2-3-1 Nihonbashi-Muromachi, Chuo-ku, Tokyo 103-0022, Japan
Public Relations Tel: +81-3-3510-3579
URL: www.khneochem.co.jp/en/

CORPORATE REPORTKH Neochem Co., Ltd.

“Taking on New Challenges“2020Editorial Policy

Realizinga brighter tomorrowfor society
through the powerof chemistry.
Our Basic Principles-Corporate Mission-

Realizing a brighter tomorrow for society through the power of chemistry.
-Management Approach-

Making our dream a reality through reliable technology and new inventions.

In this report, by demonstrating our medium- to long-term value, vision,
strengths and drivers, and the foundation of our value creation, we aim toengage in dialogue with our stakeholders to further advance our value
creation activities.
We referred to the Ministry of Economy, Trade and Industry's Guidance for
Value Co-creation in preparing this document.

Scope of Report
January 1 to December 31, 2019Index

* However, environmental report data and other statutory
information is for the period from April 1, 2019 to March 31,
2020. Some portions of the report also include activities for 2020.

02

Value Creation by KH Neochem

04

KH Neochem Strengths

07

VISION 2030

Note on Forecasts

08

Message from the President and CEO

Among the information contained in this report, information aside from
historical facts includes forecasts that are based on certain assumptions
and rely on judgments made by KH Neochem’s management using theinformation available at that time. For this reason, actual business results
may differ, depending on various factors.

13

Financial and Capital Strategy

14

Financial and Non-Financial Highlights

16

Business Overview

Reporting period:

Organization covered:	KH Neochem Co., Ltd. (nonconsolidated) (Someportions also include consolidated information.)
Date of publication:

July 202024	Special Feature (R&D):
Creating Value through Cultivation of
Our Technologies and Innovation
27

Production Technology

28

Human Resources and Corporate Culture

32

Corporate Governance37

Members of the Board

38

Message from Outside Directors
and Outside Audit& Supervisory Board Members

40

Responsible Care48

Measures Taken at Plants

50

Social Contribution Activities

51

Branding Activities

52

Dialog with Shareholders
and Investors

53

Corporate Overview / Stock Information-VISION 2030-

A Leading Global Specialty Chemical Company-3rd Medium-Term Business Plan-

Taking on New Challenges-Basic Behavior-

Taking the first step to overcoming barriers and issues we face.
-5C Credo-

Challenge Curiosity Communication Courtesy Compliance

KH Neochem｜ Corporate Report 202001

Added value in strategic fields
Based on our Corporate Mission of Realizing abrighter tomorrow for society through the power ofchemistry. , KH Neochem will contribute to building amore prosperous and sustainable society by providing
added value, primarily in three strategic domains: theenvironment, healthcare, and electronics.

Business Activities for Our Ambitions

Environment

Our Ambitions

A Leading Global
Specialty Chemical
Companyp. 07

Changes in society
Worsening global warming rowing global awareness ofG
environment issues

Sources of Competitive Advantage
Strategic Domains

Global nichetechnical
capabilities

Providing specialty chemicals that contribute to tacklingenvironmental issues such as global warming

EnvironmentIncreasing demand for air conditioners,
especially in Asia

Added value
 ontributing to the reduction of globalCwarming with raw materials forrefrigeration lubricants for environmentallyfriendly air conditionersP romoting green chemicals and helping
reduce the impact on the environment

Electronics

p. 04

Healthcare

Healthcare

Providing value-added specialty chemicals to accommodate
diverse lifestyles and the needs of people worldwide

Drivers
Technology
and Information

Businesses

p. 24

Human Resources
and Corporate Culturep. 16

Performance Materials

p. 28

Production
facilities ranking
among the world’s
foremost

Co-creation withcustomers

p. 04

p. 06

Providing highly functional andenvironmentally friendly materials that haveunique structures and physical properties

Raw materials for refrigeration lubricants
Cosmetic ingredients

Changes in society

Added valueIncreasing health and beauty
consciousness due to population growth
and the rise of income levels in Asia

S upporting the realization of beauty byproviding high-quality cosmetic
ingredientsDiverse lifestyles and needs

 ontributing to improve QOL* byCproviding raw materials for detergentsand toiletry products

Raw materials for water borne coatings*Quality of life
p. 22

GlobalEnvironment

Local
Community

Electronic Materials

Electronics

Selling high-purity solvents for evolving
electronic materials

Safety andStability

Corporate
Governance

Providing specialty chemicals that contribute to the spread of AI
and IoT, the mobility revolution, and next-generation technologies
in the electronics industry

High-purity solvents(for semiconductors and displays)

Foundation for Value Creation

p. 23

Basic Chemicals
A range of applications in industrial fields withvaried product lineups and high quality

Changes in society apid improvements in computingR
technologies for the ICT society(information age) obility revolution due to theMdevelopment of AI and IoT

 ontributing to the development ofCelectronics by creating new materials
and by providing solutions usingstate-of-the-art technologies

Solvents
Resin raw materials
Plasticizer raw materials

02

KH Neochem｜Corporate Report 2020

Added value
 ontributing to technology
C
improvements in semiconductors anddisplays by consistently supplying
high-purity solvents and further
improving their quality

Realizing a brighter tomorrow for society through the power of chemistry

Value Creation by KH Neochem

KH Neochem｜ Corporate Report 2020

03

KH Neochem Strengths

Global niche technical capabilities
KH Neochem has products that in Japan are solely manufactured by us, and even in the world are only
manufactured by a few companies. With our unique approach based on oxo, our core technology, we help
provide many of the materials that are essential for people’s lives.

High-pressure
oxo reaction
technologies

Crude oilThe oxo technologies use both highand low-pressure processes
Propylene

Variousrawmaterials

Low-pressure
oxo reaction
technologies

KH Neochem has two types of oxo reaction technologies: ahigh-pressure process exclusive to the Japanese market and alow-pressure oxo reaction process. Using our organic
synthesizing technologies, we are then able to synthesize arange of derivatives from aldehydes obtained by the oxo
reaction, including alcohols, synthetic fatty acids, and esters. We
manufacture a wide range of products by maximizing thesuperior attributes of our oxo technologies.

(Plasticizer raw
material)

Isononanoic
acid

Automobiles

HousesCosmetics

Refrigeration lubricant raw materials for environmentallyfriendly air conditioners.
It is also used as a base material for cosmetic products.

Raw material for plasticizers that make plastics more malleable,
mainly used in wallpaper, flooring, and automobile parts.

Butyl alcohol

Butyl acetate(Solvent)(Solvent)

Air conditioners(Refrigeration lubricant
raw material)(Plasticizer raw
material)

2-ethylhexanoic
acid

Automobiles

Air conditioners(Refrigeration lubricant
raw material)
HousesAutomobiles

Foodpackages

Cosmetics

Refrigeration lubricant raw materials for environmentallyfriendly air conditioners.
In addition, 2-ethylhexanoic acid is also used as a raw
material for interlayer films in car and truck windshields
and as a base material for cosmetic products.

Sold as a raw material for coatings, inks, adhesives, etc., and used
for automobile interiors and exteriors, the exterior walls ofbuildings, and food packaging materials.

1,3-butylene
glycolRefining (high purification) technologies
Refining technologies processes are used for obtaining a highly pure target
compound from a mixture. Our products have a consistent quality with extremely
low impurities and are highly valued by customers in Japan and overseas. They are
manufactured using purification technologies that we have cultivated over many
years as well as thorough quality control.

Isodecylalcohol

Isononylalcohol

Skin toners(Cosmetic ingredient)

Beauty serums

Possesses high moisturizing properties and is suitably antibacterial,
resulting in use as an ingredient for high-end skin toners, beauty
serums, facial masks, etc.

High purification
technologies

Variousolefins

Oxo reactions, also known as hydroformylation reactions, are areaction of raw materials, such as olefins, carbon monoxide, andhydrogen, for synthesizing aldehydes. The highly rare,environmentally friendly oxo technologies, use carbon dioxide(CO2) as a raw material for making carbon monoxide andhydrogen. The Yokkaichi Plant captures some of the CO2
emitted in flue gases after fuel is burned and uses that as a raw
material.

High-pressure oxo
reaction technologies

What is an oxo reaction?

Low-pressure oxo
reaction technologies

Oxo synthesis technologies

Market Share and Areas of Use of KH Neochem Products in Japan

High-purity
solvents

Semiconductors

Displays

Extremely pure solvents are used for manufacturing
semiconductors and displays.
ディスプレイや半導体の製造プロセスに使用される
非常に高純度の溶剤です。

High-level quality control technologies

Production facilities ranking among
the world’s foremost
KH Neochem has plants in Yokkaichi and Chiba. The Yokkaichi Plant has two sections for oxo-related products with aproduction scale and product lineup at a high level domestically. Our Chiba Plant has a high-pressure oxo reaction processcapable of supplying specialty alcohols and synthetic fatty acids, such as isononyl alcohol, isodecyl alcohol, and isononanoic
acid. In VISION 2030, we have plans for large-scale investments in production plants, with the aim of further increasing our
production capacity and improving productivity.

04

KH Neochem｜Corporate Report 2020

Yokkaichi Plant

Chiba Plant

KH Neochem｜ Corporate Report 202005

Our Ambitions

KH Neochem Strengths

Co-creation with customers
The vision of KH Neochem for continuing to create new value and striving for sustainable growth.
We aim to achieve sustainable growth and increase corporate value bymaking strategic investments to meet the demands of society.

Our main customers are leading companies in their industries andcompanies with a unique presence, and we have created new value
through long-standing, strong relationships of trust.
Our policy is to establish face-to-face relationship withcustomers, whether they are in Japan or overseas. Strengthening
the relationship of trust with our customers allows us to quickly

Our Ambitions

A Leading Global Specialty
Chemical Company

and precisely grasp industry trends, such as market demand,
helping to develop our businesses.

Expansion of our businesses

History of KH Neochem
Providing specialty chemicals that contribute to the reduction of global warming and a better quality of life

Our startup businesses provide
products for fields close to ourdaily lives, such as houses,
automobiles, and foodpackaging

1948

Expansion of products with the largest global share and new businesses in three strategic domains

Began as Japan's first mass-producerof acetone and butyl alcohol byfermentation
Provided new value by looking beyond the times

Top-class profitability in the chemical industry
Benzaburo Kato,
founder of our business

1961

Financial Targets*

Converted to petrochemical
manufacturing methods
Transformed the Company to meet thechanging times

Began performancematerials businesses
Entering the markets ofhigh-value-added productsthat are more friendly topeople and the environment.
Providing products used forenvironmentally friendly air
conditioners and cosmetics.

Began electronicmaterials businesses
Developing the products thatmeet the demands of theadvanced electronics industry,
such as high-purity solventswith extremely low impurities(dust and metal fragments).

1988
Established a two-plant system:
the Yokkaichi and Chiba Plants

Net sales

Operating income

ROE

Equity ratio

180.0 bnJPY

Over 25.0 bnJPY

Over 12%50%

Corporate growth at 5%
annually on average

Expansion of profits at
7% annually on average

Maintaining highcapital efficiency

Construction of a financial
structure that is immune tothe external environment

Expanded our product lineup, creating a systemthat can cope with diverse needs(Consolidated basis)

2008
Extended accident-free record:
the Yokkaichi Plant

Growth Image

Our proud safety and stability record:
accident free for 23.95 million man-hours

Operating income

2011-2012

Fundamental
business

Became independent and changed
name to KH Neochem

Strategic
businesses+5.0bnJPY

Strategy Overview(billion yen)
25

Newbusinesses

Strategic
businesses
20

Electronics

Became independent from Kyowa Hakko
Kirin Group (at that time), marking the startof KH Neochem

Healthcare

15

2016
Aiming to create new
businesses

Listed on the First Section of theTokyo Stock ExchangeElectronics

We intend to create innovationfrom non-conventional
perspectives by working on
collaborative technicalinnovation with external
partners using cross-industry
exchanges, business matching,and other approaches.

Took new steps forward as a listed company

Healthcare

2018

Environment

KH Neochem｜Corporate Report 2020

+8.0bnJPY

10Environment

5

Announced VISION 2030
The vision of KH Neochem for continuing tocreate new value and striving for sustainablegrowth201806

Greater

2030(VISION 2030)

Market Growth

Began basic chemicalbusiness

Actively investing in growthareas to further develop
businesses, including new
businesses
Fundamental
businessStrengthening
competitiveness andsecuring stable earnings
by continually improving
productivity

Enabling capital
investment instrategic businesses
to support growth0

Invested Capital

BiggerKH Neochem｜ Corporate Report 202007

Message from the President and CEO

Take steady action to achieve
VISION 2030 goals amid changes
in the business environment
I would like to express my sincere sympathy to those who have contracted COVID-19 and my deep
condolences to those who have lost friends or family members.
We find ourselves in a challenging situation in 2020 due mainly to the global economic stagnation
caused by the COVID-19 pandemic. However, we have a distinctive and promising product lineup, so
we will make every effort to meet society’s needs, realize sustainable growth, and take steady action toachieve our VISION 2030 goals, amid these changes.

Addressing major changes in the environmentMore than a year has passed since I became president and
CEO in March 2019. The Japanese petrochemical industry
flourished in the five years before that, but 2019 turned out
to be a year of turbulence in the business environment.
Things began relatively smoothly, but in the second half ofthe year, basic chemical products especially took a hit due toslow demand from China, primarily reflecting trade friction
with the United States. Most recently, the situation has
grown increasingly complex due to the added stress of the
global COVID-19 pandemic.
VISION 2030 and the Third Medium-Term Business Plan
were launched in fiscal year 2019 (ended December 31,2019). The numerical targets were based on the assumptionthat a solid growth rate would be maintained in the market,

primarily in Asia. For that reason, unfortunately we arefacing changes in the business environment that make itsignificantly different than we anticipated.
At the same time, history shows us that in certain periods
the petrochemical industry will perform slowly due toeconomic cycles. This is a pattern that has repeated over the
past several decades, so a downturn should not be
surprising. It is usual that material manufacturers are
impacted by other industries. As a manager, it is importantfor me to take the best course of action for sustainablegrowth while basing decisions on a long-term outlook andimplementing resourceful measures that consider changes inthe environment.

Moving forward steadily to achieve VISION 2030

Michio Takahashi
Representative Director
President & CEO
KH Neochem Co., Ltd.

08

KH Neochem｜Corporate Report 2020

In fiscal year 2020, we expect a substantial year-on-year
decline in both sales and profit. This is mainly because the
Yokkaichi and Chiba Plants will undergo large-scale periodic
maintenance this year and because of the global economic
downturn associated with the spread of COVID-19.
On the other hand, over the medium to long term, we
expect demand to gradually pick up, and we are confident
that demand will grow for our main products. We continue
to develop as we identify the needs that lead to solutions tosocial issues, so that our products can contribute to society.
The concept of VISION 2030 is to become a leading
global specialty chemical company. This remains unchanged,
despite the harsh business environment. We have positioned
three fields—the environment, healthcare, and electronics—
as our strategic domains, where we will maximize ourcompetitive advantages and prioritize the allocation ofmanagement resources. We aim to capture the top global
share with our products and to create new businesses. We
look to provide specialty chemicals that contribute to the
reduction of global warming and to a better quality of life
through many industries around the world.
Due to the nature of business in the equipment

industry, we must anticipate demand and make precede
capital investments. Our management team will makeeffective investment decisions to achieve VISION 2030.

Strategic domains

Environment

Electronics

Healthcare

KH Neochem｜ Corporate Report 202009

Message from the President and CEO

Progress on taking on new challenges in
our third Medium-Term Business Plan

Boldly making decision of large investments thatwill create a future pillar for earnings

Our Third Medium-Term Business Plan defines a three-year
period for taking on new challenges setting us on the road toour goals under VISION 2030. The main strategy is toimplement initiatives for long-term growth, and we havemade steady progress up to this point. The key will be toaccurately determine our capital investments based on longterm demand forecasts. Over the past few years, ourrefrigeration lubricant raw materials performed well. This was
thanks to large-scale investment in anticipation of demandamid the harsh business environment resulting from the 2008
global financial crisis. Our production plants built between
2011 and 2014 succeeded in meeting increased global
demand. Of course, we must carefully assess the market
growth rate and the feasibility of expanding our market share,
but we recognize the importance of building up our plants forthe future.

Strategy II is active investment for the future expansion of
performance chemical business. We will study the businessfeasibility and make decisions for large investments inperformance chemicals that will create a future pillar for
earnings.
Construction of a new plant for refrigeration lubricant
raw materials was completed at the Yokkaichi Plant at the
beginning of 2020, but we will need to investigate
expanding the Chiba Plant as well to address growing
demand. We have already begun a feasibility study, butplant construction costs have risen well above what was
initially anticipated, so we will continue improving thereinforcement plan to make sure that it results outweigh theinvestment.
In the area of research and development, we areaccelerating open innovation. Our new KH Neochem
innovation hub (KH i-Lab) in Kawasaki City, Kanagawa
Prefecture, is where we engage in open innovation withcompanies from other industries, research institutes, andother organizations. We hope to create new businesses instrategic domains that will become new pillars for earnings(see the special feature on pages 24 to 26 for details).
From the standpoint of risk control, it is very importantto reduce inventory risk. Reflecting on the enormous
inventory we were stuck with during the 2008 global
financial crisis and the resulting losses, we have beenworking on creating a system for adjusting inventory andthe micro-fabrication technology for circuits whenmanufacturing semiconductors. EUV is expected to bringabout a generational change that happens once every 10
years, and it is a major business opportunity in the materials
field. Kurogane Kasei focuses on flexible businessdevelopment, so this investment decision was made aheadof similar-sized competitors. The company plans to start
operation of the new equipment by the end of 2020.
For cosmetic ingredients, we are working on
debottlenecking via small investments based on demand forskin care products in Asian markets and in response tocompetitors’ expansion plans. We completed some of theplanned investments in 2019 and will make the remaining
investments in 2021.

In addition, there is Strategy I: Profit increase by new
facilities. The goal is to complete construction of new
facilities during the period of the third Medium-TermBusiness Plan and to tie that into higher earnings.
Construction of the new plant for refrigeration lubricant
raw materials at the Yokkaichi Plant was completed onschedule, January 2020. There are depreciation costs up
front, but I believe the new plant will contribute to earnings
during the period of the current mid-term plan.
Regarding electronic materials, at our subsidiary
Kurogane Kasei we are investing in facilities for extreme
ultraviolet (EUV) photoresist material, essential for the next
generation of semiconductor manufacturing. EUV improves

Third Medium-Term Business Plan: taking on new challenges

believe that we have been able to maintain effective levels,
to some extent, during this difficult time. Further, at theend of 2019 we issued our first straight bonds. This allowed
us to raise 5 billion yen to increase our liquidity. We have
improved our financial standing so that we can withstandeven extreme changes in the external environment, for aperiod of time, by closely managing inventory and otherinitiatives within our normal business operations. We willcontinue to make bold decisions on large investments while
carefully monitoring the business environment and market
trends.

Improving our operations

Strategy Ⅰ

Strategy Ⅱ

Strategy Ⅲ

Profit Increase by
New Facilities

Active Investment for
the Future Expansion of
Performance Chemical Business*

Improvement ofbusiness framework

S tart up of new facilities forrefrigeration lubricant raw
materials and marketing of
new productsF urther increase in production
capacity for performancechemicalsF urther introduction of facility
control system with latest
technologies (AI and IoT)

 perate new facilities for nextOgeneration semiconductormaterials

 reation of new businessCthrough the new research hub

Improvement of work
environment andencouragement of diverse
work styles

For Strategy III, improvement of business framework, we aretaking on initiatives in both technology and information,
human resources and corporate culture, which are the drivers
for achieving VISION 2030.
For technology and information, we are promoting
restructuring plant operations using AI and IoT. Adding
elements such as AI enables more efficient operations andcontributes to energy savings and lower manufacturing costs.
We call this the Advanced Process Control system and havealready introduced it at several plants. By 2023, we plan to
introduce this system at most production lines in the Yokkaichi
and Chiba Plants.

*Performance materials and electronic materials

10

KH Neochem｜Corporate Report 2020

KH Neochem｜ Corporate Report 202011

Financial and Capital Strategy

Message from the President and CEO

Fostering a corporate culture that has
diverse human resources and that maximizes results
When it comes to human resources, we believe that people
who work with speed, aiming for innovations,professionalism, and enhancing their network are essential for
long-term growth. For this reason, we are hiring mid-career
workers. Since becoming independent of the Kyowa Hakko
Kirin (now Kyowa Kirin) Group in 2011, we have hired
specialists in corporate adminstrations, finance, humanresources, and other areas to strengthen our corporate staff
function. As our business has grown, we have also hired
additional engineers, sales representatives, and R&D staff.

Today, nearly half of all our employees joined us after webecame independent. We anticipate that bringing in
employees who have worked in different environments and ayounger generation will breathe new culture into theCompany and create an innovative working environment.
In our corporate culture, we hope to maximize results byrecognizing a wide range of values and by promoting
diversity. As mentioned, our lineup of human resources hasgrown significantly more diverse. At the same time, however,
we recognize the importance of improving employee
engagement so that everyone can exert his or her fullpotential while heading in the same direction. For that goal,
we carried out new training as well as training to boost
employee engagement as part of our corporate culture
reform. The aim is to deepen understanding of VISION 2030
in every workplace, especially among the managers who are
key to promoting the business. I have a solid belief thatencouraging the people at every workplace to put their
dedication into their own words is, step by step, leading toincreased commitment. These are steady measures, and wewill implement them as necessary to promote reforming ourcorporate culture.

Masaya Hamamoto
Board Director
Senior Corporate Officer & CFO
KH Neochem Co., Ltd.

Solid financial base
Under our VISION 2030, we aim to build a balanced financialbase that is less susceptible to changes in the external
environment while maintaining a high level of capitalefficiency. Our targets for 2030 are an ROE of over 12% andan equity ratio of 50%.

Investment strategy

Toward continuous improvement of corporate value
ESG initiatives have gained attention in recent years. I believethat it is highly important for us to ensure sustainablebusiness growth by contributing to society through business.
Up to now, we have contributed to society by providing
high-value-added materials, which includes improvements to
our lineup of low environmental impact products. Our
refrigeration lubricant raw materials used in environmentallyfriendly air conditioners are a good example of something
directly linked to addressing a social issue.
We have also steadily strengthened ways to improve theeffectiveness of corporate governance and to ensure
thorough compliance during our journey as an independent
listed company.
Moreover, we have been working on social contributions
at the Yokkaichi Plant (Yokkaichi City, Mie Prefecture) andthe Chiba Plant (Ichihara City, Chiba Prefecture), while
reducing the environmental impact during production,
cooperating with local governments and asking the local
people about their needs.

12

KH Neochem｜Corporate Report 2020

Although we are already working on initiatives that tie
into ESG, we recognize that a challenge for the future will
be communicating what we are doing to those outside theCompany while systematically organizing the information,
establishing targets, and implementing a PDCA cycle.
We are currently facing a challenging businessenvironment impacted by COVID-19 Pandemic, but we havea distinctive and promising product lineup. Thank you verymuch for your continued support as we pursue medium-to
long-term growth.

We plan to invest 23 billion yen over the three-year period of
the current Medium-Term Business Plan (fiscal years 2019 to2021). Specifically, these investments are 12.5 billion yen in
strategic investments centered on performance materials, apillar of our growth, and 10.5 billion yen to strengthen ourbusiness framework such as reinforce existing production
and improving the workplace environment. In fiscal year
2019, we built a new plant for refrigeration lubricant raw
materials at the Yokkaichi Plant and opened our open
innovation hub (KH i-Lab in Kawasaki City). With theseinvestments, we are putting together a system capable ofsupporting medium- to long-term growth centered on theenvironmental field, one of our strategic domains.
At the same time, we will continually monitor demand
trends and judge the right timing for large investments sothat we do not take on too much financial burden from fixed
costs while plant construction costs remain high.

Fiscal year 2019 results andfiscal year 2020 outlook
Fiscal year 2019 brought with it a difficult businessenvironment. Demand slowed going into the second halfamid economic uncertainty, particularly in China, against
the backdrop of trade friction between the United States
and China.
In fiscal year 2020, there is uncertainty over the businessenvironment due to lower corporate production and stalled
consumer spending associated with the rapid decline in the
global economy reflecting COVID-19 pandemic. Given thissituation, we are steadily moving forward with full-scale
operation of the new plant for refrigeration lubricant raw
materials and facilities for semiconductor materials at our
subsidiary, Kurogane Kasei.

Shareholder return policy
Our basic policy is to provide stable shareholder returns inproportion to corporate growth. We set dividend payout
ratio of 30% as a guide, while considering an effectivebalance between investment for the future growth, andfinancial soundness. In fiscal year 2019, we provided interim
and year-end dividends of 30 yen per share, for a full-year
dividend of 60 yen per share. We plan to provide a dividendof a same amount in fiscal year 2020.
We will continue working to further improve corporate
and shareholder value through medium- to long-term
profit growth, investments that support this growth,shareholder returns, as well as dialogue with shareholders
and investors.
KH Neochem｜ Corporate Report 202013

Financial and Non-Financial Highlights
The figures on page 14 are consolidated and those on page 15 are non-consolidated.
Data with no explanatory notes indicate the period from January 1 to December 31, each year.

Net sales

Operating income(billion yen)120

(billion yen)

103.5

94.7

101.2

80.2

94.2

Energy consumption and specific consumption
11.5

12

10.9

9.0
6.3
6

40

0

3
2015

2016

2017

2018

2019 (fiscal year)

0

2015

2016

(kt)

250

500

200

400

150

150

300

100

100

200

50

50

100

2019 (fiscal year) 0

0

250
200

9

80

（L/t）

(1,000 kL)

9.6

2017

2018

2019 (fiscal year)

CO2 emissions volume

0

205.0
216.8

2015

206.5

218.7

202.3

2016

199.5

2017

208.7
210.0

2018

204.6
207.2

442.4

448.2

2015

2016

473.6

2017

448.9

440.2

2018

2019 (fiscal year)

Energy consumption (crude oil equivalent) (1,000 kL)
Specific energy consumption (L/t)*April 1st to March 31, each year

*April 1st to March 31, each year

Profit attributable to owners of parent

Net interest-bearing debt

(billion yen)(billion yen)

10

20

8.2

7.7
7.5

6.7

6.0

6.9

19.0

15

11.9

2015

2016

2017

2018

2019 (fiscal year)

0(t)(frequency rate)

1.00

16.8

5.6

10

2016

2017

2018

0.81

0.88

0.100

0.90

0.81

2019 (fiscal year)

0

2015

2016

2017

2018

0.075

0.06

0.050

0.04

0.8

1.1

0.94

0.50

7.3

7.3

5
2015

0.75

(severity rate)

0.09

15

5

2.5

Frequency rate (accidents resulting in lost workdays)/Severity rate

25
20

10.9

10

5

0

19.0

Disposed of as landfill

2019 (fiscal year)

0.25
0

0
2015

0.03

0.02

0.025

0

0

0

0

2016

2017

2018

2019 (fiscal year) 0

Frequency rate and Severity rate:KH Neochem
Frequency rate:Chemical industry average (Ministry of Health, Labour and Welfare statistics)
Severity rate:Chemical industry average (Ministry of Health, Labour and Welfare statistics)*April 1st to March 31, each year

Equity ratio/ROE

CAPEX

Number of employees

Number of new employees(fiscal year)

(%)

50

39

40

28

30
20

28

33

38

40

2015

Equity ratio

2016

2017

10

800

7.0

5

20

18

10
0

(persons)

7.5

29

20

(billion yen)

20182019 (fiscal year)

2.4

2.4

2.5
0

2015

2016

599

600

1.6

2015

2016

2017

2018

2019

New graduates

14

18

8

21

27

Mid-career

8

5

14

19

50

Total

22

23

22

40

77

659

600
400

2.9

2017

601

611

200
2018

2019 (fiscal year)

0

2015

2016

2017

2018

2019 (fiscal year)

ROE*As of December 31, each year

Depreciation

R&D expenses

New female employees (%)(billion yen)(billion yen)

(%)

1.5

20

*Only workers who have signed a labor contract with no fixed termYears of service and gender differences(fiscal year)

5

4.0

4

3.5

3.4

3.3

3.3

3

1.0
1.0

0.9

0.9

0.8

0.8

0.5

2015

2016

2017

2018

2019 (fiscal year)

0

4.5

5

1
0

13.0
10.0

8.7
10

2

13.6

15

2015

2016

2017

2018

2019 (fiscal year)

0

2015

2016

2017

2018

2019 (fiscal year)*Only full-time workers

14

KH Neochem｜Corporate Report 2020

2016

2017

2018

2019

2020

Years of service(male)

17.1

16.5

16.0

14.6

13.5

Years of service(female)

16.9

16.9

16.3

14.3

14.3

Year difference(male and female)

–0.2

0.4

0.3

–0.3

0.8

*As of April 1, each year
KH Neochem｜ Corporate Report 202015

Business Overview

Proportion of total
operating profit

Gross profit(2019)(consolidated, hundred million yen)

Performance
Materials

74

Refrigeration lubricant
raw materials,
Cosmetic Ingredients

2015

124

118

119

2017

2018

2019

87

2016

Note: In the Business Overview section, when calculating operating profit in results by business field,
administrative expenses, etc., which are common to the entire company, are not allocated.

Key Points in the Third Medium-Term Business Plan
In the three strategic domains that we have established, Performance
Materials supports two strategic domains: the environment and healthcare.
Refrigeration lubricant raw materials used in environmentally friendly air
conditioners have contributed to global warming prevention. Cosmetic
ingredients, used in high-end skincare cosmetics such as skin toner, havehelped improve the quality of life (QOL) of people all over the world.

Refrigeration Lubricant
Raw Materials
Areas of Use

Strategic Domains❷ Further increase in production capacity for performance chemicals(refrigeration lubricant raw materials, etc.)

Looking back on activities in 2019 and future initiatives

Environment

Representative Products

2-ethyl hexanoic acid
Air conditioners❶ Start up of new facilities for refrigeration lubricant raw materials
and marketing of new products

Isononanoic acid

Value chain example
We manufacture and sell lubricant raw materials used for refrigerating equipment in air conditioners based on our oxo reaction
technology developed for our basic chemicals.

Regarding ❶, we were able to build a new plant for
refrigeration lubricant raw materials at the Yokkaichi Plant
almost as planned in 2019, and held the completion
ceremony in January 2020. For the future, we will continue
to make every effort for stabilized operations with effective
operational management. In addition, we are planning todevelop new products and to implement debottlenecking.
Regarding ❷, we have started to conduct a feasibility
study for improvements at the Chiba Plant. The plan requiresa very difficult investment decision in the face of majorchanges in the business environment, such as the rising costof plant construction. However, we will make effective
management decisions to meet strict economic constraints,
by quickly modifying the plan and after considering all
management priorities.
Although there was a short-term sales slowdown
because of the impact of COVID-19 in the first half of2020, growth is expected in global demand forenvironmentally friendly air conditioners and eventually forour refrigeration lubricant raw materials over the medium
to long term. We will make every effort to implement our
growth strategy, taking the best course of action for
immediate management issues and prioritizing the
medium- and long-term perspectives.

KH Neochem
Procured raw materials• Propylene• Various olefins

Technology

Product

Technology foroxo reactions

Refrigeration
lubricant raw
materials

Process toward final productRefrigeration
lubricantmanufacturer

Compressor
manufacturers

Final productCreating new value

Environmentallyfriendly air
conditioners

Contributing to
global warming
prevention

Global expansion ofenvironmentally friendly air
conditioners

Strength

External Environment

Large share of global market

Global expansion in the environmentally friendly air
conditioner market
Population expansion in emerging nations

Located in Asia,
the region with the world’s highest demand
R&D system in cooperation with customers

16

KH Neochem｜Corporate Report 2020

Worldwide increase in the size of middle-income groups
Tightening international environmental
regulations for refrigerants

New facility for refrigeration
lubricant raw materials at the
Yokkaichi Plant
Demand for refrigeration lubricant raw materials has
been growing due to growth in the air conditioner
market in China and other emerging nations, as well
as a shift to refrigerants that are effective against
ozone layer depletion and global warming. We
established a new plant in Yokkaichi Plant in responseto these global trends. We completed construction in
January 2020, realizing productivity improvements of
50% for each product.

KH Neochem｜ Corporate Report 202017

Refrigeration Lubricant Raw Materials

Market Prospects for Refrigeration Lubricant Raw Materials
One of KH Neochem’s main products is refrigeration lubricant raw materials. In this special
feature, we look at the prospects for these ingredients, while reflecting on the global trend forincreasing concern for the environment.

What are refrigeration lubricant raw materials?
Air conditioners make rooms cool by taking in hot indoor air and moving just the heat to the outside. Moving the heat to theoutside is performed by a refrigerant, which functions by being compressed in a compressor inside an air conditioner’s outdoor
unit. The compressor needs a lubricant, specifically a refrigeration lubricant raw materials to operate efficiently and smoothly,
without breaking down over a long working life.
Currently, the shift toward environmentally friendly air conditioners is accelerating, and demand for refrigeration lubricant raw
materials that are compatible with the refrigerants used in these air conditioners is also growing rapidly. KH Neochem holds anextremely high share globally for the raw materials used in refrigeration lubricant raw materials.
Market Position of KH Neochem
Raw materials

Refrigerant carrying heat
Indoor unit

LubricantOutdoor unit

Cool refrigerant
Indoors

Refrigeration lubricant raw materials

Hot refrigerant

Outdoors

Isononanoic acid

Base oils

Compressor

Discharge heat

Cooled air

2-Ethylhexanoic acid

Compressors/air conditioners

Advanced Nations

Emerging Nations

Obliged to Reduce the CO2 Equivalent Value, basedon the Kigali Amendment and Growing Demand forSynthetic Refrigeration Lubricant Raw Materials

Different Reduction Schedules for Advanced andEmerging Nations

Although CFC substitutes do not harm the ozone layer, 18 typesof CFC substitutes with high GWP were added as regulated
substances in the Kigali Amendment, with a view toward
preventing global warming.
The gradual reduction of CFC substitutes outlined in the Kigali
Amendment uses CO2 equivalent values obtained by multiplying
the quantities of CFC substitutes by GWP as an index. Averagevalues for the production and consumption of CFC substitutes from2011 to 2013, among other data were used as standard values.*3
For advanced nations, including Japan,*4 a gradual reduction in
CO2 emissions from the standard values is required from 2019 to2036, with the ultimate target of an 85% reduction by 2036.
As a result, this regulation is expected to further raise demand
for air conditioners that use low GWP refrigerants, such as R32.
Advanced Nations and Refrigerant GWP Reduction Schedule*3

Transition to Refrigerants and Refrigeration Lubricants
Raw Materials with Low Environmental Impact-10%

From Controlled CFCs to CFC Substitutes

Shift to Low GWP*1 Refrigerants

In 1987 the Montreal Protocol was adopted, establishing theregulatory measures for CFCs, including the gradual reduction andultimate elimination of controlled CFCs, which cause ozone layer
depletion. As a result of this Protocol being enacted, a global shift to
CFC substitutes that do not harm the ozone layer has developed
rapidly since around 2000.

Since its adoption, the Montreal Protocol has undergone several
revisions, as they are required. In the 2016 Kigali Amendment,*2 it
was agreed to gradually reduce refrigerants with high GWP tosuppress global warming. This is accelerating the shift to newrefrigerants such as R32, a CFC substitute with low GWP.

Under the Montreal Protocol, advanced nations are required toeliminate ozone layer-depleting controlled CFCs by 2020,
while emerging nations are working on initiatives towardelimination by 2030.
In the measures against global warming laid out in the Kigali
Amendment, emerging nations*5 are obliged to reduce the CO2
equivalent value by 10% of the standard value by 2029. The
regulations become stricter in steps, ultimately reaching therequirement for an 80% reduction by 2045.
In addition to the above, as emerging nations grow in economic
strength, a significant increase in demand is expected forenvironmentally friendly air conditioners (see the diagram below).
*5 T he standard value is calculated based on the average values for production andconsumption of CFC substitutes from 2020 to 2022, among other data. The
schedule is more gradual in India, Pakistan, Iran, Iraq, and the Gulf States. For
more detail, please see the graph below.

Global Air Conditioner Sales Forecasts
Petroleum-based (compatible with old refrigerants)
Synthetic (compatible with current and new refrigerants)

CO2 equivalent value

Air Conditioner Mechanism

International Regulations on Refrigerants Concerning Climate Change(Kigali Amendment) and the Future of Refrigeration Lubricant Raw Materials

Global market for air conditioners usingsynthetic refrigeration lubricant
raw materials is growing.

-40%

140

-70%
-80%

2019

2024

2029

2034

-85%

2036~

millionunits

100

millionunits

CAGR: 5%.

Transition in Refrigerant and the Raw Materials for Refrigeration Lubricant
Global environmental
regulations

1987 Montreal Protocol

1997 Kyoto Protocol

2016 Kigali Amendment

Global trends

Requirement to reduceand eliminate controlled CFCs

Greenhouse gas emission regulations

Requirement to reduce CFC substitutes

From around 2000

Transition in refrigerants

Transition in refrigeration
lubricant raw materials

Substitute(CFC substitute)

New refrigerant: R32

Substitute(CFC substitute)

Ozone layer - causes depletion

Ozone layer - no depletion

Ozone layer - no depletion

Global warming impact – large(GWP – high)Global warming impact – large(GWP – high)Global warming impact – low(GWP – low)

Petroleum-based

KH Neochem｜Corporate Report 2020

2025
Source: KH Neochem forecasts based on JARN data

Synthetic

Using raw materials produced by KH Neochem

From 20XX
Substitute

Next-generation
refrigerant(currently under development)

Under development*1 GWP (global warming potential): the greenhouse effect of a refrigerant, expressed as a value with carbon dioxide standardized at 1.
*2 Kigali Amendment: A new international agreement reached at the 28th Montreal Protocol Conference (MOP28) held in Kigali, Rwanda on October 15, 2016.

18*4 Regulatory measures differ in some advanced nations, such as Belarus and Russia.

2018

From 2012

Old refrigerants: R12/R22 Current refrigerant: R410A(controlled CFCs)*3 F or more details, please refer to the Montreal Protocol on Substances that
Deplete the Ozone Layer on the website of the Ministry of Economy, Trade andIndustry. (Japanese documents only)
https://www.meti.go.jp/policy/chemical_management/ozone/law_ozone_laws.html

KH Neochem’s Strategy
Due to the Kigali Amendment and the growing economic strength of emerging nations, we foresee an increase in demand for air conditioners
using low GWP refrigerants, such as R32. We will further strengthen our capacity to supply refrigeration lubricant raw materials used in these
air conditioners. With an eye on the future, we will also conducting research and development into refrigeration lubricant raw materials thatwill be compatible with next-generation refrigerants for extremely low GWP.

KH Neochem｜ Corporate Report 202019

Business Overview

Cosmetic Ingredients

Strategic Domains

Healthcare

Key Points in the Third Medium-Term Business Plan
Areas of Use

Face masks

Representative Products❶ Production capacity growth for skincare products (1,3-BG) in
response to expanding markets for skincare products in Asia

1,3-butylene glycol(1,3-BG)❷ Quality improvement by creating low-odor products, etc. tomeet varied customer requirements

Skin toners /beauty serums

Looking back on activities in 2019 and future initiatives
Value chain example
We manufacture and sell cosmetic ingredients mainly for skincare products and have received a strong reputation for
product quality.
KH Neochem
Procured raw materials

Technology

Product

Process toward final product

Final productCreating new value

Ethylene

Synthetic
technologies

Cosmetic
Ingredients

Cosmetics manufacturer

High-quality cosmetic
product (skincare
product)

Contributing to
improvements in
QOL*

To meet increasing customer
requirements for high-end
products and diversification

Strength*Quality of life

External Environment
Growth in the skin care market

Integrated system for production
from raw materials
Located in the promising Asian market

Global expansion of
middle-income groups

Spread of e-commerce

Growth in the men’s
cosmetics market

Increasing interest in high-end
and natural products

Increasing global sales channels focused on Asian markets
We are selling our 1,3-BG compound in Japan and Korea, where people have high awareness of beauty and skincare, as well as
to China, Southeast Asia, and India, markets with rapidly increasing demand.

The amount of purchase ofskincare products (per person)

Korea
China

($) 150

Japan

120
90
60

India

Southeast Asia

30
0

142

123

Huge potential
demand25

75Regarding ❶, we began production debottlenecking with aminor investment in 2019. In addition, we plan to implement
further debottlenecking (to be completed during periodic
repairs in 2021).
Regarding ❷, we will do our best to develop low-odor
chemicals in collaboration with various research institutes.
It is expected that customer demand for skincare
products, mainly in Asia, will increase in the medium to longterm, although there were some slowdowns in customer
demand in the tourism industry and the retail travel businessbecause of COVID-19 pandemic in the first half of 2020.
Recently, it seems that our competitors are building newplants, so we will steadily implement our growth strategy
placing value on the medium- and long-term perspectives aswell as on cosmetic ingredients.

Rare ingredients withfew global suppliers
We are one of a handful of companies worldwide thatare capable of manufacturing cosmetic grade 1,3-BG.
Every cosmetic has an ingredients label. If it says BG
or 1,3-butylene glycol, there is a good chance ourmaterials have been used. Our high-quality 1,3-BG
which is widely used in high-end skincare cosmetics, has
supported beauty and healthy lives all over the world.

2

Source: The Company's estimate (2019)20

KH Neochem｜Corporate Report 2020

KH Neochem｜ Corporate Report 202021

Business Overview

Proportion of total
operating profit

Gross profit(2019)(consolidated, hundred million yen)

Electronic
Materials

26

Strategic Domains

2015Electronics

31

2016

32

2017

30

29

2018

2019

Note: In the Business Overview section, when calculating operating profit in results by business field,
administrative expenses, etc., which are common to the entire company, are not allocated.

Areas of Use

Business Overview

Proportion of total
operating profit

Gross profit(2019)(consolidated, hundred million yen)

Basic
Chemicals
Fundamental
business

56

58

2015

2016

68

70

2017

2018

56

2019

Note: In the Business Overview section, when calculating operating profit in results by business field,
administrative expenses, etc., which are common to the entire company, are not allocated.

Representative Products

Areas of Use

Representative Products
Butyl alcohol
2-ethyl hexyl alcohol

PMA-P

Isononyl alcohol
Semiconductors

PM-P

Displays

Coatings / inks

Ethylene glycol monobutyl ether

Value chain example

Value chain example

We sell products such as high-purity solvents with an extremely low impurities (contamination and metal fragments) used forthe manufacturing process of displays and semiconductors. These solvents are manufactured by utilizing the technologies
that we have cultivated over many years, such as high purification, synthesis and quality control technologies.

These products are manufactured using our core technologies, and are sold for many uses, including coatings, inks, and wire
harnesses in industrial fields such as automobiles, houses, and electrical machinery.

KH Neochem
Procured raw materials

Technology

PMHigh purification
technologies
Synthesis technologies
Quality control technologies

KH Neochem
Product
High-purity
solvents

Process toward final productPhotoresist
manufacturers

Final productCreating new value

Electronicequipment

Contributing todevelopments in
loT and 5G
technologies

Display andsemiconductor
manufacturers

Procured raw materials• Propylene• Various olefins

Technology

Product

Synthetic technologies
including oxo
Distillation
technologies

Solvents
Resin raw materials
Plasticizer raw
materials

Strength
Technological expertise in high purification
technologies accumulated over many years

External Environment
Growing electronic materials market associatedwith development of IT and electronics industries
Spread and development of AI & IoT

Varied product lineups and supply system
Advanced quality control systems that
accommodate customer requirements

Improvements in the speed andfunctionality of electronic equipment
Increased demand for cutting-edge semiconductors
due to the spread of 5G technologies

Key Points in the Third Medium-Term Business Plan

❶ Operate new facilities for the next generation semiconductor materials❷ Further improvement in the quality of high-purity solvents in response
to greater miniaturization of semiconductors

Process toward final productCoatings, inks, resin
manufacturers, etc.

Strength
The largest production
capacity for oxo alcoholin Japan

Extensive range of
products supported by an
expanded lineup ofderivatives

Contributing to
comfortable
lifestyles(automobiles, houses,
beverage cans, etc.)

Trusting relationship andstable trade with top
manufacturers in eachmarketLocated close othergrowing Asian countries

Stabilized market in Japan andexpanding market in the rest of Asia
Stable domestic market
Population growth in emerging nations
Economic growth centered in Asia

Key Points in the Third Medium-Term Business Plan

❶ Operating an effective pricing policy and higher sales figures❷ Further introduction of facility control system with latest technologies (AI and IoT)

Looking back on activities in 2019 and future initiatives

Regarding ❶, in our subsidiary company, Kurogane Kasei
Co., Ltd., a commission manufacturer of electronic material
products, we began in 2019 setting up a new plant formaterials for the next generation of semiconductors. We
plan to complete construction and start operations this year.
This plant will also produce materials for the current
generation of semiconductors, so we will create an effective
production and sales strategy that matches market trends
based on an in-depth consideration of the growing existing

Regarding ❶, we faced a difficult situation: there was a
slowdown in domestic demand, including for automobiles
and houses, as well as softening market conditions. We
cannot estimate how long the impact of COVID-19 will last,
but we will closely observe the market trends and try toquickly catch any recovering demand to improve our sales.

KH Neochem｜Corporate Report 2020

Creating new value

Industrial
products

External Environment

Looking back on activities in 2019 and future initiatives
market. As well, we will take into account the growth of thestate-of-the-art EUV (extreme ultraviolet) photoresist market.
Regarding ❷, in an environment where theminiaturization in semiconductors is advancing daily, due to
COVID-19 there is a growing need for better product quality
in response to changes in people’s work and lifestyles. We
are making every effort to improve our quality control andsupply chain systems to further improve the quality of ourhigh-purity solvents.

Final productRequired to combine
raw materials foreach application

Higher performance semiconductors
and advanced innovations invarious IoT technologies

22

Butyl acetate

Wire harnesses

Regarding ❷, we have been introducing the system
mainly into plants for Basic Chemicals. As of 2019, we haveintroduced the system into some 20% of the entire plant,
contributing to productivity improvements and reducing
workloads. We are trying to introduce this system into mostof our plants by 2023.

KH Neochem｜ Corporate Report 202023

The Source of Our Competitive Advantage: Technology and Information

Special Feature (R&D)

Creating Value through Cultivationof Our Technologies and Innovation
Achieving VISION 2030 will require us to come up with new ideas and engage in new efforts that go
beyond a mere extension of our R&D thus far.
We have taken a new step toward improving corporate value in the medium to long term byimplementing bold organizational reform, strengthening our human resources capabilities, cultivating
our technology, and creating new businesses through collaborative innovation.

Organization
Improving the R&D system toachieve VISION 2030
In January 2019, we opened our Innovation Strategy Officeand partially integrated the Yokkaichi Research Laboratories
with the technology divisions of the Yokkaichi and Chiba
Plants to create our new R&D Center. Combined with theexisting R&D Department, this makes a three-department
system with clearly defined missions for each. In the fieldsof refrigeration lubricant raw materials and cosmetic
ingredients, cultivation of existing technologies is essential
to further increase our competitive advantage. That role isfulfilled primarily by the R&D Department and the R&D
Center. Meanwhile, the Innovation Strategy Office aims tocreate new businesses while engaging in collaborative
innovation with companies from other industries andventure companies as an independent research hub.
R&D
Department

Innovation
Strategy Office

R&D Center24

Exploration of peripheral technologies andnew themes which anticipate futureEstablishment of a business plan for therealization of VISION 2030

Human Resources
Strengthening human resources
capabilities to create
market-oriented value
Human resources capabilities are the most importantelement for the foundation of technologies and strategies.
Because of our background of growing while developing
strong core businesses, we have excelled at productoriented R&D. However, to create new businesses requires
the generation of new value from a market-oriented
approach as well, and we recognize strengthening ourhuman resources capabilities as another pressing issue.
As such, we are hiring experienced mid-career
employees, especially for the Innovation Strategy Office,and engaging in more personnel rotations than ever before
within the R&D Department and Group company toprovide a range of experience and gain a broader
perspective. We also actively participate in exchange
forums with other industries and have begun crosscompany human resources exchanges.
By creating an environment where people from diverse
backgrounds and ways of thinking can actively exchange
ideas, we hope to make way for new chemistry that go
beyond a mere extension of the existing trajectory.

Yukihiro Isogai
Board Director
Corporate Officer
R&D office, Innovation Strategy Office
KH Neochem. Co., Ltd.

Technology
Oxo brand strategy:
Addressing social needs

Creating value instrategic domains

KH Neochem possesses high-pressure and low-pressure
oxo reaction technology and manufacturing expertise thathas been accumulated over many years. This oxotechnology is one of our strengths, and we will further
polish it and work with numerous types of raw materials,
including those that are derived from biomasses, to roll out
a range of new products in strategic domains. KH Neochem
has adopted what we call the Oxo Brand Strategy for
implementing this project and considers it one of the key
strategies for maintaining our position as a leading global
specialty chemical company. Up to now, we have usedmostly petrochemical raw materials in our businesses, but
in recent years the utilization of chemicals derived fromnatural raw materials has been increasing rapidly all over
the world. Amid this trend, we are pursuing new
possibilities for our oxo technology and will address social
needs to achieve VISION 2030.

In the environment domain, we are engaged in R&D toestablish a competitive advantage for our refrigeration
lubricant raw materials in the refrigerating and air
conditioning market, while researching and gathering
information on next-generation refrigerant trends incountries around the world. We are also working on thedevelopment of a long chain alcohol using plant-derived
raw material, which is a first for us, and we plan to roll it
out as an environmentally friendly surfactant.
In the healthcare domain, we have begun looking intorolling out 1,3-butylene glycol, a cosmetic ingredient, tobioproduct applications in addition to making quality
improvements.
In the electronics domain, we take advantage of our
R&D strength in materials such as high performancematerials in optical field, utilizing oxo reaction technology
on a daily basis.

Strengthening core technologies supporting
competitive strategy
Establishment of new technology for therealization of future strategy

KH Neochem｜Corporate Report 2020

Environment

Healthcare

Electronics

Oxo-augmenting
technological capabilities

Collaborativetechnical
innovation withexternal partners

Use of naturally
derived raw
materials

KH Neochem｜ Corporate Report 202025

The Source of Our Competitive Advantage: Technology and Information
The Source of Our Competitive Advantage: Technology and Information

Collaborative
Innovation

Evolution of production technology
Introduction of an advanced process control system for plants

Establishing a base foropen innovation
We established the KH Neochem innovation Laboratory (KH
i-Lab) in Kawasaki City, Kanagawa Prefecture as a base forinnovation within AIRBIC, a center for industry-academia
exchange and R&D within Shin-Kawasaki Sozo no Mori, andhave been promoting innovation there since October 2019.
To make it a hub of communication at KH Neochem, we arepromoting a range of activities, including cultivation andtraining of human resources, marketing, and public relations
in collaboration with the personnel, sales, public relations
and other divisions for internal communication. For external
communication, we are disclosing our internal technology
in an easy-to-understand way and promoting exchangewith companies from other industries and technicalcollaboration with universities.

26

Collaborative innovation withventure companies

Communicating information on
our technology

Taking advantage of our prime location, we are participatingin the Kawasaki Deep Tech Accelerator startup support
program of Kawasaki City as a supporter company. In fiscal
year 2020, we will also promote collaboration with startups.
For example, we have already begun collaborating withstartups that have strengths in technologies such as thosefor utilizing plant-derived raw materials and for materials
informatics. Accelerating our new chemical change, we will
tie this into our goal of realizing a brighter tomorrow.

Up to now, our R&D has focused on internal initiatives, but
we are also engaged in joint research with universities on
topics in our core domains such as refrigeration lubricants,
surfactants, and cosmetic ingredients. We are utilizing theknowledge and networks of universities to solve challenges
related to a number of research topics, and communicating
the results of that research at academic conferences andother events. Moreover, we are introducing development
products that are still in the review stage at exhibitions andtying this into acceleration of new product development
through exchange of information with users.

KH Neochem｜Corporate Report 2020

Production Technology

A chemical plant is a maze of pipework, and safe plant
operations are ensured through continual, precise
adjustments in the flow rates of raw materials and products.
Extensive experience and highly specialized knowledge arenecessary to acquire the techniques for operating plants.
Furthermore, the manual adjustment of flow rates
unavoidably involves manufacturing losses.
To minimize these manufacturing losses, an advanced
process control system, or a state-of-the-art system that
employs technologies such as AI, controls the plant byautomatically estimating the appropriate settings, based on
temperature, pressure, and other conditions.
The introduction of this system, which automaticallyadjusts settings to the right values, has allowed us to minimize
manufacturing losses. Reducing the operator workload also
makes it possible to further improve operational efficiency.
We will further expand the introduction of this advanced
process control system. As of 2020, this system has been
introduced at around 30% of our plants, and by 2023 weplan to introduce it at most of our plants. We are applying
this system company-wide to dramatically increase our
production efficiency.

Restructuring Business Processes Related to Equipment Management
As a petrochemical manufacturer, maintaining safe and stableproduction is one of our biggest targets. Effectively inspecting,repairing and upgrading our plants and equipment that
deteriorate over time is a vital role of our equipment
management department. Equipment breakdowns could stop
production and lower production efficiency, resulting inmissed manufacturing opportunities. For this reason, we are
restructuring our business processes for equipment
management to prevent potential drops in the quality ofequipment management work, such as a rapid generationalchange of employees due to the retirement of veteran staff.
First, we are focused on maintaining equipment based onrisk assessments, regularly obtaining estimates of thefrequency rate and impact of breakdowns in advance andperforming preventive maintenance. We are also working on
standardizing operations and redoing the equipment ledger,
so that younger employees can do the same work as moreexperienced employees. In these ways, we aim to effectively
direct our limited management resources, helping to reduce
missed manufacturing opportunities as much as possible.
KH Neochem｜ Corporate Report 202027

Human Resources andCorporate Culture
Education System

Basic policy to realize VISION 2030

Position

Human resources“Networking” to further develop strengths

Worker-manager fostering training

Leaders

Presentations (advanced)

Requiredtraining
Advanced

Leadership

Required training
Fundamental

Mentoring

Mid-level
employees

Corporate culture to mutually accept various skills and values,
promote diversity and maximize achievements

Problem-solving
knowledge
Logical thinking
Presentations (basic)

Initiatives for Human Resource Development

28

KH Neochem｜Corporate Report 2020

Young
employees

Required training
Basic

New employees’
trainer system

Logical writing

KH Neochem has set Technology and Information, Human Resources, and Corporate Culture as the drivers forbecoming a leading global specialty chemical company, our ambition stated in VISION 2030. To develop ourhuman resources and our corporate culture, we will continue to use the current strengths of our employees andwe will work to complement their weaknesses to improve the ability of each employee. We will recognize a wide
range of skills and values, promote diversity, and create a culture that maximizes results.

Objective thinking
New employee training

have required programs by specialty in addition to training
by rank. Starting from the third year, the training isintermediate, and we have set it up so that employees canengage in training according to their own duties andchallenges, based on interviews with their supervisors under

Language training and learning support for instructor dispatch“Professionalism” to gain competitive advantages●

Self-development support system●

Corporate culture

We are working to enhance our training systems andhuman resource development as one way to nurture thecharacter described in the figure above. Our training
programs are systematized and tailored to the growthstages of our employees, supporting both proactive skill
acquisition and career development based on a nurturing
policy of raising the base competence in the first five yearsof employment, giving a hand up to leaders, and identifying
future managers.
In fiscal year 2019, we introduced three new educationand training programs.
The first is the new employees’ training system. This is a
two-year system for instructing and training new employees
according to a plan prepared by trainers selected by thedepartment in question, to foster a culture throughout the
department for training new employees. Training is provided
to trainers for the introduction of the system, andsubsequently information is provided on a regular basis andfollow-up is carried out by interviews. In addition, six months
after their appointment, trainers are provided with follow-up
training. We work to raise their motivation for the following
year by sharing solutions to problems and training expertise.
This trainer system is designed to not only help new
employees but also offer an opportunity for the trainers
themselves to gain experience and grow.
The second education and training program is language

Languagetraining

New managers’ training“Innovations” responding to changes
in the environment

Workshop for new employees’ trainers“High spirit of cooperation““Speed“ in outperforming competitors

Planning and management“Strong sense of responsibility“●On-the-job training andcareer development

Management skills training

Sales

●

●

Managers

Production technologies, engineering“High analytical ability“Specialized skills training

R&D●

Solution skills

Executive candidate
fostering

Ideal type of person for 2030●

Human skills

Humandevelopment
meeting
Skillsdevelopment
meeting

Strengths of employees

Position-specific education
Management skills

a goal management system. The actual training has been
started in 2020. We will continue to plan and implement
measures to support our employees in self-directed skill
acquisition and career development.

Initiatives to Improve Engagement

Training for trainers

learning support. In fiscal year 2019, we offered an online
English conversation program as well as group English
conversation lessons for employees who were already using
English in their work. The program is taught by instructors
who visit the office. Each group made up its own schedule
to gather before or after work once a week for six months
and to participate in a two-hour English conversation lesson.
The third education and training program is specialized
training to increase professionalism, which is one of thecharacter traits we seek to develop.
The targets for this third program are employees who arein their fifth year or less with us. We have organized theskills required by job category and put together a system inwhich they undergo education and training accordingly. The
training is basic for those in their second year or less, and we

To bolster our strengths in management, we have held
teamwork engagement training for managers throughout
the Company. In fiscal year 2018, the training was carriedout for those in general manager-level positions. In fiscal
year 2019, we expanded the scope to include all managerial
positions to better spread awareness among team members.
This training program uses the results of an engagement
survey held in advance for all employees as themes, andspends time communicating management skills that will
increase performance by enhance engagement in theworkplace and in the Company as a whole. The second
survey was conducted in fiscal year 2019, and the results
surpassed those of the first survey for every question.
After the training, they shared what they learned with
their respective teams and established action plans toimprove engagement. A range of initiatives are being
implemented, including one where e-mails saying, “Goodjob!” are sent to team members who do a good job, witheveryone in the department receiving a copy.
We will continue to roll out measures so that each
employee will gain a solid sense of the effect of initiatives

such as this, resulting in an improved engagement score for
the Company.

Engagement training

Engagement survey results
First year(2018)

Second year
(2019)

2.99

3.09
0.1 points higher

KH Neochem｜ Corporate Report 202029

Human Resources and Corporate Culture

Promoting understanding of VISION 2030
If we are to achieve VISION 2030, each individual employee
must deeply understand his or her own role, and everyone
must get on the same page as we take up the challenge.
At the beginning of 2019, and during the period from
May to June, top management visited our production plants
and held briefing sessions on VISION 2030. In July, the Vision
Book booklet was distributed to all employees. Along with amessage from top management, this booklet explains
VISION 2030 and includes the background and aims ofestablishing VISION 2030, our ambitions and expectations of
employees as well as the thoughts of representative
employees in various departments and age groups regarding
VISION 2030. In addition, from October to November
managers and team leaders who are key to connecting themanagement of each workplace formed workplace working
groups where they communicated VISION 2030 to theirsubordinates in their own words and put together adeclaration that includes workplace ideals, the 5C Credo,*
and actions to be taken. Digital posters were made for eachdepartment and are available on the Company’s intranet.

aware of the expected role, and to systematically train them.
We will foster a climate of providing support for even more
active participation by female employees while raisingawareness of flexible workstyles and allowing each employee
to realize his or her full potential according to their skills,

Creating workplaces where it is easy to work
Workplace working group

Vision Book

“Our Declaration” poster*Please refer to Our Basic Principles at the beginning of this report.

Promoting diversity
We foster a corporate culture in which employees recognize
each other’s diverse values and everyone is able to play anactive role and fulfill his or her potential.
As part of those efforts, we are eagerly rolling out
measures to promote active participation by women.
We recognize the importance of increasing thepercentage of women in management positions and putting
together a system that allows the active participation ofdiverse employees. For that reason, we have set two goals,
which are planned to be acheived by March 31 2022, in the

Number of new employees
2015

2016

(fiscal year)

2017

2018

2019

fiscal year 2019 general employer action plan related topromoting active participation by women.
(1) Raise the percentage of female managers to at least 7%(2) E stablish a system for both men and women that allows
them to continue working while raising children or taking
care of family members
To achieve these goals, we are working to introduce skill
development plans and establishing a system to support
flexible workstyles. The former is designed to select candidates
for management positions at an early stage, to make them

New female employees (%)

14

Mid-career
workers

8

Total

22

18

5

8

14

21

19

27

50

22

40

77

Note: Only workers whose employment agreements do not have a fixed term.

30

13.6

15

10.0

8.7

10

13.0

4.5

KH Neochem｜Corporate Report 2020

0

2015

2016

2017

2018

2019 (fiscal year)

Note: Only workers whose employment agreements do not have a fixed term.

We also introduced a telecommuting system for
employees rearing children or caring for family members(the scope has currently been expanded as a measure toaddress COVID-19). We have created an environment thatallows employees with limited time to work due to childrearing or caring for family members to easily balance thatwith work.
In addition, we are implementing physical measures tocreate an environment that is easy to work in, including
the relocation of our headquarters and workplace
improvement plans.

Expanded scope of the telecommuting system
As a tentative measure to prevent the spread of COVID-19 and ensure the safety of our employees during the
global pandemic, we have expanded the scope of our telecommuting system.
Currently, not only employees rearing children or caring for family members but also all employees to whom
the flextime system applies are allowed to work from home. Since the state of emergency was declared in April
2020, in principle all employees working at headquarters and most of the daytime employees at plants have beenworking from home. Even after the state of emergency was lifted, we continued to allow employees to work fromhome (as of July 2020, this remains the case). During the period of the tentative measure, we eliminated core hours
and allowed employees to work any time between 5 a.m. and 10 p.m. We also loaned our employees mobile
phones and Wi-Fi routers and promoted the use of an online meeting system so that they could work from home
without any problems. In fact, our employees are utilizing online meetings and other tools for internal meetings
and training as they go about their work.
We are aiming to improve the pleasantness of the work environment and sense of job fulfillment throughopportunities such as this, and looking for new ways of doing jobs and ways to streamline operations.

(fiscal year)

2016

2017

2018

2019

2020

Years ofservice
(men)

17.1

16.5

16.0

14.6

13.5

Years ofservice(women)

16.9

16.9

16.3

14.3

14.3

Difference

-0.2

0.4

0.3

-0.3

0.8

(%)

5

23

As part of diversity promotion, we are also working on
developing an environment that is easy to work in andrespects the work-life balance of each individual.
In addition to days of no overtime, a flextime system
and a paid leave system that allows half-days, we have put
together systems that allow flexible workstyles according toemployees’ life stage.
For example, the system of shorter work hours for
employees rearing children had been limited to 48 months,
but we eliminated that limit. This has allowed more
employees to actively take advantage of the system.

Years of service of male and female employees

20New
graduates

capabilities and experience, and to play an active role innumerous ways. In addition, we are actively promoting
hiring mid-career workers, people with disabilities andpeople from overseas, active participation by reemployedworkers, and more.

Note: All data are as of April 1.

Rate of reinstatement after childbirth/child care leave

100 %Note: Fiscal years 2015–2019 (No applicants in 2017)

KH Neochem｜ Corporate Report 202031

Corporate GovernanceCorporate Governance Structure

Corporate Governance

Number of Audit &Supervisory Board Members

Number of Directors

Internal

Outside3

8

Internal

13Outside5172Nomination andCompensation Committee

Number of Directors and Audit &Supervisory Board Members

Number of Meetings of
Audit & Supervisory
Board Meetings Held in
Fiscal Year 2019:(Number of Directors included)

Female2

Number of the Board of
Directors Meetings Heldin Fiscal Year 2019:

Internal

11

Outside

Male

1

4

13

3

9

We are building a corporate governance structure that takes thefollowing points into consideration and we are working to putthat system into place:To strive for substantive assurance of the rights and equality of
our shareholders and engage in constructive dialogue with them.
To disclose accurate financial information and non-financial
information that is useful in constructive dialogues with ourshareholders and other similar purposes, with appropriate
timing and in a readily understandable format.
To strive toward appropriate cooperation with stakeholders
other than our shareholders.
For corporate executives and the Board of Directors to provide
leadership for building a corporate culture of respect for therights and perspectives of our various stakeholders and for
ethics in business activities.
For the Board of Directors to the its responsibility to exercise
effective supervision from an independent perspective over the
execution of duties by corporate executives, to make every
effort to develop an environment that supports corporate
management risk-taking, and so on.

Board of Directors
See the KH Neochem website for details on corporate governance and internal control.
http://www.khneochem.co.jp/ir/governance/*Note: The numbers for the Board of Directors, Audit & Supervisory Board, and Nomination and Compensation Committee are as of July 31, 2020.

Basic conceptual approach
Guided by the Corporate Mission of “Realizing a brighter tomorrow for society through the power of chemistry.”,
the KH Neochem Group is committed to realizing sustained growth, medium to long-term heightening ofcorporate value, and sound management that assures transparency and fairness.

The Board of Directors of KH Neochem promotes sustainablegrowth and improvement of medium- to long-term corporate
value and works to build and operate an appropriate corporate
governance structure while functioning as an operational
decision-making body on items in laws, regulations, and the
Articles of Incorporation, as well as important management
matters. It also functions as a supervisory body over the
execution of duties by the executive directors. As a rule, theBoard of Directors meets regularly (once a month). Extraordinary
meetings of the Board of Directors can be convened asnecessary to deal with urgent management issues.

Composition of the Board of Directors

Overview of Corporate Governance Structure
General Meeting of Shareholders
Appointment &dismissal

Reporting
Supervision

Audit & Supervisory Board(one-half or more
outside members)

Consultation(More than half of the membership composed of outside directors)

Reporting

Proposal

Nomination and Compensation Committee

Appointment
dismissal
supervision(one-third of the members are outside directors)

Directions

Board of Officers
ReportingCorporate Officers
In charge

Operating Departments

32

KH Neochem｜Corporate Report 2020

Cooperating

ReportingManagement Committee

Accounting Auditors

Evaluation &dismissal

Accounting audit

Directions

President and Chief Executive Officer

Cooperating

Environmental and
Safety Committee
Quality AssuranceCommittee

Cooperating

Auditing Department

Internal audit

Board of Directors

Appointment &dismissal

Advice & guidanceAppointment &dismissal

The Board of Directors at KH Neochem comprises eight executive
directors, including three outside directors (one is female) who are
independent officers. We believe this is an appropriate size forpromoting diversity, including gender issues, and for swift
decision-making. There is a balanced composition overall offull-time directors possessing expertise and knowledge in business,
production, R&D, management planning, finance and accounting,and other areas. The outside directors actively express theiropinions and raise questions based on their broad perspective andexperience in corporate management. The term of service of theexecutive directors is set at one year in order to promote prompt
responses to change in the management environment, as well as
to make clear that the management responsibility of the executive
directors lies within the business year.

executive directors with the performance, including, but notlimited to, stating their views as required, examining important
documents under consideration for approval. They also take steps
for mutual coordination with the Auditing Department andaccounting auditors by regularly exchanging views andinformation, holding discussions with them, and so on.
The KH Neochem Audit & Supervisory Board has threemembers, including two outside members. As a rule, the Audit& Supervisory Board holds regular meetings once a month andalso holds extraordinary meetings as necessary. They take steps
for mutual information sharing with Audit & Supervisory Board
members, formulating auditing plans, examining audit
implementation status and audit results, and engaging in
related activities.

Nomination and Compensation Committee
KH Neochem has established a discretionary Nomination andCompensation Committee with an outside director as the chairand more than half of the members are outside directors. This
committee acts as an advisory body to the Board of Directors to
reinforce the independence, objectivity, and transparency of
directors’ actions and deliberations on the nomination andcompensation of executive directors and executive officers.
In 2019, we established a basic policy on executive director(excluding outside directors) compensation and launched areview for ensuring a more appropriate officer compensation
plan to achieve that policy. In 2020, we are continuallyinvestigating a compensation system that places more weighton share-based compensation at an appropriate level and thattakes general norms into account. We are in serious discussions
now to realize this as soon as possible.

 utside directors and outside Audit &O
Supervisory Board members
All outside directors and outside Audit & Supervisory Board
members satisfy the requirements for independence set out by
the Tokyo Stock Exchange. The outside directors make use of
their abundant work experience and high level of professionalism
to express their views actively and directly from an objective andbroad standpoint to ensure that management judgments are notbiased by internal points of view. They also offer constructive
advice and oversight. Outside Audit & Supervisory Board
members have rich experience, broad insight, and considerable
expertise, and they conduct audits fairly and objectively.

 udit & Supervisory Board and Audit &A
Supervisory Board Members
Audit & Supervisory Board members meet with the Board of
Directors, Management Committee, and other important
committees, where they audit the execution of duties by

Board of Directors and Audit & Supervisory Board Members

KH Neochem｜ Corporate Report 202033

Corporate GovernanceInitiatives to Increase the Effectiveness of the Board of Directors

 raining members of the Board of Directors/Audit
T& Supervisory Board

Strengthening the governance structure

In 2019, we invited a specially appointed professor (at the time),
Kunio Ito of Hitotsubashi University. The professor gave a lectureon the topic “The Current Status of Governance Reform andFuture Challenges.” The lecture topics ranged from the changes
required for sustainable growth to improving dialogues withinvestors, succession plans, and management training. Afterward,
Professor Ito engaged in a lively discussion with our officers.
In 2020, we will carry out other intitiatives, including having
outside experts give lectures on the topic of ESG, and we will
provide opportunities for discussions with our executive officers
for further sustainable growth of our corporate value.

Separation ofmanagement andbusiness execution

Enhancement oftransparency

Directors’
remuneration review

February 2013

December 2016

March 2018

Introduction of
executive officer
systemEstablishment ofNomination andCompensation
Committee

Note: The title of the executive
officer has now beenchanged to corporate officer.

Introduction of
performance-linked
stock compensation
systemNote: C ompensation Committee
was established in 2014.

Enhancing diversity
within the Board of Directors
March 2019

March 2020

Appointment ofa female director

Appointment ofanother female
Audit & Supervisory
Board member,increasing thepercentage offemale officers

Evaluation of effectiveness of the Board of Directors
The effectiveness of the Board of Directors is evaluated once a year with advice from an external agency. The members of the Board of
Directors consider specific improvements based on the results, and ongoing efforts are made to improve the functioning of the Boardby implementing those measures.

Process

1. Conduct questionnaire survey of all members of Board of Directors and Audit & Supervisory Board
2. Outside agency collates results
3. Members of the Board of Directors conduct analysis, discussion, and assessment
4. Brainstorm necessary improvements and implementation of countermeasures

The roles, composition, and status of operations of the Board of Directors have earned a mostly
positive assessment, and we recognize that overall effectiveness has been secured. In particular, thebalanced and lively discussions at the meetings have been noted as a strength.
On the other hand, the officers discussed countermeasures to address the following three issues
from the standpoint of further reinforcing the supervisory function of the Board of Directors:

Assessment results andcountermeasures for
improvements

Mechanism for continuous monitoring (supervision) by the Board of Directors
Enhancement of discussions on matters such as medium- to long-term management strategies
Further utilization of Nomination and Compensation Committee and gathering of information at
the Board of Directors meetings
The officers made the following operational improvements and amended the Rules of the Board of
Directors based on the issues identified:
Provide regular progress reports on key measures of the medium-term business plan
Eliminate formal resolutions and discuss important topics in stages

Officers' Compensation
KH Neochem has established a discretionary Nomination andCompensation Committee. This committee deliberates on thepolicy and standards of officers' compensation, etc. as well as
performance evaluation from the standpoint of ensuring theappropriateness of compensation levels and transparency. It also
checks everything up to the calculation of individualcompensation for each officer.
Compensation for directors (excluding outside directors)
includes monetary compensation and performance-linked,
share-based compensation, and the basic policy is as follows:Provide sufficient incentive to improve medium- to long-term
performance and increase corporate value
Ensure competitiveness to secure diverse and outstanding
human resources
Share interests with shareholders and other stakeholders

Indicator for performance-linked compensation
KH Neochem has introduced performance-linked compensation
for directors (excluding outside directors), both monetary andshare-based, and uses consolidated EBITDA* as the indicator
based on the characteristics of our business.

34

KH Neochem｜Corporate Report 2020

Around 30% of all monetary compensation is performancelinked, and it is calculated using the rate at which planned
earnings are achieved and the average achievement rate overthe past five years.

Performance-linked, share-based compensation
Performance-linked, share-based compensation is calculatedusing the rate at which planned earnings are achieved on thecondition that consolidated operating income is in the black.
While putting more priority on performance, this compensation
system clarifies the link with the stock price, providing directors
with both benefit from increases in the stock price and the riskof decreases in the stock price with shareholders, thereby
increasing awareness of contributing to improvement of
medium- to long-term performance and increasing of corporate
value. Outside directors and Audit & Supervisory Board members
receive only monetary compensation (fixed monthly amount)based on their roles and to ensure independence.

 otal amount of compensation by officer classification, total amount of compensation by category,T
and number of officers subject to compensation (2019)
Total amount ofcompensation(million yen)

The Rules of the Board of Directors were amended to further enhance discussions on matters such as medium- to long-term
management strategies at the Board of Directors meetings, and resolutions based on the Corporate Governance Code, including basic
management policies and important matters of corporate governance (e.g. decisions on basic policies related to society, theenvironment, and sustainability), were added.
Moreover, we reviewed final-approval authority clauses within the Rules of the Management Committee and Rules on FinalApproval and transferred authority as appropriate so that the Board of Directors can focus more on discussing these importantmanagement matters.
In 2020, we aim to further strengthen governance through these discussions and make our management foundation even morecapable of responding flexibly in highly uncertain environments.

Monetary compensation*EBITDA is calculated using the following formula: EBITDA = Operating income + Depreciation and Amortization + amortization of goodwill(the amount from the consolidated statement of income is used for operating income, while the amount from the consolidated statement of cash flows is used for amortizationof goodwill).

Officer classification

Amendment of rules and regulations

Specially appointed professor Kunio Ito giving a lecture

Directors

Total amount of compensation by category (million yen)
Number of officers
Share-based
Monetary compensation
subject tocompensationcompensation
Fixed
Performance-linked Performance-linked

142

73

53

16

6

Audit & Supervisory Board members(excluding outside members)

18

18

-

-

1

Outside directors

11

11

-

-

3

Outside Audit & Supervisory Board members

10

10

-

-

2

(excluding outside directors)

Notes: 1. T he amount of directors' compensation was resolved at 200 million yen or less annually (excluding the employee portion of salary for directors who are also employees)
at the Extraordinary General Meeting of Shareholders on March 31, 2011. In addition to the above compensation limit, a performance-linked, a “Board Benefit Trust(BBT)” share-based compensation plan was introduced for directors (excluding outside directors) at the 8th Ordinary General Meeting of Shareholders on March 27,
2018. The resolution provides that every three fiscal years, a maximum monetary amount of 110 million yen will be contributed to the trust as funds for acquiring theCompany’s shares paid to eligible directors.
2. T he amount of annual compensation for Audit & Supervisory Board members was resolved at 50 million yen or less at the Extraordinary General Meeting of
Shareholders on March 31, 2011.
3. The table above does not include unpaid outside directors.
4. T he amount of share-based compensation recorded as an expense during the fiscal year is provided based on the BBT plan introduced at the time of the resolution at
the 8th Ordinary General Meeting of Shareholders on March 27, 2018.
KH Neochem｜ Corporate Report 202035

Corporate GovernanceMembers of the Board

ComplianceDirectors

Basic conceptual approach
We formulate our rules and regulations, then inspect our legal compliance on the basis of our Compliance
Guiding Principles and compliance regulations, and we make every effort for strict implementation. We also
make every effort to ascertain the status of compliance promotion in the KH Neochem Group, and we aretaking appropriate measures.

Measures for Compliance
Compliance structure
KH Neochem has revised compliance rules and established thecompliance structure shown on the right to both strengthen the
structure and further increase the effectiveness of theimplementation.
The position of compliance officer has been established toassign responsibility for these matters, including swift investigationand preparing appropriate countermeasures. At compliancepromotion meetings, compliance officers encourage compliance,
carry out educational activities, and conduct training, etc.

been established within the Company, and the Corporate
Attorney Hotline has been established outside the Company.

Chief Compliance
Officer President
Supervision andinstruction

KH Neochem has established hotlines for executives andemployees to counsel and talk concerning about compliance.
Specifically, the Compliance Hotline, the Compliance Officer
Hotline, and the Full-time Corporate Auditor Hotline have all

Supervision

ReportCompliance officers*
Convocation andmanagement

Hotlines

ReportCooperating

Implementation of promotion
measures/reporting

Board ofDirectors

Compliance
Promotion Meeting*A Compliance Secretariat has been established to assist compliance officers

Compliance Structure

Business Continuity Management (BCM)

All of our business divisions engage in risk assessment byidentifying risks that could affect business activities of the KH
Neochem Group as a whole, calculating the risk level basedon the impact and probability of occurrence, and conducting
an assessment.
Consequently, those business divisions discusscountermeasures to prevent any occurrence and to reduce theimpact of risks at the highest level. Meanwhile, management
reviews the appropriateness of risk assessments and thecountermeasures, and identifies material business risks to discussand determine what action to take. In these and other ways, we
are working to ensure thorough risk management.
Identify
risks

Implementationof countermeasures
Particular risks
specific to eachbusiness division

Evaluaterisks

Formulatecountermeasures

KH Neochem supplies various customers with products that are
essential for production in a wide range of industries and thesocial lives of citizens.
For that reason, we believe that we have a very important
responsibility to maintain and continue our business activities
and achieve an early recovery in the event of a large-scaledisaster. Each of our workplaces has formulated a business
continuity plan (BCP), and we steadily implement advancemeasures and carry out employee education and training toensure that these BCPs will function effectively in the event ofan emergency. We also inspect and revise the BCPs as part ofour business continuity activities.

KH Neochem｜Corporate Report 2020

Toshihiro Matsuoka

Representative Director
President & CEO

Board Director
Senior Corporate Officer, Production & Technology Office

Apr. 1987 Joined Kyowa Hakko Kogyo Co., Ltd.
July 2011	President of Basic Chemicals Division of Kyowa
Hakko Chemical Co., Ltd. (now the Company)
Mar. 2013 Director and Executive Officer of the Company
Mar. 2016	Managing Director and Executive Officer of theCompany
Mar. 2017	Executive Vice President & Executive Officer of theCompany
Mar. 2019	Representative Director, President and Chief
Executive Officer of the Company (to present)

Apr. 1987 Joined Kyowa Hakko Kogyo Co., Ltd.
Apr. 2008	General Manager of Production Administration
Division of Kyowa Hakko Chemical Co., Ltd. (now the
Company)
June 2011 General Manager of Yokkaichi Plant of the Company
Apr. 2013 Executive Officer of the Company
Mar. 2014 Director and Executive Officer of the Company
Mar. 2018	Managing Director and Executive Officer of theCompany
Mar. 2020	Board Director & Senior Corporate Officer of theCompany (to present)

Tatsuro Niiya

Masaya Hamamoto

Board Director
Senior Corporate Officer, Business Headquarters Office

Board Director
Senior Corporate Officer & CFO

Apr. 1988 Joined Kyowa Hakko Kogyo Co., Ltd.
July 2013	General Manager of Chemical Sales & Marketing
Division, Business Headquarters Office of theCompany
Jan. 2016 Executive Officer of the Company
Mar. 2017 Director & Executive Officer of the Company
Mar. 2019	Managing Director & Executive Officer of theCompany
Mar. 2020	Board Director & Senior Corporate Officer of theCompany (to present)

Apr. 1985	Joined The Industrial Bank of Japan, Limited. (nowMizuho Bank, Ltd.)
Apr. 2011	General Manager of Osaka Corporate Banking
Division No. 1 of Mizuho Corporate Bank, Ltd. (nowMizuho Bank, Ltd.)
Apr. 2014	Executive Officer and General Manager of Corporate
Banking Division No. 5 of Mizuho Bank, Ltd. (retired
in March 2015)
Apr. 2015	Executive Officer of IBJ Leasing Company, Limited.
(now Mizuho Leasing Company, Limited)
June 2015	Director, Executive Officer and General Manager ofCorporate Planning Department of IBJ Leasing
Company, Limited.
Apr. 2016	Managing Director, Managing Executive Officer andGeneral Manager of Corporate Planning Departmentof IBJ Leasing Company, Limited. (retired in May 2019)
June 2019 Joined the Company
Sep. 2019 Senior Executive Officer of the Company
Mar. 2020	Board Director & Senior Corporate Officer & Chief
Financial Officer of the Company (to present)

Yukihiro Isogai

Sayoko Miyairi

Board Director
Corporate Officer, R&D office, Innovation Strategy OfficeOutside Director

Apr. 1987 Joined Toaboshoku Co., Ltd.
Aug. 2000 Joined YIC Co., Ltd.
Oct. 2001 Joined Kyowa Hakko Kogyo Co., Ltd.
Jan. 2016	General Manager of Yokkaichi Research Laboratories,
R&D Office of the Company
Dec. 2017	General Manager of R&D Office (to present) and
General Manager of Yokkaichi ResearchLaboratories, R&D Office of the Company
Jan. 2018 Executive Officer of the Company
Mar. 2019 Director & Executive Officer of the Company
Mar. 2020		Board Director & Corporate Officer of the Company(to present)

Apr. 1979 Joined Hitachi, Ltd.
July 1982 Joined Bank of America, N.A., Asia Headquarters
Mar. 1986	Joined Pasona Inc. and seconded and thentransferred to Edu Consult Co., Ltd.
(now Scholar Consult Co., Ltd.)
Apr. 2000 Partner of Scholar Consult Co., ltd. (to present)
Apr. 2000	Assistant Professor of Nihonbashi Gakkan University(now Kaichi International University)
Jan. 2005 Director of Scholar Consult Co., ltd.
Apr. 2008	Professor of Nihonbashi Gakkan University (topresent)
Mar. 2019 Outside Director of the Company (to present)
June 2020	Outside Director of Toyo Engineering Corporation (to present)

Jun Tsuchiya

Yuji Kikuchi

Outside Director

Outside Director

Apr. 1981 Joined Argonne National Laboratory, U.S.A.
May 1983 Joined Lawrence Berkeley National Laboratory, U.S.A.
Feb. 1984	Joined Mitsubishi Chemical Industries Limited (nowMitsubishi Chemical Corporation)
Jan. 1999	Seconded as President to Verbatim Corporation,
U.S.A. subsidiary of Mitsubishi Chemical Limited(now Mitsubishi Chemical Corporation) as asecondment
Apr. 2001	General Manager of Corporate Planning Office of
Mitsubishi Chemical Industries Limited (nowMitsubishi Chemical Corporation) (retired in January
2002)
Feb. 2002	Director of Rohm & Haas Japan K.K. (now Dow
Chemical Japan Limited) (retired in December 2006)
Jan. 2007	Representative Director and President of Heraeus K.K.
(retired in September 2018)
Oct. 2018	CEO of Tsuchiya International Consulting Corp. (topresent)
June 2019	Outside Director of Soken Chemical & Engineering
Co., Ltd.
Mar. 2020 Outside Director of the Company (to present)

Apr. 1992	Registered as an attorney at law Entered Sakano,
Seo & Hashimoto Law Office (now Tokyo Hatchobori
Law Office)Apr. 2002 Partner of Tokyo Hatchobori Law Office
Mar. 2003	Joined the Securities and Exchange SurveillanceCommission (Coordination and Inspection Division,
Executive Bureau)
Mar. 2005	Returned to being a partner at Tokyo Hatchobori
Law Office (to present)
June 2010	Outside Audit & Supervisory Board Member of Inui
Warehouse Co., Ltd. (now Inui Global Logistics Co.,Ltd.)
June 2014	Outside Audit & Supervisory Board Member of NEC
Networks & System Integration Corporation (topresent)
Mar. 2020 Outside Director of the Company (to present)

Audit & Supervisory
Board Members
Discuss
and reportManagement

Seiji Saito

Akio Nakahashi

Isao Takahashi

Audit & Supervisory Board Member

Production & Technology Office

Chiba Plant

General Manager
Corporate Administration

Toshiaki Ogata

Yoshiaki Kondo

President of Kurogane Kasei Co., Ltd.

Yokkaichi Plant

Audit & Supervisory Board Member(Independent Auditor)

Selection of material
business risks

Corporate Officers

Tokuo Oodo
Kazuhiro Kawai

Directions

Keiko Tamura
In the workshop formulating a BCP

36

Michio Takahashi

Audit &
Supervisory
Board
Members

Risk Management
Risk Management System(as of July 31, 2020)

Audit & Supervisory Board Member(Independent Auditor)

Hideki Shimizu
Strategic planning and Purchasing

Akira Kamimura
Finance, Public & Investor Relations,
General Manager,
Finance Division

KH Neochem｜ Corporate Report 202037

Messages from Outside Directors andOutside Audit & Supervisory Board Members

Fulfilling Our Social Responsibility with a United Management Team

Supporting the Foundation for “Aggressive Governance”

There are relationships of trust built upon the corporate culture ofworking together to create innovation that has been in place since before
the Company became independent, and there is a positive kind of tension
at meetings. Thus, only a few years have passed since the Company's
share were listed on the stock market, but both the full-time and outside
directors that comprise the Board of Directors engage in open and frank
discussion—on not only matters to be approved but also about importantmanagement issues affecting both the present and future—based on thegeneral principles of the Japan’s Corporate Governance Code.
When the Nomination and Compensation Committee reviewed theselection of candidates for outside director and director compensation,emphasis was placed on ensuring that the process was highly transparent
and satisfactory, by comprehensive data analysis and exchange of opinionswith the full-time directors subject to said compensation.
Such an atmosphere creates an environment conducive to fulfillingthe monitoring function of the internal control system. I can share adifferent perspective as an outside director based on my professional
experience, and the Board members provide a thorough response to eventhe most basic of questions.
Going forward, management must be even more united as a team tosolve internal and external challenges, as the Company faces the difficult
business environment caused by COVID-19. Furthermore, companies
today are required to take corporate social responsibility that incorporates
an ESG perspective and the element of SDGs, so it is necessary to take abroad perspective when engaging in corporate management.
I hope to facilitate sympathy and relationships of trust within the
management team based on my personal experience, and I will leverageoutside connections and networking involving cross-industry information
provision to support the strengthening of corporate governance.

The strengths of KH Neochem are its global niche technical capabilities,
its production facilities ranking among the world’s foremost, and cocreation with customers. If the Company were to let its guard downeven for a moment, any of these strengths could be overtaken by acompetitor or become obsolete. To continue fully leveraging thesestrengths and become a leading global specialty chemical company—
while increasing corporate value over medium to long term—it isessential to continue enhancing existing businesses. At the same time,
the Company must continue to innovate based on concepts that differ
completely from the existing businesses.
It might be a hackneyed phrase, but to achieve such
multidimensional management I believe it remains as true today as everthat aggressive rather than defensive governance is essential. As alawyer, I have been involved in corporate law for many years, especiallyon corporate management for a range of clients. Taking advantage ofthat experience, I hope to improve management’s outlook, primarily
from a legal standpoint, and support the foundation for aggressive
governance within the Board of Directors.

Sayoko Miyairi
Outside Director

38

KH Neochem｜Corporate Report 2020

Outside Director

Spreading Compliance AwarenessCompanies are social entities and need to be sustainable. For that to be possible, it is essentialthat a company builds and operates a proper internal control system and spreads complianceawareness. Compliance is defined as conformity with the law. A majority of complianceviolations arise from a lack of awareness rather than insufficient knowledge of complicatedlaws or rules. There is serious risk hidden in thoughts such as, “We’ve always done it thisway” and “This much should be fine.”
Companies have customary ways of doing things that have developed over many years,
Kazuhiro Kawai
but if form triumphs over substance, it can lead to an inconsistency with social norms. As an Audit & Supervisory Board Member(Independent Auditor)
Audit & Supervisory Board member (independent auditor), I keep that in mind, leveraging myknowledge and experience gained at other companies to conduct audits from an objective,
third-party standpoint. In this manner, I will make effort to contribute to the Company’ssustainable growth and development.

High Hopes for Global Business Expansion
and the Limitless Possibilities of ChemistrySociety cannot exist without materials. Moreover, the raw materials that
go into them, the manufacturing processes, and the final products
cannot cause damage to the environment. Chemical technology is oneof tools that are useful to the public by supplying the products withinvarious restrictions. KH Neochem has introduced a variety of uniquechemical materials. The Company will need to continue pursuing endlesspossibilities, leveraging the extensive knowledge accumulated with our
chemical technology.
It will be our new challenge to go beyond commercializing androlling out technology to supply products useful to humanity on a global
basis. The world is made up of diverse cultures and values. Goingforward, I believe the Company must further improve businessdevelopment initiatives within those different environments. I hope tosupport those challenges from my position as an outside director.

Yuji Kikuchi

Achieving Further Growth Based on a Robust Compliance Structure

Jun Tsuchiya
Outside Director

KH Neochem seeks to become a leading global specialty chemical company, an ambition
stated in VISION 2030. I believe that the key to achieving that goal is for each individual
employee to feel strongly motivated and energetic in their work. Paying particular attention to
the compliance structure and status of operations, I hope to work together with the othermembers of the Audit & Supervisory Board and communicate thoroughly with those in charge
as I perform my duties. This will help employees to fulfill their potential under a solid
compliance structure and sound compliance operations.

Keiko Tamura
Audit & Supervisory Board Member(Independent Auditor)

KH Neochem｜ Corporate Report 202039

Responsible Care

Action plan for industrial safety is available on our website: http://www.khneochem.co.jp/en/csr/rc/

Fiscal Year 2019 RC Program Objectives and Results Together with Fiscal Year 2020 Objectives
Basic conceptual approach◎: Achieved

Responsible Care (RC) refers to the autonomous management activities thatbusiness operators who manufacture or handle chemicals carry out toimplement and take steps to improve environmental, safety, and healthmeasures throughout all processes involving chemicals, from development
through manufacturing, physical distribution and use, to final consumption
and disposal. KH Neochem has adopted an RC Program Policy and is
implementing Responsible Care.

RC codeKH Neochem has established an Environmental and Safety
Committee with the president as chair and the executive officer
in charge of safety management as vice chair, and the Company
is implementing an RC program. Activities are being pursued atevery operating facility in accordance with the RC Program
Policy and the Fundamental Policy for Safety Management
determined by the Environmental and Safety Committee.
Environmental and Safety Committee
Chair:

Osaka Branch Office

President

Vice chair: Executive officer in chargeof safety management

RC program policy

Secretariat: Environment Safety &Quality Assurance Division❶	ComplianceCorporate Headquarters

Yokkaichi Plant❷ Environmental conservation

We will make every effort to reduce the environmental impact of our
products at every stage, from development to disposal.

❸	Safety and disaster prevention and occupational safety and health
We will maintain our record of zero accidents and disasters, making every
effort to assure safety, peace of mind, and health for regions andcommunities, as well as for everybody who works at KH Neochem.

❹	Physical distribution safety and chemical and product safety

We will acquire the most up-to-date safety information on the chemical
substances and products that we handle, and we will provide the correct
information to customers, to the people involved in physical distribution, andto the people who work at KH Neochem.

❺	Dialogue with society

We will contribute to regions and communities by engaging in dialogue andcommunication with them regarding the environment, safety, and health.

Status of Certification Acquisition
The Yokkaichi Plant and the Chiba Plant have acquired
certifications for quality management systems (ISO 9001) andenvironmental management systems (ISO 14001). These plants
are maintaining their certification and promoting RC programsin line with those systems, and both have made the transition to
the new ISO 9001 and ISO 14001 standards (2015 versions).
Plant

Fundamental policy for safety management

Yokkaichi
Plant❶	In addition to safety-related laws and regulations, we will act in unfailingcompliance with the decisions made by KH Neochem.

❷	We will always continue maintaining awareness of sources of danger andmaking every effort to prevent safety-related accidents.

❸	We will continue improving our safety management systems and seeking to

Chiba
Plant

Certification acquired
ISO 9001

January 1999

ISO 14001

July 2000

ISO 9001

December 1998

ISO 14001

November 2000

Objective◎

Environmental accidents: 0

Safety and disasterprevention

Safety-related accidents: 0

Safety-related accidents: 4△

Safety-related accidents: 0

Work-related accidents: 0

 mployee accidents resulting in lostE
workdays: 0
Employee accidents not resulting in lost
workdays: 3 (Yokkaichi Plant and Chiba
Plant)
Accidents at cooperating companies
resulting in lost workdays: 0
Accidents at cooperating companies not
resulting in lost workdays: 7 (Yokkaichi
Plant and Chiba Plant)△

Work-related accidents: 0

Compliance violations: 0

Compliance violations: 0◎

Compliance violations: 0

 rouble reduction five-year averageT(28 cases) or lower

Trouble: 37 cases△ rouble reduction five-year averageT(27 cases) or lower

Inspections and Audits

Inspections underway

Environment safety inspections and quality audits
At KH Neochem, periodic environment safety inspections of the
Yokkaichi Plant, Chiba Plant, and Sakai Logistics Center are
conducted by the Environment Safety & Quality Assurance
Division at corporate headquarters under the direction of theexecutive officer in charge of safety management. Periodic
quality audits are also similarly conducted under the direction of
the executive officer in charge of quality assurance. The
environment safety inspections and quality audits involve
evaluation of RC activities at our operating facilities.

Chiba Plant
Sakai Logistics CenterIn addition to international regulations and domestic laws and regulations,
we will comply with KH Neochem rules and regulations.

Evaluation

Environmental accidents: 0

OthersKH Neochem has established the RC Program Policy and pursues
business activities with commitment first and foremost to
fulfilling responsibility to society as a corporation. We do this inorder to continue being a chemical manufacturer that provides
distinctive products in a variety of sectors and that supports theglobal environment, as well as comfortable lives for people
around the world. What is required of chemical manufacturers,
above all, is to operate their plants safely, and so we haveformulated the Fundamental Policy for Safety Management toimplement a thoroughgoing response to that requirement, andwe are making every effort to assure the security and safety of
our operations.

Actual results

Environmental accidents: 0

RC Program Policy and System
RC Program System

Objective△: Unachieved

Fiscal year 2020

Environmental
conservation

Occupational safety
and health

RC Program Policy○: Almost achieved

Fiscal year 2019

Certification body
Japan Chemical Quality
Assurance Ltd.
International Standards
Certification Center
Japan Chemical Quality
Assurance Ltd.
Japan Chemical Quality
Assurance Ltd.

Internal audit of plants
The Yokkaichi Plant and the Chiba Plant conduct internal audits
for ISO 9001*1 and ISO 14001*2 as well as for accreditation as
high-pressure gas inspection executors (completion inspection
and safety inspection)*3 based on safety management systems.

Environment safety inspection (Yokkaichi Plant)

External audits
The Yokkaichi Plant and the Chiba Plant undergo external audits(maintenance audits and renewal audits) based on ISO 9001*1
and ISO 14001*2 and are maintaining their certifications.
KH Neochem is taking continuing steps to improve RC
programs by incorporating the results of these environment
safety inspections, quality audits, internal audits of plants, andexternal audits as feedback.
*1 and *2, See page 40*3 See page 45

upgrade safety management levels.

❹	We will make every effort to conduct training and consciousness-raising inorder to encourage employees and other people involved to take theinitiative to prevent accidents.

40

KH Neochem｜Corporate Report 2020

Environment safety inspection (Chiba Plant)

KH Neochem｜ Corporate Report 202041

Responsible Care

Environmental Conservation

Global Warming Prevention

Flow of Environmental Impact Results nergy consumption, specific consumption,
E
and CO2 emissions volume

This shows an overall image of inputs and outputs that occur when manufacturing our products.

INPUT

OUTPUTKH Neochem

Product
480,922 t

Energy (crude oil equivalent)
Released into the atmosphere

Fuel……………………… 172,258 kL
Purchased steam ………… 14,936 kL

CO2 …………………………440,103 t

Purchased electric power… 17,367 kL

SOx ……………………………… 2.3 t
NOx………………………… 259.9 t

Dust …………………………… 5.8 t

Water

PRTR substances ……………… 3.3 t

Yokkaichi Plant
City water ………………………12 kt

Released into the water

Ground water …………………32 kt

Total amount released…… 4,468 kt

Industrial water ………… 7,398 kt

(L/t)

250

250

200

200

150

150

100

100

50

50

0

0

Amount generated……… 52,703 t

Scope of aggregation: Yokkaichi Plant and Chiba Plant
Period covered:
April 1, 2019 to March 31, 2020

(million yen)
Substance of main measures

Investment
amounts

Expense amounts

188

2,388

Pollution prevention costs

Air pollution prevention, water pollution prevention, etc.

(174)

(881)

Global environmental conservation costs

Global warming prevention, energy conservation
measures, etc.

(0)

(247)

Efficient use of resources, recycling of waste, etc.

(14)

(1,260)Purchase of recycled stationery (eco-label goods), etc.

0

2

0

26

Breakdown

Costs within business area

Social program costs
Environmental remediation costs

Environmental management system maintenance,
operation, etc.
Research and development, etc. for products contributing to environmental conservation, etc.
Contributions to groups engaging in environmental
conservation, support, etc.
Oil spill liability insurance, levies on pollution loads
Total

0

223

0

0

0

6

188

2,644

* Some totals may not tally due to rounding.

Economic impact(million yen)

Description
Profit201720182019 (fiscal year)

8

3,000

6

2,000

4

1,000

2

AmountSales of waste material (waste catalyst, scrap, etc.), sales of recovered containers

02019 (fiscal year)

0
2015

2016

2017

2018

Scope of aggregation: All KH Neochem operating facilities
Period covered:
April 1, 2019 to March 31, 2020

Reduction of Amount Released into
the Environment
Chemical substances
KH Neochem makes reports to the Japanese government inaccordance with the PRTR Act*3 on the amount of Type or Class 1
designated chemical substances manufactured or used annually,that is released into the environment and on changes in thoseamounts. The amounts released are shown in the figure below.
*3 P RTR Act: the act covering the tracking of amounts of specific chemical
substances released into the environment and promoting improvements in the
management of these substances

Amounts released（t）■ Air ■ Water

15

500
400

Environmental conservation costs

Research and development costs

2016

(L/t)

4,000

(1,000 kL)

Environmental accounting quantitatively determines and evaluates the amounts of investment and expenses for environmental conservation.

Management program costs

2015

CO2 emissions

Environmental Accounting

Resource recycling costs■ Energy consumption (crude oil equivalent) (1,000 kL)
Specific energy consumption (L/t)(1,000 kL)

Amount as final landfill …… 0.8 t

Upstream and downstream costs

Energy consumption and specific consumption

T-P ……………………………… 1.6 t

Waste material
Chiba Plant

Classification*1. Energy Saving Law: the law covering the rational usage of energy*2. G lobal Warming Law: the law covering the promotion of initiatives taken themeasure against global warming

T-N ……………………………… 9.7 t
PRTR substances ……………… 7.3 t

522,396 t■ Energy consumption (crude oil equivalent) (kL)Specific energy consumption (L/t)（kL）

As a designated business operator under the Energy Saving
Law,*1 KH Neochem makes every effort to promote rational
uses of energy. As a specified emitter under the Global Warming
Law,*2 we are also working diligently to reduce CO2 emissions.
In fiscal year 2019, our energy consumption and CO2 emissions
volume as percentages from the previous year were 98.0% and98.0%, respectively, showing a decrease. Our specific energy
consumption was also down 1.4% from the previous year.
Going forward, the whole company will act together to improve
the specific energy consumption and reduce CO2 emissions.

COD ………………………… 24.7 t

Raw materials

Energy consumption and specific consumption
in physical distribution

10

300
5

200
100

0
0

2015
2015

2016

2017

2018

2016

2017

2018

2019 (fiscal year)

2019 (fiscal year) nergy consumption and specific consumption
Ein physical distribution
As a designated shipper under the Energy Saving Law,* KH
Neochem also promotes the rationalization of energy use duringphysical distribution. Specific energy consumption during
distribution decreased 7.5% from the previous year in fiscal year
2019 owing to systematic ship transportation to stock points.
We will continue to work on reducing our energy consumption
in several ways, such as increasing lot sizes and using additives
to improve ship fuel.
1

Amount of PRTR Act Type or Class 1 designatedchemical substances released (fiscal year 2019)[Top five substances by amount released]
Ordinance
number(t)

Amount released

Substance name

Air

Water

Soil

35

Isobutyl aldehyde

0.4

1.8

0.0

Total
2.2

12

Acetaldehyde

0.9

1.2

0.0

2.1

1

Water-soluble zinc compounds

0.0

1.8

0.0

1.8

20

2-aminoethanol

0.5

0.8

0.0

1.3

300

Toluene

0.7

0.0

0.0

0.7

* Some totals may not tally due to rounding
Scope of aggregation: Yokkaichi Plant and Chiba Plant
Period covered:
April 1, 2019 to March 31, 2020

9

Scope of aggregation: Yokkaichi Plant and Chiba Plant
Period covered: January 1,2019 to December 31, 201942

KH Neochem｜Corporate Report 2020

KH Neochem｜ Corporate Report 202043

Responsible Care

Air pollutants

Water pollutants

Waste material

For the sulfur oxides (SOx), nitrogen oxides (NOx), and dust
discharged from boilers, liquid waste incinerators, sludge
incinerators, and other such equipments, KH Neochem of course
complies with emissions standards based on the Air Pollution
Control Act, and we additionally comply with levels that havebeen agreed upon with local communities.

KH Neochem complies with emissions levels based on the Water
Pollution Prevention Act as well as with levels agreed upon withlocal communities for chemical oxygen demand (COD), total
nitrogen (T-N), and total phosphorus (T-P) in wastewater.

Amounts released (SOx, dust)

Amount released (total effluent discharged)

At KH Neochem we implement thoroughgoing separation ofwaste materials and engage in the 3Rs of waste management:
reduce, reuse, and recycle. We are moving forward to reuseacid waste and alkaline waste in our plants as well as to reduce
their volume, to contract recycling treatment of waste
catalysts, and to reuse incinerator waste as aggregate. For
waste material that cannot be reused or recycled, we aremaking every effort to treat it to reduce its volume and to
reduce the amount that goes to a landfill.

（t）

■ SOx

(kt)

■ Dust6,000

8
6■ Amount generated ■ Amount released ■ Amount treated as final landfill

4

0
2,000

2015

2

7.3

2016

16.8

0

0
2015

2016

2017

2018

2015

2019 (fiscal year)

Amount released (NOx)

2016

2017

2018

Amount released (COD, T-N, T-P)

（t）

（t）

400

40

300

30

200

20

■ COD

2019 (fiscal year)

■ T–N

2017

1.1

2018

■ T–P

7.3

2019

(fiscal year) 0.8

2016

2017

2018

2015

2019 (fiscal year)

40,00050,00060,000 （t）
53,424

11,41351,396

8,807

The Yokkaichi Plant and Chiba Plant each define their own
Safety Management Policy in accordance with the Fundamental
Policy for Safety Management (see p. 40). They carry out avariety of activities to secure the safety of their plants, including
safety and environmental assessments, disaster preparedness
training, and so on.

At KH Neochem, we conduct an SEA in advance to assess theenvironmental, safety, and health impact when introducing newtechnology, new processes, new facilities, new machinery, andnew chemical substances. By using the SEA assessment results
for feedback, we make every effort to heighten the safety ofprocesses and equipment.

54,705

9,958

Emergency training

54,825

11,337

KH Neochem conducts periodic disaster preparedness training
for emergency scenarios, as well as training in initial firefighting
response and emergency reporting. We prepare so that we canrespond promptly and appropriately, keeping damage to aminimum in the event of an emergency.

52,703

9,056

1,000

2,000

3,000

Recycling rate (%)

4,000

（t）

2015

0
2015

30,000■ Recycled amount (t)10020,000Recycled amount and recycling rate
0100

10,000

Safety and Disaster Prevention Measures

Safety and environmental assessment (SEA)

Amount of waste generated, amount released,
and amount treated as final landfill

4,000

Safety and Disaster Prevention

2016

2017

2018

2019

(fiscal year)

2016
2017

Levels agreed upon with local communities
and annual maximum values

Levels agreed upon with local communities
and annual maximum values
SOx

1

NOx

COD

Dust*

Agreement
level

Maximum
value

Agreement
level

Maximum
value

Agreement
level

Maximum
value

Yokkaichi
Plant

1.0
Nm³/h

0.0
Nm³/h

53.0
kg/h

26.5
kg/h

0.025
g/Nm³

0.001
g/Nm³

Chiba
Plant

9.0
Nm³/h

0.1
Nm³/h

12.0
Nm³/h

1.9
Nm³/h

4.5
kg/h

0.5
kg/h

(kg/day)

T–N

T–P

Disaster prevention comprehensive drill (Yokkaichi Plant)

2019

Agreement
level

Maximum
value

Agreement
level

Maximum
value

Agreement
level

Maximum
value

Yokkaichi
Plant

201.2

110.2

46.0

21.8

13.0

9.1

Chiba
Plant

124.0

53.4

90.0

37.9

12.5

4.0

*1 Dust: At the Yokkaichi Plant, density controls are set per item of equipment.
Here, the generator boiler figure is shown as a typical example.

2018(fiscal year)

0

6

3

Employees speak out

Kanami Tanaka
Kasumigaura Product Division 2,
Yokkaichi Plant

44

KH Neochem｜Corporate Report 2020

Since joining the Company, I have been working on plant operations in Kasumigaura Product Division 2
at the Yokkaichi Plant, and since 2011 I have worked on maintaining safe and stable operations.
In this division, there is a plant that manufactures more than one product, so there is productchangeover work. This work is complicated and requires proficiency to perform it safely. For that reason,
experienced workers and younger workers are working together to ensure the technology is passed onby reviewing the manual. Additionally, we read the 5C Credo card together and recite the safety slogan
at the daily morning meeting to promote safety awareness and educate employees to prevent humanerror. In October 2019, I received a commendation* from the Japan Petrochemical Industry Association. I
consider it a great honor, and I will continue to work on ensuring safe and stable operations.
* As a result of selection by the Plant Safety and Industrial Hygiene Committee of the Japan Petrochemical Industry
Association, as well as letters of commendation from Chairman Morikawa to 14 people from 14 companies that were
judged to have outstanding skills and that have produced excellent safety results at their worksite or division.

12

（％）

Waste material treatment flow
Amount of waste generated: 52,703 t 100 %Amount recycled internally: 3,368 t

Ensuring safe and stable plant operations

9

6.4 %
Amount treated internallyas final landfill:0 t 0.0 %Amount reduced internally: 40,294 t 76.5 %Amount of waste released: 9,056 t 17.2 %Amount recycled externally:

534 t

1.0 %

Amount reduced externally: 8,522 t 16.2 %Amount treated externallyas final landfill:
0.8 t 0.0 %Scope of aggregation: Yokkaichi Plant and Chiba Plant
Period covered:
April 1, 2019 to March 31, 2020

Independent disaster prevention drill(Chiba Plant)

Disaster evacuation drill for tsunami(Chiba Plant) ccreditation as high pressure gas inspection
A
executors (for both completion inspection andsafety inspection)
This system, instituted by the High Pressure Gas Safety Act,
enables companies that are recognized to have high standards
for safety management, operations management, andequipment management, to conduct their own completion
inspections and safety inspections in accordance with the High
Pressure Gas Safety Act.
The Yokkaichi Plant has acquired this accreditation for six
manufacturing facilities and the Chiba Plant has acquired it forone manufacturing facility. Both plants take steps for continuing
improvement by implementing the plan-do-check-action(PDCA) cycle.
KH Neochem｜ Corporate Report 202045

Responsible Care

Occupational Safety and HealthOccupational Safety and Health Measures
KH Neochem conducts risk assessments* in order to assure thesafety of employees and personnel engaged in work at our plants,
as well as to take preventive action against disaster. We also
conduct case studies on accidents and disasters that haveoccurred in the past, whether in the Company or elsewhere, andwe make every effort to prevent the occurrence of similar
accidents or disasters. We also engage in risk prediction activities
using hiyari hatto, close call recognition, and kigakari memo,
memos on matters of concern, improvement suggestion
programs, and other everyday health and safety activities.
A revision of the Industrial Safety and Health Act has also
made it mandatory to conduct risk assessments*2 of chemical
substances. We began administration of these assessments
when the amended law went into effect on June 1, 2016.
1*1 Risk assessment: This refers to a series of techniques for identifying the risks andhazards in work, determining the seriousness and likelihood of work-related
accidents arising from them, combining that information to estimate the risks,
deciding on a priority for countermeasures based on the magnitude of thoserisks, studying measures to eliminate or reduce the risks, and keeping a record of
the results.
*2 Chemical risk assessment: This refers to the identification of the risks and hazardsof chemical substances and products, estimation of the likelihood of risk toworkers or damage to their health, and studying measures to reduce the risks.

Physical Distribution Safety and Chemical and Product Safety
Number of work-related accidents■ Accidents not resulting in lost workdays(Cases)■ Accidents resulting in lost workdays

5
4
3
2
1

There have been zero accidents resulting in lost workdays at the
Yokkaichi Plant since October 11, 2008, and at the Chiba Plant
since September 3, 2010. In fiscal year 2019, however, there
were three accidents at these plants (Yokkaichi plant: 2, Chiba
plant: 1) that did not result in lost workdays. We are making
every effort to examine the root causes of these accidents andto devise countermeasures, including safety education andequipment improvements, to prevent a reoccurrence.
In 2002, the Yokkaichi Plant set the Japan Industrial Safety
and Health Association record (at that time) for the longest
accident-free period classified by industry and the record has
been kept to date. Domestically, the plant is holding the position
among the top record holders for accident-free working hours
classified by industry (organic chemical product manufacturingindustry: 23,953,235 hours, as of October 2008). In 2005, theplant celebrated reaching 10,000 continuous days of accidentfree work, and we put up a commemorative plague.

For preparedness in the event of an accident while transportingKH Neochem products, we have created yellow cards that set
out the measures to take in case of an emergency, who tocontact, and so on. We make certain that these cards are always
carried by the drivers of tanker trucks or other vehicles duringtransportation.

2015

2016

2017

2018

2019 (fiscal year)

There were no accidents resulting in lost workdays.
For details, please see the Status of Work-related Accidents column.

Frequency rate (accidents resulting in lost workdays)
KH Neochem
Chemical industry average(Ministry of Health, Labour and Welfare statistics)(Frequency rate)

1.2

KH Neochem gives first priority to providing correct
information so that our products can be used safely, and theCompany is taking measures to put this into practice. Inside
Japan, we create SDS*1 and labels displaying risk and hazard
information and safety measures according to JIS standards,
which are GHS*2 compliant. In other countries, we implement
measures as necessary in accordance with that particularcountry’s GHS system.
*1 SDS: Safety data sheets*2 GHS: Globally Harmonized System of Classification and Labelling of Chemicals

1.0
0.8

Container labels

0.4
0.2

0

Yellow card(front, in Japanese)

Chemical substance management

00.6

Status of Work-related Accidents

Yellow cards

2015

2016

2017

2018

2019 (fiscal year)

Frequency rate: Indicator of the frequency of accident occurrence(Number of fatalities and injuries) ÷ (Cumulative number of actual work hours)
× 1,000,000

Severity rate

KH Neochem
Chemical industry average(Ministry of Health, Labour and Welfare statistics)(Severity rate)

0.10
0.08

We affix labels to our product containers as cautionary notices
to people who handle KH Neochem products.
For products exported to other countries, we provide
information and other support of every kind to the local
importers who are responsible for affixing container labels.

Container labels(KH Neochem Americas Version)
ISONONANOIC ACID (KYOWANOIC-N)
Hazard statement

Harmful if swallowed. Causes serious eye irritation. Harmful to aquatic life with long
lasting effects.

Precautionary statement
Prevention

Wash thoroughly after handling. Do not eat, drink or smoke when using this product.
Wear eye protection/face protection. Avoid release to the environment.

ResponseIf swallowed: Call a poison center/doctor if you feel unwell. Rinse mouth. If in eyes:
Rinse cautiously with water for several minutes. Remove contact lenses, if present
and easy to do. Continue rinsing. If eye irritation persists: Get medical
advice/attention.

Storage

Warning

Store away from incompatible materials.

Supplemental information

Disposal

For additional information read Safety Data Sheet for this product.

Dispose of contents/container in accordance with local/regional/national/international
regulations.

Safety data sheets (SDS)At KH Neochem, we create a safety data sheet (SDS) for all
products that we guarantee the quality of, and we provide thesesheets to customers and distributors. For export products, weprepare and provide an SDS using the official language of thecountry in line with the legal framework of the exporting country.

KH Neochem Americas, Inc., 1515 East
Woodfield Road, Suite 710, Schaumburg,
IL 60173
TEL: (847) 517-8800
Emergency: CHEMTREC: (800) 424-9300
United States

SDS (general-purpose English-language version)
Safety Data Sheet
TRADE NAME: ISONONANOIC ACID (KYOWANOIC-N)

0.06(06-08)Page 1 of 4First issue:
Revised:22.06.1994
07.05.2019

1. CHEMICAL PRODUCT AND COMPANY IDENTIFICATION
Trade Name:

0.04

SDS No.: 06-08

ISONONANOIC ACID (KYOWANOIC-N)

Company Name: KH Neochem Co., Ltd.
Address: 2-3-1, Nihonbashi-Muromachi, Chuo-ku, Tokyo, 103-0022, Japan
Department for Information: Sales & Marketing Department 2
TEL +81-3-3510-3561
FAX +81-3-3510-3571
Emergency Contact Number:TEL +81-3-3510-3561
FAX +81-3-3510-3571

0.02

0

NFPA

2. INFORMATION ON COMPOSITION

2015

2016

2017

2018

2019 (fiscal year)

Severity rate: Indicator of the seriousness of an accident(Cumulative number of lost work days) ÷ (Cumulative number of actual work hours)
× 1,000

Chemical Name
SynonymContent
Structural Formula
Molecular Formula
Molecular Weight
CAS NoUN No.
EINECS No.
ENCS No.

3,5,5-TRIMETHYLHEXANOIC ACIDKYOWANOIC-N, NOIC-N
95 %UP
C8H17COOH
C9H18O2
158.2
3302-10-1
Not regulated.
221-975-0(2)-608

3. HAZARD IDENTIFICATION
Physical Hazard:
Major Health Hazard:
Major Environmental Hazard:

Combustible liquid.
Harmful if swallowed. Causes serious eye irritation.
Harmful to aquatic life. Harmful to aquatic life with long lasting effects.

4. FIRST AID MEASURES
4.1 General Instructions:
4.2 Eye Contact:

There are no general instructions necessary.
Immediately flush eyes with plenty of clean water for at least 15 minutes while holding
eyelids open. Get prompt medical attention.
Remove contaminated clothing. Wash the affected area with plenty of soap and water. If
irritation develops, see a physician.
4.4 Ingestion:
Rinse mouth. Get prompt medical attention. Never make an unconscious person vomit ordrink fluids. When vomiting occurs, keep head lower than hips to help prevent aspiration.
4.5 Inhalation:
Remove individual(s) to fresh air. In emergency situations use proper respiratory protection
to immediately remove the affected victim from exposure. Administer artificial respiration if
breathing has stopped. Keep at rest. Get prompt medical attention.
4.6 Notes to the Physician: There is no special information available. Treat symptomatically.
4.3 Skin Contact:

5. FIRE FIGHTING MEASURES

Flash Point (in open cup):
127 °C
Autoflammability:
440 °C
Explosion Limits:
Lower limit 1.2 vol%Suitable Extinguishing Media: Water spray, ABC dry chemicals, protein type air foams or carbon dioxide. Carbon
dioxide may be ineffective on large fires, due to lack of cooling capacity andpossible reignition.
Not to be used for safety reasons: water jet.
Special Exposure Hazards Arising from Substance or Combustion Products:
Formation of carbon monoxide and carbon dioxide at the combustion of the product.
Thermal decomposition may release toxic and irritating vapors. Thermal influence
results in a pressure build-up in closed drums – danger of rupture.
Special Protective Equipment Required for Fire-fighting:
Cool product containers exposed to fire with water spray. In case of fire, wear aself-containing breathing apparatus and OSHA/MSHA approved full protective
Copyright(C): KH Neochem Co., Ltd.

Plague commemorating continuous accident-free days

46

KH Neochem｜Corporate Report 2020

KH Neochem｜ Corporate Report 2020

47

Measures Taken at Plants

Responsible Care-related data for our plant is available on our website: http://www.khneochem.co.jp/en/csr/rc/

Yokkaichi Plant
Location

Chiba Plant

Umaokoshi Plant 2-3 Daikyo-cho, Yokkaichi City, Mie Prefecture
Kasumigaura Plant 1-4 Kasumi, Yokkaichi City, Mie Prefecture

Yoshiaki Kondo
Executive Officer
Plant Manager

Environmental and safety topics

Location

11-1 Goi Minami-kaigan, Ichihara City, Chiba Prefecture

Executive Officer
Plant Manager

Environmental and safety topics

Cleaned safety mirrors at road curves in Kyohoku area
Participated in a volunteer cleanup of Takamatsu shoreline at Kawagoe-cho
Participated in a volunteer cleanup and flower bed maintenance on Kyohoku-dori Avenue
Participated in a volunteer cleanup of Route 23 pedestrian crossings (recognized as an organization that cares for the roads by the Director of the
Mie Office of Rivers and National Highways, Chubu Regional Development Bureau, Ministry of Land, Infrastructure, Transport and Tourism)

Participated in a pro bono event in Yokkaichi City
Cooperated with a rogaining competition organized by a local NPO
Held a plant tour for a local educational institution
Employee received a commendation from the Japan Petrochemical Industry Association
Employee received a commendation from a director of the Mie Prefecture High Pressure Gas Safety Association

Cosponsored Goi Rinkai Festival
Participated in a volunteer cleanup of Route 16
Held a plant tour for a local educational institution
Carried out traffic safety exercise on Route 16
Chiba Labor Standards Association awarded one person a commendation as an outstanding worker.
Employee received a commendation from the Chiba Prefecture High Pressure Gas Safety Association.

Initiatives at Yokkaichi Plant

48

Akio Nakahashi

Chiba Plant Initiatives

 leaning safety mirrors atCroad curves

 ooperation with local
Crogaining competition

Goi Rinkai Festival

 lant tour for elementaryP
school students

This activity was planned out of a desire for local
elementary and junior high school students to be able tocommute to school safely and with peace of mind at thestart of the new school year. In cooperation with thearea’s civic center, residents’ association, and othergroups, we cleaned the safety mirrors at road curves in
the area. Employee volunteers cleaned mirrors in 92
locations, a substantial increase from the previous year.

We cooperated in the management of a mini-rogaining
competition organized by a local NPO commissioned by
Yokkaichi City. Rogaining is a sport in which teams
compete for the highest score, visiting multiple
checkpoints using a map within a time limit. One of thecheckpoints was located on the plant premises, and weorganized some activities, including commemorative
photos and yo-yo fishing.

We ran a refreshment booth at the Goi Rinkai Festival,
which was mainly organized by local companies,
including KH Neochem, and neighborhood associations
from the Goi area. The event was a great success, withmany local people and the Ossa-kun, a regional mascot
paying visits. We will set up booths in the future tocontribute to the community.

We held a plant tour for local elementary students incollaboration with nearby companies. Around 110
students toured the plant with a large bus and learned
how petrochemical complexes create familiar benefits.

KH Neochem｜Corporate Report 2020

KH Neochem｜ Corporate Report 202049

Social Contribution Activities

Branding Activities

KH Neochem is working to contribute to society through business and communications activities for the sustainable development of

Basic conceptual approachsociety. We are strengthening our approach to community service by emphasizing activities with deep local roots in Yokkaichi City,
Mie Prefecture and Ichihara City, Chiba Prefecture in particular, where our plants are located.

We believe, to sustainably increase our corporate
value, it is important for us to explain ourcompany to our stakeholders in an easy toStrengthening Social Contributions

5 Guidelines for Social
Contribution Activities●

Activities that will be welcomedby those we are benefiting●

Activities that employees canactively participate in●

Activities that can continue●

Activities that will provide
opportunities to learn about KH
Neochem●

Activities that relate to businessunderstand way and to increase our visibility. We
are developing our branding activities in line with

Fiscalyear

2017

 onducted in-house questionnaire for all employees regarding socialC
contribution activities

this belief.

 ecided on substance of social activities after reviews and discussions
Dthat included management based on the results of the employee survey

2030, we formulated a brand image and*573 responded, approximately 90% of employees (non-consolidated)

Touched up paint at a sports field in Yokkaichi City, Mie Prefecture
Fiscalyear

2018
Fiscalyear

2019

As fiscal 2019 was the first year of VISION
deployed it in various advertisements andpublications. We also conducted internal andexternal branding activities through support for
short track speed skater, Moemi Kikuchi, who is

Touched up paint at a sports field in Ichihara City, Chiba Prefecturecompeting on the global stage.
1

 ouched up paint at a General Athletic Playground in Yokkaichi
T
City, Mie Prefecture

Activities in fiscal year 2019
Formulate brand image for VISION 2030 1

Donation and Painting Benches at a General Athletic Playground (Yokkaichi City, Mie Prefecture)planned. This painting enabled a glimpse of goodcommunications among the employees. As well, some who
had finished their own work rushed to help out in other areas.
Yokkaichi City Mayor Tomohiro Mori came to see thepainting work, and he watched with admiration as theparticipants painted the benches. At the closing ceremony,
there was a tree planting ceremony to commemorate oursocial contribution. Mayor Mori then made some remarks andpresented the volunteers with a letter of appreciation. At theend, Yoshiaki Kondo, manager of the Yokkaichi Plant, gave
Painting work

Backgroundthe closing remarks saying, “We would like to continue doing2S upport for Moemi Kikuchi,
short track speed skater 3
Appeared on a TV show

(BS11: The Team, Other Side of Winning and Losing)

Activity debriefing meetings (in-house)
Fans voluntarily cheeringDigital ads at major stations(spot ads in May: Tokyo, Nagoya, and Shin-Osaka Station)

 d flashing on electric bulletin board onAbullet trains (spot ad in May) 5

43

Photo：Aflo Sport

4

Advertisements in Kaisha Shikiho(summer and New Year's issue)

Advertisements in various newspapers, etc.

business here in Yokkaichi with the trust of the local people.”
Kasumigaura Green Field will be used to host the Mie

On this occasion, when considering what to do, we talked with

Tokowaka National Athletic Festival (scheduled to be held inpeople at Yokkaichi City Hall about activities that would make2021). We were able to make a small contribution to a place

the community happy. After that, we received proposals fromthat many will be visiting, so the activity was very meaningful

the city hall, and we carefully reviewed them to see which

for our company.

ones were in line with our key points for social contribution

2

5

We plan to continue with this type of activity next year andactivities. The one that most closely aligned with these key

beyond. In 2020, we plan to make a social contribution near

points was the donation of wooden benches and painting

our Chiba Plant after consulting with Ichihara City Hall. Our

existing benches and guard pipes at Kasumigaura Green Field.

hope is to continue making contributions to local communities
and various other stakeholders on an active and ongoing basis.

Activity Report

VISION 2030 Introduction Movie
The introduction movie about VISION 2030,
statement of our ambitions by 2030 is available in
our website.

This time, we built five new wooden benches. With the paint

We aspire to be a leading

we use on our products, our employees hand-painted existing

global specialty chemical company

benches and guard pipes in the Kasumigaura Green Field in

and we aim for continued growth

Yokkaichi City.

together with our stakeholders.

The work was performed by 98 volunteers from the whole
company. These were tough activities because of the wide

http://www.khneochem.co.jp/en/company/philosophy/vision.html

range of target areas and the steel guard pipes were difficult
to paint. However, thanks to the dedicated work of ouremployees, we were able to finish the painting work as

50

KH Neochem｜Corporate Report 2020

Commemorative tree planting ceremony Letter of appreciation from Yokkaichi City
Left: Mayor Mori, right: President
Left: Mayor Mori, right: President
Takahashi
Takahashi

KH Neochem｜ Corporate Report 2020

51

Dialog with Shareholders and Investors

Corporate Overview / Stock Information

IR Activities in 2019

Corporate Overview (as of December 31, 2019)

No. Month
1
Feb.
Feb.
2
Mar.
3
Apr.
4
May
5
May
6
June
7
June
8
Aug.
9
Sept.
10
Sept.
11
Oct.
12
Nov.
13
Dec.
14

Activities

Reference

Third Medium-Term Business Plan and financial results briefing
Tokyo Stock Exchange IR Festa
Overseas institutional investors conference
Overseas IR
Financial results briefing (conference call)
Overseas institutional investors conference
Plant tour for institutional investors
Overseas IR
Financial results and R&D briefing
Individual investor briefing
Plant tour for institutional investors
Plant tour for institutional investors
Financial results briefing (conference call)
Nomura IR Fair

2018
Tokyo
Tokyo
U.S.
2019 1Q
Tokyo
Chiba Plant
United Kingdom
2019 1H
Yokkaichi City, Mie Prefecture
Chiba Plant
Yokkaichi Plant
2019 3Q
Tokyo

Global Network

Establishment December 2010
(Our predecessor Kyowa Yuka,
was established in November 1966)

CapitalOsaka Branch
Tokyo
Head Office

Sakai
Logistics Center

8.8 bnJPY

Head Office2-3-1, Nihonbashi-Muromachi, Chuo-ku,
Tokyo 103-0022, Japan

Affiliations

Kurogane Kasei Co., Ltd.
Kurogane Fines Inc.
KH Neochem Americas, Inc.
Shanghai Seika Trading Co., Ltd.
J-Plus Co., Ltd.*

Chiba Plant

Yokkaichi Plant
R&D Center

KH i-Lab (Kawasaki)

KH Neochem
Americas, Inc.
Shanghai Seika
Trading Co., Ltd.

*Joint venture with Mitsubishi Chemical Corporation

Communication with Shareholders

Communication with Investors

KH Neochem holds a ordinary general meeting of shareholders in

Our corporate executives actively communicate with investors

March every year. The general meeting of shareholders is ourin order to deepen their understanding of our business andhighest decision-making body. We also consider it a valuable

performance. For example, in 2019, we held four financial

opportunity for us to engage directly in dialogues with our

results briefings, as well as R&D briefing, plant tours, individual

shareholders, and we make every effort to schedule the meetinginvestor briefings, and other events (shown in the table above)for a time and place that will make it easy for shareholders towhere investors were able to understand about ourattend. We communicate the details of our business activities

management policies, business performance, safety andand initiatives in an easy to understand way by using videos. This

environmental efforts, and other aspects of our business.

year's meeting was held while taking appropriate measures toAdditionally, in December 2019, we participated in the Nomura

prevent the spread of the COVID-19. Moreover, we publish our

IR Fair, an very meaningful occasion for KH Neochem

semiannual business reports to incorporate special features about

executives to hear the opinions and impressions from many

our new research hub (KH i-Lab) opened in 2019 as well as otherindividual investors.

business topics.

Semiannual business reports

Nomura IR Fair

Stock Overview (as of December 31, 2019)
Total number of shares authorized to be issued

Total number of issued shares

136,200,000
Major Shareholders
Name of Shareholder

KH Neochem has been selected as a constituent of the SOMPO Sustainability
Index by SOMPO Asset Management and the MSCI Japan Empowering

6,010

Types of shareholders (%)
Number of
Shares held(Thousand Shares)

Holding ratio(%)

Japan Trustee Services Bank, Ltd.
(Trust Account)

4,241

11.45

THE CHASE MANHATTAN BANK 385036

2,627

7.10

(Trust Account)

The Master Trust Bank of Japan, Ltd.

2,379

6.43

Tosoh Corporation

1,852

5.00

TAIYO FUND, L.P.

1,097

2.96

JP MORGAN CHASE BANK 385174

1,037

2.80

Mizuho Bank, Ltd.

733

1.98

TAIYO HANEI FUND, L.P.

732

1.98

Japan Trustee Services Bank, Ltd.

725

1.96

Japan Trustee Services Bank, Ltd.

698

1.89

(Trust Account 9)(Trust Account 5)

Selected as a constituent of the ESG Index

Number of shareholders

37,029,400

Financial instruments business operators
Japanese Individuals,
other

1.07%

8.48%
Other Japanese
corporations

13.98%

Overseas
corporations,etc.

43.60%
Financial
institutions

32.87%

Rating Information (as of April 17, 2020)
Rating Agency

Issuer Rating

Short-term Rating

BBB+

a-2

Women Index (WIN), an ESG index created by the Government Pension

52

Investment Fund (GPIF).

Rating and Investment Information, Inc. (R&I)*The inclusion of KH Neochem Co., Ltd. in any MSCI index, and the use of MSCI logos, trademarks, service marks or index names herein, do not constitute a sponsorship,endorsement or promotion of KH Neochem Co., Ltd. by MSCI or any of its affiliates.
The MSCI indexes are the exclusive property of MSCI. MSCI and the MSCI index names and logos are trademarks or service marks of MSCI or its affiliates.

For the definition of ratings, please see the website of the rating agency (below):
https://www.r-io.jp/eng/index.html

KH Neochem｜Corporate Report 2020

KH Neochem｜ Corporate Report 202053