Message from the CFODAIMON HidekiDirector,Senior Managing Executive Officer,CFO
Head of Sustainability
Promotion & IR Department

dialogue with stakeholders from both a financial and non-financial perspective, and will continue to do so going forward.
Since the mid-2000s, Nissan Chemical has placed ROE as
its most important financial indicator, and this will remain thecase in the future. ROE, an indicator of capital efficiency, isthe financial indicator that best matches our business strategy of efficiently investing limited management resources tocontinue producing essential products in highly profitablebusiness fields, and is widely supported by investors as aneasy-to-understand single indicator.
Since the early 2010s, our ROE has steadily increased. Andalthough we aimed to maintain above 16％ in our previous midterm business plan “Vista2021 Stage II” (2019-2021), this target
was further raised to maintain above 18% in Vista2027 (20222027), achieving an ROE of 19.4% in FY2022. This is approximately twice the average of chemical manufacturers in the same industry.
We have achieved proactive shareholder returns over thelong term, and we will continue this policy. The total payout
ratio, including share dividends and share repurchases, istargeted at 75％ of net income after taxes in Vista2027. Our
total payout ratio for FY2022 was 78％. Furthermore, while

Execute Unwavering Financial and Non-financial
Strategies to Improve Mid- to Long-term Value
With the mission to constantly meet the expectations of themarket and society, it is our responsibility to increase themid- to long-term value of the Company as a going concern,by viewing its economic and social value as two wheels. AsCFO, I consider it an important mission to achieve our returnon equity (ROE) target, which is our most important management indicator, to improve our economic value. At the sametime, it is extremely important to increase our social value
and levels of contribution by promoting sustainable management so that we can continue to achieve sustainable growth
while contributing to solving social issues.
Investors are increasingly interested not only in financial
aspects but also in non-financial aspects, such as ESG (Environment, Social, and Governance). Which is why, in the current mid-term plan “Vista2027”, we have decided to specify
and disclose equally both financial and non-financial aspects
as the management indicators that Nissan Chemical should
aim for. The Sustainability Promotion & IR Department, which
was newly established in April 2022, is actively engaging inNissan Chemical Corporation

49

Integrated Report 2023

Operating profit in FY2022 was 52.3 billion yen, marking arecord high for the 9 consecutive years(billion yen)

18.1

200

18.7

10.1

100

206.8
9.1

22.9

(billion yen)

2525

45

20
20

208.0
11.5

8.9228.1

151510.6
1010

204.9

5500(%)

4020.3
209.1

150

42.5

38.6

37.1
2018

2019

52.3

51.0

2020

2021

2022 (FY)* Including the effects of accounting policy changes from FY2021●Net income attributable to owners of parent / ROE
ROE in FY2022 was 19.4%. Maintained high ROE by focusing on
creating high value-added products(billion yen)

2525
22.9
In FY2022, we achieved increased
sales and profits with oper20.3
18.7
18.1
atingfor20
200profit and ordinary income reaching record highs 20
the 9 consecutive years, and net income reaching a record
228.1
209.1 While
highfor the 10 consecutive years.
more than half15
15of
150
208.0
206.8
other companies in thesame industry reported
dropinprofit,
11.5
10.6
10.1
we 100offset a decline in9.1
profits in8.9
Performance Materials which1010
was affectedby the market slowdown, with a significant in204.9
creasein profits in Agricultural Chemicals, which continued
50
5
to be strong. We believe that the strength of our52.3
resilient and
51.0
42.5
38.6 portfolio was fully demonstrated.
37.1 businesswell-balanced000
Our ROE
also peaked20182019 at 19.4%,
2020exceeding
2021the mid-term
2022 (FY)target of above
18%. In
addition,
been
Operatingprofit(left axis) we have
Sales (leftaxis)selected as a conNissanofChemical
operatingmargin(rightaxis) in June 2023, andstituent stock
the JPX
Prime150
Index
Major domestic chemical manufacturers (average) operating margin (right axis)
we were rated
as having an excellent equity spread, or differ* Including the effects of accounting policy changes from FY2021
ence between ROE and cost of equity.
While achieving these results, we are also steadily making much needed growth investments. In addition to the construction of an agrochemicals manufacturing facility in India,
Nissan Bharat Rasayan, and the construction of a new semiconductor plant in South Korea, NCK, we have been activelyinvesting in key areas, including DX-related investments andincreased R&D expenses on plants and Company-wide bases,
to ensure sustainable growth for the future.
High standards have also been maintained in terms of external evaluations. In April 2023, we were selected as a Most
Honored Company in the Chemicals sector by Institutional Investor, a prominent U.S. financial magazine, for the 5 consecutive years. And the Company was ranked first in “Best IRTeams” and second in “ESG Rankings”.
I would also like to add that the message issued by theTokyo Stock Exchange to listed companies in March 2023 has
become something of a talking point. More specifically, thisconcerns the situation in which approximately half of all com-250

19.2

4540

16.6

16.9

19.4

17.5

35
30
25
2015(%)

2015

10.5
29.4107.2
30.8

5.7

9.0

9.2

38.8

41.1

105

33.5

50201820192020

2021

2022 (FY)0Net income (left axis)
Nissan Chemical ROE (right axis)
Major domestic chemical manufacturers (average) ROE (right axis)●Total amount of dividend / Share repurchase / Total payout ratio
Total payout ratio achieved the Mid-term Business Plan(FY2022-2027) target of maintaining 75%(billion yen)

(%)

35

100

30
25
20
1575

72

9.0

10.0
51.3

45.0

105075
10.0
47.8

76
12.0

78
9.0
57.9 50

40.5

12.1

13.115.0

17.3

2018

2019

2020

2021

23.1

2022 (FY)0

Total amount of dividend (left axis)
Share repurchase (left axis)
Nissan Chemical total payout ratio (right axis)
Major domestic chemical manufacturers (average) total payout ratio (right axis)

50

Integrated Report 2023

3530
25
20
15
10500

Operating profit (left axis)
Sales (left axis)
Nissan Chemical operating margin (right axis)
Major domestic chemical manufacturers (average) operating margin (right axis)

Achieved Record High Profits for 10 Consecutive(billion yen)(%)
Yearsand Received External Recognition
24.5 in FY2022

Nissan Chemical Corporation

24.5250

Value Creation & Growth Strategies

We will steadily implement
the Vista2027 plan andactively deepen dialogue
with our stakeholders●Sales / Operating profit / Operating margin

taking into consideration feedback from our investors, wehave increased the dividend payout ratio from 45% to 55%,
increasing dividends for 11 consecutive years. In terms ofshareholder returns, dividend on equity (DOE) is often discussed, but since DOE = ROE x dividend payout ratio, there isno need to make it a direct target for us as we maintain a highROE.
In addition, our capital policy is to actively invest in research and development (R&D) expenses that are necessary
and sufficient for our business and still return ample cash toshareholders. Our target is to invest 7-9％ of sales each year
in R&D expenses to ensure continued growth in the future.
Since the average in the chemical industry is 3-4％ of sales,
this shows how Nissan Chemical is continually investing its
management resources in producing high value-added products. In terms of human resources, about 40% of employees
in regular positions are assigned as R&D personnel (onnon-consolidated basis).
I believe that a major factor in our operating margin of
23% in FY2022, which has remained above 10% for 20 consecutive years since FY2003, is our unwavering strategy basedon such a long-term perspective.

0Message from the CFO

Identified materiality (priority issues) to be addressed in order to realize the ideal state of the Company in 2027
Aiming for sustainable growth together with society by promoting initiatives

Promoting a Sustainable Management towards Carbon
Neutrality

100 100
80 80
60 60
40 40 39.0 39.0
20 2000(%)

50403020100

Strengthening of Nissan Chemical’sBusiness Base

Continuous Improvement ofResponsible Care Activities

Nissan Chemical Sustainable Agenda*

Personnel Retention and Trainings

GHG Emission Reduction Target
Compared to FY2018

Positive response rate in survey ofemployee attitude on human resource
development
At least 65%

Reducing by at least 30%

Promotion of Diversity
At least 18%* A plan to pursue “what we can do for the future of the globe and human” by providing products and services that contribute to solvingsocial issues

forward, we will continue to respond to changes in the external environment through the Climate Change Committee,
such as updating disclosure in line with TCFD recommendations and reviewing our ICP.
Under Vista2027, the products and services identified in
our materiality of “provision of new value for helping to enrich peopleʼs lives” are included in the Nissan Chemical Sustainable Agenda with a target of maintaining a ratio of at least
55% of all sales. Fortunately, we were able to achieve thisgoal in FY2022. Looking ahead to 2050, in addition to our existing core technologies, we will foster new core technologies
such as microbial control and information science to further
expand our target products and services in the four businessareas of information & communication, life sciences, environment & energy, and materials & services.
Meanwhile, with the aim of clarifying on individual roles● R&D expenses / Sales-to-R&D expenses ratio
Sales-to-R&D expenses ratio is maintained at around 7-9%,
with a target of 7-9% annually in the future as well20

81.6 81.6

208.78.7 8.3

8.3

7.9

7.9 7.7

7.7

4.3 4.4

4.4 4.1

4.1 3.9

7.4

(%)

(%)

1010

7.3 7.3
7.4(Forecast)(Forecast)15151055
3.9
17.4 17.4(Forecast)(Forecast)
17.8 17.817.2 17.2
16.5 16.516.0 16.016.8 16.8

6.7 6.7

Chemicals
Performance
Agricultural
Healthcare
Chemicals
Performance
Agricultural
Healthcare
Materials
MaterialsChemicals
Chemicals(%)

50
44.8%44.8%
40
30.8%30.8% 28.3%28.3%3020
10 3.6% 3.6%050

Chemicals
Performance
Agricultural
Healthcare
Chemicals
Performance
AgriculturalHealthcare
Materials
MaterialsChemicals
Chemicals

104.1

4.1 4.3

5000(FY) (FY)2022 2022
2023 2023
2018 20182019 20192020 20202021 2021

R&D expenses(left axis)
R&D expenses(left axis)
Nissan Chemicalsales-to-R&D
expensesratio (rightNissan Chemicalsales-to-R&D
expensesratioaxis)(right axis)
Major domestic
chemical chemical
manufacturers(average)(average)
sales-to-R&D
expenses expenses
ratio (rightratioaxis)(right axis)
Major domestic
manufacturers
sales-to-R&D

Sales bySales
businessdomaindomainOperating
margin margin
by businessdomaindomain
by business
Operatingby businessNissan Chemical Corporation

Provision of New Value for
Helping to Enrich People’s Lives

Proportion of female researchers(billion yen)(billion yen)

82.6 82.6

3

Maintain at least 55%

Further strengthen the current business portfolio althoughconsidering it to be in good balance(billion yen)(billion yen)

2

Rate of total sales of products and services
that contribute to solving social issues in
consolidated net sales

One of the basic strategies of our new long-term businessplan “Atelier2050”, is to pursue sustainable management further, and as such, we aim to achieve carbon neutrality by
2050. To put this into practice, we established the Climate
Change Committee in June 2022. The committee is chaired by
the President, Mr. Yagi, and is comprised of the heads of divisions and departments related to climate change issues at
Nissan Chemical. Focusing its efforts on the increasingly serious issue of climate change, the committee is responsible foranalyzing and evaluating risks and opportunities, formulating
strategies and mid- to long-term plans for addressing them,as well as annual activities and targets, and promptly reflecting its results in our business strategies.
Task Force on Climate-related Financial Disclosures(TCFD) recommendations which we have support, call for a
scenario analysis to understand how the risks and opportunities caused by climate change give impact on a companyʼs finances. We published a qualitative 2°
C and 4°
C scenario
analysis up to 2030 in FY2020. Although, in FY2022, we havereviewed the risks and opportunities related to climatechange, including the financial impact, using 1.5°C and 4°C
scenarios by the Climate Change Committee over a period ofmore than half a year, resulting in an extended analysis up to2050. Furthermore, we have revised our internal carbon pricing (ICP) and fully implementing it from this fiscal year. Going● Sales and operating margin in FY2022 by business domain

151

Integrated Report 2023

Nissan Chemical Group’s top priority issue
Strengthening of Corporate Governance, Risk Management and Complianceand the introduction of behavioral evaluation, and making themost of each employeeʼs unique abilities, we revised our personnel system in November 2022. The system was changed
from a membership-type system based on an employeeʼsjob-qualification system in the Company, to a job-type system
where the right employee is placed in the right job. While respecting diverse values and career aspirations, we have also
started a so-called career dialogue with employees and theirsuperiors from FY2023 in order to support employeesʼ career
design. Besides, we started extending the retirement age instages, and are considering training for older people so thatthey can play a more active role.
We have added a new section titled Approach and Initiatives on Sustainability to our annual securities report released in June 2023, where in addition to our sustainability
promotion system and efforts for climate change, we havestarted to include information on human capital disclosure asa third topic. Further details are available in the report, but
we have set indicators for major items related to our humanresource development policy and internal environment improvement policy with targets set for FY2024.

Continuing to Deepen Dialogue with Investors
We regularly hold financial results briefings for institutionalinvestors, analysts, and the media as well as for individual investors to provide an overview of our business, and also proactively share information on our mid- to long-term growthstrategies and sustainability activities.
In FY2022, we held business briefings (June 2022: Performance Materials R&D Briefing, September 2022: Agricultural
Chemicals Business Briefing, and March 2023: ESG Briefing)to help investors and others to better understand the contentof our mid-term business plan announced in May. The business division briefing sessions were attended by the heads
and other personnel of divisions and research laboratories,
providing explanations of mid- to long-term R&D strategies.
Since the ESG Briefing was held for the first time, a wide
range of explanations was given, from corporate philosophy
and long- and mid-term business plans, to materiality, Nissan
Chemical Sustainable Agenda products, intellectual property
strategy, and human capital, with all briefings generally wellreceived.
We will continue to properly disclose information regarding our non-financial initiatives which are of great interest toinvestors, such as our mid- to long-term strategies and climate change issue.

● Number of dialogue with investors in FY2022
Dialoguewithinstitutional
investors

Dialoguewithindividual
investors

Dialoguewithanalysts

ESG related
dialogues

Business /ESG
briefings

306

254

53

Nissan Chemical Corporation

52

Integrated Report 2023

Value Creation & Growth Strategies

panies listed on the Prime Market, where we are also listed,
have an ROE of less than 8% and a price-to-book ratio (PBR)
of less than 1.0. The Company has for many years consistently given returns to shareholders with the aim of increasing
ROE. Our PBR is about four times as high, so we can say that
we have clearly differentiated ourselves from other companies in terms of market evaluation of our corporate value.