Niterra Co., Ltd. Integrated Report 2023

Niterra Report 2023

Niterra with advanced ceramics technology
for all environments.

Niterra through a stable food supply withsensing systems to control water quality.

I will be the first to go to Mars.

I will deliver flavorful food, with confidence.

Delivering new value in the face of an ever-changing future.
To meet large-scale global environmental changes, we too must change.
Creating an organization comprised of passionate individuals working together toface challenges head-on in order to better society.
We are transcending imagination with technology that transcends boundaries.
Niterra with sensor and plasma technology
in healthcare.

I will stay healthy
and continue to dance.

We are more than just ceramics and we are going in new directions.
Niterra with carbon neutral technology.

I want to conserve our
natural resources for our children.

2040 Vision

Change Drastically Beyond the Current Way
The economy and society have changed rapidly.
There have been many changes in technology, such as the introduction of EVs andthe increasing demand for semiconductors.
There have been political changes, such as protectionism in major nations and trade
conflicts. During this difficult time, we too must change. We cannot continue as wehave in the past but must move towards creating a sustainable society.
We have followed the premise of “What ceramics can do” and “Manufacturing =Monozukuri” but now we must face the challenges of the world in order to realize abetter society. We must put aside “What ceramics can do” to face the challenges in
the world to contribute to a sustainable society, by growing to meet the challenge of“Beyond ceramics”, and work towards “eXceeding imagination”.
By 2040 we aim to create a new Niterra Group with the vision of “Beyond ceramics,
eXceeding imagination”.

nable society

Business areas to focus on

We take on challenges in new fields,
striving to improve corporate value
through ceramics materials technology
and other core competencies.
We focus on four areas of business:
Environment and Energy, Mobility, Medical, andCommunications.

Environment & Energy

Mobility

Energy andenvironmentally friendly

Fun and convenientmobility〉〉 Use sensing technology that improves
industrial efficiency〉〉 Services to meet the needs of users’ lifestyles〉〉 Supply stable renewable energy〉〉 MaaS to meet special needs〉〉 Improve electricity with ceramic components

These areas include not only new businesspillars, but also current businesses. Our corecompetencies consist of ceramics materials
technology, sensing technology, global
production and sales systems, and numerous
other areas. Leveraging these core technologies,
we seek to add value through Something New
and the use of open innovation to grow our fourareas of business.
MedicalCommunication

Bring advanced medicalcare to people all over the world

High-speed communication toconnect the real and the virtual〉〉 Non-invasive diagnosis and treatment,
provision of preventive equipment and services〉〉 Support high-speed communication and its infrastructureOur Thoughts

Corporate
Philosophy

The Nittoku Way

CSR andSustainability Charter

We are an indispensable company

that delivers true value to the world.
The Nittoku Way is a philosophy that refers to thevalues of the Niterra Group to which all employees

Long-termManagement
Plan

Corporate
Codeof Conduct

Medium-termManagement
Plan

CSR Basic Policy

Quality
Products

Involvementby allcommit in sharing and passing down to future
generation.

Corporate Philosophy
Realize our imagination.

We continue to offer new ideas and new values.
At Niterra, we aim to contribute to people all over the world by linking people totechnologies and delivering new values. As a truly global corporation, we want tobuild stronger ties not only with customers and communities, but also with thelocal and global environments. We are always working to make our corporate04

philosophy and our commitments a reality.

Basic Traits
Shisei-Shinjitsu
Dokuritsu-Jiei

Shikai-Keitei
Soshi-Kantetsu

Shared Values

CSR and Sustainability Charter
We contribute to develop a sustainable society,thereby improving our corporate value.

・We build relations of trust with our stakeholders
while making highly transparent decisions andactions.

・We cocreate and provide new value to solvingsocial issues.

Three elements constitute ourcorporate philosophy.

Philosophy

1. Commitment
With full use of the most suitable technology
and our accumulated experience, we
continue striving to offer new values to thepeoples of the world.

Niterra Report 2023

Realization of a susta

Corporate Message

2
Management
Policy3
1Commitment

2. Management Policy
We offer a working environment in which each one of us isencouraged to make full use of his or her personality and capabilities.
With all our power we are dedicated to pursue management based ontrust and confidence.

3. Action Guideline
Ever onward! Always mindful of what is the best course, we swiftly put it into action.

ActionGuideline

Message from the Chairman

Helping to Resolve Social Issues to Become a Company
That Brightens the Earth and Fosters Well-Being for Society
Chairman of the Board Shinichi Odo
A History of Taking on Challenges and

The future of our general social situation remains uncertain—the

Innovating New Technologies

VUCA* era. However, similar to our predecessors, mankind has

For the more than 80 years since our founding in 1936, the Niterra

technologies, knowledge, and wisdom. I believe humankind isGroup has been one of taking on challenges and innovating newreaching a path toward solutions based on technological changes

technologies. At the dawn of the Japanese automobile industry,under a scenario that we envision to a certain extent.

Niterra began manufacturing the first Japanese-made spark plugs*A term coined from the initials of volatility, uncertainty, complexity, and ambiguity that refers to astate in which the future is opaque and difficult to predict.

continue to pursue the possibilities of ceramics, our core technology,
and develop technologies that contribute solutions to social challenges.
Our legacy of taking on challenges continues to this day. As activities

Quantum Computers, Nuclear Fusion, and Other
Technological Innovations that Contribute to
Resolving Social Challenges

aimed at carbon neutrality accelerate around the world toward creating
sustainable societies, the automotive industry has seen the progress ofAs an example, the progress of global warming presents a serious

technological innovations including electric vehicles (EVs) and muchfuture scenario for humankind. The shared global goal of achieving

more. We are entering an era in which the structure and commitments

carbon neutrality by the year 2050 has given rise to new, importantof the industry itself are being questioned.

technologies that include not only EVs, but also renewable energy,

The Niterra long-term vision toward the year 2040 is Beyond ceramic,

CO2-free hydrogen projects, and CO2 capture technologies. We

eXceeding imagination. We are creating new business pillars that

believe the accumulation of such technological developments willtranscend the framework of ceramics. Through the accumulation oflead not only to carbon neutrality, which is our direct goal, but also totechnology and trusting relationships with customers, we create

further social development.

products through our ceramics technologies that have expanded

In addition, quantum computers are expected to play central role inapplications beyond automotive-related products in Japan andfields such as automatic operations, drug discovery, and battery

overseas, extending to semiconductor manufacturing equipment,

development. This progress will lead to solutions for various social

personal electronic devices, and medical devices. We will continue toissues. Nuclear fusion and its potential to solve environmental andseek discontinuous changes that are more than building on the past,energy problems does not produce CO2 emissions, and thisstriving for innovations that contribute answers to social challenges.

technology is also a target for industrialization as a national strategy.

05

sensors for exhaust gas in response to the demands of society. We

Niterra Report 2023

and introduced environmentally friendly high-performance plugs andovercome a wide range of challenges by leveraging new

Message from the Chairman

attention, with the emergence of alternative meats made fromin order to point the company in the right direction and achieve

plant-based ingredients and foods based on genome-editing

sustained growth? If there are three main qualities to be a leader in any

technology.

era, the first is the strong will to be a leader. The second is whether the

There are bright prospects for the future of technology. What is not clear

individual is prepared to be a leader. And the third is whether theis whether humanity will be capable of aligning with and controlling theindividual can integrate their identity with that of the organization, looking

use of new technologies to help resolve social challenges. Can

at himself or herself objectively.

humankind capitalize on technology to achieve a brighter future? What

Looking back on my own experience, I first became aware of the idea ofis the ideal form of democracy amid ongoing nationalism in certain parts

leadership when I was seconded to a German subsidiary between 1987

of the world, including the extended Russian invasion of Ukraine and theand 1992. That was when I worked with the then-president of ourconfrontational relationship between the U.S. and China over economic

British subsidiary. Performing as the “heart” of his team, he listened tocoercion? How should we understand the just balance between

employees, provided motivation, and brought the organization together

democracy and authoritarianism, and how do we resolve thesein one direction: driving results. In a word, I believed he was cool. That

conflicting structures? These are not problems easily solved in ourwas my first experience with a true global leader.

management human resources development program that identifies

current social climate.

Later, I served as president of our Australian subsidiary and thenand nurtures the next generation of management leaders. Nittoku

president of our U.S. subsidiary. In June 2011, I was appointed

Business School is a program that selects leader candidates

president and representative director of the parent company. Based on

emerging one step ahead of the next generation. Our Raise UP

my experiences, I have come to believe that no one has the perfect

Program is a selective training program to promote women toqualities as a leader by nature. This is why we must be prepared,

management positions.

One thing that can be said, however, is that the importance of taking

establish an ideal leadership image with reference to our own role

However, the motivation to work and the goal of achievement are notaction toward finding solutions is increasing. So, too, is the importancemodels, and strive to draw closer to these images and models. A leader

exclusive to becoming a leader or seeking higher pay. As valuesof joining together with others who share the same values of working

envisions the future of their company while maintaining an objective

diversify, we believe that Niterra must provide a variety of

toward a better world, sometimes through the pure spirit of altruism. In

viewpoint, clarifying what he or she should do as a leader, following

opportunities in addition to providing equal opportunities.

addition, the G7 summit called for cooperation among the Global Souththrough on those decisions. Leaders achieve results and strive for

As a company, can we provide all of our valuable human capital withcountries: India, Indonesia, Turkey, and South Africa. These countries

improvement regardless of failure or success. Top management

a sense of well-being most suited to them? Will they be happy to

are expected to become powerful in both economic and political terms.

must show that they are not afraid to take risks, fostering a culture ofwork here? For the sustained growth of a company, leaders must

We believe the requirements to break from traditional social structures

taking on challenges that will lead to the change and growth we aim

take these questions into consideration.

will be the same for companies.

for as a company in this era of transparency.

We will work together with our stakeholders to become an

When Answers are Elusive, What Are the Qualities
Demanded of Leaders?

organization in which all achieve well-being. And in so doing, we will

The aforementioned technological innovations for carbon neutrality andthe development of quantum computers are being conducted incollaboration across organizational boundaries and sometimes across

The Importance of Fair Opportunities for Human
Capitalbe active in solving social challenges and improving the well-being ofsociety at large as a company that lights the Earth, true to our new
name: Niterra. We sincerely wish that you will continue to looknational borders. New innovations will soon be beyond the resources of asingle company. Niterra shares the same social challenges, pursuing

To provide management leaders with opportunities to challenge

forward to the challenges we undertake, and we look forward to youralliances with startup companies that possess innovative technologies. We

themselves, we focus on the development of management humanongoing support.

continue to seek partnerships meaningful to society on a global scale.

capital through programs such as HAGI. HAGI is a next-generation

06

In an age when answers are elusive, what should we demand of leaders

Niterra Report 2023

Food issues related to demographic shifts are also attracting more

Table of Contents and Editorial Policy

Our Group was renamed as the Niterra Group in accordance with the change of our

PROLOGUE

English trade name to Niterra Co., Ltd., effective April 1, 2023.

The Niterra Vision
01 Our Vision
04 Our Thoughts
05 Message from the Chairman

03

Niterra Value Creation

Foundation for Value Creation

08 History of Value Creation

41 Message from the Sustainability Officer

10 Where We Stand Today

43 CSR and Sustainability Governance

11 Value Creation Process

44 Review of Priority Issues (Materiality) Activities

12 Message from the President

47 Environment

15 Priority Issues (Materiality)

52 Human Capital Management
58 Occupational Health and Safety

18 Business Model

59 Respect for Human Rights

19 Sources of Competitive Advantage

61 CSR and Sustainability Procurement①Technology and Development Capabilities

62 Corporate Governance②Global Production and Sales System

69 Executive Officers

21 Diverse Human Resources That Support Our
Competitive Advantage

22 Dialogue:

Unlocking the Source of Disruptive Change

70 Outside Directors’ Roundtable Discussion
73 Risk Management
74 Compliance
75 Information Security

and stance to become a company that contributes to a sustainable society and lets the Earth shine.

Editorial Policy

Niterra Report and Information System

stakeholders deepen their understanding of our medium- to long-term value creation

corporate value.

Niterra Co., Ltd., has issued annual integrated reports since 2017 to help all

Our 2040 Vision is to change drastically beyond the current way, as established under04

Growth Strategy

Company Information and Data

25 Long-term Management Plan

76 Financial Results Highlights for the Past 11 Years

28 Medium-term Management Plan

77 Financial and Non-Financial Highlights

31 Digital Transformation

78 Corporate Profile and Stock Information

32 Message from the Finance Officer
34 Business Strategy
34 Business Strategy Automotive Components Group37 Business Strategy Ceramics
39 Business Strategy New Businesses
40 Our Approach to Intellectual Property

Niterra Communication

our 2030 Long-term Management Plan NITTOKU BX, formulated in 2020. We
additionally established our slogan “Beyond ceramics, eXceeding imagination” based on

Summary

Niterra Integrated Report

this vision. Our major strategic theme is to pursue business beyond ceramics while
keeping ceramics at the core of our operation and transforming our business portfolio tofocus on the Automotive Components Group. In FY2021, we formulated a Medium-termManagement Plan, which ends in FY2024, to achieve our Long-term Management Plan.
Our Integrated Report provides an overall explanation of these plans and their progress

DetailAnnual Securities
ReportShareholder Newsletter

Corporate Governance
ReportBusiness Results Briefing
Presentation Materials

Sustainability website

Financial information

to help readers understand what sort of value our Group provides.

Non-financial information

This publication is also intended to serve as a tool to respond to the various opinions
and inquiries we receive from stakeholders through our business and IR activities
throughout the year. We look forward to receiving your honest opinions going forward.

02

This report focuses on the information that is essential for the enhancement of ourefforts.

07

17 Accumulated Managerial Capital

The name Niterra is a combination of “niteo” and “terra,” the Latin words for “shine” and “Earth.” This name expresses our desire

Other Information Sources

The following detailed information is also available through these other information
outlets.

Period of Reporting

FY2022 (From April 1, 2022 to March 31, 2023)*Also includes certain information on our activities before and after FY2022.

Scope of Reporting

The Niterra Group (Niterra Co., Ltd., and consolidated subsidiaries)

Guidelines for Reference

The International Integrated Reporting Framework, the International Financial
Reporting Standards (IFRS)
Guidance for Integrated Corporate Disclosure and Company-Investor Dialogues for
Collaborative Value Creation, the Ministry of Economy, Trade and Industry

Forward-Looking Statements■ Company Profile
Corporate profile, brand story, business descriptions, company history, etc.

URL：https://www.ngkntk.co.jp/english/■ Technology

Vision, core technology, approach, and areas of focus

URL：https://www.ngkntk.co.jp/english/technology/■ Sustainability
Niterra sustainability management, priority issues, corporate governance report,
SASB Content Index, etc.

URL：https://ngkntk.disclosure.site/en/

This report contains forward-looking statements regarding Niterra’s future plans,■ Investor Relations

strategies, and performance. Actual results may differ substantially from thoseFinancial statements, annual securities report, business results briefing presentations, etc.

projected in this report.

Niterra Report 2023

01

URL：https://www.ngkntk.co.jp/english/ir/01

Niterra Value Creation

Niterra Value Creation

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

History of Value Creation
Honesty and Passion

The Morimura Group DNA
The origin of the Morimura Group, the foremost ceramics conglomerate in Japan, dates back to 1876 (Meiji year 9),
when the Morimura brothers, Ichizaemon and Toyo, founded Morimura Gumi* to launch a pioneering foreign trade“We will not sell anythingthat is useless after thecustomer takes possession of it”

business in the country. The four shared values of the Nittoku Way are based on the ideas of the Morimura Group. The
Niterra Group DNA is infused with this entrepreneurial spirit and the soul of technologists.
*Current: Morimura Bros Inc.

Corporate
Philosophy

CSR andSustainability CharterLong-termManagement
Plan

Quality
Products

Magobei Okura, who served as a purchaser, ensured theShisei-Shinjitsu

Corporate
Codeof Conduct

Sincerely, do our very best.

CSR Basic Policy

Ichizaemon Morimura (right side) and Toyo in 1889

Ichizaemon Morimura VI and his brother Toyo founded

Dokuritsu-Jiei

Morimura Gumi in Tokyo, with Toyo starting an imported

Believe in one’ s own ability,
and take actions by oneself.

Involvementby allvarieties business in the U.S. The brothers delivered good
products on time and at reasonable prices. And gradually,

Soshi-Kantetsu

Shared Values

said famously, “a supply of quality products and thesatisfaction of consumers is the reality that we need tograsp.” helping build the Morimura ceramic business under
the philosophy of producing quality products.

from the Meiji government, grew into a large business.

Soshi-Kantetsu
Have cherished desires, and carry it through till the end.

Dokuritsu-Jiei“Even if only one product ina thousand is defective, thecustomer who buys it has a 100%
defective rate”

Ichizaemon Morimura was an independent spirit, never relying
on others, no matter the difficulty, and never taking unfair or
unjust advantage, no matter how tempting. He resonated with

Morimura Group History

the message of self-respect and independence of mind,

Morimura Gumi

espoused by famous educator Fukuzawa Yukichi. Ichizaemon(March 1876)

said, “While it may be easy to start a business venture, it is alsoeasy to err in direction. The fewer the challenges, the morecareless one becomes.” This philosophy remains fixed among
Niterra management today.

Nippon Toki
Gomei Kaisha

Morimura Bank
(June 1897)(January 1904)

Magoemon Ezoe (First President of Niterra Co., Ltd.)

Okura Art China(May 1919)

Morimura Gumi
Co., Ltd.
(April 1918)

Toyo Toki Co., Ltd.
(May 1917)

Nippon Toki, Ltd.
(July 1917)

With the transition from tableware to industrial products,

NGK Insulators,
Ltd.

product uniformity became a more daunting challenge.
Magoemon Ezoe demanded discipline and a high sense of(May 1919)

participation from his employees to achieve products thatdelivered performance demanded by customers on a
Merged with
Mitsubishi Bank

Okura Art China.
Inc.

Morimura Bros.,Inc.

(1929)(Reorganized in April 1950)(Renamed in July 1946)

TOTO Ltd.
(Renamed in May 2007)

Noritake Co.,
Limited(Renamed in April 1981)

NGK Insulators,
Ltd.
(Written name changed in
May 1986)

Niterra Co., Ltd.
(October 1936, changed
English company
name in April, 2023)

consistent basis. This philosophy of producing quality
In New York,
Morimura Brothers, 539 Broadway, around 1893

products and the involvement of all employees devoted to
manufacturing quality goods is still alive at Niterra.

08

Shikai-Keitei

passed down to his eldest son, Kazuchika. Kazuchika Okura

with an independent spirit and refusal to accept support

Unite efforts with the people of the world,
and utilize each other’ s differences.

Shisei-Shinjitsu

integrity of the products in which he dealt. This integrity was

the small trading business of the Morimura Brothers, built

Shikai-Keitei

Basic Traits
Dokuritsu-Jiei

Magobei Okura (Left) and Kazuchika Okura (Right)

Niterra Report 2023

Medium-termManagement
Plan

The Four Shared Values of the Nittoku Way

01

NiterraValue Creation

Niterra Value Creation

History of Value Creation

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

Startup period ( from 1930 )Growth period ( from 1940 )Domestic automobile industry
depending on imports

Automobile production growing rapidly

In Japan in the 1920s, when the domestic automobile
industry was still in its infancy, the supply of
automobiles was limited almost entirely to imports
from the U.S. and Europe, and automotive parts,
including spark plugs, were also imported. The firstpresident, Magoemon Ezoe, decided to produce plugs
using ceramics, a specialty product of Japan, and led
initiatives to launch domestic plug manufacturing.

In the 1940s, domestic automobile production rose to
46,000 cars, as automobiles and related parts
manufacturing developed into a major industry.
Accordingly, demand for plugs also increased. After
WWII, Japan ushered in a period of high economic
growth in the late 1950s, when the country was rapidly
becoming motorized.

Spark Plugs Make Automotive
Mobility More Accessible

Providing a Wider Range of Global Value
Through Automobiles and Ceramics
Ceramics
1949
Production of NTK Technical Ceramics started

NGK SPARK PLUG was established through thespin-off of the spark plug division of NGK Insulators.
The founding business of producing spark plugs hasgrown to make the company the world’s top
manufacturer of the product.

After the post-war confusion had settled down andspark plug production was stabilized, we began
applying ceramics to develop new technologies andproducts for the diversification of our business. The new
segment development was promoted under the brandname of NTK. Following this, we gradually broadened
our ceramic product range to include those for industrial
and environmental uses.

1937 Automotive Components
Components Production of
NGK Spark Plugs started
In 1930, we released NG Spark Plugs, Japan’s first
domestically produced spark plug, and began
producing NGK Spark Plugs in 1937.

Ceramics
1958
Ceramic cutting tools developed

The importance of ceramic industrial tools increased,
particularly in relation to electricity, automobiles,
chemical engineering and machinery, and we developed
ceramic cutting tools for cutting hard materials to be put
on sale in 1958.

1959
Overseas business expansion
Japan entered the high economic growth period,
boosting exports. Driven by this trend, we established
our first overseas base in Brazil, Cerâmica E Velas De
Ignição NGK Do Brasil Ltda(※), in 1959, and began topromote overseas advancement ahead of competitors
to build strong global networks.
Magoemon Ezoe, first president

NGK Spark Plug

※Changed English company name to Niterra do Brasil Ltda.

※Changed English company name to Niterra

Development period ( from 1990 )Impact of high economic growth

Tackling new social challenges

From the late 1960s, pollution problems were emerging asa negative effect of the high economic growth, and theautomobile industry was particularly called on to urgently
address air pollution problems. Looking to fulfill needs
related to such problems as well as resource conservation,
we started research to develop new products that would
help meet exhaust gas regulations. These regulations weremade more stringent year by year, pushing up demand forhigh-performance plugs and sensors.

From the 1990s, automakers began to focus on thedevelopment of electric vehicles, hybrid vehicles and fuel cellvehicles, as part of efforts to address environmental andenergy issues. Those years also saw the explosive growth of
information communication technologies bringing aboutsignificant changes in many people’s lifestyle. In order toprovide products that would meet new needs related to thesesocietal trends, we promoted research and development
based on our technologies built over long years.

Making Functional Contributions to theEnvironment Through Core Businesses

Improving the Quality of Life Around
the World by Meeting Diverse Needs

Ceramics
1967
Production of ceramic substrates andIC packages started

Ceramics
1999
Sales of medical oxygen
concentrators started

In the late 1960s, the silicon semiconductor integrated
circuit (IC) became a mainstream standard and its mass
production began in Japan and the US. Following thistrend, we started manufacturing ceramic substrates andIC packages by applying our ceramics technologies.

We started research on the possibility of medical
applications of bio ceramics in the 1970s, looking tofuture opportunities afforded by the progress of
population aging. Related results included the rollout of
the bone prosthesis Ceratite in 1990 and oxygen
concentrators for medical use in 1999.

1982 Automotive Components
Production of oxygen sensors forautomobiles started

From present to future
Aiming to create a sustainable society
Our business environment is undergoing an enormous changebrought about by a number of factors, such as AI and IoT-driven
digitization, the once-in-a-century transformation of the automobile
industry led by the concepts of CASE and MaaS, and mounting
concerns over climate change and ESG-related issues. Recognizing
this situation, we are striving to reduce our dependence on the
production of automotive components for internal combustion
engines, which account for 80% of our net sales, while creating new
business projects aimed at achieving a sustainable society.

Continuing to Solve Social Challenges

2000 〜 New Businesses
Building new business pillars
Under the NITTOKU SHINKARON long-term
management plan started in FY2010, we accelerated
efforts to establish new business pillars. The 2030
Long-term Management Plan “NITTOKU BX” also
started in FY2020, aiming to transform our businessportfolio by 2040. We continue with these challenging
efforts, seeking out every possible new field by applying
our core ceramics technologies including hydrogen leakdetection sensors and the solid oxide fuel cell (SOFC).

In Japan in the 1960s, as the full-scale motorization ofsociety progressed, environmental degradation such as
air pollution became a social issue. In response,
exhaust gas regulations were made stricter. To help
related industries ensure regulatory compliance, webegan developing various sensors, primarily inassociation with exhaust gas, such as zirconia oxygen
sensors and wide range oxygen sensors.
Ceramics
1989
Sales of electrostatic chucks started

In the late 1980s, requirements for higher integrationand lower cost of semiconductor elements intensified,
which gave rise to a shift to ceramic components,characterized by the material’s excellent heat andabrasion resistance, to be used for semiconductor
production equipment. In response, we promptly
introduced ceramic electrostatic chucks, andcommenced mass production of the product in the
2000s to expand sales.

Medical-use oxygen concentrator

Hydrogen Leak Detection Sensor
Solid Oxide Fuel Cell
（SOFC）

Cerâmica E Velas De Ignição
NGK Do Brasil Ltda

Cutting tools

Revenue trend

IC packages

Electrostatic chucks

Temperature sensors
for automobiles

Oxygen sensors
for automobiles*CASE (connected, autonomous, shared, electric): A new
trend in automotive industry.
*Mobility as a service (MaaS): A concept that considers
mobility as a service.

09

1936
NGK SPARK PLUG(※) founded

Establishment period ( from 1960 )Niterra Report 2023

The Niterra History

Historicalbackground andsocial issues

Addressing a Wider Range of Social Challenges

01

NiterraValue Creation

Niterra Value Creation

Where We Stand Today

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

At a Glance (as of March 31, 2023)
Paid-in capitalGroup revenue

47,869562.5

Operatingincome ratio

billion yen

million yen

15.9%

Number of employees

Composition of net sales
Consolidated

New Businesses
and Others

20%

2%

Compositionof net sales
by segment in
FY2022

Automotive
Components

79%

Japan

8% 4

18%
Asia

22%

%

1

No.

*Niterra research as of March 2022

North America

25%

Operating locations

Compositionof net sales
by region in
FY2022Japan

33

Overseas

locations59
locations

Europe23%

Global expansion
Number of countries
where our products are sold

Overseas sales ratio

Overseas employee ratio

145 82% 46%

approx.

approx.

10

Ceramics

Central andSouth America

Others3,534
16,247

Global share in spark plugs
Global share in oxygen sensors

Niterra Report 2023

Non-consolidated

Main products

01

NiterraValue Creation

Niterra Value Creation

Value Creation Process

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

The Niterra Group 2040 Vision is Change drastically beyond the current way.
We leverage ceramics technologies, as well as global scale production and sales system, to engage in business activities in the four focus areas toachieve the sustainable enhancement of corporate value: Environment & and Energy, Mobility, Medical, and Communications.

International issues

Shared Values
The Nittoku Way

Change drastically beyond the current way
Priority Issues▶ P.15-16

Responding to climate change▶ P.47

Providing environmentally friendly products

InputsGlobal human resources management

contributing to the resolution of social issues

Corporate governanceBusiness Activities

Outputs▶ P.18▶ P.34-39

Sources of Competitive Advantage

Manufactured
Capital▶ P.19-20

Applied technologies
focusing on coretechnologies in ceramics
materials and ceramics▶ P.52

Risk management
Compliance▶ P.73

Information security

Mobility

Outcomes

Customers▶ P.34

Plugs

Help customers improve product quality
by providing high-quality materials andcomponents (help customers increase theircompetitive stance)

Social Impacts
Environment & Energy
Energy and environmentallyfriendly

Improve customer satisfaction

Sensors

Employees

Ceramics▶ P.37

Semiconductor
packages

Foster job satisfaction and motivation

Mobility
Partners

SPE
Medical(oxygen concentrators), etc.

Global production andsales system

Continue with good partnerships

Shareholders and Investors

Communication

New Businesses
SOFC cell stack, etc.

Fun and convenient mobility

Improve the sustainability of businessactivities through transparency and stabletransactions (strengthen profit base)

Return profits based on businessperformance

Social and
Relationship
CapitalIncrease share price and market capitalization

MedicalBring advanced medical care
to people all over the world▶ P.39Local Communities
Hold and sponsor community events
Pay taxes
Create employment opportunities

2030 Long-term Management Plan “NITTOKU BX”
Medium-term Management Plan 2021 〜 2024

Break to change. Change to create. ▶ P.28-30
Management Innovation（DX）▶ P.26

Medium-term Management Plan 2025 〜 2029

Extend for the future. Spread out to exceed.

Clarification of Responsibilities and Authority

Willful Cultural Change▶ P.75▶ P.74

Help employees acquire skills (provide growth
opportunities)

MedicalNaturalCapitalSoshi-Kantetsu
Have cherished desires,and carry it through till the end.

Stakeholder Returns

Automotive
components
Environment&
EnergyShikai-Keitei
Unite efforts with the people of the world,
and utilize each other’s differences.

▶ P.62Focus Areas

Intellectual
CapitalHuman
Capital

Dokuritsu-Jiei
Believe in one’s own ability,
and take actions by oneself.

Development of technologies, products, and businesses for▶ P.17

Financial
CapitalShisei-Shinjitsu
Sincerely,
do our very best.

11

Establishment of a society where economic
development and resolution of social issues are compatible

2040 Vision

With full use of the most suitable technology and our accumulated experience,
we continue striving to offer new values to the peoples of the world.

Niterra Report 2023

Global environmental issues

External environment

Corporate Philosophy and Purpose

Global Environment
Reduce CO2 emissions
Reduce our environmental footprint acrossthe value chain

Communication
High-speed communication toconnect the real and the virtual

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Niterra Value Creation

Message from the President

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

President’s message

Transforming our portfolio through the strong will tochange and by asking, Why Niterra? Aiming for sustainableenhancement of corporate value.
Takeshi Kawai, Representative Director, President and COO
Amid the ongoing uncertainty in the state of global affairs, theThreatens Sustainability

business environment of FY2022 was indeed a year of upheaval. In
China, the two-month lockdown in Shanghai at the end of Marchand other zero-COVID policies disrupted parts supplies and halted

automotive industry. Experts say that demand for parts used ineconomic activity. The U.S.-China trade frictions have continued

internal combustion engines, including our mainstay products ofsince 2018. And in the U.S. and Europe, the prolonged turmoil inspark plugs and sensors, is expected to peak in the mid-2030s. In

Russia and Ukraine, energy prices, and other factors have createdresponse, we are strengthening our existing businesses, creatinghigh inflationary pressures. The worldwide shortage of

new businesses, and firming up our business infrastructure.

semiconductors is another factor slowing the global economy. These

We created the 2030 Long-term Management Plan “NITTOKU BX”

developments have created a new globally fractured structure(NITTOKU BX) in 2020, aiming to transform our business portfolio.

threatening social sustainability.

Today, our internal combustion engine business represents 80% of
total revenue. We intend to shift this business to 60% of total
revenue, raising our non-internal combustion business to 40%.

Record-High Revenue
and Operating Profit

I took office as president in 2019. This year marks my fifth year inleadership and the third year of the medium-term management plan

In the face of lower auto production and other negative factors, thewe formed under NITTOKU BX. How will we expand our non-internal

Niterra Group posted record-high revenue of 562.5 billion yen in

combustion engine business leveraging our strong internal

FY2022, up 14.4% year on year. We also posted record-highcombustion engine business? The operating catch phrase under thisoperating profit of 89.2 billion yen, up 18.2%.

medium-term management plan is Break to Change. Change to

We owe this performance to three major factors. The first is theCreate. Our company is working as one to embody this slogan andstrength of our business model in the automotive components,

drive toward our 2040 ideal, which is disruptive change.

where products for new automobiles and aftermarket parts
complement each other in terms of revenue. In the first half of the12

We are in the middle of a once-in-a-century transformation in the

Niterra Report 2023

Facing a New Globally Fractured Structure That

01

NiterraValue Creation

Niterra Value Creation

Message from the President

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

Leveraging an In-House Company System to Improvefor products for new automobiles in reaction to decreased auto

profit margin will be in the 16% range for the full year, and we plan

Responsiveness to Change, Strengthen Autonomous

production stemming from the shortage of semiconductors. In thefor annual dividends of 133 yen per share based on our policy of aManagement, and Bolster Governancesecond half of the year, we achieved higher revenue and profits

40% dividend payout ratio.

across all businesses with the resolution of semiconductor

We expect to achieve the revenue target of 600 billion yen in our

In April 2021, we adopted an in-house company system to clarify

shortages, a recovery in products for new automobiles sales, andmedium-term management in FY2023, one year ahead of schedule.

responsibility and authority as part of reforming our businesssettled demand for aftermarket parts.

Looking at each business segment, the internal combustion engine

infrastructure under our medium-term management plan. In April

The second factor, also in the automotive components, was ourbusiness is making steady progress in its key task: maximizing cash

2022, we launched a human resources system linked to thefocus on sales policies, commenced in FY2021, aimed at maximizing

generation. We expect our growing products for semiconductor

performance of each company. We believe these systems improvesales and profits. Instead of pursuing sales volume in a haphazard

manufacturing equipment business to drive demand in areas suchsensitivity and enhance motivation to act amid the fast-paced

way, we negotiated price increases in view of soaring raw materials

as power semiconductors over the long term. While special demandchanges in the market environment, leading to an increased ability tocosts and shifted to a strategy of expanding sales of high-value-in connection with COVID-19 appears to have ended for the time

adapt with price increases for products and other actions.

added products, including environmentally efficient precious-metalbeing in our respiratory equipment-related business, we expect sales

We established a new team in the headquarters Global Strategy

spark plugs, finding success in the aftermarket industry.

to increase with our November 2022 acquisition of MGC

Division specializing in specific areas including business portfolio

The third factor was the strong sales of components for

Diagnostics, a U.S. manufacturer of cardiopulmonary diagnostictransformation, M&As, strategic human resources, and sustainability.

semiconductor production equipment in our non-internal combustion

equipment.

This new team serves as a command post for the entire Niterra

engine business. We view these components as a growth business.

We have experienced delays in building new business due to certain

Group. Our aim is for each company to pursue autonomous and

The rapid weakening of the yen against the U.S. dollar also provided

external factors. However, Niterra Group company Morimura SOFC

agile operations, while strengthening governance and follow-through,a tailwind for our performance.

Technology Co., Ltd. began mass production in its fuel cell (SOFC)

particularly for important strategies related to the management of thebusiness in FY2020, and we expect this to be an area of high growth

Developing Favorably Received Ceramics Bearings Intogroup. We also plan to review the design of our human resourcesin the future, as hydrogen is attracting enormous attention in Japana New Pillar of Businesssystem for greater flexibility with an eye to changes in businessand other countries as part of national strategies toward achieving

performance and in the market environment.

carbon neutrality.
Our full-year forecast for FY2023 calls for revenue of 600 billion yen

More recently, we have high expectations for bearing balls, which are

and operating profit of 96.5 billion yen, both higher year on year.

a ceramic bearing component that utilizes silicon nitride. These

These forecasts take into account uncertainties in the global

high-performance products are becoming an increasing target of

economy and foreign exchange risks. In the automotive

demand in response to higher voltages in electric vehicles (EVs) due

components, we expect a recovery in sales, particularly for products

to light weight, lower heat generation, high rigidity, insulation

for new automobiles, in response to the resolution of semiconductor

properties, and corrosion resistance.

shortages. At the same time, we expect a temporary slowdown in

In addition, we have already launched Doctor Link, a connected

the market for products for semiconductor manufacturing equipment

preventive maintenance service for auto body shops that utilizes ourdue to the U.S.-led restrictions on semiconductor exports to China.

sales network and connected technology. We also market a waterIn response to the surge in energy prices stemming from the impact

quality sensing system for shrimp aquaculture that uses our sensingof the ongoing situation in Russia and Ukraine, as well as thetechnology to address issues faced by the primary industry. These

increase in labor costs due to inflation, we expect to raise prices byservices are beginning to show signs of traction.

13

15.3 billion yen across the entire group. We project the operating

Niterra Report 2023

year, sales of aftermarket spark plugs rose, despite sluggish demand

01

NiterraValue Creation

Niterra Value Creation

Message from the President

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

play a socially significant role in helping our repair shop andachieving carbon neutrality, we plan to install an experimental facility

distributor partners engage in new businesses. We are also

at our Komaki Plant (Aichi Prefecture) to test small-scaleconsidering scenarios in which services such as the aforementioned

methanation, which captures CO2 for reuse as fuel. We have other

Doctor Link will connect to our platform, leading to the creation oftechnologies that can be spun off, including CO2 capture technology,

other businesses that utilize the networks of other business partners.

and we continue with research to provide a variety of options for

Niterra will focus on certain business, giving them concrete form andcarbon neutrality.

connecting with promising business partners for mutual benefits. In
this way, we shift to see things as a whole, adding new value andCommunicating Our Commitment to the World Throughgenerating growth through Something New. We plan to create a

Our New Corporate Name, Niterra

series of successful experiences and find new business seeds in thefields of environment and energy, mobility, medical, andTo contribute to the sustainability of society, we must not only offer

communications.

products and technologies, but also communicate our philosophy
and ideas. As the world transitions to clean energy, we decided in

Remaining Two Years of our Medium-Term

In-House Venture System and Other Measures to

FY2023 to change our corporate name from NGK SPARK PLUG to

Management Plan

Support Employees Who Are Taking on Challenges andNiterra. This change demonstrates our determination to achieve ourContributing to Society

goals and define the path we take toward the future. The nameIncluding this fiscal year, we have two years remaining under our

Niterra Report 2023

Solidifying Our Foothold for the Next Step in the

Niterra combines the word niteo, meaning “to shine” in Latin, with
Just launching any new business is not enough. We must first ask

terra, our own word representing the Earth. In other words, the namemedium-term management plan beginning in FY2025, we are

Why Niterra? Why is it that Niterra must be the one to create this

Niterra reflects our desire to be a company that brightens the Earth.

shifting from a phase of broad approaches to new businesses to abusiness? From this perspective, we prepare other options for

In 2025, we plan to sponsor and exhibit at the world exposition Expophase of consolidation. We intend to concentrate resources on

businesses that could have social significance, but which are not2025 Osaka, Kansai, Japan. The theme of the expo, Designingbusinesses with a high degree of certainty, leveraging ourlinked to our core technology, addressing these businesses throughFuture Society for Our Lives, is highly compatible with our visioncompetitive advantage in ceramics-related technologies, building

internal ventures or other organizational structures. YORICOM Co.,

behind Niterra. We are preparing for the expo, hoping that ourmodels that produce results first of all. We hope to establish a

Ltd, a provider of digital communications services for the elderly

stakeholders will become more familiar with our businesses,

foothold for this next step between this year and next, presenting afounded in April 2023, is the result of a Niterra in-house venture. We

environmentally friendly products and technologies, and message.

road map for the next step during the period of the current medium-look to expand our circle of solutions to social challenges,

The power of our employees is the most critical element forterm management plan.

emphasizing relationships that include partnerships with otherachieving the transformation we envision and delivering sustained

From this perspective, one plan to develop a new business will utilize

companies and investments in spin-off companies.

growth. Every employee must embrace a strong desire to change. I

our global supply chain—including repair and parts shops. ThisAs one example of a new initiative to contribute to society, we

tell our people that failure is not a bad thing. Rather, the worst thing

global supply chain is a Niterra strength that stands shoulder toinstalled our solid-state batteries and conducted outer spacethat can happen is that nothing changes. If you take a wrong turn,shoulder with our technological capabilities. One example of thisproof-of-concept tests for the lunar lander for HAKUTO-R, a private

head in another direction as quickly as possible. Speed is the key.

model is offering our network as a platform for EV technology

lunar exploration program in which we participate. We will continue

We will embody the phrase in the NITTOKU BX action guideline,

systems to the IT companies and other entities entering the EV

to explore all the possibilities of solid-state batteries for the future ofchange with will, taking on new challenges without fear of risk. I

market at an increasing pace. Even after demand for internalsociety, identifying what we can offer, and continuing research on

encourage you to look forward to the new Niterra Group, and I ask

combustion engine-related parts peaks in the future, we may stillsolid-state batteries and battery materials (solid electrolytes). For

for continued support and guidance from you, our stakeholders.

14current medium-term management plan. In preparation for the new01

NiterraValue Creation

Niterra Value Creation

Priority Issues (Materiality)

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

The Niterra Group believes it is important to identify materialities under each area of ESG, setting medium- to long-term goals to address these materialities.
Therefore, we identified eight materialities to address by defining the market environments, stakeholder expectations, risks, opportunities, and activities that affect Niterra Group growth.

1

Understand the external environment

Steps to define
priority issues

STEP

Identify social requirements (issues) in reference
to the United Nations Global Compact, SDGs,
ISO 26000, GRI Standards, ESG surveys,
industry guidelines and other companies’
benchmarks.

2

Analyze and prioritize issues

We hold discussions among related departments,
conducting materiality assessment for stakeholders
in reference to international guidelines, etc., and ESG
surveys used in STEP 1, and for our company inconsideration of past activities and future management
plans, and create an assessment results map.

Social issues

Environment

Using the map made in STEP 2, we selectmaterialities of higher priority subject to discussions
within the CSR and Sustainability Committees,
attended by outside directors, and the approval of
the Board of Directors. We review these materialities
every year.

High

Short
term

●

Risk

Efficient use of CO2 for a decarbonized society

Opportunity

Effective use of renewable energy

Opportunity

Distributed power sources, and local production and consumption of energy

Opportunity

Biodiversity conservation

Risk

Opportunity

Stricter environmental regulations

Risk

Opportunity

Decline in the number of internal combustion engine vehicles

Risk

Expanding demand for automobiles in emerging economies
Change in people’s preferences regarding transportation means and consumption

Society

Opportunity
Risk

Expansion of the sensing field●

Governance

Opportunity
Opportunity

Diversification of human resources

Risk

Opportunity

Diversification of work styles and values

Risk

Opportunity

Well-being●

Opportunity

Opportunity

Respect for human rights

Risk

Diversification of management personnel

Risk

Stable procurement of raw materials

Risk

Geopolitical risks

Risk

Earthquakes and disasters caused by climate change

Risk

Implementation of compliance

Risk

Measures for information security (cyberattacks)

Risk

Opportunity

Medium
term

Long
term

15

Protectionism
Emerging economies● Disparities in society● Human rights●

Robots, automation, labor saving
Artificial intelligence (AI)● Sensing IoT● Nanotechnology● Biotechnology● Aging society with a decreasing
birthrate/Population explosion● Diversity● Work-life balance● Pandemic● Earthquakes

Importance to our company

Reduction of greenhouse gas emissions

International issues

Establishment of a society
where economic development andresolution of social issues are compatible

MediumPriority issues

Select priority issues

Niterra Report 2023

Climate change● Decarbonized society● Biodiversity● Environmental destruction

3

Risks and opportunities

Global environmental
issues
●

STEP

High

Importance to stakeholders

STEP

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NiterraValue Creation

Niterra Value Creation

Priority Issues (Materiality)

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

See P.44-45 Review of Priority Issues Activities for more details
Priority Issues

Environment

Reasons for Identification as a Priority Issue

Major Initiatives

Responding toclimate change

The impact of climate change, including the increased severity of natural
disasters, hinders the sustainable development of society. For this reason, theworld faces the common challenge of reducing CO2 and other greenhousegas emissions that cause climate change, while aiming to realize adecarbonized society. The Group also recognizes that reducing CO2
emissions from business activities and supply chains is an important issue.

Reduction of CO2 emissions

Providingenvironmentallyfriendly products

The earth’s resources are limited. To preserve the earth’s limited resources for
future generations, we must minimize the environmental impact of the
products and services used by the current generation. The Group has abird’s-eye view of the entire lifecycle, from when products and services areused to when they are disposed of. We will use that position to contribute to
the sustainable development of society by providing products and services
with lower environmental impact.

Dissemination and expansion ofenvironmentally friendly products

Sales ratio of wide range oxygen sensors:at least 50%▶ P.44

Dissemination of high-efficiency distributed power supply
systems with an eye on the use of CO2-free hydrogen fuel▶ P.44Development of applications forlead-free piezoelectric materials

Promoting substitution for lead-based
piezoelectric materials▶ P.44Development of sensing
IoT business

Improving operational efficiency through automation,
optimization and generalization▶ P.44

Carbon Neutral as a service

Establishing and introducing a synthetic fuel (methane)manufacturing system▶ P.44The Group acknowledges that employees are the most importantmanagement resources. We believe that respecting the diversity andindividuality of our more than16,000 employees around the world andcreating an environment in which each and every employee can play activeroles will lead to the development of the Group.

Promotion of employment of women,
foreign nationals, and careers

Percentage of female/foreign national/mid-career
employees in managerial posts: at least 25%

Examination of a
New Personnel System

Improved results of employee satisfaction surveys

To achieve sustained growth and improve medium- and long-term corporate
value, we believe that it is important to structure the Board of Directors with ateam of people from different backgrounds with a variety of expertise andexperience. We also focus on enhancing the supervisory function of theBoard of Directors and ensuring transparency in decision-making byimproving the percentage of outside directors on the Board of Directors.

Increasing the ratio of female andforeign nationals to directors

Percentage of female and foreign national directors:
at least 30%

Increasing the ratio of
external directors

Percentage of outside directors: at least one-third

The Group is committed to taking on the challenges of the world. We willcocreate and provide new value to help solve these challenges, so that we
can contribute to realizing a better society. The world faces various
challenges from climate change to food shortages. We continue to use ourtechnology and our accumulated experience to offer new value to people
around the world.

16

Corporate governance

Sales ratio of precious metal plugs:at least 50%▶ P.56▶ P.62

Risk management

In the modern era of dramatic changes in the environment surrounding
business, the risks that companies face are also diversifying. Responding torisks the wrong way could put a company’s survival at risk. The Group strives
to carry out risk management from day to day, so that it can enhance its
corporate value.

Management of serious incidents
signs and prevention of
their occurrence

Establishing a risk management system that
contributes to management decision making▶ P.73ComplianceTo develop the business of our Group, we must continue to be a company
that is trusted by society. With recognition that our Group is a member ofsociety, we aim to be a company that is trusted by all our stakeholders byappropriately meeting social demand.

Survey of employees’ awarenessand continuous education

Conducting compliance awareness surveys
and disclosing the results▶ P.74

Information security

Information technology is becoming more sophisticated every day, and wehandle a variety of information assets in our business. Meanwhile, as
cyberattacks and other risks increase, bolstering information security is key.
The Group will also enhance information security by positioning information
assets as one of its management resources. We will make effective use ofthem while protecting them appropriately.

Maintaining and strengthening
incident response organizations
and building preventive systems

Establishing an information security
management system▶ P.75GovernanceContribution to SDGs

▶ P.49Development of fuel cells

Society

Global humanresources management

CO2 emissions: 30% reduction
from the FY2018 level by FY2030

Reference Page

Niterra Report 2023

Development oftechnologies, products,
and businesses forcontributing to theresolution of social issues

Goals and Outputs

01

NiterraValue Creation

Niterra Value Creation

Accumulated Managerial Capital

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

Throughout our history of challenge and transformation, we have built a store of both financial and non-financial managerial capital.
Based on this managerial capital, we contribute solutions to social issues through our business activities,
aiming for sustainable enhancement of corporate value by maintaining and strengthening managerial capital.

Financial Capital

Encourage management for our
next stage of growth while aiming
to improve capital efficiency

Intellectual
CapitalApplied technologies, expertise,and innovative creation focusing
on core ceramics material
technologies and ceramics

Human Capital

A diverse base of self-directed
and creative human resources
who work independently
and generate new ideas

Social and
Relationship
CapitalA global sales structure
supplying products to more than145 countries around the world,collaborative relationships
with stakeholders

Natural Capital

Electricity, raw materials,
water resources, etc.,
required for business activities

69,305AA- (R&I)
AA- (JCR)

million yen

Bases in Japan

33

Capital Investment

Bases Overseas

59

million yen

Equity attributable toowners of the parent

62.4%

Interest-Bearing Debt

198,222

million yen

31,335

R&D Expense

27,887 million yen
R&D Expense Ratio

5.0%

Patents Owned

Open Innovation Centers

5,563

3

17

Production systems thatprovide stable, high-quality,and highly reliable products

Ratings

Niterra Report 2023

Manufactured
CapitalOperating Cash Flows

Ratio of Employees Overseas
Employees (Consolidated)

16,247

Distributors Association
Membership consisting ofapproximately 380 parts dealers;
Possible business relationships withnearly 80% of more than 70,000
maintenance shops across Japan

Approx.

46%

Ratio of Employees With Overseas
Secondment Experience

12.3%

Investments in Startups

19

Employees Participatingin DX Training

Number of Female
Managers

7,516

35

Global Sales Presence145

companies in total

countries

Electricity

Raw Material Input

Water Input

463,140,000
kWh50,000tons

1,610,000
m3

01

NiterraValue Creation

Niterra Value Creation

Business Model

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

Our history of Niterra spans over 80 years and started with the manufacture of plugs. Then, applying its core ceramics technologies, we developed anumber of businesses, and are currently accelerating business development in the Ceramics and the New Businesses to transform thebusiness portfolio, while maintaining high profitability in the core Automotive Components.

Automotive
Components

Businesssegments

Main products

Plugs

Strengths

Sensors■ Integrated production system,from materials development to manufacturing■ Unique sales channels around the world■ Ceramic material technology that canwithstand high-power plasma■ Ceramic sheet lamination technology that contributes
to surface temperature homogenization, low particles,
and wide-ranging surface temperatures

End-users

Value offered

Automobile and motorcycle
manufacturers

Automobile andmotorcycle users

Higher fuel economy

General purpose engine
manufacturers

General purpose engine users

Cleaner exhaust gas

Components distributors

Automobile industry

Contribution to a convenientmobile society

Semiconductor production
equipment manufacturers

Semiconductor industry
Communication industry

Enhanced performance ofsemiconductors
Contribution to a digital society

Rental operators

Home patients

Improvement of symptoms

Medical institutions

Outpatients

Higher quality of life

Electronic device industry

Higher performance ofelectronic devices

Ceramics

18

Automobile industry

Niterra Report 2023

Products for semiconductor
manufacturing equipment

Customers

Oxygen concentrators■ Product lineup including portable andstationary oxygen concentrators and cardiopulmonary
diagnostic equipment■ Worldwide sales channels for rental
operators and hospitals

Semiconductor packages■ Ceramic multilayer technology customized
for various applications

Semiconductor manufacturers■ High reliability with excellent heat resistanceand hermeticity

Semiconductor inspection
components manufacturers

New Businesses(SOFC)■ Short delivery times to meet customer needs

SOFC cell stacks

Assembly manufacturers■ Catalytic electrode and ceramic materials
technologies cultivated in the sensor business■ Disparate material bonding and film formation
technologies for highly efficient power generation■ Broad product lineup, from home use to industrial use

Automobile industry

Machine manufacturers

Power generation
business operators
PlantsData centers
Public facilities
Retail facilities
Households, etc.

Distributed power sources
BCP preparedness
Contribution to a
decarbonized society

01

NiterraValue Creation

Niterra Value Creation

Sources of Competitive Advantage① Technology and Development Capabilities

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

In our more than 80 years of history, we have cultivated a wide variety of applied technologies based on our core ceramics and ceramic materials technologies.
We aim to transform our business portfolio by strengthening and utilizing these technologies to create new businesses in four business domains: Environmental and Energy, Mobility, Medical, and Communications.

Products Developed by the Niterra Group

Plugs

Spark Plugs, Glow Plugs

Product Lines and Core Technologies

Technology
Spark Plugs

・Application technology for harsh environments
・Disparate material bonding technology

Oxygen Sensors,

Sensors

Ceramic Material
Technology

Knock Sensors

Technology
Oxygen Sensors

・Application technology for harsh environments
・Sensing Technology

LED Packages,

・Application technology for harshenvironments

Ceramic sheet lamination technology for transmitting
electrical signals while protecting semiconductors from heatand moisture, contributing to the IoT and next-generation
communication society.

・Application technology for harsh environments
・Disparate material bonding technology

Ceramic sheet lamination technology that provides durability anduniform temperature distribution in plasma and high-temperatureenvironments during semiconductor manufacturing. This technology
contributes to improved semiconductor production efficiency.

Technology

Automotive-Use Ceramic
Packages

Rapid and accurate sensing, even in the presence of severe
temperature changes and waste condensate in automotive
environments; compliance with strict emissions regulations.

Mobility

IC Packages,

Semiconductor
Packages

Environmental
and Energy

IC Packages

Niterra Report 2023

Core Technology

Temperature Sensors,

Ceramic material technology allowing engines to withstandhigh temperatures and high pressures.
Disparate material bonding technology for superior ignitability
and combustion efficiency to improve fuel efficiency.

Business Focus for the Future

19

SPE

MedicalElectro-static Chucks,
Vacuum Chucks

Oxygen Concentrators

Technology
Electro-static Chucks

Technology

Oxygen sensor, developed through the application of ceramic
sheet lamination technology, are installed to monitor safety
and contribute to improved patient quality of life.

・Sensing technology

Oxygen Concentrators

Communication*View our product introduction video for more on Niterra production technologies ▶ https://www.ngkntk.co.jp/english/corporate/advertising/

Commercialization Strategy Utilizing Our Core Technologies
To achieve the portfolio transformation we describe in our 2030 Long-term Management Plan “NITTOKU BX” , we intend tostrengthen our core technologies and create new businesses that leverage these technologies.
Specifically, we plan to establish a division (Scientific Research Laboratory Division) to explore and create industry-leading
and world-class technologies. At the same time, we will upgrade core technologies and create new core technologies fromTOPICS

Solid Electrolytes

We confirmed the stable operation of solid-state batteries
using our ceramic materials technology in the harsh spaceenvironment of the HAKUTO-R private lunar exploration

a medium- to long-term perspective to support our future.

program overseen by space startup company ispace, inc.

We established a new division in FY2023 (Business Implementation Division) to develop businesses leveraging our core

We will continue to develop materials that can be used intechnologies. This division will create new businesses rapidly by identifying technologies necessary to solve market issues

various harsh environments.

and collaborating actively with our Scientific Research Laboratory Division and other companies.

Medical01

NiterraValue Creation

Niterra Value Creation

Sources of Competitive Advantage② Global Production and Sales System

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

We established a global production and sales system that supplies products to more than 145 countries. Through this system,
we provide the same standard and high-quality products from anywhere on the planet in cooperation with Niterra Group companies around the world.
The sales channels we developed over the years for NGK Spark Plug have become the source of our revenue.

Favorable Balance of 80%-Plus
Overseas Sales

Sales Conducted Through 33 Offices in Japan 59 Offices Overseas,
and in 145 Countries and Regions

Sales ratio

Sales Offices

Manufacturing Centers

Technology Centers

North America

Beginning with our entry into Brazil in 1959, we
have steadily expanded our overseas sales
channels ahead of other Japanese companies.

Asia

Today, we operate 33 manufacturing and sales

Europefacilities in Japan, with another 59 corporate

23%

entities. Our solid global production and sales
system provides high-quality products

22%

25%

18%

Niterra Report 2023

companies, technical centers, and otherJapanworldwide. We developed sales channels to
distribute products not only to car

20

manufacturers in Japan and overseas, but also
to repair and parts shops. These channels
contribute to sales of our products in both the
new car assembly and repair parts markets.
We believe we operate a well-balanced
business across the world, with overseas sales
accounting for more than 80% of total sales.

TOPICS

Other

4%

Latin America

8%

Employee Comments

Account Executive
OEM sales

Account Executive, OEM Sales, Niterra do Brasil Ltda.
Throughout my more than 35 years at Niterra, I have been building a solid
relationship with the company. Besides professionalism, I strive to apply
dedication and love to overcome the challenges of everyday life. I value theteamwork and effective communication I witness every day and I’m proud of theresults it brings us. Being recognized and respected by the company motivates
me and it is essential for performance improvement. I am heading in the same
direction as Niterra: seeking evolution, innovating, and ensuring success. I am
happy to be part of this story.

Deputy General
Manager,
Plant Operation

Deputy General Manager, Plant Operation Niterra Asia Co., Ltd.
Quality!!! Word most powerful of business sustainability. Quality related to every
single minute of our life, our work. To build the best quality of our work, it is notother persons’ responsibilities. But it is ours. We are production people, every stepof our work we put quality be a path of our standard. In Thailand, we focus on frompeople’s knowledge & skill to the compliance with their work. Focus on process &product quality control. Continuous improvement of quality and productivity byimplementing new technology that is developed by our people. Our goal is that wewant customers satisfied with our quality product when they use it.

01

NiterraValue Creation

Diverse Human Resources That Support Our
Competitive Advantage

Niterra Value Creation

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

Having a diverse group of self-disciplined creative human resources who can work and create independently is essential for us to take advantage of our competitive edge and change drastically beyond the current way.
We are pleased to introduce the diverse human resources that actively support our competitive advantage in the field.

We challenge ourselves to go
beyond the boundaries andcreate new business on our own.

J・I, IGNITE Company

Y・T, Business Implementation Division

N・I, Mobility Business Company

I am responsible for spark plug technical strategy department. Our

I am involved in the development of ceramic materials (oxide-based

I develop new businesses in the area of mobility. By doing this, I

strength is in our production and sales sites in Japan and overseas. We

Li-ion conductive solid electrolytes) for use in solid-state batteries, one

combine the strong assets we have cultivated in our automotive

are also involved in automotive parts other than spark plugs, so we haveof the next-generation of storage batteries. We use ceramic material

business, our global production and sales system, for example, withaccess to the opinions of automakers and customers around the worldtechnology cultivated from making our mainstay spark plug products

my own strengths in digital marketing and other skills I cultivatedfrom a variety of perspectives.

and exhaust gas oxygen sensors.

through being seconded to a venture company. Creating new

We formulate policies from a wide viewpoint based on market trends,

The solid electrolyte material we developed has the highest level ofbusinesses requires the ability to think and formulate hypotheses

including CO₂ emission reduction technology for internal combustion

Li-ion conductivity among oxide-based materials. When used in

independently, moving forward even when the correct answer mightengines. As an example, a new CO₂ emission reduction technology

batteries, this material is expected to exceed the performance of

not be clear. The task is difficult, but I am excited by the challenge ofmeant that spark plugs were exposed to an even harsher environment,

current Li-ion batteries. Since joining the company, I have worked

verifying hypotheses and finding the correct answer. It is extremely

which required new considerations. We were forced to broaden our

mainly on the development of solid electrolytes. At first, my work was

rewarding to imagine that the services I develop will help customers

perspective to include exhaust and environmental regulations, inmostly academic in nature, giving presentations at conferences andsolve their problems. I was seconded to a venture company for aaddition to the traditional ignition purpose of spark plugs. In so doing,

so on. But recently, I have been doing more work at trade shows andyear beginning in 2021 to learn the skills and mindset for creating

we made decisions on development based on whether this could

showing our products to customers. My desire to see the materials

new businesses. This program is just one way in which our company

become a new mainstream technology, which led to an enormous

we develop used in batteries is one aspect of my work that makes it

fosters a culture in which employees can challenge themselves

sense of accomplishment.

worthwhile.

without being bound by conventional ways of thinking.

The automotive industry is undergoing a once-in-a-century

Batteries are made up of a complex combination of material functions

To achieve the business portfolio transformation described in thetransformation, and the internal combustion engine is facing resistancewithin a device. Even a material offering high Li-ion conductivity cannot

2030 Long-term Management Plan “NITTOKU BX”, I hope to expandin the midst of a trend toward EVs. However, many people in the world

be used in a battery on its own. In addition, each customer has their

the mindset, network, and skills I have gained through my past

still need vehicles that use internal combustion engines. We will continue

own battery concept, and uses for solid electrolyte materials andexperiences to create new businesses and continue to challenge

to provide spark plugs that contribute to the global environment andperformance requirements differ. As an engineer dealing in ceramics, I

myself. Further, I hope to be part of a movement in which allsociety by considering the type of spark plugs required in a society thatwant to build my own technical expertise to meet the requirements of

employees work actively together to create new businesses beyond

is striving to reduce CO₂ emission and carbon neutrality througheach customer and make this material a key material in the highly

the framework of their own departments.

improved fuel efficiency.

competitive battery market in the future.

21

We want to make the materials
we develop into key materials
for the battery market.

Niterra Report 2023

We continue to create
spark plugs that contribute to
the Earth and society.

01

NiterraValue Creation

Niterra Value Creation

Dialogue

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

Representative Director,
President, andChief Operating Officer

Takeshi Kawai
Member of the Board(Outside Director)

Member of the Board(Outside Director)*

Chiharu Takakura

Morihiko Otaki

What is the source of Niterra’s strength and competitive advantage in creating disruptive change toward 2040?
A discussion among Takeshi Kawai, representative director, president, and chief operating officer, and two outside directors sheds light on this issue.

Strengths as a Pioneer inand get to the bottom of these issues.

maintaining a constant supply and growing globally, all in parallel.

Core Ceramics Technology

Otaki Looking back over more than 80 years of history, I think

This solid foundation is an absolute strength for Niterra.

Niterra is one of the few companies in the world that can boast

Kawai Since our founding, we have taken on the challenge of

Kawai Disruptive change is our vision for 2040. Under our long-term

continued business growth while developing such a wide range ofdeveloping technologies based on our core ceramics technology.

management plan, we continue to take on the challenge of creating newcomponents and businesses centered on spark plugs and sensors.

We have created a wide range of products, including spark plugs,

value that contributes answers to social issues and to transform our

The company’s strengths as a pioneer in core ceramic materials

sensors, and other products for internal combustion engines that webusiness portfolio. What is our competitive advantage in fostering

technology and in applied technology businesses are the significant

continue to improve and evolve. We are proud to say that we have achange? What are our strengths in human resources that support ourfactors behind this success.

competitive advantage in the field of “evolution through expansion.”core assets? To gain an understanding of and know the expectations of

Takakura Niterra has been part of an automotive industry that has

The question we must ask is, Why Niterra? Why are we creating that

our stakeholders, as well as to take stock of the source of our strengths,

driven the Japanese economy for a long time. And the company

new business? We believe ceramic technology will be at the center

I met with two of our outside directors to hear their objective opinions

continues to take on the challenge of technological innovation,of the next disruptive change from the standpoint of differentiation.

* This three-way dialogue was conducted in May 2023. Mr. Morihiko Otaki retired on June 27, 2023.

22

Unlocking the Source of Disruptive Change

Niterra Report 2023

Dialogue: The President and Two Outside Directors

01

NiterraValue Creation

Niterra Value Creation

Dialogue

Our global sales network could be utilized
as a new business.

Growth Strategy

Foundation for
Value Creation

features as giving us a competitive edge.

Global-Scale Sales Network

Takakura So Niterra has the foundation to compete in sectors

New Business Possibilities

Company Information
and Data

demanding high-function, high-value-added products.
actually run without spark plugs and sensors. This is a valuable

have high rigidity, offer electrical insulation, and provide highnetwork for responding to the different needs of each region.

corrosion resistance, but they are expensive and difficult to mass-

Kawai I agree completely. We are looking for ways to utilize thisproduce. However, in addition to conventional applications invaluable asset for new business. For example, we may be able tomachine tools and elsewhere, demand for these bearing balls hasoffer our sales network to IT companies and other non-automotive

increased recently in response to the high voltages of electriccompanies that enter the EV market at an accelerated pace in thevehicles. With this demand as a tailwind, we can differentiate our

future. This could have a high social significance, as it would allow

products in terms of materials and manufacturing methods torepair shops and distributors who have helped us in the pastdevelop these bearing balls into a next pillar of our business.

continue their business without pulling down the shutters, even after

Otaki In this respect, one of Niterra’s strengths is the company’s

the demand for internal combustion engine parts disappears in theability to leverage ceramics in providing a one-stop service fromfuture.

Engaging in Materials Research and Development

materials research to completed products, including combinations of

Otaki After all, if automobiles remain as a means of transportation,

Competing With High-Performance,

different materials. What about the company’s sales network? Niterraeven though the form may change, people will still sell cars and cars

High-Value-Added Products

has 59 overseas locations*, not only manufacturing centers but also

will still need maintenance. There is still tremendous potential formany sales companies.

real-world platforms, not just online platforms. The perspective of

Otaki Components for semiconductor manufacturing equipment,

Kawai In the past, it seemed like every neighborhood had at least

combining real and virtual is also interesting.

fuel cells, and other products in our non-internal combustion engine

one community-based electronics shop. It’s the same in our case,businesses that use ceramic materials technology are already onjust worldwide. There are probably few areas in any country where

Creating a Paradigm Shifttrack, and Niterra is expanding into the medical field as well. Is there

you won’t see an NGK spark plug sign. Due to the nature of ourThrough Positive Self-Denial

still room for the future of ceramic materials and related

products, we develop sales channels to ensure that our products

technologies? And in which fields can they be applied?

reach not only car manufacturers, but also repair and parts shops.

Kawai We believe so. For example, when comparing resins and*As of March 2023

Kawai To create a paradigm shift that breaks with conventional
wisdom and is based on our strengths in core technologies, sales

ceramics, ceramics cannot win in terms of versatility and cost.
However, ceramics have many strengths, including excellent heat
resistance, electrical insulation, durability, and corrosion resistance.

We have established Venture Labs in Tokyo,

Ceramics also have many applications, including household goods,

Silicon Valley, and Germany as bases for global

industrial products, and semiconductor products. The compound
annual growth rate of the ceramics market has grown steadily overthe past several decades. We expect demand to continue to grow in
the future. Moreover, we see the high demand for applications inhigh-performance and high-value-added products with many

open innovation. We prepared an area in the
exhibition space to introduce our coretechnologies where visitors can experience our
products using augmented reality (AR).

23

Takakura No matter how much the online market grows, a car cannot

that is highly functional. They are lightweight, generate less heat,

Niterra Report 2023

Kawai Silicon nitride bearing balls are a ceramic bearing component

01

NiterraValue Creation

Niterra Value Creation

Dialogue

network, and other assets mentioned earlier, we must change themindset of our employees and our corporate culture. We are

A Major Evolution Over the Past 10 Years.

beginning to see positive changes in response to a range of actions

What Are the Keys to Transformation

we have taken, including hiring diverse human resources, introducing

Over the Next 10 Years?

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

I believe that the honesty andseriousness of Niterra’s human resources arevaluable assets in manufacturing.

an internal company system, and upgrading the HR system. These
director. Compared with when I first joined in June 2013, I feel thetake on new challenges.

company has changed dramatically. Spectacularly, even. In the past,

Takakura A paradigm shift requires a perspective that questions thethe corporate culture would have been one of caution. Forgetobvious. For companies that have experienced success, this is a major“looking before you leap.” People wouldn’t leap no matter how safe

challenge that you could call a “success trap.” I have been impressed

it looked. Now, people engage boldly in new activities, moving on toby the seriousness of the company’s human resources since I became

the next step if things don’t work out. The company is also

an outside director in June, 2021. I believe that honesty, accuracy, andcollaborating with other companies and conducting mergers andimportant. If Niterra can break through to this point, I expect that theeven being stern are core assets that are hard to come by, especially inacquisitions proactively. The number of highly skilled, career-oriented

company will achieve an amazing transformation in the span of the

manufacturing. Making a jump to the next stage based on these assets

employees with different values and backgrounds is increasing. In

next 10 years.

depends on whether an organization can engage in positive self-denial.

the meantime, the internal combustion engine business, our core

Kawai Listening to the both of you, I have a renewed awareness of

Can an organization understand its own strengths, while tearing downbusiness, continues to grow, and this business seems to haveour company’s strengths and challenges. Our strength is to act inthose strengths to reach the next level? Even the Niterra medium-term

almost all the people, things, and money it needs. Now it is up to theunison and accelerate forward when we open a path. We will

management plan references Break to change. Change to create. as acompany to find the seeds of business and create a market. To

continue to collaborate proactively toward this end, but first, weslogan. One of the keys to a paradigm shift could be the capacity tocreate a paradigm shift, alliances with companies with completely

must deliver one or two more successes, and then move with our“enjoy” positive self-denial.

different strengths and human resources will become increasingly

vision for 2040.

I expect the company to undergo an amazing
transformation over the next 10 years.

The new office building N-FOREST symbolizes the Changing Niterra. Thisbuilding introduces various new initiatives and facilities, and will serve as thebase for promoting our transformation, digital transformation, new ways ofworking, and creating innovation.

24

Otaki It has been approximately 10 years since I became an outside

emergence of a corporate culture that encourages employees to

NITERRA Report 2023

changes include an increase in the speed of reform and the02

Niterra Value Creation

Growth Strategy

2019

Renovating
FY2013 to 2015

FY2016 to 2018

Evolving

Delve into existing
business and seek
new business

Launch new products
or new business

Develop existingand new businessat an accelerated rate

2030

2030 Long-term Management Plan “NITTOKU BX”▶ P.262040

Backcast(from FY2020 to FY2029)“Transformation of Our Business Portfolio” for Growth

Real Value

7th Medium-Term Management Plan

Medium-Term Management Plan
(4 years)

Medium-Term Management Plan
(5 years)❶ Strengthen current businesses❷ Establishing new business pillars❸ Establish strong business infrastructures

Break to change.
Change to create.

Extend for the future.
Spread out to exceed.

Respect Dokuritsu Jiei.
Start from scratch.

To foster a new corporate culture,
we will work toward sustainable growth.

Niterra in 10 years(from FY2010)● A distinguished monozukuri company ● A highly profitable company● A progressive company ● A human “assets” company

Operatingincome ratio

15

ROE

% or more(FY2022: 15.9%)

12% or more(FY2022: 12.3%)

2040
Vision25

Delving

FY2010 to 2012

2025

2023

Change drastically beyond
the current way

ROIC

Beyond ceramics, eXceeding imagination% or more

For the solution of various social issues,10

we need to search for a new way of doing(FY2022: 8.6%)

business by thinking beyond “WhatManagement Innovation (DX)Clarification of Responsibilities
and Authority

Priority Issues (Materiality)

Environment

Society

Willful Cultural Change▶ P.16

ceramics can do.” We aim to meet thechallenge of going “beyond ceramics” and“exceeding the imagination” of society andourselves, thereby changing “drasticallybeyond the current way” in 2040.

Governance

Niterra Report 2023

(from FY2010 to FY2019)

Company Information
and Data

In FY2020, Niterra formulated the 2030 Long-term Management Plan, called NITTOKU BX,
deeming 2030 as a milestone year for the growth of the company over the next two decades.
The 2030 Long-term Management Plan “NITTOKU BX” consists of three Medium-term Management Plans: the 7th Medium-term Management Plan (the lastyear of which was the first year of the Long-term Management Plan), a four-year medium-term management plan and a five-year medium-term management
plan. We will put more specifics to this 10-year plan as we work together to achieve our 2040 Vision.

2020

Long-term Management Plan “NITTOKU SHINKARON”

Foundation for
Value Creation

Long-term Management Plan

2040 Vision and the2030 Long-term Management Plan

2010

Growth Strategy

02

GrowthStrategyLong-term Management Plan

“NITTOKU BX”

Niterra Value Creation

Growth Strategy

Changes in the external business environment

Company Information
and Data

Guiding principle

According to these graphs, which forecast the sales volume of new automobiles and the numbers ofvehicles in operation
around the world, the number of automobiles with internal combustion engines will!"#$!$%&'()*+ ,-./012345 6&'()*+789:
continue to increase
until around 2030. However, in the middle of the 2030s, the number will peak and!"#$%&'()*+,-./01234567
begin to go down. We therefore need to shift to a business structure that does not rely on the sales of!"#$%&'()*+,-,./01234567869:;<=>?@;
products used
in internal combustion engines by the middle of the 2030s.
!"# of units)(MillionsFoundation for
Value Creation

In our Long-term management plan, we have upheld “Change with Will !!” as the guiding principle,
meaning “with a strong commitment (“Will”), we will foster “Change” for coexistence with society andpeople”. We aim to reform our organizations and business structure with speed to make our company
one that can coexist with stakeholders from a global perspective.

!"# of units)(Millions

Equipped with internal
combustion engines

Niterra Report 2023!"-.'()*+,
Number of automobiles
owned around the world!"#$%&'()*+,
Worldwidesales of new automobiles

Source: Forecasts made by Niterra based on data provided by IHS Markit Automotive through its “Mobility and Energy Future” service;<=>?@%ABCDEF
GHFIJIFEKL7MAINEOEFP%BQR%SQLCTP%UHFHCLV%W,XYZ,[\]^_`abcd*Forecast at the time of formulationof the Long-termManagement
Plan (2020)!

!"#$%&'(#$&)*"$+,-.$)/0-$'11$(23456$(767897:

26

Transformation of the business portfolio

Business fields to focus on

We have currently doing business with a focus on internal combustion engines (ICE), however in the
future, we need to be involved in more than ICE business and embrace the challenge of starting new
businesses to transform our business structure. Specifically, as the 2040 targets, we aim to decrease theproportion of ICE business in our total sales revenue from the current 80% to 40% while raising that of
non-ICE business from the current 20% to 60%, thereby transforming our business portfolio. To achievethese targets, we will decrease the ratio to 60% and increase the ratio to 40 % for ICE business andnon-ICE business, respectively, as milestone targets for 2030 under the 2030 Long-term Management
Plan “NITTOKU BX.”

We are focused on both existing and new businesses in four fields: Environment & Energy, Mobility,
Medical, and Communication. Our core competence includes materials technology, sensing technology
and a global production/sales system. We will add “Something New” to these to create new value andfoster “Open Innovation” both internally and externally, thereby achieving further growth in four fields.
Energy and environmentally friendly

Fun and convenient mobility■ Use sensing technology that improves industrial efficiency■ Supply stable renewable energy■ Services to meet the needs of users’ lifestyles■ Improve electricity with ceramic components

Environment &EnergySales revenue composition
750.0

billion yen

60%■ Non-ICE business

40%

2020

(when preparing Long-term Management Plan)

Bring advanced medical care topeople all over the world■ Non-invasive diagnosis and treatment,
provision of preventive equipment and services

20%
80%

60%

2030

MobilityCore
Competence*billion yen(Forecast)

426.2■ MaaS to meet special needs

40%

2040

MedicalCommunication

High-speed communication toconnect the real and the virtual■ Support high-speed communication and its infrastructure■ ICE business(Year)*Ceramic material technology, application technology in harsh environments, disparate material bonding technology, sensing technology, rapid high-temperature heating technology,
and global production and sales system

02

GrowthStrategyLong-term Management Plan

Niterra Value Creation

Strategy

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

Transformation of Our Business Portfolio for Growth
As the mainstay of the Long-term Management Plan, we will foster
the transformation of our business portfolio. As for ICE-related
business, we will be able to expand revenue and operating income

Sales revenue composition■ ICE business■ Growth business■ New business

until 2030 in line with an increase in the number of ICE-equipped
automobiles. However, in anticipation of the business environment in

1%
10%

17%

2040, we need to pursue rationalization, higher efficiency andselection and concentration. As part of this initiative, we have shifted

FY2019to an in-house company system in April 2021, while somedepartments were spun off. With more clarification of responsibilities

Secure profit while transforming thebusiness portfolio

30%

FY2029(Forecast)82%

and authorities, we will transform ourselves with speed. In new

60%

ICE businessSuper efficiency and cash generation

Growth business

Drastic development exceeding
market growth rate

New businessSelecting and choosing theme andcommercializing cutting-edge themes
Niterra Report 2023

businesses, we aim to achieve a business value of 200 billion yen by
2030, working to achieve growth in each area for sales andprofitability. We aim to turn these businesses into our profit pillars in
2040, although their operating income margin might still be low inthat year. We will increase efficiency in our ICE-related business withthe growth businesses and achieve a profit growth rate that is higher
than the market growth rate for these businesses. For the new
businesses, we will strictly screen the themes to be continued,
thereby revitalizing the new businesses. In order to promote this kindof business portfolio transformation, it is essential to achieve thefollowing three aims: management innovation (digital transformation),clarification of responsibilities and authority, and willful cultural

Specific measures
1

Management Innovation (digital transformation)〉〉Small, strong and agile head office to support thetransformation of our business portfolio〉〉Quick management decisions supported by DX

27

a focus on making profit, use the cash gained in that business for

FY2029 management target
The 2030 Long-term Management Plan “NITTOKU BX” indicates the
midway milestone for our 2040 Vision. Under this plan, we strive forbusiness portfolio transformation, clarification of responsibilities andauthority, and investment in new businesses. In line with the guiding
principle, Change with Will!!, which should be followed by all
employees, we will achieve Beyond ceramics, eXceeding imagination

Clarification of Responsibilities and Authoritychange. We will break our dependence on ICE-related business2

based on this recognition.

〉〉Clarification of authority and responsibilities to promote thetransformation of our business portfolio〉〉Build an optimized structure and system for each business

3

Willful Cultural Change〉〉Undertake culture reform and strengthen the Group’ s abilities

to be reborn as a new Niterra Group. For the management targets
for FY2029, we aim to achieve an operating income ratio of 15% or
more, ROE of 12% or more, and ROIC of 10% or more.

Operatingincome ratio

15% or more(FY2022: 15.9%)

ROE

12

% or more(FY2022: 12.3%)

ROIC

10

% or more(FY2022: 8.6%)

02GrowthStrategy

Niterra Value Creation

Medium-term Management Plan

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

In our Medium-term Management Plan, we will work on zero-based reforms to achieve our 2040 Vision and the 2030 Long-term Management Plan “NITTOKU BX,”
which will be the milestone for the vision. Here we explain the overview.

VisionSpecific target

PolicyKey Initiatives

Achieving change beyond thecurrent way

To transform of our business portfolio, we will maximize cash generation in current businesses
and proactively allocate management resources optimally to growth and new businesses.

Each company ensures its
competitive advantage and practice Dokuritsu-Jiei
Transformation of business portfolio

Business strategy

Run on two wheels while current andnew businesses operate independently

Promote investment in non-ICE business andconversion of human resources
Measures

Achieve accelerated business growth

Determine an appropriate business scale and maximize cash generation
through ultra-efficiency

Growthbusinesses

Achieve business growth that exceeds market growth rateNewbusinesses

Realize new businesses pillars and shorten business creation cycle

Niterra Report 2023

Introduce individual systems and performance-based
compensation systems that match the business environment

ICE businessMaximize the cash-generating capacity of the plug and sensor businesses

28

Cross-company operations

Further strengthen earning power through ROIC management〉〉Invest in non-ICE business〉〉Promote transformation of human resources portfolio

Value creation

Contribution to society
to be accomplished〉〉Strengthen earning power through ROIC management

Break down the barriers of conventional thinking with NITTOKU DX
Transform all aspects of Nittoku culture, including management decisions,business domains, work styles, and corporate climate

Improve business activities and start new businesses torealize a sustainable recycling society
Set and implement sustainable business operation goals

Performance Goals
We aim to achieve revenue of 600 billion yen and an operating income of
100 billion yen in the fiscal year 2024, the final year of our 2025 Medium-term Management Plan.

FY2020Previous Medium-termManagement Plan
Final-Year Results

FY2021
Medium-termManagement PlanFirst-Year Results

FY2022Medium-termManagement Plan
Second-Year Results

FY2023Medium-termManagement Plan
Third-Year Forecast

FY2024
Medium-termManagement Plan
Final-Year Forecast

FY2029 targets

750.0

Revenue(billions of yen)

427.5

491.7

562.6

600.0

600.0

Operating income(billions of yen)

47.4

75.5

89.2

96.5

100.0

-

Operatingincome ratio

11%

15%

16%

16%

17% or more

15% or more

Non-internal
combustion revenue(billions of yen)

88.9

103.4

118.6

111.1

150.0

300.0

with our plan under a greater sense of urgency to recoup progress over the remaining two years of our

ROIC

6%

8%

9%

9%

10%

10% or more

Medium-term Management Plan.

ROE

9%

13%

12%

12%

13%

12% or more

Due in part to the depreciation of the yen, we expect in general to achieve our Medium-term Management Plan
target of 600 billion yen in revenue and other indicators in fiscal 2023, one year earlier than the final year of ourplan. If we achieve these targets ahead of schedule, we intend to establish new indicators. At the same time, we
encountered delays in creating new businesses, but results began emerging in fiscal 2022. We will move forward

02

GrowthStrategy

Medium-term Management Plan

Niterra Value Creation

Specific Initiatives

Growth Strategy

Foundation for
Value Creation

ROIC improvement drivers

Efforts to Improve Capital Efficiency
Regarding the ROIC management that was not fully in place throughout the Group during the period of the previous
Medium-term Management Plan, we have identified priority measures that should be undertaken to improve investment
efficiency. We will achieve 10% or higher ROIC by subdividing the challenges and responsibilities that must be undertaken
at individual businesses and monitoring KPIs. We will continue to work on increasing our market share in high-value-

Medium-termManagement Plan
TargetCost of sales ratio

10

Operating income ratio% or more
Medium-termManagement Plan
Target

ROIC

engine business over the medium to long term. In particular, during the current Medium-term Management Plan, we will
focus on the following priority measures: Cost reduction in indirect departments, review of unprofitable businesses by
setting rules for business withdrawal, and reduction of inventories by optimizing the supply chain.

KeyMarket
initiatives
forincrease
improvement
share
in

Cost of sales ratio

Market share increase in
Cost
reduction
in ofindirect
departments
Improvement
equipment
andhigh value-added
products
labor productivity

SGA
ratio
Revenue
SGA ratio

ROIC

added products, improving equipment and labor productivity as well as reducing fixed assets in the internal combustion

ROIC improvement drivers

Operating income ratio% or more

Return on invested
capital (%)

Working
capital
Revenueturnover (%)

Return on invested
capital (%)

Revenue
Working capital
Fixed asset turnover (%)
turnover (%)
Working capitalturnover (%)
Fixed asset turnover (%)

Return on invested
capital (%)

Points of Focus During the Current Medium-term Management Plan 2025

Points of Focus During the Current Medium-term Management Plan 2025
Fixed asset turnover (%)

As part of our initiatives to transform the business portfolio, we introduced an in-house company system in April 2021. We
have introduced this system not only for business departments but also for functions at headquarters. The organization
Division and Business Partner / Company, and a small number of strategic staff are assigned to the Global Strategy
Division. The organizational structure is designed to position each business and function as an independent pseudocompany. Through this organizational change, each company receives internal capital allocated by the headquarters, andwill be responsible not only for PL, but also for BS and CF, thereby clarifying responsibility for return on investment as well
as a decision to invest. In addition, the responsibilities and authorities, which were ambiguous in the past under thedivision system, will be clearly defined; for example optimizing the structure and rules to match the standards of theindustry to which each company belongs. The Global Strategic Headquarters will promote global group management andPoints of Focus During the Current Medium-term Management Plan 2025

Traditionalorganization
Traditionalorganization
Corporate

DomainCorporate
DomainCorporate
DomainDivisions

Divisions
Divisions

Corporate
division from April 2021
New organizations
Global Strategy Division
New organizations from April 2021
Corporate division
Global Strategy DivisionCorporate
divisiondepartment
Business support
Business
PartnerDivision(BP) / Company
GlobalStrategy
Business support department

Improvementof equipment
andReviewof unprofitablebusinesses
laborforbysettingrulesbusiness
withdrawal
Cost
reduction
inproductivity
indirect
departments
Reduction of inventories
Cost
reduction
in indirectbusinesses
departments
Reviewof unprofitableby optimizing
the supply chain
by setting rules for business withdrawal
Reviewof unprofitable
Reductionof fixedbusinesses
assetsReductionof inventories
by setting
rules
in thefor
ICEbusinessbusinesswithdrawal
by optimizing the supply chain
Reduction of inventories
fixed
assetsby Reduction
optimizingof
thesupplychain
in the ICE business
Reduction of fixed assets
in the ICE business

Roles〉〉Planning of company-wide strategies〉〉Enhancement of global governance

Roles〉〉Promotion of business portfolio transformation throughoptimal allocation of management resources〉〉Planning of company-wide strategies
governance〉〉Business withdrawal/continuityRoles〉〉Enhancement of global governance
Planning ofofcompany-wide
strategies
Promotionbusiness
portfoliotransformation
through〉〉tothe maximizationof company-wide
earning capacity〉〉Contribution
allocationof management
resources
Enhancementofgovernance〉〉〉optimalAdvancementof global
the services
provided〉
Business
withdrawal/continuity
governance〉〉
Promotionof business
transformation〉〉〉Cost
reduction
throughportfolio
efficiency
improvement through〉optimal allocation of management resources
Improvementof thecompany-wide
earning
capacityearning capacity
maximization ofcompany-wide〉〉Contribution to
Business
withdrawal/continuity
governance〉〉contributed by Business Partners (BP) / Company〉〉Advancement of the services provided
Contribution
to
the
of
company-wide
earning capacity
Cost
reduction
efficiency
improvement〉〉
ofthroughthemaximization
abilityto adapt
tochanges by introducing〉〉Improvement
Advancement
ofcompany-wide
the services
provided
Improvement
capacity〉〉systems
and ofstructures
tailored
toearningeach market
environment.
contributedbyBusiness
Partners(BP)/
Company
reduction
efficiency
improvement〉〉CostAchievement
ofthrough
KPIs andKGIs at eachcompany

BusinessPartner
department
Business(BP) / Company
Business support department
Business company/spin-off
Business Partner (BP) / Company
Business department

Improvement of company-wide earning capacity〉〉Improvement of the ability to adapt to changes by introducing
contributed by Business Partners (BP) / Company
systems and structures tailored to each market environment.

Business company/spin-off
Business department

and KGIsat eachcompany〉
Improvement ofof KPIsthe ability
to adaptto changes
by introducing〉〉〉Achievement
systems and structures tailored to each market environment.

Business company/spin-off〉〉Achievement of KPIs and KGIs at each company

accelerate the maximization of the business value according to its business position under the policy of Dokuritsu-Jiei.

Business Portfolio Management
We will strengthen business portfolio management by setting hurdle rates for each business segment. Assessing thebusinesses using the two axes of growth potential and investment efficiency, we determine the future direction. KPI andKGI are set for each company after defining expected roles based on rating in accordance with each company’s positionin the market.

Investment
Investment
efficiency
Investment
efficiency efficiency

Disclosure segments
Generation of FCF(Investment
minimization)

Revenue expansion
Achieve higher
profitability(Enhanced investment)

Revenue expansion
Generation of FCF
Achieve higher(Investment
Revenue
profitability
Withdrawal
minimization)
expansion(Enhanced
investment)
Revenue structure
Revenue
expansion
Generationof FCF(Ascertainment
reformAchieve higherof(Investment
futuredirection)
profitability
minimization)(Enhanced investment)
Revenue
Withdrawal
expansion
Revenue structure(Ascertainment ofreform Growth potential
futuredirection)
Revenue
Withdrawal
expansion
structure
BusinessRevenue
continuity/withdrawal(Ascertainment ofreformexamination flow
▶ P.30 future direction)
Growth potential

Business continuity/withdrawal
Growth potential
examination flow
▶ P.30Business continuity/withdrawal
examination flow
▶ P.30Automotive
components
Disclosure segments

ICE business

Disclosure segments
Automotive
components
GrowthCeramics
businesses
Automotive

ICE business
ICE businesscomponents

Medium- to long-term direction
Enhance cash generation andaim for even higher profits

Medium- to long-term direction

Enhance
cash generation
andto long-term
Build a Mediumprofitablestructurethat isdirection
resilient to changes
aimforexternal
even higher
profits and expand sales
in theenvironment
Enhance cash generation andBusiness scale growth exceeding the market
aim for even higher profits
growthrate and improvement
Builda profitablestructure thatofisprofitability
resilient to changes
in the external environment and expand sales

Growthbusinesses
New
Growthbusinesses
businesses

Ceramics
Newbusinesses
Ceramics

NewbusinessesNewbusinesses

Builda profitablestructurethat is resilient
to changes
Businessscale growth
exceedingthe market
Discovernew businesses thatwill be thesales
pillars ofin the external
andgrowthrate andenvironment
improvement
ofexpandprofitability
new businesses and build scenarios for commercialization
Business scale growth exceeding the market
growth rate and improvement of profitability
Discover new businesses that will be the pillars of
new businesses and build scenarios for commercializationNewbusinessesNewbusinesses

Discover new businesses that will be the pillars of
new businesses and build scenarios for commercialization

29

that used to be a part of the headquarters or functional headquarters has been reorganized into the Global Strategy

New organizations from April 2021

Improvement of equipment andlabor productivity
high value-added products

Niterra Report 2023

Introduction of an In-house Company System

Traditionalorganization

Market share increase inhighvalue-added
products
Key
initiatives
for improvement

Operating income ratio

Medium-term% or moreManagement
Plan
TargetKey initiatives for improvement

ROIC improvement drivers

CostSGAof salesratioratio

10ROIC
10

Company Information
and Data

GrowthStrategy

Medium-term Management Plan

Specific Initiatives

Business Continuity/Withdrawal Examination Flow

Niterra Value Creation

Growth Strategy

Matters considered

Strategy Department, a revitalization plan will be formulated under the● Decision as candidate, rating of business for
Corporate Strategy Department

Board of Directors

Matters consideredview. Finally, the Global Strategy Division assesses these plan in respect● Decision as candidate, rating of business for
Corporate Strategy Department
Business plan formulation and evaluation●Examining business direction● Appointment of new company presidents
Plan A

Board of Directors
Business Company● Formulation of business plan

Business plan formulation and evaluation
Plan A
Plan B

Business Company● Formulation of business plan
● Reconstruction plan by M&A

Global Strategy Divisionof probability, thereby enabling us to implement the best businessboth the Global Strategy Division and Corporate Strategy Department
have with outside human resources to establish a system that enables
rational decision-making.

● Study of business sale,Plan
B restructuring and withdrawalinternal

Global Corporate
Strategy Strategy
Division
Department

Continuous monitoring interms of both quantitativeand qualitative aspects● Reconstruction plan by M&A● Study of business sale,● Management audit of business planinternal restructuring and withdrawal

Corporate Strategy
Department

Continuous monitoring interms of both quantitativeand qualitative aspects● Management audit of business plan

Niterra Report 2023

strategy from multiple perspectives. We strengthened the organization of●Examining
business direction
Businessplan decision● Appointment of new company presidents

new company president. Simultaneously, the Corporate Strategy
Department formulates another revitalization plan from a different point of

Business plan decision

Unprofitable businesses

judge whether to continue or withdraw from unprofitable businesses. In
the event that a company comes under the organization of the Corporate

Company Information
and Data

Unprofitable businesses

The Corporate Strategy Department formulates and executes either theBusiness Revitalization or the Withdrawal or Sale of Business plans toFoundation for
Value Creation

JudgmentJudgmentof businessof withdrawal/continuation
business withdrawal/continuation

02

30

Business Partner (BP) / Company Aims

Improvement of Company-wide Profitability by Introducing Business Partners (BP) System

Providing market-competitive, high-value-added services

Business Partner (BP) / Company aims at providing high-value-added

Business Partner (BP) / Company Aims

services that are market-competitive in order to contribute to

Providing market-competitive, high-value-added services

enhancement of the business companies’ profitability. By introducing thein-house company system, we were able to visualize the costs of each

Implementation process

Implementation processorganization and its contribution to the business, which have been

Procurement / Accounting / Human Resources / Labor / IT /General Affairs/ Intellectual Property
Management / Quality
Control / Environmental
SafetyFY2021
FY2022
FY2023
FY2024difficult to come to surface. Also, the services will not be evaluatedbased on internal standards, and will be compared with those of market.

Grasp

By grasping the service levels of other companies and identifying areas

Understanding the current situation

for improvement, we will improve the quality of our services step by step,

FY2021and at the same time, we will expedite cost reduction by separating
services with high added value from those that should pursue higher

Procurement / Accounting / Human Resources / Labor / IT /General Affairs / Intellectual Property Management / Quality Control / Environmental Safety

Improvement of expertise+efficiency.

Cost ofreduction
Improvement
expertise+
Cost reduction

Grasp

ChangeBusiness improvement
FY2022

FY2023

Expansion

Expansion of range
FY2024

Improvement● Achieving both maximization of operational● Raise BP’s awareness of being a profit center● Identify problems and implement● Recognize the current situation of our● Strengthen professional skills by educatingby watching its own income statement
countermeasures
department, comparing with the service level
employeesof other companies and make improvements● Continuation of business evaluation and● Start preparing for external sales
improvement● Improve professional skills by educating
employees

drastic measuresin the eventof
that
service● Achieving
both maximization
operational
improvement and cost reduction cannot be
efficiency
improvementof quality
achieved andduringthe medium-term
management plan period● Raise BP’s awareness of being a profit centerby watching its own income statement● Continuation of business evaluation andimprovement● Recognize the current situation of ourdepartment, comparing with the service levelof other companies
make improvements
Understanding
theandcurrent
situation

ChangeImprovement

Improving the quality of service● Strengthen professional skills by educating
employees

Business improvement● Identify problems and implement
countermeasures● Start preparing for external sales● Improve professional skills by educating

employees the quality of service
Improving

Expansion

efficiency and improvement of quality

Expansion of range● Consideration and implementation of● Consideration and implementation of
drastic measures in the event that service
improvement and cost reduction cannot be
achieved during the medium-term
management plan period

02

GrowthStrategy

Niterra Value Creation

Digital Transformation

Overview of Niterra DX

each layer of this plan to transform our operations, business, and existing concepts.

Transform all aspects of culture, including management decisions,
today
NiterraDX
business Innovate
domains, work
styles, withand corporate
climateTransform all aspects of culture, including management decisions,business domains, work styles, and corporate climate① IT Infrastructure to Support Transformation

Transforming
operations
Transforming
operations

We will establish flexible, secure, and safe IT infrastructure to support the digital transformation of the Niterra Group, encourage synergies between businesses, and support new business growth.

② Human Resources to Support Transformation
change and innovation through education and proactively embraces and utilizes digital technology.

We will introduce various work styles in both offices and factories, as well as pursue higher business efficiency through the▶ Transformation of partner and customer contact pointsof new businesses
in using
areas materials
of Environment,▶ Creation
development
informatics▶ Materials
Energy,Mobility, Medical,
and Communicationof partnerand customer contact points▶ Transformation▶ Creation of new businesses in areas of Environment,
Energy, Mobility, Medical, and Communication

business decisions▶ Facilitation of business replacement with AI

use of data and AI to speed up various decisions and encourage business replacement.

We will create businesses that contribute to achieving a sustainable society based on Niterra Group ceramic technologies
cultivated to date.

〜2023

〜2024

〜2025

Building a foundation for transformation

Transformation of operations

Transformation ofbusiness andculture
〜2025

〜2023

Road to Transformation〜2024

Building a foundation for transformation

Niterra DX divides the execution steps of our basic strategy into three phases, implementing themes and KPIs foreach layer. We will use this period through 2023 to build the foundation of our transformation. Currently, we arefocusing on strengthening the IT infrastructure and human resources that will support our transformation. Once weTransformation of operations

Transformation ofbusiness and culture▶ Partial application of material informatics

Transformation ofbusiness
Transformation ofbusiness▶ Transformation of customer▶ Creation of new businesses
contact points
utilizing our assets▶ Partial application of material informatics
contact
points (procurement▶ Transformation of partner▶
Transformationof customerplatform)▶ Creation of new businesses
contact points
utilizing our assets

Transformation of
Operations
Transformation of
Operations▶ Commencement of data analysis platform ▶ Completion of Smart Factory Model Plant▶ PSI Optimization System (Japan)*1▶ Global PSI Optimization System▶ Partial application of remote factory work
▶Location-free office work (60% at home)▶ Commencement of data analysis platform ▶ Completion of Smart Factory Model Plant

Human resources tosupporttransformation
Human resources tosupporttransformationof partner contact▶ Transformation*1
Systempoints(Japan)(procurement
PSI Optimization System▶ PSI Optimization▶ Globalplatform)

work(60% atof
home)▶Location-free office▶
Formation
COE Team*2
Partialapplicationof remote factory work
▶COE
Team
▶ Formation of Global▶ Implementation of basic▶ Implementation of basic DX training
DX training ▶
(company-wide)(expertresources:of100
personnel)
Global
COE Team*2
Formation of COE Team
▶ Formationof basiccreation of▶
Implementation of basic DX training▶ Implementationof DX human resources,a framework▶ Definition and Education
DX training (company-wide)(expert resources: 100 personnel)

framework
system upgrade, completion of initial model▶ Definition and Education of DX human resources, creation of▶aCoreIT infrastructure to▶ Completion of security enhancement measures
support▶ Development of IT grand design▶ Core system upgrade, completion of initial modeltransformation
IT infrastructure to ▶ Improvement of IT investments▶ Completion of security enhancement measures
support▶ Development of IT grand designtransformation*1 PSI: Production(P), Sales (S), Inventory (I)▶ Improvement of IT investments*2 COE: Refers to consolidating management resources, such as talented human resources, expertise, and facilities scattered throughout the organization (within thecompany) in one place as a cross-functional structure to achieve company objectives and goals*1 PSI: Production (P), Sales (S), Inventory (I)*2 COE: Refers to consolidating management resources, such as talented human resources, expertise, and facilities scattered throughout the organization (within thecompany) in one place as a cross-functional structure to achieve company objectives and goals

31

Foster company-wide IT literacy anddevelop core human resources
Foster company-wide IT literacy anddevelop
core humanresources to support
Establish flexible, safe,
and secure
IT infrastructure
the digital transformation of the Niterra Group
Establish flexible, safe, and secure IT infrastructure to support
the digital transformation of the Niterra Group④ Transformation of Business

Representative Director President
Chief Operating Officer

Create business that contributes to a sustainable
society through ceramic technology
Create business that contributes to a sustainable▶ Materials development using materials informatics
society through ceramic technology

Niterra Report 2023

includingfor factories
PSI Optimization▶ Globalmanagement,
accelerateand▶ Real-timeof remoteworkmanagement
infrastructure,▶ Establishment
businessdecisions
includingfor factories
ofbusinessreplacement
withAI▶ Facilitation▶ Real-time management, accelerate management and③ Transformation of Operations

Takeshi Kawai

Transforming
business
Transforming
business

Achieve diverse work styles
Pursue higher efficiency
Achieve diverse work styles▶ Global PSI Optimization
Pursue higher efficiency▶ Establishment of remote work infrastructure,

We will develop educational programs for all group companies and core human resources to foster a culture that is open toWe, the Niterra Group declares that we will promote Niterra DX as our management strategy to transformthrough digital technology, contribute to a sustainable society, and achieve our goals set in the mediumto long-term management plan.

Company Information
and Data

Achieving change beyond the current way
Innovate today with Niterra DX

established in the Niterra Group medium- to long-term management plan. We will establish basic strategies for

Declaration of Niterra DX Promotion

Foundation for
Value Creation

Achieving change beyond the current way

We formulated Niterra DX as our vision to promote digital transformation (DX) and to achieve our vision and goals

establish a solid foundation, we will begin implementing operational, business, and cultural changes.

Growth Strategy

02

GrowthStrategy

Message from the Finance Officer

Niterra Value Creation

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

We will improve capital efficiency throughrigorous ROIC management and makeinvestments for future growth while assessing
payback potential.
Kenji Isobe, Executive Officer

In addition, the semiconductor production equipment business has“trees” and taken the initiative to improve every indicator for improving

outlook

exceeded the targets set in the medium-term plan, and is growing as

ROIC, such as inventory and fixed asset turnover, and is working toachieve their targets. As mentioned above, awareness is steadily

By business, spark plugs for repair supported our performance evenincreasing within every in-house company of the need for independence

Medium-term Management Plan. In FY2022, despite an environment ofamid the COVID-19 pandemic and the increasingly severe shortage ofand self-management. These companies are also managing their ROIC

soaring raw material prices and disruptions in the supply chain, we

semiconductors. In non-internal combustion engine businesses, thetargets with keen awareness. I strongly feel that these awareness-raisingachieved record-high revenue for the sixth consecutive fiscal year andsemiconductor production equipment business performed well due toefforts are taking root in all of our businesses.

record-high operating income for the second consecutive fiscal year.

favorable semiconductor market prices.

In the current medium-term plan, we are particularly focusing on threeThough buoyed by a cheaper yen, our performance was still largely

However, some areas still require more effort. For the creation of new

methods to improve ROIC: reduction of inventories, cost reduction inpositive in and of itself, with earnings exceeding the plan in the past two

businesses, a major pillar of our medium-term plan, we have done wellindirect departments, and review of unprofitable businesses.

years. We are on track to achieve our revenue targets in the medium-in planting the seeds for new businesses, and some have begun to● Reduction of inventories

term plan in FY2023, one year ahead of schedule.

sprout. Still, at this point we are not yet convinced that these sprouts will

In FY2022, the COVID-19 pandemic and heightened global geopolitical

Overall, we are making steady progress on the initiatives outlined in thelead to future growth pillars, and we have yet to demonstrate the way

risks resulted in logistical disruptions and other problems. Even under

medium-term plan, including the introduction of the in-house company

forward here to our shareholders and investors. This is the biggest

these circumstances, we were forced to secure enough inventory tosystem and other structural changes. Even before many companies

challenge we have faced in the past two years, and we are determined

fulfill our supply responsibilities to customers. Naturally, this had abegan moving to pass on higher raw material and energy prices, weto take the next steps to tackle it.

negative impact on ROIC, but we were able to minimize the overall

had been taking the time to solidly negotiate with our customers to passon price changes. These negotiations were successful and had aimpact on ROIC by taking responsibility to provide a stable supply to our

ROIC management

positive effect on our earnings. I believe that the introduction of thecustomers, boosting revenue.
As the COVID-19 pandemic begins to pass and logistics are stabilizing,in-house company system and the spread of ROIC management had

Our ROIC management is infused with a strong desire to further

we intend to return our inventories to effective levels over the remainingsome positive effect as well in this. In my opinion, the reason we were

improve profitability as well as capital efficiency. In addition to focusing

two years of the medium-term plan, while continuing to take intoable to smoothly pass on price changes was because each in-houseon business-specific ROIC management to ensure the achievement ofaccount the risks involved.

company worked with a sense of independence and self-management.

company-wide ROIC targets, each in-house company has set up ROIC

32

the next earnings pillar in non-internal combustion engine businesses.
We have marked the close of FY2022, the second year of our 2025

Niterra Report 2023

Review of the medium-term management plan and future

02

GrowthStrategy

Niterra Value Creation

Message from the Finance Officer

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

For our shareholders and investors● Cost reduction in indirect departments

acquisitions, we are also investing for growth in our existing automotive

Our selling, general, and administrative expenses are on the rise, partly

and semiconductor production equipment businesses. Nevertheless, as

due to the increase in revenue. Although it is difficult to reduce overhead

the officer in charge of finance, I intend to reexamine the strategic

We view the return of profits to shareholders as one of the mostcosts due to the need to address ESG and other social requirements,

investments we have made over the past two years to see if they are

we believe that it is essential to reduce overhead costs in pursuit ofconsistent with the growth investments defined in our medium-term

economies of scale. Therefore, from FY2023, we have set a cap on

plan. While the medium-term plan sets a cumulative investment cash

selling, general, and administrative expenses, both company-wide andflow of 390 billion yen, the goal is not to exhaust the investment limit.

important elements of our management policies. Our basic policy is to
M&AInternal
maintain an annual dividend payout ratio of 40%, but we will remain
combustion
InvestingOperatingflexible while taking into account the required amount of capital.
cash flows
cash flows
New
Growthand390 billion
yenour shareholders
yenthe expectations
To date,410
we billion
have metof you,for each in-house company, and are monitoring allocation and progress.

For instance, we do not intend to invest in high-risk, low-return projects,

investors, by achieving high profitability and stable cash flow. ThroughMeanwhile, we intend to make solid investments in areas matching oureven if they are new businesses, and we need to strike a balance with

dialogue with you, we have also communicated the future growth

medium-term plan strategies, such as the creation of new businesses,

M&As of existing businesses. During the remaining two years of theutilization of digital transformation (DX), and enhancement of human

medium-term plan period, we will proceed with a firm assessment of

Shareholder
returns
potentialof our automotive-related
businessand our business strategy,(Dividend payout ratio: 40%)
Borrowings, etc.

capital, while carefully monitoring cost-effectiveness.

future investment payback potentials and make decisions on whether or● Review of unprofitable businesses

not to invest based on our asessment.

Since formulating the medium-term plan, we have prepared rules for

Our financial soundness has received a degree of strong evaluations

withdrawing from unprofitable businesses, including the establishmentfrom external rating agencies, and we will continue to make investmentsof a business continuity/withdrawal examination flow. Specifically,

while maintaining an appropriate equity ratio. We recognize that ourwhether or not a business receives continues investment going forward

equity ratio is slightly above appropriate levels, and we believe that we

depends in part on the two axes of growth potential and ROIC for theshould allocate some of our resources to investment projects for futurebusiness. In FY2021, we decided to withdraw from some products ingrowth, even if it means a slightly lower equity ratio, combining this withthe medical business. For businesses that have fallen under our rules for

fundraising as necessary. Although the level of liquidity on hand as ofwithdrawal, we constantly monitor and attempt to revitalize these. If weMarch 31, 2023 has increased due to temporary factors, we will

determine that revitalizing a business would be unreasonably difficult,manage these levels under a basic policy of raising the necessary

our rules dictate that we explore withdrawal from and/or selling theamount of funds when needed.

Supervisory Committee, business withdrawal is now a topic of regular

Strategic investments and financial strategy

Investingcash flows
390 billion yen

Internal
combustion

businesses, but that does not mean that we have not invested in
growth over the past two years. In addition to several mergers andBorrowings, etc.
80 billion yen

GrowthShareholder returns

Dividends per share

166
102
70

70

FY2018FY201960

FY2020133128*(For a dividend
payout ratio of 40%*)

FY2021

FY2022

FY2023 (forecast)*The dividend amount is linked to the profit attributable to owners of the parent,
excluding one-time gains or losses arising outside of ordinary business activities.

unreasonably give the impression that our company dealt with internal
combustion engines alone. This could have prevented investors fromIn order to further improve our reputation, it is of the highest importance for
us to clearly state the progress of new businesses in concrete terms andshow a solid path toward the transformation of our business portfolio.
We look forward to continuing to earn the trust and meet the(Dividend payout ratio: 40%)

100 billion yen*Cash flow plan is based on assumptions at the time the medium-term plan was formulated.

Interim dividend: 83 yen
Year-end dividend: 83 yen

Dividends per share

Interim dividend: 83 yen
Year-end dividend: 83 yen(Maintaining dividend forecast from Oct. 28, 2022)

overseas from beginning an investment relationship with us.

New

Further growth investments

As mentioned earlier, we have been a little delayed in investing in new*Cash flow plan is based on assumptions at the time the medium-term plan was formulated.
earnedus some recognition in the form of improved PBR.

that the former company name, NGK SPARK PLUG, would
M&A

Operatingcash flows
410 billion yen

billion80 billion
yenwhich aims
to maximize
residual100
profit.
Weyenfeel that these efforts have

Niterra as of FY2023. The change was made in consideration of the fact

Cash out

discussion with the Board of Directors engaging in medium- to longterm discussions more often.

Further growth investments

In addition, the English name of the company has been changed toCash flow plan
Cash inCash out

33

rule is that, following the transition to a company with an Audit andCash in(Maintaining dividend forecast from Oct. 28, 2022)

166

expectations of our shareholders and investors as we strive tosustainably improve our corporate value.

Niterra Report 2023

business. One of the reasons for this strict application of the withdrawal

Cash flow plan

02

GrowthStrategy

Niterra Value Creation

Business Strategy
Automotive Components Group

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

KGI (2025 Medium-term Management Plan)

Looking Back on the Second Year of the 2025 Medium-term Management Plan
we aim to maximize revenues and raise prices appropriately incircumstances such as the COVID-19 pandemic and the

response to ongoing inflation. We will additionally improve profitability

semiconductor shortage. We implemented flexible price increases as

and advance our environmental contribution by reducing CO2

needed and steadily improved profitability in response to the risingemissions by further increasing the global ratio of precious metals.

cost of materials, especially precious metals. We saw a steady andIn preparation for the expected peak in inflation, we will reducereliable increase in the ratio of precious metal plugs, a high-value-

inventories by integrating part numbers and enhancing the orderadded product, in developed countries such as North America andmanagement system. The plug business has supported ourEurope as well as in emerging countries. Ratios in China, however,company, and as such we will proactively implement various

remained flat due to COVID-19-related effects such as theirmeasures to ensure residual profit while fulfilling our obligation to

lockdowns.

supply the markets.

Precious metal plug ratio by region andcommercial distribution (FY2008-FY2022)
Developed Countries

55%

For new car assembly

82%

(FY)
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

*Developed Countries: North America, Europe, and Korea

StrengthIntegrated production system from material
development to manufacturing
Unique sales channels around the world

Emerging Markets

24%

50%

7%

times

Precious metal plug sales
volume composition by region(FY2022 Actual)

83%

20%

1.5

(compared with the amount for FY2020)

For aftermarket parts

China

37%

Free cash
flows

1%

Emerging
Markets

16%

67%

China
6%
(FY)

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

5%

(FY)

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

*Emerging Markets: ASEAN, India, Central and South America

Developed
Countries

34

In the remaining two years of our medium-term management plan,strengths of our plugs for the aftermarket even under special

Annual average
growth rate:

Niterra Report 2023

For the past two years, the plug business has demonstrated the

Operatingincome ratio

02

GrowthStrategy

Niterra Value Creation

Business Strategy
Automotive Components Group

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

Looking Back on FY2022
Compared to last year, revenues of aftermarket parts in the plug

Revenue and operating income ratio

business fell drastically in the first and fourth quarters due to the(Billions of yen)

impacts of the lockdown in China. However, overall revenues rose by
14% due to the recovery in the shortage of semiconductors in

Revenue

products for new car assembly as well as higher unit sales prices
after price hikes.
Revenues in the sensor business rose by 15% due to increased
sales following the recovery of the semiconductor shortage andOperatingincomeratio

automobile production, similarly to the plug business. Our current

443.9

19.2%
387.7

billion yen

137.7

21.0%

250.0
2021
Revenue

443.9

22.3%
488.9

158.8

285.1
2022

170.6

Revenue composition

318.2

78.9%

2023

(Forecast)（FY）

Operating income ratio

volumes but also to expand sales and raise prices of our high-valueadded products, such as precious metal plugs. Through these
efforts, we are exploring sales policies that will maximize sales andSales volume and amount by region (vs FY2021)

Plugs

Regioncompared to the previous year due to the significant decline in

OEM

AM

Sensors

Plugs
OEM

AM

Sensors

motorcycle and general machine sales. On the other hand, the sales
volume and amounts of plugs for both new car assembly andNorth America

+4.0%

-4.6%

+6.6%

+18.2%+2.1%

Europe+7.6%-13.3%(+2.6%*)+12.4%+14.7%（+9.3%*）

+8.3%

China

-10.6%-13.7%-11.4%-8.6%-10.5%-11.0%Southeast Asia

+10.8%-7.5%+32.9%+10.5%+10.4%+26.0%

Global Total

+3.5%

-7.1%

+6.1%

+13.3%

+0.8%

+6.2%

aftermarket parts are comparatively increasing due to our proactive
efforts to raise prices in response to soaring precious metal prices.
The overall operating income for the Automotive Components Group

-2.0%

+9.1%

additionally increased due to higher sales volumes, price increases,
and higher sales prices resulting from increased precious metal
ratios. As a result, yearly operating income reached a record high.

* This excludes the effects from Russian corporations, which were previously included up until the results of FY2021.

35

Base sales volumes in fiscal 2022 show a downward trend

Sales Amount (excluding effects of exchange rates)

Sales Volume

profits.

Niterra Report 2023

medium-term management plan aims to not only increase sales■ Plug business■ Sensor business

21.0%

02

GrowthStrategy

Business Strategy
Automotive Components Group

Niterra Value Creation

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

External Environment
Sales forecast through FY2040
Decarbonized society
The importance of tackling climate change has increased substantially during the past few years, and governments around the world have been
moving swiftly to become decarbonized societies. The automobile industry is in the midst of a once-in-a-century period of radical transformation,

Plugs for new car assembly
Nickel plugs for aftermarket parts
Precious metal plugs for aftermarket parts

Assumptions for sales amount・Estimated based on the average unit price in FY2022
・Estimated assuming that the current market share remains constantwith automakers developing electric vehicles (EVs) as nations move with greater speed toward electrification in order to reduce CO2 emissions.

Total Global Sales

Amid this trend, we revised our sales forecast through 2040. Although growth in the OEM market will peak around 2020 or 2030, we expect thatChina

the market will continue to expand in FY2040, even in the Chinese market where the shift to EVs is relatively advanced. On the other hand, we
expect strong growth for precious metal plugs and nickel plugs for aftermarket parts. We also expect the global market as a whole to movegenerally in the same way as the Chinese market going forward, even with some differences in the fiscal year.
Stricter environmental regulations
We are also expanding our share of the market for exhaust gas oxygen sensors, in response to growing demand resulting from the global
two-wheeled vehicles, as these regulations expanded to now cover two-wheeled vehicles. The need for sensors that meet regulations is also
increasing, and sensors that require technical skills are in demand in addition to typical oxygen sensors that have been mainstream until now.
Sensors that require technical skills are more technologically advanced such as wide-range oxygen sensors capable of measuring oxygen

FY2016FY2020

FY2025

FY2030

FY2035FY2040FY2016FY2020

FY2025

FY2030

FY2035FY2040concentration in exhaust gas more precisely as well as NOx sensors capable of measuring nitrogen oxide.

Niterra Report 2023

tightening of environmental regulations. The demand for sensors that control amounts of fuel injected increased for both automobiles and36

VisionOutlook for FY2023

Market share expansion in high value-added products

Planning in anticipation of market recovery

Against the backdrop of these rapid moves toward decarbonization, the need for electrically-powered vehicles that offer high levels of

The plug business plans revenue of 318.3 billion yen in Automotive Components Group,

fuel efficiency, such as HEVs and PHVs*1, is increasing. Our range of spark plugs include the regular nickel type as well as precious

which is a 33.2 billion yen increase from the previous year, in response to the recovery ofmetal types, which are highly fuel efficient. The precious-metal spark plugs are said to offer fuel efficiency that is around 2% higher thanautomakers and the semiconductor shortage. We expect a full-fledged recovery from thethe regular types. Precious-metal spark plugs already account for around 40% of sales, and by replacing regular nickel spark plugs withthird quarter.

them, it would be possible to achieve a significant improvement in fuel efficiency. By selling precious-metal spark plugs, which help

This revenue plan anticipates a recovery in the Chinese markets, which had been in aboost fuel efficiency, we will meet the needs of the market.

depression due to their Zero Covid Policy in 2022 and the post-COVID-19 lockdown

Like spark plugs, exhaust gas oxygen sensors now need to be high-value added products with a stronger environmental contribution.

resulting from the spread of the virus. Our business activities will naturally promote the switch

Compared with regular oxygen sensors, our next-generation oxygen sensors and wide-range oxygento precious metal types and pass on the cost of appropriate labor and materials tosensors can contribute to reduced CO2 emissions through more precise measurement of oxygen concentrations, and they therefore allow

customers.

compliance with strict environmental regulations. Although HEVs and ZEVs*2 are expected to increase over the medium to long term, thisThe sensor business plans 170.7 billion yen in revenue, an 11.8 billion yen increase from thedoes not mean that ICE equipped vehicles will disappear immediately. Because it is important to reduce CO2 emissions during the transitional

previous year. Similarly to the plug business, this plan anticipates that the semiconductor

period of electrification, we will continue to provide high value-added products to the market and contribute to the environment.

shortage will be resolved and that we will see a full-fledged recovery from the third quarter.

We aim to maximize investment effectiveness by concentrating investments on high-value-added products like these spark plugs andWe expect operating income in Automotive Components Group to increase by 16.0 billion

exhaust gas oxygen sensors. We will also maximize cash generation through the expansion of our share of the market for high-profit-

yen from the previous year to 109.3 billion yen, mainly in the sensor business, due to themargin products. Finally, we will curb increases in inventory by enhancing productivity as well as identify supply chain issues such as

recovery in sales of products for new car assembly. This forecast also takes into account the

procurement, manufacturing, logistics, and sales on a cross-organizational basis. Through these efforts, we will clarify our

soaring costs and inflation of materials and other items, as well as factors in price increases

responsibilities and make efforts to reduce inventory.

for products for the aftermarket.

*1 Hybrid Electric Vehicle (HEV) Plug-in Hybrid Vehicle (PHV)*2 Zero Emission Vehicle (ZEV): Electric vehicles or fuel-cell vehicles that have zero emissions.

02

GrowthStrategy

Niterra Value Creation

Business Strategy
Ceramics

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

SPE
KGI (2025 Medium-term Management Plan)

Revenue

ROIC

35.0
17

billion yen%

Strength

Looking Back on the Second Year of the 2025 Medium-term Management Plan

Ceramic material technology that canwithstand high-power plasma
Revenue

Demand for components for semiconductor production equipment

Orders rates of stationary oxygen concentrators are dropping due tobegan declining in the fourth quarter due to a slowdown in the

declining demand and excessive customer distribution inventories.

memory market and the impacts of trade friction between the U.S.

On the other hand, demand for portable oxygen concentrators is

and China. However, both revenue and operating income increased

recovering, although production became limited by a shortage inyear on year due to strong capital investments from the global

parts. As such, sales were slightly down in the oxygen concentrator

demand for semiconductors.

business compared to the previous year, even with our businessIn fiscal 2022, we additionally met our fiscal 2024 revenue andexpansion and acquisition of MGC Diagnostics in fiscal 2022 andoperating income targets set in our medium-term management plan.

their positive contributions.

Market demand for newly developed products is strong, and we are

Operating income also decreased from worsening cost ratios caused

preparing to further expand our business.

by higher prices or purchased parts and the impact of lower sales in
the oxygen concentrator business.

%

Group Companies

Revenue

NTK CERATECROIC%KGI (2025 Medium-term Management Plan)
Revenue

Operatingincome ratio

Revenue and operating income ratio

billion yen

37

Medicalbillion yen

30.0
13

billion yen%

Strength
Revenue

Operatingincome
ratio

110.7

billion yen

9.9%(Billions of yen)

95.4
15.4%

110.7

101.4

Revenue composition

19.7%

9.9%
2.5%

2021
■ Revenue

2022
Operating income ratio

2023(Forecast)(FY)

Niterra Report 2023

SPE

30.0
13
35.0
17
MedicalCeramic sheet lamination technologythat contributes to surface temperature homogenization, low
Operatingincomewide-ranging
ratio
particles, andsurface temperatures

Product lineup including portable and stationary oxygen
concentrators and cardiopulmonary diagnostic equipment

Worldwide sales channels for rental operators andhospitals
Group Companies

NTK Medical, CAIRE, etc.

02

GrowthStrategy

Niterra Value Creation

Business Strategy
Ceramics

External Environment

VisionSPE

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

Outlook for FY2023
SPE

SPE

This policy will contribute to meeting the growing demand for etching devices

We expect markets to slowdown for products for semiconductor

sluggish in the second half of fiscal 2022, particularly due to the recession

in both the memory and logic markets by providing ceramic material

manufacturing equipment from fiscal 2023 to 2024 mainly centeredfrom memory surpluses, the effects of the U.S.-China trade conflict, andtechnology that can withstand high-power plasma. We will additionallyaround products for memory use. As such, we also expect sales ofthe lockdown in China. These impacts are expected to continue throughcontribute with our technologies for surface temperatures homogenization,

electro-static chucks to decline. However, we handle both electro-static

fiscal 2023, with external research organizations forecasting a 19%

low particle counts, and wide-ranging surface temperatures, all of which arechucks, a stacked product strong in technologically advanced products,

decline year on year in market growth. On the other hand, medium- tobased on our strength technology in ceramic sheet stacking technology. In

and bulk ceramic, which is applied to conventional products. We expect

long-term market needs in the memory market call for high-rise 3D NAND

this way, we aim to achieve an annual sales growth rate of 12% bybulk ceramic products to offset the negative impact from electro-static

devices. As such, the formation of minute yet deep memory holes, indifferentiating ourselves with our technologies that meet customer needs. We

chucks, thus preventing revenue from being negatively impacted. We also

other words, the etching process, made possible with high-power plasma

additionally aim to increase labor productivity by 30% compared to fiscal 2021

expect operating income to decrease due to declining electro-staticis important. As a result, the etching device market is expanding. Demandby establishing a production system that is resistant to market fluctuations

chucks in high-end products, as well as a deteriorating product mix due

for etching devices is also increasing in the logic market, as a result of

through optimizing inventories and improving facility operation rates.

to an increase in bulk ceramic products.

multi-patterning technology, which breaks down lines produced with asingle exposure into even finer, multiple patterns.

2020

2021

2022

2023 (Forecast)(FY)

Sales Revenue Trends

2020

2021

2022

2023 (Forecast)(FY)*Source: External research organizations (December 2022)

MedicalThe global market for oxygen treatment is expected to continue toexpand as the population ages and the number of COPD sufferers
increases, such that the projected size of the market in 2025 is 200 billion
yen. In regional terms, the North American market is currently the biggest,and the number of patients is expected to continue rising, and we believethat demand for portable oxygen concentrators, in particular, will rise. And
in the Chinese market, an increase in the number of people with COPD is

MedicalIn the past, the respiratory business focused on the oxygen concentrator

In fiscal 2023, we expect an increase in sales due to expanding sales ofbusiness for rental operators and patients. However, CAIRE Inc’s

portable oxygen concentrators, regardless of the demand for stationaryacquisition of MGC Diagnostics late last year enabled the company tooxygen concentrators remaining sluggish due to excess inventory in thegain a product portfolio of cardiopulmonary diagnostic equipment and a

distribution system. Revenue is expected to increase significantly

sales channel for medical institutions. Going forward, we will aim tocompared to last year with the addition of the revenue from our acquired

provide comprehensive solutions for respiratory patients, such as thosecompany, MGC Diagnostics. Similarly, we expect operating income towith COPD and asthma. We will additionally aim for further growth of ourincrease significantly year on year due to sales growth in the oxygen

business through the development of products that meet the needs ofconcentrator business, cost improvements, and additional revenue fromeach region as well as the expansions of our product portfolios.

MGC Diagnostics.

TOPICS

New Business in Non-ICE Business

In April 2023, we established the new company YORICOM Co., Ltd.
YORICOM combines AI with characters to create virtual assistants and develops Close Communication
business activities. Close Communication is a digital communication service that supports theindependent daily lifestyles of elderly users at home through the use of easy-to-use interfaces and virtualassistants. This new user experience is provided by Shiori Hoshiki, a 3D character who aims to be a
caregiver and stays in close contact with users every day.

expected to lead to higher demand for stationary oxygen concentrators,

For more details, visit 〉〉 https://www.ngkntk.co.jp/news/upload/1d0386bd9c5a0f1552ccd44b742b0929_1.pdf (Japanese text only)

and the market is forecast to grow at a faster rate than the U.S. market.

YORICOM Co., Ltd. Website 〉〉 https://yorisoi-communication.com/ (Japanese text only)38

Outlook for semiconductor production equipment market

MedicalNiterra Report 2023

Market conditions for semiconductor manufacturing equipment were02

GrowthStrategy

Niterra Value Creation

Business Strategy
New Businesses

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

Niterra Ventures Company Policy
We established the Niterra Ventures Company (NVC) to develop businesses focused on issues, provide
prompt value in line with the times, and to shift our business profile through their establishment.
The mission of NVC is to provide solutions that create a better quality of life for people around the world.
NVC is characterized by their ability to incorporate the best global technologies when developing solutions
to solve clients’ issues, without being limited to their core assets. Through their results, the Niterra Group

Our Initiatives (MORIMURA SOFC TECHNOLOGY)

External Environment

will incorporate new core assets to achieve our transformation.

Visiona flat plate structure that can recycle fuel. This flatcells as highly efficient generators and cogeneration

plate structure is extremely efficient, compact,systems to significantly reduce CO2, regulate power

low-cost, and has superior sealing performance. As

sources for renewable electricity, and improvesuch, it is expected to be used in hydrogen

resilience in the event of disasters. Expectations areproduction (SOEC) and other applications. We willgrowing for the introduction of fuel cell into various

develop competitive next-generation SOFC cellmarkets, such as factories aiming to recycle carbon,

stacks, enter the fuel cell markets for household andin addition to their traditional uses in business areas

business use, expand our business, contribute tosuch as households, housing complexes, nursing

achieving a decarbonized society, and aim tohomes, and commercial facilities.

establish ourselves as a flat plate fuel cell stack

The NVC commercialization flow consists of the following four elements.
① business opportunities

Identification ofFirst, we analyze the gap between the ideal society and lifestyle and reality, evaluate the issues to be solved andtheir social and economic impact, and identify business opportunities.

Hypothesis building

We then determine what issues to solve and establish a business hypothesis consisting of the issue, value provided,
potential customers, a business model, and a monetization model. We additionally interview and speak with experts
to evaluate the business probability from the three perspectives of usefulness, feasibility, and sustainability.

② and testing

MVP development and③ identification of test

Next, we create a minimum viable product (MVP) to provide value to our customers and make prompt
improvements as we check customer feedback.

④ Official launch

Finally, we make the decision to launch into the market and scale up operations after confirming that the product is
acceptable.

marketing sessions

manufacturer.

CVC

Outlook for FY2023

We entered our third year of activities in our CVC (corporate venture capital),

In fiscal 2022, we focused on improving productivity efficiency and consolidated our production basis to the Komaki

established with Pegasus Tech Ventures in April 2021. So far, we made small

Plant where we installed production equipment to increase the production capacity potential by approximately 10 times.

investments in eight companies that fit our strategy. Our collaborations with small

We will operate facilities sequentially and establish a mass production system in fiscal 2023. Going forward, we willbusinesses are taking shape and activity in our product and business developments is

encourage stronger cooperation with electronic manufacturers to increase orders and expand use from fiscal 2024.

on the rise. We will continue to accelerate the creation of new business pillars throughthe providing cash and forming business alliances with startups from countries all overStrength

Affiliated Companies

Partner:Pegasus Tech Ventures

Small equity stakes

Fuel diversity and high-efficiency power
generation stacks that contribute to a
decarbonized society
Compact design for expanded use

the world that possess advanced technology.

Expected no. of transactions Approx. five each year
Stages targeted Seed capital to Series A funding
Sizes of equity stakes Several tens of millions of yen to

MORIMURA SOFC TECHNOLOGY Co., Ltd., is a joint venturecompany consisting of Noritake Co., Limited, TOTO Ltd., NGK
Insulators Ltd., Morimura Bros Inc., and Niterra Co., Ltd.

several hundreds of million yen,
10 billion yen over six years

Investment
criteria● The startup matches our portfolio of new business pillars, the business domain targeted is broad, the business has

potential, and there is a vision for the business● There is a high degree of affinity with our new business pillars, and the startup possesses a business, technology,

and human resources that will complement/expand our portfolio● The startup possesses technology, intellectual property, and skilled people or teams of the like we are lacking as we
endeavor to establish our new businesses

39

We promote the development of a fuel cell stack withstrengthens, we expect the wide-spread use of fuelNiterra Report 2023

As social demand for a decarbonized society

Commercialization Flow

02

GrowthStrategy

Our Approach to Intellectual Property

Niterra Value Creation

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

We appropriately create, protect, manage, and utilize intellectual property in close coordination with related departments, internal companies, and Group companies,
under our policy to honor intellectual property including patents, designs, trademarks, copyrights, and trade secrets.

● Create intellectual property, aiming to further improve our corporate value.
● Honor intellectual property rights of third parties.
● Comply with laws and regulations regarding intellectual property in individual countries.

Action Guidelines

Intellectual Property Activities According to the Management Atrategy
Outlined in the 2030 Long-term Management Plan “NITTOKU BX”
One of the major strategic pillars of our Long-term Management Plan is the transformation of our business portfolio.
We are promoting various measures for the tasks, positioning intellectual property activities as an important elementin this management strategy.

Intellectual Property Activities by Business Field* Current businesses are related to the Automotive Components Group, growth businesses include business related to components for semiconductor production equipment
and respiratory-related business, and new businesses are related to the focus areas of Smart Health, Utilities, and Smart Mobility, as well as fuel cell business.

Current businesses
In our current businesses, which are the pillars of our earnings, we aim to secure a competitive advantage throughIP mix activities that protect our technologies and know-how in multiple aspects, and continue to contribute tomaximizing profitability.
Examples of intellectual property mix activities

Patent asset index (PAI) for spark plugs(Comparison with competitors when our company is set at 100)
Patent Asset Index™（2022）● Defense with a superiority patent portfolio❶ Protect new technologies and inventions from development to the● Defense through know-how secrecy

mass-production and create intellectual property.

Niterra Report 2023

● Brand protection by detecting and eliminating counterfeit products
100

Niterra Co., Ltd.

❷ Develop high-value-added patent information in
Competitors: approx. 3 on average

the company through efﬁcient patent searches using AI.
❸ Negotiate and manage complicated contract clauses❹ Protect our brands and detect and eliminate counterfeit goods in coordination
with customs ofﬁces and government agencies around the world.

Growth businesses❺ Develop regulations and management rules which comply

We aim to support business execution and growth from the perspective of intellectual property perspective by

with laws and regulations of individual countries.

working with related departments to obtain patent application rights with the aim of building a patent network for❻ Lay the groundwork for the promotion of efﬁcient intellectual property strategies,
such as responding to digital transformation and working styles that meet the needs of the times.
❼ Hold intellectual property meetings to discuss andkey products and themes in addition to conducting clearance activities to investigate infringement of third-party
intellectual property rights.

New businesses

formulate activities necessary to business strategies.

We attempted to make efforts to utilize patent(No.)■ Domestic

8,000
6,000

6,773

6,478

6,482
3,326

3,134

4,000

■ Overseas

6,255
3,184

5,563
3,027

information, such as IP landscape, as one material for
consideration in the initial stage of business creation. In
cooperation with the department in charge of creating
new business pillars, we used patent information to
verify hypothetical competitive advantages and applied

2,737

for patents based on our application strategies. Going

2,000

3,447

3,344

3,298

3,228

forward, we will continue to increase our number of

2,826

activity themes based on trial results.

0

2018

2019

2020

40

0
50
100
150
*Prepared by our company LexisNexis PatentSight.
We evaluate these figures using the Patent Asset Index of LexisNexis PatentSight. This index comprehensively takes into account the technology perspective, market
perspective, and number of patent applications and rights with valid legal status (pending applications and patents that have been granted).

regarding intellectual property based on legal knowledge.

Number of patents held

24

2021

2022

(year)

Trends in the ratio of the number of published patentapplications related to new businesses in the past four years(total as 100%)
（%）
40

36

30
20
10

14

19

7

0
2019

2020

2021

2022

(year)

03

Niterra Value Creation

Foundation for Value Creation

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

Message from the Sustainability Officer

We will strive to practice “trade-on” thatbalance both economic and social benefitsof our business.
Representative Director, Member of the Board, Executive Vice President

Toru Matsui

reduce ocean pollution and ensure safe food, as well as SOEC,

Through these actions, I will strive to ensure that investments in thewhich efficiently generates hydrogen from water, and magnets that

Since FY2021, prior to my taking charge of sustainability, I had beenarea of sustainability create economic and social value thatminimize the use of rare metals. Our entire Group is committed toworking to draw up a detailed vision for society in 2040 while taking

significantly exceed initial outlays over the long term and that ourdeveloping these new businesses and improving the intellectualon new projects. In the course of these activities, I learned how

stakeholders have a better understanding of our sustainability

capital that underpins them.

important decarbonization and the circular economy are for people

initiatives and achievements.

to coexist with the Earth going forward and that companies must

To help reduce CO2 emissions company-wide, we introduced aninternal carbon pricing system.

address these topics in order to survive. I also learned that there are

Developing technologies that help to resolve social

Specifically, an internal carbon tax is levied on the CO2 emissions ofprofitable companies that are already taking actions in these areas.

issues and our environmental initiatives

every department, including internal companies and Group
companies. Though we have currently set this at 10,000 yen per ton

From there, I realized the importance of sustainability management
and volunteered to take charge of sustainability, and was appointed

The Niterra Group hopes to contribute to the realization of a betterof CO2 emissions, this will be reviewed depending on the situation.

to the role. I will take on the challenge of spreading the concept ofsociety by confronting issues faced by the world while co-creating

The funds raised through this internal carbon tax are managed as an

the “trade-on” within the company and putting it into practice. A

and providing new value that contributes to the solution of thoseenvironmental fund to subsidize capital investment to reduce CO2“trade-on” combines economic and social benefits, where an activity

issues. To this day, we have been developing technologies,

emissions. The size of this fund reached 2.1 billion yen in theachieves economic rationality over the longer term despite incurringproducts, and businesses that contribute to the resolution of social

previous fiscal year. To date, we have provided subsidies for solar

costs in the short term.

issues. Examples include the development of fuel cell stacks andpower generation equipment, LED lighting, and environmentally

For example, we would like to take non-financial information andlead-free piezoelectric materials. Today, we continue to focus on thefriendly air conditioning equipment. These measures are intended toconvert it into indicators that are more familiar in some way ordevelopment of new technologies and materials. This includes

awareness of the need to further reduce CO2 emissions, and weanother and to visualize impact in a way that is easy to understand.

solutions such as the Regional CCU®, which makes local use of CO2

expect they will lead to accelerated reduction.

This is for the purpose of widely spreading the concept of trade-ons

collected at factories, and land-based aquaculture systems that help

41

so that employees can make sustainable decisions on their own.

Niterra Report 2023

Toward “trade-on” for greater corporate value

03Foundation for Value
Creation

Message from the Sustainability Officer

Niterra Value Creation

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

Human rights risk management incorporating social

how many of these we sell worldwide, this translates into an annualchangereduction of more than 3 million tons of CO2 emissions. On the other
hand, we believe that there is still more we can do for thesurrounding human rights, we have been holding discussions at aestablishing a circular economy, and we will continue to do moreworking group on human rights since May 2022. In January 2023,

that is needed by society. In the past year alone, the social

we revised our Human Rights Policy and conducted a human rights

landscape has changed dramatically and the development ofrisk survey, as well as training for directors. We will continue tosustainability laws and guidelines that affect corporations has

advance human rights due diligence that considers global standards

accelerated. In Japan, authorities are now demanding proactive

Accelerating our development by building mechanisms

and other factors, strengthen our training and management systems,

initiatives and disclosure, particularly from listed companies, andfor human resources to take leading roles

and systematize our approach.

attention is rising even further for sustainability. We will also update

Human rights considerations are the ticket to doing business, andthe sustainability initiatives we have taken on so far and strengthen

The Group recognizes that employees are our greatest management

must be addressed at the outset of any trade-on. What I feel is a

our efforts and information disclosure to further improve ourresource (human capital). We believe that human resources, who arechallenge is managing human rights compliance in the supply chain.

corporate value. We hope you will watch the new value we create

the source of consistent generation of value, have a true

We will encourage responsible procurement activities together withgoing forward with anticipation.

understanding of sustainability, they will be able to take ownership of

our suppliers, while regularly reviewing our CSR and Sustainability

and execute trade-ons that balance economic and social benefits.

Procurement Guidelines, which are our standards.

As part of this initiative, it is our intent to raise awareness among
employees in order to spread the concepts of trade-ons between

Taking on further challenges toward trade-ons

sustainability and profit.
I believe that initiatives to encourage diversity, such as increasing theSpark plugs for internal combustion engines, one of our main

ratio of female managers and strengthening the recruitment ofbusinesses, are often viewed negatively for the environment.

foreign employees, comprise one of a number of powerful ways to

However, in reality they contribute significantly to reducing

generating diverse new ideas and realize trade-ons. We will focus onenvironmental impact by improving fuel efficiency and reducing thecreating a work environment where diverse human resources cansize and resource use of components. In particular, for reducing

make the most of their individuality. The modest improvements in

Scope 3 CO₂ emissions, automobiles equipped with high-figures since FY2022 in our employee satisfaction survey show us

performance spark plugs and oxygen sensors can curb CO2that we are gradually achieving results. Going forward, we will continue

emissions by approximately 30 kg per vehicle per year compared

our activities and aim to maximize the value of our human capital.

with automobiles equipped with basic, conventional products. Given

42

environment, such as further waste reduction, recycling, andNiterra Report 2023

Considering the recent changes in the international community

03

Foundation for Value
Creation

Niterra Value Creation

CSR and Sustainability Governance

CSR and Sustainability Charter
CSR Basic Policy
The Nittoku
We are committed to delivering new value to people allWay

Risk Management Policy

CSR andSustainability
Charterover the world and contributing to society, as expressedLong-termManagementPlanin our corporate philosophy. This commitment isassociated with our concept of sustainability, which is to

Corporate
Philosophy

Compliance Policy

Information Security Policy

CSR
Basic Policy

Procurement Policy
Information Disclosure
PolicyInvolvementby allQualityproducts

Environmental Policy

the CSR Basic Policies (12 in total), which dictate Groupaction guidelines for CSR, to present our concept more

Basic Traits

clearly, communicate it widely both internally andShisei-Shinjitsu

Occupational Health and
Safety Policy
Shikai-Keitei

Social Contribution Policy

Soshi-Kantetsu▶ P.4

Outside Director,

Chiharu Takakura

Tax Policy

Recognizing External Environments
It is important to recognize the importance of how we as a company perceive andaddress various issues facing society and the Earth such as climate change,
biodiversity, and human rights. We recognize that we must conduct business from theperspective of sustainability. So, we hope to enhance the sustainability of society and
our Group by working to solve social issues through our Group business operations.

Mission and Vision of the CSR and Sustainability Committee

Shared Values

To formulate the committee’s mission and vision, we take sustainability management into
account and fully discuss how we can help resolve social challenges based on our core

The CSR and Sustainability Committee acts as anadvisory body to the Board of Directors and is
responsible for reporting and advising consultations fromthe Board, as well as supervising each expert
committee. They invite outside experts as guests to theBoard to broaden knowledge and perspectives duringconsultations from the Board of Directors meetings. They
additionally hold multifaceted discussions to encouragesustainability management in the long term and makereports and proposals to the Board. Each expert
committee monitors the effective execution of theirrespective specialized operations, and the CSR and
Sustainability Committee oversees them. Expert
committees share important information with the CSR
and Sustainability Committee, such as the status of CO2
emission reduction and risk assessment.

Advising

competence and management philosophy. The CSR and Sustainability Committee aims to

CSR and Sustainability
Committee

Board ofDirectors

Reporting

Secretariat(Sustainability Strategy Dept.)

Supervise
Each Expert Committee
Risk Management
Committee

Compliance Committee

Quality Committee

IT Security Committee

Environment Committee

Health and
Safety Committee

CSR and Sustainability Committee Medium-term Management Plan
FY2022
Fosteringunderstanding
and empathy

Lectures byexternal experts
Executive training

FY2023Making it apersonal
concern

Sublimation ofawards program
Consider incorporating
sustainability elementsin the next Medium-termManagement Plan

FY2024
Incorporation into ourbusiness for the Long-termManagement Plan and Vision
Integration of sustainability
and economic rationality
Proposal for incorporating sustainability
elements in the next Medium-termManagement Plan
Promote incorporation into ourbusiness for the Long-termManagement Plan and Visionachieve its mission and vision through reporting and making proposals to the Board of Directors.
Mission
Shift Niterra Group Sustainability Management to future-oriented resolutions by improving
corporate value through the coexistence of society and our Group beyond the current
framework toward a sustainable society.

VisionStrive for the understanding and sympathy of society in the creation of a sustainablecoexistence between people’s happiness, the Earth, and the universe.

CSR and Sustainability Committee Discussions
We discuss sustainability issues that cover a wide range of areas, such as theformulation of our mission and vision, the effectiveness of specialized committees,
the revision of human rights policies, human capital disclosure, and awarenessraising activities. We will continue to promote self-motivation, as set in themedium-term plan, and examine new important themes such as biodiversity andhuman capital management. In addition, we will continually raise the awareness of
employees and discuss the review of our priority issues (materiality) for the next
medium-term management plan.

43

CSR and Sustainability
Promotion System

CSR and sustainability promotion system

Niterra Report 2023

externally, and promote CSR and sustainability.

Dokuritsu-Jiei

Human Resource Policy

Company Information
and Data

Chair of the CSR and Sustainability Committee

Quality Policy

help solve social issues through business activities.
We established the CSR and Sustainability Charter andFoundation for
Value Creation

CSR and Sustainability Committee
Message from the Chairman

Human Rights Policy

Corporate
Code of
Conduct

Medium-termManagement Plan

Growth Strategy

03Foundation for Value
Creation

Review of Priority Issues (Materiality) Activities

Niterra Value Creation

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

We have identified eight priority issues (materiality) to be addressed in order to realize a sustainable society. For these priority issues, we have defined major initiatives, targets, and outputs, and are carrying out activities from a
medium- to long-term perspective. For FY2022, we have made progress as follows. We will continue to address these issues and contribute to the realization of a sustainable society.

Environment
Major Initiatives

Responding to climate change

Reduction of CO2 emissions

Goals and Outputs

Society
CO2 emissions: 30% reduction from the
FY2018 level by FY2030

Progress in FY2022

Reduced by 27.6% (211,000 tons)

Specific Activities• We worked to create energy through energy-saving and solar power generation in areas such as manufacturing.
• We adopted CO2-free electricity at headquarters, Satsuma Plant, and Satsuma Electrode Plant of the Nittoku
Spark Tec WKS Co. Ltd.
• We launched Employee Participation in Cabon Neutral Activities

Major Initiatives

Providing environmentally friendly products

Dissemination and expansionof environmentally friendly products

Goals and Outputs

Sales ratio of precious metal plugs:
at least 50%
Sales ratio of wide range oxygen sensors:
at least 50%

1) 43%
2) 39%

Specific Activities• Certified the OZAS®-S4 oxygen sensor and Sumikaze ozone generator as Nittoku Green Products underthe environment-friendly product certification system.
• Sales ratio for precious metal plus and wide range oxygen sensors for automobiles increased in the
Chinese market due to the early recovery from the COVID-19 pandemic, although the number of sales
was on an overall downward trend.

Society
Major Initiatives

Development of technologies, products, and businesses contributing to
the resolution of social issues 1
Development of fuel cells

Goals and Outputs

Dissemination of high-efficiency distributed
power supply systems with an eye on theuse of CO2-free hydrogen fuelProgress in FY2022

Established a system for the mass production of SOFC cell stacks

Specific Activities

We consolidated the cell production process in Ise City, Mie Prefecture to the main plant in Komaki City,
Aichi Prefecture. We then established a single integrated mass production system from cells to stacks.
We will consider further increasing production capacity based on future orders.

Goals and Outputs

Promoting substitution for lead-based
piezoelectric materials

Progress in FY2022

Continued to introduce and propose lead-free piezoelectric materials as well as Promoted technologicaldevelopment aimed at expanding applications of lead-free piezoelectric materials as well as continued to
introduce and propose

Specific Activities

We continued to encourage our customers to replace leaded piezoelectric materials with lead-free piezoelectricmaterials in the semiconductor, automotive, and medical fields in anticipation of future regulations.

Society
Major Initiatives

Development of technologies, products, and businesses contributing to
the resolution of social issues 3
Development of sensing IoT business

Goals and Outputs

Improving operational efficiency throughautomation, optimization and generalization

Progress in FY2022

Made progress in the development of a water quality management system for land-based shrimp aquaculture

Specific Activities• We achieved our target yield of land-based shrimp aquaculture• System development is progressing and is expected to be completed in the fall of 2023

Society
Major Initiatives

Development of technologies, products, and businesses contributing to
the resolution of social issues 4
Carbon Neutral as a service

Goals and Outputs

Establishing and introducing a synthetic
fuel (methanes) production system

Progress in FY2022

Completed a demo container-sized methanation device for CCU solutions and prepared for operation

Specific Activities• We completed a demo container-sized methanation device.
• We exhibited regional CCU at EcoPro 2023 and the DECARBONISATION EXPO.

*Carbon Neutral as a service is our vision of a decarbonized circular society and solution services.
For more information please visit our website: https://ngkntk.disclosure.site/en/themes/174/

44

Progress in FY2022

Development of applications forlead-free piezoelectric materials

Niterra Report 2023

Environment

Major Initiatives

Development of technologies, products, and businesses contributing to
the resolution of social issues 2

03Foundation for Value
Creation

Society

Major Initiatives

Review of Priority Issues (Materiality) Activities

Governance

Global human resources management
1) Promotion of employment of women,
foreign nationals, and careers
2) Examination of a New Personnel
SystemGoals and Outputs

1) Percentage of female, foreign national,
and mid-career employees in managerial
posts: at least 25%2) Improve the results of employee
satisfaction surveys

Specific Activities

1) • We continued to implement the Raise UP Program (selective training for female manager promotion)
This program was effective in changing the mindset of female employees.
• Continued to raise awareness through diversity training for managerial positions and Company e-mailnewsletter distributions2) • Held a briefing session for officers and general managers to use the results of the employee satisfaction
surveys for workplace improvement. We also held a workshop for general managers to discuss how toutilize survey results.
• Regularly distributed messages from the chairman and held roundtable discussions with the chairman
and employees.

Major Initiatives

Corporate governance
Goals and Outputs

1) Percentage of female and foreign national
directors: at least 30%
2) Percentage of outside directors: at least
one-third

Progress in FY2022

1) 45% (5 out of 11 directors)
2) 64% (7 out of 11 directors)

Specific Activities

1) In order to achieve sustained growth and enhance corporate value over the medium to long term, the Boardof Directors continues to be composed of a diverse group of people with different backgrounds in terms ofexpertise and experience.
2) In order to strengthen the supervisory function of the Board of Directors and further ensure transparency indecision-making, the Company has transitioned to a company with an Audit and Supervisory Committee,
and the majority of the Board of Directors is composed of outside directors.

GovernanceRisk management

Major Initiatives

Management of serious incidents
signs and prevention of theiroccurrence

Progress in FY2022

Promoted measures for priority risks

Specific Activities• Updated the risk map and periodically reviews our priority risks.
• Promoted measures for priority risks and monitored progress.

Goals and Outputs

Establishing a risk management system that
contributes to management decision making

Foundation for
Value Creation

Company Information
and Data

Compliance

Survey of employees’ awarenessand continuous education

Goals and Outputs

Conducting compliance awareness surveys
and disclosing the results

Progress in FY2022

Implemented improvement activities based on the results of the compliance awareness surveys

Specific Activities• Implemented improvement activities in departments deemed necessary based on the FY2021 complianceawareness survey results.
• Renewed in-house training for managerial positions to strengthen the prevention of harassment.
• Distributed helpline cards to all Company and domestic Group employees.

Governance
Major Initiatives

Information security

Maintaining and strengthening incident
response organizations and building
preventive systems

Goals and Outputs

Establishing an information security
management system

Progress in FY2022

1) Acquired TISAX certification for Group companies in Thailand
2) Conducted IT security audits

Specific Activities

1) • Acquired TISAX certification at Group companies in Thailand and all other planned locations.
•Began discussions on ISMS (Niterra Standards) for overseas Group companies. They are to be deployedin FY2023.
2) Launched company-wide IT security audits and audited six Company divisions and three Group companies.

451) Increasing the ratio of female andforeign nationals to directors
2) Increasing the ratio of external
directors

Major Initiatives

Growth Strategy

Niterra Report 2023

Progress in FY2022

1) 19.9%2) 3.33 (92.6% response rate)

Governance

Niterra Value Creation

03

Foundation for Value
Creation

Niterra Value Creation

Priority Issues Special Feature:

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

Climate Change Initiatives

Internal Carbon Pricing System and Internal
Environmental Funds
Niterra introduced internal carbon pricing, an internal carbon tax, and internal
environmental funds to reduce our Scope 1 and Scope 2 emissions andTotal cost comparison

Total cost forenvironmentallyfriendlyequipment is

CO2

CO2

CO2
emissionsCO2emissionsInternal carbon tax

cheaperInternal environmental funds

Control department

become carbon neutral.
Base price

Basis of our activities and the external environment
The Group declared our goal of becoming carbon neutral by 2050 and set a specific interim
target of a 30% reduction by FY2030 from FY2018 levels. We introduce these frameworks toInternal
carbontax payments

Environmentallyfriendly equipment

Internal carbon pricing

1 ton
Co2

Subsidies forinvestments in
CO2 emission
reductionequipment

10,000 yen＝

Internal companies and Group companies

Details on our activities

Niterra Report 2023

raise awareness and accelerate CO2 emission reduction.

Original
equipment

Base price

The Group set our internal carbon pricing at 10,000 yen per ton of CO2 emissions. By

46

visualizing the social costs of emissions, we aim to increase awareness of CO2 emission
reductions and accelerate our activities. We calculate the cost of CO2 emissions for applicableequipment when making capital investments and compare it with the total cost of theequipment, including installation fees. In doing so, the Group makes environmentally conscious
investment decisions.
The internal carbon tax is a framework that collects money from each department, includinginternal companies and group companies, in accordance with their CO2 emissions. The internal
environmental fund takes the money collected from this tax and uses it to subsidize capital

Carbon-Neutral In-House Support Service
This service will supply electricity from electric power companies with added environmental value derived
from surplus solar power. This power is generated at the homes of Group employees and used at our plants.
Electric power companies then award incentives to the employees who provide this environmental value.
This service is one example of our energy-creating activities introduced to foster Group momentum for CO2
emission reduction and educate employees to carry out Group-wide emission reduction activities.

investments for CO2 emission reduction.
Employee housing

Current status
As the internal carbon tax is 10,000 yen per metric ton, more than 2 billion yen will be collected
every year and put into our environmental fund. We collected 2.1 billion yen in fiscal 2022,
investing 200 million yen in environmental subsidies. We invested in solar power generation, air

Provide environmental value derived
from surplus solar power
Electric
power
companies

Niterra Co., Ltd.
Electricity
supplyAward incentives

control equipment, LED lighting, heat pumps, and other items. In fiscal 2023, we plan to invest
another 2.8 billion yen.

*For more information please visit our website: https://ngkntk.disclosure.site/en/themes/167/

03

Foundation for Value
Creation

Environment

Niterra Value Creation

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

Environmental Policy
As a globally developing core manufacturing corporation, we aim to promote environmental conservation activities linked with corporate management maintaining agood balance with corporate growth, based on “Involvement by all” in order to contribute to the construction of a sustainable society.
• Through all of our business activities, we make particular efforts to reduce CO 2 emissions toward a decarbonized society, conserve water resources, manage waste, and develop,
offer and expand environmentally friendly products.

ActionGuidelines• We strive to conserve the ecosystem through the control of chemical substances that place a burden on the environment.
• We strive to raise environmental awareness among our employees to ensure that they all positively participate in activities.
• We observe the laws, ordinances, and agreements concerning environmental conservation.
• We aim to substantiate information disclosure to stakeholders and communication activities, and also conduct activities for coexistence with the regional community.
• In order to achieve these targets, we will strive to make ongoing improvements to our environmental management system.
Niterra Report 2023

Promotion System
We established the Central Environmental Committee and environmental committees in each region to comply with environmental

Environmental Promotion System

The Central Environmental Committee chaired by the Environmental Advisor (President), directors, company presidents, regional
environmental administrators, and heads of the working groups. This committee checks the progress of Eco Vision 2030 and47

laws and regulations as well as to encourage environmental preservation.

Central Environmental Committee
Secretariat

other issues to work for continuous improvement.

(Environment & Safety
Management Department)

Each internal company manages its own targets on items relevant to business activities and conducts activities integrated
with business to achieve Eco Vision 2030. Meanwhile, we formulate action plans and work to comply with regulations ineach region, raise environmental awareness, and communicate with local communities. Various working groups are
established as cross-functional teams across the internal companies to promote specialized matters such as energy
conservation and chemical substances.

Environmental Management System
The Group obtained integrated Group-wide ISO 14001 certification for the Company and 13 domestic Group companies (asof the end of FY2022). Other domestic and overseas group companies also established environmental management
systems, with one domestic and 17 overseas companies individually certified under ISO 14001. 96% of Group employees
have obtained ISO 14001 certification.

Environmental Committees(each region)

The Environmental Committee
formulates action plans and works tocomply with regulations in each region,
raise environmental awareness, andcommunicate with local communities.

Each Company and Group Company*Regions: Units of environmental management system activities

Working groups
Working groups consider and carryout surveys and environmental
measures such as energy
conservation and hazardous
substances management.

03Foundation for Value
Creation

Niterra Value Creation

Environment

Eco Vision 2030
Protecting the global environment is the foundation of asustainable society. For all our stakeholders, we must face it headon as a key management issue.
On the premise of aiming for carbon neutrality in 2050, we haveestablished “Eco Vision 2030,” which shows the vision (or goal) of
what we want to be by 2030 and the vision of what we will
pursue until 2040.

Foundation for
Value Creation

Company Information
and Data

Four important issues
Eco Vision 2030 issues

The milestone to be achieved in 2030

Our vision for 2040

Responding to Climate
ChangeCO2 emissions: 30% reduction from the FY2018 level

Implementing activities toward realization of a decarbonizedsociety *Aiming for carbon neutrality by 2050

Expanding Environmentally
Friendly Products

Expand Nittoku Green Products

All products contribute to the improvement of the global
environment and contribute to making sustainable society
come true

Conserving Water
Resources

Water consumption intensity: Keep below FY2018 level

Implementing sustainable business operations in response
to global water risks

For Eco Vision 2030, we analyzed the impacts that ourbusinesses and products would have on society and our

Growth Strategy

Achieve over 95% effective utilization rate

Waste Management

Reduce at least 1% of waste intensity compared to FY2018
Promote 3R (reduce, reuse, recycle) activities

company and identified 13 issues with the greatest impact.

Contribute to a global recycle-oriented society by promoting
zero emission

are Responding to Climate Change, Expanding Environmentally

Other issues

Friendly Products, Conserving Water Resources, and Waste
Management. We positioned these issues as the four important
2030, our Group will work together to help achieve global carbon
neutrality and zero emissions.

Eco Vision 2030 issues
Integration withmanagement

The milestone to be achieved in 2030
Incorporate global environmental issues into business strategy
Environmental KPI (Eco Vision 2030) initiatives andmanagement commitment to achieve them

Our vision for 2040
Continuing to incorporate global environmental issues intobusiness strategy

Globalization of EMSWork to improve environmental information sharing
with overseas Group companies as well as monitoringand supervisory functions

Continuing to carry out environmental information sharing
with overseas Group companies as well as monitoring andsupervisory functions

Analysis of climate-relatedrisks and opportunities

Analyze climate change risks and opportunities andincorporate responses into business strategy

Ensuring business sustainability by analyzing climate changerisks and opportunities and incorporating responses intobusiness strategy

Aim for zero violations of environmental laws andregulations and zero environmental accidents

Being a company trusted by society by maintaining zeroviolations of environmental laws and regulations and zeroenvironmental accidents

Raising environmental
awareness

All employees take environmental education programs
and actively engage in environmental conservation
activities

All employees have a high level of environmental awarenessand are able to contribute to the realization of a sustainable
society as a company

Chemical substancesmanagement

Carry out appropriate chemical substancesmanagement and reduce environmental impact

Continuously carrying out appropriate chemical substancesmanagement to help conserve biodiversity

Green procurement

Achieving 100% introduction of the green
procurement system

Carrying out procurement with a low environmental impact
so that we can help realize a sustainable society

Green logistics

Promoting green logistics and reducing CO2
emissions by optimizing logistics efficiency

Achieving green logistics globally

Enhancement of environmental
information disclosure

Responding to stakeholder requests and using
communication to foster dialogue

Responding to stakeholder requests and using
communication to foster dialogue

Implementing
environmental compliance(compliance with environmental laws and regulations
and elimination of environmental accidents)

48

issues and set quantitative targets for them. Through Eco Vision

Niterra Report 2023

Among them, the four issues identified to have a greater impact

03Foundation for Value
Creation

Environment

Niterra Value Creation

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

Information Disclosure Based on TCFD Recommendations
In July 2020, the Niterra Group announced its support for the Task Force on
Climate-related Financial Disclosures (TCFD) recommendations.
Based on the TCFD recommendations, we disclose important information related to climate change as outlined below.
https://ngkntk.disclosure.site/en/themes/168/

GovernanceMetrics and targets
Pursuing carbon-neutrality by the year 2050, our group has set a goal to reduce CO2 emissions by 30% bycompiles recommendations based on climate related risks and opportunities and reports to the Board of

FY2030 compared with FY2018 levels.

Directors, which then makes final decisions on these recommendations. In addition, the CSR and

To make further advancements toward achieving these targets, we have set the CO2 emission reduction rate

Sustainability Committee monitors the progress of priority issues, including our response to climate change.

as one of the evaluation indicators in the performance-linked stock remuneration system for directors

The Environmental Committee deals with specific CO2 emission reduction and other activities, while the Risk

(excluding directors who are Audit and Supervisory Committee Members and outside directors) andManagement Committee deals with risks related to climate change.

corporate officers (excluding employment-type corporate officers).
We aim to achieve a 30% reduction in each Scope 3 category in FY2030 (compared to FY2018). We also
ask our suppliers to set CO2 reduction targets and provide support as appropriate.

We looked at the entire supply chain, projected social and regulatory trends in the short, medium, and long term,

CO2 Reduction Targets and Results

and then listed a wide range of risks and opportunities. We assessed the business impact of risks based on

Items

Targetscenarios assuming risks related to the transition to a low-carbon economy and risks related to physical changes
caused by climate change. As opportunities, we considered the opportunity for management reform throughclimate change mitigation and adaptation measures. We summarized the risks and opportunities related to

The Niterra group faces various risks and opportunities in each type of business. Therefore, monitor regulatory trends

Results

Scope 1 and 2

30% reduction from the
FY2018 level by FY2030

Reduced by 27.6% compared with
FY2018 in FY2022[Emissions: 211,000 tons][Intensity: 0.58t/million yen]

Scope 3Category 1 Purchased goods and services
Part of Category 4 Transportation anddelivery (upstream)
Category 11 Use of sold goods

30% reduction from the
FY2018 level by FY2030

Increased by 0.8% compared with
FY2018 in FY2022[Emissions: 11,150,000 tons]

climate change submitted a report to the CSR and Sustainability Committee for confirmation. ▶P.50-51

Risk management

49

Strategy (risks & opportunities)

closely and assess the respective impacts on business in terms of risks and opportunities related to climate change.

* The above CO2 reduction targets were certified as well-below 2°C (WB2°C) targets by the SBT Initiative in June 2022 as science-based targets (SBT).

The Risk Management Committee evaluates risks from a company-wide perspective by analyzing their impact,

11 Use of Sold Goods. We set fiscal 2030 targets for these three categories to reduce CO2 emissions.

* 97.6% of total Scope 3 emissions consist of Category 1 Purchased Products and Services, Category 4 Transportation and Delivery (upstream), and Category

likelihood of occurrence, and status of countermeasures to determine whether or not they will have a significant
impact on our business activities and ability to achieve targets. Risks evaluated as requiring priority action are

CO2 emission reduction measures for Scope 1 and 2, such as energy conservation activities, progressed as

designated as priority risks, and the Risk Management Committee confirms the status of mitigation activities. The

planned. Furthermore, our early adoption of energy creation through solar power generation and CO2-free

CSR and Sustainability Committee confirms key opportunities, incorporating these opportunities into ourelectricity enabled reductions to exceed our target values.

management strategy and priority issues (materialities), when necessary.

Niterra Report 2023

Regarding the approach of management concerning climate change, the CSR and Sustainability Committee

03Foundation for Value
Creation

Niterra Value Creation

Environment

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

Climate-related risks

Carbon tax

If a carbon tax is introduced, taxes levied on fuel will increase procurement costs, resulting in a rise in the costs of energy and raw materials.

Carbon border tax

If a carbon border tax is introduced, taxes will be levied on products to be exported, resulting in the reduction in the cost competitiveness of the products.

Regulations on carbon emissions

The achievement of GHG reduction targets will be required, resulting in increases in the costs of, for example, making capital investments and purchasing
electricity generated from renewable energy sources.

Sale of gasoline powered vehicles

In countries that ban the sale of gasoline-powered vehicles, OEM demand will disappear, resulting in a decrease in sales.

Proliferation of energy saving andrenewable energy technologies
Development of newtechnologies

Expenditures on the research and development of new technologies will increase.

Timing of the impact
Short Medium Longterm
term term

The introduction of new energy-saving and renewable-energy technologies will increase the cost related to, for example, capital investments.

Shift in customer preferences

After the 2030s, the number of people who choose ZEVs even as used cars will increase, resulting in a decline in demand for spark plug replacement andeventually a decrease in sales.
Products that emit less CO2 in their life cycle will be chosen, resulting in a decrease in the sales of conventional products.

Shift in investor preferences

Investors’ opinions will turn against internal combustion engines, resulting in divestments.

Shifts in job-seekers’ preferences

Job seekers’ opinions will turn against internal combustion engines. Accordingly, job seekers will not choose us as their place to work.

Increased severity of extreme
weather events
Changes in precipitation patterns
and variability in weather patterns

Typhoons and other extreme weather events will cause damage to plants and other facilities, resulting in shutdown or a decrease in production. Furthermore,
additional costs will be incurred to restore equipment. Non-life insurance premiums will also increase.
Rising sea levels will increase the risk of flooding and storm surges. Plants and transport infrastructure located in coastal areas will be damaged and supply chains
will be broken, resulting in the extra costs of addressing these problems.
Plants in areas facing severe water shortage will be forced to shut or slow down operations due to limitations on water usage, resulting in the cost of shifting
production to other plants, increased transportation costs and the like.

Rising mean temperatures

Employees who work in extreme heat will frequently get heat stroke. To reduce their increased physical burden, the cost of dealing with extreme heat and labor costs will increase.

Sea level rise

Assessment(impact)
Small Medium Large

Climate-related opportunities
AspectMajor opportunity

Resource efficiency

The increasing adoption of new energy-saving and renewable-energy technologies will reduce energy costs.

Energy source

The increased demand for hydrogen as a fuel exempt from carbon tax will provide new opportunities in the hydrogen energy market.
The current internal combustion engine business will continue as technologies such as methanation develop and synthetic
fuels such as eFuel become more widespread.

Products and services

To conform to fuel efficiency regulations, demand for high value-added products will increase.

Timing of the impact
Short Medium Long
term term term

The hydrogen energy market is expected to grow due to mandatory reduction of GHG emissions. Increased demand forhydrogen technologies, SOFC, and SOEC will provide business opportunities.
Demand will increase for CO2 recycling-related solutions (e.g., using electricity to produce hydrogen (SOEC), using recovered
CO2 as fuel, etc.).
In disaster preparedness, local consumption of locally-produced energy (distributed power generation) will receive attention,
resulting in increased demand for SOFCs
Demand will increase for ceramics-related technologies and products used in electric motors and generators.
Markets

The development of new climate-related technologies that meet social needs will provide business opportunities.

Resilience

In disaster preparedness, the continuous reinforcement of the BCM and BCP of our group, including our supply chain,
will help enhance our resilience.

Short term: short term until around 2025 in line with the target yearof our Medium-term Management Plan
Medium term: medium term until around 2030 in line with the target
year of our Long-term Management PlanLong term: long term until around 2040 in line with the vison of ourLong-term Management Plan

50

Risks related to thephysical impacts ofclimate change

Business impact (risk)

Niterra Report 2023

4°C scenario

Acute Reputation Markets Technology

Risks related tothe transition to alower-carbon
economyChronic

2°C scenario

Policy and legal

Risk item

03

Foundation for Value
Creation

Niterra Value Creation

Environment

Business risks, opportunities and responses under the
climate-related scenarios
To further clarify climate-related risks and opportunities, we examinedbusiness environments and responses by business type under both 2°C

Automotive
Components
Group

Spark plugs,
Glow plugs,
Sensors

Under a 2°C scenario, sales of internal combustion engine parts are expected to decline
in the future due to stricter regulations on vehicles with internal combustion engines. On
the other hand, opportunities will arise in the electric vehicle market and other newmarkets.Under a 4°C scenario, further energy conservation and toxic-gas emission
control will be required in terms of internal combustion engines. Therefore, we will takemeasures to improve the performance of internal combustion engine parts.

Impact certain revenue
sources*

Fuel cells

Under either a 2°C or 4°C scenario, demand for non-fossil energy sources is expected to
grow. Therefore, we will continue to enhance our measures taken in the relevant markets.
Under a 2°C scenario, the proliferation of hydrogen infrastructure is expected. Therefore,
the market may grow at an accelerated rate.

Analysts project a 200
billion yen market, with apossibility of an upward
swing depending on thewider adoption ofhydrogen infrastructure.

Under either a 2°C or 4°C scenario, the impact on risks and opportunities is small.

Small

Fuel cellbusinessother new needs and markets are expected to arise. Therefore, in the2030 Long-term Management Plan NITTOKU BX, we designatedEnvironment & Energy as one of the business fields on which to focus.

Company Information
and Data

Product

combustion engines, whose sales revenue makes up 80% of the total
toward the realization of a decarbonized society, hydrogen-related andFoundation for
Value Creation

Examinedbusinessand 4°C scenarios. With regard to our business related to internal
at present, we are facing a major change. On the other hand, geared

Growth Strategy

Otherbusinesses

SPE, packages,
oxygen concentrators,
cutting tools,
bearing balls, etc.

Responses to future business risks and opportunities

Financial impact

Revenue target
in our Long-termManagement Plan

450 billion yen(FY2029)300 billion yen(FY2029)

business portfolio (40% ICE business, 60% non-ICE business).

• For the Automotive Components Group, under the 2°C scenario, sales are expected to decline in the future due to stricter regulations.
Therefore, the transformation of our business portfolio is required.
• For other business types, under either a 2°C or 4°C scenario, we will conduct business flexibly and strategically while keeping a close
watch on market trends. Thus, we have high resilience in terms of both medium- and long-term perspectives.

FY2020 Revenue: 426.2 billion yen
Composition ratio of the internal combustion engine business in FY2020: 82%
Projected decrease in sales of products for internal combustion engines beginning in FY2040: 10%426.2 billion yen x 82% x 10% = 35 billion yen

Conserving Water Resources

Waste Management

Biodiversity Conservation

Protecting the sustainability of water resources that are essential for

The Niterra Group uses a variety of raw materials of which we must makeWe recognize that the conservation of biodiversity is also an important

maintaining ecosystems is one of the most important issues for theeffective use, including recycling. We pursue the reduction and effective use

issue. Therefore, we established the Niterra Group Biodiversity Actiongroup. To this end, our Eco Vision 2030 calls for the efficient use ofof waste materials in line with our Eco Vision 2030 targets of a 95% or more

Guidelines, based on which we work to remain aware of the fact that ourwater with a goal of maintaining water consumption intensity at or below

effective utilization rate, a reduction of at least 1% of waste intensity

activities, particularly involving energy and resource usage, are inevitably

FY2018 levels.

compared to FY2018, and the implementation of 3R activities.

causing impacts on biodiversity, and are taking appropriate measures to

In FY2022, water consumption intensity for drinking water, well water,

Our effective utilization rate for FY2022 was 91.3%, the same level as the

reduce such impacts throughout our business operations, in cooperation

and river water was 4.40 m3/million yen, which was a decrease ofprevious year. Total emissions were 21,188 tons, a 7% decrease year onwith business partners and external groups. We will continue to identify

18.4% compared with FY2018. In addition, the water usage amounted

year. Our waste intensity was 0.058 tons per million yen, a decrease ofissues related to biodiversity risks associated with our business (materials,

to 1.61 million m , a 3% decrease compared with the previous year.

22.8% compared with FY 2018.

components, products, location, etc.) and comply with the Taskforce on

3Nature-related Financial Disclosures (TNFD) framework.

51* The financial impact of the internal combustion engine business
Based on analysis by IHS Markit Automotive, we forecast the number of vehicles with internal combustion
engines to decline beginning in the mid-2030s due to increased restrictions on internal combustion engines
as a result of climate change measures in many countries. At the same time, demand for spark plugs,
which is the core of our internal combustion engine business, reflects not only use in new vehicles, but also
use in repair work. Here, since we expect vehicles with internal combustion engines will continue in use, ourforecasts indicate that sales will peak after 2040 and then gradually decline. Given this situation andassuming a 10% decrease in revenue in the internal combustion engine business beginning FY2040
onward compared with FY2020 levels, we estimate a decrease in revenue of about 35 billion yen.

Niterra Report 2023

Toward 2040, we will push forward with the transformation of our03Foundation for Value
Creation

Niterra Value Creation

Human Capital Management

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

Human Resource Policy
We acknowledge that our employees are our most important management resource. In light of this, we respect the diversity and individuality of our employees andstrive to develop the group as a whole by ensuring that these self-leading and innovative human resources can fully demonstrate their capabilities.

ActionGuidelines• We foster aspiring human resources who can act to bring about changes and also change themselves (self-leading and innovative human resources) and establish an environment
where they can perform to the best of their abilities.
• We strive to nurture a corporate culture where human resources with different qualities can fully realize their own capabilities and ensure that the right human resources are assigned to the right posts.

Executive Officer

Tomohiro Yamaguchi

The Group’s external environment is in a period of dramatic change. In

sound growth and ensure happiness for all employees. We strive toorder to address this and build an organization that can withstand harsh

understand and accept diverse human resources regardlessbusiness environments, we began with our internal environment, carrying

attributes such as gender and age, and to provide each with theout organizational reforms. These included introducing the in-house

best support and opportunities in a fair way.

company system, spinning off some businesses, and other actions. In

In addition, to raise the value of human capital, we recognize that humanaddition to improving the internal environment, we believe that boosting

resources are the most important management resources for a company.

employee engagement will also make a significant contribution to increasing

Knowing this, and to achieve the goals of our Long-term Management

corporate value. To realize our goal of creating a company that is attractive

Plan, we have defined the human resources we seek as “self-disciplined

to employees, we carry out employee satisfaction surveys with the aim ofcreative human resources” and are taking systematic and consistentincreasing engagement even in a changing environment. To create

actions to create this kind of human resources. Among these, we consider

innovation for “change beyond the current way,” we will transform our

In our 2030 Long-term Management Plan “NITTOKU BX,” we have set

the development of next-generation leaders to be an issue of tremendousorganization to allow every employee to fully demonstrate their capabilities“change drastically beyond the current way” as our actions toward ourimportance, and we are working to cultivate managers from early stages

and play an active role.

vision for 2040. The core message of this vision is to be a company thatcoexists with a diverse range of human resources with aspirations. We are
not only concerned with “what ceramics can do,” but also with theacquisition and development of autonomous human resources, thecombination of diverse knowledge and expertise, as well as moreengagement with the aim of maximizing our human capital and thereby
improving corporate value so that we can take on challenges beyond therealm of ceramics and beyond the world and our own imagination.
To realize our vision, we need a diverse range of human resources who
have aspirations. We consider diversity, equity & inclusion (DE&I) to be oneof our most important management strategies as we believe that

Launch of Long-termManagement Plan
Until 2020

Preparations for achieving
a true independent spirit(in-house company system)
2021 - 2024

Break to change.
Change to create.
Respect Dokuritsu Jiei (independent spirit).
Start from scratch.

Creating self-disciplined
creative human resources

True independent spirit
2025 - 2029

Extend for the future.
Spread out to exceed.
To foster a new corporate culture,
we will work toward sustainable growth.

Our vision
2040

Change drasticallybeyond the current way

52

Creating an organization
where diverse humanresources can play anactive roleand develop human resources for upper management.

fully demonstrate their abilities are essential for companies to attain

Niterra Report 2023

Message from the Officer in
Charge of Human Resourcesharnessing each employee’s individual qualities and helping them

03

Foundation for Value
Creation

Niterra Value Creation

Human Capital Management

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

Our human resources strategy focuses on how to acquire anddevelop the human resources needed to achieve the vision of our2030 Long-term Management Plan “NITTOKU BX,” and ourInnovation for change beyond the current way

Medium-term Management Plan. We have defined the image ofhuman resources we seek and are advancing global humanresources management to bridge the gap with our current humanresources and transform our portfolio in this area.
In order to create technologies and new businesses that can respond to

Deepening existing businesses

Pursuing new businesses

rapid changes in the environment, we are focusing not only on thefurther development of internal human resources, but also on the

Priority issues(materiality)

In order to realize the transformation of our business portfolio, we seek
to develop all of our employees into self-disciplined creative humanresources who are able to work independently and create new ideas.

Global human resource management▶ P.54

we are working to establish a Group-wide skill map that defines thenecessary skills for our talent. We will also identify the gap between the

Engagement

current state of our employees and the desired skills, and create anenvironment in which employees can improve their skills to fill this gap.
In addition, we are implementing selective training measures for the
next generation of management, working to help target employees
acquire the right attitudes, concepts, and knowledge. Furthermore,as part of our succession plan, we have identified potential

Further utilization ofcurrent human resources

Acquiring external
specialist human resources

Allocate the right people in theright roles and improve their skills

Strategic recruitment

successors for key positions in units of “now,” “in one to three
years,” and “in five years.” We systematically maximize organizational
performance by assigning the best human resources to core
positions. As for DX, we are actively deploying measures to cultivate
our personnel to achieve high efficiency in operations and to realize“change beyond the current way.” In FY2022, we implemented

Human resources we seek

Four requirements for self-disciplined creative human resources
Clear goals

Working with intent

Mutual respecteducational measures to improve the digital literacy of employees at
all domestic Group companies. We will continue to deploy
educational measures to harness digital technologies for reforming
operations, and ultimately, creating new businesses.

Diversity, equity & inclusion (DE&I)

Fulfilling one's role

Transforming human resource portfolio

53

As a specific initiative to create self-disciplined creative human resources,

Niterra Report 2023

strategic acquisition of external human resources with sharp expertise.

Transforming business portfolio

Human Resources Strategy

03Foundation for Value
Creation

Niterra Value Creation

Human Capital Management

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

Global Human Resources Management
Personnel system

Employee skill enhancement and career development

facilitate the employment and promotion of candidates regardless ofnationality and to provide them with opportunities and environments thatIn this fiscal year, we introduced a Group-wide skill map for employees

allow them to demonstrate their abilities. It was named the HAGI

accelerate the creation of self-disciplined creative human resources whoto check their own skills as a tool to support their personal growth. In

Program after Hagi City in Yamaguchi Prefecture, where the Shoka

can realize the themes of the Medium-term Management Plan to “Break to

addition to specialized training with voluntary participation from

Sonjuku school developed diverse human resources at the end of thechange” and “Change to create,” we have incorporated the Group Human

employees to improve their own skills, we also offer a variety of

Edo period. Chairman of the Board Shinichi Odo serves as the head of

Resource Policy. This policy clearly defines the direction of human resource

programs to support employee career development, including level-

the program. Under the program, seminars have been held on apolicies that the entire Group will pursue, creating a highly fair personnel

specific training to acquire the knowledge and skills necessary for eachcontinuous basis to provide employees with opportunities to learnsystem that rewards achievements and challenges regardless of age,level and role, and training for manufacturing that focuses on quality

together with a focus on gaining practical knowledge from a Group-

gender, and other personal attributes. We have introduced a system in

education and other areas. We are also utilizing My Career, a framework

wide perspective. We

which employee compensation reflects the results produced by eachto help employees envision their future careers and think autonomously

are thereby developing

in-house company, and we expect each employee to be aware of theabout the approach they want to take. From this fiscal year, we are also

leaders with the will andoutput that contributes to our business and performance, and to work in apromoting our Career Design Cycle, in which each employee arranges

sense of mission

more efficient manner.

their “cans” (work they can do) and “wills” (the kind of work they want torequired to take the

A role grading system was introduced for managerial positions, and by

do). The Career Design Cycle is a process whereby employees take

Niterra Group into thesetting role ranks and salaries according to the roles required, weownership of the design and achievement of their own careers, utilizing

future.

established a system so that the actual roles played by the employees andinterviews with workplace supervisors in order to realize their vision,

their compensation are aligned. By abolishing the annual requirement for

both for their work and for themselves. In the event that the cycle is not

Nittoku Business School

promotion for staff positions as well, we have been able to quickly appoint

working well for employees and there are concerns regarding their daily

Targeting human resources in Japan, we run Nittoku Business School

excellent human resources in both managerial and staff positions,work or career, we offer a consultation helpline that they can contact atclasses for employees who are almost qualified to participate in the

regardless of tenure. In addition, as human resources who can make a

any time. Employees certified as career consultants provide one-on-

HAGI Program. For these classes, we have prepared a curriculum that

positive impact on our business management and performance by utilizing

one counseling tohelps participants develop logical thinking and acquire knowledge andtheir high level of expertise, we have established qualification for specialist

employees,

skills in areas such as management strategies, marketing, andpositions (SP positions). The M positions, the traditional managerial

supporting them sopresentations. They also include case studies based on actual examples

positions, will focus on management, while SP positions will concentrate onthat the consulting

and are intended to help participants to develop the spirit, techniquesdemonstrating their expertise toward more efficient business operations. By

employees can findand physical stamina required of leaders.

further clarifying the roles of each individual, we will realize speedy innovation

answers for

Employees who have completed the HAGI Program and the Nittoku

and the placement of the right people in the right roles to promote thethemselves.

We also revised our evaluation system, providing more opportunities forinterviews than in the past, working to build an environment that clarifies
employee evaluations through detailed follow-ups and where employees

A HAGI Program session

Business School curriculum have already been making contributions incore positions within the Group. We have also established a selective
human resources development program within each of PAMA, Asia,

Development and management of managerial human resourcesand other regions and implement the program four times a year for thedevelopment of business leaders.

can achieve autonomous career development. Through the new personnel

HAGI Program

In addition, the Corporate Management Committee, whose members

system, we aim to encourage changes in employee awareness, develop

As our businesses expanded globally, in 2016, we started a program toconsist of the Representative Director and some executive officers,richly creative human resources who can fulfill their roles, and foster afind and develop the next generation of global managerial humanhas been meeting once a month to discuss personnel matters forcorporate culture that rewards challenges.

resources, targeting all Group companies. This program is intended tocore positions across the entire Group.

54

achievement of organizational goals.

A career consultation session

Niterra Report 2023

In April 2022, the Company revamped its personnel system. In order to03Foundation for Value
Creation

Niterra Value Creation

Human Capital Management

Growth Strategy

Foundation for
Value Creation

Initiatives to improve employee engagement

Recruitment strategy

The Group conducts employee satisfaction surveys for the following

In terms of recruitment, in order to respond quickly to changes in thethree purposes.

business environment and to transform our human resource portfolio,

Work Style Reform Declaration

Company Information
and Data

Work style reforms

we are aggressively pursuing employment of mid-career personnel,

We recommend “diversified work styles” for “Creating an organization(1) to understand employee motivation and sense of burden

mainly in headquarters, new business, and IT departments andcomprised of passionate individuals working together” of NITTOKU BX.

(2) to understand the current status, verify the effectiveness,and consider measures for our Action Guidelines “Change(transformation) with (co-existence) Will (will),” as set in theLong-term Management Plan

including those at the managerial level. We are also working to hire(3) to improve the workplace through examination of the results

graduates, we have been hiring around two to five foreign employees

Promote comfortable remote work to employees.

▶Create an environment with a goal of a remote work rate of 70% or more.

foreign employees in our effort to adapt to the rapid advancement of

Prepare tools that respond to change and create new value.

globalization and encourage diverse talent to play active roles. For new▶To that end, we will invest in digital solutions.

And we want you to find the best for yourself from the many options andbecome a “self-disciplined human resource who can continue to add value.”every year, recently with a special focus on hiring foreign employees

Niterra Group respects each person’s values and aspirations.

who have acquired more specialized skills from overseas universities, indepartmental heads to notify them of the department’s situation andaddition to those who have studied in Japan. Furthermore, we havechallenges indicated by the results. For items with low engagement

been working to increase the ratio of female employees and the

To improve productivity and develop self-disciplined human resources, weand for which engagement should be increased, issues and actions

employment rate of people with disabilities. The inclusion of mid-career

formulated the Work Style Reform Declaration in 2021. Remote work,

are considered through exchanges of opinions within departments toemployees and foreign nationals in each workplace has build greater

promoted as part of these work style reforms, had taken root in each

improve and revitalize workplaces. The HR development department

diversity, equity, and inclusion across the Company.

workplace as a combined result of reviewing operations and taking
measures to prevent the spread of COVID-19. However, in January 2023,

identifying issues through interviews with young employees andMid-career employment (non-consolidated)

we encouraged employees to come to work to a certain extent (40% orsection managers at each workplace and holding study sessions(Number of employees)
40

more per month) to further activate face-to-face communication andwith department heads to encourage action.
The overall satisfaction level for FY2022 was confirmed to be slightly
higher than that of the previous year by about 1%.

20

In addition, the change in overall satisfaction has been adopted as

10

one of the indicators used in the calculation of directors’ bonuses asof FY2022. We recognize that improving employee engagement is
an important management issue and will work on measures toward
this improvement.
▶ Employee Satisfaction Survey Graph▶ P.77

maximize the benefits of both remote and in-person work.

30

0

26

9

2020
■Female ■Male

30

3
2021

In addition, in order to achieve the goal of reforming work styles as indicated34

in the 2030 Long-term Management Plan “NITTOKU BX,” we aim to
institutionalize the following two measures in FY2023 to improve productivity
and increase engagement.

62022 (Fiscal year)

In February 2022, we began a trial run of a system for employees

New graduate employment (non-consolidated)(Number of employees)
140
120

34.4

100
80
60
40
20

0

(%)
40

38.2

30

23.6
84
40
26

21

2020
2021
■Female ■Male
Ratio of female employees(1) Diversification of where we work

21
13
2022

The graph shows the number of employees hired by the Company on a non-consolidated basis.

resources living in remote areas and preventing turnover by moving
away from a working style restricted by location.

20(2) Diversification of working hours

10

By expanding employee options with regard to working hours, we0(Fiscal year)*Due to company spinoffs, recruitment has been handled by each Group company since FY2021.

working in remote areas, which will lead to securing excellent humanwill create an environment that encourages employees to achieve
harmony between their work and private lives and grow into selfdisciplined human resources.
*For more details about work style reforms, please see our website:
https://ngkntk.disclosure.site/en/themes/198/55

is also leading efforts to create better workplace environments by

Niterra Report 2023

The survey results of each individual department are fed back to the03Foundation for Value
Creation

VisionNiterra Value Creation

Human Capital Management

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

Diversity, equity & inclusion (DE&I)

Providing opportunities and developing each individual so they
can make their own unique contribution

We consider diversity, equity & inclusion (DE&I) to be one of our most important management strategies as we
believe that harnessing each employee’s individual qualities and helping them fully demonstrate their abilities are
essential for companies to attain sound growth and ensure happiness for all employees. We strive to recognize andaccept diverse human resources regardless of gender, age, disability, nationality, as well as lifestyle and personality,
and to provide each with the best support and opportunities in a fair manner. We utilize new values and ideas coming

Vision and action policy for diversity, equity & inclusion (DE&I)

VisionA ction p olicy• Growth of the company andhappiness of the individual• Diversification of decisionmaking levels• Ratio of women, foreign nationals, andcareer hires in managerial positions: 25%• Promoting female managers and providing
career development• Developing more flexible work styles

from an employee-friendly workplace that accepts such people by combining different “knowledge.”

Interview with a female manager (1)front of them, and that they will seize it. We hope that this program

managerial positions. Why is it once again necessary to grow thewill be seen as a way that makes the Niterra Group stronger.

number of women in these positions?
Q. In the promotion of diversity, one of your management strategies,

workforce, but also to have women at decision-making levels. We

please tell us about your future goals, including your thoughts on

believe that when determining which direction a company will aim for,having a diverse workforce.

better choices can be made if opinions from colleagues with diverse

I believe that for a company to be strong, it needs the ideas of a

attributes, such as women, are shared and discussed. Our ratio ofdiverse set of employees. This is because the world itself is made up

women in managerial positions has now finally exceeded 4%.

of diverse people. I believe that if decisions are made based on the

I believe that we have reached a point in time where we can, without

ideas of only people with similar attributes, we risk bias emerging inhesitation, say that the ratio of women in managerial positions shouldsome part of our thinking, making it difficult for the organization tobe equal to the ratio of all female employees, which is 17%.

grow. The promotion of diversity is one means by which we will reachactive participation by self-disciplined creative human resources, a

Q. In the context of your own experience, tell us about the issues

goal of our Medium-term Management Plan. We seek to achieve athat need to be resolved in order to increase the ratio of women instate in which

managerial positions?

individuals are

If we wait for a natural cultivation of female managers, we will findrespected and theirourselves behind the rest of the world. Therefore, we haveactive participation

implemented a program to help elevate women to managerial

is a given.

positions. Some women, like myself, don’t like the idea of putting on
General Manager of Human Resources Strategy Dept.,
Global Strategy Div.

Natsuki Hirano

airs. But, even if you just reach a little at the start of something big,
you can be the one to produce real results. It is my hope that myfemale colleagues will recognize when there is an opportunity right in56

I believe it is important not only to have more women in the

Niterra Report 2023

Q. One of your priority tasks is to increase the ratio of women in03Foundation for Value
Creation

Niterra Value Creation

Human Capital Management

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

Diversity, equity & inclusion (DE&I)
Interview with a female manager (2)Initiatives to Promote DE&I

Q. Having been a participant in Raise UP

1. Selective female manager promotion training

Program training for promoting female

Niterra Group aims to increase the ratio of women, foreign nationals, and mid-career employees in managerial positions to 25% by 2030, andmanagers yourself, how do you make use

has shown strong progress toward this goal, at 20% as of March 2023. A specific effort to increase the ratio of women in managerial positionsof this experience in the field in your current

is the Raise UP Program, a training program for selective promotion of women to managerial positions. With the support of multiple mentors,

position of promoting this training?

we encourage the growth of women, creating opportunities for them to acquire the knowledge, skills, and attitude required for managerial

In the Raise UP Program, a training program for

positions. We launched this program in 2019, and since then, 20 women have been promoted to managerial positions through the program.

selective promotion of women to managerial

As we accept diversity and promote the right talent, the ratio of female managers is increasing year by year.

positions, I learned many things thatsignificantly changed my own awareness.

2. Male childcare

These things included self-reflection,

Recognizing that the declining birthrate is an important social issue, we are encouraging men to take childcare leave. Specific actions

presentation skills to communicate in my own words, and insights from mentors. I try tohere include, as part of our environmental improvement efforts, seminars on the revision of Japan’s Child Care and Family Care Leave

share that experience with the program participants. Because I feel that female managers

Law for supervisors and those in the child-rearing generation, respectively, to raise awareness among workplace supervisors, as well as

also need horizontal connections, we also focus on networking both internally and externally.

seminars on how to achieve a good balance between childcare and work. As a result, the rate of employees taking childcare leave hasThis networking includes roundtable discussions between program participants and moreincreased significantly, up 28% over the previous year. In addition to increasing the rate of employees taking childcare leave, we are also

veteran colleagues who have already gone through the program, as well as opportunities tofocusing on expanding flexible work styles to support employees who wish to balance childcare and career development without taking

interact with female managers from other companies.

Niterra Report 2023

Q. As a first step toward diversity, what goals are you working toward in order to57

leave. We encourage the participation of men in childcare by offering a choice of places to work through our system for employees
working in remote areas and a choice of working hours through our flextime working system.

increase the ratio of women in managerial positions?

3. Gender pay gap

It is my desire to increase the ratio of women in managerial positions each year by

We help our employees to autonomously develop their careers by providing a variety of work style options. Specifically, we haveestablished a system that allows employees to choose generalist or non-management-track positions regardless of gender,
provides job transfer programs, and offers shorter working hour options. This gives our employees options for work styles that they

consistently carrying out the Raise UP Program. In addition, I will focus not only on
measures tailored to the characteristics of ourcolleagues, including the promotion of active

can pick and choose based on their own preferences. This system does not discriminate between genders, and wage levels

participation of women, but also on being

between men and women, all other conditions being equal (e.g., position, job transfer program), show nearly equal wages

understanding and inclusive of diversity. I will also

between the genders. However, we recognize that the ratio of women in managerial positions is lower than that of men, and wework on measures to create an organizational

will further accelerate work to have women play an active role. We respect the choices that employees make of their own volition

climate where employees can demonstrate theirand are working with emphasis on enhancing systems that allow them to enjoy a long, secure tenure with us.

individuality, including not only diversity in visible
characteristics, but also invisible diversity in

Ratio of female employees
Selected as a Nadeshiko Brand company for FY2021 as a company
that promotes the empowerment of women
As a company that excels in the empowerment of women, we wereselected as a Nadeshiko Brand company for FY2021, which is jointly
selected by the Ministry of Economy, Trade and Industry and the Tokyo
Stock Exchange. This is the second
time for us to be selected as aNadeshiko Brand company following
the selection in FY2018.

terms of individual abilities, experience, and

（%）
20
15

14.8

15.4

16.0

2.3

2.9

3.0

15.6

16.8

knowledge.

10
5
0

1.5
2018
Generalists

1.8
2019
Section Chiefs

4.4

2.6

3.2

2020
Managers

2021

4.7
4.2
2022（Fiscal year）*A manager refers to those whose duties and responsibilities are equivalent
to those of a section manager or higher. Though the Company has specialist
positions of manager grade, they are not included above.

HR Development, HR Development Dept.,
HR Communication Company

Namiko Nishimoto

03

Foundation for Value
Creation

Occupational Health and Safety

Niterra Value Creation

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

Occupational Health and Safety Policy
With high respect to humanity, we act on occupational health and safety as the company’s starting point.
• To prevent health damage, injuries at work, and illnesses of employees, we will provide healthy and safety working environment and act to improve physical and mental health.
• We will comply with laws and voluntary regulations regarding Occupational Health and Safety.
• We will continuously improve occupational health and safety management system and health and safety performance.
• We will eradicate injury at work by eliminating hazards for occupational health and safety and by reducing risks.
• We will promote ability and awareness at occupational health and safety through education and enlightenment.
• We will inform all employees about this policy and engage in health and safety activities with the participation of all employees.

ActionGuidelines

Promotion System

Occupational Health and Safety Initiatives
Fostering Employee Health

Risk assessments (RA) are the core activity of our OHSMS. We have

The Niterra Group regards the health of employees as one of its important(OHSMS), and are working to obtain certification at Group companies

reviewed diverse potential risks resulting from workplace equipment,

managerial resources for sustainable corporate growth and is fostering thein Japan and overseas. Under our OHSMS system, each internal

chemical substances, and work at every workplace and evaluated them

health of individual employees for “health and productivity management.” Incompany and Group company sets its own goals and plans, andto take hardware/software countermeasures (residual risk management),

December 2017, we made a declaration on health and productivity

engages in health and safety activities through the Health and Safety

prioritizing the most dangerous risks.

management as the entire Niterra Group and are implementing

Committee at each business site.

In addition, workplace leaders observe work and review RA results tocountermeasures to support mental health and against lifestyle-related diseases

The state of management at each internal company and Group

ensure that all workplaces are working together to reduce risk. In theand passive smoking.

company is subject to a management review by the manager in

event of an accident, an accident alert is promptly distributed to all

In particular, we have achieved 100% of employees undergoing healthcharge of overall health and safety at the Central Health and Safety

Niterra Group companies, with an accident field report distributed at acheckups, the basis for employee health management, and we are also

Committee once every two quarters.

later date that outlines permanent countermeasures and other measures

focusing on voluntary health checkups such as gynecological examinations and*Please see our website for a diagram of our promotion system in this area:

to raise awareness and prevent similar accidents.

H. pylori examinations. In addition, from the viewpoint of preventing passive

https://ngkntk.disclosure.site/en/themes/177/

smoking, we have established a smoking cessation clinic on our premises, andFrequency of occupational accidents(Frequency)
1.0

1.08

0.8
0.6

0.93
0.77

0.58

0.54

0.4
0.2
0.0

0.52

0.90
0.54

0.34
0.08
2018

0.13

0.00
2019

2020

2021

0.53
0.42
0.00
2022 (Fiscal year)

Niterra occupational accidents
Total Niterra accidents
Electrical machinery and equipment manufacturing industry average (reference)

Educationfrom April 2023, smoking has been banned throughout the entire premises. We

To prevent accidents from occurring, we conduct education and training

are growing our various health management measures not only at the Company,

activities from the viewpoints of “people,” “products,” and “systems.” The

but also among Group companies, including actions to establish habits for

Health and Safety Guidelines book distributed to all employees

weight loss and exercise across the entire Group.

summarizes the basics of health and safety, and is available in English
and Portuguese. Each workplace holds group readings to ensure thateach and every employee practices safe behavior. We provide training
using hazard simulators to simulate accidents so that trainees canexperience the fear of having an accident, which is difficult to describe inwords, and so that they can learn how to avoid accidents. In addition to
29 types of hazard simulators, two types of protective equipment fitting

In FY2022, the Company experienced three occupational accidents

check devices are also available. Through a variety of educational and(versus seven in the previous fiscal year), with an overall frequency of

training activities, including stratified and specialized training, we aim to

0.42. All accidents were minor.

build a safety culture.

Declaration on health and productivity management
I. Niterra Group declares that we will support the health of each and every
employee and promote Kenkokeiei (health and productivity management) byviewing the health of our employees as one of the most important management
resources in order to realize sustainable growth.
II. We will respect the diversity and individuality of each employee and promote thecreation of a workplace in which each employee can fully demonstrate his or her
abilities as well as work energetically.
III. We will work together with the labor and health insurance unions to actively
engage in health promotion activities that include employees’ families from along-term perspective

President & Chief Operating Officer

Takeshi Kawai* Kenkokeiei is a registered trademark of NPO Kenkokeiei.

58

Risk Assessment Initiatives

standard for occupational health and safety management systems

Niterra Report 2023

In FY2021, we obtained ISO 45001 certification, the international

03Foundation for Value
Creation

Niterra Value Creation

Respect for Human Rights

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

Human Rights Policy
We are working to resolve various social issues to realize sustainable societies. We recognize that as a prerequisite for this, it is important to respect human rights of people who are affectedby our business activities, and that it is essential to continuously fulfill such responsibilities in truly contributing to the realization of sustainable societies. To this end, we respect human rights
set out in the Universal Declaration of Human Rights and the ILO Declaration on Fundamental Principles and Rights at Work, and make our best efforts to protect the dignity of these people
based on the UN Global Compact, the UN Guiding Principles on Business and Human Rights, and the OECD Guidelines for Multinational Enterprises.

• We disclose efforts and progress promptly on human rights actions and keep
updating ones through discussions and dialogues with various internal and external
stakeholders.

• We identify negative impacts that we could have on human rights through our businessactivities, and strive to prevent, mitigate, or eliminate the causes of such impacts.

• This policy applies to all Corporate Officers and employees of the Group. We
provide appropriate education and trainings to ensure that all Corporate Officers andemployees understand and act with this policy.

• We establish a scheme for our employees and suppliers to access or report, andaccept consultations and notifications concerning human rights. Upon receiving
c o n s u l t a t i o n s o r n o t i f i c a t i o n s , w e i n v e s t i g a t e t h e f a c t s , a n d i f a n y p ro b l e m i sidentified, we remedy it through appropriate response.

• We keep encouraging all of our business partners, including suppliers, to understandthe Policy and join our efforts to respect human rights.

▶Visit the following website for more details https://ngkntk.disclosure.site/en/themes/175/

Niterra Report 2023

ActionGuidelines• We comply with the laws and regulations of all countries and regions in which we conduct
our business activities. If where national laws and international human rights differ, weseek ways to respect internationally recognized human rights wherever possible.

59

Respect for Human Rights
We recognize that our businessareas. Each department, such as HR,

affects a wide range of people

procurement, risk compliance, and environment

from our employees to theand safety, addresses human rights issues.

employees of our business

Some issues require efforts from eachpartners, and residents of local

department, and each department and expert

communities. As such, we arecommittee involved monitors the issue andcommitted to respecting humanprogress. In response to recent global progressrights through the identificationin legislation on business and human rights, weand assessment of negative

established a working group in FY2022 andimpacts on human rights related

began exploring how we can evolve Groupto our business activities. We also

respect for human rights into an approach thatwork to respect human rights

meets global standards.

through the establishment of

The CSR and Sustainability Committee

structures to prevent, mitigate,

oversees Group measures on human rights.

and correct negative impacts.

Human Rights Policy Formulation andAnnouncement

Overview of our efforts to respect human rights

Step 1
Identify andassess negative
impacts

Step 2Prevent andmitigate negative
impacts

Humanrights due
diligence

Step 4
Explain anddisclose
information

Step 3
Assess theeffectiveness ofmeasuresEstablish grievance mechanism and correct

Human rights issues affect a wide range of

Formulate and announce Human Rights Policy

Promotion System

We established the
Human Rights Policy as
one of our CSR basic
policies in 2020. In

Survey and organize issues tocover(such as Group issues, human rights
risks, and global standards)

January 2023, werevised the Human
Rights Policy due to theincreasing importanceand expectations ofDraft the revision
The CSR and Sustainability
Committee checks the revision

corporate human rights
initiatives, as well as the

Dialogue with stakeholders

Human Rights Policy revision processneed for initiatives within
the Group and over theentire value chain.

The Board of Directors
approves the revision
Notify employees andannounce to the public

03Foundation for Value
Creation

Niterra Value Creation

Respect for Human Rights

Human Rights Due Diligence

Supply chain

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

Dialogue with Stakeholders

We make efforts to identify, assess, prevent, and mitigate humanWe have issued CSR and Sustainability Procurement Guidelines to

We hold regular labor-management meetings with the labor union,rights risks related to our business activities.

our suppliers to promote CSR and sustainability initiatives throughout

which represents our employees, to discuss the management of

To identify human rights risks, we organize the main value chains

our supply chain. These guidelines also include compliance items

working hours and employee work styles. Our business partners haveand stakeholders of the Group and extract any risks generally

related to human rights such as labor, health and safety. We areaccess to our consultation counter through which we hold consultations

assumed for each value chain. We then organize these risks, taking

requesting suppliers to survey the status of implementation with aand address their concerns. In addition, we hold roundtable meetings

reports from international organizations, media databases, otherchecklist every two years, providing feedback on the evaluation

with representatives of residents living near the plant to discuss whether

surveys, and benchmarks of other companies into account. From

results. For suppliers that require follow-up, we confirm the situation

there are any issues that could threaten their living environment.

there, we conduct a human rights risk assessment, map, andby visiting them and other means. We provide support as

identify human rights risks in priority areas.

appropriate if improvements are necessary.

We currently encourage efforts to respect human rights by focusing

Every employee participates in human rights training where they

these results.

Our Group

Compliance awarenesssurveyOur
Group

Supplychain• In FY2022, we focused on following-up with FY2021 results• In FY2023, we plan to reinforce questions on human rights

Survey through the
CSR and Sustainability
Procurement Guideline
checksheet• In FY2022, we reinforced questions on human rights(38 companies)• We conducted interviews at Group companies where
foreign national technical intern trainees work (2 companies)• Conducted once every two years• We will reinforce questions on human rights in thenext survey (FY2023)• In FY2022, we administered a human rights-specific survey
instrument to some business partners (28 companies)•Compliance awareness survey for employees

levels of awareness and understanding, and the status of ourorganization. Employees can anonymously write about how they feel
about compliance in the open-ended section of the survey. Issues
and potential human rights risks identified through the survey arereported to the department managers to improve and prevent.

Rights Policy. Quizes are then administered to check participants’level of understanding. In our management-level human rights
seminars, we provide opportunities for participants to reflect on
global trends and human rights in business. We also increase
opportunities to educate, provide information on human rights, andraise the awareness of management and employees. In recent years,
our various trainings and newsletters have increased Groupawareness of gender equality and LGBTQ issues, while keeping aclose watch on racial issues happening around the world.

Our compliance awareness survey for domestic Group employees
enables us to ascertain compliance risks (including harassment),

watch videos on the need to respect human rights and our Human

Complaint Handling Mechanism
We established contact points to accept opinions, questions,requests, etc., from stakeholders, customers, suppliers, andemployees.

•Human rights and labor surveys for Group companies
We conduct annual human rights and labor surveys of Group
companies in Japan and overseas to identify potential humanrights risks.

Human rights seminar for management-level employees(held both in person and online)

60

surveys on human rights and labor for Group companies. Thesesurveys enable us to identify human rights violations and potential• Conducted once every two years in Japan• Conducted annually
Human rights andlabor survey

We conduct compliance awareness surveys for employees andhuman rights risks.

Educational Activities
Niterra Report 2023

on priority risks directly in our Group and our supply chain based on

Our Group and supply chain measures03

Foundation for Value
Creation

Niterra Value Creation

CSR and Sustainability Procurement

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

Procurement Policy
We aim to realize globally optimal procurement based on our quality products principle. To this end, we focus on strengthening cooperation with suppliers and promoting our CSR
and sustainability efforts throughout our supply chain system, while at the same time striving to carry out proper purchasing transactions when procuring materials and parts, basedon the following guidelines:• We conduct rational transactions based on fair, transparent, and open competition.

ActionGuidelines• We comply with procurement-related laws and regulations and foster responsible procurement. We select suppliers based on comprehensive assessment of product quality,
technology, prices, deliveries, CSR and sustainability initiatives, and efforts to continuously make improvements.
• Aiming to procure more eco-friendly products, we strive to promote our green supplier system.
• We enhance mutual trust with our suppliers, who are good partners for us, and strive to realize mutual development.
▶For more details, please visit our website : https://ngkntk.disclosure.site/en/themes/179/

Taking seriously the recent social and environmental issues related to our supply chain, we are promoting responsible procurement activities that not only comply with various laws and regulations, such as the Subcontracting Act,

Niterra Report 2023

CSR and Sustainability Procurement Initiatives
but also give due consideration to human rights and the environment.

61

CSR and sustainability procurement initiatives

conducted in fiscal 2021, we received responses from• Setting reduction targets for greenhouse gases

82% of the subject suppliers. For some suppliers, we held

The CSR and Sustainability Procurement Guidelines

To foster CSR and sustainability measures across theinterviews with management and provided other follow-that we issue to our suppliers stipulate that suppliers

supply chain, we issued our CSR and Sustainability

ups, thereby asking for improvement.

set greenhouse gas reduction targets and take action

Procurement Guidelines and have been distributing copies
to suppliers.

Encouraging suppliers toward carbon

The CSR and Sustainability Procurement Guidelines set

neutrality

the rules that our suppliers are requested to comply withconcerning the environment, human rights and labor,business continuity planning (BCP), business ethics,
information security, occupational health and safety, andproduct quality and safety. We ask our suppliers to put
them into practice together with the Niterra Group. We
also ask our suppliers to distribute copies of the Guidelines
to their own suppliers.
To monitor the status of implementation by the suppliers,
we conduct surveys every two years using a check list
and provide feedback on the results. For the survey weIn order to work toward carbon neutrality throughout
our supply chain, we ask our suppliers to set
greenhouse gas reduction targets and cooperate inour surveys about CO2 emissions related to products
for the Group. In our FY2022 survey on this topic, we
held briefing sessions on the context around carbon
neutrality, our Group’s initiatives, our procurement
stance toward carbon neutrality, and our intention to
support our suppliers, requesting their understanding
and cooperation.

to achieve them. In the FY2022 survey, 27% of

Status of supplier CO2 emissions
reduction target-setting (in FY2022)
No plan for
consideration

9%

suppliers had already set CO 2 reduction targets, andwe will encourage suppliers that have not yet set

Targets set

27%

targets to do so.

• CO2 emissions surveys on products for the GroupIn FY2022, we began surveys to ascertain the amount of

To be considered48%

CO2 emissions at our suppliers as they pertain to ourUnderconsideration

16%

Group, and will maintain these surveys going forward.

• Supporting suppliers in reducing CO2 emissions
We help our suppliers to reduce their CO2 emissions through support measures such as conducting
energy saving diagnostics and introducing energy saving case studies and subsidies.
*For more details about green procurement, conflict minerals, and sustainability training, please see our website:
https://ngkntk.disclosure.site/en/themes/179/

03

Foundation for Value
Creation

Niterra Value Creation

Corporate Governance

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

Basic Philosophy on Corporate Governance
Guided by our corporate philosophy under the slogan “With established trust and confidence inside and outside the company, we aim to contribute to the peoples of the world by creating and putting at their disposal new values
for the future”, we have established, and are working to enhance, our corporate governance system to promote management aimed at increasing our corporate value over the medium to long term. Our basic view on corporate
governance is to build relationships of trust with our shareholders, customers, business partners, employees, local communities, and other stakeholders through management that ensures fairness and a high degree oftransparency, and to develop and operate management framework and internal control system to achieve sustainable growth through efficient and sound management.

Corporate Governance System

Internal

Corporate Governance System Chart (As of June 27, 2023)
General Meeting of Shareholders

The Company has selected a company with an Audit and Supervisory
Committee for the purpose of further enhancing discussions on management

3 Nomination
Committee

Audit
Supervision

Appointment/dismissal
Inquiry/report

1 Board of Directors

function, and further speeding up management decision-making and execution

Appointment/dismissal

Appointment/dismissal

Audit and2 Supervisory
Committee

Cooperationof business. Each organization is set up within the framework of a company
with an Audit and Supervisory Committee.

Directors(excluding Audit and Supervisory
Committee members)

Corporate Governance Highlights
Directors’ years of service*1

Up to 3 years

8-10 years

2

Average

5.4 years

44-7 years

Age
60 or younger

70 or older

2

4

Average

66.4

5 CSR &

Sustainability
Committee

Business
executionfunction

Percentage of independent
outside directors

Inquiry/report

Percentage of female anddirectors from overseas

Internal
directors

464%

Risk Management Committee

7

6Female andfrom overseas

5*Years of service for directors who served as Audit and Supervisory Committee members prior to becoming
a director are presented as the sum of their tenure in those two roles.

Health and Safety Committee

Investment

Corporate Officers

IT Security Committee
Environment Committee

HR
Indication

Quality Committee

45%

Management Meeting

Audit

Audit

Cooperation

ReportPresident Officer

StrategySpecial Committees

Compliance Committee

Independent
outsidedirectors

Audit and Supervisory
Committee Office

Supervision

5

Independent
Auditors(Audit and Supervisory
Committee members)

Appointment/
dismissal/
supervision

61-69

4

Directors

62

4 Remuneration
Committee

Indication

Cooperation

Internal Auditing Department

ReportCorporate Officers& Company
Presidents Meeting

Audit

Indication
Indication

Niterra Report 2023

policies and strategies at the Board of Directors, strengthening the supervisory

11+ years

OutsideBusiness Operation Section (Headquarters functions, Internal Companies)/Group Companies

For ① to ⑤, see details on▶ P.63

03

Foundation for Value
Creation

Niterra Value Creation

Corporate Governance

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

Overview of Major Organizations

PurposeChair①Board of Directors②Audit and Supervisory Committee③Nomination Committee④Remuneration Committee⑤CSR and Sustainability Committee

The Board of Directors deliberates and makes decisions
on important management issues such as basic
management policies and medium-term management
strategies, and supervises the status of businessexecution by management and the status of internal
control systems by receiving reports from theRepresentative Director and President and other parties.

The Audit and Supervisory Committee audits andsupervises the directors’ business execution as anindependent organization on the behalf of shareholders.
The Audit and Supervisory Committee also confirms theappropriateness and suitability of the nominations andremuneration of directors (excluding directors who are
Audit and Supervisory Committee members) byattending Nomination Committee and Remuneration
Committee meetings and forming opinions on thesematters.

To ensure reasonableness and transparency with regard
to director and corporate officer nomination, theNomination Committee, consulted by the Board of
Directors, deliberates on the appointment of directors,
which will be proposed at the general meeting ofshareholders, as well as on the appointment anddismissal of representative directors, executive directors,
and corporate officers, and then delivers its opinions to
the Board of Directors.

To ensure reasonableness and transparency with regard to
director and executive officer nomination, the Remuneration
Committee, based on the Board of Directors’ request for
opinions, deliberates on matters related to remuneration of
directors (excluding directors who are Audit andSupervisory Committee members) and corporate officers(excluding employment-type corporate officers), as well as
the appropriateness of the proposed remuneration of eachdirector and executive officer, and delivers its opinions to
the Board of Directors.

To promote sustainability management in the Group, theCSR and Sustainability Committee, based on the Boardof Directors’ request for opinions, deliberates to identify
priority issues in each area of ESG (Environment,
Society, and Governance), delivers its opinions andadvice to the Board of Directors, and supervises
activities of each specialized committee.

Chairman of the Board Shinichi Odo

Chairman of the Board Shinichi Odo

Member of the Board (Outside Director) Chiharu Takakura

4 directors who are Audit and Supervisory Committee
members (including 3 outside directors)

3 representative directors and 4 outside directors (excluding
directors who are Audit and Supervisory Committee members)*The 4 directors who are Audit and Supervisory Committee
members also attend

3 representative directors and 4 outside directors (excluding
directors who are Audit and Supervisory Committee members)*The 4 directors who are Audit and Supervisory Committee
members also attend

Member of the Board (Outside Director) Chiharu Takakura
Executive Vice President Toru Matsui
Full-time Audit and Supervisory Committee Member Mikihiko Kato
Executive Officer Hiroyuki Maeda

FY2022:12

FY2022:10 (after our transition to a company with an
Audit and Supervisory Committee on June 24, 2022)

FY2022:3

FY2022:1

FY2022:5

In FY2022, in addition to regular matters such as
resolutions stipulated by laws and regulation or articles
of incorporation, the Board of Directors deliberated onmatters such as the progress of the Medium-termManagement Plan, business and growth strategies forindividual businesses, capital and financial strategies,
brand and philosophy systems, the state of Group
governance, revisions to human rights policies, and theeffectiveness of the Board of Directors.

In FY2022, in addition to deliberations at Audit andSupervisory Committee meetings and attendance of each
Audit and Supervisory Committee member at Board of
Directors meetings, interviews with directors, corporate
officers, and managers of business and internal control units,
and regular liaison meetings with the Internal Auditing Office
were conducted to improve audit effectiveness. In addition,
the standing Audit and Supervisory Committee member
confirmed the effectiveness of internal controls and thestatus of business execution by attending important
meetings such as the CSR and Sustainability Committee
and the Corporate Management Committee and throughregular liaison meetings with Group company auditors, andmade reports at Audit and Supervisory Committee meetings.

In FY2022, the Nomination Committee, based on the
Board of Directors’ request for opinions, deliberated
mainly on the composition of the Board of Directors, thecontent of proposals to be submitted to the general
meeting of shareholders for the election of directors, theappointment of representative directors and executive
directors, the appointment and dismissal of corporate
officers, and succession plans for senior management,
and delivered its opinions to the Board of Directors.

In FY2022, the Remuneration Committee deliberated
and reported mainly on evaluations of corporate andindividual performance, the resulting individual
remuneration for each director (excluding directors who
are Audit and Supervisory Committee members) andcorporate officers (excluding employment-type corporate
officers), the policy for determining remuneration andother matters for directors after the transition to acompany with an Audit and Supervisory Committee, andthe design of performance-linked remuneration.

In FY2022, the CSR and Sustainability Committee
deliberated on its activity policy, activity goals for theperiod of the Medium-term Management Plan,sustainability management, revisions to human rights
policies, and disclosure of non-financial information, andalso invited outside experts to give lectures to enhance
the knowledge and perspective of the committee.

Membership
Meetings Held

Status of Specific
Activities in
FY202263

Full-time Audit and Supervisory Committee Member Mikihiko Kato

11 directors (including 7 outside directors)

Corporate governance measures over time

2022
2021

●Issued the Corporate Governance Report●Formulated the criteria for the appointment of independent officers●Began assessing the effectiveness of the Board of Directors

2020●Transitioned to
a company
with an Audit andSupervisory
Committee

2019

2018
2017

●Appointed an outside director

2016●Added non-financial
indicators to theperformance-linked
stock remuneration
system indicators

2015
2014
2013
2012
●Decreased the upper limit of the numberof directors from 25 to 13●Introduced the corporate officer system●Increased the number ofoutside directors to three●Increased the numberof outside directors to two●Increased the ratioof outside directors
to one-third●Established the Nomination andRemuneration Committees●Introduced the Employee
Corporate Officer System●Introduced the performance-linked
stock remuneration system●Eliminated and consolidated thehierarchy of corporate officers

Niterra Report 2023

Chairman of the Board Shinichi Odo●Increased theratio of outside
directors toover one-half03Foundation for Value
Creation

Niterra Value Creation

Corporate Governance

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

Roles and Structure of the Board of Directors
The Board of Directors plays the following roles to help the company achieve sustainable growth and

The Company’s Board of Directors believes that it is important for the Board to comprise diverse human resources with different

increase its corporate value on a medium- to long-term basis, thereby increasing its profitability,

backgrounds, including specialized knowledge and experience, in order to achieve sustainable growth and increases in corporate

capital efficiency and others:

value over the medium to long term. The Board is made up of human resources with extensive experience, high levels of●Deliberates and makes decisions on the basic management policies,
medium- to long-term management strategies and other important managerial issues

knowledge, and advanced specialization, with consideration given to gender, nationality, work experience, and age, to achieve agood balance according to the business environment at a given time. In addition, by making up the majority of the Board of●Builds and improves the environment to help the management team takerisks appropriately

Directors with outside directors who have experience and specialized knowledge gained under environments that differ from the●Supervises the management team in a highly effective manner from an
independent and objective standpoint

ensure transparency and objectivity in decision making.

company, the Board can strengthen its supervisory function and engage in deliberations from various perspectives in an effort to
Director candidates are not excluded from consideration on the basis of their race, ethnicity, nationality, country of birth, cultural background, etc.

Considering the business and management system of the Group, the Board of Directors identified the knowledge and experience which it should possess from “Basic areas from the perspective of important management decision-making and businessexecution supervision” and “Areas that need to be particularly promoted and supervised to realize the medium-term management plan.” According to this, Directors are assigned in well-balanced manner with consideration for diversity.

64

Skill Matrix of Directors* 1
Experience/Knowledge/Expertise
Name

PositionIndependenceManagement

Finance/
Accounting

Governance/
Legal/
Risk management

Experienceoverseas

Technology/R&D

Sales/Marketing*2
Shinichi Odo
Takeshi Kawai

Representative Director,
Executive Vice President

Mackenzie
Donald Clugston

Outside Director●

Miwako Doi

Outside Director●

Chiharu Takakura

Outside Director●

Outside Director●

Mikihiko Kato
Kanemaru Yasui
Fumiko Nagatomi
Christina L.
AhmadjianComposition of each Committee
New Business/
M&A

HRD/HRIT/DX

SCM

Nomination
Committee

Remuneration
Committee*3

Representative Director
Chairmanof the Board
Representative Director, President& Chief Operating Officer
All Divisions

Toru Matsui

Takayoshi Mimura

Director Full-time Audit
and Supervisory
Committee Member
Outside Director Audit
and Supervisory
Committee Member
Outside Director Audit
and Supervisory
Committee Member
Outside Director Audit
and Supervisory
Committee Member

Niterra Report 2023

Skill Matrix of Directors

Attends the meeting Attends the meeting●

Attends the meeting Attends the meeting●

Attends the meeting Attends the meeting●

Attends the meeting Attends the meeting*1: The above matrix represents the areas of expertise that we expect from each director and does not represent all of the knowledge and experience that they possess.
*2: Areas fundamental for critical decision-making in the management and supervision of business operations*3: Areas that require active promotion and supervision to realize the Medium-term Management Plan

CSR andSustainability
Committee

03Foundation for Value
Creation

Niterra Value Creation

Corporate Governance

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

Roles and Independence of Outside Directors
To enhance the supervisory function of the Board of Directors and to ensure the transparency and objectivity of decision-making through discussions from multifaceted viewpoints, outside directors make up the majority of the Board of Directors, which
comprises diverse talent who have abundant experience, tremendous insight and a high degree of professionalism. We appoint all the independent outside directors as independent officers and notify the Tokyo Stock Exchange and the Nagoya Stock
Exchange of their appointment. In order to ensure that candidates have neither special relationships with the management team and major shareholders nor conflicts of interest with general shareholders, we designate those who meet all the followings as
independent officers: our own criteria for the appointment of independent officers; the requirement of independent officers set by the Companies Act; and the rules and regulations stipulated by the financial instruments exchanges.
Outside directors attend the Board of Directors meetings and non-statutory advisory bodies to demonstrate their supervisory function by becoming involved in the important decision-making of the company from an independent standpoint, whileproviding advice from an overall perspective based on their abundant experience and insight when formulating and confirming the progress of medium- to long-term management policies at the Board of Directors meetings. Outside directors who are
Audit and Supervisory Committee members serve as a supervisory and auditing function based on their independence and expert knowledge.
Name

Outside director

Mackenzie
Donald Clugston

Outside director

Reason for appointment

FY2022 Frequency of attendance

Audit and Supervisory
Committee

As a diplomat, he has a great deal of global experience and expertise in international affairs and trade. As an outside director, he oversees business execution by the Company’s management
team and provides advice to the team, and we have selected him as an outside director with the expectation that he will continue to fulfill his role.

12/12

―

Miwako Doi

She has an abundance of experience and an outstanding record as a researcher in the field of information and communication and has been engaging in advanced research both in academia and in
the private sector. As an outside director, she oversees business execution by the Company’s management team and provides advice to the team, and we have selected her as an outside director
with the expectation that she will continue to fulfill her role.

12/12

―

Outside director

Chiharu Takakura

She has an abundance of experience and knowledge in organizational development and human resource development through her experience as a consultant in these fields and her experience in
key positions in the personnel departments of many global companies, including international pharmaceutical companies. As an outside director, she oversees business execution by the Company’s
management team and provides advice to the team, and we have selected her as an outside director with the expectation that she will continue to fulfill her role.

12/12

―

Outside director

Takayoshi Mimura

He has long been involved in management from both an executive and supervisory perspective, including serving as a business manager and chairman of the board of directors at an operatingcompany, and has a high degree of insight into corporate management and corporate governance. In addition, he has an abundance of experience in the medical device field and global businessfrom his long involvement in the medical device business and the cultivation of overseas markets. We have selected him as an outside director in the expectation that he will oversee businessexecution by the Company’s management team and provide advice to the team based on his insight and experience.

――

Outside director,
Audit and Supervisory
Committee member

Kanemaru Yasui

He has expert knowledge and experience accumulated over many years as a certified public accountant. We have selected him as an outside director who is an Audit and Supervisory Committee
member with the expectation that he will supervise and audit the company’s overall management based on his expert insights as an outside director who is an Audit and Supervisory Committee
member, and that he will provide appropriate advice for overall management.

12/12

10/10

Outside director,
Audit and Supervisory
Committee member

Fumiko Nagatomi

She has expert knowledge and experience accumulated over many years as a lawyer. We have selected her as an outside director who is an Audit and Supervisory Committee member with the
expectation that she will supervise and audit the company’s overall management based on her expert insights as an outside director who is an Audit and Supervisory Committee member, and that
she will provide appropriate advice for overall management.

12/12

10/10

Outside director,
Audit and Supervisory
Committee member

Christina L.
AhmadjianBased on her extensive experience and deep insight as a researcher of corporate management, corporate governance, and organizational culture and her involvement in management as an outside
director in many companies, we have selected her as an outside director who is an Audit and Supervisory Committee member with the expectation that she will supervise and audit the company’s
overall management based on her expert insights as an outside director who is an Audit and Supervisory Committee member, and that she will provide appropriate advice for overall management.

9/10*

10/10

65

Board ofDirectors*Board of Directors meetings held after taking office as an outside director on June 24, 2022

Succession Plan
The Board of Directors engages in theformulation and implementation of thesuccession plan, designed to discover andcultivate future CEOs and other businessleaders. The members of the Board see to itthat sufficient time and resources arecommitted to developing their successors in aplanned manner.

Niterra Report 2023

Title

Specific involvement by the Board of Directors

Details of measures to discover and cultivate human resources

In addition to confirming the operation of succession plans

In FY2022, we launched the “Management Sparring Dojo,” a management human resources development program

through the Nomination Committee, the representative

aimed at cultivating the competencies and viewpoints required for management by talent who will become our next

directors and other outside directors are actively involved inmanagement team (members of the Corporate Management Committee). This program is designed to provide

human resource development by participating in management

participants with the knowledge (including ESG, science, geopolitics, etc.) that a manager should have, as well as thehuman resource development programs as lecturers andattitude and thinking required of a manager. In addition, through the HAGI Program for global next-generation

observers.

managerial human resource development and the Nittoku Business School selective training program, we arecontinuously striving to discover and develop human resources who will lead the next generation of management.

03Foundation for Value
Creation

Niterra Value Creation

Corporate Governance

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

Evaluation of the Effectiveness of the Board of Directors
The company conducts an annual evaluation of the effectiveness of the Board of Directors in order to verify whether the Board of Directors is properly fulfilling its expected functions and to continuously improve its effectiveness.
In FY2022, we conducted a questionnaire survey of directors to evaluate the composition and operation of the Board of Directors, deliberation of management and other strategies, and oversight of business execution. The
results of this survey were used to evaluate the effectiveness of the Board of Directors.

We confirmed that effective measures are being taken in the following areas:

Method of evaluation
Evaluation was conducted by
the Board of Directors based ona survey of directors.

•The Board of Directors has established suitable internal controls and risk management structures in the Group to ensure proper compliance and support risk taking andsupervises the status of operations through the Internal Auditing Office, Sustainability Committee, and subordinate committees.
Overview of
evaluation
resultsfor FY2022●Composition and operation of theBoard of Directors•The Board of Directors has confirmed that the design of the management remuneration scheme is consistent with the company’s management and business strategies and isbalanced with short- and long-term objectives and non-financial indicator targets.
•To ensure that remuneration is set in a manner that provides appropriate incentives, the Remuneration Committee has evaluated that the execution of duties by management
is appropriate from the perspectives of sustainable growth and enhancement of corporate value.

●Deliberation of management andbusiness strategies•The Board of Directors implements appropriate improvement measures regarding key issues identified through evaluation of the effectiveness of the Board of Directors and strives
to enhance its effectiveness.

66●Corporate ethics and risk management●Monitoring of business execution andevaluation/remuneration of management

FY2021 evaluation●Dialogue with shareholders and investors
Issuesrecognized

Evaluation at the Board of Directors

Confirmation of issues
ActionstatusStudy of issue action policy•To ensure that decisions regarding the appointment and dismissal of management are appropriately carried out, the Nomination Committee appropriately evaluates
management's execution of duties from the perspective of sustainable growth and corporate value.

Niterra Report 2023

Survey items•The roles and functions of the Board of Directors and management in charge of business execution were clarified, and we confirmed that the Board of Directors comprises
members who have the knowledge, skills, experience, and diversity necessary to fulfill their roles and functions.

•Further enhancing deliberation within the Board of Directors regarding
medium to long term management strategies and monitoring of theMedium-term Management Plan
•Improving the prior distribution of materials and provision of explanations
to outside directors
With respect to further enhancing deliberation within the Board of Directors
regarding medium to long term management strategies and monitoring of theMedium-term Management Plan, in FY2022, in conjunction with the transition
to a company with an Audit and Supervisory Committee, in addition to theexisting categories of items to be resolved and items to be reported, a new
category of items were introduced to be discussed at the Board of Directors
meetings, namely, items for discussion and consultation, with the aim of
discussing medium- to long-term management policies. In addition, the Boardof Directors reviewed its decision-making criteria in order to delegate theauthority to make decisions on individual business operations to the executive
side. Furthermore, the Board of Directors regularly reports on the progress of
the Medium-term Management Plan.
With regard to improving the prior distribution of materials and provision of
explanations to outside directors, we focused on prior explanations to outside
directors on important matters to be discussed at the Board of Directors meetings,
thereby enhancing and streamlining the discussions at the meetings.

FY2022 evaluation

Issuesrecognized

ActionPolicies•Improving information and explanations provided to the Board of Directors
regarding medium- to long-term management strategies•Strengthening oversight of management succession plans by the Board of
Directors and Nomination Committee
As the focus of the Board of Directors’ deliberations shifts from individual
business execution to medium- to long-term themes, the information
provided to the Board of Directors has been improved accordingly
to further enhance the quality of deliberations. The Company has set
improving information and explanations provided to the Board of Directors
regarding medium- to long-term management strategies as an issue tofurther improve the quality of deliberations. Going forward, efforts will bemade to improve the content of Board of Directors meeting materials andadvance explanations of Board of Directors meeting proposals, and todevise methods for providing information.
With respect to strengthening oversight of management succession plansby the Board of Directors and Nomination Committee, information sharing
will be enhanced with members of the Board of Directors and Nomination
Committee through such measures as reporting on the status of succession
planning efforts, including the managerial human resource development
program.

03

Foundation for Value
Creation

Niterra Value Creation

Corporate Governance

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

Remuneration for Officers
Basic policy

Type and details of remuneration for officers

Remuneration for directors (excluding directors who are Audit and Supervisory Committee members and outside directors) and corporate
officers is paid based on the policy of providing them with additional motivation to contribute to improving the company’s businessperformance on a medium- to long-term basis and growing the corporate value, while ensuring they have a shared interest withshareholders by holding company shares themselves. The remuneration consists of fixed remuneration paid in the form of cash; bonus,
which is linked with the company’s single-year business performance, etc.; and performance-linked stock remuneration paid in accordancewith each person’s position and level of achievement against the performance targets set in the medium-term management plan and others.

Details of
remuneration

Remuneration of directors who are Audit and Supervisory Committee members and outside directors comprises only fixed remuneration.

Performance-linked stock remuneration
The Board Incentive Plan (BIP) is adopted, where
the company shares and money in the amountequivalent to the value of the shares of thecompany are given or granted to directors at theend of the period set for the system, based on
their positions and level of achievement against
the targets set in the Medium-term Management
Plan, etc.

•Change in consolidated operating
income for the current fiscal year
versus past fiscal years•Qualitative evaluation of individual
performance

Single-year performance goals: Consolidated
revenue, consolidated operating income
Medium-term performance goals: Consolidated
revenue, consolidated operating income, ROIC
Non-financial measures goals: Sales from non-ICE
business, rate of reduction of CO2 emissions

Payment is determined within therange of 0% to 200% based on
the achievement of the company
performance target and assessmentof individual performance.

The ratio of the fixed portion to theperformance-linked portion is set to be 3:7, inthe case of 100% achievement of each indicator.
The performance-linked portion is determinedwithin the range of 0% to 200%, according to theachievement of each indicator.

Directors (excluding directors who
are Audit and Supervisory Committee
members and outside directors),
Corporate Officers

Directors (excluding directors who are Audit
and Supervisory Committee members andoutside directors), Corporate Officers (excluding
employment-type corporate officers)*

Our Remuneration Committee acts as an advisory body to the Board of Directors. It deliberates on the remuneration policies, procedures,and systems for directors (excluding directors who are Audit and Supervisory Committee members and outside directors) and corporate
officers as well as the appropriateness of the amount of remuneration planned to be paid to each director (excluding directors who are Audit
and Supervisory Committee members) and corporate officers, and submits the results to the Board of Directors to ensure the rationality andtransparency of the decisions made concerning the remuneration of directors (excluding directors who are Audit and Supervisory Committee

Indicators against
which the achievementof performance targets
is assessed-

How to determine
payment-

members and outside directors) and corporate officers. In FY2022, the committee met one times.

Example of remuneration payment
In the case of 100%
achievement of key performanceindicators (KPIs)

Fixed remuneration:
60%

Bonus:
25%

Performance-linked
stock remuneration:
15%

Policy on the payment of bonus

Recipients

Directors, Corporate Officers*An Employee Stock Ownership Plan (ESOP) Trust has been adopted for employment-type corporate officers.

As for bonuses, in addition to the base amount set for each position, an amount is paid to each person, decided comprehensively inconsideration of the quantitative targets set for corporate performance such as consolidated revenue and consolidated operating income
ratio, which reflect the results of sales activities, and based on the qualitative evaluation of the individual performance of the person. The
Company uses consolidated operating income, which reflects the results of operating activities, as an indicator for the calculation of bonus

Total amount of remuneration, etc. paid to officers, total payment amount by remuneration type,
and the number of recipients (for FY2022)

amounts, in order to ensure bonuses are tied to the Company’s performance and to raise awareness of the need to contribute to theimprovement of the Company’s performance. The bonus amount is calculated based on the rate of increase or decrease of consolidated
operating income for the current fiscal year against past fiscal years and based on the qualitative evaluation of individual performance.

Performance-linked stock remuneration system
We introduced the performance-linked stock remuneration for directors (excluding directors who are Audit and Supervisory Committee
members and outside directors) and corporate officers (excluding employment-type corporate officers) to further clarify the link between thecompensation of directors and the value of the Company’s stock, and to have them share interests with shareholders, so as to incentivize
them to contribute to the improvement of the Company’s medium- to long-term performance and to increasing corporate value. Under thesystem, the Board Incentive Plan (BIP) is adopted, where points are given to directors based on their position and the level of achievement
against the targets set in the Medium-term Management Plan. Points are calculated according to the method stipulated in share granting
regulations, which were determined by the Board of Directors after the deliberation of the Remuneration Committee. After the end of theperiod, shares of the company and money in the amount equivalent to the value of the shares are to begiven or granted based on granted
points. Indicators against which the achievement of the performance targets is assessed are set based on single-year performance goals,
medium-term performance goals, and non-financial measures goals. The single-year performance goals are based on consolidated revenue
and consolidated operating income, which reflect the results of sales activities. The medium-term performance goals are based on thetargets set in the Medium-term Management Plan, which are consolidated revenue, consolidated operating income, and ROIC, an indicatorof whether we have efficiently earned profits relative to invested capital. For non-financial measures goals, sales from non-ICE business andrate of reduction of CO2 emissions are used as indicators to reflect the results of efforts for sustainable growth and corporate valueenhancement, and to facilitate the transformation of our business portfolio.

Category

Total amount of
remuneration paid
(millions of yen)

Total payment amount by remuneration type(millions of yen)Fixed
remuneration

Bonus

Bonus
Performance-linked
stock remuneration

Number ofrecipients(persons)

Directors (excluding directors who are Audit andSupervisory Committee members)(of which, outside directors)

494
(61)

328
(61)

111
(-)

55
(-)

12
(5)

Directors who are Audit and Supervisory
Committee members(of which, outside directors)

70
(35)

70
(35)

-

-

4
(3)

Audit & Supervisory Board members(of which, outside Audit &Supervisory Board members)

17
(10)

17
(10)

-

-

4
(3)

(Notes) 1. The total amount of bonuses and performance-linked stock remuneration are both the amounts expensed in FY2022.
2. The above includes remuneration for three directors and two Audit & Supervisory Board members (including one outside Audit & Supervisory Board member) who retired at the conclusion of
the 122nd general meeting of shareholders.

67

Bonus
Bonus is determined based on acomprehensive consideration of
the base amount for each position,
by taking into account quantitative
targets for the degree of achievementof Company performance goals aswell as qualitative evaluations ofindividual performance, and is paid ata certain time each year.

Niterra Report 2023

Fixed remuneration
Fixed remuneration is determined
holistically according to the position
and responsibilities, by taking into
account peers’ levels, the company
performance, and the level of
employee salaries, and then paid
monthly.

03Foundation for Value
Creation

Niterra Value Creation

Corporate Governance

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

Measures to Strengthen Functions of Audit and Supervisory Committee
Establishment of the Audit and Supervisory Committee Office

Coordination with the Internal Auditing Office

To support the execution of duties by the Audit and Supervisory Committee, the Audit and Supervisory Committee Office

The Audit and Supervisory Committee and Internal Audit Department meet regularly and as necessary to exchange

was established, and four employees were assigned to the office full-time. These employees receive instruction from theinformation on audit policies, audit plans, audit implementation status, and other matters and to work in close collaboration

Audit and Supervisory Committee members, liaise and coordinate internally, and gather and provide the necessary

with one another. In particular, the standing Audit and Supervisory Audit Committee member and the Audit and Supervisory

information. The Audit and Supervisory Committee Office works under the supervision and direction of the Audit andCommittee Office and the Internal Audit Department hold monthly meetings to strengthen mutual cooperation. In addition,

Supervisory Committee and their independence in relation to supervision and direction from directors (excluding directors

Audit and Supervisory Committee members or Audit and Supervisory Committee Office staff attend audits conducted by the

who are Audit and Supervisory Committee members), corporate officers and employees is ensured. In addition, transfers,

Internal Audit Department when necessary, and the Internal Audit Department conducts investigations and makes reports aspersonnel evaluations, etc. require the prior consent of the Audit and Supervisory Committee.

requested by the Audit and Supervisory Committee.

Policy on the stocks held for reasons other than pure investment purposes
Niterra holds the stocks of its suppliers and others basically to maintain and enhance stable business relationships with them,when the company decides that holding the stocks will help increase its corporate value after verifying the economic

Stocks Held for Reasons Other than Pure Investment Purposes (listed stocks)(Billions of yen)rationality from medium- to long-term viewpoints. The Board of Directors annually checks whether it is rational and
60

40

33

29

consideration of the capital cost and comparing the related risks and returns on a medium- to long-term basis. Whenthe Board decides that the company should not continue to hold any of the stocks, the company will sell them asappropriate, in consideration of the market trend.

Criteria for the exercise of voting rights
For the exercise of voting rights for the stocks owned by our company, we will decide whether to exercise the rights for each
item of the agenda, considering whether it will contribute to increasing the corporate value of the investee company and of
our own company. In particular for the selection of directors, appropriation of retained earnings and other items that have alarge impact on shareholder value, we will exercise the voting rights according to the criteria set for the rights.

Training for Officers

30

27
20

40

20

16
10

20
56.3

46.8

37.6

48.0

36.1

25.1

FY2017FY2018FY2019FY2020

FY2021

FY2022100Amount0

Number of issues*The amount represents market capitalization.

Enhancement of Group Governance

We provide the directors with sufficient assistance to fulfill their expected roles and responsibilities where applicable. For the

Niterra has corporate officers who were locally recruited at its regional headquarters (RHQs) for the Americas and EMEA ininternal directors, we encourage them to take external seminars to acquire additional knowledge to meet their obligations,order to ensure that speedy and accurate managerial decisions are made at bases closer to the markets they serve in view ofwhile the internal directors and corporate officers are required to attend an executive training session to share the managerial

the company’s globally expanding business environment. We have also formed unique governance teams at the RHQs to

issues and seek out the solution. In order for the outside directors to deepen understanding of the Group, each departmentbuild an optimal decentralized system on a group-wide basis and enhance corporate governance as the entire Group.

explains the businesses and operations in addition to providing them with opportunities to visit major sites of the businesses.

Moreover, the Global Group Governance Division is in place as an organization that audits the effectiveness of the Group’s

Directors who are Audit and Supervisory Committee members periodically take external sessions to gain understanding ofgovernance as an entity that is separate from its business execution. This organization formulates and implements measureswhat roles the Audit and Supervisory Committee members fulfill, the audit methods, the relevant laws and regulations, andto carryout audits on the management of Group companies and RHQs and on the core business operations of eachfinancial accounting knowledge required for the accounting audit.

department. It also formulates and implements measures to enhance internal control across the Group and thus plays animportant role for the enhancement of the Group’s governance.

68

useful in terms of enhancing its corporate value to keep the stocks individually for each of the investee companies, in(Number of issues)

80

Niterra Report 2023

Stocks Held for Reasons Other than Pure Investment Purposes

03Foundation for Value
Creation

Executive Officers

Niterra Value Creation

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

Directors (as of July 1, 2023)
Representative Director, Chairman of the Board

Shinichi Odo
Born April 3, 1954

April 1977: Joined our company
February 2003: General Manager of Overseas Aftermarket Sales & Marketing Dept.,
Sales and Marketing Div., Automotive Components Gr.
July 2005: President, NGK SPARK PLUGS (U.S.A.), INC. (Now Niterra North America, Inc.)
June 2007: Member of the Board
June 2010: Member of the Board (Managing Director)
June 2011: President
April 2012: President & CEO
April 2016: Representative Director & Chairman of the Board President &Chief Executive Officer
April 2019: Representative Director & Chairman of the Board (up to today)
May 2020: Chairman of the Japan Auto Parts Industries Association (JAPIA)

Representative Director, President, Chief Operating Officer
All Businesses, Global Strategy Div., Global Group
Governance Div., and Strategy PF Office

Takeshi Kawai
Born October 13, 1962

April 1987: Joined our company
February 2011: General Manager of Sensor Engineering Dept. II, Sensor Div.,
Automotive Components Gr.
April 2012: Corporate Officer
April 2015: Managing Officer
June 2015: Member of the Board, Managing Officer
April 2016: Member of the Board, Senior Managing Officer
April 2019: President & Chief Operating Officer (up to today)
Shares held: 18,432
Years in office: 8

Shares held: 36,108
Years in office: 16

Mackenzie Donald
Clugston

Born June 19, 1950

Shares held: 0Years in office: 4

Born February 14, 1962

April 1984: Joined our company
April 2011: President of NGK SPARK PLUG EUROPE GmbH (Now Niterra EMEA GmbH)
October 2013: General Manager of OEM Sales & Marketing Dept.,
Sales and Marketing Div., Automotive Components Gr.
December 2014: President of NGK SPARK PLUG (SHANGHAI) CO., LTD.
(Now Niterra (Shanghai) Co.,Ltd.)
April 2015: Corporate Officer
July 2016: President of NGK SPARK PLUG (SHANGHAI) TRADING CO., LTD.
(Now Niterra Trading (Shanghai) Co., Ltd.)
April 2018: Managing Officer
June 2018: Member of the Board, Managing Officer
April 2019: Member of the Board, Executive Vice President
April 2020: Representative Director, Member of the Board, Executive Vice President (up to today)
Number of shares: 12,254
Years in office: 5

Member of the Board (Outside Director)

Member of the Board (Outside Director)

Member of the Board (Outside Director)

Born June 2, 1954

Born December 22, 1959

Born June 18, 1953

Miwako Doi

April 1979: Joined Tokyo Shibaura Electric Co., Ltd. (currently Toshiba Corporation)
July 2005: Senior Fellow, Corporate Research & Development Center, Toshiba Corporation
July 2008: Chief Fellow, Corporate Research & Development Center, Toshiba Corporation
April 2014: Auditor, National Institute of Information and Communications Technology,
an Incorporated Administrative Agency (currently, a National Research andDevelopment Agency) (up to today)
June 2015: Outside Director, Nomura Research Institute, Ltd.
April 2017: Executive Director, Nara Institute of Science and Technology(up to today)
June 2019: Outside Director, Isetan Mitsukoshi Holdings Ltd. (up to today)
April 2020: Vice President, Tohoku University (up to today)
June 2020: Outside Director, Subaru Co., Ltd. (up to today)
Member of the Board (Outside Director), NGK SPARK PLUG CO., LTD.
(Now Niterra Co., Ltd.) (up to today)
Shares held: 2,267
Years in office: 3

Chiharu Takakura

April 1983: Joined the Ministry of Agriculture, Forestry and Fisheries
May 1992: Obtained an MBA from Georgetown University (U.S.A)
August 1993: Consultant, Sanwa Research Institute Corp.
July 1999: Planning Manager, Human Resources Division, Pfizer Japan Inc.
October 2006: General Manager of Human Resources Department, Human Resources
and Communication Division, Novartis Pharma K. K.
July 2014: Corporate Fellow, General Manager, Global Human Resources Dept.,
Ajinomoto Co., Inc.
April 2020: HR Advisor, ROHTO Pharmaceutical Co., Ltd.
June 2020: Director, Head of Well-being Management Promotion Division,
ROHTO Pharmaceutical Co., Ltd.
June 2021: Outside Audit & Supervisory Board Member, NGK SPARK PLUG CO., LTD.
(Now Niterra Co., Ltd.)
April 2022: Director, Chief Human Resource Officer, ROHTO Pharmaceutical Co., Ltd.
June 2022: Member of the Board (Outside Director), NGK SPARK PLUG CO., LTD.
(up to today)
June 2023: Outside Director, Nomura Real Estate Holdings, Inc.,and Mitsui Sumitomo Insurance Co., Ltd. (up to today)
Shares held: 945
Years in office: 2 (including 1 year as an outside auditor)

Takayoshi Mimura

April 1977: Joined Terumo Corporation
June 2002: Corporate Officer, Terumo Corporation
June 2003: Member of the Board, Corporate Officer, Terumo Corporation
June 2004: Member of the Board, Executive Officer, Terumo Corporation
June 2007: Member of the Board, Managing Officer, Terumo Corporation
April 2008: Member of the Board, Managing Officer, Supervisor of Hospital Company,
Sales Administration Department, Terumo Corporation
June 2009: Member of the Board, Managing Officer in China and Asia, Terumo Corporation
April 2010: Member of the Board, Managing Officer, General Representative of China,
Terumo Corporation
June 2010: Member of the Board, Senior Managing Officer, Terumo Corporation
August 2011: Chairman and General Manager, Terumo (China) Holdings Co., Ltd.
April 2017: Representative Director & Chairman of the Board, Terumo Corporation
June 2021: Chairman of the Japan Federation of Medical Devices Association
April 2022: Advisor to the Board, Terumo Corporation
June 2022: Advisor of Terumo Corporation, Outside Director of Autobacs Seven Co.,
Ltd., and Mitsui Chemicals Inc. (up to today)
June 2023: Member of the Board (Outside Director), Niterra Co., Ltd. (up to today)
Shares held: 0Years in office: Newly appointed

Member of the Board,
Full-time Audit and Supervisory Committee Member

Member of the Board (Outside Director),
Audit and Supervisory Committee Member

Member of the Board (Outside Director),
Audit and Supervisory Committee Member

Member of the Board (Outside Director),
Audit and Supervisory Committee Member

Born August 18, 1962

Born February 22, 1951

Born November 28, 1952

Born March 5, 1959

Mikihiko Kato

April 1985: Joined our company
February 2012: General Manager, Corporate Planning Dept.
August 2012: President of Cerâmica E Velas De Ignição NGK Do Brasil Ltda.
(Now Niterra do Brasil Ltda.)
October 2015: General Manager, Corporate Planning Dept.
April 2016: Corporate Officer
June 2017: Member of the Board, Corporate Officer
April 2019: Member of the Board, Executive Officer
April 2022: Member of the Board
June 2022: Member of the Board, Full-time Audit and Supervisory Committee
Member (up to today)
Shares held: 10,956
Years in office: 6

Kanemaru Yasui

March 1981: Registered as a Certified Public Accountant
April 1999: Representative Partner, Central Audit Corporation
September 2006: Partner, Misuzu Audit Corporation
August 2007: Representative Partner, AZSA & Co. (currently KPMG AZSA LLC.)
June 2008: Managing Partner, Director of Nagoya Branch, AZSA & Co.
(currently KPMG AZSA LLC.)
June 2013: Retired from KPMG AZSA LLC.
July 2013: Director of Yasui Certified Public Accountant Office (up to today)
June 2014: Outside Director, NICHIHA Corporation Member of the Board(Outside Director), NGK SPARK PLUG CO., LTD. (Now Niterra Co., Ltd.)
June 2022: Member of the Board (Outside Director),
Audit and Supervisory Committee Member (up to today)
Shares held: 3,601
Years in office: 9*Years served as auditors are included for directors that served as auditors before their appointment.
*Number of shares held are current as of March 31, 2023. Shares include individual shares in Niterra Executive Shareholding Association.
For more information on Directors, please visit the following website.
https://www.ngkntk.co.jp/english/corporate/profile/executive/index.html

Fumiko Nagatomi

April 1981: Registered as an attorney and joined Hachisuka Law Firm
March 1989: Left Hachisuka Law Firm
April 1989: Opened Nagatomi Law Firm (up to today)
May 2006: Outside Auditor, UCS CO., LTD.
June 2016: Audit & Supervisory Board Member (Outside Corporate Auditor),
Chubu Electric Power Co., Inc. (up to today)
June 2017: Outside Audit & Supervisory Board Member, NGK SPARK PLUG CO., LTD.
(Now Niterra Co., Ltd.)
June 2022: Member of the Board (Outside Director), Audit and Supervisory
Committee Member (up to today)
Shares held: 3,219
Years in office: 6 (including 5 years as an outside auditor)

Christina L. Ahmadjian
January 1995: Assistant Professor, Columbia Business School
October 2001: Associate Professor, Graduate School of International Corporate Strategy,
Hitotsubashi University
January 2004: Professor, Graduate School of International Corporate Strategy,
Hitotsubashi University
June 2009: Outside Director, Eisai Co., Ltd.
April 2010: Director of Research, Graduate School of International Corporate Strategy,
Hitotsubashi University
April 2012: Professor, Graduate School of Commerce and Management, Hitotsubashi University
June 2012: Outside Director, Mitsubishi Heavy Industries Ltd.
June 2014: Outside Director, Japan Exchange Group, Inc.
April 2018: Professor, School of Business Administration, Hitotsubashi University Business School
June 2018: Outside Director, Sumitomo Electric Industries, Ltd. (up to today)
March 2019: Outside Director, Asahi Group Holdings, Ltd. (up to today)
June 2021: Outside Director, NEC Corporation (up to today)
April 2022: Emeritus Professor, Hitotsubashi University (up to today)
Specially Appointed Professor, Rikkyo University
June 2022: Member of the Board (Outside Director), Audit and Supervisory Committee
Member, NGK SPARK PLUG CO., LTD. (Now Niterra Co., Ltd.) (up to today)
Shares held: 165
Years in office: 1

69

June 1982: Joined the Department of Foreign Affairs and International Tradeof the Canadian Government
August 2000: Canadian Consul General in Osaka
August 2003: Minister, Embassy of Canada in Japan
August 2009: Ambassador of Canada to Indonesia, Timor-Leste, and the ASEAN
November 2012: Ambassador of Canada to Japan
June 2016: Outside Director, KAMEDA SEIKA CO., LTD. (up to today)
September 2016: Specially Appointed Professor, Kwansei Gakuin University(up to today)
June 2017: Outside Director, Idemitsu Kosan Co., Ltd.
March 2018: Outside Director, Sapporo Holdings Limited (up to today)
June 2019: Member of the Board (Outside Director), NGK SPARK PLUG CO., LTD.
(Now Niterra Co., Ltd.) (up to today)

Toru Matsui

Niterra Report 2023

Member of the Board (Outside Director)

Representative Director, Member of the Board,
Executive Vice President, Assistant to President,
Sustainability Strategy Dept., Scientific Research Laboratory,
Niterra Ventures Company

03Foundation for Value
Creation

Niterra Value Creation

Outside Directors’ Roundtable Discussion

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

It’s urgent that we transform our business portfolio.
We’re using our collective wisdom to find the best way forward.

only financial results; non-financial factors such as a company’s
position in society and its reputation and trust from society are ofincreasing weight. In this sense, risk management and complianceare becoming more and more important, and I am committed to
Doi I got a technical background in the manufacturing industry,and I’ve conducted research from the user’s point of view,especially in the field of human interface technology. I think that’s
the other side of the business. Reflecting on the comments thatcame before, when it comes to corporate value, I ask myself,“Which stakeholders’ value is being affected?” For example,
Outside Director

Outside Director

Outside Director

Outside Director

Kanemaru Yasui

Fumiko Nagatomi

Miwako Doi

Mackenzie Donald Clugston

besides profit and capital efficiency and other values thatshareholders and investors expect, we must also consider thevalue to employees, such as how the business is changing. And
the value to each stakeholder can change over time. I also try to

The role of outside directors based on their background andthe non-financial, such as consideration for human rights. At the

speak about how things should be in the future, which is a way ofexpertisesame time, I believe that Niterra has made progress diversifying its

thinking I developed as a researcher.

outside directors, and as a result, the Board of Directors is better

Clugston Overseas expansion will be key to Niterra’s growth, so

Yasui I believe our role as outside directors is to use ourable to discuss issues from a variety of perspectives at meetings.

it’s important to talk about the regions and businesses to invest

knowledge and state our opinions on how the Company should

Nagatomi When we discuss issues at board meetings, it isin. That could include business acquisitions overseas. As an

increase corporate value. What is corporate value? There areimportant to consider how those issues will affect corporate

outside director, our role is not only to decide whether a project

many ways to address that question. Perhaps my perspective

value. As a lawyer by profession, I often speak from a risk

is worth investing in, but also to ask whether it’s an appropriate

as a CPA strongly colors my view, but basically, I think corporate

management and compliance perspective. I recognize that I am

investment in light of the Company’s vision. We should be asking

value is the discounted present value of a company’s future

expected to speak based on my experience in these areas. The

whether it is appropriate to take on that business opportunity andearned profits. However, we should recognize that increasing

elements of corporate value and the factors that cause corporate

whether we are truly capable of doing this. I believe that is my role

corporate value requires not only financial perspectives but also

value to go up or down are more diverse than in the past. It’s not

and will help increase corporate value.

70

why I am so interested in the perspective of the stakeholders on

Niterra Report 2023

speaking from my knowledge and experience.

03

Foundation for Value
Creation

Outside Directors’ Roundtable Discussion

Further improving the effectiveness of the Board of Directors

Niterra Value Creation

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

understood by executives, but that information too must be shared at

Yasui I too sit on the Nomination Committee and Remuneration

Board meetings then debated and judged on how this impacts the overall

Committee as a member of the Audit and Supervisory Committee. Of

Doi We’ve made significant operational improvements for energizing

management plan. Now that outside directors make up a majority of thecourse, it’s important for the Remuneration Committee to discuss thethe Board of Directors and making it more effective. If there is anything

Board, the executive team needs to think about how it communicates withremuneration system itself – details like the ratio of the fixed portion

that needs more improvement, it might be the awareness of thosethem instead of just doing things the same way.

of remuneration to the performance-linked portion. But the basis foron the executive side when explaining items on the agenda. Perhaps

Nagatomi By shifting to a company system, we’ve transferred moreevaluation also includes things like the percentage of sales that come fromit can’t be helped, but I believe that when executives explain theirauthority to the executives, so the Board is spending less time talking

non-ICE business operations and how we can reduce CO2 emissions.

agenda, they are often talking about business execution. But meetings

about specific business issues like capital investment, even if they’reSo, our system is also set up to incentivize actions in those areas.

of the Board of Directors are supposed to be a place to talk about

on the agenda. On the flip side, we spend more time on issues likestakeholders, risks, and other factors when management decisions

M&As and the progress of medium- to long-term management plans,

are made. So, those on the executive side should consciously explain

which really should be discussed at length. So, this change allows

things on behalf of the president. They should explain from themore deliberation time for those things that need it. I feel that theYasui The Board has been discussing successor training and it seems

president’s perspective. Besides that, we need to have a management

Board of Directors is certainly more effective now.

that the whole company is working on this issue. One specific example

perspective on how the issue being discussed will be positioned toAlso, I sit on the Nomination Committee and Remunerationis the Management Sparring Dojo. It’s a management personnel

achieve the goals of the medium- to long-term business plan, what theCommittee as a member of the Audit and Supervisory Committee.

development program that we launched in FY2022 after the Board ofrisks are, and what impact it will have on stakeholders.

From that position, I believe that Niterra has the means to ensure

Directors discussed it. I hope that the Nomination Committee will continue

Yasui I agree with that. For example, if we’re discussing an investment,that decisions on directors’ nomination and remuneration are rational

to view the results of these initiatives positively while discussing successor

naturally we need to talk about the return, such as how long it will takeand transparent. I’m convinced we have a solid basis for making

training in depth.

to recover the investment. At the same time, we can’t neglect to discuss

evaluations and that this is functioning well. One of my major roles

Clugston Niterra offers generous human capital development programs.

the impact of that investment on stakeholders. If we’re debating anon the Remuneration Committee, after the basic structure of the

Besides Management Sparring Dojo, we’ve had a successor training

investment, a decision on whether to take the risk naturally follows, but

remuneration system is explained to us, is to make sure that things areprogram called HAGI in place for some time. Its focus is the development

we should carefully examine which stakeholders will be affected andoperating as required by that system.

of the next generation of management personnel. This highly acclaimed

initiatives relate to the medium- to long-term management plan and what,
if any, impediments there are to achieving the plan’s goals. However,I believe that the transition to a company system has enhanced oureffectiveness, in part due to the transfer of authority. The Audit andSupervisory Committee analyzes the time spent on deliberations at Boardof Directors meetings, and their results show this is clearly the trend.
Clugston And whenever the Board is deliberating, it’s important tounderstand how the issues under discussion fit into the medium- to longterm business plan. So, the executive side really needs to provide effective
explanations of items being discussed, and this is all the more important as
more authority moves to the executive side. Some information is implicitly71

effectiveness, we need to spend more time talking about how actual

Niterra Report 2023

how they’ll be affected if we take on that risk. For the sake of Board

Initiatives for succession planning and human capital improvements

03Foundation for Value
Creation

Outside Directors’ Roundtable Discussion

Niterra Value Creation

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

we can rely solely on our own resources to ensure growth in new
domains. At the same time, bringing in outside resources will raise
another issue: Will Niterra’s existing governance structure andmethods still be effective? I think the deep discussions we arehaving on Group governance show that we are aware of this issue.
Transforming our business portfolio has got to be our highest priority.
To meet this challenge, we must decide in which areas to invest ourcurrently plentiful management resources to usher in future growth.
This topic takes up more Board discussion time than any other.
Doi That’s certainly true. And as part of this we’re looking globallyfor investment targets. Niterra has a long history of growth as a
B2B enterprise, but as we seek new business domains, we needto consider B2C as well. The Company needs to take on domains

nationality, and provides them with opportunities and an environment toengines will steadily decrease. But it’s also a fact that there is still

where it might be hard to leverage past experience. Moreover,play an active role. I’m hopeful that these programs will continue to beenormous economic value in the ICE business right now. Under

differences in culture and infrastructure involve governance risks asused well into the future to develop the next generation of managers. Also,

the circumstances, we believe that our management mission

Niterra transforms the business portfolio. So, the Company needs

I’ve noticed that the Board’s discussions on personnel strategy have reallyis to efficiently generate cash in the ICE business and to steer

to reinforce its foundation as an organization, which includes moredeepened since Ms. Takakura, who has a profound knowledge of thismanagement so that the cash is effectively invested in the non-ICE

sophisticated supply chains and practicing effective monitoring.

issue, was appointed as an outside officer. These discussions reinforce forbusiness. In addition, as we expand our business domains, it will be

I encourage Niterra to keep promoting employee diversity, which

me how important it is to have a diverse Board of Directors.

even more important to practice risk management as it relates to theincludes increasing the number of females and foreign nationals in

Doi Ms. Takakura has given us all sorts of advice on personnel strategy,

governance and management of Niterra’s Group companies aroundmanagement. At the same time, Niterra will need the Company’sand Niterra is having more in-depth discussions on succession planning

the globe. For HR issues we’ll have to be flexible, which includes

many rich management resources to transform the business portfolioand successor development programs, investment in human capital,

appointing people from outside the Company, as there are limits toand tap into the collective wisdom to become a sustainable company

education, and reskilling. And we are currently in the process of putting

our self-sufficiency approach.

that helps to resolve social challenges.

in place a framework for that. We’re taking strong steps for successor

Clugston We must keep discussing Niterra’s business portfolio

training, like putting together a long list of candidates and introducing thetransformation, with a strong awareness of shifting our axis from the ICE

Management Sparring Dojo mentioned earlier. I also think it’s unique andbusiness to the non-ICE business. Granted, it will be difficult in some

progressive that Niterra provides an environment where outside directors

respects because the ICE business is currently generating cash. Niterra

can observe these successor training programs and that outside directors

needs to nurture the seeds of future growth while developing many

attend presentations by candidates for promotion to corporate officer.

leaders of the next generation, and this needs to be done now while
Niterra has solid business pillars and a sound financial position. Many

Essential steps to transforming the business portfolio

challenges lie ahead if we’re going to achieve that, but we are working on
various initiatives that will be the foundation for our actions. Since some of

Nagatomi The major challenge facing Niterra is the future of thethose seeds are starting to sprout, I believe we have enough potential.

ICE business. Gasoline and hybrid vehicles are still the mainstream,

Yasui As Ms. Nagatomi pointed out, there are limits to how much72

but in the long run, demand for products for internal combustion

Niterra Report 2023

initiative identifies and fosters people who have potential, regardless of

03Foundation for Value
Creation

Niterra Value Creation

Risk Management

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

Risk Management Policy
We adapt from a global viewpoint to changes in the management environment surrounding our group and to the diversification of risks and will foster risk management to reduce or avoid the lossof managerial resources, thereby improving our corporate value.

ActionGuidelines• We identify the risks that might hamper the achievement of our management targets from a global and long-term viewpoint and strive to prevent the actualization of these risks
in a planned and organization-based manner.
• In the event that such a risk materializes, we strive to minimize the impact on our stakeholders, maintain their trust and prevent the recurrence of similar incidents.

Promotion System
For risk management, we have appointed the President as “Chief Administrator” and the Director

Risk recognition

Identify risks
List the related risks for each operational process.

in charge of the Business Management Dept. as “Promotion Manager,” and are making efforts toMoreover, we established the Risk Management Committee as an advisory committee, chairedby the corporate officer appointed by the Chief Administrator. The Risk Management Committee

Risk analysis

encourages the implementation, maintenance, and improvement of company-wide risk management▶ P.62Company-wide Risk Management

Risk evaluation

We assess risks by analyzing their degree of impact and likelihood of occurrence, as well as the statusof countermeasures in place, to determine whether or not they will have a significant impact on business
continuity and goals throughout the company. Any risks determined to require priority action are designatedas priority risks and the Risk Management Committee checks on the status of mitigation activities for theserisks. In addition to ESG risks, we assess the following risks to our business and other areas.

Business risks
1. World affairs and exchange rate fluctuation risks

8. Climate change risks

2. Business environment risks

9. Information security risks

3. Product quality risks

10. Human resource securement risks

4. Technological development risks

11. Legal, regulations, and litigation risks

5. Intellectual property risks

12. Business investment risks

6. Raw material procurement risks

13. Infectious disease risks

7. Natural disaster risks

14. Human rights violation risks*For more information on our risk initiatives, please visit P.23 of our Annual Securities Report.
https://contents.xj-storage.jp/xcontents/AS06537/b37775e2/11fe/4986/a6ac/12201a1fddcc/20230901184529262s.pdf

Selection ofpriority risks

Planning,
implementing andmonitoring of
measures

Review

Make analysis based on the evaluation results provided by
the Business Management Dept. and other departments incharge of the risks.

Evaluate and prioritize the risks basedon the analysis results
Based on the risk analysis results, select the candidates forpriority risks.

73

under the supervision of the CSR and Sustainability Committee.

Analyze the impact of risks,probability of their materialization and how
measures are taken against them

Level of impact

risks and the crisis management to handle risks when they become obvious.

Niterra Report 2023

improve and operate our risk management system that integrates the risk management to prevent

Probability of risk materialization

Select particularly significant risks (priority risks)and departments in charge of the risks
The Risk Management Committee selects the priority risks andthe departments in charge of the risks.

Plan, implement and monitor priority risk reduction
activities
The departments in charge of the risks plan and conduct risk reduction
activities and the Business Management Dept. monitors the activities.

Evaluate the risk reduction activities to give instructions
for improvement as needed
The results of the risk reduction activities are reported to the Risk
Management Committee, which evaluates the level of achievement
and gives instructions for improvement as needed.

Countermeasures

AnalysisPriority risks

Business Continuity Management (BCM)
We conduct BCM activities in preparation for possible earthquakes and other large-scale disasters. Specifically, we make efforts to control and reduce disasters on a group-wide basis through the formulation of business continuity plans (BCP). These plans will enable us tominimize damage in the event of a large-scale disaster and resume production as soon as possible if operations are suspended, thereby helping customers maintain their supply chains. In addition, we will continue our efforts to develop and maintain a system to prepare
for unforeseen circumstances regarding infectious diseases such as COVID-19.
*For more on our major initiatives, visit the following website. https://ngkntk.disclosure.site/en/themes/183/

03

Foundation for Value
Creation

Niterra Value Creation

Compliance

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

Compliance Policy
With recognition that Niterra is a member of society, we enhance corporate ethics and understand the spirit and meaning of laws, company regulations, international rules, and social norms in order toappropriately meet social demand and become a company trusted by the international community.

ActionGuidelines• We not only comply with laws and regulations, but also act in good faith with common sense and responsibility as a member of society.
• We regularly educate and raise the awareness of all our employees to impart a high level of ethics and correct knowledge, with which they can act voluntarily to prevent a violation.
• Should a violation occur, we will promptly investigate the causes and take remedial actions. We will strive to take appropriate countermeasures to prevent recurrence and fulfill our accountability.

Promotion System

Compliance Initiatives

We established the Compliance Committee chaired by the Representative Director to enhance compliance. This committee conducts activities
instructions on measures to be taken in the event of a noncompliance incident and monitor their implementation.
The Compliance Committee formulates action plans based on the results of employee compliance awareness surveys and cooperates witheach expert committee and group company to implement activities to encourage compliance. The committee additionally encourages efforts
to prevent workplace harassment in the workplace and ensures that labor and management work thoroughly together on compliance.
The committee continuously provides compliance education and conducts awareness-raising activities for both executives and employees
to increase their awareness of compliance. They additionally provide related information and raise and spread awareness through designated▶ P.62

Recommendation

Audit(Representative Director)

Corporate Ethics Helpline(Inside and outside the company)

Cooperation

Consultation
and reporting

Consultation
and reporting

ensure employees do not engage in inappropriate behavior. We also confirm that the content and use of charitable donations do not violate thelaw. Overseas group companies also educate employees and conduct research on local laws.

Reporting• Office organization• Person in charge of reporting desk at each Group company• Division in charge of Laws and Regulations

Niterra Co., Ltd.

Group companies

We take our violation of the Anti-Monopoly Act of Japan, uncovered in FY2014, seriously. As such, we established a system to promotecompliance with competition laws and ensure legal compliance both within and outside the country. In Japan, we formulated the Anti-Monopoly
employees. Moreover, we have introduced an in-house e-mail inspection system to monitor and prevent recurring violations of the competition
law. Our overseas Group companies are required to report the activity status regarding compliance with competition laws to Niterra on a

Cooperation

Consultation and reporting
Suppliers

contributions or bribery. Subsequently, we provide the Conduct Guidelines Concerning the Giving and Receiving of Gifts and Entertainment to

Act Compliance Manual and distributed copies to employees while holding a range of related seminars internally for both executives and(Anti-Harassment Committee)

ReportingConsultation
and reporting

Our Compliance Guidebook, distributed to employees, defines rules on corruption prevention, such as the prohibition of involvement in political

Activities concerning competition laws
ExpertCommittee

Compliance Committee Secretariat

Reportingwith government agencies and political bodies are of a sound and proper nature.”In FY2022, there were no violations of laws and regulations relating to corruption across the Group.

Internal Audit
OfficeCompliance Committee Chairman

ReportingCode of Conduct: “We shall promote fair, transparent, free competition and sound trade. We shall also ensure that our relationships and contacts

In the unlikely case of a violation of the anti-corruption rules, the Compliance Committee will take the lead in addressing the issue.
Disciplinary
Committee

Compliance promotion system
Compliance Committee

As a company participating in the UN Global Compact, we strive to prevent corruption in line with the following statement made in our Corporate

regular basis. Our team in charge of competition laws and compliance visit overseas Group companies, audit their compliance systems andimplementation status, and check whether local employees are sufficiently aware of the related rules. We additionally hold seminars featuring
guest speakers. We will continue to educate and audit to ensure compliance with competition laws both in Japan and abroad.

Labor union

Export control
We comply with domestic laws and regulations based on the Foreign Exchange and Foreign Trade Act in accordance with the multilateral export control

Internal Reporting System
We maintain the Corporate Ethics Helpline as an internal reporting system available to employees and suppliers seeking to receive consultation
and/or make reports regarding compliance. We established the Compliance Committee Secretariat to serve as our internal channel. At the same

regime (MECR) established for international peace and safety. In addition, we have established related internal rules and an in-house export control
organization. We also conduct awareness-raising and inspection activities targeting departments engaged in export control, thereby ensuring andenhancing our export control in compliance with the related laws and regulations. We are working to prevent the destabilization of international affairs byfocusing on preventing the outflow of sensitive technology as well as cargo that can be diverted to military use.

time, we also establish channels through external expert service providers, enabling employees and suppliers to seek consultation and makeCompliance education and awareness raising

reports outside work hours and on holidays, thereby improving user convenience. In addition, users have access to anonymous consulting and

To raise awareness and knowledge regarding compliance, we continue to educate employees by using the Compliance Guidebook, which

reporting, where we protect them from being identified or suffering disadvantages as a result of their reporting.
These channels accept consultations and reports when they become aware of any kind of compliance violation, including harassment and/or any
other behavior that could lead to such a violation. We investigate any consultation or report received and promptly deal with any problems confirmed.
In FY2022, there were 97 consultations and reports, including those from Group companies. In addition, Niterra reviewed related regulations andreacquainted employees with our Corporate Ethics Helpline in accordance with the amended Whistleblower Protection Act of June 2022.

summarizes the rules concerning companies and society, and the Compliance Newsletter, which provides specific examples of complianceissues that could arise in our daily operations. In addition, we hold level-specific and theme-specific training. We conduct an employee
compliance questionnaire to check their level of understanding of corporate rules and systems as well as to review corporate culture andcompliance risks. In FY2022, we focused on improvement activities such as conducting interviews with departments facing issues basedon the FY2021 questionnaire.

74

compliance facilitators at each department.

Prevention of corruption
Niterra Report 2023

under the supervision of the CSR and Sustainability Committee to prevent noncompliance issues. The Compliance Committee will also give03

Foundation for Value
Creation

Information Security

Niterra Value Creation

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

Information Security Policy
We regard all of our own information assets as one of our management resources. Through the proper protection and effective use of our information assets,
we pursue healthy maintenance and development of our business.
• We establish rules that clearly define the system and responsibilities for the protection and management of all information assets including the information we keep for our customers,
the know-how and intellectual properties owned by our group, and personal information.

ActionGuidelines• We comply with laws, ordinances, and regulations regarding information security.
• We educate all executives and employees who handle information assets about the importance of information security, and about specific items to be observed.
• We continuously update the information infrastructure for the maintenance and improvement of the confidentiality, integrity, and availability of all information assets.
• We promote measures to prevent accidents in order to address the risks of information leakages associated with the continuous advancement and sophistication of information technology.
Should an accident occur, we will strive to minimize the damage and take preventive measures against recurrence.

Information Security Management System
In response to information security risks that threaten companies and organizations, we set information security as a

Sustainability Committee supervises and works together with this system to strengthen information security.

priority issue (materiality) and are building an information security management system. In 2020, we obtained

We established the IT Security Committee (held at least twice a year) chaired by the Chief Administrator of the DX Strategy Department.

accreditation for the Trusted Information Security Assessment Exchange (TISAX), the German information security audit

Members include the head of the Information Systems Department, the head of the General Administration Department, and members ofstandard for the supply chain of the automobile industry. Group companies in the United States and China acquired

major departments such as the planning divisions of the headquarters organization and each company. The IT Security Committee

TISAX certification in FY2021, while group companies in Thailand acquired certification in FY2022. With this, we haveencourages appropriate measures by confirming how information security activities are conducted across the Group.

obtained certification at all planned bases.

We also established the Confidentiality Management Subcommittee (held at least once a year) under the supervision of the Risk
Management Committee. This subcommittee is chaired by the Chief Administrator of the Business Management Department, whilecommittee members include members of each department. The Confidentiality Management Subcommittee works to reduce risks in the

Responding to Information Security Incidents

management of confidential and personal information.

We have established a Computer Security Incident Response Team (CSIRT).

In addition, members and managers of each department assigned to IT security and confidential and personal information security lead

When an incident occurs, the CSIRT promptly organizes and confirms the facts, determines the level of theinformation security activities in each department.

incident, and then responds. We also accumulate and share knowledge as a measure to prevent recurrence. In▶ P.62

addition to responding after an incident occurs, we are also striving to defend in advance, and we are trying toInformation Security Promotion System

improve the level and maturity.
We publish CSIRT Communication monthly to keep employees informed and aware of information security. When

IT Security

IT Security Committee

Risk Management Committee

necessary to issue a highly urgent alert, we issue urgent communications on specific precautions to prevent theoccurrence of any incidents.

Confidential andPersonal Information
Management

Confidentiality Management Subcommittee

Protection of Personal Information
As exemplified by the General Data Protection Regulation (GDPR) enforced in the EU and the Personal Information Protection

Each
Department

Department Manager

Department Manager

Department Chief

Department Chief

Law in Japan, measures to protect personal information are enhanced globally. In response, the Niterra Group has set a
range of internal rules to protect, manage and handle the personal information of its customers and employees.

75

We established a promotion system for each area of IT security and confidential and personal information management. The CSR and

Niterra Report 2023

Promotion System

04

Niterra Value Creation

Growth Strategy

Foundation for
Value Creation

Company Information
and Data

Company Information and Data
Financial Results Highlights for the Past 11 Years

J-GAAPIFRS(Millions of yen)

2014

2015

2016

2017

2018

2019

2020

2021

2022

Revenue

302,798

329,758

347,636

383,272

372,919

409,912425,013426,073427,546

491,733

562,559

Operating income (loss)

23,754

51,661

62,196

66,28453,59567,27958,38548,44747,38975,512

89,219Ordinary income (loss)

27,67454,96067,90764,48355,55969,09459,258−̶̶̶Profit (loss) attributable to owners of the parent

20,90932,70436,75330,81525,60244,33542,63833,69838,36760,20066,293

Capital expenditures

24,012

41,03436,37245,33936,32837,591

56,58751,00433,44429,58931,335

Depreciation

12,798

11,567

13,337

16,834

19,601

20,92023,97931,952

34,70037,94039,194R&D expenses

17,10019,40021,337

23,123

23,41625,28328,072

28,315

26,11523,68527,887

Cash flows from operating activities

26,19454,69736,59356,46549,76465,70743,70459,78763,397

71,91069,305

Cash flows from investing activities(15,442)(61,148)(12,865)(82,331)(53,410)(26,422)(48,380)(52,926)(42,523)

10,234(37,375)

Free cash flows

8,456

3,541

13,995(25,866)

6,335

29,636(21,356)

4,627

41,39869,71334,382

Dividend payout

4,788

5,223

7,181

8,487

9,055

10,823

14,601

14,435

12,23020,792

33,839Total equity

268,309302,793343,380

341,044354,710388,115

401,505

399,737

451,626

517,988563,739

Total assets

366,489

458,148

485,497

526,103563,801

599,972

629,417663,374

771,293823,181903,102

Interest bearing debt

27,41857,33946,15380,212

99,275

98,115

110,755

152,946

197,194

165,268

198,222( Yen )

Earnings (losses) per share

96.06

150.26168.88141.60119.44209.37204.74163.06188.59296.04326.091,946.10

2,206.18

2,530.01

2,772.61

1,223.41

1,381.38

1,566.80

1,557.16

1,660.06

1,837.46

1,917.04

Cash dividends per share

22.00

28.00

36.00

42.00

42.00

60.00

70.00

70.00

60.00

102.00166.00Operating income ratio (%)

7.8

15.7

17.9

17.3

14.4

16.4

13.7

11.4

11.1

15.4

15.9

Equity attributable to owners of the parent per share

Return on Sales revenue (%)

6.9

9.9

10.6

8.0

6.9

10.8

10.0

7.9

9.0

12.2

11.8

Gross profit on sales (%)

24.2

32.6

35.8

35.6

33.0

34.6

33.8

31.4

30.5

31.8

35.2

ROE (Return on equity) (%)

8.4

11.5

11.4

9.1

7.4

12.0

10.9

8.4

9.1

12.5

12.3

ROA (Return on assets) (%)

5.9

7.9

7.8

6.1

4.7

7.6

6.8

5.1

5.0

7.3

7.4

ROIC (Return on invested capital) (%)

5.8

11.0

11.6

11.4

8.5

10.0

8.2

6.3

5.5

7.9

8.6

64.4

62.5

64.3

63.4

59.7

58.2

62.5

62.4

Equity ratio (%)

72.7

65.6

70.2

Total asset turnover (%)

0.9

0.8

0.7

0.8

0.7

0.7

0.7

0.8

0.6

0.6

0.6

Dividend payout ratio (%)

22.9

18.6

21.3

29.7

35.2

28.7

34.2

42.9

31.8

34.5

50.9

76

2013

Niterra Report 2023

2012

(Fiscal year)04

Company Information
and Data

Niterra Value Creation

Financial and Non-Financial Highlights

Growth Strategy

Financial Highlights(Millions of yen)

600,000IFRS

J-GAAP

562,559

500,000
400,000
300,000

425,01330

100,000

75,000427,546

426,073

20
15.4

13.7

58,3852018

50,00010

48,447
2019

Operating income

15.9

J-GAAP

75,51247,3892020

25,00089,219
0

2021

10.9
8.2

6.3

10

9.1

8.4

8.6

7.9

33,6985.5

566,29338,367

2018

2019

50
29.09

25

27.58

25.67

21.07

20

2020

2021

Return on equity

0
2019

2020

2021

2022 (Fiscal year)

Equity ratio attributable to owners of the parent

Earnings per share / Cash dividends per share / Dividend payout ratio

Percentage of female / foreign-national /mid-career employees in managerial posts (non-consolidated)

(Yen)

63.4

59.7

62.5

58.2

62.4

20

60

0

0
2018

2019

2020

2021

42.9
34.2

2022 (Fiscal year)

163.062018
Earnings per share

The equity ratio attributable to owners of the parents decreased by 0.1pt due
to expansions in the scale of business, strategic stockpiling, and the size ofour total assets, including inventories.

60,00070

201930,00056,58720,000

102

60

2020

2021

Cash dividends per share

25

40

20

30

15

28,07233,44434,70037,94029,58939,194

26,115

2019

2020

2021

2022 (Fiscal year)

3

1

0

0
2018

2019

2020

2021

2022 (Fiscal year)

We endeavor to diversify management, including female managers. As apriority issue, we aim to increase the ratio of female, foreign nationals, andmid-career employees in managerial posts to 25%.

23,685

70

45

40
30

30

20

36

2020

2021

2022 (Fiscal year)

The Company allocates approximately 5-6% of revenues to research anddevelopment expenses. This percentage reached 5.0% in FY2022.

2019

2020

2021

2022

2018
Ratio of Outside Directors(Fiscal year)

As a priority issue, we aim to improve the results of our employee satisfaction
survey. Employee satisfaction levels rose slightly in comparison with last year.
These results enable us to improve the workplace by understanding employee
motivation and to what degree they feel a sense of burden from work.

100

(%)

100

96

94

94

98

18

10

20
0

2019
2020
2021
2022 (Fiscal year)
Ratio of female and foreign national directors

As a priority issue, we aim to increase the ratio of outside directors to morethan one-third of all directors by FY2030. In addition, we aim to increase
the ratio of female and foreign national directors to more than 30%. The
Company achieved both of these targets as of FY2022.

100
80

25

60
40

18
10

36

0
2019

3.33

80

50

2018

3.30

Number of employees who took childcare leave / percentage of employees
who returned to work after taking childcare leave (non-consolidated)
64

60

30

3.34

(Number of people)(%)

20,0003.37

2Dividend payout ratio

Depreciation

Automotive-related activities will focus investments on improving the
production efficiency of existing equipment and will continue to invest in the
non-ICE business for medium- to long-term growth.

13.6

5

10
2018

4

0

0

Capital expenditures

19.9
14.5

10

10,0000

Employee satisfaction survey

10

27,887

2019
2020
2021
2022 (Fiscal year)
Sales percentage of wide range oxygen sensors

As a priority issue, we aim to increase the sales ratio of precious metal
plugs and wide-range oxygen sensors by over 50%. These products arepart of our environmentally friendly Nittoku Green Products. Sales ratios
are gradually increasing towards this target.

20

31,33523,9792018
Precious metal plugs

5

12.5

IFRS

28,31527

17.02022 (Fiscal year)

39(Rating, out of 5)

Ratio of Outside Directors /ratio of female and foreign national directors

J-GAAP

51,004

31,952188.5950

Our basic policy stipulates a 40% dividend payout ratio, as set forth in themedium-term management plan. Portions of capital exceeding appropriate
capital levels are subject to shareholder return, including through share
repurchases. As a result, the annual dividend for FY2022 increased 64 yenyear on year to 166 yen.

(Millions of yen)

IFRS

40,000166(%)

R&D expenses

Capital expenditures / Depreciation
J-GAAP

326.09296.04204.74
70

34.5
31.8

180
120

40

50.9

(%)

37

77

240

80

(Millions of yen)

IFRS

300

100

60

J-GAAP

37

43

Niterra Report 2023

As a priority issue, we aim to reduce CO2 emissions by 30% compared with
FY2018 levels by FY2030. Progress in energy conservation and other CO2 reduction
measures is going as planned. As a result of this and our early adoption of solar
power generation and CO2-free electricity, we have surpassed our reduction targets,reaching a 27.6% reduction of FY2018 levels in FY2022.

IFRS

40

0
2018

Return on invested capital

Inventories increased as the Ukraine crisis caused resource prices to soar and the zero-COVID
policy in China caused a stagnant supply chain and prolonged supply constraints. Despite these
setbacks, ROIC increased 0.7pt from the previous fiscal year due to the recovery in Automotive
Components, increased sales of SPE products in the ceramics business, and higher profits
resulting from the strong depreciation of the yen in the foreign exchange market.

J-GAAP

34

41

10

Although Automotive Components was affected by the lockdowns in China, we posted
record revenues and operating income. Factors that boosted our profits include a recovery
in automobile production due to partial improvement in the semiconductor shortage,steady sales of spark plugs for new car assembly, expansions in the scale of our ceramics
business, and the strong depreciation of the yen in the foreign exchange market.

(%)

39

30
20

10

2022 (Fiscal year)

39

40

26.51

5
0

Profit attributable to owners of the parent

(%)

35

15
60,20042,638

Sales percentage of environmentally friendly products(10,000 tonnes)

30

12.3

12.5

0

2022 (Fiscal year)

Operating income ratio

CO2 emissions (Scope 1 and Scope 2)
(%)

IFRS

15

11.1

11.4

0
Revenue(Millions of yen)491,733

200,000
100,000(%)

Company Information
and Data

Non-financial Highlights

Profit attributable to owners of the parent /Return on equity /Return on invested capital

Revenue / Operating income / Operating income ratio

Foundation for
Value Creation

40

35
53

46
4

36

5

13

2018
2019
2020
Number of employees who took childcare leave (male)

60

55

20

24
2021

0
2022 (Fiscal year)

Number of employees who took childcare leave (female)
Percentage of employees who returned to work after taking childcare leave

More male employees take childcare leave while their return-to-work rate
after childcare leave remains high.

04Company Information
and Data

Corporate Profile and Stock Information

Major shareholders (As of March 31, 2023)

Corporate data ( As of March 31, 2023 )Niterra Co., Ltd.
Headquarters
Established
Number of employees

1-1-1 Higashisakura, Higashi-ku, Nagoya
461-0005, Japan URBANNET NAGOYA NEXTA Bldg.
October 1936
Non-consolidated : 3,534
Consolidated :16,247

Number of shares and shareholders (As of March 31, 2023)
Paid-in capital

47,869 million yen

Total number of authorized shares

390,000,000

Total number of issued shares

204,175,320

Listed markets
Shareholder registry administrator
Accounting auditor
Number of shareholders

Tokyo Stock Exchange (Prime Market)
Nagoya Stock Exchange (Premier Market)
Mitsubishi UFJ Trust and Banking Corporation
KPMG AZSA LLC
116,696

Treasury Stock

Financial Institutions

0.16%（325 thousand shares）

Individuals and Others
in JapanForeign Corporations
and Individuals

Breakdown ofshareholders
by type

Trust Services

18.73%（38,250 thousand shares）

19.34%（39,489 thousand shares）

Other Corporations in JapanFoundation for
Value Creation

Company Information
and Data

Initiatives

Name of shareholder

Number ofshares held
(thousand)Ownership ratio (%)

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

26,392

12.94

Meiji Yasuda Life
Insurance Company

16,794

8.23

The Dai-ichi Life Insurance
Company, Limited

16,752

8.21

Custody Bank of Japan, Ltd.
(trust account)

7,238

3.55

National Mutual
Insurance Federationof Agriculture Cooperatives

5,384

2.64

Nippon Life Insurance Company

3,563

1.74

TOTO Ltd.

3,433

1.68

Nomura Trust and Banking Co., Ltd.
(investment account)

2,908

1.42

NTK Business Partners
Shareholdings Association

2,797

1.37

JPMorgan Securities Japan Co., Ltd.

2,464

1.20

●Climate change initiatives
JAPAN CLIMATE INITIATIVE (JCI)●GX League

Major awards and evaluations
For other awards, evaluations,and past track record, please visit our website.

https://ngkntk.disclosure.site/en/themes/190/

Corporate evaluation of ESG investment

78

26.56%（54,241 thousand shares）

24.43%（49,872 thousand shares）

Growth Strategy

Securities Companies

7.23%（14,756 thousand shares）

3.55%（7,239 thousand shares）

Note: Ownership ratio above is calculated excluding treasury stock.

Stock price and trading volume ( as of June 30, 2023 )The Nikkei 225

Stock price of Niterra Co., Ltd.
( Yen)
3,500( Yen)
35,0003,000

30,0002,500

25,0002,000

20,0001,500

15,0001,000

10,000

500

5,000

0

0

■Trading volume

Editorial Note
Thank you for taking the time to read our Niterra Report 2023. On April 1, 2023, we changed our English name to
Niterra Co., Ltd., and our Group was reborn as the Niterra Group. We are committed to the sustainableenhancement of corporate value as a company that lets the earth shine. I hope this report will help deepen yourtrust and understanding of our company. Going forward, we will continue to disclose information in a timely andappropriate manner, and actively engage in dialogue with our stakeholders. We sincerely ask for your honest(Million shares)
60

opinions and continued support for the Niterra Group.

50
40

Executive Officer

30

Corporate Communication Dept., Global Strategy Div.

20

Koji Suzuki

1002017/7

2018/1

2019/1

2020/12021/12022/1

Niterra Report 2023

Breakdown of shareholders by type (As of March 31, 2023)

Niterra Value Creation

Administrative Office of Niterra Report 2023 Project2023/1

Note: Trading volume above does not include data for trading via the ToSTNet system.

Contact us : https://www.ngkntk.co.jp/english/contact/

Niterra Co., Ltd.
URBANNET NAGOYA NEXTA Bldg. 1-1-1 Higashisakura, Higashi-ku, Nagoya 461-0005
https://www.ngkntk.co.jp/english/
Corporate Communication Dept., Global Strategy Div.