Kurita Water Industries Ltd.

FY2018
Shareholder Relations Meeting(Securities code: 6370)

February - March 2019

Contents
Ⅰ

Kurita Group Overview

P1-5

Ⅱ

Medium-Term Management Plan MVP-22

P6-9

Ⅲ

Corporate Governance Initiatives of Kurita

P10-23(Reference)

Efforts for Dialogue with Shareholders/Investorsⓒ2018 KURITA WATER INDUSTRIES LTD. All Rights Reserved.

P24

Ⅰ Kurita Group Overview

Company Overview & Shareholder Composition
Company Overview
 Name: Kurita Water Industries Ltd.
 Representative: Michiya Kadota, President
 Date of Establishment : July 13, 1949
 Location: Nakano Central Park East, 10-1,
Nakano 4-chome, Nakano-ku, Tokyo Fiscal Year-end: March 31
 Stock Exchange Listing : First Section of the Tokyo Stock Exchange
 Paid-in Capital: ¥13,450,751,434
 Issued Common Stock : 116,200,694 shares Number of Shareholders : 22,195 (As of September 30, 2018)

Shareholder Composition (Top 10) (as of September 30, 2018)
Rank

Shareholder

Shares (1,000)

Ratio

1

Japan Trustee Services Bank, Ltd. (Trust Account)

8,957

7.70％

2

Nippon Life Insurance Company

5,979

5.14％

3

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

5,679

4.88％

4

Japan Trustee Services Bank, Ltd. (Trust Account 9)

2,571

2.21％

5

Tokio Marine & Nichido Fire Insurance Co., Ltd.

2,155

1.85％

6

Japan Trustee Services Bank, Ltd. (Trust Account 5)

2,109

1.81％

7

MUFG Bank, Ltd.

2,056

1.76％

8

BNYMSANV AS AGENT/CLIENTS LUX UCITS NON
TREATY 1

1,960

1.68％

9

BANK JULIUS BAER AND CO., LTD.

1,748

1.50％

10

STATE STREET BANK AND TRUST CO. 505025

1,614

1.38％

Shareholding Ratio (as of September 30, 2018)
Treasury Stock 3.1%
Individuals
9.8%

Financial
Institutions
34.1％

Securities
Firms
2.3％

Foreigners
43.6％

Other Domestic
Firms
7.1％

Note: In addition to the above, the company has 3,593 thousand shares of treasury stock.
Japan Trustee Services Bank, Ltd. (Trust Account) includes 327 thousand shares of treasury stock for performance-linked stock compensation to directors.
ⓒ2018 KURITA WATER INDUSTRIES LTD. All Rights Reserved.

1

Kurita Group Philosophy System
Systemizing our mission and visions based on the corporate philosophy

Corporate
Philosophy

Core
ValuesCorporate VisionCorporate Philosophy
Study the properties of water, masterthem, and we will create anenvironment in which nature and man
are in harmony

Basic Policy
1. Kurita Group Code of Conduct
2. Corporate Governance Policies
3. Basic Policies for Constructing an Internal
Control System

Corporate Vision(Revised April 2018)“A Creator of unique value to the solutionof water and environment,”
contributing to the realizationof a sustainable society.

4. CSR Policy
5. Kurita Group BCM Policy (BusinessContinuity Management)
6. Kurita Group Business Policyⓒ2018 KURITA WATER INDUSTRIES LTD. All Rights Reserved.

2

CSR Policy
In order for the Kurita Group to continue to grow as it works to realize its
corporate philosophy, CSR has been positioned at the heart ofmanagement strategy
Definition

The Kurita Group’s responsibility for its impacts on society

Objectives

1. Creating and maximizing shared value for the Kurita Group and society
2. Identifying, preventing and mitigating possible adverse impacts by the
Kurita GroupCSR Policy

Provide solutions to issues related to water and the environment,
and fulfill responsibility for the future
Basic themes

Growth opportunity themes

1. Provide highly safe services
and products

4. Solve issues related to water
resources

2. Conduct fair businessactivities

5. Realize sustainable energy use

3. Respect human rights

7. Advance industrial production
technologies

6. Reduce wasteⓒ2018 KURITA WATER INDUSTRIES LTD. All Rights Reserved.

3

Kurita’s Business Domains
Industrial Water/
Groundwater

Water Treatment

Manufacturing Lines
Manufacturing Process Process treatment

Water treatment
system Pre-treatment
 Soft water production
 Pure water production

Power generation
systems

Air conditioning
systems

Refrigeration
Systems

Water Treatment

BoilerBoiler chemicals

 Boiler, vaporizer■ Condenser water treatment

Utilities

Cooling
Tower

Cooling water
treatment chemicals

Ultrapure waterproduction system
 Ultrapure waterproduction

Process treatment
chemicals Cooling water
treatment

Wastewater
Reclamation
Wastewater
reclamation system
RO membrane
treatment chemicals

From factory entrance to exitⓒ2018 KURITA WATER INDUSTRIES LTD. All Rights Reserved.

Wastewater
Treatment
Wastewater
treatment chemicals
Wastewater
treatment system

Industrial
waste

Waterway,
sewagedischarge
4

Changes in Net Sales and Operating Income Margin(billion yen)
260

236.8
204.9 199.7
197.1

14.9
130

12.3

14.0

214.4 214.2
178.5 181.2

14.8

15.0

193.8

180.1 178.1

189.4

15.2
15.0

11.7

10.3
8.4

0

9.3

9.1

9.5

3/2007 3/2008 3/2009 3/2010 3/2011 3/2012 3/2013 3/2014 3/2015 3/2016 3/2017 3/2018(fiscal year–end)

（％）
30.0

█ Net sales0 Operating income marginⓒ2018 KURITA WATER INDUSTRIES LTD. All Rights Reserved.

5

Ⅱ Medium-Term Management Plan
MVP-22

Basic Policy and Priority Measures
Basic Policy
Maximize close relationship with customers by redefining
preconceived ideas and dramatically raising the quality andspeed of our work.

Priority Measures
 Development of CSV Business Enhancement of total solutions

 Rebuilding of plant production
system Creation of new business and thepromotion of innovation

 Strengthening the foundation andpromotion of research anddevelopment

 Establishment of the Group
governance systemⓒ2018 KURITA WATER INDUSTRIES LTD. All Rights Reserved.

6

The Two Pillars
The two pillars of our initiatives are investment in growth andimproved profitability
Electronics
industryfield

Newbusinesses

Energy/infrastructure
field

Overseasbusinessbase

Investment in growth
Ultrapure water supply business
M&A
R&D

Generalindustries
Field

Existing
overseasbusiness

Improved profitability
Review of business portfolio
Providing integrated solutionsⓒ2018 KURITA WATER INDUSTRIES LTD. All Rights Reserved.

7

Management Targets and Required Measures
Management Targets
Measures

Net sales organic growth rate

3 ％ or more

Operating income margin

Return on equity (ROE)15 ％10 ％ or more

Adoption of management using
return on invested capital (ROIC)(1) Expansion of the service contract
business model for sharing
created value(2) Creation of comprehensive
contracts for maintenance andoperations management
originating from major EPC
projects(3) Restructuring and downsizing of
low-margin businesses andassetsⓒ2018 KURITA WATER INDUSTRIES LTD. All Rights Reserved.

8

Acceleration of Investment and Utilization of Capital
Concentrated investment in growth fields,
and efficient and effective use of capital
Utilization of
liabilities
Compressionof assetsSharebuybacks

 Consider implementing after taking into
account demand for funds and share price

Dividends

 Continue dividend increases wheneverpossible

M&A

Operatingcash flow

Sources of funds

Capitalexpenditures

 Utilize for obtaining business basis,
irrespective of whether they are existingor new
 Accelerate investments in ultrapure
water supply business, new businessmodelsUses of fundsⓒ2018 KURITA WATER INDUSTRIES LTD. All Rights Reserved.

9

Corporate Governance Initiatives ofⅢ
KuritaBasic Concept and Basic Policies
Basic Concept

Basic Policies (5 Items)

Corporate Philosophy(1) Ensuring the rights and equality of shareholders

Study the properties of water, master them, andwe will create an environment in which nature andman are in harmony

Establishment of Corporate Governance(2) Appropriate level of cooperation withstakeholders other than shareholders(3) Ensuring appropriate information disclosure andtransparency of information(4) Duties of the Board of Directors and the Audit &Supervisory Board, etc.
(5) Dialogue with shareholders and investors

Purpose Transparent, fair, prompt and decisive decisionmaking
 Highly effective management supervision
Sustainable Growth and Medium- andLong-Term Enhancement of Corporate Value
Respect for the rights and position of
stakeholders and meeting their expectations
Customers

Business
Partners

Employees

Shareholders/
Investors

Local
Communities

Policies (16 Items)
Policies were revised in FY2018 in conjunction withrevision of corporate governance code
Major Changes• Clarified policy on reducing shareholdings
for policy purposes• Clarified selection of a candidate forsuccessor to the president anddevelopment of successor planningmeasuresⓒ2018 KURITA WATER INDUSTRIES LTD. All Rights Reserved.

10

Corporate Governance Structure
Set up a new Successor Planning Committee
Company with the Audit & Supervisory Board
General Meeting of Shareholders

Nomination &Remuneration
Advisory Council
Successor Planning
Committee

Election/
Dismissal

Consultation

Board of Directors
Advisory

ReportingDiscussion/
Reporting

Resolution
Election/
Supervision

Election/
Dismissal

Audit

Audit & Supervisory
Board

Election/
Dismissal
Cooperation

Audit
Cooperation

Business Operations
Reporting

E&S (Environmental &Social) Committee,
Investment Committee andVarious Other Committees

President

Audit report

Executive Committee
Discussion/
ReportingInstructions

Operating
Divisions

Accounting
AuditorMembers of the Audit &Supervisory Board

Cooperation

Internal Auditing
Department

Internal audit
Accounting Audit & Internal Control Auditⓒ2018 KURITA WATER INDUSTRIES LTD. All Rights Reserved.

11

Changes in Dividends and Dividend Payout Ratio
Dividends forecast to rise for 15th consecutive year
（yen）
120

56.1

Rough standard for dividend
payout ratio is an average of
30-50% over five years

100

（％）
60.0

52.4

45.4

50.0

44.3
39.9

80

60

25.1

26.9

25.4

22.5

26.8 26.8

28.4

32.6

30.6

35.7

30.0

20.0

40

20

22

18
0

40.0

3/20053/2006(fiscal year–end)

28
3/2007

32

34

36

38

40

42

44

3/20083/20093/20103/20113/20123/20133/2014

46

48

50

52

54

3/20153/20163/20173/20183/201910.0

0(forecast)█ Dividend per share Dividend payout ratioⓒ2018 KURITA WATER INDUSTRIES LTD. All Rights Reserved.

12Size and makeup of the Board of Directors
The Board of Directors as a whole complements the necessary knowledge,
experience and diversity for overall decision making
 Members: 12 (including 2 independent External Directors)
Name
Koichi Iioka

Water Treatment Chemicals/
Water Treatment Facilities
Japan

Overseas●●

Corporate
Planning

 Term: 1 year

Finance/
Legal affairs
Accounting

Michiya Kadota

●

●

●

Kiyoshi Itou

●

●

●

Takahito Namura●

Toshitaka Kodama●

Yoshio Yamada●

Hirohiko Ejiri●

Toshimi Kobayashi●

Yasuo Suzuki●

Yukihiko Mutou
Tsuguto Moriwaki(External Director)
Ryoko Sugiyama(External Director)

Technology

Other

●
●

●
●

●

●

●
●

●

●
●
●

*1: This chart is based on information contained in Proposal 2 of the Notice of Convocation of the 82nd Ordinary General Meeting of Shareholders.
*2: Technology refers to R&D and manufacturing.

There shall be three or more Directors in total. At least two of these Directors shall beExternal Directors to ensure
the independence and objectivity of the Board of Directors.
ⓒ2018 KURITA WATER INDUSTRIES LTD. All Rights Reserved.

13

Evaluation of the Board of Directors
The effectiveness of the Board of Directors is analyzed
and evaluated to identify the future issues
Implementation Method
Frequency

Once a year

Method- Self-evaluation
Discussion of written survey (withrespondents identified) andtabulated results

Evaluation
Items(1) Board of Directors roles andresponsibilities(2) Collaboration with External
Directors and Members of the
Audit & Supervisory Board(3) Board of Directors composition(4) Board of Directors operation(5) Contributions of individual
directors and Members of the
Audit & Supervisory Board(6) Dialogue with shareholders

Note: The evaluation of the Board of Directors for the period from January to
December 2018 is currently underway.

Evaluation Results(Period Covered: January - December 2017)
 Average of self-evaluations were generally good inall 6 items.
 Of these, evaluations of 4 and 5 were particularlyhigh.
 Evaluations of 1 was relatively low, and evaluations
by External Directors were particularly low.

Issues More in-depth discussion regarding the selection of
successors to directors is necessary.

Measures Various measures relevant to the development andevaluation of successors to directors will beestablished in a systematic manner.
 Information regarding the election, retirement, andevaluation of successors to directors will be
provided to the Nomination and Remuneration
Advisory Council in advance, and the contents ofdeliberation at the Board of Directors meetings
based on the report by the Council will be improved.

ⓒ2018 KURITA WATER INDUSTRIES LTD. All Rights Reserved.

14

Continuous Board of Directors’ Reforms
FY2018 Initiatives

Expected Benefits

Reform Executive Officer system
Management Oversightand Execution• Change employment contracts to commission
contracts• Change to compensation system similar to that for
Directors• Set up Successor Planning Committee

Director Candidate
Selection & Training

Director Compensation

Providing Information andTraining to Directors andMembers of the Audit &Supervisory Board• Improved objectivity in selections
process and transparency inselection• Utilize external organizations• Review requirements for Directors andrequirements for President successor• Systemized training

Review operational performance indicesSeminars by outside instructors
On-site visits by External Directors
External Director participation ininternal committees(April - December 2018)

Enhanced awareness of role as
Executive Officer and improved
operation execution

Achievement of management goals
9 times • Acquisition of new expertise on
management strategy for digital
3 timesbusiness, CSR, etc.
total 11 timesⓒ2018 KURITA WATER INDUSTRIES LTD. All Rights Reserved.

• External Directors' deeper
understanding of the Company's
business and initiatives

15

Independent External Directors
Actively expressing opinions and proposals to Board of Directors
Term & Restrictions on
Holding Concurrent Posts
 One-year term Allowed to serve concurrently at up to three listedcompanies, including Kurita

Activities

Tsuguto Moriwaki

Board ofDirectors
Attendance（2018.4 - 12）

10 11

1967

Joins Kobe Steel, Ltd.

1999

Managing Director of Kobe Steel, Ltd.
President and Representative Director of Kobelco Construction
Machinery Co., Ltd.

2002

Executive Vice President and Representative Director of Kobe
Steel, Ltd.

2004

President and Representative Director of Shinsho Corporation

2010

Adviser to Shinsho Corporation/Retires in 20122015 -

Director of Kurita (present post)

meetings

Board ofDirectors
Attendance（2018.4 - 12）

 Express opinions at Board meetings from a
medium- and long-term perspective andproposals on improving governance, such as
establishing an investment committee

Ryoko Sugiyama

 Discuss issues at the Nomination andRemuneration Advisory Council and theSuccessor Planning Committee

2007

Director of Sugiyama & Kurihara Environmental Consultants, Inc.
(present post)

2010

Professor of Fuji Tokoha University (current Tokoha University)

 Act as observer at internal committee meetings(E&S Committee, Solutions BusinessCommittee, Safety and Hygiene Committee)
and express opinions

2010

External Director and Audit and Supervisory Committee Member,
LECIP Holdings Corporation (present post)

2015

External Director, UACJ Corporation (present post)2017 -

Director of Kurita (present post)

1996

Establishes Sugiyama & Kurihara
Environmental Consultants, Inc.;
Representative Director of Sugiyama & Kurihara
Environmental Consultants, Inc.

ⓒ2018 KURITA WATER INDUSTRIES LTD. All Rights Reserved.

10 11

meetings

16

Effective Functioning ofMembers of the Audit & Supervisory Board
Attendance at Board of Directors meetings and active input
Name

Shiro Hayashi
Kenjiro Kobayashi
External Memberof the Audit &Supervisory
Board

Independent
Officer

Shigekazu Torikai
External Memberof the Audit &Supervisory
Board

Independent
Officer

Attendance(April - December 2018)

Experience, Abilities, ExpertiseHas held various positions of responsibility in R&D
and administrative divisions; possesses substantial
experience and expertise in technology andmanagement issues, and has worked overseas.
Has had a distinguished career in fields separate
from the Kurita Group; possesses highly specialized
expertise in finance, corporate planning, newbusiness development, and a wealth of experience
in international business.
Possesses specialized expertise as a lawyer and awealth of experience and insight into corporate legal
matters.

Board meetings

Audit meetings

11

8

11

9

11 meetings

11 meetings

11 meetings

87

8 meetings

8 meetings

8 meetings

1. Members of the Audit & Supervisory Board attend meetings held by the Board of Directors, Executive
Committee, E&S Committee and other important meetings while auditing Directors’ execution of duties
2. Support for Members of the Audit & Supervisory Board and cooperation with Internal Auditing Department• Head of Audit Office assists administratively to ensure members can properly perform audit workⓒ2018
KURITA WATER
INDUSTRIESwork
LTD. All Rights Reserved.
• Members direct audit staff asnecessaryfor support

17

Composition and Results of Nomination &Remuneration Advisory Council
Council are chaired by External Directors andcomposed of mainly external officers
Members
Candidates for
Director,
Representative
Director, andDirector withspecial title
Nomination

Full-time external member of the Audit &Supervisory Board Full-time member of the Audit & Supervisory
Board President Executive GM, Corporate Planning Division Executive GM, Group Administration Division

Evaluated all candidates

Evaluated candidates formember of the Audit &Supervisory Board

Evaluated Director performance
Discussed appropriateness ofcompensation based on shortterm incentives

Candidates formember of the
Audit &
Supervisory
Board

Remuneration

2 External Directors
Full-time external member of the Audit &Supervisory Board
 President

FY2018 Results

2 External Directors
Full-time external member of the Audit &Supervisory Board
 PresidentBoth Councils are convened once a yearⓒ2018 KURITA WATER INDUSTRIES LTD. All Rights Reserved.

18

Successor Planning
Successor planning is systemized
Selection of successor candidates
Assessment

Recommendation

Planning of successor candidates

Selection

Confirmation

Interview
Assessment

Successor
Planning
Committee

Board ofDirectors

External
Organization

Interview

Review/
Identify areafor
improvement

President

President

Setting
initiatives

Confirmation

Successor
Planning
Committee

Board ofDirectors

Candidates for President
President
Externalorganization

Directors

Executive
SeniorManaging Director
and above

Directors

Candidates for Director

Feedback to candidates,
placement, appointment, etc.

Members of Successor Planning Committee
Issue

Members

Selection of candidates for President

Two External Directors and one fulltime member of the Audit &Supervisory Board

Selection of candidates for Director;
President, Chairman, Executive Senior
Setting initiatives for fostering
Managing Directors, in addition to
successor
candidates
above three membersⓒ2018 KURITA WATER INDUSTRIES LTD. All Rights Reserved.

19

Compensation System for Directors andMembers of the Audit & Supervisory Board
Review director performance evaluation indicators
to aim for achievement of management goals
Paid atretirement(1) Directors (excluding External Directors)

Fixed compensation

Contribution toshareholding
schemePerformancelinked
compensation

Performance-linked
stock compensation

Evaluation Indicators
 Common

Evaluation Indicator▶Consolidated operating income

 President, Executive GM of Corporate Planning, Executive GM of Group Administration ▶ROE
 Executive GM of R&D Division ▶Ratio of projects completed, R&D investment efficiency (consolidated) Profit attributable toowners of parent

 Executive GM of Engineering Division ▶YoY change in consolidated gross profit margin Executive GM of Solution Business Division ▶YoY change in consolidated operating income margin Executive GM of Next Generation Business Division ▶YoY change in division’s consolidated net sales Executive GM of Sales Division ▶YoY growth in division’s consolidated sales and YoY change inconsolidated operating margin(2) External Directors, Members of the Audit & Supervisory Board

Fixed compensationⓒ2018 KURITA WATER INDUSTRIES LTD. All Rights Reserved.

Contribution toshareholding
scheme20

Roles and Achievements of the Investment
Committee
Contributing to efficient discussions at Board of Directors
Roles

Members

Meetings

FY2018 Activity(April - December 2018)

Cases
reviewed

Results(Reference) Investment standard



Review investments and financing to be submitted to the Board of Directors
or the Executive Committee for deliberation



Report results of reviews to Directors and Members of the Audit &Supervisory Board

Chairman

Deputy Executive General Manager of Corporate Planning Division

Members

Executive GM of Group Administration, GM of Planning, GM of
Accounting, GM of Finance, GM of Group General Affairs,
Manager of Group Legal

14
Investment, M&A

9Capex projects

6

Borrowing, funding

3

Corporate establishment, etc.

3

Business sale

1

total

22 projects

Improved discussions at Board of Directors and Executive Committee;
accelerated submission of approval request and enhanced activity
Hurdle rate calculated at: [capital cost (estimated at less than 8% + Risk
premium for each project]ⓒ2018 KURITA WATER INDUSTRIES LTD. All Rights Reserved.

21

Shares owned for Policy Purposes
Shares sold to raise capital efficiency, consistent with
policies in Medium-Term Management Plan In some cases, Kurita Water Industries Ltd. holds listed sharesas shares owned for policy purposes to strengthen business
relationships, etc.

 When holding such shares, the Company makes efforts to

Policyminimize the risk of holding shares owned for policy purpose.
The propriety of holding each individual stock owned for policy
purpose is reviewed at the Board of Directors. Based on the
results, the Company aims to reduce the holding of shares
owned for policy purposes.

Frequency
Review ofholdings

 Once a year and as necessary If the total of the business profits and the dividends received fallStandard

short of expectations for 5 consecutive years Occurrence of a scandal, etc.

FY2017Sales

FY2018(Apr.-Dec.)

 Sold 9 out of 46 stocks

 Sold 15 out of 37 stocks (some were partial sales)ⓒ2018 KURITA WATER INDUSTRIES LTD. All Rights Reserved.

22

Disclosure Policy Revised
Disclosure Policy revisedin tandem with introduction of the Fair Disclosure Rule
Main Changes
1. Clearly stated the purposes of information disclosure
2. Clearly stated the handling of material information subject to the
Fair Disclosure Rule
3. Clearly stated the systems in place to ensure fair information
disclosures

Ensure fair and timely information disclosures to investors in anenvironment where all investors can make transactions with peace ofmind, while also preventing a decline in information disclosure by going
too far to ensure fairness.
ⓒ2018 KURITA WATER INDUSTRIES LTD. All Rights Reserved.

23

(Reference)

Efforts for Dialogue with Shareholders/Investors
New Initiatives in 2018
Produced notice of convocation in color, Added more information(published together with shareholder report; added candidate photos, graphs, etc.)

Provided more English-translated information in notice of convocation

Previous Key Initiatives
Results briefing for institutional investors (four times a year)
Implementation of roadshow overseas (two times a year)
Early forwarding of the notice of convocation

June 1999-

Adoption of ICJ, Inc.’s platform for electronic exercise of voting rights

June 2006-

SR visits

November 2011-

Preparation of the notice of convocation (reference materials) in English

June 2013-

Preparation of English translation of CG report

October 2016-

Quick disclosure prior to notice of convocation

June 2016-ⓒ2018 KURITA WATER INDUSTRIES LTD. All Rights Reserved.

24

Forward-looking Statements
The plans and values contained in this document are decided based on information
available at the present time. They contain risks and uncertainties, and therefore may
differ from actual results.