DKS REPORT2019

DKS Co. Ltd.

Chemistry provides
a solution.
DKS Credo

Contributing to the nation and society through industry

DKS Mottoes

Quality First, Cost Reduction, R&D Efforts

DKS Group Logo
The DKS Group logo symbolizes“Act for a Leap,”
our step for globalization.
It describes the bridge for growth toward“Challenge to 1000.”

CONTENTS
About the DKS Group
2 Advantages and Strengths of DKS Businesses
4 The History of Chemistry Provides a Solution
6 Value Creation Process of the DKS Group
8 Financial and Nonfinancial 11-Year Summary
10 Financial and Nonfinancial Highlights
12 Message from the CEO
18 Review of the Medium-Term Management Plans

DKS Report 2019 Editorial Policy
In 2016, the DKS Group began to publish its annual report (DKS
Report), which added information about the Company's finances andmanagement strategy to what had been in its Environmental andSocial Report. From 2017, we referred to the International Integrated
Reporting Framework promoted by the International Integrated
Reporting Council (IIRC).
We are continuously publishing an English-language edition. As
our business activities become increasingly international in nature,
we aim to communicate to all our stakeholders including thoseoutside Japan. Starting with the disclosure of environmental, socialand governance (ESG), and nonfinancial information associated withDKS’s sustainable growth, we will also convey management’s vision,business results, growth strategy, capital policy and otherinformation.
In this Report, by visualizing those“invisible assets”that raise
corporate value, we attempt to describe the Company's current
conditions and its journey to the future, so as to be able to inform thereaders of the creation of value across the short, medium and longterms. Looking to the future, we will use the DKS Report as acommunication tool with all our stakeholders.
Please refer to our official website for detailed information
about the financial and nonfinancial information of the DKS Group.

Organizations Covered by this Report
DKS Co. Ltd.“( DKS”or“the Company”) and Group companies(collectively“the DKS Group”)

Period Covered by this Report

19 Five-Year Management Plan“REACT1000”
20 Risks and Opportunities
22 Financial/Capital Strategies and Total Shareholder Return

Five Operating Segments
24 Five Core Business Segments
25 Surfactants
26 Amenity Materials
27 Polyurethane Materials
28 Functional Materials
29 Electronic Device Materials

Technological Strength of the DKS Group
30 Pursuing breakthrough developments in connection
with the human brain through I. Japonica-Bombyx Fungus

Business Foundations
32 Important CSR Issues
34 Important Issue 1: Quality and Safety Management

In principle, this Report contains our activities and data during
FY2018 (from April 1, 2018, to March 31, 2019). The data on the
Industrial Accident Severity Rate (ASR) and the Industrial Accident
Frequency Rate (AFR) were obtained from January to December 2018.

36 Important Issue 2: Research and Development

Reference Guidelines

44 Important Issue 5: Responsibility as a Global Company

International Integrated Reporting Framework by the International
Integrated Reporting Council (IIRC),“Environmental Reporting
Guideline 2012”by the Ministry of the Environment,“Environmental
Accounting Guideline 2005”by the Ministry of the Environment,“Environmental Accounting Guideline for Chemical Industries(November 2003)”by the Japan Chemical Industry Association (JCIA)

Postedon theWebsiteThe Emission of Notification Substances
under the PRTR Law in FY2018
Transition of the Environmental Impact at
Branches and Yokkaichi Chemical
Safety Securement and Disaster Prevention【Forward-Looking Statements】Statements contained in this report regarding

the plans, projections and strategies of DKS that are not historical fact constituteforward-looking statements about future financial results and are subject to risks
and uncertainties. As such, actual results might differ significantly from theseforward-looking statements due to changes in various external environmental factors.
Consequently, DKS hopes for your understanding as it does not guarantee thecertainty of such forward-looking statements.

38 Important Issue 3: Human Resource Management
40 Important Issue 4: Consideration for the Environment
48 Management

Data
50 Fundamental Knowledge of Surfactants
52 Proprietary Technologies of DKS
54 Consolidated Financial Statements
57 Dialogue with Shareholders and Investors
58 Domestic/Overseas Network
60 Corporate Data
61 On Publishing the DKS Report 2019

DKS REPORT 20191

About the DKS Group

Advantages and Strengths of DKS Businesses
DKS products are used across a broad spectrum of industrial fields, which allows the Company to quickly catchon to the trends of the times and the needs of customers, as well as to deliver rapid solutions to problems.
Utilizing the range of expertise accumulated since its founding and its diverse lineup of product groups, thes strengths go beyond simply providing materials. Instead, the Company’s strengths also lie in its
Company’
technological capabilities, which allow it to customize the function and performance of products in line withcustomer requirements and to make proposals based on the ideal product combination.

Solutions toSociety’s
Challenges

Environmental
conservation andclimate change
response

Realization of safe,
secure lifestyles

Chemistry provides a solution
DKS's Five Segments

Functional
Chemicals
We provide solutions forthe individual needs ofvarious industries by
proposing and creating
additional value
based on our chemical
technology-derived
substances/material
technologies(detergents, emulsifiers,
dispersants, thickeners,
foaming agents).

Plastic
Materials
Realization ofan abundant,
convenientsociety

Contribution totechnologicalinnovation

We provide plastic
additives and resinmaterials indispensable
for various plastics
that have remarkablecharacteristics
not found in natural
materials (radcure
monomers/oligomers,
flame retardants,
antistatic agents,
lubricants, anti-clouding
agents, antioxidants).

Surfactants
We have provided highly
functional surfactants since
our foundation in 1909.

Amenity Materials
We provide materials andapplication technologies to
add comfort in daily living
environments.

Polyurethane Materials
We provide industrial materials andpolyurethane materials (paints,
adhesives, civil engineering andconstruction materials and electric
insulation materials).

Functional Materials
We provide flame retardants,
radcure resins, waterborne
polyurethanes, etc., forapplications essential to home
appliances and daily life.

Electronic Device Materials
We provide ceramic materials,
conductive pastes, etc., forapplications in home
appliances and electronic
components.

DKS’s Three Strengths
A 100-Year History andTechnological Capabilities that
“Respond”to the Times

Since its founding, the Company has employed its
technological capabilities to solve issues faced bycorporations and society. While perfecting its
technologies for formulating, synthesizing andevaluating materials, the Company also establisheditself as a leader in industrial chemicals.
2

DKS REPORT 2019

Broad Customer Base of
Inspiring/Inspired Partners

Flexible Combinations Basedon Diverse Product Groups

The Company has established afoundation of partners (customers)
who anticipate the needs of the final
consumer, inspire and are inspired by
new approaches, and with whom theCompany can cooperate.

By applying its expertise in a broad
range of industrial fields andcombining its diverse product groups,
the Company proposes added value
tailored to its customers.

DKS Group Products Around Us
About the DKS GroupDKS Group products support a variety
of products used in our daily life.

Oil spill treatment
agentsFeed binders

Waterproof
roofing materials

Conductive pastes
for solar batteries

Five Operating Segments

Rock hardening
agentsPrecision cleaning
agents

Optical fiberconnectors

Business Foundations

Sealants forelectric insulation

Building reinforcing
agentsData

Silicon wafer detergents

Food additives
Health supplements
Coatings for building
materials and furniture

ShampoosSurface modifiers
Flame retardants
IT & electronicmaterials

DKS REPORT 20193

About the DKS GroupThe History of Chemistry Provides
Industry Events

1900S

1930S-1950S

1960S-1970S

With the advent of World War I, thespinning industry undergoes
dramatic growth. Textile goods
exceed 50% of Japanese exports.

Following World War I, the industry
undergoes a period ofmodernization, during which time
the textile industry sees anaccelerating shift from natural
fibers to synthetic alternatives.

Upon entering Japan’s period of
rapid economic growth, thepetrochemical industry begins totransition to domestic production
and stronger international
competitiveness.

Founding to Establishment of
Business Base

Expands Business Scope andModernizes Operations

Strengthening and Renaissance1909 SILKREELER cocoon unwinding agent

1934 MONOGEN higher alcohol-based detergent

1969 PYROGUARD flame retardant for plastics

1950 CELLOGEN synthetic thickener

1970 DK ESTER food emulsifier

Along with the development of the textile
industry, the Company developed many typesof soaps and textile oil agents, thereby
establishing its position as a textile oil agent
manufacturer.
During this period, the Company
developed the nonionic surfactant NOIGEN,
the cationic surfactant CATIOGEN and various
progenitors for other surfactants, setting thestage for its rise to the top of the industry.

Against the backdrop of intensifying pricecompetition in industrial fields, the Company
expanded the scope of and diversified its
industrial products. In anticipation of the future
potential of the polyurethane market―positioned
as a downstream sector within the petrochemicalindustry―the Company commenced its polyether
business. Moreover, the Company launched one
business after another that would serve as afoundation for the future, including flame
retardants and sucrose fatty acid esters.

Main products of this time

DK ESTER emulsifier for food(chemical agents for spinning)

1915 Gembu Marseille Soap

(industrial soap for textile)

Cocoon unwinding agents were developed at thestart of the 1900s to address the need for a methodto spin waste cocoons while leaving as much of
the sericin in place as possible, which had been achallenge for the spinning industry.
Following the start of World War I, theCompany introduced Gembu Marseille Soap, thefirst industrial soap for textiles made in Japan, andsupported the development of the textile industry.

Trademarks of the Company(from left: Seiryu, Suzaku, Byakko and Gembu)

1914
General partnership company
Ohno Kogyo Seiyakusho established1978
Capital participation in Chin Yee Chemical
Industries, Co., Ltd., in Taiwan accompanying
the textile industry's shift to Southeast Asia
1960
Ohgata Plant opened
Japan's first solvent-method
manufacturing of
CMC [CELLOGEN] started

DKS REPORT 2019

3/1984

3/1983

3/1982

3/1981

3/19803/19793/1978

3/1977

3/1976

3/1975

3/1973

3/1972

3/1971

3/19703/19693/1968

3/1967

3/1966

3/1965

3/1964

3/1963

3/1962

3/1961

3/19603/19593/1958

3/1957

3/1955

3/1954

3/1953

3/1952

3/1951

3/19503/19494

3/1956

1959
Yokkaichi Chemical Company Limited
established to manufactureand sell nonionic surfactants

1909
Founded1949
1918
Listed as a public company
Dai-ichi Kogyo
Seiyaku Co., Ltd.,established

1973
Gembu
established1969
Nippon Levulose Co., Ltd.
(later Shiga Plant of DKS), established3/1974

1939
Yokkaichi Plant opened

1970
Constructs sucrose fatty acid
ester plant (later Shiga Plant)

a Solution
2000S

Following the oil shocks of the 1970s, theindustry transitions to high-value-added
products. In the 1990s, greater interest isplaced on environmental considerationand safety, which accelerates the greater
functionalization of existing materials.

Japan’
s chemical industry begins to see the development of high functional
sectors that aggressively create and deliver added value to society.

Rebuilds Operations and DKS Rebirth

Qualitative Change and Second RenaissanceFull-Scale Shift to DREAM Businesses

1981 NEW FRONTIER UV/EB-curable

2005 ELEXCEL IL ionic liquid2018 I. Japonica-Bombyx Fungus dietary

supplement
Sudachin citrus sudachi peel extract powder

2013 RHEOCRYSTA

cellulose nanofibers

1990 EIMFLEX polyurethane
1992 HITENOL polymerizable surfactant
In the transition to high-value-added
products, the Company enhanced its
research and development in the priority
areas of“Resources and Energy,”“Electronics and IT,”
“Food, Pharmaceuticals
and Cosmetics”and new materials. The
Company developed various highly functionalsurfactants and polyurethane products.
In aiming to become a leader in highly
functional chemicals, the Company begancollaborating with other industries as a wayof addressing new needs. Moreover, theCompany developed nonionic surfactants
with a low environmental impact incollaboration with an overseas manufacturer.
1985
Dai-ichi Kagaku Kogyo Co., Ltd., established(former Nippon Levulose Co., Ltd.)With its full-scale entry into the life sciencesbusiness in 2018, the Company acquired
Biococoon Laboratories, Inc., and Ikeda
Yakusou Co., Ltd., as wholly owned
subsidiaries. As an initiative that links
achieving healthy longevity and revitalizing
communities, the life sciences business has,along with the environment/energy andelectronics/IT fields, become part of thefoundation on which the Company is focusedfor creating a better future.

In establishing electronic and IT materials as
the next generation of business pillars thatwill serve as the foundation for future growth,
the Company began to take steps to transition
from a traditional surfactant company to aleading industrial chemical supplier. In 2015,
the Company completed construction of theKasumi Plant at its Yokkaichi Branch, which isintended to serve as the core location forcorporate value creation.

ELEXCEL IL ionic liquid

Five Operating Segments

polyurethanes

I. Japonica-Bombyx Fungus and Sudachin

Business Foundations

1982 SUPERFLEX waterborne

Biococoon Laboratories, Inc., and Ikeda Yakusou Co., Ltd., 2018
become wholly owned subsidiaries
2011(¥ billion)
2015
Newly establishedYokkaichi ChemicaltheKasumi
Plant
60
Company Limitedin Yokkaichi
100% acquired
2009
100th anniversaryof the founding50

2006
R&D labs relocated to Kisshoin, Kyoto,
to develop new technologies

1986
Kyoto Elex Co., Ltd., established to manufactureand sell electronic materials 1996
P.T. Dai-ichi Kimia Raya
1988
Dai-ichi Ceramo Co., Ltd., established in Indonesia
established to strengthen
the electronic materials sector

2002 Elexcel Corporation
established

40

30
Kasumi Plant in Yokkaichi

Net Sales

monomers and oligomers

About the DKS Group

1980S-1990S

Data

20

Product development and business deployment that address global events and expand net sales

3/20193/20183/20173/20163/20153/20143/20133/20123/20113/20103/20093/20083/20073/20063/20053/20043/20033/20023/20013/20003/19993/1998

3/1997

3/1996

3/1995

3/1994

3/1993

3/1992

3/1991

3/19903/19893/1988

3/1987

3/1986

3/1985

10

0

DKS REPORT 20195

About the DKS Group

Value Creation Process of the DKS Group
Based on its technologies and trust accumulated over the past 100 years, the DKS Group applies
originality and imagination to limited resources to deliver materials that enrich our way of life.

Principal
Management
Resources

Business Model(Results for the fiscal year ended March 2019)

B２B２C

Manufacturing capital
Manufacturing bases: 13(includes three overseas)
Raw materials used: Petroleum,coal, ore minerals, plants,
biological materials

Intellectual capital
Patents held: 961(of which held overseas: 453)

Develophigh-valueadded
products

Ascertain the needs of end users
through business collaboration with
Inspiring/Inspired Partners
Establish
dedicated
plants forcustomers

R&D dedicatedfor customers

Marketneeds

SampletakingEmployees (consolidated): 985(of which global employees: 213)

Add
functionality
that
contributes
to society

Financial capital

B２C

Net assets: ￥33,591 million

Interest-bearing debt: ￥23,466 million

Improve thefunctionalityof commodity
products

Social capitalPrimary agencies(Zenkoku Ichi-Ko Kai): 34

B２B

Natural capital

Research &development

Human capital

Product
designDevelop and offer proposals
based on customer needs

Energy consumption: 25,900 L/year

Water consumption: 4,392,000 m3/year

Value
Drivers

6

DKS REPORT 2019

Uni-Top Strategy
Aim for the top throughuniquenessStrengthen relationships
with Inspiring/
Inspired Partners ▶P. 17

R&D Foundation
Research and▶P. 36Development
Proprietary Technologies▶P. 52of DKS

Order
taking(Five core business segments)

About the DKS GroupNew ProductDevelopment/
Product
Improvement

DKS Stakeholders
andValue Creation(As of March 31, 2019)

Employees

Five Operating Segments

Skills acquisition
Work-life balance
Work motivation
Diversity
Percentage of paid vacation used:

Amenity Materials▶P. 26

Polyurethane
Materials▶P. 27A new business field was added thisfiscal year through the acquisition of
Biococoon Laboratories, Inc., andIkeda Yakusou Co., Ltd.

Functional
Materials▶P. 28Manufacturing
Sales & Marketing
Management
Research & Development

Shareholders
GrowthEfficient and transparent
management
Shareholder returns
TSR over the past five years: 16.3％
ROE: 8.4％

Customers
Coexistence and mutual prosperity
through the joint development ofhigh-value-added products
Project theme development throughInspiring/Inspired Partners

Regional economic revitalization
driven by contributions to thedevelopment of local communities
Development of life sciences productsCore products:
I. Japonica-Bombyx Fungus
Sudachin

GovernanceStrong and transparent
business promotion structure
Corporate Governance ▶P. 44

Data

5-year management planfor sustainable development▶P. 19(As of April 30, 2019)

Society
Electronic Device
Materials▶P. 29REACT1000,
AND100×6

Ratio of female managers: 8.9％

Business Foundations

Marketing

68.5％
Mass
production

Production
management

Procurement

Surfactants▶P. 25

DKS REPORT 20197

About the DKS Group

Financial and Nonfinancial 11-Year Summary
Financial Data (Millions of yen)

3/20093/20103/20113/2012Net Sales

46,52815,880
8,316
7,504
9,406
5,420
7,572
298
(28)
(350)
2,929
1,700
1,936
1,383
(2,678)(1,295)
117
14,43841,74916,25944,352
14,373
7,397
7,161
9,467
5,950
6,692
1,575
1,239
503
873
1,733
1,863
3,061
(1,661)1,400
195
15,31644,291
14,49951,245
15,131
7,046
8,761
11,441
8,863
8,748
2,732
2,439
1,155
1,111
1,836
2,010
2,502
(616)
1,886
298
16,49847,741
14,09856,24918,7797,220
8,634
10,228
11,386
8,296
2,033
1,742
165
2,312
2,252
2,273
2,309
(2,869)(560)
298
16,94951,357
15,700(44.95)
1,751
15.00

64.45
1,839
25.00

146.90
1,839
35.00

19.35
1,889
35.00

16.3
4.2
0.6
(2.4)
(0.8)
32.7
1.0
975
0.6
1.5

15.1
4.2
3.6
3.6
1.2
32.4
0.8
1,330
20.6
0.7
1.9

17.1
3.9
5.3
7.7
2.5
32.9
0.5
1,305
8.9
0.7
2.7

14.7
4.0
3.6
1.0
0.3
31.4
0.6
1,230
63.6
0.7
2.9

894
609
131
14.3
6
6
72.3

910
582
129
14.6
8
4
71.4

861
554
131
14.8
6
6
69.0

995
533
133
14.8
10
7
66.7

Surfactants
Amenity Materials
Polyurethane Materials
Functional Materials
Electronic Device Materials
Overseas Sales
Operating Income
Ordinary Income
Profit Attributable to Owners of Parent
Capital Expenditures
Depreciation and Amortization
R&D Expenses
Net Cash Provided by (Used in) Operating Activities
Net Cash Provided by (Used in) Investing Activities
Free Cash Flows
Cash Dividends Paid
Net Assets
Total Assets
Interesting-Bearing Debt1
Per-Share Data (yen)2
Net Profit
Net Assets
Cash Dividend
Major IndicesOverseas Sales Ratio (％)
R&D Expenses to Sales Ratio (％)
Operating Margin (％)
Return on Equity (％)
Return on Assets (％)
Equity Ratio (％)
Net D/E Ratio (times)
Year-End Stock Price (yen)PER (times)
PBR (times)
Dividend Payout Ratio (％)－

Nonfinancial Data
No. of Employees (consolidated)
No. of Employees (non-consolidated)
No. of Employees Outside Japan
Ratio of Female Employees to Total Employees (non-consolidated)
No. of Employees Who Utilized the Child-Care Leave System (non-consolidated)
No. of Employees Who Utilized the Child-Care Part-Time Work System (non-consolidated)
Annual Paid Leave Rate (non-consolidated + assigned employees) (%)
No. of Patents Held (overseas) 3
Generated Waste Amount (tons) 4
CO2 Emissions (consolidated) (thousands of tons) 4

－

8,579
43.1

－

9,912
37.4

－

15,774
57.5－

13,39549.8

1. Lease obligations not included in interest-bearing debt.
2. Per share information and period-end share price data have been retroactively adjusted to reflect the consolidation of five shares into one share implemented on October 1, 2018.
3. The collation method was amended to a legal effective date basis from FY2016.
4. Data are presented on a non-consolidated basis up to FY2009 and on a consolidated basis including Yokkaichi Chemical from FY2010.

8

DKS REPORT 2019

3/20173/201851,843
19,486
6,825
8,466
9,666
7,398
7,323
1,754
1,544
797
3,664
2,003
2,340
2,477
(3,548)(1,071)
298
18,20055,416
18,712

54,614
20,3597,141
9,564
10,680
6,868
8,103
2,477
2,374
1,336
1,512
2,104
2,506
3,553
(1,793)1,760
298
19,886
57,57020,67955,597
21,573
6,856
9,442
11,216
6,508
8,743
2,944
2,717
1,782
3,948
2,153
2,439
2,322
(3,229)(907)
474
26,15664,42021,32252,782
20,7797,208
8,934
11,259
4,600
9,131
3,439
3,200
2,198
8,485
2,087
2,380
4,197
(7,687)(3,490)528
26,74566,05723,22752,254
19,793
6,986
9,093
12,517
3,862
8,794
3,944
3,773
2,489
3,786
2,335
2,393
3,750
(3,336)414
608
28,044
69,046
24,59456,955
21,416
7,502
9,115
14,070
4,850
9,929
5,053
4,725
3,351
2,467
2,473
2,307
5,017
(1,130)3,886
710
31,96073,97623,8633/201959,574
21,957
8,151
9,026
16,239
4,199
10,139
4,341
4,175
2,581
5,802
2,555
2,765
3,236
(5,694)(2,458)711
33,59175,906
23,466

93.40
2,022
35.00

156.602,200
35.00

193.452,362
45.00

208.202,425
50.00

237.002,650
60.00

330.302,971
70.00

254.11
3,083
70.00

14.1
4.5
3.4
4.8
1.5
31.1
0.7
1,250
13.4
0.6
2.8

14.8
4.6
4.5
7.4
2.4
32.6
0.6
1,610
10.3
0.7
2.2

15.7
4.4
5.3
8.2
2.9
38.7
0.4
1,935
10.0
0.8
2.3

17.3
4.5
6.5
8.7
3.4
38.8
0.5
1,640
7.9
0.7
3.1

16.8
4.6
7.5
9.5
3.7
38.9
0.5
2,135
9.0
0.8
2.8

17.4
4.1
8.9
11.8
4.7
40.8
0.4
4,375
13.2
1.5
1.6

17.0
4.6
7.3
8.4
3.5
41.3
0.5
3,480
13.7
1.1
2.0

979
526
135
14.8
10
11
62.7
636 (237)
14,421
51.9

969
514
135
16.0
8
8
63.7
660 (245)
12,724
52.0

944
508
142
15.9
11
9
61.0
722 (299)
13,876
51.3

982
495
150
17.0
9
10
64.5
822 (344)
13,191
50.9

967
486
189
17.5
6
13
62.4
855 (378)
17,364
52.5

976
497
193
17.5
12
10
67.4
924 (427)
20,770
53.9

985
512
213
17.8
7
10
68.5
961 (453)
19,06353.0

DKS REPORT 2019

About the DKS Group

3/2016

Five Operating Segments

3/2015Business Foundations

3/2014Data

3/20139

About the DKS Group

Financial and Nonfinancial Highlights
Financial Highlights (Consolidated)■ Operating Income/Operating Margin■ Net Sales/Overseas Sales Ratio(¥ million)(％)(¥ million)

30

5,000

25

4,000

20

3,000

15

2,000

10,000

10

1,000

0

0

0

55,597 52,782 52,254

60,00056,955 59,574

50,00040,00017.3

15.7

30,000

17.4

16.8

17.0

20,0003/2015 3/2016 3/2017 3/2018 3/2019

2,944
5.3

7.5

6.5

(¥ million)

5.0

30,0004.0

25,000

60

50

50

45

40

2.1

2.0

30

2.5

2.4

2.3

2.0

20
10

0

3/20153.0

3/20163/20173/20183/201921,32220,00023,22723,863 23,466

3/20173/201810,0005,000

00*The Company conducted a 5-to-1 reverse stock split for commonshares on October 1, 2018.

3/20153/20163/2019*Lease obligations not included in interest-bearing debt.

Nonfinancial Highlights (Group/Non-consolidated)■ Number of Patents Held (Group)

Outside Japan

Japan(Patents)
1,000

297

316

378

427

453

0

438

447

15,00017,364
13,876 13,191

477

497

508

3/2015 3/2016 3/2017 3/2018 3/2019

DKS REPORT 2019

(1,000 t)
70
60
50

71.3
50.9

52.5

53.9 53.0

30
20

5,000
0

■ CO2 Emissions (Group)40

10
3/2015 3/2016 3/2017 3/2018 3/2019*The collation method was amended to a legal effective date basis from FY2016.

10

19,063

10,000400
200

20,770(t)
20,000800
600■ Generated Waste Amount00

24,59415,0001.0863/2015 3/2016 3/2017 3/2018 3/2019

(％)

60

10

2

(Yen)
70

7.3

8.9

12

4

■ Interest-Bearing Debt

70

4,341

3,944

3,439

■ Dividend per Share/Dividend on Equity (DOE)

70

(%)

5,053

3/2005 3/2016 3/2017 3/2018 3/2019

■ Net Profit Margin

(%)

(%)

11.8

12.0
10.0

8.2

8.0

8.4

9.5

8.7

4.0
2.0
0

3/20153/20163/20173/20183/2019

3.2

2.0

0

3/20153/20163/2017■ Asset Turnover Ratio■ Financial Leverage(Times)(Times)

1.0

0.91

0.81

0.8

0.76

0.80

0.77

0.6

4.0
3.0

2.79

2.58

2.57

2.50

2.43

3/2017

the Child-Care Leave/Child-CarePart-Time Work Systems (Non-consolidated)(People)15

Employees to Utilize the Child-Care Leave
Male
FemaleChild-Care Part-Time Work System

13

12

10

99

9

7

7
5

6

2

2

10

10

1

5

3/20193/201803/20153/20163/20173/20183/2019■ Ratio of Female Employees■ Annual Paid Leave Rate

(％)
20

(％)
80

(Non-consolidated)

15

17.5 17.5 17.8
15.9 17.033/2015 3/2016 3/2017 3/2018 3/2019(Non-consolidated + Assigned Employees)

70
60

61.0

64.5 62.4

67.4 68.5

50
40

10

4

Business Foundations

3/2016Data

3/2015■ Number of Employees to Utilize

03/2019

1.0

0.2

3

3/2018

2.0

0.4

0

4.6

4.8

4.2

4.0

ROE declined to 8.4% from the previous fiscal year.
ROE was also affected by the decrease in the asset
turnover ratio, which fell because of a diminishedsales profit ratio resulting from lower profits andbecause of low growth in net sales compared togreater assets resulting from investments.

6.0

5.9

6.0

Five Operating Segments■ ROE

About the DKS GroupROE Analysis based on the DuPont Model

30
5

20
10

0

3/2015 3/2016 3/2017 3/2018 3/2019

0

3/2015 3/2016 3/2017 3/2018 3/2019

DKS REPORT 201911

About the DKS Group

Message from the CEO

Chairman & CEO

SAKAMOTO Takashi

12

DKS REPORT 2019

The fiscal year ended March 2019 almost coincided withthe end of the 30-year Heisei era, which the print media
describes with expressions of upheaval and turbulence.
I would like to mention three memorable events: thebursting of the bubble economy as described in Japan as
Number One, the end of the U.S.-Soviet Cold War due tothe collapse of the Soviet Union and the rise of China,
and economic transformation due to advances inelectronic equipment capacity and processing speed.
Most economic changes are attributable to the speed atwhich they occur.
I would like to chart the course of what was thenDai-ichi Kogyo Seiyaku Co., Ltd.̶we have been known
as DKS only since 2013̶through the 30 years of the
Heisei era. As a result of management and operational
failures that arose at the time the economic bubble
burst, a period of sluggish performance continued formore than a quarter of a century. We used the Lehman
Brothers crisis of September 2008 as an opportunity torid ourselves of a negative legacy. In April 2009, the100th anniversary of our founding, we launched thefuture-oriented“CHANGE100 Plan.”We systematically
executed measures to change our profit structure.
Yokkaichi Chemical Co., Ltd., became a wholly owned
subsidiary, and we established a future base bypurchasing new land and building plants.
When the CHANGE100 Plan was completed, welabeled existing businesses as ACTUAL businesses,
improvement businesses NEXT businesses and new
businesses DREAM businesses. The current

DKS REPORT 2019

Five Operating Segments
Business Foundations

Capital investment prioritized
to increase capital productivity

management plan, REACT1000, commenced with theintroduction of NEXT peripheral businesses and thelaunch of completely new DREAM businesses. Our aim
was to transform ourselves into a company that canwithstand and survive any upheavals and turbulence.
Our focus areas are environment and energy,
electronics and IT, as well as the life sciences. We areconstructing new plants related to these focus areas in
the Kasumi area of Yokkaichi City, Mie Prefecture, andundertaking manufacturing. The goal is a return on
invested capital (ROIC) of more than two times theweighted average cost of capital (WACC). Estimates forthe fiscal year ended March 2019 exceeded the target
value, and the collection period was shortened. From a
protracted business downturn, DKS converted to a
structure that enabled stable growth during the 30-year
period of the Heisei era. The NEXT businesses arecontributing significantly to profits.
As a new business, we had been seeking to enter
the life sciences field related to human health. Whileendeavoring to gather information, I met a professor
who had been pursuing ways to prevent the onset or
improve the early diagnosis of dementia for nearly 30
years. His results were being commercialized as auniversity-initiated venture. The substances that had
proven effective in mouse experiments were related tosilkworms. Since Dai-ichi Kogyo Seiyaku (today’s DKS)
was founded on a surfactant for unraveling silkworm
cocoons, we came to a mutual understanding, including
a regional economic revitalization plan. This venture
happily decided to join our group.
Ikeda Yakusou Co., Ltd., was a manufacturer offunctional foods that possessed the technology to
extract this specific substance and had acquired GMP1
certification, which is essential for pharmaceuticals.
After repeated negotiations, we decided to acquire all
the shares of Ikeda Yakusou. Along with health

Data

Review of fiscal 2018, the final year of the Heisei era

About the DKS Group

Calls of“Yo-i Ya Sa-”at Miyako Odori Festival
Spring comes to new Reiwa era,
dawning of a period of harmony
and governance13About the DKS Group

Message from the CEO

supplements, we considered the formulation businessto be two halves driving a life sciences whole. Fields
such as CMO2 and CDMO3 in the development andmanufacturing contract business support drug
discovery in the pharmaceutical industry. In the years tocome, we will work to realize a DREAM businessthrough collaborations with venture companies and
M&A with a view to entering this business.
1. Good Manufacturing Practice (manufacturing/quality control standard)
2. Contract Manufacturing Organization (organization entrusted withpharmaceutical manufacturing)
3. Contract Development & Manufacturing Organization (organization
entrusted with development/manufacturing)

Progress and assessment of the REACT1000 Management Plan

Road to sustainable growthestablished in the turbulent
Heisei era

Based on the results from the previous CHANGE100 Plan,
under which we had promoted structural reform, welaunched the current plan in April 2015. The sales target
had to be revised at the midway point due to deteriorationin the business environment of, for example, the solar
panel sector, which had attracted high expectations. Amid
the growing uncertainty of the economy due to the
U.S.-China trade war, the fiscal year ended March 2019was our second highest in terms of business performancewith higher sales despite lower profits. We have left theoperating income target for the final year of the plan as¥6.0 billion, unchanged from the initial target. However,that target could be difficult to achieve due to high raw
material costs, an increase in R&D costs and capital
investment depreciation. The burden of R&D expenses andcapital investment is not insignificant, however, that forms
the basis for future growth and will proceed as planned.
The situation in the global economy is increasing in its
severity, the main contributory factors being the U.S.-China
trade war, uncertainty surrounding the European economy
and geopolitical risks. We decided to focus on improving
profits in unprofitable sectors while expanding our
profitable NEXT businesses. In the fiscal year ending
March 2020, we aim for operating income of ¥5.1 billion,
which would exceed the record achieved in the fiscal year
ended March 2018. Our plan calls for a total of ¥12.0 billion
to be invested in electronic materials and life sciences overthe next three years, including new investments in 5G
fields for next-generation communications. Increasing
total assets to ¥76.0 billion will provide the potential forsales growth.

14

DKS REPORT 2019

Although the financial figures will not reach ourtargets, we have finished initial work on the non-financial
issues set out under the five-year plan. Items for improving
corporate value are listed in a matrix in relation to the four
stakeholders surrounding the Company. These total 20
items, the five indicators derived from the acronym REACT
times their relationships to the four stakeholders. For
example, one of the relationships with shareholders is“change from undervalued stock to growth stock.”The
price-to-book ratio (PBR) has increased from 0.6x to 1x,
and the price-earnings ratio (PER) has increased from 8x
to 15x. What requires explanation is the international
strategy. We selected EXPORT as the“E”in REACT and
decided to improve the overseas sales ratio.
The securities report shows exports as a percentageof net sales classified by region. We had targeted anincrease from 15% to 20% and achieved 17%. The thinking
behind our international strategy is to make products thatare valued globally before expanding overseas. In the era of
the yen’s appreciation toward the ¥70/$1 range, we issued
a statement to the municipalities declaring our intention tobuild a plant in Japan. That was the new plant in Mie
Prefecture. As globalization advances, the exports ofbusiness partners using our products is increasing. The
sales of our products overseas including those of partners
has increased from 35% to 51% over the past four years.
Under our REACT1000 plan, we are engaging inmanagement that is conscious of the need to build afoundation for sustainable and stable growth, which
remains the mission of all companies. As we live in an eraof upheaval and turbulence, a business model that cansurvive change is demanded. From the last century to thebeginning of this century, the crux of DKS’s business
operations had been high-quality manufacturing. I thinkthat people will buy our products if they are good. We areliving in a world in which the capacity and processing
capability of electronic devices have advanced dramatically,
and it is a world in which the planet’s space and time havebeen reduced and shortened.
We are strengthening relationships with leading
companies that are at the forefront of the product markets.
At the same time, we are seeking models to create
products that can only be supplied to those business
partners, for example, collaborations withinspiring/inspired partners who spark off each other. The
starting point of this model is not products but rather acustomer focus. On the new 100,000-m2 site at Kasumi, we
started phasing in our fourth plant. The new plant’s fourproducts are only being offered to inspiring/inspired
partners. These accounted for more than 40% of our total
operating income for the fiscal year ended March 2019.

About the DKS Group
Five Operating Segments

Spring in Kyoto starts with the Miyako Odori Festival. This
year, it was the eight picturesque sights entitled Miyogawari(Imperial Succession) and Kabuki no Irodori (Celebration of
Kabuki) that offered good wishes upon the arrival of a newera. As a result of the capital’s relocation to Tokyo at thetime of the Meiji Restoration in 1868, a mood of stagnation
existed in Kyoto. Two opportunities were created to dispel
thoughts of that situation and raise a sense of excitement.
The governor of newly formed Kyoto Prefecture proposed
the first exhibition in Japan, in which the Miyako Odori
show was held to attract visitors. The Inoue Ryu Kyoto
dance form was introduced at the festival and is now
directed by the fifth generation of its practitioners.
Also, a national education institution was formed
called the Seimikyoku, in part a transliteration of the Dutch
word chemie (chemistry). There having been no
Japanese-language equivalent to the word when chemie
was brought to Japan in the latter part of the Edo period(1603–1867), an academic specializing in the Netherlands
named KAWAMOTO Komin devised the word kagaku(chemistry) from the two kanji characters meaning“transformation”and“discipline.”Established in 1869, theOsaka Seimikyoku later became Kyoto University, and the
Kyoto Seimikyoku, established in 1870, was the dawn of theJapanese chemical industry. The chemical industry beganwith the import trade of synthetic indigo, which wasinvented by the German company BASF.
A cornerstone of Japanese industry during the era
when new industries were being encouraged was theexport of silk goods. A venture company that started withthe manufacture of an unwinding agent, called soap today,
used to unravel and wash the silkworm cocoons, the raw
material for silk yarn, was what is now known as DKS. The
synthetic indigo imported into Japan in 1898 throughYamada Ichirobei Shoten (now Yamada Kasei Co., Ltd.) is
mentioned in publications of BASF. Later, we obtained arecipe for surfactants, the origin of our technologies fromthis agency that has continued for more than 200 years. I
consider Reiwa as the start of a new era that will compare
favorably with the Meiji era (1868–1912).
Previously chosen from Chinese origins, on thisoccasion the era name is associated with Manyoshu,
Japan’
s oldest anthology of poems. Historically, themeaning implied by rei was auspicious and that of wa wasBusiness Foundations

Our Company and others:
A business model thatcombines ourand their technologies

graceful. On the day the new era was announced,
I interpreted rei as governance and wa as harmony.
If pronounced as Spanish, rey va, the meaning of a kinggoing comes to mind. I find it an appropriate name for an
era in which Japan is embarking on a new voyage̶an eraof growth and harmony through new collaborations andsolid corporate governance.
The thing that came to mind when envisaging
REACT1000 was that we had entered the dimension of
consumer-to-business (C2B) flows. They are different fromthe 20th century B2B (business-to-business transactions)and B2C (business-to-consumer transactions) market
flows. We, a chemical materials manufacturer, believe that
our survival lies in developing products that address the
new trend of needs, or rather, wants, of C = consumer.
We will achieve this by strengthening our collaborations
with inspiring/inspired partners who are familiar with themarket.
A good balance between the ACTUAL (our existing
businesses), the NEXT (our peripheral businesses) and theDREAM (our new businesses). The four stakeholders suchas employees, shareholders, business partners andsociety. Operating these beautiful harmonies withappropriate governance, we consider Reiwa as a symbol ofstable growth. We started the NEXT investment of ¥4.8
billion for 5G communication circuit board materials in
August. The Formulation Development Promotion Officelaunched in April and the Quality Assurance Office, whichis under the direct control of the president, hascommenced operations.

Our next future-oriented plan: FELIZ 115

Creating corporate value
starts with sound dialogue
While looking back on the current management plan, I
reviewed the policies of the U.S. President. I interpret thetrade war using my own judgment and prejudices. The
Chinese economy that overtook Japan, which was thesecond largest in the world in terms of gross domestic
product, was judged to be expansive in scale based on the20th century model. In other words, it takes time tobecome an advanced country. President Trump’s current
tariff policy deals a significant blow to the traditional
Chinese economy. Am I the only one who sees this feud as
being of benefit to Japan? We view this as an opportunity
for us as a chemical manufacturer in Japan.
I think we achieved structural changes during past
four years under the REACT plan. There were four

DKS REPORT 2019

Data

Reiwa, beautiful happiness created by harmony and governance15About the DKS Group

Message from the CEO

Together with women employees (Shiga Branch 50th Anniversary Ceremony, August 2019)
From left: MORI Yuka, Enfubayar Enfuyanga, Chairman and CEO SAKAMOTO Takashi and TAIRA Sanae

questions at last year’s general meeting of shareholders.
The last question was“There is the word‘first,’but is Mr.
Sakamoto’s‘first’the shareholders or the employees?”I
answered without hesitation.“Employees come first.”Thequestioner nodded. At an opportunity to talk one-to-one
with shareholders after the general meeting, one
participant said that“a lot was affirmed in front of yourshareholders. It gave me great pleasure.”I was glad tohear those words.
Abbreviated as SDGs, the Sustainable Development
Goals are UN targets for 2030. The form that DKS will takein 2030 already has been determined. Five years prior tothat, in 2025, we aim for net sales of ¥85.0 billion andoperating income of ¥10.0 billion, as well as sales in thelife sciences business of ¥10.0 billion. In 2030, with net
sales of ¥135.0 billion and operating income of ¥18.0
billion, the ACTUAL, NEXT and DREAM businesses shouldeach account for a third of total sales. The plan is tosubstantially expand the high-profitability NEXTbusinesses and utilize that cash to invest in DREAMbusinesses, thereby laying the foundation for the future.
In conjunction with our financial goals, we will work to
improve corporate value with an emphasis on quality in the
non-financial aspects of our operations. We call thisapproach FELIZ 115, feliz meaning happy in Spanish. As wewill be marking our 115th anniversary in the fiscal year
ending March 2025, we will practice happiness
management. The letters of FELIZ stand for FUTURE,
ENVIRONMENT, LIFE, INNOVATION and Z-FLAG.
Signifying the determination to face challenges, at the
beginning of a new era, the latter is the signal flag adopted
by the Japanese that was hoisted prior to a naval battle
that took place in the Sea of Japan during the Meiji era.

16

DKS REPORT 2019

A good relationship with the four stakeholders
surrounding the Company is a constant theme, but what
are the five components of FELIZ for employees,
shareholders, business partners and society? Our
employees will voice and share their opinions in
discussions about the next management plan to be
formulated in the current fiscal year. The themes forshareholders already have been selected: future = growthstock; environment = ESG index; life = longevity stock;innovation = market capitalization of ¥50.0 billion and thechallenge = posting record profits.
The 17 SDGs are incorporated into the DKS Credo, the
DKS Mottoes and the company song. We have selected five
SDGs that DKS will make a conscious effort to address: 3.
Ensure healthy lives and promote well-being for all at allages; 7. Ensure access to affordable, reliable, sustainable
and modern energy for all; 9. Build resilient infrastructure,promote inclusive and sustainable industrialization andfoster innovation; 12. Ensure sustainable consumption andproduction patterns; and 17. Strengthen the means of
implementation and revitalize the global partnership forsustainable development. The production of I. JaponicaBombyx Fungus (Cordyceps sinensis) supplied bysericulture farmers will form an initiative directly linked toregional revitalization.
Oiwaiyasu,“Full of happiness, Uni-Top”

Increasing our earning power,
heading out into the world fora better future
On May 1, 2019, the day the new emperor acceded to thethrone, we raised a celebratory glass as a toast with those
who have a connection to Yamada Ichirobei Shoten.
Oiwaiyasu is the Kyoto dialect equivalent of itadakimasu, theexpression of gratitude uttered before a meal. If 1869,
when the Seimikyoku was established in Japan, is taken as
the first year of chemistry, this year marks the 150th
anniversary. Back then, the Seimikyoku provided an
opportunity to bring about the innovation called industrial
revitalization through chemistry in Kyoto, which had been acity of a thousand years of history and tradition. The
three-day Japan Industrial Safety and Health Association(JISHA) conference will be held for the 78th time, but for
the first time in Kyoto, on October 23, in the first year of the
new Reiwa era. This major event, held once a year by the
JISHA, will be attended by more than 10,000 people fromall over the country, and around 250 companies plan tomake presentations at side meetings. As the head of achemical manufacturer, I serve as the chairperson of theAbout the DKS Group
Five Operating Segments

executive functions. The board of directors will consist ofnine directors including two representative officers,
directors in charge of production, sales, research andmanagement and three outside directors, the goal being to
make quick decisions. A Successor Training Committee
made up of outside directors also will be established.
I think that“the power to earn = NEXT (intellectual +human resources) × Inspiring/Inspired Partners.”TheNEXT and DREAM businesses cover our focus fields of theenvironment and energy, electronics and IT, as well as life
sciences. We supply each product to inspiring/inspired
partners that are leading international companies. The
intellectual and human resources involved are working on
developments that anticipate the future of our business
partners. In the case of the circuit board materials for 5G
communication, for example, we have decided that our
next investment will be double the amount of the firstinvestment four years after plant construction.
Construction began in August 2019 and will be completed
in June 2020. We will strive for stable and continuous
operation at a high level of business.
The Company’s annual slogan for 2019 is“Full ofHappiness, Uni-Top.”This reconfirms the image of theCompany as top-rated in terms of its uniqueness and as
aiming for happiness management. Our strength is thetechnology that we have cultivated in our 110-year history,
starting with the surfactant used to unravel silkworm
cocoons. I believe that it is our mission to make the most of
this strength and continue to develop, from Kyoto to theworld and into the future. As a Uni-Top company, we arecontinuing along the path of creating a company that is
widely known in the international community. We are
grateful for the ongoing understanding of ourshareholders, business partners and social stakeholders.

Business Foundations

Kyoto Labor Standards Association, which is co-hosting
the conference. As the representative of a company thathas received the White 500 health management
certification from the government for two successive years,
it is my firm intention to attend. Junko Koshino, the leading
Japanese fashion designer, will give a special speechentitled“Words I Got from Mom.”She is a diversity pioneer
who wrote the“My Personal History”column in the Nihon
Keizai Shimbun in August. We believe that work-stylereform is synonymous with improving labor productivity
and capital efficiency. It is also beauty created by harmony
and governance.
On my desk I have a book entitled Wage Labor and Capitalby Karl Marx. In my youth, while attending a Shorinji
kempo martial art dojo, I studied economics. I always keep
in mind three key concepts to be achieved in my own style:humanism, planned economy and peoples’right toself-determination (from Marx’s Das Kapital). My
interpretation is that we equally have basic human rights,
should utilize limited resources systematically and should
value what we rely on. I view this as a starting point for theemployee-first concept and the basis of earning power.
Intellectual and human resources are among the elements
related to productivity that enhance value.
Research-and-development (R&D) expenses are an
indicator of intellectual resources, and labor’s share ofincome is used for human resources. We are aiming for an
increase in our R&D expenses to sales ratio by 1.0
percentage point to more than 5% and for labor’s share ofincome to increase 3 percentage points to 70%. Thisaffects research and manufacturing personnel and we
intend to raise the happiness level of our employees. In theNEXT and DREAM businesses, a key human resource
development tool is on-the-job training (OJT). From thenext fiscal year, we will separate the management andEntering the manufacturing smartification era

Who are our Inspiring/Inspired Partners?

DKS REPORT 2019

Data

Having purchased 100,000 m2 of industrial land in the third industrial
complex in Kasumi in the city of Yokkaichi and positioned the plant as amother plant (a complex base that provides new product prototyping andfulfills R&D functions), we commenced operations in 2015. Based on thetrust of the senior management of“business partners who provide a mutual
spark,”whom we call inspiring/inspired partners, we manufacture exclusive
products using technologies that have been honed between the R&D andsales departments of both companies. These Uni-Top (small but unique)
Kasumi Plant, Yokkaichi Branch
products account for most of the Kasumi Plant’s output.
Plant No. 1’
s operations cover electronic materials as well as civil engineering and construction materials, No. 2 produces
special nonionic surfactants, No. 3 manufactures functional polyurethane products and No. 4, which is currently underconstruction, will produce materials for electronics. Based on the ACTUAL businesses (existing products), the NEXT businesses(application of existing products and peripheral products) at the Kasumi Plant have grown to account for 40–50% of operating
income.
We aim to achieve further growth toward 2030 by launching a new NEXT business in line with the C2B era to create
products that are required by the final customer market.
17About the DKS Group

Review of the Medium-Term Management Plans
ADD21(Ambitious Dynamics DKS
for the 21st Century)― Tolerance to Changes
April 2004–March 2009
net sales ￥50 billion
Targeted Figures Consolidated
Ratio of ordinary income to sales 7%

CHANGE100 Stage I

CHANGE100 Stage II

April 2009–March 2012

April 2012–March 2015

Consolidated net sales ￥55 billion or higher
Operating margin 4% or higher

Consolidated net sales ￥60 billion or higher
Operating margin 5% or higher“Each of Us Holds the Key to Success”“Each of Us Holds the Key to Success”―Changing the Corporate Culture ―Expansion along with Earnings

Slogan“With High Aspirations, We Will

VisionBusiness Expansion andSustainable Corporate Value Growth

Building a Business Structure Necessary
Staying Ahead of the Times as
as a Leading Industrial Chemical Company a Leading Industrial Chemical Company

Management
Policies

1. Putting the concept“R&D is the engineof the Company”into practice to realize
customer satisfaction
2. Continuously complementing andexpanding the values of the Company
3. Reinforcing the business byemphasizing the“three actuals”(actual
work site, actual goods and actual
situation)
4. Enhancing corporate governance
5. Promoting compliance management
6. Establishing an ideal company structureby the 100th anniversary (April 2009)

1. Securing a stable profit structure
2. Pursuing greater businessefficiency
3. Developing and strengthening our
foundation to realize the“technology makes the Company”
concept
4. Accelerating the creation of new
products
5. Enhancing compliancemanagement
6. Improving managerial skills andhuman resource development

Plan Outline

1. Increasing sales and building astable earnings-generating
business portfolio
2. Developing and expanding new
high-value-added businesses
3. Generating strong awareness ofand benefits from realizing targets
after establishing themanagement infrastructure

1. Enhancing the enterprise’s power (marketing clout, cost-saving ability, technicalstrength and organizational power) = Heightening our corporate value
2. Promoting selection and concentration = Determining the withdrawal fromunderperforming segments based on our exit rule
3. Optimizing the allocation of management resources = Funneling people, goods and capital
4. Seeking more productivity = Seeking more profitability through the integrated
business division approach
5. Creating new businesses and strengthening cooperation with the parties concerned =Developing inorganic materials, dispersion technology, electronics materials, etc.
6. Focusing on priority business segments = Promptly reaping the benefits of an existing,ongoing, highly profitable business

Review

In the final year of the plan (FY2009),
business conditions became severe,characterized mainly by declining
demand and falling sales prices amid
surging raw material naphtha prices
caused by high crude oil prices and thesubsequent global recession triggeredby the financial crisis in the UnitedStates. Against this backdrop, DKS
undertook such initiatives as boostingsales of core products, developing newmarkets in growing fields that include
IT and the environment, focusing on
developing new materials, continuallyrevising prices, and cutting operating
expenses and other costs. Despite
these efforts, the Company’s earnings
fell below the plan’s targets.

The initial year saw the impact of thefinancial crisis triggered by the
Lehman Brothers bankruptcy. With
revenues growing over the next two
years, however, DKS successfully
achieved a target of the plan byrecording final fiscal year (fiscal year
ended March 2012) consolidated net
sales of ¥56.2 billion. In contrast, theCompany was unable to reach theplan’s operating income target due tooperating income decreasing in the
final fiscal year amid sharp demand
drops and ongoing high raw
resources prices.

Although DKS aimed to increase net
sales from ¥56.2 billion the previous
fiscal year to ¥60 billion, the fiscal
year ended March 2015, the final yearof the plan, ended with consolidated
net sales at ¥55.5 billion, below thetarget because of delays ininvestment to raise production in corebusinesses and stagnation in thesolar cell field. On the other hand,
DKS achieved its operating margin
target given record-high operating
income, ordinary income and net
income. While missing its quantitative
targets, DKS saw success inqualitative terms.

● Introduced an integrated business● Increased business divisions’● Upgraded the management infrastructure

Further instillation of a profitability
mind-set

Improve the corporate culture to bringa profitability mind-set to the forefront
Realize a balance in three areas:
1. Maintain a strong balance sheet:
Simultaneously increase assets andliabilities/capital
2. Revamp the business portfolio:
Select and concentrate on
future-oriented businesses
3. Optimize human resources:
Develop highly capable employeesthat cross generational lines

Maintain a robust and healthy balance
sheet to increase earnings

Shine Brightly in the 21st Century”

1. Expanding peripheral businessfields2. Enhancing and reinvigorating
domestic production facilities
3. Accelerating the creation of new
businesses
4. Pursuing cost reductions
5. Improving management
capabilities and developing humanresources
6. Enhancing overseas expansion andstrengthening administration

Basic Strategies

Successes

Issues18

DKS REPORT 2019

division approach that verticallylinks the research, production andmarketing divisions, and promoteda change in consciousness toward
the concept of emphasizing
earnings based on strict budget
management and clarifying
responsibilities

profits by instilling a profitability
mind-set● Launched and promoted the
Human Resources Development
Project aimed at instilling anawareness of management in all
departments(e.g., commenced introducing a new ERP
system) for the future● Maintained a healthy balance sheet(increased the capital adequacy ratio)● Made new investments for growth (madeYokkaichi Chemical a wholly owned
subsidiary) to expand business fields,
purchased land, began preparation for a
new plantFive-Year Management Plan“REACT1000”April 2015 to March 2020

1 Create new corporate value

We will maximize our performance and market capitalization derived
from assets held.
We will increase awareness toward the Company's image and profile.
We will increase management efficiency by focusing on corporate governance.
We will pat careful attention to ROE from a medium- to long-term perspective.
We will promote the development of materials and technologies in collaboration
with business partners, academia, associations, and related parties.
We will improve Group-wide productivity based mainly on a Yokkaichicomposite base structure.

2 Create a clear corporate image

Management 3 Ensure more profound corporate governance
4 Maintain and increase optimal ROE levels
Policy5 Create advantages through collaboration

6 Accelerate and enhance mother plant functions

Scope of REACT1000 and AND100×6

Year to March 2020 Targets
Net Sales

Society

R (RETURN)

Give proper
credit for theircontributions

P/E andP/B for 1000

Positive
Active partner economic
cycle

E (EXPORT)

Increase theoverseas ratio

Annual reportMarketdevelopment

A (ADVANCE) ACTUAL100×6
C (CREATE)

NEXT100×6

T (TRAIN)

Training &education

Mother plant

Withdraw from
unprofitable DREAM100×6
businesses
Change from Diplomacy with
undervalued stock
specialto growth stock assignments
OutsideIncrease IT
executivesales
meetings

Operating Income¥67.0 billion ¥6.0 billion

BrandsOperating Margin

Overseas Sales Ratio

ROE

9.0% 10% 20%

Regional
revitalization
Public classes■ Net Sales

Results

60
50
40

39.0

41.9

46.0

48.9 46.550.0

44.4

3/07

3/08

3/10

59.5
60.0 or higher
57.0
56.2 55.0 or higher54.6 55.6
52.8
52.3
51.8
51.2

Target67.0

Business Foundations(¥ billion)
70

Five Operating Segments

Employees Shareholders Customers

About the DKS Group

Practicing the concept“chemistry provides a solution,”we will take up the challenge of carrying out ourmanagement plan REACT1000.

30
20
10
3/05

3/06

3/09

ADD21

3/11

3/12

CHANGE100 StageⅠ

3/13

3/14

3/15

3/16

3/17

CHANGE100 Stage Ⅱ

8.9

65.0％ or higher

7

2
1
0

5.3

5.3

4
3.6

3.1
1.2

2.1

2.2

0.9

1.0

3/05

3/06

3/07
ADD21

1.6

1.3
0.6

3/08

2.7

4.0％ or higher
3.4
3.6
2.0
1.8

4.5
2.5

2.9

3.4

7.3

7.5

6.5

5

3/20 (Target)

Results

Target(¥ billion)
7

3

3/19

REACT1000

Results■ Operating Income/Operating Margin

3/18

5.1
3.9

Target
9.0

(％)
9

6.0

8
7

4.3

6
5
4
3
2

0.6

1

0.3

3/09

Data

0

3/10

3/11

3/12

CHANGE100 StageⅠ

3/13

3/14

3/15

CHANGE100 Stage Ⅱ

3/16

3/17

3/18

3/19

0
3/20 (Target)

REACT1000
DKS REPORT 201919

About the DKS Group

Risks and Opportunities
Identifying Significant Risks at DKS
In terms of risk management, the Company established a
Risk Management Control Committee as a systematic
response and formulates activity plans, reviews activities,
identifies risks and examines countermeasures. (Pleaserefer to page 47.)
Confirmation of risks recognized in theorganizational risk management system

2

Identification of risks that should be recognizedat the five business segments

3

Matrix analysis based on the importance of eachrisk (the degree of impact on stakeholders) andthe probability of risk becoming evident (possibilityof negative impact due to occurrence/disclosure)

4

Extraction of significant risks from the viewpointof materiality in integrated reporting

5

Analysis of impact and response to thoserisks when they occur

High

6

Probability of risk becoming evident

1

Based on the results of such activities, in producing the
DKS Report 2019 we identified risks from the viewpoint ofs
information that is of great importance to the Company’
stakeholders, namely in terms of materiality (significance).
The procedure for extracting that information is set out below.

3
5

2
4

7

10
9

8

11

Low
Low

Identify risks

1

Risk significance (impact on stakeholders)High

Prioritize the 1 － 11 significant risks on the right

Risks That Lead to Opportunities
An event that can damage the broad value of acompany, risk can also lead to opportunities. DKS
considers risks in a segregated manner: theavoidance of risk and the formulation of strategies incases where corporate value can be increased byresponding well to risk. The Company would like topractice management that can respond appropriately
to risks in order to achieve sustainable growth.

■ Example of Potential Risk: Naphtha Price Hikes

The domestic price of naphtha, the main raw material forour products, rose to more than ¥70,000 per kiloliter in the
fourth quarter of 2014. It then fell to around ¥31,000 in
mid-2016 and stands at a level just above ¥40,000 in 2019.
Measures against naphtha price fluctuations might include
risk hedging using derivatives, including futures and foreignexchange rates, but they are only partially effective.
Increases in costs due to such raw material
fluctuations could lead to pressure on profits, the burden of

price hike negotiations and even the loss of customers. On
the other hand, the contact points with customers during
price hike negotiations, and the gathering of detailed
information, give rise to opportunities to acquire new orders
by replacement with new materials. If we can present moreadvantageous transaction conditions for customers
compared to other companies in the same industry, it could
lead to an increase in market share. This is one example of
how we can seize risk-associated opportunities.

Overview of Significant Risks
The table on the opposite page summarizes the significant risks (11 items) to which DKS is exposed and outlines
the impact of and responses to those risks as well as the accompanying opportunities created by them.

20

DKS REPORT 2019

2 No raw materials

production in the
manufacturing sector

3 Large numbers ofcustomers

4 Composition ofsales with a large
variety of small-lot
products

5 Many single-

material sales

6 Increasing demand forinexpensive products
associated with growthin emerging nations

7 Improvement intechnological leveland productivity
in neighboring countries,
especially China

8 Strengthened laws

and regulations

Profits come under pressure from cost price increases

Increased contacts with customers throughprice hike activities will increase opportunities
for replacement with new materials andproposals for new themes.

Time taken for price hike activities to maintain profit
marginDecline in market share, lost ground due to price hikes(transfer to another company in the same industry)If more price competitive than other companies
in the same industry in a similar environment,
market share could increase.

Inability to control prices

There is no need for fixed costs, giving rise to
predominance at times of economic downturns.

Business continuity plan (BCP) measures become necessary

Costs can be reduced by searching forinexpensive raw materials.

Time taken, costs incurred in customer follow-up

Information on each industry is easily obtainable
due to having customers in every field.

Cost of small-lot product processing becomes
expensive, cost competitiveness declines
Time taken in research, sales and rectifying
problems due to a variety of productsPossessing a lineup of products that can beused in each field enables a variety of
formulation proposals by combining themProfitability declines in single-material sales forsurfactants due to inferiority in terms of cost relative tooverseas competitors and major manufacturers who
specialize in bulk manufacturing

Improve competitiveness by promoting the
Uni-Top strategy, which does not pursue volume.

Decrease in profit margin due to the sales composition
ratio being weighted toward inexpensive products

Promotion of a differentiation strategy through cost reductions,formulation sales proposals, Japanese quality, customizing

Concerns about losing competitiveness in domestic
and overseas markets

Cooperation and alliances with overseas companies

Concerns about patent infringements overseas

Enhancement of a patent strategy

Necessity to maintain regulatory conformance should there be
legal revisions to, for example, the Act on the Evaluation ofChemical Substances and Regulation of Their Manufacture, etc.
Associated sequence of work takes time starting with contacting
customers supplied, proposals of alternative products,
performance evaluations, 4M (man, machine, material andmanufacturing method) changes, revision of standards, etc.

About the DKS Groupmaterial prices,
centering on
naphthaResponses to Risks and Opportunities

Five Operating Segments

1 Increases in raw

Impacts from Risks

Business Foundations

Significant Risks

Should the same thing happen with anothers product, it can be regarded as ancompany’
opportunity to replace it with a DKS product.

Cost, time and labor involved in replacement work due toa large number of varieties

9 Stricter quality controls

In the fine chemical fields, such as energy-related,pharmaceuticals and foods, a higher level of quality
control is required than with industrial chemicals,
and know-how is necessary for that.

Utilization of GMP-certified Ikeda Yakusou in thelife sciences fieldUtilization of the Kibi Plant as a fine chemical facility
specializing in the life sciences and energy-related fields

Due to our long company history, some facilities
are becoming obsolete.

equipment

An opportunity to make business continuity
decisions, enabling the beginning of a portfolio
review

Data

10 Aging facilities/

As they would not bring about enough profit to meet newcapital investment, products for which the Company isuncertain as to their business continuity would bemanufactured at those aging (and less efficient) facilities.
The scale of facilities is not matching the production
volume due to decline in sales. Decreased efficiency andconcern for quality problems due to small-lot production.
Rise of product unit cost due to production costleads to lowering of price competitiveness.

11 IT security

Leak of confidential information due to virus orinternal management error

Strengthen compliance through employee training andappropriate measures against unauthorized access

DKS REPORT 201921

About the DKS Group

Financial/Capital Strategies and Total Shareholder Return

１Financial Position

As of the end of the fiscal year ended March 31, 2019,
the Company had total assets of ¥75.9 billion (up 2.6%
year on year), net assets of ¥33.5 billion (up 5.1% year onyear), an equity ratio of 41.3% (up 0.5 percentage point
year on year) and interest-bearing debt of ¥23.4 billion(down 1.7% year on year); the net D/E ratio was 0.48.
Regarding cash flows for the period, lower profits
during the fiscal year under review led to cash flows
provided by operating activities declining to ¥3.2 billion,2

below the ¥5.0 billion recorded during the previous
fiscal year. With an increase in capital investments to¥5.8 billion from ¥2.4 billion the previous fiscal year,
cash flows used in investing activities reached ¥5.6
billion. Meanwhile, free cash flows turned negative atminus ¥2.5 billion. Cash flows used in financing
activities were ¥1.5 billion as a result of dividend
payments (¥700 million) and loan repayments, but thefinancial base remains stable.

Financial Analysis of the Past 10 Years

The performance and financial results of the DKS Group for the period from April 2008 to March 2019 are
analyzed as follows. (Cumulative totals are the totals over the 10-year period from April 2009.)
April 2008March 2009

April 2018March 2019

Net Sales¥46.5 billion¥59.5 billion

Increased 28.0%

Operating Income¥0.3 billion¥4.3 billion

Second highest level in history despite lower profits

Operating Margin

0.6%

7.3%

¥(0.35) billion¥2.58 billion

-2.4%

8.4%

Total Assets¥41.7 billion¥75.9 billion

Net Assets¥14.4 billion¥33.5 billion

Interest-Bearing Debt

¥16.2 billion¥23.4 billion

1.0

0.5

Profit Attributable to Owners of Parent
ROE

Net D/E Ratio

Total for 10 years from April 200922

Assessment/Comments

Failed to reach the 5-year target (9.0%)
Ten years ago, the business environment following the
global financial crisis was severe
Despite falling from the previous fiscal year,
ROE in excess of 8% was ensured
Increased 81.8%
Increased approximately 2.3 times because of retained
earnings and two capital increases
Increased ¥7.1 billion mainly due to securing capital
investment funds
Improved significantly due to increases in net assets

Assessment/Comments

Profit Attributable to Ownersof Parent Cumulative Total¥16.3 billion

Recorded total profits of ¥12.4 billion over the past five years

Capital Investment
Cumulative Total¥33.9 billion

Depreciation Cost Cumulative Total¥21.5 billion

Invested aggressively for growth since the fiscal year from
April 2014 onward investing ¥12.4 billion more than theamount of depreciation

R&D Expenses Cumulative Total¥23.2 billion

Continued investment in technology

FCF Cumulative Total¥0.86 billion

FCF over the past 10 years increased slightly

Dividend Cumulative Total¥4.4 billion

Capital Increase¥4.4 billion

The dividend per share increased to ¥70 from ¥15
a decade ago (after considering stock splits)
Implemented public offerings on two occasions(March 2011 and December 2014)

Share Buybacks¥1.0 billion

Determined as a shareholder return policy in January 2017

DKS REPORT 2019

Total Shareholder Return for the Past 10 Years
About the DKS Group3

Total shareholder return (TSR) by dividend and stock price was as follows. Despite making adjustments over the past
year in response to the rapid rise in the stock price during the previous fiscal year, TSR over the past three years
reached a high annual return rate of 30.9%. Meanwhile, the annual TSR rate was 16.3% over the past five years and15.0% over the past 10 years. These levels exceed the shareholder capital cost anticipated by the Company.
DKS

600

TOPIX

TOPIX Chemicals Index

500
400

Five Operating Segments

300
200
100
0
3/20093/20103/20113/20123/20133/20143/20153/20163/20173/20183/2019Note: Share price trends including dividends (closing price data for March 31, 2009 = 100)

3 years

5 years

10 years

Cumulative
total

Annualrate

Cumulative
total

Annualrate

Cumulative
total

Annualrate

DKS(18.9%)

124.4%

30.9%

112.7%

16.3%

304.1%

15.0%

TOPIX

(5.0%)

26.2%

8.1%

47.1%

8.0%

153.3%

9.7%

TOPIX Chemicals Index(4.0%)

52.4%

15.1%

104.0%

15.3%

264.6%

13.8%

Business Foundations

1 yearNote: The annualized conversions are geometric averages of cumulative returns.

Future Financial Strategies/Shareholder Returns

Under REACT1000, our current five-year management
plan, we have set“maintaining and enhancing anappropriate ROE level”as a management policy. In
addition, as an action point we are promising all ourshareholders a change from comparative value stock to
growth stock. For our financial strategy going forward,
while supporting medium- to long-term growth, we would
like to implement measures to optimize the cost of equity.
Because we are a chemical manufacturer, continuous
investments in plant and equipment, as well as R&D
expenditures, are indispensable for achieving medium- tolong-term growth. While maintaining continuing financial
discipline, we are therefore investing for growth, and themain source of that investment will be internal reserves
and interest-bearing debt. In addition, we believe an
important option will be to conduct policy flexibly, such as

making capital increases for growth or financiallystrategic acquisitions of treasury stock, based on our
financial situation and stock market trends.
Specifically, we will 1) steadily raise PBR to 1 or aboveby improving and maintaining ROE to a level above thecost of equity, 2) maintain financial discipline and bringabout a reduction in the cost of capital to an appropriate
level by using moderate leverage, and 3) aim forsustainable dividend growth and optimize the cost ofcapital through flexible shareholder return measures in
conjunction with share buybacks.
Moreover, in terms of M&A as part of growthinvestment, we will select investment projects for which
ROIC exceeds the capital cost and aim for PMI(post-merger integration) that contributes to greater
corporate value over the medium to long term.
DKS REPORT 2019

Data

4

23

Five Operating Segments

Five Core Business Segments
Surfactants
Providing highly functional surfactants
since the Company’s founding in 1909
Nonionic surfactantsAnionic surfactants■ Cationic surfactants■ Amphoteric surfactants■ Polymerizable surfactants■■

Sales by Segment

Amenity Materials
Providing materials and peripheral
application technologies necessary
for a comfortable living environment
Sucrose fatty acid esters
Cellulose polymers■ Vinyl polymers■ Acrylic polymers■ Health supplements■

Electronic
DeviceMaterials■

7%

Polyurethane Materials
Functional Materials

27%

Net sales for the year
ended March 31, 2019

Surfactants¥59,574
millionPolyurethane Materials

15%

Amenity Materials

14%

37%

Providing industrial materials and urethane
raw materials, for example, paints, adhesives,
civil engineering and construction materials,
electric insulating materials
Polyether polyols
Urethane prepolymers■ Urethane systems■■

Functional Materials
Providing products that are essential
to daily life and home electronics, forexample, flame retardants, radcure
resins, waterborne polyurethanes
Radiation-curable monomers/
oligomers■ Waterborne polyurethanes■ Flame retardants■ Amide-based lubricants■Electronic Device Materials
Providing ceramic materials andconductive pastes for home appliancesand electronics components
Conductive pastes for electronics
Injection molding pellets■ Functional inorganic materials■■

24

DKS REPORT 2019

Soap & detergents

About the DKS Group

IT & electronics

Paints & colorants

Surfactants

21,57320,00020,77919,793

21,416

21,9572,500

15,0001,500

10,000

1,000

5,000

500

0

3/20153/20163/2017

2,190

2,000

3/20183/2019Segment outline
Since the Company’s founding in 1909, the surfactants
segment has provided core technologies that havesupported DKS for more than 100 years. DKS
surfactants provide high added value in a wide variety
fields and applications including soap and detergent, IT,
electronics, rubber and plastics, paints and color
materials, and energy through their emulsifying,dispersing, solubilizing, penetrating, wetting, foamingand defoaming, and surface modifying functions. We
currently develop and manufacture these products withpetrochemicals and oils/fats as key raw materials
primarily at the Yokkaichi Branch, the Shiga Branch andYokkaichi Chemical Company Limited.

0

2,094

2,171

1,595

1,607

3/2015-26.5%

3/20163/20173/2018

Five Operating Segments

25,000Operating Income (¥ million)

3/2019The strengths of DKS and the main functions of
the business
The typical function of surfactants is to clean (i.e., dirt
removal), which is represented in the well-known item
“soap.”Surfactants act on the surface of substancesthat do not mix such as oil and water and display
emulsification and dispersion actions to remove dirt.
Recently, however, the functions that the Company’scustomers require for surfactants have evolved beyond
simply cleaning to more sophisticated and uniqueapplications that reflect the advancement of theindustry.
The surfactant synthesis, analysis and evaluation
technology developed over its more than 110-year
history has enabled the Company to provide
performance and functions tailored to customer needs
through its numerous product lines and combinations.

Business Foundations＋2.5%

Net Sales (¥ million)

A review of the fiscal year ended March 2019and our outlook for the future
Relationship between the segment and society
This segment leverages our many years of experienceand accumulated technologies. Our abundant lineup of
products has enabled us to introduce optimal productsthat meet customer needs, while we are able toconceive high-value-added products through our uniquedevelopment approach. Going beyond simply providing
materials, we work closely with customers to findsolutions to their problems.
Amid the global rise in environmentalism, we havebeen pursuing in recent years research anddevelopment on highly biodegradable, eco-friendly
products that do not cause water pollution.

DKS REPORT 2019

Data

During the fiscal year ended March 2019, this segment
saw strong net sales overall.
In Japan, sales fell significantly for soap anddetergent applications, were low for toiletry applications
and slightly weak for machinery and metal applications.
Sales were solid for rubber and plastic applications andstrong for IT and electronics applications. Overseas,
sales were slightly weak for textile applications but grewfor paints and color material applications.
Looking ahead, we will focus on providing products
customized to meet customer needs in accordance with
the Uni-Top strategy.

25

Five Operating Segments

Personal care

Food

EnergyAmenity Materials
Net Sales (¥ million)＋8.7%

10,000
8,000

6,856

7,208

6,986

7,502

8,151

700

6,000

400

4,000

300

0

638

600
500

200

2,000

409

-64.7%

413

225

180

100
3/20153/20163/20173/20183/2019Segment outline
The Amenity Materials segment provides materials andperipheral application technologies necessary for a comfortableliving environment. The Company provides materials suitable tothe products of customers in a wide range of industries including
foods, pharmaceuticals, cosmetics, toiletries, fisheries/livestock,
textiles, pulp/paper, civil engineering, agrochemicals andagro-materials. As part of our entry into the new life sciencesbusiness, in July 2018 we acquired Biococoon Laboratories, Inc.,and Ikeda Yakusou Co., Ltd., to produce I. Japonica-Bombyx
Fungus and Sudachin (sudachi peel extract), respectively.
In addition to core-technology surfactants, DKS
manufactures products made from natural raw materials,
including sugar and pulp, at the Shiga and Ohgata branches inline with the Company’s commitment to preserving theenvironment. The Company also produces health food products
at the Biococoon Laboratories’Tanagura Plant and the Ikeda
Yakusou facility in Tokushima Prefecture.

A review of the fiscal year ended March 2019and our outlook for the future
During the fiscal year ended March 2019, this segment saw overall
growth in net sales.
Although sales in Japan for cellulose polymer for feed
applications were somewhat sluggish, sales were solid forpharmaceutical applications and grew for energy and environmental
applications. Sales for sucrose fatty acid esters for food applications
remained solid.
Overseas, sales were weak for cellulose polymers for foodapplications but were strong for sucrose fatty acid esters for
personal care applications, while food application-related sales rose.
In the life sciences business, a new plant located in Tanagura,
Fukushima Prefecture, will be completed in the autumn of 2019 andwill manufacture I. Japonica-Bombyx Fungus, which is made with
only pure domestic ingredients. We have obtained HACCP*
certification and enhanced our quality control systems to provide
consumers with safe and reliable health food products.
*HACCP (Hazard Analysis Critical Control Point): A food sanitation management method thatwas developed to ensure the safety of food used in the U.S. space program in the 1960s.

26Operating Income (¥ million)

DKS REPORT 20190

3/20153/20163/20173/20183/2019The strengths of DKS and the main functions of
the businessWith more than 65 years of experience in cellulose polymers
using pulp and more than 50 years of experience in sucrose fatty
acid esters using sugar, the Company has a long history inproduct development and is developing markets based on thebasic and application technologies accumulated to date. Amongthese, sucrose fatty acid esters are highly characteristic as an
edible surfactant and DKS is one of only a handful of companies
worldwide producing them. Sucrose fatty acid esters are used as
an emulsifier for oil/fat and cream as well as an agent to improve
food texture, such as giving cookies their crispy texture. Recently,
we have established technologies to produce cellulose nanofibers(CNF), using nanotechnology to make very fine natural cellulose
fibers, a new material that is attracting attention mainly for its
use in personal care and general industrial applications. This isaccomplished by leveraging CNF’s characteristic viscosity andemulsifying, dispersing and stabilizing properties.

Relationship between the segment and society
This segment targets industrial fields that place an emphasison safety such as food, personal care products andpharmaceuticals as end products that are placed in themouth, come into contact with skin and stimulate the fivesenses. With demographic trends indicating that major
Japanese market growth looks unlikely, the Company will
focus on overseas expansion while maintaining its current
customer base.
DKS recently has gotten involved with I. Japonica-Bombyx
Fungus, a health food product that could help address the risein dementia patients, a social issue taking hold in Japan.
Currently, clinical trials are under way aimed at receiving
permission to label this product as a food with functional
claims. We will pursue research and development to extend
people’s healthy lives that reflects the spirit of the DKS Credo:“Contributing to the nation and society through industry.”

Civil engineering

About the DKS Group

Construction

Synthetic lubricants

Polyurethane Materials

8,934

9,093

9,115

9,026

350

8,000

300
250

6,000

200

4,000

150

230

127

100

2,000
0

293

100

41

50
3/20153/20163/20173/20183/2019Segment outline
The segment provides polyurethane materials andindustrial materials, including paints, adhesives, civilengineering and construction materials, and electric
insulation materials. The Company possesses technologies
used to manufacture high-elasticity urethane rubber andurethane elastomers as well as soft/rigid urethane foams.
The Company leverages these properties to provide avariety of high-performance urethane products for a widearray of industries and applications that include cushioning,thermal insulation, molding and painting materials.
Rock hardening agents used for mountain tunnel
projects such as roads and railways are an essential
product for infrastructure upgrading. The Company’sproducts play a role in maintaining safety in environments
where one misstep can put people’s lives in jeopardy.
With petrochemicals as the mainstay raw materials inthe segment, the products are mainly manufactured at the
Yokkaichi Branch.

A review of the fiscal year ended March 2019and our outlook for the future
During the fiscal year ended March 2019, net sales for thissegment were slightly weak overall.
Sales remained strong for functional urethane with IT
and electronics applications and solid for synthetic
lubricants that are eco-friendly and in line with HFC
regulations but fell sharply for civil engineering chemicals.
Rock hardening agent sales are expected to grow as
construction for the Linear Chuo Shinkansen projectproceeds.

The strengths of DKS and the main functions of
the business
The Company’s urethane materials are used mainly in civilengineering and construction, painting materials,
adhesives and electric insulation materials, with theoverriding priority of ensuring people’s safety through0-59.0%

3/20153/20163/20173/2018

Five Operating Segments

9,442

Operating Income (¥ million)

3/2019applications mainly for transportation equipment, civilengineering projects and electronic materials. With therecent diversification of electric appliances and theincorporation of IT in automobiles, electronic components
are being used under increasingly severe conditions.
Meanwhile, the need for lightweight, compact andintegrated electronic components has increased, while
components now need to be protected from physical andchemical effects to maintain strength and ensure durability.
Lightweight, strong urethane resin plays a key role in thisarea. The Company’s electric insulation materials̶whichfeature a superior balance of insulation, heat-resistant andflame-retardant properties̶have a wide range of uses,from home appliance to transportation equipment
components, to meet the exacting needs of customers.
In addition, our rock hardening agents for tunnel
construction have a broad array of uses that include publicroads and railways while boasting a high market sharebased on their safety and performance.
We will conduct employee training at the safety
training center located at the Kasumi Plant, where theseproducts are manufactured, with the aim of generatingGroup-wide synergies.

Business Foundations

10,000-1.0%

Relationship between the segment and society
The Kasumi Plant located in Yokkaichi, Mie Prefecture,began operations in December 2015 after construction
went as planned and serves as a mother plant that
accounts for one-third of the 100,000-m2 site area. Rockhardening agents manufactured at the plant #1 areindispensable materials for tunnel construction, including
roads and railways. These products are contributing to
infrastructure projects that make people’s lives moreconvenient. In June 2019, the plant #3 was completed andmanufactures functional polyurethane resin. Against thisbackdrop, we will redouble our initiatives withinspiring/inspired partners.
Based on our Uni-Top strategy, we will pursue thedevelopment of materials by combining cutting-edge
facilities and application technologies that meet customer
needs and are in tune with the times.
DKS REPORT 2019

Data

Net Sales (¥ million)

27

Five Operating Segments

Electronics

Flame retardants for plastics

Films

Functional Materials＋15.4%Net Sales (¥ million)

16,23917,00014,07015,00012,00011,216

11,259Operating Income (¥ million)
2,500

1,500

1,305

9,000
1,000

6,000

3/20153/20163/20173/20183/2019Segment outline
The Functional Materials segment provides technologies andmaterials contributing to advanced performance, including resinsused in daily necessities, as well as IT and electronic materials
often used in personal computers, smartphones and homeelectronics. Some of the segment’s products include plastic
flame retardants, antistatic agents, lubricants, anticlouding
agents to reduce film and resin clouding, antioxidants
suppressing oxidation degradation in a variety of materials, andradiation-curable monomers and oligomers using radcure (UV or
EB curing) technology. The waterborne polyurethanes being
developed since 1973 are used in wood and plastic paints, metaland paper coating agents, film and wood adhesives, andpaper/fiber binding.
These products are manufactured at the Ohgata and
Yokkaichi branches (Chitose and Kasumi Plant).

A review of the fiscal year ended March 2019and our outlook for the future
During the fiscal year ended March 2019, the segment saw a
substantial expansion in sales. In Japan and overseas, there wasnotable growth in radiation-curable monomers and oligomers for
IT and electronics applications, as well as strong growth in flame
retardants used in rubber and plastics applications. For flame
retardants, it is important to note that pricing is set in line withbromine market conditions. On the other hand, the expansion inradiation-curable monomers and oligomers represents a successstory in our cooperation with our inspiring/inspired partners.

The strengths of DKS and the main functions of
the business
The technology used in radiation-curable monomers andoligomers is called radcure technology, in which a resin
composition such as paint is instantaneously dried and cured byirradiating it with ultraviolet light (UV) or an electron beam (EB).
Radcure technology is widely used in several applications across a
28

767

673

3/20153/2016

500

3,000
0

2,404

1,926

2,000

12,517＋24.8%

DKS REPORT 20190

3/20173/20183/2019variety of fields to conserve resources and energy and to reduce
environmental impact. Applications include the clear paint used inbuilding materials and furniture; anticorrosive paint for metals;
resist materials for semiconductors, dry films and LCDs; andcoating agents for mobile phones, optical fibers, plastics andpaper. DKS monomers are highly functional alcohol-based
products using ethylene oxide (EO) addition technology, which
results in low curl, low viscosity and enhanced hardness. Our
B2B2C business model focuses on a cooperative relationship with
our inspiring/inspired partners to develop innovative one-of-a-kindproducts. The DKS brominated flame retardant’s raw material issourced from a global bromine production site, and because theraw material price can fluctuate based on bromine market
conditions, it is important for DKS to maintain proper controls on
product prices. Brominated flame retardants exhibit greater
stability and stronger flame retardancy for rubber and plastic
materials than do phosphorus and inorganic flame retardants.

Relationship between the segment and society
While many urethane resins are based on organic solvents, DKS
also is researching and developing waterborne polyurethanes inwhich the polyurethanes are dispersed in water, largely inreaction to rapidly growing demand for safer water systems associety places an increased importance on environmental
concerns. In addition to being safe for the environment andpeople, we believe these products are likely to see increased
demand thanks to their ability to allow high-performancefinishing in a variety of applications, including paper and metal
processing, as well as film processability. Given the global trend
away from organic solvents, this is one of the product groups onwhich we are focusing our energies.
Target markets for this business show a strong potential for
growth and are in areas both in Japan and overseas in which DKS
can demonstrate its strengths. While competitors include
electronic materials manufacturers and overseas flame retardant
manufacturers, the Company looks to secure growth through its
innovative technologies and proposal capabilities.
DKS launched construction of a new radiation-curable
monomers and oligomers plant in August 2019, with completioncurrently targeted for June 2020.

Solar cells

About the DKS Group

Ceramic materials

Lithium ion battery cell

Electronic Device Materials
Operating Income (¥ million)

8,000-13.4%

6,508
6,000
4,600
4,000

4,850

4,199

3,862

240

215

200

-65.5%

160
120

94

74

80
40

2,000

3

0

Five Operating Segments

Net Sales (¥ million)-40
3/20163/20173/20183/2019Segment outline
As the information society continues to advance, as evidenced by
the rapid spread of the Internet and smartphones, the electronic
device materials segment is focused on developing and supplying
ion-conductive polymers, ionic liquids, ceramic materials andlithium-ion battery materials, as well as conductive pastes forsolar cells, We dissolved Elexcel Corporation last year and moved
the former company’s operations to the R&D Headquarters, witha corresponding shift to an organizational system specializing in
the research and development of lithium-ion battery materials.
We intend to further develop our innovative technologies in eacharea of operation, while also promoting R&D in line with thetrends of the times. Mainstay products in the electronic devicematerials segment are produced at subsidiary companies Kyoto
Elex and Dai-ichi Ceramo.

A review of the fiscal year ended March 2019and our outlook for the future
Sales in this segment in the fiscal year ended March 2019 weregenerally sluggish.
Despite an expansion in sales of conductive pastes for solar
cells, sales of injection molding pellets were generally weak. One
threat to the segment is the improvement in technological abilities
in countries throughout Asia, including China. However, bydeveloping new markets and building firm relationships withcustomers based on the B2B2C business model, we intend to offer
added value that cannot be beaten by cost competitiveness alone.

The strengths of DKS and the main functions of
the business
DKS is focused on advancing business activity at subsidiarycompanies using its innovative technologies. The Company’ssurface chemistry, which is its core technology, is used in the
mixing techniques of resins and ceramic powders or organic
materials and metal powders. DKS can conduct mixing operations-80

3/2015-65
3/20163/20173/20183/2019under special conditions and with a high level of viscosity thanks
to its detailed know-how in the process. Compound technology is
one of our key strengths, allowing us to provide specific materials
that meet the needs of our customers. One example is conductive
pastes, which have precious metals as the main raw material andare made with inorganic fillers and soluble binders. Conductive
pastes improve functionality in the electronic devices andcomponents used in solar cells, automobiles, smartphones, LEDs,
office equipment and medical equipment. Materials for ceramic
and metal powder injection molding are used to produce small
and difficult-to-process complex three-dimensional ceramics andmetal parts. They often are used in electronic devices such as
smartphones, precision components such as watches andmedical equipment, and automotive and optical communication
components. The segment also can provide powder injection
molding compounds made by precisely mixing raw material
powder, binder, and dispersant.
Another one of our strengths can be found in lithium-ion
batteries, where we handle everything from materials researchand development to the manufacture of prototype lithium batteries.

Business Foundations

3/2015

Relationship between the segment and society
The lithium-ion batteries (LiB) used in electric vehicles generally
employ lithium phosphate as an electrolyte and an organic solvent
as an electrolytic solution. However, because there is a risk oforganic solvents igniting, manufacturers have been careful toincorporate safety measures, including adding in flame retardants.
We have developed an ionic liquid that remains in that state at 100℃
and below, has no vapor pressure and is nonflammable, andbecause it is highly safe and has high ion conductivity, we aredeveloping electrolyte applications for lithium-ion batteries andcapacitors. These kinds of liquids are also attracting attention as
next-generation materials in the energy device field and as green
solvents for reducing environmental impacts. Through theseproducts and efforts, the segment is playing an important role inmaking all our lives safer and more comfortable. While theimproving technological capabilities of countries in Asia, including
China, are a threat, we believe growth is possible by offering our
proprietary technologies, R&D capabilities and solid quality.

DKS REPORT 2019

Data

0

29

Technological Strength of the DKS GroupPursuing breakthrough developments in connection
with the human brain through I. Japonica-Bombyx Fungus
It has been said that we use only about 10% of our brain,leaving us with enormous potential. However, is it
possible to develop our brains to resist the onset ofdementia, or even to outperform AI? Biococoon
Laboratories has revealed that an original hot water
extract of I. Japonica-Bombyx Fungus has proven able tocompletely eliminate damage in the hippocampal tissueof senescence-accelerated mice. The research suggests
the potential that more than 20% of the human brain canbe used. In an environment in which there is no cure-all
treatment for dementia, including Alzheimer’s disease,in humans, we are promoting research and developmentin I. Japonica-Bombyx Fungus, which could serve as a
critical innovation in an aging society.

● Figure 1. Manufacturing methods for I. Japonica-Bombyx Fungus

Natural ophiocordyceps sinensis, existing as a moth parasite (left),is combined with the silkworm pupae (middle) to form I. Japonica-Bombyx Fungus (right)

Silkworm pupae

Natural ophiocordyceps
sinensis, existing as amoth parasite

I. Japonica-Bombyx Fungus● Figure 2. Effect of a hot water extract of I. Japonica-Bombyx Fungus to repair hippocampal

damage in senescence-accelerated mice

Histochemical observations (Holzer’s staining)❶ Normally aging and senescence-accelerated mice given water, with hippocampus tissue observation made using Holzer’s staining

Normally aging miceSenescence-accelerated mice

Arrows in the yellow
circle indicate
gliosisNC

AC

Normally aging mice (control) that have ingested water Senescence-accelerated mice that have ingested water❷ Senescence-accelerated mice given a hot water extract of I. Japonica-Bombyx Fungus in low (5 mg/kg) and high (25 mg/kg) concentrations

Senescence-accelerated mice given a hotwater extract of I. Japonica-Bombyx Fungus
in a low (5 mg/kg) concentration

Senescence-accelerated mice given a hotwater extract of I. Japonica-Bombyx Fungus
in a high (25 mg/kg) concentration

Complete
disappearanceof gliosis
IJEｘ5mg/kg
I. Japonica-Bombyx Fungus extract administeredorally for five weeks (5 mg/kg)
30

DKS REPORT 2019

IJEｘ25mg/kg
I. Japonica-Bombyx Fungus extract administeredorally for five weeks (25 mg/kg)

showed memory in the senescence-accelerated mice
restored to the level of normally aging mice. In otherwords, it appears that I. Japonica-Bombyx Fungus could
serve to repair hippocampus damage and promote theimprovement of memory.1 As a result of the experimentwith mice, human testing was advanced, withindications of an increase in acetylcholine2 in the brain
from the ingestion of I. Japonica-Bombyx Fungus.3
The mechanism by which I. Japonica-Bombyx
Fungus repairs the hippocampus is highly distinct anddifferent from the functional foods expected tocontribute to enhanced cognitive function and currently
available dementia treatments (see Table 1). We target
further clarification of the ability of I. Japonica-Bombyx
Fungus to repair the hippocampal tissue through a
combination of DKS know-how in chemicals and the life
sciences expertise of Biococoon Laboratories. If therestorative properties to the hippocampal tissue can beclarified, it would suggest not only the potential for
functional foods and pharmaceutical candidates forcognitive improvement but also the formation of amaterial that could allow humans to use 20% or more of
their brain in the near future.

Five Operating Segments

Figure 1 shows ophiocordyceps sinensis fungi harvested
from a natural environment in a parasitic state with amoth, with the I. Japonica-Bombyx Fungus
manufactured through infestation of silkworm pupae
after expelling silk during sericulture.
The first stage of the experiment involves normallyaging mice and senescence-accelerated mice drinking
water, with observation of the hippocampal tissues
permitted through Holzer’s staining. The
senescence-accelerated mice are used as the model for
dementia, including Alzheimer’s disease, and while noabnormal tissue was observed in the normally aging
mice, the senescence-accelerated mice exhibited a
gliopathic reaction, with what appears to be a fibrouslesion (lower section of Figure 2). In another experiment,
the senescence-accelerated mice showed a greater
deterioration in memory than did the normally aging
mice. The senescence-accelerated mice are then given
a hot water extract of I. Japonica-Bombyx Fungus in low(5 mg/kg) and high (25 mg/kg) concentrations.
Surprisingly, at the low concentration there were only a
few fibrous scratches and at the high concentration they
were not observed at all. Further memory experiments

About the DKS Group

Substances that can repair damaged hippocampal tissue
in senescence-accelerated mice as a welcome addition toan aging society<References>
1. Sericulture and Insect Biotech, Vol. 85, pp. 63–67 (2016).
2. Iwate Medical Journal, Vol. 68, pp. 223–227 (2017).
3. Frontiers in Pharmacology, Vol. 5, pp. 1–11 (2014).

Business Foundations● Table 1. Mechanisms and target cells/tissues for pharmaceuticals, functional and health foods treating

Food or substanceTarget (cells or tissue)

Mechanism

Donepezil (Aricept)

Nerve cells

Enzyme inhibition

Gingko biloba extract

Nerve cells

Antioxidant

Ferulic acid

Nerve cells

Antioxidant

Plasmalogen

Cerebral cortex

Plasmalogen supply

Resveratrol

Nerve cells

Antioxidant

Omega-3 fatty acids

Nerve cells

Antioxidant

Iso alpha acids

Microglia

Neuroprotection

I. Japonica-Bombyx Fungus

Hippocampal tissue

Loss of gliosis responseDatas diseasedementia, including Alzheimer’Note: Revised the reference material "3" noted above.

DKS REPORT 201931

Business Foundations

Important CSR Issues
Basic Policies
We are confronted with a broad range of issues, from environmental problems such as global warming, resource
depletion and a crisis of biodiversity to an increasing population that causes food resource and energy problems
amid rapid globalization and an increasingly information-based society. We look to take on these challenges andto protect our environment and way of life while improving safety and level of comfort. To do these things, wepursue“Chemistry provides a solution”and contribute to the establishment of a sustainable society.

Identifying Important CSR Issues (Materiality)
At DKS, we are formulating“materiality,”tackling issues from a long-term perspective. In the formulation of materiality,
we have referenced the UN’s Sustainable Development Goals (SDGs),* ISO 26000 and other global guidelines, given theimportant demands that international society places on DKS as we work to advance business globally.
*At the UN Sustainable Development Summit held in September 2015, there were 17 SDGs adopted to find solutions to issues
the world is facing.

Materiality Identification Process
Having mapped the aspects derived from Steps 1 and 2,
we identified five facets of materiality mainly in terms of priority.

STEP 1
Identify theimportancefor the Company

STEP 2
Identify theimportancefor stakeholders

STEP 4

STEP 3

Identify themateriality

Drawa materiality map

Importancefor stakeholders

Identify five critical issues of importance
Extremely
high

High

Importance for DKS

32

DKS REPORT 2019

Quality and
SafetyManagement

Consideration
for theEnvironment

ResearchandDevelopment

Human
Resource
Management

Responsibility
as a Global Company

Quality and
Safety Management(P. 34)

Research andDevelopment(P. 36)

Relation to global guidelines

Activity details

SDGs

ISO 26000

Providing highly safe products

Consumer issues

Ensuring quality assurance and securing product safety

Consumer issues

Promoting occupationalsafety and health

Labor practices

To website

Responding to potential and apparent needs with Uni-Top strategy promotion

Consumer issues

Developing products that contribute to the environment

Environment

Promoting an intellectual property strategy

Fair operating
practices

Securing and nurturing outstanding human resources

Labor practices

Five Operating Segments

DKS’s important
CSR issues

About the DKS Group

Relationship between the Five Important DKS Issues and Global Guidelines(P. 38)

Consideration for
the Environment(P. 40)

Responsibility asa Global Company(P. 44)

Health management initiatives

Labor practices

In-house communication

Community involvementand development

Environmental conservation initiatives

Environment

Preventing global warming (saving energy)

Environment

Managing chemical substances

Environment

Reducing emissions of environmental impact substances

Environment

Strengthening the corporate governance system

Organizational
governance

Strengthening risk management

Organizational
governance

Establishing a compliance structure

Fair operating
practices

Sustainable Development Goals (SDGs)
Stipulated by the United Nations

SDGs Targeted by DKS

Data

Human Resource
Management

Business Foundations

Promoting diversity

DKS REPORT 201933

Business Foundations
Important Issue

1

Quality and Safety Management
Quality Assurance/Quality Policy
Our Company established its Quality Policy and Quality Assurance Management Regulations in 1995. Providing high-quality,
safe and reliable products based on quality assurance (QA), we are working to realize improvements in customer satisfaction.
1．We establish quality-related management standards for eachdepartment that cover the entire process, from productplanning to customer service through design/development,
manufacturing and sales. Through the appropriate operationof such standards, we strive to provide high-quality productsthat are safe and reliable, maintain and improve productquality, and provide quality assurance for our customers.
2．To effectively bring about quality assurance functions
throughout the entire Company, we establish and maintain aquality management system.
3．All our employees must observe this basic concept of quality
assurance and carry out tasks in accordance with the Quality
Assurance Management Regulations.

Quality Policy

Quality Control System
As a chemicals manufacturer, we are committed to the maintenance and improvement of product quality using ISO 9001 as abasic tool in our quality management system. We execute PDCA cycles to provide products and services that comply withcustomer requirements as well as with laws and regulations. We work on day-to-day activities̶such as production control,
corrective measures and preventive actions relative to nonconformities (such as complaints/abnormalities), audits, change
control and training̶and devise improvements by conducting continuous reviews of the management system. While aiming to
improve customer requirement satisfaction levels, we are promoting the further integration of ISO and business activities.
● QC System Diagram

RC Promotion ConferenceManagement Committee

Business Headquarters

Procurement &Logistics Center

Sales
Department

R&D
Department

Production
Department

Quality Assurance (PL) Meeting

QMS Committee

Quality Assurance Department

Production Control Headquarters

Quality Control Section(General Manager of) Branch

Product quality review meetings at each production baseQuality Assurance (QA) System
We view QA as fundamental to our business, and as
we keep our Quality Policy in mind, we continue topromote QA activities from productdesign/development, manufacturing and sales tocustomer service through each relevant department.
Having established a QA Department, independent
from the Business Headquarters, R&D
Headquarters and Production Control Headquarters,in April 2018, the Department is charged with taking
the lead role in supervising quality assurance and in
overall coordination between our departments, whileworking on the establishment and strengthening of
the QA system. In line with the diversifying customer
demands and the heightened requirements for
product quality from a social perspective, we remaincommitted to working to ensure product safety andquality, as well as trying to prevent quality-related
issues before they arise.

34

DKS REPORT 2019

● QA System Diagram

Chairman CEO
Management Committee

General Manager of
Quality Control Department

Director i/c Environment,
Safety & QA
Quality Assurance (PL) Meeting

Managers of Quality Control
Sections at Yokkaichi,
Ohgata, Shiga

Director i/c
Business Headquarters
Executive General Managers ofBusiness Divisions
General Managers of Sales
Departments
General Managers of R&D
Departments
General Managers of Production
Departments

QMS Committee

Director i/c
R&D Headquarters

General Manager ofCorporate R&D Department

Director i/c
Production Control Headquarters

Product Safety (chemical substance management from design development)
About the DKS GroupWe have in place a product development system based on our environmental and safety philosophy, which is centered on“contributing
to the sustainable development and realization of happy societies by considering human health, safety and environmental preservation
throughout the life cycle of each product, from development to scrapping.”Ensuring compliance with laws and regulations related tochemical substances in Japan and overseas, we formulate chemical substance management rules, conduct the appropriate
management of chemical substances, and undertake design and development that as far as possible considers the environmental
impact. We are also promoting the building of a system that enables the appropriate relaying of information on the chemical
substances contained in our products and information on applicable laws and regulations throughout our supply chains.
● Product Safety Mechanism

Customers & Local Communities
Search & Investigation

Design & Development

Research & Preproduction

Required Quality

Commercial Production(Product Sales)

Securing of Product Safety

Planning

Investigation of technologicalinformation● Investigation of laws
and regulations●

Product Design

Realization of quality
Safety confirmation● Environmental impact
assessment● Investigation of conformity withapplicable laws and regulations● Investigation of raw materials

Commercial
Production Review
Occupational/Process
Safety & Disaster Prevention
Production technology review
Product evaluation (safety/packaging)● Compliance with applicable laws
and regulations● Environmental impact assessment● Securing of raw materials● Creation of SDS and technicaldocuments

Five Operating Segments

Process Safety andDisaster Prevention

Process Review

Stable Supply
Technical Service
Quality control
Response to improvement requests● Provision of product information● Regulatory compliance● Environmental conservation● Securing of distribution safety

●

●

●

●

●

●

Compliance with Chemical Substance Laws and Regulations
Substances Control Law but also the Export Trade Control
Order in regard to products for export, and overseas laws andregulations, including those dealing with conflict minerals andrules regarding the registration of chemical substances. We
also focus on the sharing of information by using groupware
to transmit outlines of revisions to laws and regulations.

Business Foundations

With the goal of obtaining the latest information and enacting
management measures to ensure compliance, we continue tomonitor trends in not only domestic laws such as the Act on
the Evaluation of Chemical Substances and Regulation of
Their Manufacture, etc., the Industrial Safety and Health Law,
the Food Hygiene Law, and the Poisonous and Deleterious

Provision of Product and Technical Information
Our products are utilized in a variety of industrial fields, andwe provide product and technical information tailored to thecharacteristics of each product and service. We always
respond to requests and inquiries from our customers quickly,
adequately and in good faith. We also provide information on
hazardous materials to ensure safe handling, including that
relative to product properties, applicable laws andregulations, transportation, handling methods and emergency
measures by means of safety data sheets (SDS). We provide
information using chemSHERPA, an information transfer
scheme for chemicals contained within products throughout
the supply chain. We also promote product labeling and issue

SDS related to compliance with the Globally Harmonized
System of Classification and Labelling of Chemicals (GHS) andcompliance with local regulations for exports to the UnitedStates, Europe and Asia. We have continuously updated our
SDS and labeling to remain in compliance with the revised Act
on the Evaluation of Chemical Substances and Regulation of
Their Manufacture, etc., and the Industrial Safety and Health
Law, as well as the Poisonous and Deleterious Substances
Control Law. When introducing our products, we not only
focus on close communication with our customers throughdaily business meetings but also disseminate information
through brochures and technical documents.

Because we position quality-related nonconformity(complaints/deviation) as an important issue for securing quality,
we check any appearance of nonconformity, determine the cause
and verify the corrective action and its effectiveness to prevent
reoccurrence. We also attempt to handle any product complaints
we have received quickly, adequately and in good faith. Informationon complaints and nonconformity is managed centrally via the
Company’s intranet, and we implement appropriate measures toprevent any similar recurrences of nonconformity by the

Data

Efforts to Reduce Complaints/Nonconforming Products
involvement of peer groups. In addition to our efforts aimed atpreventing the reoccurrence of nonconformity, we conducted areview of our system and made improvements, the priority issue
being to respond to our customers with speed and the appropriate
measures whenever such an event occurs. In the years to come,we will continue to strive to improve customer satisfaction byfocusing on being imaginative and creative while promoting
ongoing efforts to reduce nonconformity and prevent any
recurrence should an incident arise.
DKS REPORT 201935

Business Foundations
Important Issue

2

Research and Development
DKS’s Foundation That Underpins Strategies
As an industrial chemical manufacturer, it is our management philosophy to continue to be a prominent company that
responds to the expanding chemical requirements of industries. To realize that philosophy, we are focusing on the
research and development of high-value-added products, with a particular focus on products with IT andelectronics-related applications, and the development of new applications for battery materials and cellulose nanofibers.
With innovative wisdom and technologies, we are pursuing“Chemistry provides a solution”in every industry anddeveloping products that can contribute to a sustainable society.

R&D System
In FY2018, we established the Life Sciences R&D Department,
which is focused on the development of cellulose nanofibers,
and the Elexcel R&D Department, which develops applications
for battery materials, within the Research and Development
Headquarters as part of the reorganization to a systempromoting new development and collaboration with the
Corporate R&D Department in charge of new development, newbusinesses and companywide research themes. In addition topromoting in-group cooperation between the Functional
Chemicals R&D Department, which mainly conducts productdevelopment for the Surfactants and Amenity Materials
segments, and the Plastic Materials R&D Department, which is
responsible for the development of products for the
Polyurethane, Functional Materials and Electronic Materials
segments, we are working to accelerate research anddevelopment through cooperation with outside entities such as
public research institutes, universities and customers. The
Production Technology Department provides support for the
innovation and creation of new production technologies.

● R&D System Diagram

R&D Investments

Number of Patents Obtained

In FY2018, the total expenses required for R&D amounted to¥2,765 million, which represented 4.6% of net sales. The total
number of R&D personnel of the Company and the domestic
subsidiary companies was 196, which was equivalent toaround 20% of all employees (as of March 31, 2019).

Mindful of future business development, we actively promote
the filing and obtaining of intellectual property (IP) rights
based on R&D results. Recently, to provide our business
operations with stronger backup, we have been focusing on
improving the quality of our patents through enhanced
information retrieval functions. We will continue to respondto the globalization of our business and acquire rights
securely for important domestic and foreign markets.

● R&D Costs(¥ million)
3,000

2,380

2,393

2,765
2,307

2,000

Joint research
Personnel exchanges

Customers
Closed/open
innovation

National projects

DKS Group R&D Departments
Functional
Chemicals
R&D Department

Plastic
Materials
R&D Department

Subsidiarycompanies'
R&D departments

Intragroup collaboration

R&D Headquarters(Corporate R&D Dept., Life Sciences R&D Dept., Elexcel R&D Dept.)

Production Technology Department● Number of Patents Held

Outside Japan

In Japan

800
2015

2016

2017

169

2018
600

● Research Personnel(Persons)
200

Government
agencies

1,000

1,000
0

Universities
Public research
institutions

174

180

344

378

478

477

453

427

196
400

150
100

200

508

497

50
0

36

2015

DKS REPORT 2019

2016

2017

2018

0

2015

2016

2017

2018

*Based on the effective date.

Our Products and Technology Development
About the DKS Group

Eco-Friendly Products and Technology Development
We supply products that meet environmental requirements, including global warming prevention, energy and resourcesaving, environmental protection and prevention of environmental pollution, and engage in the development of related
technologies.
Environmental
requirement

Functions &featuresOur product lineup & technology/Application

Halogen-freeness
Energy efficiency
Energy & Resource
SavingBinder for lithium-ion batteries

ELEXCEL ACG Series

Gel polymer for lithium-ion batteries

DD-1200C Series

Conductive paste for solar cells (lead-free)

DK BE-CLEAR Series

Waterborne detergents

DK POLYOL 3000 Series

HFC1 -free water-reactive polyols for urethane foams/Insulating materials

COLOURSOL CT-171D

Dye accelerating/Leveling agents for polyester

NEW FRONTIER Series

Solvent-free UV/EB-curable monomers/Adhesives, coating agentsDK SYSTEM NF Series

HFC-free systems for rigid polyurethane foams/Insulating materials

Effective resource
utilization
ELEXCEL IL Series
Extension of life span EIMFLEX Series

Slag anti-solidification agents
Ionic liquids/Energy device materials
Polyurethanes for electric insulation/Sealants

NOIGEN XL Series, NOIGEN TDS Series

Nonionic surfactants/Emulsifiers, cleaning agents

RHEOCRYSTA Series

Cellulose nanofiber water dispersions

AH212

Organic alkaline agent

SUPERFLEX Series

Polyurethane water dispersions/Paints, coating, binders

EIMFLEX WF Series

Waterborne single-shot polyurethanes for electric insulation/Sealants

ELASTRON Series, ELASTRON BN Series

Thermoreactive polyurethane water dispersions/Binders, adhesives

NEW FRONTIER Series

Solvent-free UV/EB-curable monomers/Adhesives, coatings

Reduction ofenvironmental impact

HITENOL Series, NOIGEN Series

Polymerizable surfactants/Emulsifiers for emulsion polymerization

TRIBIO Series

Polylactic acid modifying agents

Removal ofcontaminants

SEACLE N-800

Marine oil spill treatment agent

DEOPELLET Series

Foul odor gas absorbents

Eco-friendliness
Environmental
Protection,
Prevention ofEnvironmental
Pollution

CELLBINDER Series

VOC2 reduction

Business Foundations

Global Warming
Prevention

Clean energy

Five Operating Segments

Lithium-ion batteries

1. HFC: Hydrofluorocarbons
2. VOC: Volatile organic compounds

Products to Meet Environmental Requirements
DKS began to manufacture and sell HITENOL and
NOIGEN Series polymerizable surfactants in the 1980s. Sucheco-friendly products as water-based paints and adhesives,
which have been popular in recent years, offer excellent water
resistance and adhesiveness. The new HITENOL AR Series
products offer excellent copolymerization qualities with a wide
range of monomers and improve the water resistance of andinhibit the formation of bubbles in paints and adhesives.

Data

DKS has been developing products made using sugars andcellulose, which are eco-friendly materials that are derived
from plants and are renewable. Among them, the cellulose
nanofiber RHEOCRYSTA possesses unique physicochemical
properties due to its single-digit nano size, and the Company
is advancing the development of applications so that thisproduct can be used as a high-performance additive in, forexample, inks, cosmetics, ceramics and batteries.

DKS REPORT 201937

Business Foundations
Important Issue

3

Human Resource Management
Securing Superior Human Resources, Ensuring Diversity
Human Resource Philosophy
Respect for Humanity
Our fundamental human resource philosophy is rooted in
the idea that our people are our assets and must be
nurtured and treasured.
Our basic understanding is that the growth of ourpeople will support the growth of the Company. The
employees are supposed to actively play their roles in each
workplace; learn, grow and exhibit their capabilities; andtry to fulfill themselves. This way, we believe that they
become the power of prosperity of the Company and thesource to make it eternal.
The Company also supports the maintaining andimproving of employee health, which form a cornerstoneof individual employee self-fulfillment.

Human Resource Development Policies
1. Development of Professional Workers
We aim to train professional human resources who havehigh market value and can work on their own initiative.
(1) People possessing advanced, specialized skills(2) People who recognize and achieve their roles and goals(3) People who raise and solve issues themselves(4) People who demonstrate leadership in the workplace
2. Development of Autonomous Personnel
Switch to human resources able to work on their own
initiative through their own motivation

Respect for Human Rights and Diversity▶Efforts to Prevent Harassment

We are trying to prevent harassment through, for example,
educational programs in hierarchical training courses. Several
persons are selected as contacts, even from outside the
Personnel Department, so that anyone can easily find someone
to talk to and get advice from, and in addition, whistleblower
portals inside and outside the Company are in place.

▶Work-Style Reforms

Work-Life Balance
Since the Company’s Chairman and CEO, SAKAMOTO Takashi,
is concurrently serving as the chairperson of the Kyoto Labor
Standards Association, we are taking the initiative to support
activities that balance work and family life. For FY2018, theactual ratio of annual paid leave taken was 68.5%. From FY2019,
we will introduce the taking of annual leave in hourly
increments and, in the years to come, promote initiatives
toward achieving 70%, which is the Cabinet Office’s target.
There has been an increase in men taking childcare leave inrecent years. In the fiscal year ended March 31, 2019, 57% of
those using childcare leave were men.
● Introduction of Telecommuting System
We are introducing a telecommuting system from the current
fiscal year. We are reforming the human resource system toimprove work productivity and realize diverse work styles.
●▶Promotion of Employee Participation and Advancement
Having set up an Employee Participation and Advancement

Promotion Committee chaired by a senior management
member, we are aiming for a human resource group capableof successfully contributing to improvements in Company
performance. We are creating environments in which we canmaximize the abilities of diverse employees, including
women, seniors, people with disabilities and members of theLGBT community, and enable them to take an active part in
our Company.
● Promotion of Women’s Participation and Advancement
In addition to environments that facilitate women in working
for many years, we will maintain work environments thatenable women to develop their careers and implement
measures aimed at having 10.0% or more of managerial
positions occupied by women. As of the end of April 2019, theratio had risen to 8.9% compared with 6.8% as of the end of
April 2018. We also have created environments in which
women can play active roles in all workplaces, and women
have been active at manufacturing sites since FY2019.
● Retiree Reemployment System
In reemploying all applicants as“senior challenge staff,”weconduct monozukuri (manufacturing) by handing down thetechniques and skills that make the best use of theexperience they have accumulated over many years.
● Employment of People with Disabilities
We appreciate the aptitudes of people with disabilities andare actively working to create opportunities for them todemonstrate their abilities.

Human Resource Development/Education▶Global Human Resource Development

We are undertaking a variety of projects based on the DKSGroup’
s globalization strategy.
The efforts on which we are focusing involve conducting
three types of training: global mind-set training to makeyoung employees more overseas-aware from an early stage;cross-cultural understanding and skills training sessions for
mid-level employees; and in-house, selective training
involving visits to subsidiaries geared toward employees withhigh global awareness.
In addition, we have opened an in-house language
school and are actively recruiting non-Japanese nationals.
We will continue to accelerate the globalization of the
DKS Group.

38

DKS REPORT 2019

▶Education Courses

Education programs for our employees are supported by threepillars: in-house on-the-job training, external education to learn
skills and abilities, and assisting self-development. In recent
years, we have focused on joint training with other companies tonurture next-generation leaders and enhancing our brother/sister
program (reinforcement of a backup support system for new
employees) aimed at having a new employee leaving rate of 0%
three years after joining the Company. The Company is focusing its
attention on human resource
training in other areas as well,including by bolstering its supportof employees aiming to improvetheir own abilities, be it throughcorrespondence learning, theacquisition of qualifications orother forms of self-development. General view of a training session

Efforts in Healthy Company Management
About the DKS GroupWe aim to bolster the Company’s productivity, and thus its corporate value, by maintaining and improving the health of
our employees, which is a key RETURN component in the REACT matrix of action guidelines targeting Sustainable
Development Goal No. 3: Ensure healthy lives and promote well-being for all at all ages.
Healthy Company Declaration Regarding its employees as Company assets, DKS will strive to maintain and improve their health. Chairman & CEO, SAKAMOTO Takashi

Concept of Healthy Company Management
Healthy Company Declaration
Prevent disease and mental health issues by health management

Regular health checkups, special health checkups, specific health guidance
Mental care: internal and external EAP*, stress checks
In-house education: e-learning, group training, etc.
● Improve conditions of company premises and housing: amenity
facilities, measures to prevent passive smoking, etc.
● Look into absenteeism and presenteeism● Holding of events involving exercise●●●

The management understands health checkup data andActionmental health survey results
In-house sharing of health checkup results data
● Internal and external release of an assessment by external institutions● Explore routes for improvement based on an assessment by external institutions● Explore next health management targets based on health checkup results andsecondary data
●
●

Do
Check

Inspect workplaces, monitor working environments
Interview after health checkup and summarize results● Follow-up after stress checks● Third-party assessment by external institutions: DBJ
Health Management rating, White 500 (Certified Healthand Productivity Management Organizations)●●*EAP: Employee Assistance Program

Efforts in Healthy Company Management
For the second successive year, DKS was recognized as a White
500 Organization, receiving certification from the Ministry of
Economy, Trade and Industry (METI) as an outstanding entity
engaging in health and productivity management. Four of our
subsidiaries also received certification.
We also acquired the highest health management rating fromthe Development Bank of Japan Inc. (DBJ) for the second
consecutive year.
The purpose of acquiring the ratings is to assess Company
efforts through the eyes of external organizations, which could leadto further improvements in corporate value in the years to come.

Internal Communications▶Holding of“Festa”

We hold festa, which are festivals for each region, to promote
the good health of employees and their families and broad
exchanges. Elaborately planned events, such as amochi-pounding festival, a bowling tournament, a tunafilleting show and chartering a sightseeing boat on the Uji
River are useful in facilitating active inter-departmental andintergenerational communications.

▶Health Management Initiatives

The Company’s health checkup participation rate, the re-checkup
participation rate, the health guidance implementation rate and the stresscheck rate all stand at 100%. We support daily exercise with morning
calisthenics and the holding of walking events and provide nutritious andwell-balanced meals at canteens. We encourage measures to prevent
passive smoking, educate all employees on how best to prevent
lifestyle-related diseases, provide fully Company-subsidized influenza
vaccinations while subsidizing the cost of breast cancer screening, dental
screening and treatments to quit smoking. The Company has establishedinternal and external contact centers for mental and physical issues,
extending acceptance to family members such as parents. We provide
mental health education for all our employees and for employees who
work long hours, and we have established interviews with occupational
physicians that exceed the statutory requirements. Health measures for
employees are planned, implemented, and investigated at meetings
attended by management, as we believe the enhanced health of ouremployees bolsters the overall strength of the Company.

Business Foundations

Plan

Five Operating Segments●▶Information Transmission inside the Company

Publishing the in-housenewsletter“DKSCOM”every
other month, our Public &Investor Relations
Department works to instill
the management policies andvisions, as well as to foster
communications within the
Company. Feedback is also
taken into consideration inplanning the newsletters sothat information can bedisseminated and clearly
understood by all employees
in a timely fashion.

Data

Formulate measures to prevent lifestyle-relateddiseases● Formulate health management targets● Develop internal company communication● Improve the workplace environment

Work and live in a safe and healthy environment

DKS REPORT 201939

Business Foundations
Important Issue

4

Consideration for the Environment
Basic Philosophy and Basic Policies for Environmental and Safety Practices
Basic Philosophy

Basic Policies

Our basic philosophy is to contribute to society bymaking a company that thrives together with local
communities and employees by supplying productsthat satisfy customers. Based on this, ourenvironmental and safety philosophy is to contributeto the sustainable development and realization of
happy societies by considering the human health,safety and environmental preservation throughout
the life cycle of each product from development to
scrapping.

(1) Throughout the life cycle of each product fromdevelopment to scrapping, we evaluate and minimize theimpact of business activities on the environment and makethe best efforts to preserve the environment.
(2) We aim at accident- and disaster-free operations to secure
the safety of both local communities and employees.
(3) We confirm the safety of raw materials, semi-finishedproducts and final products to prevent health-relateddisorders of all relevant people including, but not limited to,employees, logistic/transportation workers, customers andgeneral consumers.
(4) We strive to continuously improve the safety andenvironment not only by strictly complying with relevant
legislation and regulations but also by self-management.

Responsible Care (RC) Activity Promotion System
We set up the safety and environment philosophy, basic and action
policies, based on which we promote our corporate activities
related to quality, safety and the environment. Such issues are
discussed and decided by the RC Promotion Conference, which is
the top decision-making body and is chaired by the president.
Moreover, we regularly hold environmental preservation
meetings, safety and health meetings and quality

assurance/product liability meetings chaired by the quality, safety
and environment personnel and joined by the production branch
general managers and relevant department managers. In thesemeetings, corporate targets, action plans and results are
discussed to promote the RC activities. Under each of thesemeetings is a committee to make, implement and evaluate
specific action plans for continuous improvements.

● RC Promotion System Diagram

Management
Committee

Environment
Preservation Meeting

EMS1
Committee

RC(Environment, Safety andQuality Assurance)
Promotion Conference

Safety and
Health Meeting

SHMS2
Committee

Quality Assurance/
Product Liability Meeting

QMS3
Committee

Environment Preservation
Committee
Safety and Health Committee
Kyoto Central Branch
Production Branches● Tokyo Headquarters● Offices●●

Quality Assurance (PL)Committee●

Production Branches

1. EMS: Environmental Management System
2. SHMS: Safety and Health Management System
3. QMS: Quality Management System

Management Systems
The Company promotes the comprehensive safety
management of chemical substances based on the RC Code,which consists of the seven management systems stipulated
based on Japan Chemical Industry Association (JCIA) policies:
environmental conservation, safety and disaster prevention,

occupational safety and health, logistics safety, chemical
product/product safety, dialogue with society and management
system. In addition, the Company is working on improvements
in environmental conservation and quality, using
environmental ISO and quality ISO standards as tools.

Observation of Environmental Laws and Regulations
Environmental risk management is an important measure tominimize environmental risks and/or consequent damages
caused by risks. We comply with environmental-related legislation
and regulations and agreements with local municipal
governments, based on the Declaration of Action by Board
Members and Employees and there was no violation of laws and40

DKS REPORT 2019

regulations. All our production sites in Japan are regularly
checked for environmental compliance in accordance with the ISO
14001–based environmental management system. Up-to-date
information on legislation is checked and understood on a timely
basis and disseminated internally to ensure compliance. Recently,
education programs using an e-learning system have started.

About the DKS Group

Environment-Related Complaints
The Company received no complaints related to the environment in the fiscal year ended March 31, 2019. We will continue to strive toensure safety in our operations while working to earn the understanding of those living nearby our plants and other company locations.

Environment Accounting
In the fiscal year ended March 31, 2019, the DKS Group’s investment in environmental-related systems was spent mainly in the fieldof pollution prevention. Resource circulation costs accounted for a relatively strong ratio of costs tied to preservation of theenvironment. The economic benefits therein include profits on the actual sales of valuable resources and the amount of cost savings
and are not based on estimated economic benefits.
● Investments and Costs of Environmental Protection Activities

Main activities

Costs within
the plant premises
Upstream/downstream cost
Administrative cost
R&D cost
Social activity cost

Investment (Millions of yen) Costs (Millions of yen)

Air/water/other pollution prevention
Global environment preservation, energy saving
Resource recycling, resource saving, waste treatment/disposal
Lowering environmental impact in containers/packaging
ISO acquisition/completing surveillance audits, greening branch premises
Environmentally responsive R&D
Providing support grants for environmental protection toenvironmental preservation groups or local communities

Environmental damage cost
Total

16.2
55.3
4.4
0.0
1.0
0.0

212.9
61.4
420.9
0.2
32.0
594.9

0.8

1.8

0.0
77.7

0.0
1,324.1

Five Operating Segments

Category● Economic Effects Generated by Environmental Protection Measures

Category
Profit on sale of valuable resources
Amount of cost savings through energy saving
Amount of cost savings through resource saving
Total

Main activities

Cost (Millions of yen)

Sale of metal scrap, waste oil and waste alkali, etc.
Cost savings in electric power and fuels
Cost savings through reduction of water use/waste

8.2
0.0
1.9
10.1

● FY2018 Activity Targets and Results, FY2019 Activity Targets

Target parameter Management items FY2018 activity targets
Promotion of energy Energy consumption 1% improvementsavingper unit
compared with FY2017
29.5% reduction compared
Reduction of GHG* CO 1
with FY2005 on average from2emissions
FY2016 to FY2019
Waste generation 1% improvement in the
Reduction of
fiscal year rate of
per unit
industrial waste
nonconsolidated DKS3
Final disposal rate2 3.4% or less in FY2019

DKS REPORT 2019

Data

FY2018 results
Evaluation Refer to page FY2019 activity targets
1.6% improvement
1% improvement compared
P. 42
C
compared with FY2017
with FY2018
29.5% reduction compared26.1% reduction
with FY2005 on average fromin FY2017 compared
P. 42
C
FY2016 to FY2019
with FY2005
1% fiscal year rate
7.1% increaseC
improvement incompared with FY2017
P. 43
non-consolidated DKSC
4.8％
3.4% or less in FY2019
9.0% decrease compared
SOx emissions
Awith FY2017
Reduced emissions of
Reduced emissions of
50.0%
decreasecomparedA
NOx emissions
environmental pollutants with FY2017
environmental pollutants
Reduction ofin the air
in the air
environmental
57.3% decrease comparedA
P. 43
impact substance Dust emissions
with FY2017
emissions
5.6% decrease comparedA
Water discharge Reduced emissions of
Reduced emissions ofwith FY2017
environmental pollutants
environmental pollutants
3.9%
increasecomparedin waterin waterC
COD emissions
with FY2017
Proper management
PRTR Law–designated Reduced emissions of PRTR 26.1% increase compared
Reduced emissions of PRTRCP. 42
of chemical substances substances emissions Law–designated substances with FY2017
Law–designated substances
Promoting the green
27.9%, decreased
Improvement of the green
Promotion of green procurement
procurement ratio of
8.6 percentage points
procurement ratio of officeーCoffice supplies
compared with FY2017
supplies
No occupational accidents
No occupational accidentsC
Two cases occurred
Posted (days away from work)(days away from work)
Elimination of disasters/accidents
on ourEliminating severe accidents
website Elimination of severe accidents
Bassociated with production facilities No accidents occurred
involving production facilities
Promotion of an environmental
Promotion of an environmental
Environmental management system management system
MaintainedB
P. 40
management system
1. Derived from energy in the production and administrative sectors
2. The ratio of the final disposal amount to the generated waste amount
3. We have decided not to set numerical targets for the Group until the method of recycling sludge newly generated from the wastewater
treatment plant is established at a subsidiary company.
*GHG: Greenhouse gas

Business Foundations

Evaluation A: Significant result B: Result in line with the target C: Target remains unachieved

41

Business Foundations
Important Issue

4

Consideration for the Environment
Global Warming Prevention (Energy Saving)recorded 52,900 tons of carbon dioxide emissions in the fiscal year
ended March 31, 2019, a 1.9% decrease compared with the previous
fiscal year, but a 26.1% reduction compared with the fiscal year ended
March 31, 2006, meaning that the third year of the five-year target
was not reached. We will continue to work to improve the efficiency of
our energy use toward the achievement of our five-year targets.

In the fiscal year ended March 31, 2019, energy consumption in the
DKS Group amounted to 25,900 KL, a 1.0% decrease compared withthe previous fiscal year, however, the energy consumption per unit
worsened 1.6%, which means that we were not able to achieve ourfiscal year targets. This is mainly due to only the slight decrease inenergy consumption while the production volume decreased. We● Targets and Performance in FY2018

Evaluation A: Significant result B: Result in line with the target C: Target remains unachieved

Target parameter Management items

Activity targets

Performance in FY2018

Evaluation

Promotion of energy
savingEnergy consumption
1% improvement compared with FY2017 1.6% increase compared with FY2017
per unit

C

Reduction of GHG*
emissionsCO2

29.5% reduction compared with FY2005
26.1% reduction compared with FY2005
on average from FY2016 to FY2019

C*GHG: Greenhouse gas● Changes in Energy Consumption

30.4

20

132

122

15
10

26.2

25.2

24.2

25

(Yokkaichi, Ohgata, Shiga, administrative sectors, domestic subsidiaries,
derived from non-energy)(1,000 t)
80
70
60
50
40
30
20
10
0

200

25.9

131

● Changes in CO2 Emissions

175

134

150
125

100

100

5

75

0

71.3
50.9

52.5

53.9

52.9

CO2

Energy Consumption(1,000 KL)
30

Index of Energy Consumption per Unit

(Yokkaichi, Ohgata, Shiga, administrative sectors, domestic subsidiaries)
Index of energy consumption per unit

50
2005 201520162018 (FY)2017
Notes: 1. Index of energy consumption per unit [2005 = 100]
2. Domestic subsidiaries include Yokkaichi Chemical,
Kyoto Elex and Dai-ichi Ceramo.
3. Administrative sections include Elexcel Corporation (currently Elexcel R&D
Department) acquired through an absorption merger in 2018.
4. The calculation method for energy consumption was revised in FY2018.
Data have been retroactively adjusted from FY2017.

2005
2015
2016
2018 (FY)2017
Note: Carbon dioxide emissions in administrative sectors include fuels
for Company cars.

Proper Management of Chemical Substances
The DKS Group had a total of 65 notification substances under the PRTR
Law in FY2018. The total amount of emissions was 61.0 tons, which
resulted in a 12.6-ton (26.1%) increase compared with the previous year.
The breakdown was 60.4 tons to air, 0.59 tons to water and none to land.
In FY2018, the amount of waste transfer recorded was 207.4 tons, a61.6-ton (22.9%) reduction compared with the previous fiscal year due tothe use of recycled solvents and changes in the variety configuration. We
will advance improvements in production processes and the introductionof recovery equipment, while continuing to make efforts to reduce theemissions/discharge of PRTR substances into the environment.

Evaluation A: Significant result B: Result in line with the target C: Target remains unachieved● Targets and Performance in FY2018

Target parameter

Management items

Activity targets

Performance in FY2018

Evaluation

Proper managementof chemical substances

PRTR Law–designatedsubstances

Emission reduction of PRTR
Law-designated substances

26.1% increase comparedwith FY2017C● Changes in Emissions of PRTR Law-Designated Substances

(t)
80

76.4

60

63.9
47.6

40
20

0.49

0.54

0.55

60.4

6
4

0.59

2

0
2014
2015
2016
2017
2018 (FY)
Notes: 1. The numerical values show the total amount for DKS and Yokkaichi Chemical.
2. We have revised the method for calculating atmospheric emissions volume andhave retroactively revised PRTR notification substance figures through FY2015
according to this method.
3. For the emission amount of notification substances under the PRTR Law in
FY2018 (among all notification coverage substances, those of which the emission
or transfer amount was 0.01 tons or more), please visit our website.
https://www.dks-web.co.jp/english/ir/report/index.html

42

0

0.38

47.8

(t)
8

Emissions to Water

Emissions to Air(DKS, Yokkaichi Chemical)
Emissions to air ■■ Emissions to water ■■DKS REPORT 2019

Reducing Emissions of Environmental Impact Substances
Compared with the previous fiscal year, the DKS Group’s air-pollutant

emissions in FY2018 showed a 9.0%, 50.0% and 57.3% decrease in
SOx, NOx and dust emissions, respectively.
We will move ahead with facility improvements and studies ofoperational methods with the aim of making further energy-efficiency
enhancements.

Emission/discharge reduction ofenvironmental pollutants in the air
Emission/discharge reduction ofenvironmental pollutants in water● Changes in SOx, NOx and Dust Emissions

0.9
26.8

1.4

1.3
1.3
0.8
0.8
0.7
20.7
17.6
16.7

0.7 0.6
10.3

(t)
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0

SOx/Dust Emissions

NOx Emissions

2.1

Evaluation
A
A
A
A
C

● Changes in Water Discharge and COD Emission Amounts(Yokkaichi, Ohgata, Shiga)
SOx emissions ■■ NOx emissions ■■ Dust emissions ■■

(t)
140
120
100
80
60
40
20
0

Performance in FY2018
9.0% decrease compared with FY2017
50.0% decrease compared with FY2017
57.3% decrease compared with FY2017
5.6% decrease compared with FY2017
3.9% increase compared with FY2017(Yokkaichi, Ohgata, Shiga, Yokkaichi Chemical)
Water discharge ■■ COD emissions ■■(1,000 m3)
5,000
4,000

3,541

3,000
1,000
0

2014 2015 2016 2017
2018
(FY)
Note: Yokkaichi Chemical possesses no facilities that generate SOx,
NOx or dust.

18.9

15.3

2,000

(t)
35
30
27.3 25
20
15
10
5
0
2018
(FY)

4,424
3,877 3,908 25.9
26.3 4,177

2014

2015

2016

2017

COD Emissions

Reduction ofenvironmental
impact substanceemissions

Activity targets

Five Operating Segments

Evaluation A: Significant result B: Result in line with the target C: Target remains unachieved

Target parameter Management items
SOx emissions
NOx emissions
Dust emissions
Water discharge
COD emissions

In FY2018, the DKS Group recorded 4,177,000 cubic meters in the amount ofwater discharge, a 5.6% decrease compared with the previous year, and 27.3
tons of COD emissions, a year-on-year increase of 3.9%. We will continue tomake efforts to reduce the water discharge and COD emission amounts by, forexample, conducting reviews of our production processes and optimizing theoperation methods at our effluent treatment facilities.

Water Discharge● Targets and Performance in FY2018

Water Pollution Prevention

About the DKS GroupAir Pollution Prevention

Waste Reduction

Evaluation A: Significant result B: Result in line with the target C: Target remains unachieved
Performance in FY2018

Evaluation

1% improvement in the fiscal year rateof non-consolidated DKS

7.1% increase compared with FY2017

C

Final disposal rate

3.4% or less in FY2019

4.8%

C

● Changes in Generated Waste Amount, External Recycling● Changes in Final Disposal Amount and Final Disposal Rate

Amount and External Recycling Rate(t)
25,00020,00015,00010,000

95.4

95.7

95.7

95.7

96.2

96.9

(%)
100

96.7
90.5
19,591 80

91.6 91.8 21,658
17,364 20,779
15,904 19,063
13,876 13,191
13,276 12,621

60
40

5,000

20

0

0

External Recycling Rate

Generated Waste Amount/
External Recycling Amount(Yokkaichi, Ohgata, Shiga, Kyoto, domestic subsidiaries)
Generated waste amount ■■ External recycling amount ■■DKS
DKS Group)
External recycling rate (2014 2015 2016 2017
2018
(FY)
Notes: 1. Domestic subsidiaries include Yokkaichi Chemical, Kyoto Elexand Dai-ichi Ceramo.
2. Kyoto Branch includes Elexcel Corporation (currently Elexcel R&D
Department) acquired through an absorption merger in 2018.

(Yokkaichi, Ohgata, Shiga, Kyoto, Yokkaichi Chemical)

Final disposal amount ■■ Final disposal rate

(t)
1,200

5.9
1,145
1,023
5.5

1,000
800
600
400
200
0

1,044
4.8

(%)
6.0
5.0
4.0
3.0

1.2

1.4

171

180

2.0
1.0

Final Disposal Rate

Reduction of waste

Activity targets

Waste generation
per unit

Final Disposal Amount

Target parameter Management items

Data● Targets and Performance in FY2018

disposal amount was 1,044 tons, representing 101 tons year-on-year
decrease. One contributory factor was that part of the sludge generated
at the new facility was now recycled. For that reason, the final disposal
rate was 4.8%, an improvement (decrease) of 0.7 percentage pointcompared with the previous fiscal year. In the year ahead, we will moveahead with a review of our sludge recycling and work to reduce the final
disposal amount.

Business Foundations

The amount of waste generated by the DKS Group in FY2018 amounted
to 21,658 tons, an increase of 878 tons compared with the previous
fiscal year. The waste generation per unit result was 7.1% worse (anincrease) than the previous fiscal year, and thus we were unable toachieve our target of a 1% improvement (decrease) in the annual rate.
The recycling rate was 90.5%, which marked a 1.3-percentage-point
worsening (decrease) compared with the previous fiscal year. The final

0
2014 2015 2016 2017
2018
(FY)
Note: The ratio of the final disposal amount to the generated waste amount

DKS REPORT 201943

Business Foundations
Important Issue

5

Responsibility as a Global Company
Corporate Governance
Basic Concept
We are operating the business based on our Company
Credo“contributing to the nation and society throughindustry”along with our three Company Mottoes̶“Quality“Cost Reduction”and“R&D Efforts,”which were theFirst,”
founders’spirit. To aim for the establishment of a management base that can gain and maintain the trust of society,as well as to conduct transparent and fair corporate
activities that are rooted in corporate social responsibility(CSR), we pursue higher governance as management policy
and position it as one of our most important tasks. As a
specific measure to achieve this, the DKS Board of

Directors passed a resolution establishing a basic policy forour internal control system in May 2006.
Through these practices, we will strengthen ourmanagement base so that we can earn high trust from all
stakeholders, including our customers and society. We also
believe it is important to conduct corporate activities withtransparency and fairness rooted in CSR.
For an overview of corporate governance at DKS,
please refer to page 27 and the following pages in our
Securities Report for FY2018 at the following URL(Japanese only):▶

https://www.dks-web.co.jp/ir/img/annual_security_report_
h31_3.pdf

Status of Our Response to the CG CodeWe hereby provide the reasons for not implementing the following
10 principles as part of our compliance with the Corporate
Governance Code.
▶Corporate Governance Code Principles for which DKS is Not

in Compliance and the Reasons for Non-Compliance[Supplementary Principle 1-2-4]
Given that the shareholding ratio for overseas investors at DKS
is only about 12%, we have determined that it is not necessary
to provide an English translation of the Notice of Convocation
at this time. To make it easier for overseas investors to
exercise their voting rights, we will consider providing an
English translation when the shareholding ratio for overseas
investors exceeds 20%.
[Principle 1-4. Cross-Shareholdings]
DKS maintains cross-shareholdings for the purpose ofstrengthening its relationships with its business partners. Our
holdings are verified based on risks and returns from a
medium- to long-term perspective and continually reviewed
based on suitability of ownership, considering the purpose ofownership, the rationality of investment and the investment
amount. Voting rights on cross-shareholdings are exercised inconsideration of whether the given proposal will contribute toenhanced medium- to long-term corporate and shareholder
value for the DKS Group and the investee company.
[Principle 2-6. Roles of Corporate Pension Funds as Asset
Owners]
DKS has introduced a“defined benefit-type corporate pensionplan”and a“defined contribution-type corporate pension
plan.”We have established“pension rules”for the“defined
benefit-type corporate pension plan”and in accordance withour basic policy have defined an optimal asset composition
ratio and appointed a management agency we believe best
suited for stable pension management over the medium tolong term. With the goal of ensuring proper management, weregularly request from this agency reports on operational
policies and the status of assets. We ensure that there is noconflict of interest between the beneficiary and the Company
by entrusting individual investment decisions and the exercise
of voting rights to the asset management agency.
The corporate pension plans are designed to ensure low
operating risk and appropriate management, with the latterachieved through regular communication with the specialized
asset management agency. We accordingly believe there islittle need for DKS to actively recruit and maintain humanresources specializing in pension asset management.
44

DKS REPORT 2019

[Supplementary Principle 4-1-3]
The succession planning for the CEO and other top executives
remains a most important matter for company continuity, and
it is important to carefully judge evident and potential
management ability. Succession planning is a matter solely forthe chief executive officer, who is familiar with the innerworkings of the Company. DKS plans to establish and operatea successor development committee with outside executives
as members, as we believe it is important to listen to theopinions of our outside directors in regard to the qualities andattributes of potential candidates.
[Supplementary Principle 4-10-1]
The three independent outside directors do not constitute amajority on the DKS Board of Directors. However, in addition tomonthly Board of Directors meetings, external executive
officers hold meetings every other month and one“freemeeting”is held for external directors and representative
directors each year. These meetings allow the sharing of
information regarding the state of the Company and current
management issues, as well as communication and coordination with management and cooperation with the auditors andaudit & supervisory board members. In addition, the independent outside directors provide advice and commentary on
important matters, including nominations and remuneration, atthe outside directors’meetings. We therefore believe it is notnecessary at this time to establish independent committees
such as a nomination committee or a remuneration committee.
[Principle 4-11. Preconditions for Board and Audit andSupervisory Board Effectiveness]
The Board of Directors is composed of company employees withknowledge and experience in a variety of fields, including sales,
production, research, purchasing, logistics, planning, accounting
and finance, and human resources and management, as well as
those with management experience overseas. Those fromoutside the company have a wealth of experience and specialized knowledge from working in life insurance companies, aswell as in manufacturing companies operating in domains
separate from those of DKS, and government agencies focusedon working conditions and occupational health and safety. We
believe diversity, including that relative to gender, still showsroom for improvement, though any person who is recognized ashaving the proper qualifications will be considered as a
candidate for the Board of Directors. On the whole, we believe
the Board of Directors and the Audit and Supervisory Board are
well-versed with the business and have achieved a level ofdiversity and effectiveness with functional financial checks.

About the DKS Groupassessment by the outside executives and full-time
auditors. In the previous fiscal year, the outside
executives and full-time auditors found the Board of
Directors' effectiveness to be at a generally appropriate
level, with the effectiveness of the Board of Directors asa whole deemed as sufficient. DKS does not disclose asummary of the analysis or evaluations results.

[Supplementary Principle 4-11-3]
Verification of the effectiveness of the Board of Directors
is conducted on an annual basis, with self-assessments
by all directors and auditors based on questions
prepared by the Secretary's Office of the Board of
Directors. The replies are collected by the Secretary's
Office, where they are then analyzed and given an

Executive Remuneration▶Director Remuneration

Director remuneration consists of 1) fixed remuneration,2) performance-linked remuneration to provide
incentives and 3) stock-linked compensation toaccentuate the sharing of value with shareholders.
However, remuneration for outside directors consists of1) fixed remuneration and 2) stock-linked compensation.
Fixed Remuneration
Fixed remuneration is set based on the scope ofoperations for which each director is responsible, as
well as his or her position, and is paid on a monthly
basis.
Performance-Linked Remuneration
Based on an annual performance evaluation of theCompany as a whole in the previous fiscal year, andperformance evaluations of the division of which eachdirector is in charge that are conducted twice a year,
performance-linked remuneration factors inconsolidated sales, recurring profit and operating cash
flow, with the allocation as a set position-based
percentage of the whole.
Stock-Linked Remuneration
Having introduced restricted stock-linked compensation
based on the scope of operations for which eachdirector is responsible in his or her position, we set
specific allocations for the monetary compensation thatprovides a bonus for the granting of shares withrestriction on transfer.

Five Operating Segments

Of the above, as determined by resolution at theOrdinary General Meeting of Shareholders held on June25, 2019, 1) fixed remuneration and 2)
performance-linked remuneration are set to a
maximum amount of ¥30 million per month (equating to¥360 million per annum, which does not include thewage salaries of individuals serving concurrently as
employees and executives). As determined by resolutionof the Ordinary General Meeting of Shareholders heldon June 27, 2017, 3) stock-linked compensation is set toa maximum of ¥100 million per annum (of which theportion for outside directors shall be ¥6 million or lessper year, and which does not include the wage salaries
of individuals serving concurrently as employees andexecutives). In addition, the total number of shares ofcommon stock that the Company will thus issue or
dispose of is to be up to a maximum of 100,000 shares
per annum.
Having been drafted by the representative directors,
all the above is paid upon the passing of a resolution by
the Board of Directors.
▶Audit & Supervisory Board Member Remuneration

Business Foundations

Audit & Supervisory Board member remunerationconsists of 1) fixed remuneration and 2) stock
remuneration based on audits conducted and the role
played in promoting shareholder interests.

● Executive Remuneration (Fiscal year ended March 2019)

Total remuneration(Millions of yen)

Directors(excluding outside directors)

Total by type of remuneration (Millions of yen)
Fixed

Performance-linked

Stock-linked

Number of
executives

277

180

71

24

11

Audit & supervisory board members(excluding outside audit &supervisory board members)

41

38

ー

3

3

Outside executives

30

27

ー

2

6
Data

Executive position● Significant Portion of Salary Paid to Executive Directors Who Concurrently Serve as Employees(Fiscal year ended March 2019)
Total (Millions of yen)

Number of executives

Details

58

7

Salary (including bonuses) as employees

DKS REPORT 201945

Business Foundations
Important Issue

5

Responsibility as a Global Company
Compliance
Basic Concept
Since the Compliance Control Committee was established in 2004, our Company has been continuously engaged in thebuilding and maintenance of our compliance system, as well as in activities to instill compliance practices in our
employees. Recognizing that compliance activities are indispensable for continuing as a sound company, we willfurther strengthen our activities in the years to come.

Corporate Philosophy
The corporate philosophy around which the Company forms
the basis of its actions is indicated in our Company credo,
Company mottoes and Code of Corporate Ethics. These arealso outlined in our Declaration of Action by Board Members
and Employees. We post these in-house so that all employees
can always act with them in mind, and we provide apocket-sized Corporate Philosophy Handbook to all Company
employees. The Company also conducts e-learning activities
explaining our philosophy, with tests given to confirm
understanding.

▶Declaration of Action by Board Members

and Employees

Regarding the six-item set of principles established as theCode of Corporate Ethics, we broke down the content as towhat kind of behavior is actually required, clearly state theguidelines for the actions of executives and employees(including seconded and contract employees, as well as
temporary employees) and declare that these guidelines will
be implemented as a code of conduct.

▶Code of Corporate Ethics

To establish corporate ethics that contribute to putting theCompany policies into practice, we established a six-item set ofprinciples as the Code of Corporate Ethics and adhere to theword and spirit of all laws and regulations, as well asinternational rules. We also respect the culture and customs ofeach country and region where we conduct our businessactivities and declare that we will act with social common sense.

Compliance in PracticeCode of Corporate Ethics▶Compliance Control Committee▶Compliance Awareness Survey

The Compliance Control Committee is charged withestablishing and maintaining the Company’s compliancesystem.
Since its establishment in 2004, the Compliance Control
Committee has been continuously engaged in building thecompliance system, implementing educational activities toentrench compliance practices in our employees andconducting surveys to ensure understanding of the compliancesystem.

We conduct a Compliance Awareness Survey for all employees
each December with the aim of accurately understanding theeffects from activities aimed at further instilling compliancepractices. Based on employee awareness of key issues, we
use the results to determine initiatives for next year.
The fiscal year ended March 31, 2019, was the 14th
consecutive year the Company has implemented theAwareness Survey.
Initially, internal awareness was rather low, and the
response rate for the survey was only about 76% for theCompany as a whole. However, improved penetration and theongoing activities contributed to a response rate of 99% for the
14th survey.
The survey contains the same fixed questions each time,
focuses on issues deemed important for that year andconfirms the results from that year’s Corporate Ethics Month.
《Sample Items in the Awareness Survey》▶Corporate Ethics Month

The Compliance Control Committee has designated Octoberevery year to be Corporate Ethics Month and conducts
activities during the month, including educational activities
and the dissemination of information, centered on a particulartheme. The theme for the fiscal year ended March 31, 2019,was employees confirming and following company rules.
Activities focused on the importance of conducting businesswith a full understanding of the rules, with the Committee
reviewing all established rules and regulations for deficiencies
and subsequent revisions.
▶Whistleblower Hotlines

DKS has established whistleblower hotlines where employees
can consult on and report possible violations to establishedlaws and regulations.
While the Company already had an internal hotline, DKS
in 2016 established an external hotline as well, with
instructions on use distributed internally, including throughthe Company intranet.
46

Corporate philosophy handbook

DKS REPORT 2019

● Highly transparent management has been achieved through theappropriate disclosure of information

100

No transparency ■Fair transparency ■Slight transparency ■Good transparency ■

80
60
40
20
0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018(year)

We intend to continue to raise awareness of compliance andstrengthen our activities aimed at ensuring that employees
comply with all laws and regulations.

Risk Management (Risks and Responses to Them)
About the DKS Group

Basic Concept
Diverse and becoming more complex, the corporate risks surrounding the Company could result in increased adverse
impacts on the Company itself, as well as on employees, shareholders, customers and local communities. We position
risk management as an important management issue and are taking steps to prevent potential risks and prevent the
spread of risks that have already manifested.

Risk Management
Major initiatives implemented in the fiscal year ended March
31, 2019, included the extraction of risks and implementation ofcountermeasures in each department, the implementation of
measures to prevent information leakages and notifications tooverseas travelers through groupware calling attention to theseleaks.
We believe it is important for employees to understand“crisis management”andconcepts such as“risk management,”“business continuity management”(focusing on responding tointerruptions in business) and to view the establishment ofactivities entrenching these concepts as vitally important.
With renewed recognition, we will promote further
management education, including e-learning, in the fiscal year
ending March 31, 2020.

Five Operating Segments

To address Group risk, we have established a Risk Management
Control Committee that meets on a regular basis and iscomposed of representatives of each department, with thedirector in charge serving as the chairperson.
With a focus on developing and standardizing the risk
management system, the Committee determines an action planand reviews results, identifying potential risks and consideringcountermeasures.
In Japan and overseas, the Company and its subsidiaries areworking to operate and maintain crisis management systems ona daily basis so that we can communicate risk crisis information
as soon as possible, ascertain the situation and take appropriate
measures. To deal with potential and/or evident risks, we havetaken several steps, including establishing and maintaining Risk
Management Procedures, Product Liability (PL) Prevention andManagement Procedures and Information Security Rules.

Business Continuity Plan (BCP) and Disaster Countermeasures● Business Continuity Plan (BCP) Outline▶Disaster Preparedness

Risk Management LevelⅠ Understanding risk possibilities under normal operation
Risk Management LevelⅡ Risks to be coped with within plants, branches, offices and subsidiaries
Risk Management Level Ⅲ Risks to be coped with within divisions (including subsidiaries)
Risk Management Level Ⅳ Risks to be coped with Companywide
Risk Management Level Ⅴ Unexpected risks

Disaster strikes
Operation Degree (supply of products, etc.)

In the event of a crisis, our Risk Management Manual
establishes management levels in line with the crisis, with theperson in charge in line with those risk management levels
tasked with risk management.
Noting the increased occurrence of abnormal weather
conditions, such as torrential rain, typhoons and abnormal
temperatures, our annual preparation for natural disasters
includes training on understanding and reporting the safety

Business Foundations

situations of employees and damage conditions, as well as ways
to improve disaster response and employee awareness. In thefiscal year ended March 31, 2019, the safety confirmation systemlinked to the Japan Meteorological Agency information was usedfour times to confirm the safety of each department using
companywide PCs and mobile phones. We will continue training
in the fiscal year ending March 31, 2020, to make sure all
employees are registered in the safety confirmation system andthrough safety confirmation training we will reaffirm thereporting procedure via the responsible parties.

BeforeTo continue businessabove the lowest
permissible level

After (initial responses and BC response)

To recover the degreeof operation within
the permissible time100％

RecoveryObjectives
Lowest permissible level
Objectives Lowest permissible level

Present anticipated recovery curve
Recovery curve after implementation of BCP

Time

Data

BCP is an abbreviation for Business Continuity Plan, whichallows a company to maintain critical operations when it isaffected by an unforeseen natural disaster such as anearthquake. Even if business activities are unavoidablyinterrupted, the BCP focuses on restarting important functions
within the recovery time objective and minimizing the risks
involved in interrupted operations.
We have created a BCP for a large-scale earthquake andthe outbreak of a highly virulent H1N1-type influenza. We also
have created a BCP for logistics operations in the event of anearthquake or torrential rain. We are regularly reviewing andupdating our BCPs.

Source: Cabinet Office, Business Continuity Guidelines, Third Edition

Information Security
Through the optimization of infrastructure and the ensuring of
security, we provide high-quality services protecting against
disasters and cyberattacks, while simultaneously promoting
robust and sustainable industrialization and the expansion oftechnological innovation.
Within the Company, we are creating a system ensuring

information security by established information security
policies, countermeasure standards and implementation
procedures. Recognizing the importance of the internal control
system, the Internal Audit Department conducts internal
audits while independent auditors conduct outside audits.
DKS REPORT 201947

Business Foundations

Management (as of June 25, 2019)
Board of Directors

SAKAMOTO Takashi

Representative Senior Managing Director
Executive General Manager in charge ofBusiness Headquarters■ Number of shares held: 29,242 shares■ Career summary■ Number of shares held: 11,361 shares■ Career summary

April 1970
February 1991
May 1994
December 1999
June 2001
June 2001
April 2004
June
June
June
June
June

2004
2007
2011
2013
2015

Joined The Fuji Bank, Limited (current Mizuho Bank, Ltd.)Manager of Madrid Branch of Fuji BankManager of Nihonbashi Branch of Fuji BankManaging Director of Fuji Asset Management Co., Ltd.
Joined DKS Co. Ltd.
Director
Executive General Manager in charge of Corporate
Planning Headquarters
Managing Director
Senior Managing Director
Representative Vice President
Chairman and Executive Director (current)
Concurrently President (current)

1982 Joined DKS Co. Ltd.
2004 General Manager of Polyurethane & Construction Materials
East Sales Department, East Sales Headquarters
2008 General Manager of Plastic Materials Sales
Department, Plastic Materials Business Division
January 2009 General Manager of Procurement Department,
Procurement & Logistics Headquarters
April 2009 Executive General Manager in charge of Procurement& Logistics Headquarters
June 2011 Director and Executive General Manager in charge of
Personnel & General Affairs Headquarters
January 2012 Concurrently President of Osaka Branch
April 2013 Executive General Manager in charge of Corporate Planning
Headquarters and Personnel & General Affairs Headquarters
April 2014 Managing Director
April 2017 Representative Senior Managing Director (current)
Executive General Manager in charge of Business Headquarters (current)
April

ONISHI Hideaki■ Number of shares held: 13,227 shares■ Career summary■ Number of shares held: 11,025 shares■ Career summary

KITADA Akira

OKAMOTO Osami

April 1975 Joined DKS Co. Ltd.
October 2007 General Manager of Financial Division andAssistant to Auditor
May 2008 General Manager of Accounting Department andAssistant to Auditor
June 2008 Executive General Manager in charge of Financial
Headquarters (current)
June 2009 Director
June 2016 Managing Director (current)
May 2019 Concurrently General Manager of Financial Department

Director
Executive General Manager in charge of
Personnel & General Affairs Headquarters
President of Osaka Branch■ Number of shares held: 5,044 shares■ Career summary

April
April

1989 Joined DKS Co. Ltd.
2009 General Manager of Functional Chemicals R&D
Department, Functional Chemicals Business Division
October 2010 General Manager of Planning Office, Functional
Chemicals Business Division
April 2013 Executive General Manager of Functional Chemicals
Business Division, Business Headquarters
June 2015 Director (current)
April 2016 Executive General Manager in charge of Production
Control Headquarters and in charge of Environment,
Safety & Quality Assurance Department
April 2018 Executive General Manager in charge of Personnel & General Affairs
Headquarters (current) and President of Osaka Branch (current)

YAMAJI Naoki

Director
Executive General Manager in charge of Corporate Planning Headquarters
Concurrently General Manager of COO Office
Concurrently General Manager of Formulation Development Promotion Office■ Number of shares held: 3,482 shares■ Career summary

April
April

1991 Joined DKS Co. Ltd.
2013 General Manager in charge of Planning Department,
Yokkaichi Reorganization Division, Production Control
Headquarters
April 2014 General Manager of COO Office
April 2015 Executive General Manager of Plastic Materials
Business Division, Business Headquarters
April 2016 Concurrently in charge of Tokyo Headquarters
April 2017 Executive General Manager in charge of Corporate
Planning Headquarters (current) and COO Office
June 2017 Director (current) and in charge of Personnel &General Affairs Headquarters
April 2018 In charge of Production Control Headquarters
December 2018 Concurrently General Manager of COO Office (current)
April 2019 Concurrently General Manager of Formulation
Development Promotion Office (current)Managing Director
Executive General Manager in charge of
R&D Headquarters
April
April

1982 Joined DKS Co. Ltd.
2001 General Manager of Plastic Materials R&D
Department, Plastic Materials Business Division
October 2005 General Manager of Synthesis R&D Supervision
Department, Technological Development Headquarters
March 2006 General Manager of Plastic Additive Materials R&D
Department, Technological Development Headquarters
April 2008 Deputy General Manager of Plastic Materials R&D
Department, Plastic Materials Business Division
April 2009 General Manager of Plastic Materials Laboratory,
Plastic Materials Business Division
June 2011 Executive General Manager in charge of R&D Headquarters (current)
June 2014 Director
April 2017 Managing Director (current)

Director
Executive General Manager of Plastic Materials Business Division,
Business Headquarters and in charge of Tokyo Headquarters■ Number of shares held: 6,188 shares■ Career summary

April
April

1989 Joined DKS Co. Ltd.
2006 General Manager of Sales Department, Plastic Additive
Materials Business Division
General Manager of East Sales Department, Surfactants Business Division
General Manager of Planning Office, Functional Chemicals Business Division
Director of Yokkaichi Chemical Co., Ltd.
General Manager of Yokkaichi Reorganization
Department, Production Control Headquarters
April 2014 General Manager in charge of Management Planning
Office, Corporate Planning Headquarters
April 2016 Deputy Executive General Manager in charge of Corporate
Planning Headquarters
April 2017 Executive General Manager of Plastic Materials Business
Division, Business Headquarters (current)
Concurrently in charge of Tokyo Headquarters (current)
June 2017 Director (current)
December 2018 Concurrently General Manager of Plastic Materials Sales Department
May 2007
April 2008
October 2010
April 2013

KAWAMURA Ichiji

Director
Executive General Manager in charge of
Production Control Headquarters■ Number of shares held: 1,589 shares■ Career summary

April 1985
August 1995
November 2001
April 2002
May 2004
July
April
July

2008
2011
2013

April
April

2015
2016

April

2017

April

2018

June

2018

Joined The Fuji Bank, Limited (current Mizuho Bank, Ltd.)
Senior Assistant to Director of London Branch
General Manager of Yokohama Branch
Assistant Branch Manager, Yokohama-chuo Branch of Mizuho Bank
Assistant Branch Manager, Seoul Branch of Mizuho
Corporate Bank, Ltd.
Deputy General Manager of Sales Department 6
General Manager, International Corporate Sales Department
General Manager, International Corporate Sales
Department of Mizuho Bank
Temporary transfer to DKS Co. Ltd.
Joined DKS Co. Ltd.
Deputy Executive General Manager in charge of
Personnel & General Affairs Headquarters
Executive General Manager in charge of Personnel &General Affairs Headquarters
Executive General Manager in charge of Production
Control Headquarters (current)
Director (current)

MISAWA Hideto

IWASAKO Koichi■ Number of shares held: 1,468 shares■ Career summary■ Number of shares held: 3,853 shares■ Career summary

Director
Executive General Manager of Domestic
Subsidiaries Division (Business Headquarters)
April1981 Joined Matsushita Electric Works, Ltd.
(current Panasonic Electric Works Co., Ltd.)
December 2001 General Manager of Product Development Department,
Electronic Device Materials Business Division
November 2002 General Manager of Market Development Department,
Electronic Device Materials Business Division
March 2004 General Manager of Circuit Materials Development Department,
Electronic R&D Center, Electronic Materials Headquarters
April 2007 General Manager of Functional Materials Business Division
April 2008 Director of Electronic R&D Center
October 2015 Director of New Business Development Center
October 2017 Joined DKS Co. Ltd. General Manager of COO Office
April 2018 Advisor and Executive General Manager in charge of Domestic
Subsidiaries Division, Business Headquarters (current)
June 2018 Director (current)

DKS REPORT 2019

April
April

URAYAMA Isaｍu

Managing Director
Executive General Manager in charge ofFinancial Headquarters

48

AKASE Yoshinobu

Chairman CEO

Director
Business Headquarters
Representative Director and President of Yokkaichi Chemical Company Limited
April 1987 Joined DKS Co. Ltd.
October 2006 General Manager of Business Planning Office, Corporate Planning Headquarters
June 2007 General Manager of Business Planning Office, Yokkaichi
Chemical Company Limited
April 2008 General Manager Research Management of the
Research Management Center, R&D Headquarters
April 2013 General Manager of Planning Office, Plastic Materials
Business Division, Business Headquarters
Concurrently General Manager in charge of Flame
Retardants and Resin Additives, Plastic Materials Sales Department
April 2014 Executive General Manager of Plastic Materials Business
Division, Business Headquarters
April 2015 General Manager of COO Office
June 2015 Director
April 2016 Executive General Manager of Domestic Subsidiaries
Division, Business Headquarters
June 2016 Concurrently President of Osaka Branch
June 2018 Advisor of Domestic Subsidiaries Division, Business Headquarters
Representative Director and President of Yokkaichi
Chemical Company Limited
April 2019 Representative Director and President of Yokkaichi Chemical
Company Limited, Business Headquarters (current)
June 2019 Director (current)

AOKI Sunao

TANIGUCHI Tsutomu

Director (outside)

Director (outside)■ Number of shares held: 449 shares■ Number of shares held: 328 shares■ Career summary

April 1972
June 2000
June 2003
January 2005
June 2005
December 2005
April 2006
April
June
April
June

2009
2011
2014
2014

Joined Mitsubishi Heavy Industries, Ltd.
Director of Takasago Laboratory, Technology Department
Director
General Manager, Technology Department
Representative Executive Officer
Visiting Professor of Tsinghua University in China (current)
Representative Managing Executive Officer of Mitsubishi
Heavy Industries, Ltd.
Executive Vice President and Executive Officer
Vice Chief Director of Mitsubishi Research Institute, Inc.
Special Advisor of Mitsubishi Heavy Industries, Ltd.
Director of DKS Co. Ltd. (current)■ Career summary

October 1978 Labor Standard Inspector of Labor Ministry
April 2002 Chief of the Sonobe Labor Standards Inspection
Office, Kyoto Labor Bureau, Ministry of Health,Labour and Welfare (former Labor Department)
April 2004 Senior Officer for Personnel Planning, General
Affairs Division
April 2006 Chief of the Kyoto-minami Labor Standards Inspection Office
April 2008 Director of the General Affairs Division
April 2010 Chief of the Kyoto-shimo Labor Standards Inspection Office
April 2012 Chief of the Kyoto-kami Labor Standards Inspection Office
June 2014 Executive Director of Kyoto Labor Standards Association
June 2017 Registered as Labor and Social Security Attorney (Kyoto
Labor and Social Security Attorney’s Association)
Chief of Tsutomu Taniguchi Labor and Social Security
Attorney’s Office (current)
Director of DKS Co. Ltd. (current)

About the DKS Group

Board of Directors

MIYATA Yasuhiro
Five Operating Segments

Director (outside)■ Number of shares held: ー■ Career summary

April
April
April
April
April
April
April
April

June

1987 Joined Dai-Ichi Mutual Life Insurance Company (current
The Dai-Ichi Life Insurance Company, Limited)2003 Senior Portfolio Manager, Kogin-Daiichi Life Asset Management
Company (current Asset Management One Co., Ltd.)2009 General Manager of Global Fixed Income Investment
Department, Dai-Ichi Mutual Life Insurance Company(current The Dai-Ichi Life Insurance Company, Limited)2010 General Manager of Global Fixed Income Investment
Department, The Dai-Ichi Life Insurance Company, Limited
2014 General Manager of Group Pension Business Unit, The
Dai-Ichi Life Insurance Company, Limited
2016 Executive Officer, General Manager of Group Pension
Business Unit, The Dai-Ichi Life Insurance Company, Limited
2018 Executive Officer, Chief General Manager, Investment
Concurrently General Manager of Equity Investment Department
2019 Managing Executive Officer, Chief General Manager, Kansai Market
Concurrently Chief General Manager, Kansai Operations
Bureau, The Dai-Ichi Life Insurance Company, Limited (current)
2019 Director of DKS Co., Ltd. (current)

FUJIOKA Toshinori

NISHIZAKI Shinichi■ Number of shares held: 11,905 shares■ Number of shares held: 5,648 shares■ Career summary

April 1980 Joined DKS Co. Ltd.
October 2000 General Manager in charge of General Business
Promotion Office, Procurement & Logistics Headquarters
July 2001 General Manager in charge of Sales Promotion
Office, Sales Headquarters
October 2005 General Manager of East Supervision
Department, Sales Supervision Headquarters
June 2007 Executive General Manager in charge of
Personnel & General Affairs Headquarters
April 2010 President and Representative Director of Kyoto
Elex Co., Ltd.
June 2011 Executive General Manager in charge ofProcurement & Logistics Headquarters andPresident of Osaka Branch Office
June 2014 Director
April 2016 Executive General Manager of RHEOCRYSTA
Business Division (Business Headquarters)
April 2018 Assistant to President
June 2018 Audit & Supervisory Board Member (current)

Audit & Supervisory Board Member■ Career summary

April
July

1982 Joined DKS Co. Ltd.
2004 General Manager of Financial Department,
General Affairs Financial Headquarters
October 2007 Executive General Manager of Secretary's
OfficeNovember 2008 Executive General Manager of Internal Audit
Office and Auditor
April 2010 General Manager of Financial Department,
Financial Headquarters and Auditor
April 2013 Assistant to President
June 2013 Audit & Supervisory Board Member (current)

IDE Hidehiko

TANAKA Haruo■ Number of shares held: 449 shares■ Number of shares held: 225 shares

Audit & Supervisory Board Member (outside)■ Career summary

April 1970
May 1995
May 1997
July 1999
September 1999

Joined The Fuji Bank, Limited
Manager of Chicago BranchManager of London Branch
Deputy Director General of Headquarters
Managing Director of Fuji AssetManagement Co., Ltd.
October 2005 Full-time Management Auditor of Mizuho
Private Wealth Management Co., Ltd.
June 2007 Auditor of Ulvac Materials, Co., Ltd.
June 2008 Audit & Supervisory Board Member of
DKS Co. Ltd. (current)

Audit & Supervisory Board Member (outside)■ Career summary

April 1978
February 2005
June 2006
June 2010
June
June
June

2011
2013
2015

June

2016

Joined The Bank of Kyoto, Ltd.
General Manager of Private Banking Division
General Manager of Public Affairs Division
Executive Officer and General Manager of
Public Affairs Division
AuditorFull-time Auditor
President and Representative Director of
Kyogin Card Service Co., Ltd. (current)
Audit & Supervisory Board Member (current)

DKS REPORT 2019

Data

Audit & Supervisory Board Member

Business Foundations

Audit & Supervisory Board

49

Data

Fundamental Knowledge of Surfactants
Generally, an“interface”refers to the border area between two materials of different states of solid, liquid or gas. A surface
active agent, or surfactant, is a term for a chemical that exhibits functions and improves the performance of these interfaces.

1

Basic Structure of Surfactants

Surfactants have a unique chemical structure that has
both hydrophilic and hydrophobic properties. Using thisstructure, surfactants can achieve a variety of effects suchas emulsification, dispersion, foaming and adsorption by
weakening surface tension or forming molecularaggregates or micelles (spheres).

Functions of surfactants by reducing surface tension

Oil / water
Fine powder

Add surfactants

Water

Emulsifies

Surface (interface) tension reduced

Oil

Emulsion
Dispersesb Thin solutionc Critical micelled Higher

Makes
foam

Air
Hydrophobic
group

Foams

2

a Extremely thin solution

Dispersion

Hydrophilic
group

Water

Surfactant solutions

concentration solution

concentration solution

Surfactant Types

Surfactants have four main structural types based on thefunctions they are designed to achieve. Of these four types,
three are ionic surfactants that transform into electrolytic
dissociation ions (atoms or groups of atoms bearing anelectrical charge) when dissolved in water, and the remaining
Types of surfactants

type is nonionic surfactants, which do not form ions. The threeionic surfactants are further subdivided based on the type ofion they form in water: anionic (or negative ion) surfactants,
cationic (or positive ion) surfactants and amphoteric(containing both positive and negative ions) surfactants.

Characteristics
Superb emulsifying
and dispersing properties● Good foaming● Not susceptible to temperature●Anionic surfactants

Cationic surfactants

Amphoteric surfactants

Absorbed by textiles, etc.
Antistatic effects● Sterilizing effect●●Non-irritative to the skin
Superb solubility in water● Synergetic effects with other surfactants●●

Balance of hydrophilic and hydrophobic
properties easily adjustable● Superb emulsifying andsolubilizing properties● Low foaming● Susceptible to temperature

Main applications

Laundry detergent

ShampooShower gel
Hair conditioner

Fabric softener

Disinfectant
Shower gel

Dishwashing liquid

Shampoo●

Nonionic surfactants

50

DKS REPORT 2019

Laundry detergent

Emulsifier/solubilizer

Dispersant

Metal processing oil

Actions and effects

Applications

Mixes water and oil and makes an
emulsion. Makes a uniform
dispersion with fine particles floatingon the water surface.

Ice cream, margarine,
paints, inks

Moistening,permeating

Spreads agrochemicals thin anduniform on the leaf surfaces. Evenly
disperses dyestuff and finishing
agents on textiles and leathers.

Pesticide spraying,permeation of dyestuff
and finishing agentson textiles

Takes in air bubbles in water andstabilizes. Prevents foaming.

Foam concrete,
light gypsum boards

Removes dirt by moistening the surfaceof textiles and dirt, taking the dirt off the
textiles by penetrating in between them,and emulsifying/dispersing the dirt.

Household detergents,
bath soaps, machineryand metal cleaning
agents

Improves the smoothness of yarns inthe spinning and/or knitting process
and makes soft andsmooth-textured textiles.

Textile finishing agents,
metal processing oils

Prevents static electricity generation bymaking the surfaces smooth. Makes static
electricity easier to escape by forming awater-absorptive coating on the surface.

Antistatic anddustproofing treatment
for synthetic fibers andplastic products

Adheres to the metal surface andforms a coat to prevent oxygen (air)and water from contacting the metal
and causing rust.

Metal surface
treatment

Makes the dyestuff gradually beabsorbed by the textiles and brings
about uniform dyeing.

Textile processing

A positively charged surfactant isabsorbed to negatively charged
bacteria, destroys the cells andsterilizes.

Hand sanitizer

Mixes incompatible
substances

Makes wetting andpermeation easier

Making or
removing foam
Makes and/or
removes foam

Cleaning

Removes dirt

Softening,smoothing

Softens and smooths

Antistatic

Prevents static electricity

Rustproofing
Prevents rustLeveling, fixing

Prevents uneven dying,enhances dye fastness

Sterilizing

Removes bacteria

4

Data

Emulsifying,dispersing

Five Operating Segments

Function

About the DKS Group

Main Actions and Applications

Business Foundations

3

Environmental Impact of Surfactants

Domestic wastewater contains surfactants. Most such
wastewater is collected and treated at public sewage
treatment plants and released to the environment althoughsome could be released directly to rivers/oceans or land.

Because surfactants are biodegradable, even if
released into the environment they eventually degrade tocarbon dioxide and water by bacteria. To preserve thenatural environment, products with high biodegradability
are being developed and proactively used in Japan.

DKS REPORT 2019

51

Data

Proprietary Technologies of DKS
Technical Road Map: Proprietary Technologies
Precisionequipment

Electric
equipment
Transportationequipment

Construction

Transportationequipment

Phenolderivatizatives
Potting

Cosmetics

Ionic liquid
Polymer function
designing

Organic-inorganic
hybridization

Polymer modification

Polymer synthesis

Alkylene oxide
function designing
Alkylene oxide
addition

Urethanization

Bromination

Electric
equipment Chemicals

Nano-dispersion

Emulsion polymerization
Polymerizable emulsifier
Food application
evaluation

Cellulose
modification

Synthesis, blending,evaluation, analysis,
and application
technologies

Precision cleaning
agents evaluation

Sucroseesterification

Surfactants

TextileFisheries/
agriculture
andforestry

Wet dispersion

Emulsification/
dispersion

Interface/surface control

Isocyanate blocking
Flame retardation

Cellulose
nanofiberization

Battery evaluation/assembly

UV/EB curing

Urethane forcivil engineering

TextileChemicals

Chemicals
Glycidylation

Glass

Electric
equipment

Hard surface
treatment

Food
products
Extraction& drying
Fungiculture

Precisionequipment

Machines
Steel

Technologies are
multiplied to produce
new technologies

Basic Technology
Interface/surface control technology

A variety of applications can be achieved with surfactants, for example, emulsification, dispersion, solubilization, wetting/penetration, surface /interface
tension control, foaming/defoaming and surface modification. The primary applications of surfactants are emulsification and dispersion for mixing
together substances that normally are not mixed together. Emulsification and dispersion are conditions in which other substances exist in a liquid in theform of small dispersed particles; this is generally known as emulsion. Surfactants have a wide range of uses spanning from household to industrial.
The most common is emulsion between various oils and water. Although water and oils will separate after being mixed, adding a surfactant as anintermediate between water and oils enables the creation of stable emulsion. The most familiar example of this phenomenon is washing dishes. Whenwashing dishes to which oil residue has adhered, the surfactant is first absorbed into the oil residue, where it reduces the interface tension between theoil and dishwashing liquid. Next, the liquid enters between the oil residue and dishware via wetting/penetration. Finally, oil residue is separated from thedishware through physical force such as washing by hand. The residue is adsorbed into the micelles formed by the surfactant and then dispersed
throughout the liquid, which prevents re-adherence of the residue. In this way, the surfactant’s surface tension reduction function, wetting/penetration
effect and other effects such as emulsification, solubilization and dispersion are major factors in the washing effect. Moreover, improving the wettabilityof paint and adding various functionality (e.g., leveling, water/oil repellent, antifouling, lubricity) can be included as types of technology for surface
modification and interface control. These surfactants exhibit superior solubility in solvents and a high surface tension reduction function with a small
amount of use. For example, fluoropolymers are widely used in water-and oil-repellent agents for textile. Our company is working to develop PFOA
(perfluorooctanoic acid)-free fluoropolymers through the synthesis of various surfactants and the use of application technology. This makes it possible torespond to needs for surface/interface control, which had been difficult to achieve using conventional surfactants.

Alkylene oxide addition technology

This technology adds ethylene oxide (EO) and propylene oxide (PO) to raw materials of higher alcohols derived from natural sources such as coconut oilor palm oil, as well as phenols and amines.

Alkylene oxide functional design technology

Through the addition of alkylene oxide (AO), in addition to EO and PO sequencing such as random polymerization and block polymerization, thistechnology enables desired control for the number of added moles. This makes it possible to freely design a surfactant composition, which satisfies therequired performance.

Urethanization technology

This technology synthesizes a urethane resin that is a polymer compound possessing urethane bonds in the main framework of the molecular structure.
Through diverse combinations of the raw materials polyisocyanate and polyol, it is possible to change the type and length of the structural chain and tochange the structure of both ends, thus creating a variety of physical properties. This makes it possible to create substances such as elastic urethane
rubber and urethane elastomer, as well as soft/hard urethane foam in conjunction with foaming reaction. By utilizing these properties, these substances
can be used in products such as cushioning, thermal insulation, molding and coating materials. In addition, water-based urethane resin can be obtainedby emulsifying urethane resin. Our company’s products can be broadly divided into nonreactive and reactive. Nonreactive water-based urethane resin isan emulsion product of urethane resin. Reactive water-based urethane resin is produced by using a blocking agent to protect the terminal isocyanategroups generated by the reaction between polyisocyanate and polyol and emulsify. Reactive water-based urethane resin is composed of the two basic
structures of a soft segment and a hard segment, and it undergoes quasi-crystallization during the resin molding process. Consequently, it combines
flexibility, toughness and elasticity and possesses superior solvent resistance and adhesion. Because the material combines safety and highfunctionality, it is used in a wide range of processes such as film, metal, paper and textile.

52

DKS REPORT 2019

Cellulose modification technology

About the DKS Group

This technology synthesizes anionic water-soluble polymers with cellulose as the main raw material. The CMC (sodium carboxymethyl cellulose)
synthesized via this technology can be used in various applications by changing the length of the molecular chain and the addition quantities of the
carboxymethyl group. CMC is known as a food additive, is easily dissolved in either cold or hot water and becomes a viscous liquid that is colorless andtransparent. It has an extensive record of use as a thickening stabilizer. Uses include as a thickening agent for food seasonings and a binding agent forfish feed and pesticides. CMC is known for functioning as a high-performance dispersion stabilizer. It is applied to products seeking an even higher levelof functionality, for example, a dispersion stabilizer of lactoprotein in lactic acid bacteria beverages, an anti-redeposition agent in detergents and adispersion/thickening stabilizer for toothpaste.

Sucrose esterification technology

This technology is used to obtain sucrose fatty acid esters (SEs), a non-ionic surfactant that as natural sucrose is part of the hydrophilic group and as higher
fatty acids such as stearic acid and oleic acid are part of the lipophilic group. The high safety of SEs is recognized by international organizations (Joint
FAO/WHO Expert Committee on Food Additives), and SEs were approved as a food additive in Japan in 1959. In addition to food products, SEs are used in awide range of products such as pharmaceuticals and personal care products. Examples include emulsifiers, viscosity modifiers, anti-aging agents forstarches and texture modifiers. Synthesis methods of SEs can be broadly divided into an esterification reaction method that uses fatty acid chlorides and fatty
acid anhydrides, a transesterification method with lower alcohol esters of fatty acids and an enzyme method using enzymes such as lipase as the catalyst.
Among these methods, the transesterification method has been industrialized, with sucrose and fatty acid methyl esters used as the raw materials.

Cellulose nanofiberization technology

This technology is used to create the new material cellulose nanofibers (CNFs) by chemically or physically treating the naturally derived cellulose fibers
to reduce the fiber width to a nano meter size. Our Company’s CNFs are exceptional for their extremely fine fiber width on the single nano level. Thisfineness is achieved via chemical modification processing. Furthermore, by utilizing its exceptional characteristics such as viscosity behavior,
emulsification and dispersion stability effect, our CNFs can be used in products such as cosmetics and general industrial products.

Five Operating Segments

Emulsion/polymerization technology

This technology conducts polymerization by using surfactants to emulsify in water the monomers that do not dissolve in water. This enables synthesis ofhigh molecular weight polymers that cannot be obtained via bulk polymerization or solution polymerization. Furthermore, because the polymer system issurrounded by water, it is easy to remove polymerization heat and perform stable temperature management. A polymerizable surfactant is a type of
surfactant that possesses a radical polymerizable group. It is used as an emulsifier for emulsion polymerization. Through copolymerization withmonomers during the process of the emulsion polymerization, it improves the mechanical stability, chemical stability, freezing/thawing stability andfoaming property of polymer dispersion, and improves the water resistance of the polymer film.

Application Technology
Nano-dispersion technology

This technology stably mixes immiscible substances to bring out the diverse power inherent in materials. This technology is expected to support
dispersants that enable dispersion in the nano range, various dispersion methods, and applicability to a wide range of materials such as inorganic
powder, organic powder and oil. Nano materials can be broadly divided into carbon materials (e.g., fullerene, nano tubes, nano fibers, graphene), metals(e.g., gold, silver, copper) and metal oxides (e.g., silica, titania, zirconia), all of which possess diverse characteristics. This technology disperses thesenano materials into mediums such as water, organic solvents and resins. However, as particle size of substances is reduced to nano size, the impact of
the Van der Waals force becomes stronger, resulting in problems such as particles being prone to agglomeration and a decrease in transparency.
Interface control is required to prevent agglomeration.
Function/usage: Electronic and electric equipment (touch panels for smartphones and tablets), cosmetics (sunscreen), eyeglass frames, etc.

Business Foundations

Radiation curing technology

This technology instantly dries and cures coatings and other types of radiation-curable resin compounds by irradiating them with ultraviolet (UV) rays orelectron beams (EBs). The technology is also called radcure (UV/EB curing). Radcure technology is used in a wide range of diverse fields due to its ability
to conserve resources and energy and reduce environmental load. Its uses include clear coatings for construction materials and furnishings; anti-rust
coatings for metal; resistance materials such as semiconductors, dry film and LCD displays; coatings for items such as mobile phones, optical fibers,
plastics and paper; printing ink; plate-making materials; and adhesives. Our Company’s monomers are made from the raw material alcohol using EO
precision-addition technology. We offer a full lineup of products with added functionality (e.g., high hardness, low viscosity, low curling).
Function/usage: Adhesives, paints/coatings, printing/marking

Flame retardation technology

This technology adds/disperses compounds containing flame-retardant elements such as bromine, phosphorus, nitrogen, boron, silicon and/or antimony
to/in polymer materials to make them flame-retardant by a chemical reaction and bonding resulting from it. Recently, out of consideration for theenvironment, attention is being placed on the use of inorganic compounds such as hydrated metal compounds (Mg hydroxide, Al hydroxide) and
nano-composites (MMT, CNT). Flame retardants are broadly divided into halogenated and halogen-free products which are based on phosphorus or inorganic
substances. Halogenated flame retardants have superior flame-retarding efficiency and therefore are most widely used as flame retardants for plastics. Our
Company’s products are brominated flame retardants that give sufficient flame retardancy with a small amount of use. Moreover, the products interfere little
with the superior properties of plastic, namely, heat resistance, heat stability, UV stability, workability, mechanical strength and electrical properties. The
products are capable of satisfying requirements for the flame retarding of plastics, which are increasingly diverse and have increasingly advanced functions.
Function/usage: Electronic and electric equipment, OA equipment, construction products, automotive products, railway cars, textile, paper, aircraft,marine vessels, etc.

Ionic liquid

Data

Generally, ionic liquid is an ion pair compound that remains in a liquid state at/below 100ºC. It has no vapor pressure and is nonflammable. Because
ionic liquid has high safety and ion conductivity, it is used in electrolyte applications such as lithium-ion batteries and capacitors. Ionic liquid also is
attracting attention as a next-generation material in the energy device field and as a green solvent that reduces environmental impact. Ionic liquid is asalt composed only of ions (anions, cations). It dissolves a variety of organic and inorganic compounds and can conduct ions.
Function/usage: Reactive solvents, extraction solvents; as electrolytes, dye-sensitized solar batteries, lithium-ion batteries, electric bilayer capacitors andactuators; lubricants, dispersants and antistatic agents, etc.

Special Technology
Glycidylation technology

This technology belongs to Yokkaichi Chemical. Via synthesis technology using glycidyl ether, which is a bifunctional aliphatic epoxy compound
possessing a flexible framework in the center of the molecule, the technology generates compounds with improved flexibility, toughness and water
resistance of cured materials.
Function/usage: Electronic material
DKS REPORT 2019

53

Data

Consolidated Financial Statements
Consolidated Balance Sheets
AssetsCurrent assets
Cash and deposits
Notes and accounts receivable―trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Prepaid expenses
Other current assets
Allowance for doubtful accounts
Total current assets
Non-current assets
Tangible fixed assets
Buildings and structures
Accumulated depreciation
Buildings and structures, net
Machinery, equipment and vehicles
Accumulated depreciation
Machinery, equipment and vehicles, net
Tools, furniture and fixtures
Accumulated depreciation
Tools, furniture and fixtures, net
Land
Leased assets
Accumulated depreciation
Leased assets, net
Construction in progress
Total tangible fixed assets
Intangible fixed assets
Goodwill
OthersTotal intangible fixed assets
Investments and other assets
Investment securities
Long-term loans receivable
Long-term prepaid expenses
Deferred tax assets
Net defined benefit assets
Other intangible fixed assets
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets
Total assets

54

DKS REPORT 2019

FY2018FY201911,523
16,515
7,784
31
2,134
270
2,342
(15)
40,587

7,485
17,872
9,456
29
2,451
276
1,803
(15)
39,361

24,905 25,407(13,563) (14,451)
11,341 10,955
33,625 34,107(27,497) (28,754)
5,353
6,128
3,795
3,659
(3,170) (3,235)
559
489
9,182
8,933
1,470
1,542
(902)
(946)
568
596
3,104
95
27,584 29,724
－

378
378

871
477
1,348

3,672
420
208
83
403
326
(6)
5,108
33,07173,658

4,037
268
232
91
569
277
(6)
5,472
36,54575,906(Millions of yen)
FY2018FY201912,222
6,197
313
893
649
37
220
2,176
22,712

12,926
6,604
227
704
678
37
251
2,790
24,22017,665
575
307
107
73
256
18,985
41,697

16,862
497
298
98
73
264
18,09542,315

8,895
7,223
14,043(1,086)29,076

8,895
7,237
15,934(1,068)30,998

531

28

271

26

279

271

Total accumulated othercomprehensive income

1,082

325

Non-controlling interests
Total net assets
Total liabilities and net assets

1,801
31,96073,6582,266
33,59175,906

Liabilities

Current liabilities
Notes and accounts payable―trade
Short-term loans payable
Lease obligations
Income taxes payable
Provision for bonuses
Accrued business office taxes
Accrued expenses
Other current liabilities
Total current liabilities
Non-current liabilities
Long-term loans payable
Lease obligations
Deferred tax liabilities
Net defined benefit liability
Asset retirement obligations
Other non-current liabilities
Total non-current liabilities
Total liabilities

Net assets
Shareholders’equity
Capital stock
Capital surplus
Retained earnings
Treasury shares
Total shareholders’equity
Accumulated other comprehensive income

Valuation difference on availablefor-sale securities
Foreign currency translation adjustment
Remeasurements of defined
benefit plans

Consolidated Statements of Income

FY20194,277
5,728
10,006
5,053

4,577
6,525
11,103
4,341

8
52
68
6
26
76
238

6
64
63
35
34
47
251

242
185
138
566
4,725

196
220
417
4,175

－

141

1,098
1,098
171
113
29
314
5,509
1,434
61
1,496
4,012
660
3,351

59,574
44,13015,444

Five Operating Segments

56,95541,896
15,059About the DKS GroupFY2018

－

－

141
240
96

－

Business Foundations

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Selling expenses
General and administrative expenses
Total selling, general and administrative expenses
Operating income
Non-operating income
Interest income
Dividend income
Share of profit of entities accounted for using equity method
Insurance income
Rent income
Other non-operating income
Total non-operating income
Non-operating expenses
Interest expenses
Compensation-related expenses
Other non-operating expenses
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of shares of subsidiaries and associates
Gain on sales of land
Total extraordinary income
Extraordinary losses
Impairment loss
Loss on disposal of non-current assets
Loss on sales of buildings
Total extraordinary losses
Profit before income taxes
Income taxes―current
Income taxes―deferred
Total income taxes
ProfitProfit attributable to non-controlling interests
Profit attributable to owners of parent(Millions of yen)

337
3,979
1,110
57
1,168
2,810
229
2,581

Consolidated Statements of Comprehensive Income (Millions of yen)
FY2018FY2019

386
2
123
62
5
580
4,593
3,873
720

(503)

4,012

2,810
Data

ProfitOther comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Share of other comprehensive income of entities accounted for using equity method
Total other comprehensive income
Comprehensive income
Comprehensive income attributable to owners of parent
Comprehensive income attributable to non-controlling interests

－

(326)
(8)
(26)
(864)
1,945
1,824
121

DKS REPORT 2019

55

Data

Consolidated Financial Statements
Consolidated Statements of Cash Flows
Cash flows from operating activities
Profit before income taxes
Depreciation
Amortization of goodwill
Increase (decrease) in allowance for doubtful accounts
Interest and dividend income
Interest expenses
Share of loss (profit) of entities accounted for using equity method
Impairment loss
Loss (gain) on disposal of tangible fixed assets
Loss (gain) on sales of tangible fixed assets
Loss (gain) on sales of shares of subsidiaries and associates
Decrease (increase) in notes and accounts receivable―trade
Decrease (increase) in inventories
Increase (decrease) in notes and accounts payable―trade
Increase (decrease) in net defined benefit liability
Other cash flows from operating activities
SubtotalInterest and dividend income received
Interest expenses paid
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities
Payments into time deposits
Proceeds from withdrawal of time deposits
Purchase of tangible fixed assets
Proceeds from sales of tangible fixed assets
Purchase of investment securities
Purchase of shares of subsidiaries resulting in change in scope of consolidation
Proceeds from sales of shares of subsidiaries resulting in change in scope of consolidation
Payments for loans receivableCollection of loans receivable
Proceeds from subsidy income
Other cash flows from investing activities
Net cash provided by (used in) investing activities
Cash flows from financing activities
Net increase (decrease) in short-term loans payable
Proceeds from long-term loans payable
Repayments of long-term loans payable
Redemption of bonds
Proceeds from share issuance to non-controlling shareholders
Repayments of lease obligations
Purchase of treasury shares
Proceeds from disposal of treasury shares
Cash dividends paid
Dividends paid to non-controlling interests
Payments from changes in ownership interests in subsidiaries that
do not result in change in scope of consolidation
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
56

DKS REPORT 2019

(Millions of yen)
FY2018FY2019

5,509
2,473

3,979
2,555
110
0
(70)
196
(63)
240
96

－

5
(61)
242
(68)
171
113
(1,068)

－

－

(141)
(1,277)(1,894)
688
(185)
197
4,432
155
(195)
(1,155)
3,236

(116)
83
(2,505)
1,822
(2)

(43)
49
(3,707)(1,645)(1,466)
1,755
(188)
258
6,030
139
(241)
(911)
5,017

－
－

(400)
3
100
(114)
(1,130)(55)
4,000(4,800)
－
－

(299)
(1)
7
(606)
(38)

－

(970)
(780)
130
(250)
1
80
(205)
(5,694)(685)
5,918(6,005)
(50)
385
(321)
(0)
－

(709)
(41)

(62)

－

(1,858)
78
2,106
9,296
11,402(1,510)(155)(4,123)
11,402
7,278

Dialogue with Shareholders and Investors
About the DKS Group

Disclosing the necessary corporate information in a timely and appropriate manner, the Company attaches importance tothe occasions for communicating with the wide range of people concerned.
While actively conducting dialogues with its many investors, the Company has been able to seize opportunities for
dialogue involving stories about its creation of value.
Through the words of the Chairman himself, the Company arranges regular large and small meetings with investors. In
addition, with regard to explaining financial performance and business scope, the personnel in charge conduct interviews
and offer direct explanations as part of their everyday tasks. As this Report serves as a tool for sustainable and constructive
dialogue, we are working to improve corporate value, including mutual understanding through active communication.

Ordinary General Meeting of Shareholders
The Ordinary General Meeting of Shareholders
held on June 25, 2019
Number of shareholders
who attended

109shareholders

Percentage of those
exercising voting rights

79.3％

Five Operating Segments

On June 25, 2019, the Company held its annual Ordinary General
Meeting of Shareholders at the hall at the Company's corporate
Headquarters building. The shareholders who attended that day
numbered 109, including some who had traveled long distances
to be there. After the conclusion of the general meeting, theCompany held a management briefing session given by the CEO
and an informal gathering.
Using the valuable time to directly explain management's
way of thinking and direction through mutual dialogue, theCompany regards the general meeting as an important occasion
for the management team to earnestly obtain feedback directlyfrom shareholders and for that feedback to be subsequently
reflected in management.

Dialogue with Institutional Investors and Analysts

Dialogue with Individual Investors

We hold briefing sessions for investors covering the first-halfand full-year periods.
In the fiscal year ended March 31, 2019, large meetings
were held at the Securities Analysts Association of Japan andsmaller meetings were at the Company's Tokyo Headquarters.
There was a total of 103 attendees for the first-half and full year,
and the Company hosted a relaxed dialogue via a Q&A format.

Immediately after the General Meeting of Shareholders, we
held an informal gathering at our Headquarters and heard
opinions from our shareholders firsthand. On July 5, we held amanagement briefing session in Otemachi, Tokyo, geared
toward shareholders in the Kanto region. In the years to come,the Company will continue to host occasions at which toconvey its direction in a more easily understood manner.

Business Foundations

Dialogue with Shareholders and Investors

Number of attendees at management briefings in 2019

134attendees

Number of dialogues in the fiscal year ended March 31, 2019

Data

190meetings● Dialogue-Based Activities in the Fiscal Year ended March 31, 2019

Results briefing

2

Small meetings for institutional investors and analysts

87(Of which, meetings with overseas investors)(10)

DKS REPORT 2019

57

Data

Domestic/Overseas Network (As of March 31, 2019)
Domestic Network
Head Office/Laboratory

Kyoto Elex Co., Ltd.

Nagoya Office

Biococoon Laboratories, Inc.

Ikeda Yakusou Co., Ltd.

Tokyo Head Office
Dai-ichi Kenkou Co., Ltd.

Kyushu Office

Shiga Branch

K&D Fine Chemical Corporation

Location: 427 Gokasho Hiyoshi-cho, Higashiomi, Shiga
Area: 106,813 m2
Main products: Sucrose fatty acid esters, foodadditives, metal surface treatment agents,
surfactants, solvent-alternative aqueous andnon-aqueous detergents

Osaka Office
Gembu Co., Ltd.
Dai-ichi Ceramo Co., Ltd.
Yokkaichi Chemical Company Limited

Ohgata Branch
Location: 230 Saigata, Ohgata-ku, Joetsu, Niigata
Area: 87,732 m2
Main products: CMC, waterborne polyurethanes,
professional detergents, polyvinylpyrrolidone

Chitose Plant, Yokkaichi Branch

Kasumi Plant, Yokkaichi Branch

Location: 7 Chitose-cho, Yokkaichi, Mie
Area: 17,355 m2
Main products: Polyether polyols, urethane
prepolymers, EV/EB-curable
monomers/oligomers,
anionic surfactants, cationic surfactants

Location: 1-23-5 Kasumi, Yokkaichi, Mie
Area: 101,138 m2
Main products: Polyurethane materials,
functional materials

Subsidiary and Affiliated Companies (Japan)
Company nameLocation

2-1 Miyahigashi-cho, Yokkaichi, Mie 510-0843, Japan
Phone +81-59-345-1161 Fax +81-59-345-1159
2nd Floor, Osaka Asahi Seimei Kan, 4-2-16 Koraibashi,
Gembu Co., Ltd.
Chuo-ku, Osaka 541-0043, Japan
Phone +81-6-6229-1840 Fax +81-6-6229-1845
8th Floor, Yaesuguchi Daiei Building, 1-3-1 Kyobashi,
Chuo-ku, Tokyo 104-0031, Japan
Dai-ichi Kenkou Co., Ltd.
Phone +81-3-3275-0583 Fax +81-3-3275-0604
432 Gokasho Hiyoshi-cho, Higashiomi, Shiga 529-1403, Japan
Dai-ichi Ceramo Co., Ltd.
Phone +81-748-48-5377 Fax +81-748-48-5322
1 Ogawara-cho, Kisshoin, Minami-ku, Kyoto 601-8391, Japan
Kyoto Elex Co., Ltd.
Phone +81-75-326-2883 Fax +81-75-326-2884
1 Niihamacho, Chuo-ku, Chiba, Chiba 260-0826, Japan
K&D Fine Chemical Corporation
Phone +81-43-262-2039 Fax +81-43-262-4396

Yokkaichi Chemical Co., Ltd.

Biococoon Laboratories, Inc.

4-3-5 Ueda, Morioka, Iwate 020-8551, Japan
Phone +81-19-613-5564 Fax +81-19-613-5570

Ikeda Yakusou Co., Ltd.

1808-1 Nakazu, Shuzu, Ikeda-cho, Miyoshi,
Tokushima 778-0020, Japan
Phone +81-883-72-5320 Fax +81-883-72-5005

DKS REPORT 201958

Business activities
Production and sales of
surfactants
Sales of detergents, finishing agents andequipment for professional laundry,sales of industrial/professional-use deodorants
Production and sales of agents for civilengineering and construction
Production and sales of materials forceramics and injection molding
Production and sales ofelectronic materials
Production and sales of surfactants andorganic/inorganic chemicals
Wide-ranging research and development frompharmaceuticals to health care ingredients
Production and sales of foods as well as healthcare products
Production of drug substances and various
ingredients used in health foods
Production and sales of life sciences products including
pharmaceuticals and quasi-pharmaceutical productsAbout the DKS Group

Overseas Network

Five Operating Segments

Sisterna B.V.
DKS (Shanghai) International Trading Co., Ltd.

Dai-ichi Kogyo Seiyaku(Singapore) Pte. Ltd.

DDFR Corporation Ltd.

Business Foundations

Chin Yee Chemical Technologies(Wuxi) Co., Ltd.

Chin Yee Chemical Industries,
Co., Ltd.

P.T. Dai-ichi Kimia Raya

Operation Bases (World)
P.T. Dai-ichi Kimia Raya

Location
Jl. Maligi II Lot G-2 Kawasan Industri KIIC,
Karawang Barat, Jawa Barat, Indonesia
Phone +62-21-8904574 Fax +62-21-8904576

Business activities
Production and sales of textile agents,
paper processing agents, flame retardant
for plastics and food additives

DKS (Shanghai) International
Trading Co., Ltd.

11F Lidye Commercial Building, 22 Nanking West Road, Taipei, Taiwan Production and sales of surfactants
Phone +886-2-2556-9353 Fax +886-2-2558-6833
and plastic materials
Room #1104, New Town Center Building,
83 Loushanguan Rd., Shanghai, P.R. China
Trading
Phone +86-21-6236-8080 Fax +86-21-6236-8700

Sisterna B.V.

Belder 30A 4704 RK Roosendaal, The Netherlands
Phone +31-165-524730

Chin Yee Chemical Industries,
Co., Ltd.

Plot 88-C, Wuxi National High & New Tech Industrial
Chin Yee Chemical Technologies Development Zone, 214028, Wuxi, Jiangsu, P.R. China(Wuxi) Co., Ltd.
Phone +86-510-85200156 Fax +86-510-85204878
Dai-ichi Kogyo Seiyaku(Singapore) Pte. Ltd.
DDFR Corporation Ltd.

80 Robinson Road #10-07 Singapore 068898
Phone +65-6420-6810 Fax +65-6826-4092
25th Floor, One Capital Place
18 Luard Road, Wanchai, Hong Kong
Phone +852-2827-7761 Fax +852-2824-1502

Application development
and sales of sucrose esters
Production and sales of plastic materials

Data

Company nameTrading
Sales of plastic additives, e.g.,
flame retardants

DKS REPORT 2019

59

Data

Corporate Data (As of March 31, 2019)
Corporate NameDKS Co. Ltd.

Foundation

April 1909

Incorporation

August 1918

Paid-in Capital

8,895 million yen

Headquarters / Laboratory
5 Ogawara-cho, Kisshoin, Minami-ku, Kyoto 601-8391,
Japan
Phone: +81 75 323 5911 Fax: +81 75 326 7356

Number of Employees 512 (consolidated: 985)

Main Branch
55 Nishishichijo Higashikubo-cho, Shimogyo-ku, Kyoto
600-8873, JapanTokyo Headquarters
8th Floor, Yaesuguchi Daiei Building, 1-3-1 Kyobashi,
Chuo-ku, Tokyo 104-0031, Japan
Phone: +81 3 3275 0561 Fax: +81 3 3275 0599

Total Number of
10,684,321 shares
Shares Outstanding
Share Unit Number 100 shares
Number of
Shareholders

4,007

Stock Listing

Tokyo Stock Exchange

Securities Code

4461

Date of Record

Every year on March 31, and other dates
as necessary and publicly announced in advance

Annual Meetingof Shareholders

Every year in late June

Shareholder
Mizuho Trust & Banking Co., Ltd.
Registry Administrator 1-2, Yaesu 1-chome, Chuo-ku, Tokyo

Osaka Branch
2nd Floor, Osaka Asahi Seimei Building, 4-2-16 Koraibashi,
Chuo-ku, Osaka 541-0043, Japan
Phone: +81 6 6229 1717 Fax: +81 6 6229 1793
Nagoya Office
7th Floor, Nagoya International Center Building, 1-47-1
Nagono, Nakamura-ku, Nagoya 450-0001, Japan
Phone: +81 52 571 6331 Fax: +81 52 586 4539
Kyushu Office
4th Floor, Hakata Ekimae Daiichi Building, 1-2-3
Hakata-eki Minami, Hakata-ku, Fukuoka 812-0016, Japan
Phone: +81 92 472 6353 Fax: +81 92 472 4989

List of Major Shareholders (Top 10)
Shareholder Name

Number of Shares Ratio of Shareholding (%)

Japan Trustee Services Bank, Ltd. (Trust account)

1,438,400

14.16

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

670,500

6.60

The Dai-ichi Life Insurance Company, Limited

613,400

6.04

Mizuho Bank, Ltd.

427,000

4.20

The Bank of Kyoto, Ltd.

417,000

4.10

Asahi Mutual Life Insurance Company

339,400

3.34

Shareholding Association of DKS's Business Partners

278,100

2.74

DKS Employee Shareholding Association

255,325

2.51

DFA International Small Cap Value Portfolio

178,400

1.76

RE FUND 107-CLIENT AC

149,838

1.47

Notes: 1. The Company has 523,435 of treasury shares that are excluded from the major shareholders above.
2. The ratio of shareholding is calculated after subtracting of treasury shares.

Shareholder Distribution
Composition by Shareholder
Financial institutions

Securities companies

Foreign corporations, etc.

Treasury stock

0.72%

0.70%

2.00%

Japanese
corporations

2.25%

60

Composition by Shareholdings Note: Figures as of March 31, 2018,

DKS REPORT 20190.02%
Individuals and others

94.31%are indicated in ( )Treasury stock 4.90%（4.98％）
Japanese corporations
6.45%（5.86％）
Foreign corporations, etc.
12.48%（15.77％）

Securities companies
0.69%（1.34％）
Financial
institutions

Individuals 49.65
and others （46.08％）%

25.83%（25.98％）

On Publishing the DKS Report 2019

Five Operating Segments

About the DKS Groupsuch to its stakeholders. We also note the importanceof climate-related financial disclosures, as outlined by
the TFCD, as an indicator for chemicals companies.
With this in mind, we have included explanations of
our initiatives in technology development and theprovision of environmentally friendly products.
The DKS Report 2019 comes in the final year of
our 5-year management plan. As a key milestone, wehave been focused on clearly identifying risks andopportunities distinct to DKS. For example, ourbusiness model adds value to consumers by bringing
in new customers through the Company’s full-fledged
entry into the life sciences business. Our next 5-year
management plan, dubbed“FELIZ 115,”will begin in
the fiscal year beginning April 1, 2020. With the goal ofinstilling happiness (feliz means happy in Spanish) in
the management of our business, the new plan should
be completed by December 2019.
We look forward to the feedback from ourstakeholders that will allow us to produce even more
substantial and meaningful reports in the years ahead.

SAKAMOTO Takashi
Chairman, CEO
September 2019

Business Foundations

This issue marks the fourth time the DKS Group has
published its integrated report since the initial reportin the fiscal year ended March 31, 2017. We believe thereport is an important way to communicate
information related to the creation of value at DKS to
our stakeholders. Taking a long-term perspective, thereports look at the current situation and explain the
Company’s growth strategies in an easily understoodmanner. As we move into the first year of the Reiwa
era in Japan, which envisions opening the door to“beautiful harmony,”we are renewing our efforts toprovide a clear and complete introduction of theCompany.
DKS celebrated the 110th anniversary of theCompany’s founding in 2019. Since the foundation, theCompany’s motto has been“contributing to the nationand society through industry.”I believe thisencapsulates the theme of the Sustainable
Development Goals (SDGs) for 2030 adopted by theUnited Nations at its summit in 2015. Among the 17
SDGs, DKS prioritized five that play to the strengths of
the Company. With a focus on achieving these goals,
we aim to contribute to the resolution of social issues
while achieving sustainable improvements incorporate value.
We believe it is important to produce an integrated
report that supports constructive dialogue between
the Company and its investors. With the Corporate
Governance Code being revised in June 2018, DKS hasreconfirmed its position relative to the principles in therevised code and has provided careful explanations of

Editing
supporting its business and corporate activities. At thesame time, we sought through cooperation with the
production company to improve the report from avisual perspective, making it easier to read.
We would like to take this opportunity to express
our gratitude to all the parties concerned for theircooperation in the editing. We also welcome the frankopinions from readers as we work toward the issue forthe next fiscal year.

Data

Launched at the same time as our 5-year
management plan, the Company's integrated report
now has reached its fourth issuance.
In recognition of the fact that companies can nolonger expect to last long if they are not in harmony
with society, we have adopted the Uni-Top strategy,
which focuses on the Company's innovativetechnologies to resolve environmental and social
issues. Amid growing calls for enhanced disclosure,including relative to non-financial data, we havefocused on making this report readily available not
only outside the Company but also inside the Company
so that it can be used to share information andpromote further understanding.
With a new team under a new system, we took adifferent perspective in the production and editing of
this year's report. First, we identified important risks
and opportunities based on management strategies inline with a business model centered on value creation.
We then sought to devise a clear and consistent story
reflecting the DKS vision on the important issues

Public & Investor Relations Department

DKS REPORT 201961

DKS Co. Ltd.
5 Ogawara-cho, Kisshoin, Minami-ku, Kyoto 601-8391, Japan
TEL: +81 75 323 5911 FAX: +81 75 326 7356
https://www.dks-web.co.jp/english/index.html
Published: October 2019
Printed in Japan