Integrated Report
2020
Fiscal Year Ended December 2019

Creating a Safer,More Secure
Eco-Friendly Society

Nisshinbo Holdings Inc.
2-31-11, Ningyo-cho, Nihonbashi,
Chuo-ku, Tokyo 103-8650, JAPANTEL +81-3-5695-8833 FAX +81-3-5695-8970

www.nisshinbo.co.jp/english/

Nisshinbo Group

Corporate Philosophy
Based on its commitment to VALUE and its Business Conduct Guidelines, which are derived
from the Corporate Philosophy, the Nisshinbo Group aims to increase corporate value together
with stakeholders as an Environment and Energy Company group that works to createa sustainable society.

Integrated Report
Rationale

The Nisshinbo Group’s business strategy is to help create a super smart
society as an Environment and Energy Company group, in line with its
Corporate Philosophy – “Change and Challenge! For the creation of the
future of Earth and People.” At Nisshinbo, everything we do is anchoredby the concept of contributing to society through our business activities asa Public Entity, which aligns with our stance on environmental, social andgovernance (ESG) themes and will support efforts to realize the sustainable
development goals (SDGs).
With this year’s Integrated Report, we have provided more non-financial
information, such as details about our stance on the SDGs, ESG and risk

Nisshinbo Group Corporate Philosophy

Change and Challenge!
G

For the creation of the future
Corporate
Philosophy

Gof Earth and People.
E

management, aiming to create an informative tool as part of dialogue withinvestors and other stakeholders. Going forward, we will work even harder

E = Environment

Prevent climate change andatmospheric pollution, protect
biodiversity, manage water
resources, etc.

to provide useful information that contributes to constructive dialogue.

S = Social

Respect human rights, promote
diversity, ensure employee healthand safety, etc.

Masahiro Murakami
President
Nisshinbo Holdings Inc.

G = GovernanceCompliance, risk management, etc.

S

VALUE

VALUE
— The value we provide and the approach we take to realize
our Corporate Philosophy

Business Conduct
Guidelines

Fundamental Spirit

PublicEntityConsistent
Integrity

Innovation• We provide our customers with eco-friendly products and services to create asafer and more secure society with integrity.
• We create new value to inspire and satisfy our customers.
• We improve upon our corporate value and meet the expectations of
our shareholders.
• We hold dear a corporate culture in which our employees can proudly workwith vigor and boldly engage in new endeavors.

Business Conduct Guidelines— Standards of behaviour expected of every Group employee• Respect for Human Rights • Thorough-Going Compliance• Respect for Diversity• Awareness and Concern towards our Environmental Impact• Safety is the Basis for Everything• Fair and Transparent Business Practices • Boldly Striving Forward• Innovation • Quality Communication

Mobility

Supporting Efforts toRealize the SDGs
We aim tocontribute to
the SDGs bydeveloping
our business instrategic fields.

The Nisshinbo Group’s Corporate Philosophy is“Change and Challenge! For the creation of the
future of Earth and People.” That philosophy coincides
with the aims of the Sustainable Development Goals(SDGs), which we are working towards through ourbusiness activities as an Environment and Energy

Infrastructure& Safety

Company group.

Guidelines Used to Prepare the Report“International Integrated Reporting Framework,” International Integrated Reporting
Council (IIRC)“Guidance for Integrated Corporate Disclosure and Company-Investor Dialogues for
Collaborative Value Creation,” Ministry of Economy, Trade and Industry (METI)“Sustainability Reporting Standards,” Global Reporting Initiative (GRI)1

Life& Healthcare

Contents

Nisshinbo Group Snapshot
Note: The fiscal period ended December 2018 is a nine-month transitional period (Mar-Dec 2018) due to a change in fiscal year-end.

Net Sales
C2

Nisshinbo Group Corporate Philosophy

1Integrated Report Rationale /Supporting Efforts to Realize the SDGs

2

Contents

Profile(billions of yen)36

At a Glance

15

37

Wireless and Communications

40—Message from the President of JRC Mobility

41

Micro Devices

Nisshinbo Group Snapshot

44—Message from the Chairman of New Japan Radio

4The Nisshinbo Group’s Corporate History

45

Automobile Brakes

50

Precision Instruments

54

Chemicals

6

The Nisshinbo Group’s Approach to Value Creation

57—Message from the President of Nisshinbo Chemical

8

To Our Shareholders and Investors

58

Textiles14Interview with Chief of Corporate Strategy Center

60

Real Estate

TextilesWireless andCommunications

Chemicals

Precision
Instruments¥6.4 billion

10

Period ended
December 20195¥509.6 billion

0

Micro Devices

Wireless andAutomobile
Chemicals
Real EstateCommunications
BrakesMicro Devices
Precision
TextilesOthersInstruments

Automobile Brakes

Operating Income / Loss*EPS

Shareholders’ Equity Ratio
and ROE

17

Creating a Safe and Secure Society

62

Corporate Governance(billions of yen)

(yen)

(%)

21

Creating a Sustainable Society

68

Board of Directors, Audit & Supervisory Board

16

200

50

12

150

8

100

Shareholders’ Equity Ratio

ROE

StrategyManagement Framework

ESG Special Feature

Real Estate Others

Period ended
December 2019

Profile3

Strategy

Operating Income

Overview of Business Segments

Members and Managing Officers—Implementing Environmental Management

26

Mobilizing the Power of Individuals

70Managing Risks and Opportunities

29

Creating Safe and Healthy Working Environments

73

Nisshinbo’s Response to the COVID-19 Outbreak

32

The Nisshinbo Group’s Value Chain

74

Compliance34

Reinforcing Corporate Governance40
ESG Special Feature

24

30
20

Financials—Outside Director Message

The Nisshinbo Group’s Financial Strategy

78

Eleven-Year Summary

80

Management’s Discussion and Analysis

84

Financial Statements

50

0

0

–40

–50
2016.3 2017.3 2018.3 2018.12 2018.12 2019.12

History92

Key Companies in the Nisshinbo Group93

Corporate Data

THE INCLUSION OF Nisshinbo Holdings Inc. IN ANY MSCI INDEX, AND THE USE OF MSCILOGOS, TRADEMARKS, SERVICE MARKS OR INDEX NAMES HEREIN, DO NOT CONSTITUTEA SPONSORSHIP, ENDORSEMENT OR PROMOTION OF Nisshinbo Holdings Inc. BY MSCIOR ANY OF ITS AFFILIATES. THE MSCI INDEXES ARE THE EXCLUSIVE PROPERTY OF
MSCI. MSCI AND THE MSCI INDEX NAMES AND LOGOS ARE TRADEMARKS OR SERVICEMARKS OF MSCI OR ITS AFFILIATES.

* Operating income for the fiscal year ended December 2018 has been adjusted to facilitate year-on-year comparison.

Number of Employees

Research andDevelopment Expenses

Greenhouse Gas
Emissions per Unit of Sales(thousand)(billions of yen)(t-CO2/million yen)

25

25

1.5

20

20

1.2

15

15

0.9

10

10

0.6

5

5

0.3

0

0

0

2016.3 2017.3 2018.3 2018.12 2019.12

2

2016.3 2017.3 2018.3 2018.12 2019.12

2016.3 2017.3 2018.3 2018.12 2019.12

3

Financials

THE USE BY NISSHINBO HOLDINGS INC. OF ANY MSCI ESG RESEARCH LLC OR ITSAFFILIATES (“MSCI”) DATA, AND THE USE OF MSCI LOGOS, TRADEMARKS,SERVICE MARKS OR INDEX NAMES HEREIN, DO NOT CONSTITUTE A SPONSORSHIP, ENDORSEMENT, RECOMMENDATION, OR PROMOTION OF NISSHINBOHOLDINGS INC. BY MSCI. MSCI SERVICES AND DATA ARE THE PROPERTY OF
MSCI OR ITS INFORMATION PROVIDERS, AND ARE PROVIDED ‘AS-IS’ AND
WITHOUT WARRANTY. MSCI NAMES AND LOGOS ARE TRADEMARKS OR SERVICEMARKS OF MSCI.

–10Management Framework

As of 2020, Nisshinbo Holdings Inc. received
an MSCI ESG Rating of AA.

0

2016.3 2017.3 2018.3 2018.12 2019.12(adjusted)

91

10

Business Segments

76

4

2016.3 2017.3 2018.3 2018.12 2019.12

The Nisshinbo Group’s Corporate History

Long-term Goal: ROE 12% (2025)
Strategic business domains

Transforming the Business Portfolio toAddress Society’s Changing Needs

1940-

1950-

2000-

1878

1944

1958

2005

Walter Willson Cobbett Ltd.,
TMD’s forerunner company,
foundedProduction of friction materials
startedEstablished Nihon KohbunshikanCo., Ltd., begins production ofplastic bobbins

New Japan Radio Co., Ltd.
becomes a consolidated subsidiary

Develop our business in fields such asindustrial machinery, ships, aircraft anddrones, as well as automobiles.
Go beyond the production of parts andmaterials, utilizing the data our equipment
gathers to develop businesses that support
safe ship operation and energy efficiency.

Help to prevent or mitigate disasters(including through water management
systems and weather radar).
Support the creation of a hydrogenoriented society (develop fuel cell partsand materials.)

Leverage our strengths in sensor,
ultrasound, wireless and othertechnologies to create new businesses.

Nisshinbo Group Net Sales (billions of yen)
Electronics (Wireless and Communications, Micro Devices)

Automobile Brakes

Others* Nine months of results due to change in fiscal year-end

600

500

400

300

200

ESG Special Feature

1878-

Life & Healthcare

Strategy

From 1945, the Group stepped up moves into new business fields such as automobile brakes andchemicals, diversifying its operations during Japan’s recovery and rapid economic growth in the postwar
period. In the 1960s, the automobile brakes business expanded, spurred by the growing popularity ofcars in Japan. Nisshinbo also actively developed its precision instruments and chemicals businesses,
building new plants and adding capacity. The yen’s appreciation after the Plaza Accord in 1985 forced
Nisshinbo to reorganize its operations and actively move into overseas markets. Today, more than 50%of the Group’s sales are generated overseas and over half of the Group’s workforce is outside Japan.
There have also been major changes in the consolidated sales ratio of each business.

Infrastructure & Safety

ProfileTMD’s brake business has the longest history of any business in the Nisshinbo Group, tracing its
roots back to 1878. Nisshin Cotton Spinning Co., Ltd. was established not long after that in 1907.
From those starting points, the Group has continued to expand by actively reorganizing its
portfolio to align its businesses with society’s changing needs. Nisshinbo’s mission is to contributeto society through its business activities, guided by the Nisshinbo Group Corporate Philosophy– “Change and Challenge! For the creation of the future of Earth and People.”

Mobility100

02010.32011.32012.32013.32014.32015.32016.32017.32018.32018.12* 2019.12

Business portfolio reforms

1915

1949

Nippon Radio Telegraph
Manufacturing Co. founded(now Japan Radio Co., Ltd.)

Nagano Japan Radio Co., Ltd.,
Ueda Japan Radio Co., Ltd.,TOKYO SHIRTS CO., LTD. founded

1959

New Japan Radio Co., Ltd. foundedFoundation brakes business sold
Acquired Ricoh Electronic Devices
Co., Ltd., making it a consolidated
subsidiary
ProNav AS acquired
New Japan Radio Co., Ltd. becomesa wholly owned subsidiary

2011

TMD Friction Group S.A. acquired
2013

2015

TOKYO SHIRTS CO., LTD. acquired
Nanbu Plastics Co., Ltd. acquired
2017

Alphatron Marine Beheer B.V. acquired

Papers business soldJapan Radio Co., Ltd. becomesa wholly owned consolidated subsidiary

2015

2016

2018

Dividend policy revised (dividend raised
from ¥15 to ¥30, consolidated dividend
payout ratio target of 30% adopted)
Number of outside directors increased(from 3 to 4, including one female
director), takeover defense measuresabolished
Stock’s industry classification changed,
trading unit reduced

Corporate Governance Policy formulated
Nomination Committee and Remuneration
Committee established
Number of directors reduced(from 13 to 10, including 4 outside directors)

Fiscal year-end changed

2019

Established NJ Components Co., Ltd.
to operate business acquired fromFKD Corporation

Corporate governance reforms
2006

Outside director system andmanaging officer system
introduced, term of office fordirectors changed(reduced from 2 years to 1)• National modernization andindustrialization• Transition in key • Global warming and other shared issues
industries
faced by mankind(from textiles to automobiles)

Nisshinbo Group’s role

• Contributed to Japan’s modernizationas cotton textile maker• Supported development of automotive sector
as specialist supplier of friction materials

2017

Internal advisor and consultant system abolished• Helping to create super smart society as Environment and Energy Company group5

Financials

Challenges in each era

4

2018

CHOYA CORP. soldManagement Framework

Nisshin Cotton Spinning Co., Ltd.
starts operating its Nishi Arai Plant
as a chemicals production facility

2014

Japan Radio Co., Ltd. and Nagano
Japan Radio Co., Ltd. become
consolidated subsidiaries

Business Segments

Nisshin Cotton Spinning Co., Ltd.
founded

Holding company system adopted

1907

1946

2010

The Nisshinbo Group’s Approach to Value Creation
As the Nisshinbo Group becomes more diversified, we are working to strengthen Group and global management and increase
corporate value by uniting the Group’s various businesses under our Corporate Philosophy, “Change and Challenge! For thecreation of the future of Earth and People,” which aligns with our approach to the Sustainable Development Goals (SDGs).

1907~
National modernization andindustrialization

Contributed to Japan’s
modernization as
cotton textile maker

1990s~
Globalwarmingand othersharedissues facedby mankind

Mobility

Targeting specific SDGs where Nisshinbo can make a real contribution while also taking into account all 17 SDGs

Life &
Healthcare●

Textiles○Automobile
Brakes●Precision
Instruments●

Wireless andCommunications

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Micro Devices

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Chemicals

●

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Supported
development of
automotive sector as
specialist supplier offriction materials

Helping to create
super smart society
as Environment andEnergy Company
group

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Target 3.2

Target 3.2: Reduce the infant mortality rate
Target 3.6: Halve the number of global deaths andinjuries from road traffic accidents

Target 7.3: Double the global rate of improvement
in energy efficiency

Target 9.4

Target 13.1

Target 9.4

Target 9.4: Improve sustainability withenvironmentally sound technologies

Target 13.1: Strengthen resilience to climate-related
hazards and natural disasters

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Materiality

E• Awareness and concern
towards our environmental
impactContribute to the environmental
and energy fieldS• Respect for human rights• Respect for diversity• Safety is the basis for everything• Quality communication

Create a safe and secure societyG• Thorough-going compliance• Fair and transparent businesspractices

Global compliance

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Management Framework

Target 7.3

Business Segments

Target 3.6

Business Conduct Guidelines

Nisshinbo Group Corporate Philosophy

Change and Challenge! For the creation
G

G

Public Entity is Nisshinbo’s enduring fundamental
6of the future of Earth and People.
E

S

sprit = Contribute to society through business activities
7

Financials

Constant○●

Real Estateanchored by the Corporate Philosophy

Revised to create closer
links with ESG themes
and make it clearer forthe global organization○○

Core SDG objectives and targets inour businessNote: Please visit our Sustainability
website for more details about
the relationship between our
Corporate Philosophy (BusinessConduct Guidelines),
materiality and KPI targets.

○

ESG Special Feature

Reformingthebusiness
portfolio toalign withchanges inissuesfaced bysocietyBusinesssegments

Infrastructure& Safety

Strategy

Change1970s~
Transition in
key industries(from textiles toautomobiles)

Strategic
businessdomains

ProfileChallenges in each era

Nisshinbo Group’s
contribution

To Our Shareholders and Investors

Overview of 2019
We made good progress with our medium- andlong-term strategy, but recent earnings havebeen weak.

Financials

9

Management Framework

8

Business Segments

while focusing on cash flow creation

ESG Special Feature

Contributing to society through our business activities

Note: Figures for the fiscal period ended December 2018, which
was a transitional fiscal period, have been adjusted to facilitatecomparison with the fiscal year ended December 2019.

Strategy

Creating a Safer,More Secure
Eco-Friendly Society

ProfileThe Nisshinbo Group faced a tough business climate in2019 amid the cyclical slowdown in the global economy
and rising trade tension between the US and China.
On an adjusted basis, net sales declined 1.0% year on
year to ¥509.6 billion, operating income increased 35.5%
to ¥6.4 billion, and net loss attributable to owners of theCompany widened ¥5.2 billion year on year to ¥6.6 billion.
US-China trade issues were anticipated at the start of
the fiscal year, so we took action to maintain profitability
by implementing Groupwide cost reduction activities
throughout the year, including cutting executive pay andreducing selling, general and administrative expenses.
However, we regret to report that profits missed ourtargets, with the slowdown in China and the knock-on
effect in Europe more severe than we expected.
The bottom-line loss reflected impairment losses
booked by TMD. The company is currently rebuilding its
business under the leadership of a new CEO and backed
by a large number of employees seconded from Nisshinbo
Brake Inc. As part of the restructuring, we are fundamentally reviewing production lines and facilities. Based on
our outlook for the business, we recognized fixed asset
writedowns on production lines in the OEPC business(original equipment for passenger cars) amid a sluggish
recovery in profits.
Under our medium- and long-term strategy, we aim totransform Nisshinbo into an Environment and Energy
Company group that provides solutions for some of theissues faced by society today. To realize that goal, we areforming business alliances and using M&A to overhaul thebusiness portfolio. Also, by strengthening links between
the Group’s diverse businesses, we are developing newcollaborative businesses to support a shift in focus from“things” to “experiences” and “services.”
These activities are progressing smoothly, but resultsfor 2019 raise some questions about strategy execution.
In 2020, management policy is focused on improving cash
flow, which is the source of funds needed to invest in theGroup’s growth. We will also continue to put priority on
measures to drive growth in priority fields.

To Our Shareholders and Investors

Measures to Generate Cash Flow

Expanding New Businesses

Challenge and Change! For the creation of future of Earth and People.
Adapting to the changing demands of modern life and society and shifting focus to the environment and energy fields

ESG Special Feature

Nisshinbo Group Corporate Philosophy

In Mobility, we stepped up efforts in the area of electricvehicles (EV) in 2019. Subsidiary Nagano Japan Radio Co.,
Ltd. manufactures coil devices used in EVs and hybrid
vehicles, but a lack of production capacity means it has
struggled to keep up with a recent steep rise in demand.
We were faced with a choice – invest to expand thebusiness or withdraw altogether. In the end, Nagano
Japan Radio acquired the coil business of FKD Corporation and established it as subsidiary NJ Components Co.,
Ltd. The new company offers more than just production
capacity. It has extensive know-how in manufacturing andproduct development, giving us the base to start building
an EV-related coil business with sales of ¥10 billion.
We are also pushing ahead with research and development in the fuel cell vehicle (FCV) market. Our fuel cell
catalysts, which replace expensive platinum catalysts,
have already been adopted for portable fuel cell applications,and we are now working on versions for fuel cells usedin forklifts and cars. Carbon bipolar plates are anotherpromising Nisshinbo product. They already have a dominant

Strategy

One of the most important tasks of a business leader is
to increase profits on the income statement. That meansbuilding a business capable of generating strong cash
flow, rather than simply increasing profits in accounting
terms. In 2020, we will review every business segment inminute detail to ensure they generate operating cash flow.
In addition to typical approaches such as sustained
cost reduction, inventory control and efforts to ensure
rapid recovery of receivables, we are running checks of allshare of the market for residential polymer electrolyte fuelcells (PEFCs) and we are now developing them further for
automotive applications. This is a long-term research
theme, with FCVs only expected to gain momentum inthe auto market from 2030, but we continue to conduct
development and testing to ensure our products are readywhen the market takes off.
In the Life & Healthcare field, new businesses thatbring together our expertise in wireless and communications, micro devices and precision instruments aredeveloping a stream of collaborative products, including
a wireless echo device that doctors can use to rapidly
check patients during ward rounds, and an allergy testing
device that can detect 41 allergies from a single dropof blood.
However, going forward, we will need to work
collaboratively with other companies outside the Groupto develop new products and services. Amid the shift
from “things” to “experiences” and “services,” Nisshinbo
will have to acquire new application technologies andgain access to new sales channels. We plan to step up
collaboration with external partners in 2020.

We are rolling out a range of new measures inthe xEV and healthcare fields.

ProfileGroup businesses and products to assess whether costs
are being managed carefully and whether product prices
have been set appropriately to reflect added value.
Businesses and products with no prospects for profits
will be discontinued. In the past, boosting volumes wasan accepted way of absorbing fixed costs, but withcompanies now under more pressure than ever to lift
profit levels, that crude approach is no longer tenable.
We will build a powerful product portfolio through rigorous cost planning and by increasing the sales weightingof cost-competitive products.

We will build a powerful product portfolio basedon appropriate cost levels and product prices.

Targeting three strategic business fields

Strategic Business Domains

Realize super smart societies as(See ESG Special Feature on page 17 for more details)

Business Segments

Business Policies

Developing Digital Businesses

an Environment and Energy Company group
Weather radar
Disaster prevention
solutions
Alertmarker+, etc.

Mobility

Copper-free friction materials
Fuel cell vehicle parts and materials
Marine wireless communicationequipment, etc.

Long-term Goal:
ROE 12% (by 2025)
Infrastructure &SafetyLife &
Healthcare

Generate operating cash flow

Ultrasound imaging
equipment
Medical equipment andhealthcare management
equipment development, etc.

(See Financial Strategy on page 76 for more details)

10

In 2019, earnings in the wireless and communications
business were stronger than in other businesses, reflecting
its stable customer base in Japan’s public sector. The
strong performance was also down to frontline staff inthe business, who achieved their targets in what is ahighly competitive market segment. However, while thepublic sector customer base is stable, growth prospects
are lacking. We are therefore rapidly switching our focus
from public to private customers, from domestic to overseas markets, and from “things” to “experiences” and“services.” We are already seeing progress in areas suchas the marine data service business, centered on our
J-Marine Cloud system, and in disaster prevention solutions
11

Financials

2020 Nisshinbo Group Slogan

in Southeast Asia, but we have to implement the change
in direction even faster.
In particular, in the Mobility field, there are numerous
new business opportunities related to autonomous land,sea and air transport for technologies in the wireless andcommunication business. In addition to marine communications, the two core companies in the business – Japan
Radio Co., Ltd. and JRC Mobility Inc. – are leading theindustry in developing a diverse range of communication
sensors and devices for exciting new applications, suchas collision avoidance technologies* for large drones,
which are popularizing the concept of flying cars, andfor roadside infrastructure to support advanced driverassistance systems (ADAS).
In today’s world, where speed is often the key tosuccess, we recognize that new businesses could fail to

We set up a new Digital Business Department toaccelerate business development.

Management Framework

Aiming to increase corporate value
through business policies closely linked to our
Corporate Philosophy

To Our Shareholders and Investors

E

S

G

In 2006, we positioned global environmental protection
as our top-priority social issue and reformed ourbusiness with a focus on the environment and energy.

Contributing to the SDGs
through our business

Public Entity – Our founding spirit of contributing tosociety through business activities
2006 We embarked on governance reforms, including
the introduction of an outside director system,
before the enactment of Japan’s Corporate
Governance Code2015 Abolished takeover defense measures

ESG Is Integral to the Nisshinbo Group

March 2020
Financials

12

Management Framework

The global business community is stepping up efforts to
support the decarbonization of society. Recent examples
include moves to adopt recommendations by the Task
Force on Climate-Related Financial Disclosures (TCFD) in2018 and the Green Swan Reports published by the Bankfor International Settlements in early 2020. Against thatbackdrop, Nisshinbo’s businesses are likely to attract
more attention than ever before.
Public Entity has been a key element of our Corporate
Philosophy since Nisshinbo was founded. The phrase
expresses our commitment to contributing to society
through our business activities. In today’s language, itcorresponds directly to the social component of environmental, social and governance (ESG) activities. So, whatkind of issues does society face? The issues have changed
over the years, but 2006 was a turning point. In that year,
we witnessed a clear rise in concern about the destructionof our global environment. That prompted us to put priority
on protecting the global environment and launch ourpolicy of transforming Nisshinbo into an Environment andEnergy Company group. In parallel with that approach,create safe and secure living environments. Many of themalso align with the SDG targets. In addition to productsthat prevent and mitigate disasters, we supply sensors
and devices crucial to autonomous driving systems and thesuper smart society; automotive brake friction materials
that do not contain copper – a cause of marine pollution;
parts and materials for fuel cells – regarded as the ultimate
clean energy source; and Carbodilite, an essential functional
additive used in the manufacture of eco-friendly biodegradable plastics and water-based paints. By enhancing
these businesses, we aim to make an even greater contribution to society through our business activities andachieve major strides towards the SDGs by increasing
sales of “products that contribute to the creation of asustainable society,” our top environmental goal.

businesses that go one step further by actually preventing
environmental destruction. Based on internal standards,
we certify some Nisshinbo products as “products that
contribute to the creation of a sustainable society.” Our
top environmental goal is to boost sales of those products
to 65% of net sales by 2025.
In these and other ways, the Nisshinbo Group has
been promoting ESG approaches long before they
became widely known. To reflect that, and to mark the
10th anniversary of Nisshinbo’s adoption of the holding
company system, we added phrasing about our stance on
ESG to our Corporate Philosophy principles and changed
our Corporate Philosophy to “Change and Challenge! For
the creation of the future of Earth and People,” to make iteasier to understand in other languages. On a daily basis,
we are working to transform our business to realize ourstrategy – help to create the super smart society withsafe and secure living environments as an Environment
and Energy Company group – which also stems from our
Corporate Philosophy. Our ESG initiatives correspond with
the Sustainable Development Goals (SDGs) and we aim
to help achieve the SDGs through our business activities.
The Nisshinbo Group supplies a wide range of products
and services that help to protect the environment andBusiness Segments

we resolved to take the lead in our industry and create ahighly transparent corporate governance structure to
support the Group’s growth (see page 62, Corporate
Governance). Our hope in 2006 was that we could moveon to other ways of contributing to society once theenvironmental issues were resolved, but unfortunately,
the destruction of our planet has only become worse
since then.
With the addition of Japan Radio Co., Ltd. and New
Japan Radio Co., Ltd. to the Group, we are now a businessgroup that can help prevent and mitigate disasters, support
autonomous driving, and create super smart societies. As
extreme weather caused by the deteriorating environment
becomes more common, our disaster prevention solutions
have proved to be consistently effective. As a manufacturing company, we are obviously taking steps to cut
energy usage and industrial waste by making our plants
and logistics facilities progressively more eco-friendly
each year. However, to make a genuine contribution,
we want to actively decarbonize society and protect theenvironment through our products and business activities.
We will continue to operate businesses that prevent andmitigate the impact of disasters on lives and property, but
we want to accelerate efforts to create products and

ESG Special Feature2017 Abolished internal advisor and consultant
system and formulated Nisshinbo’s Corporate
Governance Policy(See page 67 for more details)

We aim to make an even greater contribution tosociety through our business activities.

Strategy* As drones become larger, they will need to be certified for collision
avoidance to prevent accidents with air ambulances and other aircraft

ESG is Nisshinbo’s founding spirit
Profiletake off if we continue to channel management resources
into businesses that are busy with existing work. We
therefore decided to set up a new Digital Business
Department on April 1, 2020 as part of the Corporate
Strategy Center at Nisshinbo Holdings Inc. The office willbring together all the Group’s digital technologies andrelated personnel to develop plans and create marketingand customer proposals with the aim of launching new
digital services businesses that help to solve issues facedby society. The office will actively work with external
companies in the IT and AI fields to complement theGroup’s internal resources. Initially, the office will have ateam of around 10 people, but we plan to increase that to
20 or 30 while flexibly adjusting the team’s composition.

Masahiro Murakami
President
Nisshinbo Holdings Inc.

13

Interview with Chief of Corporate Strategy Center

each of the Group’s businesses, I focus on whether they

Q4. What areas are you focusing on to improveaccurately reflect conditions in the operating environment.

cash flow generation in frontline businesses?

As the Chief of the Corporate Strategy Center, I have no

Kazunori Baba
Director, Executive Managing Officer
Chief of Corporate Strategy Center

we anticipate a significant improvement in profits in the

To give an example, the micro devices business is
expected to benefit from the rollout of 5G technology,

automobile brake business as margins improve inbut my job is to ask questions, such as what are the

TMD’s OEPC business (original equipment for newneeds of customers and what are Nisshinbo’s competitive

passenger cars) and as conditions in the aftermarket

advantages? I also check if assumptions for costs andrecover. Also, in the precision instruments business,sales prices are accurately factored into business plans.

Group company Nanbu Plastics Co., Ltd., which makes
plastic molded automotive parts, operates production

PDCA reviews during the fiscal year are based on KPIs
and are conducted on a monthly basis for some benchmarks

sites in China and Indonesia, while Nisshinbo Mechatronics

and on a one-off basis for others when needs arise. For

Inc. has plants in China and other countries in Asia. We

example, in the wireless and communications business,

think cost competitiveness can be improved by realigning

we carefully classify all the businesses in the segment

those sites and strengthening cooperation. In addition toand identify which ones are growing, rather than simply

targeting lower production costs, we want to create ameasuring overall earnings performance, which can be

more efficient network of manufacturing sites in Japan

heavily skewed by a few large orders.

and overseas from the perspective of access to markets

We will also use M&A, business disposals andHowever, the main role of the Corporate Strategy

other approaches to continue building a business portfolio

Center is to evaluate the possibilities and future prospects

that more closely aligns with our Corporate Philosophy,of businesses, provide information and extend otherbased on our business strategy of helping to create safe

support to reinforce corporate governance. Our role is to

Q5. How do you plan to accelerate businessportfolio restructuring?

and customers.

and secure living environments as an Environment andstrengthen management accountability, which ultimately

Energy Company group, which is linked to our philosophy.

means working to narrow any perception gap between

fundamentally needs to address, based on our under-

We aim to increase corporate value by accelerating

shareholders and the policies and strategies of our businesses

A. The Nisshinbo Group includes a wide range of busi-

standing of Nisshinbo’s intrinsic role as a company. We

this strategy.

(see page 70, Managing Risks and Opportunities).

nesses, which makes it harder for investors to understandintend to continue working on these key measureswhat Nisshinbo does and gives the impression of ineffi-

Another theme we have been tackling in recent years

beyond 2020. Nisshinbo needs to flexibly respond tois the need to create an even stronger Group to bringchanges in the operating environment at all times, but

together the growing number of new subsidiaries andQ3. What are your views on reducing

we will retain our long-term perspective while raising

new manufacturing sites worldwide.

indirect costs?

ciency. Companies with a diversified business structure
tend to attract a conglomerate discount. To address thoseissues, Nisshinbo has reclassified its operations into threestrategic business fields and is channeling managementawareness about achieving earnings targets andQ2.

You are focusing on risks and opportunities
in each business to ensure earnings targets areachieved. How are risks and opportunities
incorporated into business plans?

Key Measures in 2020
Promote activities to achieve key performance
goals

2

Accelerate business portfolio transformation

3

Step up Group compliance, occupational health& safety and environmental management

5
6

Ensure Corporate Philosophy is firmly
entrenched in Group
Build collaborative culture to maximize diverse
personnel and business resources
Promote risk management

Center and the Business Support Center in a single

its strengths in manufacturing with communication

organization. The integration itself will not lead to a large

technologies to develop new services businesses.

reduction in indirect costs, but we aim to review all

The first strategic busines field is Mobility. We are

expenses and rigorously target cost savings. In addition toallocating a high weighting of resources to this field,

saving money in backoffice divisions, we hope the process

underscored by the establishment of JRC Mobility Inc.

will spur a greater appetite for cost reduction across thein 2018. In the second field, Infrastructure & Safety, weGroup’s frontline businesses.

are leveraging the strengths of Japan Radio Co., Ltd. in

In a typical cost reduction program, the aim is to cut

disaster prevention solutions and related systems. In theplans and followed the PDCA cycle, we sometimes fellout all wasteful expenses across the entire value chain,

third field, Life & Healthcare, we aim to develop new

short of our targets. The lesson I learnt was that targets

from orders through to shipments. In the Corporate

products based on three themes – monitoring, remotewere hard to achieve if the wrong targets were set in theStrategy Center, nothing is off-limits. In all frontline andoperation, and contactless – that go beyond the traditional

first place.

backoffice divisions, we need to thoroughly assess theboundaries of the medical field by combining ournecessity for and the impact of all spending.

strengths in plastic parts molding and electronic devices

Now, when I review business plans submitted by

14

resources into those areas. Nisshinbo is also combining

15

Financials

4

A. I previously worked as the president of Nisshinbo
Textile Inc. Even though we carefully developed businessA. In April 2020 we combined the Corporate Strategy

Management Framework

implementing related measures.

1

Business Segments

A. The six measures cover themes selected by the
Corporate Strategy Center that we believe the GroupESG Special Feature

measures in 2020. What themes did you choose
and why?

subsidiaries that have joined the Group. For example,

Strategy

Q1. The Nisshinbo Group is focusing on six key

A. There is still plenty of scope to increase efficiency atplans, but I evaluate all plans and offer advice.

ProfilePursuing powerful management capabilities torealize our Corporate Philosophy by focusing on
cash flow generation and strengthening risk
management in health and safety and other areas

direct say in the development or implementation of businessInterview with Chief of Corporate Strategy Center

ESG Special Feature

with the medical equipment business of Ueda Japancustomers. Our mantra is “no quality without safety, no

Radio Co., Ltd.

customers without quality.” Every year we evaluate

Our mission in the Corporate Strategy Center is tohealth and safety performance. Any plant that sees aensure those efforts to expand our business are tightly

drop in performance has to implement intensive

focused, backed by a leaner, more efficient business

remedial measures.

Four SDGs underpin
our business activities

Creating a Safe and Secure Society

structure to help us achieve our 15% ROE target by 2025.

Q6. Why are you currently focusing on

risk management?

occupational health and safety?
A. We clearly identify, analyze and evaluate risks ineach business in accordance with the Nisshinbo Group
Risk Management Rules. Managing directors in eachmanufacturing sites worldwide. For example, the definitionbusiness prioritize risks and develop scenarios thatof “major accident” differs from site to site due to theassume a significant impact on operations from thoseunique customs of each country and region and variations

risks. That information is collated and mapped by thein labor law and insurance systems. Recognizing those

Corporate Strategy Center and then discussed by thedifferences, we aim to lift health and safety levels in 2020

Board of Management and the Board of Directors.
The Nisshinbo Group classifies risks into fourGroup. It goes without saying, but our targets for healthcategories – avoid, control, transfer and accept – andand safety are more rigorous than those typically used bydevelops economically rational responses.

Japanese companies. That’s because we have to meetthe stringent quality standards of automakers and otherNisshinbo’s Risk Management

STEP 2

UnderstandAnalyze and evaluate

STEP 3

Prioritize

Mitigate

Transfer

AcceptIf risk control is more

If risk transfer is

If risk acceptance is

economical than risk transfer

more economical

more economical

Exclude from risk area

Solve problems within
the organization
Strengthen management processes
to better understand risks

STEP 4

Review
management
strategy

Educateemployees

Improvebusiness
processes❶ Direction:mechanical scanning

Phased Array Weather Radars❶ Elevation:
electronic scanning❷ Direction:mechanical scanning

Enhancesystems

16

Use capital
marketUtilizeinsurance
marketCaptives

Internal reserves
Case-by-case
response

17

Financials

If risks exceed
potential returns❷ Elevation:mechanical scanningManagement Framework

Avoid

Existing weather radars

Weather radars supplied by Japan Radio Co., Ltd.
are widely used by Japan’s Meteorological Agency,
Ministry of Land, Infrastructure, Transport and Tourism
and by overseas meteorological agencies to forecast
weather conditions and rainfall. Cases of localized
heavy rain have been increasing in Japan in recent
years due to weather conditions such as thunderclouds
occurring in linear precipitation zones, leading toelevated risk of natural disasters caused by flooding
and extreme wind. Existing radar systems, which typically need about five minutes to complete a single
observation cycle, are too slow to create stereoscopic
images of fast-forming thunderclouds.
To address those issues, Japan Radio is developinga next-generation meteorological radar using a phasedarray system. The system uses compact radars withmultiple, overlapping antenna beams that reduce blind
spots in radar coverage, enabling rapid, stereoscopic
observation of thunderclouds to achieve expeditious
forecasting of localized rainstorms. Japan Radio
continues to work on improving its system to tackle
challenges such as converting weather observations
to rainfall estimates and identifying the difference
between rain, snow and hail, which is currently hard
to do with current weather data.

Business Segments

STEP 1

Weather Radars
ESG Special Feature

to meet the ideal standards defined by the Nisshinbo

Strategy

A. As the Nisshinbo Group expands globally, we areseeing differences in health and safety standards at

Climate change is considered to be the main reason for the large number of natural disasters in recent
years. We are also seeing more issues that have the potential to undermine people’s safety and security,
such as relentless growth in land, sea and air mobility and healthcare issues associated with super-aging
societies. Aiming to create a safer and more secure society with integrity, the Nisshinbo Group supplies
disaster prevention systems such as weather radars and river level monitoring equipment and provides
shipping support services for safe vessel operations. The Group is also developing new products inthe medical and healthcare fields.

ProfileQ7. What approach are your taking with

ESG Special Feature: Creating a Safe and Secure Society

Disaster Prevention Solutions

Sea and Air Safety

Japan Radio provides a service called Alertmarker+
that sends information such as area-specificmessages, evacuation orders and disaster
information to digital signs and other display
equipment. The service automatically sends
J-Alerts and disaster information using existing
displays in municipal offices, public halls,
hospitals, schools and other facilities where
people gather. Alertmarker+ is easy to accesswith the Alertmarker BoX add-on, which connects to displays via an HDMI cable. Existing
facilities require no other external connection,
making the service resilient to cyberattack. The
service is increasingly being adopted for event
halls, subways and other facilities, spurred by
growing use of digital signage.

The large number of aging concrete structures
has become a major issue in Japan. Most concrete
bridges are typically designed to last around 50
years, but over half of Japan’s bridges areprojected to exceed that age by 2030.
The Nisshinbo Group has developed a handheld ultrasound device that can generate highly
precise 3D internal readings of concrete structures,simply by attaching the device to the concrete.
We expect the device to play a key role in structural
maintenance work.

ECDIS
One-stop service

Remote maintenance system(JRC RMS)

Satellite link

RMS

JRC

One-stop service

J-Marine Cloud
Weather routing(J-Marine Routing)

Digital charts
Weather and sea state information

Ship-to-shore
information sharing

Vessel visualization service(J-Marine GIS for Web Pro)

Weather and sea

Ship position, observational data,state informationequipment status, AIS, radar, route plan

Alertmarker+ in use
in Tokyo Station

Financials

Left: External view of ultrasound array sensor
Right: Ultrasound probes (area attached to concrete)

Customer

18

Management Framework

Nondestructive Testing

Business Segments

Alertmarker+

ESG Special Feature

Disaster prevention products

In safety systems for airports, we are conducting
operational testing of a multilateration system for
airport surveillance at an airport in Vietnam.
Multilateration systems receive secondary surveillance
radar (SSR) signals from aircraft via multiple receivers
located around the airport, enabling precise detectionof aircraft positions based on the difference in time
between signal reception at each receiver.
Japan Radio also runs the J-Marine Cloud service,an online service providing shipping information. The
service relays real-time weather routing data and VTS
information to ship crew, who can superimpose various
data on charts using their PCs to optimally analyze thelatest maritime conditions. Onshore offices can use
the system to provide high-level support by accessing
and sharing real-time ship positioning data, official
maritime information and data from ship engines,
including surveillance images. With J-Marine Cloud,anybody in the shipping sector can now access thesame level of information and achieve the same
standard of operational control as major shipping
companies. The service is also available to individuals
through a smartphone app, helping to significantly
enhance maritime safety for pleasure boat users.

Strategy

Disaster prevention products

Japan Radio sells wireless communication systems
for marine applications (satellite communicationequipment), ship navigation systems (marine radar),ship bridge systems and other products for commercial
ships and fishing vessels worldwide. The company
has a particularly high share in the market for navigation systems for large commercial vessels and a longtrack record supporting shipping around the world.
Japan Radio also builds vessel traffic service (VTS)
safety systems and supplies related equipment, helping
to make shipping operations safer in ports and coastal
areas. VTS safety systems are installed in marine
safety centers and in many communication basestations in areas where navigation is difficult, suchas narrows between small islands, to provide safe
shipping route information and to centrally manage
all ship movements in a designated area. We sell thesystems to customers overseas, as well as in Japan.
One example is Indonesia, where we have supplieda radar sensor-equipped VTS safety system andinstalled coastal offices (base stations for the shorebased role in ship-to-shore communications) toensure safe navigation in the Strait of Malacca
between Indonesia and Singapore.

ProfileJapan Radio also sells its solutions overseas.
The company is deploying dam and river management
systems with radars for customers in the Philippines
and Vietnam and a digital wireless information andwarning system in Tonga in the South Pacific. In
Indonesia, Japan Radio is testing a tsunami detection
system that uses marine radar to detect wave heights.
In addition to damage from natural disasters,societies are exposed to the risk of serious damage
from accidents caused by aging roads and otherpublic infrastructure. Japan Radio aims to leverage its
strong business links with government customers to
step up the development of its public infrastructure
maintenance business.

Japan Radio provides equipment and systems
designed to protect people and communities fromnatural disasters such as river flooding, landslides,
tsunami and high tides. The company builds systems
to monitor dams and other water resources. They
comprise water level and rainfall gauges, telemeters
for remote monitoring, alarms, sirens, cameras andother equipment, which are connected via communication networks. By combining its systems with meteorological, seismic and other data, Japan Radio also
provides a broad range of solutions that go beyond
the simple monitoring of rivers at risk of flooding,such as disaster prevention information relay systems
that help to ensure public safety during disasters.

Managed vessel

19

ESG Special Feature

ESG Special Feature: Creating a Safe and Secure Society

Creating a Sustainable Society
Unmanned Aircraft Collision Avoidance

The J-Marine Navigational electronic Conning
Station Table (NeCST), developed by Japan
Radio, is a revolutionary vessel navigation
support system that allows users to make handwritten annotations to digital charts on screen.
Linking J-Marine NeCST to J-Marine Cloudsignificantly improves the efficiency of planningand optimizing navigation routes.

Small and mid-size unmanned drones have thepotential to play a key role during disasters bytransporting necessary equipment and searchingfor missing people. However, there is an urgent
need to develop collision avoidance technologies
to prevent accidents with air ambulances andother manned aircraft.
With the support of Fukushima Prefectureand Soma City, Japan Radio teamed up with
NEDO and four companies to run the world’s firsttest of an unmanned aircraft equipped with acollision avoidance system. Japan Radio provided
a compact, lightweight radar for the unmanned
drone. During the test, the unmanned drone
travelling at 40km/h autonomously avoided amanned helicopter travelling at 60km/h.

J-Marine NeCST

Mid-size unmanned aircraftwith collision avoidance system

As an Environment and Energy Company group, the Nisshinbo Group strives to provide its customers
with eco-friendly products and services. This is one of the values that underpin our Corporate Philosophy– “Change and Challenge! For the creation of the future of Earth and People.” We are focusing on
developing and promoting the uptake of products and services that help to realize a sustainable society.

Fuel Cell Productshydrogen refueling stations and other infrastructure,
but FCVs offer a number of potential advantages,
including short refueling times and high energy
density. Hydrogen fuel cells are already in use forcommercial vehicles such as buses, trucks and forklifts,
which can be refueled relatively easily, and there isrising interest in potential applications such as trains
and large drones.

The Nisshinbo Group is working to drive uptake offuel cells, which use hydrogen as the energy source.
Hydrogen fuel cells are the ultimate clean source ofenergy, emitting no CO2 emissions during use. In
Japan, fixed fuel cells are used widely for houses,
commercial facilities and other sites, but are yet totake off in mobility applications.
A number of issues currently stand in the wayof fuel cell vehicle (FCV) uptake, such as a lack of

ESG Special Feature

J-Marine NeCST

Strategy

Safety Products

ProfileSafety Products

Advancing manned

Hydrogen Products

Bipolar Plates for Fuel Cells

Life & Healthcare
capabilities, data interface and analysis technologies
and the textile planning and procurement skills ofGroup companies. The belt collects and analyzes
information on the unborn baby’s vital signs (heatrhythm, heart rate, pulse etc.) and relays the information
to smartphones or devices in hospitals and clinics.

Bipolar Plates for Fuel Cells

Intravascularultrasound image

20*1 Polymer electrolyte fuel cells: Significantly lower operating temperatures than solid oxide fuel cells (SOFCs) mean PEFCs are likely to become the maintype of fuel cell.
*2 Fuel cell forklifts are gaining ground, especially in North America, as their small areas of operation make it easy to install refueling infrastructure.
Ultrasounddiagnostic equipment

21

Financials

Through Ueda Japan Radio Co., Ltd., the Nisshinbo
Group manufactures ultrasound diagnostic equipment
and image processing equipment, as well as mechatronics devices for X-ray equipment and other medical
applications. Nanbu Plastics Co., Ltd. manufactures
test kits and plastic components for medical applications, while optical semiconductor devices made by
New Japan Radio Co., Ltd. are used as key sensor
components in wearable health devices.
Leveraging the extensive portfolio of technologies
and customer networks of Group companies, theNisshinbo Group is currently working on the development of new medical equipment and healthmanagement devices. One example is a maternity beltthat predicts the onset of labor pains. To develop the
product, we are drawing on the sensor development

Management Framework

Carbon bipolar plates manufactured by the Nisshinbo
Group have a high market share in fixed PEFCs*1 forresidential and commercial use, such as the Ene-Farmsystem. Our carbon bipolar plates are not only lighter
than metal versions, they are also easier to mold into therequired flow channel shapes and are more resistant tocorrosion, helping to improve the performance anddurability of fuel cells.
Nisshinbo has also invested in Canadian fuel cellmaker Ballard Power Systems Inc. and is working withthe firm on joint research projects. Our carbon bipolar
plates have already been adopted for a Ballard fuel stackused in forklifts*2. We are now working to rapidly ramp
up production amid recent growth in demand for fuelcells used in prototype FCV buses and trucks.

Business Segments

helicopter

ESG Special Feature: Creating a Sustainable Society

Environmental Products
Hydrogen Products

Copper-reduced and Copper-free
Friction Materials

Platinum Catalyst Substitutes for
Fuel Cells

Brake pads

Carbodilite

Ultrasonic gas sensors measure differences inthe specific gravity of hydrogen, helium andother atmospheric gases. The sensors have beendeveloped by combining technologies fromacross the Nisshinbo Group – ultrasound technologies developed by Ueda Japan Radio for the
medical field, and signal processing technologies
created by Japan Radio for radar and wirelesscommunication products. Unlike existing products,
our sensors do not require heaters or rare metal
catalysts, helping to extend their usable lives.
Response time is also fast and they can detect
gas over a wide area. Compared with large,
heavy and expensive existing products, our new
sensors are small, light and battery powered,meaning they can be used easily whenever andwherever they are needed.
We started trial sales of a portable helium gas
leak sensor in 2019. Going forward, we aim tocontribute to the realization of a hydrogen society
by developing a portable hydrogen gas leaksensor for use in FCVs.

Carbodilite is a high-performancepolycarbodiimide-based plastic material developedby the Nisshinbo Group. We supply Carbodilitein water-based, oil-based and powder forms,
and as an additive in adhesive agents. Due to its
unique highly reactive, low-toxic profile, Carbodiliteis blended with coatings, inks and various plastics(polyester-based plastic, biodegradable plastic,
polyurethane elastomer and others) to improvethe durability, adhesiveness and other propertiesof secondary products.
In the automotive, heavy-duty anti-corrosion
coating, construction coating and ink industries,
tighter regulations governing volatile organic
compounds (VOC) and efforts to reduce environmental impact are spurring demand for
Carbodilite, which is a highly safe, water-based
additive that can reduce required temperaturesin drying processes. Also, in Europe and othermarkets where rules on the use of non-degradable
plastics are being tightened, demand for biodegradable alternatives is growing strongly.

Carbodilite is spurring wider adoption of biodegradable plastics, as it improves durability
without affecting biodegradability.
It is already used in a growing range of applications, including multi-use film for agricultural
applications, industrial materials, food packaging
and printed circuit board adhesives.

Financials

Ultrasonic Gas Sensors

Management Framework

22

Environmental Products
Business Segments

MoLeTELLR®
Portable gas leak detector

Hydrogen Products

ESG Special Feature

Brake linings

Carbon alloy catalyst

Strategy

Ballard portable-use fuel cellstack with carbon alloy catalyst

ProfileNisshinbo is taking a completely new approachto catalysts for fuel cells with the development ofcarbon alloy catalysts. Existing catalysts use
platinum, a scare resource. By switching tocarbon-based catalysts, we can significantly
reduce costs and ensure stable supplies. Ourcarbon alloy catalysts were adopted by Ballard in2017 for its portable fuel cell, marking the firstever use of a non-platinum catalyst. Ballard’s
portable fuel cell is attracting interest for outdoor
and emergency backup supply applications.
In 2019, we succeeded in developing a fuelcell that uses 33% less platinum. By creating
fuel cells that use a platinum and carbon alloy
catalyst mix, we aim to create compact models
that are 10-15% cheaper to install than pureplatinum models. Our hybrid catalyst is currently
undergoing performance testing by automakers
for use in FCVs.

The automobile brake business, one of theGroup’s core businesses, manufactures brakepads, brake linings and other friction materials.
Subsidiary Nisshinbo Brake Inc. produces NAO
friction materials, which are used mainly inJapan and the US.
US environmental regulations, effective from2021, will prohibit the sale of new friction materials
or vehicles fitted with friction materials that havea copper content of more than 5%. From 2025,
stricter rules will come into force that further
reduce the limit on copper content to 0.5%.
Nisshinbo Brake was one of the first in theindustry to respond to the new rules by developing copper-reduced and copper-free friction
materials, which have attracted firm support
from automakers. We forecast strong annual
growth in shipments of the new friction materials,
helping to further increase our share of thefriction materials market.

23

ESG Special Feature: Creating a Sustainable Society

Implementing Environmental Management

Activities to Maintain Biodiversity

The Nisshinbo Group is aiming to increase corporate value as a more united corporate group by realizing its
Corporate Philosophy — “Change and Challenge! For the creation of the future of Earth and People.” As an
Environment and Energy Company group, we will continue to offer new products and systems that help protect
the environment, save energy and create alternative sources of energy, while also providing solutions that addresssome of the greatest issues faced by humanity today, such as environmental destruction and natural disasters
caused by climate change, to make life safer and more secure for people everywhere.

The Nisshinbo Group is promoting activities to protect biodiversity, with a particular focus on SDGs 14.2 and 15.5.
The Group is implementing activities such as protecting natural habitats, important ecosystems and threatened
species at business sites in Japan and overseas in accordance with the Aichi Targets*.
* Targets to be met by 2020, set at the 2010 meeting of the Conference of the Parties to the Convention on Biological Diversity

Activities to Protect the Environment at Overseas Business Sites

Primary targets

1

Increase ratio of products that
contribute to sustainable society

65

Reduce greenhouse gas
emissions per unit of sales

3

15

Improve recycling ratio
toby% or more compared withfiscal year ended March 2015

95% or more

Related Aichi target

Activity

Wildlife being protected

Shenzhen NJRC
Technology Co., Ltd.
(China)Target 12: Protection ofendangered species

Protection
activities
withinbusiness site

Cyathea spinulosa
Davidia involucrata(Assigned top protectionlevel in China)

PT. Nikawa Textile
Industry (Indonesia)

Target 12: Protection ofendangered species

Protection
activities
withinbusiness site

Cycas Javana(Indonesian endangered
species EN)

Strategyto% or more of
total sales

2Company / site

ProfileLong-term Environmental Targets (fiscal year ending December 2025)

Medium-term Environmental Targets (end-2021) and Results
Step up activities tomaintain biodiversity

Water usage per unit ofsales

Promote Life Cycle
Assessments (LCAs)*1

Increase sales ratio for
products that contributeto sustainable society

Reduce energy
consumption per unitof salesReduce greenhouse gas
emissions per unit ofsales

Reduce volume of PRTR*2
substance emissions perunit of sales

Improve recycling rate

Targets forend-2021

Implement activities
at more than five sites
overseas

Reduction of 3% ormore compared withfiscal year ended
March 2018

Ratio of total sales:
50% or more

Ratio of total sales:
55% or more

Reduction of 10% ormore compared withfiscal year ended
March 2015

Reduction of 10% ormore compared withfiscal year ended
March 2015

Reduction of 10% ormore compared withfiscal year ended
March 2018

90% or more

Results as ofend-2019

Currently being
implemented at two
business sites

Reduction of 16%
compared with fiscal
year ended March 2018

Ratio of total sales: 33%

Ratio of total sales:
50%

Reduction of 5%compared with fiscal
year ended March 2015

Reduction of 7%
compared with fiscal
year ended March 2015

Reduction of 22%
compared with fiscal
year ended March 201882%
Business Segments*1 Life cycle assessment (LCA): Understanding of environmental load during product life cycle, from raw materials, to production, use, and final disposal*2 PRTR substances: Substances subject to Pollutant Release and Transfer Register (PRTR) system pursuant to Act on the Confirmation, etc. of Release
Amounts of Specific Chemical Substances in the Environment and Promotion of Improvements to the Management Thereof. Reports of their amounts ofrelease and transfer must be filed.

SDGs with Close Links to the Nisshinbo Group’s Businesses
9. Industry, innovation and infrastructure

Ensure availability and sustainable management

Build resilient infrastructure, promote inclusive andof water and sanitation for all

sustainable industrialization, and foster innovation

12. Responsible consumption
and production
Ensure sustainable consumption andproduction patterns

13. Climate action
Take urgent action to combat climate change
and its impacts

The Nisshinbo Group’s Environmental Issues and Related SDGs
Water resources

LCA

Energy efficiency

Climate change
countermeasures

Transport volume

Chemical substancemanagement

Resource conservation

Environmental
contribution activities

Core targets: 14.2 15.5

Core target: 6.4

Core target: 12.4

Core target: 12.2

Core targets: 9.4 13.3

Core target: 12.2

Core targets: 6.3 12.4

Core target: 12.5

Core target: 17.17

Financials

Biodiversity

Management Framework

6. Clean water and sanitation

ESG Special Feature

Key activities

For more details, please visit the Nisshinbo Group’s Sustainability website.
https://www.nisshinbo.co.jp/english/csr/index.html

24

25

ESG Special Feature

Mobilizing the Power of Individuals

Define role
Evaluate
performance

Systematic Process for Cultivating the Next Generation ofBusiness Leaders — Training Framework< Regular review >Define role and evaluate performance for key positions

Next-generation businessleader program

4 Management mindset follow-up training

18 months

3 – 1 Selective external training

3 – 2 Practical workshops

Led byNisshinbo
Holdings

2 Training to attain management mindset

Stream-based training for
future managers

1 Recognize own abilities

Workshops for younger employees
Training exchange programs with other sectors

Recommend participants for program

Selection

Selective

Identify future business leader candidates

Led by Group
companies< Regular review >Define role and evaluate performance for key positions

Training programs at individual companies orfor specific roles
OJT
Strategy

Define role
Evaluate
performance

ProfileDevelopment program

Based on the belief that people are vital to the success of companies, the Nisshinbo Group puts considerable
effort into training personnel. Through diversity and work practice reforms, the Group is also striving to cultivate
a corporate culture where employees with diverse values and capabilities can maximize their potential while
taking on new challenges.

Systematic Process for Cultivating the Next Generation ofBusiness Leaders — Overview

Diversity Strategy

Human Resources Training• Cultural awareness training• Talks by employees who have worked
overseas

For employees
assigned tooverseas posts• Cross-cultural communication• Training to increase understanding ofcompliance and risk management• Training at language schools to improve
linguistic ability

For youngemployees• Language study for 2-6 months in the US
and China• English and business Japanese courses
held jointly with Group companies

For employees
up to 35 years
old• Measures to promote overseas
experience• Support for online English conversation
classes and web-based language study
tools

26

On April 1, 2018, the Nisshinbo Group publisheda Work Style Reform Action Plan. The goal of theplan is to create a company where people withdiverse backgrounds take pride in their work andremain highly motivated. We are implementing a
range of activities in line with the plan.
Nisshinbo Holdings, Inc. and Japan Radio Co.,
Ltd. have set up satellite offices to create a more
efficient working environment by reducing travel
time between Group company locations. Also,
as part of a remote working trial, we participatedin the Telework Days 2019 initiative run by the
Ministry of Internal Affairs and Communications
and other bodies. Using that experience, we
implemented a work-at-home policy for all
Group companies from April 2020 as part ofmeasures to prevent the spread of COVID-19.
Nisshinbo Holdings has formulated a generalbusiness operator action plan based on the Act
on Advancement of Measures to Support Raising
Next-Generation Children*. Under the plan, we
aim to create a workplace where employees canfulfill their potential and maintain their careers
while balancing work and life commitments. To
achieve that goal, the plan includes a number oftargets for paternity leave for male employees
and diverse work practices. Similar measures
are being implemented by 12 Group companies
in Japan.
* A law enacted on April 1, 2005 to create healthy and supportive
environments for having and raising children.

Work Style Reform Action Plan
(April 1, 2018 to December 31, 2020)

1. Rectify long working hours
Reduce the number of employees working under theso-called “36 agreement” with special clauses by 20%
compared with fiscal 2017
2. Encourage use of annual paid leave
Achieve an annual paid leave utilization rate of 70% or more
3. Promote flexible work styles(1) Introduce systems that allow for diverse work patterns(2) Increase the ratio of male employees using either
childcare leave or the accumulated paid leave system forthe purpose of childcare to 15% or more
27

Financials

Going forward, we will focus on training employees
to give them the skills they need for today’s digital business environment. In 2020, as a first step, we launched
a new digital skills course for newly hired employees.

Work Style Reforms

Management Framework

For new
employees

Business Segments

The Nisshinbo Group has built a systemized training
framework with a number of components. The framework includes courses designed for different groups,
such as new recruits and people newly appointed to
mid-level manager, section head and division head
positions, courses to acquire specific skills, general
study courses covering topics such as career training,safety, human resources and the environment, andspecialist courses on technologies, accounting,intellectual property and other topics related to
specific businesses and functions. We also run a
special program for employees earmarked to become
senior managers. The program is designed to foster
approaches, knowledge and behavior for their futuresenior manager roles before they are promoted. In
addition, as part of efforts to cultivate future leaders,
we run workshops for young managers on how to
improve businesses.
Another area we are focusing on is cultivating
human resources that can handle the demands ofinternational business. The courses shown on theright are designed with that aim in mind.

diversity, we need to implement reforms across ourentire organization, targeting corporate culture, systems,
work practices, employee skills development andemployee mindset.

ESG Special Feature

The Nisshinbo Group aims to achieve performancetargets and drive the Group’s sustained growth byharnessing the diversity of its people and organizations as the source of its competitiveness. To foster

ESG Special Feature

ESG Special Feature: Mobilizing the Power of Individuals

Creating Safe and Healthy
Working Environments
Empowering Women

2014• Released voluntary action plan to promote women to executive and management
positions2015• Held lectures for senior managers

2016• Started training program for management-level employees (held 14 times for totalof 394 managers)
This training for all employees at the managerial level is designed to help participants
understand the fundamental significance of promoting the advancement of women andhelp them recognize and overcome their own biases.

The Nisshinbo Group Business Conduct Guidelines state, “Safety Is the Basis for Everything– We hold safety as the top priority for all of our activities to bring high-quality products toour customers.” Based on that, we strive to improve health and safety management by
ensuring all our employees understand that safety takes priority over everything.

Profile• Started training program for female employees (held nine times for total of 228
participants)
This training for female employees aims to help participants understand thefundamental significance of promoting the advancement of women and help
them overcome their own biases to encourage them to engage in the type ofwork they want.
• Submitted general business operator action plan based on Act on Promotion of
Women's Participation and Advancement in the Workplace
Set concrete targets for number of female managers and ratio of female recruits• Started joint training sessions for line managers and female staff (held nine times
for total of 115 groups)
Managers and their female staff participate in pairs, engaging in group discussions andmeeting one on one to create medium-to long-term career plans.

2017

Action Plan
Targets for 2020 (accomplishedin 2015)

Number of female
managers

Triple number compared with
December 2014

Female graduate
recruit ratios

Office position stream 40%,
specialist position stream 20%

Level of senior
management commitment
Strong messaging andfocus on frontline operations

Strict adherence
to fundamentals
Rule compliance andequipment inspections

Zero injury principle(Zero occupational injuries)

No major accidents
Reduce frequency of injuries with lost work to zero
Reduce frequency of all levels of injuries to zero

Preemption principle

Implement risk assessments(Identify early signs of danger)(Work practices, equipment, chemical substances)

Systematic risk reduction measures based on audits of hazards
and harmful chemical substances

Raise employee awarenessof safety issues
Training / guidanceParticipation principle

Prioritize safety at all times(Cooperation of all employees)(High awareness)

Increase the ability of all employees to anticipate danger
by implementing safety training and KYT activities

29

Financials

Nisshinbo Holdings, Inc. employs people withmental disabilities to work in the plant factories
at its Fujieda business site. Managers qualified
as Vocational Life Consultants for People with
Disabilities work with each employee individually
to fill out self-diagnosis check sheets on a daily
basis. Data from the sheets is used to understandand harness the potential of the employees while
ensuring reasonable care is taken to maintaintheir mental health.
As of end-December 2019, TOKYO SHIRTS
CO., LTD. employed 15 people with disabilities(2.28% of its workforce). They work in various
settings – two people in retail stores, three athead office, and 10 in sewing. Also, we provide
workplace training for people with disabilities in
conjunction with the Kashiwa School for Special
Needs Education operated by Chiba Prefecture.
In 2019, two students from the school each spent
two weeks receiving training in sewing and ironing.
One of the students joined TOKYO SHIRTS in
April 2020.

Management Framework28* Danger awareness training

Eliminate major
workplace accidents* Sexual orientation and gender identity

education, horizontal deployment of lessons learned
from occupational accidents within the Group, danger
awareness training and near-miss reporting), in addition to training new hires and adjusting work content.
Nisshinbo also conducts routine risk assessments ofequipment, work and chemical substances in line withan annual plan that prioritizes risks to be addressed,
and implements preventive safety measures.

Harnessing the Potential of
Employees with Disabilities

Zero injury activities

The Nisshinbo Group has been conducting
awareness-raising activities to promote understanding about sexual minorities since 2016.
Examples include training courses for senior
management and information provided to
employees through the company magazine andother channels. We have also revised the Nisshinbo
Group Business Conduct Guidelines to prohibit
discrimination of any kind. The guidelines state,“We respect the character and individuality ofeach and every person and never allow
discrimination and violation of human rights.”
In recent years, the acronym SOGI* is used toencompass and represent all sexual orientations
and gender diversity, instead of LGBT, which only
identifies certain sexual minorities. While upholding
respect for diversity as an important keyword, we
aim to continue raising awareness about sexualand gender diversity in order to create a workplace where people from diverse backgrounds
can work actively without discrimination.

To eliminate all serious accidents, the Nisshinbo
Group has implemented the following four key policies
at Group companies: (1) continuous and rigorous risk
assessments of work, equipment and chemical substances; (2) safety education and KYT* activities; (3)reviews of work standards and rules; and (4) improvements to health and safety levels by learning from
activities at workplaces with no accidents.
Each business site enhances every employee’s safety
awareness by conducting small group activities (e.g.,training when work details change, skills-improvement

Business Segments

Promoting Understanding of SOGI

Health and Safety Activities

ESG Special Feature

Appoint a female
board member

Strategy

Since December 2014, when the Nisshinbo
Group announced a voluntary action plan topromote women to executive and management
positions, we have conducted a range of training
courses and lectures for every level of employee
across the Group to change thinking about
empowering women, which we have positioned
as a priority issue. We also hold joint training
sessions for line managers and their female staff.
In 2016, we created a general business operator
action plan based on the Act on Promotion of
Women's Participation and Advancement in the
Workplace and set concrete targets for thenumber of female managers and the ratio of
female recruits. We also hold annual meetings
for personnel tasked with promoting diversity ateach Group company. The meetings are used toreport on steps being taken and share views on
initiatives such as female recruitment andparticipation in external seminars.

Measures to empower women in the workplace

ESG Special Feature: Creating Safe and Healthy Working Environments

Nisshinbo Brake – Risk Engineering Survey

Occupational Injuries
Frequency of Injuries with Lost Workdays
Nisshinbo Group (Japan)
Average for Japanese manufacturing industry

1.2

0.8

0.4

0

16.3

17.3

18.3

18.12

19.12

Electric motor and engine mechanism todrive fire hydrant pump

Strategy* Frequency of injuries with lost workdays = number of employees injured
with lost work ÷ aggregate number of working hours x 1 million

ProfileIn 2019, there were no instances of major workplace
accidents (accidents with level 7 or higher injuries).
The frequency of injuries with lost workdays* at theGroup’s domestic business sites was 0.65, which islower than the average for the Japanese manufacturingsector and an improvement from the 0.76 level in theprevious fiscal year. At business sites with a particularlyhigh number of injuries, we are providing ongoingtargeted guidance as part of efforts to raise safety
management standards across the Group.

Nisshinbo Brake Inc. conducted a risk engineering survey at its Tatebayashi Plant inJuly 2019. The survey was carried out by a highly experienced risk engineer, whoverified and analyzed the company’s disaster prevention and mitigation measures,
identified risks (related to fire, explosions, natural disasters, etc.) and developed risk
impact predictions, and provided advice on how to prevent and mitigate those risks.
During the site visit, the engineer checked manufacturing equipment, as well asa wide range of other equipment and facilities, including a special high-voltage
electricity substation, wastewater treatment facilities, the plant’s boiler room, andstorage facilities for hazardous substances. The engineer also held meetings withstaff to understand disaster prevention and mitigation measures in each area of theplant and verified implementation status.
The risk engineering survey gave Nisshinbo Brake’s Tatebayashi Plant highmarks for disaster prevention and mitigation measures from both an infrastructure
standpoint and an operational standpoint, with the plant’s reliable implementation of
the PDCA cycle earning particularly strong praise. The survey also commended thehigh level of risk awareness among the plant’s management team and the water
discharge drills conducted by the self-defense fire brigade.
The survey report is based on international criteria, which means it is recognized
as a third-party report in the global insurance market.

Water discharge drills conducted by the
self-defense fire brigade

also pass on information about occupational injuries
that have occurred at business sites in Japan tobusiness sites in other countries to prevent recurrence
worldwide. Additionally, we continue fostering anawareness of the dangers of chemical substances,promote thorough use of protective equipment andwork to prevent health problems.

Japan and one manufacturing site overseas. We also
verified health and safety conditions and carried out
safety checks at four overseas manufacturing sites.
At the end of each fiscal year, the results of all
audits and checks are compiled in a comprehensive
audit report, which is used to analyze potential risks
and communicate good practices to the whole Group
as part of workplace health and safety activities in thefollowing fiscal year.

30

Improve health
Raise productivity

The Nisshinbo Group’s Health Management Policy
states that the “Nisshinbo Group, through the establishment of an environment where each individual
member can play an active role by promoting employee
health and sound workplace, aims to be a corporategroup which is indispensable, at any time, for oursociety.“ To promote health management efforts
across the Group, Nisshinbo established the Group
Health Management Department Meeting, which is
attended by health management department leadersfrom each Group company and is tasked with coordinating the Group’s activities. Specifically, the meeting
focuses on activities in three key areas: personal health,organizational health and safety awareness to ensure
all employees are fully aware of their safety obligations.

Improve lifestyle habits(smoking, exercise, diet,sleep) based on resultsof medical checkups

Reduce general healthrisks based on stresscheck analysis

1

2

Individual
healthOrganizational health

3 Ensure safety awarenessManage risks

Start using work management
standards for heavy work

Financials

The Nisshinbo Group conducts regular occupational
health and safety audits of its manufacturing sites.
A monitoring team composed of the Health & Safety
Group from Nisshinbo Holdings Inc., labor unions,safety and health management staff representing eachbusiness, and health and safety officers from otherbusiness sites, checks the state of health and safety
management at the targeted business sites. In 2019,
we conducted audits at 35 manufacturing sites in

Framework for Health Management Initiatives

Management Framework

Health and Safety Audits

Health Management

Business Segments

As operations have become increasingly global,
Nisshinbo Group’s business sites in other countries
have grown to outnumber those in Japan. We are
deploying danger awareness training and danger
experience education carried out at business sites inJapan to business sites in other countries, in order toraise every employee’s safety awareness and instill
the attitude that safety takes priority in all cases. We

ESG Special Feature

Activities at Business Sites in Other Countries

31

ESG Special Feature

E

The Nisshinbo Group’s Value Chain

Materiality

The Nisshinbo Group has formulated a set of Business Conduct Guidelines. The guidelines comprise nine points
and are anchored by the Group’s Corporate Philosophy. In all processes across the value chain, every Group
employee is required to adhere to the guidelines and support efforts to advance management’s materiality goals
in the environmental E , social S and governance G spheres, which will also contribute to the attainment of the
Sustainable Development Goals (SDGs).

Business Conduct
Guidelines anchored by
the Corporate Philosophy

S

Contribute to
the environmental
and energy fieldG

Create a safe
and secure society

Global compliance• Awareness and concern towards• Respect for human rights• Thorough-going compliance

our environmental impact• Respect for diversity• Fair and transparent business• Safety is the basis for everythingpractices• Quality communication

ProfileMaterials Procurement• Nisshinbo has drawn up a Corruption Prevention
Guidebook to ensure employees are mindful ofcomplying with all corruption regulations overseas.
The guidebook is provided to all Group companies
including overseas subsidiaries. It covers all
international treaties and regulations related topreventing corruption. Nisshinbo updates theguidebook as necessary and uses it as part of its
corruption prevention measures in the Group.

32• The Nisshinbo Group is working to reducetransportation volumes with SDG 12.2 as
the core target. Specifically, we are reducing transportation volumes to promote theefficient use of resources, such as fuelused in transportation.

• As part of efforts to reduce waste and encourage
the reuse of packaging, TOKYO SHIRTS CO., LTD.
has introduced flatpacks to minimize packaging as
much as possible.

• The Nisshinbo Group has established a Corporate
Ethics Reporting System to be used by a broad
range of stakeholders, not only people inside
the Group, to facilitate the early detection andrectification of legal violations and prevent
their recurrence.

• We established the Group Health Management
Department Meeting in 2018 to drive healthmanagement efforts across the Group. The meetingis attended by health management department
leaders from each Group company and is tasked
with coordinating the Group’s activities.
• Nisshinbo Group employees actively participate inenvironmental contribution and enhancement
activities in line with SDG 17.17.
• We are working to achieve zero emissions (recycling
ratio of 99% or more) across the entire Nisshinbo
Group. Of Group business sites that generateannual waste of 10 tons or more, 32 locations
have achieved zero emissions.

• In November 2019, TOKYO SHIRTS also started
supporting the BRING™ brand developed by
JEPLAN, INC. and began collecting unneeded
shirts at 10 stores. JEPLAN collects and recycles
old clothing and uses the recycled materials to
manufacture new clothing. TOKYO SHIRTS plansto roll out the system to more than 100 storesnationwide during 2020. By promoting BRING™ to
its customers, it aims to help reduce waste emissions, including in the supply chain.

• The Nisshinbo Group is engaging in initiatives toreduce the amount of waste generated by eachbusiness, aiming to achieve a 95% recycling rateby 2025.
• Using the AQUEDUCT Water Risk Atlas publishedby the World Resources Institute (WRI), we conduct water risk assessments at Group businesssites and key parts of the Group’s supply chain.
The Group monitors sites and areas of the supply
chain that are rated "high risk." We also conduct
surveys of water consumption in the supply chain
and manage the results of the surveys.

Financials• The Nisshinbo Group implements chemical
substance management activities with SDG 6.3
and 12.4 as the core targets.
(1) Conducting appropriate control and leakprevention measures for hazardous materials
through ISO 14001 activities in accordancewith the laws and regulations of each country(2) Reducing the use of PRTR substances and theemission and transfer of PRTR substances atmanufacturing sites(3) Switching to non-PRTR cleaning agents used incleaning processes in the precision instruments business• The Nisshinbo Group will contribute to theachievement of the SDGs through activities that
improve quality and customer satisfaction. Key
performance indicators (KPIs) are managed andsystematically implemented to achieve the Group's
medium-term CSR goal of continuously promoting
measures that improve customer satisfaction.

Management Framework• The Nisshinbo Group promotes life-cycle
assessment (LCA) activities with SDG 12.4 as thecore target.
(1) Enhancing user convenience by concluding
unlimited end-user licenses for LCA software(2) Developing and increasing the number ofoperators by holding LCA software utilization
seminars(3) Reducing chemical substances and waste
emissions based on product LCA results(4) Introducing LCA from the product development
stage and using it to develop eco-friendly
products• Nisshinbo Automotive Manufacturing Inc.
(NAMI) in the US has taken the lead incoordinating with three local suppliers tointegrate transportation fleets across its
supply chain. Previously, separate vehicles
moved between NAMI and its three suppliers, but a single fleet of vehicles now picks
up and transports materials between all
three companies.

Business Segments

Contributing to
the EnvironmentSales

ESG Special Feature• Nisshinbo has formulated the Nisshinbo GroupCSR Procurement Basic Policy, which sets out
its stance on CSR initiatives across the entire
supply chain. Based on the policy, all Group
companies are required to formulate their own
specific CSR Procurement Guidelines tailored tothe characteristics of their operations and conduct
CSR surveys of suppliers to raise awareness of
CSR procurement. The results of the surveys areused to provide feedback to suppliers to help
them improve their activities.

• Individual employees have a vital role to play inensuring companies contribute sustainably to ourdiverse global society. We aim to create a moreworker-friendly environment for employees by
respecting their individual personalities and qualities
and by placing the right people in the right jobs.
To that end, we respect diversity in all forms,
including in human rights and recruitment, andpromote a healthy work-life balance. Additionally, we
carry out safety and occupational health activities
with the aim of eliminating all workplace accidents.

Distribution

StrategyContributing toSociety

Manufacturing

33

ESG Special Feature

Reinforcing Corporate Governance — Outside Director Message

Keiji Taga

Nisshinbo’s integrity as a company has
immense value

Nisshinbo chairman Masaya Kawata and president

pursuit of profit and increasing dividends. That approach

Masahiro Murakami have both said they want board

really resonated with me as somebody with a long track

meetings to be frank and open so that everybody is com-

record in policy financing.

fortable about actively sharing their opinions and raising any
concerns. In my experience, that is indeed the case, with

In my first year as outside director I took part in threemeetings allowing plenty of time for in-depth discussions.

plant visits. I had the same impression each time –Nisshinbo employees are very talented and sincere. Even

My lasting memory of meetings in the past year is awith my lack of professional experience in engineering,

video conference call with local senior managers respon-

their explanations were patient and easy to understand.

sible for restructuring TMD’s operations. They provided

It became clear to me that over many years Nisshinbo hasa clear and honest update about the situation at TMD,

built up a strong foundation of technologies, which has

including details about the issues so far, giving the Board

helped the Group work quietly behind the scenes toof Directors the insights and information they needed for

create a range of superior products that play a key role in

an intense discussion about business restructuring. That

people’s lives every day. Those insights opened my eyes

emphasis on transparency and governance is a very

to Nisshinbo’s considerable potential.

positive part of Nisshinbo’s corporate style and is also
likely to anchor the Group’s future development.
I also sit on the Nomination Committee and the

I joined the Development Bank of Japan (DBJ) in 1973.

I was appointed as an outside director at Nisshinbo in

Unlike ordinary commercial banks, the DBJ is a policy

2019. My role is to bring attention to things that the

Nisshinbo needs to create a more close-knit
organization

financing institution that provides financial support toboard might not notice, based on a completely different

Nisshinbo has acquired many firms over the last decade

stand up to scrutiny by carefully analyzing earnings

projects that align with national policy. Because of that,background and viewpoint to inside directors responsible

or so, resulting in a much more diverse business portfolio

performance and the situation at other companies. As

decisions to invest are not solely based on prospects forfor business execution. Of course, as a director

and workforce. That is one of the Group’s major

Nisshinbo works to create a more close-knit organization,

the success of each project. The DBJ has to take a

appointed by Nisshinbo’s shareholders, my duty is tostrengths today.

I expect to see a new generation of employees withbroader macroeconomic perspective, allowing for a wide

protect their interests and increase the Nisshinbo

range of considerations that arise in negotiations withGroup’s corporate value.

senior management compensation, we ensure pay levels

However, to display its true power, Nisshinbo needs

experience in all areas of the Group. Drawing on thatto rapidly weave together all the strands of those M&Aexperience, they will intuitively harness the Group’s
diversity to drive innovation and deliver results.

deals to create a stronger, more close-knit organization.

mentation is economically rational and efficient and to

Of course, the chairman and president are well aware of

I believe Nisshinbo has significant future potential

industrial impact, dialogue with academic experts, andmonitor the transparency of business execution on behalfthat challenge, supporting efforts to encourage technology

thanks to its strong technological capabilities and its

public relations activities related to policy implementation.

of shareholders.

and personnel exchanges between different businessdiverse, talented people. In my role as outside director,

On a daily basis, the bank deals with business leaders

When I was approached about becoming an outside

fields in the Group. To step up those efforts, the Company

I hope to use my own experience to help Nisshinbo

from many industries and key people in national and local

director, I had no previous direct contact with Nisshinbo,

established a Digital Business Department in April 2020.

increase its corporate value going forward.

government and business groups. That environment gave

so I didn’t have a clear image of the Company. Delving

The office, which will be staffed by a team of people fromme some very valuable experience.

into the detailed information on the website, I was sur-

all Nisshinbo’s business fields, is tasked with developing

In 2009 I was invited to join the management team at

new digital service businesses using resources fromshift away from its founding business of textiles to

inside and outside the Group. The office is set to be apresident in 2013, staying in the role for four years. Afterbecome an Environment and Energy Company group

key test of Nisshinbo’s efforts to create a morethat I worked for one year as chairman of DBJ Assetfocused on Mobility, Infrastructure & Safety, and Life &close-knit organization.

Management Co., Ltd., a DBJ subsidiary, helping to set

Healthcare. The website also sets out the Corporate

up frameworks to support business growth.

Philosophy in refreshingly direct terms. I learned that

Financials

prised to see how Nisshinbo is making a transformative

Tokyo Ryutsu Center Inc. and I became the company’s

Nisshinbo, in its relationship with society, has been

34

Management Framework

My mission is to assess whether business imple-

development, community studies into economic andBusiness Segments

public agencies and business groups involved in policy

Remuneration Committee. Guided by a set formula for

ESG Special Feature

Working in policy financing has given me
a broader perspective

it was established, rather than simply focusing on theStrategy

Outside Director

A highly effective Board of Directors

ProfileBacked by more than a century of corporate history,
Nisshinbo draws on superior technology and diverse humanresources to contribute to society through its businessactivities, guided by its key principle of Public Entity.

committed to consistent integrity as a public entity since35

Overview of Business Segments — At a Glance

Overview of Business Segments

The Nisshinbo Group is made up of seven distinct businesses — wireless and communications,micro devices, automobile brakes, precision instruments, chemicals, textiles and real estate. Nisshinbo
supplies high-value-added products that meet customer needs, driven by innovation born out of businesscollaboration and portfolio reorganization that has kept the Group aligned with changing needs.
Main business areas
Marine systems

Segment Share

29.9%

Wireless andCommunications

Supplies solutions such as disaster prevention systems
and weather radars, as well as marine systems andcommunications equipment.

P.37

Marine radar and communications equipment

Communications equipment
for vehicles

GPS receivers, ITS equipment

Solutions and specialized equipment
systems and weather radars
ICT and mechatronics

Disaster prevention

Power supplies, Large-format copiers

Medical equipment Probes for ultrasound diagnostic
equipment, oscillators for catheters

Micro Devices
Segment Share

12.8%

P.41

Automobile Brakes
Segment Share

25.8%

Segment Share

12.8%

P.45

Precision
Instruments
P.50

Working to expand sales of analog semiconductors andother electronic devices, supported by microelectronics
technologies.

New Japan Radio

The Nisshinbo Group is the world’s leading maker ofbrake friction materials by market share; now expanding
its presence as a true global supplier using its network
covering key markets worldwide.

Friction materials

Manufactures molding products for home appliance andautomotive applications and supplies processed precision
automotive parts and customized production equipment
for customers worldwide, primarily in Asia.

Molding products

Semiconductor devices and SAW filters

Ricoh Electronic Devices

Power management ICs, etc.

Disc pads and brake linings

Precision parts processing including parts for electronic
brake systems (EBS)
Customized production equipment

Wireless and Communications
Japan Radio Co., Ltd. / JRC Mobility Inc.

Chemicals
Segment Share

1.8%

P.54

TextilesSegment Share

9.7%

P.58

Manufactures a range of highly promising products inthe environmental and energy fields, such as Carbodilite,a modifier for biodegradable plastics and waterborne
resins, and bipolar plates for fuel cells.

Carbodilite high-performance chemical additive

Mainstay business is products made from natural
cotton; supplies high-quality “Made by Nisshinbo”
dress shirts, uniforms and other products tomarkets worldwide.

ShirtsDress shirts, casual shirts and fabricTextilesUniform fabric and casual fabricThermal insulation products
Bipolar plates for fuel cells
Fine carbon products

The wireless and communications business supplies communication and navigation equipment withworld-leading reliability to users in the shipping sector. It also provides various disaster prevention systems,
such as dam and river management systems and weather forecasting systems. In addition, JRC Mobility
Inc., which was established in 2018 to develop the Group’s business in the mobility field, is pushing ahead
with new products that will help realize autonomous driving, drawing on ITS* products and other existing
automotive products transferred from Japan Radio Co., Ltd.
* Intelligent Transport Systems: Systems that use data processing technology to solve traffic issues such as accidents and congestion

Related SDGs

Real Estate
Segment Share

2.3%

P.60

Procures funds to support the Nisshinbo Group’s growthstrategy by effectively utilizing idle plant sites and otherreal estate assets arising from business restructuring.

36

Sales
Leasing

Housing lots
ARIO Nishi Arai and other properties

37

P. 38

Business Results and Strategy

P. 40

Message from the President of JRC Mobility

Overview of Business Segments— Wireless and Communications

Note: Figures for the fiscal period ended December 2018, which was anine-month transitional fiscal period, have been adjusted to facilitatecomparison with the fiscal year ended December 2019.

Summary of Financial Results for 2019

In solutions and specialized equipment, we aim to provide
integrated solutions that make life safer and more secure forpeople everywhere. To do that, we will expand our reach into
new business fields and establish a new services business,

Segment
Profit(billions of yen)160(billions of yen)

5.0

*1 Life Cycle Management: Support services for the entire life cycle ofvessels, from delivery to decommissioning*2 Automatic Identification System*3 Advanced Driver Assistance Systems

120

Main Locations

2.5
80

Key Companies
040(millions of yen)0

18.12 adjusted

19.12

Marine systems

33,21034,916

Communications equipment

16,528-2.5

18.12 adjusted

19.12

Marine systems(2,727)(1,171)

16,802

Communications equipment

1,439

1,872

317

2,087

64,52968,815

Solutions andspecialized equipment

ICT and mechatronics

18,328

19,831

ICT and mechatronics

268

372

Medical equipment

9,408

9,170

Medical equipment

751

757

Other businesses

2,512

2,646

Other businesses

(442)

(217)

JRC Mobility

0132

JRC Mobility

(289)

(397)

Eliminations

247

(104)

Eliminations, etc.*

190

796

144,762

152,213

Total

(493)

4,100

Total

Nagano Plant

Nagano, Nagano Prefecture

Nagano Japan Radio Co., Ltd.

Nagano, Nagano Prefecture

Disaster prevention systems, mechatronics

Ueda Japan Radio Co., Ltd.

Ueda, Nagano Prefecture

Wireless communication equipment,
medical equipment

Alphatron Marine Beheer B.V.

The Netherlands

Navigation equipment,
Wireless communication equipment

ProNav AS

NorwayNavigation equipment,
Wireless communication equipment* Includes revisions to retirement benefits and differences arisingfrom adjustments to figures for the previous fiscal period.

38

Main Products and Services
Disaster prevention systems,
mobile communications equipment

Financials

Solutions andspecialized equipment

Japan Radio Co., Ltd.

LocationManagement Framework(millions of yen)

Main Locations and Key Subsidiaries

Business Segments

Net Sales

Business Strategies for 2020

operations through ship-to-shore networks, centered on our
J-Marine NeCST system, which was launched in 2018. In
March 2020 we launched J-Marine Watcher II, an anti-collision
smartphone app for small vessels that are not fitted withradars or AIS*2.
In communications equipment, we continue to work on a
range of development projects in the mobility field, including
ADAS*3. We are also working to expand sales of ETC andmobile locators, which are currently enjoying strong demand.
In addition, we have developed a next-generation safety
protection system for railway maintenance workers on bullet
train lines. We plan to expand sales to JR companies when
they upgrade their safety systems. In smartphone opticaltransmission systems, which can be adapted to all types ofmobile phones, we are developing new products to address
market needs. We also see prospects for increased sales
from our new multiband wireless device for automotive
applications, launched in 2019 for the North America market.
In ICT and mechatronics, our strategy is to win new
customers and develop new products. Specifically, in the ICT
business, we aim to capture market share by moving rapidly
into the IoT field; in the automotive parts business, we willleverage synergies with NJ Components; and in the mechatronics business, we plan to extend our reach in the industrial
equipment and commercial printer business fields.

ESG Special Feature

In 2019, the wireless and communications business
reported net sales of ¥152,213 million, up 5.1% year on year
on an adjusted basis, and segment profit of ¥4,100 million,
an improvement of ¥4,594 million on an adjusted basis.
In solutions and specialized equipment, sales of road information systems declined, but sales and profits rose overall,
supported by an increase in large projects in Japan andoverseas, including water and river information systems,
municipal disaster prevention systems, and aerospace andmeteorological systems.
In marine systems, sales of equipment for merchantvessel retrofit projects declined year on year amid weak

while also maintaining and growing existing businesses. In
business targeting the public sector in Japan, we aim tocontinue generating sales and profits from existing fields,such as disaster prevention systems, dam and river management systems, and aerospace and meteorological systems,
while also moving into public infrastructure maintenance,
including road infrastructure. As part of moves to build ourservices business, Japan Radio signed a comprehensive
partnership agreement with Japan’s largest infrastructure
maintenance company in 2019. Our aim is to capture business
opportunities from major maintenance and upgrade work on
Japan’s ageing public infrastructure, using Japan Radio’s
wireless communication technologies to propose services
such as advanced monitoring systems for Japan’s road networks. In the private sector, we continue to develop systems
based on private LTE (4G) networks, but in order to drive
advances in IoT solutions, we will also develop systems for
5G architecture and reinforce our Alertmarker+ and SOLOGIS
information services. Overseas, our business continues toexpand each year. We now sell flood warning systems,
equipment for ports and airports, shortwave marine radar,and airspace monitoring radar for windfarm operators.
In marine systems, we continue to expand our LCM*1
business in the aftermarket. In small and medium-size vessels,
we aim to increase our market share in the North European
fishing vessel market, led by ProNav, and in the broader
European market for small and medium-size vessels throughAlphatron Marine Beheer B.V. We will also steadily expand
our menu of shipping support services for safe vessel

Strategy

growth in the aftermarket, but demand for equipment for
new-build vessels was strong and ProNav AS reported higher
sales of equipment for small and mid-size fishing vessels inNorthern Europe. Those factors lifted sales overall, contributing
to narrower losses in marine systems.
In communications equipment, sales of amplifier products
declined amid slowing shipments of smartphone opticaltransmission systems. However, sales and profits rose year
on year, reflecting strong demand for automotive ITS, PHS
devices and commercial wireless equipment.
In ICT and mechatronics (formerly mechatronics andpower supplies), sales and profits increased year on year,
supported by firm demand for card payment terminals andwireless equipment for gas meters in ICT and power
supplies, and sales from NJ Component Co., Ltd., whichbecame a consolidated subsidiary in July 2019.
Starting in 2019, the communications equipment businessof Japan Radio is gradually being transferred to JRC Mobility.

ProfileWireless and Communications

Business Results
and Strategy

39

Message from the President of JRC Mobility

Overview of Business Segments

JRC Mobility Inc. was established in 2018 toenable rapid decision-making and create adynamic business structure in the mobility
field. Over the last two years, our efforts todevelop new products, enhance relationships
with customers and build business structures
have progressed according to plan.
Kinji Kato
President
JRC Mobility Inc.

JRC Mobility Sets Sail

will enable users to gather highly accurate big data on
positioning. Mobile locators are set to be a vital component
in autonomous vehicles. We are targeting applications inagricultural machinery, construction machinery anddrones, as well as passenger cars.

JRC Mobility is tasked with creating and developing
communication devices and solutions for all areas of themobility field. In 2020, Japan Radio will transfer onboard
ETC devices and mobile locators from its communicationequipment business and its entire ITS business, which
includes GNSS* receivers, to JRC Mobility. Remaining
operations, including commercial wireless devices inJapan Radio’s communications equipment business, arescheduled for transfer in 2021. JRC Mobility is finally readyto set sail on its voyage as a specialist mobility company.

Launching Our Sensor Business
JRC Mobility is developing a high-performance ultrasoundsensor. The new sensor has a much wider field of viewthan existing products, allowing it to detect objects inclose proximity and far away. We see potential applications
in next-generation self-parking and parallel parking assist
systems. New Japan Radio Co., Ltd. is responsible fordeveloping the ASIC chip for the sensor. The sensor
covers all the blind spots of a vehicle and warns users ofobjects, helping to significantly improve safety aroundconstruction machinery and forklifts.
JRC Mobility is also harnessing Nisshinbo’s strengths inmillimeter wave radar technology to develop speedometers.
Wireless technology means the device does not requirea hard connection to the vehicle, so it can be installed as
an aftermarket add-on for detecting speed. The sensor
provides accurate speed readings that are not affected byenvironmental conditions, helping to make vehicles safer.
The automotive sector is developing innovativetechnologies based on the theme of CASE (connected,
autonomous, shared, electrified). As a company with along pedigree in the field of advanced ICT, JRC Mobility
aims to tap into that trend and drive further growth in the
Nisshinbo Group’s mobility businesses.

Expanding the Automotive Business
JRC Mobility has a high share of the onboard ETC device
market for imported vehicles in Japan. The market forthe devices is also growing worldwide as other countries
adopt road toll payment systems similar to ETC. Againstthat backdrop, we have signed a contract with a distributor
to supply ETC devices for the US, China and South Korea
markets. The deal will lead to a dramatic increase in our
ETC device production and shipments over the next
decade, so we are working rapidly to establish an automated production system. We also acquired two German
companies with development engineering, assembly andlogistics capabilities in April 2020. Both companies havepre-existing business relationships with the Nisshinbo
Group. These new development locations in Germany
will allow us to dramatically expand our onboard device
business with automakers in Europe and drive the strategic
development of our business worldwide.
In mobile locators, which use accelerometers andgyro-sensors to estimate position, we have incorporated
high-precision GNSS receiver chips into the devices.
Combined with communication capabilities, the locators

Micro Devices
New Japan Radio Co., Ltd. / Ricoh Electronic Devices Co., Ltd.
In the micro devices business, Nisshinbo has created new value in audio equipment, automotive andindustrial devices, ICT and other fields, drawing on its competitive advantages in analog semiconductors
and microwave technologies. Centered on New Japan Radio Co., Ltd. and Ricoh Electronic Devices Co., Ltd.,
we are stepping up cooperation across the Group to create a stream of new products and businesses in
the areas of automotive CASE, industrial equipment and healthcare.

Related SDGs

* Global Navigation Satellite System: High-precision satellite positioning
system using quasi-zenith satellites.

40

41

P. 42

Business Results and Strategy

P. 43

Key Products

P. 44

Message from the Chairman of New Japan RadioOverview of Business Segments— Micro Devices
Note: Figures for the fiscal period ended December 2018, which was atransitional fiscal period, have been adjusted to facilitate comparison
with the fiscal year ended December 2019. Adjusted figures for2018 do not include earnings for Ricoh Electronic Devices for theperiod before it became a consolidated subsidiary (Jan-Mar 2018).

Business Results
and Strategy

Business Strategies for 2020

Summary of Financial Results for 2019

Segment
Profit(billions of yen)75

Key Companies

New Japan Radio Co., Ltd.

Ricoh Electronic Devices Co., Ltd.

Location

Main Products and Services

Kawagoe Works

Main Locations and Key Subsidiaries

Fujimino, Saitama Prefecture

Electronic devices, microwave products

Saga Electronics Co., Ltd.

Kanzaki, Saga Prefecture

Electronic devices, microwave products

NJR Fukuoka Co., Ltd.

Fukuoka, Fukuoka Prefecture

Electronic devices, microwave products

THAI NJR CO., LTD.

ThailandElectronic devices, microwave products

Yashiro Plant

Kato, Hyogo Prefecture

Electronic devices
Business Segments

Net Sales

Main Locations

Key Products(billions of yen)

25

15

Electronic devices

10

25

5

1

18.12 adjusted

19.12

50,081

43,61018,073018.12 adjusted

22,812New Japan Radio
Ricoh Electronic Devices*

Eliminations(1,418)(1,137)

Eliminations, etc.*

Total

66,73665,286

Total

2

1

19.12

1,565

144

1,043

375

(374)

(263)

2,234

256

*1 Adjusted figures for 2018 cover results for Apr-Dec 2018.
*2 Includes goodwill amortization and revisions to retirement benefits

42

Automotive products

Industrial equipment products

The number of ICs per vehicle continues toincrease amid the shift to vehicle electrification and advances in autonomous driving
technology. ICs are now needed for a
growing array of applications, from car audio
to power control units, which support basic
vehicle functions, electric power-assisted
steering and battery management systems,
as well as sensors that are integral to parking
assist systems, collision avoidance andprevention systems and autonomous driving.

Nisshinbo has a diverse lineup of products
to meet customers’ needs – operational
amplifiers that play a key role in improving
the sensing precision of encoders, which
support movement in industrial robots,
PMICs that support stable, low-noise
operation of various industrial equipment,
and analog front-end ICs that optimally
integrate industrial equipment functions.

43

Satellite communication
system components
VSAT* are satellite ground stations that playa crucial role in satellite-based internet
connectivity, data transmission and telephony.
New Japan Radio is Japan’s only supplier ofkey components for VSAT and one of only ahandful of specialist suppliers worldwide. It
has the top share in the global market.
* Very Small Aperture Terminal

Financials

New Japan Radio
Ricoh Electronic Devices*(millions of yen)0

Microwave productsManagement Framework

20
50(millions of yen)

ESG Special Feature

In 2019, the micro devices business reported net sales of¥65,286 million, down 2.2% year on year on an adjusted
basis, and segment profit of ¥256 million, down 88.5% on
an adjusted basis.
In mainstay electronics devices, sales of communicationrelated products declined, reflecting sluggish sales ofsmartphones, particularly at key manufacturers in the US,
South Korea and China, and a rapid deterioration in market
conditions caused by US-China trade tensions. Sales ofindustrial equipment-related products also fell amid weak
capex-led demand for smartphone facilities and slow economic
growth in China and Europe. Demand for automotive-related
products was relatively firm, but sales declined year on year
on an adjusted basis.
In microwave products, sales declined due to weak salesof satellite communication products in the US. However,profits rose on fixed-cost reduction.
Meanwhile, New Japan Radio continued to actively
implement work style reforms. Those efforts were recognized

Strategy

The micro devices business has positioned automotive, industrial
equipment and IoT applications as growth fields and is strengthening its business to tap into that growth. In particular, we aim
to build a high-growth, stable business model that is resilient
to fluctuations in the semiconductor market by increasing theweighting of automotive products in our business. We planto achieve that by developing new products for next-generation electric vehicles and advanced driver assistance systems(ADAS). We will also pursue Group synergies by building acooperative framework for New Japan Radio and Ricoh
Electronic Devices covering procurement through to production.
The economic environment remains challenging in 2020, but
we are upgrading production facilities and product developmentin preparation for when demand does recover.
New Japan Radio is working to commercialize a number of
new devices and developing next-generation products suchas MEMS sensors for microphone modules used in smart
speakers and AI-powered speakers, and optical sensors for
wearable devices and health device applications. The company
is also developing high-precision analog front-end ICs with aview to starting volume production. In microwave products,
we are developing and manufacturing products for a wide
range of fields, including satellite communication systems,
sensors and high-output electron tubes.

Sensors incorporating microwave technology are becoming
a new growth field, driven by a steep rise in demand in thelast few years. Sensors that can accurately detect human
movement are being adopted for a wider range of fields,
including crime prevention and other security tasks, household
and automotive applications, and even healthcare applications.
In addition to standalone sensors, we are supplying modular
products that integrate sensors and peripheral components,
helping us win business from new customers.
The micro devices business is reinforcing quality management
at its plants. By establishing target KPIs and PDCA cycles andcreating a management review and emergency response
mechanism, we aim to visualize the cost of quality and manage
risk related to quality issues. We will also use the “Five Whys”
technique to analyze the causes of any issue and rapidly
improve quality. Additionally, we plan to increase the accuracyof production and sales systems to eliminate lost sales
opportunities. At the same time, we will reduce lead times toimprove inventory control, enabling inventory management on
a weekly unit basis. Another goal is to achieve zero industrial
accidents by reinforcing health and safety activities.

ProfileMicro Devices

by the Ministry of Economy, Trade and Industry (METI), which
certified New Japan Radio as a White 500 company withoutstanding health management for the fourth consecutive
year. The company is also working to improve diversity,
including holding plant tours for female university students.

Power management ICs are the main product at Ricoh
Electronic Devices, which is developing compact, low-powerICs that are highly efficient, precise and reliable using CMOS
analog technology. In devices for automotive applications, thecompany is working on the development of high-quality ICs
for high voltages and currents needed in next-generation
powertrain components, as well as ICs with improved low-noise
and noise regulation performance to increase the accuracy of
sensors for ADAS equipment.
The microwave product business has a stable market forcomponents used in radars, while demand for components
used in satellite communications is also expanding steadily.
We see the potential for continued growth going forward as
the information society becomes more diverse. Key to thatgrowth is demand for satellite communication components.
Demand is currently being driven by Asia, where there are alarge number of emerging markets for satellite communication.
The business is currently developing new products to address
recent market trends, such as increasing communication
speeds and capacities, and the need for ultra-compact,
high-performance transceivers with low-power consumption.

Message from the Chairman of New Japan Radio

Overview of Business Segments

We face a tough operating environment due toChina’s economic slowdown and the COVID-19
outbreak, but we continue to develop new
products and invest in our business in
preparation for the rebound in the economy.

Ryo Ogura
Chairman
New Japan Radio Co., Ltd.

Our Operating Environment

field, business enquiries are rising at a steady rate, withpotential customers particularly interested in our ICs for
optical rotary encoders. The ICs help to increase thespeed and precision of robot arms, which are playing a
key role in the shift to factory automation. In the ICT field,
the global smartphone sector, which ships roughly 1.4
billion devices annually, is now transitioning to 5G smartphones. That trend is likely to support firm demand forsemiconductors.
Our semiconductor technology is also vital to various
joint projects with other businesses in the Nisshinbo
Group. New Japan Radio is playing an increasingly
important role in the Group by supporting the development of new medical equipment and other products. A
leading example is the automotive ultrasound sensor wedeveloped with JRC Mobility Inc.

The Nisshinbo Group’s micro devices are used in automotive and industrial equipment and communication products
such as smartphones. However, all of those fields were
hit by the slowdown in China in 2019 that spread to otherparts of the global economy.
We had expected our business to return to 2018 levels
this year, but the COVID-19 outbreak means the toughbusiness climate is set to continue. Despite that outlook,
we are putting systems in place to prepare for a rapid
rebound in orders once the economy recovers.
A key theme for the electronics components sector isthe expected increase in demand related to 5G, CASE
and IoT. We are preparing for the possibility of a steep
rise in demand across the board if the various problems
the world currently faces are resolved swiftly. Automotive
devices in particular are likely to see sustained growthin shipments over the long term, so we are adjusting
output and inventories while keeping a close eye onmarket conditions.

Ongoing Capital Investment
Against that backdrop, we have continued to invest in
design and development and manufacturing facilities inorder to increase added value through device modularizationand to respond to rising orders.
New Japan Radio’s subsidiary Saga Electronics Co.,
Ltd. has completed the expansion of its automotive
device assembly line, while Ricoh Electronic Devices,
plans to increase 8-inch wafer output at its Yashiro plantfrom the current 6,500 wafers per month to 10,000 by
2025. The company is also rapidly introducing 0.18um
process technology, which will further increase thecompetitiveness of the micro devices business. The newtechnology will shrink chip area by 40%, reducing costs
by increasing the number of chips per wafer, while themore complex chip architecture will improve performanceand a higher operating voltage will boost power output.

Stable Business Expansion
The micro devices segment is well-placed for growth inshipments over the medium and long term. In the automotive field, we anticipate new orders from Tier 1 autocomponents suppliers in Japan and Europe for ADAS
devices and other parts related to the CASE trend. WhileEVs are becoming increasingly common, gasoline vehicles
are likely to be around for some time yet, so we forecast
continued demand for engine sensors, gas sensors andother ICE-related devices. We are preparing to launch a
number of new automotive products from 2021, whichshould lead to greater earnings stability as the weightingof automotive sales rises. In the industrial equipment

44

Automobile Brakes
Nisshinbo Brake Inc. / TMD Friction Group S.A.
Nisshinbo is a global supplier with world-class development capabilities in the field of friction materials,
which are key components in automobile brake systems. Our strategy in the automobile brakes business is
to address the specific requirements of each market and customer with three businesses — Nisshinbo Brake,
TMD Friction Group and Saeron Group — aiming to meet global automaker needs for optimum partsprocurement as the world’s leading friction materials company.

Related SDGs

45

P. 46

Business Results and Strategy

P. 48

Developing Our Business Worldwide

Overview of Business Segments— Automobile Brakes

Note: Figures for the fiscal period ended December 2018, which was anine-month transitional fiscal period, have been adjusted to facilitatecomparison with the fiscal year ended December 2019.

higher personnel expenses and other factors outweighing
firm sales. In yen terms, sales and profits both fell year on
year. In Thailand, sales and profits declined following the saleof the foundation brake business.
Sales at TMD were stable year on year. On a local currency
basis, sales rose but losses widened, mainly due to costs
related to business restructuring. However, in yen terms,
sales declined and the loss was wider due to the strong yen.
In the OEPC business (original equipment for passengercars), TMD booked a writedown on fixed assets of ¥14 billion,
which was recorded under extraordinary losses.

Summary of Financial Results for 2019

Global auto production has seen sustained growth in recent
years led by rising demand in China, but output declined year
on year in both 2018 and 2019. Market conditions are also
likely to remain challenging in 2020 amid the COVID-19
outbreak. At Nisshinbo Brake, new orders for copper-reduced
and copper-free friction materials are firm, in line with our
expectations. The company is investing in the necessary
facilities in Japan and the US to ensure production anddeliveries ramp up smoothly.
The main goal of the automobile brakes business in 2020is to return TMD to profit. In TMD’s aftermarket business, we

150

Main Locations(billions of yen)

5.0

Key Companies
2.5

100

Nisshinbo Brake Inc.

50
-2.5

(millions of yen)(millions of yen)

0

-5.0

TMD Friction Group

18.12 adjusted

19.12

Nisshinbo Brake

56,44450,854

Nisshinbo Brake

3,846

1,620

TMD

90,59385,850TMD(4,055)(4,152)Eliminations(6,866)(5,366)

Eliminations, etc.*

(707)

(808)

140,171

131,338

Total

(916)

(3,340)Main Products and Services

Ora, Gunma Prefecture

Automobile brake friction materials

Nisshinbo Automotive Manufacturing Inc.

USA

Automobile brake friction materials

Saeron Automotive Corporation

South Korea

Automobile brake friction materials

Nisshinbo Somboon Automotive Co., Ltd.

Thailand

Automobile brake friction materials

Saeron Automotive Beijing Corporation

China

Automobile brake friction materials

Nisshinbo Saeron Changshu Automotive Co., Ltd.

China

Automobile brake friction materials

TMD Friction GmbHGermany, etc.

Automobile brake friction materials

19.12

Financials

Total

18.12 adjusted

Main Locations and Key Subsidiaries* Including amortization of intangible fixed assets at TMD

46

Management Framework0

Location

Tatebayashi Plant

Business Segments

Segment
Profit(billions of yen)

*1 Demand for these products, which are compatible with US regulations
on copper content, is projected to increase worldwide. US environmental
regulations, effective from 2021, prohibit the sale of new friction
materials or vehicles fitted with friction materials that have a copper
content of more than 5%. From 2025, the limit on copper content will
be reduced to 0.5%.
*2 Noise, Vibration, Harshness: A term describing the noise and vibration
characteristics of vehicles.

ESG Special Feature

Net Sales

Business Strategies for 2020

that is by developing friction materials with better NVH*2
performance for EVs, plug-in hybrids and fuel cell vehicles(FCVs), which are quieter than conventional cars. We havealso started studies, research and development into the next
phase of copper friction material regulations, which will further
limit microparticle emissions caused by wear and tear in
brake systems.
More than ever, as a manufacturer of friction materials, wehave to accurately ascertain developments at customers andreflect those trends in our business strategy. By showing thevalue we can offer as a Group, we aim to win even greater
trust from automakers.

Strategy

In 2019, the automobile brakes business reported net salesof ¥131,338 million, down 6.3% year on year on an adjusted
basis, and a segment loss of ¥3,340 million, a deterioration of¥2,423 million on an adjusted basis.
In domestic operations, orders increased following thelaunch of new copper-reduced and copper-free*1 products,
but sales and profits declined year on year, mainly due to thesale of the foundation brake business.
In the overseas operations of Nisshinbo Brake Inc., sales
and profits declined in China, reflecting weaker car sales andcosts associated with the startup of new business sites. Car
sales also declined in the US, but the launch of new products
lifted sales and profits year on year. In South Korea, salesrose and profits declined on a local currency basis, withare rebuilding relationships with Europe’s largest distributors
to expand sales. The aftermarket business is in the midst ofrealignment, with many competitors and distributors merging,so we need to respond dynamically to the changing businessenvironment. In the OEPC business, we are working to
improve the situation at the Essen plant. Our aim is toachieve a rapid recovery in margins by reducing the defective
product ratio to lift productivity.
Meanwhile, automakers have started planning andexploring specifications for the next generation of brakes.
They are working on new themes such as CASE (connected,
autonomous, shared, electrified) and MaaS (mobility as aservice), and pushing ahead with research into brakes forEVs. EVs require less friction material due to the use ofregenerative braking systems, which is likely to depress
demand for replacement parts over the longer term. However,we see potential for even higher demand for friction materials
if car sharing services become more widespread, spurring
growth in vehicle utilization rates. Growth in autonomous
driving is also likely to accelerate that trend.
Changes in the way we use cars will also lead to changes
in specifications for brakes and friction materials. In response,
the automobile brakes business is already developing productsthat are ideally suited to electronically controlled brake systems
and other developments in our field. One way we are doing

ProfileAutomobile Brakes

Business Results
and Strategy

47

Overview of Business Segments — Automobile Brakes

Developing Our Business Worldwide
Nisshinbo Brake Inc., a world-leader in brake friction materials development, started moving into
overseas markets from the late 1990s to meet the needs of global automakers. The company’s area of
operations increased dramatically in 2012 with the acquisition of the TMD Friction Group. As the world’s
top maker of friction materials by market share, Nisshinbo Brake’s strategy is to supply products
worldwide by addressing the unique needs of each market and customer.
China

TMD Friction Esco GmbHin Essen manufactures partsfor new passenger cars andthe aftermarket.

Saeron Automotive (Beijing) Co., Ltd. andNisshinbo Saeron (Changshu) Automotive Co.,
Ltd. manufacture brake friction materials,
while TMD businesses Hangzhou TMD Friction
Co., Ltd. and Shijiazhuang TMD Friction Co.,
Ltd. respectively manufacture parts for new
passenger cars and the aftermarket.

France

NISB
TMD

6.6

0.9

Japan 12.7

0.7
16.4

2018

8.1

8.2

Americas 10.2

11.1

2018

2019

Asia

26.4

2018

2019

73.3

69.6

5.6

Europe

23.2

2019

2018

2019

Capital Investment Plan for 2020 (initial plan)¥2.0 billion

Strategy

TMD Friction France manufactures
aftermarket parts.

(billions of yen)

ProfileGermany

Sales by Region¥1.7 billion

Russia¥2.2 billion

O.O.O. TMD Friction Eurasia
is an aftermarket business.

¥10.8 billion¥4.8 billion
Japan
Asia

TMD Friction UK Ltd.
manufactures anddistributes aftermarket
parts.

EuropeMajor planned investments:• Expansion at US brake friction materials plant• Capacity increase at TMD’s Essen plant making parts for new passenger cars
• Capacity increase at plant in China making brake friction materials• Construction of IoT system on production lines at Tatebayashi Plant in Japan

Business Segments

UAE
TMD Friction Middle East,a branch office in Dubai,
manages the aftermarket
business in the region.

Spain
TMD Friction España S.L. manufactures
parts for new passenger cars.

TMD Friction Romania
S.R.L. manufactures
aftermarket parts.

ThailandNisshinbo Brake’s Tatebayashi
Plant in Gunma Prefecture is
the “mother plant” in the automobile brake business, using
IoT and other technologies onfriction material productionlines and conducting R&D.

MexicoBrazilTMD Friction México,
S.A. De C.V. manufactures
parts for new passenger
cars and the aftermarket.

TMD Friction Do Brasil
manufactures parts for
new passenger cars andthe aftermarket.

Nisshinbo Somboon
Automotive Co., Ltd.
manufactures brakefriction materials.

48

Nisshinbo Automotive Manufacturing
Inc. manufactures brake friction materials
TMD Friction, Inc. manufactures parts
for the aftermarket.

Financials

RomaniaUS

Japan

Management Framework

India
Nisshinbo Brake
equity-method affiliate
Rane Brake Lining
Ltd. manufactures
brake friction materials.

South Korea
Saeron Automotive Corp.
(Cheonan), Nisshinbo
Brake’s South Korean
subsidiary, manufactures
brake friction materials.

ESG Special Feature

AmericasUK

49

Overview of Business Segments

Key Products

ProfileEBS Valve Blocks
Nisshinbo Mechatronics Inc. manufactures EBS valve blocks for electronic stability
control (ESC) systems at a plant in China operated by subsidiary Nisshinbo-Continental
Precision Machining (Yangzhou) Co., Ltd. ESC systems use information on driving conditions gathered from sensors to control vehicle stability and braking. Nisshinbo draws on
its long track record of expertise to meet client needs for valve blocks, which require
advanced machining technology and must meet high standards for quality and cost.

ESG Special Feature

Automotive Molding Products
Using its molding technology for rotating parts, Nisshinbo Mechatronics has supplied
automotive fans for car air conditioners and radiators for many years. However, with thePrecision Instruments

acquisition of Nanbu Plastics Co., Ltd. in 2015, Nisshinbo Mechatronics is using thesubsidiary’s strengths in automotive wire harness connectors and molding products forheadlights to expand its reach in the automotive field. Nisshinbo Mechatronics and Nanbu
technologies to generate synergies, while also leveraging their ability to offer integrated
support to clients, from product planning and development through to assembly.

Automotive headlight components

Management Framework

Utilizing various areas of expertise accumulated over more than 70 years, this segment is focused on precision
metal parts processing for the automotive sector and parts molding and processing for the automotive andhome appliance sectors. The segment also makes customized production equipment to meet the specificneeds of customers. We work closely with subsidiary Nanbu Plastics Co., Ltd. to develop these businesses
globally, centered on Asia.

High Value-added Molding Products
Nisshinbo Mechatronics manufactures Eco Cross fans used in residential air conditioners.

Related SDGs

Business Segments

Plastics are now developing their business worldwide by combining their respective

Nisshinbo Mechatronics Inc.

Strategy

Automotive EBS
valve block

The patent-protected fans are lighter and more energy-efficient than existing equivalent

Key Products

P. 52

Business Results and Strategy

fans. By combining its proven expertise in rotational technologies with state-of-the-art
molding technologies, Nisshinbo Mechatronics has created a cost-competitive fanthat also saves energy and resources. Eco Cross is highly regarded by Japanese air

Financials

P. 51

conditioner makers, which are expanding their operations worldwide. We are currently
increasing production to address projected growth in demand, mainly in China andSoutheast Asia.
Fans for residential andcommercial air conditioners

50

51

Overview of Business Segments— Precision Instruments

Note: Figures for the fiscal period ended December 2018, which was anine-month transitional fiscal period, have been adjusted to facilitatecomparison with the fiscal year ended December 2019.

Summary of Financial Results for 2019

In the precision instruments business, the operating environment is likely to be challenging in the near term, as precisionparts for the automotive sector, air-conditioner parts, andautomotive headlamp assemblies are all highly exposed toeconomic conditions in China and other markets in Asia.
However, demand for automotive parts is likely to rise going
forward, so we plan to upgrade production facilities at all our

Segment
Profit(billions of yen)

75

Main Locations(billions of yen)

2.0

Key Companies
1.5

50
1.0
25

(millions of yen)(millions of yen)0018.12 adjusted

19.12

18.12 adjusted

Precision parts

18,92015,775

Precision parts

746

382

Molding products

52,67252,094

Molding products

1,931

1,286

Eliminations(5,671)(2,441)Eliminations(1,049)

(789)

Total

65,921

65,429

Total

1,628

879

19.12

Location

Main Products and Services

Miai Machinery Plant

Okazaki, Aichi
Prefecture

Molding products,
automotive precision parts

Hamakita Plant

Hamamatsu,
Shizuoka Prefecture

Automotive precision parts

Nisshinbo Precision Instrument & Machinery Hiroshima Corp.

Higashihiroshima,
Automotive precision parts
Hiroshima Prefecture

Nisshinbo-Continental Precision Machining (Yangzhou) Co., Ltd.

China

Automotive precision parts

Nisshinbo Mechatronics (Shanghai) Co., Ltd.

China

Molding products

Nisshinbo Mechatronics (Thailand) Ltd.

ThailandMolding products

Nisshinbo Mechatronics India Private Limited

India

Molding products

Shizuoka Prefecture,
Molding products
etc.

Nanbu Plastics Co., Ltd.

Management Framework

Nisshinbo
Mechatronics Inc.

0.5

Main Locations and Key Subsidiaries

Business Segments

Net Sales

Business Strategies for 2020

manufactures feces sampling containers, but it has also
received orders for allergy testing kits, a promising area ofsynergy with Ueda Japan Radio Co., Ltd. Shipments of the
kits started in February 2020. As a result, Nanbu Plastics’
medical business (Yoshida site) will be relocated to the
Nisshinbo Group’s Fujieda site with the aim of significantly
increasing output and productivity. The relocation is scheduled
to take place in 2021.
The customized production equipment business plays a
key role supporting the Nisshinbo Group’s manufacturing
sites. It provides molding equipment for carbon bipolar plates
in the chemicals business and manufacturing equipment forxEV parts made by Nagano Japan Radio Co., Ltd. in thewireless and communications business.

ESG Special Feature

In 2019, the precision instruments business reported net
sales of ¥65,429 million, down 0.7% year on year on an
adjusted basis, and segment profit of ¥879 million, down
46.0% on an adjusted basis.
In precision parts for the automotive sector, sales andprofits declined year on year. Orders for valve blocks used inelectronic brake systems (EBS) increased, driven by higher
sales at customers, but due to a decline in average unit price,
the busines was unable to fully offset higher depreciation
costs. Nisshinbo Precision Instrument & Machinery Hiroshima
Corp. saw an increase in shipments of exhaust valves andstarted volume production of air intake parts for engines.

plants and reorganize our network of manufacturing sites.
In precision parts, Nisshinbo-Continental Precision
Machining (Yangzhou) Co., Ltd. continues to add production
capacity for valve blocks, while Nisshinbo Precision Instrument& Machinery Hiroshima is focusing on the development of
new prototype products in order to win more orders forautomotive parts.
In molding products, Nisshinbo Mechatronics (Thailand)Ltd. continues to strengthen its lineup of air-conditioner
parts, but it is also aiming to secure orders for other typesof products, starting with vehicle ornaments and badging
parts. In India, we plan to actively expand our facilities tocapture rising local demand for air-conditioners. Nisshinbo
Mechatronics (Shanghai) Co., Ltd. will boost output of
air-conditioner parts, production of which was transferredfrom Japan. The company also plans to increase productionof automotive headlamp assemblies, which were transferredfrom Nanbu Plastics.
Nanbu Plastics operates manufacturing sites in Japan andother parts of Asia (China, the Philippines and Indonesia). To
capture global demand, we will reconfigure those sites aspart of a broader move to optimize all plants in the precision
instruments business.
Medical applications are another promising growth field forthe precision instruments business. Nanbu Plastics already

Strategy

In the molding products business, sales and profits
declined due to weak demand for air-conditioner parts madeat Group sites in Japan, Shanghai and Thailand, and as aresult of higher depreciation costs. In Thailand, we started
full-scale shipments of vehicle ornaments and badging parts.
The parts are made by Nanbu Plastics using proprietary
technology that removes the need for metal components.
Demand for the non-metallic parts is likely to expand, as
they do not interfere with millimeter wave radar used inautonomous driving systems. However, Nanbu Plastics
reported lower sales and profits from automotive parts, partly
reflecting weaker car sales in China. The company decided toclose its Hiroshima plant as part of a business reorganization,
but it will continue to explore options for establishing abroader manufacturing framework.

ProfilePrecision Instruments

Business Results
and Strategy

Financials

52

53

Overview of Business Segments

Overview of Business Segments — Chemicals

Business Results and Strategy
Note: Figures for the fiscal period ended December 2018, which was a nine-month transitional fiscal period, have been adjusted to facilitate comparison withthe fiscal year ended December 2019.

Net Sales

12(billions of yen)

2.5Management Framework

Segment
Profit(billions of yen)

2.0
8

1.5
1.0

4

0.5

Related SDGs

(millions of yen)(millions of yen)0

18.12 adjusted

Business Results and Strategy

P. 56

Key Products

P. 57

Message from the President of Nisshinbo Chemical

Environment and energyrelated products*

9,950

8,079

Environment and energyrelated products*

Carbon products, etc.

1,827

1,553

Carbon products, etc.

Eliminations

(214)

(245)

Eliminations

11,563

9,391

Total

Total

* Fuel cell bipolar plates, Carbodilite, insulation materials

54018.12 adjusted

19.12

55

19.12

1,918

1,408

460

240

3

0

2,381

1,650

Financials

P. 55

Business Segments

Drawing on a broad base of expertise and intellectual property in the chemical field, this segment is working
to develop products that help protect the environment and make life more comfortable. Our environmentand energy-related products include bipolar plates for fuel cells and Carbodilite, a high-performance plastic
material that increases the durability and chemical resistance of biodegradable plastics and water-based
resins, which have minimal environmental impact. We are investing management resources in thesepromising growth areas as a matter of priority.

In thermal insulation products, we continue to see an accelerating shift in demand to foaming agents with low global
warming potential*1. In response, we are rapidly developing

ESG Special Feature

Nisshinbo Chemical Inc.

Business Strategies for 2020

Strategy

Chemicals

In 2019, the chemicals business reported net sales of¥9,391 million, down 18.8% year on year on an adjusted
basis, and segment profit of ¥1,650 million, down 30.7% on
an adjusted basis.
In thermal insulation productions, demand for urethanebase solution was firm overall, but sales and profits declined
year on year due to the completion of a large project
supplying rigid processed insulation products (refrigerationmaterials for LNG carriers) and weaker sales of bio-carriers
for wastewater treatment.
In functional materials, Carbodilite registered lower sales
and profits year on year, reflecting slower economic growthin China and Europe caused by US-China trade tensions, aswell as declining car sales and inventory adjustments at
major customers.
In fuel cell bipolar plates, higher sales for household-use
fuel cells in Japan and for fixed fuel cells overseas supported
growth in sales and profits. The business also saw anincrease in orders for prototype products for use in buses,
trucks and other commercial vehicles overseas.
In glass-like carbon products, sales and profits declined
amid a slowdown in the semiconductor and OLED markets,
but as a new application, the business started selling partsfor semiconductor manufacturing equipment used to makelow-power memory chips.

Profileand working to launch non-fluorocarbon products*2 andflame-resistant and non-flammable products. A new sprayfoam base solution currently under development has beencertified as non-flammable and we intend to launch it as soon
as possible. We are also marketing our civil engineering
insulation base solution with the aim of winning more businessfor aqueduct tunnels, and targeting an increase in orders forour newly developed railroad ballast materials. In bio-carriers
for wastewater treatment, we aim to expand our businessoverseas, including setting up a local production system
in China.
In the Carbodilite business, we plan to launch new
products with lower environmental impact and develop new
applications to drive strong growth. Examples includehydrolysis-resistant agents for biodegradable plastic andwaterborne cross-linking agents for use in paint, coatings andadhesives that help reduce atmospheric pollution and othertypes of environmental pollution. To meet projected growthin demand, we plan to improve the efficiency of existing
plants and open new production sites to boost output.
In fuel cell bipolar plates, we are receiving a growing
number of enquiries about fixed fuel cell applications frompotential customers in the global market. We aim to tap intothat interest to push for the adoption of our bipolar plates inmore fuel cells. In automotive applications, automakers
worldwide are working on the development of fuel cells for cars,
buses and trucks, and we aim to capture some of the strong
demand for bipolar plates needed in their prototype products.
We aim to secure IATF 16949 certification, the international
standard for automotive quality management systems
required for automotive parts factories, by December 2021.
In glass-like carbon products, we forecast long-term

Summary of Financial Results for 2019

Message from the President of Nisshinbo Chemical

Overview of Business Segments — Chemicals

growth in the key market of semiconductor production
equipment, spurred by uptake of the next-generation mobile
communication standard (5G) and an increase in data center
construction. We will also continue to drive growth in themarket for automotive products that exploit the highly pureand durable characteristics of glass-like carbon and develop
products with improved resistance to oxidation.
*1 A measure of how much heat a greenhouse gas traps in the atmosphererelative to carbon dioxide, expressed as a numerical value*2 Urethane foam that uses hydrofluoroolefins (HFOs) or water as theblowing agent

Chem icals

Main Locations and Key Subsidiaries

Key Companies

Nisshinbo Chemical Inc.

Location

Main Products and Services

Toke Plant

Chiba, Chiba Prefecture

R&D Center (Carbodilite)

Asahi Plant

Asahi, Chiba Prefecture

Urethane products, fine carbon products

Tokushima Plant

Tokushima,
Tokushima Prefecture

Carbodilite

Chiba Plant

Chiba, Chiba Prefecture

Carbon bipolar plates for fuel cells

ProfileMain Locations

The chemicals business comprehensively supports the Nisshinbo Group’s activities in its
strategic business fields of Mobility, Infrastructure& Safety and Life & Healthcare by providing
core technologies. The business portfolio also
includes a large number of products with thepotential for strong growth in the near future.
Akihiro Kamei
President
Nisshinbo Chemical Inc.

Strategy

Bipolar Plates for Fuel Cells

Key Products

Bio-carriers: APG

Bio-carriers for Wastewater Treatment

Carbodilite is the collective name for a rangeof polymer and polycarbodiimide-based
products developed in-house by Nisshinbo
Chemical Inc. Carbodilite is a highly effective
modifier and cross-linking agent blended
with base materials for paints, plastics andother products. Countries worldwide aretightening rules governing volatile organic
compounds (VOC) and other regulations to
reduce CO2 emissions and restrict use ofcertain chemical substances. Due to its
highly safe characteristics, that trend isspurring demand for Carbodilite in Japan andoverseas as an alternative to existing highly
toxic cross-linking agents, and as a key
modifier for water-based paints and coatings
with lower drying temperatures. Meanwhile,amid growing concern worldwide about
single-use plastic products, Carbodilite isincreasingly being adopted as a modifier forbiodegradable plastic, which is seen as asolution to plastic pollution issues.

AQUAPOROUSGEL (APG) is a bio-carrier
for microorganisms that improves theeffectiveness of microorganisms in systems
used to treat wastewater from factories
and other facilities. APG is a high-performancebio-carrier that settles rapidly into wastewater, while its sponge-form provides alarge surface area for bacteria to attach toand colonize. APG is highly regarded inJapan, where it is used by leading water
purification companies. It is also helping to
improve water quality at public sewage
treatment facilities in China and countries
in Southeast Asia.

56

Carbodilite
Carbodilite continues to see steady growth as a highperformance chemical product that improves the durability
and other characteristics of biodegradable and water-based
plastics, spurred by growing use of those plastics. Biodegradable plastic is gradually being adopted for more applications, such as packaging film and industrial materials, aswell as for supermarket shopping bags. Agricultural film isanother promising new application. After use, the film canbe ploughed back into farmland, where it biodegrades,
eliminating the considerable time and effort needed torecover the film. Demand for biodegradable agricultural film
is projected to grow strongly in China and other overseas
markets. In water-based plastics, Carbodilite is used as asafe and reliable cross-linking agent for paints, ink, adhesives
and other products, helping to reduce emissions of volatileorganic compounds (VOC) and CO2, reduce environmental

Glass-like Carbon
Glass-like carbon is mainly used for parts and materials insemiconductor production equipment. We anticipate
increased demand for our products, supported by growthin the semiconductor industry as 5G devices and equipment
becomes more widespread. In new applications, glass-likecarbon can be used by the automotive industry to makecurved glass screens, and we aim to spur wider use inareas that take advantage of its processing accuracy anddurability. As glass-like carbon is adopted for more applications, we will put in place the necessary framework to
support stable growth.
57

Financials

Carbodilite

Carbon bipolar plates have a high market
share in fixed fuel cells for residential andcommercial use, such as the Ene-Farmsystem. Nisshinbo’s carbon bipolar plates
are not only lighter than metal versions,they are also easier to mold into the required
flow channel shapes and are more resistant
to corrosion. Our plates have already been
adopted for a fuel stack used in forklifts and
we are currently developing new models foruse in future fuel cell vehicles (FCVs).

Management Framework

Bipolar Plates for Fuel Cells

Nisshinbo Chemical’s urethane products are used in a broad
range of products, from insulation materials for housing andnon-housing applications, to urethane base solution for cushioning materials used in railroads and office chairs and rigid
urethane foam for LNG carriers. We are seeing growth indemand for urethane in infrastructure maintenance projects
as repair materials for roads, railways and agricultural tunnels
and as ballast materials for railways. We are also working on
the development of environmentally friendly products to
support growth in the future. In China, we are expanding
sales of bio-carriers for wastewater treatment. Interest in
our bio-carriers is rising, backed not just by the product’s
capabilities but also by our efforts to provide added value by
showing potential customers the best ways to use them.

Business Segments

Carbodilite

Thermal Insulation Products (Bio-carriers for
Wastewater Treatment)

ESG Special Feature

Bipolar plates for fuel cells

pollution and significantly improve working environments.
Carbodilite has the potential to support almost limitless
applications, as specifications differ at each chemical
manufacturer and for each product. Going forward, we
will continue to develop new products that address customer needs and step up marketing activities in a range
of application fields to drive strong growth.

Nisshinbo Chemical manufactures bipolar plates for polymer
electrolyte fuel cells (PEFCs). The plates have a high sharein the market for fixed fuel cells such as the Ene-Farmsystem, and they are increasingly being used in fixed fuelcell emergency power backup systems. Automotive applications are another promising growth field, with Japan,
Europe, China and other countries increasingly focusing
on fuel cell vehicles (FCVs) as a technology to reduce CO2
emissions. Nisshinbo’s carbon bipolar plates are alreadyused in some FCVs and have earned a strong reputation
for reliability and high power output. Since 2019, we havereceived a large number of requests to supply our bipolar
plates for prototype fuel cells, raising expectations for sales
growth and providing the opportunity to build up an operational track record. Our Chiba busines site is currently
working to secure IATF 16949 certification, the international
standard for automotive quality management systems,
ahead of wider adoption in commercially available vehicles.

Overview of Business Segments

Nisshinbo Textile Inc.

ESG Special Feature

Note: Figures for the fiscal period ended December 2018, which was a nine-month transitional fiscal period, have been adjusted to facilitate comparison
with the fiscal year ended December 2019.

Net Sales
Related SDGs

sales and profits year on year. However, in yen terms, sales
declined due to the strong yen, but profits increased.

Business Strategies for 2020

58

1.5

40

1.0

20

0.5

(millions of yen)0

18.12 adjusted

19.12

Japan

47,013

42,484

Japan

Overseas

22,134

21,970Eliminations(15,494)

Total

53,653018.12 adjusted

19.12

1,028

526

Overseas684

770(14,949)

Eliminations

(406)

(260)

49,505

Total

1,306

1,037

Main Locations
Key Companies

Nisshinbo Textile Inc.

Main Locations and Key Subsidiaries

Location

Main Products and Services

Fujieda Plant

Fujieda, Shizuoka Prefecture

Developed materials

Tokushima Plant, Yoshinogawa Plant

Tokushima Prefecture

Developed materials

PT. Nikawa Textile Industry

Indonesia

Textile spinning and weaving

PT. Nisshinbo Indonesia

Indonesia

Textile weaving and dyeing

Nisshinbo Do Brasil Industria Textil Ltda.

BrazilTextile spinning

Nisshinbo (Shanghai) Co., Ltd.

China

Textile productsTOKYO SHIRTS CO., LTD., Naigai Shirts Co., Ltd.

Tokyo, etc.

Dress shirts

59

Financials

In the domestic market, we see the risk of a short-term
decline in demand for apparel due to the COVID-19 outbreak.
We also forecast a contraction in demand over the longer
term as Japan becomes a super-aging society. Overseas, we
anticipate prolonged trade tension between the US and China
and a slowdown in the Chinese economy. As with Japan, the
COVID-19 outbreak is also likely to weigh on growth overseas.
However, rising interest in ESG investing worldwide means
there are major business opportunities for low-carbon technologies and products that align with the SDGs. We also
forecast continued expansion in the global textile market,
spurred by sustained population growth and economic
growth in developing countries.
Against that backdrop, we aim to increase operating cash
flow in the textiles business by accelerating the development
and launch of new products for the super smart society and(millions of yen)(billions of yen)Management Framework

In 2019, the textiles business reported net sales of ¥49,505
million, down 7.7% year on year on an adjusted basis, andsegment profit of ¥1,037 million, down 20.6% on an
adjusted basis.
In the domestic market, sales and profits declined. Salesof wrinkle-free shirt fabric and uniform fabric were firm, butthat was outweighed by disappointing sales of non-woven
fabric for cosmetics goods, business shirts at TOKYO SHIRTS
CO., LTD. and apparel at Nisshin Toa Iwao, Inc. TOKYOSHIRTS continued to see firm sales of products incorporating
Nisshinbo technology, such as SUPIMA cotton wrinkle-free
shirts and non-see-through shirts. Meanwhile, as part ofmoves to rebuild the business portfolio, we made the decision
to exit the denim fabric business due to limited prospects for
an upturn in earnings.
Overseas, sales at Indonesian subsidiaries were flat year
on year, reflecting weak growth in supplies to third countries
and regions. However, a companywide improvement program
called T-KAIZEN led to lower costs, helping to lift profits. On
a local currency basis, our Brazilian subsidiary reported higher

60

Business Segments

Summary of Financial Results for 2019

Segment
Profit(billions of yen)

Strategy

Since its founding in 1907 as Nisshin Cotton Spinning Co., Ltd., Nisshinbo has led the Japanese textile
industry with its state-of-the-art technologies and high quality. Nisshinbo subsequently expanded its businessglobally in the fields of spinning, weaving, processing and sewing, and today possesses some of the world’s
most advanced technologies in product development and production. Nisshinbo is currently working toincrease global sales of the APOLLOCOT brand by mobilizing its sophisticated textile processing technologies.

The textiles business is also pushing ahead with thedevelopment of smart textiles. We are working on productsthat integrate microphones and sensors into the fabric,targeting several potential applications – health monitoringand protection, workplace environment improvements, andworker safety management. One example is a maternity belt
fitted with high-performance microphones to monitor thehealth of unborn babies and predict the onset of labor pains.
To make comfort one of the key standout features, we haveincorporated sensors that mean the belt does not have to
be worn next to the skin. The sensors are supplied by New
Japan Radio Co., Ltd., which has a strong portfolio of
micro-electromechanical systems technology. The belt iscurrently undergoing trials and we hope to launch it before
the end of 2020.
We are also using technologies from the textiles
business to respond to the COVID-19 outbreak, including
boosting production of MOBILON tape for medical facemasks and manufacturing gauze fabric for masks and themasks themselves.

ProfileTextilesenvironmental energy society, and by rapidly building digitalbusinesses and SDG-focused manufacturing businesses.
In shirt products, we aim to create new markets andincrease market share by developing next-generation productswith even better performance, particularly APOLLOCOT
non-iron fabric, which can help cut electricity consumption
through reduced need for ironing. In materials development,
we aim to expand sales of OIKOS cosmetics products and
MOBILON inner wear and develop new applications.
TOKYO SHIRTS will focus on low-environmental impact,using its pure cotton wrinkle-free shirts and support forpolyester shirt recycling as a selling point. The company will also
combine its IT and brand strategies, reinforce merchandisingin physical stores, integrate physical sales and online sales
with a CRM system, and launch new products.
In Indonesia, we will continue to pursue our goal of global
cost-competitiveness and global quality, while also developing
new products that align with the SDGs and moving toeco-friendly factories that comply with local environmental
regulations in order to expand supplies to third countries
and regions.

Overview of Business Segments

Real EstateManagement Framework

Related SDGs

62

Corporate Governance

68

Board of Directors, Audit & Supervisory Board Members and Managing Officers

70Managing Risks and Opportunities

73

Nisshinbo’s Response to the COVID-19 Outbreak

74

Compliance

Strategy

Nisshinbo’s real estate business redevelops properties that have become vacant as a resultof business changes at Group companies. Income from those activities is used to fund theGroup’s growth strategy, such as launching new businesses and expanding global operations.
Income is generated from two main sources — property leasing and the sale of housing
lots. Nisshinbo has actively developed the housing lot sales business since 2009, when theGroup moved to a holding and operating company structure. The Group’s domestic realestate portfolio includes many land and property sites with excellent locations, generatingstrong earnings for the real estate business.

ProfileNisshinbo Holdings Inc.

Note: Figures for the fiscal period ended December 2018, which was a nine-month transitional fiscal period, have been adjusted tofacilitate comparison with the fiscal year ended December 2019.

Summary of Financial Results for 2019

Segment
Profit(billions of yen)

12

Management Framework

Net Sales

Business Segments

Business Strategies for 2020
The real estate business will continue to fulfill its role as asource of funds to help Nisshinbo attain its management

ESG Special Featuretargets by effectively utilizing the real estate assets of thewhole Group. We plan to continue generating stable earnings
by focusing on the following projects.
The Group is redeveloping the north section of the former
Japan Radio Co., Ltd. site in Mitaka (Tokyo). We plan to sellaround 680 condominium units in 2020 and 2021. Marketing
activities began in 2018 and demand is firm for units to behanded over in 2020.
With the redevelopment of the former Miai Plant site
(Aichi), we plan to sell 357 detached homes and land forcommercial, medical and welfare facilities between 2019 and2024. We forecast higher sales and profits in 2020, as sales
at the site are set to gear up during the year.
New projects include the redevelopment of employee
housing in Nishi Arai (Tokyo) as rental condominiums.
Rebuilding work started in December 2019. We expect tobegin sales of Phase 1 (50 units) in September 2021 andPhase 2 (149 units) in April 2024.

In 2019, the real estate business reported net sales of¥11,655 million, up 62.3% year on year on an adjusted basis,and segment profit of ¥8,163 million, up 101.9% on an
adjusted basis.
In the housing lot sales business, sales and profits bothrose sharply, supported by the start of housing lot sales at
the former Miai Plant site (Aichi) and the sale of a building foruse as a large commercial facility (Aichi). In the property
leasing business, leasing operations were firm for land, officebuildings, commercial facilities and other properties. In 2019,a condominium with 44 rental units was constructed on theformer head office site of TOKYO SHIRTS CO., LTD. (Tokyo).
Leasing of the units started in August 2019.

(billions of yen)

10.0

7.5
8

Financials

5.0
4
2.5

(millions of yen)(millions of yen)0

18.12 adjusted
7,182

0

Directors and Audit Supervisory Board Members of Nisshinbo Holdings, Inc. Please see pages 68-69 for more details.
18.12 adjusted

19.12
11,655

60

4,042

19.12
8,163

61

Corporate GovernanceCorporate Governance Structure
Nisshinbo has separated decision-making and oversight frombusiness execution and adopted a managing officer system toCorporate Governance Structure<Decision-making and oversight functions>

Coordinate

Four Audit & Supervisory Board Members(including two independent outside audit &supervisory board members)

11 directors (including four independent outside directors)
AdviseAudit & Supervisory Board

Audit

Board of Directors
Recommend

Nomination Committee
Remuneration Committee

Discuss /ReportReportFinancial Auditors

Reappoint
Coordinate

Coordinate

ReportAudit<Business execution functions>

Accounting audit

Representative Directors
Instruct

Discusses business execution matters

Board of Management

Instruct

ReportInternal Audit Officer

Report<Audit functions>Managing Officers, Business Divisions, Group Companies

Audit

Directors

Managing Officers

Representative directors are appointed by resolutionsof the Board of Directors. As of March 27, 2020, thechairman and president were the Company’s two
representative directors.

As of March 27, 2020, the Company had 11 directors,
including four outside directors. The Board of Directors
is responsible for making decisions on importantmanagement matters and for monitoring the executionof duties by directors. Directors are appointed for
one-year terms in order to clarify management
responsibility each fiscal year.

Nisshinbo has adopted a managing officer system tospeed up decision-making for business execution andclarify operational responsibilities. As of March 27,
2020, the Company had 14 managing officers, including
the president and five with dual roles as directors.
Managing officers are also appointed for one-year terms.

62• Alignment with corporate philosophy and management policy• Compliance with laws and regulations and corporate ethics• Increasing medium- to long-term corporate value• Securing the trust of various stakeholders including
shareholders, customers, employees, business partners,
and local communities

Financials

Representative Directors

Management Framework

Appoint /Oversight

Appoint / Dismiss

Appoint / Dismiss

Business Segments

General Shareholders’ Meeting
Appoint / Dismiss

Responsibilities of the Board
Directors and the Board of Directors recognize that they have afiduciary duty to shareholders and thus strive to appropriatelyreflect shareholders’ intentions within the board. By overseeing
the preparation and management of internal control and risk
management systems, directors and the board help to monitor
business execution and decision-making. At the same time, theCompany fearlessly confronts risk and works to achieve governancethat is focused on quick and bold decision-making. In this manner,
the Company aims to achieve greater accountability to stakeholders,increased profitability, and higher returns for shareholders.
In light of the above, the Board of Directors deliberates anddecides on important management matters at board meetings,
such as the formulation of management strategies and plans,changes to the business portfolio group structure, and the implementation of M&As. These management matters are determinedbased on the criteria for agenda items stipulated under theCompanies Act of Japan, other statutory and regulatory requirements, and various internal rules that govern the Board of Directors
and the delegation of authority. Further, in its deliberations anddecisions, the board keeps the following matters in mind.

ESG Special Feature

reinforce those functions. By transferring responsibility for businessexecution to managing officers and strengthening oversight by
the Board of Directors, we are improving management efficiency
and transparency and creating an effective governance structurethat will support the Group’s sustained growth and enhance
corporate value over the medium and long term.
Nisshinbo has established an Audit & Supervisory Board.
The members of the Audit & Supervisory Board monitor the
execution of duties by directors in accordance with audit policy
and plans determined by the board.
The Board of Directors authorizes the senior management
team to make judgements and decisions on important mattersrelated to business execution, except items that require

To promote the globalization of each Nisshinbo company
along the lines of environment and energy, the Board of Directors
selects management talent as candidates for directors who
possess outstanding management experience, have the necessary
firm commitment and ability to realize the Company’s Corporate
Philosophy and increase corporate value, and who enhance thecomposition of the board through greater diversity in areas suchas gender and nationality. As of March 27, 2020, the Board of
Directors was composed of 11 directors, of which four are independent outside directors (including one woman). The maximum
number of directors is set at 14 in the Company’s Articles
of Incorporation.
With respect to independent outside directors, the Board of
Directors shall obtain the consent of the person in question andappoint them after carefully determining their eligibility as anindependent director, taking into consideration the externalrequirements set forth in the Companies Act and the independence standards set by securities exchanges. To ensure thatoutside directors and outside Audit & Supervisory Board members
are able to properly fulfill their roles and responsibilities, whennominating a candidate, the Company shall understand the status
of officers who concurrently serve in other listed companies orcompanies and organizations that correspond to such, and verify
that it will not interfere in their attendance of the Company’s
Board of Directors meetings, Audit & Supervisory Board meetings,
or their work.

Strategy

Corporate Governance Policy
We have formulated the Nisshinbo Corporate Governance Policy,
which clearly states our basic thinking on corporate governanceand related initiatives. By steadily implementing the principles ofthe policy and revising and improving its content as needed, we
aim to improve the effectiveness of governance and create aframework for rapid and bold decision-making that contributes tosustained growth and increased corporate value over the
medium and long term.

resolutions of the Board of Directors. Following discussions by
the Board of Management, which comprises directors, managing
officers and other senior officers, the president finalizes the detailsof delegated business execution matters and resolutions to be
discussed by the Board of Directors. The Board of Management
also discusses important matters related to Group businessexecution, responses to business risks and other key items.
In addition, the Company appoints a number of outside
directors and outside members of the Audit & Supervisory Board.
The corporate governance structure also includes a Nomination
Committee and a Remuneration Committee, which advise theBoard of Directors. Committee members comprise the chairman,
president and several outside directors.
We have adopted this structure as we believe it ensures
operations are conducted in an appropriate manner. Under thisstructure, outside directors draw on their depth of experienceand expertise to monitor business management from an objective
and independent standpoint, while outside members and internallyappointed standing members of the Audit & Supervisory Board
work closely with the Internal Audit Office.

ProfileNisshinbo is aiming to increase corporate value over the medium and long term as an Environment andEnergy Company group by operating its various businesses based on global business management andcash flow management. To achieve this, we are improving the quality of corporate governance andother aspects of our organizational culture. In parallel, we are striving to deliver quantitative growth inearnings and shareholder value, focusing on ROE to improve profitability and placing importance on
the share price in management decisions.
By making rapid and bold decisions based on risk-taking in line with our management principles, we
are working to enhance management efficiency while ensuring transparency, as well as improve
accountability, act ethically and build a stronger corporate governance structure founded on our
Corporate Philosophy.

63

Independent Outside Directors at Nisshinbo Holdings Inc.
Name

Keiji Taga

Mr. Taga has a long track record incorporate management as the
director of a government-affiliatedfinancial institution and the presidentof a business corporation. Drawing
on his extensive management
experience and achievements and hishigh level of expertise, Mr. Tagaprovides oversight of management
activities at the Nisshinbo Group.

1973 Joined Japan Development Bank (currently Development Bankof Japan Inc.)
1999 General Manager of Urban Development Department ofDevelopment Bank of Japan Inc.
2002 General Manager of General Affairs Department of Development
Bank of Japan Inc.
2004 Executive Director of Development Bank of Japan Inc.
2008 Director and Executive Managing Officer of Development Bankof Japan Inc.
2009 Vice President and Representative Director of Tokyo Ryutsu
Center Inc.
President and Representative Director of TRC Service Co., Ltd.
2013 President and Representative Director of Tokyo Ryutsu Center Inc.
Director of TRC Service Co., Ltd.
2017 Chairman and Director of DBJ Asset Management Co., Ltd.
2018 Adviser of DBJ Asset Management Co., Ltd.
2019 Outside Director of the Company (to the present)

1981 Appointed as Public Prosecutor
2007 Special Investigation Director of Tokyo District Court Public
Prosecutors Office2015 Chief Prosecutor of Tokyo District Court Public Prosecutors
Office2016 Deputy Prosecutor-General of Supreme Public Prosecutors
Office2018 Superintending Prosecutor of Tokyo High Public Prosecutors
Office2019 Registered as attorney-at-law (to the present)
2019 President of Japan International Training Cooperation
Organization (JITCO) (to the present)
2020 Outside Director of the Company (to the present)

Hiroyuki Chuma

Mr. Chuma draws on his specialist
expertise in industrial organization
theory and technology management
and his extensive knowledge andinsights related to corporate innovation
to provide oversight of management
activities at the Nisshinbo Group.

1984 Assistant Professor of Department of Economics, Southern
Illinois University Carbondale
1985 Associate Professor of Faculty of Economics,
Tokyo Metropolitan University
1992 Associate Professor of Graduate School of Economics/Facultyof Economics, Hitotsubashi University
1993 Professor of Graduate School of Economics/Faculty of
Economics, Hitotsubashi University
1999 Professor of Institute of Innovation Research,
Hitotsubashi University
2000 Visiting Professor of Department of Economics, Yale University
2000 Faculty Fellow, Research Institute of Economy,
Trade and Industry (RIETI)
2004 Director of Research,
National Institute of Science and Technology Policy (NISTEP)
2012 Professor of Graduate School of Commerce & Management/
Faculty of Commerce & Management, and Institute of
Innovation Research, Hitotsubashi University
2014 Professor of Faculty of Social Innovation/Graduate School of
Innovation and Social Studies, Seijo University (to the present)2015 Professor Emeritus of Hitotsubashi University
2015 Faculty Fellow, RIETI
2020 Outside Director of the Company (to the present)

64

Role of Nomination Committee
Appoint

DismissTopmanagement
positions

The Board of Directors selects directors for top management
positions from candidates proposed by the committee, which puts
forward individuals with the necessary outstanding attributes,
aptitude and achievements to fulfill the role.

Directors

The Board of Directors selects directors from candidates proposedby the committee, which puts forward individuals with a strong trackrecord in corporate management and the necessary commitment
and ability to realize Nisshinbo’s Corporate Philosophy and increase
corporate value.

In cases where directors, including top managers, are deemed nolonger qualified for their role due to reasons such as the lack ofnecessary qualities and aptitude for management, the committee
recommends dismissal of the director to the Board of Directors,
supported by reasons for the recommendation. Based on the committee’s recommendation, the Board of Directors decides whether todismiss the director or submits a proposal seeking approval for thedismissal of the director to the General Shareholders’ Meeting.

Managing
officers

The Board of Directors selects managing officers from candidates
proposed by the committee, which identifies and proposes outstanding
individuals from among the Group’s business subsidiary leaders andmanagement grade-employees who have the necessary specialist
skills and management capabilities, backed by a firm commitment
and resolve.

Succession
planning

The president develops succession plans for top managers and other directors (excluding outside directors) and managing officers and cultivatescandidates to take over their roles. Details of those plans and progress with succession planning are shared with and discussed by the Nomination
Committee, which includes outside directors, and adjusted and improved as necessary. The Board of Directors monitors progress with succession
planning based on necessary reports received from the committee.

Nomination
Remuneration

President of Japan
International
Training
Cooperation
Organization(JITCO)

Nomination
Remuneration

Nomination
Remuneration

Remuneration for Directors and Senior Managers
To increase transparency and objectivity in processes for determining remuneration, Nisshinbo has established a Remuneration
Committee as an advisory body for the Board of Directors. As of
March 27, 2020, the committee comprised the chairman, thepresident and four outside directors. The committee chairman isselected by members of the committee.
To attract outstanding management talent and ensure
appropriate conditions for directors and senior managers, theRemuneration Committee develops a remuneration table fordirectors and verifies and makes appropriate adjustments to thetable referencing criteria such as remuneration levels andIn cases where managing officers are deemed no longer qualified fortheir role due to reasons such as the lack of necessary qualities andaptitude for management, the committee recommends dismissal ofthe managing officer to the Board of Directors, supported by reasonsfor the recommendation. Based on the committee’s recommendation,
the Board of Directors decides whether to dismiss the managing officer.

composition at peer companies and the Company’s relative
position in the sector and subsectors.
Remuneration for directors comprises basic remuneration(monthly payment), bonuses and stock-based remuneration(restricted stock compensation plan), which are set within the
maximum limits approved by the General Shareholders’ Meeting.
Stock-based remuneration for each role is set within separate
maximum limits for amounts and shares determined by resolutions of the General Shareholders’ Meeting. However, outside
directors receive only basic remuneration (monthly payment) andretirement benefits are not paid to directors. Remuneration for
managing officers is based on the same policies and procedures.

Remuneration for Directors and Auditors (Fiscal period ended December 2019)
Classification

Remuneration breakdown (Millions of yen)
Total remuneration
Bonus
Restricted stock(Millions of yen) Basic remuneration(Fixed)(Performance-linked) compensation plan

Stock options

Total
number of payees

Directors(Excluding outside directors)

228

170

36

19

2

8

Audit and Supervisory Board members(Excluding outside audit andsupervisory board members)

34

34

—

—

—

3

Outside directors and outside Audit andSupervisory Board members

52

52

—

—

—

9

Notes: 1. Total maximum remuneration for directors: No greater than ¥400 million per year (Employee salaries of individuals simultaneously appointed as employee and director are
not included in payments to directors. Directors are also eligible to receive compensation through a restricted stock compensation plan, up to a maximum value of ¥40
million per year).
2. Total maximum remuneration for members of the Audit & Supervisory Board: No greater than ¥70 million per year
3. The Company had 11 directors (including four outside directors) and four Audit & Supervisory Board members (including two outside members of the Audit & Supervisory
Board) as of March 27, 2020.

65

Financials

Mr. Yagi draws on his specialist legal
expertise and his long track record
and insights in the legal field toprovide oversight of management
activities at the Nisshinbo Group.

Nomination
Remuneration

Management Framework

Hiroaki Yagi

Outside Director of
SEIKO PMCCORPORATIONBusiness Segments

1987 Joined Ryoka Systems Inc.
2003 Opened a counseling business office (to the present)2015 Outside Director of the Company (to the present)

Committees

ESG Special Feature

Ms. Fujino has specialist knowledge
and experience, mainly in the field of
personnel development, in her role asa career counselor. Drawing on her
extensive expertise and experienceand her perspective as a woman,
Ms. Fujino provides oversight ofmanagement activities at the Nisshinbo
Group and contributes to the promotionof diversity management.

Shinobu Fujino

Significant
concurrent
appointments

Strategy

ProfileCommittee as an advisory body for the Board of Directors. As of
March 27, 2020, the committee comprised the chairman, thepresident and four outside directors.

ProfileReasons for appointment

Selection and Dismissal of Directors and Senior Managers
To increase transparency and objectivity in processes for selecting
and dismissing directors, Nisshinbo has established a Nomination

Basic remuneration: Amounts paid are derived from basic
remuneration tables for each role determined through discussions
by the Remuneration Committee.
Bonuses: Paid to directors, except outside directors, as anincentive linked to fiscal year earnings performance. Based on
basic remuneration tables for each role determined throughdiscussions by the Remuneration Committee, bonuses are paid
to each individual commensurate with their role, in line with theperformance of the Group and businesses in their respective
areas of responsibility against targets for net sales, pre-tax profits,
operating cash flow and other indicators.

Changes in Cross-Shareholdings(Stocks)

100
80(¥67.6 billion) (¥67.6 billion)

83

80(¥74.8 billion)

73

60(¥61.5 billion) (¥69.0 billion)

66

63

20
0

2016.32017.32018.32018.12 2019.12

66

Marketing/engineering

Product design and technology seminars
Disclose and raise awareness of Green Procurement Guidelines

Procurement

Briefings for suppliers
Suppliers

Water consumption volume and hazardous substance productinspections

CSR

CSR procurement surveys
Shareholders/investors

Employees

Local communities
NGOs, NPOs, government
agencies

General Meeting of Shareholders
Briefings and small meetings for institutional investors
Online information and publications for investors

IR

Publication of internal newsletters

PR

Employee surveys

Diversity

Internal whistleblower system

CSR

Participation in local events

Business sites

Factory tours, workshops

Factories, engineering departments

Participation in projects to protect biodiversity

Business sites

Participation in neighborhood cleaning activities

Business sites

Research with academic partners

R&D

Corporate Governance Reforms

Composition of the Board of Directors
Number of inside directors

2006

Introduced outside director system andmanaging officer system, reduced term ofoffice for directors from two years to one

2015

Increased number of outside directors fromthree to four
Abolished takeover defense measures

2016

Reduced number of board members from13 to 10 (including four outside directors)
Corporate Governance Policy formulated
Established Remuneration Committee andNomination Committee (both discretionary
bodies), started evaluating effectiveness ofBoard of Directors

2017

Abolished internal advisor and consultant system

2018

Introduced restricted stock compensation system

Number of outside directors (of which are women)(year)

2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
0

5

10

15 (people)

Survey of Directors and Audit & Supervisory Board Members
Each year, the Company surveys all directors and all audit &supervisory board members about the effectiveness of the Boardof Directors (this year’s survey was conducted in January).
Responses to the survey are collated and reported to the board.
The survey is used to assess the effectiveness of the Board of
Directors and to discuss improvements by helping the board
understand the current situation, identify and analyze any issues
and compare responses with those in the previous year’s survey.
The results of the survey indicate that the 11 directors,
including four outside directors, conduct dynamic discussions
during board meetings, drawing on their extensive management
experience and track record and their specialist knowledge.
Responses also indicate that the Board of Directors needs toenhance its ability and functions as the board of a holding company
with diverse businesses, and that sound decision-making isimportant to raise the quality of discussion. Based on thoseinsights, the board confirmed and shared the following two
priority measures to be implemented in 2020.
• Provide explanations and information to improve the quality
and efficiency of board discussions.
• Provide opportunities to discuss specific issues that affectthe overall strategic direction of the Group, such as management strategy and other matters related to increasing corporate
value and material risks that could impact corporate value.

67

Financials

40

Customers

Management Framework

Stakeholder Engagement
Nisshinbo recognizes that continuous dialogue with stakeholders
is key to supporting sustained growth in corporate value. In linewith the aims of our VALUE commitment, we work hard toresolve any issues by emphasizing dialogue with customers,
shareholders, employees and all other stakeholders connected to
the Nisshinbo Group.

Key department/site

Exhibitions

Business Segments

Protecting the Rights and Ensuring the Equal Treatmentof Shareholders
The Company shall ensure that the exercise of minority shareholder rights is not impeded and will take appropriate measures
to fully protect shareholder rights. The Company will implement
various measures related to communication with shareholders
and investors and ensure the appropriate operation of the General
Shareholders’ Meeting.
The Company has set out a policy for cross-shareholdings.
In line with that policy, it regularly assesses the purpose andeconomic rationale for cross-shareholdings based on capitalcosts and other indicators. The results of the assessments arereported to the Board of Directors, which discusses the merits ofcontinuing to hold the shares or selling them. If the Company
receives approaches from companies about selling its holdings oftheir shares, it will respect their wishes and not hinder the sale ofshares, while also putting forward its views.

Examples of engagement

ESG Special Feature

Dialogue with Shareholders
The IR Director, who oversees policies and measures related
to communication with shareholders and investors, accurately
and fairly disseminates information outside the Company andproactively conducts IR activities. The IR Director also strives toenhance the General Shareholders’ Meeting, where senior
management can interact directly with shareholders, and theresults briefings and briefings to overseas investors. In addition,
the Company plans and conducts individual meetings withdomestic and overseas investors throughout the year.
If deemed necessary, the IR Director and other directors andmanaging officers take part in responding to applications forinterviews from shareholders and investors.
The status of IR activities including measures and policies
about communication with shareholders and investors is routinely
reported to the Board of Directors where it is reviewed.

Stakeholder

Strategy

Stock-based remuneration: Paid to directors, except outside
directors, in the form of restricted stock allocations to provide
greater incentive to directors to increase the Company’s shareprice and corporate value by aligning their interests more closelywith shareholders with respect to the risk and reward of shareprice fluctuations. Stock-based remuneration for each role is set
within maximum limits for amounts and shares determined by
the General Shareholders’ Meeting.

Stakeholder Engagement Initiatives

ProfileThe Company regularly assesses its holdings of shares inbusiness partners to ascertain the size and scope of the holdings
and to evaluate the economic rationale for holding the shares.
Shares with diminished strategic value are sold incrementally andsystematically. In addition, the exercise of voting rights related tocross-shareholdings shall be performed after deciding in eachindividual case the purpose of the holdings from the standpointof increasing the corporate value of the Company and the relevantbusiness partner. In the event of resolutions with the potential
for a large impact on corporate value, such as the appointment or
dismissal of directors or the introduction or extension of takeover
defense measures, the Company will conduct a particularly
rigorous assessment of the rationale and necessity for holding
the shares.
Nisshinbo has not adopted takeover defense measures. In
the event that the Company decides to implement a capital policythat could harm the interests of shareholders, the Company will
provide a clear explanation to shareholders about the necessity
and rationale for the policy and follow the necessary procedures.

Board of Directors, Audit & Supervisory Board Members and Managing Officers
As of March 27, 2020

Board of Directors

Audit & Supervisory Board Members

ProfileToshihiro Kijima

Takumi Ohmoto

Atsushi Yamashita* Mitsunori Watanabe*
LawyerMasaya Kawata

Director,*
President

Director,
Senior Executive Managing Officer

1

Masahiro Murakami

Kenji Ara

Director and Managing
Executive Officer,
Shikoku Chemicals Corporation* Outside Audit & Supervisory Board member

Managing Officers

Chairman, Japan Radio Co., Ltd.

Strategy

Director,*
Chairman1

President

Masahiro Murakami*

Kenji Ara*
Executive Managing Officers

Ryo Ogura*Director,
Executive Managing Officer

Director,
Managing Officer

Director,
Managing Officer

Ryo Ogura

Kazunori Baba

Yasuji Ishii

Shuji Tsukatani

Chairman, New Japan Radio Co., Ltd.

Chief of Corporate Strategy Center

President, Nisshinbo Brake Inc.

Senior Manager of Finance,
Accounting and IT Service Department
Corporate Strategy Center

Executive Managing Officer

Executive Managing Officer

Managing Officer

Managing Officer

Managing Officers

Akihiro Ishizaka

Makoto Sugiyama

Toshihiro Masuda

Akihiro Kamei

Yasuji Ishii*

Senior Manager ofCorporate Strategy
Department andCorporate Governance
Department

Senior Manager of CSR
Department, Diversity
Development Department andHuman Resources andAdministration Service
Department

President,
Nisshinbo Mechatronics Inc.

President,
Nisshinbo Chemical Inc.

Managing Officer

Managing Officer

Managing Officer

Managing Officer

Yasuo Imashiro

Kazuo Saito

Kaoru Murata

Yuzo Matsui

General Manager,
Business Development
DivisionManaging Director,
Nisshinbo Singapore Pte. Ltd.

President,
Nisshinbo Textile Inc.

Senior Manager of Property
Management Department

Shuji Tsukatani** Concurrent board member

Business Segments

Director,
Executive Managing Officer

Kazunori Baba*

ESG Special Feature

Senior Executive
Managing Officer

Management Framework

Director*2

Director*2

Director*2

Keiji Taga

Shinobu Fujino

Hiroaki Yagi

Hiroyuki Chuma

Career Counselor

LawyerProfessor of Faculty of Social Innovation/
Graduate School of Innovation and Social
Studies, Seijo University
Professor Emeritus of Hitotsubashi University*1 Representative director*2 Outside director

68

69

Financials

Director*2

Managing Risks and Opportunities

The Nisshinbo Group has established a risk management system, shown in the diagram below, toappropriately address business risks and minimize any losses associated with those risks. Additionally,in order to turn business risks into opportunities that support sustained growth, the Nisshinbo Grouproutinely works to identify and analyze any changes in the operating environment, aiming to create
new growth opportunities by contributing to society as an Environment and Energy Company group– a business strategy that aligns with the Group’s Corporate Philosophy.

Nisshinbo Holdings (HD)Japan RadioNew Japan Radio
Ricoh Electronic
DevicesNisshinbo Brake
Nisshinbo Mechatronics
Nisshinbo Chemical
Nisshinbo Textile

Identify and evaluate risks,develop appropriate responses

Geopolitical Risk

• Impact on operations from geopolitical developments• Consider country risks, etc., when determining appropriate
investment levels for each country/region

Fluctuations in Product Markets, Exchange Rates and Raw Material Prices• Changes in supply-demand balance in product markets due
to fluctuations in economy• Impact on earnings from significant volatility in raw
material prices• Impact on earnings from fluctuations in exchange rates• Impact from changes in rules or regulatory frameworks
governing products and services in each market

Internal risksMonthly
review• Impact on earnings from pandemics of previously unknown
diseases such as COVID-19• Create new value by contributing to society throughmedical-related businesses

ClimatechangeRegulatory
framework

Governance, etc.

• Management issues due to greater business diversity• Large number of duplicate functions among Groupbusinesses

Changes inindustrial
structure
Confirmrisk
management
statusOperating environment

Identify risks for entire Groupand verify response measures• Harness Group’s diverse strengths by integrating
businesses/organizations to drive innovation and increase
resilience to changes in operating environment

M&A/Major Investments

Board ofDirectors

Report on status of urgent and high-priority risks• Use new business resources to capture opportunities that
support sustained growth• Form project teams for each M&A deal to strengthen
PMI activities; Board of Directors to verify investment
effectiveness while building up internal expertise• Separate capex budget approval and implementation
approval functions, hedge risks by adjusting capex in
response to changes in operating environment

Human Resources

Note: HD means Nisshinbo Holdings Inc.

• Difficulties hiring and retaining talented people

Details

Response• Overlap between Corporate Philosophy and growinginterest in ESG among younger people, leading to morehiring opportunities

Climate Change• Develop business continuity plan (BCP) based on assumptionof major natural disasters, conduct training to improveGroup’s response to risk of business disruption• Take steps to reduce CO2 emissions• Introduce SOx/NOx removal equipment• Increase sales ratio for “products that contribute to thecreation of a sustainable society” to 65% by 2025 (moredetails on P.12, To Our Shareholders and Investors)• Greater demand for fuel cell vehicles as hydrogen society
gains momentum• Growth in number of new ships built amid rising demand forbiomass fuel transportation• Improve technological capabilities for developing fuel cellparts and materials• Increase production capacity for marine wirelesscommunication equipment to address rising demand for new
biomass fuel transportation vessels• Sell water/river management systems, weather radars andother disaster prevention/mitigation solutions developed inJapan to customers overseas• Expansion in businesses providing disaster prevention/
mitigation solutions to address rising wind and flood damage

70

Rapid Technological Innovation• Dramatic changes in existing markets due to technologicalinnovation• Decrease in competitiveness due to delays in technology
development and product development plans• Management decides to continue/cancel R&D projects basedon regular assessments• Opportunities to develop groundbreaking technologies
and tap into growth by combining resources from diverse
businesses• Form teams by flexibly assigning personnel from various
Group businesses

Human Rights Issues• Widespread sexual and power harassment that undermines
the working environment

71• Establish human rights team at HD to maintain and raiseawareness across the Group

Financials• Impact on supply chains from major natural disasters causedby extreme weather• CO2 emission costs due to introduction of carbon tax• Costs to reduce CO2 emissions• Costs to respond to tighter rules on SOx/NOx emissions
worldwide• Impact on business activities from tighter rules on greenhousegas emissions

Management Framework

Key Risks and Opportunities• Use RPA, IoT and other tools to increase automation andrealize labor savings• Implement strategic PR activities to improve corporate
visibility and image• Provide human resources and financial support to joint
research projects with academia• Use targeted local recruitment activities

Business Segments

Verify major risks and risk developments, discuss responses• Reform business portfolio to align with changes in issues
faced by society, improve cash flow (more details on P.8,
To Our Shareholders and Investors)• Improve efficiency by overhauling Groupwide organizations
and using outsourcing• Maintain Group integration by consolidating oversight ofGroup company management at HD and establishing
financial discipline

ESG Special Feature

Confirmrisk
management
statusGroup Management

Board ofManagement

Opportunities• Provide appropriate support to management by forming
emergency response teams and aggregating andcommunicating information

Capex/R&D
Attract/train
human resources• Mistakes with M&A deals and major investment plans

Risks• Use diversified business strategy to mitigate impact onearnings from sudden changes in operating environment• Build reliable relationships with multiple suppliers• Use forward exchange contracts, etc., to minimize exchange
rate risk• Gather risk information from business sites in each country/
region and feed back to management

Business portfolio

Person with ultimate
responsibility= President of HD

Risk Management
OfficeImplement
PDCA

External risks

Instruct

Risk management
general manager

Response

Communicable Diseases
Annualreview
Political/
economic

Appoint

Details

Strategy

Presidents and key
personnel from HD
and core operatingcompanies

Formulate plan for new fiscal year

Opportunities

ProfileThe Nisshinbo Group’s Risk Management System

Risks

Nisshinbo’s Response to the COVID-19 Outbreak

Risks

Opportunities

Details

Response

Business Management• Increasing complacency in governance• Building on pioneering steps such as introduction of outside
director system in 2006, adoption of HD system in 2009 andtermination of advisor/consultant system in 2017, establish
advanced governance system that balances managementtransparency with bold risk-taking (more details on P.62,
Corporate Governance)• Take risks based on balance between proactive anddefensive governance

On January 9, 2020, Chinese media reported that a new type of coronavirus had been detected. In midJanuary, this development prompted the Nisshinbo Group, led by the Corporate Strategy Center, to start
discussing its response to the outbreak in accordance with a predetermined BCP program. A response
team was established on January 27, and since then, the team has been coordinating all aspects of theGroup’s response to COVID-19 in line with its basic policy on infection countermeasures, such as
updating the latest situation at Group companies and providing information about preventing the
spread of infection.
ProfileQuality Issues• Loss of trust, claims for damages or product recalls due toquality issues or defects with products or services• Use risk management system to minimize risk probability
and potential impact• Establish quality assurance team at HD to oversee quality
assurance and product safety activities at Group companies

Information Security• Continuous training and annual internal audits to assess
information security• Use risk management system to minimize risk probability
and potential impact

Ensure safety of all employees, safety and peace ofmind of customers, business partners

Maintain supply chains

Response team activities
Strategy• Unauthorized disclosure of personal information, customer
information or trade secrets• Information leaks or data corruption caused by computerviruses

Basic Policy on Responding to the COVID-19 Outbreak

Board of Directors
ReportPresident

Compliance• Messaging from president of HD to underscore importanceof fair business practices• Continuous implementation of compliance training• Severe penalties for misconduct• Appoint outside directors with legal background

Information
COVID-19 outbreak
response teamGather /analyze data

Site
surveys• Communicate response policy• Ascertain number of daily infections, production site operational status• Gather and share information, issue instructions

Fraud/Illegal conduct• Financial window-dressing, accounting irregularities, etc.

• Use internal control system and corporate ethics reporting
system to prevent misconduct• HD and Group companies work together to roll out high-level
health and safety approaches from Japan to sites worldwide

Business Reputation• Routinely monitor situation as part of risk management• Continuously share information with major ESG investors and
ESG index research firms to identify trends

Encouraging employees to work from home: Nisshinbo
seeks to limit the number of employees coming to work
while maintaining a certain level of office attendance; work
space has also been expanded to increase distancing
between employees.

Using video conferencing: Nisshinbo is providing more
opportunities to use contactless information sharing.

• Steadily reduce exposure to cross-shareholdings in line with
Corporate Governance Policy (more details on P.66, Corporate
Governance)• Increase value by redeveloping real estate

Ensuring safe working environments: At manufacturing
sites, Nisshinbo is maintaining social distancing across theworkplace, including the shop floor, shared areas andcanteens; all areas are thoroughly disinfected and ventilated
on a regular basis.

Providing masks and sanitizer, encouraging social
distancing

Cross-shareholdings/Idle Real Estate• Fluctuations in market value

The Group continues to implement the above approach and is taking the following steps to address risks related to the Three Cs(closed spaces, crowded places, and close-contact settings).

Expanding staggered work attendance system:
Nisshinbo aims to mitigate the risk of infection during peakrush hour by staggering work arrival times.

Sharing information about how to reduce the riskof infection

Management Framework• Impact on business from misreporting in media, spread ofrumors or online rumors• Labelled as target for divestment by investors

Response teams at Group companies
in Japan and overseas

Business Segments

Workplace Accidents• Impact on business of failure to ensure employee health andsafety worldwide

Documents

ESG Special Feature• Loss of trust and damage to corporate value caused by legal
violations such as corruption or anti-competitive practices, orby corporate behavior that diverges from social norms

Medicalinformation

Improving work environments based on feedback
from employees
Financials

BCM training exercise (August 30, 2019)

72

Brazil: Enforcing hand washingBrazil: Social distancing

Tokyo (head office): Expanding
work spaces

73

China (Shanghai): Checking
temperature of employees on
arrival at work

Compliance

Based on Public Entity and Consistent Integrity – the fundamental spirit of Nisshinbo’s Corporate
Philosophy, – the Group’s mission is to act with fairness and integrity to contribute to society throughits business activities. To achieve our mission, we have formulated Business Conduct Guidelines inorder to win trust from the public through fair and honest business activities.

about Article 18 of Japan’s Unfair Competition Prevention

Reporting System

Act (prohibition of provision of illicit profit, etc., to foreign

Nisshinbo has established a Corporate Ethics Committee

public officials, etc.), the guidebook provides information

to handle all compliance matters across the Group.

about international treaties and laws designed to prevent
corruption, such as the United Nations Convention Against
Corruption (UNCAC), OECD treaties on preventing corrup-

reoccurrence of suspected or actual legal violations. Grouption of overseas public officials in international transactions,employees and external parties can submit reports to thethe US Foreign Corrupt Practices Act (FCPA) and its

system. Group employees can report their concerns

related guidelines, and the UK Bribery Act. Nisshinbointernally to the Corporate Ethics Committee or directly to

updates the guidebook as necessary and uses it as part ofan outside corporate attorney. All information provided byits corruption prevention measures in the Group.

whistleblowers is treated in the strictest of confidence

Financials
The Nisshinbo Group’s Financial Strategy

78

Eleven-Year Summary

80

Management’s Discussion and Analysis

84

Consolidated Balance Sheet

Ensuring Business Confidentiality

unfair treatment. The Corporate Ethics Committee takes

Nisshinbo signs non-disclosure agreements with suppliers

appropriate steps to deal with issues raised by reports.

to prevent any leak of confidential information such as

86

Consolidated Statement of Profit or Lossintellectual property, technologies and expertise disclosed

87

Consolidated Statement of Comprehensive Income (Loss)

88

Consolidated Statement of Changes in Equity

89

Consolidated Statement of Cash Flows90

Segment Information

Compliance Education

during the product design and development stage andIn order to ensure fair and honest business practices, theacross all points of the supply chain.

Nisshinbo Group conducts compliance training for different

We also conduct annual internal audits to check whether

employee levels and work sites and provides training to

the Group’s trade secrets are being managed appropriately.

employees prior to overseas assignments.
From the fiscal year ended March 2017, we added

Business Segments

and every effort is made to protect whistleblowers from

CSR Procurement Basic Policy
Nisshinbo has formulated the Nisshinbo Group CSR

in the Group to our list of KPIs in order to raise awarenessProcurement Basic Policy, clarifying its stance on seven

about compliance. We also created a compliance training

specific areas: legal compliance, fair trade, information

manual for managers in both Japanese and English to be

security, environmental protection, human rights, healthused in training sessions across the Group.

and safety, and quality assurance.

Management Framework

annual compliance training for manager-grade employees

In addition, compliance training is provided at eachsubsidiary in accordance with conditions in each country,

1. To strictly observe all legal obligations and social norms

region and industry.

2. To always pursue business in a sound and fair manner
3. To properly manage all information
4. To give due consideration to protection of the environment

Initiatives to Prevent Corruption

ESG Special Feature

76

Strategy

Nisshinbo has also established a Corporate Ethics
Reporting System to rapidly identify and prevent any

ProfileCorporate Ethics Committee and Corporate Ethics

5. To respect all basic human rights

In recent years, countries worldwide have been reinforcing

6. To strive for a secure and healthy living and working environment

regulatory systems and stepping up efforts to prevent and

Financials

7. To aim to ensure the quality and safety of all products and services

expose bribery and corruption. Nisshinbo has created a
Corruption Prevention Guidebook, which includes information about responding to related regulations overseas.

We are working to extend our CSR initiatives acrossThe guidebook is distributed to all subsidiaries, including

the entire supply chain by asking suppliers to adhere tooverseas Group companies. In addition to information

our principles in those seven areas.

74

75

The Nisshinbo Group’s Financial Strategy

Many Group businesses are in the industrial processing

Shuji Tsukatani

ratio currently stands at 40%, indicating an appropriate

However, sticking only to manufacturing limits room forbalance between debt and shareholders’ equity. If we can

improvement in investment efficiency. Nisshinbo’s switch

pare back assets, we should be able to reduce interest-in focus from “things” to “experiences” and “services,”bearing debt and equity (pay more dividends and buy backwhich the president talked about earlier (see page 9, To

more shares) in a balanced manner. Needless to say,

Our Shareholders and Investors), will also improve theprofitability has a key role to play. Our target for averageGroup’s business structure from the perspective of

ROIC is 8% on a consolidated basis, but new businesses

investment efficiency.

could conceivably generate in excess of 10% and existing

We could improve ROIC in several ways, such as

businesses urgently need to lift ROIC.

boosting investment efficiency (reducing working capital)

Note: For more details about reducing cross-shareholdings, see the graphon page 66.

and liquidating non-operating assets, such as land (fixed

Strategy

Director, Managing Officer
Senior Manager ofFinance, Accounting & IT Service Dept.
Corporate Strategy Center

field, so they have limited scope to streamline assets.

ROE Target and B/S, P/L Assumptions for 2025

In our dialogue with capital markets, we emphasize return

businesses. Nisshinbo is no exception. The temporaryon equity (ROE) as a key performance indicator (KPI) for

halt to production and sales activities across the Group is

the Nisshinbo Group. We have taken steps to enhance

set to have a significant impact on earnings. However,control over key elements affecting ROE, such as sales,

Nisshinbo is fortunate to have sufficient financial

operating income (operating margin) and return on assets

resources to weather the storm.

(ROA). However, we have also been looking into using
return on invested capital (ROIC) as a better performancebenchmark for a diversified corporate group like Nisshinbo

our policy for 2020, is all about returning to the basics offrom the standpoint of driving change in the earnings

business management. However, with the Group in the

structure and managing more dynamic businesses. Over

process of overhauling its business portfolio, operating

the last year, corporate departments have been using

cash flow is a weak point that has to be tackled.

ROIC to change the mindset of senior managers andThat policy will not change, even as societies face the2020, we are using an ROIC tree visualization to improve

focused on our goal of achieving self-sustaining growth byunderstanding and introducing ROIC in conjunction withmaximizing operating cash flow to secure funds for rein-

operational improvement programs at manufacturing sites

vesting in our business (investing cash flow). A temporary

to firmly entrench the benchmark in frontline businesses.

increase in debt exposure (financing cash flow) is a pre-We currently assume a weighted average cost ofcapital (WACC) of 6% and a long-term ROE target ofbalance to the funding structure over the medium and

12%, so ROIC of around 8% looks appropriate. We havelong term. That’s why operating cash flow will be key.

no plans to apply that level uniformly across the Group,

Fixed assets:¥300 billion

Equity: ¥240 billion
Investments and otherassets: ¥110 billion

Equity: ¥240 billion
Shareholders’equity ratio: 40%

Total liabilities and equity:¥600 billion

Total assets:¥600 billion

ROE: 12% (2025)
and P/L assumptions

Comment

Net sales¥540 billion

Current sales level, assumes continued business portfolio realignment

Operating income¥43 billion

Target operating margin = 8%

but we need to find the right level for each business in

NOPAT¥30 billion

Assumed effective tax rate = 30%

order to achieve an average ROIC of 8% on a consolidated

ROE

12%

NOPAT ÷ equity = 12.5%

ROIC

8%

NOPAT ÷ (tangible and intangible assets + working capital) = 7.9%
• Reduce working capital• Liquidate fixed assets (land, investment securities)

basis (see next page for more details).

76

Liabilities:¥360 billion

77

Financials

scription for dealing with the crisis, but we aim to restore¥190 billion

Tangible andintangible assets:¥190 billion

establish it as a benchmark in frontline operations. In

new reality of coexisting with COVID-19. We have to stay

(Inventories:¥120 billion)

Management Framework

At times like these, cash holdings and cash flow are
extremely important. “Generating operating cash flow,”

Current assets:¥300 billion

Business Segments

The COVID-19 outbreak is having a serious impact on(Payables: ¥60 billion)(Receivables:¥130 billion)

ESG Special Feature

Nisshinbo’s Earnings Structure

Working capital

Generating Operating Cash Flow

ProfileThe COVID-19 outbreak will have a major impact onearnings in the near term, but we are introducing
ROIC as a KPI to spur growth in cash flow and scaleback assets, aiming to build a robust financial basethat supports self-sustaining growth.

asset) and investment securities. The shareholders’ equity

Eleven-Year Summary(millions of yen)

2010.03

2011.032012.032013.03

2014.032015.032016.032017.032018.032018.122019.12¥242,409¥325,555¥379,340¥450,693¥494,350¥523,758¥533,989¥527,274¥512,048¥416,221¥509,661

51,699112,820

169,907

175,308

187,743

209,116

205,368

190,852

193,621——

Wireless and Communications

—

—

—

—

—

—

—

—

—

90,427

152,213

Micro Devices

—

—

—

—

—

—

—

—

—

53,77765,286

Automobile Brakes

41,046

46,11947,450118,849

148,699

161,887

165,037

146,062

154,205

135,008

131,338

Precision Instruments

24,90832,02025,191

24,52028,65528,60829,52560,68764,91862,21965,429Chemicals

6,309

7,284

8,258

8,150

8,810

8,138

8,285

9,483

11,285

8,173

9,391

Textiles

53,222

57,40060,96454,73654,63051,07360,12755,84254,64043,66049,505Papers

31,53630,32630,22030,524

31,686

31,28032,58532,648———

Real Estate

6,298

12,437

9,082

15,367

10,567

9,246

8,358

8,084

8,406

4,237

11,655

Operating Results
Net Sales
Electronics

27,14928,26823,23923,56024,41024,704

23,61624,97318,72024,844

3,570

19,843

4,170

13,394

13,175

13,744

12,617

4,890

15,086(2,506)

6,482

Net Income (Loss) Attributable to Owners of
the Company

1,896

11,185

9,416

6,418

9,012

13,694

10,776

3,575

26,352(7,183)(6,604)Equity¥193,639¥211,557¥213,751¥242,623¥276,865¥306,938¥284,472¥275,753¥290,434¥264,849¥252,536

Total Assets

358,110479,852

534,584

551,933

611,311

678,486

651,793646,288

651,959622,381

617,528

Capital Expenditures

13,027

12,80015,705

20,12319,89636,90922,86230,50530,10327,19932,387

Depreciation and Amortization

12,96013,15814,55018,96921,48623,111

22,571

22,264

22,183

19,816

24,955Strategy

27,391

ProfileOther Businesses
Operating Income (Loss)

Financial Position

Net Cash Provided by Operating Activities¥27,538¥16,529¥12,974¥34,095¥26,075¥37,120¥39,566¥26,768¥32,415¥15,495¥26,249

Net Cash Provided by (Used in) Investing Activities(9,949)11,591(57,861)(10,973)(19,862)(21,271)(22,793)(31,429)(1,798)(20,723)(21,759)

Net Cash Provided by (Used in) Financing Activities(30,347)703

16,835(24,073)(2,321)(6,238)(9,044)

3,595(34,785)

11,936(10,065)

Business Segments

Cash Flows(yen)

Net Income (Loss) Attributable to Owners of
the Company
Shareholders’ Equity
Cash Dividends¥10.38¥63.32¥53.83¥36.74¥51.60¥80.33¥67.93¥22.52¥160.59¥(43.26)¥(39.45)

1,034.04

1,036.80

1,063.19

1,198.67

1,369.78

1,634.07

1,472.26

1,444.94

1,659.29

1,457.26

1,431.35

15.00

15.00

15.00

15.00

15.00

15.00

30.00

30.00

30.00

30.00

30.00
(%)

51.1

38.0

34.7

37.9

39.1

38.2

35.9

35.5

Return on Assets (ROA)

0.5

2.7

1.9

1.2

1.5

2.1

1.6

Return on Equity (ROE)

1.0

6.1

5.1

3.2

4.0

5.5

4.4

144.5

23.7

27.9

40.8

29.1

18.7

12,48818,292

22,30422,08322,052

Number of Patents Approved

—

1,986

1,986

2,293

Greenhouse Gas Emissions per Unit of Sales(t-CO2/million yen)

—

—

—

—

Payout Ratio

41.2

40.1

38.6

0.6

4.1

(1.1)

(1.4)

1.5

10.6

(2.8)

(2.7)

44.2

133.2

18.7

—

—

21,387

23,05523,256

23,10422,85022,889

2,448

2,424

2,441

2,402

2,400

2,682

2,910

1.372

1.330

1.267

1.311

1.279

1.320

1.259

ESG Indicators
Number of Employees

Notes: 1. In the fiscal year ended March 2017, Iwao & Co., Ltd. was merged with Nisshin Toa Inc., both of which are consolidated subsidiaries. The appareltextile operations of Iwao & Co., Ltd. included in the other businesses segment were reclassified under the textiles business segment as a result.
Figures from the fiscal year ended March 2013 have been adjusted to reflect this change.
2. The Group’s elastomer operations were transferred from the chemicals business to the textiles business in the fiscal year ended March 2016.
Figures from the fiscal year ended March 2015 have been adjusted to reflect this change.
3. The Company changed its fiscal year-end from March 31 to December 31, effective from the fiscal period ended December 31, 2018.
4. The electronics business segment was separated into wireless and communications and micro devices as part of adjustments to earnings
management classifications in the fiscal period ended December 2019.

78

79

Financials

Shareholders’ Equity Ratio

Management Framework

Key Ratios

Management Resources

Per Share

Management’s Discussion and Analysis

Highlights• Net sales rose in wireless and communications and real estate, but Group sales fell due to the impactof the slowdown in China on automobile brakes and other businesses.
• TMD reported a net loss after booking impairment losses on fixed assets.
• A new syndicated loan and a renewed committed credit line ensured continued funding liquidity.

Operating Income

Net Loss Attributable to Owners of
the Company

Fiscal year ended December 2019509,661

6,482(6,604)Previous fiscal year

514,933

4,784(1,366)

Change (million ¥)(5,272)

1,697(5,237)

Change (%)(1.0%)

35.5%

—

30

20

10

0
15.3

Total assets as of December 31, 2019 stood at ¥617,528
million (US$5,614 million), a decline of ¥4,853 million fromthe end of the previous fiscal period. That mainly reflected
decreases of ¥5,166 million for cash and cash equivalents,¥9,825 million for property, plant and equipment and¥2,567 million for investments in and advances to unconsolidated subsidiaries and affiliates, outweighing increasesof ¥5,208 million for receivables and ¥7,526 million forinvestment securities.
Total liabilities as of December 31, 2019 were ¥364,992
million (US$3,318 million), an increase of ¥7,460 million fromthe end of the previous fiscal period. The main changes in

Total Assets

Equity(billions of yen)(billions of yen)(billions of yen)

700

350

600

300

500

250

10

400

200

5

300

150

200

100

100

50

15

400
300
200
100

0

0

-5
16.3

17.3

18.3

18.12

18.12

19.12

0
16.3

(adjusted)

17.3

18.3

18.12

18.12

19.12

19.12

0
15.3

16.3

17.3

18.3

18.12

19.12

15.3

(adjusted)

80

18.12

Financials

Operating Income / Loss

500

18.3

liabilities were increases of ¥20,704 million for long-term
debt (including the current portion), ¥2,050 million for deferred tax liabilities and ¥2,018 million for other long-term
liabilities, outweighing a decrease of ¥18,842 million for
short-term bank loans.
Equity as of December 31, 2019 totaled ¥252,536
million (US$2,296 million), a decline of ¥12,313 million
from the end of the previous fiscal period. The main reason
for the decline was a decrease of ¥11,996 million forretained earnings.
As a result of the above, the consolidated shareholders’equity ratio declined 1.5 percentage points to 38.6%.

(billions of yen)

20

17.3

Financial Position

Net Sales
600

16.3

81

Management Framework

Net Sales(yen)Management Resources(millions of yen)

Cash Dividends

Business Segments

Adjusted Earnings: YoY Comparison

after considering factors such as financial stability. In principle, Nisshinbo retires treasury stock, but the stock may
be used in share swaps as part of M&A deals aimed atsignificantly increasing shareholder value.

The full-year dividend for the fiscal year ended December
2019 is ¥30 (US$0.27) per share, the same amount as forthe previous fiscal year.
By focusing on ROE, Nisshinbo is aiming to deliver sustained increases in shareholder value through the distributionof profits and other means. We also intend to accelerate
investment in areas that drive growth, such as R&D, capital
expenditures and M&A, aiming to secure even greater support and trust from the public, markets and stakeholders as
an Environment and Energy Company group.
In principle, we intend to pay an interim dividend and a
year-end dividend, targeting stable and consistent dividends
based on a consolidated payout ratio target of around 30%.
Also, when the Group holds sufficient internal reserves
to fund growth strategies, we plan to actively return profits
to shareholders through share buybacks and other means

Strategy

micro devices. Together with the existing segments of automobile brakes, precision instruments, chemicals, textiles and real estate, the Company now has a total of sevenreportable business segments.
In 2019, the Nisshinbo Group reported net sales of¥509,661 million (US$4,633 million), down ¥5,272 million(1.0%) year on year on an adjusted basis. Net sales increased in the wireless and communications business,
supported by higher sales of aerospace and meteorologicalsystems in the solutions and specialized equipment business of Japan Radio Co., Ltd. The real estate business also
reported higher net sales, buoyed by the sale of a building
for use as a large commercial facility. However, thosepositives were outweighed by a drop in sales in the automobile brake business, which was affected by factors
such as the sale of the foundation brake business and theimpact of the slowdown in the Chinese market.
The Group reported operating income of ¥6,482 million

The Company changed its fiscal year-end from March 31
to December 31, effective from the fiscal period ended
December 31, 2018. Due to the change in fiscal year-end,
the previous fiscal period was a transitional period coveringnine months of results (April 1, 2018 to December 31, 2018)
for the Company and consolidated subsidiaries that had
March fiscal year-ends, 10 months of results (March 1, 2018
to December 31, 2018) for consolidated subsidiaries that
had February fiscal year-ends, and 12 months of results(January 1, 2018 to December 31, 2018) for consolidated
subsidiaries with December fiscal year-ends. For reference
purposes, figures for the previous fiscal period have beenadjusted to facilitate comparison with figures for the fiscal
year under review (referred to as “adjusted basis”).
The Company has adjusted its earnings managementclassifications. Effective from the fiscal year ended
December 31, 2019, the electronics business segment
has been separated into wireless and communications andDividend
ProfileOperating Results¥6,604 million (US$60 million), a deterioration of ¥5,237
million year on year on an adjusted basis, largely due to thebooking of an impairment loss on fixed assets in TMD’s
OEPC business (original equipment for new passenger cars).

(US$59 million), up ¥1,697 million (35.5%) year on year onan adjusted basis, mainly supported by higher sales in thewireless and communications business and the real estatebusiness. Although operating income increased, the Group
reported net loss attributable to owners of the Company of

16.3

17.3

18.3

18.12

19.12

Fund Procurement

Medium-term Management Strategy¥25,000 million committed credit line agreement with its
major banks. The Company also continues to have access toapproved funding through overdraft facilities and commercial
paper, ensuring necessary levels of liquidity.

In July 2019, the Company secured a long-term syndicatedloan of ¥30,000 million, replacing part of an existing shortterm bank loan to ensure stable funding at a low interest
rate. Also, in September 2019, the Company renewed a

Cash Flows
Cash used in financing activities totaled ¥10,065 million(US$92 million), mainly reflecting cash used of ¥10,653
million for repayment of long-term debt, ¥18,277 million
for decrease in short-term bank loans–net, ¥5,065 million
for cash dividends paid and ¥4,924 million for purchase oftreasury stock, against cash provided of ¥32,369 million
from proceeds from long-term debt.
As a result of the above, cash and cash equivalents at
the end of the fiscal year totaled ¥37,268 million (US$339
million), a decrease of ¥5,166 million from the end of theprevious fiscal period.

Cash Flows from Investing Activities

Selection of Accounting Standards
considering voluntarily adopting International Financial
Reporting Standards (IFRS), a common set of global accounting standards. However, no final decision has been
made on timing and other factors related to voluntary
adoption of IFRS at this stage.

The Nisshinbo Group currently uses Japanese accounting
standards. However, given that the Company’s basic management policy is to develop its business globally, overseas
operations are likely to account for a growing share of
consolidated earnings. From that perspective, we are

Capital Expenditures(billions of yen)

40
30

Management Frameworkmaterial manufacturing facilities, ¥3,862 million was invested
in Nisshinbo Automotive Manufacturing Inc., primarily for
manufacturing facilities for friction materials that arecompatible with regulations on copper content, and ¥1,987
million was invested in Nisshinbo Brake Inc., also mainly
for manufacturing facilities for friction materials that arecompatible with regulations on copper content.

The Nisshinbo Group channels its capital expenditures
into priority product fields that offer the potential for longterm growth and into upgrading manufacturing equipment
to raise product quality. It also invests in environmental
initiatives such as the reduction of greenhouse gases andin manufacturing facilities to address rising demand in
China, Southeast Asia and other emerging markets. As aresult, in the fiscal year ended December 31, 2019, capital
expenditures totaled ¥32,387 million (US$294 million).
In the wireless and communications business, ¥5,153
million was invested in Japan Radio, mainly for logistics
warehouse facilities and backbone IT systems. In the micro
devices business, ¥4,345 million was invested in New Japan
Radio Co., Ltd., primarily for electronic device manufacturing and research and development facilities, and ¥3,645
million was invested in Ricoh Electronic Devices Co., Ltd.,
mainly for research and development facilities and backbone IT systems. In the automobile brake business, ¥4,429
million was invested in the TMD Group, mainly for friction

Management Resources

Capital Expenditures

Business Segments

Cash used in investing activities totaled ¥21,759 million(US$198 million), mainly reflecting cash used of ¥25,436
million for the purchase of property, plant and equipment,
and cash provided of ¥3,989 million from proceeds fromsales of investment securities and investments in andadvances to unconsolidated subsidiaries and affiliates.

Strategy

Cash Flows from Financing Activities

Cash provided by operating activities totaled ¥26,249 million(US$239 million), mainly reflecting cash provided of ¥24,955
million from depreciation and amortization, ¥16,181 million
from loss on impairment of long-lived assets and ¥5,466
million from decrease in inventories, against cash used of¥3,520 million for income taxes–paid, ¥3,655 million forequity in earnings of unconsolidated subsidiaries and affiliates, ¥3,343 million for gain on sale of investment securities and investments in and advances to unconsolidated
subsidiaries and affiliates, net, ¥5,909 million for increase
in receivables and ¥4,060 million for decrease in payables.

ProfileCash Flows from Operating Activities

with the development of components and materials for fuelcell vehicles, such as carbon bipolar plates and alternatives
to platinum catalysts. The Group is also supplying devices
and stepping up the development of sensors for autonomous vehicles and working to develop communications
networks that link vehicles and traffic infrastructure.
In addition, we are developing radar, sensors andother devices needed for autonomous ship operation,satellite communication, and aircraft and drone control
systems, as well as using the data gathered from theproducts developed by the Group to support safe andenergy-efficient operations.
The Nisshinbo Group is targeting ROE of 12% in 2025.
While the Group faces a number of uncertainties
caused by the COVID-19 outbreak and other developments, we will continue to execute our growth strategy in2020 by channeling management resources into the key
Mobility field.
In the wireless and communications business, thesolutions and specialized equipment business, which is
focused on public sector projects, continues to perform
well, but the marine systems business is still in the process of recovery. The micro devices business faced a rapid
deterioration in market conditions caused by trade friction
between the US and China, but the environment is now
improving. In the automobile brake business, we have invested heavily in production facilities for copper-reduced
and copper-free friction materials, orders for which are
growing strongly amid rising global demand for more ecofriendly products, but depreciation costs related to that investment have weighed on profits. However, businessrestructuring of TMD is almost complete and we expect
the automobile brake business to return to profit in 2020.

As the Group becomes more diversified, Nisshinbo is aiming
to enhance Group management and global management andincrease corporate value by uniting its various businesses
under its Corporate Philosophy, “Change and Challenge!
For the creation of the future of Earth and People.”
Based on the view that the quality of a company is thesum of its people, not the business itself, the Group will
also continue to adapt its business to the changing demands of modern life and society, while also increasing its
focus on “experiences” and “services,” backed by its
strengths in manufacturing “things.”
The Nisshinbo Group has been shifting its strategic
focus to the environmental and energy fields, guided by
the themes of protecting the global environment and creating a sustainable society. As an Environment and Energy
Company group, we will continue to propose new products
and systems that help protect the environment, save energy
and create alternative sources of energy, while also providing
solutions that address some of the biggest issues faced byhumanity today, such as environmental destruction andnatural disasters caused by climate change, help create
super smart societies.
Based on that thinking, we will enhance and expand
our presence in the mainstay Mobility field and supply
products and services in the Infrastructure & Safety field
and the Life & Healthcare field to contribute to the creationof future societies.
In the Mobility field, we are expanding our business bypromoting Groupwide collaboration that combines ourwireless communication technologies with technologies inelectronic devices, mechatronics and chemicals.
In automotive products, we are establishing our positionin the global market by pioneering the development andsale of copper-free friction materials and pushing ahead

20
Financials

10
0
15.3

82

16.3

17.3

18.3

18.12

19.12

83

Consolidated Balance Sheet
December 31, 2019

Millions of Yen

ASSETS

Thousands of
U.S. Dollars (Note)

2019

2018

2019

¥37,268¥42,434$338,800

282

1

2,564

Millions of Yen

LIABILITIES AND EQUITY

Thousands of
U.S. Dollars (Note)

2019

2018

2019

Short-term bank loans¥46,549¥65,391$423,173

Commercial paper

30,00030,000272,727

Current portion of long-term debt

39,818

8,057

361,982

CURRENT LIABILITIES:CURRENT ASSETS:
Cash and cash equivalents
Time deposits
Receivables:

Payables:
21,084

189,173

Trade notes

23,48324,129213,482

106,294

99,673966,309

Trade accounts

37,87340,145344,300

Unconsolidated subsidiaries and affiliates

1,127

1,225

10,245

Unconsolidated subsidiaries and affiliates

Other

4,495

5,364

40,863

Other

Allowance for doubtful receivables

(588)

(417)

(5,345)

121,848

118,991

1,107,709

Accrued income taxes

4,092

3,088

37,200

8,395

9,732

76,318Other current liabilities

20,026

19,378

182,054

231,023

218,089

2,100,209

Long-term debt

47,68658,743

433,509

Liability for retirement benefits

51,80750,292

470,973

Deferred tax liabilities

18,875

16,825

171,591

Inventories
Other current assets

Accrued expenses

Total current liabilities
Total current assets

299,930

298,087

106

273

964

14,24012,751

129,454

14,836

14,877

134,8732,726,636
LONG-TERM LIABILITIES:

Land

35,15836,891

319,618

Buildings and structures

157,800

169,882

1,434,546

Machinery, equipment and tools

341,540

3,170,818

8,254

9,909

75,036

Other

10,655

2,405

96,864560,657

560,627

5,096,882(385,793)(375,938)(3,507,209)

Total
Accumulated depreciation
Net property, plant and equipment

174,864

184,689

1,589,673

13,583

141,827

133,969

139,443

1,217,900

Total liabilities

364,992

357,532

3,318,109

251,273

EQUITY:
Shareholders’ equity:
Common stock—authorized, 371,755,000 shares; issued,
27,64027,610Capital surplus

178,894,764 shares in 2019 and 178,834,769 shares in 2018

20,421

20,396

185,645

Retained earnings

165,549

177,545

1,504,991

Treasury stock—at cost, 12,545,648 shares in 2019 and
7,542,144 shares in 2018
Total shareholders’ equity(11,035)(144,973)

214,516

1,796,936

39,571

33,992359,736

Accumulated other comprehensive income:Net unrealized gain (loss) on available-for-sale securities

(98)

(218)

78,876

71,350717,055

Deferred gain (loss) on derivatives under hedge accounting
Foreign currency translation adjustments

3,810

5,274

34,637

Investments in and advances to unconsolidated subsidiaries and affiliates

32,69535,262297,227

Postretirement liability adjustments(2,915)(4,067)(26,500)

Deferred tax assets

5,250

6,160

47,72740,44235,101

367,655

Goodwill

5,101

7,131

46,373

Stock acquisition rights

168

161

1,527

Other

20,812

19,702

189,200

Noncontrolling interests

14,263

15,071

129,664

142,734

139,605

1,297,582

252,536

264,849

2,295,782¥617,528¥622,381$5,613,891¥617,528¥622,381$5,613,891

Total investments and other assets
TOTAL

Total

Total equity
TOTAL

Note: The translations of Japanese yen amounts into U.S. dollar ($) amounts are included solely for the convenience of readers outside Japan and have been
made at the rate of ¥110 to $1, the approximate rate of exchange at December 31, 2019.

84

85

Financials(24)

Investment securities

INVESTMENTS AND OTHER ASSETS:

Management Framework(15,947)
197,663

Management Resources

348,790

Construction in progress

15,601

Total long-term liabilities

Business Segments

Other long-term liabilities

PROPERTY, PLANT AND EQUIPMENT:

Strategy

20,809Trade accounts

ProfileTrade notes

Consolidated Statement of Profit or Loss

Consolidated Statement of Comprehensive Income (Loss)Year Ended December 31, 2019Year Ended December 31, 2019

Millions of Yen

Thousands of
U.S. Dollars (Note)

Millions of Yen

2018

2019

¥(6,870)¥(5,556)$(62,454)

5,583(8,968)50,754

74

(79)

673

Foreign currency translation adjustments(1,549)(4,926)(14,082)

Postretirement liability adjustments

1,177

(582)

10,700Equity in earnings of unconsolidated subsidiaries and affiliates

(304)

(910)

(2,764)

4,981(15,465)

45,281¥(1,889)¥(21,021)$(17,173)

2018

2019

NET SALES¥509,661¥416,221$4,633,282

NET LOSSCOST OF SALES

409,014335,0443,718,309

OTHER COMPREHENSIVE INCOME (LOSS):Net unrealized gain (loss) on available-for-sale securities

SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
Operating income (loss)

100,647

81,177914,973

94,16583,683856,046

6,482(2,506)58,927

Deferred gain (loss) on derivatives under hedge accounting

Total other comprehensive income (loss)

Profile

2019

2019

Gross profit

Thousands of
U.S. Dollars (Note)

OTHER (EXPENSES) INCOME:
2,590

2,515

23,546

Interest expense(1,133)(889)(10,300)

Gain on sales of property, plant and equipment
Equity in earnings of unconsolidated subsidiaries and affiliates
Loss on impairment of long-lived assets

228

5,518

3,943

33,227

Owners of the Company¥(1,263)¥(21,971)$(11,482)

Noncontrolling interests

(626)

950

(5,691)(147,100)

1,713

31,100Business structure improvement expenses(1,929)(2,071)(17,536)230(4,007)

2,091(8,740)(975)(79,454)(2,258)(3,481)(20,527)

Current

5,438

4,299

49,436

Deferred(826)(2,224)(7,509)

4,612

2,075

41,927(6,870)(5,556)(62,454)

(266)

1,627

(2,418)¥(6,604)¥(7,183)$(60,036)

LOSS BEFORE INCOME TAXESManagement Resources(2,407)

3,421

Business Segments(16,181)

Other (expenses) income—net

TOTAL COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO:

607
3,655

Gain on sales of securities
Other—net

COMPREHENSIVE LOSSINCOME TAXES:

Total income taxes

NET (LOSS) INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS
NET LOSS ATTRIBUTABLE TO OWNERS OF THE COMPANYYenManagement Framework

NET LOSS

U.S. Dollars

Cash dividends

86¥(39.45)¥(43.26)$(0.36)

30

30

0.27

Financials

PER SHARE OF COMMON STOCK:Net loss

StrategyInterest and dividend income

87Consolidated Statement of Changes in Equity

Consolidated Statement of Cash Flows

Year Ended December 31, 2019Year Ended December 31, 2019
Millions of Yen
Millions of Yen

Accumulated Other Comprehensive Income

BALANCE, APRIL 1, 2018
Cumulative effects of changes inaccounting policies

CommonStockCapitalSurplusRetained
Earnings

Treasury
Stock

Total
Shareholders’Equity¥27,588¥26,719¥189,186¥(24,610)¥218,883

Deferred
Net Unrealized
Gain (Loss)
Gain (Loss) onon Derivatives
Available-forunder Hedge
Sale Securities
Accounting¥42,964

Foreign
Currency
Translation
Adjustments¥(19) ¥10,361¥(3,418)

¥152

—

365

—

365

—

¥26,719¥189,551¥(24,610)¥219,248¥42,964

Cash dividends, ¥30 per share——(4,999)—(4,999)—Net loss attributable to owners of
the Company——(7,183)—(7,183)

—

—

—

—

Purchase of treasury stock

—

—

—

(5)

(5)

—

—

—

—

Disposal of treasury stock

—

(11)

—

40

29

—

—

—

—

—

Changes by share exchanges—(6,334)—

13,540

7,206

—

—

—

—

Issuance of new shares

22

22

—

—

44

—

—

—

—

Change in scope of equity method

—

—

176

—

176

—

—

—

—

Net change in the nine-month period

—

—

—

—

—

(8,972)(79)(5,087)¥27,610¥20,396¥177,545¥(11,035)¥214,516¥33,992¥(98)¥5,274BALANCE, DECEMBER 31, 2018
(JANUARY 1, 2019, as previously reported)¥290,434

—

—

—

—

365

¥(19) ¥10,361¥(3,418)¥152¥21,511¥290,799———(4,999)——(7,183)

—

—

(5)

—

29

—

—

7,206

—

—

44

—

—

176

(649)

9

(6,440)(21,218)¥(4,067)¥161¥15,071¥264,849

—

—

—

(63)

—

(63)

—

—

—

—

—

(16)

(79)

¥20,396¥177,482¥(11,035)¥214,453¥33,992¥(98)¥5,274¥(4,067)¥161¥15,055¥264,770

Cash dividends, ¥30 per share——(5,065)—(5,065)

—

—

—

—

—

—

(5,065)Net loss attributable to owners of
the Company——(6,604)—(6,604)

—

—

—

—

—

—

(6,604)Purchase of treasury stock

—

—

—

(4,924)(4,924)

—

—

—

—

—

—

(4,924)

Disposal of treasury stock

—

(5)

—

12

7

—

—

—

—

—

—

7

Issuance of new shares

30

30

—

—

60

—

—

—

—

—

—

60

Change in scope of consolidation

—

—

(264)

—

(264)

—

—

—

—

—

—

(264)

Net change in the year

—

—

—

—

—

5,579

74

(1,464)

1,152

7

(792)

4,556

¥27,640¥20,421¥165,549¥(15,947)¥197,663¥39,571¥(24)¥3,810¥(2,915)¥168¥14,263¥252,536

BALANCE, DECEMBER 31, 2019

Thousands of U.S. Dollars (Note)
Accumulated Other Comprehensive Income

BALANCE, DECEMBER 31, 2018
(JANUARY 1, 2019, as previously reported)
Cumulative effects of changes inaccounting policies
BALANCE, JANUARY 1, 2019 (as restated)

CapitalSurplusRetained
Earnings

Treasury
Stock

Total
Shareholders’Equity$251,000 $185,418 $1,614,045 $(100,318) $1,950,145
—

—

(573)

$309,018(573)—$251,000 $185,418 $1,613,472 $(100,318) $1,949,572$309,018——(46,045)

Net loss attributable to owners of
the Company——

Purchase of treasury stock——

Disposal of treasury stock—

Issuance of new shares

Foreign
Currency
Translation
Adjustments

PostStockretirement
Noncontrolling
Acquisition
Liability
Interests
RightsAdjustments

Total
Equity$(891) $47,946 $(36,973) $1,464 $137,009 $2,407,718
—

—

—

—

(145)

(718)

$(891) $47,946 $(36,973) $1,464 $136,864 $2,407,000—(46,045)

—

—

—

—

—

—

(46,045)(60,036)—(60,036)

—

—

—

—

—

—

(60,036)—(44,764)(44,764)

—

—

—

—

—

—

(44,764)

(46)

—

109

63

—

—

—

—

—

—

63

273

273

—

—

546

—

—

—

—

—

—

546

Change in scope of consolidation——(2,400)—(2,400)

—

—

—

—

—

—

(2,400)Net change in the year

—

—

—

—

—

50,718673(13,309)

10,47363(7,200)41,418$251,273 $185,645 $1,504,991 $(144,973) $1,796,936$359,736

BALANCE, DECEMBER 31, 2019$(218) $34,637 $(26,500) $1,527 $129,664 $2,295,782¥(2,258)¥(3,481)$(20,527)(3,520)24,955
1,986(3,655)
561
1,345
1,156
73
(344)
16,181(8,983)
19,816
1,889(4,006)
(665)
2,535
647
266
287
2,407

(32,000)
226,864
18,054(33,227)
5,100
12,227
10,509664(3,127)
147,100(3,343)(1,615)(30,391)

11

562

100

(5,909)5,466(4,060)(2,396)28,507
26,24926,421(15,466)(7,992)
2,873
18,976
15,495(53,718)
49,691(36,909)(21,783)
259,154
238,627

1,156

830

10,5093,989(25,436)

2,553(26,992)

36,264(231,236)

(79)
(282)
—
868

(35)
6,273
(261)
—

(718)
(2,564)
—
7,891

—
—
(1,975)(21,759)

1,544(1,742)(2,893)(20,723)——(17,955)(197,809)

FINANCING ACTIVITIES:
Proceeds from long-term debt
Repayment of long-term debt
Increase (decrease) in short-term bank loans—net
Cash dividends paid
Purchase of treasury stock
Increase (decrease) in other long-term liabilities
Other—net
Net cash provided by (used in) financing activities

32,369(10,653)(18,277)(5,065)(4,924)(1,277)(2,238)(10,065)3,249(5,998)20,159(4,999)
(5)
(381)
(89)
11,936294,264(96,845)(166,155)(46,045)(44,764)(11,609)(20,346)(91,500)(73)(5,648)42,434(752)
5,956
36,478(663)(51,345)
385,763482¥37,268—¥42,434

4,382$338,800

89

Financials

INVESTING ACTIVITIES:
Proceeds from sale of property, plant and equipment
Proceeds from sale of investment securities and investments in andadvances to unconsolidated subsidiaries and affiliates
Purchase of property, plant and equipment
Purchase of investment securities and investments in and advances tounconsolidated subsidiaries and affiliates
Decrease (increase) in time deposits—net
Purchase of investments in subsidiaries with changes in consolidation scope
Proceeds from acquisition of shares of newly consolidated subsidiaries
Proceeds from sales of investments in subsidiaries with changes in
consolidation scope
Purchase of investments in capital of subsidiaries
Other—net
Net cash provided by (used in) investing activities

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
INCREASE IN CASH AND CASH EQUIVALENTS RESULTING FROMINCLUSION OF SUBSIDIARIES IN CONSOLIDATIONCASH AND CASH EQUIVALENTS, END OF YEAR

88

2019

Management Framework

Cash dividends, $0.27 per share—

Deferred
Net Unrealized
Gain (Loss)
Gain (Loss) onon Derivatives
Available-forunder Hedge
Sale Securities
Accounting

2018Management Resources

CommonStock

2019

Business Segments—¥27,610BALANCE, JANUARY 1, 2019 (as restated)

OPERATING ACTIVITIES:
Loss before income taxes
Adjustments to reconcile net loss to net cash providedby (used in) operating activities:
Income taxes—paidDepreciation and amortization
Amortization of goodwill
Equity in loss (earnings) of unconsolidated subsidiaries and affiliates
Provision for (reversal of) doubtful receivables
Interest and dividends income
Provision for business structure improvement
Increase (decrease) in liabilities for retirement benefits
Loss (gain) on sale of property, plant and equipment, net
Loss on impairment of long-lived assets
Loss (gain) on sale of investment securities and investments in andadvances to unconsolidated subsidiaries and affiliates, net
Loss on write-down of investment securities and investments in andadvances to unconsolidated subsidiaries and affiliates
Changes in operating assets and liabilities:
Decrease (increase) in receivables
Decrease (increase) in inventories
Increase (decrease) in payables
Other—net
Total adjustments
Net cash provided by (used in) operating activities

Strategy

Cumulative effects of changes inaccounting policies¥21,511

Total
EquityProfile—¥27,588

BALANCE, APRIL 1, 2018 (as restated)—

PostStockretirement
Noncontrolling
Acquisition
Liability
Interests
RightsAdjustments

Thousands of
U.S. Dollars (Note)Segment Information

History

Year Ended December 31, 2019
Millions of Yen

1907

Established Nisshin Cotton Spinning Co., Ltd.

1958

Established Nippon Kohbunshikan Co., Ltd. (name changed to Nippon Kohbunshi Co., Ltd. in 1986)(acquired by Nisshinbo Mechatronics Inc. in 2010)1972

Established Nisshinbo Do Brasil Industria Textil LTDA. (Brazil)¥509,661

1989

Established Kohbunshi (Thailand) Ltd. (Thailand)(name changed to Nisshinbo Mechatronics (Thailand) Ltd. in 2011)(5,883)—¥(5,883) ¥509,661¥(6,075)¥6,482¥20,952 ¥617,528

1993

Established Pudong Kohbunshi (Shanghai) Co., Ltd. (China)(name changed to Nisshinbo Mechatronics (Shanghai) Co., Ltd. in 2010)

1995

Established Nisshinbo Urban Development Co., Ltd.

1996

Established Nisshinbo Somboon Automotive Co., Ltd. (Thailand)

1997

Established Nisshinbo Automotive Manufacturing Inc. (USA)1998

Established P.T. Gistex Nisshinbo Indonesia (Indonesia)(name changed to P.T. Nisshinbo Indonesia in 2010)

1999

Established Saeron Automotive Corporation (South Korea)

2000

Purchased additional shares of P.T. Nikawa Textile Industry (Indonesia)

2019
Wireless andCommunications

Sales:
Sales to externalcustomers
Intersegment sales
or transfers
Total
Segment profit (loss)
Segment assets
Other:
Depreciation andamortization
Increase in property,
plant and equipment
and intangible assets

Microdevices

Automobile
BrakesPrecision
Instruments

Chemicals

TextilesReal Estate

Other
Businesses¥152,213¥65,286¥131,338¥65,429¥9,391¥49,505¥11,655¥24,84483¥152,296¥4,100¥164,234

811¥66,097¥256¥76,23112¥131,350¥(3,340)¥133,654

325¥65,754¥879¥74,802173¥9,564¥1,650¥9,395

17¥49,522¥1,037¥51,3391,484¥13,139¥8,163¥49,017

2,978¥27,822¥(188)¥37,904

Eliminations/
Corporate

Consolidated¥—¥3,656¥3,761¥9,799¥4,279¥222¥1,483¥1,248¥220¥287¥24,955¥5,237¥7,990¥13,006¥2,928¥166¥1,109¥1,141¥100¥710¥32,387

Established Continental Teves Co., Ltd. through merger with Continental Teves AG & Co. oHG(name changed to Continental Automotive Co., Ltd. in 2007)

Millions of Yen

2018
Wireless andCommunications

Sales:
Sales to externalcustomers
Intersegment sales
or transfers
Total
Segment profit (loss)
Segment assets
Other:
Depreciation andamortization
Increase in property,
plant and equipment
and intangible assets

Microdevices

Automobile
BrakesPrecision
Instruments

Chemicals

TextilesReal Estate

Other
Businesses

Eliminations/
Corporate

Consolidated

2002

Acquired all shares of Iwao & Co., Ltd.
¥90,427¥53,777¥135,008¥62,219¥8,173¥43,660¥4,237¥18,720

25¥90,452¥(6,510)¥155,160

820¥54,597¥1,605¥74,1027¥135,015¥(814)¥152,529

142¥62,361¥1,691¥76,605

111¥8,284¥1,665¥9,057

15¥43,675¥1,250¥55,139

1,126¥5,363¥2,681¥49,790

1,643¥20,363¥(32)¥38,149¥—¥416,221(3,889)—¥(3,889) ¥416,221¥(4,042)¥(2,506)¥11,850 ¥622,381¥2,259¥2,429¥8,743¥3,712¥163¥1,282

¥929

¥157

¥142

¥19,816¥2,349¥4,012¥10,768¥8,197¥176¥1,399¥296¥127¥(125)¥27,199

2003

Established Saeron Automotive Beijing Corporation (China)

2004

Established Continental Automotive Corporation (Lian Yun Gang) Co., Ltd. (China)

2005

Acquired additional shares of New Japan Radio Co., Ltd.

2006

Acquired additional shares of Japan Radio Co., Ltd. and Nagano Japan Radio Co., Ltd.

2009

Spun off five businesses — Textiles, Automobile Brakes, Papers, Precision Instruments, and Chemicals — andconverted to holding company; corporate name changed to Nisshinbo Holdings Inc.

2010

Established Nisshinbo-Yawei Precision Instruments & Machinery (Jiangsu) Co., Ltd. (China)(formerly Jiangsu Yawei Nisshinbo Precision Instruments & Machinery Co., Ltd.)
Acquired additional shares of Japan Radio Co., Ltd., making it a consolidated subsidiary
Nagano Japan Radio Co., Ltd. also became a consolidated subsidiary as a result

2011

2019
Wireless andCommunications

Other:
Depreciation andamortization
Increase in property,
plant and equipment
and intangible assets

Microdevices

Automobile
BrakesPrecision
Instruments

Chemicals

TextilesReal Estate

Other
Businesses

Eliminations/
Corporate

Consolidated$1,383,755$593,509 $1,193,982$594,809$85,373$450,045$105,955$225,854$— $4,633,282

754$1,384,509$37,273$1,493,037

7,373
109
2,955
$600,882 $1,194,091 $597,764$2,327 $(30,364)$7,991$693,009 $1,215,036 $680,018

1,572$86,945$15,000$85,409155$450,200$9,427$466,718

13,491$119,446$74,209$445,609

27,073(53,482)—$252,927 $(53,482) $4,633,282$(1,709) $(55,227) $58,927$344,582 $190,473 $5,613,891

Established Nisshinbo Saeron (Changshu) Automotive Co., Ltd. (China)
Established Nisshinbo Singapore Pte. Ltd. (Singapore)

Thousands of U.S. Dollars (Note)

Sales:
Sales to externalcustomers
Intersegment sales
or transfers
Total
Segment profit (loss)
Segment assets

Established Nisshinbo (Shanghai) Co., Ltd. (China)

Acquired all shares of TMD Friction Group S.A. (Luxembourg)
2012

Established Nisshinbo Business Management (Shanghai) Co., Ltd. (China)

2014

Established Nisshinbo-Continental Precision Machining (Yangzhou) Co., Ltd. (China)

2015

Acquired all outstanding shares of TOKYO SHIRTS CO., LTD.
Changed Company’s sector classification on stock markets from textile products to electrical equipment
Acquired all outstanding shares of Nanbu Plastics Co., Ltd.

2016

Nagano Japan Radio Co., Ltd. and Ueda Japan Radio Co., Ltd. became wholly consolidated subsidiaries ofJapan Radio Co., Ltd.

2017

Sold the papers businessJapan Radio Co., Ltd. became a wholly owned consolidated subsidiary$33,236$34,191$89,082$38,900$2,018$13,482$11,346$2,000$2,609$226,864$47,609$72,636$118,236$26,618$1,509$10,082$10,373$909$6,455$294,427

2018

Sold the foundation brakes business
Established JRC Mobility Inc.
New Japan Radio Co., Ltd. became a wholly owned consolidated subsidiary
2019

90

Acquired Ricoh Electronic Devices Co., Ltd., making it a consolidated subsidiary

Acquired all shares of NJ Components Co., Ltd.

91

Key Companies in the Nisshinbo Group

Corporate Data
(As of December 31, 2019)

Company

Location

Main Products and Services

Wireless and Communications

FoundedComposition of Shareholders

February 5, 1907
Securities firms

Japan Radio Co., Ltd.

Japan

Disaster prevention systems,
mobile communications equipment

JRC Mobility Inc.

Japan

Automotive radars, ultrasound sensors

Micro Devices
New Japan Radio Co., Ltd.

Japan

Electronic devices, microwave products

Ricoh Electronic Devices Co., Ltd.

Japan

Electronic devices

Automobile Brakes

Common Stock¥27,639 million (US$251 million)Japan

Automobile brake friction materials

EuropeAutomobile brake friction materials

Shareholders

Saeron Automotive Corporation

South Korea

Automobile brake friction materials

27,723Nisshinbo Automotive Manufacturing Inc.

USA

Automobile brake friction materials

Nisshinbo Somboon Automotive Co., Ltd.

Thailand

Automobile brake friction materials

Nisshinbo Saeron Changshu Automotive Co., Ltd.

China

Automobile brake friction materials

Japan
Japan

Nanbu Plastics Co., Ltd.

Molding products,
automotive precision parts
Molding products

18.6%

240
22,64922,889Other Japaneseinstitutions

Basic Stock Information
SectorElectrical equipment

Stock code

3105

Number of shares per trading unit 100 shares(As of December 31, 2019)
Number of shares held
(thousand shares)

Shareholder nameShareholding ratio(%)

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

24,962

15.01

Japan Trustee Services Bank, Ltd.
(Trust Account)

11,712

7.04

Business year

January 1 to December 31

Shareholder record datefor dividends

Teijin Ltd.

10,528

6.33

December 31 (June 30 for interim dividend)

Fukoku Mutual Life Insurance Company

9,000

5.41

Japan Trustee Services Bank, Ltd.
(Trust Account 9)

5,743

3.45

DFA INTL SMALL CAP VALUE PORTFOLIO

2,780

1.67

Japan Trustee Services Bank, Ltd.
(Trust Account 5)

2,694

1.62

Shikoku Chemicals Corporation

2,600

1.56

Trust & Custody Services Bank, Ltd.
(Securities Investment Trust)

2,598

1.56

Japan Wool Textile Co., Ltd.

2,282

1.37

Nisshinbo-Continental Precision Machining (Yangzhou) Co., Ltd.

China

Automotive precision parts

Total shares authorized

371,755,000 shares

Nisshinbo Mechatronics (Thailand) Ltd.

ThailandMolding products

Total shares issued

Continental Automotive Corporation

Japan

Automotive precision parts

178,894,764 shares(As of December 31, 2019)

Treasury stock

12,545,648 shares(As of December 31, 2019)

Chemicals
Urethane products,
high-performance chemical products

13.4%

Major Shareholders

Automotive precision parts

Japan

Foreign institutions

18.6%

Nisshinbo Precision Instrument & Machinery Hiroshima Corporation Japan

Nisshinbo Chemical Inc.

39.6%

2-31-11, Ningyo-cho, Nihonbashi, Chuo-ku,
Tokyo 103-8650, JapanTMD Friction Group S.A.

Nisshinbo Mechatronics Inc.

Japanese financial
institutions

Head OfficeNisshinbo Brake Inc.

Precision Instruments

7.0%Japanese individuals
and others

Employees
Parent Company
Subsidiaries
Total

Treasury stock

2.8%

Mitsubishi UFJ Trust and Banking Corporation
1-4-5, Marunouchi, Chiyoda-ku,
Tokyo 100-8212, Japan

Transfer agent

Stock Price and Trading Volume

TextilesNisshinbo Textile Inc.

Japan

Shirt fabric, developed materials(yen)

NISSHINTOA IWAO INC.

Japan

Textile products

1,800TOKYO SHIRTS CO., LTD.

Japan

ShirtsNisshinbo Do Brasil Industria Textil Ltda.

BrazilTextile spinning

PT. Nikawa Textile Industry

Indonesia

Textile spinning and weaving

PT. Nisshinbo Indonesia

Indonesia

Textile weaving and dyeing(million shares)

1,500

50

1,200

40

Trading volume (right)

900

Real Estate
Japan

Real estate operations

Nisshinbo Singapore Pte. Ltd.

Singapore

Group company support

Nisshinbo Business Management (Shanghai) Co., Ltd.

China

Group company support

Nisshinbo Urban Development Co., Ltd.

Other

30

600

20

300

10

0

0

6/17

92

60

Stock price (left)

9/17

12/17

3/18

6/18

9/18

93

12/18

3/19

6/19

9/19

12/19

3/20