CKD Report 2019
Integrated Report 2019

Pioneering the Futurewith Automation
Having remained ahead of the needs of the times since its inception as a pioneer in automation technology,
CKD has developed a variety of products centered on automatic machinery and component products.
The technologies for these products have been cultivated and are continuing to evolve in keeping withthe times. Boasting an extensive product lineup, CKD possesses a wide range of supporting technologies
that extend across industrial fields.
In the years to come, we are aiming to become a total factory automation (FA) worldwide supplier byintegrating technologies that have been refined over many years in both automatic machinery andcomponent products.

Corporate
Philosophy

Corporate
Commitment

Conduct
Guidelines

With creative knowledge and technology,
we shall innovate fluid control andautomation, and thus contribute tobuilding a rich society.
1. Recognition of Corporate Social
Responsibility
2. Care for the Global Environment
3. Thorough Customer Orientation
4. Challenge Technological Innovation
5. Corporate Culture with Faith in Human
Resources
1. Awareness of social responsibility
2. Sincere and fair conduct
3. Observation of the law
4. Disclosure of information
5. Environmental preservation
6. Customer orientation
7. Challenging technological development
8. Enhancing human resources
9. Appropriate execution and reformation ofbusiness
10. Exertion of organizational strength

CONTENTS
CKD’s Corporate Value Creation
Continually Evolving CKD

02Corporate Value Creation Model

04

Management Strategies

About This Report• In addition to the information that has previously been covered in CSR reports, thispublication aims to provide all stakeholders with an understanding of the overall
picture at CKD. Published as an integrated report, this report brings together
summaries of financial information, such as medium- to long-term management
strategies, value creation and business performance as well as non-financial
information, including that relating to the environment, society and governance (ESG).

President’s Message

06

Financial/Capital Strategies

11

CKD’s Foundation to Realize
Value Creation

12

Tree of Growth14

At a Glance

16

Business Overview and Outlook

18

ESG Information
SDGs Initiatives in the ESG Field

24

ESG Summary26• This edition is based on international integrated reporting frameworks, such as theInternational Integrated Reporting Council (IIRC) and Global Reporting Initiative(GRI) standards.

Stakeholder Engagement27

Corporate Governance28• In the years to come, we will use integrated reports as a tool to communicate with
our stakeholders to make social contributions through our business, to realize asustainable society and to improve corporate value.

Risk Management

32

Compliance

33

Board of Directors, Audit & Supervisory 34
Board Members

Communication Tools

Human Resources

36

Quality Management System

38

Contains the status of corporate governance.

Environmental Management System

40

Local Society

42

Securities Report(Only available in Japanese)

CSR Report(Only available in Japanese)

Financial/Corporate Data

Reports on the quarterly andannual results for the fiscal
year.

Reports on the corporate
activities of the CKD Group.
Issued as an integrated
report instead of the previous
CSR Report.

Financial/Non-Financial Highlights

44

11-Year Financial Summary

46

Share Information48

Corporate Data

49

Integrated Report
We compile and publish inareas such as performancehighlights, messages from thepresident, business overviews,
strategies and future directions,past performance trends, andfinancial information.

Corporate Governance
Report(Only available in Japanese)

Materials Related toBusiness Results

CKD Technical Journal(Only available in Japanese)

Posts quarterly reports andfinancial briefing materials.

Introduces technical information about the technologies
and the results of research anddevelopment that have been
accumulated over many years
through the resolution of challenges and problems related toinnovating automation.­

General Meeting of
Shareholders Materials
Contains materials relating to
the General Meeting of
Shareholders, such as convocation and resolution notices.

Please visit the main com­munication tools posted
under Home > INVESTORRELATIONS > IR Library on
the CKD website.

Disclaimer
Based on information currently available to theCompany and certain information deemed
reasonable, for example, the forward-looking
statements with regard to the business forecasts
contained in this report are not something that we
as a company guarantee. Furthermore, actual
results may differ significantly due to a variety ofcontributory factors.

URL: https://www.ckd.co.jp/english/ir/
CKD Report 2019

01

CKD’s Corporate Value Creation

Continually Evolving CKDHaving been engaged in the research and development of automation and fluid control technologies formore than 75 years since its inception in 1943, CKD boasts a wide variety of products. These products havepenetrated markets widely and are contributing to the realization of an affluent society and the creation of a
new era.
Net Sales(Millions of yen)

Net Sales

120,000

Operating Income

100,000

80,00060,00040,0001973
Oil crisis
20,000

0

1946

1950

Fiscal 1946–1976
Fiscal 1977–2017
Fiscal 2014–2015

1955

1960

1965

1970

1975

1980

Non-consolidated Results
Consolidated Results
Accounting periods of overseas subsidiaries changed from end of December to end of March

Technologies and Management
1943
Established as Japan
AircraftElectric
Co.,
Ltd.
1945
Changed company name to
Chukyo Electric Co., Ltd.
1947
Vacuum tube
manufacturing
equipment
Manufacturecommenced as
our first automatic
machine02

CKD Report 20191955
Automatic pharmaceuticalpackaging machine
Having entered the packaging market with the development of ampule fillingmachines developed fromvacuum tube manufacturing
equipment, we developed
strip packaging machines

1956
AC solenoid development
Commenced manufactureof our first functional parts
developed for automatic
machinery.
Functionalparts later
becomemajor pillars
underpinningour company
1960
Cylinder development
Commenced productionof cellular cylinders, the origin of pneumatic cylinders

1961
Plant relocated to city of
Komaki,
Aichi
Prefecture

1979
Changed company name to CKDCorporation
1984
Established M-CKD PRECISION SDN.
BHD. in Malaysia as first overseas subsidiary

1963
Pneumatic index table
Developed pneumatic index
table with combined barrel
cams and air cylinders
1968
Electrolytic capacitor element winding machine
Developed electrolytic
capacitor element winding
machine because our functional parts are used inmachines that manufacture
electrolytic capacitors

Fine systemcomponents
Developed our first
product for semiconductor manufacturing
equipment

Fiscal 2019–2021 Fourth Medium-Term Management Plan
Fiscal 2016–2018 Third Medium-Term Management Plan
Fiscal 2013–2015 Second Medium-Term Management Plan
Fiscal 2010–2012 First Medium-Term Management Plan

Build-up CKD 2021

Challenge CKD 2018

GLOBAL CKD 2015

NEW CKD 20121991
Heisei era recession
2008
Lehman Brotherscrisis

2001
Dotcombubblebursts

1985
Plaza
AccordOperating
Income(Millions of yen)

15,00012,000

9,000

6,000

3,000

0

1985

1985
Established CKD USA
CORPORATION

1988
Established CKD THAICORPORATION LTD.

1989
Established CKDSINGAPORE PTE. LTD.

1990

1995

1992
3D solder paste inspection machine
Incorporated image processing technology from the1970s, and developed
equipment capable of highspeed 3D inspection via 1D
and 2D image processing

2000

2005

2010

2001
Established CKD (Shanghai)
Corporation in China

2013
New CKD (China) Corporation
plant completed

2002
Established CKD Korea
Corporation in South Korea

2014
Established PT CKD TRADINGINDONESIA
Established CKD VIETNAM
ENGINEERING CO., LTD.
Established PT CKDMANUFACTURING INDONESIA

2003
Established CKD (China)
Corporation
2007
Established TAIWAN CKDCORPORATION
2012
Established CKD Field
Engineering Corporation as
automatic machinery service company

2015
Established CKD MEXICO, S. de
R.L. de C.V.
Established CKD India Private
Limited2015

2018 (FY)2016
Established CKD Europe B.V. in
the Netherlands as our 14th overseas subsidiary
2017
Integrated CKD Nikki Denso Co.,
Ltd. business2019
Tohoku Plant completed in
Ohira-mura, in Kurokawa districtof Miyagi Prefecture

Tohoku Plant

CKD Report 201903

CKD’s Corporate Value Creation

Corporate Value Creation Model
Investing capital in each focus domain, CKD works on technological innovation and value creation to resolve
various social issues through its automation and fluid control business domains. Going forward, we will continue
to contribute to the realization of an affluent society, as outlined in our corporate philosophy, without ending
the cycle of social value creation.

Social Issues

Inputs

Focus Domains

Business
Domains
K Rapid changes
in businesse­ nvironment
K Increasing sophistication/diversificationof manufacturing(monozukuri) due to
IoT
K Increasing need forautomation
K Increasing demand
for unit systems due
to equipment standardization andlabor shortages
KC ollaboration
between humans
and robots, fully
unmanned factories,
full utilization of AI
K Increasing pace ofelectrification
K Burgeoning demand
for semiconductors

ESG Fields
K Climate change

Food

Manufacturing
capitalPharmaceuticals
Rechargeable
batteries

Financial
capitalHumancapitalK Labor shortages
K Promotion of­diversity

Electronic
components

Machine
tools

Fluid
control
technologies

Semiconductors

Intellectual
capitalFPD

Social andrelationshipcapitalCorporate
Philosophy

NaturalcapitalWith creativeknowledge andtechnology, we
shall innovate fluid
control and automation, and thus
contribute to building a rich society

K Energy problems

K Waste management

Automation
technologies

Automobiles

K Environmental­pollution
K Depletion of water
resources

Core Technologies

Materiality

Social issues
CKD has aimed
P26
to solve

Cycle of Social
04

CKD Report 2019

Business Divisions

Social Value Creation
Contributing to global
automation as total FA supplier

P18
Automatic
machinery business

All the products provided by the Company

Contributing to technologicalinnovation through semiconductor
manufacturing equipment
Fine system components

Contributing to stablesupply of pharmaceuticalproducts
Pharmaceutical products
packaging machines

Components
business

P20

Contributing
to food safety/
long-term storage
Food packaging
machines
Nitrogen gas purification units
Antibacterial/disinfection filters

Contributing to reduction of air pollution
by widespread use of electric vehicles(EVs)

Contributing to
improvements inagricultural productivity

Winding machines for lithium-ion batteries

Agricultural IoT devices

Contributing to renewable energy
productivity improvements

Wireless sprinkler systems

Components for solar cell manufacturing processes

Corporate
Governance
Human
ResourcesEnvironmental
Management
SystemLocal Society

Automatic sprinkler control
components

Contributions in ESG Fields
P28

P36

P40

Training

Water/
sanitation

Growth/employment

Productivity/
consumption

ClimatechangeP42

Value CreationCKD Report 201905

Management Strategies

President’s Message

President
Kazunori Kajimoto

06

CKD Report 2019

President’s Message

In 2016, having formulated our 10-year long-term management vision, CKD is strengthening efforts with an eye
on 2025 to respond to market environments that are set to undergo significant changes in the years to come. Asa pioneer in fluid control and automation, we are aiming to become a Total FA Worldwide Supplier in 10 years
while realizing automation for customers in Japan and overseas. We believe that realizing our 10-Year Vision willcontribute to the creation of an affluent society, meet the expectations of our shareholders and lead to thehappiness of our employees and their families. To realize a sustainable society, we will also continue to growinto a “people-friendly company” and make efforts to contribute to society through our b­ usinesses.

CKD’s Value Creation
Process

Fiscal 2018 Results

Based on our corporate philosophy, “With creativeknowledge and technology, we shall innovate fluid control
and automation, and thus contribute to building a richsociety,” we are identifying and addressing materiality
among social issues from the perspective of CKD andsocial importance. Spanning a wide range of industries
that require automation and labor savings—such as food,
pharmaceuticals, rechargeable batteries, electronic
components, automobiles, machine tools, semiconductors
and FPDs—our customers are aiming to resolve problems
through fluid control and automation technologies.
The roots of value creation lie in the Company being
founded on automatic machinery, where the necessarycomponents were grown to form businesses. This spirit isbeing handed down to this day. For example, we areproducing automatic machinery for food and rechargeable
batteries and offer a wide range of products—such as thepioneering FP Series components for food production
equipment and P4 Series components that arecompatible with rechargeable batteries—by quickly
incorporating the demands required into equipment. In
this way, our automatic machinery and the equipment
business are two halves of a whole and are contributing
to the creation of an affluent society.
With regard to the Sustainable Development Goals(SDGs), I would like to promote activities so that the 17
goals and 169 targets can be fully understood,
incorporated into the business, and lead to the resolvingof social issues.

The consolidated financial results for fiscal 2018 include
net sales of ¥115.7 billion (edging down 0.03% year onyear), operating income of ¥5.4 billion (down 56.5%),
ordinary income ratio of 4.7% (down 6.1 points), andROE of 6.0 % (also down 6.1 points).
Sales grew strongly in the first half of fiscal 2018 but
declined in the second half due to a decrease in
semiconductor capital investment and a slowdown in
Chinese investment in automation. Profits decreased
due to the costs for transitioning to the new coresystem, as well as to the capacity expansion costs tocope with future increases in production.
Since the market environments in the first half of fiscal
2019 have been weaker than expected at the beginningof the fiscal year due to the impact of U.S.-China trade
friction and delays in semiconductor capital investment,
we revised our earnings forecast at the end of the firstquarter. In addition to strengthening our foundations,over the medium to long term we will promote initiatives
for new businesses to firmly capture future demand thatcan be expected to expand the market. These include
capital investments in automation for labor saving, 5G
communications as well as further investment geared
toward the more widespread use of electric vehicles(EVs), the demand for which is increasing.

CKD Report 201907

Management Strategies

Business Environment
Emerging Economies

EconomyOngoing rises inpersonal expenses from
economic growth

Trend toward borderless
economies due to EPAs
Rise of protectionism

Developed Countries

Technologies

Decrease in working population
Increasing sophistication of
production technologies

Evolution ofcommunication/mobility
Proliferation of IoT/AI

Pharmaceuticals

Society

Diversity
Work style reforms

Environment

Increasing interestin the environment

Increasing sophistication ofpharmaceutical technologies
Aging societyLong-Term Management Vision
10-Year Vision Title
Aspiration

Contributing toan affluent society

GO CKD
Total FA Worldwide Supplier
Meeting the
expectations ofshareholders

Looking Back on Challenge
CKD 2018
Formulated in 2016, the Third Medium-Term Management
Plan was deemed the first three years to realize our
10-Year Vision. The thinking behind its title, Challenge
CKD 2018, was to respond quickly to changes andlead to significant business opportunities. Cumulative
net sales over the three years from fiscal 2016 to fiscal
2018 were ¥325.4 billion, an increase of 31%
compared with the result of the Second Medium-Term
Management Plan.
In addition to the development of products that cancontribute to labor saving in both the pharmaceuticalindustry and in the packaging machinery sector of theautomatic machinery business, we commenced sales ofservice products, such as preventive maintenance. In
the food market, we developed new forms of packaging
and initiated sales of packaging machinery and special
materials as a set. In industrial machinery, we captured
the strong demand from the automobile industry that led
to the sales of 3D solder paste inspection machines andwinding machines for lithium-ion batteries.

08

CKD Report 2019

Caring for
employees andtheir families

In the equipment business, to challenge both India,
where growth is expected, and the European market,
where there is great demand, we established local
subsidiaries in each region. In the United States, atechnology development base was created in Silicon
Valley, where cutting-edge industries are concentrated.
In the business alliance with Nikki Denso Co., Ltd., sales
were greatly increased by leveraging mutual strengths.
Among our initiatives, I have a special affection for the
Tohoku Plant. As I have seen the damage wrought by
the Great East Japan Earthquake, I felt a strong desire
to build a plant in the Tohoku region to support recovery.
I am very happy that, after eight years, we were able tocomplete the Tohoku Plant in January 2019. The
Company’s first new plant in Japan in 34 years, it is thefirst one located outside the Tokai region. Based on theconcept of a “human-friendly plant,” we remained awareof the necessity to provide environments that are
conducive to work. The new plant is equipped with astate-of-the-art automatic warehouse, automatic
assembly equipment and clean rooms. In addition to thedecentralization of production plants using BCP, we
expect to meet customers directly and reduce thedistances between us.

President’s Message

Medium-Term Management Plan

Build-up CKD 2021

Basic Policy 1
Evolve products from being best in Japan to
becoming globally recognized products

Basic Policy

L Strengthen pharmaceutical products packaging
machine business in China

Evolve products from being best inJapan to becoming globally recognizedproducts
Challenge new business activities andmarkets
Strengthen our business foundations

Basic Requirement

Machine developed specificallyfor Chinese market

New production building at ourplant in China

L Globally expand fluid control components business

Human resource development

Technical Center

New Medium-Term
Management Plan
Build-up CKD 2021
Geared toward the achievement of our 10-Year Vision,
the Fourth Medium-Term Management Plan, whichbegan in April 2019 and is called Build-up CKD 2021, isdesigned to build the foundation that will lead to the
future of the Company while growing strongly for three
years. Utilizing the newly introduced core system at the
new plant in Tohoku and the new production building in
China, we will promote activities to raise productivity. To
form the core of our activities, we have adopted threebasic policies: evolve products from being best in Japan
to becoming globally recognized products; challenge
new business activities and markets; and strengthen ourbusiness foundations. Believing that human resources
are most important for the Company’s continued
development, we will develop strategic and systematich u m a n re so u rc e de ve l opme n t wh i l e creating
environments in which national staff members can play
active roles.

Tohoku Plant

Evolve Products from Being Best in Japan to
Becoming Globally Recognized Products
Developing products with a characteristically highmarket share in Japan, we will deploy those products inoverseas markets while aiming for them to become thebest in the world. In the automatic machinery business,
we will work on machines developed specifically for the
Chinese market and the use of the new productionbuilding at our China Plant to expand sales of ourmainstay pharmaceutical packaging machines in the
Chinese market. In the components business, we will
expand fluid control equipment sales not only in Japanbut around the world by launching the full-scale
operation of the Tohoku Plant. In the United States, wewill promote product planning and development closely
related to customers by strengthening the functions of
the Technical Center. Due to upcoming competition in
the European market, an alliance will be an effectivemeans to actively promote our products. In this way, we
will develop products and deploy strategies tailored toeach region and country, and promote activities rooted
in the local area while incorporating the culture andhuman resources of that nation.

CKD Report 201909

Management Strategies
President’s Message

Basic Policy 2
Challenge New Business Activities andMarkets
L Integrate with partners, strengthen electric
motion products business

Basic Policy 3Strengthen Our Business Foundations
Germany

China

USA

Singapore

L Development of machines compatible withnew forms of packaging
L Expand business domains by means of
new technologies

Challenge New Business Activities and Markets
We will take on many challenges to launch new
businesses and develop new markets. The mostimportant new business is the electric motion products
business. Whereas pneumatic components are compact
and powerful, electric components have different
features that enable high precision and arbitrary position
control. As we have both pneumatic and electriccomponents (linear and rotating) we are able to cater toa variety of customer needs. To strengthen the electric
motion products business we will use the know-how
accumulated in pneumatic components and strengthen
the utilization of synergistic effects in development andsales with CKD Nikki Denso Co., Ltd. We will also
contribute to the creation of an affluent society bymeans of new technologies, such as the development ofmachines that support new packaging formats for the
food industry, and assistive devices (PowerArm) torealize safe and comfortable working environments.

10

CKD Report 2019

Italy

India

P Establishment of overseas subsidiary L Strengthening of development function
G Local production commenced
Sales network expansion
Strengthening of control function

Strengthen Our Business Foundations
Under the previous Medium-Term Management Plan, we
have been enhancing our production capacity andexpanding our sales network, mainly in East Asia and
ASEAN. During the course of the new Medium-Term
Management Plan, we will strengthen local development
functions in China and the United States while
commencing local production in India and Italy. We will
also establish new local subsidiaries in Germany and Italy,
thereby strengthening our sales base.
To increase productivity, we will promote automation and
IoT while strengthening production methods that do not
rely on people. Utilizing the newly introduced core system,
we aim for more planned production activities. We will
also actively incorporate digital technologies, such as
information and communications technology (ICT) andartificial intelligence (AI), to improve work efficiency.
To resolve social issues and create an affluent society
we have started activities for the SDGs that are required
all over the world. We will do our utmost to do what wehave to do for the children of the future.

Financial/Capital Strategies
Financial Strategy
The three-pillared basic policy of the financial strategy comprises: (1) improvement of corporate value, (2) the buildingof a sound financial base, and (3) shareholder return. In the fiscal year under review, capital investment for the purposeof expanding production capacity increased. In addition, interest-bearing debt increased as a result of raising capital
investment, bringing the equity ratio to 58.6%. As a result of investing in the next generation, however, the net D/E
ratio was +0.20 times and we are maintaining a sound financial position.
FY EndedMar. 2018

FY EndedMar. 2019

YoY
Comparison

Total assets¥130.8 billion¥136.9 billion+¥6.0 billion

Business scale expanding

Total shareholders’equity¥79.9 billion¥80.3 billion+¥0.3 billion

Increased by retaining part of net income

Cash and cash
equivalents¥14.7 billion¥12.0 billion-¥2.7 billion

Despite an increase due to interest-bearing debt,
there was a decrease due to a decrease in working
capital and an increase in capital investment

Interest-bearing
debt¥11.6 billion¥28.6 billion+¥16.9 billion

Increased mainly due to investments in plant andequipment

Shareholders’e­ quity ratio

61.1%

58.6%

-2.4 points

Decreased due to an increase in interest-bearing debt

Net D/E ratio-0.04 times+0.20 times+0.25 points

Positive position maintained due to an increase ininterest-bearing debt

12.1%

6.0%

-6.1 points

ROE

ROE
Strategically advancing investment based on our
10-Year Vision and the Medium-Term Management
Plan—to challenge new business activities and markets
while securing profits based on achieving the targets inthe management plan of each business—we will strive
to improve corporate value with the goal of stably
maintaining ROE of 9% or more.

Building a Sound Financial Base

Declined in accordance with a decrease in profit

investment and R&D. As a reference, the dividend payout
ratio is set at 30% to ensure stable returns to shareholders
after securing sufficient capital for growth investment.

Stockholdings
As a general rule, stockholdings are not maintained
unless it is determined that they will contribute to theenhancement of our corporate value from the standpointsof business strategy, business alliances with business
partners, and the maintaining and strengthening ofbusiness relationships. With regard to stocks of lesser
significance, these will be sold in stages, taking into
account the Company’s situation. Should it be deemednecessary to maintain stockholdings for reasons such as
business strategy, business alliances and the maintaining
and strengthening of business relationships, the Board of
Directors carefully examines the purpose of and verifies
the rationality behind each stockholding every year.
ROE

9.0% or moretenvalue improv
em
rate
po
Achievementof both growthinvestment andshareholder return
underpinned bysound financial
al
base

Co
r

We are building a stable financial base that can flexibly
respond to growth investments for business expansion.
Since we are an equipment-related company and are
influenced by economic conditions, we have set acapital adequacy ratio of 60% or more as the standard
for optimal financial leverage. Not possessing excessive
amounts of cash on hand, we raise funds on the basisof cost and convenience of procurement based on ourmanagement plan. External borrowing is managed sothat the net D/E ratio remains at around 0.3 times toenable financial soundness to be maintained while wework to diversify financing.

Comment

ba
se

ur n
et

i
nc

Net D/E Ratio
Aroundna

60%Sound fi

The basic policy involves working to improve corporate
value by investing in facilities and R&D to enhance themanagement base and further expand the business whileproviding stable dividends to shareholders.
Since we are pursuing a growth strategy based on
our 10-Year Vision and the Medium-Term Management
Plan, the plan is to mainly utilize reinvestment for capital

Shareholders’equity ratio
target of

ShareholderrShareholder Return Policy

Dividend
payout ratio
target of30%

0.3 times
CKD Report 201911

Management Strategies

CKD’s Foundation to Realize Value Creation
While providing value to society and solutions to social issues through product development based on
automation technology and fluid control technology, we aim to achieve sustainable development andenhance corporate value.

Manufacturing Capital
In Japan

OverseasSouth Korea

Inuyama
Komaki

Kasugai

China

TohokuYokkaichi
CKD Nikki Denso
Co., Ltd. (Chiba)

Thailand
Malaysia

CKD Shikoku Seikou
Corporation (Kochi)

Indonesia

Our main plants in Japan are the three in Aichi Prefecture(in the cities of Komaki, Kasugai and Inuyama) and one
plant in Yokkaichi, Mie Prefecture. Additionally, tostrengthen production for the semiconductor market, inwhich growth in demand is expected over the medium tolong term, and to promote a business continuity plan
(BCP) for products manufactured in the Tokai region, weestablished our Tohoku Plant (Ohira-mura, Kurokawa-gun,

Miyagi Prefecture) in fiscal 2018. Adding Group
companies CKD Shikoku Seikou Corporation (Sukumo
City, Kochi Prefecture) and CKD Nikki Denso Co., Ltd.
(Sakura City, Chiba Prefecture) makes a total of sevenproduction bases.
Overseas, we supply products in a timely manner fromproduction plants in five countries: China, Thailand,South Korea, Malaysia and Indonesia.

Human Capital
Dispatch of trainees fromJapan to overseas bases

Dispatch of trainees fromoverseas bases to Japan

Cumulative total:

Cumulative total:

19

1,868

(As of April 30, 2019)(As of April 30, 2019)(As of March 31, 2019)50

As further progress is made in globalization in the years tocome, we will hire diverse human resources and allow
them to demonstrate their capabilities to increase
corporate competitiveness and bring about value creation.
At the same time, a human resource strategy will become
essential to maximize our performance as an organization.

12

CKD Report 2019

Number of
non-Japanese employees

We will conduct our overseas trainee system, which
promotes the development of global human resources
and national staff that form the core of value creation,
undertake diversity promotion to encourage the active
participation of each and every employee, and engage inincreasing the sophistication of our human resources
through specialized technical and skill training.

Intellectual Capital
Number of patents held (As of March 31, 2019)

1,518
Maintaining departments that specialize in intellectual
property, CKD works to further improve corporate value
by managing intellectual property for all CKD Group
companies and proposing/implementing intellectual
property strategies. Our intellectual property strategies
involve implementing detailed measures that reflect CKD
business strategies based on close collaboration

between intellectual property departments anddevelopment/technology departments. In addition, weare establishing a foundation for CKD Group production
and sales overseas by increasing overseas patent filings
targeting important regions as we expand abroad. As aresult, the number of intellectual property rights we holdabroad is increasing annually.

Social and Relationship Capital
CKD continues to co-create various forms of value forsociety through its businesses. To this end, we pursue
high quality and safety by providing customers in various
industries with controllers and drive components
installed in automatic manufacturing equipment as well
as automatic equipment including packaging machines.
In addition, we are upgrading systems to meet thevarious needs of our global customers by establishingfacilities worldwide and building an elaborate network inJapan and abroad. The relationships of trust with ourcustomers we have fostered to date not only enable
steady operations but have also become a key asset wewill develop further going forward.

Natural Capital
Developing Products that Reduce
Environmental Burdens
CKD believes that developing products that are more
eco-friendly requires consciously formulating targets forenvironmental burden levels at the planning andAutomatic machinery

development stages. With this in mind, we are developing
products that reduce environmental burdens using ourunique Environmental Acceptability Assessment Form*.
* Environmental Acceptability Assessment Form: Evaluates environmental burden levels infour areas—energy conservation, resource conservation, waste, environmental pollution
both in terms of customer and internal environments.

Component productsCompact Flow Rate Sensor Rapiflow
FSM3 Series (plastic body type)

Pharmaceutical product packaging machines
FBP Series
3D solder paste
inspection systems
VP9000Food packing machines CFF Series

Karman vortex flow rate
sensor for water FLUEREXWFK2 Series(IO-Link compatible)

Pilot-operated 3, 5-port valves(4GR Series)

CKD Report 201913

Management Strategies

Tree of Growth
Electric actuators[EBS/EKS/EBR]

Flow rate sensors［FSM3］

PowerArm[PAW]DISC [ND-s]

Portable air supply unit
［ASU］
Nitrogen gas extraction unit
［NS］

Linear slide hand
[LSH-HP]

Antibacterial,
bacteria-removing filter[SFC/SFS]

Air unit [CXU]Fine buffers [FBU2]Flow rate controllers [FCM]2005
Precision suction plates [PVP]

Flow sensors [FSM]

Belt type [ETV]Slider type [ETS]PowerArm[PFB2]

Linear slide cylinder[LCG/LCM/LCR/LCW]

Global cylinder[SCG-STG]

ABSODEX high precision type
[AX7000X]

ABSODEX compact type
[AX6000M]

Electric actuators[ELCR/ESSD
ERL/ESD]

Find speed cylinders

Linear P&P units[PPLX]

Electric actuators [KBA]

Small table sliders[KSA]

Air bearings [LBC]
Table-shaped
rotary actuators
[GRC]

1995

Dustproof andwaterproof types
ABSODEX [AX8000]

ABSODEX
Flow sensors [PF]Magnet type rodless cylinders [MRL]Membrane super dryers [SD]Rodless cylinders [SRL]
Guided cylinders[STS-STL]Electronic regulators [ER]1985

Compact cylinder[CS]

P&P units

Parallel cams
[PCI]

FRLs [C Series]

Compact 3-axis
machining centers
Intermediate position stopping cylinders

1975
F.R.L. kit[K Series]

Medium bore size cylinders[SCA]

Index units[CTIU]

Refrigerated air dryers

1965
Air cylinders [CA]Cellular cylinders [CAV]

1945
14

CKD Report 2019

Labor-saving components

Outdoor FRLs [FRMW]

Low dust generation
and belt types[ECV]

Linear slide cylinder[LMG]

Drive components

2015Electric shuttle mover[ESM]

Electric actuators

Digital gap switches [GPS3]

Electric actuators[KBX]

Pneumatic auxiliary components

Speed control valve with adjusting dial
[DSC-C]Our pursuit of automatic machinery development and diversification sprung from the seeds of vacuum tube
appliance manufacturing. We have used our core technologies as a platform to establish new machinery
product fields and continue to develop technologies that meet customer needs. Going forward, we will
provide wide-ranging support to manufacturing operations worldwide with our myriad of product lineups.

Blister packers for pharmaceuticalproducts and medical devices [MBP]
Automatic pharmaceutical products
packagingmachine“Eco Blister”[FBP]
PTP foreign particle inspection
machine “Flash Patri”[FP600]
LED backlight manufacturing systems

Lithium-ion
battery
manufacturingmachine3D solders paste
inspection systems

Outdoorpilot-operated
5-port valves [4F2/3]
Direct acting
3-port valves[3QR]

Wire-saving block
manifolds[MN4E0]

Pilot-operated
3, 5-port
valves[4GA-4GB]

Automatic sprinklers withresin solenoid valves [GSV2]
Capacitance electromagnetic
flow rate sensors [WFC]Electric needle valves forchemical liquids[MNV]
Wireless diaphragmvalves [SWD-MWD]
Valve forchemical liquids[AMD part 3R]

Metal-free solenoid
valves for chemicalliquids [MR16]

Gas combustion
composite valves [GHV]

Multipoint float level switches[KML]
Proportional vacuum
pressure control systems[VEC]

Metal-free solenoid valve
for chemical liquids[MYB-MEB]

Wire-saving block
manifolds [MN4S0]

Chemicalliquid valves[AMD]

Water flow rate
sensors [WFK]Special purpose valves

Chip mounters

Blister packers [FBP]Process gas
regulators[PGM]

Cylinder valves [SAB]

Integrated gas
feeding systems[IAGD]

Tantalum capacitor manufacturingsystems
Food blister packers[CFF]

Pilot regulatorsfor chemical liquids[PMP]

Integrated water
units [WXU]Fine system components

Food packaging machine“Eco Blister” [CFF]

Pilot-operated
3,5-port valves[4GR]

Fluid control components

Winding machines forlithium-ion batteries [PEW-380]

Medical pillow wrapping
machines [HPL]

Water flow rate sensors[WFK2]

Pneumatic control components

Automatic machinery

Pharmaceutical products
packaging Eco Blister[FBP-320E]

High vacuum valves[AVB-AVP]

Wire-saving 4-port valves[4T]
Pilot kick general
purpose valves[ADK-APK]

Process gas valves[AGD-MGD]

Pneumatic valves[4K]
Ultra-high vacuum valves[HVB]

Chemical liquid valves[AMB]

Direct acting general
purpose valves[AB-AG]High speed horizontal
production ofstraight tube
fluorescent

Pneumatic
valves[4F]

Solenoid valves for water [WV]Electrolytic capacitor winding
Midget bulb units(Stop taillights)

Blister packers [DBP]
Index units [RTA]

4-way pneumatic valves [PCD]

Turret drilling machines

AC solenoid [DS]Light bulb and fluorescent
manufacturing
Vacuum tube manufacturing

CKD’s core technologies

CKD Report 201915

Management Strategies

At a Glance
Automatic machinery

Sales ratio

16%

Main solutions, products
The Automatic Machinery segment offers a wide array of products, including
packaging machines for medical, pharmaceutical and food products, as well as theimage inspection technology equipped on those machines, printed circuit board
solder paste image inspection machines, manufacturing machines for devices forvehicles that use lithium-ion battery, and other products.
Packaging machines
Pharmaceutical products packaging
machines
Medical-use packaging machines
Food packaging machines

Industrial machinery
Lithium-ion battery manufacturingmachines
Three-dimensional solder paste inspection
machines

Net sales

Lighting machines
Lamp manufacturing equipment

Segment income
L L (Left axis)
L L (Left axis) Overseas sales
Ratio of segment income L (Right axis) Ratio of overseas sales L (Right axis)(¥ billions)
20 20 2015

18.4 18.4
18.4
17.0 17.0
17.0 16.3 16.3
16.316.0
16.0
16.0
15.9 15.9
15.9
15.1 15.1
15.1
15 15

10

10 10

5

5 5

0

0 0
2014 20142015
20142015
2016
20152016
2017
20162017
201820172018
201920182019
2019(Fiscal (Fiscal
year(Fiscalended
yearyear
ended
March
ended
March
31)March31) 31)

2.5
2.0
1.5
1.0
0.5

(¥ billions)
2.4 2.42.4
2.52.5
2.2 2.22.2
2.1 2.12.1
2.01.92.0 1.91.9

25(%)
25 25 3

20

20 20

2
13.9
13.9
13.713.9
1.4 1.415
1.4 15 15
1.51.5 13.7 13.7
11.4 11.4
11.41.21.2
1.2
12.9 12.9
12.9
10 10 101.01.01
8.9 8.98.9
7.2
7.2
7.2
5
5 5
0.50.500 0 0
0 0
2014 2014
2015
2016
2017
2018
2019
20142015
20152016
20162017
20172018
20182019
2019(Fiscal (Fiscal
year(Fiscalended
yearyear
ended
March
ended
March
31)March31) 31)0(¥ billions)
3 3
2.8 2.82.8

2 2

10

10 10

6.9 6.96.9

5

5 5

0 0
0
0 0
2014 20142015
20142015
2016
20152016
2017
20162017
201820172018
201920182019
2019(Fiscal (Fiscal
year(Fiscalended
yearyear
ended
March
ended
March
31)March31) 31)

Sales ratio

84%

The component products segment consists of a diverse lineup of products,
including pneumatic components and drive units equipped on automatic
production equipment for a variety of industries, fluid control components used forsemiconductor and medical processes, and other products.
Labor-saving components
Direct drive motors
Index units
Electric actuators

Net sales

(%)
25 25

12.1
12.1
1.012.1
1.0 1.0
1 1

Main solutions, products

Pneumatic control components
Directional switching valves
Drive units
Pneumatic cylinders
Assistance devices
Pneumatic auxiliary components
Refining and pressure adjusting components
Sensor components

25

2.6 2.52.5
2.6 2.6
2.5
2.3 2.32.3
20 20 20
16.7 16.0 16.0
16.7 16.7
16.015.5
15.5
15.5
1.9 1.91.9
15 15 15
12.5
12.5 12.5

Component products

Fluid control components
Fluid control valves
Valves used in medical
analysis
Combustion gas valves
Explosion prevention
valves(Most recent threefiscal years,
cumulative)

Fine system components
Process gas valves
Chemical liquid valves
Vacuum valves

Segment income
L L (Left axis) Overseas sales
L L (Left axis)
Ratio of segment income L (Right axis) Ratio of overseas sales L (Right axis)(¥ billions)100 100 100(Most recent threefiscal years,
cumulative)(¥ billions)
99.6
99.699.6
99.499.4
99.4

20 20 20(%)(¥ billions)

20 20 2030 30 30(%)
29.629.6
29.6
40 40 4028.7
28.728.750 50 50

15.915.915.9
29.929.9
29.9
29.9
29.9
29.9
29.8
29.8
29.8
14.814.814.8
15.815.815.8
28.8
28.828.8
28.7
28.7
28.7
13.9
15 1513.9
1513.915 15 1530 30 30
26.526.526.5
13.113.1
13.1
12.5
12.512.5
20 20 20
20.4
20.4
20.4
21.7
21.7
21.7
19.819.819.8
11.211.211.2
16.016.016.0
8.6 8.6108.610 10
10 10 8.4
10 8.48.7
20 20 20
8.78.5 8.5
8.48.78.5

25 25 25575.675.675.6
75 75 7568.1
68.168.1
66.266.2
66.2
60.460.460.4

55

8.6 8.6 8.6
5 55

10 10 1010 10 1000 0 0
0 0 0 0 0 0
0 0 0
20142014
2015*
2014
2015*
2016*
2015*
2016*
2017
2016*
2017
2018
2017
2018
2019
2018
20192019
20142014
2015*
2016*
2017
2018
2019
2014
2015*
2015*
2016*
2016*
2017
2017
2018
2018
20192019
2015*
2016*
2017
2018
20192019
20142014
2015*
2014
2016*
2015*
2017
2016*
2018
2017
2019
2018
(Fiscal
year
ended
March
31)March(Fiscal
year
ended
March
31)March(Fiscal
year
ended
March
31)March(Fiscal(Fiscal
year
ended
year
ended
March
31) 31)(Fiscal(Fiscal
year
ended
year
ended
March
31) 31)(Fiscal(Fiscal
year
ended
year
ended
March
31) 31)* Figures from fiscal years ended March 31, 2015 and March 31, 2016 exclude impact from accounting period changes.
0

16

0

CKD Report 2019

The food packaging machine, Eco Blister CFF-360E series
was designed in pursuit of safety, simplicity, design and theenvironment based on the concept of meeting market
demands for labor saving, reduced running costs andmeasures to prevent foreign particle contamination. Thesemachines stand out for their exceptional environmental
features as they apply PTP* system technology forpharmaceutical product packaging, thus reducing wasted film
material by up to approximately 51% compared toconventional model types, and cut air usage by roughly 30%.
* PTP refers to “Press Through Package.”

Automatic packaging systems

CKD products, from drive units to labor-saving components,
fluid control components and numerous other components
work in tandem to contribute to the manufacturing(monozukuri) that takes place at factories around the world.
Recent years have seen factories make progress inincorporating IoT into their operations, and that has spurreddemand for machinery capable of interacting within a varietyof networks. In the component products segment, we areworking to address a host of needs, including to respond to
the advance of IoT technologies, automation and energy
conservation, within a framework for development thatleverages our core technologies while collaborating closelywith our customers.

Drive units

Pneumatic control components

Electric actuators

Fluid control components

Fine system components

CKD Report 201917

Management Strategies

Business Overview and Outlook

Automatic Machinery
Business Division
Katsunori Hayashida
Director & Executive Officer
General Manager of Automatic Machinery Business Division

Strategy
We in the Automatic Machinery Business Division welcome change and endeavor to evolve automation
technology along a multitude of avenues as an organization that continually offers automatic machinery thatsatisfies customers around the world. This is our vision, and it is the basis for how we differentiate ourselvesfrom competitors. We incorporate the requirements and requests of each individual customer into our automatic
machinery, whether it be equipment that packages pharmaceutical or food products with heat-processed film,
3D solder paste inspection systems that feature image inspection technology, or lithium-ion battery
manufacturing machines that perform high-speed wrapping of multiple ingredients. We strive to satisfy
customers by providing quality products that meet their needs for delivery and cost.

Fiscal 2018 Report
In Fiscal 2018, sales of both lithium-ion battery production
system machines and 3D solder paste printing inspection
machines increased, although sales of pharmaceuticalproducts packaging machines declined on the impact of acontraction in capital investments made by pharmaceuticalmanufacturers in Japan. Overall net sales in the segment
fell year on year, however, an increase in orders andimproved earnings for lithium-ion battery production
system machines and 3D solder paste printing inspection
machines lifted orders and segment income above that ofthe previous fiscal year.
The impact of pricing reform in the packaged drugs field
has seen generic pharmaceuticals manufacturers in Japan
cut back on capital investments, and for that reason we aremaking concerted efforts to expand sales in the Chinese
market. Armed with the high-quality products cultivated inJapan, we initiated the deployment of Japanese engineers
to China so as to introduce equipment models tailor-madefor the Chinese market, strengthen production at the China

Plant, and to build a framework in which to offer services.
In the food packaging field, we collaborated with package
material manufacturers to develop a new machine modelfor the V-Pack, a novel type of packaging that can be
opened with one hand, and we have since launched salesof the machine.
In industrial machinery, the global rollout of 3D solder paste
inspection systems accelerated, and for that reason we are
introducing new products, expanding production capacity
in China, strengthening our sales structure in Europe andthe US, and bolstering data management throughintercommunication with pre and post processing. With
regard to lithium-ion battery manufacturing machines, we
are working to capture domestic demand and focusing ourefforts on next-generation batteries. In China, the largest
market, we have begun to collaborate with Chinesecompanies with the aim of growing sales channels andstrengthening our ability to deal with price adjustments.

Value Provided through Business
Main Products that Create Value

18

Automatic packagings­ ystems

These systems contribute to providing safe and secure products with equipment that packages pharmaceutical products­(tablets, capsules) and food items.

Inline medical productinspection systems

These systems facilitate safe and secure pharmaceutical products with high-speed and highly accurate inspections for tablet
flaws, foreign particle contamination, torn sheets and other problems.

Three-dimensional solder
paste inspection machines

These machines contribute to raising productivity and quality guarantees for the printed circuit board mounting process withprinted circuit board solder paste inspection machines.

Lithium-ion batterym­ anufacturing machines

These are systems that contribute to the spread of eco-friendly vehicles and countermeasures for the environment with machines
to manufacture lithium-ion batteries for electric vehicles (EVs) and other automotive uses.

CKD Report 2019

Fiscal 2021 Sales Goals

19.0

¥

billionSegment Income

2.0¥billion蒸
通Quick Pack

V-PackMESH in CUP

Upcoming Topics
This business division’s priority issue is to enhance the services provided to domestic pharmaceuticalmanufacturers and expand sales in the Chinese market so as to grow sales in the packaged drugs field. In the
packaged food field, we are looking for sales growth in ASEAN and East Asia, and to increase business for
V-Pack, a new and innovative form of packaging. With regard to industrial machinery, we are linking the pre- andpost-processing in 3D solder paste inspection systems and seeking to capture market share in Europe and theUS. Beyond these three fields, building other new pillars of business is another topic of discussion. In addition,
as eliminating the use of plastic is becoming a global trend, we believe it is necessary to observe and respondto the actions taken by medical product and drug manufacturers and package material manufacturers.

Future Initiatives
Under our Medium-Term Management Plan, we
embrace a basic policy of transforming our profit
structure and accelerating entry into global markets, andwe will take action to implement measures for priority
topics. In the packaged drugs field, we will respondswiftly to market demands so as to speed our
expansion into the Chinese market, and with the aim ofcost competitive manufacturing (monozukuri) will bolster
overseas production. In Japan, we are working to builda services business that leverages IoT. With foodpackaging we are moving forward to establish formingEver Further Evolution!

technologies that will be essential to creating new
packaging forms such as V-Pack. Moreover, to realize
cost competitive production and sales of goods we aim
to develop partnerships in and outside of Japan while
seeking to expand our business. Operating plants inboth Japan and overseas will not only mean
manufacturing (monozukuri) that takes place in the
optimal location for production but will also entrench themodularization of equipment to realize lot production
and planned production, that will in turn lead to lower
costs and higher profits.

Development of the 3D solder paste inspection system,
the VP9000 series
In the new VP9000 series, we have incorporated
CKD’s long-accumulated statistics management
capabilities to enhance quality maintenance, andanalytical and improvement functions. Then we
went even further, equipping this model with multiresolution switching functionality where customers
can at their own discretion set their preferred
resolution to achieve a balance of addressing
demands for printing pad miniaturization andinspection speed. In conjunction with this we haveset our sights on capturing market share in Europe
and the United States, a task that we have been
considering. Aiming to improve legibility andoperability, we have also revamped GUI andenlarged the touch panel display. This represents
an evolution that makes for an especially userfriendly inspection machine.
CKD’s inspection machines are created with thecustomer’s ease of use in mind, and are designed
to be compact with consideration to ergonomicsbased monitor height, cover design and installation
space. They also adopt full touch panel operations
to obviate the need for the use of a mouse.
We will continue to pursue enhanced functionality
and the user friendliness that satisfies customers
worldwide, and will endeavor to raise the quality ofthe solder printing process.

CKD Report 201919

Management Strategies

Business Overview and Outlook
Component ProductsComponents
Business Division
Katsuhito Okuoka
Director & Senior Managing Executive Officer
General Manager of Components Business Division

Strategy
Having set the goal of achieving CKD’s 10-Year Vision, namely becoming a “Total FA Worldwide Supplier,” wein the components product segment strive to offer new value to customers. To this end, our response to thecurrent dramatic period of transition where manufacturing (monozukuri) and technology are rapidly evolving
and markets are becoming increasingly globalized, is to wield a robust lineup of FA systems, including
pneumatic control components, labor-saving components, electric actuators, fluid control components, andfine system components. We develop products and offer services that respond to global needs, and work tobolster our worldwide production network and logistics framework.

Fiscal 2018 Report
In fiscal 2018, the market in Japan experienced what
appeared to be a pause in demand for semiconductor
manufacturing equipment, an area that had been afactor for favorable business conditions in fiscal 2017.
Consequently, fine system components and the entire
range of control components felt the impact. In addition,in overseas markets, sales declined due to theslowdown in capital investments in the Chinese market
due to trade friction between the US and China.
To build a production network with an eye to the future,
we are bringing online the Tohoku Plant and the new
production site in China, and have strengthened
collaboration with CKD Nikki Denso Co., Ltd., which is
now a Group company. This fortified framework hasenabled us to globally offer high-precision direct drive
motor technology and products. Together with increasing
the number of items produced at overseas plants to

respond to large-lot orders and short lead-time demands
in markets outside of Japan, we have boosted overseas
production capabilities by having facilitated local
procurement of parts and materials for local processing.
In order to establish CKD in new markets, we beganoffering a diverse lineup of new products that are able tomeet the needs of customers. These include products
geared toward food manufacturing processing, as wellas the assistance device “PowerArm” that alleviates theburden of heavy labor and ensures safety to realize amore comfortable work environment, a carriable air
supply unit that can provide compressed air as long as
power is available, and an ample variety of components
capable of interacting with increasingly prevalent IoT
networks. Related to this, we have also rolled out
services in collaboration with major communications
device manufacturers.

Value Provided through Business
Main Products that Create Value
These devices control the refinement of airﬂow, pressure adjustments, the driving of a cylinder, and so on. We develop automatic systems
Pneumatic control
responding to a broad range of industrial needs and propose pneumatic technologies in consideration of environmental preservation andc­ omponents
energy conservation.

20

Drive units
Electric actuator

As pneumatic cylinders are easily automatic, they are used in a wide range of industrial fields. Proposals are made using high precision anduser-­friendly electric actuators, and automation in line with customer needs is realized with control technologies that utilize air and electric motion.

Fluid control
components

Under the concept of high quality and wide variation, we are utilizing fluid control technologies to launch a broad range of products, fromvarious types of valves, product series that meet the needs of medical and pharmaceutical processing, as well as food processing andenvironmental products such as water treatment systems.

Fine systemcomponents

With a broad range of products covering supply systems to exhaust systems of semiconductor and ﬂat panel displays, we are able to­ rovide state-of-the-art process control. We support the electronic device industry with our fine system components which can be used inpclean environments.

CKD Report 2019

Fiscal 2021 Sales Goals

124.0

¥

billionCKD Nikki Denso Co., Ltd. Sakura Plant

Segment Income

17.5

¥

billionTohoku Plant Automatic manufacturing equipment

Upcoming Topics
Looking to the external environment where markets are in a constant state of change and Japan’s working
population is in decline, among other issues which must be dealt with, we see that it is essential to accelerate
development speed, develop flexible production and strengthen a platform for global production. In our internal
environment, tasks include development integrated with our group company, CKD Nikki Denso Co., Ltd., stable
operation of the newly established plant, development strengthening overseas bases are required, and also tostrengthen our efforts thus far. It will be necessary to become even more tenacious in the endeavors we have been
undertaking until now. Moreover, we will conduct high level manufacturing (monozukuri) at respective production
bases, both inside and outside of Japan, and develop these plants in a way that contributes to local communities.

Future Initiatives
Every year as the pace of business quickens, we work tobuild a structure capable of providing an early
determination of the direction business will take so that we
can deal with such changes in the external environment.
By taking our current business model to a global level, we
aim to scale up operations in new business areas.
Moreover, in response to the growing trend toward smart
factories that can be seen worldwide, we brought CKD
Nikki Denso Co., Ltd. within the scope of consolidation andare developing and offering FA systems that lead to highly
functional products and predictive detection. We are also
boosting our efforts with regard to components for foodEver Further Evolution!

manufacturing equipment, components for medical-relateduse, products that work to reduce environmental burden,
assistance devices, services and other offerings that are
tied to our activities to achieve SDGs.
Responding to issues in the internal environment, we areproceeding to bring automation and streamline plants
Groupwide, including the Tohoku Plant, the new
production site in China, and at CKD Nikki Denso Co., Ltd.
so that we can build a new foundation for the future.
Together with raising production capacity, we are also
promoting the creation of easy-to-work environments andCSR activities that are deeply rooted in local communities.

Development of IoT Products for Agriculture
As an IoT business for agriculture, services thatindicate optimal growth conditions are becoming
increasingly ubiquitous. These agriculture-focusedservices include using sensors to collectenvironmental information, such humidity andsunlight in farm fields, as well as the temperature
and water content volume in soil, or carbon dioxide
within greenhouses, which are analyzed with AI
based on plant science.
CKD has also collaborated with ICT partners,
and has begun endeavors with the aim of
automating operations needed for cultivation bycommunicating various environmental data andother information through the cloud andperforming operations using remote control.

As a first step in our efforts we have developed anumber of new products, such as an irrigation
valve for greenhouses that enables operations to
be conducted remotely, a liquid fertilizer mixture
unit that mixes, dilutes, and controls the supply of
liquid fertilizer, a motor that automates the opening
and closing of windows, and a valve unit that
selects and controls supply and location.
Being part of the agriculture business has been agreat education for us with regard to building IoT
systems and the telecommunications technology
suited to IoT-based remote control. Our future goal
is to be a solutions provider that can use thetechnical expertise gained in the field to solve
problems of worker shortages and other issues.

CKD Report 201921

Management Strategies

Business Overview and Outlook
Component Products

Sales andMarketing Division
Shinji Yuhara
Director & Executive Officer
General Manager of Sales and Marketing Division

Strategy
Utilizing our track record accumulated in pneumatic components, fluid control components and fine systemcomponents—areas at which we excel—and by adding new electric actuators to our lineup, we will proceedwith comprehensively bringing together the automation and labor-saving technologies that will give rise to asustainable society. Moreover, we are working to become a truly global company by promoting a five-zone
overseas strategy that will work to strengthen our global sales operations. We in the Sales and Marketing
Division are working toward the 10-Year Vision of becoming an “FA Total Consultant.”

Fiscal 2018 Report
One of the key issues facing the world economy that
continues to grow is a shortage of labor, and that is why
we believe the wave of automation will only pick up pace.
This was the situation in fiscal 2018 when we took action
to move into global growth markets that were
demonstrating real vitality in terms of capital investments.
One particular example was the automotive industry.
There, we welcomed a once in a century period oftransition, namely, a shift toward electric vehicles (EV), andinvestment is ongoing. We also project further growth with
the introduction of 5G telecommunications, IoT, AI andother new technologies in the semiconductor andelectronic component industry. We are moving forward on
product planning underpinned by an enhanced marketing
function that will enable us to respond to the myriad ofgrowing automation needs. Accompanying this is thenurturing of our human talent to raise their ability to
conduct quality sales, to seize upon those strengths thatare unique to CKD, and to work aggressively to establish
ourselves in growth markets.
Another issue with regard to fiscal 2018 was that,being in the midst of a business climate known as a“semiconductor super cycle,” we had forecast increased
sales for components targeting the semiconductor
industry. However, impacted by falling memory costs,
lagging sales of smartphones and other factors made for a
noticeable delay in investments by chipmakers. The
adoption of electrification in the automotive industry is
gaining speed, and there is firm demand for machine tools

22

CKD Report 2019that are compatible with IoT, while the situation in the foodand medical industries is stable. Outside of Japan, in
addition to the impact of lower capital investments in thesemiconductor industry, we have also been hit by a decline
in automation-related investments in China. The result of
these factors is that sales will decrease temporarily, although
we do project that over time we will trend toward recovery.
One new initiative that we are undertaking is working
toward the integration of activities with CKD Nikki Denso
Co., Ltd., which has become a Group company. We havemade its flagship products, high-precision direct drive
servo motors and linear servo motors, available through
CKD’s network, and in so doing have enabled proposals
to new customers, which in turn has allowed us to build
upon our business results. As a lineup compatible with nextgeneration FA systems, we have announced motorless-type
electric actuators that enable customers to integrate and use
their own existing motor. This new concept has proved
popular in the market. We are showcasing these new
products at trade shows and other venues, and working tohave them accepted into the FA market.
The Sales and Marketing Division has proclaimed its
10-Year Vision of how it sees itself as a “FA Total
Consultant.” In addition to proposals for automation andlabor saving that leverage a diverse array of products in its
lineup, we are planning and promoting expanded sales for
products that facilitate a reduction to environmental
burden. In this way we are working to develop sales
activities that contribute to realizing a sustainable society.

Fiscal 2021 Sales Goals
Overseas sales

44.0

¥

billionElectric motor sales

A meeting being held overseas

14.0

¥

billionOverseas trade show

Upcoming Topics
The FA industry is transitioning to a new stage, given the surging automation needs in global markets and theconsideration given to environmental matters such as creating a low-carbon society. Major topics for theSales and Marketing Division are to have a firm grasp of this change, and to develop an organization that canbe quick off the mark in responding to the voices in the market, and to develop our human resources.

Future Initiatives
New ideas on consideration for the environment are coming
out of the FA industry as well. Among those, one notable
trend is the integration of electric motion equipment. Moreand more, conventional equipment that utilizes hydraulics orpneumatics is being combined with electric components. In
response to this, we are introducing direct drive actuators as
new products, in addition to rotary-type direct drive motors.
By taking into consideration customer needs when we
propose pneumatic and electric motion components, which
are our strengths, we are conducting sales that provide thesolutions to issues that arise on the frontlines of p
­ roduction.

Our global sales activities are built on a production andsales network that extends worldwide, and each region
has an area-specific strategy. We provide an ample
amount of sales promotion equipment that is in highdemand, and have national staff as the main drivers ofsales activities. In addition, we are also aggressively
working to promote our brand by taking part in overseas
trade shows. We are striving to continue to meetcustomer demands, and we hope that you will anticipate
great things from CKD.

Ever Further Evolution!
Expanding nitrogen gas applications
for food manufacturing processes—Nitrogen gas extraction unit—

Alleviating back pain that occurs
when handling heavy loads—PowerArm—

As safety considerations rise in the food industry, nitrogen gas
applications are growing with the objective of preventing
oxidation in food processing and in the packaging process. CKD
seeks to enhance its Food Process series of components forfood manufacturing processes with the launch of a nitrogen gas
extraction unit. This product separates oxygen and nitrogen fromcompressed air and can refine highly pure nitrogen gas up to a
99.9% concentration. It also uses materials that conform to the
Food Sanitation Act and consequently contributes to theacquisition of HACCP and FSSC certifications.

Production processes very often entail activities for lifting,­supporting or transferring heavy loads. There are cases where
performing such repetitive tasks results in lower back pain andindustrial injuries, making this a critical issue at production sites.
To solve this problem, we developed PowerArm, an air-poweredbalancing product that supports human movement and that cansmoothly make light work of up to 75kg. We are presenting thisproduct at trade shows and exhibiting it at CKD’s showroom,
offering a hands-on trial to experience its high degree of­operability.

CKD Report 201923

ESG Information

SDGs Initiatives in the ESG Field
Along with building relationships of trust among our stakeholders through various activities, we maximallyleverage the technologies and experience we have accumulated over the years as we work with our
stakeholders to solve the challenges faced by society, thereby contributing to the future of society andcontinuing to develop together.

Scope ofContribution

E
Environment

Society’s Challenges

K Climate change
K Environmental pollution
K Energy issues
K Water resources
K Waste management

K Health issues

S
SocialK Food issues
K Labor shortages
K Diversity
K Work-life balance
K Local communities
K Work safety

G

Governance24

CKD Report 2019

K Corporate governanceK ComplianceK Risk management

CKD’s MaterialityKD evelopment of low environmentalload productsKR eduction of CO2 emissions and­prevention of environmental pollution
K Response to resource and energy
issuesKR espect for human rights
KP romotion of diversity
KW ork-style reforms (promote
work-life balance)
KF air, just procurement
KC ontribution to local society

K Corporate governanceK ComplianceK Stakeholder engagement
K Risk management

Primary Initiatives and Results During Fiscal 2018

We work to develop low environmental load
products.
Our efforts to reduce CO2 emissions resulted
in a 19% decrease (per unit of production)compared with fiscal 2013.
Our efforts to reduce water usage resulted
in a 20% decrease (per unit of production)­compared with fiscal 2013.

P40

We formulated the “CKD Health Management
Declaration,” under which we work to create
healthy, energetic workplaces for both themind and body.
We promote diversity for employing a wide
range of human resources, regardless of gender,
nationality, or age.
Human Resource Development
We strengthen initiatives that enable a diverse
range of human resources to maximize theirpotential and excel.

P36

Uncompromising Governance
We appointed three directors and three­auditors as independent officers as part ofour efforts to ensure transparent, healthy­management.
Risk Management
In preparation for the event of major losses
due to large-scale natural disasters, weformulate BCPs that prioritize human life andthat ensure continuity of recovery support and
CKD’s businesses.

P28

CKD Report 201925

ESG Information

ESG Summary
ESG Initiatives
Based on our corporate philosophy, “With creative knowledge and technology, we shall innovate fluid control
and automation, and thus contribute to building a rich society,” we conduct our business activities from along-term perspective that takes into account changes in the social and business environments. As a global
company, we also promote initiatives for the critical themes of environment, social and corporate governanceby considering the impacts on society and CKD, tackling materiality, and creating economic and social value.

Corporate Commitment
Recognition of Corporate
Social Responsibility

Each corporate member recognizes Corporate Social Responsibility, complies with all laws and­regulations, discloses information, and acts in good faith to gain the trust of society.

Care for the Global
Environment

We shall propose eco-friendly products and strive for environmental conservation through corporate
activities.

Thorough Customer
Orientation

We shall always correspond with a customer oriented and modest mindset, offering products and­services to promote customer satisfaction.

Challenge to Technology
Innovation

We shall take a leadership role in the industry by identifying global trends, striving for technology­innovation, and offering effective products in a timely fashion.

Corporate Culture with
Faith in Human Resource

We shall build a corporate culture with faith in human potential and satisfaction upon achievementof each member, courageously challenge innovation in operation, and capability to demonstrate
maximum strength of organization.

Materiality

High

Among the many issues that exist within society, we define materiality from the perspectives of “importance for CKD”
and “importance for society,” and undertake initiatives to enhance sustainability in aims of ensuring the sustainable
development of the world and society, as well as ensuring the further growth of CKD.

P Stakeholder engagement

P Corporate governanceP Compliance
P Reduction of CO2 emissions and prevention ofenvironmental pollution
P Provision of safety- and quality-oriented products
P Undertaking the challenge of technology­innovation

P Risk management

P Occupational health and safety

P Respect for human rights

P Human resource development and­development of future generations

P Promotion of diversity
P Work-style reforms(promote work-life balance)

P Response to resource and energy issues(secure water resources)

P Fair, just procurement

P Undertaking the challenge of new businesses
and new markets

P Contribution to local society

Medium

Impact on and importance for stakeholders

P Development of low environmental load products

Medium26

CKD Report 2019

Impact on and importance for CKD business activities

HighStakeholder Engagement
Policies and Initiatives

Corporate
Philosophy
Corporate
Commitment

Stakeholders

Legal responsibilities

Economic responsibilities

Ethical responsibilities

NPO/NGOInternational society

Government

Social contribution responsibilities

Core stakeholders

Mass media

Competitors

Global environment

Local society

Shareholders/Investors

Suppliers

Employees/Families

Standards of Conduct

Customers

In order to contribute to the realization of a sustainable
society through our main businesses, based on our
Corporate Philosophy, Corporate Commitment, andStandards of Conduct, we precisely execute the “social
contribution responsibilities,” “ethical responsibilities,”“economic responsibilities,” and “legal responsibilities”
that we, as a company, must fulfill for our stakeholders.
Within each department, we also utilize communication
tools and provide opportunities to communicate with
our stakeholders as part of our efforts to gain anunderstanding among our stakeholders regarding ouractivities.

Stakeholder Engagement Initiatives
Stakeholders

Primary Dialogue Methods

Primary Responsibilities and Challenges

P Inquiry forms and other inquiry contact points
P Product information provided through websites andSNSs
P Showrooms and seminars

We consistently address our customers witha customer-oriented and modest mindset,
prioritize safety, quality, and the environment,
and offer products and services that satisfy
our customers.

Suppliers

P Shared procurement policies
P Production trend briefings

We establish principles and basic policies
for procurement activities, strengthen
partnerships through fair, just transactions
with our suppliers, and aim for mutual
prosperity.

Employees/Families

P In-house publications, intranet
P Employee awareness surveys
P Opportunities to converse with top management
P Internal whistleblowing system
P Discussions with labor unions
P Safety and health committee

We aim to create healthy workplaces inwhich all employees can work safely andwith a sense of purpose.

Shareholders/
Investors

P General meeting of shareholders
P Consolidated financial results briefings
P IR events/Individual meetings
P IR information website
P Consolidated reports/Annual reports/Shareholder
communications

We strive to actively disclose informationand conduct dialogues in order to ensuretransparency.

Local Society

P Contribution activities for local communities (scienceclasses, forestation activities, etc.)
P Dispatch of instructors to lectures and educational sites
P Information broadcasting through websites and SNSs
P Social contribution activities in regions throughout theworld

We aim to be an “open” company thatcoexists with local communities andcontributes to society.

Global Environment

P Environmental management framework
P Environmental education
P Compliance with environmental regulations
P Development of low environmental load products

We comply with environmental laws andregulations, work to prevent environmental
pollution and reduce CO 2 emissions, andundertake environmental management
activities.

Customers

CKD Report 201927

ESG Information

Corporate GovernanceWe strive to ensure and strengthen the feasibility of corporate governance from the perspectives of “ensuringtransparent, healthy management” and “appropriate cooperation with stakeholders” for the purpose ofrealizing a greater level of sustainable corporate value.

Outside Director Messages
Junichi Kagawa, Outside Director
The environment in which companies are situated is in constant flux. Various conditions arechanging, including changes in business due to politics and the economy, and changes intechnology needs due to technological progress. And companies encounter various
situations, at times taking every chance to grow and at other times prioritizing preparation
for the future by quietly accumulating technology. Another important challenge is making
improvements to regular operations.
I have experienced a wide range of business, including management, technology
development, research, intellectual property, and quality assurance. And I have also
experienced intense front-line situations during negotiations with customers. As CKD
advances with its globalization, I hope to contribute to the further development of its
business based on the experience I have accumulated. And I will strive in earnest to
maintain and ensure the critical management issues of validity and transparency.

Noriko Asai, Outside Director
In today’s world, where technological innovation as typified by AI, IoT, and robotics is
evolving at an accelerated pace, CKD appears to be blessed with the opportunity to achieve
greater growth. The world is also undertaking the challenge of the SDGs in order to realize asustainable society, and within the trend towards implementing Society 5.0, CKD stands on
the precipice of making a further leap. Along with those in the industrial world I haveanalyzed the management condition of more than 2,000 manufacturing sites in 32 countries
around the world and in Japan, and have served as a member of new technology screening
committees and policy deliberation committees. During this time, I have come into contact
with technological changes and work-style reforms. Leveraging this expertise, I will spare noeffort in contributing to greater corporate value by raising issues and offering advice to help
CKD make and supervise decisions that ensure objectivity and transparency from anexternal perspective.

Kazumasa Uemura, Outside Director
Until I was appointed as a director last year, I served as the assistant director of a nearby
national university hospital, where I oversaw the education and training department for doctors
and other medical professionals. This department was deeply involved in human resource andlabor management, where the recent pressure from society for work-style reforms, particularly
the mental health maintenance of our staff, was an extremely important issue.
CKD contributes to the creation of social value in Japan’s industrial world through the provisionof machinery and components that form the foundation of a wide range of industries,
particularly that of the manufacturing industry, from perspectives that go beyond those of
pursuing corporate profits and greater scale. However, these social contributions are only
made possible when the mental and physical health of each employee is maintained.
Therefore, I will contribute to management from the perspective of industrial safety and healthmanagement, including work practice management and work environment management.

28

CKD Report 2019

Outside Audit & Supervisory Board Member Messages
Koichi Hayashi, Outside Audit & Supervisory Board Member
I have been involved with finance, accounting, and auditing for roughly 30 years. Afteracquiring experience in audit work in the US and returning to Japan, I have participated in
multiple M&As, including cross-border M&As, and the accompanying PMI (Post Merger
Integration) work. Meanwhile, as CKD aims for greater global business growth, it has been
actively promoting capital partnerships outside of Japan and business acquisitions within
Japan. Based in part on my past experience, I intend to constantly verify whether CKD’s
management control framework corresponds to its growth. Only when this appropriate
control framework is in place can CKD achieve sustainable business growth and build winwin relationships with its stakeholders.

Naotaka Nanya, Outside Audit & Supervisory Board Member
Ever since becoming an attorney in 1993, I have experienced many cases involving
corporations. And I have experienced first-hand how the environment encompassing
corporations is now changing more dramatically than a decade earlier. The roles demandedof companies from the perspectives of corporate governance and compliance have also
expanded to encompass a broader scope, and we can assume that this trend will only
evolve to a higher level. In order to meet these requirements, it is essential to ensurebalanced management for the interests of shareholders as well as employees, suppliers,
local society, the global community, and a wide range of other stakeholders in order toenhance corporate value. I will play my part in ensuring that my experience, howevermodest, connects to the growth and improvement of the Group in this respect.

Takeshi Sawaizumi, Outside Audit & Supervisory Board Member
Against the backdrop of emerging disturbances in the post-cold war global system, theworld economy is now faced with numerous geopolitical risks, including trade disputes
coinciding with US-China power struggles, the issue of Brexit, and the destabilization of EU
politics and economics triggered by immigration issues. Despite this situation, CKD is aiming
to champion its position as a “Total FA Worldwide Supplier” and further advance its
globalization. Based on my experience and involvement in the management of many
companies from the stance of finance, I will maintain my gaze on these numerous changes
at the global level, while at the same time, as an auditor, ensuring credibility among all
stakeholders and striving to contribute, however modestly, to the achievement of thecorporate targets established by CKD.

CKD Report 201929

ESG InformationCKD Group endeavors to further enhance
corporate governance as a mechanism to
Mindsetrealize management that is healthy andefficient, and that has a character oftransparency which earns the ongoing trust and goodwill of
all stakeholders, with their diverse range of vested interests.

Status of Internal Control System and
Risk Management Structure Development
CKD’s basic policy for putting in place an internal control
system and risk management structure is determined, andexecuted, by its Board of Directors. Details of the basic
policy are as follows.
a) Ensuring conformity to laws and regulations, as well as
the Articles of Incorporation
To be sure that directors and employees comply with laws
and regulations, as well as the Articles of Incorporation in
the performance of their duties, we maintain Standards ofConduct and internal regulations, and have put in place asystem that prohibits relations with antisocial forces andoffers a way to report illegal activities. We have alsoestablished a Nomination, Remuneration Advisory
Committee to designate directors and determine theircompensation, among other duties.
b) Preserving and managing information
Proposal approval forms, the minutes of various meetings,
and other information associated with the execution ofduties by directors are appropriately preserved andmanaged in accordance with laws and internal regulations.
c) Risk management
In tandem with seeking to raise awareness of complianceamong all employees, the risk management sections ofeach business division work in close cooperation andunder the primary authority of the divisions tasked with risk
management (General Affairs Department, Information
Resource Management Department, Internal Control Audit
Office and Legal Department) at headquarters, which
promotes Com­panywide risk management. In addition, to
respond promptly and with precision to risks that are
increasingly complex, we have established the Risk
Management Com­mittee under the auspices of the Boardof Directors as an entity that manages risks laterally
throughout the Company. The Risk Management
Committee deliberates and decides upon matters relating
to Companywide risk management.
d) Ensuring efficient execution of duties by directors
As a general rule, the Board of Directors convenes once
per month, and the Board of Managing Directors,
comprised primarily of Company officers, convenes on an

30

CKD Report 2019as needed basis. This enables swift decision making bymanagement. The Company also holds management
meetings for matters that impact operations at eachbusiness division. These meetings are attended by officers
and division heads who share information through reports
and discussions on the analysis of the businessenvironment and the progress of financial planning, andalso reflect management decisions. In addition, theintroduction of an executive officer system has effectively
separated the management decision making, as well as
supervisory and operational execution functions,
responsibilities that had previously been held by the Boardof Directors. This enables precise and prompt decision
making, and agility in executing business operations.
e) Ensuring appropriate operations within the corporate
structure
CKD promotes efficient subsidiary management based on
regulations for the control of subsidiaries both in andoutside of Japan. In tandem with this, as subsidiaries fallunder the scope of Standards of Conduct and within therisk management structure, we pursue proper business
operations with subsidiaries by having a thorough systemof reporting to headquarters and providing advanceapproval concerning important matters.
f) Matters related to employees assigned to auditors
The Company assigns employees to assist the auditors in theperformance of their duties, as necessary, and grants such
employees the authority to conduct investigations as
directed by the auditors. In such a case directors andauditors deliberate, in advance, concerning human resources.
g) Reporting to auditors
At the request of auditors, directors and employees of theCompany and its subsidiaries shall provide required
reporting, and share information regarding Groupwide
management conditions and status of business execution,in accordance with laws and regulations and as stipulatedby the Audit & Supervisory Board. In addition, employees
who are assigned to auditors are not to be the subjectof disadvantageous treatment due to sharing information
and reporting to auditors.
h) Structure to ensure the effective execution of otherauditor audits
To raise the effectiveness of the Group’s audit structure, wehave established the Internal Control Audit Office under the
direct control of management, and ensure opportunities for
information exchange by auditors, accounting auditors andthe Internal Control Audit Office. In addition, auditors may
consult with external experts in the legal, accounting orother fields as necessary, and the payment of related
expenses will be the responsibility of the Company.

Oversight Functions

Promotion Structure

The Company has adopted a board of auditors’ system,
and its Audit & Supervisory Board is comprised of four
auditors, three of whom are outside auditors. Each auditor
attends Board of Directors’ meetings and other important
meetings based on the audit policies, formulated by the
Audit & Supervisory Board, and audit plans, and conducts
audits of directors’ execution of duties through surveys on
the status of business tasks and financial conditions.
Auditors work closely with the Internal Control Audit Office
and accounting auditors, and exchange information on anas needed basis.
Also attending the Board of Managing Directors andmanagement meetings is the standing auditor who
deliberates on the management matters of each businessdivision, analyzes the business climate, and works tounderstand the status of business planning progress so as
to provide appropriate audits.
Accounting audits are conducted under an audit contract
with Deloitte Touche Tohmatsu LLC for Companies Act
audits and Financial Instruments and Exchange Act audits.
We request accounting audits that are fair and unbiased.

In addition to its responsibilities as determined by laws andregulations, the Board of Directors is positioned as an entitythat determines basic policy and important mattersconcerning management. We believe that it is essential tohave leadership driven by top management and decision
making that is both transparent and fair. Based on thisthinking, as a company that has adopted a board ofauditors’ system, we entrust to administrative personnel the
execution of those routine duties as would be permitted
within the scope of the law, and we work toward
management that is transparent and objective owing tostrengthened management oversight conducted byauditors. In addition, together with appointing three
independent outside directors, we have established a
Nomination, Remuneration Advisory Committee as anadvisory body to the Board of Directors to strengthen the
independence, objectivity and accountability of Board of
Directors’ functions associated with director nomination andcompensation. The committee is convened as needed, andbased upon the results of deliberation on matters related tonomination and compensation, committee members reportto the Board of Directors.
Areas of expertise held by outside directors

Junichi Kagawa

Human
Technology Healthcare,resource
medicaldevelopdevelopment
mattersmentqBusiness
administrationqq

Noriko Asaiq

Kazumasa
UemuraCorporate governance organizationqNomination, Remuneration
Advisory CommitteeStanding director
Outside director

Board of Directors
Consultation/
reportAppointment/
dismissal

General Meeting of Shareholders
Appointment/
dismissal

Appointment/
dismissal

Audit & Supervisory Board

Participation

Standing director
Outside director

Operational
audit

AuditorOutside auditor
Report/cooperation

Appointment/
dismissal

Accounting Auditor

Accounting
audit

Executive DirectorqGeneral Affairs Department
Board of Managing Directors,
Management Meeting

Legal Department

Information Disclosure
Committee

Management System Department

Risk Management Committee

Internal Control Audit OfficeInformation Security
Promotion Committee
Good Value Promotion
Committee

Corporate Planning Department
Security Export Control OfficeBusiness Divisions

CKD Report 201931

ESG Information

Risk Management
CKD considers risk management as an important operational activity to be a company that continues to earn
the trust of society, and together with maintaining this management structure, the Company strives tomitigate serious risk and to minimize loss that results from risk.
CKD identifies various risks ancillary tobusiness activities so as to ensure business
Mindsetcontinuity and to raise corporate value, andbased upon the proper assessment of suchrisks, undertakes efficient and effective management
activities.

Risk Management Promotion Structure
CKD formulates risk management regulations that define astructure of risk management promotion. In conjunction
with this, the Company positions the Risk Management
Committee directly under the Board of Directors, which
serves to promote risk management. The Risk
Management Committee performs the following duties.
a) Considers methods of risk identification, assessment
and response, and makes the decision on how to
respond to riskb) A ssesses the effective results of the risk response
method, and based upon this, considers corrective
measuresc) Provides guidance, communicates and makes requests
in relation to matters for thorough Companywide
implementationd) Audits and monitors matters decided upon by the Risk
Management Committeee) Reports to the Board of Directors

32

CKD Report 2019

Formulation of Business Continuity Plans(BCP)
We make preparations for events such as large-scale
earthquakes, fires, typhoons or other enormous disasters,
and believe that the safety of human life is of the utmost
priority. We therefore formulate BCP that serve to aid in
the recovery of the local community and our business
partners, and keep our business in operation.
Main Initiatives• Educate all employees and conduct training for workinglevel responders• Implement an array of drills (drills for initial response,
business recovery, evacuation, first aid, fire extinguishing,and others)• Prepare supplies (home return support sets, stored rice
and water, electricity generators, and others)• Hold BCP formulation seminars for business partners

Mindset on Information Security
Information security refers to securing the safety ofcomputers and information for conditions that enable
information to be used properly, and can be categorized
into three elements, namely, confidentiality, integrity, andavailability. At CKD we strive to heighten the level of
information security for technical data, engineeringdrawing information and other material of a classified
nature. We also introduce security measures to efficiently
protect information assets, and define related points andoperational processes. Moreover, under our information
security framework we take measures such as conducting
drills, seek to educate all employees, and bring together arange of related information in order to clarify laws andregulations that pertain to information security, various
rules and guidelines.

Compliance
We at CKD have a high sense of ethics, and strive to put into practice fair and legitimate business activities that
follow the dictates of common sense. In addition, we have in place Standards of Conduct, and thoroughly
communicate these to guide the actions that each and every employee should take in the course of their daily duties.
Each and every employee shall adhere to
the laws and regulations that pertain to
Mindsettheir duties, as well as to our Corporate
P h i l o s o p h y. We w o r k t o f u l f i l l o u r
responsibility to society through fair and sound businessactivities.

Promotion of Compliance Inside andOutside of JapanThe Standards of Conduct that define our fundamental
principles of employee behavior stipulate adherence tolaws and regulations, and we undertake a number of
initiatives in our pursuit of raising an awareness ofcompliance throughout the Group worldwide.

Whistleblower System
Discovering problems associated with compliance at an
early stage is critical. For that reason, we have establisheda system whereby employees and others who work in the
CKD Group can report illegal activities. In addition to thisinternal reporting system, we have in parallel establishedan external reporting system, staffed by an independent Investigation/
guidance on
corrective
measures Report

 Contact

Attorney-at-law (externalreporting contact point) Report

CKD Privacy Policy URL:
https://www.ckd.co.jp/english/privacy/

 Report,etc.
 Response

Personal information protection manager(General Manager, General Affairs Department)

Relevant division

 Guidance

Good Value Promotion
Committee (Internalreporting contact point)

OutsideauditorIt is incumbent upon companies to properly manage andprotect personal information in the course of conducting
business operations. Based on the CKD privacy policy put
in place to fulfill such a duty, we have defined regulations
pertaining to personal information protection, and work toproperly protect personal information.

Personal information protection system

President () Report

Protection of Personal Information

 Response

Non-relevant

Relevant(General Affairs
Department)(Personnel
Department)

Whistleblower

Head of administration, Information
Resource
Management(General Manager,
Information Resource
Management
Department)

Head of audit (General Manager,
Internal Control Audit Office)Report processing system

attorney-at-law, and together with care made to protect
those making reports we strive to quickly discover, andcorrect, compliance problems. We continuously work to
make employees aware of this whistleblower system, andare making progress on creating a structure which enables
reports from overseas-based employees by developing
the ability to handle reports in English and multiple otherlanguages. The details of reports are made available to thepresident without delay, and investigation anddeliberations are made at the Good Value Promotion
Committee, with measures being taken to correct the
problem and ensure that it does not reoccur.

Implementation of compliance training
CKD systematically conducts compliance training for employees with the aim of evoking andentrenching compliance awareness. In Japan, training is provided in accordance with employee role
when first entering the Company, when being promoted, when taking up an overseas posting, andother occasions. Employees at sites outside of Japan are also periodically provided with training andgiven information on laws and regulations. Training content consists of the basics of calling attention
to issues of harassment, managing confidential information, measures to prevent cartels and othertopics, and is well-crafted in line with the roles that trainees perform.
We at CKD keep firmly in mind that sincere and fair conduct, thoroughly engrained in compliance, isprecisely the way that we will earn the trust from all our stakeholders, and the education we provide
will work to this end.
CKD Report 201933

ESG Information

Board of Directors, Audit & Supervisory Board Members

Naotaka Nanya

Shinji Yuhara

Kazumasa Uemura

Katsuhito Okuoka

Junichi Kagawa

Kazunori Kajimoto

Noriko Asai

Masafumi Kokubo

Shigeru Ohmori

Outside Audit &Supervisory Board
MemberDirector andExecutive Officer

Outside Director

Director and Senior
Managing Executive Officer

Outside Director

President

Outside Director

Director and Senior
Executive Officer

Standing Audit &Supervisory Board
MemberKazunori Kajimoto

Katsuhito Okuoka

Masafumi Kokubo

President

Director andSenior Managing Executive Officer

Director andSenior Executive Officer

Apr. 1991 Joined the Company
Jun. 2014 Deputy General Manager, Components
Business Division, General Manager,
Administration Department
Jun. 2015 Executive Officer
General Manager, Components
Business Division (to the present)
Jun. 2016 Director & Executive Officer
Jun. 2018 Director & Managing Executive Officer
Jun. 2019 Director and Senior Managing Executive
Officer (to the present)

Apr. 1983 Joined the Company
Oct. 2005 General Manager, Sales and Planning
Department, Sales and Marketing
Division
Oct. 2008 Chairman and President, TAIWAN CKDCORPORATION
Sep. 2012 General Manager, Corporate Planning
Department (to the present)
Jun. 2015 Executive Officer
Jun. 2018 Director & Executive Officer
General Manager, Security Export
Control Office (to the present)
General Manager, Internal Control and
Auditing Office (to the present)
Jun. 2019 Director and Senior Executive Officer (tothe present)

Apr. 1980 Joined the Company
Jun. 2004 Director & Executive Officer
General Manager, Sales and Marketing
Division
Jun. 2005 Director & Managing Executive Officer
Jun. 2008 President (to the present)

34

CKD Report 2019

Junichi Kagawa

Koichi Hayashi

Outside Director

Outside Audit & Supervisory Board Member

Apr. 1977
Jun. 2003
Jun. 2007
Jun. 2009
Jun. 2011
Jun. 2012
Jul. 2014

Oct. 1990 Joined KPMG LLP, New York Office
Apr. 1997 Registered as a certified public
accountant (to the present)
Mar. 2008 Representative Director, Attax Co., Ltd.
(to the present)
Jun. 2010 Audit & Supervisory Board Member, theCompany (to the present)
Jun. 2013 Outside Auditor, Plaza Create Co. Ltd.
Jun. 2018 Outside Director, Plaza Create Co. Ltd.
(to the present)

Joined NGK Spark Plug Co., Ltd.
Director
Managing Director
Senior Managing Director
Advisor & Senior Technical Executive
Director, the Company (to the present)
Commissioned by NGK Spark Plug Co.,
Ltd. (to the present)

Noriko Asai

Naotaka Nanya

Outside Director

Outside Audit & Supervisory Board Member

Apr. 1997 Research Assistant, School of
Economics, Nagoya University
Mar. 1999 Received Ph.D. (Economics)
Apr. 2003 Assistant Professor, School ofManagement, Chukyo University
Apr. 2007 Professor, School of Management,
Chukyo University (to the present)
Jun. 2015 Director, the Company (to the present)

Apr. 1993 Registered as attorney at law (to thepresent)
Sep. 1999 Opened Nanya Law Firm
Jun. 2006 Alternate Auditor of the Company
May 2011 Corporate Auditor of UNY Group
Holdings Co., Ltd.
Jun. 2012 Audit & Supervisory Board Member, theCompany (to the present)
May 2013 Auditor of Circle K Sunkus Co., Ltd.
Sep. 2016 Outside Auditor of FamilyMart UNY
Holdings Co., Ltd.

Shinji Yuhara

Kazumasa Uemura

Takeshi Sawaizumi

Director and Executive Officer

Outside Director

Outside Audit & Supervisory Board Member

Apr. 1986 Joined the Company
Oct. 2007 General Manager, Nagoya Sales
Department, Nagoya Branch, Sales andMarketing Division
May 2012 Osaka Branch Manager, Sales andMarketing DivisionJun. 2013 Executive Officer
Apr. 2014 Deputy General Manager, Sales andMarketing Division
Apr. 2015 General Manager, Sales and Marketing
Division (to the present)
Jun. 2018 Director & Executive Officer (to the present)

Mar. 1990 Received Ph.D. (Medicine) from Nagoya
University
Aug. 2005 Professor, Medical Education Center,
School of Medicine, Nagoya University
Apr. 2009 Advisor to President, Nagoya University
Apr. 2017 Professor, Faculty of Health andMedical Sciences Aichi Shukutoku
University (to the present)
May 2017 Professor Emeritus of Nagoya University(to the present)
Jun. 2017 Director, the Company (to the present)

Apr. 1974 Joined The Sumitomo Bank, Limited(currently Sumitomo Mitsui Banking
Corporation)
Jun. 2002 Executive Officer
General Manager, Osaka Second
Corporate Business Office (Sumitomo
Mitsui Banking Corporation)
Jun. 2003 Executive Director, Sumitomo Mitsui
Card Company, Limited
Oct. 2006 President, Alpha REIT Advisors Co., Ltd.
Jun. 2008 President, SMBC Consulting Co., Ltd.
Jun. 2014 Audit & Supervisory Board Member, theCompany (to the present)
Oct. 2014 Advisor, Laox Co., Ltd. (to the present)

Katsunori Hayashida

Shigeru Ohmori

Director and Executive Officer

Standing Audit & Supervisory Board Member

Apr. 1984 Joined the Company
Jun. 2006 General Manager, Production
Department, Automatic Machinery
Business Division
May 2009 General Manager, Battery Engineering
Department, Automatic Machinery
Business Division
Apr. 2011 General Manager, Procurement
Department, Purchasing DivisionJun. 2018 Executive Officer
General Manager, Automatic Machinery
Business Division (to the present)
Jun. 2019 Director and Executive Officer (to thepresent)

Apr. 1980 Joined the Company
Mar. 2005 General Manager, Sales and Planning
Department, Sales and Marketing
Division
Apr. 2012 General Manager, Nagoya Branch,
Sales and Marketing Division
Apr. 2014 General Manager, Osaka Branch, Sales
and Marketing DivisionJun. 2016 Standing Audit & Supervisory Board
Member (to the present)

Koichi Hayashi

Katsunori HayashidaTakeshi Sawaizumi

Outside Audit &Supervisory Board
MemberDirector and Executive
Officer

Outside Audit &Supervisory Board
MemberCKD Report 201935

ESG Information

Human Resources
Human resources development putting the abilities of employees to their best use
We believe the realization of “A Corporate Culture That Places Faith in Human Resources” requires us todevelop global human resources and create a working environment where employees can challengethemselves and pursue self-fulfillment. We value the potential of each of our employees, regardless of gender,
age, or nationality, and are focused on strengthening our human resources development efforts so that eachworker can make the most of his or her abilities.

One of our key corporate commitments iscreating a “Corporate Culture That Places
MindsetFaith in Human Resources.” Quite simply,
we believe human resources represent
human capital and are accordingly viewed as a key
management resource for the sustained development andgrowth of the Company.
Developing the abilities of our employees is a key theme
for management at CKD, and our goal is to create a lineup
of human resources that can provide products andservices of great value to our customers while
simultaneously expanding our business on a global basis.
We are focused on the strategic andsystematic creation of a production system
Policyin which workers are eager to tackle thechallenges of a new business while
maintaining the strengths inherent in our core technologies
and technical abilities, and a sales system where our
employees can meet the needs of our customers not onlyin Japan, but around the world.

A Corporate Culture That Places Faithin Human Resources
We place a high value on the motivation and potential of eachof our employees, and are focused on enacting businessreforms without fear of failure and creating a corporate
culture that maximizes the strengths of the organization.
Career Planning Sheets
In order to better create a workplace motivating toemployees, CKD supervisors and managers use a “Career
Planning Sheet” as a means of communication in assisting
subordinates in their career planning efforts.

Promoting Work-Life Balance
We are working to improve the lives of our workers both athome and in the workplace, as we believe a fulfilling life inboth these locations contributes to a working environment
where employees can achieve self-fulfillment.
Reducing Working Hours Through Improved
Operational Efficiency and Time Management• Reduce use of outside labor through the implementationof operational improvements• Establishment of a set day once a week where workers
leave at a specified time•S etting specified days when all employees use paid time off• Creation of an hourly paid leave system
Childcare Support System
CKD has created a system for childcare leave that is open
to all our employees. We have also established a system
where workers can be exempt from overtime work and asystem in which employees can work shorter hours until
their child reaches their fourth year in elementary school.
CKD is creating a working environment in which our female
employees can give birth with peace of mind, and wheremale and female employees raising their children canbalance their work and home responsibilities.
Nursing Care Support System
We have also created an environment in which employees
taking care of family members at home can balance theirwork and home responsibilities. In general, CKD
employees may take leave for up to one year to care for
their spouses and children, the parents of either theemployee or their spouse, as well as grandchildren,
siblings or grandparents with whom they are living withand for whom they are providing care.

Creating a Corporate Culture That Puts Faith in Human Resources
Kazuhide Okada, Executive Officer, General Manager of the Personnel Department
The CKD Group had 4,582 employees, including those overseas, as of March 31, 2019.
Under the CKD flag, these employees of various nationalities are focused on improving theirindividual skills, technical abilities and productivity while providing high added-value
products and services to our customers. In order to meet the growing needs of ourcustomers as well as support the work-life balance of our employees, CKD is actively
implementing workstyle reforms and pledges to maintain its efforts to build a corporate
culture that places faith in human resources.

36

CKD Report 2019

Promoting Diversity
CKD is promoting a workforce that makes the best use ofits diversity and does not discriminate on the basis ofgender, nationality, or age.
Measures Aimed at Empowering Women
We believe the creation of an environment in which
women can play an active role and fully demonstrate theirabilities will contribute to a workplace where every
employee can provide their best contribution.
With this in mind, we opened a daycare center at the Head
Office and Komaki Plant location in April 2018. We alsoestablished at the same time a system that provides
support to employees working in areas where daycare is
not available for their child in non-licensed daycare centers.
Promoting the Active Participation of Foreign Employees
In order to further promote diversity and globalization, theCKD Group is actively hiring foreign employees, including
35 foreign nationals employed in Japan. We are also
actively engaged in the Technical Intern Training Program,and as of March 31, 2019, accepted 198 technical interntrainees, mainly from China, the Philippines, and Indonesia.
Broadening the Re-employment System
We broadened our system for re-employing retired
employees in April 2012. With the goal of increasing thenumber of options available for workers after they reached
the retirement age of 60, we established a lifetime
employment program allowing employees to continue
working regardless of their age while simultaneously
maintaining our existing re-employment system.

Human Resources Development
Bolstering our efforts to allow our diverse employees toplay an active role and make the most of their abilities.
Education and Training
Using a level-specified system for all employees, we areproviding educational programs according to eachworker’s role in the Company and educational support for
self-development in line with that worker’s particularbusiness. Moreover, each department engages inprograms and initiatives designed to improve the skills of
their employees and the environment in which they work.
System for Overseas Trainees
We have established an overseas trainee system allowing
the exchange of employees for training. The fostering of a
global workforce and the promotion of enhanced
understanding over how the businesses work is
contributing to improvements in our business.
Skill Training Facility
We launched a skill training dojo (facility) in fiscal 2016 withthe aim of teaching employees how to best use measuring
equipment and machine tools for metals processing. In
the parts processing department, the goal is to improve

the skill level of young employees and to further improve
the skill level of processing by passing on the skill level ofsenior employees.
In-house Language Courses
CKD conducts in-house language learning courses tosupport the language skills of our employees, somethingnecessary as our business becomes increasingly
globalized. In addition, we offer opportunities for further
self-development by holding language learning seminars
and providing support for external courses andcorrespondence learning.

Occupational Safety and HealthWith the goal of achieving zero accidents, we are focusedon creating a “safety first” corporate culture, including
through the implementation of safety and health activities
in which all Company employees participate.
Basic Philosophy
We put safety first and follow correct procedures inmanufacturing operations.
Maintaining a safe and healthy workplace allows us toprovide products that our customers can use with peaceof mind.
Policies
1. We will maintain healthy minds and bodies.
2. W e will make safety a priority and raise safety
awareness among all employees.
3. We will comply with all laws, internal rules and specified
work procedures.
4. We will work to predict and avoid risks.
5. We will produce safe and secure products.

Promoting Health Management
We believe the health of our employees is a key issue formanagement, and we are working accordingly to improvehealth awareness among the employees and create aworking environment conducive to healthy minds and bodies.
The CKD Health Management Declaration
We believe the health of our employees is a key issue formanagement and in cooperation with health insurance
societies and labor unions, we are working to improvehealth awareness among the employees, building aworking environment conducive to healthy minds andbodies, and promoting “health management.”
Key Initiatives
1. Work-life balance(workstyle reforms, management of time spent working)
2. Prevention of lifestyle-related diseases(improving diet, sleep, exercise habits, preventing
smoking and passive smoking)
3. Creating a comfortable working environment(promoting mental health, improving the working
environment, supporting for balancing treatment and work)
CKD Report 201937

ESG Information

Quality Management System
Focused on manufacturing products of even higher quality
With the goal of more efficiently and effectively supplying products and services that satisfy our customers,
we have made a commitment to continually improve product quality and environmental management
practices throughout the company. In line with this commitment, we have established annual quality andenvironmental policies and promoted their awareness not only within CKD but also among those working with
the Company.

Our product quality and environmental
policies focus on more efficiently and
Policyeffectively supplying products and services
that satisfy our customers. Accordingly, we
have established the following policies and remaincommitted to continuously improving the quality
management system throughout the Company.

ISO 9001, ISO 14001 Certification[Quality]
1. We will conduct activities aimed at achieving zerocomplaints and zero product defects.
2. We will build an innovative and global structure that:a) Improves the overseas production and sales ratiosb) Identifies optimal quality and boosts product qualityc) Improves cost competitivenessd) Enhances productivity

CKD Nikki Denso Co., Ltd.

Our policy on quality centers on quality targets aimed atpreventing defects, and sustained improvements througha focus on productivity, cost competitiveness, quality, andoverseas operations.
Our ongoing efforts to enhance quality include ISO
9001-based quality management, and evaluating
operational conditions through internal audits andmanagement reviews twice a year. Moreover, allemployees, including thoseat overseas subsidiaries,
participate in efforts aimed
at raising quality awarenesseach year in November,which we have selected as
our month to focus on
quality.

CertificationCKD CorporationCKD THAI CORPORATION LTD.
CKD (China) Corporation

Initiatives

Certification Date

ISO 9001

Jun. 24, 1994

ISO 14001

Dec. 8, 2000

ISO 9001
ISO 14001
ISO 9001
ISO 14001
ISO 9001

Jan. 14, 2004
Jan. 4, 2009
Mar. 16, 2018

Case Study a: Implementing Own
Process Completion Activities

Don’t create or continue to make defects,
and don’t allow defects to move to postprocessing
With the aim of zero complaints and zero defects, we arepromoting a quality policy that includes own-processcompletion*1 activities.
We are continuously engaged in a variety of activities
aimed at ensuring own-process completion becomes
deeply rooted, focusing on following established guidance,with a key theme of not creating or continuing to makedefects, and not allowing defects to move to postprocessing.
The main activities focus on improvements to theorganization as a whole, including on-site education for
managers and supervisors in regard to the importance of
own-process completion.
As a more specific activity within the organization, we
launched Challenge 1000*2 from fiscal 2016 as a mediumterm plan aimed at reducing the Company’s process

Quality andEnvironmental Policies

ISO Certification for CKDGroup Companies inJapan and Overseas

38

CKD Report 2019

Guidance provided on location at the Challenge 1000

defect rate. Efforts include on the-job training (OJT) for
leaders in own process completion and improvements
through process failure QC stories. These activities arebeing carried out not only in domestic plants, but also inoverseas production bases, with a focus on improving
plant capabilities so that consumers around the world canuse our products with confidence and peace of mind.
*1 Own-process completion: Centers on the idea that a manufacturer can guarantee
the product quality of items produced in-house through the incorporation of machine
and line quality measures.
*2 Challenge1000: CKD has established a policy of designating the mass production
line at a plant with a high defect rate as a priority line, and set a defect rate reduction
target of 1,000ppm (0.1%). The idea is for all departments to work together to makecontinuous improvements, and through these activities provide OJT for own processcompletion and improve the quality control process (QC story).

Case Study b: Using QC Testing to Improve Skills
Raising quality awareness on a companywide basis
through QC certification
W i t h t h e g o a l o f b o o s t i n g q u a l i t y a w a re n e s scompanywide, we launched activities promoting QC
testing in fiscal 2010 and over the nine years through fiscal
2018, 1,398 people had taken and passed the exam,including not only those working in technology,
production, and purchasing, but also those focused insales and working in the head office. One positive result ofmany people taking the exam was an increased basic
knowledge of quality and the formation of a common
language, which has contributed to ongoing improvements
and effective management. QC certification exams areplanned each year as part of the company’s training plan,and have become entrenched on a sustained basis at acompanywide level.
We are also engaged in activities designed to contribute tothose taking the exam to successfully pass it, including
seminars conducted by an in-house instructor being held
immediately before the exam.

Number of people passing the QC exam
(No. of people)
1,500
49
1,200

1,238

41
35

900
24
600
13

1,036
842

0

1,129

54
1,398

(%)
60
50
40
30

711

495

300
2

51

54

20
10

258
33

0

2010 2011 2012 2013 2014 2015 2016 2017 2018 (FY)

L Cumulative (Left axis)

L Passage rate (Right axis)

Case Study c: Efforts during Quality MonthPutting quality first in the provision of products
and service
November is “Quality Month” at CKD, with all employees
participating in related activities, which include quality
month messages from the Company, executive QC
patrols, reports and evaluations on quality-related
activities, and the creation of quality slogans, with the bestof these being recognized with awards.
Quality Month includes national events, and our checks on
progress toward meeting quality targets and daily
improvement activities not only raise awareness, but allow
the company to recognize successful efforts and improve
on-site operations.
With the goal of deepening quality awareness, we also
communicate our ideas on quality to employees both inJapan and overseas through Quality Month messages.
Finally, the company president and executives
participate in QC
patrols, demonstrating
their commitment toquality by directly
observing quality
conditions at thecompany’s production
and manufacturing
QC Patrol
facilities.

Case Study d: Quality Awareness Activities
for Suppliers
Quality policy briefings and quality improvement­activities
As part of Quality Month, the Company holds briefings for
its major suppliers. In addition to explaining current quality
policy details and reporting on the state of quality over the
past year, the Quality Assurance Department provides an
explanation on the importance of modification control*3.
We conduct a survey after the briefing, focusing on thequality control status of each supplier and explanations
that have been
provided to secondary
suppliers. We also
conduct follow-up
activities to ensure theimplementation ofcontent provided
during the briefings.
*3 Modification Control refers to efforts aimed at minimizing risk of defects in products
delivered to customers as the company or supplier makes shifts in manufacturingmethods, materials, or machinery.

CKD Report 201939

ESG Information

Environmental Management System
Living in harmony with the environment
CKD is engaged in companywide efforts to improve the environment, including efforts in regard to pollution andin ensuring compliance with product-based environmental regulations, such as the European RoHS Directive.
We recognize that the realization of a low-carbon society is indispensable to the needs of the international
community, and believe that not only can business be conducted while maintaining the environment in a
beautiful state, but that the environmental activities undertaken by each of our employees can produce
significant positive results. CKD will continue to contribute to the preservation of the environment by developing
and supplying to our customers environmentally friendly products that comply with relevant laws andregulations thanks to our years of experience in automation and fluid control technologies.

We have established our environmental
policies in line with our commitment to
Policyensure that CKD business activities,
products, and services have an appropriate
environmental impact and contribute to the prevention andreduction of pollution.
[Environment]
1. We will promote the development and expanded
sales of environmentally friendly products.
2. We will clarify and comply with all environmental
laws and regulations, while working to prevent
pollution and CO2 emissions, including by thoseworking at CKD in their social life.
a) We will promote the conservation of energy andresources and build energy-saving production linesb) We will reduce environmental pollutantsc) We will reduce waste
We are developing and expanding sales of environmentallyfriendly products, focusing not only on the conservation ofenergy and resources, but also on the environmental impactof the product throughout its life cycle. While maintaining
compliance with all environmental laws and regulations, weare also working to reduce our environmental impact asmuch as possible by conducting our business in recognitionof our social responsibilities and continually striving to
reduce CO2 emissions and pollution.

Structure

CKD
Management

Companywide efforts to reduce ourenvironmental impact.

Environmental
Management
Committee

Head Office and Plant
Head Office Staff
Sales and Marketing Division
Automatic Machinery Business Division
Components Business Division
Kasugai Plant
Inuyama Plant
Yokkaichi Plant
Tohoku Plant

Environmental Regulations and Compliance
There are a number of environmental laws and regulations
that apply to CKD operations, including the Air Pollution
Control Law, the Water Pollution Control Law, and the
Waste Disposal and Public Cleansing Act. In addition tocomplying with these laws and regulations, we continue towork on improving the environment.

Environmental targets and results
TargetResultDevelop and release environmentally Established annual development and sales targets. Achievement ratefriendly products in line with our standards in fiscal 2018 was 87%.
Develop and expand Expand sales of products with low Targeting a 10% year-on-year increase. Achievement rate in fiscal
sales of products with environmental impacts
2018 was 100%.
low environmental
Collect requests from customers for
impacts
improvements in products with low Established sales division targets. Achievement rate in fiscal 2018environmental impacts, and propose was 259%.
development and improvement plans
Accumulate data related to chemical
Reduce environmental
Promoting the collection of substance data in order to comply with
substances within products in line withcustomer requests.
pollutants
REACH regulations
Targeting 1% reduction in energy consumption per unit. While energy
Promote theconsumption volume increased 0.2% compared to the previous fiscal
Improve infrastructure and reduce energy
year in fiscal 2018, energy consumption per unit was down 1.1%.
conservation of
consumption
We achieved our target in reducing energy consumption per unit byenergy and resources
an average of 3.6% each year between fiscal 2014 and fiscal 2018.

40

CKD Report 2019

Initiatives Aimed at Combatting Global Warming
Targeting a reduction in CO2 emissions intensity by enacting
continuous improvement activities, including the introductionof energy-saving equipment and the construction ofenergy-saving production lines.
L CO2 emissions volume increased 15% compared tofiscal 2013 (3,631 tCO2), but decreased per unit ofsales by 19% over the same period.

CO2 emissions
(tCO2/millions of yen)
0.50
(tCO2)
30,00025,00024,59725,29520132014

24,147

25,79028,5420.25

28,2280.00

20,00015,00010,000Note: Domestic plants and sales offices

5,000
0

2015

2016

2017

2018 (FY)L Emissions per unit of sales (Right axis)

L L CO2 emissions (Left axis)

Initiatives Aimed at Reducing Industrial Waste
CKD is working to reduce and recycle waste, including bymanaging the separation, discharge, storage and consigned
processing of any waste generated at the company’splants.
L Industrial waste volume increased 28% compared tofiscal 2013 (266 t), but decreased per unit of sales by
10% over the same period.
Note: Domestic plants

Industrial waste volume
(t/millions of yen)
0.020

(t)

0.015

1,500
1,200
900

951

1,077

1,015

1,050

1,128

1,216

0.010
0.005
0.000

600
300
0

2013

2014

2015

L L Industrial waste volume (Left axis)

2016
2017
2018 (FY)L Emissions per unit of sales (Right axis)

Initiatives Aimed at Reducing Water Consumption
CKD is promoting the effective use of water resources at
its plants, by working to reduce overall water use andimprove the processes in which it is used.
L Water use increased 13% compared to fiscal 2013
(44,017 m3), but decreased per unit of sales by 20%
over the same period.
Note: Domestic plants

Water usage
(m3/millions of yen)
6.0
4.0
(m3)
400,000

337,605

300,000

308,587

335,936

329,410

2015

2016

355,365

381,6222.0
0.0

200,000
100,000
0

2013

2014

L L Water usage (Left axis)

2017

2018 (FY)L Emissions per unit of sales (Right axis)

Environment-related Capex
The figure to the right shows capital
expenditures and related details forthe four domestic plants targeted forenvironmental conservation
improvements. Investment amounts
are focused primarily on equipment
expenditures and do not include
costs such as personnel expenses.

FiscalYear

Investment
Amount(millions of yen)

2014

253

2015

310

2016

111

2017

111

2018

314

Details
Energy source conversion (from heavy oil, LP gas to City gas)
Updating to highly efficient air conditioning equipment
Updating to highly efficient air conditioning equipment
Introduction of cogeneration equipment
Improving operational methods for air conditioning equipment
Improving operational methods for power control equipment
Shift to LED lighting
Introduction of water recycling equipment
Updating compressor equipment
Updating to highly efficient air conditioning equipment
Introduction of cogeneration equipment
Shift to LED lighting
Updating compressor equipment

CKD Report 201941

ESG Information

Local Society
CKD aims to be an “open” company that can contribute to society and operate inharmony with local society.
Our policy is based on “contributions to environmental preservation,” “contributions to the nurturing of thenext generation,” and “contributions to social and cultural development,” and since the Great East Japan
Earthquake in 2011, CKD has been a continuous supporter of those impacted by the disaster. Together withlocal society both in Japan and overseas, we will continue to strive toward building a sustainable society.

As a good corporate citizen, we value
engagement with local communities,
promote social contribution activities, andstrive to play our part in creating an affluent
society. (Based on the Corporate Philosophy, Corporate
Commitment, and Standards of Conduct)

Basic
Policies

Courses of action

Contributions toenvironmental
preservation

Creating a System Allowing Time off
for Volunteer Activities
With the goal of supporting employees in their social
contribution activities, CKD created a system allowing 3-5days off per year for volunteer-related activities.
This allows each employee to contribute to society in anarea in which they feel familiar, with possible fields foraction including welfare activities, disaster relief andrecovery efforts, and activities aimed at preserving natural
habitats.

Contributing to the Preservationof the Environment
CKD forestation activities

Contributions
to socialand culturaldevelopment

Contributions
to the nurturingof the next
generation

CSR Funding

Initiatives

With the aim of contributing to society, CKD
launched the CSR Fund in June 2006.
In fiscal 2018, we provided active support to children
impacted by the 2011 Great East Japan Earthquake anddonated to artistic and sports organizations.
Other

2%
Support to areasand people impacted
by disasters

34%

Preservation of
the environment

16%
Nurturing thenext generation

7%

Community
events1%

42

Medical andwelfareArtistic and sports
organizations

3%

37%

CKD Report 2019

CKD employees and theirfamilies participate involunteer activities topreserve forest areas in the
Kaisho Forest area of Seto
City, Aichi Prefecture. This
area has volunteer activities
throughout the year, including pruning and trimming,
maintaining the trees and bushes around the viewing area,and preserving the promenade.
Clean-up activity around the Oyama RiverCKD sponsors the Oyama
River clean-up activity, inwhich employees and local
residents work together,every September. The effort
serves to revitalize the areaaround the Oyama River thatruns through Komaki City, Aichi Prefecture, where theCompany’s head office and factory are located, andcontributes to the preservation of a rich environmental area.
Clean-up activity in the Owari Pedestrian
Parkway Area
CKD every month conducts clean-up activities in the
Owari Pedestrian Parkway Area, which is located adjacentto the Inuyama Plant. Related activities include cleaning of
the park and the multi-purpose area along the pathway,
which is used as a venue for dancing to celebrate the
O-Bon holidays every summer.

Nurturing the Next Generation
Teaching science through manufacturing(monozukuri )CKD sponsors a scienceclass for elementary school
students in the area aroundthe Komaki facility, where
the head office is located.
Noting that children are
becoming increasingly
distanced from science, our goal is to increase theirinterest in science and nurture those who will be theleaders in the years ahead.
Practical training for those studying pharmaceuticals
CKD also conducts practical training for pharmacy
students in their fifth year of study. The training centers of
the theme of deepening knowledge related to PTP* sheets,
including how to operate the PTP for pharmaceuticals
packaging machines and how PTP sheets are
manufactured.
* PTP stands for “Press Through Package”, where medicine can be taken out bypressing it through the enclosing package material.

PTP SheetSponsoring Science Inkare
CKD is a sponsor of Science
Inkare, which supports theindependent research of
students. In fiscal 2018, oneof 100 student presentations
from around Japan was
selected to receive the CKDaward.

Efforts aimed at promoting blood donations
CKD has conducted blood drives since 2006. In fiscal
2018, 253 people took part.
Table for Two
Table for Two is a project that sends meals to children in
Africa, funded through a donation of ¥20 per meal at theCompany’s cafeteria. Cafeterias at four domestic CKD
plants take part in the program.
Cooperating with the “Kodomo 110-ban no ie” program
As part of the Company’s commitment to the safety ofchildren, CKD cooperates with the “Kodomo 110-ban noie” program, which is a network of safe houses children
can run to during an emergency, including to findprotection from a suspicious stranger.

Social Contributions Overseas
Efforts to preserve the environment in ChinaCKD China participates in efforts to preserve theenvironment in that country in cooperation with companies
located around the plant. Some of the company’s efforts
include promoting eco-activities and cleaning up refusearound local roads.
Efforts to preserve the environment in Thailand
CKD Thailand employees
have participated in coral
reef preservation activities,
which include planting coral,at the Sattahip Naval Base.

Efforts to preserve the environment in the USCKD USA participates in the Christmas tree decorating
event at the Brookfield Zoo in Chicago, Illinois. A portion of
the participation fee is donated to fund the protection of
wildlife and forests. The company’s social contribution
efforts also include participation in Toys for Tots, which
provides Christmas presents for underprivileged children.

Contributing to Social and Cultural Development
Eco-cap and used stamp collection activities
CKD is involved in the collection of PET bottle caps andused stamps. The collected caps are sold to recycling
companies, with the profits donated to provide vaccines tochildren around the world. Used stamps are donated toorganizations providing medical support overseas or soldto collectors, with gains of sales used to fund activities.

CKD Report 201943

Financial/Corporate Data

Financial/Non-Financial Highlights
Earnings

115,665 million
Operating income ratio 4.7%
Net sales ¥77.42

Net income per share (EPS) ¥(¥ million)
120,000

90,000115,700

83,37988,117

115,665

(%)
20

(¥)
160

15

120

147.6594,012112.3896.25
10.8

60,000
10.0

10.2

9.2

4.7

30,000
8,363
0

2015

2016

80

5

40

0

0

87.99
77.42

12,472

9,580

8,107

10

5,429

2017

2018

2019

2015

2016

2017

2018

2019

(Fiscal year ended March)(Fiscal year ended March)
L Net sales (Left axis) L Operating income (Left axis)
L Operating income ratio (Right axis)

Corporate value
ROE

Financial foundation

6.0%

Shareholders’ equity ratio

(%)
16

58.6%

(%)
80
68.9

68.3

66.7

12.1
12

10.1

9.8

61.1

58.6

2018

2019

60

8.3
8

40
6.6

4

6.0

7.7

6.9
5.7

20
3.6

0

2015

2016

2017

2018

2019

0

2015

2016

2017

(Fiscal year ended March)
L ROE(Fiscal year ended March)

L ROA

Research and development

Cash flow

3,637 million

Research and development expenses ¥(¥ million)
5,000(17,121) million

Free cash flow ¥(¥ million)
15,000

4,330
4,000
3,348
3,000

2,927

10,163
3,637

7,500

2,857

8,027
6,226
1,471

6,081

5,542

1,844

0
-1,7302,000-7,500

1,000

0

2015

2016

2017

2018

2019

(Fiscal year ended March)-15,000-4,7552015-6,1832016

CKD Report 2019-7,27320172018-17,1212019-14,867(Fiscal year ended March)
L Cash flows from operating activities
L Free cash flow

44

-2,254-4,081

L Cash flows from investing activities

Diversity

Employees

Ratio of female workers in managerial positions*

0.6%

(%)
0.8

40.1%

(No.)(%)
5,000
60
4,582
4,284
50
4,000
3,719
3,594
3,294
40
41.3
41.0
40.6
3,000
40.1

0.6

0.6

Ratio of overseas employees

36.1

0.4

0.3

30

2,000
20

0.2

1,000

0

0

0

0

2015

2016

2017

2018

2019

10

0

2015

2016

2017

(Fiscal year ended March)* CKD Corporation employees as of March 31

2019

0

(Fiscal year ended March)
L Number of employees (Left axis)

Diversity

2018

L Ratio of overseas employees (Right axis)

Labor health and safety

Ratio of disabled employees

2.21%

Number of overtime hours worked

(%)
3.00

58,047 hours(Hours)80,00069,9732.50
60,000
2.00

2.13

2.22

2.22

2.21

2.11

58,047

57,12851,07948,20842,6821.50

40,0001.00
20,000
0.50
0

2015

2016

2017

2018

2019

0

2015

2016

2017

2018

(Fiscal year ended March)

Environment

Human resources

Energy usage volume

14,786 crude oil equivalent kL(Crude oil equivalent kL)
16,00012,00012,4102019(Fiscal year ended March)

86,929,000

Training costs ¥(¥ thousand)

14,752

14,78686,92990,00078,535

13,311
12,25860,00048,75553,417

58,8348,000
30,000
4,000

0

2015

2016

2017

2018

2019

(Fiscal year ended March)

0

2015

2016

2017

2018

2019
(Fiscal year ended March)

Note: Scope of aggregation: Domestic plants, sales offices

CKD Report 201945

Financial/Corporate Data

11-Year Financial Summary

Medium-Term
Management Plan
(Unit)NEW CKD 2012

2009

2010

2011

2012

Business results
Net sales(¥ million)

68,17550,03572,02072,804Gross profit(¥ million)

15,796

11,421

20,657

19,655

Selling, general and administrative expenses(¥ million)

13,96911,087

13,154

13,588Operating income(¥ million)

1,826

333

7,502

6,067

Ordinary income(¥ million)

872

711

7,528

6,213

Net income attributable to owners of parent(¥ million)(2,849)

1,494

4,577

3,741

Cash flows from operating activities(¥ million)

2,183

7,775

4,048

3,775

Cash flows from investing activities(¥ million)(2,276)(831)(1,048)(3,020)Cash flows from financing activities(¥ million)

1,312(5,838)(766)(2,450)Free cash flows(¥ million)

(92)

6,944

2,999

754

Total assets(¥ million)

62,80262,86972,17170,079Net assets(¥ million)

39,594

41,48045,33548,322

Cash and cash equivalents(¥ million)

4,458

5,581

7,728

5,961

Interest bearing debt(¥ million)

11,281

6,012

5,851

4,040

Depreciation(¥ million)

3,314

2,918

2,639

2,769

Capital investment(¥ million)

1,879

597

2,180

2,963

Research and development expense(¥ million)

2,149

1,731

2,245

2,151

Net income per share (EPS)(¥)(45.28)

24.04

73.40

58.96

Dividends per share

(¥)

16

6

14

12

Net assets per share (BPS)(¥)

636.90667.24714.46761.54

Automatic machinery business(¥ million)

16,731

11,967

13,061

14,762Components business(¥ million)

51,44338,06858,95958,041

21.9

15.8

20.6

20.3

Cash flow

Financial position

Investment

Per share information

Key performance indicators
Sales by products

Ratio of overseas sales%

Sales by areasJapan(¥ million)

53,212

42,12257,15558,043

Rest of Asia(¥ million)

13,305

6,907

13,08012,712Other(¥ million)

1,658

1,006

1,785

2,047

ROE

%

(6.7)

3.7

10.5

8.0

ROA

%

(4.1)

2.4

6.8

5.3

Shareholders’ equity ratio

%

63.0

66.0

62.8

69.0

Note: Accounting year figures have been revised for the accounting year ended on March 31, 2018 to reflect changes in accounting policies from April 1, 2018.

46

CKD Report 2019

Long-term vision
GLOBAL CKD 2015

10-Year Vision
Challenge CKD 2018

Build-up CKD 2021
(Fiscal year ended March)

2013

2014

2015

2016

2017

2018

2019

65,03175,491

83,37988,117

94,012

115,700

115,665

17,022

23,151

25,43926,73428,72735,83528,51013,77815,26817,076

18,627

19,14623,36323,081

3,244

7,883

8,363

8,107

9,580

12,472

5,429

3,517

8,136

8,735

8,094

9,771

12,469

5,425

2,452

5,456

6,010

5,459

6,958

9,142

4,793

7,008

9,754

6,226

8,027

10,163

5,542(2,254)(5,017)(6,224)(4,755)(6,183)(4,081)(7,273)(14,867)(57)(2,330)618(3,329)(2,505)2,559

14,374

1,990

3,530

1,471

1,844

6,081

(1,730)(17,121)71,742

86,71196,01896,412

106,361

130,887

136,961

50,852

57,71265,55566,41970,95780,05880,444

8,180

9,831

12,29010,342

13,905

14,79912,028

5,070

3,446

5,411

4,391

3,602

11,684

28,627

2,619

2,485

3,188

4,060

3,964

4,230

5,173

2,710

5,800

5,454

7,801

4,864

9,422

14,843

2,336

2,709

2,927

2,857

3,348

4,330

3,637

38.99

87.36

96.25

87.99

112.38147.65

77.42

10

18

24

26

30

37

28

814.25924.091,049.70

1,072.72

1,146.02

1,291.26

1,296.94

14,202

15,113

15,92016,954

18,38016,344

16,02750,82860,37767,45871,16375,631

99,355

99,638

20.8

22.6

27.6

29.7

25.5

27.8

26.9

51,49958,46160,352

61,90770,046

83,51884,515

11,966

14,815

20,455

22,46920,772

28,52927,253

1,565

2,214

2,571

3,741

3,193

3,652

3,897

4.9

10.1

9.8

8.3

10.1

12.1

6.0

3.5

6.9

6.6

5.7

6.9

7.7

3.6

70.9

66.6

68.3

68.9

66.7

61.1

58.6

CKD Report 201947

Financial/Corporate Data

Share Information
Share price trend
Share price (¥)
3,000
2,500
2,000
1,500
1,000
500
0


Trading volume (1,000 shares)
20,00016,00012,000
8,000
4,000
0

2008/3

2009/3

2010/3

2011/3

2012/3

2013/3

Stock status (As of March 31, 2019)
233,000,000 shares

Total number of shares outstanding

68,909,449 shares

Number of shareholders

15,114

80

10.15
1.42
10.18

18.44

17.69

24.11

29.23

26.93

32.20

24.52

2017

31.33

2018

29.76

2019

CKD Report 20192019/3

Dividends (¥)

Dividend payout ratio (%)

28

36.2

2018

37

25.1

2017

30

26.7

2016

26

29.5

2015

24

24.9

2014

18

20.6

2013

10

25.6

2012

12

20.4

2011

14

19.1

2010

6

25.0

2009

16

  —

2008

22

25.9

Between
1,000-5,000 units

0.19%
L Treasury stock
L Securities
companies
L General
corporations
L Individual
shareholders
L Foreign
corporations
L Financial
institutions

0.27%

0.01%
3.76%

15,114

Between
1-5 units57.89%

Between500-1,000 units

0.19%

Less than 1 unit

Number of
Shareholders(As of March 31, 2019)

Between100-500 units

1.38%

Between50-100 units

2.08%
Between
5-10 units

12.09%
48

2018/3

2019

Treasury stock

40

0

2017/3More than 5,000 units

10.14
1.35
10.12

60

20

2016/3

Shareholder ratio by number shares held
(Unit: 100 shares)

Shareholder status (As of March 31)
10.15
2.09
10.19

2015/3

Dividends/dividend payout ratio (Fiscal year ended March)

Total number of authorized shares

(%)
100

2014/3

Between
10-50 units

22.14%

Corporate Data
Corporate profile
Company nameCKD Corporation

Establishment

April 2, 1943

Paid-in capital¥11,016 million

Lines ofBusiness

Consolidated number
4,582 (March 31, 2019)of employees
Net sales¥115.7 billion (March 31, 2019)

Listed onFirst Section of the Tokyo Stock Exchange
and Nagoya Stock Exchange

Securities code

6407

Development, manufacture, sale, and export ofmachinery that includes automatic machinery,labor-saving components, pneumatic control
components, pneumatic auxiliary devices,drive components, pneumatic auxiliarycomponents, fine system components,­
fluid ­control components

Headquarters Address: 2-250 Ouji, Komaki City,
Aichi 485-8551, Japan
Telephone: +81 (568) 77-1111

Key overseas business facilities and overseas subsidiaries
EUROPECKD Europe B.V.
CKD Corporation
Europe BranchASIA

NORTH AMERICACKD (China) Corporation
CKD (Shanghai) CorporationCKD KOREACORPORATIONTAIWAN CKDCORPORATIONM-CKD PRECISION
SDN. BHD.
CKD THAICORPORATION LTD.

CKD Singapore Pte. Ltd.
CKD Corporation
Branch Office(Asia Pacific)

CKD USA
CorporationCKD MEXICO, S.
de R.L. de C.V.

CKD Vietnam
Engineering Co., Ltd.
PT CKDMANUFACTURING
INDONESIAPT CKD TRADINGINDONESIACKD India Private Limited

L Production bases
L Sales offices

Editorial policy
CKD Report 2019 is an integrated report that the CKD Group has published for the first time in order to contribute to engagement with its
various stakeholders. The report has been edited in a manner to facilitate understanding of CKD’s business profile, management strategies,
and growth strategies.
Organizations covered in the report: In principle consolidated CKD Group companies
Scope of the report: In principle from April 1, 2018 to March 31, 2019 but includes certain periods before and after in order to provide
more detailed information.
CKD Report 201949

2-250 Ouji, Komaki, Aichi 485-8551, Japan
Telephone: +81 (568) 77-1111
Facsimile: +81 (568) 77-1123
URL: https://www.ckd.co.jp/english/

CC-1477A 2019.12