New Vision and the Next Management Plan “Mission 2030”

Denka Company Limited

CONTENTS

1 Review of Denka Value-Up (FY2018 - FY2022)
1.

Overview of Profitability, Strategic Investment, andShareholder Returns

2 New Vision
1.

Envisaged World of the Future2.

Business Opportunity-Generating Megatrends
and Focus Areas

3.

Vision3 Mission 2030 (FY2023 - FY2030)
1.

Business Value Creation

2.

Human Resources Value Creation

3.

Management Value Creation

4.

Financial Strategy

5.

KPIs Overview List

1

Review of Denka Value-Up
Management Plan
Our Threefold
Growth Visions(FY2018 - FY2022)
Two GrowthStrategies

Business Portfolio Shift- Accelerated growth of specialty business

Environment/Energy

Healthcare

High Added Value
Infrastructure- Specialization in core business- Redefinition of commodity business position

FY2021 The Ideal Form of Denka

Introduction of Innovative Processes- Improvement of productivity through innovationsin production, R&D, and operational processes
Business

Environment

Human Resources

Focus on work that
we perform better
than anyone else

Achieve net zero
greenhouse gas
emissions by FY2050

Become a company inwhich all employees
can feel growth

A company that is genuinely necessary
to society and irreplaceable to the world,
and that employees and stakeholders
can take pride inCopyright ©Denka Co., Ltd. All Rights Reserved.

31

1

Review of Denka
Value-Up

Overview of Profitability, Strategic Investment, andShareholder Returns

 Profitability
Operating income as aSpecialty-Fusion Company

Operating income (billion yen)

500
50450
45

Operating income ratio

16%

43

40.1

400
40
350
35

34.7

34.2

14%
12%

31.6
10%

300
30
250
25

10%

200
20
150
15

10%

10%

8%

8%

8%
6%
4%

100
10
550

2%

000%

2018

2019

2020

2021

2022

5 years cumulative (2018 - 2022)

 StrategicInvestment
 Shareholder
Returns
Copyright ©Denka Co., Ltd. All Rights Reserved.

Initial Plan

Actual¥75.0B¥133.3B

Planned Total
Shareholder
Return Ratio

Actual Total
Shareholder
Return Ratio

50%

52%

Major Investments
Actof production capacity ofAugmentation
spherical alumina,
ual silicon nitride powder,and influenza vaccine, etc.

ActShares
Total ualDividends Repurchased¥57.0B¥2.1B

Net Income¥115.0B

4

21

VisionEnvisaged Worldand Challenge

Envisaged World of the Future
Megatrends andFocus Areas

SustainabilityVisionTechnologySustainability

Evolving Technology

Global warming

Technological innovation

More natural disasters
Shift to electric vehicles

DX, AI, robots, high-speed
telecommunications
Genetic engineering

Marine plasticpollution
Air and waterpollution, soil
contamination

Pandemics
Food shortages
Lack of water resources

Global Population Growth

Population
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Economic inequality
Limits of globalization
Geopolitical risks

Confusion in Social Order

Confusion
522Vision

Envisaged Worldand Challenge

Envisaged World of the Future

Business Opportunity-Generating Megatrends and Focus AreasMegatrends andFocus Areas

VisionMegatrends

Focus Areas

Renewable energy
Sustainability

Mobility revolution
Expanded demand for

ICT & Energy

semiconductors and devices
Evolving
TechnologySophisticated medical needs
Innovative medical technology
Healthcare

Global Population
GrowthFoods and water resources
depletion
Confusion in
Social Order

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Increased infrastructure demand

Sustainable Living

623Vision

Envisaged Worldand Challenge

VisionMegatrends andFocus Areas

VisionThe values in our employees’ minds
Denka’s DNA

Core Value

Initiative: We will continue to challenge the possibilities of chemistry.
Integrity: We will engage in our work with sincerity and dedication.
Empathy: We will respect diversity and create a safe and secureenvironment.

Denka’s guiding

Denka’s long-standing principles and raison d'etre

principle

PurposeMake the world a better placeas specialists in chemistry

Denka’s DNA

Denka’s
responsibility

MissionCopyright ©Denka Co., Ltd. All Rights Reserved.

Bold, convincing, and ambitious targets

By 2030, we will increase the value of our human resources andmanagement, and we will focus on creating business value thatcombines the three elements of specialty, megatrends, andsustainability.

723Vision

Envisaged Worldand Challenge

VisionMegatrends andFocus Areas

Vision Formulation of a vision comprising Core Value, Purpose, and Mission

Denka’s responsibility

Denka’s guiding principle
Raison d'etre

Denka’s DNA

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83Mission 2030

Megatrends

MissionSpecialty

By 2030, we will increase the value of our humanresources and management, and we will focus oncreating business value that combines the threeelements of specialty, megatrends, andsustainability.
 Enhancement of corporate value withthree growth strategies

Specialty

Megatrends

Sustainability

Businessvaluecreation

Increase profitability in megatrend areas whereDenka can demonstrate its strengths tocontribute to a sustainable society

HumanResources
Value Creation

Become a company that enables each individual to feel
their own growth with Denka’s core values of Initiative,Integrity, and Empathy

Management
Value
Creation

Strengthen ESG management through moresophisticated corporate governance

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93

1Business value creation

Mission 2030

- Make 100% of businesses “three-star businesses” that incorporate thethree elements of specialty, megatrends, and sustainability- Strategic investment (growth, processes, environment, M&A) over 8 years : ¥360B
R&D spending (including ¥50 billion for basic research): ¥180B
Net sales

Operating income

ICT & Energy¥100B or more

Healthcare

Operatingincome ratio
15% or higher¥600B or more

Sustainable Living

¥550B
¥445B

¥60B
¥43B

2022
Copyright ©Denka Co., Ltd. All Rights Reserved.

2026

2030

2022

2026

2030
1031Business Value Creation

Mission 2030

Megatrends and Specialty

ICT & Energy
PolicyCreate a better society with the supply of cutting-edge materials
Technology and Strategy by Area
[Next-generation high-speed
telecommunications][xEV / Renewable energy]

Energy loss, heat conduction

Electroconductivity, super high-purity,durability

Technology

Precision spheroidization, hightemperature control, precision filmformation, coordination polymerization

Nanoparticles, impurity control, hightemperature firing

Strategic

Establish top market shareBecome de facto market standard

Products

Spherical silica, spherical alumina,electronic packaging, heat dissipationmaterials, LCP film, ultra low dielectricmaterials, etc.

Acetylene black, silicon nitride, electronic
circuit boards, next-generation conductive
material, etc.

Needs

Envisaged
growth until 2030
(Operatingincome)

2x thatof 2022

45(Billion yen)

30
22.5

2022

2026

2030

¥80 billion in strategic investment and ¥40 billion
in R&D spending over 8 years

Copyright ©Denka Co., Ltd. All Rights Reserved.

11

31

Business Value Creation

Mission 2030

Megatrends and Specialty

Healthcare
PolicyImprove quality of life for people around the world in areas of prevention, diagnosis, and treatment
Technology and Strategy by Area
[Prevention][Diagnosis][Treatment]

Needs

Prevention of infectious
diseases

Advancement of vitro
diagnostics

Cancer treatments

Technology

Cultured and recombinant
proteins

Production of diverse
antibodies
Simultaneous multi-item
measurement

Culturing and purification ofviruses
Formulation

Strategic

Development of new
vaccines, such as mRNA

Entry into next-generation
diagnostic pharmaceuticals
and genetic testing domains

Upgrading of manufacturing
capabilities and developmentof business in the CDMO
domainInfluenza vaccines, newproducts

Reagents for automatic
analyzers,
antigen testing kits, newproducts

Viral products, new products

Products

Envisaged
growth until 2030
(Operatingincome)

4x thatof 2022

40(Billion yen)

20112022

2026

2030

¥80 billion in strategic investment and ¥70
billion in R&D spending over 8 years

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12

31Mission 2030

Business Value Creation

Megatrends and Specialty

Sustainable Living
PolicyRealize safe, secure, and comfortable daily lives

Technology and Strategy by Area
[Foods][Infrastructure][Daily necessities]

Easing the impact of natural
disastersReducing the burden on theenvironment

Circular economy

High-temperature firing,humic acid control

High density/denisification,quick hardening, CO2 fixing

Chemical recycling,development of bio-derived
resinsStrategic

Overseas expansion

Technology development andoverseas marketing adapted toincreasingly sophisticatedinfrastructure demand

Early establishment oftechnology and social
implementation
Collaboration with local
communities and othercompanies

Products

Biostimulants
Environmentally-friendly
fertilizers

Special cement additives,
LEAF

High-performance styrenebased resins
Bio-plastics

Needs

TechnologyContribution to fooddemandEnvisaged
growth until 2030
(Operatingincome)

2x thatof 2022

15(Billion yen)1072022

2026

2030

¥30 billion in strategic investment and ¥20
billion in R&D spending over 8 years
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Reserved.

13

31Mission 2030

Business Value Creation

Pursuit of Sustainability

Achievement of carbon neutrality
Measures2030 KPIs- Portfolio reform including establishment of low-carbon
acetylene chain- CO2 emissions: 60% reduction (1.48 milliontons) compared with FY2013- Development and implementation of CO2 capture, storage
and utilization technologies- Achievement of carbon neutrality (2050)- Expansion of green energy by increasing hydroelectric
power generation and establishing new solar power plant- Maximum output of renewable energy power:
150MW

Sustainable cities and fulfilling daily lives
Measures2030 KPIs- Promotion of circular economy for styrene-based
packaging materials- Establishment of consortium for social
implementation of chemical recycling- Establishment of CO2 sequestration technology- Market launch and sales expansion of LEAF

Environmental conservation and minimization of environmental footprint
Measures2030 KPIs- Continuation of zero waste emissions- Final waste disposal volume: zeroemissions- Response to natural-related risks, such as biodiversity
and water resource conservation, based on the Taskforce
on Nature-related Financial Disclosures (TNFD)¥85 billion in environmental investment over 8 years
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14

32Mission 2030

Human Resources Value Creation

 Invest in human resources and undertake system reforms with theaim of being a company that enables each individual employee to feel
their own growth
StrategyKPIs (2030 targets)Strengthening of HRdevelopment systems

Cultivation of future executive
manager candidates, building ofcompany-wide, integrated education
framework, and fostering of a selfdirected learning culture

Average training costs: 2xthat of FY2021

Promotion of Diversity, Equity& Inclusion

Fostering of workplace environments,
systems, and culture that empowers
individuals with diverse ways ofthinking to demonstrate theircapabilities

Women, foreign nationals,
and mid-career hires toaccount for 50% ofmanagerial positions

Health and Productivity
Management and work stylereformPromotion of system reforms tocreate workplaces that employees
will “want to come to work again
tomorrow”

Visualization and ongoing
improvement ofengagement

PolicyCopyright ©Denka Co., Ltd. All Rights Reserved.

1533Management Value Creation

Mission 2030

 From the perspective of ESG management, work to strengthen themanagement foundations on which Denka’s corporate survival is premised
PolicyStrategy

KPIs (2030 targets)

Process reforms

Transformation of business model andorganization, productivity improvements, anddevelopment of in-house digital workforce

Investment in process reforms:¥50 billion over 8 years (¥14.6 billion over
5 years with DVU)

Respect for humanrights

Establishment of human rights policy andthorough respect for human rights based on
the United Nations Guiding Principles on
Business and Human Rights and the Global
Compact

Identification of human rights risks in theDenka Group supply chain andestablishment of response processes

Place the utmost
priority on safety

Group-wide efforts toward essential safety,
establishment of rules, and promotion of safe
workplace environments

Rate of lost-worktime injuries: 1.1 (2021)→ 0.2 or under

Supply chainmanagement

Sustained improvement of added value acrossentire supply chain

No high-risk suppliers

Product safety

Contribution to sustained growth of society
and the environment through the provision oftrusted products and services

Integration of quality control systems,
raising of control standards
No serious quality accidents

Enhancement ofcorporate governance

Building of highly sophisticated and effective
corporate governance structure that ensurestransparency and fairness based on highethical standards

Ongoing improvement of effectiveness ofBoard of Directors
No serious compliance violations throughthorough risk management
16

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34Mission 2030

Financial Strategy

 Enhance corporate value by improving ROE
 Concentrate on further portfolio shift and new business creation byemploying ROIC for business evaluation

ROE

ROIC

FY2018 FY2022 average

FY20309%

15% orhigher

FY2018 FY2022 average

FY20307%

10% orCopyright ©Denka Co., Ltd. All Rights Reserved.

higherMeasures- Improvement of profitability andefficiency with creation of three types ofvalue- Selection and concentration ofbusinesses through evaluation of ROIC
- Pursuit of optimal capital structure (use offinancial leveraging)1734

Financial Strategy

Mission 2030

 Cash Allocation(Billion yen)

Total Cash inflow (annual average)
DVU
5 years
Cash flowfromoperatingactivities
Sale ofassets

Mission2030
8 years180.8(36.2)

650(81.3)

Strategic

10.8

10

Cash flowfrominvestingactivities

50

80

Shareholder returns (TotalBorrowing

241.6(48.3)

Total

Total Cash Outflow (annual average)

GeneralSub-total

DVU
5 years
71.9(14.4)
109.9(22)181.8(36.4)

Mission2030
8 years360(45)210(26.3)
570(71.3)

59.8(12)170(21.3)

241.6(48.3)

740(92.5)

shareholder return ratio: 50%level)740(92.5)Total

 HR and R&D costs(Billion yen)

Mission2030

Denka Value-Up
5-year total

Annualaverage8-year total

Annualaverage

Human
Resources

260.4

52.1

500

62.5

R&D

73.6

14.7

180

22.5

Total

334

66.8

680

85

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18

35Mission 2030

Major Financial / Non-financial KPIs
2030 KPI Targets

Financial

OperatingincomeROE¥100 billion or more
(FY2022: ¥43 billion)

15% or higher

15% or higher

ROIC

10% or higher(FY2018 - FY2022 average 8.8%)

Approved
investment
amount8 years from FY2023 to FY2030:¥540 billion (5 years from FY2018
to FY2022: ¥260.9 billion)

60% reduction comparedNon-financial

Operatingincome ratio

CO2 emissions

Rate of lostworktime injuries:(Number of deaths andinjuries ÷ Total hours
worked × 1 million)

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with FY2013 (1 million tons)(FY2021: 2.13 million tons)

0.2 or less
(FY2021: 1.1)

(FY2018 - FY2022 average 9.3%)(FY2018 - FY2022 average 6.9%)Total
Shareholder
Return Ratio

50% level(FY2018 - FY2022 average 52.1%)

Maximum outputof renewableenergy power

Managerial positions
occupied by women,foreign nationals, andmid-career hires

150MW(FY2021: 133MW)

50%(FY2021: 19%)

19

Caution regarding forward-looking statements
The forward-looking statements herein, including plans andtargets, are based on information currently available to theCompany and on certain assumptions deemed reasonable.
Actual results may differ significantly from these forecasts due toa wide range of factors.

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20