the
response of preventing the spread of the COVID-19 and under the issuance of the state of emergency by the Japanese government, we flexibly responded to the social change as we could maintain the structure that 80% or more of our employees worked at home in the businessbases, such as Tokyo and Osaka. We will aim for the workplace environment where diverse human resources can participate actively andfurther accelerate workstyle reform.

DAIKEN GROUP REPORT 2020

64

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 pf promote Environment Management
President
CSR Committee

QEMS Manager■ Chairperson: Representative Director,President

Secretariat: Quality Assurance Department
and ESG Promotion Department■ Secretariat: ESG Promotion Department and Corporate

Planning Department

QEMS Internal Audit Team<Key Agendas Concerning Environment in Fiscal 2020>• Results and progress of the medium-term ESG plan
(Environment)• Response to the climate change-related issues(Reporting of the scope 3 calculation results)

QEMS Managers in each department
and group company

Strengthen Environmental Risk Management
Based on the basic approach on environment management, the Daiken Group operates the
management system that integrated the ISO 9001-compliant quality management system andthe ISO 14001-compliant environment management system and the overseas production bases
individually acquired the ISO 14001 certificate, and the entire group is putting effort into the improvement of environmental performance. To be able to effectively operate the system of ISO, we
implement internal audits annually, in addition to the periodic review by the external institution, andby continuously following PDCA, such as extracting issues and responding to the improvement,
we raise the level of the company-wide environment management.
ISO 14001 Certificate Acquisition Status (As of the end of March 2020)(1) The percentage of the offices that acquired the certificate in all offices in Japan:
90.6% (Based on the consolidated number of employees)

37 offices and plants
at 9 companies(2) The percentage of the offices that acquired the certificate in all overseas offices:
61.4% (Based on the consolidated number of employees)

5 offices and plants
at 5 companies

The scene of the external review

Recycling of Waste Materials
The Daiken Group aims to realize a recycling-oriented

Breakdown of Waste Processing

society and puts effort into recycling the waste, such as

Final volume disposed of in landfill

reusing defectives generated in the manufacturing process7%

as product materials to the extent possible, using those for

Simple incineration

heat even if those cannot be used for product materials. In
fiscal 2020, by promoting the initiative to increase the use of

2%

47,500 t

promotion of use of heat 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 landfill. We
continue to further improve the recycling rate.

Use for heat27%

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

65

DAIKEN GROUP REPORT 2020

9%

RecyclingAmount ofwaste generated

waste for materials at the Takahagi plant, in addition to the

Valuables91%

Use for materials

54%(reused as ingredients)

Topics
Pursue new possibilities of the industrial materials business by comprehensively
using wood in cooperation with local communities
We upheld “Contribute to the building of a sustainable society by efficiently using limited resources” as one of the elements in the significance ofexistence and ambitions for the long-term vision GP25 in which our vision in 2025 was drawn, have been actively promoting the use of domestic timbersthat are particularly requested by the state policy, and have been pursuing the possibilities of new use application development through thecomprehensive use of wood toward the expansion of the industrial materials business. As one of these initiatives, we established the Nichinan Total
Cascading Use of Wood commercialization study project in November 2016 with Nichinan, Tottori Prefecture, that has been actively putting effort into
the forestry industry and the wood processing industry to use abundant forest resources, Nichinan Forestry Cooperative, and Orochi Co., Ltd., which isa local LVL manufacturer and started new development toward the effective use of wood resources by cooperating with the local community.

After about six months

Established Nichinan Daiken Co., Ltd., a company that processes veneer for LVL
At Nichinan Daiken Co., Ltd., which was established in March 2019, business to give rot-proof and ant-proof treatment to veneers to be
used for LVL as the previous process for LVL to be manufactured by Orochi Co., Ltd. is slated to start.

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

Business Base for Total Cascading of Wood
Conservation of Forests
Appropriate management andoperation of forest resources
will grow healthy forests andcontribute to ecosystemconservation

Use of Renewable
EnergyUse residual wood offcuts oflumber manufacturing as thefuel for the biomass boiler andfully and effectively use theresource

Felled trees
Tree planting

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

Materials C, D

Greening Promotion

Research Institute

Orochi Co., Ltd.

Promotion of
Crop Growth

Promotion of the useof domestic timber

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

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

Wood fiber plant Chip manufacturing
plant

BoilerDisaster Restoration
DW fiber’s soil buffering action willtransform soil to the environment
appropriate for plant growth andimprove salt balance• Development of tree trimmingand planting techniques andhuman resources• Utilization development• Development of productswith highly added value

Data

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

ESG Serving as a Foundation of Value Creation

Development image of the total use of wood through regional cooperation

Strategy for Value Creation

Soil improvement additive DW fiber

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 and Tourism. Registration number: KT-170110-A

Daiken Group's Value Creation

Developed a Soil Improvement Additive DW Fiver and Started Proposing It
A soil improvement additive DW fiber that we started proposing in May 2017 is a soil improvement additive made of timber offcuts(wood chips) that are generated in manufacturing LVL by Orochi Co. Ltd., using wood that the Nichinan Forestry Cooperative hewed out
and that are fibrillated and to which fulvic acid with plant growth-promoting effects is added. It contributes to the greening of the soil andcrop growth promotion, as well as post-disaster reconstruction, such as regeneration of protective forest from salty winds.

Regional Development
Revitalization of the forest
products industry using local
resources will contribute to thedevelopment of local economy
and employment creation

DAIKEN GROUP REPORT 2020

66

Data

Eleven-Year Financial Summary(¥million)

6,000

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

5,000

4,000

3,000

2,000

1,000

0

4.1

3.8
2.6

1.6

1,375

511

874

(¥million)

Fiscal 2010

Fiscal 2011

Fiscal 2012

Fiscal 2013

Net sales

140,936

141,506

151,209

158,153

Cost of sales

104,325

102,345

113,189

119,121

Gross profit

36,61039,161

38,02039,031

Selling, general, and administrative expenses

33,60034,81233,47734,327

Operating profit

3,010

4,349

4,542

4,703

Ordinary profit

2,819

4,373

4,600

5,669

Profit before income taxes

79

3,464

1,893

2,373

Profit attributable to owners of parent

511

1,375

874

1,318

ROE (Return on equity)

1.6%

4.1%

2.6%

3.8%

ROA (Return on assets)

2.3%

3.6%

3.8%

4.4%

Gross profit margin

26.0%

27.7%

25.1%

24.7%

Selling, general, and administrative expenses ratio

23.8%

24.6%

22.1%

21.7%

Operating profit ratio

2.1%

3.1%

3.0%

3.0%

Ordinary profit ratio

2.0%

3.1%

3.0%

3.6%

Cash flows from operating activities

3,141

4,438

9,074

2,624

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

Cash flows from financing activities

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

Free cash flows

(145)

1,819

5,856

591

Capital investments

2,785

3,765

2,758

4,036

Depreciation

4,197

4,574

4,217

4,107

R&D expenses

1,471

1,464

1,470

1,453

Total assets

123,862

115,969

125,469

131,618

Net assets

36,66336,83936,94939,870Shareholder equity

33,21333,30633,56936,002

Shareholder equity ratio

26.8%

28.7%

26.8%

27.4%

Interest-bearing debts

39,40733,72032,86534,506

1.19

1.01

0.98

0.96

1,302.61

1,327.08

1,337.57

1,434.53

Earnings per share (EPS) (¥)

20.04

54.41

34.83

52.53

Dividend per share (¥)

25.00

31.25

37.50

37.50

Dividend payout ratio

124.8%

57.4%

107.7%

71.4%

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

638

786

941

941

Market capitalization

32,76438,65035,88832,249

Employees (Consolidated) (Persons)

3,255

3,189

3,183

3,194

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

67

1,318

DAIKEN GROUP REPORT 2020

（％）
15.0

11.7

12.5

11.7

7.0

7.8

7.0

7.5

5,895

5,447

5,132

5.0

4,402

3,988
2,546

10.0

2,736

Daiken Group's Value Creation

9.5

9.8

2.5

Fiscal 2016

Fiscal 2017

Fiscal 2018

Fiscal 2019

Fiscal 2020

168,833

168,141

168,841

170,581

182,962

202,481

137,693

131,657

127,452

125,201

127,946

139,289

151,442

42,69937,17540,68943,64042,63543,67351,03839,12133,72235,10235,10835,11637,94042,653

3,577

3,452

5,586

8,532

7,519

5,733

8,384

5,025

4,648

5,281

9,033

8,760

6,838

9,108

4,617

1,373

6,875

7,247

8,342

7,301

8,871

2,546

2,736

3,988

5,132

5,895

4,402

5,447

7.0%

7.0%

9.8%

11.7%

11.7%

7.8%

9.5%

3.8%

3.4%

4.0%

6.9%

6.4%

4.5%

5.5%

23.7%

22.0%

24.2%

25.8%

25.0%

23.9%

25.2%

21.7%

20.0%

20.9%

20.8%

20.6%

20.7%

21.1%

2.0%

2.0%

3.3%

5.1%

4.4%

3.1%

4.1%

2.8%

2.8%

3.1%

5.4%

5.1%

3.7%

4.5%

9,663

9,299

6,016

10,566

9,158

10,052

16,807(5,168)(4,072)(5,972)(4,201)(2,711)(15,079)(17,863)(1,054)(2,635)(5,486)(6,734)(6,342)

11,165

1,468

4,494

5,227

43

6,364

6,447

(5,027)(1,056)

3,274

3,206

3,508

4,757

3,081

6,586

5,490

3,990

4,093

4,068

3,506

3,768

4,134

5,079

1,342

1,349

1,430

1,477

1,551

1,592

1,491

135,890

135,596130,315132,171

140,776

160,158

170,638

41,41944,984

43,83349,08656,97961,741

62,975

37,15440,57340,78946,61454,24458,90455,778

27.3%

29.9%

31.3%

35.3%

38.5%

36.8%

32.7%

34,59934,20431,43826,33821,95230,78443,876

0.93

0.84

0.77

0.57

0.40

0.52

0.79

1,480.47

1,669.47

1,692.28

1,933.99

2,250.58

2,264.10

2,142.99

101.46111.70164.67212.96244.60174.55209.32

37.50

37.50

50.00

64.00

74.00

74.00

70.00

37.0%

33.6%

30.4%

30.1%

30.3%

42.4％

33.4%

941

914

1,210

1,542

1,783

1,925

1,821

35,26032,93137,842

49,67560,54556,03944,143

3,141

3,191

3,060

3,071

3,073

3,287

3,807

DAIKEN GROUP REPORT 2020

Data

Fiscal 2015

180,392

ESG Serving as a Foundation of Value Creation

Fiscal 2014

Strategy for Value Creation

0

68

Data

ESG Data

E Environment
Scope

Unit

2016

2017

2018

2019

2020 (Fiscal year)

1,000 GJ
(Heat quantity
equivalent)

2,815

2,841

2,888

2,874

2,914

42

48

50

50

50

2,032

2,124

2,041

1,943

1,865

1,543

1,664

1,572

1,455

1,381

1,000 t

47.5

49.6

48.8

48.6

47.5

Percentage of final volume
disposed of in landfill

％

5.7

7.2

7.5

7.6

7.2

Emissions/Transfer volumet

Total energy input％

Percentage of renewable energy
Effective use of water
resources

Quantity of water intake
Discharge of drainage

Group
production
bases in Japan

Amount generated
Waste, etc.
PRTR

Scope 1 (Direct emissions)Greenhouse gas

Scope 2 (Indirect emissions)
Scope 1 + 2Groupconsolidation inJapan

1,000 m3

32

8

10

13

13

48.4

39.2

36.1

35.4

35.4

66.5

64.7

63.2

58.6

59.9

114.8

103.9

99.3

93.9

95.3

1,000 t-CO2

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

2020

Percentage (%)

Emissions（1,000 t-CO2）(Fiscal year)

Percentage (%)

Category 1. Purchased goods andservices

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

65.4

Category 2. Capital goods

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

19.7

1.7

12.4

1.0

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 that one’s
company purchased

8.6

0.7

16.8

1.4

Category 4. Upstream transportation anddistribution(1) Emissions associated with the logistics (transportation,
cargo handling, and storage) of the products andservices purchased in the reporting fiscal year from the
supplier to one’s company(2) Emissions (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

10.7

Category 5. Waste generated inoperations

Emissions associated with the transportation and disposalof waste generated in one’s company

3.1

0.3

3.2

0.3

Category 6. Business travels

Emissions associated with the employees’ businesstravels

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

Category 8. Upstream leased asset

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

－

－

−

−

Category 9. Downstream transportationand distribution

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

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

Category 11. Use of sold products

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

41.1

3.5

36.7

3.0

Category 12. End-of-life treatment of soldproducts

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

89.6

7.6

90.3

7.4

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. Investments

Emissions related to investment management

－

－

−

−

1,077.7

92.0

1,120.6

92.2

Scope 1 (Direct emissions)

35.4

3.0

35.4

2.9

Scope 2 (Indirect emissions)

58.6

5.0

59.9

4.9

1,171.7

100.0

1,215.9

100.0

Scope 3 Total

Total

69

Emissions（1,000 t-CO2）

DAIKEN GROUP REPORT 2020

S Social
Number of Employees
Scope

Unit

2017

2018

2019

2020 (Fiscal year)

3,060

3,071

3,073

3,287

3,807

2,231

2,245

2,248

2,275

2,332

Global

829

826

825

1,012

1,475

Average age

40.9

41.2

41.4

41.6

41.6

37.4

37.5

37.7

38.6

38.8

41.7

42.2

42.2

42.4

42.4

17.3

17.6

17.7

17.7

17.5

11.0

11.1

11.5

11.6

11.6

18.8

19.3

19.3

19.3

19.2

18.4

18.9

19.5

20.2

21.9

35.9

37.5

34.0

20.3

34.6

0.92

0.64

0.62

1.04

1.23

2

10

5

12

28

0

8

0

7

20

2

2

5

5

8

％

100

100

100

100

100

Non-consolidated

％

2.08

2.10

1.80

2.03

1.95

Non-consolidated

％

49.5

51.8

49.8

53.9

64.9

Group production basesin Japan*

％

99

100

100

100

100

Japan

Group consolidation

Persons

Age

FemaleMale
Average length of service

Non-consolidated

FemaleYear

Male

Daiken Group's Value Creation

2016

Number of employees (Consolidated)

Women’s Active Participation
The female employee ratio％

Non-consolidated

The female manager ratio

Childcare Leave
Number of employees taking childcare leave
Male

Non-consolidated

FemalePersons

The rate of returning to work from childcare leave

Strategy for Value Creation

The ratio of female employees hired

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

CSR Procurement
The rate of acquisition of the agreement on the
CSR procurement standards*One production base in Japan in fiscal 2016, four production bases in Japan from fiscal 2017 to 2018, and the group production bases in Japan from fiscal 2019 to 2020

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

Group production basesin Japan

-

0.78

0.42

0.82

1.22

0

%

100

100

100

100

100

2016

2017

2018

2019

2020 (Fiscal year)

9

9

9

9

7

2

2

2

2

2

G GovernanceDirector Composition
Scope
Number of Directors
Number of Outside Directors

Non-consolidated

Unit
Persons

ESG Serving as a Foundation of Value Creation

Annual Paid Leave
Acquisition of paid holidays*The number of persons are the figures as of the end of June in each fiscal year

Data

Status of the Board Convened
Number of the Board convened
Attendance rate of Outside Directors

Non-consolidated

Times

13

12

12

15

13

％

96

100

95

100

100

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

Times

14

14

13

14

14

％

100

100

100

100

97

Total/persons

2,298

516

3,276

863

1,337

1

4

1

6

14

Non-consolidated

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

Non-consolidated

Case

For more information, please visit our website.

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

DAIKEN GROUP REPORT 2020

70

Data

Financial Statements
Consolidated Balance Sheet(¥million)

Previous
consolidated
fiscal year

Current
consolidated
fiscal year

(March 31, 2019)(March 31, 2020)

AssetsPrevious
consolidated
fiscal year

Current
consolidated
fiscal year

(March 31, 2019)(March 31, 2020)

Notes and accounts payable-trade22,902

20,209Liabilities

Current assets

Current liabilities

Cash and deposits

16,865

16,839Notes and accounts receivable-trade

43,01235,825

Electronically recorded obligations-operating

7,671

6,637

Electronically recorded monetary claims-operating

7,499

6,267

Short-term loans payable

5,929

8,885

15

－

Current portion of bonds

400

7,000

Merchandise and finished goods

12,00915,812Current portion of long-term loans payable

3,414

3,260

Work in process

3,687

4,064

Lease obligations

37

140

Raw materials and supplies

5,667

7,134

Accounts payable-other

22,526

19,486

Other

2,915

2,113

Income taxes payable

2,021

1,671

Allowance for doubtful accounts

(120)

(123)

Accrued consumption taxes

60

1,150

91,55387,934

Provision for bonuses

2,120

2,397

850

740

Securities

Total current assets

Provision for product warranties

Non-current assets

－

168

Other

4,002

5,827

20,356

Total current liabilities

71,93877,575

14,649Non-current liabilities
Bonds payable

10,00013,000Long-term loans payable

10,93911,394

Property, plant, and equipment

Provision for loss on litigation

Buildings and structures, net

10,744

12,335

Machinery, equipment, and vehicles, net

13,344Land

13,735

Leased assets, net
Construction in progress

70

37

1,416

1,103

Other, net

2,009

2,943

Lease obligations

62

195

Total property, plant, and equipment

41,321

51,426

Deferred tax liabilities

1,342

1,479

Goodwill

4,473

12,631

Net deferred benefit liability

Software

1,619

1,574

Negative goodwill

Provision for product warranties

Intangible assets

Other

281

627

6,375

14,834

Investment securities

16,761

12,620Net defined benefit asset

1,795

879

Total intangible assets
Investments and other assets

Deferred tax assets

Other
Total non-current liabilities
Total liabilities

465

266

3,508

3,554

23

19

137

176

26,47830,087

98,416

107,662

Net assets

513

1,421

Other

1,795

1,498

Capital Stock

15,30015,300Allowance for doubtful accounts

(34)

(68)

Capital surplus

14,071

14,08020,831

16,351Retained earnings

25,50729,081

68,52882,612

Treasury shares(1,418)(1,403)

Total shareholder’s equity

53,46057,0592,912

Total investments and other assets
Total non-current assets
Deferred assets
Bond issuance cost

75

91

Total deferred assets

75

91

160,158

170,638

Total assets

71(¥million)

DAIKEN GROUP REPORT 2020

Shareholder’s equity

Accumulated other comprehensive income
Valuation difference on available for-sale securities

5,161

Deferred gains or losses on hedges

132

(443)

Foreign currency transaction adjustment(176)(3,493)Remeasurements of defined benefit plans

326

(256)

Total accumulated other comprehensive income

5,444(1,281)

Non-controlling interests

2,837

7,197

Total net assets

61,741

62,975

Total liabilities and net assets

160,158

170,638

Consolidated Statements of Income

Consolidated Statements ofComprehensive Income(¥million)(¥million)

Current
consolidated
fiscal year

Previous
consolidated
fiscal year

Current
consolidated
fiscal year

(April 1, 2018 toMarch 31, 2019)(April 1, 2019 toMarch 31, 2020)(April 1, 2018 toMarch 31, 2019)(April 1, 2019 toMarch 31, 2020)

Net sales

182,962

202,481

Profit

4,597

6,512

Other comprehensive income(2,251)

139,289

151,442

43,67351,038Valuation difference on available for-sale securities(1,738)Selling, general, and administrative expenses

37,94042,653

Deferred gains or losses on hedges

103

(608)

Operating profit

5,733

8,384

Foreign currency transaction adjustment(453)(3,691)Re-measurements of defined benefit plans, net of tax

(82)

(583)

Interest profit

63

58

Share of other comprehensive income of entities
accounted for using equity method

(0)

(0)

Dividend income

454

452

(2,170)(7,135)

Rent income

178

171

2,427

(623)

Dividend income of life insurance

48

40(breakdown)
2,272(1,277)154654

Non-operating profit

Total other comprehensive income
Comprehensive income

Amortization of negative goodwill

103Comprehensive income attributable to owners of parent

Share of profit of entities accounted for using equity method

52

49

Comprehensive income attributable to noncontrolling interests

Exchange gain

39－

Reversal of allowance for doubtful accounts

1

－

659

606

1,506

1,380

Interest expenses

161

291

Sales discounts

128

132

Miscellaneous profit
Total non-operating profit
Non-operating expenses

7

15

Foreign exchange losses－

81

Miscellaneous expenses

103

136

Total non-operating expenses

401

656

6,838

9,108

Ordinary profit

ESG Serving as a Foundation of Value Creation

Loss on sales of accounts receivable

Extraordinary profit
Gain on sales of non-current assets

30

39

Gain on sales of investment securities

165

345

－

163

State subsidy
Compensation income

953－

Total extraordinary profit

1,149

549

Extraordinary losses
13

13

220

157

Loss on reduction of non-current assets－

156

Loss on sales of investment securities－

148

Loss on valuation of investment securities

104－

Compensation payments

347－

Provision for loss on litigation

－

184

Other

0

126

Total extraordinary losses

686

786

Profit before income taxes

7,301

8,871

Income taxes - current

2,195

2,830

Income taxes in the past fiscal year

681－

Income taxes - deferred

(172)

(470)

Total income taxes

2,703

2,359

Profit

4,597

6,512

Profit attributable to non-controlling interests

195

1,064

Profit attributable to owners of parent

4,402

5,447

Data

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

Strategy for Value Creation

Cost of sales
Gross profit

Daiken Group's Value Creation

Previous
consolidated
fiscal year

DAIKEN GROUP REPORT 2020

72

Data

Financial Statements
Consolidated Statements of Changes
in Net Assets(¥million)
Current
consolidated
fiscal year

Previous
consolidated
fiscal year

Current
consolidated
fiscal year

(April 1, 2018 toMarch 31, 2019)(April 1, 2019 toMarch 31, 2020)(April 1, 2018 toMarch 31, 2019)(April 1, 2019 toMarch 31, 2020)

7,301

8,871

4,134

5,079

Cash flows from operating activities
Profit before income taxes

Capital Stock
Balance at beginning of current period

13,15015,300Issuance of new shares

2,149

Balance at end of current period

15,30015,300

Balance at beginning of current period

11,943

14,071

Issuance of new shares

2,117

Disposal of treasury shares

10

9

14,071

14,080Capital surplus

Retained earnings

Depreciation
Amortization of bond issuance cost

29

35

Loss on retirement of non-current assets

220

157

Loss (gain) on sales of non-current assets

(17)

(26)

Loss (gain) on sales of investment securities

(165)

(196)

Loss (gain) on valuation of investment securities

104－

Amortization of goodwill

475

1,315

Increase (decrease) in allowance for doubtful accounts

035

Increase (decrease) in provision for bonuses

(76)

171

Balance at beginning of current period

23,00725,507

Increase (decrease) in provision for product warranties

(562)

(318)

Dividends of surplus(1,902)(1,873)

Increase (decrease) in net defined benefit liability

629

996

Profit attributable to owners of parent

4,402

5,447

Increase (decrease) in provision for loss on litigation－

169

Balance at end of current period

25,50729,081

Interest and dividend income

(517)

(510)

Interest expenses

161

291

(1,430)(1,418)Foreign exchange losses (gains)

64

(23)

Purchase of treasury shares

(0)

(0)

Share of (profit) loss of entities accounted for using equity method

(52)

(49)

Disposal of treasury shares

12

15

Decrease (increase) in notes and accounts receivable-trade(2,438)

9,902(1,418)(1,403)

Decrease (increase) in inventories(3,914)(847)

Increase (decrease) in notes and accounts payable-trade

5,352(6,986)

Decrease (increase) in consumption taxes refund receivable

(368)

364

Increase (decrease) in accrued consumption taxes

(336)

1,089

Treasury shares
Balance at beginning of current period

Balance at end of current period
Total shareholders’ equity
Balance at beginning of current period

46,670Issuance of new shares

4,267

53,460

Dividends of surplus(1,902)(1,873)

Other

1,117

252

Profit attributable to owners of parent

4,402

5,447

Subtotal

11,143

19,773Purchase of treasury shares

(0)

(0)

Interest and dividend income received

517

510

Disposal of treasury shares

22

25Interest expenses paid

(161)

(290)

53,46057,059Balance at end of current period
Accumulated other comprehensive income
Valuation difference on available for-sale securities

Income taxes paid

(1,446)(3,185)

Cash flows from operating activities

10,052

16,807

Cash flows from investing activities

Balance at beginning of current period

6,897

5,161

Proceeds from withdrawal of time deposits－131

Net changes of items other than shareholders’ equity, net(1,735)(2,249)Purchase of property, plant and equipment(6,932)(5,526)

Balance at end of current period

5,161

2,912

Proceeds from sales of property, plant and equipment

40

143

Purchase of investment securities

(5)

(54)

466

1,183

(8,237)(13,419)

Deferred gains or losses on hedges
Balance at beginning of current period

22

132

Proceeds from sales and redemption of investment securities

Net changes of items other than shareholders’ equity, net

110

(575)

Balance at end of current period

132

(443)

Purchase of shares of subsidiaries resulting in change in scopeof consolidation
Proceeds from purchase of shares of subsidiaries resulting inchange in scope of consolidation

Foreign currency transaction adjustment
Balance at beginning of current period

245

(176)

Net changes of items other than shareholders’ equity, net(421)(3,316)

Balance at end of current period(176)(3,493)Remeasurements of defined benefit plans
Balance at beginning of current period

409

326

Net changes of items other than shareholders’ equity, net

(82)

(583)

Balance at end of current period

326

(256)

Balance at beginning of current period

7,574

5,444

Net changes of items other than shareholders’ equity, net(2,129)(6,725)

Balance at end of current period

5,444(1,281)

Total accumulated other comprehensive income

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

2,734

2,837

102

4,359

2,837

7,197

Total net assets
Balance at beginning of current period

73(¥million)

Previous
consolidated
fiscal year
Shareholder’s equity

Balance at end of current period

Consolidated Statements of Cash Flows

56,97961,741

Issuance of new shares

4,267

Dividends of surplus(1,902)(1,873)

Profit attributable to owners of parent

4,402

5,447

Purchase of treasury shares

(0)

(0)

Disposal of treasury shares

22

25

Net changes of items other than shareholders’ equity, net(2,026)(2,365)

Balance at end of current period

61,741

62,975DAIKEN GROUP REPORT 2020

Other
Cash flows from investing activities

－

140

(412)

(461)

(15,079)(17,863)

Cash flows from financing activities

315(3,037)

Proceeds from issuance of bonds

－

9,949

Redemption of bonds

－

(474)

Net increase (decrease) in short-term loans payable

Proceeds from long-term loans payable

12,200800

Repayments of long-term loans payable(3,623)(3,715)

(39)

(116)

Repayments of finance lease obligations
Proceeds from share issuance
Proceeds from share issuance to non-controlling shareholders
Purchase of treasury shares
Cash dividends paid

4,267

－

9

－

(0)

(0)

(1,902)(1,873)

(60)

(62)

11,165

1,468

Effect of exchange rate change on cash and cash equivalents

(40)

(438)

Net increase (decrease) in cash and cash equivalents

6,097

(26)

Cash and cash equivalents at beginning of period

10,767

16,865

Cash and cash equivalents at end of period

16,865

16,839Dividends paid to non-controlling interest
Cash flows from financing activities

1.0

Stock Information (As of March 31, 2020)
0.8

Stock Information

Breakdown of Shares by Type of Shareholder

Total number of authorized shares

79,643,600

Total number of shares issued

27,080,043

（%）
100

0.70%
4.26%
7.48%

4,055

Number of shareholders
Shareholder registry administrator

14.60%

80

Sumitomo Mitsui Trust Bank, Limited

30.11%

0.30%
3.88%

6.15%

5.96%

13.96%

14.45%

29.43%

29.80%
Securities
companies

ITOCHU Corporation

Foreign institutions
and others

Number of
SharesOwnership
Ratio (%)

9,103,100

35.0

Name

Treasury stock40

Major Shareholders

46.22%

42.85%

20

Individuals andothers

45.61%

Financial institutions
Other Japanesecompanies0

4.0

Sumitomo Mitsui Banking Corporation

986,980

3.8

SUMITOMO LIFE INSURANCE COMPANY

931,200

3.6

Japan Trustee Service Bank Ltd. (Trust Account)

896,500

3.4

DAIKEN CORPORATION Trading-Partner
Shareholding Association

790,100

3.0

Sumitomo Mitsui Trust Bank, Limited

688,000

2.6

Sumitomo Forestry Co., Ltd.

638,200

2.5

2016

2017

2018

2019

2020
(Fiscal year)

Marubeni Corporation

564,388

2.2

DAIKEN CORPORATION (%) 119.6

160.5

199.3

178.3

149.7

DAIKEN CORPORATION Employee Shareholding
Association

551,864

2.1

89.2

102.3

118.5

112.5

101.8

2018

2019

2020 (End of the period)

Total Shareholder Return

TOPIX (%)

(Note) 1. DAIKEN CORPORATION is in possession of 1,051,904 treasury shares. However, the Company
is excluded from the above list of major shareholders.
2. The ownership ratio is calculated excluding the treasury stock.

(Note) 1. T otal shareholder return: This expresses the total investment return for a shareholder thatcombines the amount of the stock price increase and dividend.
2. This is calculated using the calculation formula specified by the Cabinet Office Ordinance.
3. Figures are as of the end of each fiscal year from 2016 to 2020.

(For last 10 years)

605

560

496

250

386
200

358

322

352

441

378
329

ESG Serving as a Foundation of Value Creation

Trend of Stock Price/Market Capitalization/PER/PBR
MarketCapitalization(¥100 million)

Strategy for Value Creation

1,031,000

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

Daiken Group's Value Creation

60

0.31%
3.93%

150

100

Data

Stock price of DAIKEN CORPORATION

50

TOPIX

*Figures of stock price of DAIKEN CORPORATION and TOPIX are indexed, based on the data of closing prices on March 31, 2010.

0

High (¥)(Fiscal year)

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

1,615

1,635

1,450

1,530

1,635

2,050

2,349

3,150

2,844

2,291

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

885

1,045

830

1,135

1,180

1,130

1,918

1,950

1,747

1,316

1,540

1,430

1,285

1,405

1,355

1,570

2,061

2,512

2,154

1,696

28.30

41.06

24.46

13.85

12.13

9.53

9.68

10.27

12.34

8.10

PBR (times)

1.16

1.07

0.90

0.95

0.81

0.93

1.07

1.12

0.95

0.79

(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 2020

74

Data

Company Information (As of March 31, 2020)
Subsidiaries part of the Group

Production baseIndustrial materials business

Building materials businessEngineering business

TDY Collaboration Showroom
You can see products from three 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.

Domestic
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

TDY Tokyo

Dai-tac Corporation
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
C&H Co., Ltd.

DAIKEN ENGINEERING CORPORATIONDAIKEN HOME & SERVICE CORPORATION
Smileup Corporation

75

DAIKEN GROUP REPORT 2020

Operational Headquarters
Osaka officeCompany NameDAIKEN CORPORATIONFounding

September 26, 1945

Capital Stock15.3 billion yen

Stock Exchange
Listings

First Section, Tokyo Stock Exchange
7905

Setting Day

March 31

General Meetingof Shareholders

June

1-1, Inami, Nanto City, Toyama, Japan

Operational
Headquarters

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

Global

PACIFIC WOODTECH CORPORATION(USA)

Singapore Branch

DAIKEN MIRI SDN.BHD.
(Malaysia)

ESG Serving as a Foundation of Value Creation

DAIKEN Industries (Ningbo)
Corporation (China)

Strategy for Value Creation

CIPA Lumber Co., Ltd.
(Canada)DAIKEN (Shanghai) Corporation (China)

Daiken Group's Value Creation

Security CodeRegistered Head
OfficeIndonesia 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 202076

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 October 2020