Financial Briefing

NAGASE&CO.,LTD.
May 27,2022

Copyright © 2022 NAGASE & CO., LTD.

IDE N T IFY >>> DE V E L OP >>> E X PA N D

FYE March 2022

Contents■ FYE March 2022 Results, FYE March 2023 Earnings Projection P3～P19■ Initiatives Under Medium-Term Management Plan ACE 2.0

P20～P27■ NAGASE Group Sustainability

P28～P38

Copyright © 2022 NAGASE & CO., LTD.

FYE March 2022 Results, FYE March 2023 Earnings Projection

Copyright © 2022 NAGASE & CO., LTD.

Consolidated Statements Income▶ Gross profit
・ Higher profit in all segments, with all stages of profit below gross profit reaching record highs
・ In particular, the automobile, resins and electronics, the Prinova Group's nutrition-related business performed well
▶ Operating income
・ Income greatly increased year-on-year with increases in gross profit; the economic impact of the COVID-19 had been significant
in the previous fiscal year
▶ Net income
・ Significantly higher profits with strong business performance and gain on sales of cross-shareholdings, despite recording impairment
losses that pressured profits downward
100 millions of yen

21/03

22/03

ChangeVs.PY

Forecast（announced Feb 9）

Achievement

Sales

6,252

7,805

+ 1,553

125%

ー

ー

Gross profit

1,146

1,394

+ 248

122%

1,380

101%

<GP ratio>

18.3%

17.9%

(0.5pt)－ー－

SG&A expenses

926

1,042

+ 115

112%

1,030

－

219

352

+ 133

161%

350

101%

228

364

+ 136

160%

365

100%

188

259

+ 71

138%

250

104%

@ 106.1@ 112.4@ 6.3 Weak yen@111.9@ 15.7@ 17.5@ 1.8 Weak yen@17.4

OperatingincomeOrdinary
incomeProfit Attributableto owners of theparentUS$ Exchange rate
(period average)
RMB Exchange rate
(period average)* Offset to sales and cost of sales from application of revenue recognition standards: March. 2021, -¥204.9 billion; March. 2022, -¥244.8 billion* Impact from foreign exchange: Gross profit, +¥3,200 million; Operating income, +¥900 million

Copyright © 2022 NAGASE & CO., LTD.

4

Gross Profit by Region▶ Higher profit both domestic and overseas▶ Domestic : In particular, the automobile-related business and electronics-related business for mobile devices/displays performed well
▶ Overseas : The resins business, mainly for office equipment, appliances, and video game devices and focused on Greater China and
ASEAN, and the nutrition-related business in Europe and the Americas performed wellDomestic & Overseas Gross profit(100 millions of yen)
Total 1,394

1,400

Overseas
681
1,200

1,000

800

100%
90%

Total 1,146

70%

Overseasgross profit
ratio
48.8%

60%

Total 681

700

Total 511
Europe64

Americas
175
300

Domestic
634

Domestic
713

30%

ASEAN
127

200

100
10%
0%

0
21/03

ASEAN
94

20%

200

22/03

Americas
238

400

40%

400

Other
10

500

50%

600

Other
11

Europe
84

600

80%

Overseas
511

Overseasgross profit
ratio
44.6%

Overseas gross profit By Region(100 millions of yen)Greater
China
166

Greater
China
218

0

21/03

22/03

* From FYE March 2022, the usual overseas net sales per-destination region have been replaced by per-region information for grossprofit, aggregated for each location of consolidated* Domestic figures under Domestic & Overseas Gross Profit include inter-regional adjustments

Copyright © 2022 NAGASE & CO., LTD.

5

Gross Profit by Business & Segment▶ Higher profits in all segments, with a full year gross profits reaching record high▶ Functional Materials and Advanced Materials & Processing : Profitability improved due to expanded sales share of highly functional
materials and high-value-added group products, in addition to the impact of rising market prices.
▶ Life & Healthcare : Profits increased due to strong performance in the Prinova Group's nutrition-related business and strong salesof cosmetics-related materials* Comparison information for segment values reflects impact from business segmentation changes implemented on April 1, 2021.

Change in Gross Profit By Segment (100 millions of yen)

Gross Profit By Business & Segment (100 millions of yen)

1,200

1,000

Total 1,394

Total 1,394

1,400

Total 1,146

Manufacturing
546

Total 1,146

Life &
Healthcare
374

Manufacturing
475Life &
Healthcare
447

Mobility 127

800
Mobility 89
600

400

Trading& Other
670

Trading& Other
847

200Electronics &Energy255
Advanced
Materials& Processing
268
Functional
materials
1550Electronics &Energy297

Advanced
Materials& Processing
323

History of Gross Profit(100 millions of yen)
400
300

345
260

353

341
299

277

353
308

200
Functional
materials
198

By Business

By Business

By Segment

By Segment

21/03

22/03

21/03

22/03

Copyright © 2022 NAGASE & CO., LTD.

22/03

21/03

100
0
１Q

２Q
21/03

３Q

４Q

22/03

6

Operating Income by Business & Segment▶ Operating income reached a record high with an increase in gross profit across all segments, despite a slowdown in the second half,
mainly due to the normalization of profitability related to resin sales and an increase in general and administrative expenses▶ Manufacturing business operating income reached record high, mainly due to strong Prinova Group performance▶ We continue to invest for sustainable growth in the future, such as DX-related areas

Operating Income by Business & Segment (100 millions of yen)

Change in Operating Income By Segment (100 millions of yen)

Total 352

420
Life &
Healthcare
94

Total 352

350
Manufact
uring
114

280
Total 219

Manufacturing87

140

Trading& Other237
Trading& Other
131

0

(70)

Life &
Healthcare
65
Mobility 18

210

70

Total 219

By Business
21/03

By Business
22/03

Copyright © 2022 NAGASE & CO., LTD.

Electronics &Energy84
Advanced
Materials& Processing
73
Functional
materials
47

Mobility 41

Electronics &Energy102

21/03
Advanced
Materials& Processing
108

Functional
materials
78

History of Operating Income(100 millions of yen)

Corporate&Others(72)

By Segment
21/03

By Segment
22/03

97

100

97

86
71

80

71
58

52

60
40

Corporate&Others
(68)

22/03

36

20
0
1Q

3Q

２Q
21/03

4Q

22/03

7

Functional Materials Segment Operating Income Overview▶ Raw materials sales increased for coating and urethane raw materials as well as those related to industrial oil solutions and plastic
materials, driven by an increase in automotive production▶ Sales trended strong in areas like electronics chemicals for the electronics industry, such as for semiconductor-related products▶ Profits increased year-on-year; the economic impact of the COVID-19 had been significant in the previous fiscal year, primarily inthe automobile-related businessHistory of operating income （100 millions of yen）

Operating income by business（100 millions of yen）
Total 78
Manufact
uring
11

75

20
20

19
18

18

60
15
Total 47
45

13

Manufact
uring 5

13

10
Trading &
Other
67

30
Trading &
Other
42

10
8

5

15

0

0
21/03

22/03

1Q

２Q
21/03

Copyright © 2022 NAGASE & CO., LTD.

3Q

4Q

22/03

8

Advanced material & Processing Segment Operating Income Overview▶ Resins sales, mainly in products to the office equipment, appliance, and video game device industry, performed well due to risingmarket conditions▶ Digital print processing materials sales continued to be sluggish due to impact from declining market from the second half ofthe previous fiscal year
▶ Profits increased significantly year-on-year thanks to strong sales in the resins business both domestically and overseas, as well as improvementin profitability from rising market conditions

History of operating income （100 millions of yen）

Operating income by business（100 millions of yen）
Total 108

Manufact
uring 0

32

31

100
30

80
Total 73

24

Manufact
uring 020

6040

Trading &
Other
107

20

19

17
15

14

Trading &
Other
72

20

0

0
21/03

22/03

1Q

２Q
21/03

Copyright © 2022 NAGASE & CO., LTD.

3Q

4Q

22/03

9

Eｌectronics & Energy Segment Operating Income Overview▶ Sales increased for display-related materials and precision processing-related materials for semiconductors▶ Sales of formulated epoxy resins-related products increased, primarily for mobile devices and semiconductors▶ Establishing a structure for next-generation communications-related business, aiming for medium- to long-term growth despite upfront
development costs

History of operating income （100 millions of yen）

Operating income by business（100 millions of yen）
Total 102

30

29

100

Total 84
80

60

20

25
24

24
23

20

Manufact
uring
39

40

25

Manufact
uring
35

16

Trading &
Other
67

16

10

Trading &
Other
45

0

0
21/03

22/03

1Q

２Q
21/03

Copyright © 2022 NAGASE & CO., LTD.

3Q

4Q

22/03

10

Mobility Segment Operating Income Overview▶ Sales increased in functional materials and functional components for EV interior and exterior fittings and electrification▶ Profits increased significantly year-on-year due to a recovery in automotive production and rising market prices▶ Profitability improved due to progress in business portfolio transformation, including increased sales of high-value-added products

History of operating income （100 millions of yen）

Operating income by business（１００ millions of yen）
Total 41

11

40

10

10

10
9

8
30

7

7

6

20

Total 18

Trading &
Other
41

4
3

2
10

Trading &
Other
18

0
(1)
(2)

0
21/03

22/03

1Q

21/03
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3Q

２Q

4Q

22/03

11

Life & Healthcare Segment Operating Income Overview▶ Materials sales, manufacturing, and processing all trended strongly in the nutrition-related business, primarily focused on the Prinova Group▶ Sales increased related to food materials, primarily TREHA™, in cosmetics materials, primarily AA2G™, and related to pharmaceutical raw
materials and intermediates▶ Profits increased significantly year-on-year ; the economic impact of the COVID-19 had been significant in the previous fiscal year, primarily infood materials and cosmetics-related material

History of operating income （100 millions of yen）

Operating income by business（100 millions of yen）
Total 94

30
27

80
23
22
21

Total 65
60

40

20
Manufact
uring
69

20

16

Manufact
uring
46

13

13

10

20
Trading &Other
19

Trading &
Other
25

0
21/03

22/03

0
1Q

21/03
Copyright © 2022 NAGASE & CO., LTD.

3Q

２Q

4Q

22/03

12

State of Major Manufacturing Subsidiaries▶ Nagase ChemteX Corporation : Profits increased with strong sales related to formulated epoxy resins primarily for mobile devices andsemiconductors, as well as for products like photolithography materials for displays▶ Hayashibara Co., Ltd. : Profits increased with demand for the TREHA ™ food material and with recovery in demand for the AA2G ™
cosmetics material▶ Prinova Group : Profits increased with continued strong sales of nutrition materials thanks to U.S. economic recovery as well as withrecovery of manufacturing and processing

100 millions of yen

21/03
Sales
Nagase ChemteX
Corporation

Hayashibara Co.,Ltd.

Prinova Group

Copyright © 2022 NAGASE & CO., LTD.

22/03

Change

Vs.PY

259

289

30

112%

Gross profit

80

89

8

110%

Operating income

32

37

5

117%

Sales

236

265

29

112%

Gross profit

100

108

7

107%

Operating income

43

45

1

104%

Goodwill amortization etc.

30

30

-

100%

Operating income after
amortization burden

12

14

1

115%

Sales

866

1,209

342

140%

Gross profit

163

218

55

134%

Operating income

47

69

22

147%

Goodwill amortization etc.

19

20

1

104%

Operating income after
amortization burden

27

49

21

177%

13

Prinova Group Update
Expand business in North America■ FY2021 acquisitions
Expand product lineup for ingredient sales⇒ acquisition of The Ingredient House(sweetener distributor)

Expand regional portfolio of processing centers and strengthening functions⇒ acquired Lakeshore Technologies

PMI is on track and producing synergies, including the start of business with a major brand owner■ Strengthen manufacturing and processing functions through new plant construction
Expand capacity of Armada (contract manufacturing) and Solutions (processing)⇒ New plant to be built in Utah

Preparations underway and production scheduled to start in JulyFY2022 Numerical Plan
Operating Income (100 millions of yen)

■ FY2021: Operating income of 6.9 billion yen due to strong sales of106materials and recovery at Armada, which had been underperforming
８６

during fiscal 2020 due to COVID-19■ FY2022: Forecast operating income of 8.6 billion yen due to ongoingstrong performance for the business as a whole, as well as higher
sales stemming from the full-year contributions of two acquisitions

Plan at Acquisition

６９
47
40

and the effects of increased capacity■ Expect to achieve targets three years ahead of schedule comparedto plans at the time of acquisition* Forecast conversion rate (FY2022: 120.0 yen; FY2025: 108.7 yen)

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FY2019FY2020

FY2021

FY2022(Forecast)

FY2025(Plan)

14

Consolidated Balance Sheets▶ Current assets : Accounts receivable and inventories increased due to favorable performance (working capital increased)▶ Net assets : Shareholders’ equity increased due to the recording of profits for the fiscal year, despite payments of dividends, purchasesof treasury stock, and a decline in market value of investments in securities▶ NET D/E ratio : Increased to 0.33 with increase in short-term borrowings due to demand for funds from increased working capital

100 millions of yen

21/03
Total current assets

22/03

Change

4,017

5,142

1,125

492

542

50

2,425

2,898

473

972

1,575

602

2,388

2,254

(134)

937

756

(181)

Total assets

6,405

7,397

991

Current Liab.

2,061

3,078

1,016

(Notes & accounts payable)
Non-current Liab.

1,199
960

1,490
767

290
(192)

Total Liab.

3,021

3,846

824

Shareholders' equity

2,847

2,988

140

449

454

5

87

108

20

3,384

3,550

166

(Cash & time deposits)(Notes & accounts receivable)(Inventories)
Total non-current assets(Investments in security)

Accum. other comprehensive income
Non-controlling interests
Total net assets
Working capital

2,198

2,983

Shareholders' equity ratio

51.5%

46.5%

0.23

0.33

NET D/E ratio

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Details

Short-term loans/CP+570,
Current portion of bonds+100

Translation adjustments+126,
Net unrealized holding loss on securities(118)15Consolidated Cash Flows▶ Operating CF : Net cash used of ¥17.7 billion as working capital increased due to strong business performance▶ Investing CF : Net cash used of ¥7.6 billion due to purchases of property, plant and equipment and the acquisition of stock of a
subsidiary related to a corporate acquisition; offset in part by proceeds from sales of investments in securities▶ Financing CF : Net cash provided of ¥27.2 billion, mainly due to a net increase in short-term loans in connection with an increase inworking capital, offset in part by dividends and purchases of treasury stock
100 millions of yen

２1/03

22/03

Operating CF

203

(177)

Investing CF

26

(76)

230

(254)

(258)

272

9

29

Net change in cash and cash equivalents

(19)

+ 47

Depreciation and amortization of
tangible and intangible assets

133

136

Fixed asset investment

(128)

(169)

Change in working capital

(100)

(631)

Free CF
Financing CF
Effects of exchange rate changes on cash and cash
equivalents

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16

FYE March 2023 Earnings Projection▶ Semiconductor and food-related businesses, which are the focus areas of medium-term management plan ACE 2.0, will continue to expand
market share and maintain strong performance▶ We expect the impact of COVID-19 on economic activities to be limited in response to the easing of regulations in various countries▶ We expect sharp rises in oil prices and the chemical market, while supply chain disruptions are likely to continue to one degree or another▶ Direct business with Russia and Ukraine is negligible and impact is limited▶ Despite the many uncertainties in the external environment, we currently expect to record record-high profits for a second consecutive
fiscal year
100 millions of yen

22/03
Actual23/03
Forecast

ChangeVs.PY

Gross profit

1,394

1,590

195

114%

SG&A expenses

1,042

1,210

167

116%

Operating income

352

380

27

108%

Ordinary income

364

390

25

107%

Profit attributable toowners of the parent

259

285

25

110%

US$ Exchange rate
(period average)@ 112.4@ 120.0

RMB Exchange rate
(period average)@ 17.5@ 18.5

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17

FYE March 2023 Earnings Projection (By segment)▶ We expect the resins business, centered on Advanced Materials & Processing and Mobility, to experience strong performance based on
our projections of increased demand and ongoing high market condition levels▶ We expect the semiconductor-related products business, centered on Functional Materials and Electronics, to experience strong
performance based on our projections of strong demand, particularly for telecommunications applications▶ We expect further growth in the nutrition-related business of the Life & Healthcare-related Prinova Group due to expanding
consumption and rising health consciousness in Europe and the Americas▶ We expect cost increases in Corporate & Others due to office relocation, etc.
100 millions of yen

22/03 Actual
Functional Materials

23/03 Forecast

ChangeVs.PY

Gross profit

198

221

22

112%

Operating income

78

83

4

106%

Advanced Materials& Processing

Gross profit

323

343

19

106%

Operating income

108

117

8

108%

Electronics& Energy

Gross profit

297

325

27

109%

Operating income

102

115

12

112%

Gross profit

127

142

14

112%

41

44

2

106%

447

557

109

124%

94

112

17

119%

1

2

0

168%

Operating income

(72)

(91)

(18)

ー

Gross profit

1,394

1,590

195

114%

352

380

27

108%

MobilityLife & Healthcare

Corporate & Others

Total

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Operating income
Gross profit
Operating income
Gross profit

Operating income18

Shareholder Returns▶ Annual dividend increased from the originally planned ¥48 per share to ¥54 per share in response to strong performance▶ As we expect strong earnings for FY2022, we plan to increase annual dividends per share by ¥6 to ¥60 per share (increase in dividends
for an expected 13th consecutive fiscal year)▶ We are proceeding as planned with the repurchase of ¥6 billion in treasury stock, as resolved in February 2022
(purchase period : February 2022 to February 2023)

Total Dividend

Stock buy-backTotal Payout ratio％

millions of yen
51.0
48.3

50.0

15,00042.4
12,52039.5
12,000
33.7

35.6

36.0

12,085

40.0

5,041

30.0

35.2

33.0

30.5
6,006

9,000
6,799
6,000

5,269
3,557

3,811

4,064

7,186

6,643

1,956

5,456

952

5,023

5,230

5,456

5,691

1,776

20.0

1,107

3,000

6,514

7,044

3,557

3,811

4,064

4,162

14/03

15/03

16/03

17/03

18/03

19/03

20/03

21/03

22/03

23/03
（Forecast）

¥２8

¥30

¥32

¥33

¥40

¥42

¥44

¥46

¥54

¥60

0

Dividend per share

10.0

0.0

※ 22/03 year-end dividend to be submitted for approval to the 107th general meeting of shareholders scheduled for June 2022.
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19

Initiatives Under Medium-Term Management Plan ACE 2.0

Copyright © 2022 NAGASE & CO., LTD.

Medium-Term Management Plan ACE 2.0 Basic Policies
Become a true “Business designer”
ACE 2.0 “Pursuit of Quality”
With a mindset focused on Accountability (A), Commitment (C) and Efficiency (E), and to enable its sustained growth,
NAGASE will work to give concrete shape (business, mechanisms, culture)(Pursuit)

to the aspirations expected by all of its stakeholders.
(Quality)

Reform of Profit Structure

Reform of Corporate Culture

Create a profit base toward the Ideal NAGASE(1) Pursuit of profitability and efficiency

Mindset toward the Ideal NAGASE

・Implement a company-wide asset replacement andreallocation of resources(2) Strengthen existing businesses

・Expand business opportunities through globalization
・Improve productivity of manufacturing businesses andexpand value-added through technical innovation(3) Create sustainable businesses (N-Sustainablebusiness)(1) Pursuit of economic and social value

・Fostering a sustainability mindset, and rigorous monitoring offinancial and non-financial indicators(2) Pursue efficiency

・Deepen awareness of capital efficiency
・Improve productivity of core operations(3) Strengthen human resources to drive reforms

Functions supporting reforms(1) Accelerate DX further

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(2) Promote sustainability(3) Strengthen corporate functions
21

Reform of Profit Structure – Pursuit of Profitability and Efficiency –▶ Execute strategies according to four quadrants and accelerate shift of resources to Focus and Develop areas

Replace Businesses in Portfolio
・ Divested consolidated subsidiary Kotobuki Kasei
・ Withdrew from certain unprofitable and inefficient businesses

Expand Focus Area Business・ Semiconductor-related
Established Semiconductor Strategy Planning Teamto accelerate group-wide efforts

・ Food-related
Prinova Group growing faster than expected at the time ofacquisition⇒ Expanding product lineup and strengthening manufacturing
and processing capabilities through M&A⇒ Investing in expansion of contract manufacturing capacity

Invest in Start-Ups
・ Investing in next-generation communications andnew material development start-ups

Copyright © 2022 NAGASE & CO., LTD.

22

Reform of Profit Structure – Strengthen Existing Businesses –▶ Strengthen the foundation supporting manufacturing business growth
Strengthen the management foundation of group manufacturing businesses■ Strengthen and implement collaborations on safety, quality, and the environment
within the Group Manufacturers’ Collaboration Committee
In addition to sharing information and engaging in discussions on safety and quality, the Collaboration Committee
discusses policies and measures to achieve carbon neutrality in the manufacturing industry, shares information on DX
activities within each manufacturing company, and pursues other initiatives to strengthen collaboration and implementation■ Established Group Manufacturing Management Innovation Office
Created a new organization to enhance synergies and improve the business of group manufacturers through a high-levelview of the manufacturing capabilities, production technology, R&D, quality control, engineering, investment
evaluation, etc., of each manufacturing company from a business management perspective

Expand manufacturing business profits■ FY2021 : Record-high operating income due to growth of the Prinova Group, Nagase ChemteX, etc.
■ FY2022 : We expect to achieve the ACE 2.0 KPI of 20.0 billion yen(100 millions of yen)

FY2019Results

FY2020Results

FY2021Results

FY2022
Forecast

Gross profit

396

475

546

668

Operatingincome

128

138

169

200

Copyright © 2022 NAGASE & CO., LTD.

*

Results calculated using simple sums*

Totals are based on classifications after the change in FY2021, which include
the Prinova Group as a manufacturing company

23

Reform of Corporate Culture – Pursuit of Economic Value and Social Value –▶ Establish non-financial targets (KPIs) under ACE 2.0
Background Behind Non-Financial Targets (KPIs)■ The Ideal NAGASE of 2032: Business Designer that Creates a Sustainable Future■ Toward achieving our vision- Important Stakeholders
Identify- Materialities (Key Issues)
to create values we want to provide to our stakeholders■ Set non-financial targets (KPIs) in the following two areas to evaluate and monitor initiatives
quantitatively

Carbon Neutrality

Employee Engagement
To achieve sustainable growth of the NAGASE Group,As part of our efforts to solve the materialities of

we must increase engagement with employees—oursocial issues, environmental issues, andimportant stakeholders—achieving a relationshipglobalization , we must address and respond to

between company (organization) and employee built

climate change as a key issue

on mutual respect and mutual motivation- KPI * Engagement survey implementation and scores- KPI * Greenhouse gas emissions reductions(Scope 1, 2 basis)* See NAGASE Group Sustainability for specific targets

Copyright © 2022 NAGASE & CO., LTD.

24

Reform of Corporate Culture – Pursuit of Efficiency –Reduce cross-shareholdings ACE 2.0 Target :30.0 billion yen cumulative reduction
FY2020
Number ofholdings(companies)

FY2021(43)

180
Listed 130
Unlisted 50(including partial sales of holdings)

137

7.8 billion yen reduction

Listed85
Unlisted 52(184)

Balance at
end of period

816（100 millions of yen)

Listed 773
Unlisted 43

Listed 593
Unlisted 38

24.1％

17.8％

Percentage ofnet assets

・ FY2021 49 companies⇒ Progress: 26% toward target

632

・ FY2022

Expand Shareholder Returns

Plan to continue reductions

ACE 2.0 Policy :Continued dividend increases + share buybacks
to a maximum equivalent of cross-shareholdings sales

FY2021

FY2022 ・ FY2021 Dividends per share (planned)

Results

Forecast

54

60（24＋30）（30＋30）6050Dividend per share (yen)(interim + year-end)

Share buybacks(100 millions of yen)

54 yen/share (8 yen increase)
・ FY2022 Dividends per share (planned)

60 yen/share (6 yen increase)
Expected 13th consecutive dividend increase・ February 2022
Resolved to conduct 6.0 billion yen in share buybacks

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25

Reform of Corporate Culture – Pursuit of Efficiency –▶ Improve efficiency
・ROE increased to 7.7%, close to the target of 8.0% in the final year of ACE 2.0
・WACC decreased by 0.2% due to an increase in the ratio of interest-bearing debt to equity
・ROIC rose 1.1%, despite an increase in invested capital, due to improved profitability and gain on
sales of cross-shareholdings
FY2020ChangeFY2021

FY2025
Target

ROE

5.9%

+1.8%

7.7%

8.0% or higher

WACC

5.7%

(0.2%)

5.5%

5.0% or lower

ROIC

4.2%

+1.1%

5.3%

5.0% to 5.5%

NET D/E Ratio

0.23

+0.1

0.33

0.5 or lower

Net assets(100 millions of yen)Interest-bearing
debt(100 millions of yen)
Copyright © 2022 NAGASE & CO., LTD.

3,384
1,189

+166

+475

3,550
1,665
26

Reform of Corporate Culture – Pursuit of Efficiency –▶ Cash Allocation
・Cash inflow of 52.5 billion yen before deducting changes in working capital and investments (expenses) for DX, R&D, etc.
・Cash outflow of 85.8 billion yen due to working capital (stemming from strong financial results), DX and R&D expenses, andother growth investments, etc.
・Share buybacks leveraging cash inflows from cross-shareholdings sales, increased dividends due to strong financial results
combined for 12.4 billion yen in shareholder returns
100 millions of yen

Cash inflow* Operating CF after adjustments

525

Dividends and share buybacks

124

Proceeds from sales ofcross-shareholdings, etc.

92

Investment in DX, R&D, etc.

71

Proceeds from change
in interest-bearing debt

401

Increase in working capital

631

Other growth investments, etc.

156

Other expenditures

25

Other income

Total cash inflows*

Cash outflow

7

1,026

1,008

Operating CF excluding the impact of changes in working capital, DX and R&D costs recorded as expenses, etc.

Copyright © 2022 NAGASE & CO., LTD.

27

NAGASE Group Sustainability

Copyright © 2022 NAGASE & CO., LTD.

Corporate Philosophy
We recognize our responsibility to society
and offer beneficial products and services
while maintaining the highest standards of

Sustainability Basic Policy"Continue to make efforts for solvingsocial and environmental issues
through our corporate activities forthe sustainable growth of the
NAGASE Group and society” ispositioned as a common idea
throughout the philosophy structure.

1.
2.
3.

Business operations
with integrity
Good relationship withsociety
Consideration for theenvironment

Copyright © 2022 NAGASE & CO., LTD.

integrity.
Management
Philosophy

Throughour

growth,we

willcontribute to society and enrich the lives ofour employees.

To realize a sustainable world where people

Visionlive with peace of mind, each of us embodies
our value proposition, “Identify, Develop andExpand” through daily activities.

“Ideal NAGASE”
for 2032(200th anniversary)Business Designer that Createsa Sustainable Future :“Identify, Develop and Expand” – Contribute to
the development of sustainable society.

29

Our Recognition of External Environmental Changes＊1

Degree of importance to stakeholders ＊1

The most important matters for both NAGASE and its stakeholders are “technological innovation”, “climate change andresource shortages”, “demographic changes”, and “industrial reorganization”

Technological innovation

Climate change andresource shortages

Increased demand for deciphering information
Expanded opportunities for new business, changes inindustrial structures

Increased demand to develop materials andprocesses with lower environmental impact
Increased demand for supply chain-wide response

Demographic changes

Industrial reorganization

Population increase in emerging countries
Aging in advanced countries

More active industry reorganization andreassessment of distribution channels driven byintensifying competition and more sophisticatedmanagement methods

Degree of importance for NAGASE's business＊2*1 Assessed as important matters that produce great change to the respective needs of employees, business partners, local communities, consumers, and shareholders.
*2 Assessed as important matters that offer opportunities for new businesses, opportunities for existing businesses, threats to existing businesses, and threats to business continuation.

Copyright © 2022 NAGASE & CO., LTD.

30

Materiality (Key Issues)
Materiality

Delivered Values

Employees

•
•
•

•

Business
Partners••

Society andConsumers

•
•

•

Share
holders•

Provide a safe and friendly work environment.
Provide a cheerful, happy, and engaging
workplace.
Create a corporate Group that is a sense of pridefor employees and their families.
Establish a cooperative relationship by gaining
deep understanding of business partners, whichenables pursuit of a wide range of possibilities.
Provide solutions to issues that need to be tackled
throughout the value chain as well as social issues.

Contribute to the development of the local
community through legal compliance andethical management.
Consider the rights, health and comfort ofeveryone involved in the supply chain.
Provide products and services towards
realization of a sustainable world.
Foster trust and a sense of security through a highly
transparent management structure and timely andreasonable information disclosure.
Maximize enterprise value by increasing both
economic and social value and through continuous
business creation.

Copyright © 2022 NAGASE & CO., LTD.

Related SDGs

【Use diverse human resources; offer a workplace environment andcorporate culture】••

Use advanced technologies to improve productivity and leverage
diverse human resources.
Provide a workplace environment and foster a corporate culture as aGroup where employees with diverse backgrounds have mutual respectand motivate each other.

【Use of state-of-the-art technology to create new value】••

Create new value leveraging advanced technologies and a network ofbusiness partners.
Provide a wide range of solutions based on understanding the truecauses of the increasingly complex problems of business partners.

【Solving Social and Environmental Issues, and Globalization】••••

Solve problems that threaten safety and security, e.g., climate change
and food and water shortage.
Contribute to securing and improving food safety by utilizing biotech, AI
and other advanced technologies.
Fulfill health maintenance demands due to increasingly aging societies inadvanced countries.
Contribute to the acceleration of globalization and solve social issues ineach region.

【Corporate Governance】••

Establish a highly transparent corporate governance system.
Make sustainable improvement of enterprise value by balancing
economic value and social value.

31

Sustainability Advancement Structure
・ Establish a structure to advance sustainability throughout the group・ Launch the Employee Engagement Improvement and Carbon-Neutral Projects as a corporate projects

Board of Directors
Committee/Project

Business Execution Organization

Established in June 2020

Established in April 2021

Sustainability Committee* Corporate Sustainability

Department

Chairman：Asakura
Representative Director, President▶Emission reduction▶LCA Visualization▶Food Systems

Employee Engagement
Improvement Project

Carbon-Neutral Project

Established in September 2021

Established in July 2021

Owner：Asakura
Representative Director, President

Owner： Kamada
Director▶Circular Economy▶Disclose of related information

Corporate Projects
Issues for the NAGASE Group to Addressfor ESG assessment
Individual Projects
Issues to be addressed throughcollaboration among related organizations* Effective April 1, 2022, the Corporate Communication Department was renamed the Corporate Sustainability Department and placed

under the direct control of the representative director, president.
Copyright © 2022 NAGASE & CO., LTD.

32

Single-year results(Short-Term)

Ideal NAGASE(Medium-Term)

Ideal NAGASE(Long-Term)

Non-Financial Target (1): Improve Employee Engagement

Values we want toprovide to
stakeholders[Employees]•
Provide a safe and friendly work environment•
Provide a cheerful, happy, and engaging workplace•
Create a corporate group that is a sense of pride for employees and their families

Materialities(Key Issues)[Use diverse human resources; offer a workplace environment and corporate culture]•
Use advanced technologies to improve productivity and leverage diverse humanresources•
Provide a workplace environment and foster a corporate culture as a group where
employees with diverse backgrounds have mutual respect and motivate each other

ACE 2.0 Non-financial
targets (KPIs)*

Group companies
NAGASE(non-consolidated): Percentage of companies conducting regular
engagement surveys 100%
: Engagement survey score of 60 or more

Initiatives
and policies

Talent management, health management, work-style reform, Diversity &Inclusion, HR policy

Results

Implemented engagement survey; engaged in work-style reform (started Project
Bridge, eliminated dress code)

Disclosures[Number of employees (non-consolidated)]
Number (percentage) of male and female employees, number (percentage) of non-regular
employees, percentage of employees with disabilities, number of mid-career hires[Work-style (non-consolidated)]
Rate of new graduates retained after three years, turnover rate for personal reasons, average
years of service, average annual salary, total annual hours worked, rate of paid leave taken,
number of employees taking maternity and childcare leave, number of employees participating inhuman resource development training, total hours of training[Safety and health (non-consolidated + domestic manufacturing companies)]
Number of work-related accidents, number of fatalities, frequency rate, frequency of workrelated accidents, number of employees participating in training related to health and safety* Prinova Group calculated as a single company.
* FY2021: Implemented by 41% of group companies (including 24 companies with one-time implementation) NAGASE (non-consolidated)

Copyright © 2022 NAGASE & CO., LTD.

engagement survey score was 52.4.

33

Single-year results(Short-Term)

Ideal NAGASE(Medium-Term)

Ideal NAGASE(Long-term)

Non-Financial Target (2): Carbon Neutrality

Values we want toprovide to
stakeholders
Materialities(Key Issues)
ACE 2.0 Non-financial
targets (KPIs)[Society and Consumers]•
Contribute to the development of the local community through legal compliance andethical management•
Consider the rights, health and comfort of everyone involved in the supply chain•
Provide products and services towards realization of a sustainable world where
people live with peace of mind••

Solve problems that threaten safety and security, e.g., climate change and food andwater shortages
Contribute to the acceleration of globalization and solve social issues in each region

Consolidated
Consolidated
NAGASE(non-consolidated)
Overall Measures
Visualization

Initiatives
and policies

Reductions: Scope 1 and 2 reduction rate of 37% or more (compared to 2013): Reduce emissions through the generation or purchase ofrenewable energy of 35,000 tons or more (cumulative total): Scope 2 Zero emissions: Participation in external initiatives, promote environmental
investing, examine internal carbon tax: Visualize emissions in the supply chain, calculate the LCA ofstrategic products: Provide low-carbon products and reduction solutions; adopt
environmentally friendly facilities
Improve production process, utilize renewable energy(purchase, generate renewable energy in-house)

Results

Declaration of carbon neutrality, declaration of support for TCFD, businessalliance with ZeroBoard Inc. began calculating LCA for domestic manufacturingsubsidiaries

Disclosures(results only)[Consolidated]• Greenhouse gas emissions (Scope 1, 2, and 3)• Greenhouse gas Scope 1 emissions by type
• Energy consumption, electricity consumption, consumption rate during
production (t-CO2/ton of production)

Copyright © 2022 NAGASE & CO., LTD.

34

NAGASE Group Carbon Neutral initiatives[NAGASE Group Carbon Neutral Declaration]
2050 Target：Scope1,2 Carbon Neutrality
2030 Target：Scope１,2 46% reduction（compared to 2013 levels)
Scope3 １２．３% or more reduction(compared to 2020 levels)[Overall Group]
Overall Measures

・ Participate in external initiatives
・ Promote environmental investing・ Examine internal carbon tax[Manufacturing][Trading]

Measure (2)Measure (1)Visualize emissions inthe supply chain, etc.
Measure (3)Provide low-carbon products andreduction solutions,Introduce green facilities, etc.

Copyright © 2022 NAGASE & CO., LTD.

Visualization

Reduction

Life-cycle assessments forstrategic products, etc.
Measure (4)Improve manufacturing
processes, use renewable energy(purchase/in-house generation),etc

35

Issues in the Supply Chain: Values Offered by NAGASE

External Environment
Response to climate change
as a management issue

Scope3：Need to address climatechange throughout the supply chain

・ Need standardized calculation

・ Disclosures of climate change-related
information are a competitive factor

・ TCFD disclosures is required in theprime market
・ TCFD recommends Scope 3

・ Scope 3 reductions are noteffective if only in-house efforts

in the stock market

Have not yet standardized
calculation methods for the supply
chain

are mademethods for setting reduction
targets
・ Standardization of calculation

・ Reduction targets must be set

methods and assurance of accuracy,

upstream in the supply chain

particularly for overseas production

disclosure

sites

Values provided by the NAGASE Group•

Provide low-carbon products and reduction solutions; adopt environmentally friendly facilities•

Provide support for Scope 3 calculations in the supply chain•

Switch to Category 1 (products purchased) and other primary data; facilitate dialogues to appeal
to economic value

Copyright © 2022 NAGASE & CO., LTD.

36

Business Alliance with Zeroboard Inc.
Zeroboard Inc. and NAGASE & CO., LTD. Enter Business Alliance for Expansion of
CO2 Visualization Service Supporting Decarbonization of Companies
Through Technology and a Trading Firm Network
Zeroboard Inc. and NAGASE & CO., LTD. have agreed on a business alliance for sales andexpansion of zeroboard, a cloud service developed by Zeroboard Inc. for calculating andvisualizing CO2 (carbon dioxide) emissions to support the decarbonization of companies.

Zeroboard Inc. will develop and improve zeroboard, and manage its database, while NAGASE
will sell the service mainly to the chemical industry, collect information on customer needs,
and develop and provide CO2 emissions reduction solutions.
The leading company in GHG
calculation and visualization• Data linkage between user companies• Calculate CO2emissions (Scope 1-3) basedon the GHG Protocol through simple data entry• Reporting functions for integrated reports

Calculationof Scope 3

Validated
for GHG
protocolCost
reduceand environmental regulations• Monthly fee structure matching different
company sizes

Copyright © 2022 NAGASE & CO., LTD.

37

Major Initiative Endorsements and Third-Party Evaluations[New Evaluations]

Selected as a component of
the FTSE Blossom Japan
Sector Relative Index

Group company
Hayashibara awarded the
EcoVadis Gold Medal[CDP Ratings]
FY2018FY2019FY2020

FY2021

Climate

D

C

B

B

Water

C

C

B

A-

ForestForest：not scored

C-

C

C

[Endorsed Initiatives and Third-Party Evaluations]

Copyright © 2022 NAGASE & CO., LTD.

38

https://www.nagase.co.jp/english/

These presentation materials contain projections based on forward-looking
assumptions, forecasts, and plans as of May 27, 2022.
Actual earnings may differ from projections due to risks and uncertainties in
the future global economy, competitive landscape, currency exchange rates,
etc.

Copyright © 2022 NAGASE & CO., LTD.