Chapter 2

Revie w o f Busine ss Nikke Business Divisions

Textile & ClothingMaterials
Leveraging our unique technologies
for a circular economy andsupply chain transformation
Managing Executive Officer
General Manager of Textile & Clothing Materials Division

Yoshiyasu Kaneda
Results of the 2nd year of the 2nd medium-term management plan(fiscal year ended November 2022)(Unit: Million yen)

1st year

2nd year

3rd year (final year)

Fiscal year ended November 2021

Fiscal year ended November 2022

Fiscal year ending November 2023

Medium-term
plan

Results

Medium-term
plan

ResultsDifference

Medium-term
plan

Sales

32,00029,87234,50029,735

Forecast*(4,765)

36,70033,800Operating income

2,700

2,749

3,200

3,234

34

3,650

3,300

Operating margin

8.4%

9.2%

9.3%

10.9%

1.6 points

9.9%

9.8%

Evaluation*Announced in January 2023

Performance by business segment for the fiscal year ended November 2022
Note: Sales distribution was calculated based on group-wide sales excluding sales of “Others” and adjustment divisions (3,720 million yen). Operating
income distribution was calculated based on the total amount of segment income excluding “Others” and the adjustment amount (-1,584 millionyen).

Sales distribution

Operating income distribution
Textile & Clothing
Materials

29,735 million yen

28.2%

Breakdown
Uniforms
TextilesYarn
OthersTextile & Clothing
Materials
Breakdown
Uniforms
TextilesYarn
Others3,234 million yen

81%
14%
4%
1%

26.3%

Changes in ROIC (return on invested capital)
ROIC

2019

2020

2021

(fiscal year ended November)

3.7％

5.1％

4.8％

6.1％

7.0％

Main products and services

Nikke Group Integrated Report 2023

2022

2018

• Uniforms: Uniform materials for schools, private companies, and government offices• Textiles: Clothing materials• Yarn: Yarn sales

1989%
13%
1%(3%)Textile and clothing material trade shows

Uniform materials for private companies(fabrics)

Uniform materials for schools (fabrics)

Clothing materials

Business overview● Development, manufacture, and sale of high-performance materials and products primarily for clothing use

Key policies● For all activities, conduct initiatives with an awareness of the SDGs, working to achieve environmental friendlinessand business growth● Develop business operations that maximize production capacity by capitalizing on our distinctive thread/yarn● Utilize digital technologies to achieve supply chain transformation and operational cost reduction● Use focused investment of management resources and close coordination of production and sales to accelerate

growth in overseas business

Sustainable management-focused medium-term management plan and strategy
Business advantage

Business strategy

The Textile & Clothing Materials Division has an advantage inthe form of an integrated supply system, which encompasses acomplete supply chain within the Group, from raw materials
procurement and materials (thread) development to sewn
product delivery. Specifically, it is our capability in developing
materials and adapting to customer needs that sets us apartfrom other companies. When it comes to materials
development, we have a technological foundation cultivatedover many years that allows us to produce proprietary,patented thread highly regarded in the market. This technology
will let us construct a new value chain that can contribute to acircular economy. And I believe that the ability to pursue
technology-driven business evolution gives our division acompetitive advantage.

Our division’s key policy is to ensure that “For all activities,
conduct initiatives with an awareness of the SDGs, working toachieve environmental friendliness and business growth.”
Specifically, we will work to create a new value chain, which
encompasses environmentally friendly product development
and recycling systems. We are also aiming to develop materials
that will differentiate us from other companies, as well as toimprove the sophistication of our production technology andengage in capital investment to dramatically increase energy
efficiency. To undertake such activities, it is essential to havean organizational culture of swift, bold action. We will thus workon developing such a culture within our division.

Risks and opportunities
We view the continuing decline in Japan’s birthrate andworking population as a medium- to long-term structural risk,
as it means a shrinking market for uniforms. More immediately,
we are also cognizant of the risk of rising costs due to soaring
energy prices, yen depreciation, and other factors affected bygeopolitical risks. On the other hand, we view the increasingawareness prompted by the SDGs to reduce global
environmental burdens as a significant opportunity for ourdivision. This is because we have unique technologies to makeproducts from natural wool and recycled raw materials, whichsets us apart from the competition.

Recycling school uniforms into school uniforms
With the help of Komaba
Gakuen High School (in Tokyo),we will begin in April 2024 thefirst demonstration testing inJapan of from-clothesinto-clothes recycled school
uniforms. This system returns
wool blend school uniforms
into their raw materials stateand then remakes them fromthose materials.

Komaba Gakuen High SchoolSchool
Collector

VendorFirst in Japan!

No-wasterecycled uniforms
Apparelcompany

Dismantling/wool
recoveryfactory

Spinningmill

Nikke Group Integrated Report 202320