Showa Sangyo Group

Integrated Report 2023

Maximizing the potential of grainContents

Group Management Philosophy.............................................................

1

Editorial Policy

Chairman’s Message..............................................................................

4

In Integrated Report 2023, we convey our vision andCEO’s Message......................................................................................

6

value creation initiatives based on the Showa Sangyo

Business Overview................................................................................. 12Group’s management philosophy, which is “Contributing to healthy, rich, and varied meals,” to stakeholders
in a way that is easy to understand, with the aim ofValue Creation Story
Thoughts on Value Creation.................................................................... 14
Value Creation Journey........................................................................... 16
Value Creation Case Studies................................................................... 18
Value Creation Process........................................................................... 20

creating better communication, leading to further value
creation. In producing the report, we referenced International Integrated Reporting Framework by the Value
Reporting Foundation (VRF) (now the IFRS Foundation),
Guidance for Integrated Corporate Disclosure andManagement Capital.............................................................................. 22

Company-Investor Dialogue for Collaborative Value

Strengths of a Grain Solution Company.................................................. 24

Creation by Japan’s Ministry of Economy, Trade andMaterialities............................................................................................ 26

Industry, and other guidelines.

Ensuring Safe, Reliable, and Stable Supplies.......................................... 28
Promoting Digitalization.......................................................................... 29

The contents of this report are published on our website
in order to inform even more people.
https://www.showa-sangyo.co.jp/en/ir/

Group Management Philosophy

Management Strategy
Roadmap to Realization of Long-term Vision.......................................... 30

Scope of Reporting

Review of Long-term Vision “SHOWA Next Stage for 2025”................... 32

Showa Sangyo Group (as of March 31, 2023) SpecificMedium-term Management Plan 23-25.................................................. 34

activities are mainly reported for Showa Sangyo Co., Ltd.

Sales Strategy(Message from Manager of Business Management & Sales Division)...... 42

Reporting Period

Financial Strategy (Message from Manager of Corporate Division).......... 44

The report focuses on activities in FY2022 (April 1, 2022

RD&E* Strategy (Message from Manager of Technical Division)............... 46

to March 31, 2023), but some sections of the report

Strategy by Business.............................................................................. 48

cover the latest information, such as the Business Over-

Flour Milling Business......................................................................... 48

view section and the Medium-term Management Plan

Vegetable Oils Business..................................................................... 49

23-25 in the sections on the Long-term Vision.

Contributing to healthy, rich,and varied meals
Group Management Planning System

Starches and Sweeteners Business................................................... 50
Animal Feed Business........................................................................ 51
Other.................................................................................................. 51*Research, Development and Engineering

Sustainability
Sustainability.......................................................................................... 52
Responding to TCFD Recommendations................................................ 54
Reducing Burden on the Environment.................................................... 58
Human Capital Management.................................................................. 60

Group
Management
Philosophy

Contributing to healthy, rich, and varied meals

Stakeholder Engagement....................................................................... 62

Governance
Messages from Outside Directors........................................................... 64
List of Officers........................................................................................ 66

Vision(Long-term Vision)

Next Stage for 2025
See page 30 for details.

Corporate Governance........................................................................... 68
Risk Management................................................................................... 74
Compliance............................................................................................ 75

Data
Corporate Profile.................................................................................... 76
Financial and Non-financial Highlights (11 Years)..................................... 78

SpiritGuiding Principles• Each and every individual will reach their potential and meetthe challenge of Next Stage.
• We will fulfill our corporate social responsibility by acting withintegrity, combining our strengths, and respecting diversity.

Share Information................................................................................... 80

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We arethe Grain Solution Company.

What is “grain” at the Showa Sangyo Group?
The Showa Sangyo Group handles four types of grain:
wheat, soybeans, canola and corn.
We handle the largest volume of grain among
Japanese food manufacturers (Showa Sangyo research).

What is a Grain Solution Company?
The Group delivers an exhaustive range of ingredients that create
a delicious taste in wheat flour, premixes such as tempura batter,
vegetable oils, soy protein, sweeteners, and compound feed
for livestock made from a variety of grains.
We propose solutions for issues in response to the needsof customers and society.
Our mission is to listen to customers and deliver“delicious answers = grain solutions.”
A company that takes advantage of synergies in every process from procurementof grain to production, research and development, and sale of products
to extract solutions from grain.
This is what we do as a Grain Solution Company.

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Chairman’s Message

We will continue
to develop our strength
as “Professionals in Grains.”
Since its founding in 1936, Showa Sangyo has processed wheat, soybeans, canola, corn, and othergrains, which are the bounty of the earth, into such products as wheat flour, premixes, vegetable oils,
and sweeteners, and delivered them to many customers. In the 87 years since then, we have continued to exhaustively study each of these grains, making the Showa Sangyo Group into “Professionals
in Grains” with extensive knowledge of the power and potential contained in every kernel.
The fact that we are a single corporate group that deals in multiple grains makes us uniqueamongst Japan’s many food manufacturers. Our Group is a Grain Solution Company that solves ourcustomers’ food challenges and needs by combining the wide-ranging foods and materials we offer.
The scope of our business is not limited to the food industry, but extends to customers in a wide
range of industries.
As a company that makes our dealing in grain, our livelihood is intertwined with grain. Our strong
desire to not waste a single kernel has led to our 99.9% food recycling rate. Moving forward, we willcontinue to leverage our expertise in grains and work behind the scenes to fulfill our social missionof ensuring the safety, reliability and stable supply of the food that ends up on people’s dinner tables.

ChairmanShowa Sangyo Co., Ltd.

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CEO’s Message

Continuation and Transformation
Toward Our 90th Anniversary
When Showa Sangyo was formulating its Long-term Vision
for FY2025, the year it marks the 90th anniversary of its
founding, I was involved in the formulation of the Long-term
Vision and Medium-term Management Plan as the head of
the Management Planning Dept. I feel a sense of destiny andresponsibility in having assumed the position of CEO at thesame time we start the Medium-term Management Plan thatwill take us to FY2025.
Showa Sangyo Group has long walked the path towards
realizing its founders ideal of “Prosperity Through Agriculture.”* Today, we contribute to healthy, rich, and varied
meals as a Grain Solution Company that leverages a uniquebusiness model of dealing in a wide variety of grain. In ourLong-term Vision, we look beyond this towards our Next
Stage as a Grain Solution Company.
I see my two missions as being the continuation of what
we have built together with our previous CEO and current
Chairman Kazuhiko Niitsuma, as well as taking the lead in
making the transformational changes that will allow its continued growth.

President and CEO
Showa Sangyo Co., Ltd.

The COVID-19 pandemic and other major changes inthe social environment have brought the biggest challenge
facing our Group into sharp relief. The challenge is that
our company deals in many highly volatile commodities
and therefore has a profit structure that is greatly affectedby changes in the business environment. As the domestic
market is expected to shrink in the future due to Japan’s declining and aging population, we must evolve as a company
that can survive over the long term even in this context.
After considering various approaches to address theseissues, in April 2023 we implemented the first fundamental
reorganization of the company since its founding. This wasin an effort to maximize the Group’s strengths as a Grain
Solution Company.

The most notable characteristic of our Group is how
many different food-related businesses we deal in as a single corporate group, including flour milling, oil processing,and starches and sweeteners businesses. No other single
corporate group in Japan deals in as diverse a range offood products as we do. While we may not be the leader
in any one of these businesses, we process a total volume
of multiple grains larger than that of any other company inJapan. In the past, we have aimed to be competitive bytaking advantage of economies of scale at the entrance,such as by leveraging our scale in procurement and R&D.
At the exit, however, sales have been vertically divided andproduct-oriented. This means that our sales strategies andcompetition strategies were compartmentalized in eachbusiness unit. By instead having sales organizations for eachcustomer, we will be able to think about what we can offer
each individual customer from a combination of our Group’s
multiple businesses.
It should also be mentioned that our flour milling, oilprocessing, starches and sweeteners, and other businesses
each had their own customers, and that together they makeus one of the Japan’s largest food manufacturers in termsof total customer base. Our ability to offer a wide range ofsolutions to so many customers is a major strength of ourGroup.
The main purpose of this reorganization is to developthese advantages and strengths that other companies cannot imitate.
On the other hand, making this reorganization a successwill require increasing the knowledge and other capabilitiesof our employees. To achieve this, it is important that ouremployees all share the same values and are highly motivated. My main focus at the moment is leading all employees inthe direction of this growth.

*This motto was coined by the founder Hideo Ito when he founded the company. It expresses his desire to make Japan more prosperous through food, and his belief thata thriving agriculture industry was essential to that goal.

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inclusion, such as achieving the statutory employment ratioof people with disabilities and our goal of more than doubling
the number of female managers.
In part due to the reclassification of COVID-19 as aClass 5 infectious disease, we expect to see a pickup in
the domestic economy from FY2023. At the same time,
raw grain and energy prices remain high due in part to the
protracted situation in Ukraine, and the yen’s depreciationin the foreign exchange market continues to be a factor.
As such, the business environment surrounding the Group
continues to be challenging. While continuing to strive towards strengthening our core businesses and the expansionof our business fields, we will work to transform our profit
structure to one less susceptible to changes in the businessenvironment.

Review of Previous FY/MMP
Performance and Business Environment
For details on the review of the Medium-termManagement Plan, see page 32.

The period of Medium-term Management Plan 20-22 saw
an extremely harsh business environment due to the COVID19 pandemic, the situation in Ukraine, sharp rises in raw
grain and energy prices, and rising import costs caused by
the rapid depreciation of the yen against the dollar. While weachieved our net sales target, ordinary profit and ROE fell
far short of our targets. Meanwhile, we believe that we havebeen able to steadily make investments for our next stageof growth, including M&A, capital injections, and capital
expenditures.
The addition of new types of oils other than generalpurpose oils, such as Boso oil and fat’s rice oil and Tsuji Oil
Mills’ corn oil, has prepared us to respond to the changing
environment. In the Starches and Sweeteners Business, theaddition of San-ei Sucrochemical to our portfolio has given
us a distinctive new product in the form of medical-grade
glucose. Most notable about this product is the approximately 80% domestic market share enjoyed by San-ei,
which has now made us one of the industry leaders. In thisand other ways, we have taken measures that will lead tothe strengthening our core businesses and the expansion of
our business fields. The strength of our Group has grown byleaps and bounds in the last three years. One notable example of a successful business initiative by a Group member
company is the convenience store bread business, which
delivers bread to several thousand convenience stores in
the Kanto region. Amid the economic downturn caused by
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Showa Sangyo Group Integrated Report 2023

the COVID-19 pandemic and soaring energy prices, they
contributed significantly to profits through workplace-level
improvement activities that boosted productivity.
On another note, the No. 2 Premix Plant inside of our
Funabashi Plant became operational last June. In addition
to strengthening our premixes business, we expect the newplant’s manpower reduction measures will alleviate our labor
shortage issues and improve efficiency, and that it will also
allow us to deliver customers the smaller bags and smaller
volumes they desire.
We also made capital investments to reduce CO2 emissions in production processes. This included setting newGroup environmental targets and converting the Kashima
Plant’s cogeneration facilities from coal to town gas. In
terms of human capital, we steadily implemented initiatives
to contribute to solving social issues, including diversity and
FY2022 Results
Results

Medium-term Management Plan
20-22 Targets(1) Net Sales: ¥335.0 billion¥280 billion(2) Operating Profit: ¥4.1 billion―(3) Ordinary Profit: ¥6.5 billion¥13 billion(4) ROE: 7.1%

9.0% or more

(5) Dividend payout ratio: 27.9%

Approx. 30%

Forecast for FY2023

360 billion¥ 7.5 billion¥ 8.6 billion(1) Net Sales............................................. ¥(2) Operating Profit.................................
(3) Ordinary Profit....................................

[Medium-term Management Plan 23-25]
Recognized Issues and Key Measures
For details on the Medium-term Management Plan,see page 34.

In Medium-term Management Plan 23-25, we establishedfive basic strategies alongside new financial indicators.
Of these five strategies, we will focus most heavily on
promoting (1) Strengthening Our Core Businesses and (2)Expansion of Our Business Fields, while also promoting
three strategies that support our business strategy from theperspective of strengthening our sustainability management
capabilities. Through strategies (1) and (2), we will realize two
primary outcomes. The first is optimizing our product mix
by strengthening the sales of our unique product lines. The
second is strengthening the development and sales of valueadded products leveraging the Group’s unique materials
and technologies. By doing so, we will develop our profit
structure to one less susceptible to changes in the businessenvironment.
The highlight of the new Medium-term Management Plan
is the aforementioned our organizational reshuffle, the firstsince the company’s founding. By radically transforming oursales organization into a “one-stop shop,” we will enhance
our sales capabilities. By integrating our separate sales
desks for each business category and customer, we canmaximally leverage our diverse business, which is one of ourstrengths, thereby adopting a market-oriented system thatprovides customers with the best solutions.

[Medium-term Management Plan 23-25]
Financial Indicators and Targets
Indicators

FY2025 Targets

Compared to
FY2022(1) Ordinary Profit¥13 billion

200%(2) ROE

7.0% or more―

(3) ROIC*

4.0% or more

2.2 points up(4) CCC

75 days

16 days shorter(5) NET D/E Ratio

0.6 or less―*Definition of ROIC (Return on Invested Capital)
ROIC = Operating profit after tax ÷ Invested capital (Net interest-bearing debt +Shareholders’ equity)
Operating profit after tax is calculated with income taxes as 30% of operating profit.

[Medium-term Management Plan 23-25]
Five Basic Strategies(1) Strengthening Our Core Businesses(2) Expansion of Our Business Fields(3) Reducing Burden on the Environment(4) Rebuilding Our Platform(5) Reinforcing Stakeholder Engagement

While it is a big change, we have been discussing it for
more than five years. We took the first step towards reorganization two years ago when we established the Solution
Sales Department for the restaurant industry, which hasdelivered an approximately two-fold improvement in performance. We have received positive feedback from customers
about our new proposals, and we feel that we are on theright track for the future.
We also reshuffled organizations outside of the Business
Management & Sales Division involved in sales, establishinga Technical Division and a Corporate Division (see the figureon the next page). The Technical Division, which is involved
with research and development, researches the various potentials of grain that the Group possesses. As it goes about
doing this, the Business Management & Sales Division listens
to the needs and desires of customers. Responding to theseneeds and desires in turn leads to the creation of proposals
with high added value. While our sales model is primarily
BtoB, the way we ultimately deliver value is BtoBtoC. Thatis, we deliver value to consumers through our customers.
We believe it is important that sales and development areclosely connected.
The Corporate Division was established as part of a

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functional reorganization aimed at allowing each part ofthe division to better leverage their particular expertise on aGroup-wide basis. It will control the business portfolio more
precisely than ever before as it evolves into a Group-wide
Corporate Division.

As for the expansion of products with uniqueness andadded value, we will develop products with higher levels ofprocessing. More specifically, we will be strengthening ourfrozen food business, which revolves around Showa Frozen
Foods’ processed wheat products such as their mainstay
takoyaki, wontons, and petit cakes. Further, we will expand
into new areas where we can leverage the synergies of ourGroup, such as premix-based processed products andplant-based foods. We will work to promote our fine chemicals business, which is focused on the fields of health foodand cosmetics, as well as our oleochemical business, which
utilizes by-products.

One important initiative to both strengthen our existing
businesses and develop new ones is the expansion of ouroverseas businesses.
Though we have set up shop in China, Taiwan, andVietnam, our first wholly-owned overseas premix plant will
become operational in Vietnam in 2025.
In addition, we are working to expand our comprehensive foods business across regional borders by engaging
in M&A of overseas businesses and pursuing capital andbusiness alliance agreements with overseas partners basedon two basic policies: “Expansion of Our Business Fields”
and “Achieving High Added Value by Expanding the Value
Chain.” In this way, we aim to “Take the SHOWA Business
Model Overseas.”
Further, by centralizing our scattered export operations
into the Overseas Business Development & Sales Department, we will comprehensively manage our export strategy,
aiming to increase sales volumes and profitability by exporting more products to more places.

Human Capital Management
For details on human capital management, see page 60.

With Medium-term Management Plan 20-22, we set a target
and achieved of more than doubling our number of womenin management positions.
Our Women’s Advancement Task Force took active
measures such as organizing panel discussions between
managers aimed at raising the consciousness of female
employees and holding lectures by female executives andexternal directors. Such efforts lead to the achievement of

Building Systems Linked to the Revision of the Sales Organization

We will conduct a radical reorganization of our Research and Development, Engineering, and Corporate divisions,as well, and built systems for advancing Medium-term Management Plan 23-25.
Business Management& Sales Division
Business
Management

Strengthen business portfolio management

the target. With Medium-term Management Plan 23-25, wehave set a target for the proportion of women in management positions of at least 10% by FY2025, and will work
towards realizing this goal.
In terms of institutional reforms, we renewed our personnel framework for the first time in some 20 years in FY2021.
Most notably, we believe that the success of employees is
the most important factor in the continued activities of acompany, which is why we introduced a system that would
allow innovators to thrive. This new system allows employees to raise their hand and propose new business ideas, andif they pass muster, the employee will be allowed to work
exclusively on them for three years. As of now, three themes
have been approved, and each of the three innovators is
working full time towards the future commercialization of
their ideas.
We will also strengthen our general reskilling efforts.
In Medium-term Management Plan 23-25, we have set atarget of more than double our investment in reskilling by
FY2025 (vs. 2021). We will work on the career building andreskilling of individual employees in coordination with staffing
arrangements based on our business strategy.

 evelopment of measures inDcoordination with the materialities
For more information on materialities, see page 26.
For details on environmental initiatives, see page 58.

In parallel with the new Medium-term Management Plan, we
have also revised our materialities. As someone who cameup through sales, I tend to focus on the business side ofthings, but having taken a fresh look at what we have compiled, I realized that the things expected of companies bysociety are very wide-ranging.
These new materialities represent the Group’s reassessment of our current situation in line with our stakeholders’expectations and the changing world around us. We will be
developing policies for the issues shown here in coordination
with Medium-term Management Plan 23-25.
As for our environmental initiatives, in particular, these are
deeply linked to the fact that the Group’s business is theprocessing of raw grain into products. We recognize that
protecting the environment, including the soil, fertilizer, andwater that produce our grain, is linked to the sustainability ofthis business. While we previously set environmental targets
for FY2030, we have also set new targets for FY2025 in linewith Medium-term Management Plan 23-25. In addition, we
have set a new reduction target for the amount of plastic
we use in containers and packaging materials. We plan tosteadily implement a series of measures to achieve thesegoals. We will also work to create a roadmap towards acarbon neutral future.
The Group will aim to fulfil its responsibilities as a public
institution while also achieving sustainable growth of corporate value for the benefit of employees. As the new leader ofShowa Sangyo, I will do my best to manage the company,
so we ask our stakeholders for their further understanding
and continued support of our Group.

Hideyuki Tsukagoshi
President and CEO❶ Establish new Business Planning Department organization dedicated to the expansion of
our business fields❷ Promote business management and expansion in a manner that is business-centric andintegrated with Group companies

Maximization of sales efficiency

Sales❶ Integrating of sales desks → Accurately and rapidly grasp customers’ latent needs❷ Improving of problem-solving abilities → Propose optimal solutions with high levels ofcustomer satisfaction❸ Consolidation of sales support organizations → Improve efficiency of back office
operations

Synthesis of Market-in and Product-out
Technical Division

We integrated the research and development and engineering into a single division to enhance
product development in line with our business strategies.

Evolution into a corporate division of the Group
Corporate Division

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Showa Sangyo Group Integrated Report 2023

We reorganized the division based on its functions to leverage its expertiseon a Group-wide basis.

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Business Overview
Percentage of net sales by business ercentage of commercial
P
products/household foods(FY2022)

Other*Percentage of Foods segment net
sales for Showa Sangyo Co., Ltd.

1.5%
¥5.0 billion

Household foods

6.7%

Animal Feed
Business

Net sales

17.7%¥59.4 billion(FY2022)¥

Starches and Sweeteners BusinessWe manufacture and sell corn starch, sweeteners made fromcorn including glucose, high-fructose corn syrup, corn syrup,
and isomalto-oligosaccharides, and modified starches madefrom corn. These products have a wide range of uses ranging
from beer, soft drinks, confectionary, and bread in the food sector through to applications in the industrial sector.

335.0 billion
Foods Business*Foods Business: Total of Flour Milling
Business, Vegetable Oils Business,
Starches and Sweeteners Business

*

80.8%
¥270.5 billion

Premixes
Pasta
Baking breadBran· Shikishima Starch MFG. Co., Ltd.
· San-ei Sucrochemical Co., Ltd.

Cornstarch· Shin Nihon Chemical Co., Ltd.

Modifiedstarches

93.3%

Animal Feed Business[Main Group companies]

Wheat flour(As of June 30, 2023)

Commercial
products

Flour Milling Business
Wheat flour is the most versatile food product and is a key ingredient that is indispensable in our meals. As commercial products,
we manufacture and sell a variety of wheat flour suitable for uses
such as bread, cakes, and noodles, as well as premixes andpasta to meet user needs. We also provide premixes and pasta
as household foods.

[Main Group companies]

Sweeteners(As of June 30, 2023)· Okumoto Flour Milling Co., Ltd.
· Kida Flour Mills Co., Ltd.
· Naigai Flour Milling Co., Ltd.
· Central Flour Milling Co., Ltd.
· Swing Bakery Co., Ltd.
· Grandsolu bakery Co., Ltd.
· Garden Bakery Inc.
· Tower Bakery Co., Ltd.

We manufacture and sell compound feed for poultry, swine, dairy
and beef cattle, and fish farming as well as nutrient rich substrate
for mushroom bed cultivation. The location of Group company
plants in coastal areas makes it possible to obtain raw materials
directly from the quay. In addition, we can also obtain secondary raw materials such as wheat bran and defatted soybeansfrom our own flour mills and oil processing plants, which is very
effective in terms of procurement of raw materials. We provide
total support for the livestock business, including production anddevelopment of high-quality animal feed, distribution of products,
and management advice.

[Main Group companies](As of June 30, 2023)

Compound feed

· Kyushu Showa Sangyo Co., Ltd.
· Showa Keiran Co., Ltd.

Eggs

· Z.Y. Food Company Limited· Showa Sangyo Vietnam Co., Ltd.
· Kouchan Mill Co., Ltd.

Other
Vegetable Oils BusinessWe manufacture and sell a variety of vegetable oils made fromsoybeans, canola, corn, rice bran, and other raw materials anddeveloped to suit various uses, such as tempura, fried foods,
and donuts. We also provide defatted soybeans used as raw
material for animal feed and soy protein used in processed meatand seafood products.

[Main Group companies]

Cooking oil
Soy protein
Frozen food(As of June 30, 2023)· Boso oil and fat Co., Ltd.
· Nagaokayuryo Co., Ltd.

In addition to the Warehousing Business, which stores and handles imported grain, and the Real Estate Business, which leases
the Group’s real estate holdings, the Showa Sangyo Group isalso involved in the insurance agency business, the automobile
leasing business, the transportation business, and agribusiness.

· Kumiaiyushi Co., Ltd.

· Shosan Kaihatsu Co., Ltd.
· Shourei Co., Ltd.
· Oban Co., Ltd.
· Shosan Transportation Co., Ltd.

· Minaminihonkomeabura Co., Ltd.

· Star Bakery Co., Ltd.
· Nagoya futo Silo Co., Ltd.

· Showa Frozen Foods Co., Ltd.

· Shibushi Silo Co., Ltd.

· Tsuji Oil Mills Co., Ltd.

· Kashima Silo Co., Ltd.
Kashima plant silos

Showa Sangyo Group Integrated Report 2023

· Shosan Shoji Co., Ltd.

· Shosan Business Services Co., Ltd.

· Musashiyushi Co., Ltd.
· Tokyoyushikogyo Co., ltd.

12

[Main Group companies](As of June 30, 2023)

Plant factory

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Value Creation Story

Thoughts on
Value Creation

Value Creation
Journey

Value Creation
Case Studies

Value Creation
Process

Management
CapitalStrengths

Materialities

Safety andReliability

Digitalization

Thoughts on Value Creation
Ever since being founded, we have continued to pursue the delivery of both physicaland mental health by providing rich and varied meals.
We make extensive use of grains, which are the bounty of the earth,
to provide people with safe and reliable “food.”

Present

Initiatives on materialities throughbusiness activities

Future2025(Provision of value to stakeholders)

Past(New materialities from FY2023)●

Customers

1. Contribution to society
through our food businesses

Prosperity Through
Agriculture

1 Supply safe, reliable and high-quality foods●

Globalenvironment

was in a very difficult position as continued poor harvests further worsened
chronic food shortages.

●●

2 Contribute to consumers’ health and diversifying needs●

Employees

During the early Showa period, Japan●●●

2. Preserve the earth that produce grains
and the global environment●

3 Consideration for the environment

Local
communities●

Supply safe, reliable and high-quality foods
Improve quality management and ensure
traceability

Reduction of CO2 emissions
Reduce waste
Use renewable energy

Respect human rights and diversity
Human capital development
Promote work-life balance ontribute to and interact with communities aroundC
plants and sites
Contribute to food education

Long-term Vision“Grain Solution Company Next Stage”
providing satisfaction
for all stakeholders
See page 30 for details about our Long-term Vision.

Our founder’s desire to make Japanprosperous through food, which required

3. Promote engagement with stakeholders

thriving agriculture forms the starting
point for the Showa Sangyo Group.

Business
partners(suppliers andcontractors)●●

Improve quality through collaboration
Ensure occupational safety and improve theworking environment

4 Utilization of human capital
5 Harmonious association with local communities

Shareholders& Investors●● ontinuous and stable profit distribution
CImprove corporate value

6 Cooperation with stakeholders in our supply chains●

7 Enhance credibility with our stakeholders

NGO/
NPO

●

 rovide support with donationsPProvide support and sponsor activities throughcooperation

See page 53 for details about the revision of materialities.

Government●●

 ooperate with policies to solve public issues
CCreate stockpile for disasters

Medium-term Management Plan 23-25 linked to materialities

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Value Creation Story

Thoughts on
Value Creation

Value Creation
Journey

Value Creation
Case Studies

Value Creation
Process

Management
CapitalStrengths

Materialities

Safety andReliability

Digitalization

Value Creation JourneyEver since being founded, the Showa Sangyo Group has grown its business while helping to solvea variety of social issues through “food.” Since being founded, we have changed in step with the times.
Going forward, we aim to be a company with sustainable growth potential that contributes to people’s
health and futures through a wide range of businesses based on grain.

PeriodFounding period (From 1936)

1960 through 1980s

1990 through 2000s

From 2010

Historicalbackground

Severe food shortages

Expansion in demand and diversificationin eating habitsMore sophisticated “food” needs

Changing lifestyles and values

Value createdby the Showa
Sangyo Group

Creating an integrated system in the
agricultural processing sector andcontributing to agricultural development

Realizing stable supply of a wide variety of
products through construction of industrial
complexes for foodStrengthening product development in a wide
range of fields to provide products that matchthe times

Creating unique value-added
as a “Grain Solution Company”

Commenced production and sale of wheat flour,
cooking oil, corn syrup, and fertilizer with the aimof creating an integrated system from soil preparation at the farming stage through to productprocessing and sales. We supported the development of Japanese agriculture while also helping to solve the post-war food shortages.

With the diversification in eating habits during Japan’s period of high economic growth, we foresaw
an increase in grain imports from overseas and concentrated all of our plants in coastal areas. While expanding our production facilities and silos and solving the cost issues involved in mass production ofa wide variety of products, we met new needs withthe launch of various household foods in addition tocommercial products.

With increasingly sophisticated “food” needs and diversification in the raw material properties and type of products
demanded, we strengthened our product development in avariety of grains and evolved our processing technologies, inaddition to focusing efforts on recipe proposals. We continued
to develop products that delighted customers, including products combining functional properties with delicious foods andhealth-conscious products.

Consumption styles related to “food” have become even moresophisticated and diverse, requiring product development tomeet the needs of the times, such as health-conscious consumers. In addition, people’s lifestyles were completely transformed by COVID-19, which began spreading in 2020. Stayat-home demand increased as people avoided eating out inrestaurants. This required product development in the areas ofsimple foods and food that is delicious even after some time
due to the growth in cooking at home and take-out food.

History of our
products
1956 Launched
KESSHO BUDOTO

1957 Launched
SHOWA HOTCAKENO-MOTO

1961 Launched
SHOWA SOKUSEKITEMPURA BATTER
MIX

1969 Launched
SHOWA SOYPROTEIN FRESH,
a soy protein foodproduct

1983 Launched
SHOWA OUGONTEMPURA BATTER
MIX, a high-grade
tempura batter mix

1984 Launched
SHOWA SUPPLEMENTOKAMA-NI-PON, wheat
germ oil capsules forcooking rice

1992 Launched
1994 Launched 2000 Launched
SHOWA OILSHOWA ONIKU-WOSHOWA OLIGO
OLEIN RICH,YAWARAKAKUSURUTIME SYRUP,
a food for specified sunflower oil
KARAAGE-KO
which is rich inhealth use
oleic acid2005 Launched
SHOWA CAKENO-YONA
HOTCAKE MIX

2011 Launched
SHOWA RENJIDE-CHINSURUKARAAGE-KO

2020 Launched
SHOWA KENKO
RICE BRAN OIL

2021 Launched
SHOWA MOTSUTSUMANAI!
MAZEGYOUZANO-MOTO

2021 Launched
SHOWA
MANMARU OKINA
HOTCAKE-NOMOTO

2022 Launched
SHOWA MOAGENAI!!
YAKITEMPURANO-MOTO

Main topics for the Group in each period

1936 Established
Although Japan was industrializing in theearly Showa period, rural areas were severely impoverished due to serious foodshortages compounded by continued

Our Founder
Hideo Ito

(Net sales)(Billions of yen)

1961

Completed Japan’s first coastal industrial complex
for food with the completion of the Tsurumi Plant

1994

Completed the Funabashi industrial complex forfood (now the Funabashi Plant)“Oligo Time” (involved ingredient: isomalto-oligosaccharide)obtained approval from the Ministry of Health and Welfare as afood for specified health uses

1965

2002

Established Showa Frozen Foods Co., Ltd.

1966

Established the Research and Development Center

2004

Established “Showa Juku” employee training School

1970

Completed the Kobe industrial complex for food(now the Kobe Plant)

2005

Established Swing Bakery Co., Ltd.

2009

Made Okumoto Flour Milling Co., Ltd. into a subsidiary
Began operating food safety and quality management system

2014

2015

Established Grandsolu Bakery Co., Ltd.

2016

Established the RD&E* Center

poor harvests. Our founder Hideo Ito wit-

1973

Completed the current Headquarters building

nessed this impoverishment and set up

1974

Completed the Kashima Plant

2017

Announced SHOWA Next Stage for 2025, the Long-term Vision

1976

Made Shikishima Starch MFG. Co., Ltd. into a
subsidiary

2018

Established Showa Sangyo Vietnam Co., Ltd. in Vietnam
Made Garden Bakery Inc. into a subsidiary

1991

Established the Food Development Center

2020

Underwrote capital increase of Z.Y. Food Company Limited andKouchan Mill Co., Ltd. (Taiwan)
Made Boso oil and fat Co., Ltd. into a subsidiary
Made San-ei Sucrochemical Co., Ltd. into a subsidiaryShowa Flour Milling Co., Ltd. in charge ofprocessing agricultural products with thedesire to support Japanese agriculture. In
1936, the following year, he established
Showa Sangyo Co., Ltd.

Trend in Net Sales

Announced “Grain Solution Company” as the corporate brandmessageBegan equity participation in Central Flour Milling Co., Ltd.
(made Central Flour Million into a subsidiary in 2018)
Began equity participation in Dachan LiangYou Foods(Shanghai) Co., Ltd., expanding into flour milling businessin China

2022

Began operation of Funabashi Premix No.2 Plant

2023

Entered into capital and business alliance with Tsuji Oil Mills

335.0 billion

¥

300

200

100

*Research, Development and Engineering
016

Showa Sangyo Group Integrated Report 2023

Showa Sangyo Group Integrated Report 2023

17

Value Creation Story

Thoughts on
Value Creation

Value Creation
Journey

Value Creation
Case Studies

Value Creation
Process

Management
CapitalStrengths

Materialities

Safety andReliability

Digitalization

Value Creation Case Studies
The radical reorganization, which was the first since the company was founded, was not simply a reorganization of sales
departments but was designed to fundamentally transform our business model. We implemented various initiatives forthe company-wide reorganization in April 2023. These initiatives included a previous test operation by the Solution Sales
Dept., the development and reconstruction of a number of platforms supporting the reorganization, and the consolidation ofcorresponding marketing organizations. We will continue to develop the organizational structure based on these experiences.

(1) Reorganization of Sales Departments (Foods Business)(2) Consolidation and Upgrade of Marketing Departments

As grain professionals, the departments responsible for each sales channel are attentive to meeting the needs of business partners(BtoB) and provide proposals for one-stop “delicious answers = grain solutions” that consumers seek (BtoBtoC).

[Previous] Sales Division[New] Sales Division–Experts in each business–– Grain professionals –Flour Milling Dept.

Oils & Fats Dept.

Ingredients
Sales Dept.

Food Process
Sales Dept.

Starch & Sweetener Dept.
Retailer Sales
Dept.

Household Foods Dept.

Sales channel

Effects of solution(B)–Our fields of contribution–

Group I

Confectionery,bread, noodle

Group I

Food and beverage
manufacturers

Group I

Processed food manufacturers
Ready-to-eat processing vendors

Group II

RestaurantGroup I

Side dish, delicatessenGroup II

Export, overseas businessJapanese food trends,
safety and reliability

Principal Account Sales Dept.

Principal Account Sales Dept.

CVS

Food trends, deteriorationof quality, proposal of sales
floor operations

Solution Sales Dept.

Solution Sales Dept.

Restaurants (cross regions)

Scientific menu
development, food trends

Branch(Osaka, Nagoya, Sendai,
Sapporo, Fukuoka, Hiroshima,
Kanto Shinetsu)

Branch(Osaka, Nagoya, Sendai,
Sapporo, Fukuoka, Hiroshima,
Kanto Shinetsu)

All channels

All local food needs[New] Sales Division

Sales channel

Consumers– Grain professionals –

(B)

(C)

Confectionery,bread, noodle

Group I
Analyze andpropose・Interview surveys
・Specification surveys
・Market size research・Analysis of present situation
・Specification analysis
of market
・Assessment
as a whole
・Trend analysis

Analyze customer
issues using various
techniques

Ingredients Sales Dept.
Group II

Food Process
Sales Dept.

Identify
issuesFood and beverage
manufacturers

Group I

Processed food manufacturers
Ready-to-eat processing vendors

Group II

RestaurantGroup I

Side dish, delicatessen

Retailer Sales Dept.
Group II

Household foods

Overseas Business
Development & Sales Dept.

Export, overseas business

Principal Account Sales Dept.

CVS

Solution Sales Dept.

Restaurants (cross regions)

Branch(Osaka, Nagoya, Sendai, Sapporo,
Fukuoka, Hiroshima, Kanto Shinetsu)

All channels■ Reorganization● Platform development andrebuilding● Promotion of digitalization on the backof support for telecommuting during
COVID-19 pandemic● Integration of customer management and negotiation management
platforms, strengthening of sales support area

2019
● Renewal of platform for managing and making assets outof product development knowledge

Showa Sangyo Group Integrated Report 2023

Marketing Group

Food trends,
pursuit of freshness,convenience

Household foods

Consolidation of marketing
functions

Sales Planning & Promotion Dept.

Food trends,
deterioration of quality,
anti-aging(3) Process of Developing and Rebuilding our Platform to Support Reorganization

18

(C)

Improvement of texture,
taste and flavor,
production process,dining style

Overseas Business
Development & Sales Dept.

2018

Consumers

Marketing functions, which were previously dispersed in multiple departments, were consolidated and integrated. We propose optimal
solutions with high levels of customer satisfaction by creating a department that responds to sales channels.

2020

 trengthening of knowledge management in R&D and marketing fields●S ystematization and implementation of education to improve sales skills●S

2021■ Establishment of Solution Sales Dept.
 pin off, consolidation, and integration of sales support functions■S● Strengthening of KGI/KPI management in business and sales domains● Digitalization of invoices and shipping information, etc.

2022

2023
■ Company-wide reorganization● Improvement of working environment
looking ahead to ABW*
*Activity Based Working

Showa Sangyo Group Integrated Report 2023

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Thoughts on
Value Creation

Value Creation
Journey

Value Creation
Case Studies

Value Creation
Process

Management
CapitalStrengths

Materialities

Safety andReliability

Digitalization

Value Creation Process
We leverage our expertise in grains, which is the strength of the Showa Sangyo Group, from every angle,
to provide the “delicious answers = grain solutions” that users seek.

Group Management
Philosophy

Long-term Vision“Grain Solution Company Next Stage”

Contributing to healthy, rich,and varied meals

Environment
surrounding
our businessproviding satisfaction
for all stakeholders

See page 30 for details.

INPUT

Business ModelSee page 22 for details.

OUTPUTSee page 24 for details.

Human capital●●●

2,863 Group employees

Human resources who inherit
the SHOWA SpiritGrain professionals
Intellectual capital●●●

Procurementof raw materials

●

●

●

Marketing capabilities built
through dialogue with various
customers

●

Other

Leveraging our expertise

●

●





AnimalFeed

Diverse and numerous business
partners
Supplier FSQMS auditsStarchesandSweeteners

R&D

●

●

· Diverse and numerous
business partners· From business-specificto “one-stop” sales
departments organizedby business category
and customer

R&D capabilities that createsynergies

2,154,000 tons in grain used

178,000 kL (crude oil equivalent)in total energy input
Sales Planning &Promotion Dept.



Ingredients Sales Dept.

Solution Sales Dept.

4 Utilization of human capital
1(Compared to FY2013)*

Overseas Business
Development & Sales Dept.

“99.9 ”%
food recycling*2

Animal feed using
by-products of grain
processingShowa Sangyo Group Integrated Report 2023%
reduction of CO2
emissions

Principal Account Sales Dept.

Foundations that support sustainable corporate growth

Stakeholder Engagement

Corporate GovernanceSee page 68 for details.

Risk Management
See page 74 for details.

3 Consideration for the environment

3. Promote engagementwith stakeholders

27.2

Retailer Sales Dept.

¥32.0 billion in growth investment(result under Medium-termManagement Plan 20 - 22)Environment

Food Process Sales Dept.

¥247.7 billion in total assets¥17.4 billion in capital investment(result under Medium-termManagement Plan 20 - 22)

2. Preserve the earth that produce
grains and the global environment

High value-added
processed foods

Animal Feed Business Dept.

13,980,000 tons in water
resources used

See page 62 for details.

20

Sales

upply safe, reliable and high1 Squality
foods
ontribute to consumers’ health2 Canddiversifying needs%
dividend payout ratio– Grain professionals–



No.1

domestic market share

27.9[New] Sales DivisionEnvironment-related investment

1. Contribution to society
through our food businesses

6.52023 reorganization of sales departments

Increase in production capacity
alongside expansion in market
share

See page 26 for details.

¥
billionin ordinary profit

sought by users.

Integrated production unique tothe Showa Sangyo Group

Contribute to Solving Issues

Finances“delicious answers = grain solutions”

Financial capital●

Vegetable
Oils

in grains, we deliver

365,000 tons of grain silostorage capacity(Showa Sangyo Co., Ltd.)Natural capital●

Wide variety of foodingredients (primaryprocessed products)Householdpancake mix

Edible and medical
crystalline glucose

R&D capabilities combining
diverse food ingredients,
technologies, and know-how¥2.7 billion in R&D expenses

Materialities

domestic market shareSocial capital●

Safe and reliable production
systemFlour
MillingGlobal procurement of a wide
variety of grains

MarketNo.1

Production

Manufacturing capital●

OUTCOME

22.1%
reduction of food loss
(Compared to FY2018)*3

armonious association
5 Hwith
local communities
with stakeholders
6 Cinooperation
our supply chains
Enhance credibility

7 with our stakeholders

Compliance
See page 75 for details.

*1 Scope: Showa Sangyo Group companies (consolidated subsidiaries + non-consolidated manufacturing subsidiaries)*2 Scope: Showa Sangyo Co., Ltd.
*3 Scope: S howa Sangyo Co., Ltd. and Group companies that generate at least 100 tons/year in food loss (Six companies: Showa Sangyo,
Swing Bakery, Grandsolu bakery, Garden Bakery, Tower Bakery, and Showa Frozen Foods).
Showa Sangyo Group Integrated Report 2023

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Thoughts on
Value Creation

Value Creation
Journey

Value Creation
Case Studies

Value Creation
Process

Management
CapitalStrengths

Materialities

Safety andReliability

Digitalization

Management Capital
Characteristics of Showa Sangyo Group• Human resources who inherit the SHOWA Spirit

Initiatives for Further Evolution• Drastic promotion of D&I
Proportion of women in management positions: At least 10% in FY2025• Strategic investment in human capital
Investment in Reskilling: More than double in FY2025 (vs. 2021)• Enhancement of employee engagement
Engagement Score: Target score to be announced during the term of the “Medium-term Management Plan 23-25”

Human capital• Grain professionals• New value creation and trusting relationships born through associating witha diverse array of customers

Intellectual capital• Marketing capabilities built through dialogue with various customers• R&D capabilities combining diverse food ingredients, technologies, and know-how• Fusion of technologies through cooperation of R&D technicians and technologists fromdifferent fields• Application design skills that best display diverse materials and products and are built
through mutual creation with customers over many years• Timely value provision to customers• Strengthening development of plant-based food, while also moving forward with fine chemicals business, oleochemical business,
and agribusiness• Strengthening open innovation• Research and development using IT and AI technologies• Ensuring business freedom and strengthening our market competitiveness by utilizing intellectual property• Improving productivity through movement towards smart factories• Handling production of small amounts of diverse products in an efficient way• Seeking efficiency in facilities

Manufacturing
capital• Our own grain silos in each manufacturing base (Kashima, Kobe, Funabashi, Group
companies), and dedicated berths in main bases• Top-class unloading capacity for a food maker 2,750 t/h *1• Top-class grain storage capacity for a food maker 365,000 t *1
• Highly efficient energy usage only possible at a worksite using flour (mainly electricity) andvegetable oils, starches and sweeteners (mainly steam)• Integrated production unique to our Group· Utilization of by-products from manufacturing flour, oil, starches and sweeteners in
the Animal Feed Business· Extracting and refining oil using germ from the Starches and Sweeteners Business andsell corn oil in the Vegetable Oils Business• Synergy among worksites

Social capital• Diverse and numerous business partners• Supplier FSQMS audits• Sales structure that links with research and development to rapidly solve customer issues• Efficient raw material procurement through use of larger-sized procurement vessels with
mixed cargo of grains• Efficient delivery system through mixed cargo of diverse products• Deployment of the company’s unique Food Safety and Quality Management System(FSQMS), and ensuring safety and reliability through FSSC22000, ISO 22000 certification• Strengthening supply chain management• Strengthening BCP countermeasuresR esponding to lack of drivers, linking with Group grain silo companies *2, natural disaster countermeasures, infection
countermeasures, etc.

• Reduce CO2 emissions (switch from coal to town gas as fuel for cogeneration facilities)• Food recycle rate 99.9% *1• Renew utility facilities (strengthen biomass boiler, etc.)• Strengthen lifecycle assessment (LCA) design technology through considering the environment, and promote utilization of by-products• Shrink inventory and reduce food loss through use of IT and improving supply-demand forecast precision• Strengthen environmental management structure in order to take measures that reduce CO2 emissions, food loss, water usage,and plastic usage• Total assets 247.7 billion yen• Growth investments 32.0 billion yen (result under “Medium-term Management Plan 20-22”)• Capital investments 17.4 billion yen (result under “Medium-term Management Plan 20-22”)• Asset reduction (Review of cross-shareholdings and real estate)• Stakeholder returns (Continuation of long-term, stable dividends at a dividend payout ratio of around 30%)
• Working capital
Restrict increases in working capital through shortening of CCC*3 by optimizing inventories

Natural capital

Financial capital*1 Showa Sangyo Co., Ltd. *2 Nagoya futo Silo, Kashima Silo, Shibushi Silo *3 Cash conversion cycles

22

Showa Sangyo Group Integrated Report 2023

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Thoughts on
Value Creation

Value Creation
Journey

Value Creation
Case Studies

Value Creation
Process

Management
CapitalStrengths

Materialities

Safety andReliability

Digitalization

Strengths of a Grain Solution Company
Utilizing Showa Sangyo Group’s food ingredients in an integrated way in order to solve various and numerous
customer issues in the form of products and services that rapidly meet customer needs—that is, supplying “grain
solutions” is a unique strength of this Group, one not found in dedicated food makers. We fully demonstrate ourcharacteristics as a “Grain Solution Company” by combining our Group companies’ food ingredients with processing technology from other fields in order to deliver “delicious answers” to our customers.

Showa Sangyo Group’s Business Model
It is precisely because our Group handles various grainsthat we can create synergies for new value creation throughmasterful use of the grain expertise we have. By linking research and development, material procurement, production

The Reason We Can Achieve Grain Solutions
As a platform for diverse and numerous grains, our Grouphas developed businesses across a broad range of fields.
We dig up insight and the true needs of each of our customers by detecting, accumulating, and combining various
needs through deep communication with our diverse andnumerous customers. Additionally, we create new products
and provide new value that customers require by combin-

ing diverse food ingredients, technology and know-how
spanning the range of businesses of our Group. As a “Grain
Solution Company,” we have become an inimitable presence, with a synergy of marketing power formed thanks toour variety of customers and development skills in numerous
technological fields.
Core businessand sales in the value chain, we achieve and spur further
evolution of solutions to issues through broad knowledge
and know-how that cannot be achieved through specialization in specific fields.

VariousgrainsFlour Milling
Business

Vegetable Oils
Business

Starches and Sweeteners
Business

Animal Feed
Business

R&D

Value chain

Procurementof raw materials

Production

Endless vertical and horizontal integration of our core businesses—Flour Milling Business,
Vegetable Oils Business, Starches and Sweeteners Business, and Animal Feed Business—with the value chain (research and development, raw material procurement, production, sales)

Production

Safe and reliable production
systemFlour
MillingGlobal procurement of a wide
variety of grains

Procurementof rawmaterials

Sales

Other

Leveraging our expertise

99.9% Food Recycling—Only Possible with a Grain Solution Company

Vegetable
Oils

We achieve a food recycling rate of 99.9% through effective use of by-products (bran, soybean meal, gluten feed,etc.) produced during manufacturing processes in the Flour
Milling Business, Vegetable Oils Business, and Starches
and Sweeteners Business as raw ingredients in compound
animal feed.

in grains, we deliver“delicious answers = grain solutions”
sought by users.

R&D

Sales
·D
 iverse and numerous business partners·F rom business-specific to “one-stop”
sales departments organized bybusiness category and customer[New]
Sales Division

Food Process Sales Dept.
Retailer Sales Dept.
Principal Account Sales Dept.
Solution Sales Dept.
Overseas Business Development & Sales Dept.
Animal Feed Business Dept.

24

Showa Sangyo Group Integrated Report 2023

SoybeansFlour Milling Business

CanolaVegetable Oils Business

Wheat flour

Premix

Soybean oil

Wheat germ

Pasta

Soybean germ

Canola oil

Defatted soybeans

Corn

Food products

Starches and Sweeteners Business
Corn oilCornstarch
GlucoseSoybean protein

Modified starchHigh-fructose corn syrup

Corn syrup

Low decomposition
powdered corn syrup

Isomalto-oligosaccharides

Livestock products

Animal Feed
Business products– Grain professionals–

Wheat

Ingredients Sales Dept.
By-products2023 reorganizationof sales departments

Sales Planning &Promotion Dept.

Products of each businessR&D capabilities that createsynergies

StarchesandSweeteners

Raw materials

AnimalFeed

Our business model maximizes use of nature’s bounty ofgrain, including use beyond raw ingredients in compound
animal feed, such that none is wasted, as we engage invarious initiatives to build a sustainable society with limited
burden on the environment.

Bran

Soybean meal

Canola meal

Gluten meal
Gluten feed

Animal Feed Business

Compound feed for chickens

Compound feed for swine

Compound feed for dairy
and beef cattle

Showa Sangyo Group Integrated Report 2023

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Thoughts on
Value Creation

Value Creation
Journey

Value Creation
Case Studies

Value Creation
Process

Management
CapitalStrengths

Materialities

Safety andReliability

Digitalization

Materialities
The Showa Sangyo Group has stipulated three materiality themes and seven materialities(
for details, see page 53) in order to advance initiatives for achieving sustainability.

Materialities

Main initiatives in the Medium-term Management Plan 23-25

Related Medium-termManagement Plan
Key Strategies

Related KPIs in the Medium-termManagement Plan 23-25〇 Diverse and numerous customer contacts〇 Earning customer trust through safe, secure, and stablesupplies● Loss of customer trust due to product accidents•R einforcing product sales by transforming into “one-stop”
sales models•S trengthening business scope expansion and profitability throughlinks among Group companies•O ptimization of product lineup and sales price•S eeking more procurement regions for raw grains•C entrally managing energy procurement in the Group•O perating food safety and quality management system(1) Strengthening Our
Core Businesses(5) Reinforcing
Stakeholder
Engagement•G rowth in ordinary profit throughstrengthening core businesses:+2.7 billion yen•C ost reduction throughproduction improvements: Morethan 1 billion / over 3 years
in total〇 Diversified customer needs (health, time saving, convenience)〇A cquisition of market competitiveness by launching ecofriendly products〇C reation of new markets by utilizing new materials●L oss of growth opportunities due to shrinking domestic
market in our core businesses•E xpansion of value-added products sales by differentiation strategy•A dvancement into new frozen food category for foods with premix
products and soy protein products as raw materials•A dvancement into new businesses, such as plant-based foods,
fine chemicals, and oleochemical•E xpanding overseas businesses by strengthening existing
businesses in the ASEAN region and developing new businesses•S trengthening export business by utilizing our branding and quality(2) Expansion of Our
Business Fields•G rowth in ordinary profit inoverseas business and frozen
food business: +800 million yen

Related opportunities and risks○Opportunity ●Risk

Priority themes

Target SDGs
for contribution

1. Contribution to society through our food businesses(1) Supply safe, reliable and highquality foods

Expansion of customer base
Ensuring safe, reliable, and stable supply(
for details, see page 28)
Maintaining stable operations(2) Contribute to consumers’ healthand diversifying needs

Contribution to human’s healthContribution to diversifying needs

2. Preserve the earth that produce grains and the global environment〇C ost reduction through energy-saving and reductionof food loss
● Inadequate grain procurement due to climate change● Loss of trust due to delayed response toenvironmental issues•C ontinuous efforts to achieve environmental targets (reduction inwater usage, food loss, CO2 emissions, plastic usage)•A dvanced utilization of biomass•P romotion of modal shift•E stablishing a roadmap toward carbon neutrality(3) Reducing Burden on
the Environment•R eduction of CO2 emissions:
30% or more
• Reduction of food loss:
30% or more•R eduction of water usage:
9% or more•R eduction of plastic usage:
7% or more

(4) Utilization of human capital

Health and productivity management
Promotion of D&I
Human capital development〇 Improving productivity by improving job satisfaction〇D ecrease in turnover rate, secure superiority in opportunities
to recruit● Difficulty in hiring and increase in turnover rate due to delay
in response•T ransform into an organization to take full advantage of ourdiversity activities•P romoting strategic investment and enhancing human resource
management•T ransform into a highly engaged organization•M aintaining sound worker and employer relations(4) Rebuilding Our
Platform(5) Reinforcing
Stakeholder
Engagement•P roportion of women in
management positions:
At least 10%• Investment in reskilling:
More than double (vs. 2021)(5) Harmonious association withlocal communities

Promotion of CSR activities(food donation, etc.)〇 Gaining fans of our Group●L oss of trust due to lack of interaction with local communities• Implementing Sustainability Basic Policy•P romote education using grains•P roviding food in cooperation with NPOs•S
 ocial contribution and interaction in our regional business sites(5) Reinforcing
Stakeholder
Engagement(6) Cooperation with stakeholders
in our supply chains

Enhancement of sustainable procurement
Optimization of logistics system〇 Cost reduction through efforts across the supply chain● Logistics failure due to delay in responding to social issues●L oss of customer trust due to inability to procure raw
materials•O ptimization of delivery routes (including joint shipping)•S upply chain management•B usiness partner surveys (human rights, environment, working
environment, etc.)(5) Reinforcing
Stakeholder
Engagement〇 Improve productivity and reduce costs through business
management upgrades● Loss of social trust due to violation of laws and regulations● Lower evaluation from investors due to insufficient disclosure● Occurrence of opportunity loss and unexpected loss due tonegligence in digital investment• Advancing business portfolio management by introducing ROIC
• Permeation and improvement of CCC management• Establishment of organizational foundation by reorganization• Endorsement of domestic and international initiatives• Strengthening IR to individual shareholders and foreign anddomestic institutional investors, disclosure in English of IR
documents, and providing opportunities for communications with
our top management• Proactive information disclosure via SNS, etc.
• Development of HR to promote DX(4) Rebuilding Our
Platform(5) Reinforcing
Stakeholder
Engagement(3) Consideration for
the environment

Responding to climate change
Consideration for biodiversity

3. Promote engagement with stakeholders(7) Enhance credibility with our
stakeholders

26

Showa Sangyo Group Integrated Report 2023

Business management upgrade
Promoting digitalization(
for details, see page 29)
Strengthening IR activities
Risk Management and compliance•R OIC: 4.0% or more•C CC: 75 days•F
 uture HR to promote DX:
Training of 100 staff members•C ost reduction due todigitalization:
130 million yen / year

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Value Creation

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Journey

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Case Studies

Value Creation
Process

Strengths

Materialities

Safety andReliability

Digitalization

Ensuring Safe, Reliable, and Stable Supplies

Promoting Digitalization

Strengthening Food Safety and Quality Management System
Our Group establishes its “3 Principles of Safety and Reliability” and employs its own “Food Safety and Quality Management System (FSQMS)” to ensure performance of them.
With HACCP*1 as its pillar, this system takes into accountfeatures from ISO22000*2, FSSC22000*3, ISO9001*4, and
the AIB Food Safety System*5, and is uniquely reorganizedby our Group for efficient use. The principles of this FSQMS
are applied to Group companies, and through internal audits, lecture sessions, precision management and quality
control technology training, we are raising the baseline of
the supply chain, including all Group companies and evenGroup delivery companies, as we intend to maintain andimprove permeation and influence of the principles.
Additionally, for the lecture sessions and training sessions, we take measures, such as using remote access,web access, and recorded video, to provide the opportunity
to take the session regardless of time, place, or number ofpeople.
Furthermore, we are forming a foreign law and regulation
audit system to expand business abroad, and are strengthening quality control systems for agribusiness, frozen foodand cosmetic materials to expand into new businesses.

In order to achieve “creation of new value using DX,” the Showa Sangyo Group promotes the optimization andadvancement of business duties using digital technologies, and the development of human capital who promote
DX in our “Medium-term Management Plan 23-25.”*1 HACCP (Hazard Analysis Critical Control Point): In this system, critical control
points are established for all processes from arrival of raw materials to manufacture and delivery, and are continuously monitored in order to prevent delivery of
products hazardous to humans.
*2 ISO22000: International specifications for food safety management systems
intended for production, delivery and sales of safe food*3 FSSC22000 (Food Safety System Certification 22000): International specifications for food safety systems that clarifies which items should be maintained inorder to guarantee food safety, based on ISO22000.

Management
Philosophy

Before Medium-termManagement Plan 17-19• Supplier management
On-site audits of main raw materials
Plant audits of secondary raw materials
Plant audits of packaging materials•P recision audits of quality assurance
certificate•Q uality investigation of received raw
materials• Introduction of food defense facilities•H ealth and productivity management of
employees

Medium-termManagement Plan 20-22

Step Ⅳ

ISO22000
FSSC22000

StepⅡ

StepⅠ

ISO9001

After Medium-termManagement Plan 23-25

AIB

Food Safety and Quality Management System

Diversification ofwork styles

Business processtransformation

From analog to digital

Toward creationof new value

Sophisticationof businessby digitalization

Promotion ofdigitalization

Digitalization

Promotion ofdigitizationDX

Acceleration ofdigitalization

Step Ⅲ

HACCP
PDCA

Audits/Investigations

Traceability

Design/Development

Purchase

Manufacturing

Quality Control

Education/Training

Improvement
Activities

5S

Internal Standards/
Procedures

KPI and Targets
KPI

Medium-term Management Plan Target

Promoting digitalization*4 ISO9001: International specifications for quality management systems*5 AIB (American Institute of Baking) Food Safety System: Framework for external
auditors to perform on-site audits at plants in accordance with the “AIB Consolidated Standards for Food Safety,” which places emphasis on GMP (GoodManufacturing Practice), a guideline for manufacturing safe food. It includes
ideas about food defense, and the following five items are inspected in the audit: Operational methods and personnel practices, Maintenance for food safety,
Cleaning practices, Integrated pest management, and Adequacy of prerequisite
and food safety programs.

Principle 2. Plant manufacturing stage
Do not make problematic products• Risk assessment of new productdevelopment• Strengthen traceability system• FSQMS investigation activities
Audit activities of own plants
Patrol activities of Group companies• Education of quality managers
Analysis technology (precision management)
Sensory evaluation (taste/smell tests)
Training at Group companies•D igitalization promotion costs: 4.5 billion yen over 3 years (1.2 billion yen for growth investment)

Main measures ❶Introduction of multifaceted
analytical DB and Dashboard
Main measures ❷•S ales transformation through effective use of customer information(customer analysis → sufficient customer proposals)•C ost reduction: 60 million yen per year•F
 uture HR to promote DX: training of 100 staff members

Development of HR to promote DX•C ost reduction by deploying “No-code development tools”: 70 million yen per year

Introduction of Multifaceted Analytical DB
and Dashboard
We are building a database for centralized management ofcustomer information in order to provide digital support for
our reform into a “one-stop” sales organization. In conjunction with that, we are introducing a dashboard for effective
use of all information.

Development of HR to Promote DX
We design our human resource training program for theroles in digital promotion.
We foster practical digital skills, such as with no-code
development tools, in members specifically chosen as future
DX human resource candidates so they can digitally solve
issues in their own departments.

Principle 3. Delivery stage
Do not deliver problematic products• Audit of our own warehouses

Multifaceted analytical DB• Surveys/instruction for logistics storage
warehouses[Customer list][Customer chart]· Priority clients• Contamination prevention during loading
and at the time of delivering at thedestination· Targets· Business card
information• Shutting and locking trucks• Education of workers such as drivers· Project information· Activity history

Schedule· Past estimates

Activity recording

Dashboard

Rename Information System Department
as “Digital Promotion Department” andpromote digitalization in the whole company· Forecast/ result
management· Performance byproduct

Management· Performance bycustomer

DigitalPromotion Dept.

· Performance bybusiness category· KPI management• Sanitation/Quality improvement activities atforeign production bases

Digital Promoter

Chose digital promoters from every
department, have them acquire digital skills,
such as no-code development tools, andsolve issues in their own department (Digital
Promotion Department provides education,
support, and evaluations)(Future HR to promote DX)

System users

Response to food poisoning and infections

Groupware

Showa Sangyo Group Integrated Report 2023

Medium-termManagement Plan 23-25

StepⅤ

3 Principles of Safety and Reliability
Principle 1. Raw material procurement stage
Do not bring in problematic materials

Medium-termManagement Plan 17-19

Food Safety
and Quality Policy

3 Principles of Safety and Reliability
Based on the ideas in the “3 Principles of Safety and Reliability,” our Group engages in revisions of all standards in the processes
from the stage of procurement of raw materials to delivery, and activities to improve the level of the manufacturing environment.

28

Management
Capital

WF

Document management

ERP(All employees)

Showa Sangyo Group Integrated Report 2023

29

Management Strategy

Roadmap to Realization of Long-term Vision
As our vision for Showa Sangyo in FY2025, the year of our 90th anniversary, we formulated the Long-term
Vision SHOWA Next Stage for 2025, and we will pursue this vision by developing three successive threeyear Medium-term Management Plans over the nine year period of 2017 to 2025.

Towards the Formulationof a New Long-term
VisionLong-term Vision

3rd

Stage

“
Next Stage for 2025”

2nd

Stage

1st

(Vision)Medium-termManagement Plan

Stage

23-25

Medium-termManagement Plan

Medium-termManagement Plan

-Let’s thicken our trunks, extend our branches and leaves,and grow fruit that benefits the world-[Harvesting]

20-22

17-19

“Grain Solution Company - NEXT STAGE”
providing satisfaction for all stakeholders＋[SHIN-KA][Building][Laying foundation]
¥

20.0

20.0

¥

billionbillionOrdinary profit█ Initial Plan
█ Result / Revised Plan

¥

11.5

13.0

¥
billion
¥

10.1

13.0

billion¥billionFY2025 Plan¥

FY2019 (Results)
30

Showa Sangyo Group Integrated Report 2023

billion

6.5

billionFY2022 (Results)

FY2025 (Planned)●

Ordinary Profit

●

ROE

●

ROIC

●

CCC

●

Net D/E Ratio

13.0 billion
7.0% or more
4.0% or more
75 days
0.6 or less¥

VisionShowa Sangyo Group Integrated Report 2023

31

Management Strategy

Review of Long-term Vision “SHOWA Next Stage for 2025”
Here, we review the key strategies and outcomes of the 1st Stage and 2nd Stage Medium-termManagement Plans in the Long-term Vision.

Long-term Vision “SHOWA Next Stage for 2025”

1st

Stage

of the Long-term
VisionBasic Policy

Medium-term Management Plan

1st Stage Mediumterm Management
Plan

Major KPIs

Key Strategies
and Outcomes

17-19

2nd
Stage

of the Long-term
Vision“Foundation stage to pursue our Long-term Vision”-Establishing a stable profit base and preparing for further growth-

Basic Policy

Targets

Results

Evaluation

Net sales¥260.0 billion¥254.0 billion○

Ordinary profit¥11.5 billion¥10.1 billion△

ROE

9.0% or more

8.0%

Equity ratio

50.0% or more

49.2%(1) Strengthening
Our CoreBusinesses(2) Expansion of
Our Business
Fields(3) Contribute toSolving Social
Issues(4) Rebuilding Our
Platform(5) Reinforcing
Stakeholder
Engagement

Evaluation

◎

△

〇

〇

〇

2nd Stage Mediumterm Management
Plan[Building]“SHOWA New Value Creation”-What is the value only Showa can create?Targets

Results

Evaluation¥280.0 billion¥335.0 billion○

Ordinary profit¥13.0 billion¥6.5 billion

×

△

ROE

9.0% or more

7.1%

△

○

Dividend payout ratio

Approx. 30%

27.9%

○

Major KPIs

Key Strategies
and Outcomes

We faced a severe business environment due to the COVID-19 pandemic, a sharp rise in the raw grain prices,and soaring import and energy costs. Though net sales exceeded the plan thanks to a focus on appropriate pricerevisions, ordinary profit and ROE did not reach their targets.

Major OutcomesIssuesKey Strategy• Establishing an integrated production system
for the convenience store bread business• Exploring synergies between ourbusinesses• Strengthening our production capacity(Soy Protein / Starch Syrup)• Strengthening development ofhigh value-added products(1) Strengthening
Our CoreBusinesses• Taiwan: Launch of new Flour Milling and Eggs
businesses• Expansion of businesses incurrent overseas business areas• Establishment of Showa Sangyo International
Vietnam Co., Ltd.

• Cultivation of the next growthbusiness• Reduction of CO2 emissions throughintroduction of gas cogeneration systems• Contribution to a sustainable
society• Development of garbage bags madefrom biomass• Strengthening non-financial
strategies that contribute to our
corporate value• Building a business strategy promotion system• Advancing of our businessportfolio management system• Establishing a Remuneration Advisory
Committee and Management Advisory
Committee

20-22

Net sales

Despite record-high ordinary profit, we fell short of our targets due to the impact of higher logistics, labor, energy,
and other costs.
Key Strategy

Medium-term Management Plan

• Strengthening dialog with our
stakeholders• Strengthening IR for individual investors• Strengthening external
communication〇

Major OutcomesIssues•A cquisition of San-ei Sucrochemical
as a subsidiary• Transformation to a “one-stop”
sales organization•S ales integration with Naigai Flour Milling• Strengthening the development/
sale of value-added products•R evision of the Baking Bread Business profit
structure•S tart of operations at Funabashi Premix
No.2 Plant(2) Expansion of
Our Business
Fields△•A cquisition of Boso oil and fat Co., Ltd.
as a subsidiary• Expansion of overseas businessand strengthening of exports•T aiwan: Conversion of Flour Milling and Eggs
businesses to equity method affiliates• Expansion of frozen foodbusiness•E ntering the agribusiness industry• Challenge to new businesses•S trengthening the development/sale ofplant-based foods(3) Contribute toSolving Social
Issues〇• Strengthening Groupmanagement• Strengthening the posting of informationon the corporate website

Evaluation•D isabled employment: Achievement of thestatutory employment rate

• Continuous efforts to achieve ourenvironmental goals•D iscontinued use of coal at Kashima Plant’s
cogeneration facilities• Promotion of D&I•T CFD Endorsement and Disclosures (Starches
and Sweeteners Business)•A chievement of target of “more than doubling
the proportion of women in management
positions”•S
 etting new Group Environmental Targets(4) Rebuilding Our
Platform• Introduction of the new personnel framework〇•S trengthening solution-based sales by
establishing the Solution Sales Department• Advancing our business portfolio
management• Leveraging our intangible assets• Introduction of “Zero Trust” security system(5) Reinforcing
Stakeholder
Engagement

32

Showa Sangyo Group Integrated Report 2023

• Issuing Integrated Reports〇•L isting on the Prime Market• Strengthening proactive
communication and dialog•S trengthening external communication abilities
by opening official social media accounts

Showa Sangyo Group Integrated Report 2023

33

Management Strategy

3rd

Stage

of the Long-term
VisionMedium-term Management Plan 23-25

The Showa Sangyo Group has formulated a medium-term management plan for the period fromFY2023 to FY2025 as the final stage of SHOWA Next Stage for 2025, the Long-term Vision.

’s declaration:“SHIN-KA”

Basic Concept

Toward the 90th Anniversary,and beyond

Showa Sangyo, which will celebrate its 90th anniversary in FY2025, fulfills a social mission to provide stable supplies of safe and secure food while continuing
to grow toward realization of the Group’s vision.
Having made our “SHIN-KA” declaration, we will
evolve our grain solutions as Professionals in Grains
and pursue the intrinsic value of ingredients, while
being committed to deepening sustainability management through initiatives aimed at contributing topeople’s health and reducing burden on the environment.

Grains
We will realize the“evolution” of ourgrain solutions.

HealthFinancial KPIs and Quantitative Effects of Priority Measures
Under Medium-term Management Plan 23-25, we have introduced ROIC as a new management indicator, as we are working to advance business portfolio management by developing business evaluation and rules for allocating management
resources. In addition, focusing on the KPIs that make up ROIC, including cash conversion cycles (CCCs), will increase
corporate value.
We also aim to generate profit of ¥6.5 billion by steadily implementing each of the measures.

Sustainable

We will meet thechallenge of “deepening”
sustainability
management.

We will pursue
the “intrinsic value”
of ingredientsand contribute topeople’s health.

(2) Expansion of Our Business Fields

1. Evolution of Grain Solutions - Strengthen product sales bytransforming into “one-stop” sales organization

1. Expanding overseas businesses by strengthening existing
businesses in the ASEAN region and developing new businesses

2. Strengthening cooperation among Group companies

2. Strengthening export businesses

3. Optimization of product composition

3. Expansion of frozen food businesses

4. Expansion of value-added products sales by differentiation strategy

4. Challenge to new businesses- Plant-based food
- Fine chemicals, oleochemical

5. Strengthening stable procurement

P.36

(%)

6.5
3.9

6.5
7.1*1

13.0
7.0 or more

200%

ROE
ROIC*2

(%)

2.6

1.8

4.0 or more

2.2 percentage

CCC

(day)

78
0.4

91
0.5

75
0.6 or less16 days shorter(1) Strengthening Our Core Businesses
1. Evolution of the Grain Solution

+0.4

2. S
 trengthening business scope
expansion and profitability throughlinks among Group companies

+0.9

3. O
 ptimization of product composition

+0.4

4. E
 xpansion of value-added products
sales by differentiation strategy

+1.0

P.38

(4) Rebuilding Our Platform

1. Continuous efforts to achieve ourenvironmental goals

1. Establishment of organizational foundation
by reorganization

2. Reduction of packaging plastic

2. Advancing business portfolio management
by introducing ROIC

Showa Sangyo Group Integrated Report 2023

point increaseー

3. Strive for operational sophistication bydigitalization and build a promotionalorganization for DX

P.40

Recovery in the Business Environment andResponse to Changes in the Environment(2) Expansion of Our Business Fields
1. Expansion of overseas businesses+0.5

1. Recovery of sales volume+0.6

2. Expansion of frozen food businesses+0.3

2. Appropriate price revisions+2.4+¥0.8 billion+¥3.0 billion

3.0

Ordinary profit (Billions of yen)

2.7

9.2
6.5

Deepen sustainability management to support sustainable growth of our Group34

ー+¥2.7 billion

10.2

P.39

Compared to FY2022*1 Approximately ¥5.2 billion in gain on sale of non-current assets (extraordinary income)was generated in FY2022 due to the sale of the Shosan Ageo Building.
*2 Definition of ROIC (Return on Invested Capital)
ROIC = Operating profit after tax ÷ Invested capital (Net interest-bearing debt +Shareholders’ equity)
Operating profit after tax is calculated with income taxes as 30% of operating profit.

(1) Strengthening Our Core Businesses

4. Develop a roadmap to achieve carbonneutrality

FY2025 Plan

NET D/E Ratio

We will implement two business strategies, “strengthening our core businesses” and “expansion of our business fields.”
At the same time, we will also focus on “reducing burden on the environment,” “rebuilding our platform,” and “reinforcing
stakeholder engagement,” which will support our business strategies from the perspective of enhancing our sustainability
See page 26 for details.
management capabilities. These five key strategies are also linked to our materialities.

3. Advanced utilization of biomass

FY2022 Results

Ordinary Profit (Billions of yen)

Five Key Strategies(3) Reducing Burden on theEnvironment

FY2021 Results

13.0

0.8

6.5

(5) Reinforcing Stakeholder
Engagement+¥6.5 billion

1. Drastic promotion of D&I
2. Promotion of strategic human capitaldevelopment
3. Strengthen external posting and raiseawareness of the Group via SNS

FY2019FY2020

FY2021

FY2022

Strengthening Our
Core Businesses

Expansion of Our
Business Fields

Recovery in theBusiness Environment
and Response to
Changes inthe Environment

FY2025 Plan

P.41

Showa Sangyo Group Integrated Report 2023

35

Management Strategy

Medium-term Management Plan

Key Strategy (1)｜ Strengthening Our Core Businesses

We will work on five priority measures in “strengthening ourcore business.”
Measures for Key Strategy (1)1. Evolution of Grain Solutions- Strengthen product sales by transforming
into “one-stop” sales models
2. Strengthening cooperation among Group
companies
3. Optimization of product composition
4. Expansion of value-added products sales bydifferentiation strategy
5. Strengthening stable procurement

1. E
 volution of Grain Solutions - Strengthen productsales by transforming into “one-stop” sales models
In order to further evolve as a Grain Solution Company, we
will implement the first radical reorganization of our sales
departments since our foundation.
The “product-out” sales departments for each businessbefore the reorganization sometimes resulted in duplicationof sales activities and loss of opportunities. Going forward,
however, we will evolve our sales departments into units withspecialized sales functions that respond to customer needs
as a “one-stop shop,” and integrate our sales desks for eachbusiness category. By doing this, we can maximally leverage
our diverse business portfolio, which is one of our strengths,
thereby adopting a market-oriented posture that provides
customers with the best solutions.

2. Strengthening Cooperation Among Group Companies
By integrating the operations of Group companies along business lines, we will maximize the advantages of Group synergies,
thereby improving earnings through strategic concentration of R&D, procurement of raw materials, production, and sales.

Strengthening Cooperation Among Group Companies
Flour Milling
Other

Vegetable Oils

Shosan Shoji
Shosan Kaihatsu
Shourei
Oban
Shosan Business Services
Shosan Transportation

Okumoto Flour Milling
Kida Flour Mills
Naigai Flour Milling
Central Flour Milling

Boso oil and fat
Nagaokayuryo
Kumiaiyushi
Musashiyushi
Minaminihonkomeabura
Tokyoyushikogyo

Starch andSweetener

Frozen Food

Diagram of Sales Department Reorganization

Before Reorganization

After Reorganization“Product-out” sales departments by business“One-stop” sales departments organized by businesscategory and customer

Customers

Sales Division

Company A

Flour
Milling

Business
Sales

Customers

Showa Frozen Foods

Business Management
Division

Company B

Vegetable
Oils andHouseholdFoods

Business

Company C

Starch andSweetener

Business

Animal
Feed

Sales

Sales

Business

Duplication of sales activities
and loss of opportunities

Sales

One-stop

Sales Division(Sales)Company B

Company C

Company D

FlourMilling

Vegetable
Oils

Starch andSweetener

AnimalFeed

Integrationof sales desks

Maximize business synergies

See page 42 for details.

Showa Sangyo Group Integrated Report 2023

Animal Feed

Swing Bakery
Grandsolu bakery
Garden Bakery
Tower Bakery

Kyushu Showa Sangyo
Showa Keiran

Shikishima Starch MFG
San-ei Sucrochemical

Profit generated throughbusiness expansion

0.2 billion+¥

Flour Milling Business
Expand the premix business throughoptimization of production sites centered on
Funabashi Premix No. 2 Plant
Vegetable Oils Business × Starches andSweeteners Business
Strengthen the corn oil supply chain throughcollaboration between the Vegetable Oils
Business and the Starches and Sweeteners
Business
Baking Bread Business
Develop new markets by installing new
equipment
Animal Feed Business
Expand layer poultry business throughintegrated operations from sale ofcompound feed through to egg production(Business management)

We will make the Business Management Division independent of the Sales Division, promote integrated Group management
centered on business, and strengthen business portfolio management.

36

Baking Bread

Company A
R&D

Company D

23-25

Procurement of
raw materials

Profit generated throughstrengthening profitability
Production

Sales

Maximize advantages of Group synergies and reduce costs

3. Optimization of Product Composition
As a high percentage of the products handled by the Groupare commodities, the time required for appropriate pricerevisions in response to rising costs is an issue. Under
Medium-term Management Plan 23 - 25, we will shift to anearnings structure that is impacted less by changes in thebusiness environment by strengthening sales of our uniqueproducts and optimizing product composition.
4. E
 xpansion of Value-added Products Sales by Differentiation Strategy
We will shift to an earnings structure that is impacted less bychanges in the business environment by developing valueadded products based on the Group’s unique materials andtechnology and strengthening sales.

0.7 billion+¥

Improve earnings through strategic concentration of
R&D, procurement of raw materials, production, andsales based on integrated Group operations

5. Strengthening Stable Procurement
We will further strengthen stable procurement and cost control for raw grain and the energy required for processing it inorder to maintain stable supply of food, which is the social
mission of the Group.
Stable Procurement Measures
Raw grain:	We will aim to reduce procurement risk by diversifying the regions where we procure grains.
Energy: 	The newly established Technical Planning Department will be the organization that formulates
energy procurement policy and controls costs
for the Group as a whole, including Group companies.

Showa Sangyo Group Integrated Report 2023

37

Management Strategy

Medium-term Management Plan

Key Strategy (2)｜ Expansion of Our Business Fields

For the Showa Sangyo Group to maintain growth despite thedecline in the Japanese population, in addition to “Strengthening Our Core Business,” initiatives aimed at “Expansion of
Our Business Fields” are essential to establish a foundation
for new earnings.

1. E
 xpanding Overseas Businesses by Strengthening
Existing Businesses in the ASEAN Region and Developing New Businesses
As demand in the Japanese market contracts, we will actively strengthen overseas businesses from the perspectiveof capturing growth overseas and diversifying the risk offluctuation in earnings.
In addition to strengthening business in China, Taiwan,
and Vietnam, where we have already expanded, we areworking to expand our comprehensive foods businessacross regional borders by engaging in M&A and pursuing
capital and business alliance agreements with overseas
partners based on two basic policies: “(1) Expansion of Our
Business Fields” and “(2) Achieving High Added Value by
Expanding the Value Chain.” In this way, we aim to “Take the
SHOWA Business Model Overseas.”

Measures for Key Strategy (2)1. Expanding overseas businesses bystrengthening existing businesses in the
ASEAN region and developing new businesses
2. Strengthening export businesses
3. Expansion of frozen food businesses
4. Challenge to new businesses- Plant-based food- Fine chemicals, oleochemical

Etc.

VisionAlternative foods

Take theBusiness Model
Overseas*New businesses(1) Expansion of
Our Business Fields

Cross-regional
development

Business field·C hina and Taiwan·N orth America
etc.

Animal feed/chicken eggs

Wheat flour

Raw materials(procurement)(2) Achieving High Added Value
by Expanding the Value Chain

PremixPrimary
processing

Areas Where We Challenge to Expand Our Business Fields(1) Plant-based food (PBF) business

Accurately capture growing demand in Japan and overseas by developing new ingredients and applications for plant-based food(PBF), which has been drawing attention recently due to rising awareness of the environment and healthSoy protein ingredients
manufactured at ourown oil millSecondaryprocessing

Value chain
Showa Sangyo Group Integrated Report 2023

Strengthen health food area and cosmetics area through development offunctional materials derived from rice,soybeans, and sunflowers

Processed
PBF

New PBF
ingredients(3) Oleochemical business

Promote the oleochemical business
which utilizes the by-products generated in the manufacturing process for ricebran oil and sunflower oil

Products
for BtoC

Retail andrestaurant｜ Reducing Burden on the Environment

The deterioration of the global environment
poses a major risk to the Group’s procurementof grains, our main raw material, and reducing burden on the environment is one of theGroup’s materialities. In order to ensure theachievement of the Showa Sangyo Group
Environment Targets, we have set target values for FY2025, the final year of Medium-termManagement Plan 23-25.
Furthermore, we added a new target for
reducing plastic usage as our fourth environmental target to accelerate our environmental
initiatives.
See page 58 for details.

38(2) Fine chemicals business

Processing technology
and sales know-how
cultivated throughtextured soy protein

Texturedsoy protein

Key Strategy (3)· ASEAN

Frozen Food

Wheat flour
Premix

4. Challenge to New Businesses
In the plant-based food (PBF) business, where demand is
growing in Japan and overseas, we will work to commercialize
new PBF ingredients as well as developing processed foods
based on our existing textured soy protein. Moreover, we will
work to strengthen our fine chemicals business, which is
focused on the fields of health food and cosmetics, as well as
promoting our oleochemical business, which utilizes by-products
produced in the cooking oil manufacturing process.

Develop materials and establish manufacturing technologies

Diagram of Measures for Expansion of Overseas Businesses

Existing Fields
in Overseas Businesses

3. Expansion of Frozen Food Businesses
In addition to strengthening our existing business, which
revolves around Showa Frozen Foods’ processed wheat products such as their mainstay takoyaki, wontons, and petit cakes,
we will expand into new fields where we can generate Groupsynergies, such as premixes and plant-based foods throughM&A and capital and business alliances, including overseas.

Develop applications

2. Strengthening Export Businesses
We will centralize export operations in the Overseas Business
Development & Sales Department and aim to increase sales
volume and increase earnings by expanding the number ofexport destinations and products. We will capture further demand in the ASEAN region, which is currently our main export
destination, and expand sales in North America and Europe.

Animal Feed
Eggs

23-25

Environmental Targets

Reductionof CO2 emissions

Medium-term Management
Plan Targets

Showa Sangyo Group
Environment Targets

2025 Targets

2030 Targets-30% or more

Compared to FY2013

2025 Targets
Reductionof food loss

Reductionof water usage(basic unit)

NEW
Reductionof plastic usage*(basic unit)-30% or more

-9% or more

-30% or more

2030 Targets

Compared to FY2019

2025 Targets-7% or more

2025 Targets

Compared to FY2018

2025 Targets-46% or more

-12% or more

2030 Targets

Compared to FY2013-25% or more*Single-use plastic used in petroleum-derived container and packaging materials
Showa Sangyo Group Integrated Report 2023

39

Management Strategy

Medium-term Management Plan

Key Strategy (4)｜ Rebuilding Our Platform

We will steadily implement our business strategy and focus
on “rebuilding our platform” in order to support the sustainable growth of the Group.
Measures for Key Strategy (4)1. Advancing business portfolio management byintroducing ROIC
2. Promoting human capital management
3. Promoting digital strategies
4. Promoting RD&E* strategy

1. A
 dvancing Business Portfolio Management byIntroducing ROIC
We will work to continuously increase corporate value by
improving capital efficiency using ROIC as an indicator forbusiness evaluation. By creating stable cash flow from corebusinesses for steady investments and promoting growthinvestments with a focus on the overseas businesses, thefrozen food business, and the Baking Bread Business thatwill serve as the foundation of future earnings, we will shift
our business portfolio towards an earnings structure that isless affected by changes in the external environment.

*Research, Development and Engineering

Diagram of Advancing Business Portfolio Management

2. Promoting Human Capital Management
We consider human resources to be the most importantmanagement capital for supporting the Group’s sustainable growth. We will continuously make strategic
investments in human resources and activate humanresources to the maximum degree for our sustainablegrowth and employees’ well-being

Ⅰ Create stable cash flow from core businesses for steady investments② Cash conversion cycles (CCCs)③ Investment hurdle rate

With a company-wide target of 4.0% or more,
we will set KPIs for each business with the aimof maximizing the ROIC-WACC spread.

To shorten CCCs, we will set KPIs for eachbusiness and manage progress throughmonthly cycles.

We will set a rate that exceeds WACC (4.0%)
and review overseas investment projects withthe addition of country-specific risk premiums.

Current Status of Business Portfolio

Direction of Business Portfolio
High

Starch andsweetener

Priority investment

Growth potential

Growth potential

Improving efficiency

Vegetable oils

Animal feed
Pasta
Frozenfood· Vegetable oils
· Starch and sweetener· Animal feed

Investment to be
the source of
future corporate value

Examining regrowth

Capital efficiency↑ ↑Company-wide WACC Company-wide ROIC target
4.0% or more

Improving efficiency· Overseas business· Frozen food · Baking bread

Flour milling

PremixProfit restructuring
Low
Low

Profit restructuringHighMedium-term Management Plan Targets

Drastic promotion of D&I• Proportion of women in management positions:
Above 10% in FY2025

Strategic investment in
human capital• Investment in Reskilling:
More than double in FY2025 (vs. FY2021)

Improvement of employee
engagement• Engagement Score:
Target score to be announced during the term of
the Medium-term Management Plan 23-25

3. Promoting Digital Strategies
We will move forward with the digitalization of our operations to promote digitalization in addition to training
human resources for DX to create new value throughdigital transformation and working to solve issues at
each site using digital strategies.

Digital Strategies

Medium-term Management Plan Targets

Promoting digitalization• Digitalization promotion costs: 4.5 billion yen over
3 years (1.2 billion yen for growth investment)

Main measures ❶• Sales transformation through effective use of
Introduction of multifaceted
customer information
analytical DB and• Cost reduction: 60 million yen per year
DashboardSee page 29 for details.

Main measures ❷Development of HR topromote DX• Future HR to promote DX:
Training of 100 staff members• Cost reduction by deploying “No-code development
tools”: 70 million yen per year

4. Promoting RD&E Strategy
We will integrate the Research and Development Division and the Production Technology Division throughthe reorganization of the Technical Division to enhance
product development in line with our business strategies. In addition, based on the new organizational
structure, we will steadily implement our key strategies
from a technical perspective by promoting researchand development of value-added products and establishing production technology in new business fields incooperation with business divisions.

RD&E Strategy

Medium-term Management Plan Targets

Ⅱ Promote growth investments to increment corporate value① ROICHigh uman Capital
H
Management

See page 60 for details.

Business Portfolio Policy

Baking
bread

23-25

Low
Low

Priority investment• Strengthen R&D in frozen food businesses
and new business fields• Improve production technology of overseas
production bases

Utilization of
IT/AI technology• Promotion of smart factories utilizing digitaltechnologies

Reduction of costs throughproduction improvement
activities• Cost reduction:
More than ¥1 billion / over 3 years in total

See page 46 for details.

· Overseas business· Frozen food · Baking bread

Key Strategy (5)· Flour milling· Premix· PastaExamining regrowth

Capital efficiency↑ ↑Company-wide WACC Company-wide ROIC target
4.0% or more

Expansion of
Our Business Fields

High｜ Reinforcing Stakeholder Engagement

We strive for improvement in trust through timely, relevant information disclosure
and promotion of dialogue with all of our stakeholders. Furthermore, we will foster
bidirectional communication and learn the expectations and worries of stakeholders and society, as we move forward with initiatives that fulfill our social responsibility.
See page 62 for details.

[Definitions]40

Capital efficiency (X): Average ROIC for the last 3 FY
Growth potential (Y): Average net sales growth rate for the last 3 FY
Bubble size: Invested capital in the most recent FY

Showa Sangyo Group Integrated Report 2023

ROIC: Net operating profit after tax (NOPAT) ÷ Invested capital (average balance for the twomost recent business years)
Invested capital: Interest-bearing debt + Shareholders’ equity (average balance for the last 2 FY)

Showa Sangyo Group Integrated Report 2023

41

Management Strategy

Sales Strategy (Message from Manager of Business Management & Sales Division)
Five Key Strategies in Medium-term Management Plan 23-25(1) Strengthening Our Core Businesses
1. Evolution of Grain Solutions- Strengthen product sales by transforming into “one-stop”
sales organization

2. Strengthening cooperation among Group
companies
3. Optimization of product composition
4. Expansion of value-added products sales bydifferentiation strategy
5. Strengthening stable procurement

Junji Kokuryo
Director Senior Managing Officer
In charge of Business
Management & Sales Division

 hree Years of Refining Our Value in a
T
Challenging Business Environment
The three-year period of Medium-term Management Plan
20-22 saw an extremely harsh business environment due tothe COVID-19 pandemic, the increasingly tense situation between Russia and Ukraine, sharp rises in raw grain and energy
prices, and the rapid depreciation of the yen against the dollar.
We struggled to sell our commodity products, which
are particularly susceptible to changes in the environment,at reasonable prices. On the other hand, however, we fully
identified the changes in the market that came with thechanges in the environment and focused on proposing
value commensurate with prices. As a result, we were able
to meet the expectations of customers.
The period can be described as three years of building
up our strength during which each and every employee has
become aware of and further refined the value of the “Compounded Synergy Solution” which is our strength, whilelearning from issues related to the earnings structure.

 indset Transformation Creates a Running
M
Start for Reorganization
The Showa Sangyo Group is a unique manufacturer handlinga broad range of raw materials centered on wheat, soybeans,canola, corn, and other grains. Our strength lies in the ability
to propose new value by combining these raw materials.
Therefore, it is important for the Business Management& Sales Division to focus on proposing new value without
being restricted by business domains based on a market-in
approach with the concept of being a producer that solves
the issues of customers.
The Solution Sales Department, which was newly established in April 2021, is an organization designed to apply
42

Showa Sangyo Group Integrated Report 2023

this concept in both tangible and intangible terms. Primarily
responsible for sales and proposals directed at restaurants,
the Solution Sales Department provides solutions that range
from developing menus to improving operational efficiency.
In October 2021, the back office operations that were
scattered across various sales departments were centralized
and integrated in order to reform the functions of the Sales
Division. By standardizing rules and operations that werepreviously different for each business, we have eliminatedoverburdening, waste, and overdependence on specificemployees. By doing this, we have made progress in making operations efficient by digitalizing tasks that have beenstandardized, such as the sending of invoices, for example.
The result of these changes has activated our organization. There have been more proposals based on frontline
ideas and business improvements throughout the organization than ever before, and our organization was revitalizedeven more.
This transformation of mindset was precisely the final
piece of reorganization that was needed. In April 2023, we
decided to transform the sales departments from productout sales departments for each business into one-stop sales
models organized by business category and customer inorder to embed this new way of thinking, elevate the substance of the transformation into a habit, and to give it scopein the form of organizational capability.

First Radical Reorganization Since Being
FoundedThe aim of the reorganization is evolution into an organizational structure with a market-in focus that combines various
assets to provide optimal solutions for each customer bymaking the most of the diverse business portfolio which is
the Group’s strength.

(2) Expansion of Our Business Fields(4) Rebuilding Our Platform

1. Expanding overseas businesses bystrengthening existing businesses in the ASEAN
region and developing new businesses
2. Strengthening export businesses
3. Expansion of frozen food businesses

1. Establishment of organizational foundation byreorganization
2. Advancing business portfolio management byintroducing ROIC
3. Strive for operational sophistication bydigitalization and build a promotionalorganization for DX

4. Challenge to new businesses- Plant-based food
- Fine chemicals, oleochemical

Therefore, we restructured our organization into sales
departments organized by business category and customer.
On top of this, we provided education and training for sales
staff before the reorganization to enable them to acquire
knowledge of products in categories they have not previously handled, and we will continue expanding our training programs to improve the expertise of sales staff in all categories.
In addition, organizations related to sales activities, suchas marketing organizations, were also consolidated fromeach business to ensure evolution into organizations that
accommodate all channels, as well as supporting proposals
with an awareness of the consumer perspective (BtoBtoC)
beyond the customer’s business category.
By doing this, we will provide proposals that include theAnimal Feed Business centered on eggs in addition to foodingredients such as flour, oil, starch and sweetener with theaim of establishing a unique, highly-competitive businessmodel as a Grain Solution Company that can help to solve
all kinds of issues related to food, such as improving texture
and flavor, improving production processes, and creating
new food trends.

A dvancing the Business Portfolio andCross-business Synergies
Under Medium-term Management Plan 23-25, we will advance business portfolio management with the introductionof ROIC and other measures. We will also work to increase
earnings through integrated operations of Group companies
in each business through maximizing the advantages ofGroup synergies and strategic centralization of R&D, procurement of raw materials, production, and sales.
We also consider it is important to create cross-businesssynergies that optimize the business portfolio and maximize
value creation. For example, when we welcomed Boso oiland fat and San-ei Sucrochemical into the Group in 2020,
we strengthened the corn oil supply chain through crossbusiness synergies in the Vegetable Oils and Starches andSweeteners businesses. The capital and business alliancewith Tsuji Oil Mills in May 2023 made it possible to further
strengthen competitiveness and expand the scale of operations with the aim of taking the initiative in the corn oil business.

E xpanding Frozen Food Businesses andStrengthening Overseas Businesses
Due to demographic trends in Japan and the impact of the
COVID-19 pandemic, the trend toward “time saving, convenience, and instant food” is not considered to be temporary, andwe believe demand for frozen food will remain strong in the future.
In addition to increasing the production capacity of
our existing business, which revolves around processed
wheat products which are the mainstay products at Group
company Showa Frozen Foods, we will expand into newfields where we can generate Group synergies, such as
premix-based processed products and plant-based foods
with an eye also on M&A and capital and business alliances.
On the theme of overseas businesses, we will strengthenbusinesses in China, Taiwan, and Vietnam, where we havealready expanded, in addition to aiming for cross-regional expansion of business leveraging our strengths, with “Expansionof Our Business Fields” and “Achieving High Added Value by
Expanding the Value Chain” as our two basic policies. Moreover, with the reorganization, we will enhance collaboration by
centralizing product exports for each business in the organization that handles overseas business and actively propose
Japanese food menus, such as tempura, to increase sales.

 romoting Digital Transformation (DX) Strategies
P
in Business Management and Sales Fields
With the acceleration of initiatives on digital measures triggered by the COVID-19 pandemic, we have made progressin turning customer information and marketing knowledge
into assets in the business management and sales fields.
More recently, we have been moving forward with DX in conjunction with business reforms by further promoting paperless
operations in addition to introducing hot desking at the headquarters offices of the Business Management & Sales Division.
Going forward, we hope to meet the challenge of DX
through a variety of approaches including the use of nocode tools in order to realize business reform without being
constrained by conventional ways of thinking and the development of a data platform that enables matrix analysis ofbusiness management (vertical) and sales (horizontal).
Showa Sangyo Group Integrated Report 2023

43

Management Strategy

Financial Strategy (Message from Manager of Corporate Division)
Fund Allocation Plan [Total for Three Years] (FY2023 to FY2025)

Cash inCash out
6.0 billion

Shareholder return ¥Cash inOperating cash
flow

Harvest results of measures implemented in 1st and 2nd Medium-termManagement Plans to generate ¥56.0 billion in operating cash flow

Asset reduction

Review of cross-shareholdings and real estateFundprocurement

Comprehensive management of assets and liabilities and systematic
procurement of funds

Growth investment

Operating cash flow

Yoshihiro Hosoi

56.0 billion

33.0 billion¥¥

Director Managing Officer
In charge of Corporate Division,
General Manager of PlanningManagement Dept.

I have been in charge of the Corporate Division since April
2023. I believe the mission of the Corporate Division is“keeping up with the times (constantly updating to the latest
information in specialized fields), being accurate (ensuring
tasks are implemented correctly), and being efficient (achieving in a shorter period of time with fewer people).”We also drive initiatives to reinforce governance functions, develop a working environment in which employees
can reach their full potential, and strengthen Group-wide
corporate functions to steadily implement SHIN-KA, thebasic concept of Medium-term Management Plan 23-25.

 inancial Results for the Fiscal Year EndedF
March 31, 2023
The fiscal year ended March 31, 2023 was a year when business results were difficult to predict due to raw grain prices
which surged from the second half of the previous fiscal year
and the impact of US dollar/yen exchange rate among otherfactors. At the same time, operating cash flow deteriorated
as rising manufacturing costs led to increases in inventories
and accounts receivable, and free cash flow was negative
despite the sale of owned assets. The associated increase
in interest-bearing debt made it a challenging year on thefinancial front with deterioration in the D/E ratio and CCC*.
*CCC: Cash conversion cycles

44

Showa Sangyo Group Integrated Report 2023

Financial Strategy under the Medium-termManagement Plan
(Outlook for Future Fund Procurement)

Investment inmaintenance/updating

The ratio of short-term funds has become relatively higher due to the issuance of commercial paper to support
the increase in short-term working capital resulting frompersistently high raw grain prices and energy costs since
FY2022, the depreciation of the yen, and other factors.
In addition, we were initially planning repayment using
funds on hand for the ¥7.0 billion bond redemption in March
2026, but we are now planning to combine this with refinancing as well.
We will continue to closely watch interest rate trends
and procure funds with the most advantageous terms andconditions for the Group, while appropriately incorporating
direct financing, such as bonds and commercial paper. At
the same time, we are conscious of maintaining an appropriate balance between long-term and short-term funds.
When considering procurement of long-term funds, wewill actively look into SDGs bonds and other methods to fulfil
the Group’s social responsibilities and promote initiatives
that contribute to the sustainable development of society.

Business Investment Plan
The core of our business investment will naturally be investment in equipment for flour milling, vegetable oils, andstarches and sweeteners in the foods segment, which is
the Group’s main product group. However, we envisage
consumption volume for the Group’s main products will
experience a long-term downward trend due to the decline
in the Japanese population, so it is also important to allocate
funds to expanding our business fields, including M&A andoverseas expansion.

Asset reduction ¥3.0 - 4.0 billion
Fund procurement¥9.0 - 10.0 billion(¥69.0 billion)

Continuation of long-term, stable dividends at a dividend payout ratioof around 30%

Shareholder
returnGrowthinvestment

23.0 billion¥

About the Corporate Division

Cash out

7.0 billion

SB redemption ¥Digitalization
4%

M&A investment
limit¥15.0 billion
46%

Environmental
countermeasures
5%
New businesses¥3.5 billion
Increased production
11%

Total

¥

33.0 billion

efficiency
34%

Working capital

Restrict increases in working capital to zero through shortening of
CCC by optimizing inventories(¥69.0 billion)

We will discuss investment projects thoroughly, including
the process for checking whether investment projects meetthe established hurdle rate criteria.
In terms of the big picture, the industry is likely to bestable as the world’s need for food itself will not decline dramatically, and we will continue to make steady investments
to enable steady supplies of the Group’s main products andthe continuous creation of appropriate business operations.

Shareholder Return as Distribution of Profit
We aim to continue paying stable dividends over the longterm while striving for a stable management base. In orderto enhance corporate value over the medium to long term,
we believe dividends should be determined taking into consideration the balance with growth investment and internal
reserves. One of the guidelines for the dividend payout ratio
is around 30%.
We will also consider a combination of various capital
strategies to promote initiatives aimed at the enhancementof corporate value required by society.

capital cost of holdings, and reports to the Board of Directors. Based on an asset light perspective, we sell or otherwise reduce stocks deemed not appropriate for holding.
We have a strong awareness about the importance ofstrengthening initiatives in non-financial areas, such assustainability. In addition, the experience of the COVID-19
pandemic has reaffirmed the importance of business continuity management (BCM) for providing stable supplies offood ingredients as a food manufacturer. Although we candeal with expected events using disaster prevention andother manuals prepared in advance, we also believe it isnecessary to train human resources with the ability to handle
unexpected events and events that exceed expectations ina flexible manner.
The demands on the Corporate Division are growing year
after year, but corporate competitiveness will be reduced if
the division becomes bigger than necessary. While increasing the productivity of our existing tasks, we will appropriately direct human resources and funds toward the new tasks
required by stakeholders.

Holding Policy for Cross-shareholdings
Our basic policy is to reduce cross-shareholdings in accordance with the Corporate Governance Code. The department with responsibility reviews individual stocks oncea year, taking into account the significance, rationality, andShowa Sangyo Group Integrated Report 2023

45

Management Strategy

RD&E* Strategy (Message from Manager of Technical Division)*Research, Development and Engineering

Diagram of RD&E Strategy

Provision of Products and Services
with the Group’s Unique Value
Needs from customers

Seeds and resources of the Group

Social issues

Open innovation

Market-in(Market and customers)

Masashi Ohno
Director Managing Officer
In charge of Technical Division

About the Technical Division
The Showa Sangyo Group provides safe, secure, and highquality products in addition to value based on the perspective of customers through product development leveraging
unique technologies and synergies with meeting diverse
needs promptly as the starting point. Under Medium-termManagement Plan 23-25, the Technical Division is strengthening its planning functions through reorganization to integrate each initiative into business strategy. We will establish
non-financial KPIs for RD&E strategy and environmental targets with the aim of strengthening our core businesses andexpansion of our business fields. To realize these goals, it isimportant to generate the innovation unique to the Showa
Sangyo Group through synthesis of a “market- in” approachthat starts with customer needs identified through communication and dialogue with customers and latent needs discerned by researchers and developers and a “product-out”
approach that increases high value-added through a deepening of technology. To realize the Group’s “SHIN-KA,” wewill contribute to people’s health by maximizing the power ofgrains and finding new functionalities while helping to realize
a sustainable society by using all parts of the grain.

 trengthening Our Core Businesses as
S
Professionals in Grains
While working to enhance safety, security, stability, and low
costs, which are the four basic factory principles of manufacturing, the Group will reduce the burden on the environment by
reducing CO2 emissions and other means, build a production
system for high value-added products based on customers
needs, reduce costs through production improvements, andpromote the development of smart factories utilizing digitaltechnology. To create new value, we will pursue a strategy of46

Showa Sangyo Group Integrated Report 2023

differentiation leveraging our strengths in handling a numberof grains and ingredients and in providing “grain solutions”
through synergies. We will also understand the needs ofcustomers and deliver value promptly by strengthening collaboration with the Business Management & Sales Division,
which has undergone reorganization into one-stop sales
departments organized by business category and customer.
For example, we will promote R&D that includes Japangrown wheat flour and wholemeal flour with better flavor
and texture that pursues deliciousness and health functions,premixes that perform their function with the addition of only
small amounts to wheat flour, functional frying oil with reduced absorption that improves the texture of fried food, andmodified starches for premixes. We also conduct research intofunctionality in order to expand the applications of the Group’smaterials beyond food. From the perspective of reducing burden
on the environment, we have promoted product developmentof SHOWA MO AGENAI!! YAKITEMPURA-NO-MOTO, whichallows frying with a small amount of oil, as well as designand development to reduce plastic packaging materials. We
have also conducted research into the use of biomass for
packaging inks and the caps on oil and fat products andupcycling for using by-products generated in plant manufacturing processes in soil conditioners.

Meeting the Challenge of Expanding Our
Business Fields
In the expansion of overseas businesses, we will provide
Group companies with technical support related to thedevelopment of wheat flour, premix, and egg products, production, and quality assurance with the aim of strengthening
business in Vietnam, China and Taiwan. To strengthen export businesses, we will enhance product development andestablish production and quality assurance systems that are

Product-out(Products and services)

Collaboration with

Collaboration with

the Sales Division

Group companies
Collaboration with

Collaboration with

the Business
Management Division

universities and researchorganizations

Synthesis of Market-in and Product-outaligned with the needs, culture, and laws of each country.
In the frozen food business, we will take on the challengeof product development that can create synergies using theGroup’s premix and soy protein products as raw materials.
In the challenge of new businesses, we have introduced
job grades with responsibility for creating new value under
the personnel framework that was revised in FY2021, andwe are looking into and promoting new businesses. In theagribusiness area, we are increasing production volume andthe varieties of vegetables that can be produced by upgrading equipment at plant factories and improving cultivation
technology. We will also take on the challenge of developing
high value-added vegetables in the future. In the plantbased food (PBF) business, we will identify the needs ofcustomers not only for meat substitutes but also for environmentally-friendly protein and healthy ingredients to promote
development of ingredients and applications. The Group has
increased the grains and materials it handles and also expanded the range of functional ingredients they contain withthe addition of Boso oil and fat and San-ei Sucrochemical
to the Group and the capital and business alliance with Tsuji
Oil Mills. We will expand our business fields beyond the foodsector to the chemical product sector including materials
for cosmetics and biofuel, and take on the challenge of theoleochemical and fine chemical sectors by conducting R&D
for materials with health functions, and identifying the valueof using by-products from rice bran.
In promoting new businesses, we will work on short-,
medium- and long-term open innovation with external
research organizations, universities, and private-sector
companies with the aim of strengthening and streamlining
research and development.

A iming for Maximum Utilization of
Intangible Assets
The merging of the Research and Development Division andthe Engineering Division to form the Technical Division has
strengthened integration. Going forward, we will ensure the implementation of RD&E strategy through stronger collaboration
with the Business Management & Sales Division. As digitalization accelerates, we are promoting the sharing of technology
and information, including know-how, by converting it into anelectronic format with the aim of high yield, stable production
based on the utilization of production data at plants. We will
also improve the efficiency of R&D as the utilization of digitaltechnology makes it possible to visualize food structure andpowder fluidity and to design mixtures for premixes. Although
we are promoting digitalization, we believe that human resources are still key. We will visualize human capital througha human resources portfolio and allocate the right humanresources based on business strategy in addition to enhancing our unique education system, on-the-job training, and theuse of external seminars. We are also creating places where
employees engaged in similar initiatives can share information
with the aim of strengthening communication within the Group.
Moreover, we will apply for patents and take measures todeal with counterfeit products overseas in order to properly andsecurely protect the products and services of the Group andits customers. We will also utilize patents and other intellectual
property information in the Group’s sales activities. Going forward, we will strengthen our “defensive IP strategy” to makebusiness expansion easier in core business. At the same time,
we will devise and execute an “active IP strategy” in line withbusiness strategy for the challenge in new businesses.
Showa Sangyo Group Integrated Report 2023

47

Management Strategy

Strategy by Business
Flour Milling Business

Vegetable Oils Business

Strengths of the Flour Milling Business

Strengths of the Vegetable Oils Business• Development and proposal capabilities using technical knowledge that has synergies with other businesses• Production system that takes advantage of seven production sites (flour milling, premixes, and pasta),
including Group companies• Diverse and extensive sales channels possessed by other businesses and Group companies• Development of overseas business (East Asia and Southeast Asia) based on advanced technical capabilities• Extraction and production of oil from a variety of oil raw materials, including soybeans, canola, corn, and rice bran
• Proposal of the optimum oils and fats for a wide range of sales channels and end products• Integrated production of soy protein from raw soybeans• Efficient production system based on our own plants in east and west Japan and utilizing Group company
and partner plants• Location of plant in Kashima, the largest consumption area for by-products (meal), with direct supply via conveyor tosome major users

External Environment (Issues and Opportunities)
In Japan, due to population decline, the market is contracting
and the workforce is decreasing. In this environment, the issue
is responding to falling demand against a backdrop of soaring
raw material prices and rising logistics costs. On the other
hand, consumption that was lost due to the COVID-19 pandemic is showing signs of recovery, particularly in restaurants,
and demand for social issues solutions that address issues
such as labor-saving measures and reduction of waste andfood loss has remained strong. There is increasing differentiation and variety in health-conscious products, and initiatives
to stimulate demand for domestically-produced raw materials
are underway throughout the supply chain.
Overseas, markets are expected to expand, primarily in
Asian countries where there is population growth and significant increases in per capita GDP.
Review of FY2022
The flour milling business recorded sales and profit growth
as a result of price revisions for wheat flour and premixes
in line with price revisions for wheat and the acquisition of
new business partners. We acquired new business partners
using our market analysis capabilities to make proposals
that meet the needs of customers, including major restaurant chains and bread manufacturers.
Moreover, in addition to consolidating production and improving processes through an integrated system of operations
for the seven plants of five Group companies, we continued
strengthening our handling of products in small bags with theoperation of the Funabashi Premix No. 2 Plant and reforming
the earnings structure in the Baking Bread Business.

Strategy for FY2023 and Beyond
In light of price revisions for wheat, and fluctuating energy
and logistics costs, we will strive for optimization of sales
prices for wheat flour and premixes. We are working to increase sales volume and improve profitability by developing
new products, customers, and markets, further increasing
production efficiency, strengthening our handling of smaller
bags and small lot production for commercial products leveraging the strengths of the Funabashi Premix No. 2 Plant,
and creating a high level of synergies through “one-stop”
proposals by business category accompanying the reorganization that started in April 2023.
In household products, we will expand sales of spaghetti divided into single portions imported from Turkey that
we began selling in December 2022, and we will work tostrengthen exports, primarily of export-only products suchas tempura batter.
In the Baking Bread Business, we will work to increase
productivity and reduce labor and indirect costs in order
to continually improve earnings through integrated Group
operations.

Funabashi Premix No.2 Plant

Establishment of Showa Sangyo International Vietnam Co., Ltd. (tentative name)
We will establish Showa Sangyo International Vietnam Co., Ltd. (tentative name) in Vietnam as a production site for premixes and the
prepared sugar business for Japan and ASEAN countries with the aim of expanding our business fields by leveraging knowledge fromJapan, including tempura batter and pancake mix. Using the company as a base for expansion of our business fields in ASEAN countries,
we will aim to meet needs on a global basis and increase the high value-added in the Group’s business by strengthening the value chain.
Operations at the new company are scheduled to commence in 2025.

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Showa Sangyo Group Integrated Report 2023

External Environment (Issues and Opportunities)
Since the COVID-19 pandemic, boundaries between restaurant, ready-to-eat, and home cooked meals have broken
down, market needs have become increasingly diverse andsegmented, and the speed of change has also increased.
The Showa Sangyo Group will develop, propose, and sell
products that serve as solutions for customers’ needs andissues. This includes proposing oil and fat products that aresuitable for take-out products, introducing types of oil thatbring out deliciousness, and selling very convenient frozen
food and ready-to-eat soy meat products that can be easily
enjoyed at home.
Review of FY2022
While there was a moderate trend of recovery from theimpact of COVID-19, the business environment remained
extremely challenging as demand cooled due to raw grain
prices, which remained at historically high levels, the depreciation in the value of the yen, soaring energy costs, andrising commodity prices.
In this environment, while giving top priority to optimization of sales prices, we worked at the same time to propose
value commensurate with prices, such as value-added oils
and fats to solve the issues of customers, premium oils andfats such as rice bran oil that are aligned with health awareness, and soy protein products.

Strategy for FY2023 and Beyond
Although the impact of the COVID-19 pandemic has diminished, the uncertain business environment is expected tocontinue with concerns about rising raw material, resource,and energy prices and sharp foreign exchange fluctuations,as well as sluggish consumption due to rising commodity
prices. In such an environment, we will continue to provide
proposals with value for customers.
The Showa Sangyo Group extracts all of the main fourtypes of oil (soybean, canola, corn, and rice) for which theraw materials are processed in Japan in-house within theGroup. As “Professionals in Oil Extraction” as well as “Professionals in Grains,” we contribute to our customers’ sales
by providing proposals for a wide range of oils.
We will also work to solve our customers’ issues by providing proposals for functional oils and fats with functions
that include effects suited to the use or end product orlong-lasting effects that reduce deterioration and proposals
for frozen food that reduces cooking time and saves labor.

Expanding the Lineup of Plant-based Food
Due to growing awareness of health and concern about environmental problems over the past few years, there has been a dramaticincrease in the visibility of plant-based food (PBF) and soy meat.
On the other hand, it is also the case that there are still many people who, despite being interested in these foods, have never eaten
them or do not know how to cook them. Therefore, leveraging the knowledge of Showa
Sangyo, which has been handling soy meat for many years, we expanded the lineup of
the “SOYKITCHEN” series of soy meat products for household use which allow delicious
soy meat to be enjoyed easily. These products are the pasta sauce SHOWA TAPPURIDAIZU-MEAT NO CREAM SAUCE and SHOWA SONOMAMATSUKAERU! MAMETAN, asoy meat that does not need to be rehydrated. Amid concerns about a global “protein
shortage” crisis, we will strive to solve social issues by increasing the available options forfood with a lower environmental impact.

Showa Sangyo Group Integrated Report 2023

49

Management Strategy

Starches and Sweeteners Business

Animal Feed Business

Strengths of the Starches and Sweeteners Business

Strengths of the Animal Feed Business• Industry-leading scale of operations• Approximately 70% share of the crystalline glucose market (based on research by Showa Sangyo)• Framework for stable supply with three manufacturing sites in the Group• Affinity with other businesses, including the premix business and the Vegetable Oils Business• Group production sites in the Kashima and Shibushi areas, Japan’s leading areas of demand for animal feed
• Stable supply framework for animal feed raw materials through by-products produced in other businesses• Collaboration with silo business, including Group companies

External Environment (Issues and Opportunities)
As reducing the burden on the environment becomes increasingly important, the Starches and Sweeteners Business,
which accounts for a high percentage of the Group’s CO2
emissions and water consumption, is implementing initiatives
to reduce burden on the environment as a matter of priority.
In markets such as preventive medicine, health, and liquid
diets, which are related to the aging of Japan’s population,
we will also promote proposals for the Group’s uniqueproduct groups, which include powdered syrup, crystalline
glucose and lactic acid bacteria.
Review of FY2022
Despite a trend of recovery in demand, which had slowed
due to the COVID-19 pandemic, raw material and energy
costs have continued to rise since the previous fiscal year. In
addition to giving top priority to optimization of sales prices,
we strengthened BtoB marketing with integrated sales,
research, and development, pursued further synergies
in collaboration with other businesses in the Group, andpromoted value proposal-based sales, including proposals
targeted at the increasing need for ESG and BCP action.

Strategy for FY2023 and Beyond
We will aim for a recovery in sales volume to pre-pandemic
levels through even greater synergistic effects based on“one-stop” proposals by business category accompanying
the reorganization underway since April 2023.
Taking advantage of the framework now in its third yearthat combines the three manufacturing sites in the Group,
which are the Showa Sangyo Kashima Plant, San-ei Sucrochemical, and Shikishima Starch, we will further strengthen
our systems for stable supply and low cost operations. At
the same time, we will work to increase the competitivenessof the Starches and Sweeteners Business by accelerating
our differentiation strategy in the creation of new demand.
In addition, the capital and business alliance with Tsuji
Oil Mills Co., Ltd. is designed to further stabilize supply andincrease efficiency in the Starches and Sweeteners Business, which boasts an industry-leading scale of operations,and we will aim to establish a framework for stable supply
that is unique to the Group through collaboration with the
Vegetable Oils Business.

Strengthening Cooperation Among Group Companies

Strengthening Corn Oil Supply Chain Through Collaboration Between Businesses
Showa Sangyo Group corn oil supply chain
Integrated production within the Group from procurement of corn to productionof corn germ and extraction and refining of corn oil
Starches andSweeteners
Business

Vegetable Oils Business
Corn germ

Crude corn oil

Refined corn oil

Corn
Cornstarch
Sweeteners

50

Showa Sangyo Group Integrated Report 2023

Animal Feed Business
Gluten meal
Gluten feed

Capital and Business Alliancewith Tsuji Oil Mills• Collaboration in procurement of
raw materials• Effective utilization of each other’s
production facilities• Shared utilization of logistics sites
and networks

Corn germ meal
Animal feed
raw materials• Stable supply of starches andsweeteners• Strengthening of competitivenessin corn oil and expansion in scaleof operations

Review of FY2022 and Strategy
for FY2023 and Beyond
FY2022 was a year when animal feed raw materials wereat the highest level ever due to soaring grain prices and theimpact of depreciation in the value of the yen. In this environment, while putting top priority on optimization of sales
prices, we worked to promote proposal-based sales closely
matched to each customer’s requests and issues and to
expand sales of high value-added animal feed.

The full-scale impact of higher manufacturing costs foranimal feed due to rising energy and personnel costs will beapparent in FY2023 and beyond. In addition to passing on
costs appropriately, we will continue to promote sales activities that are closely matched to our customers, including
support for livestock product analysis and increasing highvalue-added products. We will also work on sales of animal
feed and eggs after assessing the impact and status of avian
influenza, which is in the recovery phase.

Promoting Utilization of Unused Raw Materials
We have been working on the utilization of unused raw materials to use materials that are usually processed as waste as new animal feed
raw materials. So far, we have made animal feed out of materials such as potato protein and sea squirt shells. We will continue to promote
efforts in collaboration with Group companies as an initiative based on the perspective of “CSV management,” which means realizing ESG
aspects such as contributing to a circular society at the same time as economic benefits.

Other
Strengths of the Warehousing Business

Strengths of the Plant Factory• Combined grain storage capacity of Group companies
among the highest in Japan• Largest volume of grain handled among Japanese food
manufacturers (Showa Sangyo research)• Equipped with berths where Panamax ships and otherlarge-scale grain vessels can dock, facilitating low-cost
operations in transporting grain raw materials• Operation of business in regions with high demand foranimal feed in the hinterland, such as Kashima and Shibushi• Production management, quality control, and othertechnology developed over many years as a food
manufacturer• Diverse and extensive sales channels possessed byother businesses• Acquisition of JGAP certification from Japan GAPFoundation

Review of FY2022 and Strategy
for FY2023 and Beyond
In FY2022, as the impact of the COVID-19 pandemic continued and the international situation also changed rapidly, theWarehousing Business worked for efficient cargo handlingin collaboration with the grain silo companies in the Group.
In FY2023, the situation is uncertain, but we will continue
to strengthen partnerships with import trading companies
for stable procurement of raw grain.

In the plant factory, to address the issues of Japanese
agriculture, we aim to “build a sustainable agribusiness,”which will systematically produce high-quality vegetables ina stable manner without being affected by the climatic environment. We worked to maintain stable operations, increase
productivity, and to develop high value-added vegetables.
We will continue to strengthen collaboration between R&D,
technology, and sales with the aim of further business expansion.
Showa Sangyo Group Integrated Report 2023

51

Sustainability

Sustainability
Sustainability Basic Policy
The Showa Sangyo Group believes that in order to achieve
our Group management philosophy of “contributing tohealthy, rich, and varied meals,” it is our social mission andresponsibility as a Grain Solution Company which handles
diverse and numerous grains to protect the land and surrounding environment that produce grains, a source of food,and to maximize effective use such that no grain is wasted.
In order to fulfill this responsibility as a public institution
Sustainability Promotion System
We have established a Sustainability Committee in which
the President serves as Chairman and all of the persons incharge of each division serve as Vice Chairman. Under the
Sustainability Committee, in addition to committees for six
social issues our Group thinks are critical ((1) Provision ofsafe, reliable, high-quality products, (2) Fair corporate activities, (3) Respect for human rights, (4) Consideration for theenvironment, (5) Contribution to society, (6) Dialogue and information disclosure with stakeholders,) we have established
a committee which handles (7) Risk management, which wein society, we aim to achieve both a sustainable society andcontinued improvement in corporate value for our Group, as
we move forward with ESG management.
Along with these efforts in sustainability, our Group aims
for coexistence with society through deeper engagementwith all of our stakeholders.

have been working on. Furthermore, we will place a Safe
Labor Promotion Committee as an expert subcommittee inthe (7) Risk Management Committee, as we intend to move
forward with ensuring of safety for laborers and formation ofpleasant workplace environments.
Also, items decided by the Sustainability Committee arereported at Management Committee meetings and Boardof Directors meetings to receive oversight from the Boardof Directors.

Diagram of Sustainability Promotion System

ReportOversight

Instruction

Sustainability Committee
Committee chairman: President
Vice chairman: Person in charge ofBusiness Management &Sales Division, Person in
charge of Technical Division,
Person in chargeof Corporate Division
Members: General Managers
of each division*Technical aspects will be operated
by creating a different management system(1) Product Safety Committee* (Quality Assurance Department)(2) Compliance Committee (Sustainability Promotion Department)(3) Diversity Committee (Human Capital Strategy Department)(4) Environment Management Committee*(Sustainability Promotion Department)
TCFD Committee(Planning Department, Sustainability Promotion Department)(5) Social Contribution Committee(Sustainability Promotion Department)(6) Stakeholder Engagement Committee (Planning Department)
Integrated Reporting Committee (Planning Department)(7) Risk Management Committee (Risk Management Department)
Information Security Committee (Digital Promotion Department)
Disaster Response Committee (Administration Department)
Safe Labor Promotion Committee(Human Capital Strategy Department)
New

Showa Sangyo Group52

Showa Sangyo Group Integrated Report 2023

3. Investigating Response Policy for Critical Issues(FY2019)
Regarding ESG Critical Issues, in order to find comprehensive solutions, we examined the relationships among issues
and established three critical items (consideration for theenvironment; evolution of grain solutions; employee activity
promotion) and seven critical issues (sustainable production
activities; sustainable resource utilization; diverse value
response; safe, reliable, stable supply; diversity; health andproductivity management; corporate citizen activities).
In the “Medium-term Management Plan 20-22,” wedetailed and promoted the seven critical issues for eachbusiness.
4. Renewal of the Critical Issues (FY2023)
We reconsidered the critical issues upon hearing the opinions and hopes expressed in dialogue with stakeholders
and seen in social conditions. We evaluated (mapped) thevarious social issues taking “importance to stakeholders” as
the vertical axis and “influence on Group business” as thehorizontal axis.

MappingHigh • Consideration for human rights

Management Committee
Report2. Identifying ESG Critical Issues (up to FY2018)
We evaluated various social issues from the two perspectives of “importance for society” and “importance for business.” As a result, ESG Critical Issues were established forsocial issues highly relevant to society and highly linked to
our Group business after passing through discussion in the
CSR Committee (now the Sustainability Committee).

Importance to stakeholders

Board of Directors

Materiality Establishment Process
1. Extracting Social Issues
Referring to global guidelines like SDGs, ISO26000, UNGC,
and SASB, our Group has prepared a relationship between“importance for society” and “importance for business.”• Responding to climate change• Stable supply of high-quality, low-priced products• Safe, secure food
• Stable procurement of raw materials• Lengthening healthy lifespan• Reduction of food Loss
• Improvement in efficacy and transparency ofmanagement• Deliciousness and fun of foods• Promotion of diversity and inclusion• Enhancement of administrative management• Preservation of water resources

High

Influence on Group business

The Showa Sangyo Group has stipulated three materiality
themes and seven materialities based on the evaluation
results from this mapping and their relationships in order toadvance initiatives to achieve sustainability.
In our current “Medium-term Management Plan 23-25,”
Materiality Themes

we detail and promote our initiatives for achieving sustainability and implementing business strategy for each business based on the risks and opportunities related to these
Page 26 ).
materialities (Materialities

1. Contribution to society through our foodbusinesses(1) Supply safe, reliable and high-quality foods(2) Contribute to consumers’ health and diversifying needs

2. Preserve the earth that produce grains andthe global environment(3) Consideration for the environment

3. Promote engagement with stakeholders(4) Utilization of human capital(5) Harmonious association with local communities(6) Cooperation with stakeholders in our supply chains(7) Enhance credibility with our stakeholders

Showa Sangyo Group Integrated Report 2023

53

Sustainability

Responding to TCFD Recommendations
Recently, the influence of climate change on society and corporate activities has grown enormously. As a Grain Solution
Company, Showa Sangyo Group deals with diverse and numerous grains—the bounty of the earth—and recognizes thatclimate change is a particularly critical issue that society must squarely face and which requires rapid response.
In accordance with TCFD Recommendations, our Group has disclosed 4 items, “Governance,” “Strategy,”“Risk Management,” and “Indicators and Targets,” as we seek proactive dialogue with all of our stakeholders.

1. GovernanceIn order to establish the important risks and opportunities
associated with the climate and to respond with proper
management, we have established a TCFD Committee as
an expert committee within the Environment Management
Committee under the Sustainability Committee, in which the
President serves as Chairman, and Managing Directors fromeach Division all serve as Vice Chairman. The TCFD Committee identifies risks and opportunities through scenario
analysis based on TCFD Recommendations, enacts plansto respond to those risks and opportunities each year, andupon obtaining acknowledgement for the progress conditions from the Management Committee, via the Sustainability Committee and Environment Management Committee,
reports to the Board of Directors once or more per year.

and Vegetable Oils Business to “Flour Milling Business”*2,
improve climate change responsiveness across the wholeGroup, and continue information disclosure.

54

Showa Sangyo Group Integrated Report 2023

management for the entire Company, monitoring risks along
two axes—the monetary amount affected by risks identified
by the TCFD Committee and frequency of occurrence—andconfirming PDCA cycles for risk reduction and progress
toward goals for the entire Group.

TCFD Management System

Board of Directors
TCFD Governance Organization

One or more times per year

Board of Directors
One or more times per year

ReportOne or more times per year

ReportOne or more times per year

Proposal

Oversight

ReportInstruction

Instruction

Sustainability Committee

Sustainability Committee
One or more times per year

ReportManagement Committee

Oversight

Management Committee

Acknowledgement

One or more times per year

ProposalAcknowledgement

Environment Management Committee
One or more times per year

2. Strategy
In continuation of the previous year, in 2022, we continued
analysis and evaluation of the “Starches and Sweeteners
Business,” the business in our Group with the largest environmental burden, and we also analyzed and evaluated the“Vegetable Oils Business”*1, which has the second largest
environmental burden. This resulted in an analysis and evaluation of about 82% of our entire Group’s CO2 emissions(Scope 1, 2) and about 95% of our water usage (values
calculated from start of response in 2019) from these twobusinesses.
For the scenario analyses, discussions were held with
TCFD Committee members and each division relevant toeach business, as well as Group companies, all coming
together (For details on management system, see 3. Risk
Management). The procedures and methods acquired during
analysis and evaluation of the Starches and Sweeteners
Business performed in 2021 were put to use in analysis andevaluation of the Vegetable Oils Business performed in 2022,
and by sharing information among multiple businesses,
these initiatives have enhanced the resilience of our Group.
Also, in addition to the “CO2 Emission Reduction Subcommittee” and the “Water Usage Reduction Subcommittee,”which work towards achieving environmental targets for ourGroup, we linked with the “Business Strategy Promotion Committee” which is in charge of planning and promoting businessstrategy for starches and sweeteners, and vegetable oils.
Moving forward, we plan to expand targeted businesses
for analysis beyond Starches and Sweeteners Business

3. Risk Management
In addition to the system indicated in “1. Governance,” the
TCFD Committee linked with the four environmental subcommittees*3 within the Environmental Management Committee and the Business Strategy Promotion Committee inorder to identify important risks and opportunities.
Also, the Risk Management Committee, under the Sustainability Committee, is the committee that performs risk

ReportEnvironment Management Committee

Monitoring

TCFD Committee

Monitoring

Risk
Management
Committee
Scenario Analysis Step

(1)

Identify the risks and opportunities for our Groupbrought about by climate change, and express theimpact on our businesses (business impact) as anarrative.

(2)

Taking the size of business impact as an axis, prioritize
the importance of risks and opportunities for each of
the six items in the supply chain: Research and Development; Material Procurement; Transportation andStorage; Production; Sales and Marketing; Delivery.

(3)

Define scenarios, and based on the highly importantrisks and opportunities extracted in step (2), prepare
our Group’s perspective for each of the scenarios
according to PEST analysis and Five Forces analysis.

Links

Risk

Opportunity
Monitoring

ReportFour environmental
subcommittees

4. Indicators and Targets
Our Group has established reduction targets for CO2
emissions, food loss, and water usage as “Showa Sangyo
Group Environment Targets,” and in April 2023, added a
reduction target for plastic usage.

ReportMonitoring

Business
Strategy
Promotion
Committee

Links

TCFD Committee

We continue to recognize consideration for the environment as a major mission for our Group as we move forwardwith all of our activities.

Utilize internal and external data, quantify business(4) impact based on the perspective in Step (3), and clarify
influence of climate change.

(5)

Prepare response conditions for our Group’s risks andopportunities, and continue investigation so they arereflected in the business strategies of our Medium-termManagement Plan, etc.

*1 Indicates the business scope that handles services and products such as industrial-use and domestic-use cooking oil, soy protein, defatted soybeans, canola meal, anddefatted rice bran, from among the “food businesses” which are the reported segments in our Group.
*2 Indicates the business scope that handles services and products such as industrial-use and domestic-use flour, premix, pasta, and bakery goods, from among the “foodbusinesses” which are the reported segments from our Group.
*3 In addition to our previous “CO2 Emissions Reduction Subcommittee,” “Food Loss Reduction Subcommittee,” and “Water Usage Reduction Subcommittee,” we establisheda “Plastic Usage Reduction Subcommittee” in 2023.

Showa Sangyo Group Integrated Report 2023

55

Sustainability

Premises for Scenario Analysis
Scenario

Future prediction of global rise in average temperature restricted to around 1.5°C-2°C by 2100

Future prediction of average global temperature rising by 4°C or more by 2100

Perspective

Strong push to reduce carbon use to achieve carbon neutrality on a worldwide scale

No developments in initiatives as climate change countermeasures beyond the current policy and regulations, and increase in greenhouse gas emissions

Affected BusinessGroup’s Vegetable Oils Business and Starches and Sweeteners BusinessGroup’s Vegetable Oils Business and Starches and Sweeteners Business

Method for Evaluating Influence

Evaluate the influence of assumed risks and opportunities based on the size of the financial impact in the event of occurrence

Evaluate the influence of assumed risks and opportunities based on the size of the financial impact in the event of occurrence

Affected Year

Periods up to 2030 and up to 2050

Periods up to 2030 and up to 2050

Evaluation of Financial Impact A: Financial impact is expected to be 2 billion yen or more
B: Financial impact is expected to be between 1 billion yen and 2 billion yen C: Financial impact is expected to be below 1 billion yen

Scenario Analysis: Financial Impact of Risks
Risk
Type 1

Type 2

Item

Carbon tax /carbon price

Policies,
laws, andregulations●

New regulations
promotingdecarbonization

Transitional
risk

●

●

●

MarketResponse to
low carbon
demand●●Reputation

Evaluation by
investors

●

●

Acute

Intensificationof abnormal
weather●●

Averagetemperature
rise

●

●

Physical risk

Chronic

Social changes; Critical risks recognized by our Group

Starches
Vegetable
andOils
Sweeteners
Business
Business

Water
shortage●●

Content of risks with particularly highimpact from among the critical risks

Financial impact
Financial impact item

1.5°C/2°C
2030
2050

Type 1

Type 2• Carbon tax applied to production activities

Increase in cost of sales(increase in indirect costs)

Vegetable Oils: B
Starches andSweeteners: A

Vegetable Oils: A
Starches andSweeteners: A――• Reduction in CO2 emissions due to energy conservation and purchase ofrenewable energies, etc.

• There is demand for switching over to renewable energy and CO2 reduction in the
production process, so due to investment in additional facilities, costs increase.

• Increase in facility investment to achieve low
carbon manufacture

Increase in facility investment,
cost of sales (increase in expenses)

Vegetable Oils: C
Starches andSweeteners: C

Vegetable Oils: C
Starches andSweeteners: B――• Increase in low carbon energy procurement rate with our own facilities•D ue to stronger regulations on petroleum-derived plastics, there is a transition
to replacements and costs increase.

• Increase in costs of switching to packaging
materials with less environmental burden

Increase in cost of sales(increase in direct cost)

Vegetable Oils: C
Starches andSweeteners: C

Vegetable Oils: C
Starches andSweeteners: C――• Investigating use of alternative materials•C hanges in customer behavior due to higher environmental awareness• Reduced share by our products due toincreased market share by sustainable products

Reduction in net sales(reduction in quantity sold)

Vegetable Oils: B
Starches andSweeteners: B

Vegetable Oils: A
Starches andSweeteners: A

Vegetable Oils: –Starches andSweeteners: –Vegetable Oils: C
Starches andSweeteners: C• Development of sustainable products•D ue to higher environmental awareness, there is an increase in demand forbiofuels derived from soy, canola, and corn, and the cost of procuring raw
materials increases.

• Increased cost of procuring raw materials due
to increased demand for biofuels

Increase in cost of sales(increase in direct cost)

Vegetable Oils: A
Starches andSweeteners: A

Vegetable Oils: A
Starches andSweeteners: A

Vegetable Oils: A
Starches andSweeteners: A

Vegetable Oils: A
Starches andSweeteners: A• Pricing of futures raw materials market and hedges by exchange contract•D ue to delays in response to climate change and information disclosure,
corporate value drops, and capital procurement costs increase.

• Increase in capital procurement costs inaccordance with credit rating deterioration

Increase in non-operating expenses(increase in capital procurement cost)

All: C

All: C

All: C

All: C• Response in accordance with TCFD Recommendations and advancement of
information disclosure of that response• Manufacturing and procurement costs increase, as frequent wind and flood
damage negatively affect plant operation, grain production regions and thewhole supply chain, leading to plant operation halts, and reduction in amountand quality of the harvest from grain production regions.

• Problematic plant operation due to frequentwind and flood damage

Increase in cost of sales(increase in expenses)―

All: C―

All: C• Facility investment to make continuous operation of plants possible during
times of wind and flood damage• Reduction in production efficiency due tonegative influence (worsening quality) on grain
production locations

Increase in cost of sales(increase in direct cost)

Vegetable Oils: –Starches andSweeteners: C

Vegetable Oils: –Starches andSweeteners: C

Vegetable Oils: –Starches andSweeteners: C

Vegetable Oils: –Starches andSweeteners: B• Development of manufacturing technology to increase manufacturing efficiency(reduction in material processing and manufacturing time)• Increase in raw material procurement cost due tonegative influence on grain production locations

Increase in cost of sales(increase in direct cost)

Vegetable Oils: A
Starches andSweeteners: B

Vegetable Oils: A
Starches andSweeteners: A

Vegetable Oils: A
Starches andSweeteners: A

Vegetable Oils: A
Starches andSweeteners: A• Procurement and manufacturing costs may increase due to reduced harvests
and worsening quality of soy, canola, and corn, caused by global climate change.
•P rocurement costs increase due to the necessity of changing grain importroutes, due to more frequent storms on the ocean.
• As a result of the negative influence on grain production regions due to chronic
water shortage, raw material procurement costs increase and profit decreases.

• Evaluation of decentralization of raw material procurement suppliers• Increase in raw material procurement cost due tonegative influence on grain production locations

Increase in cost of sales(increase in direct cost)

Vegetable Oils: –Starches andSweeteners: C

Opportunity

MarketChanges inclient desiresContent of opportunities withparticularly high impact from among
the critical opportunities

Showa Sangyo Group Integrated Report 2023

Vegetable Oils: –Starches andSweeteners: C

Vegetable Oils: –Starches andSweeteners: C

Financial impact
Financial impact item

1.5°C/2°C

4°C

Response to critical opportunity

2030

2050

2030

2050

●

―

•T
 he plant-based food market expands due to heightened buying due toconsumers’ consideration for sustainability, and demand for vegetable protein,etc. increases.

• Increase in demand for vegetable protein inplant-based food market

Increase in net sales(increase in quantity of sales)

Vegetable Oils: C

Vegetable Oils: C――• Expansion of sales and stable supply in plant-based food market

●

―

•D
 emand for multi-purpose vegetable oils increases, and demand for vegetableoil products manufactured with low environmental burden increases.

• Increase in demand for vegetable oil productswith low environmental burden

Increase in net sales(increase in quantity of sales)

Vegetable Oils: C

Vegetable Oils: C――• Sale of vegetable oil products manufactured with low environmental burden
along the entire product lifecycle

●

―

•D
 emand for biofuel materials as a low carbon energy increases.

• Increase in demand for biofuel materials

Increase in net sales(increase in quantity of sales)

Vegetable Oils: C

Vegetable Oils: C

Vegetable Oils: C

Vegetable Oils: C• Sales and promotion of effective use of manufacturing process by-products
in biofuels

In the Starches and Sweeteners Business, we expect promotion of product development and proposals due to heightened needs for products that “quench thirst and prevent
heatstroke” accompanying average temperature increase, as well as product development and proposals due to expansion of an immunology market.

56

Vegetable Oils: –Starches andSweeteners: C

Evaluation of Financial Impact A: Financial impact is expected to be 2 billion yen or more
B: Financial impact is expected to be between 1 billion yen and 2 billion yen C: Financial impact is expected to be below 1 billion yen

Starches
Vegetable
andOils
Sweeteners
Business
Business

Changes in
consumerpreferences• Procurement of low cost low carbon energy• Acquisition and centralization of grain production region information from suppliers

Social changes; Critical opportunities recognized by our Group
Item

2050

•D
 ue to stronger regulations, a carbon tax is applied to the CO2 emissions inGroup production and across the entire supply chain, so costs increase.

Scenario analysis: Financial Impact of Opportunities
Opportunity

Response to critical risk

4°C
2030

Our Group will continue to make investigations to properly reflect opportunities due to climate change in our management plan and business strategy. We will continue ourinitiatives in reducing environmental burden in manufacturing and along the entire product lifecycle, and move forward with strengthening a sustainable supply chain united withcustomers, in order to grasp customer environmental strategy and to meet demand standards relative to environmental burden.

Showa Sangyo Group Integrated Report 2023

57

Sustainability

Reducing Burden on the Environment
KPI and Targets
Year for Standard

Reduction of CO2 emissions

Compared to
FY2013

Reduction of food loss

Compared to
FY2018Reduction of water usage(basic unit)

NEWReduction of plastic usage*1(basic unit)

Medium-term Management Plan Targets(FY2025)Compared to
FY2019Compared to
FY2013Showa Sangyo Group
Environment Targets

2030 Targets

30% or more

46% or more--

2025 Targets

30% or more

30% or more--

9% or more

12% or more--

2030 Targets

7% or more

25% or more--

Trend in CO2 Emissions (Showa Sangyo Group)50
46.2

FY2025 Target

40

30%

36.8
33.3

Environmental
Targets

46%

-

32.3

30

24.9
20

we have established targets in the Medium-term Management Plan 23-25 of 9% or more reduction by FY2025 and
12% or more reduction by FY2030 compared to FY2019 for
our Group.
By reworking existing processes and deploying effective
measures, we have achieved a 6.5% reduction in FY2022
compared to FY2019.
Moving forward, our Group will continue working to reduce water usage in order to make effective use of limited
water resources.

Reduction of Plastic Usage
In order to reduce plastic usage, our Group has rethought theweight of plastic in our previously existing products, selected
packaging materials, and changed used compositions.
Also, we inaugurated the “Plastic Usage Reduction Subcommittee” in FY2023, and established numerical targets forplastic reduction amounts for our company and our Group
company Tower Bakery, which are large waste generator
businesses. Specifically, taking basic units (plastic usage
basic units) of amount of plastics which are used once andthen thrown away (“single-use plastics”) divided by production amount, we have targets of 7% or more reduction by
FY2025, and 25% or more reduction by FY2030 comparedto FY2013 as a standard year.
Our Group continues to rethink its containers and packaging materials, as we strive to reduce amount of plastic
used and reduce environmental burden.

Received the Special Prize “24th Logistics Environment Award”!

10

2013

2021

2022

2025

2030 (FY)*In the calculation of CO2 emissions, the most recent adjusted emission factor foreach year is used for the emission factor of power purchased from electric powercompanies.
*The calculation of CO2 emissions includes a total of 27 companies, Showa Sangyo
plus 26 consolidated subsidiary companies. (The aggregation range has fluctuations
due to increases and decreases in Group companies.)

Showa Sangyo Group Integrated Report 2023

Reduction of Water UsageAs global warming advances and global population continues to increase, water risks are extremely high priority, withthreats growing stronger each year. Water resources are an
absolute necessity for our Group’s business activities, so
in order to limit the influence of water intake on the environment, we are working to reduce water usage, primarily
through the “Water Usage Reduction Subcommittee” established in FY2021.
Regarding the water usage basic units, which equal water
usage (excluding sea water) divided by production amount,(10,000 tons - CO2)

058

loss, as we manage food loss in our Food Loss Reduction
Subcommittee.
In FY2022, we optimized raw material usage through process improvements, enhanced accuracy of supply and demand predictions, and worked on lengthening best-before
date, resulting in a reduction of 22.1% compared to FY2018.
Moving forward, we will promote reduction activities, andfulfill our responsibility to make efficient use of resources andreduce environmental burden.

2030 Targets*1 Single-use plastic used in petroleum-derived container and packaging materials

Reduction of CO2 Emissions
Looking to reduce CO2, Showa Sangyo Group aims for“46% reduction or more by 2030 compared to FY2013”
in line with the government’s goal, as we continue withinitiatives in CO2 reduction. We have achieved a roughly
63,000 tons annual reduction in CO2 by switching from coal
to town gas as fuel for our cogenerational facilities at the
Kashima Plant in September 2021. Also, thanks to initiatives
in which we extracted biomass fuel (fatty acids, dark oils)
from by-products and waste produced during the oil and fat
manufacturing process, and used that biomass fuel in ourcompany, we reduced CO2 by about 2,400 tons in 2022, a
27% reduction from FY2013. We have introduced carbon
neutral power and solar power generation, and additionally,
we plan to use biomass fuel.
Additionally, in order to achieve carbon neutrality, weare examining promotion of long-term energy conservation
activities and expanded use of biomass fuels. Furthermore,since switching electric power and town gas, which is asteam fuel, to non-fossil fuels is key, we are paying attention
to the trend towards practical use of hydrogen, fuel ammonia, and next-generation thermal energy industries.

Reduction of Food Loss
Food loss incurs processing costs and is thought to be anenvironmental burden because when burned as combustible garbage, it causes CO2 emission and requires landfillingof incineration ash, etc.
Originally, our Group has continued its initiatives to prevent perfectly usable food from being thrown away, andin our “Medium-term Management Plan 23-25,” we haveestablished a target of “30% or more reduction in food loss
by FY2025 compared to FY2018” for the Company andfive Group companies with over 100 tons per year of foodOriginally, we mainly used land transportation via large trucks for long transportation
between plants. However, for the route from the Kashima Plant (Ibaraki Prefecture)to the Kobe Plant (Hyogo Prefecture), we introduced marine transport using a ferry,and land relay transportation using switching, as a target for responding to the 2024
problem of logistics and reducing environmental burden.
Anyway, we switched from normal large-sized trucks to trailers that are evenlarger in order to respond to the lack of drivers which was a worrisome issue.
This initiative in “achieving reduction of CO2 emissions and law-abiding sustainable operation” was received well, and we received the Special Prize at the “24th Logistics Environment Award” ceremony, held by the Japan Association for Logistics and Transport.
Moving forward, we will continue to give consideration to environmental problems and strive toachieve and expand sustainable operation.

Showa Sangyo Group Integrated Report 2023

59

Sustainability

Human Capital Management
The Showa Sangyo Group places the highest priority on human capital as management capital which supports continuous
growth of the corporation, and by performing proactive and continual strategic investment in human capital, we achieve“continuous corporate growth” and “improvement in employee well-being.”
Human Capital Management Cycle

KPI and Targets
Initiative themesContinuous corporate
growthImprovement in
employee well-being

Aiming for high levels for bothEngagement
D&I

DesireFeeling of
security

SkillsKnowledge
Experience

Human capitaldevelopment

1. Drastic promotion
of D&I

Medium-term Management Plan Targets
Proportion of women in management
positions: Above

10% in FY2025

2. Strategic
investment in
human capital

double in FY2025 (vs. FY2021)

3. Improvementof employee
engagement

Engagement Score: Target score to beannounced during the term of the Mediumterm Management Plan 23-25

Investment in Reskilling: More than

1. Drastic Promotion of D&I
The “INC Policy,” which represents the three basic principles stipulated in the “Showa Sangyo Group Diversity Management
Declaration,” is the behavior standard for each and every one of our employees.
To further reform into an institution that “actively utilizes” diversity, we have established a Diversity & Inclusion (D&I) Promotion
Section, which is a dedicated D&I organization within the Human Capital Strategy Department, and evaluate and execute D&I
promotion policy in an integrated way.
We will further enhance the “Employee First” philosophy stipulated in the “Showa Sangyo Health Declaration,” as we promote
self-care and improve working environments.
Promotion of Women Activities
Based on the “Showa Sangyo Group Diversity Management
Declaration,” we have striven to foster corporate culture
and prepare working environments in which each and every
employee can fully exhibit their capabilities without any constraints. In particular, we consider “Women Activity Promotion” a critical area, as we create an inter-divisional “Women’s
Advancement Task Force” and move forward with initiatives.
In 2022, we held the “SHOWA Diversity Forum 2022” inorder to achieve diversity in the decision-making layer andto create new value. We have implemented a total of threelectures and panel discussions led by women directors or
managers, which became places for formation of career
image regardless of gender, improvement in motivation anddesire for challenge, and realization of new value systems.

Promotion of Employment of Disabled Persons
In order for employees with a disability to enjoy work and be
active both daily and for the long term with our Group, we
assign individuals to proper workplaces and develop proper
work environments. At the end of March, 2023, 31 disabled
persons were active, exceeding the legally stipulated number by six people, as we achieved a legal employment rate
(2.7%) in continuation of the previous year.

INC Policy“Inclusion”
We accept diverse value systems and perspectives of eachand every one of our employees, we utilize those differences,and we create innovation.
“Normalization”
We respect the individuality of each and every one of ouremployees, and we realize a workplace where they can shine
equally as a normal matter of affairs, not something special.
“Cooperation”
Each and every one of our employees shares our Corporate
Philosophy from mutually equal positions, facing the sametargets, and working together to proactively grow.

60

Showa Sangyo Group Integrated Report 2023

Health and Productivity Management•S howa Sangyo Health and Productivity Management
Declaration
Based on the idea that “employee health is the foundation of
the Company,” we announced the “Showa Sangyo Health
Declaration” in April, 2017, as we strive for “cultivation of acorporate culture where employees put health first (self-care
promotion)” and “advancement of working style reform (improvement in workplace environment.)” These efforts havebeen well received, as we were certified for the second consecutive year in
2023 under the “2023 Certified Health& Productivity Management Outstanding Organizations Recognition Program(Large enterprise category).”•H ealth and Productivity Management Promotion System
Every year, the Management Committee establishes the year’s
policy on health and productivity improvement measures, andcentered around the Human Capital Strategy Department, welink with industrial physicians, health insurance associations,and all offices and plants, so the entire Company works as
one as we strive to promote health of our employees.

•A chieved 100% Health Check Rate and Enhanced
Health Check Follow-ups
Since FY2020, we have achieved a 100% health checkrate for employees every year. Also, regarding our follow-up
system after health checks, based on the judgement ofindustrial physicians, we recommend receiving additional
secondary examinations or offer meetings with industrial
physicians, etc., as we aim for early detection of thoseunwell either in physical health or mental health in order toprovide guidance.
•U tilized the Results of Stress Checks
Based on stress checks performed every year, we grasp thepercentage of people with high stress, and use the stresscheck results in stress prevention measures through utilization of self-care, subordinate assistance, and meetings withindustrial physicians, etc. We continue to utilize this system
in measures for the entire Company as we analyze each itemin the stress check in order to achieve more effective mental
health care.

2. Strategic Investment in Human Capital
We systematically rotate the cycle of employee placement, training & education, and evaluation to improve our human resource
management in line with HR planning based on our business strategies, while respecting individual career development.
Personnel Framework
We reconstructed our personnel framework in 2021. In the
newly deployed personnel framework, the two concepts of(1) “enhancing our problem solving abilities” (a strength of
our Group) and (2) “promoting innovation” (where we create
new value through future-based mindset) are taken as axes,
and through each system of grading, evaluating, remunerating and through education and training programs, we intend
to promote behavior focused on effective human capitaldevelopment and management target achievement.
In the personnel framework, an evaluation system is set inplace as a management tool for developing the capabilities ofsubordinates. As the start of each term, individual targets willbe established in line with management strategy and division
targets, and through evaluation meetings with the superior
held every quarter, we promote behavior for target achievement and support the growth of each and every employee.

Training System
The core of our Company’s training system is level-specifictraining, which we perform with “supporting the growth ofautonomous human capital and fostering next-generation
leaders” as our goal. All training is mutually linked with thepersonnel system and various measures for career development, so training serves the role of signposts that leadto career development of oneself and one’s subordinates.
Furthermore, separate from level-specific training, we holdan annual “Showa Juku,” for education of all employees
including those of Group companies for the purpose ofgaining understanding of management policy and obtaining
information necessary as the Company’s employees.
In addition, we provide opportunities for employees tolearn or relearn autonomously and independently, and in the“Medium-term Management Plan 23-25,” we move forwardwith initiatives as we establish an indicator of the reskill investment for FY2025 to be over twice the amount in FY2021.

3. Improvement of Employee Engagement
Based on the results of the engagement survey performed in FY2022, we establish and execute action plans for each section.
We aim to improve the well-being of each and every employee and their desire to contribute to the company throughcreation of workplaces based on human relationships with a high degree of psychological safety, and encouraging suchthrough acquisition of management skills by managers.
Showa Sangyo Group Integrated Report 2023

61

Sustainability

Stakeholder Engagement
The Showa Sangyo Group engages in information disclosure and dialogue in various ways with all of our stakeholders.
While gaining trust from stakeholders by increasing management transparency, we aim to have everyone gain a deeper
understanding of our Group’s unique business model, as we move to increase opportunities for dialogue and provide more
optimal, relevant information disclosure, and further advance our partnerships.

Dialogue with Our Stakeholders
We are proceeding with IR activities with the goal of deepening the understanding of our Group’s direction in all of our stakeholders. Along with reflecting the various opinions and desires expressed in dialogue in our Group’s corporate activities, we will link
this to creation of value as a “Grain Solution Company” that solves customer issues through grains.
Primary
Stakeholders

Medium-term Management Plan 23-25 “Reinforcing Stakeholder Engagement”
We strive for improvement in trust through timely, relevant information disclosure and promotion of dialogue with all of our
stakeholders. Furthermore, we will foster bidirectional communication and learn the expectations and worries of stakeholders
and society, as we move forward with initiatives that fulfill our social responsibility.

• Proper management in
the personnel framework• Improvement of engagement,
value of work
• Workplace in which it is easy
to work

Employees

Employees• Drastic

promotion of D&I-A cting on agenda items under our “Diversity Management
Declaration” and “Health Declaration”-C ollecting feedback from employees, holding forums,
networking, etc.

Customers & Clients-C arrying out new personnel framework (implementation ofquarterly interviews between superiors and subordinates, etc.)• Improvement

of employee engagement-C onducting engagement surveys (once a year)-E nhancement of inner branding-P roviding regular opportunities for dialogue
between workers and employers-P romoting dialogue via customer support center anddeveloping products by listening to customers’ feedback

Customers &Clients• Providing safe and high-quality
products• Proposals that make use of ourstrength of handling various grains• Information provision,exchange of opinions based on
the Customer Oriented
Declaration• Fair business practices,transactions• Broadcast of raw material
procurement policy• Product development using
customer feedback• Food Safety and Quality
Management System• Product development that
contributes to the needs of“health,” “environment,” and“time-saving convenience”• 3 Principles of Safety andReliability• Strengthening external posting-P roactive postings via newly established official
SNS account• Appropriate information
disclosure• Highly transparent management

Shareholders &Investors• Continuousand stable profit distribution

Environment & Community &NGO & NPO

- IR promotions in line with equity and shareholder strategies-C ollecting feedback from shareholders, posting ofcommunications to shareholders- IR meetings (financial results briefings, briefings for individual
investors, etc.)-E nhancement of disclosure in English, such as financial
statements- Improvement of quality of the Integrated Report• Providing
opportunities for communications with our top
management• Issuing Integrated Reports• More substantial information
provision to shareholders• Continuous and stable profit
distribution• General meeting of shareholders• Strengthening IR for individual
shareholders and domestic andoverseas institutional investors• Company briefings for individual
investors• Financial briefings, small meetings• Implementing “Sustainability Basic Policy”• Dialogue through customer
support center• Financial briefings for analysts:
Two times• Individual IR for analysts:
17 cases• Company briefings for individual
investor: Zero times• Individual financial briefings for
major shareholders: Five times• Release of briefing videoon the website• Providing opportunities forcommunications with our top
management-S table dividends over the long term
• Strengthening
IR for individual shareholders and domestic
and overseas institutional investors• “Eruboshi (2 stars)” acquiredin 2021• Harassment consultation office*Research, Development and Engineering- Renewal of corporate web site

Shareholders & Investors• Whistleblowing system• Establishment of INC Policy-S upply chain management• Maintainingsound worker and employer relations• Proportion of women in
management positions 7.9%

• Volunteer leave, leave of absence
system• Stable supply of safe, reliable
products-C ollecting feedback from and holding meetings withvalue chain customers (Human rights, conservation of theenvironment, labor conditions, etc.)• Showa Sangyo Health Declaration• Promotion of health andproductivity management• Promotion of diversity andinclusion-P roviding safe and high-quality products• Realization of sustainable procurement

Results/Impact• Investment in employees• Production technology
improvement presentations,
RD&E* presentations-T ransform our sales departments into “one-stop” salesorganization-M aking the best use of self-assessment system (once a year)

Measures for Improving
Engagement• Human capital development,
education• Evolving sales divisions into those that can enhancebusiness synergies• Acting on agenda items under “Customer Oriented Declaration”• Promotion
of strategic human capital development

Interests and Expectationsof Stakeholders- 1) Contributing to a decarbonized society- 2) Efficient use of water resources- 3) Reduction of food loss
• Endorsement

of domestic and international environmental
initiatives- Information disclosure in line with TCFD recommendations

Environment &Community &NGO & NPO• Endorsement of domestic andinternational environmental
initiatives• Promote education using grains• Providing food in cooperation
with NPOs• Promotion of regional exchange• Sincere dialogue and activities• Donations through WFP andFood Bank• Utilization of plant tours (after
recovery from COVID-19 crisis)• Continuous dialogue withthe region at all offices and plants• One-coin fundraising• Social contribution and interaction in our regional business sites• Promote
education using grains• Providing food in cooperation with NPOs
-D
 onations through WFP and Food Bank

62

Showa Sangyo Group Integrated Report 2023

Showa Sangyo Group Integrated Report 2023

63

Governance

Messages from Outside Directors
As the Showa Sangyo Group enters a period of major changes, including a new representative director, we received messages
from the Outside Directors who bring an important outside perspective to the Group’s governance.

As part of the Group’s governance system,
I will play a constructive role in improving corporate value

I will contribute to risk control and support the realizationof the Medium-term Management Plan
New

Takashi Yanagiya

Outside Director(Audit and Supervisory Committee Member)

Outside Director

This situation in which various global risks are compounded
and amplified, leading to larger crises, is known as a “polycrisis.” This was the buzzword of the World Economic Forum
Annual Meeting, better known as Davos, held in January
2023. In the age of the polycrisis, companies that are unable
to change the status quo due to the high risk of change, as
well as those that put off solving their many issues, have little
hope of achieving lasting development. Companies must
identify “what to change, and what not to change” and aim
to increase their corporate value.
In FY2023, the Showa Sangyo Group announced Mediumterm Management Plan 23-25, entitled “SHOWA’s declaration: “SHIN-KA,” aiming to grow as a Grain Solution
Company. Most notable in the plan is the transformationfrom business-specific sales departments to “one-stop”

customer-specific sales departments. This evolution into
solutions-based sales will allow the Group to respond appropriately to customer needs, and it is the Group’s first reorganization since its founding. It represents a bold challenge
towards the next stage of growth.
The current management team shares a commitment
to accelerating the speed of growth without being stuck in
the past. This attitude is reflected in the company’s trackrecord in its M&As and other recent dealings. As a director
who is part of the Group’s governance system, I will play aconstructive role in improving corporate value.

I commend the drastic measures the Group has taken
to achieve its Long-term Vision

Showa Sangyo Group Integrated Report 2023

company’s current environment, situation, strategies, andother factors. In addition to fulfilling my supervisory role as an
Outside Director, I want to play a role in building a governancesystem that is well regarded by all stakeholders. I hope to do
this by engaging in thorough dialog with Showa Sangyo’s executives about its unique corporate culture, its management
strategies, its issues that need addressing, and other topics.
In my previous position at SOMPO Group, I experienced
both executive and supervisory roles. From that experience,
I have come to believe that the essence of governance is thetransparency of and accountability in its execution, as well
as appropriate supervision and advice by Outside Directors.
By leveraging my previous experience, I will contribute toareas including risk control and support the realization of theMedium-term Management Plan.

I will contribute to the sustainable enhancement of the Group’s
corporate value by providing appropriate advice and supervision
Joji Sugo
Outside Director(Audit and Supervisory Committee Member)

Outside Director

64

Since its founding in 1936, Showa Sangyo has continued its
tireless efforts to continuously supply a stable supply of safe
and secure food products to its consumers. Without evenresorting to the current situation in Ukraine or the COVID19 pandemic as examples, it is easy to imagine how manyenvironmental changes and hardships the Group has facedsince its founding. Every time, management has taken theright course, and the Group has grown as a Grain Solution
Company.
What is the role of Outside Directors at Showa Sangyo, acompany which continues to create social value? Ultimately,
I believe it is contributing to the sound, sustainable growth ofthe company. I believe that the governance of a company has
immutable parts that are baked into its institutional design,
as well as parts that can be customized depending on the

New

Naoko Mikami

I feel that Showa Sangyo is continuing to steadily take on thechallenges that will take it ever closer to achieving its Longterm Vision. It has made significant efforts in acquisitions
through TOBs, M&As, and overseas expansion, and I am
beginning to see noticeable results of these efforts.
In the past few years, we have suffered from the effects
of climate change and volatility in global affairs, such as theweakening yen and other exchange rate fluctuations, as wellas the rising cost of raw materials. Despite this, this year
the Group achieved an increase in profit due in part to gains
on the sale of fixed assets. In the future, I expect to seetangible results of past efforts such as price revisions andsales expansion of high-value-added products.
In April 2023, the Group released its new Medium-termManagement Plan 23-25. I can confirm that in each process

Toshihiro Teshimaof the plan’s development, the validity of the logic used to
set and achieve steady yet achievable numbers was reliably
evaluated. I also commend the Group for boldly implementing a radical reorganization of its sales departments in April
2023, the first since its founding, in order to achieve thesenumerical targets.
In the area of ESG management, meanwhile, the Group is
working steadily towards compliance with TCFD recommendations. In addition to its efforts to develop high value-added
products as part of the “Evolution of the Grain Solution,” theGroup has positioned women’s advancement as one of its
key management issues. To that end, the Group organized aDiversity Form, which I attended in an independent capacity.

I assumed my position as an Outside Director of Showa
Sangyo Co., Ltd. at the General Meeting of Shareholders inJune 2023. My impression of the Group from the outside isthat it is a stalwart company that truly has long “walked together with food” for nearly nine decades. There is currently
uncertainly in the external environment because of, among
other things, raising raw grain prices caused by factors suchas tensions over the current situation in Ukraine and extreme
weather across the globe. In this context, I am certain that
the Showa Sangyo Group will play an increasingly larger roleas it aims to continuously provide a stable supply of food.
During my time in finance, I experienced a wide rangeof financial operations, including corporate sales, credit
screening of client companies, and securities investment,
including overseas securities. I will draw upon this experi-ence in a wide range of duties including not only working
to improve the performance of the Showa Sangyo Group,
but I will also strengthening corporate governance and risk
management. I see my biggest role as an Outside Directorand Audit and Supervisory Committee member as providing
the appropriate advice and supervision needed to achieve
the sustainable growth of the Showa Sangyo Group, as wellas the medium to long term enhancement of its corporate
value, from an independent and impartial standpoint and avariety of perspectives.
In line with the Group’s management philosophy of“contributing to healthy, rich, and varied meals,” I am committed to make use of my past experience to contribute toincreasing the value of the Grain Solution Company that is
the Showa Sangyo Group.
Showa Sangyo Group Integrated Report 2023

65

Governance

List of Officers(As of June 23, 2023)

Directors
CareerApr. 1981
June 2001
Nov. 2006
June
June
June
Apr.
Apr.
Apr.

2009
2012
2014
2016
2020
2023

Career
Feb. 1992
June 2013
Apr. 2015

Joined the Company
General Manager, Principal
Account Sales Division
General Manager, Flour Milling
Department
OfficerManaging Director
Senior Managing Director
President
President and CEO
Chairman (current position)

Apr.
Apr.
June
Apr.

2018
2021
2021
2023

CareerApr. 1983

Joined the Company
General Manager, Fukuoka Branch
General Manager, Management
Planning Department
OfficerManaging Officer
Director Managing Officer
President and CEO (current position)

Kazuhiko Niitsuma

Hideyuki Tsukagoshi

Susumu Oyanagi

ChairmanPresident and CEO

Number of shares owned: 60,576

Number of shares owned: 9,398

Director (Standing Audit andSupervisory Committee Member)

Apr.

2008

Apr.

2010

Apr.

2012

June
Apr.
June
Apr.
June

2013
2016
2018
2023
2023

Number of shares owned: 21,501

Joined The Industrial Bank of Japan,
Limited (currently Mizuho Bank, Ltd.)
General Manager, Securities Department,
Mizuho Corporate Bank, Ltd.
(currently Mizuho Bank, Ltd.)
General Manager, Credit Engineering
Department
General Manager, General Affairs
Department of the Company
OfficerManaging Officer
Director Managing Officer
Director
Director Audit and Supervisory
Committee Member (current position)

CareerApr. 1983
Apr. 1987
Sep. 1992
July

June 2008
Apr. 2017

Toshihiro Teshima
Outside Director (Audit andSupervisory Committee Member)
Number of shares owned: 0

Apr.
CareerApr. 1984
May 2011
June
Apr.
June
Apr.

2014
2018
2018
2021

Apr.

2023

CareerApr. 1984
Apr. 2007
June 2009

Joined the Company
General Manager, Principal AccountSales Dept.
OfficerManaging Officer
Director Managing Officer
Director Senior Managing Officer(current position)
In charge of Business Management &Sales Division (current position)

June 2014
Apr. 2018
June 2018
Apr.

Junji Kokuryo

Tatsuya Yamaguchi

Director Senior Managing Officer

Director Managing Officer

Number of shares owned: 20,994

Number of shares owned: 24,662

2023

CareerApr. 1984
June 2002

Joined the Company
General Manager, Sapporo Branch
General Manager, Household Foods
Department
OfficerManaging Officer
Director Managing Officer(current position)
In charge of Ingredients Sales Dept.,
Food Process Sales Dept., Retailer
Sales Dept., and Branch Offices(current position)

Feb. 2006

June 2011
June 2013
June 2014

Joji Sugo
Outside Director (Audit andSupervisory Committee Member)
Number of shares owned: 0

CareerApr. 1987
Apr. 2016
Apr. 2019
Apr. 2022
June 2022
Apr.

2023

CareerApr. 1985
May 2011

Joined the Company
General Manager, Funabashi Plant
OfficerManaging Officer
Director Managing Officer(current position)
In charge of Technical Division(current position)

Apr.

2016

Apr.
Apr.
Apr.

2018
2022
2023

June 2023

Masashi Ohno

Yoshihiro Hosoi

Director Managing Officer

Director Managing Officer

Number of shares owned: 5,805

Number of shares owned: 2,800

CareerOct. 2001
Apr.

2002

June 2003

Takashi Yanagiya
Outside Director
Number of shares owned: 3,200

Apr.

2006

Apr.
Oct.
Apr.
Aug.
June
June

2008
2008
2012
2012
2013
2014

June 2015
May

66

2016

Managing Director at Nomura Securities
Co., Ltd.
Representative Director and Senior
Managing Director
Representative Executive Officer andSenior Managing Executive Officer
Representative Executive Officer andVice President
Executive Officer and Vice Chairman
Senior Managing Directors and Vice
ChairmanStanding Advisor
AdvisorOutside Director, Alpha Systems Inc.
Outside Director, Hearts United Group
Co., Ltd. (currently DIGITAL HEARTSHOLDINGS Co., Ltd.) (current position)
Outside Director of the Company(current position)
Chairman, Board of Trustees, Meiji
University (current position)

Showa Sangyo Group Integrated Report 2023

CareerApr. 1983
Apr. 2007
Jan. 2010
June 2011
June 2012
Apr. 2017
June 2017
June 2019

Naoko Mikami
Outside Director

Jan. 2020

Number of shares owned: 700

June 2021
June 2021
Mar. 2022

Joined the Company
General Manager, Real Estate
Department
General Manager, Information System
Department
OfficerManaging Officer
In charge of Corporate Division(current position)
Director Managing Officer(current position)

Joined Ajinomoto Co., Inc.
Visiting Professor of Musashino
University
Joined C’BON COSMETICS Co., Ltd.
Executive Officer, in charge of
Production Department
Director, in charge of Production
Department
In charge of Administration Division
Managing Director and Executive Officer
Representative Director, Vice President,
and Executive Officer
Representative Director, Vice President,
Executive Officer, in charge of ProductDevelopment Division
Senior Advisor at YA-MAN LTD.
(current position)
Outside Director of the Company(current position)
Outside Director of Earth Corporation(current position)

June 2016
June 2018
June 2021
June 2021
June 2023

2007

Joined The Chiba Bank, Ltd.
General Manager, Makuharishintoshin
BranchGeneral Manager, Ichikawa Regional
Corporate Banking Department,
Ichikawa Branch
General Manager, Treasury Division
General Manager, Credit Division
Executive Officer and General Manager,
Credit Division
Director and Managing Executive Officer
Deputy President of Chibagin ResearchInstitute, Corporation
President, Chibagin JCB Card Co., Ltd.
(current position)
President, THE CHIBAGIN DC CARD.,
LTD. (current position)
Outside Director (Audit and Supervisory
Committee Member) of the Company(current position)

2018

June 2021
June 2023

June 2023

Joined Yamaichi Securities Co., Ltd.
Joined Smith Barney, Harris Upham
Co., Ltd.
Joined Yasuda Fire & Marine InsuranceCo., Ltd.
General Manager, General Planning
Department, Yasuda Enterprise
Development Co., Ltd.
Senior Managing Director
Executive Officer and General Manager,
Corporate Legal Department, Sompo
Japan Nipponkoa Insurance Inc.
(currently Sompo Japan Insurance Inc.)
Executive Officer and General Manager,
Corporate Legal Department, Sompo
Holdings, Inc.
Director and Managing Executive Officer,
Sompo Japan Nipponkoa Insurance Inc.
(currently Sompo Japan Insurance Inc.)
Director, Sompo Holdings, Inc.
Outside Director (Audit and Supervisory
Committee Member) of Mizuho Trust &Banking Co., Ltd. (current position)
Outside Director (Audit and Supervisory
Committee Member) of the Company(current position)

Officers
Senior Managing Officer

Officers

Hidekazu Takahashi In charge of Technical Planning Dept.,
Logistics Dept., Kashima Plant,
Kobe Plant, and Funabashi Plant

Keiichi Hinokuma

Representative Director and President, Shosan Shoji Co., Ltd.

Takayuki Ota

Representative Director and President, San-ei Sucrochemical Co., Ltd.

Toshiyuki Kaneko

Representative Director and President, Boso oil and fat Co., Ltd.

Kenji Ogawara

Representative Director and President, Okumoto Flour Milling Co., Ltd.

Noriaki Arakawa

Representative Director and President, Kyushu Showa Sangyo Co., Ltd.

Michiyo Senba

General Manager, Funabashi Plant

Takaaki Suzuki

General Manager, Ingredients Sales Dept.

Toshihiko Nagai

General Manager, Kashima Plant

Masabumi Suzuki

General Manager, Research & Engineering Dept.

Kentarou Abe

General Manager, Animal Feed Business Dept.

Yukinobu Oyama

General Manager, Food Business Dept.

Managing Officer
Hiroshi Ino

In charge of Group Personnel,
Group GovernanceTakaya Komai

General Manager, Osaka Branch

Hidenori Takahashi General Manager, Planning Dept.
Daisuke Kawazu

General Manager, Development Dept.

Hidefumi Takeuchi

General Manager, Overseas Business Development & Sales Dept.

Showa Sangyo Group Integrated Report 2023

67

GovernanceCorporate GovernanceCorporate Governance System Chart

Corporate Governance Highlights(As of June 23, 2023)

36.4 %

66.7%

Advising Attorney

Outside Director Ratio

2 of 3

Directors Not on Audit andSupervisory Committee
Supervise

Collaborate

Management Committee
Collaborate

AdviseAudit

Respond

Supervise

Executive Board

Supervise and Control

Divisions/Departments
and Group Companies

4 of 11

Audit and Supervisory Committee

Audit

InquireBoard ofDirectors

Audit and Supervise

Directors on Audit and Supervisory Committee

Auditing Department

Board of Directors

Audit andSupervisory Committee

Management Advisory Committee

Female Directors

Collaborate

Appoint / Dismiss

Remuneration Advisory Committee

11

3
1

Appoint / Dismiss

Appoint / Dismiss

Accounting Auditor

Directors

Directors on Audit
and Supervisory Committee

General Meeting of Shareholders*1Supervise and Control┌─Product Safety Committee├─Compliance Committee├─Diversity Committee
Sustainability ─┼─Environment Management Committee
Committee│ └─TCFD Committee├─Social Contribution Committee├─Stakeholder Engagement Committee│ └─Integrated Reporting Committee└─Risk Management Committee├─Information Security Committee├─Disaster Response Committee└─Safe Labor Promotion Committee

Internal Control Committee
Investment Review Committee
Traffic Safety Committee
RD&E*2 Strategy Committee Etc.

Indicate Guidelines

Showa Sangyo Group CSR Code of Conduct*1 Discretionary advisory bodies of the Board of Directors*2 Research, Development and Engineering

Basic Policy
In accordance with its management philosophy of “contributing to healthy, rich, and varied meals,” the Showa Sangyo
Group aims to enhance the trust of all stakeholders, including shareholders, customers, and employees, as well as torealize its sustainable growth and the medium to long termenhancement of its corporate value. As the concrete policy for achieving this goal, we have established the Showa
Sangyo Corporate Governance Guidelines, and we will work
to ensure the effectiveness of corporate governance as oneof our most important management issues.

 or details, please refer to the Corporate Governance Guidelines and the Corporate Governance Report (Japanese text only)F
Corporate Governance Guidelines https://www.showa-sangyo.co.jp/csr/governance/guideline.html
Corporate Governance Reporthttps://www.showa-sangyo.co.jp/pdf/corporate/csr/governance-report.pdf

History of Our Governance Initiatives
FY2015FY2016• Appointment of First Outside Director(1 of 8)• Start of Board of Directors
Effectiveness Assessments

FY2017FY2018• Transition to Company with Audit and Supervisory
Committee• Establishment of Remuneration Advisory Committee• Increase of Outside Director (3 of 11)• Establishment of Executive Remuneration Policy• Introduction of Restricted Stock Compensation System

FY2021• Appointment of Outside Directors
as At Least a Third of the Board (4 of 11)• Appointment of First Female Director (1 of 11)

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Showa Sangyo Group Integrated Report 2023

FY2022• Disclosure of Director Skill Matrices• Establishment of Management Advisory
Committee• Board of Directors
The Company’s Board of Directors consists of a total of 11
members, including four outside directors. The Board of Directors makes decisions on the execution of important business
operations of the Group and supervises the execution of duties
by directors and officers.
• Audit and Supervisory Committee
The Audit and Supervisory Committee consists of two outside
directors and one inside director, for a total of three members.
The Audit and Supervisory Committee supervises the execution of duties by the Board of Directors in cooperation with the
Accounting Auditor and the Company’s Auditing Department.
• Executive Board
We established the Executive Board as a subordinate organization of the Board of Directors for the purpose of reporting on
matters related to, among other things, the execution of duties bydirectors and officers, and for the purpose of keeping management on the same page. The board is composed of directors (including outside directors) and officers and meets once a month.
• Management Committee
We established the Management Committee as a subordinate organization of the Board of Directors for the purpose of
discussing important matters related to the execution of thebusiness, and for the purpose of keeping management on thesame page. The committee is composed of the manager ordirector in charge of each division, all officers at the managing
officer level and above, and all of directors on the Audit andSupervisory Committee (excluding outside directors).

• Management Advisory Committee
This committee composed solely of outside directors is a discretionary advisory body of the Board of Directors. It functions
to ensure the appropriateness, objectivity, timeliness, andtransparency of processes related to matters such as evaluation of the performance of directors and officers, as well as totheir selection and dismissal. It also addresses management
issues such as the development of the next generation ofmanagement talent.
• Remuneration Advisory Committee
This committee composed solely of outside directors is adiscretionary advisory body of the Board of Directors that responds to inquiries on matters such as proposed remuneration
for directors and officers. The Board of Directors determines
executive compensation after receiving a response from thecommittee, ensuring objectivity and transparency in the compensation determination process. Remuneration for directors
is determined in accordance with the publicly-available Executive Remuneration Policy and the Policy on Determination of
Details of Remuneration, etc. for Directors.

• About Our Committees
We have established various inter-divisional committees as organizations to deals with the various long-term themes related
to the management of the Group. Each committee is chairedby a director and works to resolve the various issues for which
it is responsible through decision-making and proposals tomanagement regarding said matters.
Showa Sangyo Group Integrated Report 2023

69

GovernanceDirector Skill Matrices
Based on the Group’s management philosophy of “contributing to healthy, rich, and varied meals,” we have formulated
SHOWA Next Stage for 2025, our Long-term Vision of theGroup as a Grain Solution Company for the period until theend of FY2025. We are currently pursuing the realization ofthis vision through the development and implementation of
three Medium-term Management Plans each covering athree-year period. Throughout this entire process, we will
strive to achieve the sustainable growth of our Group andthe enhancement of our corporate value in order to fulfil our
responsibilities to all of our stakeholders.
We believe that our directors have the knowledge, experience, and other qualifications needed to advance this effort,

Items on the Director Skill Matrices
and expect they will be able to demonstrate their expertise in
the process. The skill matrices of each director is as shown
below.
All of the directors possess the skills to promote ESG
management, which enables the Group to solve social issues through its business and enhance its corporate value
from the perspective of its CSV strategies. All of the directors
who are Audit and Supervisory Committee members haveaudit-related skills, and all independent outside directors
have experience in corporate management.
Note that the skills matrices below do not represent allof the knowledge, experience, and other qualifications possessed by the Company’s directors.

Skill Items

Expected Knowledge / Experience

Business Management

As an internal director, they currently serve or have experience serving as a director in management position of anyof the companies within the Group, or have an equivalent level of knowledge to such a person, and are expected
to demonstrate their expertise as a director of the Company. On the other hand, our outside directors have theknowledge and experience of having served as directors in management positions at other companies, and are
expected to demonstrate their expertise as a director of the Company.

Business Strategy

They are well-versed in the state of raw grain affairs overseas. In addition to their knowledge and experience inworking closely with government agencies and related organizations, they have knowledge and experience inbuilding relationships with various stakeholders while keeping abreast of market trends in the food industry in orderfor the Company to implement its management strategies. As such, we expect them to demonstrate their expertiseas a director of the Company to help it contribute to society by procuring raw grains that support the domestic foodsupply from overseas and conducting our business as a Grain Solution Company.

Overseas Business

They have knowledge and experience negotiating with overseas companies on behalf of a company to conclude
business alliances and other agreements. As such, we expect them to demonstrate their expertise as a director of
the Company.

R&D
Engineering / Logistics
Treasury / Finance
Governance / Risk Management
IT / Information

They are not only well versed in the field in question, but also have the knowledge and experience to provide
appropriately management and oversight. Therefore, we expect that they will be able to demonstrate their expertiseas a director of the Company to help the Group execute its management strategy and achieve sustainable growthand increase its corporate value.

Expected Knowledge / Experience
Name

Position / Responsibility in the Company

Attribute

Business
Management

Business Strategy

Overseas
Business●

Male

Kazuhiko Niitsuma

Chairman

●

●

Male

Hideyuki Tsukagoshi

President and CEO

●

●

Male

Junji Kokuryo

Director Senior Managing Officer
In charge of Business Management & Sales Division

●

●

Male

Tatsuya Yamaguchi

Director Managing Officer
In charge of Ingredients Sales Dept., Food Process Sales Dept., Retailer Sales Dept.,
and Branch Offices

●

●

Male

Masashi Ohno

Director Managing Officer
In charge of Technical Division

●

Male

Yoshihiro Hosoi

Director Managing Officer
In charge of Corporate Division, General Manager of Planning Management Dept.

●

Male

Takashi Yanagiya

Outside Director

FemaleNaoko Mikami

Outside Director

Male

Susumu Oyanagi

Director (Standing Audit and Supervisory Committee Member)MaleToshihiro Teshima

Outside Director (Audit and Supervisory Committee Member)

Male

Joji Sugo

Outside Director (Audit and Supervisory Committee Member)

Outside Director
Independent Officer
Outside Director
Independent Officer

Outside Director
Independent Officer
Outside Director
Independent Officer

●

●

R&D

Engineering /Logistics

Treasury / Finance

Governance /Risk Management

IT / Information

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

●

*Skills listed are areas in which directors are expected to demonstrate particular expertise.

70

Showa Sangyo Group Integrated Report 2023

Showa Sangyo Group Integrated Report 2023

71

Governance

Major Initiatives of the Board of Directors
The main items considered by the Board of Directors in FY2022 are as follows:

Voting Items

Reporting Items

Formulation of Medium-term Management Plans, reorganizations, establishment of overseas subsidiaries,
business alliances, introduction of new facilities andequipment, sales of owned assets, loans to business
partners, disbursement of support funds, etc.

Reports on Risk Management Committee activities,
information security measures, overseas business,promotion of women activities initiatives, research anddevelopment, the state of intellectual property, etc.

Board of Directors Effectiveness Assessments
The Company’s Corporate Governance Guidelines stipulatethat “the Board of Directors shall analyze and evaluate theeffectiveness of the Board of Directors as a whole every
year based on self-evaluations of each director.” Regarding
FY2022, all 11 directors responded to a questionnaire-based
survey in May 2023, and the results were analyzed and evaluated by the Board of Directors.
With regard to the overall operation of the Board of Directors, the Board believes that the frequency of meetingsand deliberation time are appropriate, and that a sufficientnumber of directors, including independent outside officers,
have been secured in order to ensure the effectiveness of
its decision-making and oversight functions. On the other
hand, it was pointed out that there is room for improvementin the Board’s composition.
We will continue to evaluate the effectiveness of the Boardof Directors on a regular basis to ensure its effectiveness.

Reason for Appointment as Outside Director

Name

Attendance at Board of Directors andAudit and Supervisory Committee
Meetings (FY2022)
Board of Directors

Takashi Yanagiya

16/16

−

Naoko Mikami

16/16

−

We expect that she will strengthen the decision-making and oversight functionsof the Board of Directors by leveraging her experience and extensive knowledgeof corporate management.

−−

We expect that he will further strengthen the Company’s risk management byleveraging his many years of experience at a non-life insurance company and his
extensive knowledge of risk management.

−−

We expect that he will strengthen the Company’s financial policy, etc., byleveraging his long years of experience at financial institutions and his extensive
knowledge.

(Assumed Office
June 23, 2023)

Joji Sugo(Assumed Office
June 23, 2023)

Assistance System for Outside Directors
Assistance is provided to outside directors through theBoard of Directors Secretariat. As the Board of Directors
has made the move to paperless meeting, outside directors
are provided with computers that give them early accessto meeting materials. With regard to important agenda
items such as M&As, detailed explanations are provided inadvance by the department in charge, etc. in an effort to72

Showa Sangyo Group Integrated Report 2023

executive remuneration functions as a sound incentive tocontribute to the sustainable growth of the Group and the
medium to long term enhancement of its corporate value.

(1) Executive remuneration must contribute to the sustainable growth of the Group and the medium to long termenhancement of its corporate value.
(2) Executive remuneration must contribute to sharing value with shareholders and fostering a shareholder-oriented
management mindset.
(3) Executive remuneration must consider not only short term performance, but it should also be linked to medium andlong term performance.
(4) R emuneration levels must be sufficient to attract and retain excellent personnel.
(5) Consideration must be given to creating value for various stakeholders.
(6) Executive remuneration must be designed to be both transparent and objective, and it must be decided through anappropriate process that ensures this.

• Process for Determining Remuneration
In order to ensure transparency and objectivity in the process of determining directors’ remuneration, as well as
the results of said process, the Board of Directors entrusts
the President and CEO with the final decision on directors’
remuneration by resolution of the Board of Directors, after
deliberation by the Remuneration Advisory Committee, a

discretionary advisory body of the Board of Directors. The
Remuneration Advisory Committee meets as required in
the process of determining the remuneration system fordirectors and the specific amounts of remuneration for eachdirector. The committee met a total of three times in FY2022.

Reason for Appointment

Audit andSupervisory
Committee

We expect that he will strengthen the decision-making and auditing functions of
the Board of Directors by leveraging his experience in corporate management
and his extensive knowledge of capital markets.

Toshihiro Teshima

Remuneration of Directors and Officers• Basic Policy on Determining Remuneration
The Company established and disclosed an Executive Remuneration Policy effective April 1, 2017. It establishes thefollowing basic policies with the intention of assuring thatprovide the information needed to make decisions.
We also provide outside directors with opportunities
to see our plants, R&D facilities, and Group companies inperson, while engaging in discussions with local managers,
staff, etc. This is done in an effort to make them aware of theactual situation of the company.

• Remuneration System
The remuneration system for directors consists of monetary
remuneration and stock-based remuneration.
Monetary remuneration consists of a basic fixed remuneration determined in accordance with the nature of theposition, including job duties, as well as monetary remuneration as a short-term incentive (variable fixed remuneration)
determined with consideration given to the performanceof the Company and the individual director in the previous
fiscal year. As a general rule, the ratio of these remunerations is 7:3 in favor of basic fixed remuneration (7) against
variable fixed remuneration and stock-based remuneration(3). In order to share value with the Company’s shareholders, between variable fixed remuneration and stock-based

remuneration, stock-based remuneration accounts for the
majority. Variable fixed remuneration is determined based on
the individual’s level of contribution to the Company, including the company’s performance and their individual performance, with consideration of the nature of each director’scommitment to single-year performance as milestones forachieving medium to long term performance targets.
Meanwhile, stock-based remuneration is determinedin accordance with the director’s position, etc., after comprehensively considering their roles, responsibilities, etc. It
serves as a medium to long term incentive to enhance theGroup’s corporate value over this same time scale, and toshare interests with the Company’s shareholders.

*More than half is stock-based remuneration.

Remuneration System Diagram7

3

Monetary Remuneration
Basic Fixed Remuneration

Variable Fixed
Remuneration

Stock-based
Remuneration

Showa Sangyo Group Integrated Report 2023

73

GovernanceRisk Management

Compliance

Basic Policy
The Showa Sangyo Group has established the Risk Management Committee in accordance with the Basic Policy on Risk
Management and works to strengthen prompt and appropriate responses to address serious risks to corporate management.

Basic Policy
Aware of being a corporate citizen, the Showa Sangyo Group implements activities led by the Compliance Committee with eachand every employee serving as a compliance practitioner to create a more robust organization.

Risk Management Promotion System
At the Group, Risk Management Committee identifies risks
with the potential to hinder the achievement of managementtargets once a year. The committee evaluates the identified
risks in accordance with risk criteria consisting of a matrix
formed from “level of impact on management” and “likelihood of occurrence” and implements risk assessment todetermine the severity of the risk.

In particular, for very serious risks, the person in chargeof each division reports to the Risk Management Committee
on the response policy, and the committee monitors the response status and implements improvements and guidance,
thereby developing ongoing risk management activities toreduce risk.

Diagram of Risk Management Promotion System
Board of Directors
ReportOversight

Management Committee
ReportSustainability Committee
Committee chairman: President
Strategy risk

Previous fiscal year: Activities report
Current fiscal year: Activity policy and targets

Social risk
Financial risk
Hazard risk
Operational risk

ReportP · Implementation ofInstruction

risk assessment(risk list)·F ormulation of activity
policy and targets·F ormulation of risk
countermeasures planD
· Implementation ofrisk countermeasures·E ducational activities· Correction andimprovement of risk
countermeasures

Information Security Committee
Disaster Response Committee
Safe Labor Promotion Committee

A

Instruction and sharing
of information·E valuation of risk
countermeasures
activities·R eview of risk criteria·E valuation of risk
management
effectivenessC

TCFD
Committee

Risk Category

Main Related Risks

Risk Category

Main Related Risks

1. Raw grain procurement(fluctuations in grain
prices and foreignexchange, etc.)· Sharp fluctuations in grain prices and foreignexchange markets

4. Information security· Shutdown of system due to cyberattack· Sustainable procurement of raw grain

5. Climate change· Concerns about product safety and reliability· Increased costs for product recalls due to
product defects· Risk of transition to low-carbon society· Physical risk due to intensification of abnormal
weather and average temperature rise, etc.

6. Human rights· Decline in competitiveness and corporate value (decline
in employee productivity, loss of outstanding humanresources, damage to corporate image and trust, etc.)

7. Corporate acquisitions
and joint ventures· Risk of impairment, including goodwill· Compensation for damages due to information leaks· Customer attrition due to decline in trust
3. Disasters, accidents,
and infectious diseases· Inability of employees to attend work
· Disruption of supply chain· Shutdown of plant operations

Please see the corporate website for the main measures to address each risk. (Japanese text only)
https://www.showa-sangyo.co.jp/csr/governance/risk-management.html

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Showa Sangyo Group Integrated Report 2023

Showa Sangyo Employees, etc.

Reportingandconsultation

Reportingandconsultation

Group companies Employees, etc.
Reporting and consultation

Reporting and consultation

External office (common office for the Group)

Consultation
Report (Harassment-related)

ReportInternal office for internal reporting (Common office for the Group)

Harassment consultation office

Showa Sangyo Sustainability Promotion Dept.

Showa Sangyo Human Capital
Strategy Dept.

(Collaboration with Risk Management Dept., Human Capital Strategy Dept.,
Planning Dept., and the officer in charge of Group governance)

Collaboration

Harassment consultation office
Collaboration

Responsible divisions/departments
at Group Companies
Compliance promoter(Person with responsibility for operating
the internal reporting system)

Blocking Relationships with Anti-social Forces
The Showa Sangyo Group does not maintain any relationships with anti-social forces or with groups or companies that haverelationships with anti-social forces.
In terms of specific measures to achieve this, we have established a response system to ensure the blocking of such relationships, including automation of primary screening for counterparty risk checks.

Identifying Serious Risks
The risks that could have a serious impact on management are as follows.

2. Product safety

Showa Sangyo Group Internal Reporting System Report Receiving and Handling Framework (Outline)

Consultation

Committee chairman: Person in chargeof the Corporate Division
Secretariat: Risk Management Dept.

Divisions/
Departments andGroup Companies

Internal Reporting System
The Group has established an internal reporting system, which protects whistleblowers and handles reports. Based on thecontent of these reports, we strive to improve the workplace by detecting misconduct at an early stage and identifying issues for
improvement to create places where employees can work with more peace of mind.
We revised the system based on the objectives of the amended Whistleblower Protection Act, and implemented the revised
Showa Sangyo Group Internal Reporting System Rules on April 1, 2022. Together with revising the rules, we also gave consideration to convenience for employees, including establishing a new external office for reporting on legal violations in general andenabling anonymous reporting.
In terms of consultation on harassment, we have established and operate a harassment consultation office in accordance with
the Showa Sangyo Group Harassment Prevention Rules.

Instruction

Risk Management Committee

ReportSystemThe Compliance Committee (Committee chairman: Person in charge of the Corporate Division) plays the central role in clarifying
and disseminating the Group’s compliance policy, identifying issues that change depending on social circumstances, and deciding and implementing countermeasures.
In addition to legal compliance, we follow social norms and ethical values, and employees receive extensive educationaccording to their duties.

Promotion Activities
In FY2022, we implemented the “Questionnaire on Awareness and Status of Compliance” for employees with the objective of
ascertaining employee awareness of compliance and compliance issues in workplaces.
Based on the results of the questionnaire, we have actively deployed educational and awareness-raising activities aimed atstrengthening compliance. First, we distributed a compliance calendar that combines illustrations and slogans to workplaces as
a compliance awareness-raising tool. Also as a tool to raise awareness of familiar and important topics, we started distributing
the Compliance Newsletter in a four-frame comic format via the company intranet. We have distributed these newsletters eachmonth on an ongoing basis.
In addition, in light of recent legal revisions, we are working to disseminate information to ensure legal compliance related
to the internal reporting system and the Act on the Protection of Personal Information. With regards to the internal reporting
system, we actively communicate the basic policy and system of the reporting system through training for new employees andthe company intranet and strive to enhance operations.
We will continue to promote understanding and awareness of compliance education and work to enhance management systems.
Showa Sangyo Group Integrated Report 2023

75

Data

Corporate Profile(As of March 31, 2023)▎ Company Name

Showa Sangyo Co., Ltd.

▎ Headquarters Location

2-2-1, Uchikanda, Chiyoda-ku, Tokyo▎ Representative

President and CEO, Hideyuki Tsukagoshi▎ EstablishedFebruary 18, 1936

Kobe Plant▎ Capital¥14,293,508,177▎ Number of Employees

Company: 1,276 Consolidated: 2,863

Located in the east of Kobe
Port, this manufacturing andlogistics base in western Japan
has a berth suited for panamax
class large-scale grain vessels

Japanese Domestic Offices
and Plants - 3 Manufacturing Bases

Sapporo Branch

Kashima Plant

Location: Kobe City, Hyogo Prefecture

Main Group Companies(As of June 30, 2023)

Products: Flour, premix, vegetable oil● Consolidated Subsidiary ▼ Unconsolidated Subsidiary ■ Equity Method Company

Company Name

76

Featuring a berth at which a panamax
class large-scale cargo vessel candock, this is a main plant, which
logistically, is conveniently locatedabout 80km from Tokyo, a large
consumer

Lot Area: About 73,000 m2

Sendai BranchBusiness Duties●

Shosan Shoji Co., Ltd.

Wholesale of foods and feed and insurance agency business, etc.

●

Okumoto Flour Milling Co., Ltd.

Manufacturing and sales of flour, premixes and pasta, etc.

●

Boso oil and fat Co., Ltd.

Production and sales of rice oils●

Shikishima Starch MFG. Co., Ltd.

Manufacturing and sales of corn starch and corn sweeteners●

San-ei Sucrochemical Co., Ltd.

Manufacturing and sales of corn sweeteners, lactic acid bacteria
and Bifidobacterium●

Kyushu Showa Sangyo Co., Ltd.

Manufacturing and sales of animal feed and sales of livestock produce●

Kida Flour Mills Co., Ltd.

Manufacturing and sales of flour and premixes●

Naigai Flour Milling Co., Ltd.

Manufacturing and sales of flour●

Central Flour Milling Co., Ltd.

Manufacturing and sales of flour●

Swing Bakery Co., Ltd.

Manufacturing and sales of bread●Grandsolu bakery Co., Ltd.

Manufacturing and sales of frozen dough●Garden Bakery Inc.

Manufacturing and sales of bread●

Tower Bakery Co., Ltd.

Manufacturing and sales of bread and frozen dough●Nagaokayuryo Co., Ltd.

Production and sales of rice oils●

Kumiaiyushi Co., Ltd.

Production and sales of soup, fatty acid●Musashiyushi Co., Ltd.

Production and sales of rice oils●

Minaminihonkomeabura Co., Ltd.

Production and sales of rice oils, corn oils●

Tokyoyushikogyo Co., ltd.

Production and sales of rice oils, corn oils●

Showa Frozen Foods Co., Ltd.

Manufacturing and sales of frozen foods●

Showa Keiran Co., Ltd.

Washing and sorting of eggs and purchase and sales of feed●

Shosan Kaihatsu Co., Ltd.

Commercial building and other property rental business●

Shourei Co., Ltd.

Freezer and refrigerated warehouse operations●

Oban Co., Ltd.

Wholesale of ingredients for Japanese confectionery and cookware●

Shosan Business Services Co., Ltd.

Consulting on corporate management for Showa Sangyo Group companies
and other businesses●

Shosan Transportation Co., Ltd.

Truck transportation and loading/unloading operations●

Star Bakery Co., Ltd.

Property rental business▼Okada Unso Co., Ltd.

Freight truck transportation▼

Showa Sangyo Vietnam Co., Ltd.

Technical consulting for food plants■

Nagoya futo Silo Co., Ltd.

Grain silo■

Kouchan Mill Co., Ltd.

Manufacturing and sales of flour■

Tsuji Oil Mills Co., Ltd.

Production and sales of rice oils, corn oils

▼ International Mix Joint-Venture Company■

Z.Y. Food Company Limited

Production and washing and sorting of eggs and purchase and sales of feed

• Manufacturing and sales of premixes■

Shibushi Silo Co., Ltd.

Grain silo

▼ Showa Sangyo International Vietnam■

Kashima Silo Co., Ltd.

Grain silo■

Shin Nihon Chemical Co., Ltd.

Manufacturing and sales of food enzyme•M anufacturing and sales of premixes, and preparedsugar (planned to begin operation in 2025)

Showa Sangyo Group Integrated Report 2023

Location: Kamisu City, Ibaraki Prefecture (Kashima Coastal
Industrial Zone) and other locations
Lot Area: About 390,000 m2(including Itako Mix Branch Plant, etc.)

Kanto-Shinetsu Branch

Products: Flour, vegetable oil, cornstarch and sweeteners,
processed soybean products, premix

Headquarters
Hiroshima Branch
Fukuoka Branch

Nagoya Branch
Osaka Branch

Funabashi Plant
Manufacturing and logistical base in
the capital area, which acts mainly
as a flour milling plant and handles
secondary processing of flour
Adjacent with RD&E* Center in thesame lot

RD&E Center

Location: Funabashi City, Chiba Prefecture
Lot Area: About 77,000 m2 (including RD&E Center)
Products: Flour, premix, pasta*Research, Development and Engineering

Foreign Business● Flour▼ Premix■ Animal feed/chicken eggs

China
▼ Dachan Showa Foods Tianjin Co., Ltd• Manufacturing and sales of premixes● Dachan LiangYou Foods Co., Ltd• Manufacturing and sales of flour

Taiwan● Kouchan Mill Co., Ltd• Manufacturing and sales of flour■ Z. Y. Food Company Limited•P roduction and washing and sorting of eggs andpurchase and sales of feed

VietnamShowa Sangyo Group Integrated Report 2023

77

Data

Financial and Non-financial Highlights (11 Years)
FY2012FY2013

FY2014FY2015FY2016FY2017FY2018FY2019FY2020

FY2021

FY2022

228,150
8,015
3.5
8,707
4,680

246,418
8,550
3.5
9,638
6,458

245,111
7,142
2.9
8,108
5,287

247,823
7,951
3.2
8,977
5,941

233,206
8,786
3.8
9,514
6,167

233,166
6,556
2.8
7,737
4,893

255,905
8,443
3.3
9,786
7,254

254,017
8,808
3.5
10,1606,764

255,997
7,594
3.0
9,213
10,115

287,635
5,564
1.9
6,576
4,006

335,053
4,184
1.2
6,525
7,776

152,926
58,62036.5
5.8
39,4700.71
8.8

154,544
61,71638.2
6.3
39,6340.67
11.2

160,778
69,18041.3
5.1
36,4130.55
8.4

157,941
71,60043.6
5.6
33,5020.49
8.8

164,959
75,36844.4
5.9
32,9220.45
8.7

170,544
81,04945.8
4.6
34,3430.44
6.5

174,711
86,21147.4
5.7
30,9250.37
9.0

173,451
88,721
49.2
5.8
29,9400.35
8.0

213,309
103,080
46.7
4.8
45,421
0.46
10.9

231,306
109,089
45.7
3.0
52,9270.50
3.9

247,770
116,36245.6
2.7
61,394
0.54
7.1

9,877
-6,5463,331-3,38010,926-9,432
1,493-2,30913,800-9,122
4,677-4,733

13,036-8,4284,607-4,44319,098-9,923
9,174-4,753

9,582-11,773-2,191-404

18,590-8,208
10,382-7,525

15,634-7,5998,034-4,686

13,769-26,376-12,606
13,8001,334-11,729-10,395
8,405-2,930-6,155-9,086
6,136

28.45
341.78
8.00
28.1

39.80
369.75
9.00
22.6

33.09
415.45
9.00
27.2

37.18
430.8310.00
26.9

194.26*1
2,318.46*1
10.00
25.7

154.972,476.29
30.00*2
32.3

229.652,622.82
60.00
26.1

216.452,738.26
65.00
30.0

319.673,079.85
65.00
20.3

120.61
3,161.88
60.00
49.7

232.593,378.49
65.00
27.9

7,466
7,296
1,877

8,716
7,460
1,943

7,430
7,397
2,011

8,570
7,304
1,970

12,595
7,582
2,222

7,654
7,930
2,119

7,847
8,556
2,222

9,697
8,146
2,212

12,434
8,816
2,489

9,877
9,990
2,643

9,449
9,906
2,734

31.5
128
5,618
2,004

34.1
132
5,861
2,037

34.0
133
5,734
2,057

33.7
136
5,841
2,042

32.9
136
5,749
2,103

32.5
137
6,144
2,139

34.0
148
6,342
2,376

33.5
147
6,247
2,421

40.9
184
14,990
2,899

36.8
182
14,779
2,870

33.3
178
13,9802,863

Operating Results
Net sales
Operating profit
Operating profit margin
Ordinary profit
Profit attributable to owners of parent(Millions of yen)
(Millions of yen)(%)
(Millions of yen)
(Millions of yen)

Financial Position
Total assets
Net assets
Equity ratio
ROA
Interest-bearing debt
Debt-equity ratio
Return On Equity (ROE)(Millions of yen)
(Millions of yen)(%)(%)
(Millions of yen)(Times)(%)

Cash Flows
Cash flows from operating activities
Cash flows from investing activities
Free cash flow
Cash flows from financing activities(Millions of yen)
(Millions of yen)
(Millions of yen)
(Millions of yen)

Per Share Indicators
Earnings per share
Net assets per share
Dividend per share
Dividend payout ratio

(Yen)
(Yen)
(Yen)
(%)

Other
Capital investment
Depreciation
R&D expenses(Millions of yen)
(Millions of yen)
(Millions of yen)Non-financial Indicators
CO2 emissions*3
Energy consumption (crude oil equivalent)*3
Water consumption*3
Number of employees on the consolidated basis(10,000 t)(1,000 kl)(1,000 t)(Employees)*1 Showa Sangyo implemented a reverse stock split with a ratio of 1:5 for the Company’s common stock on October 1, 2017. Accordingly,
earnings per share and net assets per share are calculated as if the reverse stock split had been implemented at the beginning of FY2016.
*2 The dividend per share of 30 yen in 2017 consists of an interim dividend of 5 yen before the reverse stock split and a year-end dividend of 25 yen after the reverse stock split.
*3 The aggregation range has fluctuations due to increases and decreases in Group companies. The aggregation range for FY2022 is 26 consolidated subsidiaries.

78

Showa Sangyo Group Integrated Report 2023

Showa Sangyo Group Integrated Report 2023

79

Data

Share Information▎Stock Code: 2004▎
umber of: 100 shares▎NShares
Per Unit isted StockL
Exchange: TSE Prime(As of March 31, 2023)

otal Number of▎TAuthorized
SharesTotal Number of▎Issued Shares: 33,985,420 shares (including 534,486 shares of treasury stock)

Foreigners
164
2,456,000 shares(7.2%)

Financial Institution
25
11,074,000 shares(32.6%)

Total Numberof Issued Shares

33,985,420 shares

Financial Instruments
Business Operator
28
780,000 shares(2.3%)

Trend in Dividend / Dividend Payout Ratio per 1 Share█ Dividend (left axis)(Yen)━ Dividend Payout Ratio (right axis)

70
60
Number of
Shares Held(thousands ofshares)Shareholder Name

Shareholding
Ratio (%)

ITOCHU Corporation

2,540

7.6

The Master Trust Bank of Japan, Ltd.
(trust account)

2,189

6.5

65

65

60

60

60

49.7

50

36.5

30

4.6

20

MITSUI & CO., LTD.

1,540

4.6

10

Yuasa Funashoku Co., Ltd.

1,233

3.7

Sompo Japan Insurance Inc.

1,197

3.6

Showa Sangyo Business Partner
Stockholder Association

1,131

3.4

The Norinchukin Bank

1,103

3.3

Sojitz Corporation

1,000

3.0

Cargill Japan LLC

940

2.8

40
30

30.0

1,542

60
50

40

The Chiba Bank, Ltd.

(%)
70

65

Major Shareholder
Treasury Stock1534,000 shares(1.6%)

Other Corporations
325
11,206,000 shares(33.0%)

Shareholder Return (Dividends)▎Number of Shareholders : 19,614

Stock Distribution Status by Owner

Individuals andOthers
19,071
7,933,000 shares(23.3%): 131,000,000 shares

30.9*

27.9

26.1

20
10

0

0

FY2018FY2019FY2020

FY2021

FY2022

FY2023(expected)*The dividend payout ratio for FY2020 excludes the influence due to gain on negative goodwill.
The dividend payout ratio including the influence due to gain on negative goodwill is 20.3%(Note) Shareholding ratio is calculated excluding treasury stock.

Stock Price
Trends in Stock Price / Volume█ Volume (left axis)(Shares)━ Stock Price (right axis)

(Yen)
3,600

2,000,000

On Issuing the “Showa Sangyo Group Integrated Report 2023”
1,600,000

3,200

1,200,000
2,800
800,000
2,400

400,000

2,000

0
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3

2018

80

2019

2020

2021

2022

2023

FY2018FY2019FY2020

FY2021

FY2022Highest Stock Price

(Yen)

3,095

3,265

3,645

3,140

2,673

Lowest Stock Price

(Yen)

2,701

2,853

3,000

2,590

2,359

Return On Equity (ROE)

(%)

9.0

8.0

10.9

3.9

7.1

Price-Book Ratio (PBR)(Times)

1.14

1.17

1.01

0.83

0.74

Showa Sangyo Group Integrated Report 2023

The “Showa Sangyo Group Integrated Report” is created as a communication tool to spur dialogue withall of our diverse stakeholders, particularly all of ourinvestors.
Every year, we are careful to include the various
opinions and perceptions of all of our stakeholders
who read that year’s report in the following year’s
Integrated Report to the greatest extent possible.
Starting this fiscal year, we have begun our newest Medium-term Management Plan, as we work forthree years to achieve “our ideal identity” in 2025, thelast fiscal year for the Long-term Vision.
Through the re-defining of materialities, five key
strategies, financial KPIs and non-financial KPIs in

the pages of the Medium-term Management Plan, we
hope you will be able to understand our future direction, which utilizes our strengths as a Group which
has a unique business model.
Moving forward, we will continue striving forproactive information disclosure, necessary for
growth of our Group, by deepening the content of ourreports, as we also strive for transparent and fair dialogue, so we humbly ask for your continued offeringof frank opinions.
Hidenori Takahashi
Officer, General Manager of Planning Department
Showa Sangyo Co., Ltd.

Showa Sangyo Group Integrated Report 2023

81

(Contact information)

Corporate Communications Section, Planning Dept.
2-2-1,Uchikanda,Chiyoda-ku,Tokyo 101-8521,Japan
Tel: +81-3-3257-2042
Fax: +81-3-3257-2097
URL: https://www.showa-sangyo.co.jp/en/
Date of publication: December 2023