FYE March 2017
Financial Briefing
May 25, 2017

Copyright © 2017 NAGASE & CO., LTD.

Contents

 FYE March 2017 Results

P. 3

 FYE March 2018 Earnings Projections

P 15
P.

 Progress of Mid‐Term Management Plan ACE‐2020

P. 21

 NAGASE Group Businesses in ASEAN, India, and the Middle East

P. 29

 ((Reference)) Information byy Segment
g

P. 40

Copyright © 2017 NAGASE & CO., LTD.

FYE March 2017 Results

Copyright © 2017 NAGASE & CO., LTD.

3

Consolidated Statements of Income
 Net sales: Lower, mainly due to the impact of the strong yen and a decrease in naphtha prices
 Operating income: Lower, mainly due to ¥3.1 billion in expenses related to retirement benefit accounting actuarial losses(¥4.0 billion negative impact in prior year)(100 millions of yen)

16/03

17/03

ChangeVs PY
Vs.

Published Forecast Achievement

Net sales

7,421

7,223

‐198

97%

7,350

98%

profitGross p

916

915

‐1

100%

923

99%

<GP ratio>

12.4

12.7

+0.3%

－

12.6%

－

SG&A expenses

736

764

+28

104%

778

－

Operating income

180

150

‐29

83%

145

104%

Ordinary income

183

163

‐20

89%

160

102%

Profit attributableto owners of theparent

123

103

‐19

84%

95

109%

US$ Exchange rate
(period average)@120.1@108.3@¥11.7 revaluation

@108

－

RMB Exchange rate
(period average)

@18.8

@16.1

@¥2.7revaluation@17(Foreign exchange rate impact on17/03 net sales and operating income results)
Net sales ：- ¥46.8 billion (approx.)
Operating income ：- ¥1.7 billion (approx.)

Copyright © 2017 NAGASE & CO., LTD.

(P
(Per‐yenexchangehrate
t impactit on nett salesl andd operatingti income)i)
Impact of US$ /yen Impact of RMB/yen
Net sales¥1.6 billion (approx.) ¥6.3billion (approx.)
Operating income ¥60million(approx.) ¥170million(approx.)4

Net Sales by Region (Domestic, Overseas) Higher sales in Japan; lower sales overseas due to the impact of the strong yen
Domestic & Overseas Sales (100 millions of yen, %)Domestic(Left axis)

8,000

Overseas(Left axis)

Overseas Sales by Region (100 millions of yen, %)Oversales Net sales（Right axis）

Greater China

51.1%
48.9%

50%

7,000

ASEAN

4,000

3,791

3,500

161
139
320

6,000

40%
3,791
3 791

3,000

Americas

Europe

Other

3,530
(V:97%)

156
119
295

(V:86%)(V:92%)

3,530

5,000

1,098

2,500

1,019

30%
,
4,000

(V:93%)
2 000
2,000

3,000

20%

2 000
2,000

3,693

3,630

10%

1,500

2,071

1,000

1,000

1,937
(V:94%)

500

0

0%
16/03

17/03

0
16/03

17/03

V:Vs 16/03

Copyright © 2017 NAGASE & CO., LTD.

5

Net Sales: Two-Year Comparison (by Segment)

Functional Materials: Lower segment sales, mainly due to a decrease in naphtha prices driving sales of coating raw materials and urethanematerials lower. At the same time, sales of plastic additives and silicone materials were strong in the Americas.
Advanced Materials & Processing: Lower segment sales. Despite higher performance in conductive materials, sales of plastic materials in Greater
China were lower, as were sales of digital print processing materials in Japan and overseas.
Automotive & Energy: Lower segment sales. Despite strong performance in the plastics business in Japan, lower naphtha prices drove sales down
overseas.

Change in Net Sales by Segment(100 millions of yen)

Net Sales by Segment (100 millions of yen)
Functional Materials

Advanced Materials & Processing

Electronics

Automotive & EnergyLife & Healthcare

Other

7,421

Advanced
Automotive &Materials &EnergyProcessing
-23
Other
-128
El t iElectronics-0-2Life &
Healthcare
-6

7,223

7 000
7,000

855

6,000

1,153

1,129

1,279

1,277

2 555
2,555

2 426
2,426

1 571
1,571

1 535
1,535

16/03

17/03

5,000

Functional
Materials
- 36

849

7,421
421

4,000
3,000
,

7,223

2,000
1,000
0

Copyright © 2017 NAGASE & CO., LTD.

16/03

17/03
6

Gross Profit: Two‐Year Comparison (by Segment) Lower profits, mainly due to the impact of lower revenues, despite improved profitability and profit ratios at domestic
manufacturing subsidiaries (0.3% profit ratio improvement)
Gross Profit by Segment(100 millions
illi
off yen))
Functional Materials
Electronics
Life & Healthcare

1,000Functional
Materials+2

Advanced Materials & Processing
Automotive & Energy
Other

916

800

Change in Gross Profit by Segment(100 millions
illi
off yen))Electronics
+0
0

Other
+0

915

216

213

94

95

229

230

233

230

139

141

16/03

17/03

Advanced
Materials &Processing
3-3

Automotive &Life &
EnergyHealthcare
+1
3
-3

600
916

1,500

1,493

1,493

1,496

1,479

1,479

915

400

200

0

17/03

16/03

Copyright © 2017 NAGASE & CO., LTD.

7

Operating income: Two‐Year Comparison (by Segment)Life & Healthcare: Higher segment profits, mainly due to profitability improvements and materials cost reduction measures at manufacturing subsidiaries. These profit
gains outpaced the negative impact on profits of costs incurred to bolster systems and structures for future growth.
Other/Corporate: Recorded ¥3.1 billion in expenses related to retirement benefit accounting actuarial losses (¥4.0 billion negative impact in prior year).
*Posted retirement benefit actuarial loss of ¥3.1 billion at end of prior period, after revising the discount rate to reflect low market interest rates (fully amortized this year)

Change in Operating Income by Segment(100 millions of yen)g
Net Sales byy Segment(100 millions of yen)
Functional Materials
Electronics
Life & Healthcare

Advanced Materials & Processing
Automotive & Energy
Other/Corporate

180
190
38
13

FunctionalFtil
Materials
+5

150
33

Advanced
Materials &P
Processing
i
+1

15

140
62

Electronics+063Life &
Healthcare-5

Automotive &Energy+2
Other/Corporate
-33

90
49

50

36

41

180

40

(10)

150

- 20
- 54

(60)

16/03

Copyright © 2017 NAGASE & CO., LTD.

17 /03

16/03

17/03
8

Earnings at Major Consolidated Subsidiaries
 On a non‐consolidated basis, NAGASE & Co. net sales were level with the prior fiscal year. However, the company reported an operating loss of ¥800 million
due to the recording of ¥3.1 billion in expenses related to retirement benefit accounting actuarial losses.
 Nagase Plastics Co., Ltd. recorded higher sales and profits for super engineering plastics owing to the acquisition of new business and other factors. This
growth offset the negative impact of declining naphtha prices.
(100 millions of yen)

Net Sales

Vs. PY

Vs. PY

ParentCompany

NAGASE & CO., LTD.

4,238

100％

‐8

‐％

ManufacturinngCompanies

Company Name

Operating Income(Note 2)

Hayashibara Co.,
Co Ltd.
Ltd

238

99％

46

103％

Nagase ChemteX Corporation

256

108％

29

162％

963

100％

90

119％

Nagase Plastics Co., Ltd.

319

98％

7

121％

Nishinihon Nagase Co., Ltd.

79

95％

5

94％

Nagase Chemical Co., Ltd.

158

99％

2

101％

Total for domestic sales (Note 1)

829

100％

19

107％

Shanghai Hua Chang Trading Co., Ltd.

345

96％

9

104％

Nagase (Thailand) Co., Ltd.

334

94％

8

110％

Guangzhou Nagase Trading Ltd.

265

88％

6

77％

Nagase Korea Corporation

74

105％

5

111％

3,336

94％

65

89％

Companies

Overseas SalessDommestic Sales
Co
ompanies

Total for manufacturing (Note 1)

Total for overseas sales (Note 1)*Note1: Totals for each category are simply the sums of each company. These sums do not equal consolidated figures.
*Note 2: Operating income does not reflect amortization of goodwill and depreciation of technology‐based assets.

Copyright © 2017 NAGASE & CO., LTD.

9State of Hayashibara
 Sales off functionalfsaccharides lower, despite strong performancefin the Pharma/Medical/
Business
Overall sales and profits level with the prior fiscal year, as costs were lower due to productivity efficiencies and cost reductions.

FYE March 2017 Results

Topics(100 millions of yen)

FYE03/16

FYE03/17

ChangeVs. PYNet Sales

241

238

‐3

99%

Operating
Income

45

46

＋1

103%

1. Solid Results for New Product Fibryxa™
Soluble dietary fiber (mainly isomaltodextrin)
produced from starch solelyy throughpg the activityy ofenzymesHigh expectations for various physiological functions due toimproved gut flora
Can be combined with a wide range of foods and beverages• While sales of TREHA™ were level in Japan, market competition and thestrong yen drove sales overseas (Greater China) lower. As a result, TREHA™
sales were lower overall. We intend to undertake stronger patent‐related
policies in Japan and overseas to bolster our performance in the future.
• Sales of AA2G™ were lower overall. While sales were strong overseas, sales⇒Core products taking over from TREHA™/AA2G™
2. Greater Production of TREHA™

in Japan were lower due to weakness in inbound tourist sales and other

Production capacity of 35,000 tons,
increase of nearly 30% compared to pre‐expansion of facility

factors.
• Our Pharma/Medical Business recorded higher sales, mainly due sales of
product for use in hard capsules for use in medical and health food[[Sales Volume]]

applications.

FY2016 Approximately
36,000 tons

• In our dye‐related business, sales of functional dyes and LUMIN™‐A werehigher• This year, we recorded solid results for our soluble dietary fiber, Fibryxa™,
first introduced to the market in 2015.
• Lower costs, mainly due to lower variable unit costs, greater production

OkayamayFunctional Saccharide
Plant, T Building

FY2017 Approximately
38,000 tons (plan)⇒Considering expansion into staple rice/noodle markets and feed markets

efficiencies company‐wide.

Copyright © 2017 NAGASE & CO., LTD.

10

State of Nagase ChemteX Corporation
 R
Recordedd d higher
hi h revenues andd profits.
fi SalesS l off epoxy resins
i forf smartphonehelectronicli components were strong,while company‐wide cost reduction efforts resulted in improved profits.

FYE March 2017 Results

Topics1. Growth in liquid sealants for high‐end semiconductors (epoxy resin)(100 millions of yen)
FYE03/16

FYE03/17

ChangeVs. PYNet Sales

237

256

＋18

108%

Operating
Income

18

29

＋11

162%

Epoxy Resin for Semiconductors/Electronic
Components⇒Top global share
Sales rose for the Nagase ChemteX high‐value‐added
high value added liquid
semiconductor encapsulation materials for semiconductor
packages (epoxy resin), a de facto standard in the industry.

⇒Aiming for higher market share by answering future needs• Our Epoxy Resin Business recored strong results for light electrical (largely
products for electronic components embedded in smartphones) and heavy
electrical industries.
• Our Chemicals Business recorded higher revenues, mainly due to improved
customer capacity utilization and securing of new contracts.
• Our Performance Chemicals Business reported strong results for conductive
materials used in the LCD industry.
• Our Bio Chemicals Business reported sales level with the prior fiscal year.
While sales of pharmaceutical‐use enzymes were strong, sales of foodenzymes fell.
• Lower costs due to company‐widecompany wide cost reduction activities

2． Inkron Limited Converted to Subsidiary

Inkron Limited boasts leading‐edge siloxane and othertechnologies. We plan to leverage the synthesis andcompounding technologies of Nagase ChemteX toenter markets demanding materials that feature
specific optical properties.
properties⇒Stronger presence in markets for displays, touch sensors, wearables

Copyright © 2017 NAGASE & CO., LTD.

11

Consolidated Balance Sheets Current assets increased,, mainlyy due to increases in notes and accounts receivable Non‐current assets increased, mainly due to increases in investments in securities (price increases for retained shares offset sales of some securities)
 Shareholders’ Equity Ratio up 1.2 point to 54.7％
AssetsLiabilities and Net Assets

16/03
Total current assets
Cash and time deposits
Notes and accounts receivable

17/03

3,123

3,212

432

398

1,963

16/03

Change2,068+88 Total current liabilities(100 millions of yen)
17/03

Change

1,561

1,664

+103

‐ 34

Notes and accounts payable

978

1,020

+42

+105

Short-term loans

341

316

‐24

(Including current portion of long-term loans)

Inventories

629

631

+2

Current portion of bonds

－

100

+100

Other

97

114

+16

Other

241

327

+85

1,997

2,095

+98 Total long-term liabilities

768

690

‐77

P
Property,t plantl t andd equipment
i
t

664

676

+11
11

L
Long-term
t
loans
l

231

200

‐30
30

Intangible fixed assets

445

407

‐37

Bonds

300

200

‐100

Investments, other assets

887

1,011

+124

Net defined benefit liability

140

146

+5

+132

Other
(Deferred ta
tax liabilities
liabilities, etc
etc.))

96

143

+47

‐ 7 Total liabilities

2,329

2,355

+26

Total net assets

2,791

2,951

+160

Total non-current assets

Investments in securities

813

945

Other

74

66

2,346

2,396

+50

Accumulated other comprehensive income

393

505

+112

Net unrealized holding gain on securities

370

476

+106

Translation adjustment

44

31

‐12

Other

‐ 21

‐2

+19

51

49

‐2

5,120

5,307

+186

Shareholders’equity

Non-controlling interests

Total assets

Copyright © 2017 NAGASE & CO., LTD.

5,120

5,307

+186 Total liabilities and net assets

12Consolidated Cash Flows Cash and cash equivalents lower by ¥3.1 billion. Despite an increase of ¥14.5 billion in cash flows from operating activities (¥16.1 billion in
profit before income taxes), the company made ¥6.5 billion in cash outlays for investing activities (¥11.5 billion in purchases of property, plantand equipment) and ¥10.5 billion in cash outlays for financing activities (¥4.9 billion in net cash outlays for short‐term loans, ¥4.0 billion in
dividend payments). *By region, cash decreased ¥4.4 billion in connection with increased working capital in Greater China.

Cash Flows(100 millions of yen)

17/03

Main breakdown

16/03

Net cash provided by (used in) operating activities

Profit before income taxes ＋161
Depreciation and amortization/amortization of
goodwill ＋109g+145
Increase in adjustments for retirement benefits＋32
Working capital - 77
Income tax paid - 77

+293

Net cash provided by (used in) investing activities

Purchases of property, plant and equipment ‐106
Purchases of intangible fixed assets included in otherassets ‐8‐ 65
Purchases of investment in securities -18
Proceeds from sales of investments in securities
＋46

‐ 126

Net cash provided by (used in) financing activities

Sh t llong-term
Short,
t
loans
l
(net
( t payments/proceeds)t /d ) -49‐ 105 Cash dividends paid ‐ 40
Purchase of treasury stock -11‐ 128

Eff t off exchange
Effectshrate
t changeshon cashh anddcash equivalents

‐5

‐ 15

Net increase (decrease) in cash and cash equivalents

‐31

+23

C h andCashd cashh equivalents
i l t att b
beginningi i off th
the year

429

Japan 239 , Greater China 115 , ASEAN42 , Europe
18 , Americas 4 , Other 9405

Cash and cash equivalents, at end of the period

397Japan 254 , Greater China 70 , ASEAN 35 , Europe
18 , Americas 5 , Other 13429

Copyright © 2017 NAGASE & CO., LTD.

13

Change in Working Capital Despite better management resulting in improved prepaid cost recovery, working capital increased by ¥6.4 billion, mainly
due to the impact of higher sales for the most recent quarter.

Working Capital (100 millions of yen)
1,614

1,678

Accounts Receivable
1,963

Accounts Receivable
2,068

Inventories
629

Inventories
631

Accounts Payable- 978

Accounts Payable- 1,020

16/03

17/03

Copyright © 2017 NAGASE & CO., LTD.

14

FYE March 2018 Earnings
Projections

Copyright © 2017 NAGASE & CO., LTD.

15FYE March 2018 Earnings Projections
 Net sales: Higher sales overall.
overall Sales growth in every segment (excluding Electronics),
Electronics) including higher sales ofsynthetic plastics in the Advanced Materials & Processing segment.
 Operating income: Higher profits. In addition to improved business profitability, we will record a lower amortization ofretirement benefit accounting actuarial losses (¥300 million; positive impact of ¥2.8 billion on income compared toprior
i fiscalfi l year).
)(100 millions of yen)

17/03 Actual

18/03 Forecast

ChangeVs. PYNet sales

7,223

7,320

+96

101%

Gross profit

915

950

+34

104%

<GP ratio>

12 7%
12.7%

13 0%
13.0%

+0 3%
+0.3%

―

SG&A expenses

764

759

‐5

99%

Operating income

150

191

+40

127%

Ordinary income

163

209

+45

128%

Profit attributable to owners of
the parent

103

125

+21

121%

US$ Exchange rate
(period average)@108.3@108@¥0.3
revelation

RMB Exchange rate
(period average)

@16.1

@15.6

@¥0.5
revaluation

Copyright © 2017 NAGASE & CO., LTD.

――
16

Net Sales Forecast (by Segment) Advanced Materials & Processing: Higher sales, mainly due to strong performance in synthetic plastics for officeequipment, appliance, and game device markets in Japan and overseas.
 Electronics: Lower revenues, mainly due to weakness in other liquid crystal‐related materials, despite projected strong
performance in Nagase ChemteX formulated epoxy resins and chemicals for liquid crystals.

Net Sales by Segment (100 millions of yen)
Functional Materials

Advanced Materials & Processing

Electronics

Automotive & EnergyLife & Healthcare

Other

8,000

6,000

7,223

7,320

849

858

1,129

1,196

1,277

1 092
1,092

2 426
2,426

2,574

Change in Net Sales by Segment (100 millions of yen)

Advanced
Materials &Processing+147

Electronics-185
Functional
Materials+59

Life &
Healthcare Other-1+8

Automotive &Energy
+66

4,000

7 320
7,320

2,000

7,223
1 535
1,535

1 595
1,595

17/03

18/03見通し(Forecast)018(Forecast)
/03見
18/03

17/ 03Copyright © 2017 NAGASE & CO., LTD.

17

Operating Income Forecast (by Segment)Hi h profits.
Higherfit InI addition
dditi tot improvedid businessb i
profitability,
fit bilit we will
ill record
d a lowerlamortization
ti ti off retirementtitbenefit accounting actuarial losses (¥300 million; positive impact of ¥2.8 billion on income compared to prior fiscal
year).

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

N SSalesNet
l b
by SSegment (100 millions
illi
off yen))
Functional Materials

Advanced Materials & Processing

Electronics

Automotive & EnergyLife & Healthcare

Other/Corporate

Other/Corporate
+18

191
150
190

33

Automotive &Advanced
EnergyMaterials &+6
Processing
Functional +13
Life &
Materials
Healthcare+2
Electronics
+5

39
22

15
140

‐5

58
63

191

90
50

64

150

40
41
(10)
-54
54

44
-36

(60)
17/03

Copyright © 2017 NAGASE & CO., LTD.

(Forecast)
18/03見通し

17/03

18/03

(Forecast)18

Investment Results and Manufacturing Business Share

Investments and financing to bolster manufacturing function, R&D function, technical/information
technical/information‐related
related capacity, and global networks
will create proprietary/competitive advantages; improve business quality and corporate value.
Manufacturing Business Share (Net Sales)

13%(100 millions
illi
off yen))Investment

1,200

Overseas Manufacturing Co.

1,000

Manufacturing Business Share15%

Domestic Manufacturing Co.

800

10%

600
400

5%

200
0
09/03

10/03

11/03

12/03

13/03

14/03

15/03

16/03

17/03

0%
(Forecast)
18/03(予)18 1
18.1
billion

Manufacturing Business Share (Operating Income)(100 millions of yen)

14.0
billion40％

Overseas Manufacturing Co.

80
60

Domestic Manufacturing Co.

50%

Manufacturing Business Share

40%
30%

40

20%

20

10%

0
09/03

10/03

11/03

12/03

13/03

14/03

15/03

16/03

17/03

0%
18/03(予)(Forecast)

17/03
Actual18/03
Forecast

Copyright © 2017 NAGASE & CO., LTD.

19

DividendsCurrent period: Annual ¥33 per share dividend (¥1 increase YoY),
YoY) representing a ¥16 interim and ¥17 year‐end
year end dividend

Next period: Annual ¥35 per share dividend (¥2 increase YoY), representing a ¥17 interim and ¥18 year‐end dividend（％ ,yen）
（％、円）

（％）

45

1.6

40

1.4

35

1.2

30

1.0

25
08
0.8
20
0.6

15
10

0.4

5

0.2

0
Dividend per Share(left axis)
Payout Ratio(left axis)
DOE (right axis)

17/03
18/03
(Forecast) (Forecast)
（予定）
（予定）

09/03

10/03

11/03

12/03

13/03

14/03

15/03

16/03

16

16

22

24

26

28

30

32

33

35

35 4
35.4

27 3
27.3

22 1
22.1

36 0
36.0

23 4
23.4

30 5
30.5

33 7
33.7

33 0
33.0

40 4
40.4

35 3
35.3

1.07

1.08

1.42

1.52

1.52

1.50

1.44

1.46

1.48

1.50

0.0

*17/03 year-end dividend to be submitted for approval to general meeting of shareholders scheduled for June 2017

Copyright © 2017 NAGASE & CO., LTD.

20

Progress of Mid‐Term Management Plan ACE‐2020
Accountability / Commitment / Efficiency

Copyright © 2017 NAGASE & CO., LTD.

21

Positioning of ACE‐2020
To achieve our goal by 2032, the last year of Long‐Term Management Policy,
we divide 17 years of its term into 3 and start stage 1 as the beginning of the Mid‐Term management
Plan ACE‐2020.
* Our goal: Normalization of the profit more than tripled.

Long‐Term Management Policy
Environmental
Adaptability

FY2016

Stage1｢Reformof Profit structure｣
structure｣｢Reform ofcorporate culture｣
culture｣【Reform
Reform】】
2016〜2020
2016〜

Change-S 2014
Copyright © 2016 NAGASE & CO., LTD.

ACE‐2020

Stage3

Stage2The stage that
two reforms permeated
and accelerated thegrowthThe stage that rapidly
growing towards to thegoal【Growth】
2021〜2025【Jump】
2026〜2032

Time
22

ACE‐2020 Basic Policy
NAGASE TTransformsfffrom “Sh
“Shosha/Trading”
h /T di ”
to “Business Designer”.
NAGASE strings all the groups together to create and provide new value
to the world through 6 key functions.

Investment

R&D

Logistics

Business
Designer

Leverage Group functions to achieve the quantitativeand qualitative targets.

Gl b lGlobalNetwork

Trading
Manufacturing

Reform Profit Structure

Reform Corporate Culture

Portfolio Optimization

MindsetCategorization of business and executionof strategy that matches with the area
Replacement of asset and reallocationof resources
Acceleration in investment that createscore business of group

Breed independence and responsibility

Expand and Strengthen Revenue
Base

Strengthen Management Platform【6 Functions】

Share the management’s message
Thorough monitoring and PDCA

Pursue efficiency

Accelerate globalization ” G6000”
Improve manufacturing profitability

HR development
23

Copyright © 2016 NAGASE & CO., LTD.

Reform Profit Structure:
Portfolio Optimization
Classify Businesses and Execute Strategies Tailored to Each Field/Replace Assets and Reallocate Resources
Accelerate to withdraw from unprofitable business,solidify management resource that can be reallocated,conduct aggressive growth investment.
investment

Focus

Expected further increase in profit

Electronics○Area development for photolithography business mainly for joint venturesin China(Wuxi Chenghong Electronic Chemicals Co., Ltd.: 39% equity investment)○Expand epoxy business in Europe
structural materials approved by European company○Strengthen for display, wearables business
Integrateinto
I t
t InkronI k
i t NAGASE as subsidiaryb idiLife & Healthcare○Expand TREHA™ production capacity○Grow sales of raw materials to major cosmetics manufacturers in Europe○Extension of manufacturing building for the manufacture of high‐potency
injections○Enterring and promoting nucleic acid technology to pharmaceuticalindustry . Execution of sole sales agency agreement with Shikoku Nucleic
Acid Chemistry , Inc.

Base

Contributed to stably increase the corporate value○Expand marketing activities for anti‐rust paint Pat!naLock™
○Develop product line for next‐generation displays○Strengthen sales promotion for engineering plastics○Improve logistics efficiencies of our Plastics Business

Copyright © 2017 NAGASE & CO., LTD.

Growth/Emerging
Transform to “Focus” in 3 years○Establish
E bli h N
New Value
V l CreationCi (NVC) Office
Offi○Participate in IBM basic IT research consortium○VC investment in Silicon Valley, USA○ Solar power generation, lithium‐ion batteries
J i t development
Joint
d l
t off hybrid
h b id systems
t
with
ith
Murata Manufacturing Co., Ltd.
○ Strengthen precision component business for EV(electronics, electrification) applications

Improvement
Immediately required drastic improvement in profit structure○Integrate functions of Beauty Care Products Department andsubsidiaries○Divestment/consolidation of subsidiaries, affiliates○Withdraw from unprofitable businesses

Replace Non
Non‐Operating
Operating Assets○ Sell idle assets○Sell cross‐shareholdings
24

Reform Profit Structure:
Expand and Strengthen Revenue Base
AcceleratelGlobalizationl b li i “G6000”“”

Improve Manufacturing Profitability

Proactively execute own market strategy in each area.

As a long term strategy, group manufacturing companies manage
autonomously, and create a new business based on a scenario
agreed upon by manufacturing, development and sales.

Elevate group presence by increase in sales.
○Appointed CEOs over five areas overseas to empower authorization.
○China/ASEAN: Centralized functions for more efficient regional operations.

○Inkron: Inkron products for LED components approved in Japan
market○Americas: Expanded regional management functions○Americas: Engineered Material Systems (subsidiary)
Solid sales of conductive ink for wearables○Americas: Start selling Cytech (35% equity investment) products○Nagase ChemteX (NCX)
Consolidate development/sales functions to grow sales ofconductive materials
Expand purchasing function to improve marginal profit ratioy/
DENABAKE™ EXTRA,, enzymeyfor bread makingg○Hayashibara/NCX:
Joint development, working currently to improve further functions

U.S.: Cytech
Products Inc. plant○China: Nagase ChemteX (Wuxi) (subsidiary)
Enhance of laboratory facilities to expand semiconductor business○China: Develop local customer base/professional network, mainly throughWuxi Chenghong Electronic Chemicals Co., Ltd.

○Totaku Industries, Inc: Strengthen presence in Kanto and Tohoku

regions of Japan; Shizuoka Plant transfer

Shizuoka Plant

China: Nagase ChemteX (Wuxi)

Kanto/Oyama Plant concept

China: Wuxi Chenghong
ElectronicEl
i Ch
Chemicals
i l Co.,C Ltd.
Ld○Europe: Research branch office openings to expand cosmetics business25

Copyright © 2017 NAGASE & CO., LTD.

Reform Corporate Culture:
Mindset/Strengthen Management Platform
ACE‐2020 Issues
Mindset○ Build Accountability, Responsibility and
Risk AwarenessInstill a shared vision of the mid‐termmanagement plan
○ Thorough Monitoring and PDCA
Improve investment quality○ Share Management
Management’ss Message
Create better communication
infrastructure
Strengthen Management Platform○ Pursue Efficiency
Eliminate excess/duplication and increase
efficiency of the organization/function

FY 2016
Delegation of authority

Strengthen monitoring system
Create dashboard, change meeting structure
Update Investment Guidelines, M&A
Promotion Project
Uncover risks in our manufacturing businesses

Conduct variance analysis and review strategy
Start Investment Council operations
Establish rules for NAGASE product market introduction

Branding activities (implement Top Management Tour),Tour) publish president videos,videos hold town meetings○ HR Developmentp

Copyright © 2017 NAGASE & CO., LTD.

Review organizations group‐wideHold seminar of mid
mid‐term
term management plan

Back Office Functionality and Efficiency Project

ACE Poster

FY 2017

Establish Business Process Re‐ engineering
division
Launch new HR system

Top Management Tour

President Video (discussion
with department manager)

Town Meeting
26

KGI & KPIKGI（Keyy Goal Indicator）
KGI
Consolidated Sales
AmountConsolidated Operating
IncomeROE

FY2016FY2017(plan)

FY2020722.3 Billion Yen

732.0 Billion Yen

1.0 Trillion Yen or more

15.0 Billion Yen

19.1 Billion Yen

30.0 Billion Yen or more

3.7%

4.2％

6.0% or more

KPI（Key Performance Indicator）Factor index to achieve KGImeasures

KPI （Index)

Increase Focused
Business

Growing investment distribution ratio in focus

Reform/Strategy

FY2016＊Operating Profit in Focus Area

(Portfolio Optimization)

FY2017(Plan)

FY202011.9B yen

115B yen

16.9B yen

46%

40%

35% <

area

Accelerate
Globalization＊Overseas Group Sales

350.2B yen

350.2B yen

600B Yen((Expandp
and StrengthengProfit Structure)

Sales Growth Rate in USA

90％

92％

170％

Increase Manufacturing＊Operating Profit from
Manufacturing
Profitability

9 B yen

10.1B yen

14.4B Yen

＊Break‐Even Point Sales Ratio

76％

78％

73%

Consolidated Selling, General and
Administrative Ratio

10.6％

10.4％

9.4%

8.2B yen**25.4B yen* 100B Yen

「A」

「A」

[A] or more

Profit Structure
Reform Indicator(Expand and Strengthen
Profit Structure))

Pursue Efficiency
Corporate Culture
Strengthen Management
Reform Indicator （Platform)
Investment

Financial Strategy
I diIndicator

Growth Investment

Financial Structure

Rating (R&I)＊Total numbers in 5 years＊ The figures in this document are all management accounting data (simple sums)
It is different from the figures disclosed on the consolidated financial statement.

27

Copyright © 2017 NAGASE & CO., LTD.

Appendix : Past results and ACE‐2020 Target
ROE

Consolidated Sales/Operating Income
Normalize 1.0 Trillion Yen or more/
30 Billion or more

Normalize Over 6％ at early stage

Sales(100Million Yen)

Consolidated Operating Income（100 Million Yen）

10,000300

ROE （％）
8.0%
6.5% 6.5%

6 0%
6.0%
6.0%

191
187

5,000

131
125

4.9%

181180155157

150

4.0%

134

150

4.2%

4.4%
4.3%
4 2%
4.2%
3.7%

4.0%
3.0%

⽬標

2016年度

2017年度度（計画）2015年度

2014年度

2013年度

2012年度

2011年度

2010年度

2009年度

2008年度

⽬標

2016年度

2017年度（計画）2015年度

2014年度

2013年度

2012年度

2011年度Target2010年度

0.0%

FY2017(PPlan)
FY2016FY2015FY2014FY2013
FY2012FY2011FY2010FY2009FY2008Target

FY2017(Pllan)

Copyright © 2017 NAGASE & CO., LTD.

FY2016FY2015FY2014FY2013
FY2012FY2011FY2010FY2009FY2008

2009年度0
2008年度

028

NAGASE Group Businesses
in ASEAN
ASEAN, India
India, and the Middle East
Takayuki Masuda
CEO
ASEAN, India

Copyright © 2017 NAGASE & CO., LTD.

29

Operation Network
Countries with Local
Corporations
Countries with
Branches, Offices

Bangladesh
India

UAE

MyanmarThailand

VietnamPhilippine

Malaysia
Singapore

Indonesia
Singapore Thailand Malaysia

India

Philippines Vietnam Indonesia

Total

Established year

1975

1989

1981

2006

1997

2008

1998

number of employees
Number of affiliatedcompaniesp
Contract warehouse

100

155

243

32

38

57

65

690

1

5

2

1

2

2

4

17

11

30

14

8

6

6

3

78

Number of customers

858

847

414

200

250

330

340

3,239

Copyright © 2017 NAGASE & CO., LTD.

Australia

30

Sales in ASEAN, India, and Middle East
S
Sales
l T
Trend
d

（100 million yen）
1,000
800
600
400
200
0
2010
（100 million yen）

2011

2012

2013

2014

Net Sales Trends by Segment

2015(Plan)
2017(予)

2016

(FY)

FY2016 Sales by Country

500

4%

Functional Materials

400

11%

Advanced Materials& Processing

300

3%

Indonesia

37%

13%

200

Vietnam5%

Automotive & Energy

100

Malaysia

13%

44%Life & Healthcare

Philippine

21%0(Plan)

Singapore

23%

25%

Electronics

Thailand

India

(FY)

*Sales for ASEAN, India, and Middle East local corporations are simple sums (sales by location). Accordingly, thesefigures differ from by‐region sales figures published in our financial results (sales by destination).
*For ease of comparison, we have used the same foreign exchange rate for all fiscal year figures.

Copyright © 2017 NAGASE & CO., LTD.

31

Example of expanding non‐Japanese business via cross‐regional
network (1) Respond to China +1 trend
trend. Create a new business through collaboration between China and Malaysia
and new service function for warehousing hazardous materials

Network, Sourcing, Customer Needs

Tokyo
y

Net Sales Trends
8.0
7.0
6.0

Korea

5.0
4.0
3.0

3PL
(Third‐Party Logistics)

2.0
1.0

China
TaiwanWarehousing and transport ofhazardous items
Regulatory compliance

(FY)

00
0.0
2015

2016

2017(予)(Plan)*FY2015=1.0

Productsd・Specialty chemicals for solar batteries

Malaysia
Copyright © 2017 NAGASE & CO., LTD.

・Speciality chemicals for semiconductors, LEDs

32

Example of expanding non‐Japanese business via cross‐regional
network (2) Creation of business via coordination among group bases of operations in Vietnam,
Vietnam where Korean companies
are expanding quickly
Trend of Sales to

Expanded sales ofhome appliances

K
Korean-Based
B
dC
Companiesi(Millions of yen; US$)
25

Expansion, mainly throughcommunications devices

20
15

22.9

10
5

12.5

9.1

58
5.8

15.0

12.7

0
2012

2013

2014

2015

2016

(Plan)
2017(予)(FY) Function Sharing

Supplier

Nagase Korea
Corporation

Korean users

Development

Information sharing
Certification process

Nagase Vietnam
Co.,, Ltd.

Vietnamese
users
Production

Sales Ordering/
Receiving
Inventories
Launch support
S bl supply
StablelNagase Korea Corporation scope of function

Supplier

Nagase Vietnam Co., Ltd. scope of function

Copyright © 2017 NAGASE & CO., LTD.

33

Mid‐term management plan ACE-2020 Sales Targets
ACE 2020 Sales
ACE‐2020
S l Target
T¥143.5¥143 5 billi
billion(Hundred million yen)
1500

0
2013

2014

(Hundred million yen)

2015

2016

(Plan)
2017(予)(Plan) (FY)
2020(予)( )Net Sales Trends by Segment

600

4%
25%

機能素材
F ti
Functionall Materials
M t i lAdvanced Materials &Processing

23%

加工材料

Electronics
電子5%

Automotive & Energy
自動車・ｴﾈﾙｷﾞｰ

7%Life & Healthcare
生活関連
0
2013

2014

2015

2016

2017(予)(Plan)(Plan)
2020(予)*Sales local corporations are simple sums (sales by location). Accordingly, these figures differ from by‐region sales figures published in our financial results (sales by destination).
For ease of comparison, we have used the same foreign exchange rate for fiscal years 2013 through 2017.

Copyright © 2017 NAGASE & CO., LTD.

(FY)

34

Create Region‐Originated Businesses to Achieve ACE-2020 Targets
 U
i ti bi
iinfrastructure/networkf t t / t
k tto create,t iintegrate,tt andd ffostert regionally
i
ll d
i
b
i
Use existing
business
drivenbusiness

Utilize powerful network to create locally based businesses,
achieving the goals of ACE‐2020 G6000*.
Locally created businesses andhigher efficiencies through professional support

Action Plans(1)Expand business with the automobile industry((2)Diversify)
y chemical sourcingg to expandpbusiness opportunities
pp(3)Build functions to expand sales of NAGASE Group products(4)Foster personnel capable of generating locally based businesses

ASEAN
N, India, Middle
M
Easst

NAGA
ASE & CO.,C LTTD.

Business expansion from Japan*G6000: Key Performance Indicator under the ACE‐2020
mid‐term management plan
Overseas Group Company Net Sales of ¥600 billion

Copyright © 2017 NAGASE & CO., LTD.

35

Action Plans for Achieving ACE-2020(1)Expand business with the automobile industry
 Focusing on regional Automotive industry as our major customer base for plastics and chemicals
chemicals.
Expanding business by 50% by 2020 utilizing regional hub function of Thailand.
Intra‐Region Automobile Production Trends

Plastics
Production
Partner(Units)
12,000,000

Automobile industry trends

10,000,000

Designproposalfunctions (usePakistan

8,000,000

Production BaseFinished products→Local produc onof components

NAGASE Group

consultants)

Engineering
Functions

Production Base
Car AssemblyVi
Vietnam
Production Base

India
Production Base
R&D

2,000,000

Base

Myanmar6,000,000

4,000,000

Component
Production

Metal Die
Production
Base

Components→car
Assembly

Thailand
Production Base
R&D

Philippine
Production BaseComponents→car
Assembly

Malaysia0（FY）（Forecast）（Forecast）

India

ThailandIndonesia

Pakistan

Australia

Philippines

Production BaseComponents, car
AssemblyIndonesia
Production BaseComponents, car
Assembly

Malaysia

Source: Extracts from FOURIN, Inc. ASEAN Automobile Industry 2015, Thai
Marklines, Pakistan (PAMA)

Copyright © 2017 NAGASE & CO., LTD.

36

Action Plans for Achieving ACE-2020(2)Diversify chemical sourcing to expand business opportunities
 Providing solutions by diversifying sourcing of chemical products(Japan + China,Taiwan,Korea and India)
Chemicals diversification Business
Sales Trends and ACE
ACE‐2020
2020 Plan(millions of yen, US$)
25

20

15

10

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コンピュータ を再起動して再度ファイルを開いてください。それでも赤い x が表示される場合
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Build up intra‐region
p new
network and develop
sourcing channels matched
to local needs

5

0

(FY)
2013

2014

2015

2016

2017(予)(Plan) ACE‐2020

Copyright © 2017 NAGASE & CO., LTD.

37

Action Plans for Achieving ACE-2020(3)Build functions to expand sales of NAGASE Group products
 EEnhancing
h i bit iti tto emerging
i countries
t i llooking
ki tto iimprove quality
lit off lif
business
opportunities
life.

Indonesia

Philippines
Installed Kitchen
for food ingredients

Starting supply/collections of Nagase Landauer radiationg embedded with p
proprietarypymeasurement devices ((badges
technology) to/from hospitals, having professionalradiation technologists measure exposure levels

Experts create recipes
and samples to fit local
demandTotal of 6,000 hospitals
throughout thePhilippines

India

Coatings Laboratory

Utilizing 2,500 sq ft of our own laboratory space to formulate coating materials, offer proposals matched to local needs.
Copyright © 2017 NAGASE & CO., LTD.

38

Action Plans for Achieving ACE-2020(4)Foster personnel capable for generating locally based businesses Hlt ‐ HRDC (H
l
tC
itt )
Human resources ddevelopment(Human R
Resources D
Development
Committee)
Singapore

HRDC(Human Resource
Development Committee)

Regular discussions/review by COO ineach base to raise level oforganizational human resources
development

CDP(Career Development Plan) /IDP(Individual Development Plan)

C hi andCoaching
d monitoringi i byb
trainers

Regional Innovative Project
Suggestions for business process
improvements by selected mid‐
midlevel employees

Copyright © 2017 NAGASE & CO., LTD.

39

(Reference) Information by Segment

Copyright © 2017 NAGASE & CO., LTD.

40

Functional Materials Segment
FYE March 2017 Actual<Net Sales/Operating Income by Location>(100 millions of yen)
FYE03/17/

Net salesYear Actual

FYE03/18/
Vs. PYYear Forecast

Vs. PY

Domestic

1,468

98％

1,508

103％

Overseas

451

97％

469

104％

Eliminations

‐384

‐

‐ 382

‐

Total

1,535

98％

1,595

104％

Domestic

33

121％

34

105％

Overseas

9

90％

9

103％

Eliminations

‐0

‐

＋1

‐

Total

41

114％

44

105%

Net sales¥153.5 billion（98％）

The Performance Chemicals business recorded slightly lower sales asa whole, mainly due to lower naphtha prices driving sales of coating
raw materials and urethane materials down, mainly in Japan andGreater China.
China
The Speciality Chemicals business recorded slightly lower sales forthe year. While sales of plastic additives and silicone materials werestrong in the Americas, sales fell in other regions.

Operrating income

Operating income¥4.1 billion（114％）

Higher profits, mainly due to cost reduction activities at our domesticmanufacturing subsidiaries.

FYE March
M h 2018 Outlook
O tl k◇We project overall higher revenues and profits for the fiscal year. We expect demand torise in the Americas for 3D printer resin and additives, as well as for coating raw•Figures above are a combination of consolidated entities by location.
locationInter‐region eliminations not reflected; adjustments provided in theeliminations column

materials imports.
imports We also eexpect
pect an increase in automobile
a tomobile production
prod ction in the in ASEAN
ASEAN,
resulting in strong sales of urethane‐related products.

Copyright © 2017 NAGASE & CO., LTD.

41

Advanced Materials & Processing Segment
FYE March 2017 Actual<Net Sales/Operating Income by Location>(100 millions of yen)
FYE03/17/

Net salesYear Actual

FYE03/18/
Vs. PYYear Forecast

Vs. PY

Domestic

1,534

99％

1,618

105％

Overseas

1,466

91％

1,548

106％

Eliminations

‐ 574

‐

‐ 592

‐

Total

2,426

95％

2,574

106％

Domestic

28

118％

36

128％

Overseas

22

92％

27

125％

Eliminations

＋0

‐

＋1

‐

Total

50

102％

64

126％

Net sales¥242.6 billion (95%)

 The Colors & Advanced Processing business recorded lower sales. Despite
higher sales of conductive materials from domestic manufacturingsubsidiaries, sales digital print processing materials were lower, driving
down total sales.
 Our business selling plastics to office equipment, appliance, and video
game device markets recorded lower sales as a whole. While sales ofthermoplastic resins were higher at our domestic manufacturingsubsidiaries, the impact of foreign currency translation drove sales lower inGreater China and other overseas markets.

Operrating income

Operating income¥5.0 billion (102%)

 Higherh profits,
f mainly
l due to improved product mix and thehimplementation of cost‐reduction measures at domestic manufacturingsubsidiaries.

FYE March
M h 2018 Outlook
O tl k◇Outlook for higher revenues and profits. Sales of synthetic plastics to the officeequipment, appliance, and game device industries are expected to be strong, as•Figures above are a combination of consolidated entities by location.
locationInter‐region eliminations not reflected; adjustments provided in theeliminations column

Copyright © 2017 NAGASE & CO., LTD.

are sales of conductive materials to the LCD industry. We also expect to see
further profitability improvements at our manufacturing subsidiaries.

42

Electronics Segment
FYE March 2017 Actual<Net Sales/Operating Income by Location>(100 millions of yen)
FYE03/17/

Operrating income

Net salesYear Actual

FYE03/18/
Vs. PYYear Forecast

Vs. PY

Domestic

1,297

103％

1,167

90％

Overseas

712

97％

602

85％

Eliminations

‐ 732

‐

‐ 677

‐

Total

1,277

100％

1,092

85％

Domestic

39

103％

34

86％

Overseas

23

87％

24

103％

Eliminations

‐0

‐

‐0

‐

Total

63

101％

58

92％

¥127.7 billion（100％）

Net sales

The Electronic Chemicals Department recorded increased sales forthe period, driven by sales of formulated epoxy resins to theelectronic components and semiconductor industries.
The Electronic Materials Department recorded lower sales, mainly
due to lower sales of materials for touch panels and thin glassprocessing.

Operating income¥6.3 billion（101％）

Higher profits
profits, mainly due to the contribution of higher revenues atdomestic manufacturing subsidiaries.

FYE March
M h 2018 Outlook
O tl k◇We project lower revenues and lower profits for the segment. While we should
see higher sales of epoxy resin, new business growth in chemicals for liquid* Figures above are a combination of consolidated entities by location
location. InterInter‐
region eliminations not reflected; adjustments provided in the eliminations
column (Including amortization of goodwill).

crystals, and strong sales of glass thin processing in China, we expect sales inour smartphone‐related business to be weak.

Copyright © 2017 NAGASE & CO., LTD.

43

Automotive & Energy Segment
FYE March 2017 Actual<Net Sales/Operating Income by Location>(100 millions of yen)
FYE03/17/

Net salesYear Actual

FYE03/18/
Vs. PYYear Forecast

Vs. PY

Domestic

584

107％

662

113％

Overseas

756

91％

766

101％

Eliminations

‐ 211

‐

‐ 232

‐

Total

1,129

98％

1,196

106％

Domestic

‐4

‐

3

‐

Overseas

20

94％

19

95％

Eliminations

‐0

‐

‐0

‐

Total

15

118％

22

143％

Net sales¥112.9 billion（98％）

The segment recorded slightly lower sales overall. While we captured
demand and recorded strong sales of plastics for automobile
electronics and electrification in our Automotive Solutions business,
declining naphtha prices and the impact of the strong yen drove
segment sales down.

Operrating income

Operating income¥1.5 billion（118％）

Higher profits, mainly due to improved profitability at domestic
manufacturingg subsidiaries.

FYE March
M h 2018 Outlook
O tl k◇We forecast higher revenues and profits, as we see a recovery in naphtha prices
and growth in sales of plastics as a result of capturing demand for engineering•Figures above are a combination of consolidated entities by location.
locationInter‐region eliminations not reflected; adjustments provided in theeliminations column

Copyright © 2017 NAGASE & CO., LTD.

plastics related to automobile electronics/electrification. We also expect further
improvements in profitability at our manufacturing subsidiaries.

44

Life & Healthcare Segment
FYE March 2017 Actual<Net Sales/Operating Income by Location>(100 millions of yen)
FYE03/17/

Operrating income

Net salesYear Actual

FYE03/18/
Vs. PYYear Forecast

Vs. PY

Domestic

1,018

100％

1,030

101％

Overseas

115

91％

115

100％

Eliminations

‐ 284

‐

‐ 287

‐

Total

849

99％

858

101％

Domestic

62

94％

68

109％

Overseas

1

27％

1

143％

Eliminations

‐ 30

‐

‐ 30

‐

Total

33

86％

39

117％

* Figuresg
above are a combination of consolidated entities byy location. Inter‐region eliminations not reflected; adjustments provided in the eliminations
column (Including amortization of goodwill).

Net sales¥84.9 billion（99%）

The Life & Healthcare Products business recorded slightly lower sales of
TREHA™ and other products to food ingredient makers in Japan, while sales
were also lower in overseas markets. In the skin care and toiletries field, werecorded lower sales of AA2G™ domestically. However, sales of raw materials
in theh same market
k were higher
h h bothb h in Japan andd overseas. In theh medicald land pharmaceuticals fields, sales of pharmaceutical raw materials andintermediates grew significantly. On the other hand, sales of medical materials
were lower. As a result, sales for the Life & Healthcare Products business werepto the priorpfiscal year.
ylower comparedDespite higher sales of new products in the beauty care products business,sales of existing products were weak, driving overall sales lower.

Operating income¥3 3 billion（86%）¥3.3
billi （86%）

Lower profits, mainly due to lower sales.

FYE March
M h 2018 Outlook
O tl k◇We forecast overall sales and profit growth for the segment. In the food materials
industry, we intend to develop applications and grow sales of Fibryxa™ and other high‐function materials,
materials while we also expect strong sales of TREHA
TREHA™. We expect strong salesof raw materials to the skin care and toiletries field, with likewise robust performance in
medical devices to the pharmaceutical and medical fields in ASEAN.

Copyright © 2017 NAGASE & CO., LTD.

45

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

These presentation materials contain forward-looking projections based on assumptions,forecasts, and plans as of May 25, 2017. Actual earnings may differ from projections due toglobal economy,
y competitive landscape, currencyyrisks and uncertainties in the future gexchange rates, etc.
Copyright © 2017 NAGASE & CO., LTD.