Integrated
Report2023
Creating
BrighterSmiles for
HealthierLives

Headquarters:
11 Kamitakamatsu-cho, Fukuine, Higashiyama-ku, Kyoto 605-0983, Japan
Phone: +81-75-561-0411

I n t e g r a t e dr e p o r tTaking the founderʼs vision

CORPORATE MESSAGE
On the occasion of our 100th
anniversary, we canvassed theopinions of our employees about
the kind of corporate image that
Shofu should project. Their feedback
provided the basis for the creation ofthis Corporate Message.
It conveys our strong intent todeliver all over the world productsthat embody Shofuʼs advanced
technologies and excellent quality
and to support peopleʼs well-being.

into the next 100 years
Shofuʼs history began about a hundred years ago. In the era of valuing imported goods
when dental care depended on imported goods from Europe and the United States,

Ayumi Terrace, Shofuʼs new corporate building, completed in March 2023

Kajo Shofu III, the founder, established SHOFU DENTAL Mfg. Co., Ltd. after he succeededin the development of high-quality porcelain teeth that are suited to Japanese mouths.
He held in his heart a strong aspiration to improve the quality of products made in Japan.

CONTENTS
Learn about Shofu

03 Shofuʼs History
05 Shofuʼs Products/Core
Competence

07 Financial and Non-financial
Highlights

09 Global Network
Value Creation Story

11 Shofuʼs Material Issues
13 Shofuʼs Value Creation Process
15 Message from the President
Business Strategy

Having inherited those high ambitions and the passion to achieve them,

19 Progress of the Fourth

Medium-term Management Plan
FY2021-FY2023

the Company has employed the research and development capabilities and technologicalstrengths that we have cultivated as a comprehensive manufacturer of

21 Message from the Financial
Officerdental materials and equipment to bring high value-added products to market.

23 Business Overview

In doing so, we have contributed to the good health and smiles of people(Dental Business)

all over the world.

25 Business Overview

As we have in the past, so shall we continue over the next 100 years(Nail Care Business andOther Business)

Ayumi Terrace showroom

to challenge ourselves to contribute to dentistry throughout the world.

26 “Abrasives and polishingmaterials,”
Shofuʼs core product area
Our strengths as a market leader
and outlook

27 Intellectual Property/

Quality Control and Assurance

ESG
Examples of

29 Officers
31 Corporate Governance
34 Risk Management/Compliance
35 Environment
37 Society

products handled by the Shofu Group

Kajo Shofu III, the founder

Financial Data andCompany Profile

43 Financial Summary for
Past 11 Years

45 Company Profile andStock Information

Editorial policy

We prepared this integrated report in the hope that our shareholders, investors,
and other stakeholders will deepen their understanding of our social and economic
value creation through reporting on our management strategies, business activities,
and ESG activities, among others. We will continue to use this integrated report asa communication tool with our stakeholders.
In editing this report, we have referred primarily to the “Guidance forCollaborative Value Creation” by the Ministry of Economy, Trade and Industry ofJapan.

01

SHOFU INC.

Period covered by the report

The fiscal year ended March 31, 2023 (April 1, 2022
through March 31, 2023) is the primary period coveredby this report.
*The report also includes information for periods before
or after the period above.

Scope covered by the report

SHOFU INC. and its consolidated subsidiaries (Someactivities are relevant to SHOFU INC. alone.)

Forward-looking statements

Forward-looking information in this report
including earnings forecasts is based on
projections and forecasts in light of information
currently available to us and is subject topotential risks and uncertainties, among otherfactors. As a result, actual results may differ
materially from those we currently anticipate due
to changes in various factors.

Integrated Report 2023

02

1922

1928

Established SHIGA SHOFU INC. in Shigaraki-cho, Koga-gun,
Shiga (currently, Shigaraki-cho, Koga-shi, Shiga).

2007

Listed on the Second Section of the Tokyo Stock
Exchange.

1976

Established the Shofu Dental Club.

2008

Purchased NAIL LABO CORPORATION and made it asubsidiary, which imports and sells nail care materials
and equipment for professional nail care specialists.

2009Concluded a business and capital tie-up with Mitsui
Chemicals, Inc. and Sun Medical Co., Ltd.

2012

Listed on the First Section of the Tokyo Stock Exchange.

2020

Enhanced the business and capital tie-up with Mitsui
Chemicals, Inc. and Sun Medical Co., Ltd.

2022

Celebrated the 100th-year anniversary of theestablishment of the Company. Transitioned to the Prime
Market of the Tokyo Stock Exchange.

Developed and began selling Japanʼs first high-quality
porcelain teeth S.A.P Anatome Form.
The first president, Kajo Shofu III, established SHOFU
DENTAL Mfg. Co., Ltd.

1952

Developed and began selling Japanʼs first diamond abrasives
and vacuum fired porcelain teeth.

1983

Changed the Companyʼs name to SHOFU INC. and conductedmanagement reforms.

1957

Opened TOKYO SALES OFFICE in Yushima, Bunkyo-ku, Tokyo.

1986

Developed and began selling dental cements, which were
one of the three major categories of dental supplies at
the time, other two of which were porcelain teeth andrubber for denture bases.

1963

Registered shares as over-the-counter stock to Osaka
Prefecture Association of Japan Securities Dealers
Association.

Developed and began selling hybrid resin teeth, Endura—newgeneration artificial teeth.

1989

Listed on the Second Section of the Osaka Securities
Exchange and on the Kyoto Stock Exchange.

1997Completed a research center equipped with the mostadvanced facilities in the dental industry.
Obtained CE Marking certification.

1939

Opened the SHOFU Showroom at Ginza 1-chome, Tokyo.

1945

Developed and began selling Japanʼs first resin teeth

1971

Established a sales subsidiary, SHOFU DENTAL CORPORATION
in California, the U.S.

Growth supported
by unique products
Though we struggled with the high-quality
porcelain teeth we developed at the time ofestablishment, we later developed dental
materials essential for clinical practice,such as porcelain teeth with alloy Clad pins,
dental cements, and rubber for denturebases, and put our business on track. In
addition, Kenji Shofu, our second president,
kept the aspirations of the founder in hisheart and devoted himself to establishingstandards for and improving the quality ofdental materials. He contributed to theadvancement of the dental materials
industry in the postwar Japan. After thechaos of the postwar period, theintroduction of unique new products to themarket proved successful, and the
management base of Shofu became solid.

Entering the global market
with our proprietary products

Bold management reforms led
to the third establishment

During Japanʼs high economic growth

In the 1980s, we, who had been mass-

period, we made a concerted effort tomarket-oriented, were hit hard bycreate products that would meet global

government policies to curb medical

standards and be competitive globally.

expenses. In 1983, we aimed to make a

As a result, we succeeded to launchshift from quantity to quality under thedental spherical amalgam ahead of theslogan of “Challenge of changes” andrest of the world. We established SHOFU

worked to make a drastic improvement

DENTAL CORPORATION (SDC) in thein the management structure. We also

United States, which became our firstchanged the name of the Company tooverseas sales office, and took our first

SHOFU INC. to make a dramatic leap instep toward becoming a global company.

the development of the business.

After that, we established overseas

Japanʼs first hybrid resin teeth Endura,

sales offices in Germany (1978) andwhich we developed after theSingapore (1980) as well. Our sales area

management reforms, was highly rated

thus spread all over the world.

and adopted by the health insurance by
its brand name.
In 1989,

As a company
targeting the world

Toward the achievement of the
50-billion-yen vision

Since the beginning of Japanʼs Heisei era(1989‒2019), we focused on developing
and expanding our overseas site networkin order to grow overseas markets. In
addition, aiming to become a global
company that focuses on new productdevelopment, we completed theconstruction of one of the largest research
centers in the dental industry andconcluded a business and capital tie-up
with Mitsui Chemicals, Inc. and Sun Medical
Co., Ltd. Meanwhile, we performed various
activities to contribute to the developmentof dentistry, such as establishment of a
training center at our headquarters in
Kyoto as a base for disseminating
information, promotion of MiCD (Minimally
Invasive Cosmetic Dentistry), a concept ofdental treatment that has aesthetic effects,
and active launch of new products.

we became theWith the conviction that our future does notlie in the extension of what we have done in
the past, we have expressed our “50-billionyen vision” to realize our corporate
philosophy. We are striving to achieve Groupnet sales of 50.0 billion yen and Group
operating income of 7.5 billion yen (ratio of
operating income to net sales of 15%). In
order to achieve these goals, we are actively
working to develop manufacturing bases andexpand sales networks in Japan andoverseas. We are also developing products
suited to digital dentistry. We celebrated our100th anniversary in 2022 and completed theconstruction of Ayumi Terrace, Shofuʼs new
corporate headquarters building in the city of
Kyoto. In the next 100 years, we are going tocontinue taking on challenges to contributeeven more to the dentistry throughout theworld as a comprehensive manufacturer ofdental materials and equipment.

first company

Financial Data and Company Profile

It was a time when Japan relied on importfrom Europe and the United States forhigh-quality porcelain teeth. Fired withenthusiasm for domestic production of them,our founder, Kajo Shofu III, commissioned
Mr. Norio Araki, who was the deputy factory
manager of a dental laboratory in the UnitedStates, to research porcelain teeth. He thenhired Mr. Araki, who came back to Japan,
established Shofu Research Center on
Porcelain Teeth, and started full-scale
research on manufacture of porcelain teeth.
In 1921, he succeeded in developing
Japanʼs first high-quality porcelain teeth
SHOFU Anatome Form, which suit Japanesepeople. In the next year, 1922, SHOFU
DENTAL Mfg. Co., Ltd. was established; theCompany was born.

Began selling the worldʼs first dental spherical amalgam,
SHOFU Spherical Amalgam.

ESG

Development of Japanʼs firsthigh-quality porcelain teeth

1965

Business Strategy

1972

Value Creation Story

Since its establishment in 1922, the founderʼs high ambitions and passion to achieve them have been handed down as Shofuʼs DNA.
With such background, we have been leading the dental industry by developing many products that were the first of their kind either
in Japan or in the world. Going forward, we will continue to take on new challenges to cater for ever-changing needs of society.

Learn about Shofu

Shofuʼs History(Billions of yen)in the dental

35.0

industry to go
public.

30.0

Photo of the Company
at the time of establishment

SHOFU Showroom
opened in Ginza,
Tokyo as a service station

New products that
supported ourpostwar growth

25.0

SHOFU DENTAL CORPORATION(at the time of establishment)[California, the U.S.]First listed company
in the dental industry

Research center

20.0

15.0

10.0

5.0

0

1922
(Establishment)

03

SHOFU INC.

1959 1960

1970

1980

1990

2000

2010

2020

(FY)

* Figures for FY1999 and thereafter refer to consolidated net sales.

Integrated Report 2023

04

The business of the Shofu Group consists of the following three businesses: Dental business, Nail care business,
and Other businesses (industrial polishing materials). While the dental business is at the core of our business, weLearn about Shofu

Shofuʼs Products
Dental Business

Value Creation Story

are also actively expanding into fields, such as the nail care market and the industrial polishing materials
market, where we can use the technologies and networks that we have cultivated in the dental business.

Sales composition by segment
N ail car e businessO t her busines s e s292,38 million yen

23,45 million yen

95 million yen( 92.3% )

40.9%

11.1%

[Domestic]
Sales
composition
by productAbrasive
products

15.1%
1.5%
Chemicalproducts

Proprietary technologies and R&D
structure that allow competitive
products to be developed
Ratio of R&D expenses to net sales:

5.8 %Ratio of R&D personnel:

18.7 %

Number of patents held:

423

Ratio of sales of new products to net sales:* Non-consolidated basis (except for the ratio of R&D expenses to net sales, which is on a consolidated basis)15.7 %We have developed our own S-PRG Filler, which contributes tooral health and extension of the life of teeth, and apply it in awide variety of products. We have also established an R&D
structure in which we are able to pursue multiple projects and are
striving to flexibly respond to change in the needs of the market.

SHOFU INC.

Chemical products[Overseas]
Sales
composition
by product

36.3%

28.6%

Abrasive
products

Diamond abrasives
Silicon polisher

Carborundum abrasives

Composite resins for fillings
CAD/CAM materials (resin)Light-curing bonding materials
Impression materials and waxes

Metal products

Cement products and others

Machinery, equipment, and others

They are widely used for
dental casting, such as bases
for implants and crowns.

We have materials used for bonding
crowns, fillings, and implants, making
dental models, and molds for casting.

In addition to machinery and equipment used indental treatment and techniques, we also haveorthodontic and preventive/hygiene materials.

Artiﬁcial teeth
products

18.9%

23.6%

Core Competence

05

10.2%

Porcelain powder

Alloys for casting and silver alloys

6.0%

Metal
products

Cement products
and others

7.8%

Machinery, equipment,
and others
Cement products
and others

They have a wide variety of applications, including dental fillings andcrowns, synthetic resins used in denture and implant, impression
materials for taking impressions of teeth, and waxes for lab works.

Dental cements

Dental stones and investments

Dental equipment Products for oral care and infection prevention
Orthodontic materials Others

Financial Data and Company Profile

Artiﬁcial teeth
products

Chemical products

They are used for grinding and polishingnatural teeth, artificial teeth, dental synthetic
resins, and metals.

ESG

Dental business sales composition
Machinery, equipment,
and others

Abrasive products

We boast the top share in the domestic
market for major dental materials used in
denture and implant.
Porcelain teeth
Resin teeth
CAD/CAM materials (Zirconia)( 0.3% )( 7.4% )Artificial teeth products

Business Strategy

Dental b u s i n e s sBusinesses that use our technologies in dental materials and equipment

Nail Care Business

Other Businesses

In the nail care business, we draw on our technologies fostered in thedental materials field and manufacture, import, export, and sell nail careproducts and equipment. In addition, we have an integrated system
within the Group from development to manufacturing and distribution.
Acrylic nail products

SHOFU PRODUCTS KYOTO INC., a groupcompany, manufactures and sells industrial
polishing materials by using the manufacturing
technology of dental polishing materials.

Gel nail products

Industrial polishing materials

Shofu will contribute to dentistry worldwide as a comprehensive
manufacturer of dental materials and equipment based on the corecompetence (core strength) we have cultivated since our establishment.

Highly-trusted SHOFU brand andworldwide sales network

Competitive product lineup (domestic market share)

Artificial teeth products:
Abrasives products:
Number of countries where
our products are sold/
number of distributors:

37.0 ％
46.3 ％

Approx. 100 countries/
approx. 1,000 companies

Number of members of Shofu Dental Club:

16,467

We deliver a wide selection of safe and high-quality products of
our own to dental professionals around the world throughdomestic and overseas sales offices and distributors.

Production technology and quality
assurance system capable of handlinga wide range of dental products
Number of items
handled:Approx. 20,000 items

Number of countries where pharmaceutical
approval has been obtained:
Global production
bases:

85 countries

4 bases in Japan
5 bases overseas

We employ our advanced production technology and solid quality
assurance system to provide products so that you can use avariety of products safely and with confidence in the process ofdental treatment and techniques.

Human resources supporting
SHOFU

Number of Group
employees:

663 persons in Japan636 persons overseas

Total number of specialists
with expert knowledge* Employees qualified as dentists, dental hygienists, dental technicians, pharmacists and others:

Average years of service

66 persons

17.41 years (men)15.12 years (women)* Non-consolidated basis (except for the number of Group employees, which is on a consolidated basis)

Based on the ideas that human resources are the very source of
creating new value and that the sum of the responsibilities performed
by individual employees is the value of the Company, we work tofoster an organizational culture and realize a work environment thatallow each staff member to demonstrate their ability to the fullest.

Integrated Report 2023

06

Learn about Shofu

Financial and Non-financial Highlights
Fin a n cial In dic ato rs

Overseas net sales(Left axis)

Net sales(Left axis)

31,678 million yen 17,396 million yen

Overseas sales ratio(Right axis)

30,00024,915

26,10845.3

44.0

20,00011,49911,295
10,0000(％)

31,678FY2019/3

FY2020/3

28,137
24,680
44.4

54.9

51.8
17,396

14,56440

20

FY2022/3

0

FY2023/3

Operating proﬁt margin (Right axis)

3,824 million yen

12.1％
3,824

(Millions of yen)
3,500

3,217

2,800

10,946FY2021/3

60

Operating income (Left axis)

2,210

2,100

2,300

1,814

1,400

8.5

9.3

11.4

12.1

(％)

Return on equity (ROE)/Price Book-value Ratio (PBR)
Equity ratio (Right axis)

Equity (Left axis)

35,342 million yen

80.8 ％

9.2 ％(Millions of yen)25

50,00020

40,00015

30,00080.4

24,25079.4

79.7
23,78630,02480.5
32,759ROE (Left axis)

(％)

（％）

80.8

82.0

10.0

35,342

80.0

8.0

78.0

6.0

10

20,000

76.0

4.0

700

5

10,000

74.0

2.0

0

0

0

0.0

0.0

7.3

FY2019/3

FY2020/3

FY2021/3

FY2022/3

FY2023/3≈

FY2019/3

FY2020/3

FY2021/3

FY2022/3

FY2023/3

PBR (Right axis)

1.0倍

Business Strategy(Millions of yen)

54.9％

Equity/Equity ratio

Operating income/Operating proﬁt margin

Value Creation Story

Net sales/Overseas net sales/Overseas sales ratio

（倍）

9.2

3

8.1
6.2

2

5.0
1.2

1.2

0.8

0.8

1.0

1

2.9
FY2019/3

FY2020/3

FY2021/3

FY2022/3

0

FY2023/3

ESG

Total assets/Return on assets (ROA)

Cash ﬂows from operating activities
ROA (Right axis)

43,727 million yen

7.4％(Millions of yen)

37,81340,00030,00020,00030,161

6.5

29,8343.9

40,70943,727

(％)
8

7.4

6

4.9

4

2.3

10,0000FY2019/3

FY2020/3

FY2021/3

FY2022/3'23/3 期Proﬁt attributable to owners of parent(Left axis)

Cash ﬂows from operating activities

3,170 million yen

3,135 million yen(Millions of yen)

(Millions of yen)

3,736

4,000

2

1,000

0

0

2,000

1,942
1,468

FY2019/3

FY2021/3

3,135

30.4

1,674

1,201

30.1

FY2022/3

FY2023/3

0704

FY2019/3

FY2020/3

FY2021/3

(％)
60

2,546

1,000

FY2020/3

32.4 ％

58.8

3,000

3,170

2,829

3,000
2,000

Payout ratio(Right axis)

32.4

R&D expenses/Ratio of R&D expenses to net sales
R&D expenses(Left axis)

FY2023/3

5.8％(Millions of yen)

(％)

2,000
1,500

30

1,000

1,492

1,537

1,563

6.0

5.9

6.3

27.2

FY2022/3

Ratio of R&D expenses to net sales(Right axis)

1,846 million yen

45

15

500

0

0

Financial Data and Company Profile

Total assets (Left axis)

Proﬁt attributable to owners of parent/Payout ratio

FY2019/3

FY2020/3

FY2021/3

1,738

1,846

20
15
10

6.2

FY2022/3

5.8

FY2023/3

50

N o n -fin a n cial In dic ato rs

Average years of service/Job turnover ratio
Average years of service(Left axis)

Job turnover ratio(Right axis)

16.86 years

2.3％(Year)
20

(％)

17.87

17.77

17.57

15

1.6

16.86

3

3.2

2.2
10

16.99

4

2.3
1.3

Average monthly overtime hours per employee
Average monthly overtime hours per employee

Number of patents held

423

(Hours)(Patents)

10.33

450

9.28

8

8.80

Number of overseas employees(Left axis)

Number of patents held

8.87 hours
12

Number of overseas employees/Ratio of overseas employees

8.87

6.09

Ratio of overseas employees(Right axis)

636 persons

49.0％(Persons)

380

389

378

405

423

600

400
400

350

561

567

564

46.5

47.0

46.7

607
47.9

(％)

636

49.0

2

5

1

0

0

40

300

4

50

200
30

FY2019/3

FY2020/3

FY2021/3

FY2022/3

FY2023/3*The job turnover ratio does not include employees who have reachedthe mandatory retirement age.

07

SHOFU INC.

0

FY2019/3

FY2020/3

FY2021/3

FY2022/3

FY2023/3

0

FY2019/3

FY2020/3

FY2021/3

FY2022/3

FY2023/3

0≈
FY2019/3

FY2020/3

FY2021/3

FY2022/3

FY2023/30*Non-ﬁnancial indicators are on a non-consolidated basis (except for thenumber of overseas employees and the ratio of overseas employee, which
are on a consolidated basis).
Integrated Report 2023

08

Overseas Expansion: For stronger overseas presence

Overseas sales/
Overseas sales ratio
Overseas sales [Millions of yen]

Dental business overseas sales ratio [%]Overseas sales ratio [%]Dental businessoverseas sales ratio%[Fiscal year ended
March 31, 2023]
55.9
54.9

52.8
51.8

45.3

44.4

Largest dental show in the Middle East and Africa region AEEDC Dubai 2023
A dental show AEEDC Dubai 2023 was held at Dubai World
Trade Centre in the UAE from February 7 to 9, 2023. In thethree days, the show received more than 50,000 visitors from
more than 150 countries around the world. The Middle East
and Africa region has the highest population growth rate in
the world, and its market is expected to expand in the future.
In the booth of Shofu, our dental technicians
demonstrated techniques using our products, including dental
porcelain powder, which drew the attention of many visitors.
Dental technicians demonstrated techniques using our products● SHOFU DENTAL GmbH●● MERZ DENTAL GmbH●● DIGITAL DENTAL SERVICE GmbH

Number of overseas sites: 15
Number of Group employees:
636 persons overseas

Russia［ 4.6people ］●● ADVANCED HEALTHCARE LTD.

Europe Central Europe,［ 47.7people ］Eastern Europe［ 2,085million dollars ］
Europe［ 9,747million dollars ］
SHOFU DENTAL MIDDLE EAST
& AFRICA OFFICE

Number of dentists in the world:
Approximately 294 million
・・・Number of dentists( One icon represents 50,000 dentists)
Source: Number of dentists in the world, Estimated market size...
“Worldwide Medical Devices Market Factbook 2023,” Fitch Solutions

Global dental equipment market:
359 billion dollars
Growth rate in the last 5 years:
7.0 ％ per year
・・・Dental equipment market size
Source: Global dental equipment market, Growth rate in the last 5 years…
“Worldwide Medical Devices Market Factbook 2023,” Fitch Solutions

09

SHOFU INC.

China
［ 88.7people ］ Japan［ 10.7people ］
Other Asian countries［ 13.3people ］
Japan［ 1,839million dollars ］

India

Middle East, Middle East,
AfricaAfrica［ 18.7people ］［ 771million dollars ］［ 38.5people ］

Financial Data and Company Profile

FY2020/3

FY2022/3

FY2020/3

10,946 FY2021/3

11,499FY2019/3

Establishment of domestic and international academic networks
Perform activities to introduce our products and provide information to local study groups and key
opinion leaders who have an influence on dental professionals in each region to build networks.

11,295

Establishing sales offices
Establish bases in several countries and regions in order to expand our overseas business.

Exhibited at the world's largest dental trade fair IDS 2023

ESG

44.0

14,564Developing sales (distributors) network
Re-evaluate whether our products are recognized by dental professionals ineach overseas region and build a distributors network as necessary

45.2 45.1

17,396

46.6

Initiatives to promote globalization of our business

World's largest dental trade fair IDS 2023
The worldʼs largest dental trade fair IDS 2023 was held in Cologne,
Germany from March 14 to 18, 2023. The fair welcomed
approximately 120,000 visitors from 162 countries around the world.
We expressed our 100th anniversary in a stylishly designed
exhibition booth and exhibited new products, such as a dentine
bonding agent for dental use and digital cameras that can be used indental treatment. We also performed demonstrations at our booth,focusing on our fast-selling CAD/CAM Zirconia (disk), porcelain
powder, and composite resins for dental fillings. The booth attracted
a lot of people.

Business Strategy

55.9

Exhibited at trade fairs held in various countries

Value Creation Story

The Group sells Shofuʼs products in more than 100 countries worldwide, with overseas sales accounting
for more than 50% of total sales. However, our presence is not strong enough in the overseas market,
which is about 20 times larger than the domestic market. We must further increase our contribution to
the worldʼs dental care in order to realize the corporate philosophy.
In terms of the medium- to long-term prospects for overseas markets, we believe that the key is
how to capture the demand in the growing markets of digital dentistry and in aging countries, and themarkets in developing countries where the middle- and high-income classes are expected to grow. We
will aim to grow further and increase our presence in overseas markets, combining horizontal applicationof the know-how we have cultivated and pioneering new frontiers to develop our business, depending on
the field and speed of growth that are different in each country and region, e.g., focusing on the digitaldentistry field in the markets in developed countries and the preventive field in the markets in aging
countries, and utilizing existing technologies in developing countries where income is expected to grow.

Learn about Shofu

Global Network

Asia/Oceania［ 3,582million dollars ］

SAPPOROSALES OFFICE

North America［ 22.7people ］
Including the U.S.［ 20.2people ］● NAIL LABO INC.

North America/
Central and South America［ 17,938million dollars ］●●● HOFU INC. HEADQUARTERS/KYOTO SALES OFFICE● SHOFU PRODUCTS KYOTO INC.

● SHOFU BIOFIX INC.

● SHOFU DENTAL CORPORATION●● NAIL LABO
CORPORATION

Central and South America［ 47.8people ］
Including Brazil［ 27.1people ］● SHOFU DENTAL BRASIL COMERCIODE PRODUTOS ODONTOLOGICOS LTDA.

SENDAISALES OFFICETOKYO BRANCHFUKUOKASALES OFFICE● SMART DENTISTRY
SOLUTIONS INC.

● SHOFU MEXICO S DE RL DE CV

Oceania［ 2.0people ］● SHIGA SHOFU INC.

NAGOYASALES OFFICEOSAKASALES OFFICE● NAIL LABO TAIWAN CO., LTD.
● SHOFU DENTAL INDIA PRIVATE LIMITEDSHOFU INC., TAIWAN BRANCH● SHOFU DENTAL TRADING (SHANGHAI) CO., LTD.

● SHOFU PRODUCTS VIETNAM CO., LTD.

● SHANGHAI SHOFU DENTAL MATERIAL CO., LTD.

● SHOFU DENTAL ASIA-PACIFIC PTE.LTD.

● Salescompanies● Manufacturing
companies● Nail care businesscompanies

Integrated Report 2023

10

The Shofu Group has provided value to society through various

future, we have formulated the Basic Policy on Sustainability, whichbusiness activities, including development of superior dental materials

presents the Groupʼs approach to sustainability, and identified fourand equipment, to continue to be a company that is trusted by society.

key themes and 16 material issues (materiality) that are linked to

1

them.

Quality assurance and stable supply of products

Zero product recall arising from quality issues

Ensuring proper use of products

Strengthening the system for collecting and evaluating information
on safety management
Enhancing information provision for proper use of products

Providing products and services that solve issues indentistry(providing products and services that have positive
impact on society)Strengthening partnerships with dental professionals
Increasing the number of countries in which our products are soldStrengthening protection and utilization of intellectual property
Providing digital products and services continuously
Providing preventive products (including Giomer products) and services continuously
Increasing the ratio of sales of preventive and digital products to net sales

Providing information for higher dental IQ

Raising awareness about diseases of and enhancing information
provision to the general public

people,” “promotion of corporate activities friendly to global

Details of Basic Policy on Sustainability:
https://www.shofu.co.jp/contents/hp2012/index.php?No=2041&CNo=2012 (in Japanese only)

environment,” “strengthening of the management base to support
corporate value enhancement,” and “cultivation of a rewardingorganizational culture and development of human resources.”

Promotion of corporate activities friendly to global environment

Process for identification of material issue

Developing recycling systems for product development, materials, etc.
Increasing the recycling rate

Addressing climate change and contributing to a
decarbonized society

27% reduction in greenhouse gas emissions (compared to FY2021)
Realizing carbon neutrality by 2050

Preventing environmental pollution

Maintaining our record with zero environment-related accident

Financial Data and Company Profile

Contributing to a sound material-cycle society

ESG

2

Business Strategy

key themes for us to work on: “contribution to higher QOL of

Related SDGs

Contribution to higher QOL of people

Basic Policy on Sustainability
In our Basic Policy on Sustainability, we have presented four

TargetValue Creation Story

In order to further promote sustainability management in the

Material issues

Learn about Shofu

Shofuʼs Material Issues

I n t e r v i e ws w i t h o u t s i d e di rect ors and busi ness di vi si ons

Step 1

We conducted interviews with our outside directors to ask what they thought were the social issues that weshould give priority to and work on from a long-term perspective. In addition, we did interviews with businessdivisions to ask about the status of the initiatives being taken on our medium-term management plan and thestatus of our responses to social issues in order to extract social issues, risks, and opportunities related to us.

Step 2

Ex t r a c ti o n a n d e x a m i n at i on of soci al i ssues

3

We extracted 40 social issues from the following two perspectives:

Respect for human rights

Promoting understanding of human rights policy and initiatives throughout the Group
Promoting sustainable procurement in our supply chain

Enforcing thorough compliance

Zero serious compliance violation

Promotion of risk management

Implementing highly effective business continuity management

Strengthening corporate governance

Strengthening group governance
Building a highly effective corporate governance structure

Disclosing information appropriately and having
dialogue with stakeholders

Conducting surveys, questionnaires, and dialogue with stakeholders
and taking measures for improvement
Enhancing the quality and quantity of information disclosure

Issues that can be identified by referring to international guidelines, such as ISO26001, GRI
Standards, and SDGs
Issues that can be identified by analyzing social conditions, market environment, and thecondition of the Company, in addition to the issues identified through the interviews in STEP 1

Ev a l u a t i o n o f m a t e r i a l i ty of soci al i ssues

Step 3

Based on the list of social issues we prepared, we analyzed, evaluated, and prioritized themfrom the following two viewpoints: materiality for stakeholders and materiality for the Company.
After discussions at the Sustainability Committee, the Managing Executive Board, and the Boardof Directors, we narrowed down the list of themes that we should give priority to and work on.

I d e n t i f i c a t i o n o f m a t e r ial i ssues

Step 4

4

Strengthening of the management base to support corporate value enhancement

Cultivation of a rewarding organizational culture and development of human resources

Enhancing employeesʼ health and ensuring safety inwork environment

Maintaining our record with zero serious industrial accident
Raising employeesʼ awareness about health (including oral health care)

Promotion of human resource development

Strengthening our support for employeesʼ career development

Promoting diversity and inclusion

Increasing the ratio of female managers

Realizing work-life balance

Increasing employee satisfaction

We prepared a draft of material issues based on the list of themes that had been narrowed down. At
the same time, we formulated quantitative and qualitative targets and action plans for each material
issue. Their comprehensiveness and validity were confirmed at the Sustainability Committee, andafter discussion at the Managing Executive Board, they were resolved at the Board of Directors.

11

SHOFU INC.

Integrated Report 2023

12

Learn about Shofu

Shofuʼs Value Creation Process
Based on our corporate philosophy of “Contribution to dentistry through innovative business activities,” we aim to create
economic and social value by pursuing business activities that utilize our wealth of resources and robust business foundation.

▼

▼

●

Total capital: 35.515 billion yen●

Equity ratio: 80.8％●

Ratio of R&D expenses to net sales: 5.8％●

Number of patents held: 423* Includes utility model rights, etc.; non-consolidated basis

Technological innovation,
evolution of treatment
technologies, and rapid
progress anddevelopment ofdigitalization in business●●

Shipping
logistics

Production equipment and technological capabilities that
can handle a wide range of dental material productsPatients

Economic value

Contribution to longer
healthy life expectancy
and higher QOL●●* Employees qualiﬁed as dentists, dental hygienists, dental
technicians, pharmacists and others; non-consolidated basis●

Global sales network covering Japanand the world●●●

Production

R&D●

Development and introductionof new products that match
local demands and needs●

Human resources
●

●

Sales
Improvement of our sales network and sales oﬃces● Establishment of domestic and international academic
networks (Create a system through which we canpromote our products directly to users)

Relocation of production sites and expansionof oﬀshore production to reduce costs andincrease production volume

Development and securing of human resources toactively promote overseas operations
Business tie-ups with Mitsui Chemicals,Inc. and Sun Medical Co., Ltd.

●●

Promotion of
corporate activities
friendly to global
environment

growth ﬁelds

Promotion of M&As (business tie-ups, technology
partnerships, business acquisitions)● Strengthening the group governance system●

Long-term partnerships
and shared prosperity
Supply of high-quality
products
in a stable fashion

Shareholders andinvestors
Sustainable growthin corporate value andappropriate andstable returns
to shareholders

Strengthening of the
management baseto support corporate
value enhancement

Management base:Consistently increasing
cash ﬂow

Local communities
Co-existence andco-prosperity
with local communities

Material issues
Contribution
to higher QOL
of people

Investment inBusiness partners anddental professionals

Capital procurement in response toincreasing capital requirements

Promotion of environmental management
system activities
Reduction of environmental impact at
development and manufacturing stages(Ratio of operating income
to net sales: 15%)

Finance

Highly-trusted SHOFU brandNetwork of good relationships withdental professionals
Number of members of Shofu
Dental Club: 16,467persons

Group operating income of
7.5 billion yen

Medium- to long- term priority issues

Improving skills and passing on knowledge
through stable employment

Social and relationship capital(domestic: 17.0 billion yen,overseas: 33.0 billion yen)

Increase our contribution to and presence in dentistry across the world

Number of Group employees:
663 (domestic), 636 (overseas)
Total number of specialists withexpert knowledge: 66

Group net sales of 50.0 billion yen

Long-term vision “50-billion-yen vision”

Human capital●

SHOFU INC.

Manufacturing
andquality control

Nail carebusiness

Domestic and overseas production sites that canmeet international standards for medical equipment(domestic: 4 companies, overseas: 5 companies)

Natural capital

13

Other
businesses

Sales andmarketing

Network involving industry, government,
academia, and medical institutions(Number of countries in which products are sold: approx. 100 countries;
number of dealers: approx. 1,000 companies)

Growing interest in
ESG/SDGs eﬀorts

DentalBusiness

Manufactured capital●

Increasing severity ofnatural disasters andepidemics

Purchasing
logistics

Financial Data and Company Profile

Responding togovernment policies tocurb medical expenses
and increasingly
sophisticated andcomplicated laws andregulations in various
countries

Social value

R&D

Intellectual capital●

Changes in the disease
structure and rising
aesthetic awareness indentistry, growing needs
for medical-dental
collaboration

Corporate philosophy: Contribution to dentistry through innovative business activities

Rating and Investment Information, Inc. (R&I)
Issuer rating: BBB+ (stable)

●

▼

ESG

Arrival of an aging
society/super-aging
society and expectations
for longer healthy life
expectancy

Financial capital

Value created▼

Business Strategy

Growth of the world’s
population- Growth of the population
and an increase in thelevel of income inemerging countries -Corporate philosophy, business activities, and growth strategy

Value Creation Story

Corporate resources

External environment

Cultivation of a rewardingorganizational
culture and developmentof human resources

E.S.G

Employees
Maintenance of stable andcontinuous employment
Promotion of diversity
and motivation

Integrated Report 2023

14

our globalization andthrough innovative
business activities.
Represe n ta tiv e D i r e c to r

Tetsu o T a k a m i

With the decision by the Japanese government to reclassify COVID-19
to Class 5, everyoneʼs continued cooperative efforts are bearing fruit,
and we are finally starting to break free from the COVID-19 pandemic.
Although uncertainty about the future remains, including the prolonged
Russia-Ukraine issue and global inflation, now is precisely the time
when we at Shofu hope to actively proceed with our global strategy
and contribute to the health of the people of the world from the field ofdentistry.
The Shofu Group has entered the final year of its fourth mediumterm management plan that began in the fiscal year ended March 31,
2021. We are actively carrying out business activities based on ashared understanding of the goal of maintaining and expanding ourpresence in the domestic market while expanding our overseas
business and of the need for strategies outside of the existing
framework that are not merely extensions of previous strategies. While
our overseas business felt the effects of the COVID-19 pandemic, wefirst saw a recovery of demand in the West, followed by the Asia andOceania regions, where our business performance has been particularly
favorable. As such, our overseas sales increased to account for over
50% of the whole. Regarding measures for venturing into new fields,with the popularization of CAD/CAM, which is used for the digital design
and manufacture of dental prosthetics, Shofu is rolling out the SHOFUS-Wave CAD/CAM system of total dental solutions, with our lineup of
scanners, software, machining tools, sintering furnaces, and processing
materials, all of which are necessary for the manufacture of prosthetic
devices using CAD/CAM. In Japan, with the revisions to healthinsurance rules for medical services in April 2022, the cases of CAD/
CAM crowns that are eligible for insurance coverage has expanded. In
light of this, they are rapidly becoming more and more popular, and ourown sales of related products are trending favorably.
With these tailwinds, in our financial results for the fiscal year

15

SHOFU INC.

ended March 31, 2023, net sales increased by 12.6% year-on-year to
31,678 million yen, and operating income increased by 18.9% year-onyear to 3,824 million yen. Both of these figures were the highest on
record. This was the second consecutive year of record highs for net
sales and the fourth consecutive year for operating income. Even
discounting the impact of the weak yen during the period, we
experienced strong growth.

CAD/CAM products performed well in Japan,
growth in the Asian region overseas
Net sales in Japan increased by 5.2% to 14,282 million yen, which was
generally in line with our forecasts. Amid the gradual shift away frommetals toward CAD/CAM crowns for prosthetics fitted inside the mouth,
our SHOFU S-Wave CAD/CAM brand has been well received by dental
clinics and dental technicians. Demand for new capital investment has
expanded, and related products have contributed significantly to sales.
According to statistics released by the Ministry of Health, Labour andWelfare in 2022, 56,000 of Japanʼs 68,000 dental clinics nationwide
have already submitted applications for insurance coverage for CAD/
CAM, and the governmentʼs Basic Policy on Economic and Fiscal
Management and Reform (“honebuto no hoshin,” “big-boned policy
outline”), which was completed in June 2023, indicates an approach of
promoting the introduction of dental materials that will not be affectedby market prices. This leads to predictions that demand for CAD/
CAM-related products and other dental materials will grow even further.
Overseas net sales increased by 19.4% year-on-year to 17,396
million yen. Although exchange rate fluctuations caused by the weak
yen were a positive factor in this result, the recovery of demand in
existing markets and our entry into new markets were driving forces in
the growth in sales. Recovery of demand from the COVID-19 pandemic
first occurred in Europe and the United States, followed by Southeast

Forecast to set a new record high for net sales for the third
consecutive fiscal year in the final year of the medium-term plan
Against the background of the full-scale recovery from the COVID-19
pandemic in global economic activity, the global dental market is
expected to expand, and we anticipate vigorous demand in emerging
countries in particular. In May 2022, in light of the demand in recovery
from the COVID-19 pandemic, we upgraded the Group targets of themedium-term management plan to 31.5 billion yen in net sales, 3.79
billion yen in operating income, ratio of operating income to net sales of
12%, and ROE of 8% for the fiscal year ending March 31, 2024, thefinal year of the plan. We have already achieved these targets.
Currently, our forecast for the Groupʼs financial results for the full year
ending March 31, 2024 are a 5.9% increase in net sales year-on-year
to 33,550 million yen, which will be the highest on record for the third
consecutive year. We anticipate a 4.3% increase to 14,897 million yen
in Japan and a 7.2% increase to 18,652 million yen overseas. With this,the percentage of total net sales accounted for by overseas sales will
increase further to 55.6%. We have set targets of 3.82 billion yen for
operating income, 12% for ratio of operating income to net sales, and
8% for ROE.
Our priority issues for achieving these numerical targets are: (1)R&D: development and introduction of new products that match local
demands and needs; (2) production: relocation of production sites andexpansion of offshore production; (3) sales: expansion of sales
networks, improvement of sales offices, and establishment of domestic
and international academic networks; (4) human resources:development and securing of global human resources; and (5) finance:
capital procurement in response to increasing capital requirements. We
will share these priorities across the entire company and pursue themwith speed. To accelerate even further growth, we intend the proactive
promotion of external collaborations and M&As. This includes

Integrated Report 2023

Financial Data and Company Profile

Highest net sales andoperating income on record

ESG

PRESI D E NT & C OO

Business Strategy

contribute to dentistrystrengthening ties with Mitsui Chemicals and Sun Medical Company,
with which we have formed a business and capital tie-up. We will also
work to strengthen our Group governance structure.
Regarding research and development, it is important to strengthenmarketing and product development in ways that match the economic
level and standards of dental medicine in each country and region. The
kinds of products and treatment systems needed in emerging countries,
where the number of people who receive dental treatment is still small,are different from those required in Japan, Europe and the UnitedStates. Because the Pharmaceutical and Medical Device Act and otherrules differ in the over 100 countries and regions covered by our salesarea, as well as the provision of products that are needed in each area,
conducting research and development that focuses on the creation of
innovation in individual dental treatments will help to elevate ourpresence in the global market. The research and development of dental
materials requires a wide range of technological domains, includingorganic and inorganic chemistry, metals, mechanical, electrical,
electronic, and biotechnology. Shofuʼs strength lies in productdevelopment aided by the accumulation of these individual technologies
and their optimal combinations. We will also take on the challenge ofinnovative product development in highly advanced areas such as 3D
printing.
In terms of production, as I mentioned above, we will aim to build
a well balanced production structure that takes various risks into
account. We will proceed to enhance our production capacity
systematically with the rebuilding of our head office plant and the
expansion of production volumes at our overseas plants, including ourVietnamese production subsidiary, and work on the diversification of
our supply chain and the relocation of and efficiency improvements in
our production divisions. Currently, our ratio of overseas production isaround 15%, but with overseas net sales now accounting for over 50%of the total, we will increase the ratio of overseas production byincreasing the degree of use of the German production company that
we acquired eight years ago and our Vietnamese production subsidiary,
while proceeding with the establishment of production bases in otherregions.
Regarding our sales strategies, we will establish sales bases andexpand our sales network to further raise recognition of our productsin the dental treatment industries in Japan and overseas. In overseas
markets, in particular, even though we are competitive in terms of
quality, a lack of brand power and recognition could plunge us into asituation of competing on price. First, we will work on the key points ofestablishing new bases and increasing our personnel. At the same time,
we will build academic networks with clinical practitioners andeducators who have influence on the ground in dental treatment in thevarious regions, hold seminars, and exhibit at trade exhibitions in Japanand overseas, in an effort to promote the profile and utility of our

Value Creation Story

We will further accelerate

Asia, South Korea, Taiwan, and other Asian regions, where sales grewsignificantly. Sales grew particularly in India due to advance action
taken in collaboration with our sales locations prior to the introductionof pharmaceutical regulations. Sales were also strong in Europe, where
we have begun to strengthen our sales and marketing activities in Italy
and other countries.
On the other hand, various business risks also became apparent,
due to the recovery of demand and inflation on a global scale. The firstwas that we were temporarily unable to keep up with the rapid
recovery in demand in the areas of raw materials procurement,
personnel, and equipment. In various countries and regions, in thetransition to the “living with COVID-19” phase, demand for products
using resin materials, which are also dental materials, exploded, andproduction was unable to keep up with that demand. The constraints on
production and other factors caused by this situation resulted in loss ofopportunity as we were unable to conduct sales and marketing
activities proactively in North America, Central and South America. We
approached the elimination of this situation with measures such as
expanding our raw materials procurement channels, increasing our
personnel, extending plant operation hours, and increasing production
volumes per lot. However, due to the continued sharp rises in the pricesof energy and packaging materials, as well as labor and other costs, wewill aim to strengthen our international competitiveness by building wellbalanced production and sales structures that take geopolitical risks
further into account.

Learn about Shofu

Message from the President

16

While holding sight of the direction we need to move toward as acompany, we are also proceeding with responses to the various
principles required by the Corporate Governance Code. Most recently,
we are conducting a scenario analysis of climate change risks andopportunities in line with the recommendations of the Task Force on
Climate-related Financial Disclosures (TCFD), and we plan to disclose
information during the fiscal year ending March 31, 2024. Through this
scenario analysis, by conducting assessments of the degree ofimportance of risks, identifying the scenario groups, and evaluating
business impacts, we are working to identify the long-term impacts ofclimate change on our business activities and considering our
responses. We have also welcomed our first female corporate officer as
an Outside Auditor. We hope that she will contribute to womenʼsempowerment and to the fair promotion of business from objective
perspectives.
At the same time as we elevate our contribution to dentistryaround the world as a Prime Market-listed company, we will strive toenhance our action on sustainability and to build more robust
governance systems.
To fulfill our responsibility as a company that practices our
corporate message of “Creating Brighter Smiles for Healthier Lives,” theShofu Group will work with speed to realize its targets of 50.0 billion yen
in consolidated net sales and 7.5 billion yen in consolidated operating
income. We hope to create both social and economic value in the global
market and to further deepen our bonds with all our stakeholders. I
would like to ask for the ongoing patronage and support of all of our
stakeholders as Shofu takes new steps toward its next 100 years.

Integrated Report 2023

Financial Data and Company Profile

SHOFU INC.

In light of this kind of business environment and future potential, we
have enhanced our corporate value with four strengths that embody
our corporate philosophy. The first is our “proprietary technologies andR&D structure.” We have launched numerous products onto the market
by continuously conducting proactive research and development. We
own 423 patents, new products account for 15.7% of sales, and R&D
staff account for 18.7% of our total employees.
The second strength is our “highly-trusted SHOFU brand and

Shofu has elected to be listed on the TSE Prime Market, which isdesigned for global companies. This is because our business objectiveof being active in overseas markets and achieving major growth, so we
can put our corporate philosophy of “Contribution to dentistry throughinnovative business activities” into practice, will lead to recognition
from the worldʼs investors.
The starting point of Shofuʼs foundation was our mission “to maketeeth for Japanese people,” which had not existed until then. It is also
our management stance of solving problems with technology. Since its
founding, the Company has developed world-first and Japan-first
products one after another to meet the daily changing needs of society,and we have always sought to contribute to the advancement ofdentistry through product development together with dental
professionals. We believe that helping to make peopleʼs healthsustainable is directly connected to medium- to long-term corporate
value enhancement, and that this is the Companyʼs sustainable
management. To bring this even more in line with todayʼs businessenvironment, we established key themes and initiatives related tosustainability in June 2022.
In our Basic Policy on Sustainability, we have identified four key
themes of “contribution to higher quality of life (QOL) of people,”“promotion of corporate activities friendly to global environment,”“strengthening of the management base to support corporate valueenhancement,” and “cultivation of a rewarding organizational culture
and development of human resources,” as well as 16 material issues(materiality) that are linked to them as issues for us to work on.
Specifically, we identified issues that will lead to value creation throughour core operations, including quality assurance and stable supply of
products and the provision of products and services that solve issues
in dentistry, issues that society is calling for, such as addressing climatechange, enforcing thorough compliance, and the promotion of diversity,and issues related to our business foundations.
“Contribution to higher quality of life (QOL) of people” andIncreasing our contributions to the world
to realize our target of 50 billion yen in net sales
ESG

17

Four strengths that embody our corporate philosophy
to enhance corporate value

Promotion of SDGs with our business activities
for peopleʼs sustainable health“cultivation of a rewarding organizational culture and development of
human resources” are the foundations that underpin our business, andas such, we intend to concentrate particular efforts on these twothemes.
Construction of Ayumi Terrace, Shofuʼs new corporate
headquarters building that symbolizes our aim of further growth after
our 100th anniversary and was built with the concept of conveying theCompanyʼs appeal both within and outside the company, was completed
in March 2023. We created a new showroom on the 1st floor, where, in
addition to the products we handle, valuable dentistry-related items in
our collection are on display. It also features equipment such as dental
examination chairs, and it serves as a place for providing information topeople engage in dental treatment.

Business Strategy

Under our corporate philosophy, “Contribution to dentistry throughinnovative business activities,” Shofu will act as an industry leader inboosting our overall competitiveness, in our major goal of making the
SHOFU brand a trusted and popular brand around the world. However,in a global market that is some 20 times the size of the Japanesemarket, our degree of contribution and sense of presence could not be
described as adequate. One barometer of the degree of contribution isnet sales. We have set a Group target in this regard of 50.0 billion yen(17.0 billion yen in Japan and 33.0 billion yen overseas). I believe thatthe best barometer for measuring our presence in the global market isfor us to become one of the top ten dental treatment manufacturers in
the world. The ideal image of our business development is to build astrong business foundation in the domestic market, demonstrate ourpresence while achieving steady growth in the giant markets indeveloped countries, and contribute to the penetration of dental
treatment in emerging countries.
Japanese society is currently in a state of flux, with a populationthat is aging and shrinking. A society that is prosperous and in whichpeople live long and healthy lives requires a greater focus on the healthof teeth, which serve as the gateway to the food that sustains our lives.
With recent research confirming how dental disease can affect overall
health, as attested by the increase in “dental IQ,” we can expect therole of dentistry to grow even more critical in the era of the 100-year
human lifespan. While there is a downward trend in dental cavities, weare considering the expansion of our business by contributing to theevolution of dental fields such as esthetic dentistry and oral healthmanagement in the oral frail (an intermediate stage in the transition
from healthy to requiring care). In particular, demand is predicted toincrease more and more in the area of maintenance for the preventionof various oral problems in Japan as its population continues to age. By
responding meticulously to changes in demand in Japan, whose
population is aging faster than anywhere else in the world, we believethat we will be able to use the expertise thus gained in other countries
and regions as their own populations head down the same path of
population aging.

sales network,” in which we take great pride as a 100-year-old
company. The massive volumes of clinical data and achievements in
artificial teeth products and abrasives products, for which we hold the
top market share in Japan, have increased trust in our brand, and they
are used by many dental professions. Our third strength is our“production technology and quality assurance system” that underpinthat brand power and reliability. We have approximately 20,000 items,
which are sold in over 100 countries and regions around the world
pursuant to the laws and regulations of each country. There are strong
requirements for dental materials, which are used inside the mouth, tobe safe and of high quality. Our group companies pass strict legal
screening in their respective countries and have structures in placethat enable them to deliver safe, reliable, and high-quality products at
all times. Our fourth strength is our “human resources supporting
SHOFU.” Our employees are the source of all other three strengths, andour employees underpin those strengths. Among those employees,
specialists with expert knowledge, including qualified dentists, dental
hygienists, dental technicians, and pharmacists, play an active role inthe company.
By further refining these four, people-centered strengths, wehope to elevate our presence in the global market.

Value Creation Story

For the penetration of
the SHOFU brand around the world

The world of dentistry is being exposed to the waves ofdigitalization and digital transformation (DX), bringing about rapidchanges to conventional treatment and the mechanisms and norms oforal care. In addition to further evolving our SHOFU S-Wave CAD/CAM
system, we are actively engaging in the digital area in peripheral fields.
In June 2023, we launched “SHOFU EyeSpecial C-V,” a digital camerathat is able to capture visual records for dental purposes, onto themarket. We developed this camera with the concept of making it “easyfor anyone to capture images,” so that images of a certain level ofquality and composition could be captured in different environments
and by multiple people. The use of our proprietary app also enables
functional management of data. Given societyʼs growing emphasis on
informed consent, we predict that the need for this product willcontinue to increase.
In the markets in developed countries, services that go a stepfurther than treatment for dental cavities are growing significantly.
Interest is growing in esthetics and the prevention of various oraldiseases, and new services to meet such needs are emerging one after
the other. By offering products and services from diverse perspectives
that are not confined by the boundaries of treatment, we will take on
the challenge of creating innovation and giving shape to new markets.
In emerging countries, new markets are being born one after theother in regions where dental treatment itself has not yet penetrated.
An increase in demand for high value-added treatment is predicted insuch countries and regions as living standards improve with future
economic growth, so we can expect to see major growth in the dental
market.
In a repeated cycle of growth and development, the dental market
continues to contribute to improving the quality of life (QOL) and thehealth of people all over the world. We believe that Shofu has majorroles that it can fulfill in an increasingly diverse global market, including
digitalization proposals in developed countries, the prevention area inaging markets, and the provision of existing technologies and knowhow
to developing countries.

Learn about Shofu

products. The purpose of establishing academic networks is not only tohelp dental professionals in the respective countries and regions tobetter understand where our products excel, but also to play animportant role as a forum for industry and academia to cooperate anddiscuss and share information, such as global oral cavity-related
information and needs and information about cutting-edge research. In
our efforts to establish these networks, we will pursue activities tointroduce our products and provide information to regional study
groups and key opinion leaders who are influential with dental
professionals in each region.
It will be our global human resources who will push thesestrategies forward on the ground. As we make efforts in the educationof our in-house human resources and securing human resources in ashifting labor market, on the other hand, we will increase the number offemale employees in Japan and raise the age at which our older
employees can continue to work under our senior continued
employment scheme from 68 years to 70 years, and implement othermeasures in our challenge to realize a diverse and inclusive workplace
where many different people can flourish.

18

reason, we have been promoting globalization acrossthe whole of our corporate management and steadily
implementing measures under our fourth medium-term
management plan towards achieving our long-term
vision, “50-billion-yen vision.”R e v i e w o f F Y 2 0 2 2 （ y e a r e n d e d M a r c h 31, 2 0 2 3）
（Unit: Billions of yen, %）ResultVariance (amount)

Variance(percentage)

29.3

31.6

2.3

8.1

Domestic net sales

14.1

14.2

0.1

0.7

Overseas net sales

15.1

17.3

2.2

15.0

Net sales

Operating income（Ratio of operating income to net sales）
Return on equity (ROE)*

2.7

3.8

1.0

40.0

（9.3%）（12.1%）

―

―

5.9%

9.2%

―

―

*Return on equity: Net income ÷ shareholdersʼ equity × 100%

Key p r o g r e s s o n p rio rit y is s u e s
Priority Issue 1 [R&D] Development and introduction of new products that match local demands and needs
Review of
FY2022Developed and launched new products suited to preventive and digital dentistry, where growth is anticipated

Current State ofProgress in FY2023

Developed and launched digital camera, “EyeSpecial C-V”

Launched “BeautiBond Xtreme,” a universal dentine bonding agent for dental use applicable for a range of adherends, in overseas markets

Developed and launched “SHOFU CREATE DIAMOND POINT FG,” a diamond abrasive that is the first product for our production site in Vietnam

Priority Issue 2 [Production] Relocation of production sites and expansion of offshore production to reduce costs and increase production volume
Review of
FY2022Current State ofProgress in FY2023

Initiatives for stabilization of raw materials procurement (review of suppliers, promotion of purchasing from multiple suppliers)

Promoted initiatives to eliminate supply capacity restraints by strengthening labor force through human resource
development and active recruitment and improving labor efficiency with the introduction of shift work
Began construction (rebuilding) of new headquarters plant to improve supply capacity and as a response to further expansion of demand in future

Current State ofProgress in FY2023

Considering resumption of overseas dispatch training, which had been suspended due to the COVID-19 pandemic

Priority Issue 5 [Finance] Capital procurement in response to increasing capital requirements
Review of
FY2022

Renewed commitment line agreement, identified funding situation of Group companies, and made effective use of Group funds

Current State ofProgress in FY2023

Continuing initiatives for improvement of funding efficiency in Group, building relationships with financial institutions toenable response to demand for funds for M&A, large-scale capital expenditure, etc

Priority Issue 6 S t r e n g t h e n i n g t h e g r o u p g ove r n a n c e sy s t e m
Promoted initiatives to ensure Group companies comply with headquartersʼ Associated Companies Management Rules

Review of
FY2022

Built database for information and materials collected from Group companies

Current State ofProgress in FY2023

Held Group Governance Meetings, attended by headquarters executive management team and the presidents of Group
companies, with the aim of unifying intentions for the maintenance of the Groupʼs compliance structure and the promotion of
the long-term vision “50-billion-yen vision” throughout the entire Group

Financial Data and Company Profile

successes led to further expansion of net sales. On the other
hand, production capacity restraints prevented us from
responding adequately to the sharper-than-expected increasein demand, resulting in loss of opportunity in some productcategories.
In terms of profit, although selling, general andadministrative expenses increased due to our active
investments for the expansion of business, including R&D
expenses, personnel expenses, advertising expenses, andtravel and commuting expenses, thanks to increased revenue,
improvement in cost of sales, and the positive impact offoreign exchange fluctuations, we recorded a major increasein profit.
ROE greatly exceeded the target in the medium-term
management plan due to the significant improvement in
profitability (ratio of net income to net sales).

Established overseas work allowance, and formalize the service for provision of daily commodities to people on temporary
overseas assignments to encourage work overseas and aid the psychological burden of working overseas

ESG

In FY2022 (year ended March 31, 2023), the second year of
the fourth medium-term management plan, both sales and net
income rose above the figures targeted for the year underthe medium-term management plan. New record highs wereachieved for net sales for the second consecutive year andfor operating income for the fourth consecutive year.
In Japan, with the revisions to health insurance rules in
April 2022, which expanded the cases of CAD/CAM crownsthat are eligible for insurance coverage, we were able tosteadily capture the increased demand for investment in
CAD/CAM-related equipment by dental clinics andlaboratories.Overseas, as economic activities returned tonormal after the COVID-19 pandemic, we succeeded in
capturing the growing demand in Asian markets, while inEurope, we maintained the client base that we had acquired
after our competitors downsized their businesses or withdrew
from the market altogether during the pandemic. These

Review of
FY2022Business Strategy

Medium-term
management plan

Priority Issue 4 [Human resources] Development and securing of human resources to actively promote overseas operations

Value Creation Story

Aiming to accomplish its corporate philosophy,“Contribution to dentistry through innovative businessactivities,” the Shofu Group is working to maintain andstrengthen the foundation of its domestic businesswhile also allocating more of its corporate resources
abroad in order to expand overseas business. For thisLearn about Shofu

Progress of the Fourth Medium-term Management Plan FY2021-FY2023

F o r e c a s t s f o r F Y 2 0 2 3 （ y e a r e n d i n g M a r c h 31, 2 0 2 4）Group net sales

Group operating income

335 billion yen

38 billion yen(Domestic: 14.8 billion yen;overseas: 18.6 billion yen)

Ratio of operating income
to net sales: 11.4%

Net sales

Domestic

Overseas

31.5
16.6

+ 20 billion yen（+6.5％）

33.5（Unit: Billions of yen）

18.6

14.8

14.8

Medium-term management plan

Forecast

In FY2023 (year ending March 31, 2024), the final year of
the fourth medium-term management plan, net sales is
expected to exceed the medium-term management plantarget by 2.0 billion yen (6.5%) and operating income isexpected to be at the same level as the plan.
We are planning the expansion of sales, primarily ofchemical products, in Japan and overseas, and forecast
net sales to reach 33.5 billion yen, significantly above themedium-term management plan target.

Priority Measures
Key numerical targets

Return on equity（ROE）

20 ％ or more
Overseas sales ratio: 55.6 ％Ratio of sales of new
products to net sales:

8.0 ％（Dental business overseas sales ratio: 56.9%）

Operating income/Operating proﬁt margin（Unit: Billions of yen, %）Secure same level as the medium-term
management plan
12.0
11.4

37

38

Medium-term management plan

Forecast

While an increase in revenue from net sales is expected, on
the profit front, in addition to a rise in the cost of sales due
to rising raw materials and energy costs, staff increases,
improvement of wages and conditions, and other factors,
we will actively make growth investments for the realizationof the long-term vision “50-billion-yen vision.” For thesereasons, we expect operating income to be 3.8 billion yen,around the same level as the medium-term management
plan target.

Priority Issue 3 [Sales] Improvement of sales networks and sales offices and establishment of domestic and international academic networks
Review of
FY2022Current State ofProgress in FY2023

19

SHOFU INC.

Increased number of distributors in all areas of the world, including North America/Central and South America, Europe, and Asia
Promoted development of KOLs in various parts of the world*KOLs: Key Opinion Leaders

Continue to promote expansion of distributor network and increase staff numbers at sales offices in various regions around the world

As well as achieving the final-year targets of the fourth medium-term management plan,we will focus our efforts on priority issues with a sense of speed,with the aim of the early achievement of our long-term vision of 50 billion yen in Group net sales.

Integrated Report 2023

20

global presence as a Prime

Direct o r
Senior Ma n a g in g E x e c u tiv e Offi c e r
Finance , Ge n e r a l A ffa ir s a n d Na il B us i nes s

We are currently standing at a major turning point, as we
accelerate our global strategy toward our long-term vision“50-billion-yen vision.” In our financial results for the fiscal year
ended March 31, 2023, we posted record highs for both revenue
and income. Net sales increased by 12.6% year-on-year to 31,678
million yen, the second consecutive year of sales growth, with net
sales in Japan up 5.2% to 14,282 million yen and overseas net
sales up 19.4% to 17,396 million yen. Even if we exclude theeffects of exchange rates, these results demonstrate strong
growth and are an indication that our global strategy is steadily
producing results.
Of the substantive increase of 3,540 million yen in net sales
over the previous fiscal year, which excludes the positive factorof 1,878 million yen from exchange rate fluctuations, the dental
business contributed 1,597 million yen, the nail business 63 million
yen, and other businesses 2 million yen. In our core dental
business, all product categories remained steady, with CAD/
CAM-related products propelling sales in Japan forward inparticular, while chemical products used as restorative materials
drove up sales overseas.
Operating income climbed 18.9% to 3,824 million yen, thesixth consecutive year of income growth. As sales activities
recovered to pre-pandemic levels, our active businessdevelopment led to increases in selling, general and administrative
expenses, such as advertising expenses and travel and transport
expenses. However, these cost rises were absorbed by the growth
in revenue and the positive impact of exchange rate fluctuations,
resulting in a major increase in income. Ordinary income increased
by 15.8% to 4,238 million yen and profit attributable to owners ofparent climbed 23.1% to 3,135 million yen. Net income per share
was 176.10 yen, and ROE rose from 8.1% in the previous fiscal

21

SHOFU INC.

year to 9.2%, showing that we were able to improve our capitalefficiency. In total assets, the construction of the new corporate
headquarters resulted in an increase in property, plant andequipment, but net assets also increased. Our equity ratio as ofMarch 31, 2023 was 80.8%, indicating the solidity of our financial
soundness.

Maintain our highly profitable management structure
and move toward active growth investment
One of the most significant factors in this high earnings capacity is
our promotion of globalization, which has increased the percentage
of our business accounted for by our global operations. Rolling out
high value-added and profitable products in overseas markets hascreated a virtuous cycle of increased earnings capacity leading toan increase in cashflow from operating activities. Several years
ago, our cashflow from operating activities was an inflow at the 2billion yen-plus mark, but in the fiscal year ended March 31, 2023,
when overseas sales accounted for over 50% of net sales, it was
an inflow of 3,170 million yen. Now that we have such a highly
profitable management structure, the strategy that we should
adopt is to accelerate the expansion of our global business andcreate a new profit cycle by aggressively investing cash flow ingrowth. One point from the fiscal year ended March 31, 2023 that
we should give serious thought to is that, because our supply
capacity was unable to keep up with the sudden increase indemand, our production structure became a major issue.
Leveraging our strength of financial soundness, and with our highcash position and strong financial health, we believe that we now
have the opportunity to accelerate our growth strategy, and that itis the right time to start actively promoting growth investments.
To increase the production capacity of our head office plant,

Forecasting a record high for the third consecutive year in
the final year of the fourth medium-term management plan
We are now in the final year of the fourth medium-term
management plan. For the fiscal year ending March 31, 2024, we
forecast a 5.9% increase in net sales year-on-year to 33,550
million yen, which will be record high sales for the third
consecutive year. Our aim is to increase the percentage of total
net sales accounted for by overseas sales even further to 55.6%,
with a 7.2% increase to 18,652 million yen. Due to personnel
increases and the strengthening of our sales activities for the
expansion of business and proactive up-front investments in R&D
for the creation of innovation, we forecast a 0.1% decrease inoperating income to 3,820 million yen, a 7.1% decrease in ordinary
income to 3,938 million yen, and ROE of 7.7%. As we do notenvisage any significant fluctuations in exchange rates, sales ofinvestment securities, settlement income, or other major changes,
our projection is that there will be only a slight fall in income
compared with the previous fiscal year. We are viewing the impact
of exchange rate fluctuations with caution and envisage anegative impact of 462 million yen on net sales.
By pursuing globalization for the realization of our “50-billionyen vision,” our production and sales locations will increase, anddue to the expansion of their scale, rearrangement, and otherfactors, the management of exchange rate fluctuation risk and thestrengthening of our compliance and governance structures will
become even more important. In terms of taxation governance inparticular, we believe that we need to consider exchange rate
fluctuations in each country and region and, among other actions,revise our pricing so that we can pay proper levels of tax.
Also, once new bases are established, so that they can be
fully operational as soon as possible, the entire Group will work to
support them while fostering synergies with them.

In terms of dividend policy, we have set a dividend payout ratio
target of at least 30% on a consolidated basis. In 2021, we added
a new numerical indicator of dividends on equity (DOE) ratio, withthe aim of DOE of 1.7%. DOE is calculated by multiplying ROE by
dividend payout ratio, and our policy is to enhance DOE by
improving both profitability and capital efficiency. Also, in addition
to our ordinary dividends, we also conduct commemorative
dividends every five years over two fiscal years.
The year-end dividend for the fiscal year ended March 31,
2023 was 42 yen per share, consisting of an ordinary dividend of
32 yen and a 100th anniversary commemorative dividend of 10
yen. Together with the interim dividend of 15 yen, the annual
dividend was 57 yen per share.
The Shofu Groupʼs growth story is supported by our
corporate philosophy, “Contribution to dentistry through innovative
business activities.” While on the one hand, the global situation,such as the Russia-Ukraine situation, grows increasingly uncertain,
we believe that the role of dental care will become increasingly
important for the sake of achieving the improvements in quality oflife (QOL) and extension of healthy longevity that people want. As
a company listed on the TSE Prime Market and also as a global
company, we will strive, united as a Group, to contribute to thehealth of the worldʼs people and to further demonstrate ourpresence. I would like to ask for the understanding and support of
all of our stakeholders.

Integrated Report 2023

Financial Data and Company Profile

Net sales reached a record high for the second consecutive
year and operating income for the fourth consecutive year

Demonstrate our presence with our contribution to
health in an increasingly uncertain global economy

ESG

Taka h i r o U me d aBusiness Strategy

Market listed company

As a global company that has elected to be listed on thePrime Market, one of our challenges is the establishment of asustainable management structure. In addition to considering
production and conveyance methods that take impact on the
global environment into account, we will pursue the allocation ofpeople and funds required to practice sustainable corporate
management in the countries and regions where we have bases,
including dealing with human rights issues.

Value Creation Story

We will demonstrate ourwe are proceeding with plans to rebuild the plant over about three
years from the end of 2023. We also plan to expand the scale ofproduction at our two domestic subsidiariesʼ plants and ourVietnam plant.
The head office plant manufactures high valued-added
products. As they are in high demand in the United States, China,
and Europe, these products are essential if we are to demonstrate
our presence in those massive markets. Sales are currently
growing significantly in India, Southeast Asia, South Korea, Taiwan,
and other Arian regions, but if we cannot become a necessarypresence in the giant markets of Europe, the United States, andChina, with their diverse, advanced needs, we will not be able tomeet the needs of the people in emerging countries, whose
economies are advancing and living standards are improving at a
rapid pace. To achieve growth in tandem with the expansion of the
global dental market, we will consider the diversification andre-arrangement of our supply chain and build a framework that willshow resilience against the impacts of the geopolitical situation,exchange rate fluctuations, and other factors.
We consider strategic investment in the promotion ofdigitalization and digital transformation (DX) to create innovation tobe essential. We will deepen our collaborations with companies ina variety of areas so that we can continue to lead DX and other
trends.

Learn about Shofu

Message from the Financial Officer22

B u s ine s s O v erv ie w

Line of businessNet sales / Operating income(Millions of yen)

Net sales (Domestic)

Sales by region (Year ended March 31, 2023)
Operating income

Net sales (Overseas)

29,23830,00025,87625,00023,66522,446

China

Domestic

North America/Central and South America

22,334Year-on-year comparison:Year-on-year comparison:Year-on-year comparison:Year-on-year comparison:

Up 11.8% (up 3.9%)*

10,462
11,983

10,695

10,07013,673

16,33912,97012,264

12,203

12,898

5,000

1,797

2,083

2,091

3,065

FY2020/3

FY2021/3

FY2022/3

Year-on-year comparison:

3,719

FY2023/3

Up 39.2% (up 25.5%)** Figures in ( ) are the percentage year-on-year changes on a substantive basis, which excludes the impact of exchange rate ﬂuctuations.

Business activities in the fiscal year ended March 31, 2023
As well as launching new products for digital dentistry and the preventionarea, which are expected to grow, we worked on strengthening ouractivities to deliver information to dental professionals through theenhancement of our digital content. Also, with the expansion of eligibility of
CAD/CAM crowns for insurance coverage due to the revisions to healthinsurance rules in April 2022, we captured the growth in demand forcapital investment among dental clinics and laboratories, and CAD/CAMrelated products contributed significantly to sales.

Initiatives for growth
We will pursue intensive sales activities focused on CAD/CAM-related
products, which are expected to attract demand, and key areas such as
artificial teeth, abrasive products, and chemical products. Also, in addition
to conducting seminars and other promotional activities online, we willreactivate in-person sales activities as economic activities return to normal
after the COVID-19 pandemic. We will also place efforts into information
provision activities targeting dental professionals.

23

SHOFU INC.

Overseas
Although our revenue increased significantly due to theeffects of exchange rate fluctuations, supply constraint
problems meant that we were unable to conduct
sufficient sales activities, primarily in the focus area ofchemical products. This meant that, substantively, net
sales were on a par with the previous fiscal year.

In addition to favorable
performances by artificial teeth
products and chemical products,
the expansion of sales channels
in the Middle East market
contributed to strong net sales.

Despite the impact of the turmoil
caused by the zero-COVID policy,
net sales remained steady, driven
by chemical products.

Net sales increased in all regions
thanks to the recovery of demandas economic activities returned tonormal after the COVID-19
pandemic.

North America/Central and South America

EuropeChina

Other Asia/Oceania

Market environment

Market environment

Market environment

Market environment

Demand remained steady after therecovery from the COVID-19 pandemic,
but in the second half of the fiscal year,
the impact of rising commodity prices led
to moves to curb dental treatment in someareas, and the future of the market
remained uncertain.

In addition to skyrocketing prices ofresources and energy due to the situation in
Ukraine, the impact of monetary tightening
policies to curb soaring commodities prices
led to heightened financial uncertainty
toward the end of the fiscal year, and thefuture of the market remained uncertain.

Although we were greatly impacted by
the COVID-19 countermeasures,
including the city-wide lockdowns in thefirst half of the year and the reversal of
the zero-COVID policy in the second
half of the year, demand remained
stable on a fundamental level.

The recovery in demand after the
pandemic, which began in Europe
and the United States, spreadwidely throughout Asia, including
ASEAN and South Asian nations,in the first half of the fiscal year,
and demand remained steady.

Business activities in the fiscal
year ended March 31, 2023

Business activities in the fiscal
year ended March 31, 2023

Business activities in the fiscal
year ended March 31, 2023

Business activities in the fiscal
year ended March 31, 2023

We worked to expand our sales networks in
Canada, Brazil, and elsewhere, increase ouracademic personnel with the aim of building
relationships with dental professionals, andexpand sales of our existing products.
However, our production capacity was
unable to keep up, particularly for chemical
products, which put constraints on theactive roll-out of sales activities.

Initiatives for growth

We will continue to work on the expansionof our sales offices, including personnelbuilding academic networks throughalso work to eliminate the previous yearʼs

Although raw materials shortages andresponses to European standards led tosupply constraints in some productcategories, we performed well in the Italianmarket, where we worked to increase
personnel and strengthen our sales capacity.
In addition, net sales remained steady due tothe expansion of sales channels to theMiddle Eastern and African markets.

Despite the major impact of the
COVID-19 countermeasures, we
worked on strengthening oursales capacity and building
relationships with dental
universities. As a result, sales ofchemical products grewsignificantly, and net sales werestrong.

Financial Data and Company Profile

The impact of COVID-19 gradually started to subside, and in the honebuto
hoshin (big-boned policy outline) decided by the Cabinet in June last year,
it was announced that the government were to consider the introduction ofuniversal dental examinations. This was good news for our business, butwith the progression of digitalization and other factors, the dental market
continued to undergo significant changes.

ESG

Market environment

Up 19.0% (down 0.1%)*

2,539 million yen

Domestic
With the revisions to health insurance rules making more cases of
CAD/CAM crowns eligible for insurance coverage, sales of CAD/
CAM-related products were favorable due to increased appetite forinvestment at dental clinics and laboratories.

Up 5.7% (up 5.7%)*

Other Asia/Oceania

0

FY2019/3

Up 21.8% (up 7.1%)*

3,755 million yen

Business Strategy

10,000Europe6,100 million yen 3,944 million yen 12,898 million yen

20,00015,000

Value Creation Story

In the dental business, Shofu
manufactures and sells dental
materials and equipment usedin dental treatment andtechniques. We sell our
products not only in Japanbut also in countries aroundthe world through our sales
bases in the U.S., Germany,
China, Singapore, India, Brazil,
and other regions.

Learn about Shofu

Dental BusinessIn response to strong demand
after the COVID-19 pandemic,
sales expanded in the South Asian
region, ASEAN, Korea, Taiwan,
and other countries. We were alsoable to grow sales significantly in
India by capturing demand prior
to the introduction ofpharmaceutical affairs regulations.

of our distributors by introducing a multiple distributors structure and replacing contracted distributors, strengthening the functions
increases and other development of frameworks, strengthening initiatives to obtain the cooperation of key opinion leaders (KOLs),
sponsorship and supporting of academic conferences and seminars, and strengthening our pharmaceutical affairs structure. We will
supply constraints as soon as possible and to expand sales in our focus area of chemical products.
Integrated Report 2023

24

B u s ine s s O v erv ie w

“Abrasives and polishing materials,” Shofuʼs core product area

Line of business

Our strengths as a market leader and outlook
What are abrasives and polishing materials?

Business activities in the fiscal year
ended March 31, 2023

2,500
2,500

Net
Net sales
sales (Domestic)(Domestic)
OperatingOperating income
income

2,372
2,372

2,355
2,355

833
833
1,539
1,539

804
804
1,551
1,551

Net
Net sales
sales (Overseas)(Overseas)

2,268
2,268

2,345
2,345

2,168
2,168

2,000
2,000
1,500
1,500

875
875
1,393
1,393

1,000
1,000
500
500

201
201

107
107

0
0

(5)
(5)

FY2019/3
FY2019/3

FY2020/3
FY2020/3

1,056
1,056
1,288
1,288

891
891
1,276
1,276

FY2021/3
FY2021/3

131
131

FY2022/3
FY2022/3

Diamond abrasives

93
93

FY2023/3
FY2023/3

Other Businesses (Industrial Polishing Materials)
In the industrial polishing materials business, which
we are rolling out by adapting technology for dental
polishing materials, despite the impact of prolonged
production cuts in the automotive industry, overallsales remained strong, as sales to industrial
machinery remained steady due to a recovery incapital investment and growing needs for automationand labor-saving.

Net sales / Operating income(Millions(Millions ofof yen)
yen)

96
96

76
76

16
16

FY2019/3
FY2019/3

13
13
FY2020/3
FY2020/3(1) Insistence on ease of use in design
We design our products from the userʼs
perspective, not only regarding basic
performance, but also pursuing less core
vibration during rotation, better sense of fit, andease of handling and maneuverability during use.

are manufactured

Message from the Development Staff Member

60
60

0
0

SHOFU INC.

95
95

92
92

87
87

90
90

Shofuʼs strength in abrasives and polishing materials

In addition to their basic performance, such as
durability and abrasive/polishing capacity,
abrasives and polishing materials also require
good operability, including ease of use andfamiliarity.
Shofu has the top market share forabrasives and polishing materials in Japan andour products are also trusted highly overseas(mainly in the United States). We are proud thatthe high regard in which our products are held in
dental care settings is the result of ourinsistence on ease of use in design, exhaustive
quality control, and our strong networks withdental professionals.

(2) Exhaustive quality control
To deliver safe and reliable products, in addition
to complying with international standards, we

120
120

30
30

25

OperatingOperating income
incomeNet
Net sales
sales

Carborundum abrasives Rubber abrasives

Future outlook

A generation or so ago, abrasives and polishingmaterials were primarily used on natural teeth
and metals, but as the times have changed, theobjects of these materials have also changed toinclude cement, resins, ceramics, and othermaterials. We develop abrasives and polishingmaterials that offer the best properties for thesechanging objects, and we work hard to ensurethat we can roll out products that accommodate
the changes in the times in a timely manner. In
addition, to enable a stable supply of our
products to many countries and regions, wehave multiple manufacturing bases, and we areworking to expand our manufacturing capacity.
Going forward, we believe that theproperties demanded of abrasives and polishingmaterials will become even more advanced. For
example, in contemporary society, where there issuch a strong awareness of the effectiveness oftime spent, the same can be said for dental
clinical settings. Reducing the time and effort
required of users is a never-ending challenge thatwill also help to alleviate the burden on patients.
As well as basic abrasive and polishing
performance, Shofuʼschallenge moving forward
will be to deliver productsthat contribute to laborsaving for users and, byextension, alleviate theburden on patients. We
SHOFU PRODUCTS
see it as our duty to find
VIETNAM CO., LTD.,
solutions to that challenge. where dental abrasives

Financial Data and Company Profile

In Japan, in addition to efforts to strengthen online
sales with the overhaul of our e-commerce site in
the previous fiscal year, we made active use of the
Harajuku Press Room, which offers brandexperiences, and collaborated with prominent nailartists in our efforts to enhance brand value.
Overseas, we will make active use ofpromotions on social media and online schools in the
United States, and in Taiwan, we will hold more
in-person seminars and strengthen sales toprofessional users.

(Millions(Millions ofof yen)yen)(3) Strong networks with dental professionals
Our abrasives and polishing materials are used
in a wide range of settings,
from academic settings suchas dental universities andvocational schools to dental
clinics and laboratories. We
put the insights thus
accumulated into productdevelopment from the userʼs
Scene of quality
perspective.
testing

ESG

Initiatives for growth

Net sales

also strive for exhaustive quality control basedon our own exacting standards, such as external
appearance and checking that the parts used
for grinding and polishing do not fall out or break
off due to rotation.

Business Strategy

Abrasives and polishing materials are used for
grinding and polishing natural teeth, dental
synthetic resins, ceramics, and metals, both indental treatment and dental laboratory settings.
For example, as well as being used to remove
sections of tooth decay and to adjust bite, they
are also used to give dentures and implants a
more natural look, so that they blend in with thesurrounding natural teeth, and to polish themgenerously to improve their esthetic appearance.
These products are indispensable to dental
treatment.
There are various different kinds ofabrasives and polishing materials, including
diamond abrasives, carborundum abrasives, andrubber abrasives. They are used for different
purposes according to differences in the materialof the item being treated, its location, and its
application.

Value Creation Story

In the nail care business, we manufacture, import,
export, and sell nail care products and equipment
based on technologies cultivated for dental
materials. For some products, including gel nailproducts in particular, we have an integrated systemthat covers from development to manufacturing anddistribution within the Group.

In Japan, although sales of “by Nail Labo,” our gel
nails for general consumers, were down, ourmainstay product, “Nail de Dance” acrylic materials,
showed signs of recovery, contributing to sales.
Overseas, although we struggled in the UnitedStates due to lackluster consumption against thebackground of the rising cost of living, in Taiwan,
recovery in demand after the COVID-19 pandemic
and strong sales of proprietary brand products inchain stores, particularly targeting general
consumers, led to growth in sales.

Learn about Shofu

Nail Care Business

14
14
22
FY2021/3
FY2021/3

FY2022/3
FY2022/3

5
5
FY2023/3
FY2023/3

Chief Researcher, Research &Development Department

Naoki Yumiyama

I have been involved in the development of abrasives andpolishing materials since I first joined the company. Shofu has along history of abrasives and polishing materials and an
extensive range of products. This made it a struggle for me tolearn the wide range of technologies involved, but thanks to
Shofuʼs solid development environment and the support of mycolleagues, I have been able to launch several products on to
the market. Based on our corporate philosophy of “Contribution
to dentistry through innovative business activities,” I will work
as one with the other members of the development team todevelop products that meet usersʼ expectations.

Integrated Report 2023

26

Learn about Shofu

Intellectual Property
Basic approach
Intellectual property-related indicators
FY2019/3

FY2020/3

FY2021/3

FY2022/3

FY2023/3

Number of patents held

380

389

378

405

423

Patent applications lodged

28

29

33

28

27

R&D expenses

1,492 million yen

1,537 million yen

1,563 million yen

1,738 million yen

1,846 million yen

Ratio of R&D expenses to net sales

6.0%

5.9%

6.3%

6.2%

5.8%

Value Creation Story
Business Strategy

The intellectual property rights (patents, utility models,designs, copyright, trademarks, knowhow, technicalinformation, etc.) that Shofu has acquired in the course of
our R&D activities are important assets of the Company.
In addition to protecting and using our core technologies inappropriate ways, we respect the intellectual property rights
of other companies and strive not to infringe on the rights ofthird parties. Positioning intellectual property as a key
corporate resource, we promote an intellectual property
strategy that is linked to business strategy and R&D
strategy, connecting it to sustainable value creation.

Details of Quality Control and Assurance:

Basic approach
As a company handling medical equipment, Shofu
considers our mission to provide a stable supplyof safe, reliable, and high-quality products basedon the quality policy below.

Quality
PolicyTo contribute to dentistry aroundthe world, Shofu observes relevant
regulatory requirements and provides
a stable supply of high-quality productswith high ethical standards.
To achieve this goal, we set quality
targets, operate quality management
systems appropriately, and continuously
improve all aspects of quality.

Quality management system incompliance with medical device
regulations in each country
In 1997, Shofu became the first company in the Japanesedental industry to obtain CE marking certification, whichmeets the requirements of the Medical Device Directive(MDD: 93/42/EEC), a quality standard of the European
Union (EU). We have also established a quality
management system that conforms to the high standardsof ISO 9001, the international standard for quality
management systems, and ISO 13485, which includes
special requirements for medical equipment.
We provide safe and reliable dental materials andequipment around the world in compliance with thePharmaceutical and Medical Device Act and otherstandards and requirements set forth by various countries
around the world.
27

SHOFU INC.

Quality assurance activities supporting
product safety and reliability

MarketingControl Supervisor
Control Manager
Marketing Director(First-class medical devices, quasi-pharmaceutical products)(In-vitro diagnostics)

Quality Assurance Division

Safety Control Division

Japan Quality Operations Manager(medical devices, in-vitro diagnostics)
Quality Assurance Manager(quasi-pharmaceutical products)

Safety Control Manager

Manufacturing

Selling

Manufacturing Division

Sales Division

Medical devices andquasi-pharmaceutical productsTechnical Supervisor
In-vitro diagnostics
Manufacturing Supervisor

Business Oﬃce Manager

Manufacturing Facility(associated companies, etc.)
Technical Supervisor or
Manufacturing Supervisor

Safety Control
Implementation Manager

Branches and Sales Oﬃces
Business Oﬃce Manager

Safety Control
Implementation Manager

Dental materials, in particular, must be adapted to
the needs of individual patients, so multi-productproduction is a prerequisite. On the other hand, it
is also necessary to ensure reliable quality foreach of these products. To implement consistentquality assurance activities from R&D throughpost-manufacturing and sales, we have set quality
targets for each business process, including
design and development, purchasing,
manufacturing, and customer relations, and wework daily on improvement activities across theentire company. To ensure the continuous,
appropriate, and effective operation of our quality
management system, we implement quality
assurance activities that support the safety andreliability of our products, such as conducting
annual management reviews on quality to monitor
and reflecting the results in the following yearʼs
activities.

Safety Management System
To ensure that dental professionals can use our
products with peace of mind, we collect safety
management information (information about
defects, etc.) related to medical devices fromwithin Japan and from overseas for evaluationand deliberation, based on the GVP Ordinance.
Information about quality, effectiveness, andsafety obtained through these processes isprovided swiftly and appropriately to dental
professionals to promote the proper use of our
products. In this way, we strive to minimize
safety-related risks and to enhance the safety
and reliability of our products.

Employee training
Shofu conducts training on its quality
management systems to raise awareness andencourage knowledge acquisition about quality
among employees. We also conduct education
required for the maintenance and enhancementof our quality management systems, including
GMP/QMS courses and safety management
information courses for employees in specificpositions.

Financial Data and Company Profile

https://www.shofu.co.jp/contents/hp1677/index.php?No=820&CNo=1677 (in Japanese only)

ESG

Quality Control and Assurance* GMP: Standards for manufacturing control and quality control for drugs* QMS: Standards for manufacturing control and quality control for
medical devices and in-vitro diagnostics

Production framework that allows a wide variety
of products to be manufactured in small lots
Because the devices and materials used in dental treatment
must be adapted to the needs of individual patients, Shofu
handles a diverse range of products. To ensure the flexible
production of many different products with an assured level ofquality, in addition to installing state-of-the-art equipment, it isessential that we establish our own proprietary manufacturing
technologies for the production of each product and that weelevate the skills of employees involved in operations. While
promoting the automation of our production equipment andsystems on the one hand, we are also focusing efforts on the
improvement of operator skills, passing on techniques throughmeticulous guidance, and establishing back-up systems. We
have also established mechanisms to ensure that only good
products pass through to downstream processes, in ourefforts to eliminate delays and waste in the entire processfrom receipt of order to production and delivery.

* GVP Ordinance: Standards for post-marketing safety management ofdrugs, quasi-pharmaceutical products, cosmetics and medical devices
and regenerative medicine products, etc.

Integrated Report 2023

28

Dire cto rs

Learn about Shofu

O f f i c e r s（ A s o f J u n e 2 7 , 2 0 2 3 ）Au dito rs

Noriyuki Negoro

Representative Director
PRESIDENT & COO

Tetsuo Takami

Number of shares held: 88,325 shares[Attendance]
Board of Directors meetings:
19/19 (100%)

Number of shares held: 28,650 shares[Attendance]
Board of Directors meetings:
19/19 (100%)

Director
Senior Managing Executive Officer
Production and Corporate Planning

Director
Senior Managing Executive Officer
Sales and International

Fumitaka Yamazaki

Kazuhiko Murakami(Date of birth: April 26, 1958)

Number of shares held: 34,163 shares[Attendance]
Board of Directors meetings:
19/19 (100%)

Number of shares held: 34,978 shares[Attendance]
Board of Directors meetings:
19/19 (100%)

Shigeyuki Komatsu(Date of birth: November 4, 1956)(Date of birth: May 31, 1958)

Number of shares held: 5,138 shares[Attendance]
Board of Directors meetings:
19/19 (100%)
Audit & Supervisory Board meetings:
15/15 (100%)

Number of shares held: 10,569 shares[Attendance]
Board of Directors meetings:
14/14 (100%)
Audit & Supervisory Board meetings:
12/12 (100%)

Outside Auditor

Outside Auditor

Yasushi Sakemi

Yoko Yamada(Date of birth: December 24, 1958)(Date of birth: March 5, 1957)

Number of shares held: 31,024 shares[Attendance]
Board of Directors meetings:
19/19 (100%)
Audit & Supervisory Board meetings:
15/15 (100%)

Number of shares held: 0 shares
Financial Data and Company Profile(Date of birth: May 27, 1961)

Akira Kawashima

ESG(Date of birth: June 22, 1960)

AuditorBusiness Strategy(Date of birth: March 9, 1956)

AuditorValue Creation Story

Representative Director
Chairman & CEO*Number of shares held by Directors and Auditors is as of April 30, 2023.

Director
Senior Managing Executive Officer
Finance, General Affairs andNail BusinessE xe c utive O f fic e rs (excluding those who also serve as Directors)
Executive Vice PresidentManaging Executive Officer

Senior Executive Officer

Executive Officer

Executive Officer

Executive Officer

Takashi Chikamochi

Takahiro Umeda

Toshinori Sakurai(Date of birth: February 13, 1960)
Number of shares held: 21,146 shares

Executive Officer

Syuji Sonoi

Kiichi Suzuki

Daizo Nishimura(Date of birth: May 23, 1949)(Date of birth: May 5, 1959)

Number of shares held: 15,900 shares[Attendance]
Board of Directors meetings:
19/19 (100%)

Number of shares held: 1,738 shares[Attendance]
Board of Directors meetings:
19/19 (100%)

Outside Director

Hiromi Hayashida

Mitsuo Kamimoto(Date of birth: April 2, 1964)(Date of birth: May 21, 1947)

Number of shares held: 0 shares[Attendance]
Board of Directors meetings: 14/14 (100%)29

SHOFU INC.

Outside Director

Number of shares held: 2,981 shares[Attendance]
Board of Directors meetings:
18/19 (95%)
Audit & Supervisory Board meetings:
13/15 (87%)

Toshiyuki Nakatsuka
Executive Officer

Hiroyoshi Miyake

Yoshikazu Nakajima
Takashi Wakayama

Executive Officer

Ryuichi Yoshimoto

Executive Officer

Junichi Sugawara

Executive Officer

Michinori Matsunaga

S kills M atrix of Dire cto rs
Knowledge and experience particularly expected for each director
Corporate
Management

Production,
Technology, andR&D

Sales andMarketing

Noriyuki Negoro

●

●

●

Tetsuo Takami●

Fumitaka Yamazaki●

Kazuhiko Murakami●

Takahiro Umeda●

Kiichi Suzuki

●

Name

Directors

Outside Director

Outside Director

Outside Director

Shinya Teramoto

Mitsuo Kamimoto●

Governance,
Compliance, andRisk Management

Qualifications, Etc.

●

●
●

●
●
●

●

●

●
●

Daizo Nishimura
Hiromi Hayashida

Finance,
Accounting, andHuman Resources

●

●

●

●

● Experienced
manager of a listedcompany● Certified public
accountant● Tax accountant●● Certified public
accountant● Tax accountant* The above table does not show all of the skills held by each director. * Activities as a director are not limited to the items marked ●.

Integrated Report 2023

30

Basic approach

Evaluation of effectiveness of the Board of Directors

Overview of the corporate governance structure

Recommendation
Consultation

Accounting audits

Appointment/
Supervision

Nomination andCompensation Council

ReportManaging
Executive Board
ReportDirection

Appointment/Dismissal
Accounting Auditor

ReportCommunication

Management Committee

Cooperation

Cooperation

Cooperation
Other committees

ReportInternal Audit
Department

Direction/Supervision

AuditsExecutive Oﬃcers in charge
Business divisions and group companies

Changes in the corporate governance structure(Year)
Institutional design for
the Board of Directors

2009

2011

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

1 year6 persons

Proportion of
Independent
Outside Directors
on the Board

Others2013

June 2011- Executive oﬃcer system

Number of Directors 13 persons

Number of Auditors

2012

Company with an audit & supervisory board

Separation of oversightand execution
Term of oﬃce of
Directors

2010

7 persons

8 persons

9 persons(including 4
Outside Directors)(including 2
Outside Directors)

8 persons 25％（2 persons）

9 persons 33％（3 persons）

4 persons(including 2
Outside Directors)

June 2011
Abolished
the retirement
allowance scheme

June 2011- Started oﬀering stock options as compensation through shares(stock acquisition right)

June 2019- Introduced the restricted
share-based compensation scheme

December 2015- Established the Corporate Governance Guidelines
Commenced eﬀectiveness evaluation of the Board of Directors
November 2018- Established the
Corporate Governance Meeting
November 2018- Established theNomination and Compensation Council
December 2021Establishedthe Sustainability Committee

31

SHOFU INC.

Started making improvements on issues
identiﬁed in the evaluation and analysis

the Board of Directors● Monitoring function of the Board of Directors● Performance of Directors and Outside Directors

Sustainability Committee

ReportReportCooperation

Personnel Committee

ReportReportDirection
Appointment/Supervision

Audit & Supervisory Board
4 Auditors(including 2 Outside Auditors)

Communication

April
2023 -● Training● Respondents’ own eﬀorts● Operations of voluntary

advisory committees

For the fiscal year under review, we conducted a questionnaire
survey in December 2022 targeting all Directors and Auditors.
Based on the aggregated results, the Board of Directors
performed an evaluation at its meeting in March 2023.
Survey results showed positive responses on such items as
the operations of the Board of Directors and discussions andexchanges of opinions at the Board of Directors. The Board of
Directors of the Company was thus evaluated to be largely effective.
Meanwhile, there were voices calling for an improvement inagenda items brought up for discussion at the meetings of the Boardof Directors. Such challenges concerning effectiveness are sharedat the meetings of the Board of Directors.
At the previous evaluation of the effectiveness, discussions at
the meetings of the Board of Directors of management strategies,
including ESG, were extracted as issues.
This yearʼs evaluation concluded that, as exemplified by thepassing of the resolution on the Basic Policy on Sustainability at a
meeting of the Board of Directors, efforts were being made toaddress the extracted issues, including those that should be dealt
with a medium- to long-term perspective, and improvements werebeing facilitated.
We will make improvements on the challenges that emerged
from this yearʼs analysis and evaluation, and thereby work to
improve the functions of the Board of Directors.

Audits by Auditors
The Audit & Supervisory Board holds monthly meetings andextraordinary meetings as required, where it receives reports onimportant matters of audit, discusses the matters or makes aresolution, and exchanges opinions. In addition, we hold meetingsof the Groupʼs Auditors meetings consisting of the groupcompaniesʼ Auditors twice a year or more to ensure appropriategroup management and enhance the audit function byencouraging cooperation among Auditors. Full-time Auditors
attend weekly meetings of the Managing Executive Board, whichis the advisory body of the Board of Directors. At the meetings,
they evaluate the validity of the matters to be discussed as partof audit and exchange opinions as required. The Auditors work incooperation with the Accounting Auditor to regularly exchange
information and opinions. They also work to collaborate withinternal audit departments to ensure internal control.

Internal control
Shofu has complied with the Companies Act and the
Financial Instruments and Exchange Act, etc. In
addition, we have stipulated basic policies on ourinternal control system, taken measures for internal
control evaluation on financial reporting, and madeother efforts to enhance the optimum internal control
system of the Company and the Group.

Internal audits
The Internal Audit Department in charge of internal audits
conducts audits under the direction of the PRESIDENT &COO by working with the Audit & Supervisory Board andthe Accounting Auditor according to the internal audit
plan. Specifically, the department conducts audits on theappropriateness of composition and operation of theGroupʼs internal control system, effectiveness andefficiency of the business operations of the Group,
reliability of financial reporting, state of asset protectionand effective use, state of risk management, and state ofcompliance with laws, regulations, and internal rules. We
have been working to enhance the audit function incollaboration with the Auditors and the Accounting Auditor
by reporting the results of internal audits and discussing
them as needed.

Financial Data and Company Profile

Corporate
Governance Meeting Consultation

Representative Director
PRESIDENT & COO

Performed evaluation and analysis and held
discussions at the Board of Directors’ meetings

Topics covered in the survey

Appointment/Dismissal
AuditsMarch
2023

The role of Group companies in the Group is growing
larger and larger every year. Issues are how Group
companies can contribute to the enhancement ofcorporate value of the entire Group, and at the same time,
how to control the various risks that could materialize in
the Group companies. We are therefore proceeding withthe development of structures for tackling these issues.

ESG

Board of Directors
9 Directors(including 4 Outside Directors)

Recommendation

December Conducted a questionnaire survey of
all Directors and Auditors
2022● Composition, operations and discussions ofShareholder’s Meeting
Appointment/Dismissal

The Company evaluates and analyzes the effectivenessof the Board of Directors with the aim of improving thefunction of its Board of Directors.

Business Strategy

１．
We respect and effectively secure shareholdersʼ rights.
２．
We consider the interest of stakeholders including
employees, customers, business partners, creditors, andlocal communities and appropriately cooperate with them.
３．
We proactively disclose the Companyʼs information.
４．
The Board of Directors appropriately fulfills required roles
and responsibilities to ensure fiduciary responsibility andaccountability to shareholders.
５．
We hold constructive discussions with shareholders.

Group governanceValue Creation Story

Shofu conducts business activities in fields of a highly
public nature under its corporate philosophy, “Contribution
to dentistry through innovative business activities.” To
sustainably conduct such business activities, it is essential
for us to fulfill our social responsibility. Shofu also believes
that it must maintain medium- to long-term sustainablegrowth through enhancement of corporate governance tofulfill its social responsibility. Accordingly, we aim toenhance corporate governance in accordance with thebasic approach presented on the right.

Learn about Shofu

Corporate Governance

Cross-shareholdings
The Company holds shares of stock of the companies withwhich it aims to maintain a cooperative relationship that is
indispensable for the smooth running of business activities.
We have already been selling cross-held shares that had
become less important, and will continue reviewing thestate of holding and shed shares that are deemed notimportant or adequate enough for us to continue holding.
When executing the voting rights, we consider mattersfrom the perspective of maximizing our corporate value
and make what are believed to be optimum choices. As
criteria for the above, we have set down the Basic Policy
Regarding Cross-holding of Listed Shares and the Basic
Policy Regarding Exercise of Voting Rights of Cross-heldShares, which are disclosed as part of our Corporate
Governance Guidelines.

See here for details of Corporate Governance:
https://www.shofu.co.jp/contents/hp2002/index.php?No=1608&CNo=2002 (in Japanese)

Integrated Report 2023

32

Risk Management

Compensation of officers

Officer categoryauthorized by the Board of Directors after consultation with the Nomination
and Compensation Council consisting of Representative Directors andIndependent Outside Directors. The amount of each Auditorʼs compensation
is determined by deliberation among the Auditors.

Details

Auditors

Fixed
compensation

Only fixed compensation shall be paid considering their responsibilities of supervising management
and providing advice from a standpoint independent of business execution.

Fixedcompensation

From the perspective of valuing independence from and objectivity on management, compensation
shall consist only of fixed compensation. The level of compensation is set referring to the levels ofother companies learned from the surveys of external specialist institutions, and the amount isdetermined according to their roles.

* The total amount of compensation including bonuses of Directors was resolved to be up to 300 million yen per annum (of which up to 30 million yen per annum for
Outside Directors) at the 143rd Shareholdersʼ Meeting held on June 25, 2015. The total amount of compensation for Auditors were resolved to be up to 50 million yen
per annum at the 126th Shareholdersʼ Meeting held on June 26, 1998.
* Separate from the aforementioned total amount of compensation for Directors, it was resolved at the 147th Shareholdersʼ Meeting held on June 26, 2019, that
restricted share-based compensation shall be allotted in the amount up to 50 million yen per annum to the Companyʼs Directors.

Status in FY2022
Total amount by type of compensation (Millions of yen)
Officer category

33

Total amount ofcompensation(Millions of yen)

Monetary compensation

Non-monetarycompensation

Fixed compensation

Performance-based
compensation

Restricted share-based
compensation

Number of
eligible officers

Directors(excluding Outside Directors)

251

155

64

31

5

Auditors(excluding Outside Auditors)

36

36

ー

ー

3

Outside officers

39

39

ー

ー

7

SHOFU INC.

For all of the Companyʼs business activities, we promotecompliance-oriented management on the basis of ensuringcorporate ethics and complying with laws and regulations.
The Company established the Ethics Committee chairedby the PRESIDENT & COO to deliberate and determine
measures to ensure compliance so that we can increase
the effectiveness of compliance of the Group.
Board of Directors
Direction

Audit & Supervisory Board

ReportAuditsReportEthics Committee
Direction

Related divisions(3) Non-monetarycompensation,etc.

To provide Directors with incentives for sustainable improvement of the Companyʼs corporate
value and for the further sharing of value with shareholders through compensation linked withshareholdersʼ interests, the Companyʼs common shares that are subject to a certain period during
which the transfer is restricted are allotted at a certain time each year. As a basic policy, theamount of restricted share-based compensation is determined based on capabilities andresponsibilities required of the Companyʼs officers, their duties to improve future corporate value,
and other matters. The number of allotted shares are determined by position within the amountresolved at the shareholderʼs meeting.

Compliance promotion system

Instruction/Direction

ReportOﬃcers in charge of complianceDirection

ReportDivisions in charge of compliance
Instruction

ReportReportConsultation desk/Helpline
Shofu group companies

Consultation

Personnel in charge of compliance
Consultation

Instruction

Consultation

Whistle-blowing system
In addition to measures to prevent violations of laws andregulations and fraud in the Group, we have a whistleblowing system to identify risks early and address issues
promptly. In addition, we prohibit any disadvantageous
treatment of whistleblowers and strictly manage
information so that whistleblowers are not identified.

Financial Data and Company Profile

Outside Directors(2) Performancebased
compensation,
etc.

Shall be cash compensation, which reflects key performance indicators (KPIs) to raise Directorsʼ
motivation towards improvement of the Groupʼs corporate value and business performance ofeach fiscal year. Performance-based compensation shall be paid as a bonus at a certain timeeach year in an amount calculated according to the degree of achievement of the targets forconsolidated net sales and consolidated operating income for each fiscal year.
The target KPIs and their values are set when formulating the medium-term management
plan so as to be in line with the plan, and reviewed as needed in response to changes in theenvironment after consulting the Nomination and Compensation Council.

Compliance

ESG

Directors(excluding Outside
Directors)(1) Basiccompensation

Shall be monthly fixed compensation and determined depending on the position and responsibility,with comprehensive consideration for the levels of other companies according to surveys byexternal research firms, the Companyʼs business performance, and the level of employeesʼsalaries, and finalized after consulting the Nomination and Compensation Council.

Business Strategy<Basic policy>
The compensation system shall sufficiently function as incentives for sustainable improvement of corporate value and belinked to shareholdersʼ interests. The amount of each Directorʼs compensation shall be at an appropriate level based oncapabilities and responsibilities required of the Companyʼs officers, their duties to improve future corporate value, andother matters.

based on which we are improving our work systems on an
ongoing basis. We are also making efforts to reduce risks so
as to minimize damage in case of an emergency, such as
conducting drills in preparation for earthquakes, fire, andother disasters, stockpiling necessity supplies, implementing
various responses and measures against infection prevention
under the pandemic, and complying with laws and regulations
concerning factory operations.

Value Creation Story

The total amount of compensation of Directors and Auditors is determinedwithin the amount resolved at the shareholderʼs meeting. The amount ofeach Directorʼs compensation is determined by the Representative Director,
Chairman (or the President, if the office of the Chairman is vacant) who is

In its effort to prevent and minimize risks, the Group has put
in place rules and guidelines for compliance, quality, theenvironment, disasters, information security, credit, and otherissues, in addition to offering training themed on compliance,
information security and other topics. The Internal Audit
Department conducts internal audits, the results of which arereported to the PRESIDENT & COO. We are also working tospot risks and reviewing the measures for dealing with risks,

Learn about Shofu

Corporate Governance

Provision of fair and equitable opportunities
and selection of business partners
Our business activities are supported by trusted
relationships with various business partners. Shofu
provides fair and equitable opportunities for competition tobuild trusted relationships with business partners. We
evaluate and select our business partners fairly bythoroughly considering factors such as quality, prices,supply capacity, delivery times, social credibility, andenvironmental considerations.

Consultation/Report

Shofu group employees

Shofu Group code of conduct
We stipulate the Group code of conduct as the guideline foreach employee to comply with laws and regulations as well asinternal rules and behave in accordance with common ethicalvalues. The Shofu Group code of conduct defines thestandards and behavior to be complied with in various aspectsof business activities base on the corporate philosophy. We
are working to ensure that all group employees are fully
aware of the code.

Guidelines on transparency of relationships
with medical institutions
To fulfill the role as part of the medical equipment industry,
the Company conducts its business in cooperation withacademia, hospitals, dentists, as well as medical
institutions and institutions that provide medical services
and conduct research, development, and clinical trials.
Such cooperation is essential to conduct our business. To
obtain trust from society, we need to ensure transparency
of relationships with medical institutions. We stipulate ourguidelines on transparency of relationships with medical
institutions based on the “Transparency Guidelines for the
Medical Device Industry and its Relationships with Medical
Institutions and Other Organizations” of The Japan
Federation of Medical Devices Associations, to which webelong. With the guidelines, we aim to be a company
trusted by society by increasing transparency ofrelationships with medical institutions.
The information on relationships with medical
institutions is published on the Companyʼs website every
fiscal year.
Integrated Report 2023

34

(千kWh)4,000

電気使用量（左軸）3,929

電気・ガス使用量の推移
153
142

3,000

(千kWh)
4,000
2,000

電気使用量（左軸）

3,929

Basic Philosophy

As a company that contributes to dentistry worldwide, Shofu will strive to reduce the environmental
impact of its business activities.

1. Set environmental targets and systematically implement initiatives that contribute to reducing
environmental impact and achieving management plans.

2. Comply with environmental laws and regulations and other requirements to which Shofu agrees.
3. Strive to prevent environmental pollution throughout the entire life cycle of our products and services.
4. Continue to improve our environmental management system to enhance our environmental performance.

External and internal issues

Needs and expectations of stakeholders

A

Improvement Leadership

Supportoperation

D

Performance
evaluation

Intended results of the environmental
management system

Environmental management system chart
President

Sustainability Committee

Environmental Management Supervisor
Environmental Management Committee

Cooperation

Chief Environmental Auditor

Environmental Management Manager
Secretariat

Deputy Environmental Management Manager
Division Managers
Environmental Management Promotion Managers

Environmental Management Promoters
Employees

35

SHOFU INC.

Shofu is working to reduce CO₂ emissions to prevent
global warming. In manufacturing processes that
consume large amounts of energy, we are promoting
initiatives to improve energy efficiency by replacing
facilities with those that contribute to energy
conservation and performing an efficient operation. In
terms of the office sector, we are working to optimize
lighting fixturesʼ use and adjust the temperature settings
for air conditioning. In addition, we are currently

Environmental Auditors'20/3 期

'21/3 期

'22/3 期

'23/3 期

CO₂ emissions (Scope 1 + 2)

(Unit: tCO₂)
FY2021

FY2022150
50

50(kWh／百万円)
200

原単位'19/3 期3,298.0

Overseas

2,032.5

2,027.1

Overseas0

Total

5,283.3

5,325.1

Total

0.8

100

89.5

Shofu is committed to reducing and reusing waste
generated by our business activities to reduce theconsumption of resources and the generation of waste,
thereby reducing the burden on the global environment.
When consigning industrial waste disposal, we
carefully check the permission status of contractors
and promote recycling of waste through consignment
contracts with appropriate disposal companies.

Shofu is working to reduce water consumption bysaving water and to ensure the quality of wastewater
through proper management. We have established an inhouse dedicated storage facility for waste liquids
containing substances that significantly impact theenvironment. These are then outsourced to waste
management companies for proper disposal. In addition,
to properly manage the quality of industrial wastewater,
we have established and are operating voluntarystandards that exceed the regulations for pH values
and other indicators stipulated by laws and ordinances.

241
移動平均（10年）

1500

3,250.8

―

213

228

221

249.7
236.3 (breakdown
241.5
CO₂
emissionsin FY2022
into
232.3
XXX.X
250
100
242and Scope 2)241(Unit:
Scope
1
228
200
221 tCO₂)50
213

Domestic

Index of CO₂ emissions per unit of net
sales (compared to FY2021)

100
0

1,000

100

Change from FY2021 (%)

200
100

promoting the use of LED lighting fixtures in factories and00offices
as a company-wide effort to reduce CO₂'19/3 期
'20/3 期
'21/3 期
'22/3 期
'23/3 期
emissions.
CO₂ emissions from the entire Group (Scope 1 andScope 2) in FY2022 slightly increased by 0.8%
エネルギー消費原単位の推移
compared to the previous fiscal year. However, they(kWh／百万円)
（10年）
were
affected原単位
mainly 移動平均
by theexpansion of our business
300
activities.
Asaresult,theindex
of CO₂ emissions per unit
249.7
エネルギー消費原単位の推移
236.3
241.5
232.3
XXX.X
250
of net sales
242 (compared to FY2021) trended downward.
300
150

Proper management of water

C

168

2,000

Waste reduction and appropriate disposal

Plan

160

Domestic

Scope 1

Scope 2719.3

2,578.7

496.5

1,530.6'20/3 期

'21/3 期

'22/3 期

'20/3 期

'21/3 期

'22/3 期50

'19/3 期

'23/3 期

1,215.8'23/3 期4,109.3

廃棄物排出量と再資源化率の推移
排出量（左軸）

187

200

（％）

再資源化率（右軸）

Financial Data and Company Profile

Shofu is headed by the PRESIDENT & COO,
and the Officer in charge of general affairs
serves as the Environmental Management
Supervisor. The Environmental Management
Committee deliberates and decides onenvironmental policies, targets, andimplementation plans, and manages thepromotion of environmental management. To
achieve our environmental targets, eachdivision has set its targets and specificmeasures. After verifying the status of its
activities through internal environmental audits,
the results are reported to the Review
Committee by Top Management, whereappropriate revisions are made. In this way, we
are working on continuous activities to reduce
environmental impact through a PDCA cycle.

0Efforts to reduce CO₂ (or greenhouse gas) emissions'19/3 期

(t)

P

153

ESG

Environmental
management system

153

Business Strategy

Environm ental Policy

3,761

150

(千㎥)

4,267

4,028

200

Value Creation Story

As a company that contributes to peopleʼs health, Shofu has established its basic philosophy and environmental
policy to harmonize with the global environment and fulfill its social responsibility toward the environment.
We promote environmental conservation activities in all our business activities based on this policy, fromdevelopment to production and sales.

ガス使用量（右軸）

3,703

142

3,000
1,000

168

160

153

(千㎥)

4,267

4,028

3,761

Learn about Shofu

Environment

Review Committee by Top Management

ガス使用量（右軸）

3,703

100

85.9

Trends in waste81.4generation and81.3recycling rate
150

85.2

81.5

(t)

168

166

Amount of waste (Left axis)

200
100

81.5

187

150
50
1000

'19/3 期

159

155
Recycling rate (Right axis)

81.4

85.2

81.3

168

166

159

'20/3 期

'21/3 期

'22/3 期

85.9
156
'23/3 期

50

80

(%)

60
100
40
80
20
60
0
40
20

0

FY2019/3

FY2020/3

FY2021/3

FY2022/3

FY2023/30Trends in water consumption(m³)
20,000

水使用量の推移
15,027
15,000(㎥)

13,952

15,576
12,84020,00010,00015,0005,000

15,027

13,952

17,69915,576

17,69912,84010,0000

FY2019/3

FY2020/3

FY2021/3

FY2022/3

FY2023/3'19/3 期

'20/3 期

'21/3 期

'22/3 期

'23/3 期5,000
0Development of environmentally friendly products
Shofu is working to develop environmentally friendly
products by reducing waste from product use andCO₂ emissions from manufacturing processes toharmonize with the global environment.
An example of an environmentally friendly
product we developed is a packaging container for
artificial teeth. It is wax-free and uses less plastic.
This development has made it easier to reduce

waste and separate waste disposal after use thanconventional wax plates.
We are also working to reduce waste
generation at dental clinics and laboratories bychanging packaging materials from plastic to paper,using collapsible and disposable containers, andsimplifying packaging materials.

Integrated Report 2023

36

Oral care awareness activities

Shofu Dental Club, a platform for exchange between the Company and dental professionals

Haiku , a dental education website forparents and children

We run the Dentist Circle for dentists and theTechnician Circle for dental technicians. We holdonline seminars in which the members canparticipate nationwide, and provide products andbooks useful for clinical practice to build good
relationships with dental professionals.
As of March 31, 2023, there were 16,467
members (including 12,659 dentists and 3,808 dental
technicians), a 13.0% increase from the previous year.

Number of Shofu Dental Club members(Persons)
18,00015,00012,93613,14913,661

14,576

16,467

12,0003,000

Haiku , an educational website on teeth: https://8iku.com/

0

FY2020/3

FY2021/3

FY2022/3

FY2023/3

37

SHOFU INC.

Activity results

Number of IR meetings with institutional investors and analysts
Number of IR meetings with institutional investors and analysts
Numberof IR
meetings with institutional investors and analysts(Meetings)
Single-year results (Left axis)(Meetings)(Meetings)(Meetings)
160

Single-year results (Left axis)
Accumulated
results(Rightaxis)
Single-year results
(Left
axis)
Accumulated results (Right axis)
Accumulated results (Right axis)

120
120
120

We aim to deepen the employeesʼ knowledgeof product information and medical technology
information through this training support, build
mutual trust with our partner companies, and growand develop.

503
503
503

80
80
80

Voices of the persons in charge

FY2019/3
FY2019/3
FY2019/3

633
633
633

91
91
91

84
84
84

47
47
47

40
40
40
0
0
0

587
587
587

724
724
724

834
834
834

(Meetings)(Meetings)
800

110
110
110

600
600
600
400
400
400

46
46
46

FY2020/3
FY2020/3
FY2020/3

FY2021/3
FY2021/3
FY2021/3

800
800

200
200
200

FY2022/3
FY2022/3
FY2022/3

FY2023/3
FY2023/3
FY2023/3000From the left

Activities to promote technology
We collect academic and technological information
at our bases in Japan and abroad through daily
contact with universities, research institutes, andmedical institutions, and as part of our efforts topromote technology, we also hold seminars andcourses targeting dental professionals which areopen to participants from outside the Company.
For over 40 years, the courses have beenoffered in small groups and with focus on hands-on
trainings and attended by many participants who

Shofu believes that IR activities are among themost important activities for sustainable growthand medium- to long-term corporate valueenhancement.
We strive to improve our managementʼstransparency by appropriately disclosing
information and promptly sharing within the
Company evaluations and requests obtained
through dialogue with shareholders and investors.

160
160

Training support for partner companies
To help young employees of our partner companies
learn about dentistry, Shofu holds study sessions
throughout Japan on basic knowledge of dental
materials, trends in dentistry, and how to use our
products.

Basic approach

Financial Data and Company Profile

FY2019/3

https://www.shofu.co.jp/contents/hp1996/index.php?No=1997&CNo=1996 (in Japanese only)

ESG

9,000
6,000

In FY2011, Shofu established Haiku , a dental education
website for children who will lead the future and theirfamilies to help them learn about teeth.
Haiku provides a variety of information on dental
care and oral health management, such as “Web Picture
Books on Teeth” for parents and children to learn together,“Parents Guide,” which introduces the key points of reading
and understanding the web picture books, and “Tooth
Lessons” on the prevention of dental caries and othertopics. Once a year, the website also invites entries of
haiku (a Japanese poem of seventeen syllables) andsenryu (humorous or ironical haiku ) related to teeth. The
website receives entries from many people, fromelementary school students to the elderly. Through Haiku ,we hope that children and the people in Japan will learn theimportance of teeth and become interested in oral health.

Details of “Dialogue with shareholders and investors”:

Business Strategy

Shofu has established the Shofu Dental Club with theaim of strengthening the relationship between dental
professionals who use our products and ourcompany, and promptly communicating information
to each other and improving the quality of dental
equipment and materials based on this cooperation,
thereby contributing to the improvement anddevelopment of dental care.

Dialogue with shareholders and investors

Value Creation Story

Network with dental professionals

Learn about Shofu

Societyfound them helpful in clinical use. Our training centerin Kyoto, standing in harmony with the landscape ofHigashiyama, houses a treatment training room anda technique training room that are fully equipped forpractical trainings. Our sales offices across Japanare also complete with training facilities. Throughthese facilities and the training center, we
disseminate product information and updates ondental care, dental technique, and preventive
hygiene.

Assistant Manager,
Sales Development Unit
Sales Development Section,
Sales Department

Miyuki Onaka
Sales Development Unit
Sales Development Section,
Sales Department

Azusa Saito“We want to somehow communicate the importance of teeth to thegeneral public.” “We want to be of help to the dentists who provide
dental care everyday.” These are the ambitions we had when we
established Haiku , a dental education website. This year marks thewebsiteʼs 12th year. We are running the website with a sense of
mission and working to make its content even better.
Oral health is extremely important for your mental andphysical health as well. Through Haiku , we hope that parents
and children will enjoy learning together to maintain oral
health, and all family members will lead a healthy daily life.
Our recent activities included holding a “Eruption/Change
of Teeth Photo Contest” and putting haiku and senryu related
to teeth that won an award in the past as advertisements on
straps on Kyoto Municipal Subway.
In addition, in the hope of someway turning the activities
of Haiku into activities to contribute to society, we started a
project to donate 10 yen worth of oral care items per haiku or
senryu entered in response to our invitation for entries of
haiku and senryu this fiscal year to Ashinaga Foundation.
We are going to work to renew the Haiku website so that
information will be available in a more enjoyable and easy-tounderstand manner.

Number of company information sessions for individual investors
Number of company information sessions for individual investors
Numberof company
information sessions for individual investors(Meetings)
Single-year results (Left axis)(Meetings)(Meetings)(Meetings)
10Single-year results (Left axis)
Accumulated
results(Rightaxis)
Single-year results
(Left
axis)
Accumulated results (Right axis)
Accumulated
84 axis)81 results (Right

10
10
8
8
8
6
6
6

4
4
4
2
2
2
0
0
0

78
78
78
6
6
6

FY2019/3
FY2019/3
FY2019/3

81
81

84
84

87
87
87

3
3
3

3
3
3

3
3
3

FY2020/3
FY2020/3
FY2020/3

FY2021/3
FY2021/3
FY2021/3

FY2022/3
FY2022/3
FY2022/3

91
91
91

4
4
4

FY2023/3
FY2023/3
FY2023/3(Meetings)(Meetings)
100
100
100
80
80
80
60
60
60
40
40
40
20
20
20
0
0
0

Number of unit shareholders
Number of unit shareholders
Number of unit shareholders(Persons)(Persons)(Persons)
15,00015,00015,00012,00012,00012,000
9,000
9,000
9,000

6,000
6,000
6,000
3,000
3,000
3,000
0
0
0

10,812
10,812
10,812

11,045
11,045
11,045

11,233
11,233
11,233

FY2019/3
FY2019/3
FY2019/3

FY2020/3
FY2020/3
FY2020/3

FY2021/3
FY2021/3
FY2021/3

13,875
13,875
13,875

13,557
13,557
13,557

FY2022/3
FY2022/3
FY2022/3

FY2023/3
FY2023/3
FY2023/3
Integrated Report 2023

38

Learn about Shofu

Society
Employee composition

Human resource development

Diverse human resource activities

(%)

Men

100
80

https://www.shofu.co.jp/contents/hp2004/index.php?No=2015&CNo=2004 (in Japanese only)

Training by job level

10080

Directors

Training for new directors
Training for promotion to
managerial position

Training for leaders of the next
generation

60

Employees in a
managerial position

Those recommended
by each division

Managers

Training for newly appointed
managers and follow-up education

Performanceappraisers

Training for newly appointed
performance appraisers andtraining for brushing up
performance appraisal skills

Men

Details of our General Employer Action Plan:
https://www.shofu.co.jp/contents/hp1974/index.php?No=1813&CNo=1974 (in Japanese only)

(%)

Women

18

19

20

20.5

21

82

81

80

79.5

79

50
40
30

40

20

20

10

0

FY2019/3

FY2020/3

FY2021/3

FY2022/3

0

FY2023/3

34.48

44.12

41.38
29.63

31.03

FY2019/3

FY2020/3

FY2021/3

FY2022/3

FY2023/3

20.5

21

Employee composition

Assistant managers
Assistant managers

Training for newly appointed
assistant managers

TargetTraining and support nameNew graduate hires
and mid-career hires

Education for newly hired
employees and follow-up training

All employees(applicants)

Distance learning assistance

Prospective
employees

Education for prospective
employees

All employees(applicants)

Assistance in obtaining
qualifications

Eligible employees byinternal criteria

Training for mid-career employees

All employees(applicants)

Online English training

Support for self-development

language skills and business knowledge through practicalwork at overseas subsidiaries and develop a sense ofinternationalism and a borderless business sense throughunderstanding different cultures, business practices, anda broad perspective. Through these efforts, we aim todevelop human resources capable of contributing tooverseas business development in the future.

Training system for development of global human resources
Training name

TargetPurpose and details

Overseas
dispatchtraining(long-term)Those recommended by eachdivision

Experience and learn in-depth about businesspractices and customs at overseas subsidiaries
for one to three months.

Overseas
dispatchtraining(short-term)Those who have taken thefollowing global human resources
training and wish to participatein overseas dispatch training

Broaden knowledge by studying businesspractices through visiting overseas subsidiaries
and participating in events for about one week.
Deepen cross-cultural understanding, including
business practices outside Japan throughlectures and exercises.

Results(cumulative number)
10 persons

6 persons77 persons

As part of our efforts to promote womenʼs participation andadvancement, we provide career development training for women.
In FY2022, we provided “leader development training for womenʼs
Proportion of women among those newly hired as employees
participation and advancement” targeting female employees at(%)
theassistant manager level and “career advancement training for50
womenʼsparticipation and advancement” targeting employees in40
44.12
general. In addition to41.38
supporting the career development of
30

34.48

29.63

20

31.03

100

6

0

0

Voice of a participant in the training
FY2021/3

FY2022/3

60

6

4

4
2

FY2020/3

20

19femaleemployees, bothtraining sessions were jointly held by four
80
82
81
80
79.5
79
local
companies in Kyoto, and theircontent
was designed
to help60
openand expand employeesʼ horizons through exchange with
40
Number of employees rehired after retirement and reemployment rate
peoplefrom other companies.
20
Number of newly rehired employees (Left axis)(Persons)(%)
We
willNew
continueto actively
providereemployment
rate (Rightaxis) opportunities for women
10
100
0
9
87.5
FY2019/3
FY2021/3
80.0
to 8reconsider
their FY2020/3
careers andstrive toFY2022/3
create anFY2023/3
environment80in
69.2
7
66.7
66.7
which women can play an active role in their element.

10

FY2019/3

18

FY2023/3

Financial Data and Company Profile

Training for womenʼs participation and advancement
(%)
Men
Women

Training for newly appointed
assistant managers and follow-up
education

SHOFU INC.

40

ESG

Training name

Development of global human resources

39

79

Proportion of women among those newly hired as employees

TargetSelection or application

21

79.5

Employee composition

Training name

Global humanresources
training

20.5

ratio
of women in employment to 30% or more on average20
and0 continue to provide training for women to encourage
FY2019/3
FY2020/3
FY2021/3
FY2022/3
FY2023/3
them to take up management positions.

TargetTo introduce its excellent dental materials and equipment
to the world, Shofu is developing key international humanresources to respond to global business. We are also
continuously providing language education such as
English conversation training and TOEIC sessions. We
also have a training program to dispatch employees toour overseas subsidiaries. This program aims to develop

2080

As part of our diversity management, Shofu is working to
identify and address issues in accordance with the Act on
Promotion of Womenʼs Participation and Advancement in
the Workplace to promote womenʼs participation andadvancement. Challenges include the low ratio of womenin employment and the low number of women in leadership
positions. For each of these issues, Shofu aims to raise the(%)

Selective training

19
81

Business Strategy

Shofuʼs education and guidance policy is to develop creative, proactive, andresponsible employees capable of responding to changes. We prepare education andtraining for employees to acquire knowledge and skills and develop their qualities as
members of an organization according to their growth. Our goal is to develop humanresources who can anticipate changes in the business environment, think about
what needs to be done to achieve organizational goals, and have the strong will totake on challenges rather than simply perform assigned tasks proactively.

18
82

Value Creation Story

Womenʼs participation and advancement 60

Details of “Together with employees”:

Women

40

2
FY2019/3

FY2020/3

20

FY2021/3

FY2022/3

FY2023/30Currently, I am engaged primarily in application for approval of medical devices and correspondence withregulatory authorities.
Proportion of women among those newly hired as employees
The training session was held jointly by four(%)
companies, including Shofu. It brought together female
employees in similar circumstances and positions. 50
The members shared with each other career reviews, details ofinterviews with senior managers, etc. and discussed future career advancement and unconscious biases.
40
I think that in order to promote womenʼs participation and advancement,
it is important to change44.12
the
41.38
30
34.48
mindset of female employees first of all. At the same time, not only “superwomen,” who are highly
career
31.03
29.63
conscious
andandcapable,but alsorate
women who make20efforts to improve their skills and abilities and advance in their
Number of employees rehired after
retirement
reemployment
careershould naturally
Otherwise,
10 womenʼs participation and advancement will not be
Number of newly rehired
employees(Left axis)become leaders.
(Persons)(%)
New reemploymentsustainable.
rate (Right axis)
10 Assistant Manager,
100
0
9
87.5
FY2019/3employees
FY2020/3 whoFY2021/3
FY2022/3
wish to work
flexiblyFY2023/3
at various
Regulatory Affairs Section,
80.0I believe that if an environment is created in which female
8 Quality Assurance Department
80
69.2
7
66.7
66.7
life stages can take managerial
positions, a diverse range of leaders will emerge in due course. I myself hope to
660
continue working in an unaffected mannerand help promote womenʼs participation and advancement at Shofu.
6
Aki, Otani
4

4
2

40

2

0
Elderly
FY2019/3 employees
FY2020/3
FY2021/3

20

FY2022/3

FY2023/3

0

Amid concerns about a future shortage of workers due to thedeclining labor force resulting from the declining birthrate andaging population, Shofu believes it is important for companies
to create opportunities for elderly employees with abundant
experience and diverse skills to work. Following the revisionof the Act on Stabilization of Employment of Elderly Persons
in 2021, we have established a system that allows elderly
personnel with abundant experience and diverse skills tocontinue working until the age of 70 after reemployment.

Number of employees rehired after retirement and reemployment rate
(Persons)
10
8
6

Number of newly rehired employees (Left axis)
New reemployment rate (Right axis)

80.0
66.7

66.7

87.5

100

69.2

7

80
60

6

4

4

40

2

2
0

(%)

9

FY2019/3

FY2020/3

20

FY2021/3

FY2022/3

FY2023/30Integrated Report 2023

40

Support system for work and life

Shofuʼs Safety and Health Committee is composedof labor and management to provide advice on
the measures necessary for safety and healthand their implementation, and to promote thesemeasures. We have been promoting a safe andcomfortable work environment with the aims of
conducting surveys, study, and measures related
to safety and health, disseminating andenlightening knowledge on safety and health,preventing accidents and diseases, investigating
causes, preventing recurrences, compiling
statistics, and implementing preventive measures.
As part of the 3S activities, each workplace
implements measures for organizing and cleaning
the workplace to create a comfortable work
environment. We also provide biannual training
for workplace representatives to educate themon safety and health.

We promote “health andFramework for promoting health and productivity management
productivity management,” which
Health and Productivity Management Promotion Manager
is an approach towards promoting(Oﬃcer in charge of personnel)
and maintaining employeesʼ healthwith a business management
perspective, in order to achieve
Safety and Health Committee
Tokyo Pharmaceutical Industry
our corporate philosophy of(represented by labor and management)
Health Insurance Society“Contribution to dentistry throughinnovative business activities.”
Health and Productivity Management Committee
Industrial doctor
We are working in(represented by labor and management)cooperation with the healthinsurance society, industrial
Personnel divisions
Industrial counselor
doctor, labor union and otherparties to address various healthissues and to improve measures
for the physical and mental wellbeing of our employees towards the goal of creating a “nice and comfortableworkplace gleaming with healthy teeth” where every employee can work vigorously and with a sense offulfillment.

Average monthly overtime hours per employee and ratio of paid leave taken
Average monthly overtime hours per employee (Left axis)
Ratio of paid leave taken (Right axis)(Hours)

(%)

18

100

15

12

80

57.14

10.33
9.28

48.40

9

45.04

61.00
8.87

60

8.80

48.18

40

6.09

6

20

3

0

SHOFU INC.

FY2019/3

FY2020/3

FY2021/3

FY2022/3

FY2023/3

Severity rate (Right axis)

0.208
3.0

0.20

2.99

2.4

2.01

0.15

2.12

1.8

0.124
0.10

1.2

1.03
0.05

0.6

0.0

0.002
FY2018

0.00

0.000

FY20190.010
FY2020People are indispensable to business activities andare therefore the most important of the management
resources; that is why treating people with respect
is our overriding principle. We hereby declare that
we will “contribute to dentistry through innovative
business activities” by creating an environment inwhich our employees can be more health conscious,
take up the “challenge of change” at their own
initiative, work with vigor, and give their best
performance.

Objectives of promoting health andproductivity management

Financial Data and Company Profile

Frequency rate (Left axis)

Prevention of long working hours
As part of its efforts to improve the working
environment, Shofu aims to create a more
comfortable working hour system. Since 2016,
we have been regularly checking the actual
status of working hours through the collaborative
efforts of labor and management to examine andimplement measures for improvement tounderstand and optimize the actual working
hours, reduce the total working hours, and solve
problems related to working hours. Through these
activities, we aim to improve productivity by
reducing overtime and work on holidays andshortening total working hours.

Health and productivity management
declaration

Frequency rate and severity rate

ESG

Health and productivity management

Business Strategy

Occupational safety and health

Value Creation Story

Creating a comfortable work environment

Shofu has enhanced its support system for
employeesʼ life events, such as childcare, nursing
care, and personal injury and illness, by providing
leave, holidays, and shorter working hours, eachof which exceeds the legal requirements. For
example, we pay for part of the child nursing careleave and have raised the childʼs age eligible forshorter working hours.
In addition, since the duration of nursing
care and personal injury and illness cannot be
predicted, we have established a leave systemthat allows employees to take up to 365 days ofleave for continuous nursing care and the first
three months of paid leave for personal injury
and illness to support subsequent hospital visits.
We have also set up a system that allows
employees to work shorter hours depending on
their level of physical recovery.

41

Learn about Shofu

Society

Rather than leaving employees solely responsible for
their own healthcare, the Company also cares forand invests in the health of employees, as it regards
employee health as a management issue. Throughsuch efforts, we will improve work engagement
throughout the Company, enhance productivity andalso business performance, and eventually realize
an employee-friendly work environment.

0.00

FY2021

FY2022* Frequency rate: the number of persons absent from work due toindustrial accidents per million actual working hours, which indicatesthe frequency of industrial accidents. Data for each year werecollected between December 16 and the following December 15.
* Severity rate: the number of working days lost per 1,000 actual
working hours, which indicates the degree of severity of an industrial
accident. Data for each year were collected between December 16
and the following December 15.

Respect for human rights
Shofu hopes to continue to be a company trusted by
the international community by respecting the humanrights of all stakeholders through communication
with our employees as well as our business partners
and local communities.
In the Shofu group code of conduct, which
serves as a code of conduct for the Shofu Group
employees, we have set forth the following
principles: to respect each otherʼs fundamental
human rights and not to infringe on the fundamental

human rights of others; to recognize the diverse
values of individuals and not to discriminate basedon race, gender, age, background, place of birth,creed, physical reason, or any other irrational factor.
Based on this policy, we promote awarenessof respect for human rights by conducting
awareness-raising activities on harassment,
establishing a harassment hotline, and providing
harassment training for employees in a managerial
position.

0Integrated Report 2023

42

145th Fiscal Year(Ended March
31, 2017)

146th Fiscal Year(Ended March
31, 2018)

147th Fiscal Year(Ended March
31, 2019)

148th Fiscal Year(Ended March
31, 2020)

149th Fiscal Year(Ended March
31, 2021)

150th Fiscal Year(Ended March
31, 2022)

151th Fiscal Year(Ended March
31, 2023)

16,02818,258

19,68822,97522,30524,031

24,915

26,10824,68028,137

31,678

Cost of sales

7,184

8,229

8,598

9,798

9,357

10,267

10,46911,423

11,083

11,97012,979Selling, general and administrative expenses

8,118

9,041

9,929

11,608

11,564

12,266

12,631

12,474

11,296

12,95014,874

Operating income

725

987

1,159

1,568

1,382

1,497

1,814

2,210

2,300

3,217

3,824

Ordinary income

732

978

1,114

1,393

1,141

1,565

1,709

1,988

2,523

3,658

4,238

Net income before income and other taxes

356

978

965

1,352

1,141

1,357

1,709

1,184

2,370

3,611

4,410

Income taxes

338

472

387

557

299

478

512

460

672

1,043

1,250

18

506

581

789

836

877

1,201

704

1,674

2,546

3,135

642

1,361

2,169

△ 15

1,194

2,156

523

△ 46

3,618

3,366

3,584

Capital expenditure

1,209

1,282

1,650

713

875

710

1,403

1,601

1,097

1,100

2,319

Depreciation expense

571

656

783

1,007

888

920

862

949

955

901

972

1,219

1,332

1,410

1,431

1,408

1,494

1,492

1,537

1,563

1,738

1,846

12,965

13,29815,625

14,265

14,286

15,345

14,975

15,416

17,82920,462

22,220Noncurrent assets

9,851

10,741

13,816

14,03914,566

15,545

15,186

14,417

19,983

20,24721,506

Current liabilities

2,969

2,801

5,510

3,049

3,215

3,663

3,820

3,680

4,212

4,437

5,949

Noncurrent liabilities

1,185

1,490

2,150

3,755

3,341

3,070

1,957

2,216

3,402

3,332

2,262

Net assets

18,662

19,747

21,781

21,50022,29624,157

24,38323,93630,19832,94035,515

Total assets

22,81724,03929,44228,30528,85330,89030,161

29,83437,81340,70943,727

ROE（％）

0.1

2.6

2.8

3.7

3.8

3.8

5.0

2.9

6.2

8.1

9.2

ROA（％）

0.1

2.2

2.2

2.7

2.9

2.9

3.9

2.3

4.9

6.5

7.4

81.6

81.9

73.7

75.7

76.9

77.8

80.4

79.7

79.4

80.5

80.8

Net assets per share (Yen)

1,169.09

1,235.34

1,360.19

1,340.00

1,396.74

1,511.85

1,524.92

1,491.81

1,690.45

1,841.55

1,996.64

Net income per share (Yen)

1.17

31.77

36.45

49.43

52.61

55.20

75.54

44.24

96.29

143.22

176.101,623.9

56.7

49.4

36.4

38.0

36.2

30.4

58.8

30.1

27.2

32.4

1.6

1.5

1.4

1.3

1.5

1.4

1.5

1.7

1.8

2.2

3.0

788.9

27.6

37.7

27.9

25.1

26.0

16.9

39.8

20.6

10.9

11.5

Cash flows from operating activities (Millions of yen)

383

823

710

1,511

2,308

1,936

1,468

1,942

2,829

3,736

3,170

Cash flows from investing activities (Millions of yen)

△ 1,201△ 441△ 3,139748△ 1,052△ 772△ 1,519△ 1,768△ 4,081△ 1,288△ 1,290

Cash flows from financing activities (Millions of yen)

△ 477

△ 1,305

2,810△ 2,152

△ 835

△ 592

△ 844

△ 224

3,023

△ 1,074△ 1,457

829

834

881

1,080

1,103

1,124

1,168

1,189

1,206

1,266

1,299

Fiscal year (Millions of yen)
Net sales

Profit attributable to owners of parent
Comprehensive income

R&D expenses

Financial Data and Company Profile

144th Fiscal Year(Ended March
31, 2016)

ESG

143rd Fiscal Year(Ended March
31, 2015)

Business Strategy

142nd Fiscal Year(Ended March
31, 2014)

Value Creation Story

141st Fiscal Year(Ended March
31, 2013)

Learn about Shofu

Financial Summary for Past 11 Years

Fiscal year end (Millions of yen)
Current assets

Other information

Equity ratio (%)

Payout ratio (%)
Dividends on equity (DOE) ratio (%)
Price earnings ratio (Times)

Number of employees (Persons)

43

SHOFU INC.

Integrated Report 2023

44

Company profile

Status of shares
Total number of shares authorized to be issued

64,000,000 shares

Headquarters address

11 Kamitakamatsu-cho, Fukuine, Higashiyama-ku, Kyoto 605-0983, Japan
Phone: +81-75-561-1112 (main)

Total number of shares issued

17,894,089 shares

Date of establishment

May 15, 1922

Number of shareholders

15,094

Capital stock

5,968,956,614 yen

Closing date

March 31

Stock exchange listing

Prime Market of the Tokyo Stock Exchange (Securities Code: 7979)

Number of employees

3,580

20.22

Line of business

Manufacture and sale of dental materials and equipment

911

5.14

Fiscal year

From April 1 to March 31 of the following year

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

Ordinary shareholdersʼmeeting

The Bank of Kyoto, Ltd.

712

4.02

June of every year

Nippon Life Insurance Company

646

3.65

The Shiga Bank, Ltd.

602

3.40

Custody Bank of Japan, Ltd.
(Trust account)

529

2.99

NORTHERN TRUST CO. (AVFC) RE IEDPAIF CLIENTS NON TREATY ACCOUNT

448

2.53

MSIP CLIENT SECURITIES

404

2.28

Shofu Employee Stock Ownership
Association

375

2.12

SCREEN Holdings Co., Ltd.

330

1.86

Sumitomo Mitsui Trust Bank, Limited
1-4-1 Marunouchi, Chiyoda-ku, Tokyo

Network
Domestic offices

SAPPORO SALES OFFICE / SENDAI SALES OFFICE / TOKYO BRANCH /NAGOYA SALES OFFICE / KYOTO SALES OFFICE / OSAKA SALES OFFICE /FUKUOKA SALES OFFICE

Overseas sites

TAIWAN BRANCH / Middle East and Africa Representative Office

Shofu group companies

Domestic

Overseas

Affiliated company

SHOFU INC.

Domestic

SHIGA SHOFU INC.
SHOFU PRODUCTS KYOTO INC.
SHOFU BIOFIX INC.
NAIL LABO CORPORATIONSHOFU DENTAL CORPORATIONSHOFU DENTAL GmbHADVANCED HEALTHCARE LTD.
SHANGHAI SHOFU DENTAL MATERIAL CO., LTD.
SHOFU DENTAL TRADING (SHANGHAI) CO., LTD.
SHOFU DENTAL ASIA-PACIFIC PTE.LTD.
MERZ DENTAL GmbHDIGITAL DENTAL SERVICES GmbHSHOFU DENTAL INDIA PRIVATE LIMITEDSHOFU DENTAL BRASIL COMERCIO DE PRODUTOS ODONTOLOGICOS LTDA.
SHOFU PRODUCTS VIETNAM CO.,LTD.
SHOFU MEXICO S DE RL DE CV
SMART DENTISTRY SOLUTIONS INC.
NAIL LABO INC.
NAIL LABO TAIWAN CO.,LTD.
Sun Medical Company, Ltd.

Distribution of shares by numberof shares held

Less than 100 shares 0.04%
Less than 100 shares 0.04%
100 shares or more 8.68%
100 shares or more 8.68%
1,000 shares or more
1,000 shares or more
6.55%
6.55%
5,000 shares
5,000
sharesor moreor more3.87%
3.87%
10,000 shares
10,000or moresharesor more
8.85%
8.85%

500,000 shares
500,000orsharesmoreor more39.01%
39.01%

Financial Data and Company Profile

Mitsui Chemicals, Inc.

ESG

1,299 (consolidated) 476 (non-consolidated)

Financial
Financial
institutions
institutions
25.09 %
25.09 %

Individuals and others
Individuals and others

30.75%
30.75%

Business Strategy

Number of Shareholding
shares held
ratio
(Thousands of shares)(%)

Administrator ofshareholder registry

Other legal
Other
legal
entities
entities33.25%
33.25%

Major shareholders
Shareholder name

Ordinary shareholdersʼ meeting: March 31 of every year
Year-end dividend: March 31 of every year
Interim dividend: September 30 of every year

Financial instruments
Financial
instruments
business operators
business operators
0.82 %
0.82 %
Foreign
Foreigncorporations, etc.
corporations, etc.
10.06%
10.06%

Value Creation Story

SHOFU INC.

* If otherwise necessary, the date designated by public notice in advance45

Distribution of shares by owner

Company nameRecord dates

Learn about Shofu

C o m p a n y P r o f i l e a n d S t o c k I n f o r m a t i o n (As of March 31, 2023)

100,000 shares
100,000orshares
more
or
more
26.66
%
26.66%

50,000 shares or more
50,000 shares or more
5.22 %
5.22 %* The shareholding ratio is calculated by deducting the number of treasury
shares (192,907 shares).

Trends in stock price and trading volume
(Yen)

3,000

Trading volume(Thousands of shares)

Stock price

2,000

2,500

1,600

2,000
1,200
1,500
800
1,000

400

500

0

4 5
2020

6

7

8

9

10

11 12

1 2
2021

3

4

5

6

7

8

9

10

11 12

1 2
2022

3

4

5

6

7

8

9

10

11 12

1 2
2023

3

0

Integrated Report 2023

46