Report on the Financial Results for
the Fiscal Year Ended March 31, 2017
and Medium-term Management Plan

Organo Corporation
May 16, 2017

Contents
Corporate Outlines

3

Financial Results for the Fiscal Year Ended March 31, 20175

Reflection of Fiscal Year 201617

Plan for the Fiscal Year Ending March 31, 201829

Medium-term Management Plan (FY2017 - 2019)39

Toward Further Development

49

Initiatives for Corporate Governance Code612

Corporate Outlines
Corporate Outlines
Corporate Name

Organo Corporation

Head Office

1-2-8, Shinsuna, Koto-ku, Tokyo 136-8631, JAPAN

Establishment

May 1, 1946

Representative

Yasuyuki Koie (President)

Capital
Number of
Employees

Business Lineup¥ 8,225,499,312
2,100 (Consolidated) * as of the end of March 2017
Water
Treatment
Engineering

Plant
Business

Manufacturing and Sales of Large-scale Water
Treatment Plants

Solution
Business

Maintenance, Operation, Refurbishment, etc. of
Water Treatment Plants

Functional Product

Major Business
Offices

Manufacturing and Sales of Standardized Water
Treatment Equipment, Water Treatment
Chemicals, and Food Processing Materials

Head Office (Tokyo), R&D Center (Kanagawa),
Tsukuba Factory (Ibaraki), Iwaki Factory (Fukushima),
Hokkaido Branch (Hokkaido), Tohoku Branch (Miyagi),
Kanto Branch (Tokyo), Chubu Branch (Aichi), Kansai Branch (Osaka),
Chugoku Branch (Hiroshima), Kyushu Branch (Fukuoka)

3

Corporate Outlines
Scope of Consolidation
Area

Consolidated

Japan

Non-Consolidated

Overseas

Construction and Maintenance ofWater Treatment Plants

Organo Food Tech Corporation

Manufacturing and Sales of Food
Processing Materials

Organo Eco Tech Corporation

Design and Sales of Wastewater
Treatment Plants

Organo Acty Corporation

Printing, Insurance Brokerage, etc.

Organo (Suzhou) Water Treatment Co., Ltd.

TaiwanOrgano Technology Co., Ltd.

Southeast
Asia

Major Business

Organo Plant Service Corporation

China

Japan

Overseas

Company Name

Organo (Asia) Sdn. Bhd. <Malaysia>

Water Treatment Engineering

Organo (Thailand) Co., Ltd. <Thailand>
PT Lautan Organo Water <Indonesia>
Hostech Corporation

Manufacturing of Standardized
Water Treatment Equipment

Tohoku Denki Tekko

Design and Construction of Various plants

Organo (Singapore) Pte Ltd <Singapore>

Southeast
Asia

Organo (Vietnam) Co., Ltd. <Vietnam>

South
Asia

Murugappa Organo Water Solutions Private Limited<India>Water Treatment Engineering

4

Financial Results
for the Fiscal Year Ended March 31, 2017

 Results
 Progress of Operating Profit Margin and ROE
 Summary Results by Business Segments
 Sales by Business Areas and Customers [Water Treatment Engineering Segment]
 Sales by Business Areas [Functional Product Segment]
 Sales by Regions
 Analysis of Operating Profit by Factors
 Balance Sheet Analysis of Cash Flow

5

Results for the Fiscal Year Ended March 31, 2017

Results(millions of Yen)

03/2016
Result03/2017Plan

03/2017
ResultY/Y
ChangeChange from
Plan

Orders Received

76,48576,50074,041- 2,444- 2,458

Net Sales

78,71979,00081,114

2,395

2,114

Gross Profit(%)

17,749(22.5)

17,300(21.9)

18,644(23.0)

894(0.5 pt)

1,344(1.1 pt)

SG & A

13,802

14,30014,529727

229

Operating Profit
(%)

3,947
(5.0)

3,000
(3.8)

4,114
(5.1)

166
(0.1 pt)

1,114(1.3 pt)

Ordinary Profit

3,871

2,900

4,162

290

1,262

Net Profit
Attributable to
Owners Parent

2,485

1,950

2,731

245

781

ROE（%）

5.4

4.1

5.7

0.3 pt1.6 pt6

Results for the Fiscal Year Ended March 31, 2017

Progress of Operating Profit Margin and ROE
(%)
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
Operating Profit
MarginROE

03/2010 03/2011 03/2012 03/2013 03/2014 03/2015 03/2016 03/2017
3.4

5.8

7.1

5.2

1.3

3.5

5.0

5.1

1.6

4.6

6.4

5.9

1.5

2.4

5.4

5.7

7

Results for the Fiscal Year Ended March 31, 2017

Summary< Market Environments >Japan[Industries in general] Investment for maintenance and renewals increased gradually, although theamount of large-scale capital investment was small.
[Electronics industry] Large-scale capital investment was made by a limited number of companies.
[Power plant industry] The restart of operations at nuclear power plants took place at a slow pace.
The number of plans is low for new investment in thermal power plants.
Overseas[Electronics industry] iPhone-related demand remained at a high level. The utilization rate ofproduction facilities was higher than expected, mainly in Taiwan.
Plans for large-scale capital investment, including by foreign companies,
were underway in the Chinese semiconductors industry due to the country’s
policy of promoting domestic production.
[Power plant industry] Plans for the construction of new power plants were underway in the AsianRegion, although some of them were delayed.
[General industries]
Business continued to be depressed in China, and investment was sluggishin Thailand.
[Water treatment market in general]
Demand was on the increase. Competition intensified with the participationof local water treatment companies.

8

Results for the Fiscal Year Ended March 31, 2017

Summary＜Business Overview＞[Power plant industry] Strong performance of maintenance in Japan.
Postponement of anticipated overseas plant projects, etc.
[Electronics industry] Postponement and cancellation, etc. of anticipated plant projects in Japan, solid
performance of plant projects in Taiwan, and an increase in orders in China.
[General industries]
Solid performance of both plant and solution businesses.
Focus on highly profitable projects, and the improvement of operating margins.
[Functional products] Growth due to the strengthening of sales.

Orders received

Sales

Operating profit

Decreased comparedwith the previous year
and the plan

Increased comparedwith the previous year
and the plan

Increased comparedwith the previous year
and the plan9

Results for the Fiscal Year Ended March 31, 2017

Results by Business Segments(millions of Yen)

Orders Received

Net Sales

Operating Profit

90,00090,0004,500

80,00080,0004,000

70,000

+ 473

+ 602

70,0003,500

60,0003,000

50,00050,0002,500

40,00040,0002,000

60,00030,000- 2,918+ 1,793

30,0001,500

20,00020,0001,000

10,00010,000

500

0
Total
Functional
Product
Water
Treatment
Engineering

03/2016
76,48503/2017
74,041

15,956

16,42960,52957,6110
Total
Functional
Product
Water
Treatment
Engineering

03/2016
78,71903/2017
81,114

15,811

16,41362,90764,700

+ 216

0
Total
Functional
Product
Water
Treatment
Engineering- 49

03/2016
3,947

03/2017
4,114

1,393

1,609

2,553

2,504

[Functional Product]
Orders received/Sales/Operating profit: Increased as a result of growth in sales of water treatment chemicals.
[Water Treatment Engineering]
Orders received : Decreased in plants for Taiwan’s electronics industry that had remained at a high level in the previous year.
Sales : Increased in the both plant and solution businesses for general industries.
Operating profit : Decreased due to a decline in sales of plants for the electronics industry in Japan.

10Results for the Fiscal Year Ended March 31, 2017

Sales by Business Areas and Customers[ Water Treatment Engineering Segment ]Sales by Business Areas

Sales by Customers

70,00070,00060,00060,000+ 6,595

50,000+ 2,760

40,000+1

30,000- 969

20,000- 4,804

20,00010,000

Total
Solution Business
Plant Business

50,00040,00030,0000(millions of Yen)

10,00003/2016
62,90731,07531,83303/201764,70033,83530,864[Solution]
Increased in maintenance for the general industries.
[Plant]Decreased in plants for the electronics industry in Japan.

0
Total
GeneralPower Plants +Water & SewerageElectronics

03/2016
62,907
20,59003/201764,70027,185

11,959

11,96030,35925,555[General Industries]
Increased in plants and maintenance of wastewater, industrial water and pure water.
[Power plants & Municipal water and sewerage]
Unchanged as a result of a decrease in plants for power stations and an increase in plantsof municipal water and sewerage.
[Electronics Industries]
Decreased in plants in Japan.
11

Results for the Fiscal Year Ended March 31, 2017

Sales by Business Areas[ Functional Product Segment ](millions of Yen)

18,00016,00014,000- 285

12,00010,000

+ 669

8,000
6,000
+ 219

4,000
2,000
0

Total
Food Proceeding Materials
Water Treatment Chemicals
Standardized Water
Treatment Equipments &Filters

03/2016
15,8115,710
4,860

03/2017
16,413
5,425
5,529

5,241

5,460
12

Results for the Fiscal Year Ended March 31, 2017

Sales by Regions(millions of Yen)

Sales by Overseas Regions

Domestic & Overseas Sales
20,00090,00080,00040%

70,000+ 845

60,00030%- 179
15,00050,00040,00030,00020,00020%+ 847

10,000+ 1,550
10%

5,000

+ 287

10,000
0

03/
03/
03/
03/
2014
2015
2016
2017
Total
62,096 68,741 78,719 81,114
Overseas
14,090 12,390 18,399 19,244
Domestic
48,005 56,351 60,319 61,869
Overseas Ratio 22.7% 18.0% 23.4% 23.7%

0%

0

03/
2014
Total
14,090
Other Areas
396
China
1,993
Taiwan8,352
South East Asia 3,349

03/
2015
12,390
256
2,076
6,999
3,057

03/
2016
18,399507
2,247
10,128
5,516

03/
2017
19,244397
2,068
10,975
5,803

13

Results for the Fiscal Year Ended March 31, 2017

Analysis of Operating Profit by Factors(millions of Yen)

5,000

4,000

3,947
Increase in
Sales
+ 540

3,000

Profit Ratio
Increase
+ 355

4,114
SG & A
Increase
- 727

2,000

1,000

0
03/2016

03/2017* The increase in sales and profit ratio increase are calculated using the gross profit margin.

14

Results for the Fiscal Year Ended March 31, 2017

Balance Sheet(millions of Yen)

Liabilities and Net Assets

Assets100,000+ 4,133

100,000

90,00090,00080,00080,000- 3,936

70,000Accounts
Receivable - trade:- 4,192

60,00050,000- 1,495

60,00040,00030,000+ 414

20,000+ 2,467

30,00020,00010,000

Total
Cash on Hand
and Deposits
Current Assets
and Others
Fixed Assets

70,00050,00040,0000- 362

03/2016
94,79503/2017
95,405

7,207

11,34063,20259,26624,38624,80010,0000
Total
Current
Liabilities
Long-term
Liabilities
Net Assets

03/2016
94,79503/2017
95,40538,00237,640

10,225

8,730

46,56749,03415

Results for the Fiscal Year Ended March 31, 2017

Analysis of Cash Flow
Effect of exchange on
cash and cash
equivalents- 171

15,00012,500CFs from
investingactivities- 1,312

10,000

7,500

7,207

(millions of Yen)

11,340CFs from
financing
activities- 994

CFs from
operatingactivities+ 6,610

5,000

2,500

0

03/2016
Cash and
Deposits
CFs from operating activities: Increased due to the collection of accounts receivable.
CFs from investing activities: Decreased due to the acquisition of fixed assets.
CFs from financing activities: Decreased due to the scheduled repayment of long-termborrowings and the payment of dividends.

03/2017
Cash and
Deposits

16

Reflection of Fiscal Year 2016

 Outline of the Medium-Term Management Plan Formulated in FY2016
 Priority Measures set out in the Plan Initiatives and Challenges in FY2016 for the Respective Priority Measures Summary17

Reflection of Fiscal Year 2016
Outline of the Medium-Term Management Plan
Formulated in FY2016
Management
VisionMetrics on
Management
Objectives

A profitable engineering company that can supply waterat the most reasonable cost and in the timeliest manner,with the quality required by industries,
in the main Asian economic zones.
 Aim to achieve ROE of 5% or more consistently by FY2018 and 8% or morelong term.
 To meet the targets, consider operating income as the most important metric onmanagement objectives and have established a revenue structure to achieve
5% or more stably in and after FY2018.
(millions of Yen)

03/2016
Result03/2017Plan

03/2017
Result03/2018
Plan

03/2019
Plan

Orders Received

76,48576,50074,04180,00086,000Net Sales

78,71979,00081,11481,00084,000Operating Profit

3,947

3,000

4,114

3,400

4,200

Operating Profit
Margin(%)

5.0

3.8

5.1

4.2

5.0

ROE (%)

5.4

4.1

5.7

4.5

5.3

18

Reflection of Fiscal Year 2016
Priority Measures set out in the Plan

Power Plants
 Consistent operation ofdomestic businesses
 Shift to overseas regions
where demand is expanding

Research andDevelopment
 Focus on the development ofhighly unique and innovative
products and technologies(semiconductor manufacturing
processes/water treatment
chemicals/functional materials)

Electronics
 Enhancement of equipment
and system businesses tosupply washing agentsincluding ultrapure water

Profitability
 Optimal distribution of
resources and cost reductions; Focus on highly profitablebusinesses and growthbusinesses

Functional ProductBusiness Development and functional
improvements with a focus onwater treatment equipment
 Development of the functionsof functional materials
 Cultivation of businesses in
new areas

Overseas Business Development of strategies ona region-by-region basis.
 Development of technologies
that reflect areas’
characteristics
 Development of local
managers

19

Reflection of Fiscal Year 2016
Initiatives and Challenges in FY2016
for the Respective Priority Measures
Power Plants
Business environments / Initiatives

Challenges

Domestic

The restart of nuclear power plants occurred at a slow pace.
New investment for thermal power plants was sluggish.
Made consistent efforts to receive orders for solution projects.

Improvement of cost competitivenessOverseas

Postponement of project plans, etc.
Placed a dedicated team in Malaysia.
Started to implement collaborations with overseas companies.

Improvement of cost competitiveness
Facilitation of collaborations withoverseas companies

Electronics
Business environments / Initiatives

Challenges

Domestic

Large-scale capital investment was sluggish.
Made consistent efforts to receive orders for refurbishment andmaintenance projects.

Improvement of cost competitivenessOverseas[Taiwan] Revenues were secured consistently despite aslowdown in investment conditions.
[China] Orders increased as a result of measures taken
collaboratively by China/Taiwan/Japan to capitalize on
aggressive plans of semiconductor-related investment.

Further strengthening cooperation ofgroup companies

20Reflection of Fiscal Year 2016
Initiatives and Challenges in FY2016
for the Respective Priority Measures
Functional Product BusinessBusiness environments / Initiatives
Standardized
Water
Treatment
Equipment

Challenges

Strengthened sales capabilities.
Made progress in the development of strategic
products.

Continuation of the development of next-generationand differentiating products
Study of the development of overseas businesses

Water
Treatment
Chemicals

Sales and profit increased mainly due to theenhancement of sales networks.
Started to sell new slime control chemicals
containing hypobromite-based oxidants overseas.

Expansion of overseas businesses
Improvement of production and supply systems
Further development of differentiating products

Food
Processing
Materials

Progress was made in customer cultivation toaddress the needs of the aging and health-mindedsociety.
Enhanced facilities for research and production.

Marketing to address new needs
Improvement of productivity

21

Reflection of Fiscal Year 2016
Initiatives and Challenges in FY2016
for the Respective Priority Measures
Research and Development
Initiatives and achievements
・Increased resources for development departments (staff and budgets).
・Strengthened collaborations with business departments.
・Strengthening of intellectual property strategies.
Number of patent applications: Increased 84% from the average for the previous five
years ⇒ The number of patent publications will increase significantly.
Number of applications

Number of publications

100

General

80
60
40
20

0

2011 2012 2013 2014 2015 2016

Fiscal Year of Application

0Year of Publication
22

Reflection of Fiscal Year 2016
Initiatives and Challenges in FY2016
for the Respective Priority Measures
Research and Development
Initiatives and achievements
Strengthened the Purification Process of sugars<Sugar purification business through chromatography using absorbents (1950s - )> Adsorbent for Chromatographic Separation of Monosaccharides

Existing
Businesses

Disaccharides(Sucrose, etc.)
Oligosaccharides
Lots of Records＋

Monosaccharides(Glucose, etc)
Developed
NEW Adsorbent

The markets for the separation and purification ofmonosaccharide, disaccharide and oligosaccharide
are fully covered.

Chromatographic
Separation Plant

23

Reflection of Fiscal Year 2016
Initiatives and Challenges in FY2016
for the Respective Priority Measures
Research and Development
Initiatives and achievements
Strengthened municipal water and sewerage treatment business “Wave Settler” for municipal water treatment~New type pulsation-based high-speed coagulation basin」


Existing
Businesses••

Space saving
Energy saving/Easy maintenanceEasy Operation

Received the first order.
Stepped up proposal-making efforts forwater purification plants nationwide

 Aerobic Granular Method for sewerage treatment<Biological treatment using granular sludge containing a highconcentration microorganisms>

Compact facilities
Low cost

Development andvalidation are ongoing.
24

Reflection of Fiscal Year 2016
Initiatives and Challenges in FY2016
for the Respective Priority Measures
Research and Development
Initiatives and achievements New Type Ammonia Water Production SystemImproved minute particle cleaning capacity
Improved performance of static electricity prevention
Increased prevention rate of corrosion of substrate

Made deliveries to semiconductor manufacturers.

 High-sensitivity Hydrogen Peroxide Monitor
Semiconductor
Manufacturing
Process<Control of hydrogen peroxide in ultrapure water (corrosion of wafer
surfaces due to oxidation>

Lower detection limit < 1μg/L
The treatment and control of peroxide in ultrapure water are
implemented simultaneously with the concurrent use of
ORDETOX, the oxidant removal catalyst.

Demonstrations are being made for evaluations at
semiconductor manufacturers.

 ORUREA, an online urea meter<Control of urea in ultrapure water (source of TOC concentration)>

Received orders for deliveries to a semiconductor
manufacturer.

25

Reflection of Fiscal Year 2016
Initiatives and Challenges in FY2016
for the Respective Priority Measures
Research and Development
Initiatives and achievements
 NMP (N-methyl-2-pyrrolidone) on-site purification and recycle system
NMP Solvent used for manufacturing lithium-ion battery (LiB) electrodes, etc.
 The amount of use increased in line with the spread of electric vehicles (EV).
 The material had traditionally been recycled by purification equipment using a
distillation method.

[NMP purification and recycle flow]

SecondaryBatteryrelated

LiB electrodemanufacturing
facilities

NMP
gas

ScrubberAdsorbent

80%NMP
solution[New system]
Purification using
membrane

Purified NMP (water content < 100 ppm)
* conventional method: water content < 500 ppm

Making proposals to LiB manufacturers in Japan and China⇒ Order are expected to be received from Chinese costomer.
26

Reflection of Fiscal Year 2016
Initiatives and Challenges in FY2016
for the Respective Priority Measures

Profitability

Initiatives and achievements

Challenges

Shift of resources to highly profitable businesses.

Initiatives
Achievements

Analysis of the structure of low-profit businesses and implementationof measures to generate high profit.

Continuation of efforts to optimize
and review management
resources.

Improved profitability in the general industries segment.

Overseas BusinessInitiatives and achievements

Challenges

Strengthening of the functions of factories in Indonesia and Vietnam.

Initiatives

Achievements

Strengthening of technological support for and facilitation oftechnological transfer to the JV in India.

Strengthening of costcompetitiveness.

Made progress in the improvement of an order acquisition anddelivery system pertaining to semiconductor projects in China.

Improvement of profitability in linewith business environments in therespective countries and regions.

Recorded an overseas sales ratio of 23.7%, or the same level as theprevious year (affected by weak currencies against the yen).
Countries or regions where there was no progress in the
improvement of profitability.
(Decrease in capital investment due to depressed businessconditions in Thailand, etc.)

Efforts to seek the possibility ofbusiness expansion into regions
other than existing businessregions.

27

Reflection of Fiscal Year 2016
Summary Achieved good results overall against the backdrop of
economic recoveries in Japan.
 Did not produce satisfactory results in terms of the creationof new impactful businesses and technologies to increase
corporate value and facilitate sustainable growth.
 Measures must be taken in earnest for significant growth byallocating sufficient resources in the next one to two years.

28Plan for the Fiscal Year Ending March 31, 2018

 Plans
 Plans by Business Segments
 Sales by Business Areas and Customers [Water Treatment Engineering Segment]
 Sales by Business Areas [Functional Product Segment]
 Sales by Regions
 Analysis of Operating Profit by Factors
 Orders Received and Net Sales for the Electronics Industry
 Progress of Orders Received, Net Sales, and Orders on Hand
 Major Indicators

29

Plan for the Fiscal Year Ending March 31, 2018

Plans

Summary

 To load the resources to creation and improvements of technologies and products forthe improvement of profitability and strengthening of existing businesses, and theenhancement of R&D to ensure the achievement of medium- to long-term growth.
 <Orders received> Expected to increase from the previous year.
<Sales>Expected to remain almost unchanged from the previous year.
<Operating profit> Expected to decline from the previous year.
(millions of Yen)

03/2017
Results

03/2018
Plan

Y/Y
ChangeOrders Received

74,04178,5004,458

Net Sales

81,11481,000- 114

Gross Profit(%)

18,664(23.0)

17,650(21.8)- 1,014(- 1.2 pt)

SG & A

14,52914,60070

Operating Profit
(%)

4,114
(5.1)

3,050
(3.8)

- 1,064(- 1.3 pt)

Ordinary Profit

4,162

2,950

- 1,212Net Profit
Attributable to
Owners Parent

2,731

2,000

- 731
30

Plan for the Fiscal Year Ending March 31, 2018

Plans by Business Segments(millions of Yen)

Orders Received
90,00080,00070,00060,00050,00040,00030,00020,00010,0000
Total
Functional
Product
Water
Treatment
Engineering

03/2017
74,041

03/2018
78,50016,42917,00057,611

61,500Operating Profit

Net Sales
90,00080,000+ 571 70,000
60,00050,00040,000+ 3,889 30,000
20,00010,0000
Total
Functional
Product
Water
Treatment
Engineering

+ 587

- 700

03/2017
81,11403/2018
81,00016,41317,00064,70064,000

4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
Total
Functional
Product
Water
Treatment
Engineering+ 41- 1,104
03/2017
4,114

03/2018
3,050

1,609

1,650

2,504

1,400

[Functional Products Segment]
Orders received/Sales/Operating profit (+): Will increase through the expansion of sales of water treatment chemicals,
standardized water treatment equipment, etc.
[Water Treatment Engineering Segment]
Orders received: Will increase significantly due to a rise in sales of plants for the electronics industry in China.
Sales: Will remain flat due to a decline in sales of plants for general industries in Japan and the electronics industry in Taiwan, andan increase in sales of plants for the electronics industry in China.
Operating profit: Will decrease due to declines in sales for the electronics industry for the of plants in Taiwan and the solution
business in Japan, and loading resources preferentially to R&D.

31

Plan for the Fiscal Year Ending March 31, 2018

Sales by Business Areas and Customers[ Water Treatment Engineering Segment ]Sales by Customers

Sales by Business Areas
70,00070,00060,00060,00050,00050,000- 1,685+ 410

30,00030,000+ 986

20,00020,000+ 1,130

10,00010,0000
Total
Solution Business
Plant Business- 2,240

40,00040,0000(millions of Yen)

03/201764,70033,83530,86403/2018
64,00032,15031,850[Solution]Will decline in sales for general industries in Japan.
[Plants]
Will increase in plants for the electronics industry in
China.

Total
GeneralPower Plants +Water & SewerageElectronics

03/201764,70027,18503/2018
64,00024,945

11,96012,37025,555

26,685[General Industries]
Will decrease in sales for wastewater and industrial water.
[Power plants & Municipal water and sewerage]
Will increase in sales for plants for power plants and municipal water andsewerage.
[Electronics Industries]
32
Will increase in sales for the electronics industry in China.

Plan for the Fiscal Year Ending March 31, 2018

Sales by Business Areas[ Functional Product Segment ](millions of Yen)

18,00016,00014,000+ 310

12,00010,000
+ 171

8,000
6,000
4,000

+ 105

2,000
0
Total
Food Processing Materials
Water Treatment
ChemicalsStandardized Water
Treatment Equipments &Filters

03/2017
16,4135,425

03/2018
17,000
5,735

5,529

5,700

5,460

5,565

33

Plan for the Fiscal Year Ending March 31, 2018

Sales by Regions(millions of Yen)

Sales by Overseas Regions

Domestic & Overseas Sales
45%

90,00022,00020,00080,000+ 1,056

70,00030%

60,00050,00018,000+ 3,182

16,00014,000- 2,275

12,00040,000- 1,169

30,00015%

10,0008,000
6,000

20,000

+ 197

4,000

10,000

2,000
0

03/
2015
Total
68,741
Overseas
12,390
Domestic
56,351
Overseas Ratio 18.0%

03/
2016
78,71918,39960,319
23.4%

03/
2017
81,114
19,244
61,869
23.7%

03/
2018
81,00020,30060,700
25.1%

0%

0

03/
2015
Total
12,390
Other Areas
256
China
2,076
Taiwan6,999
Southeast Asia 3,057

03/
2016
18,399507
2,247
10,128
5,516

03/
2017
19,244397
2,068
10,975
5,803

03/
2018
20,300
350
5,250
8,700
6,000

34

Plan for the Fiscal Year Ending March 31, 2018

Analysis of Operating Profit by Factors(millions of Yen)

5,000
4,114

Decrease in Sales- 26

Profit Margin
Decrease
- 967

4,000
SG & A Increase
- 70
3,000

3,050

2,000

1,000

0
03/2017

03/2018* The decrease in sales and profit margin decrease are calculated using the gross profit margin.

35

Plan for the Fiscal Year Ending March 31, 2018

Orders Received and Net Sales for the Electronics Industry(millions of Yen)

Net Sales

Orders Received
35,00035,00030,00030,00025,00025,00020,00020,000+ 1,164+ 1,084
15,00015,00010,00010,000119+ 2,198
5,000

5,000
0

03/
2015
Total
30,335
Overseas 11,250
Domestic 19,085

- 34

03/
2016
24,12715,023
9,104

03/
2017
21,758
11,856
9,902

03/
2018
25,04012,94012,100

0

03/
2015
Total
22,145
Overseas 8,406
Domestic 13,739

03/
2016
30,35913,164
17,19503/
201725,555
13,321
12,23403/
2018
26,685
14,485
12,20036

Plan for the Fiscal Year Ending March 31, 2018

Progress of Orders Received, Net Sales and Orders on Hand
(millions of Yen)

100,000
90,00080,00070,00060,00050,00040,00030,00020,00010,0000Orders Received
Net Sales
Orders on Hand

03/201465,50162,096
39,212

03/2015
77,87368,741
48,732

03/2016
76,48578,71946,64003/2017
74,041
81,11439,28303/2018
78,50081,00036,78337

Plan for the Fiscal Year Ending March 31, 2018

Major Indicators
03/2017

03/2018(plan)

903

1,000

1,495

1,790

950

950

16,91015,600

Number of Employees

2,100

2,110

Dividend per Share

11

10 *

5.7

4.0

Capital Investment(millions of yen)Technological Development
Expenses(millions of yen)

Depreciation(millions of yen)Interest-bearing Borrowings(millions of yen)

(yen/year)

ROE

（％）

*Indicated in the stock unit on April 1, 2017
(The year-end dividend is expected to be ¥25 per share because the consolidation of stock (the current five shares will beconsolidated into one share) will be implemented on October 1, 2017.)

38

Medium-term Management Plan (FY2017 - 2019) Views on Medium- and Long-term Business Environments New Management Indicators
 Scenario for Operating Profit and ROE Projections
 Plans by Business Segments
 Sales by Overseas Regions
 Important Measures

39

Medium-term Management Plan (FY2017 - 2019)Views on Medium- and Long-term Business Environments[Japan]Investment for the maintenance and renewal of facilities will increase, although the amountof large-scale capital investment will remain small.
IoT-related industries will grow.
The restart of operations at nuclear power plants will occur at a slow pace.
The size of water treatment-related markets will grow by 1 - 2 % per year.
[Overseas]
Economic conditions are on a recovery trend as a whole.
Semiconductor-related investment will grow mainly in China.
Lithium secondary battery-related industries will expand in line with the spread ofelectric vehicles.
Progress will be made in the construction of power plants in India, Southeast Asia, etc.
The size of water treatment-related markets will grow by approximately 10% per year
in China, Southeast Asia, and India.
40

Medium-term Management Plan (FY2017 - 2019)

New Management Indicators(millions of Yen)

03/2016 Result

03/2017 Result

03/2018 Plan

03/2019 Plan

03/2020 Plan

Orders Received

76,48574,04178,50084,00088,000Net Sales

78,71981,11481,00081,00086,000Operating Profit

3,947

4,114

3,050

3,400

4,300

Operating Profit
Margin (%)

5.0

5.1

3.8

4.2

5.0

ROE (%)

5.4

5.7

4.0

4.4

5.4

[FY2017 - 2018] We position the period as an investment period for the improvement of profitability.
[FY2019 and subsequent years] We will secure 5% or more for both operating profit and ROE consistently⇒ We aim to achieve 8% or more in the future.

Strengthening of thecost competitiveness ofexisting businesses

Cultivation of profitableprojects

Improvement andevolution of differentiating
technologies andproducts

Creation of new businessareas for medium- andlong-term sustainablegrowthResources will be allocated preferentially41Medium-term Management Plan (FY2017 - 2019)
Scenario for Operating Profit and ROE Projections
Operating income and ROE projections[FY2017] Decrease [FY2018] Increase[FY2019 - ] 5% or more consistently ⇒ Aim to achieve 8% or more in the future<Reasons for decreases> Increase in the ratio of sales of plants overseas (power plants and electronics segments)
 Increase in selling, general and administrative expenses(costs for R&D, the cultivation of new businesses, and the facilitation of commercialization, etc.)<Reasons for increases> Progress in measures for the improvement of profitability/Expansion of sales of functional products[Initiatives for raising the projected figures]
Thorough implementation of measures for the reduction of costs and theimprovement of profitability

Fluctuation Factors
Whether orders will bereceived for large-scale
semiconductor projects
overseas (several billion yen
per project)

Progress in the restart ofoperations at nuclear power
plants

Uncertainties in the world’s
economic and businessenvironments

42Medium-term Management Plan (FY2017 - 2019)

Plans by Business Segments(millions of Yen)

100,000

Orders Received

100,000

Net Sales

5,000

80,00080,0004,000

60,00060,0003,000

40,00040,0002,000

20,00020,000

1,000

0
Total
Functional
Product
Water
Treatment
Engineering

03/2017
74,041

03/202088,00016,42919,00057,61169,0000
Total
Functional
Product
Water
Treatment
Engineering

03/2017
81,11403/202086,00016,41319,00064,70067,0000
Total
Functional
Product
Water
Treatment
Engineering

Operating Profit

03/2017
4,114

03/2020
4,300

1,609

1,900

2,504

2,400

43

Medium-term Management Plan (FY2017 - 2019)

Sales by Overseas Regions(millions of Yen)

25,00020,00015,00010,0005,000
003/2013
ResultTotal
10,792Other Areas
153
China
1,519
Taiwan7,045Southeast Asia 2,075

03/2014
Result14,090
396
1,993
8,352
3,349

03/2015
Result12,390
256
2,076
6,999
3,057

03/2016
Result18,399507
2,247
10,1285,516

03/2017
Result19,244397
2,068
10,9755,803

03/2018Plan
20,300
350
5,250
8,700
6,000

03/2019Plan
19,500
400
5,600
6,700
6,800

03/2020Plan
22,700
500
6,700
8,000
7,500
44

Medium-term Management Plan (FY2017 - 2019)

Important Measures (1)Areas

Measures
Domestic

Ensuring to win orders for projects related to the restart ofoperations at nuclear power plants.
Promotion of cost reductions.

Overseas

Promotion of a brand strategy in cooperation with overseas local
subsidiaries.
Strengthening sales by establishing business relationships withoverseas companies.

Domestic

Strengthening competitiveness by promoting cost reductions.

Overseas

Strengthening of collaborations between China, Taiwan and Japanfor steady fulfillment of ordered projects and for winning orders of
new projects in China.
Further enhancement of presence in the Taiwanese market.

Power
PlantsElectronics

New Business
Areas

Technologies and business development for the wet process ofsemiconductors.
Taking on challenges to expand into non-aqueous solvents andgas-related areas.
45Medium-term Management Plan (FY2017 - 2019)

Important Measures (2)Areas

Measures
Rapid release and establishment of a business strategy of
newly developed products.

Standardized Water
Treatment Equipment &Filters

Functional
Product
Business

Separationandpurification

Development of successor models and enhancement of the
product lineup.
Improvement of sales and technical service structures
including overseas facilities.

Water Treatment
Chemicals

Developing of new chemicals.

Food
Processing
Materials

Improvement of productivity.

Improvement of overseas business structures.
Enhancement of the product lineup and expansion ofmarketing areas.

Secondary BatteryRelated Market

Establishment of recycling and purification technologies forsolvents (NMP) of positive electrodes of lithium-ion batteries
and creation of a business model and business execution
system.

Application Areas of
Separation and
Purification

Searching of untapped needs for the separation andpurification of value-added components, and technologicaldevelopment.
46

Medium-term Management Plan (FY2017 - 2019)

Important Measures (3)Areas

Measures
Resources will be allocated intensively to R&D activities aimed at further
growth mainly in focus areas such as functional products, semiconductor
processing, and separation and purification of non-aqueous solvents andgas.
Progress ofTechnological Development Expenses(millions of Yen)

2,000

R&D /
New Business
Development

1,800
1,600
1,400
1,200
1,000
800
600
2013

2014

2015

2016

2017
(Plan)
47

Medium-term Management Plan (FY2017 - 2019)

Important Measures (4)AreasProfitability

Measures
Development of and concentration on highly profitable projects.
Continuous efforts to optimize and review management resources.
Improvement of the profitability of overseas subsidiaries.

Overseas
BusinessStrengthening of marketing operations in the Asian region.
Exploitation of new areas.

CSR

Development of new basic activity policies and placement of a dedicated team tostrengthen CSR initiatives.

48

Toward Further Development

 Goals that the Organo Group Aims to Achieve
 Enhancement of Roles and Direction of Development

49

Toward Further Development
Goals that the Organo Group Aims to Achieve< Global Risks and Needs > Global risks presented at the 2017 Annual Meeting of the World Economic Forum (Davos Meeting)
1st

2nd

3rd

4th

5th

Global Risks
in Terms ofLikelihood

Extremeweather
events

Large-scale
Involuntary
migration

Major natural
disasters

Large-scaleterrorist attacks

Massive incident
Of datafraud/theft

Global Risks
in Terms of
ImpactWeapons ofMass destruction

Extremeweather
eventsWater
crisesMajor natural
disasters

Failure ofclimate-change mitigation
and adaptation

 Water risk presented by the Organization for Economic
Co-operation and Development (OECD)

40% of the world’s
population currently
lives in water-stressedriver basins

Water demand willrise by 55% by 2050

In 2050, 240 million
people are expected
to remain without
access to clean water

Required USD 6.7
trillion by 2050 forwater supply andsanitation infrastructure

Source : “OECD Principles on Water Governance” by OECD

Source : “The Global Risks Report
2017” by World Economic Forum

Supply of water necessary for
maintaining life and living
conditions
Reduction of CO2 emissions andenvironmental loads, etc.

50

Toward Further Development
Goals that the Organo Group Aims to Achieve< Roles of Organo >Strengthening of overseas business
Existing Businesses
Water Treatment
Pure Water andUltrapure Water Production
Wastewater Treatment
and Recycling

Enhancement ofoperations in the
Asian region

Further expansion
into new regions

Expansion into new business areas

Separation and Purification
Water Treatment for
Liquor, Coffee, etc. andPurification of Sugar

Semiconductor
manufacturing processes

EnergyLife science

Natural resources51

Toward Further Development
Goals that the Organo Group Aims to Achieve< Consistent Sales Growth >Progress of Nominal GDP and Net Sales

700,000

100,000
90,000600,000
Nominal GDP(millions of yen)

80,000500,000

70,000400,000

60,00050,000300,000

40,000200,000

30,000Sales(billions of yen)

20,000100,000

10,00000Source : Complied from “ World Economic
Outlook Database, April, 2017” byInternational Monetary FundThe growth of net sales has exceeded that of nominal GDP since FY2010 when overseas sales turned upward.
⇒ Progress has been made in the transformation of portfolios through overseas business development, thereby ensuring thatbusinesses are unaffected by Japanese business trends in which the growth of the water treatment market is slowing down.

[The expansion of overseas businesses is essential]
52

Toward Further Development
Goals that the Organo Group Aims to Achieve< Expansion into growing overseas markets >(billions of US$)

Progress of the overseas market size of water treatment
Excluding
China

UnitedStates

140

30

200

120

25

China

Key countries in Asia

100

20

80

Key countries inNorth America and Europe

ExcludingUnited States

60

180
50

160
140

40

120
15

60
10

40

30

100
80

20

60

20

5

0

0

China
Malaysia
Singapore

India
TaiwanVietnamIndonesia
ThailandAverage annual growth rate (2013-2020)
10.0%

40

10

20
0

0

United States
United Kingdom
FranceCanadaGermany

Average annual growth rate (2013-2020)
1.7%

Source : Complied from “Global Water Market 2017” by Global Water Intelligence53

Toward Further Development
Goals that the Organo Group Aims to Achieve< Targets and Missions >Targets
Areas in which any progress is being made or
will be made in terms of the market for water
treatment and improvement in standards of living

Existing Business Areas
China

Semiconductors
Power plants

TaiwanSemiconductors

Southeast Asia

Power plants
General industries

India

General industries
Power plants

Missions
Provision of water-related technologies and products needed
for industrial use and daily life

Socialinfrastructure
Industries

Water for power plants
Drinking water(desalination of seawater, etc.)
Industrial water
Raw water for food proceeding

Daily life

Water for pharmaceuticals
Wastewater treatment andrecycling (ZLD*)

Untapped Countries and Areas
Needs for good quality water forindustrial use and daily life

Environment

Low environmental load technologies(Energy-saving, reduction of CO2
emissions, effective use of resources,etc.)* ZLD (Zero Liquid Discharge): A system that recycles and reuses
wastewater without external discharge.

54

Toward Further Development
Goals that the Organo Group Aims to Achieve< Expanding into Growing Markets >(billions of yuan)

Change in the market and production of ICs in China

1,600
1,400
1,200
1,000
800

Market600

Production

400
200
0

*IC production: Comprises design, the wafer process and theassembly/testing process
Source: Compiled from “How will the Chinese electronics industry evolve in 2017?”, an agenda of the Shanghai
Seminar 2016 (Part 2) organized by Electronic Device Industry News of Sangyo Times

55

Toward Further Development
Goals that the Organo Group Aims to Achieve< Expanding into New Business Areas >Semiconductor Manufacturing Processes
Utility

Manufacturing Process

Ultrapure waterproduction

Hydrogen peroxide removal

Utility
Wastewater Treatment

Metal removal
Minute particle measurement

Functional Water

Cleaning

H2water／O3water／
NH3water, etc.

ManufacturingGas purification

Chemical supply
Chemical manufacturer

Developer
Etching solution
Stripping solution
Cleaning solution

Chemicalpurification

56

Toward Further Development
Goals that the Organo Group Aims to Achieve< Meeting the Social Needs >Energy and Resources
Existing Businesses
Water Treatment for Power Plants

Fluorine Recovery System “Eco-Crysta”

Water-heat Recycling System
coolingheatingcooling water
groundwater

endotherm

heatrecovery

radiation

heated water
boiler water

wastewater
Energy cost saving

Won the Grand Prize
for Excellence inEnergy Efficiency andConservation 2016

CO2 emission reduction

57

Toward Further Development
Goals that the Organo Group Aims to Achieve< Meeting the Social Needs >Energy and Resources

Business to be covered for future growth[Lithium secondary battery-related area]
The market will expand in line with the spread of electric vehicles.
NMP (N-methyl-2-pyrrolidone) on-site
purification and recycle system

Worldwide manufacturing capacity of NMP: 360,000 tons (2015)
High-grade NMP for LiB: Estimated to account for approximately
10% of total production (36,000 tons)

Purification ofelectrolytic solution

Separation and recycling ofrare metals

Expected to grow 10% every year58

Toward Further Development
Goals that the Organo Group Aims to Achieve< Meeting the Social Needs >Life science

Existing businesses

Business to be covered for future growth

Production of water for
pharmaceuticals and injection[Production process of pharmaceuticals]
Needs are growing as a result of the
progress of the aging society andincreasing health-consciousness.

+
Production equipmentof pure water forbiochemical analyses

Bio-pharmaceuticals

Cultivation of new areas throughthe development of functions andnew applications for functional
materials
59

Toward Further Development
Enhancement of Roles and Direction of Development

Improvement andEnhancement ofProfitability
Establishment of a revenue structure
to secure operating profit and ROE
of 8% or more.

• Strengthening of cost competitiveness of existing
businesses• Cultivation of highly profitable projects and areas• Improvement and evolution of differentiating
technologies and products

Achievementof goals
Creation of
New Businesses
Establishment of a base for mediumto long-term sustainable growth• Allocation of additional resources for the exploitationof new businesses as well as research anddevelopment

60

Initiatives for Corporate GovernanceInitiatives for Corporate Governance61

Initiatives for Corporate GovernanceInitiatives for Corporate Governance
Items

Initiatives/Challenges

Change of stock
units andconsolidation ofstocks[Initiatives] (Scheduled for October 1, 2017)• Change from 1,000 stocks to 100 stocks (per units)• Consolidation of five stocks into one

Independent
auditors[Initiatives]
One independent auditor will be selected(at general meeting of shareholders on June 29, 2017)

Strategic
shareholdings[Initiatives]• Evaluations were made in consideration of financial and transactional effectivenessfor the Company (June 2016).
• Some shares were sold based on the evaluations (October 2016).

Constructive
dialogs withshareholders andinvestors[Initiatives]• Presentation for shareholders• Individual meeting with institutional investors and analysts[Challenges]
Revitalization of IR activities.

Review of meetingsystems[Initiatives] (implemented in February 2017)• Objectives, members, and submitted agenda, among other factors, were revisited forclarification and revised.
• Active participation by non-executive directors.
62

Initiatives for Corporate GovernanceInitiatives for Corporate Governance
Items

Evaluation oftheeffectivenessof Board of
Directors’
meetings

Initiatives/Challenges
Evaluation
methodA questionnaire for all Directors and Auditors and discussions at Board of
Directors’ meetings (implemented during the period from April to June 2016).

Main
evaluation
items• Effectiveness : Capability, selection and remuneration pertaining to
Directors, management strategies, etc.
• Members : Excess/shortage and diversity of officers.
• Operation method : Frequency of meetings, hours of discussion, etc.
• Support system for outside officers : Provision of information, priorexplanations, etc.
• Relationships and dialogs with investors and shareholders : Information
disclosure, feedback to management, etc.

Evaluation
results• The submitted agenda and explanations to outside officers were appropriate.
• Board of Directors’ meetings are functioning effectively overall.

Challenges
andimprovement
measures• Clarification of corporate value and the direction of management:
Deepening of discussions and deliberations on medium- to long-term
management strategies, examination of CSR policies and activities.
• Enhancement of activities to disseminate information externally :Review of initiatives including the improvement of systems and staffing.
• Improvement of the remuneration system for Directors :Discussion of medium- to long-term incentives at Compensation
Committee meetings.
• Enhancement of deliberations for the selection of Directors:
Expansion of the scope of involvement by Board of Directors’ meetings, etc.

63

Initiatives for Corporate GovernanceInitiatives for Corporate Governance
Items

Enhancement of
CSR activities

Active participation
by diverse
individuals

Initiatives/Challenges[Challenges]
 Formulation of basic activity policies• Anticipated activities: Expanding activities to raise the level of social trust.
• Dissemination of information: Sending information externally andstrengthening communication.
<Information disclosure from ESG perspectives>• Review of the goals: Clarifying an ideal future corporate image.
< Revisiting the corporate value and social role of Organo >< Reconsidering the corporate concept, corporate philosophy, management philosophy,etc.> Placement of a dedicated team[Initiatives/achievements]
Obtained Three Star status of “Eruboshi,” a certificate
based on the Promotion of Women’s Career Activities Act.
(January 2017)“Eruboshi” Certification Mark
[Challenges]
Further efforts to utilize and foster diverse human resources group-wide.
<Development of all staff members at overseas subsidiaries, etc.>64

Initiatives for Corporate GovernanceInitiatives for Corporate Governance
Items

Initiatives/Challenges[Initiatives]
 Organization reviewed: Compensation Committee (established in April 2016)
and the Board of Directors
 Expansion of the portion of remuneration linked to short-term performance(operating income in the previous fiscal year) (June 2016)
Fixed

Performance-linked

President

Review of the
remuneration systemfor officers

Managing Director
Director & Executive Officer
Part-time Director
Outside Director
Managing Executive Officer
Executive Officer

0

50

100

Composition of remuneration factors (%)[Challenges] Introduction of remuneration linked to medium- to long-term performance(under consideration)
65

Organo Corporation
Corporate Planning Department
1-2-8, Shinsuna, Koto-ku, Tokyo 136-8631, Japan
TEL +81-3-5635-5111
FAX +81-3-3699-7240
URL http://www.organo.co.jp

This document includes forecasts of future developments made by management basedon their assumptions, forecasts and plans at the time of writing. Actual performance may
differ materially from the above projections due to a variety of factors.

66