DKS REPORT 2020

DKS
DKSREPORTREPORT

2020
2020
DKS
DKSCo.
Co.Ltd.
Ltd.

Advantages and Strengths of DKS Businesses

DKS Group products are used across a broad spectrum of industrial fields, which allows the Company to quickly catch on
to the trends of the times and the needs of customers, as well as to deliver rapid solutions to problems. Utilizing the rangeof expertise accumulated since its founding and its diverse lineup of product groups, the Company’s strengths go beyond
simply providing materials. Instead, the Company’s strengths also lie in its technological capabilities, which allow it tocustomize the function and performance of products in line with customer requirements and to make proposals based on theideal product combination.

Chemistry provides a solution.
DKS Credo

Contributing to the nation and society
through industry

Our “solutions”
Solutions to Society’s
Challenges

Surfactants
We provide highly functional surfactants since ourfoundation in 1909.

DKS Mottoes

Quality First, Cost Reduction, R&D Efforts

DKS’s Six Segments

Amenity Materials
Environmental conservation andclimate change response

We provide materials and application technologies
to add comfort in daily living environments.

Polyurethane Materials

DKS Group Logo

Realization of safe, secure
lifestyles

We provide industrial materials and polyurethanematerials (paints, adhesives, civil engineeringand construction materials and electric insulationmaterials).

Functional Materials
We provide flame retardants, radcure resins,
waterborne polyurethanes, etc., for applications
essential to home appliances and daily life.

The DKS Group logo symbolizes “Act for a Leap,”
our step for globalization.
It describes the bridge for growth toward“Challenge to 1000.”

Realization of an abundant,
convenient society

Electronic Device Materials
We provide ceramic materials, conductive pastes,
etc., for applications in home appliances andelectronic components.

Life Sciences
Contribution to technologicalinnovation

We provide technologies for extraction,
concentration and powdering of naturally derived
health foods and natural products.

DKS Report 2020 Editorial Policy
In 2016, the DKS Group began to publish its annual report (DKS Report), which added information about the Company’s finances and management strategy to what had been in its Environmental
and Social Report. From 2017, we referred to the International Integrated Reporting Framework promoted by the International Integrated Reporting Council (IIRC).
We are continuously publishing an English-language edition. As our business activities become increasingly international in nature, we aim to communicate to all our stakeholders including
those outside Japan. Starting with the disclosure of environmental, social and governance (ESG), and nonfinancial information associated with DKS’s sustainable growth, we will also convey
management’s vision, business results, growth strategy, capital policy and other information.
In this Report, by visualizing those “invisible assets” that raise corporate value, we attempt to describe the Company’s current conditions and its journey to the future, so as to be able to informthe readers of the creation of value across the short, medium and long terms. Looking to the future, we will use the DKS Report as a communication tool with all our stakeholders.
Please refer to our official website for detailed information about the financial and nonfinancial information of the DKS Group.
Organizations Covered by this Report
DKS Co. Ltd. (“DKS” or “the Company”) and Group companies (collectively “the DKS Group”)
Period Covered by this Report
In principle, this Report contains our activities and data during fiscal 2019 (from April 1, 2019, to March 31, 2020). The data on the
Industrial Accident Severity Rate (ASR) and the Industrial Accident Frequency Rate (AFR) were obtained from January to December
2019.
Reference Guidelines
International Integrated Reporting Framework by the International Integrated Reporting Council (IIRC), “Environmental Reporting
Guideline 2012” by the Ministry of the Environment, “Environmental Accounting Guideline 2005” by the Ministry of the Environment,“Environmental Accounting Guideline for Chemical Industries (November 2003)” by the Japan Chemical Industry Association (JCIA)

Posted on the Website
The Emission of Notification Substances
under the PRTR Law in fiscal 2019
Transition of the Environmental Impact at
Branches and Yokkaichi Chemical
Safety Securement and Disaster Prevention[Forward-Looking Statements] Statements contained in this report regarding the plans, projections and strategies of DKS that are not historical fact constitute forward-looking statements
about future financial results and are subject to risks and uncertainties. As such, actual results might differ significantly from these forward-looking statements due to changes in various external
environmental factors. Consequently, DKS hopes for your understanding as it does not guarantee the certainty of such forward-looking statements.

Oil spill treatment agents

Feed binders
Rock hardening
agentsDKS Group Products Around Us

Food additives

DKS Group products support a variety
of products used in our daily life.

Health supplements
Coatings for building
materials and furniture

Precisioncleaning agents

Optical fiberconnectors

ShampoosSurface modifiers
Flame retardants
IT & electronicmaterials

Conductive pastes
for solar batteries
Sealants forelectric insulation

Building
reinforcing agents

Silicon wafer detergents

CONTENTS
Where Have We Come From,
Where Are We Going?
 dvantages and Strengths of DKS Businesses/
00 A
DKS Report 2020 Editorial Policy01	
DKS Group Products Around Us
02	Philosophy in Practice—The History of DKS
Business Development04	Value Creation Process of the DKS Group06	
Message from the CEO
How Should We Manage?
12	
Review of the Medium-Term Management
Plans
14	
Overview of the New Medium-Term
Management Plan “FELIZ 115”18	Financial/Capital Strategies and Total
Shareholder Return20	Financial and Nonfinancial 11-Year Summary22	Financial and Nonfinancial Highlights

How Can We Be Sustainable?
24	
ESG Basic Policy
26	
Risks and Opportunities
28	
Important Issue 1: Quality and Safety
Management30	Important Issue 2: Research andDevelopment
32	
Important Issue 3: Human Resource
Management34	
Important Issue 4: Consideration for theEnvironment
38 Important Issue 5: Organizational Resilience
Corporate Governance/Compliance/
Risk Management
42	Interview with an Outside Director
44	
Board of Directors, Audit & Supervisory
Board, and Executive Officers

Business Activities Report46	Six Operating Segments
47 Promoting FELIZ 115
48	
Surfactants49	
Amenity Materials
50	
Polyurethane Materials
51	Functional Materials
52	Electronic Device Materials
53	Life Sciences
Data Section
54	
Fundamental Knowledge of Surfactants
56 Proprietary Technologies of DKS
58	Consolidated Financial Statements
61	
Dialogue with Shareholders and Investors62	
Domestic/Overseas Network
64 Corporate Data
65	
On Publishing the DKS Report 2020/
Editor’s Note

DKS REPORT 202001

Philosophy in Practice—The History of DKS Business Development
1909 Founded

1959 Yokkaichi Chemical Company Limited established to
manufacture and sell nonionic surfactants

1969 Nippon Levulose Co., Ltd. (later Shiga Plant of DKS) established1914 General partnership company Ohno Kogyo Seiyakusho established1970 Constructs sucrose fatty acid ester plant (later Shiga Plant)

1978 Capital participation in Chin Yee
Chemical Industries, Co., Ltd.
in Taiwan, accompanying the textile
industry’s shift to Southeast Asia

1960 Ohgata Plant opened
Japan’s first solvent-method manufacturing of
CMC [CELLOGEN] started

1918 Dai-ichi Kogyo Seiyaku Co., Ltd. established1973 Gembu established1939 Yokkaichi Plant opened

1949 Listed as a public company

3/19503/19603/19703/19801900s

1930s–1950s

Rapid Growth of the Spinning Industry

Industrial Modernization, Shift to Synthetics

With the advent of World War I, the spinning industry
undergoes dramatic growth. Textile goods exceed 50% ofJapanese exports.

Following World War I, the industry undergoes a period of modernization, during which time the textile industry sees anaccelerating shift from natural fibers to synthetic alternatives.

1909 SILKREELER cocoon unwinding agent (chemical agents for spinning)
1915 Gembu Marseille Soap (industrial soap for textile)1934 MONOGEN higher alcohol-based detergent
1950 CELLOGEN synthetic thickener

Trademarks of the Company (from left: Seiryo, Suzaku, Byakko and Gembu)

1909–1950s

Main products of this time

1960s

Founded as an Oil Agent Manufacturer, Aimed to Become aComprehensive Chemical Industry Manufacturer
Founded in 1909 based on the “Dai-ichi Kogyo Spirit,” the Company
developed and sold the silkworm cocoon unwinding agent, a chemical for
spinning waste cocoons. The Company responded to textile industry needs
by developing and selling a number of textile oil agents using sulfation andcompounding technologies.
In 1915, the Company introduced the first domestically produced soap,
Gembu Marseille Soap, into the textile industrial soap market, which had
been completely dependent on imported soap. The Company strengthened
efforts to expand into household products such as shampoo and laundry
and bath soap, which provided a breakthrough contribution to businessperformance during wartime and postwar turmoil.
With the development of the textile industry, the Company established aposition as a textile oil agent manufacturer. During this period, the Company
developed the nonionic surfactant NOIGEN, the cationic surfactant
CATIOGEN and various progenitors for other surfactants, setting the stage
for its rise to the top of the industry.

Establishing a Foundation for Future Growth
In the 1960s, against the backdrop of intensifying price competition inindustrial fields, the Company expanded the scope of and diversified
its industrial products. In anticipation of the future potential of thepolyurethane market—positioned as a downstream sector within
the petrochemical industry—the Company commenced its polyether
business. Moreover, the Company launched one business after anotherthat would serve as a foundation for the future, including flame retardants
and sucrose fatty acid esters.

1980s–1990s
Becoming a Leading Highly Functional Chemical Products Company
In the transition to high-value-added products, the Company enhanced
research and development in the priority areas of “Resources and Energy,”“Electronics and IT,” “Food, Pharmaceuticals and Cosmetics” and newmaterials. The Company developed various highly functional surfactants andSource of Original Technologies

Dai-ichi Kogyo Spirit and DKS Mottoes
The Dai-ichi Kogyo Spirit states that “We must demonstrate the traditional
spirit of the Japanese people—the Yamato spirit—in our industry, always
realize coexistence and co-prosperity between ourselves and others basedon the concept of service, and maintain sincerity to contribute to theprosperity of the nation, society and mankind.” Sincere efforts to manifest
this spirit continue to be passed down through our three Company Mottoes:“Quality First,” “Cost Reduction” and “R&D Efforts.”

02

DKS REPORT 2020

During the post-World War I recession, the Company constructedlaboratories in 1918, research incentives were stipulated in 1919 and “inventor
award provisions” were enacted one after another in 1920 to encourage thecreation of new products. The Company created superior new products andpatents and strove to conduct research. In 2002, the Company implemented
a patent incentive system ahead of other companies, contributing to thedevelopment and creation of new businesses such as the current life
sciences business.

Where Have We Come From,
Where Are We Going?

How Should We Manage?

How Can We Be Sustainable?

1985 Dai-ichi Kagaku Kogyo Co., Ltd. established(former Nippon Levulose Co., Ltd.)Business Activities Report

Data Section2015 Newly established
the Kasumi Plant
in Yokkaichi

2018 Biococoon Laboratories, Inc.
and Ikeda Yakusou Co., Ltd.
become wholly owned subsidiaries

1986 Kyoto Elex Co., Ltd. established to manufactureand sell electronic materials
1988 Dai-ichi Ceramo Co., Ltd. established to strengthen
the electronic materials sector

2006 R&D labs relocated to Kisshoin, Kyoto,2013 English company name changed fromto develop new technologies
Dai-ichi Kogyo Seiyaku Co., Ltd.
to DKS Co. Ltd.

Net Sales(Billions of yen)70

2011 Yokkaichi Chemical Company
Limited become wholly owned
subsidiaries

1996 P.T. Dai-ichi Kimia Rayaestablished in Indonesia

60

2009 100th anniversaryof the founding

50

2002 Elexcel Corporation established

40

30

20

10

Product development and business deployment that address global events and expand net sales
0

3/19903/20003/20103/20201960s–1990s

2000s

Growing Environmental and Safety Concerns Lead to High-Value-Added Materials

Highly Functional Chemicals Sector Developments Resolve Social Issues

Following the oil shocks of the 1970s, the industry transitions to high-value-added products.
In the 1990s, greater interest is placed on environmental consideration and safety, which
accelerates the greater functionalization of existing materials.

Japan’s chemical industry begins to see the development of highly functional sectors that
aggressively create and deliver added value to society.

1969
1970
1981
1982
1990
1992

PYROGUARD flame retardant for plastics
DK ESTER food emulsifier
NEW FRONTIER UV/EB-curable monomers and oligomers
SUPERFLEX waterborne polyurethane
EIMFLEX polyurethane
HITENOL polymerizable surfactant

polyurethane products. In aiming to become a leader in highly functional
chemicals, the Company began collaborating with other industries as away of addressing new needs. Moreover, the Company developed nonionicsurfactants with a low environmental impact in collaboration with anoverseas manufacturer.

2000s
Qualitative Change and Second Renaissance
Since 2004, the Company has constructed a business portfolio for a highly
profitable structure and promoted the development and expansion of new
businesses with high added value. With electronic and IT materials as thenext generation of business pillars, the Company began to take steps
to transition from a traditional surfactant company to a leading industrial
chemical supplier. In 2009, the 100th anniversary of our founding, theCompany started a six-year management plan with the aim of qualitativechange and promoted the transition to a business division system,

2005
2013
2018

ELEXCEL IL ionic liquid
RHEOCRYSTA cellulose nanofibers
I. Japonica-Bombyx Fungus dietary supplement
Sudachin citrus sudachi peel extract powder

management infrastructure development and non-petrochemicals, thereby
strengthening our financial position.
In 2015, the Company formulated a five-year plan for new value
creation, and in the same year, the new Kasumi Plant was constructed in
Yokkaichi, Mie Prefecture, as a mother factory with the aim of integratingproduction, sales and development functions, preparing the foundation fora second renaissance.
Life Sciences Business Launched,
Full-Scale Shift to DREAM Businesses
With its full-scale entry into the life sciences business in 2018, the Company
acquired Biococoon Laboratories, Inc. and Ikeda Yakusou Co., Ltd. as
wholly owned subsidiaries. As an initiative that links achieving healthy
longevity and revitalizing communities, the life sciences business has, alongwith the environment/energy and IT/electronics fields, become part of thefoundation on which the Company is focused for creating a better future.

A Corporate Culture of Respect for Quality
As early as 1922, uniform product standards were developed and the divisionof duties clearly stated that research staff were responsible for quality checks.
In 1951, a quality management committee was established to cultivate
a corporate culture of respect for quality and engage in organizational
development. In the 1960s, QC circles were actively developed at plants
across Japan led by young engineers, and in 1974, these activities were
unified, and together with research efforts DKS established a reputation as atechnology company.

At the Kasumi Plant, under the Uni-Top strategy (providing uniqueproducts that do not pursue scale), the Company has promoted
efforts with “business partners who provide a mutual spark,” whom wecall inspiring/inspired partners. As the profitability of special nonionicsurfactants and radcure resin materials is on the rise, they are expected
to be growth drivers for achieving our numerical targets in fiscal 2024.

DKS REPORT 202003

Value Creation Process of the DKS Group

Based on its technologies and trust accumulated over the past 111 years, the DKS Group applies
originality and imagination to limited resources to deliver materials that enrich our way of life.

Principal Management Resources

Business Model(Results for the fiscal year ended March 2020)

Financial capital

Net assets: ¥34,265 million

Interest-bearing debt: ¥29,946 million

Manufacturing bases: 13 (includes threeoverseas)
Raw materials used: Petroleum, coal, ore
minerals, plants, biological materials
Financial capital

Patents held: 1,012(of which held overseas: 479)

Marketneeds

Issues facedby customers
and society

Human capital

Employees (consolidated): 1,032(of which global employees: 177)
Social capital

Sales & Marketing

Manufacturing capital

Strong Cooperation with Core Inspiring/Inspired Partners

NEXT(Peripheral Businesses)

R&D for
specificcustomers

Establish
dedicated
plants forcustomers

Research &Development

Sampletaking

BtoBtoC

DREAM(New Businesses)

BtoC

ACTUAL

Product
design(Existing Businesses)

Primary agencies (Zenkoku Ichi-Ko Kai): 34
Inspiring/Inspired Partners

BtoB

Natural capital

Energy consumption: 25,800 L/year
Water consumption: 4,155,000 m3/year

DKS’s Three Strengths

04

DKS REPORT 2020

A 111-Year History andTechnological Capabilities Able
to Respond to the Times

Flexible Combinations Based on
Diverse Product Groups

Broad Customer Base
Inspiring/Inspired Partners

Since its founding, the Company has employed
its technological capabilities to resolve issues
faced by corporations and society. Whileperfecting its technologies for formulating,synthesizing and evaluating materials, theCompany has established itself as a leader inindustrial chemicals.

By applying its expertise in a broad range ofindustrial fields and combining its diverse
product groups, the Company proposes added
value tailored to its customers.

The Company builds a partner (customer) basethat anticipates the needs of end-users and isable to mutually inspire and collaborate withnew approaches.

>> P.30 Research and Development>> P.01 DKS Group Products Around Us>> P.56 Proprietary Technologies of DKS>> P.46 Six Core Business Segments>> P.47 Promoting FELIZ 115

Where Have We Come From,
Where Are We Going?

Manufacturing

Sales & Marketing

How Should We Manage?

Management

Research & Development

How Can We Be Sustainable?

New ProductDevelopment/ProductImprovement

DKS Stakeholders
andValue Creation(Six core business segments)(As of March 31, 2020)

Surfactants>> P.48• Providing unique and highly original
products leading to the discovery andresolution of end-user issues

Amenity Materials

OrdertakingSkills acquisition
Work-life balance
Work motivation
Diversity

Percentage of paid vacation used: 73.2%
Ratio of female managers: 9.1%
(As of March 31, 2020)>> P.49

Production
management

Data Section

Employees

Uni-Top Strategy

Procurement

Business Activities ReportMassproduction

Polyurethane
Materials

Marketing>> P.50Functional
Materials• New growth in life sciences and other businesses• Product development that enhances QOL andcontributes to society>> P.51

Electronic Device
Materials• Development of R&D and solution sales based on
resolving customer issues• Existing product proposals and functional
improvements>> P.52

Life Sciences>> P.53

Shareholders
GrowthEfficient and transparent management
Shareholder returns

TSR over the past five years: 13.9%
ROE: 6.4%
Customers
Coexistence and mutual prosperity throughthe joint development of high-value-added
products
Project theme development throughinspiring/inspired Partners
Society
Regional economic revitalization driven bycontributions to the development of local
communities
Development of life sciences productsCore products:
I. Japonica-Bombyx Fungus
Sudachin

DKS’s Five Critical Issues of Importance

Qualityand Safety
Management

Research andDevelopment

Human
Resource
Management

Consideration
for theEnvironment

Organizational
Resilience>> P.28>> P.30>> P.32>> P.34>> P.38

DKS REPORT 202005

Message from the CEO

Stronger Commitment to Our 2030 Goals

Chairman CEO Sakamototalks about DKS’s pathway to
victory.

Chairman CEO

SAKAMOTO Takashi

Review of the REACT1000 plan, which carried us forwardfrom the Heisei era to the Reiwa era
Fiscal 2019, the final year of our previous five-year plan, marked the transition from the Heisei era to
the Reiwa era. The name of the new era was announced on April 1, 2019, and the new emperor wascrowned on May 1. The Japan Industrial Safety and Health Association (JISHA) held its annual National
Occupational Safety and Health Convention for the 78th time, but for the first time in Kyoto, in October
2019, the first year of the new Reiwa era. I served as local chairperson for this highly successful event.
Later, I was invited to a tea ceremony at the Emperor’s Kyoto Imperial Palace. There, DKS was named asa Certified Health and Productivity Management Organization (White 500) for the third successive year.
We were also selected as an outstanding health and productivity management company by the Ministryof Economy, Trade and Industry (METI) and the Tokyo Stock Exchange (TSE). It was a wonderful yearthat can be highlighted in our Company’s history. During the three-year period following the launch of
REACT1000 in 2015, we consistently achieved record-high figures for operating income. This was due toa better-than-expected contribution from our 5G business related to the next-generation communication
standard. During that period, we built a new plant for the 5G business. I thought that if we could
continue with this momentum, we would achieve our planned targets. However, prices of naphtha andother commodities surged. Although demand for 5G materials continued to increase, it exceeded our
production capacity. Our emergency response measures entailed outsourcing costs that were muchhigher than expected, putting pressure on profits. We strove to reflect the higher raw materials costs inour selling prices, but that proved difficult.
With regret, therefore, we missed our performance targets for the final year of the plan. As aqualitative target, however, we formulated a slogan to ensure stable growth and survival. The slogan,which encapsulates the Company’s 100-year history, is “Chemistry provides a solution: From Kyoto to
the world into the future.” We celebrated our 100th anniversary on April 1, 2009, the first spring after
the Global Financial Crisis (GFC) that started in September 2008. The word “REACT” in our mediumterm plan underscores the core priorities we have set to connect our four stakeholder groups. We have06

DKS REPORT 2020

Where Have We Come From,
Where Are We Going?

How Should We Manage?

How Can We Be Sustainable?

Business Activities Report

Data Section

selected 20 priorities in total, based on the five letters in “REACT” multiplied by our four stakeholder
groups: employees, shareholders, customers and society. For example, “R” refers to “Return” andindicates our commitment to providing returns to each group of stakeholders. We also decided tocategorize our businesses according to a time axis, which had not been done before. Specifically,businesses that existed on March 31, 2015, when we launched the plan, are called ACTUAL businesses.
These are businesses that underpin our Company. Using them as a base, we are developing peripheralbusinesses, which we call NEXT businesses. And new businesses involving new initiatives are called
DREAM businesses. This was our blueprint for the future. And we were able to reach or make good
progress with all the qualitative targets incorporated in our REACT matrix.
REACT Matrix (priority qualitative targets)
Four stakeholders

Employees

Shareholders

Customers

Society

R (RETURN)

Give proper credit for theircontributions

P/E andP/B for 1000

Active partner

Positive economic cycle

E (EXPORT)

Increase the overseas
ratio

Annual reportMarket development

Mother plant

A (ADVANCE)ACTUAL100×6

Withdraw from
unprofitable businesses

DREAM100×6

BrandsC (CREATE)

NEXT100×6

Change from undervalued
stock to growth stock

Diplomacy with special
assignments

Regional revitalization

T (TRAIN)

Training & education

Outside officers

Increase IT sales

Public classes

We started talking about making Integrated Reports around 2014 when we were formulating
REACT1000. Prior to the GFC in 2008, we cited enhancement of corporate value in management plans
as a way to improve our business foundation. This means practicing management with a focus on value
creation processes or a strategic road map for realizing value. The aforementioned REACT matrix was
included in our first Integrated Report, covering the year ended March 2016. The SDGs advocated by theUnited Nations in 2015 and ESG targets are mirrored in the spirit of the DKS Credo, the DKS Mottoes
and the Company song, and we work constantly to achieve them. We used the matrix to monitor the
progress of our qualitative goals, with reference to the Octopus Model of the International Integrated
Reporting Council (IIRC). Our matrix shows a set of mottoes that focus on qualitative (nonfinancial)goals. We believe that these qualitative goals are reflected in our balance sheets, which represent theculmination of our historical financial performance. Three items from our previous five-year plan deserve
special mention. First, our work in radcure resins, one of our NEXT businesses, subsequently evolved into
a new high-profit core business. Second, two companies active in new fields joined the DKS Group andlaunched our new life sciences business. Third, our total market capitalization, an indicator of corporate
value, rose from the ¥10 billion range to the ¥50 billion range. Our corporate structure has truly changedin the past five years.

Influence of COVID-19 on corporate value:

Using the Octopus Model to raise value in the CtoB era
The new coronavirus that causes COVID-19 was named because it resembles the shape of a flamearound the sun. It is derived from the Spanish word for “crown.” The spread of COVID-19 has caused
a breakdown of value chains all over the world. There are also reports that we face an economic crisis
comparable to the Great Depression that started in 1929. The GFC recession resulted from financial
problems that originated with subprime loans. The coronavirus crisis is a crisis arising from the shutdownof the economy itself and so is completely different from the GFC. The economy after the Industrial
Revolution—characterized by correlation between supply and demand and between goods and money—
has changed in the 21st century. Advancements in computers, invented by humans in the 20th century,

DKS REPORT 202007

have changed the meaning of value itself. That is the result of digitalization. And it seems that digitalhas gained an advantage over manufacturing, the world of analog. However, COVID-19 has shut down
economic activity, prompting humans to think again that the source of value might be analog after all.
“Analog” in Spanish is “análogo.” Breaking this down, we see that “aná” means “anti” and “logo” means“logical.” Therefore, “análogo” means “illogical.” I think chemistry is more of an art rather than a scienceand thus refers to analog manufacturing.
Human-made manufacturing that is not logical (digital) is non-quantifiable (analog). Until the 20th
century, things were measured using analog values, but this has changed due to digitalization. Traditional
marketing used to focus on BtoB and BtoC. From now on, it will shift to CtoB. Let us cite the example ofCompany A and Company X, both based in China. Among China’s population of 1.2 billion, Company A
has a network of 700 million consumer members. Company X, a manufacturer, announces developmentof a new cosmetic product. Company A’s 700 million members see the announcement and respondpositively, providing Company X with the confidence to proceed to construction of a new factory. In otherwords, this is not BtoB or BtoC, but rather a flow in which C influences B. It is an example of value createdby digitalization. The consumer (C), who is purchase-driven, can preempt and influence the actions of
the business (B), in this case a prominent company. At our Company, we use the term “inspiring/inspired
partners” for business partners who spark off each other. They are partners who appreciate analog andenhance it into digital form. We recognize the value drivers who create value in the Octopus Model. They
represent DKS’s three strengths and five important issues (business foundation). We must be aware ofcapital cost and capital efficiency indicators (such as ROIC, ROE and PBR) and reflect these in our balance
sheets over time, because they affect our stock price. Our Uni-Top strategy, which focuses on uniquenessrather than scale, incorporates intangible factors that do not have physical form. I firmly believe this is theideal strategy to increase the value of DKS.
Octopus Model showing the value creation process(Source: “International Integrated Reporting Framework,” International Integrated Reporting Council (IIRC))

Bridging the dream of creation:“Cocoon Spanning Michinoku and Kyoto”
Reiwa, the name of Japan’s new era, is derived from a piece of Japanese poetry originally read at a banquet
in Dazaifu, Kyushu, and recorded in the Manyoshu, a collection of ancient Japanese poems. The Manyoshu
features works by many poets about their journeys between the Kyushu and Tohoku regions. Through aconnection with our subsidiary, Biococoon Laboratories, which is based in Iwate Prefecture in the Tohoku

08

DKS REPORT 2020

Where Have We Come From,
Where Are We Going?

How Should We Manage?

How Can We Be Sustainable?

Business Activities Report

Data Section

region, I was invited to give a 90-minute lecture at the Iwate Association of Corporate
Executives in July of this year. As I was speaking about the Michinoku region (ancient nameof the Tohoku region), I was reminded about a famous military commander of the early Heianperiod, named Sakanoue no Tamuramaro. He was a warrior who features in a Kyoto dance.
On the orders of Emperor Kanmu, he led tens of thousands of soldiers to deal with anuprising in Michinoku. The local enemy general who fought bravely without help was Aterui.
Tamuramaro won the battle and was preparing to return to Kyoto. He asked the emperor tosave the life of the enemy general who fought bravely. However, the aristocrats opposed thisand Aterui was executed. The principle of majority rule alone is no measure for true value.
It is said that Tamuramaro, together with a Michinoku woman who loved him, prepared theburial mound of Aterui and prayed for his soul. When I stood in front of the burial mound,which remains in Kiyomizudera in Kyoto, I considered the relationships and values of our northern warriors.
I thought of Gembu, a god who protects Kyoto from the north. (Gembu is also the name of a DKS Group
company.) I make sure to visit his shrine every New Year. With these things in mind, I decided on the title ofmy speech: “Cocoon Spanning Michinoku and Kyoto.”
Our Company was founded on a surfactant for unraveling and washing silkworm cocoons, the raw
material for silk fabrics. Meanwhile, Iwate-based Biococoon Laboratories has discovered a substancefrom silkworm cocoons that might enhance people’s immune systems. Anyway, for 90 minutes I gave myaddress, emphasizing the fact that “cocoons” are common to both our companies: DKS in Kyoto andBiococoon in Iwate. In effect, my speech was about achieving regional revitalization through a union between
Kyoto and Iwate prefectures. About an hour into my speech, I put on the happi coat to help the audience
wake up. Our new management plan is called FELIZ 115; “feliz” means “happy” in Spanish. After being
applauded for my happi coat, I gave an outline of our new medium-term plan. “Octopus” is a Latin word
meaning “eight-legged.” Moomin, a character loved all over the world, was born in August, the eighth monthof a year, which is my birth month. I love Moomin and wore a tie with Moomin designs for my address.
Finland, where Moomin was born, was ranked the world’s happiest country for the second consecutive year.
The heart of the our new plan is to practice happiness management. And the foundation of our businessmodel for the new Reiwa era, translated as Beautiful Harmony, is happiness. In my address, I introduced
examples of our management since 2015, based on the Octopus Model and value creation processes.
When we were formulating our new plan, Nokia, a leading company from the world’s happiest country,
came to mind. I see Nokia’s spectacular revival after overcoming the financial crisis as a successful case ofhappiness management for the Finnish people. We have made major investments in 5G next-generation
communications ahead of others in the world. The most important thing for our four groups of stakeholders
is happiness. The letters of FELIZ stand for Future, Environment, Life, Innovation and Z-FLAG (as meant bychallenge). We created a new matrix for happiness management using FELIZ as an acronym. We thought
about how we could create corporate value that the market evaluates highly. Chemistry is exactly theanalog value that humans produce. Let us review analog value once again. As a materials manufacturer, wecreated a business model that will celebrate its 115th anniversary in 2025. Due to the COVID-19 pandemic,
we are facing our worst postwar economic crisis, and uncertainty about the future continues to increase.
Nevertheless, we have declared that we will not change our strategy, and we will not reduce R&D andcapital investments. I am convinced that we will successfully implement FELIZ 115, our plan for 2030.

FELIZ 115:

Milestone that will sculpt our future
For the year ending March 2025, we are targeting net sales of ¥85 billion and operating income of ¥10billion. In the new plan, finalized in January 2020, we outline our strategies, tactics and concrete measures,
as well as our policies and targets. COVID-19 originated in Wuhan, China, and spread throughout the world,
it has been reported. With this in mind, I ordered the Company to verify the processes of our new plan.

DKS REPORT 202009

Given the COVID-19 pandemic, is it possible to increase operating income from ¥4.1 billion in fiscal 2019to ¥10 billion in five years? Originally, we set conservative profit targets for the first and second years of theplan, then aimed to make solid capital investments to achieve full capacity utilization from the third year toachieve the ¥10 billion target. Our product lineup is classified by material into five major categories and 39
subcategories. A look at the profit structure of our subcategories reveals an unevenness—an unevenness
in contribution by segment. From an efficiency perspective, focusing on highly profitable segments allows
us to achieve better numbers than those revealed in actual profit performance figures. Some loss-making
segments that seem inefficient at first glance are actually hidden treasures of technological development.
So we took another look. We decided to maintain our loss-making segments that represent futureoriented businesses. We reaffirmed that in the first half of the Plan, we will withdraw from some unprofitablebusinesses, and in the second half we will reap the benefits of profitable businesses. We will also step up
our commitment to the SDGs and ESG.
In the milestone year of 2025, we are targeting a ¥25 billion increase in net sales compared with 2020.
And we are targeting a further ¥50 billion increase by 2030. In that year, with net sales of ¥135.0 billion,
the ACTUAL, NEXT and DREAM businesses should each account for a third of total net sales. Do wehave a grasp of all the ACTUAL businesses activities of existing customers? We made a list of all existingcustomers and new customers under development. Among them are our inspiring/inspired partners. These
are companies with which we promote top management communications actively and regularly. Our plan
is to deepen our relationships with these partners and make 2030 a year of great achievements. I ordered
all our R&D departments to list target initiatives of all members. This effort is aimed at forming relationships
with customers and includes Japan’s position in Nikkei Data’s annual survey, which covers 74 products andservices around the world. What kind of management policies do our partner companies have, and whatkind of business should we establish with them? This work ended during the COVID-19 pandemic, opening
the way to forge ahead with building inspiring/inspired partnerships. As a technology-oriented, technologybased company, we have adhered to our three Company Mottoes of “Quality First,” “Cost Reduction”
and “R&D Efforts” since our founding. The addition of the new life sciences business to our five operating
segments (classified by type of material) for reporting purposes is a reflection of this.
Since the start of FELIZ 115, we have added life sciences as a focal segment, with the result that
we now have six operating segments. Effective the first year of the new plan, we have switched from ourprevious method of budgeting by type of material to setting targets by customer. In addition to our ACTUAL
businesses, we have now clarified the customer targets for our NEXT (peripheral) and DREAM (new)businesses. We attach great importance to the relationship between R&D—aimed at advancing the NEXTand DREAM businesses—and our customers. In our focus fields of electronics, IT, the environment, energy
and life sciences, which of our tools are best suited to which customers? We now have an organizational
structure that is fully customer-oriented. The COVID-19 pandemic has prompted new executives inour sales department to engage in deep discussion about sales activities and marketing strategies.
In the production department, as well, the pandemic has sparked increased debate and concreteplans to support our sales force. With 2030 in mind, our sales departments have changed theirfocus to short- and medium-term realities, while our R&D departments have shifted to a long-term
future perspective. We now have a system in place in which our sales and R&D departments work
together to maximize our overall organizational capabilities. In our “Second Renaissance” of 2015,
we envisaged that our business structure in 2030 would consist of BtoB (industrial products) and
CtoB (consumer products) businesses. With the help of all employees, I am confident that we will
surpass the milestone targets set in the FELIZ 115 plan.

Pursuing easy-to-understand corporate value for happiness
management
The important things in happiness management are the happiness of the Company and the happiness of
employees. This means working with a sense of excitement. Although we do not yet have a quantitative

10

DKS REPORT 2020

Where Have We Come From,
Where Are We Going?

How Should We Manage?

How Can We Be Sustainable?

Business Activities Report

Data Section

evaluation system for happiness, it is significant that we met the criteria for
certification as a Certified Health and Productivity Management Organizationin 2020. Employees working on the front lines, whether in factories or thehead office, have embarked on health management initiatives, and our
female workforce has played an important role in maintaining good working
conditions. I spoke about health management with Mr. Okada, head of the
Health Management Research Group, a nonprofit organization. He said
to me, “Mr. Sakamoto, health management is not just about talking; it’s
about paying money. It’s the same as investing.” I think he is right. I havelong emphasized the importance of sharing profits with workers. Even in
front of our shareholders, I have declared that our employees come first. Dividends are important, but weplace higher priority on employee satisfaction and capital investments. That was my reply to a question at
our Ordinary General Meeting of Shareholders. We give priority to those who work hard, and we reward
employees for their efforts. Our employees feel that the Company values their work. They are the source of
our happiness. Employee happiness is an inherent part of the FELIZ slogan and the FELIZ matrix.
The global SDGs for 2030, as well as ESG initiatives, are also about pursuing happiness. Our vision for2030 is as follows: (1) net sales of ¥135 billion and operating income of ¥18 billion; (2) a corporate image
shaped by our Uni-Top strategy, which values uniqueness; and (3) ACTUAL, NEXT and DREAM businesses
each accounting for one-third of net sales. The FELIZ 115 plan will play a backcasting role covering the fiveyear period leading up to 2030. During this period, we will establish KPIs and capital investment plans for2030. We believe that happiness management is the ultimate source of value creation. In economic terms,
humans are the creators of value, while machines and AI are simply tools to help humans achieve theirtargets. COVID-19 has dramatically changed the working environment, giving rise to working from home,teleworking and other arrangements. For chemical manufacturers, especially those who produce industrial
chemicals and other materials like DKS, human resources will be the key to survival. Recruiting is important.
Compared with last year, we made 50% more new-employee job offers this year, including to a student
from Mongolia. We are also hiring people in their 40s, a generation who experienced the worst job hunting
period when they were finishing their school. We tell everyone in-house that we have no age restrictions on
employees if they are healthy, motivated and contribute to the Company. In the analog world of chemistry, it
is important to embrace people who work happily.
We have now entered the second fiscal year in the new Reiwa era. As of July 28, the number of
COVID-19 infections in Iwate Prefecture was zero. The last 10 minutes of my 90-minute address about
Michinoku was a question-and-answer session. Three people spoke up and asked six questions. The lastperson said this: “I agree with your statement about the importance of evolution = innovation in relation
to COVID-19. That said, what are the things that you feel must never change?” It was a great question to
wrap up the session. I spent the next two-and-a-half minutes responding: “The answer lies in the treasuresleft by our founder, namely, the DKS Credo, the DKS Mottoes and the Company song.” I bowed myhead and thanked everyone and, as I descended from the stage, I thought about the symbolic presenceof Tamuramaro, the great warrior from the north. In the Age of Discovery, compass needles pointed to
Polaris, the North Star. In the southern hemisphere, people were guided by the Southern Cross. In Japan,
the warrior in the north was Tamuramaro, and the literary man in the south was Sugawara no Michizane.
Chemistry is a mixture of martial and cultural arts—like the warrior in the north and the literary man in thesouth. A new course on integrated reports has been established by a professor at Fukuoka University in
Kyushu. I regularly discuss the value creation process with teachers of the university. The key is to recognizethat the source of value lies in costs. DKS will continue creating corporate value that makes all stakeholders
happy. We ask for your ongoing understanding and support.

SAKAMOTO Takashi
Chairman CEO

DKS REPORT 202011

Review of the Medium-Term Management Plans

ADD21(Ambitious Dynamics DKS
for the 21st Century)—Tolerance to Changes
April 2004–March 2009
Targeted Figures
SloganVisionManagement
Policies

Plan Outline

Review

Successes

Consolidated net sales ¥50 billion
Ratio of ordinary income to sales 7%“With High Aspirations, We Will
Shine Brightly in the 21st Century”
Business Expansion andSustainable Corporate Value Growth
1. Putting the concept “R&D is the engine of theCompany” into practice to realize customer
satisfaction
2. Continuously complementing and expanding thevalues of the Company
3. Reinforcing the business by emphasizing the“three actuals” (actual work site, actual goods
and actual situation)
4. Enhancing corporate governance
5. Promoting compliance management
6. Establishing an ideal company structure by the100th anniversary (April 2009)
1. Increasing sales and building a stable earningsgenerating business portfolio
2. Developing and expanding new high-valueadded businesses
3. Generating strong awareness of and benefits
from realizing targets after establishing themanagement infrastructure

In the final year of the plan (fiscal 2009), businessconditions became severe, characterized mainly
by declining demand and falling sales prices amid
surging raw material naphtha prices caused byhigh crude oil prices and the subsequent global
recession triggered by the financial crisis in
the United States. Against this backdrop, DKS
undertook such initiatives as boosting sales ofcore products, developing new markets in growing
fields that include IT and the environment, focusing
on developing new materials, continually revising
prices, and cutting operating expenses and othercosts. Despite these efforts, the Company’s
earnings fell below the plan’s targets.
• Introduced an integrated business division
approach that vertically links the research,
production and marketing divisions, andpromoted a change in consciousness toward
the concept of emphasizing earnings basedon strict budget management and clarifying
responsibilities

Further instillation of a profitability mind-set

Issues12

DKS REPORT 2020

CHANGE100 Stage I—Changing the Corporate Culture

CHANGE100 Stage II—Expansion along with Earnings

April 2009–March 2012

April 2012–March 2015

Consolidated net sales ¥55 billion or higher
Ratio of ordinary income to sales 4% or higher

Consolidated net sales ¥60 billion or higher
Ratio of ordinary income to sales 5% or higher“Each of Us Holds the Key to Success”“Each of Us Holds the Key to Success”

Building a Business Structure Necessary
as a Leading Industrial Chemical Company
1. S ecuring a stable profit structure
2. Pursuing greater business efficiency
3. D eveloping and strengthening our foundation
to realize the “technology makes the Company”
concept
4. Accelerating the creation of new products
5. Enhancing compliance management
6. Improving managerial skills and human resource
development

Staying Ahead of the Times asa Leading Industrial Chemical Company
1. Expanding peripheral business fields
2. Enhancing and reinvigorating domestic
production facilities
3. Accelerating the creation of new businesses
4. Pursuing cost reductions
5. Improving management capabilities anddeveloping human resources
6. Enhancing overseas expansion andstrengthening administration

Basic Strategies
1. Enhancing the enterprise’s power (marketing clout, cost-saving ability, technical strength andorganizational power) = Heightening our corporate value
2. Promoting selection and concentration = Determining the withdrawal from underperforming segments
based on our exit rule
3. Optimizing the allocation of management resources = Funneling people, goods and capital
4. Seeking more productivity = Seeking more profitability through the integrated business division
approach
5. Creating new businesses and strengthening cooperation with the parties concerned = Developing
inorganic materials, dispersion technology, electronics materials, etc.
6. Focusing on priority business segments = Promptly reaping the benefits of an existing, ongoing, highly
profitable businessAlthough DKS aimed to increase net sales from
The initial year saw the impact of the financial
crisis triggered by the Lehman Brothers bankruptcy. ¥56.2 billion the previous fiscal year to ¥60 billion,
the fiscal year ended March 2015, the final year
With revenues growing over the next two years,of the plan, ended with consolidated net sales
however, DKS successfully achieved a target ofat ¥55.5 billion, below the target because of
the plan by recording final fiscal year (fiscal year
delays in investment to raise production in core
ended March 2012) consolidated net sales ofbusinesses and stagnation in the solar cell field.
¥56.2 billion. In contrast, the Company was unable
On the other hand, DKS achieved its operating
to reach the plan’s operating income target due tomargin target given record-high operating income,
operating income decreasing in the final fiscal year
ordinary income and net income. While missing its
amid sharp demand drops and ongoing high raw
materials prices.
quantitative targets, DKS saw success in qualitative
terms.

• Increased business divisions’ profits by instilling• Upgraded the management infrastructure (e.g.,a profitability mind-set• L aunched and promoted the Human Resources
Development Project aimed at instilling anawareness of management in all departmentscommenced introducing a new ERP system) for
the future• Maintained a healthy balance sheet (increased
the capital adequacy ratio)• Made new investments for growth (madeYokkaichi Chemical a wholly owned subsidiary) to
expand business fields, purchased land, began
preparation for a new plant
Maintain a robust and healthy balance sheet toincrease earnings

Improve the corporate culture to bring a profitability
mind-set to the forefront
Realize a balance in three areas:
1. Maintain a strong balance sheet:
Simultaneously increase assets and liabilities/capital
2. Revamp the business portfolio:
Select and concentrate on future-oriented
businesses
3. Optimize human resources:
Develop highly capable employees that crossgenerational lines

Where Have We Come From,
Where Are We Going?

How Should We Manage?

How Can We Be Sustainable?

Business Activities Report

Data Section

REACT1000 Summary
Plan Overview
When the plan was formulated, the stated goal was to solidify
the foundation of changing the corporate culture and expanding
earnings that was established in the previous plan and take on the
new challenge of creating the future. Quantitative targets included
consolidated net sales growth of 1.5 times to ¥75.0 billion, an
operating margin of 8% and operating income of ¥6.0 billion by theplan’s end. The qualitative goals involved expressing the relationshipamong the four stakeholders surrounding the Company through the
20-item slogan represented by the acronym REACT (Return, Export,
Advance, Create and Train), with the plan subheading “Act for a Leap”
indicating a break from existing conceptions to bring about change.
Review
On the quantitative side, sales were revised downward in the third yearof the plan due to an extreme slump in solar cell sales, which had been
expected to grow, but the operating income target was left unchanged,
and in the first half of the plan reached a record high for the third
consecutive year. However, after that, rising production costs for 5G
materials, which far exceeded expectations, insufficient response tosoaring raw material prices and COVID-19 led to operating incomeof ¥4.1 billion in fiscal 2019, the final year of the plan, resulting in our
unfortunately falling short of the targets.
The 20 items in the matrix, which are qualitative elements, haveall been started or are in progress. As a result, our view is that thefoundation for creating the future has been laid according to plans.

As a result, DKS was able to 1) expand business peripheral areas andefforts to create new businesses, 2) focus on business developmentwith new capital investment and R&D expenses, 3) change the balance
sheet composition and increase total assets 1.3 times compared withthe end of the final year of the previous plan, 4) bring life sciences–
related Biococoon Laboratories Inc. and Ikeda Yakusou Co., Ltd. into
the Group and 5) lay the foundation for realizing business income andprofits commensurate with total assets, including up-front investment
in new businesses.
REACT1000 Management Policy and Evaluation Evaluation A: Positive outcome B: Neutral outcome
Management policy

Contents

R

Create new corporate value(2)

Create a clear corporate
image

Increase awareness of the DKS
image and profileA

IR activities, DKS reports and other communication
efforts facilitated easy understanding; pursued
further “ease of understanding.”(3)

Ensure more profoundgovernance

Increase management efficiency
by focusing on corporate
governanceA

No increase or decrease in the 10 “explain” itemsin the Company’s Corporate Governance Report
after revision of the principles of the Corporate
Governance Code.

(4)

Maintain and increase
optimal ROE levels

Pay careful attention to ROEfrom a medium- to long-term
perspective

B

Sales below budget and a decline in profitability
due to investment led to the recent downward
trend, and the target was not achieved.

(5)

Create advantages throughcollaboration

Promote the development ofmaterials and technologies
in collaboration withbusiness partners, academia,
associations and related parties

A

Joint development with universities and otherssuch as corporate projects.

(6)

Accelerate and enhancemother plant functions

Improve Group-wide productivity
based mainly on a Yokkaichicomposite base structure

A

Investment focused on the No. 2, 3 and 4 factoriesof the Kasumi Plant. Company-wide productivity
improvements are forthcoming.

A
AdvanceC
CreateT
Train

Evaluation A: Positive outcome B: Neutral outcome

Employees

Shareholders

Customers

Give proper credit for contributions

P/E and P/B for 1000

Active partner

Positive economic cycle
Strive to contribute to Japan and society as a manufacturer of chemicalintermediary materials

Society

Create a mechanism for fairly evaluating the results of contributions to the Company

Move toward a stock price of ¥1,000 with an awareness of the P/E and P/B ratios

Create active, proposal-based relationships

B• Reached a stock price of ¥1,000 and market capitalization above ¥50.0 billion• Share buybacks, acquisition of DBJ rating, acquisition of health and productivity
brand (White 500)
Integrated Business ReportA• Selected for a Ministry of the Environment project (CNF1) and a GNCJ2 project

Recruit for overseas experienceA• Built relationships with inspiring/inspired partners (e.g., top diplomacy)• Revised management of the agency association and began sharing somedevelopment goals
Market Development

Mother Plant

Focus efforts on development of overseas markets

B

Create an integrated business report as a PR and IR tool, including use overseas• Received the WICI Integrated Report Encouragement Prize, published the DKS
Report in English• Launched IR activities for overseas investors• Chin Yee new plant project• Overseas expansion strategy forthcoming, limited to improving the procurement
environment centered on materials.

• Commenced operation of the No. 2 and 3 plants, ramped up the No. 4 plant,
introduced smart plants, acquired JIS Q45100• Factory operation not yet functioning as an export base

Withdraw from unprofitable businesses

B

First mother plant in Japan

Actual 100 × 6

ASoutheast Asia/Americas market development

Review existing businesses, ascertain business focus

Manage long-term unprofitable businesses as a liability

DREAM proposals

Improve our corporate image• Introduced a new managerial system, reviewed executive compensation• Promoted the active participation of employees

E
ExportA(1)

REACT Matrix Evaluation

ReturnEvaluation
Implement capital investment that contributes tosales: circuit board materials and other items
Market capitalization: Maintained a high level ofmore than ¥4,000 per share.

Maximize performance andmarket capitalization derived
from assets held

• Revised overseas work treatment, selection-type overseas base tours

A• Insufficient expansion of existing businesses• Did not achieve the strengthening of peripheral areas in existing businessesB• Launched soundness efforts (business reviews/withdrawal decisions not
implemented)

M&A

A• Two companies in life sciences made subsidiaries• Ongoing consideration of new projects

A
A
Brand

A

• Continue to disseminate the “DKS brand”• Enhance corporate value in such areas as Health Declaration and White 500
certification

NEXT 100 × 6

Change from undervalued stock to growth stockSpecial diplomacy Smile/Shark/Strap

Regional vitalization

Introduce a research fund, strengthen cooperation with universities

Perform management commensurate with a growth stock

Develop initiatives through alliances

Initiatives contributing to local communities• Introduced the fund and an idea contest, recommended university collaboration
themes and underground research, developed sugar derivatives and cellulose
technologies• E xpanded contributions of circuit board materials and special surfactantsA• Trading volume increased due to IR activities• Market expectation of future potential as a 5G brand• February 12, 2020, all-time high stock price of ¥4,890 at the beginning of the year

A

• Developed activities through management and the COO Office• Built relationships with customers, industry, government, academia, journalism,
finance, etc.

A

• Local contributions at the Kasumi Plant (information dissemination, job creation,building local relationships), revitalization activities at each base (e.g., factory
tour, local contribution)• Contributions to the Kyoto Labor Standards Association (Chairmanship)

Training and education

Outside executive officer meetings

Increase IT sales

Public classes

Clarify human resource development policy

Management focused on corporate governance policies

B• Regularly held outside executive officer meetings (every other month)• Expanded activities of outside executive officers (e.g., factory tours, support for
medium-term management plan)• Insufficient clarification of personnel policy and measures• Developed human resources development infrastructure, e-learning, reorganizedin-house training, strategic recruitment of technical college students(manufacturing staff)

A

Utilize new backbone system

B• Established next-generation groupware• System construction not fully utilizedA

Train chemists inside and outside Company

A• Implemented on-site lessons at each base
• Implemented student support through scholarships
1. Cellulose nanofibers 2. Global Network Council JapanNet sales plan targets/net sales

Operating income plan targets/operating income
Net sales plan targets

Net sales(Billions of yen)

Operating income plan targets

Operating income(Billions of yen)

70

7

60

6

50

5

40

4

30

3

20

2

10

1

0

3/05 3/06 3/07 3/08 3/09 3/10 3/11 3/12 3/13 3/14 3/15 3/16 3/17 3/18 3/19 3/20

3/05 3/06 3/07 3/08 3/09 3/10 3/11 3/12 3/13 3/14 3/15 3/16 3/17 3/18 3/19 3/20

DKS REPORT 2020

013

Overview of the New Medium-Term Management Plan “FELIZ 115”

Positioning of the New Medium-Term Management Plan “FELIZ 115”
 he five-year medium-term management plan “FELIZ 115” launched in April 2020 is based on the implementation of ongoingTchanges that will occur over the next 100 years, with a focus on the social environment of 2030. Despite increasing uncertainty
throughout the world, we expect the economy to grow steadily, centered on the United States.
The DKS Credo “contributing to the nation and society through industry” is eternal. We have positioned “FELIZ 115” as a new
medium-term management plan that will enhance corporate value and generate consolidated net sales of ¥100 billion.

Vision for 2030

Targeted Corporate Image

1. Highly profitable Uni-Top intermediary materials
manufacturer
2. T echnology developer pursuing progress and innovation
3. A company balancing corporate value andstakeholder satisfaction• As a Uni-Top company, we will conduct management
while sharing happiness with our four stakeholders.
• In brief, we will be evaluated for our uniqueness andwill enhance corporate value with a shared sense of
excitement.

Targeted Vision in 2030
Ahead of 2030, we will strengthen existing businesses and engage in the full-scale development of new businesses.
“FELIZ 115” will solidify our foundation to ensure we achieve our 2030 targets (net sales of ¥135 billion and operating income of ¥18 billion).

Previous medium-term
management plan

New medium-term
management plan

Next medium-term management
plan “DKS2030” (tentative)

DKS
2030

Period: April 2015–March 2020

Period: April 2020–March 2025

Results

Targets(Consolidated)

Net sales
Operating income
Operating margin
Profit
ROE
Overseas sales ratio

Targets

March 2020 results¥67.0 billion¥6.0 billion
9.0%¥3.6 billion
10.0%
20.0%

¥61.4 billion¥4.1 billion
6.8%¥2.0 billion
6.4%
16.8%

(Consolidated)

March 2025 targets

Net sales
Operating income
Operating margin
Total assets
Asset turnover ratio
Capital expenditures
R&D expenses-to-sales ratio
ROE¥85.0 billion¥10.0 billion
11.7%¥92.0 billion (forecast)
1.0 times¥12.0 billion (five-year cumulative)
5.0%
10.0% or higher

Period: April 2025–March 2030
Theme
Realization of a highly profitable Uni-Top company
Targets(Consolidated)

Net sales
Operating income

March 2030 targets¥135.0 billion (twice that of March 2020)¥18.0 billion (triple that of March 2020)

Priority Measures
Restructure management resources

Enhance earnings power

Strengthen the management foundation

Withdraw from noncontributing
businesses within
the first 1–2 fiscal years.

Realize early returns on advanced
business investmentsin the Kasumi Plant and other areas.

Revise the performance evaluation andremuneration systems; establish a systemcorresponding to contributions.

About “FELIZ 115” F Future

E Environment
L LifeI Innovation
Z Z-Flag/Challenge

14

DKS REPORT 2020

FELIZ

This word means happiness in Spanish. DKS chose “FELIZ” because we want to provide all
stakeholders with happiness. Each letter in the word FELIZ represents one of the five themesof our medium-term management plan in English.

115

Looking ahead to the final year of this plan in 2025, this number expresses our plans for the115th anniversary of our founding.

Where Have We Come From,
Where Are We Going?

How Should We Manage?

How Can We Be Sustainable?

Business Activities Report

Data Section

Overview of “FELIZ 115”
Management Objectives• DKS will restructure its business in the first two years of thisplan to become a highly profitable Uni-Top company with 2030

FY2019Results(Billions of yen)consolidated net sales more than double and operating income

FY2024
Targets

FY2019–FY2024
ChangePercentage Change

CAGR

Net sales

61.4

85.0

23.5

38.3% increase

6.7%

Operating income

4.1

10.0

5.8

140.7%

19.2%

Operating margin

6.8%

11.7%

–

4.9-percentage-point
increase–of ¥10 billion in the final year of the medium-term management

Total assets

81.7

92.0
(Plan)

10.2

12.6% increase

2.4%

plan (fiscal 2024), we aim to establish a sustainable position as a

Asset turnover ratio

0.8 times

1.0 times–

0.2 times increase–

Uni-Top company valued for its uniqueness. We will also promote

Capital expenditures

6.1

12.0
(Five-year
cumulative total)

5.8

95.5%

14.4%

R&D expenses-to-sales ratio

4.5%

5.0%

–

0.5-percentage-point
increase––

3.6-percentage-point
increase–

more than triple the respective figures in fiscal 2019.
• Targeting consolidated sales of ¥85 billion and operating income

M&A to accelerate the expansion of business domains and thedevelopment of new businesses.

ROE

6.4%

10.0% or higher

Basic Approach1• ACTUAL: Qualitative enhancement• NEXT: Expansion, reinforcement• DREAM: Development, cultivation

2

3• Maximize use of total assets resulting fromsystematic capital expenditures• Strengthen customer-specific marketing inparallel with product-specific management•F our headquarters: Sales, R&D, Production
and Administration•O ptimal allocation of management resources• Performance evaluation system thatrewards contributions•C ontinuing employee happiness-based
management

2030 business composition

Enhance corporate
value by meetingthe expectations of
the four stakeholders
surrounding the Company

2025 asset turnover ratio target

ACTUAL

NEXT

DREAM

Existing businesses

Peripheral businesses

New businesses

1/3

1/3

1/3

In 2030, we aim for ACTUAL (existing),
NEXT (peripheral) and DREAM (new)businesses to each represent one-third of ourbusiness composition, achieving qualitative
enhancements in ACTUAL businesses,
expanding and reinforcing NEXT businesses
and developing and cultivating DREAMbusinesses.

1.0 times(Equivalent to annual net sales)

DKS will maximize the use of total assets
resulting from systematic capital expenditures,
aiming for an asset turnover ratio of 1.0 times,
which is equivalent to annual sales. We will
strengthen customer-specific marketing inparallel with product-specific management.

We will establish a headquarters system forsales, R&D, production and administration,and optimally allocate management
resources. We will continue employee
happiness management with a performance
evaluation system that rewards contributions,
to meet the expectations of the four
stakeholders surrounding the Company andto enhance corporate value.

FELIZ Matrix: Meeting the Expectations of Our Four Stakeholders

F Future
E Environment
L LifeI Innovation
Z Z-Flag/Challenge

Employees

Shareholders

Customers

Society

Create on your own

PBR = ROE × PER

Reciprocal partner

Humans or AI

Distribute according tocontribution

ESG-based management

CtoB logistics

Survival of the fittest

Health firstLong-lived brandHealthcare

100 years of life

Lightning speed

Market capitalization above¥50 billion

New sales models

5G life

Behavioral changes

All-time highest profit

Development-oriented

Era of happiness

DKS REPORT 202015

Overview of the New Medium-Term Management Plan “FELIZ 115”

Action Strategy

1

2

3

Establish ESG-based management targets
in line with five of the SDGs (3, 7, 9, 12, 17);
maintain our position as a top industrial
chemical company.

Increase profits in the electronics,
information, environment and energy fields;
focus management resources on businessdevelopment in the life sciences field.

Transform the marketing strategy significantly
to increase the commercialization rate andshorten development periods.

SDGs/ESG-Based Management Objectives
SDGs (Sustainable Development Goals)

ESG (Environment, Social, Governance)

Solar cell, exhaust gas
business net sales¥10.0 billion

Cooperate with local government
strategic special zones

Promote the active participation of women

Proactively develop naturally
derived raw materials

Appoint female executives▼
Life sciences businessnet sales¥10.0 billion

Create employment
Create value with inspiring/inspired partners

Employ foreigners and people from otherindustries
Number of outside directors

5G business net sales¥10.0 billion

One-third or more of all directors

Focus the allocation of management resources in the electronics, information, environment and energy and life sciences fields
Focus areas
Electronics and information

Surfactants

Environment and energy

Special surfactants• Early return on the Kasumi Plant investment• Business expansion through equipment
operation
Cellulose nanofibers (CNFs)• B usiness expansion through equipment
operation

Amenity Materials

Polyurethane
Materials

Functional polyurethane products• Early return on the Kasumi Plant investment• Business expansion through equipment
operation

Functional
Materials

Radiation-curable resin materials• Early return on the Kasumi Plant investment• Business expansion through equipment
operation

Electronic Device
Materials
Life Sciences

16

DKS REPORT 2020

Life sciences

Synthetic lubricants• Stable profits through integrated equipment• Battery materials• Kyoto Elex
Functional materials• P romote the development of functional foods

Where Have We Come From,
Where Are We Going?

How Should We Manage?

How Can We Be Sustainable?

Business Activities Report

Data Section

Priority Measures Road Map

1
Withdraw from noncontributing
businesses within the first 1–2 fiscal
years.
(Restructure management resources)2

3

Realize early returns on advanced
business investments in the Kasumi Plant
and other areas.

Revise performance evaluation andremuneration systems; establish system
rewarding contributions.

(Enhance earnings power)(Strengthen the management foundation)

Enhance earnings power

Strengthen the management foundation• Project for creating proactive business models
centered on solutions businesses• Project for shortening the productdevelopment period by concentrating productdevelopment• Project for creating profitable patterns andeliminating hidden losses• Project for eliminating work that does not

Seven Projects for Realizing “FELIZ 115”

Restructure management resources• Project for withdrawing fromnoncontributing products• P roject for increasing contributions fromolder plants

Business Restructuring Time Line
April 1, 2020

April 2021

contribute to customers or DKS (work-stylereform)• Project for strengthening appropriate
resource management and revisingevaluation systems

Business Expansion Time Line
April 2022

April 2023

April 2024

March 31, 2025

1 Withdraw from noncontributing businesses
2 Realize returns on advanced business investments in the Kasumi Plant and other areas
3 Accelerate alliances with partner companies and achieve rapid commercialization at the Kasumi Plant and in the life sciences businesses
4 Reorganize the corporate structure with an emphasis on customer orientation; shift to Company-wide organizational sales activities
5 Revise performance evaluation and remuneration systems to a system that evaluates contributions
6 Establish SDGs/ESG-based management objectives; contribute to society through business activities; aim to enhance corporate value
7 Continue employee happiness-based management; conduct activities to maintain the “Health and Productivity Brand”; create comfortable working environments

Risks and countermeasures in planning
1

Soaring raw material prices due to changes in geopolitical dynamics and other areas

Focus efforts on passing on increases to selling prices

2

Rising interest rates

Completed funding procurement at fixed interest rates

3

Economic depression due to COVID-19

Strengthen cash conversion cycle management

4

Intensifying price competition in the 5G market

Early return on invested capital and cost reductions

5

Postponed development of NEXT/DREAM upcoming new businesses

Strengthen the R&D structure

DKS REPORT 202017

Financial/Capital Strategies and Total Shareholder Return

Financial Position
As of the end of the fiscal year ended March 31, 2020, theCompany had total assets of ¥81.7 billion (up 7.7% year on year),
net assets of ¥34.2 billion (up 2.0% year on year), an equity ratioof 38.8% (down 2.5 percentage points year on year) and interestbearing debt of ¥29.9 billion (up 27.6% year on year); the net D/E
ratio increased from 0.48 in the previous fiscal year to 0.57. Cashflows provided by operating activities increased 16.4% comparedwith the previous fiscal year to ¥3.7 billion, capital investments

increased to ¥6.1 billion from ¥5.8 billion the previous fiscal year
and cash flows used in investing activities reached ¥5.8 billion.
Free cash flows were negative at minus ¥2.0 billion. Net cash
provided by financing activities totaled ¥4.9 billion, including ¥1.0
billion used in dividend payments (due to interim dividends with arecord date of September 30, 2019) and ¥5.8 billion provided by
the issuance of corporate bonds.

Financial Analysis of the Past 10 Years
The performance and financial results of the DKS Group for the period from April 2009 to March 2020 are analyzed as follows. (Cumulative
totals are the totals over the 10-year period from April 2010.)
April 2009–March 2010

April 2019–March 2020

Net Sales¥44.3 billion¥61.4 billion

Operating Income¥1.57 billion¥4.15 billion

Down 4.3% YoY, failing to reach the five-year target

3.6%

6.8%

Failed to reach the medium-term management plantarget (9.0%)¥0.5 billion¥2.01 billion

3.6%

6.4%

Total Assets¥44.2 billion¥81.7 billion

Increased 84.5%

Net Assets¥15.3 billion¥34.2 billion

Increased approximately 2.2 times due to internal
reserves and two capital increases

Interest-Bearing Debt

¥14.4 billion¥29.9 billion

Increased ¥15.4 billion due to aggressive capital
investment

0.75

0.57

Significantly improved due to an increase in net
assetsOperating Margin
Profit Attributable to
Owners of Parent
ROE

Net D/E Ratio

18

Assessment/Comments

Increased 38.6% in 10 years

Profits declined for the second consecutive fiscal year
Failed to reach the target (10%), declined 2.0
percentage points YoY

Total for 10 years from April 2010

Assessment/Comments

Profit Attributable to Owners of Parent
Cumulative Total¥18.3 billion

Recorded total profits of ¥12.6 billion over the past
five years

Capital Investment Cumulative Total¥40.0 billion

Depreciation Cost Cumulative Total¥24.2 billion

Invested aggressively for growth since the fiscal year
from April 2014 onward, investing ¥15.8 billion morethan the amount of depreciation

R&D Expenses Cumulative Total¥26.0 billion

Continued investment in technology

FCF Cumulative Total¥(1.2) billion

FCF over the past 10 years decreased slightly

Dividend Cumulative Total¥5.1 billion

The dividend per share increased to ¥70 from ¥25 adecade ago (after considering stock splits)

Capital Increase¥4.4 billion

Implemented public offerings on two occasions(March 2011 and December 2014)

Share Buybacks¥1.0 billion

Determined as a shareholder return policy in January
2017

DKS REPORT 2020

Where Have We Come From,
Where Are We Going?

How Should We Manage?

How Can We Be Sustainable?

Business Activities Report

Data Section

Total Shareholder Return for the Past 10 Years
Total shareholder return (TSR) by dividend and stock price was asfollows. Over the past year, the stock price recovered from stock
price adjustments in the previous fiscal year. The medium- tolong-term TSR over the past three years was 22.9%, whereas theannual TSR rate was 13.9% over the past five years and 12.3%
over the past 10 years, exceeding the TOPIX and TOPIX Chemicals
dividend index returns. These levels exceed the shareholder capital
cost anticipated by the Company.
DKS(Index)TOPIX

TOPIX Chemicals Index

500

400

300

200

100

0

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

(FY)

Note: Share price trends including dividends (closing price data for March 31, 2010 = 100)

Future Financial Strategies/Shareholder Returns
1 year

3 years

5 years

10 years

Cumulative total

Annual rate

Cumulative total

Annual rate

Cumulative total

Annual rate

DKS

9.8%

85.5%

22.9%

92.0%

13.9%

219.9%

12.3%

TOPIX

(9.5%)(0.4%)(0.1%)

1.8%

0.4%

78.4%

6.0%

TOPIX Chemicals Index(7.1%)

10.3%

3.3%

27.4%

5.0%

141.8%

9.2%

Note: The annualized conversions are geometric averages of cumulative returns.

Future Financial Strategies/Shareholder Returns
Under the REACT1000 five-year management plan, we set“maintaining and enhancing an appropriate ROE level” as ourmanagement policy, promising shareholders a change fromcomparative value stock to growth stock, which the Company
believes it has adequately achieved. Going forward, while
supporting medium- to long-term growth, we will continue
implementing measures to optimize the cost of equity and plan
to execute a financial strategy supporting the realization of evenhigher TSR. In our new medium-term management plan “FELIZ
115,” which began this fiscal year, we will maximize the useof total assets resulting from systematic capital investments,
targeting an asset turnover rate of 1.0, which is comparable toannual net sales. In addition, we will improve or withdraw from
unprofitable businesses in the first and second fiscal years of
the plan, and from the third fiscal year onward, we will strive

to improve ROIC by increasing the return on invested capital.
In terms of financial strategy, DKS aims to 1) realize an ROE of
10.0% or higher in the fiscal year ending March 31, 2025, 2)
stably increase the P/B ratio by 1.0 times or more by maintaining
ROE above the cost of shareholders’ equity in each fiscal yearof the plan, 3) ensure financial discipline while reducing the costof capital to a reasonable level using moderate leverage and4) achieve sustainable growth in addition to stable dividends.
We will consider optimizing the cost of capital through flexible
shareholder return measures that also include share buybacks.
Moreover, in terms of M&A as part of growth investment, we will
select investment projects for which ROIC exceeds the cost ofcapital and aim for a strategy emphasizing PMI (post-merger
integration) that contributes to greater corporate value over the
medium to long term.

DKS REPORT 202019

Financial and Nonfinancial 11-Year Summary

Financial Data (Millions of yen)

3/20103/20113/20123/2013

Net Sales

44,352

51,24556,24951,843

Surfactants

14,373

15,131

18,77919,486

Amenity Materials

7,397

7,046

7,220

6,825

Polyurethane Materials

7,161

8,761

8,634

8,466

Functional Materials

9,467

11,441

10,2289,666Electronic Device Materials

5,950

8,863

11,386

7,398

6,692
(15.1)

8,748(17.1)

8,296(14.7)

7,323(14.1)

1,575
1,239
503
873
1,733
1,863
3,061
(1,661)

2,732
2,439
1,155
1,111
1,836
2,010
2,502
(616)

2,033
1,742
165
2,312
2,252
2,273
2,309
(2,869)

1,754
1,544
797
3,664
2,003
2,340
2,477
(3,548)Life Sciences

Overseas Sales(relative to net sales ratio %)Operating Income
Ordinary Income
Profit Attributable to Owners of Parent
Capital Expenditures
Depreciation and Amortization
R&D Expenses
Net Cash Provided by (Used in) Operating Activities
Net Cash Provided by (Used in) Investing Activities
Cash Dividends Paid

195

298

298

298

Amount of Treasury Shares Acquired
Net Assets
Total Assets
Interesting-Bearing Debt1

0
15,31644,291
14,4990
16,49847,741
14,0980
16,94951,357
15,700018,20055,416
18,712

Per-Share Data (yen)2
Net Profit
Net Assets
Cash Dividend

64.45
1,839
25.00

146.90
1,839
35.00

19.35
1,889
35.00

93.40
2,022
35.00

Major Indices
R&D Expenses to Sales Ratio (%)
Operating Margin (%)
Return on Equity (%)
Equity Ratio (%)
Net D/E Ratio (times)
Dividend Payout Ratio (%)
Total Return Ratio (%)
Year-End Stock Price (yen)2
PER (times)
PBR (times)
Dividend Yield (%)

4.2
3.6
3.6
32.4
0.75
38.8
38.8
1,330
20.6
0.7
1.9

3.9
5.3
7.7
32.9
0.54
23.8
25.9
1,305
8.9
0.7
2.7

4.0
3.6
1.0
31.4
0.60
180.8
180.9
1,230
63.6
0.7
2.9

4.5
3.4
4.8
31.1
0.66
37.5
37.5
1,250
13.4
0.6
2.8

910
582
240
14.6
8
4
71.4
−
9,912
37.4

861
554
221
14.8
6
6
69.0
−
15,774
57.5

995
533
173
14.8
10
7
66.7
−
13,395
49.8

979
526
172
14.8
10
11
62.7
636 (237)
14,421
51.9

Nonfinancial Data
No. of Employees (consolidated)
No. of Employees (non-consolidated)
No. of Employees Outside Japan
Ratio of Female Employees to Total Employees (non-consolidated)
No. of Employees Who Utilized the Child-Care Leave System (non-consolidated)
No. of Employees Who Utilized the Child-Care Part-Time Work System (non-consolidated)
Annual Paid Leave Rate (non-consolidated + assigned employees) (%)
No. of Patents Held (overseas)3
Generated Waste Amount (tons)4
CO2 Emissions (consolidated) (thousands of tons)4, 5

1. Lease obligations not included in interest-bearing debt.
2. Per share information and period-end share price data have been retroactively adjusted to reflect the consolidation of five shares into one share implemented on October 1, 2018.
3. The collation method was amended to a legal effective date basis from fiscal 2016.
4. Data are presented on a non-consolidated basis up to fiscal 2009 and on a consolidated basis including Yokkaichi Chemical from fiscal 2010.
5. The carbon dioxide emission calculation method was revised in fiscal 2018 and applied retroactively from fiscal 2016.

20

DKS REPORT 2020

Where Have We Come From,
Where Are We Going?

How Should We Manage?

How Can We Be Sustainable?

Business Activities Report

Data Section

3/20143/20153/20163/20173/20183/201954,61455,59752,782

52,25456,95559,5743/202061,456

20,35921,573

20,77919,793

21,416

21,957

18,970

7,141

6,856

7,208

6,986

7,502

8,151

7,994

9,564

9,442

8,934

9,093

9,115

9,026

8,470

10,68011,216

11,25912,517

14,070

16,23920,848

6,868

6,508

4,600

3,862

4,850

4,199

4,744

8,103
(14.8)

8,743(15.7)

9,131(17.3)

8,794(16.8)

9,929(17.4)

10,139(17.0)

10,350(16.8)

2,477
2,374
1,336
1,512
2,104
2,506
3,553
(1,793)

2,944
2,717
1,782
3,948
2,153
2,439
2,322
(3,229)

3,439
3,200
2,198
8,485
2,087
2,380
4,197
(7,687)

3,944
3,773
2,489
3,786
2,335
2,393
3,750
(3,336)

5,053
4,725
3,351
2,467
2,473
2,307
5,017
(1,130)

4,341
4,175
2,581
5,802
2,555
2,765
3,236
(5,694)

4,154
3,524
2,014
6,138
2,724
2,748
3,766
(5,842)

298

474

528

608

710

711

711

0
19,886
57,57020,680026,15664,42021,322026,74566,05723,2281,000
28,044
69,046
24,594

1
31,96073,97623,863033,59175,906
23,466

034,26581,73629,946

156.602,200
35.00

193.452,362
45.00

208.202,425
50.00

237.002,650
60.00

330.302,971
70.00

254.11
3,083
70.00

198.17
3,115
70.00

4.6
4.5
7.4
32.6
0.58
22.4
22.4
1,610
10.3
0.7
2.2

4.4
5.3
8.2
38.7
0.36
23.3
26.7
1,935
10.0
0.8
2.3

4.5
6.5
8.7
38.8
0.52
24.0
24.1
1,640
7.9
0.7
3.1

4.6
7.5
9.5
38.9
0.54
25.3
64.6
2,135
9.0
0.8
2.8

4.1
8.9
11.8
40.8
0.39
21.2
21.2
4,375
13.2
1.5
1.6

4.6
7.3
8.4
41.3
0.48
27.5
27.6
3,480
13.7
1.1
2.0

4.5
6.8
6.4
38.8
0.57
35.3
35.4
3,750
18.9
1.2
1.9

969
514
170
16.0
8
8
63.7
660 (245)
12,724
52.0

944
508
163
15.9
11
9
61.0
722 (299)
13,876
51.3

982
495
219
17.0
9
10
64.5
822 (344)
13,191
50.9

967
486
199
17.5
6
13
62.4
855 (378)
17,364
51.7

976
497
213
17.5
12
10
67.4
924 (427)
20,779
53.5

985
512
170
17.8
7
10
68.5
961 (453)
21,658
52.4

1,032
531
177
18.8
3
12
73.2
1,012 (479)
19,401
51.8

427

DKS REPORT 202021

Financial and Nonfinancial Highlights

Financial Highlights (Consolidated)
Net Sales/Overseas Sales Ratio

Operating Income/Operating Margin(Millions of yen)(%)

(Millions of yen)

80,000

60

5,000

5,053

(%)
25

4,341

60,00052,78261,45659,57456,955

3,944
4,000
45

52,254

4,154
20

3,439

15

3,000
40,000

30

16.8

17.3

17.4

2,000

17.0

20,0003/20160

3/20173/20183/201916.8

153/20200

Dividend per Share/Dividend on Equity (DOE)

(%)

80

4.0

70

60
60

6.8

10

5

0

3/20163/20173/20183/20193/2020Operating income was ¥4,154 million (down 4.3% year on year) in the fiscal year ended March 31, 2020, due
to operating expenses such as the amortization of goodwill.
The operating margin was 6.8% (down 0.5 percentage point year on year).

(Yen)

70

7.3

1,000

Due to the remarkable growth of radiation-curable monomers/oligomers for IT and electronic applications in
the functional materials segment, net sales for the fiscal year ended March 31, 2020, amounted to ¥61,456
million (up 3.2% year on year).
The overseas sales ratio was 16.8% (down 0.2 percentage point year on year).

70

8.9

7.5

6.5

Interest-Bearing Debt

29,946(Millions of yen)
30,00024,00023,22824,59423,863

23,4663/20183/2019

3.0

50

2.5

2.4

2.3

2.1

18,000

2.3

40

2.0
12,000

20

1.0
6,000

3/20160

3/20173/20183/20203/20190

The annual dividend per share for the fiscal year ended March 31, 2020, was set at ¥70 in consideration offinancial conditions, future business development and enhanced shareholder returns.

03/20163/20173/2020Interest-bearing debt as of March 31, 2020, increased by ¥6,479 million to ¥29,946 million due to theissuance of privately placed bonds for the purpose of raising working capital and equipment funds.

Nonfinancial Highlights (Group/Non-consolidated)
Number of Patents Held (Group)

Generated Waste Amount (Group)

Outside Japan(Patents)

Japan

1,200

(t)

(1,000 t)

25,000427
900

CO2 Emissions (Group)

344

453

80

479

20,77920,000378

15,00021,65871.3

19,401

17,364

60

51.7

53.5

52.4

51.8

13,191
40

600

478

477

497

508

533

10,000

20

300
5,000

0

3/2016 3/2017 3/2018 3/2019 3/2020

The number of patents held amounted to 1,012 (an increaseof 51 patents year on year). In consideration of future businessdevelopment, we are actively promoting the application andacquisition of intellectual property rights based on the results ofresearch and development.

22

DKS REPORT 2020

0

3/2016 3/2017 3/2018 3/2019 3/2020

The amount of waste generated was 19,401 tons (down 2,257 tons
year on year).

03/2005 3/2017 3/2018 3/2019 3/2020

CO2 emissions amounted to 51,800 tons (down 1,100 tons year onyear). DKS will continue to work on improving energy efficiency witha focus on global warming prevention.

0Where Have We Come From,
Where Are We Going?

How Should We Manage?

How Can We Be Sustainable?

Business Activities Report

Data Section

ROE Analysis Based on the DuPont Model
ROE

Net Profit Margin
11.8

(%)

5.9

(%)

12.0

6.0

4.8

9.5
10.0

8.7

8.4

4.3

4.2

8.0

3.3

4.0

6.4

6.0

2.0

4.0

2.0

3/20160

3/20173/20183/20203/20193/20160

3/20173/20183/20193/2020

ROE declined to 6.4% from the previous fiscal year. ROE was affected by a lower sales profit ratio, stemmingfrom lower profits, and a decrease in the asset turnover ratio, as an increase in interest-bearing debt pushed
up total assets.

Asset Turnover Ratio

Financial Leverage

0.9

3.0

(Times)(Times)

0.81

2.58

0.80

0.79

0.78

0.77

0.8

2.57

2.51

2.50

2.44

2.5

0.7

2.0

3/20160

3/20173/2018

Number of Employees to Utilize
the Child-Care Leave/Child-CarePart-Time Work Systems (Non-consolidated)
Male
FemaleChild-Care Part-Time Work System

Child-Care Leave System(Persons)

3/20203/2019151303/20163/20173/20183/2019Ratio of Female Employees (Non-consolidated)

Annual Paid Leave Rate

(%)

(%)

20.0

80.0

3/2020(Non-consolidated + Assigned Employees)

12
18.8

12

10

10

19.0

10

73.2

75.0

68.5
9

17.8

7

7
5

6

18.0

1
0

62.4

17.0
3

2

64.5

17.5
65.0

4
3

17.5

5

67.4

70.0

2

17.0
60.0

1

3/2016 3/2017 3/2018 3/2019 3/2020

The number of employees using the child-care leave system wasthree (down from four in the previous year).
The number of employees using the child-care part-time work
system was 12 (an increase of two from the previous year). Of these
12 employees, two were men and 10 were women.

03/2016 3/2017 3/2018 3/2019 3/2020

The ratio of female employees to total employees was 18.8% (up 1.0
percentage point year on year).
We will continue to conduct measures aimed at promoting women’s
participation and advancement.

03/2016 3/2017 3/2018 3/2019 3/2020

The percentage of paid leave used was 73.2% (up 4.7 percentage
points year on year).

DKS REPORT 2020

23

ESG Basic Policy

Basic Policies
We are confronted with a broad range of issues, from environmental problems such as global warming, resource
depletion and a crisis of biodiversity to an increasing population that causes food resource and energy problems amid
rapid globalization and an increasingly information-based society. We look to take on these challenges and to protect
our environment and way of life while improving safety and level of comfort. To do these things, we pursue “Chemistry
provides a solution” and contribute to the establishment of a sustainable society.

Important Issue Identification Process
At DKS, we are formulating “materiality,” tackling issues from a long-term perspective. In the formulation of materiality,
we have referenced the UN’s Sustainable Development Goals (SDGs)*, ISO 26000 and other global guidelines, given theimportant demands that international society places on DKS as we work to advance business globally.
*At the UN Sustainable Development Summit held in September 2015, there were 17 SDGs adopted to find solutions to issues the world is facing.

Step 2

Step 3

Step 4

Identify the importance forstakeholders

Draw a materiality map

Identify the materiality

Important Issue Identification Aims
Issues for society• Environmental issues: Climate change,energy depletion, biodiversity, etc.
• Social issues: Changes in social
structure due to population growth,
increased security risks due totechnological advances and the adventof the information society, public health,food crises, elimination of disparities,
etc.

Importance for stakeholders

Step 1
Identify the importance for
the Company

Importance for medium- tolong-term value creation

2 Research and Development
3 Human Resource Management

High

4 Consideration for the Environment
Importance for DKS

Dialogue channel

Main KPIs (results indicator)

Most important capitalfor realizing DKS
growthDKSCOM (in-house newsletter), festivals,
enhanced employee education at every level,
health management (walking events, non-smoking
guidance), mental health consultations, etc.

Employee satisfaction, health surveys (health examination
consultation rate), diverse human resources activities(foreigners, women and mid-career recruitment), numberof occupational accidents, smoking rate, annual leaveacquisition rate, female manager ratio

Management
evaluations supporting
DKS growth

IR activities, stakeholder engagement, shareholder
roundtables, Company newsletter (TACT),
integrated report, shareholder newslettersand convocation notices, implementation ofshareholder benefits

TSR, stock price valuation, number of dialogues, numberof briefing sessions for investors, exercise of voting rights,
ESG valuation, ROE

Partners as source ofvalue creation

Promotion of Company-wide dialogue stance,
Zenkoku Ichi-Ko Kai (association of DKS agencies),
top diplomacy for inspiring/inspired partners,
industry-government-academia collaborations

Number of inspiring/inspired partners, joint development
projects, R&D expense ratio, patent acquisitions

The basis for promoting
ESG management

Dissemination of various information, employees’
outside activities

CO2 emissions, energy consumption, number ofenvironmentally friendly products, interaction with local
communities, development of life science products,
number of focus products

Employees

Shareholders

Customers

Society24

DKS REPORT 2020

1 Quality and Safety Management

5 Organizational Resilience

Corporate Philosophy and Management Policy• Corporate mission stated in thefounding spirit and the Company Credo• Happiness management

Stakeholders

DKS Important Issues

Extremely
highImportant issues
1

2

3

4

5

Where Have We Come From,
Where Are We Going?

How Should We Manage?

How Can We Be Sustainable?

Business Activities Report

Data Section

Please refer to our website fordetails on the promotion ofoccupational safety and health.

Relationship between the Five Important DKS Issues and Global Guidelines
Important issues

1

Relation to global guidelines

Activity details

SDGs

ISO 26000

Providing highly safe products

Consumer issues

Quality and Safety
Management

Ensuring quality assurance and securing product safety

Consumer issues>> P.28

Promoting occupational safety and health >> To website

Labor practices

2

Responding to potential and apparent needs with Uni-Top
strategy promotion

Consumer issues

Research andDevelopment

Developing products that contribute to the environment

Environment

Promoting an intellectual property strategy

Fair operating
practices

Securing and nurturing outstanding human resources

Labor practices

Human Resource
Management

Promoting diversity

Human rights>> P.32

Health-based company management initiatives

Labor practices

Environmental conservation initiatives

Environment

Preventing global warming (saving energy)

Environment

Managing chemical substances

Environment

Reducing emissions of environmental impact substances

Environment

Strengthening the corporate governance system

Organizational
governance

Establishing a compliance structure

Fair operating
practicesStrengthening risk management

Organizational
governance>> P.303

4Consideration for
the Environment>> P.34

5
Organizational
Resilience>> P.38

SDGs Targeted by DKS

Sustainable Development Goals (SDGs) stipulated by the United Nations

DKS REPORT 2020

25

Risks and Opportunities

Identifying Significant Risks at DKS
Based on the results of such activities, in producing the DKS
Report 2020 we identified risks from the viewpoint of informationthat is of great importance to the Company’s stakeholders, namely
in terms of materiality (significance). The procedure for extractingthat information is set out below.

Confirmation of risks recognized in the organizational risk management system

2

Identification of risks that should be recognized at the six business segments

3

Matrix analysis based on the importance of each risk (the degree of impact on
stakeholders) and the probability of risk becoming evident (possibility of negative
impact due to occurrence/disclosure)

4

Extraction of significant risks from the viewpoint of materiality in integrated reporting

5

Analysis of impact and response to those risks when they occur

Low

1

High

Prioritize the ①—⑫ significant risks on the right

Identify risks

Probability of risk becoming evident

In terms of risk management, the Company established a Risk
Management Control Committee as a systematic response andformulates activity plans, reviews activities, identifies risks andexamines countermeasures. (Please refer to page 41.)

Low

Risk significanceHigh(impact on stakeholders)

Risks That Lead to Opportunities
Although an event could damage the broad value of a company,
risk might also lead to opportunities. DKS considers risks in asegregated manner: the avoidance of risk and the formulationof strategies in cases where corporate value can be increased

by responding well to risk. The Company would like to practicemanagement that can respond appropriately to risks to achievesustainable growth.

Example of Potential Risk: Naphtha Price Fluctuation
The domestic price of naphtha, the main raw material for our
products, rose to more than ¥70,000 per kiloliter in the fourth
quarter of 2014. It then fell to around ¥31,000 in mid-2016 andwas in the low ¥40,000 range in 2019. In the second quarter of
2020, it fell to around the mid-¥20,000 range. Measures against
naphtha price fluctuations might include risk hedging using
derivatives, including futures and foreign exchange rates, but they
are only partially effective.
Increases and decreases in costs due to such raw material
price fluctuations could lead to pressure on profits, the burden of

price negotiations and even the loss of customers. On the other
hand, the contact points with customers during price negotiations,and the gathering of detailed information, give rise to opportunities
to acquire new orders by replacement with new materials. If
we can present more advantageous transaction conditions forcustomers compared to other companies in the same industry, it
could lead to an increase in market share. This is one example of
how we can seize risk-associated opportunities.

Overview of Significant Risks
The table on the opposite page summarizes the significant risks (12 items) to which DKS is exposed and outlines the impact of andresponses to those risks as well as the accompanying opportunities created by them.

26

DKS REPORT 2020

Where Have We Come From,
Where Are We Going?

Significant risks

How Should We Manage?

How Can We Be Sustainable?

Impacts from risks
Profits come under pressure from cost fluctuations.

① Fluctuation in raw material
prices, centering on
naphtha② No raw materials

production in the
manufacturing sector③ Large number ofcustomers④ Product composition

consists of a large varietyof small-lot products⑤ Many single material sales⑥ Increasing demand forinexpensive products
associated with growth inemerging nations⑦ Improvement intechnological level andproductivity in neighboring
countries

Business Activities Report

Data Section

Responses to risks and opportunities

Time taken for price negotiation activities to maintain the profit margin.

Increased contacts with customers through price negotiation activities
will increase opportunities for replacement with new materials andproposals for new themes.

Decline in market share, lost ground due to price negotiations (transfer toanother company in the same industry).

If more price competitive than other companies in the same industry in asimilar environment, market share could increase.

Inability to control prices depending on raw material prices.

There is no need for fixed costs, giving rise to predominance at times of
economic downturns.

Business continuity plan (BCP) measures become necessary.

Costs can be reduced by searching for inexpensive raw materials.

Time taken and costs incurred in customers’ response.

Information on each industry is easily obtainable due to having
customers in every field.
Revised in “FELIZ 115.”

Cost of small-lot product processing becomes expensive, costcompetitiveness declines.
Time required for research, sales and responses to problems due to avariety of products.

Possessing a lineup of products that can be used in each field enables avariety of solutions to be proposed.
→ Product composition revised under “FELIZ 115.”

Sales of single surfactant materials are competitively inferior to thoseof overseas competitors and major manufacturers specializing in bulk
manufacturing.

Facilitate improved competitiveness by promoting the Uni-Top strategy,
which does not pursue volume.

Decrease in profit margin due to the sales composition ratio being
weighted toward inexpensive products.

Promote a differentiation strategy through solution proposals, cost
reductions, Japanese quality and customization.

Concerns about losing competitiveness in domestic and overseas markets.

Cooperation and alliances with overseas companies.

Concerns about patent infringements overseas.

Enhancement of a patent strategy.

Required to maintain compliance in accordance with legal revisions to
the Act on the Evaluation of Chemical Substances and Regulation of Their
Manufacture, Poisonous and Deleterious Substances Control Act, etc.

⑧ Strengthened laws andregulations

An associated sequence of work takes time starting with contacting
customers supplied, proposals of alternative products, performance
evaluations, 4M (man, machine, material and manufacturing method)changes, revision of standards, etc.

Should the same thing happen with another company’s product, it canbe regarded as an opportunity to replace it with a DKS product.

Cost, time and labor involved in replacement work due to a large numberof varieties.

⑨ Stricter quality

controls>> P.41
Risk Management

In fields such as energy-related, pharmaceuticals and foods, a higher
level of quality control is required than with industrial chemicals, andknow-how is necessary.

Effective utilization of good manufacturing practices such as Ikeda
Yakusou being GMP-certified in the life sciences field.
Utilization of the Kibi Plant as a fine (high-quality) chemical facility
specializing in the life sciences and energy-related fields.
Formulate and implement product liability (PL) prevention management rules.

Some facilities used for many years are becoming obsolete.

⑩ Aging facilities/equipment

As they would not bring about enough profit to meet new capital
investment, products for which the Company is uncertain as to theirbusiness continuity would be manufactured at those aging (and lessefficient) facilities.
The scale of facilities is not matching the production volume due to a
decline in sales. Decreased efficiency and concern for quality problems
due to small-lot production.

An opportunity to make business continuity decisions, enabling the
beginning of a portfolio review.
Consider structural reforms through digital transformation (DX).
Promote production system enhancements and improved production
efficiency by making the Kasumi Plant a mother plant.

Rise of product unit cost due to production cost leads to lowering ofprice competitiveness.

⑪ IT security>> P.41
Risk Management⑫ Impact on economic

activity due to the spreadof an infectious disease

Leak of confidential information due to a computer virus or an internalmanagement error.

Strengthen compliance through employee training and appropriate
measures against unauthorized access.

Impact on production and shipments caused by employee infections.

Promote work-style revisions through working from home and telework.

Impact on business performance from the delay or suspension of raw
materials procurement, production or the provision of products to users,caused by supply chain disruptions.

Revise the supply chain and strengthen BCP measures.

DKS REPORT 202027

Five Important Issues
Employees

Important Issue 1

Customers

Society

Quality and Safety Management

Improving the quality of products and services offered by corporations will lead to meeting the needs of customers and society, earning
trust and enhancing the value provided to society and related capital. To this end, DKS views quality from four perspectives: design anddevelopment, manufacturing, sales and customer service. We strive to improve quality in collaboration with customers and suppliers.

Quality Assurance/Quality Policy
As a chemical partner conveying the essence of high functionality for the future, wewill provide customers with safer, higher-quality products that maximally contributeto the development of their business. To realize this, we engage in quality control
using the PDCA cycle based on our fundamental quality assurance and quality
policy in an effort to improve quality and customer satisfaction.
Fundamental Quality Assurance
1. We establish quality-related management standards for each department thatcover the entire process, from product planning to customer service throughdesign/development, manufacturing and sales. Through the appropriate
operation of such standards, we strive to provide high-quality products thatare safe and reliable, maintain and improve product quality and provide quality
assurance for our customers.
2. To effectively bring about quality assurance functions throughout the entire
Company, we establish and maintain a quality management system.
3. All our employees must observe this basic concept of quality assurance and carryout tasks in accordance with the Quality Assurance Management Regulations.

"DKS Quality Policy"

Quality Control System
As a chemicals manufacturer, we are committed to the maintenanceand improvement of product quality using ISO 9001 as a basic tool in
our quality management system. We execute PDCA cycles to provide
products and services that comply with customer requirements as wellas with laws and regulations. We work on day-to-day activities such as
QC System Diagram

production control, corrective measures and preventive actions relative tononconformities (such as complaints/abnormalities), audits, change control
and training and devise improvements by conducting continuous reviewsof the management system. While aiming to improve customer satisfaction,
we are promoting the further integration of ISO and business activities.

Management Committee
Sales Headquarters

RC Promotion Conference

R&D Headquarters

Quality Assurance (PL) Meeting
Production Headquarters

PlantsCustomer Support Department

Procurement Department
Raw materials procurement

Sales Departments

R&D Departments

Delivery Group

Order/Shipping

Quality Assurance Department
Quality management (supervision)
Regulatory management
RC promotion activities

Production Departments

Product Quality Review Meeting
Customers

QMS Committee

Quality Control Sections
Quality inspection(raw materials, products)
Certificate of analysis issuance

Yokkaichi Branch
Ohgata Branch
Shiga Branch

Quality Assurance
We view QA as fundamental to our business, and as we keep our Quality
Policy in mind, we continue to promote QA activities from productdesign/development, manufacturing and sales to customer service
processes through the relevant departments of the Sales Headquarters,
R&D Headquarters and Production Headquarters. With the Chairman
CEO as the Chief Quality Assurance Officer, environment, safety andquality assurance staff raise quality assurance issues, have the authority
to formulate and recommend solutions, and have overall responsibility
for the quality management system. Led by the QA Department General
Manager, the QA Department is tasked with taking the lead role insupervising quality assurance and in overall coordination between our
departments, while attempting to establish and strengthen the QA
system. In line with diversifying customer demands and heightened
requirements for product quality from a social perspective, we remaincommitted to working to ensure product safety and quality, as well astrying to prevent quality-related issues before they arise.
28

DKS REPORT 2020

QA System Diagram
Chairman CEO
Management Committee
Director i/c Environment, Safety & QA
Quality Assurance (PL) Meetings
QMS Committee

Sales Headquarters
Executive General Manager

R&D Headquarters
Executive General Manager

Customer Support Department
General Manager
General Managers of Sales
Departments
Procurement Department General
Manager

Corporate R&D Department General
ManagerR&D Department General Manager
Elexcel R&D Department General
Manager
Life Sciences Supervisory Department
General Manager

Production Headquarters
Executive General Manager
Yokkaichi Branch
General Manager
Ohgata Branch
General Manager
Shiga Branch General
Manager

Quality Assurance Department
General Manager
Managers of Quality Control
Sections at the Yokkaichi,
Ohgata and Shiga Branches

Where Have We Come From,
Where Are We Going?

How Should We Manage?

How Can We Be Sustainable?

Business Activities Report

Data Section

Product Safety (chemical substance management from design development)
We have in place a product development system based on our environmental and safety philosophy, which is centered on “contributing to thesustainable development and realization of happy societies by considering human health, safety and environmental preservation throughout the life
cycle of each product, from development to scrapping.” Ensuring compliance with laws and regulations related to chemical substances in Japanand overseas, we formulate chemical substance management rules, conduct the appropriate management of chemical substances, and undertake
design and development that as far as possible considers the environmental impact. We are also promoting the building of a system that enables
the appropriate relaying of information on the chemical substances contained in our products and information on applicable laws and regulations
throughout our supply chains.

Product Safety Mechanism
Customers & Local Communities
Search & Investigation

Design & Development

Research & Preproduction

Commercial Production(Product Sales)

Process Review

Process Safety and Disaster Prevention

Required Quality

Planning• Investigation of technological information• Investigation of laws and regulations

Securing of Product Safety

Product Design• Realization of quality• Safety confirmation• Environmental impact assessment• Investigation of conformity with a pplicablelaws and regulations• Investigation of raw materials

Commercial Production Review

Stable Supply

Occupational/Process Safety & Disaster Prevention

Technical Service• Production technology review• Product evaluation (safety/packaging)• Compliance with applicable laws a ndregulations• Environmental impact assessment• Securing of raw materials• Preparation of safety data sheets (SDSs) andtechnical documents• Quality control• Response to improvement requests• Provision of product information• Regulatory compliance• Environmental conservation• Securing of distribution safety

Compliance with Chemical Substance Laws and Regulations
With the goal of obtaining the latest information and enacting
management measures to ensure compliance, we continue to monitor
trends in not only domestic laws such as the Act on the Evaluationof Chemical Substances and Regulation of Their Manufacture, etc.,
the Industrial Safety and Health Law, the Food Hygiene Law, and the
Poisonous and Deleterious Substances Control Law but also the Export

Trade Control Order in regard to products for export, and other export
regulations, including those dealing with conflict minerals and rules
regarding the registration of chemical substances. We also focus on
the sharing of information by using groupware to transmit outlines ofrevisions to laws and regulations.

Provision of Product and Technical Information
Our products are utilized in a variety of industrial fields, and we provide
product and technical information tailored to the characteristics of eachproduct and service. We always respond to requests and inquiries fromour customers quickly, adequately and in good faith. We also provide
information on hazardous materials to ensure safe handling, includingthat relative to product properties, applicable laws and regulations,transportation, handling methods and emergency measures by means ofsafety data sheets (SDSs). We provide information using chemSHERPA,
an information transfer scheme for chemicals contained within products
throughout the supply chain.

We also promote product labeling and issue an SDS related tocompliance with the GHS* and with local regulations for exports to theUnited States, Europe and Asia. We continuously update our SDSs andlabeling to remain in compliance with the revised Act on the Evaluationof Chemical Substances and Regulation of Their Manufacture, etc.,
and the Industrial Safety and Health Law, as well as the Poisonous andDeleterious Substances Control Law. When introducing our products,
we not only focus on close communication with our customers throughdaily business meetings but also disseminate information throughbrochures and technical documents.
*Globally Harmonized System of Classification and Labeling of Chemicals

Efforts to Reduce Complaints/Nonconforming Products
Because we position quality-related nonconformity (complaints/deviation)and our response to that as an important issue for securing quality,
we check any appearance of nonconformity, determine the cause andverify the corrective action and its effectiveness to prevent reoccurrence.
Details of complaints and anomalies are centrally managed bygroupware to share information and are horizontally deployed Companywide to prevent similar nonconformities from occurring. In addition to

our efforts aimed at preventing the reoccurrence of nonconformity, we
recognize the importance of responding to our customers with speed
and appropriate measures whenever such an event occurs. In the years
to come, we will continue to strive to improve customer satisfaction byfocusing on being imaginative and creative while promoting ongoing
efforts to reduce nonconformity and prevent any recurrence should an
incident arise.
DKS REPORT 202029

Five Important Issues
Employees

Important Issue 2

Customers

Society

Research and Development

Technology is important intellectual capital for DKS, an important foundation supporting management strategies for sustainable growth. In
terms of future business development, we are actively promoting applications for and the acquisition of intellectual property rights based on
the results of research and development in pursuit of the concept “Chemistry provides a solution.”

DKS’s Foundation That Underpins Strategies
As a leading industrial chemical manufacturer, it is our management philosophy to continue to be a prominent company that responds to the expanding
chemical requirements of industries. To realize that philosophy, we are focusing on the research and development of high-value-added products, witha particular focus on products with IT and electronics-related applications, and the development of new applications for battery materials and cellulose
nanofibers. With innovative wisdom and technologies, we are pursuing “Chemistry provides a solution” in every industry and developing products thatcan contribute to a sustainable society.

R&D Basic Policy and Promotion System
In fiscal 2020, the R&D Departments of the Business Divisions
were integrated into the single R&D Department, and for Companywide research themes and the development of new businesses andtechnologies, DKS also created the Corporate R&D Department, theNew Business Development Department and the Drug Formulation
Development Department aimed at strengthening our research
structure.
The Elexcel R&D Department develops applications for battery materials.
The Life Sciences Supervisory Department is focused on thedevelopment of new applications for cellulose nanofibers and will focus
efforts on R&D centered on extraction and concentration technologies,
as well as mass production technologies, including I-Japonica Bombyx
Fungus and “sudachi citrus” under the umbrella of the newly acquired
Biococoon Laboratories, Inc. and Ikeda Yakusou Co., Ltd. In addition
to promoting in-Group cooperation, we are working to accelerate

R&D Investments

R&D Costs(Millions of yen)

2,765

3,000
2,500

2,393

R&D System Diagram
Universities

Government agencies

Public research institutions
Joint research
Personnel
exchanges

Customers
Closed/open
innovation

National projects

DKS Group R&D Departments
R&D Headquarters

Subsidiary companies
R&D departments

R&D Department, Elexcel R&D Department, Corporate R&D Department,
New Business Development Department, Drug Formulation Development Department,Life Sciences Supervisory Department

Production Headquarters/Production Technology Department

Intellectual Property

In fiscal 2019, the total expenses required for R&D amounted to ¥2,748
million, which represented 4.5% of net sales. The total number of R&D
personnel of the Company and the domestic subsidiary companies
was 208, which was equivalent to around 20% of all employees (as ofMarch 31, 2020).

2,380

research and development through collaboration with outside entities
such as public research institutes, universities and customers. The
Production Technology Department provides support for the innovationand creation of new production technologies.

Mindful of future business development, we actively promote thefiling and obtaining of intellectual property (IP) rights based on R&D
results. Recently, we have been focusing on improving the quality ofour patents through enhanced information retrieval functions. We willcontinue to respond to the globalization of our business and acquire
rights securely for important domestic and foreign markets.
Number of Patents Held

2,748

Outside Japan

Japan(Patents)

2,307

1,200

2,000

427

1,500
900

1,000

344

453

479

378

500
0

2015

2016

2017

2018

2019

(FY)

600

Research Personnel

478

477

497

508

533

2015

2016

2017

2018

2019

(Persons)
250
200

169

174

180

196

300

208

150
0
100
Note: Based on the effective date.
50
0

30

2015

DKS REPORT 2020

2016

2017

2018

2019

(FY)

(FY)

Where Have We Come From,
Where Are We Going?

How Should We Manage?

How Can We Be Sustainable?

Business Activities Report

Data Section

Our Products and Technology Development
We supply products that meet environmental requirements, including global warming prevention, energy and resource saving, environmental protection
and prevention of environmental pollution, and engage in the development of related technologies.

Environmental
requirement

Functions and features

Our product lineup and technology/Application

Lithium-ion batteries
Clean energy
Global Warming Prevention

Halogen-freeness

Energy efficiency
Energy & Resource Saving

Binder for lithium-ion batteries

ELEXCEL ACG Series

Gel polymer for lithium-ion batteries

DD-1200C Series

Conductive paste for solar cells (lead-free)

DK BE-CLEAR Series

Waterborne detergents

DK POLYOL 3000 Series

HFC1-free water-reactive polyols for urethane foams/Insulating materials

COLOURSOL CT-171D

Dye accelerating/Leveling agents for polyester

NEW FRONTIER Series

Solvent-free UV/EB-curable monomers/Adhesives, coating agentsDK SYSTEM NF Series

HFC-free systems for rigid polyurethane foams/Insulating materials

Slag anti-solidification agents
Effective resource utilization
Extension of life span

Eco-friendliness

Environmental Protection,
Prevention of Environmental
Pollution

CELLBINDER Series

VOC2 reduction

Reduction of environmental impact

Removal of contaminants

ELEXCEL IL Series

Ionic liquids/Energy device materials

EIMFLEX Series

Polyurethanes for electric insulation/Sealants

NOIGEN XL Series, NOIGEN TDS Series

Nonionic surfactants/Emulsifiers, cleaning agents

RHEOCRYSTA Series

Cellulose nanofiber water dispersions

AH212

Organic alkaline agent

SUPERFLEX Series

Polyurethane water dispersions/Paints, coating, binders

EIMFLEX WF Series

Waterborne single-shot polyurethanes for electric insulation/Sealants

ELASTRON Series, ELASTRON BN Series

Thermoreactive polyurethane water dispersions/Binders, adhesives

NEW FRONTIER Series

Solvent-free UV/EB-curable monomers/Adhesives, coatings

HITENOL Series, NOIGEN Series

Polymerizable surfactants/Emulsifiers for emulsion polymerization

TRIBIO Series

Polylactic acid modifying agentsSEACLE N-800

Marine oil spill treatment agent

DEOPELLET Series

Foul odor gas absorbents

1. HFC: Hydrofluorocarbons
2. VOC: Volatile organic compounds

Products to Meet Environmental Requirements
The Company has been developing products made using sugars andcellulose, which are eco-friendly materials that are derived from plants
and are renewable. Among them, the cellulose nanofiber RHEOCRYSTA
possesses unique physicochemical properties due to its single-digit nanosize, and the Company is advancing the development of applications
so that this productcan be used as a highperformance additive in, forexample, inks, cosmetics,
ceramics and batteries.

The Company began to manufacture and sell HITENOL and NOIGEN
Series polymerizable surfactants in the 1980s. Such eco-friendly products
as water-based paints and adhesives, which have been popular in recent
years, offer excellent water resistance and adhesiveness. The new product
HITENOL AR Series offers excellent copolymerization qualities with awide range of monomers
and improves the water
resistance of and inhibits
the formation of bubbles inpaints and adhesives.

DKS REPORT 202031

Five Important Issues

Important Issue 3

Employees

Society

Human Resource Management

Human capital is the most important asset for DKS, and we aim to maintain talented human resources and diversity based on the idea of
valuing people. We recognize the growth of employees to be the driving force for the development of the Company, leading to a wide range
of enhancements in corporate value.

Human Resource Philosophy
Respect for Humanity
Our fundamental human resource philosophy is rooted in the idea that ourpeople are our assets and must be nurtured and treasured.
Our basic understanding is that the growth of our people will support
the growth of the Company. The employees are supposed to actively playtheir roles in each workplace; learn, grow and exhibit their capabilities;
and try to fulfill themselves. This way, we believe that they become thepower of prosperity of the Company and the source to make it eternal.
The Company also supports the maintaining and improving of
employee health, which forms a cornerstone of individual employee selffulfillment.

Human Resource Development Policies
1. Development of Professional Workers
We aim to train professional human resources who havehigh market value and can work on their own initiative.
1) People possessing advanced, specialized skills
2) People who recognize and achieve their roles and goals
3) People who raise and solve issues themselves
4) People who demonstrate leadership in the workplace
2. Development of Autonomous Personnel
Switch to human resources able to work on their own initiative throughtheir own motivation

Respecting Human Rights and Diversity: Promoting Diversity, Human Resource Development and Education
Work-Style Reforms
Work-Life Balance
DKS takes the initiative in activities supporting a balance between
work and family. In terms of systems, we formally introduced atelecommuting system in fiscal 2019 and a flextime system in fiscal
2020 and are working to reform the personnel system to improve
employee productivity and realize diverse work styles.

Efforts to Prevent Harassment
We are trying to prevent harassment through, for example, educational
programs in hierarchical training courses. Several persons are selected
as contacts, even from outside the Personnel Department, so thatanyone can easily find someone to talk to and get advice from.
Moreover, whistleblower portals inside and outside the Company, as
well as an external Employee Assistance Program (EAP), are in place.

Promotion of Employee Participation and Advancement
Having set up an Employee Participation and Advancement Promotion
Committee chaired by a senior management member, we are aiming
for a human resource group capable of successfully contributing to
improvements in Company performance. We are creating environments
in which we can maximize the abilities of diverse employees, including
women, seniors, people with disabilities
and members of the LGBT community,and enable them to take an active
part in our Company. We also held aseminar on long-term care in 2019 tosupport balanced work that can bedone by both men and women.

Human Resource Development and Education Systems
The three pillars of our human resource development and education
programs are in-house on-the-job training, external education to learn
skills and abilities, and assisting self-development. In recent years,
we have focused on joint training with other companies to nurturenext-generation leaders and enhancing our brother/sister program(reinforcement of a backup support system for new employees) aimed
at a 0% attrition rate for new employees, and the development of
human resources for the digital transformation targeting the realizationof disruptive innovation utilizing data and IT technologies.
We also conduct global mindset training to ensure young employees
are aware of activities overseas as soon as possible, cross-cultural
understanding and skills training sessions for mid-level employees andin-house, selective training involving visits to subsidiaries overseas for
employees with high global awareness.
DKS is focusing attention on human resource training in other areas
as well, including by bolstering its support for employees aiming to
improve their own abilities, be it through correspondence learning, theacquisition of qualifications or other forms of self-development.

Promotion of Women’s Participation and Advancement
In addition to environments that facilitate women in working for many
years, we will maintain work environments that enable women todevelop their careers and implement measures aimed at having 10.0%
or more of managerial positions occupied by women.
Retiree Reemployment System
In reemploying all applicants, we conduct monozukuri (manufacturing)by handing down the techniques and skills that make the best use of
the experience they have accumulated over many years.
Employment of People with Disabilities
We consider people with disabilities as a valuable asset to our
workforce, and in addition to safely clearing the statutory employment
rate for persons with disabilities, we aim to further improve retention
rates and are proactively engaged in creating abilities through trainingthat understands the aptitude of the respective individuals.

32

DKS REPORT 2020

Items

FY2019 Results

Annual paid leave taken

73.2%

Male employees taking child-care leave

66.0%

Ratio of women in managerial positions (as of March 31, 2020)

9.1%

Employment of people with disabilities (as of March 31, 2020)

3.1%

Employment of people with disabilities (to third year of employment)

87.5%

New graduate attrition rate (to third year of employment)

3.1%

Where Have We Come From,
Where Are We Going?

How Should We Manage?

How Can We Be Sustainable?

Business Activities Report

Data Section

Health-Based Company Management (“Kenko Keiei”) Initiatives
We aim to bolster the Company’s productivity, and thus its corporate value, by maintaining and improving the health of our employees.
This initiative is reported to committees and meetings attended by officers in charge to obtain approval for plans formulated based on these results.

Concept of Health-Based Company Management
Healthy Company Declaration: Regarding its employees as Company assets, DKS will strive to maintain and improve their health.
Prevent disease and mental health issues by health management• Formulate measures to prevent lifestyle-related diseases• Formulate health management targets• Develop internal Company communication• Improve the workplace environment• Gather results of health checks, management ascertains status of mental health• Share health checkup results data in-house• Release both internally and externally an assessment by external institutions• Explore routes for improvement based on an assessment by external institutions• Explore next health management targets based on health checkup results andsecondary data
• Verify the effect on productivity and corporate value

Work and live in a safe and healthy environment

Plan

Do

Action Check• Regular health checkups, special health checkups, specific health guidance• Mental care: internal and external EAP, stress checks• In-house education: e-learning, group training, etc.
• Improve conditions of the Company premises and housing: amenity facilities;
implement measures to prevent passive smoking, etc.
• Look into absenteeism and presenteeism• Hold events involving exercise• Inspect workplaces; monitor working environments• Interview after health checkup and summarize results• Implement workplace improvement activities after stress checks• Request third-party assessment by external institutions: DBJ Health Management
rating, White 500 (certified health and productivity management organizations)• Conduct cross-analysis relating to productivity

Efforts in Health-Based Company Management
DKS was selected by the Ministry of Economy, Trade and Industry(METI) and the Tokyo Stock Exchange (TSE) for the first time as a
“Health and Productivity Management Brand 2020.” For the third
consecutive year, DKS and subsidiaries Gembu Co., Ltd., Dai-ichi
Kenkou Co., Ltd., Dai-ichi Ceramo Co., Ltd., Kyoto Elex Co., Ltd.,and from this year, Ikeda Yakusou Co., Ltd. were certified as White
500 Organizations (sponsored by METI and Nippon Kenko Kaigi).
We also acquired the highest health management rating from theDevelopment Bank of Japan Inc. (DBJ) for the third consecutive year.
Going forward, assessments of Company efforts through the eyesof external organizations will continue to lead to further enhancements
in corporate value.

corporate value through the maintenance and improvement of
employee health. From fiscal 2017, we have been developing practicalmeasures to enhance lifestyle-related disease and metabolic syndrome
prevention and countermeasures that go beyond education andtraining, including walking events, the creation of training rooms andthe provision of healthy menus in employee cafeterias. As a result, fromfiscal 2016 to fiscal 2019, the discovery of health problems decreased
2.3%, the number of people aged 40 or older who maintained
proper body weight increased 6.9% and the rate of secondary healthexaminations was maintained at 100%. We also provided counselingto all new employees who were nervous about their new job. Feedbackquestionnaires revealed that hurdles for counseling were lowered.
In fiscal 2019, we began providing counseling for newly appointed
managers and will continue this practice in the future.
Health Issue Improvement KPIs

Issue

Targets, Activities and Outcomes
Based on our Healthy Company Declaration, DKS strives to maintainand improve the health of its employees, and at the same time,
stipulates guidelines for employee health activities and promotes
Company-wide health maintenance. The employee health guidelines
consist of five items aimed at improving productivity and enhancing

Key
Performance
Indicator (KPI)

1. Preventionof issues
among healthy
employees

2. Prevention of
aggravation
among high-risk
employees

3. Prevention and4. Creation ofearly detection ofenvironment
employee mental
leading tohealth issues
quitting smoking

Employees who
exceeded abdominal
girth standards

Employees 40 years
or older at risk foror experiencing
metabolic syndrome

Leave taken by
employees withmental health issues

Employees who
smoke

Current figure (2019)

Current figure (2019)

Current figure (2019)

Current figure (2019)

30.7%

26.6%

0.2%

21.4%

Target figure (2024)

Target figure (2024)

Target figure (2024)

Target figure (2024)

25.0%

22.0%

0.2% or less

11.4%

DKS REPORT 202033

Five Important Issues
Shareholders

Important Issue 4Society

Consideration for the Environment

Natural capital is a critical common asset for chemical manufacturers, making sincere responses to various environmental problems acommon global issue in the aim for economic development and conservation of the global environment. DKS will always face social issues,
protect human environments and lifestyles, and contribute to the creation of a sustainable society as “chemistry provides a solution” forimproving safety and comfort.

Basic Philosophy and Basic Policies for Environmental and Safety Practices
Basic Philosophy

Basic Policies

Our basic philosophy is to contribute to society by making a company

1) T hroughout the life cycle of each product from development to
scrapping, we evaluate and minimize the impact of business activities
on the environment and make our best efforts to preserve theenvironment.
2) We aim at accident- and disaster-free operations to secure the safetyof both local communities and employees.
3) We confirm the safety of raw materials, semifinished products andfinal products to prevent health-related disorders of all relevant people
including, but not limited to, employees, logistic/transportation workers,
customers and general consumers.
4) We strive to continuously improve the safety and environment not only
by strictly complying with relevant legislation and regulations but also by
self-management.

that thrives together with local communities and employees by supplying
products that satisfy customers. Based on this, our environmental andsafety philosophy is to contribute to the sustainable development andrealization of happy societies by considering the human health, safety andenvironmental preservation throughout the life cycle of each product fromdevelopment to scrapping.

Responsible Care (RC) Activity Promotion System
We set up the safety and environment philosophy, as well as basic
and action policies, based on which we promote our corporate
activities related to quality, safety and the environment. Such issues are
discussed and decided by the RC Promotion Conference, which is the
top decision-making body and is chaired by the president.
Moreover, we regularly hold environmental preservation meetings,
safety and health meetings and quality assurance/product liability

meetings chaired by the quality, safety and environment personnel andjoined by plant general managers and relevant department managers.
In these meetings, corporate targets, action plans and results are
discussed to promote RC activities. Under each of these meetingorganizations is a committee to make, implement and evaluate specificaction plans for continuous improvements.

RC Promotion System Diagram
Management Committee

RC (Environment, Safety andQuality Assurance) Promotion
Conference

Environment Preservation
Meeting

EMS1 Committee

Safety and Health Meeting

SHMS2 Committee

Quality Assurance (PL)Meeting

QMS3 Committee

Environment Preservation Committee
Safety and Health Committee
• Kyoto Central Branch • Plants • Tokyo Headquarters• Branches and Offices

Quality Assurance (PL) Committee• Plants

1. EMS: Environmental Management System
2. SHMS: Safety and Health Management System
3. QMS: Quality Management System

Management System
In addition to promoting the comprehensive safety management ofchemical substances based on the RC Code, which consists of sevenfactors derived from Japan Chemical Industry Association (JCIA)
policies—environmental conservation, safety and disaster prevention,

occupational safety and health, logistics safety, chemical and productsafety, dialogues with society and the management system­—DKS
is working toward improvements in environmental conservation andquality, using environmental and quality ISO standards as tools.

Observation of Environmental Laws and Regulations
Environmental risk management is an important measure to minimize
environmental risks and/or the consequent damages caused by risks.
We comply with environmental-related legislation and regulations
and agreements with local municipal governments based on the
Declaration of Action by Board Members and Employees, andthere were no violations of laws or regulations in fiscal 2019. All our34

DKS REPORT 2020

production plants in Japan are regularly checked for environmental
compliance in accordance with the ISO 14001-based environmental
management system. Up-to-date information on legislation is checked
and understood on a timely basis and disseminated internally to ensurecompliance. Recently, education programs using an e-learning systemhave started.

Where Have We Come From,
Where Are We Going?

How Should We Manage?

How Can We Be Sustainable?

Business Activities Report

Data Section

Environment-Related Complaints
In fiscal 2019, there was one noise complaint. We took immediate
steps to investigate the cause and examine corrective measures. As
a result, problematic noise was reduced by suppressing equipment

vibration and installing sound absorbing panels. We will continue
to engage in environmentally friendly operations while gaining theunderstanding of nearby residents.

Environment Accounting
In fiscal 2019, Group investment in environmental-related systems wasspent mainly in the field of energy saving. Resource circulation–related
costs accounted for a relatively high ratio of costs tied to preservationof the environment. The economic benefits therein include profits on
the actual sales of valuable resources and the amount of cost savings
and are not based on estimated economic benefits.

Investments and Costs of Environmental Protection Activities

Economic Effects Generated by Environmental Protection Measures

Main activities

Investment(Millions of yen)

Costs
(Millions of yen)

Air/water/other pollution prevention

12.9

198.1

Global environment preservation,energy saving

23.2

90.4

Resource recycling, resourcesaving, waste treatment/disposal

0.0

496.3

Upstream/
downstream cost

Lowering the environmental impact
in containers/packaging

0.0

0.1

Administrativecost

ISO acquisition/maintenance,
greening of branch premises

1.3

38.7

R&D cost

Environmentally responsive R&D

0.0

650.2

Social activity cost

Providing support grants forenvironmental protection toenvironmental preservation groups
or local communities

0.3

1.2

Environmental
damage cost

0.0

0.0

Total

37.7

1,475.0

Category

Costs within theplant premises

Category

Management items

Promotion of energy saving

Energy consumption perunit

1% improvement compared with fiscal 2018 Up 9.8% YoY

Reduction of GHG
emissions

CO2 emissions1

29.5% reduction compared with fiscal 2005
on average from fiscal 2016 to fiscal 2019

Waste generation per unit

1% improvement in the fiscal year rate of
non-consolidated DKS3

Energy-saving measures

Cost savings in electric power and fuels

0.4

Resource-saving activities

Cost savings through reduction of water use/
waste

0.0

Fiscal 2019 activity targets

Fiscal 2019 results

Final disposal rate

B: Result in line with the target

Dust emissions
Water discharge

Fiscal 2020 activity targets based on medium-term
environmental targets (FY2020–FY2024)

Evaluation

Refer to page

C

P.36

Improve more than 1% YoY based on fiscal 2019
results

26.8% average reduction fromfiscal 2016 to fiscal 2019
compared with fiscal 2005

C

P.36

Decrease more than 1% YoY based on fiscal 2019
results

Down 8.3% YoY

BAmount of waste generated to decrease more than
1% YoY based on fiscal 2019 results
Non-consolidated DKS final disposal rate to be
maintained at under 0.1%

CUp 17.7% YoY

C

Up 34.1% YoY

CDown 22.8% YoY

A

Down 5.4% YoY

B

Down 30.2% YoY

AReduced emissions of PRTR Regulationdesignated substances

Up 0.4% YoY

C

P.36

Reduce emissions of PRTR Regulation-designatedsubstances

Promoting the green procurement ratio of
office supplies

29.4%; 1.5-percentage-point
improvement YoY

B—

Improve the green procurement ratio of office supplies

No occupational accidents (that cause days
away from work)

One incident

C

Eliminating severe accidents associated withproduction facilities

No accidents occurred

B

Promoting an environmental management
systemMaintained

B

Reduced emissions of environmental
pollutants in water

COD emissions

C: Target remains unachieved

4.9%

3.4% or less in fiscal 2019

Reduced emissions of environmental
pollutants in the airNOx emissions

2.8

3.2

P.37
2

SOx emissions
Reduction of environmental
impact substanceemissions

Gain on sale of metal scrap, waste oil andwaste alkali, etc.

Evaluation A: Significant result

Target parameter

Reduction of industrial
waste

Sale of valuables

Total

Fiscal 2019 Activity Targets and Results, Fiscal 2020 Activity Targets

Costs(Millions of yen)

Main activities

The DKS Group will reduce the final disposal amount by
100 tons or more compared with fiscal 2019 results infiscal 2024

P.37

Reduce emissions of environmental pollutants inthe air
Reduce emissions of environmental pollutants in water4

Proper management ofchemical substances

PRTR Regulation designated substances
emissions

Promotion of green procurement

Elimination of disasters/accidents

Environmental management system

Posted on our
websiteP.34

Achieve zero environment-related accidents
Comply with environmental laws and regulations
Promote an environmental management system

1. Derived from energy in the production and administrative sectors
2. The ratio of the final disposal amount to the generated waste amount
3. We have decided not to set numerical targets for the Group until the method of recycling sludge newly generated from the wastewater treatment plant is established at a subsidiary company.
4. PRTR Regulation: The emission and transfer amount of notification substances under the PRTR Regulation

DKS REPORT 202035

Five Important Issues
Shareholders

Important Issue 4Society

Consideration for the Environment

Global Warming Prevention (Energy Saving)
In the fiscal year ended March 31, 2019, Group energy consumption
amounted to 25,800 KL, a 0.4% decrease compared with the previous
fiscal year, however, the energy consumption per unit increased 9.8%,
which means that we were not able to achieve our fiscal year targets.
This is mainly because, compared to the previous fiscal year, theproportion of products requiring energy increased due to changes in
the product mix. In fiscal 2019, we recorded 51,800 tons of carbon

dioxide emissions, a 1.2% decrease compared with the previous fiscal
year and a 27.7% reduction compared with fiscal 2005. This is anaverage 26.8% reduction compared with fiscal 2005 from fiscal 2016
to fiscal 2019, meaning the target was not reached. With the start ofnew medium-term targets in fiscal 2020, we will continue to work to
improve the efficiency of our energy use toward the achievement of our
five-year targets.

Targets and Performance in Fiscal 2019

Evaluation A: Significant result

B: Result in line with the target

Target parameter

Management items

Promotion of energy saving

Energy consumption per unit

1% improvement compared with fiscal 2018

9.8% increase compared with fiscal 2018

C

CO2 emissions

29.5% reduction compared with fiscal 2005 on average from fiscal
2016 to fiscal 201926.8% reduction compared with fiscal 2005 on average fromfiscal 2016 to fiscal 2019

C

Reduction of GHG emissions

Activity targets

C: Target remains unachieved

Changes in Energy Consumption

Evaluation

Changes in CO2 Emissions(Yokkaichi, Ohgata, Shiga, administrative sectors, domestic subsidiaries)
Energy Consumption

Index of Energy consumption per unit

(1,000 KL)

146

40

Performance in fiscal 2019

133

131

133

25.2

26.2

25.9

(Index)(Yokkaichi, Ohgata, Shiga, administrative sectors, domestic subsidiaries, derived from non-energy)(1,000 t)

150

80

125

60

100

40

75

20

71.3

30.4
30

20

25.8

100

10

2005

0

2016

2017

2018

2019

(FY) 50

Notes: 1. Index of energy consumption per unit [2005 = 100]
2. Domestic subsidiaries include Yokkaichi Chemical Co., Ltd., Kyoto Elex Co., Ltd. and Dai-ichi Ceramo Co., Ltd.
3. T
 he calculation method for energy consumption was revised in fiscal 2019.
Data for fiscal 2016 and fiscal 2018 have been retroactively adjusted.

0

2005

51.7

53.5

52.4

51.8

2016

2017

2018

2019

(FY)

Notes: 1. The administrative sector includes fuel for Company-owned vehicles.
2. The CO2 calculation method was revised in fiscal 2019 and retroactively adjusted for fiscal 2016.

Proper Management of Chemical Substances
The DKS Group had a total of 67 notification substances under the
PRTR Regulation in fiscal 2019. The total amount of emissions was
61.2 tons, which resulted in a 0.2-ton (0.4%) increase compared withthe previous year. The breakdown was 60.6 tons to air, 0.57 tons towater and none to land. Emissions amounted to 51,800 tons (down
1.2% YoY), a 27.7% decrease compared with fiscal 2005. The average
reduction from fiscal 2016 to fiscal 2019 was 26.8% compared withfiscal 2005, meaning the target was not achieved. With the start ofnew medium-term targets in fiscal 2020, we will continue to work
to improve the efficiency of our energy use toward the achievementof our five-year targets. The amount of waste transfer recorded was
223.6 tons, a 16.2-ton (7.8%) increase compared with the previous
fiscal year. We will advance improvements in production processes
and the introduction of recovery equipment, while continuing to makeefforts to reduce the emissions/discharge of PRTR substances into theenvironment.

Targets and Performance in Fiscal 2019

Evaluation A: Significant result

B: Result in line with the target

C: Target remains unachieved

Target parameter

Management items

Activity targets

Performance in fiscal 2019

Evaluation

Proper management of chemical substances

PRTR Regulation-designated substances

Emission reduction of PRTR Regulation-designated substances

0.4% increase compared with fiscal 2018

C

Changes in Emissions of PRTR Regulation–Designated Substances(DKS, Yokkaichi Chemical)
Emissions to air

Emissions to water

(t)

(t)

80

8.0

63.9

60.6

60.4

60

6.0

47.8

47.6

40

20

0

36

4.0

0.49

0.54

0.55

0.59

0.57

2015

2016

2017

2018

2019

DKS REPORT 2020

2.0(FY) 0Notes: 1. The numerical values show the total amount for DKS and Yokkaichi Chemical.
2. F
 or the emission and transfer amount of notification substances under the PRTR Regulation in fiscal
2019 (among all notification coverage substances, those of which the emission or transfer amount was
0.01 tons or more), please visit our website.
https://www.dks-web.co.jp/english/ir/report/index.html

Where Have We Come From,
Where Are We Going?

How Should We Manage?

How Can We Be Sustainable?

Business Activities Report

Data Section

Reducing Emissions of Environmental Impact Substances
Air Pollution Prevention
Compared with the previous fiscal year, the Group’s air-pollutant
emissions in fiscal 2019 showed rises of 17.7% and 34.1% for SOx
and NOx, respectively, while dust emissions fell 22.8%. We will moveahead with facility improvements and studies of operational methods
with the aim of making further energy-efficiency enhancements.

Water Pollution Prevention
In fiscal 2019, the Group recorded 3,952,000 cubic meters in theamount of water discharge, a 5.4% decrease compared with theprevious year, and 19.1 tons of COD emissions, a year-on-year
decrease of 30.2%. We will continue to make efforts to reduce
the water discharge and COD emission amounts by, for example,
conducting reviews of our production processes and optimizing theoperation methods at our effluent treatment facilities.

Targets and Performance in Fiscal 2019

Evaluation A: Significant result

Target parameter

Management items

Activity targets

SOx emissions
NOx emissions
Dust emissions
Water discharge
COD emissions

Reduction of environmental impact
substance emissions

Performance in fiscal 2019

Emission/discharge reduction of environmental pollutants in waterSOx emissions

Dust emissions

Water discharge

(t)

(t)

(1,000 m3)

30

3.0

5,000

(t)

4,424

0.8

17.6

2015

0

2.0

1.4

13.9
10.3
0.7
0.6

0.8

0.7

2016

50

4,177

3,908

3,877

1.3

COD emissions

3,952

4,000

20.7

10

C
C
A
B
A

(Yokkaichi, Ohgata, Shiga, Yokkaichi Chemical)

NOx emissions

1.3

Evaluation

Changes in Water Discharge and COD Emission Amounts(Yokkaichi, Ohgata, Shiga)

16.7

C: Target remains unachieved

Up 17.7% YoY
Up 34.1% YoY
Down 22.8% YoY
Down 5.4% YoY
Down 30.2% YoY

Emission/discharge reduction of environmental pollutants in the air

Changes in SOx, NOx and Dust Emissions

20

B: Result in line with the target

2017

26.3

25.9

3,000

0.8

1.0

0.5

30

19.1

18.9

2019

2018

40

27.3

2,000

20

1,000

10

(FY) 0

0

2015

2016

2017

2018

2019

(FY) 0Note: Yokkaichi Chemical possesses no facilities that generate SOx, NOx or dust.

Waste Reduction
The amount of waste generated by the Group in fiscal 2019
amounted to 19,401 tons, a decrease of 2,257 tons compared withthe previous fiscal year. The waste generation per unit for DKS on a
non-consolidated basis improved 1.0% (decreased) compared withthe previous fiscal year, achieving our target. The recycling rate was
89.7%, which marked a 0.8-percentage-point worsening (decrease)
compared with the previous fiscal year. The final disposal amount was
Targets and Performance in Fiscal 2019
廃棄物発生量
Target parameter

外部リサイクル量 外部リサイクル化率（
Management items

Waste generation per unit
Final disposal rate

Reduction of waste

948 tons, a decrease of 96 tons compared with the previous fiscal
year. One contributory factor was that part of the sludge generated at
the wastewater treatment facility is being recycled. The final disposal
rate was 4.9%, a worsening (an increase) of 0.1 percentage pointcompared with the previous fiscal year. In the year ahead, we will moveahead with a review of our sludge recycling and work to reduce thefinal disposal amount.
Evaluation A: Significant result B: Result in line with the target C: Target remains unachieved
第一工業製薬グループ）
Activity targets
Performance in fiscal 2019
Evaluation

第一工業製薬1% improvement in the fiscal year rate of non-consolidated DKS
3.4% or less in fiscal 2019

B
C

Down 8.3% YoY
4.9%

Changes in Generated Waste Amount, External Recycling Amount and External Recycling Rate

Changes in Final Disposal Amount and Final Disposal Rate

(Yokkaichi, Ohgata, Shiga, Kyoto, domestic subsidiaries)(Yokkaichi, Ohgata, Shiga, Kyoto, domestic subsidiaries)

Generated waste amountExternal recycling rate (External recycling amount

(t)

95.7

25,00095.7

20,00015,00096.2
91.6
20,77917,364
15,90496.9
91.8 21,658
19,063

13,191 12,621

96.7

DKS

DKS Group)

94.9

90.5

89.7
19,591 19,401
17,397

Final disposal amount

(t)

100

1,200

80

Final disposal rate

5.9

(%)

1,023

(%)

1,145
1,044

4.9

6.0

4.8

948

4.5

5.5

900

60
600

10,000

40

5,000

20

0

2015

2016

2017

2018

2019

(FY) 0Note: Domestic subsidiaries include Yokkaichi Chemical Co., Ltd., Kyoto Elex Co., Ltd. and Dai-ichi Ceramo Co., Ltd.

3.0

1.4
300

1.5

180
0

2015

2016

2017

2018

2019

(FY) 0Note: The final disposal rate is the ratio of the final disposal amount to the generated waste amount.

DKS REPORT 202037

Five Important Issues

Important Issue 5

Employees

Shareholders

Customers

Society

Organizational Resilience

DKS has established an appropriate corporate governance system for sustainable growth and improvement of corporate value over the
medium to long term and strives to ensure thorough compliance and risk management. Even if the organization becomes exposed to various
changes in the outside environment and risks, to achieve sustainable growth and social contributions DKS aims to be an organization that is
conscious of resilience and flexibility in addition to sustainability and growth.

Corporate Governance
Basic Concept
DKS engages in business based on our Company Credo, “Contributing to the nation and society through industry,” along with our three Company
Mottoes—“Quality First,” “Cost Reduction” and “R&D Efforts”—which embody our founders’ spirit. Aiming to establish a management foundation able
to earn and maintain the trust of society, as well as to conduct transparent and fair corporate activities that are rooted in corporate social responsibility(CSR), we pursue higher governance as management policy and position it as one of our most important tasks. To realize these goals, DKS established abasic policy for its internal control system, which is revised as necessary.

Organizational Design and Structure

Company

OutsideGeneral Meeting of Shareholders
Appoint/Dismiss

Appoint/Dismiss
Audit

Cooperate

Audit & Supervisory Board

Company (6)Outside (3)Company (2)Outside (3)Auditor assistant

Audit
ReportCEO

Audit

Check for illegal
activities

Propose/Report important matters

ReportCooperate

Internal Audit Department

General Affairs andLegal Department

ReportCompliance Control Committee

RC (Environment, Safety & Quality) Promotion Conference

Risk Management Control Committee

Security Export Control Committee

Senior executive officers
2 people
Executive officers
9 people

Report, etc.

(Business execution)

Policies, planningand guidance

Audit

Detailed corporate governance information >>Securities Reporthttps://www.dks-web.co.jp/ir/img/annual_security_report_2020_3.pdf(Japanese only)

Management Committee

ReportManagement Committee
Deliberate important matters
Managing Directors

Accounting auditor

Decide on deliberation
regarding appointments/
dismissals
Judge on accounting
audit appropriatenessSelect/Dismiss
Supervise

Guide/
Supervise

Appoint/Dismiss
ReportBoard of Directors

Report, etc.

Policies, planningand guidance

Chaired by the Chairman CEO and composed of six
Company directors, two full-time corporate auditors, twosenior executive officers and two executive officers, theManagement Committee meets prior to Board of Directors
meetings and is divided into a management meeting todiscuss management issues and a finance meeting todiscuss finance issues. In the fiscal year under review, 7management meetings and 12 finance meetings were held
to ensure careful and quick decision-making.

Respective business execution departments/Group companies

Status of Response to Corporate Governance CodeRegarding compliance with the Corporate Governance Code, we have not implemented the 10 Principles. Please refer to our Corporate
Governance Report for the principles and reasons for non-implementation.
Detailed corporate governance information >> https://www2.tse.or.jp/disc/44610/140120200615444718.pdf (Japanese only)

Board of Directors Diversity
Company directors possess knowledge and experience in various
fields such as sales, production, research, purchasing and logistics,
planning, accounting and finance, and personnel and general affairs,
as well as overseas management experience. Outside directors comefrom life insurance companies, manufacturing companies in different

industries and administrative agencies related to labor conditions andoccupational health and safety. At present, the Board of Directors is not
sufficiently diverse in many ways, including gender, but in the future, if
such a person is recognized as qualified, he or she will be appointed
as a member of the Board of Directors.

Overall Efficacy of the Board of Directors
Every year, all directors and corporate auditors conduct self-evaluations
based on a questionnaire prepared by the Board of Directors
secretariat (President’s Office Secretary Group). This questionnaire
is compiled by the Board of Directors secretariat (President’s OfficeSecretary Group), then analyzed and evaluated by outside officers andfull-time corporate officers. As a result, last fiscal year, outside officers

38

DKS REPORT 2020and full-time corporate auditors assessed the effectiveness of theBoard of Directors as being generally appropriate and determined that
effectiveness is ensured, while also receiving opinions regarding further
improvements to the efficacy of the Board of Directors. Considering
these recommendations, we will continue to improve the efficacy of theBoard of Directors.

Where Have We Come From,
Where Are We Going?

How Should We Manage?

How Can We Be Sustainable?

Business Activities Report

Data Section

Executive Remuneration
The basic policy regarding executive and auditor remuneration involves a) appropriate compensation for execution of duties, b) remunerationthat encourages actions to improve business performance and maximize corporate value and c) remuneration that deepens value sharing withshareholders.
Director Remuneration
Director remuneration consists of 1) fixed remuneration, 2) performance-linked remuneration (incentives) and 3) stock remuneration (deepens value
sharing with shareholders). For outside directors, in consideration of involvement in business execution decisions, compensation consists of 1) fixed
remuneration and 3) stock remuneration.
1) Fixed remuneration

2) Performance-linked remuneration

3) Stock remuneration

Calculation
methodMonthly remuneration is set based on the sizeof the role tasked to each director and his or
her position.

Company performance in the previous fiscal
year is evaluated once each year, with thedepartments each director is in charge ofevaluated twice each year; then the amount ofcompensation is calculated and increased or
decreased within a certain range.

DKS introduced a transfer-restricted stock compensation system, with decisions as to the specificallocation of monetary compensation to be paid for the granting of transfer-restricted shares based on
the size of the role tasked to each director and their position.

Scope of amountAt the General Meeting of Shareholders held on June 26, 2018, a resolution determined thatmonthly remuneration for directors be set at ¥30 million (¥360 million per annum, with outside
director remuneration set at ¥3 million per month). This does not include the salary of employees
who concurrently serve as directors.

At the General Meeting of Shareholders held on June 27, 2017, a resolution determined the amount ofstock remuneration be set at ¥100 million per annum (¥6 million or less per annum for outside directors;
this does not include the salary of employees who concurrently serve as directors), with 100,000 sharesas the maximum number of common shares to be issued or disposed of per annum. All of the above aredrawn up by the CEO remitted and paid upon resolution by the Board of Directors.

Audit & Supervisory Board Member Remuneration
Audit & Supervisory Board Member remuneration is composed of 1) fixed remuneration and 2) stock remuneration based on the appropriatenessof audits conducted and the role played in promoting shareholder interests.
1) Fixed remuneration

2) Stock remuneration

Calculation
methodAn amount suitable for the role of an Audit & Supervisory Board Member entrusted by shareholders is
set and paid as fixed monthly remuneration.

Scope of amountAt the General Meeting of Shareholders held on June 29, 2005, a resolution set maximum compensation
at ¥6 million per month (¥72 million per annum).

Regarding stock remuneration, DKS introduced a transfer-restricted stock compensation system, anddetermines the amount of monetary compensation to be paid for granting transfer-restricted shares
suitable for the role of an auditor entrusted by shareholders.
At the General Meeting of Shareholders held on June 27, 2017, a resolution set maximum stockcompensation at ¥20 million per annum, with 20,000 shares as the total number of common sharesof the Company to be issued or disposed of per annum. All the above are determined and remitted
after consultation with Audit & Supervisory Board Members.

Total Amount of Remuneration for Each Officer Position, Total Amount of Remuneration
by Remuneration Type and Number of Applicable Officers
Total remuneration by type (Millions of yen)

Total remuneration(Millions of yen)

Fixed

Performance-linked

Stock-based

Number of applicable
executives (persons)

Director (excluding outside directors)

282

190

67

25

10

Audit & Supervisory Board Member(excluding outside Audit & Supervisory
Board Members)

43

39

—

3

2

Outside officers

32

30

—

2

6

Officer position

Targets for indicators related to performance-linked remuneration in
the fiscal year under review were to exceed consolidated net salesof ¥56.9 billion, consolidated ordinary income of ¥4.7 billion andconsolidated operating cash flow above ¥5 billion in fiscal 2018. In the

Significant Portion of Salary Paid to
Executive Directors Who Concurrently
Serve as Employees
Total (Millions of yen)

Number of
executives(persons)

Details

66

6

Salary as employees

previous fiscal year, which the performance-linked remuneration for thecurrent fiscal year is subject to, consolidated sales increased to ¥59.5
billion and consolidated ordinary income decreased to ¥4.1 billion. In
addition, consolidated operating cash flow decreased by ¥3.2 billion.

Appointment and Dismissal of CEO and Succession Plan
Regarding the appointment of the CEO, the outgoing CEO proposesa candidate for successor that is resolved after thorough deliberationby the Board of Directors, which includes two independent outside
directors. If the CEO is not sufficiently fulfilling his role, or if there isa reason to dismiss the CEO’s position, the Board of Directors will
deliberate and resolve the dismissal of the CEO.
In addition, succession planning for the CEO is the most importantmatter for the survival of the Company, thus it is critical to identify

actual and potential capabilities of management. The succession planis the exclusive property of the CEO, who is familiar with all aspectsof the Company. DKS believes it is desirable to hear the opinions ofoutside officers regarding the qualities and aptitude of successors,
thus we established and operate a successor training committee withoutside officers as members.

DKS REPORT 202039

Five Important Issues

Important Issue 5

Employees

Shareholders

Customers

Society

Organizational Resilience

Compliance
Basic Concept
Since the Compliance Control Committee was established in 2004, the Company has been continuously engaged in the building and maintenanceof our compliance system, as well as in activities to instill compliance practices in our employees. Recognizing that compliance activities areindispensable for continuing as a sound company, we will further strengthen our activities in the years to come.

Corporate Philosophy
The corporate philosophy around which the Company forms thebasis of its actions is indicated in our Company Credo, Company
Mottoes and Code of Corporate Ethics. These are also outlined in our
Declaration of Action by Board Members and Employees. We post
these in-house so that all employees can always act with them in mind,
and we provide a pocket-sized Corporate Philosophy Handbook to all
Company employees. The Company also conducts e-learning activities
explaining our philosophy, with tests given to confirm understanding.
Code of Corporate Ethics
To establish corporate ethics that contribute to putting the Company
policies into practice, we established a six-item set of principles as
the Code of Corporate Ethics and adhere to the word and spirit of alllaws and regulations, as well as international rules. We also respect theculture and customs of each country and region where we conduct

our business activities and declare that we will act with social common
sense.
Declaration of Action by Board Members and Employees
Regarding the six-item set of principles established as the Code ofCorporate Ethics, we broke down the content as to what kind of
behavior is actually required, clearly state the guidelines for the actionsof executives and employees (including seconded and contract
employees, aswell as temporary
employees) anddeclare that theseguidelines will be
implemented as acode of conduct.
“DKS Corporate Philosophy Handbook”

Compliance in PracticeCompliance Control Committee
The Compliance Control Committee is charged with establishing andmaintaining the Company’s compliance system. Since its establishment
in 2004, the Compliance Control Committee has been continuously
engaged in building the compliance system, implementing educational
activities to entrench compliance practices in our employees andconducting surveys to ensure understanding of the compliance system.
Corporate Ethics Month
The Compliance Control Committee has designated October every
year to be Corporate Ethics Month and conducts activities during
the month, including educational activities and the dissemination of
information, centered on a particular theme. The theme for the fiscal
year ended March 31, 2019, was “What Is Compliance? A Returnto the Basics” aimed at reaffirming basic information and information
handling rules. In addition, as part of this activity, we requested reports
on business conducted in each department aimed at organizing laws
and regulations to deepen understanding and called for them to bereaffirmed within each department.
Whistleblower Hotlines
DKS has established whistleblower hotlines where employees canconsult on and report possible violations to established laws andregulations. While the Company already had an internal hotline, DKS in2016 established an external hotline as well, with instructions on use
distributed internally, including through the Company intranet.

40

DKS REPORT 2020

Compliance Awareness Survey
We conduct a Compliance Awareness Survey for all employees eachDecember with the aim of accurately understanding the effects from
activities aimed at further instilling compliance practices. Based on
employee awareness of key issues, we use the results to determine
initiatives for next year. The fiscal year ended March 31, 2020, was the
15th consecutive year the Company has implemented the Awareness
Survey. This year, we confirmed the awareness of compliance with laws
and regulations and Company regulations on which we placed particularemphasis during Corporate Ethics Month, confirming that awareness ofCompany regulations has increased more than 10% compared to theprevious fiscal year. The survey posed questions about areas of policy
that, in the future, we would like to see reflect current conditions, withmany requests made regarding workplace environments working fromhome. Based on these results, we will continue to raise awareness ofcompliance and strengthen compliance activities.
Requested Areas for the Implementation of Measures in Fiscal 2019
Other: 2%

Workplace environment/
working from home: 36%

Information management/
intellectual property rights: 18%

Anti-Monopoly Act/
Subcontractor Law: 7%

Environmental protection: 14%

Harassment: 23%

Where Have We Come From,
Where Are We Going?

How Should We Manage?

How Can We Be Sustainable?

Business Activities Report

Data Section

Risk Management (Risks and Responses to Them)
Basic Concept
Diverse and becoming more complex, the corporate risks surrounding the Company could result in increased adverse impacts on the Company
itself, as well as on employees, shareholders, customers and local communities. We position risk management as an important management issue
and are taking steps to prevent potential risks and prevent the spread of risks that have already manifested.

Risk Management
To address Group risk and systematically promote activities, we haveestablished a Risk Management Control Committee that meets on aregular basis and is composed of representatives of each department,with an operating officer serving as the chairperson.
With a focus on developing and standardizing the risk management
system, the Committee manages risk by determining action plans
and reviewing results, identifying potential risks and consideringcountermeasures.
In Japan and overseas, the Company and its subsidiaries are working tooperate and maintain crisis management systems on a daily basis so that
we can communicate risk crisis information as soon as possible, ascertain
the situation and take appropriate measures. To deal with potential and/or evident risks, we have taken several steps, including establishing andmaintaining Risk Management Procedures, Product Liability (PL) Prevention
and Management Procedures and Information Security Rules.

Major initiatives implemented in the fiscal year ended March
31, 2020, included the extraction of risks and implementation ofcountermeasures in each department, the implementation of measures
to prevent information leakages and notifications to overseas travelers
through groupware calling attention to these leaks.
We believe it is important for employees to understand concepts
such as “risk management,” “crisis management” and “business
continuity management” (focusing on responding to interruptions inbusiness) and to view the establishment of activities entrenching theseconcepts as vitally important.
As a result of the above, in fiscal 2019 we conducted e-learning
on “risk management” and “business continuity management” forall managers in an attempt to acquire knowledge and reaffirm theimportance of these efforts.

Business Continuity Plan (BCP) and Disaster Countermeasures

Disaster Preparedness
In the event of a crisis, our Risk Management Manual establishes
management levels in line with the crisis, with the person in charge inline with those risk management levels tasked with implementing risk
management.
Risk Management Level I

Understanding risk possibilities under normal operation

Risk Management Level II

Risks to be coped with within plants, branches, offices and subsidiaries

Risk Management Level III

Risks to be coped with within divisions (including subsidiaries)

Risk Management Level IV

Risks to be coped with Company-wide

Risk Management Level V

Unexpected risks

We are taking appropriate measures and enhancing themanagement of risks that interfere with the supply of products. Ourannual preparation for natural disasters also includes training onunderstanding and reporting the safety situations of employees anddamage conditions, as well as ways to improve disaster response andemployee awareness.
We will continue to promote appropriate business continuity
management based on protecting human life and safety, continuing
operations and meeting social responsibilities.
Business Continuity Plan (BCP) Outline
Disaster strikes
Operation Degree (supply of products, etc.)

BCP is an abbreviation for Business Continuity Plan, which allows
a company to maintain critical operations without suspending plans
when it is affected by an unforeseen natural disaster such as anearthquake. Even if business activities are unavoidably interrupted, theBCP focuses on restarting important functions within the recovery time
objective and minimizing the risks involved in interrupted operations.
We have created a BCP for a large-scale earthquake and theoutbreak of a highly virulent H1N1-type influenza. We also havecreated a BCP for logistics operations in the event of an earthquake ortorrential rain. We are regularly reviewing and updating our BCPs.

BeforeTo continue businessabove the lowest
permissible level

After (initial responses and BC response)100％

To recover the degree of
operation within thepermissible time

RecoveryObjectives
Lowest permissible level
Objectives
Present anticipated recovery curve
Recovery curve after implementation of BCP

Lowest permissible level

Time

Source: Cabinet Office, Business Continuity Guidelines, Third Edition

Information Security
Through the optimization of infrastructure and the ensuring of security,
we provide high-quality services protecting against disasters andcyberattacks, while simultaneously promoting robust and sustainableindustrialization and the expansion of technological innovation.

Within the Company, we are creating a system ensuring information
security by established information security policies, countermeasure
standards and implementation procedures. Recognizing the importanceof the internal control system, the Internal Audit Department conducts
internal audits while independent auditors conduct outside audits.

DKS REPORT 202041

Interview with an Outside Director

I focus more on older factories than newer ones because
increasing the productivity of aging facilities tends to lift profits
once equipment depreciation ends. Following my appointment as
an outside director, I toured every factory, paying close attention
to areas ranging from 5S activities (Sorting, Setting-in-Order,
Shining, Standardizing and Sustaining the Discipline) to the status
of inventories. Determining how 5S activities are conducted shines
a light on how factories are being managed. I believe improving
management at these facilities can boost profits even further.
The Production HQ now oversees factory operations because oforganizational changes that began in the current fiscal year, and I
therefore anticipate rapid improvements in factory management.

Q

What is your impression of DKS’s sales activities?

Director (outside)

AOKI Sunao

I feel that DKS needs to brush up its customer-oriented sales
activities even further. Companies that primarily engage in BtoB

The importance of outside directors is increasing yearly,

sales generally have plenty of room to improve from a customer’s

as they work to ensure transparent, fair and objective

perspective. Such companies need to closely monitor BtoB sales

decision-making.

targets after investigating both markets and customers. DKS should

We invited AOKI Sunao to share his thoughts about theextend its customer-oriented marketing approach even further.

effectiveness of DKS’s corporate governance as well as
its growth strategy and potential.

Customers often visit factories in advance to determine
whether they should place orders there. In so doing, factories
become a form of advertising, serving as a showcase. In addition,clients will likely write reports after touring DKS factories, so the

Impressions of DKS from an Outside Perspective

Q

To start, please tell us your honest impression of
DKS’s positives, negatives and overall atmosphere.

Company should upgrade its facilities and interaction based on
the impression it gives to customers.
I have high hopes for the FELIZ 115 medium-term
management plan as I have heard that it introduced a new DKS
sales organization to enhance marketing capabilities.

I was appointed as an outside director because of my association
with Chairman SAKAMOTO Takashi. DKS has a comfortable work
environment with employees who are dedicated and diligent. On
the other hand, the Company somewhat lacks a sense of speed,
and I feel this is an area where further improvement is needed.
DKS is a manufacturer of chemical intermediary materials.

DKS’s Growth Strategies

Q

What does DKS need to do to realize sustainablegrowth? Also, what future vision should be adopted
for the next hundred years?

DKS and Mitsubishi Heavy Industries, where I used to work, are42both manufacturers, but they have different business models and

DKS has been in business for a century or longer because society

product lines. From a manufacturing perspective, however, therequired so. Companies that are neither valued nor needed byprocesses remain the same: procuring raw materials, processing

society are doomed to disappear. I hear that DKS reformed its

at the factory, assembly and shipment. I see many areas from abusiness structure and overcame hard times. Corporate growth

process perspective where DKS still has room for improvement.

regardless of business size is possible by understanding customer

I believe DKS can become even more profitable by making suchneeds and issues, and then providing optimal solutions more

improvements.

quickly than competitors.

DKS REPORT 2020

Where Have We Come From,
Where Are We Going?

How Should We Manage?

How Can We Be Sustainable?

Companies unwilling to try new things will not develop
or survive. It is critical to cultivate a corporate culture that
aggressively pursues new businesses without fear of failure.
Making it clear that the entire management team is responsible for

Business Activities Report

Data Section

FELIZ 115 and the Future of DKS

QWhat kind of advice did you provide during theformulation of FELIZ 115?

new business activities should generate greater momentum.
With the spread of globalism, DKS needs to become aI met with management on several occasions to determine thecompany that thoroughly pursues customer-oriented businesses

seven key initiatives for realizing FELIZ 115. All these initiatives

worldwide with an eye to the future. DKS also needs to develop

target the creation of a high-margin Uni-Top company. This includes

a corporate culture that welcomes diversity regardless of race,

withdrawing from unprofitable businesses and adopting an HR

gender or religion and a love for innovation. Beyond this, DKS

system that uses performance evaluations to enhance earnings.

needs a management team that can effectively lift earnings andFurthermore, the Company needs to promote data-based

maintain employee motivation.

management as part of these initiatives. Holding discussions
based on data should accelerate decision-making. DKS needs

DKS’s Corporate Governance

Q

Please describe your fundamental concepts forto determine customer needs and challenges and connect themto actual businesses by sharing this data with each division more
rapidly as it pursues its Uni-Top strategy.

corporate governance.

In principle, corporate governance involves making and actually

Q

What themes will be important going forward?

implementing decisions. Problems arise when companies strayfrom this principle. Issues observed at laboratories, factories and

ESG management is an important policy. Implementing ESG

sales offices in Japan are caused by management that simply setsrequires first increasing earnings. “Environmental” and “social”

numerical targets at meetings and then makes employees solely

aspects must remain in balance with the Company’s profitability. In

responsible for achieving them. While holding meetings to makeother words, the Company must prepare the resources needed toimportant decisions is necessary, front-line employees are tasked

execute ESG-based management.

with producing results. It is a waste of time to opt for business

As for governance, succession planning is a key theme. Howplans that cannot be implemented. In other words, management

to develop future managers and leaders is a difficult issue, withestablishing specific methods for implementing plans on-site is theleadership development planning being particularly challenging.

first step to producing results.

I see benefits from selecting promising candidates, giving them

It is dangerous to simply impose numerical targets on workplaces.
It is worth noting that major problems which occurred at large
corporations were triggered by falsified reports issued by front-line

experience in a variety of departments and screening them basedon their performance.
In companies, making decisions is an important task that only

employees to show that numerical targets were being achieved.

the president can bear. The president should be selected from

Simply stated, it is important for management to clarify what is

personnel who are capable of performing risk management andrequired of on-site employees to reach such targets. Every level ofdamage control based on verified data.

management should make clear decisions on-site regarding who

The FELIZ 115 medium-term management plan provides ashould do what and when and make sure they are done. In addition,road map for management toward 2030. These measures will

I think clarifying where responsibility lies is a fundamental aspect ofenhance DKS’s ability to meet the expectations of shareholders

corporate governance.

and many other stakeholders. I would like to see DKS become aAt the same time, expectations have increased recently for outside
directors to perform auditing duties. DKS has enhanced corporate

Uni-Top chemical manufacturer beloved by employees, customers,
shareholders and society.

governance by ensuring that one-third of the Board consists ofoutside directors. Moreover, I feel that the Board of Directors engages
in meaningful deliberations given that director duties are separated
into areas such as manufacturing, finance and labor.

DKS REPORT 2020

43

Board of Directors, Audit & Supervisory Board, and Executive Officers

Board of Directors (as of July 1, 2020)
SAKAMOTO
Takashi

URAYAMAIsamu

YAMAJI
Naoki

Chairman CEO

Representative Senior
Managing Director

Managing Director
Administrative Supervisor

Number of shares held:
31,761 shares

Number of shares held:
14,720 shares

Number of shares held:
4,247 shares

Career summary

Career summary

Career summary

April
1970
February 1991
May
1994
December 1999
June
2001
June
2001
2004
April
June
2004
2007
June
June
2011
2013
June
2015
June

April
October
May
June
June
June
April

April
April

Joined The Fuji Bank, Limited (current Mizuho Bank, Ltd.)Manager of Madrid Branch of Fuji BankManager of Nihonbashi Branch of Fuji BankManaging Director of Fuji Asset Management Co., Ltd.
Joined DKS Co. Ltd.
Director
Executive General Manager in charge of Corporate Planning Headquarters
Managing Director
Senior Managing Director
Representative Vice President
Chairman and Executive Director (current)
Concurrently President (current)

1975
2007
2008
2008
2009
2016
2020

Joined DKS Co. Ltd.
General Manager of Financial Division and Assistant to Auditor
General Manager of Accounting Department and Assistant to Auditor
Executive General Manager in charge of Financial Headquarters
Director
Managing Director
Representative Senior Managing Director (current)

1991 Joined DKS Co. Ltd.
2013 	General Manager in charge of Planning Department, Yokkaichi Reorganization
Division, Production Control Headquarters
April
2014 General Manager of COO Office
April2015 	Executive General Manager of Plastic Materials Business Division, Business
Headquarters
2016 Concurrently in charge of Tokyo Headquarters
April
2017 Executive General Manager in charge of Corporate Planning Headquarters
April
2017 Director and in charge of Personnel & General Affairs Headquarters
June
2018 In charge of Production Control Headquarters
April
April
2019 	Concurrently General Manager of Formulation Development Promotion Office2020 Managing Director (current)
April		
Administrative Supervisor (current)

OKAMOTOOsami

KITADAAkira

KAWAMURA
IchijiManaging Director
Sales Supervisor in Chargeof Tokyo Headquarters

Director
R&D Supervisor

Director
Production Supervisor

Number of shares held:
6,860 shares

Number of shares held:
5,958 shares

Number of shares held:
2,245 shares

Career summary

Career summary

Career summary

April
April

April
April

April
1985 Joined The Fuji Bank, Limited (current Mizuho Bank, Ltd.)
August 1995 Senior Assistant to Director of London Branch
November 2001 General Manager of Yokohama Branch
2002 Assistant Branch Manager, Yokohama-chuo Branch of Mizuho Bank
April
May
2004 Assistant Branch Manager, Seoul Branch of Mizuho Corporate Bank, Ltd.
July
2008 Deputy General Manager of Sales Department 6
2011 General Manager, International Corporate Sales Department
April
July
2013 General Manager, International Corporate Sales Department of Mizuho Bank
2016 	Joined DKS Co. Ltd.
April
Deputy Executive General Manager in charge of Personnel & General Affairs
Headquarters
April
2017 	Executive General Manager in charge of Personnel & General Affairs
Headquarters
April
2018 Executive General Manager in charge of Production Control Headquarters
June
2018 Director (current)
April2020 Production Supervisor (current)

1989 Joined DKS Co. Ltd.
2006 	General Manager of Sales Department, Plastic Additive Materials Business
Division
2007 General Manager of East Sales Department, Surfactants Business Division
May
April
2008 General Manager of Planning Office, Functional Chemicals Business Division
October 2010 Director of Yokkaichi Chemical Co., Ltd.
April
2013 	General Manager of Yokkaichi Reorganization Department, Production Control
Headquarters
2014 	General Manager in charge of Management Planning Office, Corporate Planning
April
Headquarters
April
2016 	Deputy Executive General Manager in charge of Corporate Planning
Headquarters
April
2017 	Executive General Manager of Plastic Materials Business Division, Business
Headquarters
Concurrently in charge of Tokyo Headquarters (current)June2017 Director
December 2018 Concurrently General Manager of Plastic Materials Sales Department
April
2020 Managing Director (current)		Sales Supervisor (current)

October
April
June
April
April
April

1989 Joined DKS Co. Ltd.
2009 	General Manager of Functional Chemicals R&D Department, Functional
Chemicals Business Division2010 General Manager of Planning Office, Functional Chemicals Business Division2013 	Executive General Manager of Functional Chemicals Business Division,
Business Headquarters
2015 Director (current)
2016 	Executive General Manager in charge of Production Control Headquarters andin charge of Environment, Safety & Quality Assurance Department
2018 	Executive General Manager in charge of Personnel & General Affairs
Headquarters and President of Osaka Branch2020 R&D Supervisor (current)

AOKI
Sunao

TANIGUCHI
Tsutomu

MIYATA
Yasuhiro

Director (outside)

Director (outside)

Director (outside)

Number of shares held:
648 shares

Number of shares held:
527 shares

Number of shares held:
100 shares

Career summary

Career summary

Career summary

April
1972
June
2000
June
2003
January 2005
June
2005
December 2005
April
2006
April
2009
June
2011
April
2014
June
2014

October
April

April

Joined Mitsubishi Heavy Industries, Ltd.
Director of Takasago Laboratory, Technology Department
Director
General Manager, Technology Department
Representative Executive Officer
Visiting Professor of Tsinghua University in China (current)
Representative Managing Executive Officer of Mitsubishi Heavy Industries, Ltd.
Executive Vice President and Executive Officer
Vice Chief Director of Mitsubishi Research Institute, Inc.
Special Advisor of Mitsubishi Heavy Industries, Ltd.
Director of DKS Co. Ltd. (current)

1978 Labor Standard Inspector of Labor Ministry
2002 	Chief of the Sonobe Labor Standards Inspection Office, Kyoto Labor Bureau,
Ministry of Health, Labour and Welfare (former Labor Department)
April2004 Senior Officer for Personnel Planning, General Affairs Division
April
2006 Chief of the Kyoto-minami Labor Standards Inspection Office
April2008 Director of the General Affairs Division
April
2010 Chief of the Kyoto-shimo Labor Standards Inspection Office
April2012 Chief of the Kyoto-kami Labor Standards Inspection OfficeJune2014 Executive Director of Kyoto Labor Standards AssociationJune
2017 	Registered as Labor and Social Security Attorney (Kyoto Labor and Social
Security Attorney’s Association)
		
Chief of Tsutomu Taniguchi Labor and Social Security		
Attorney’s Office (current)		
Director of DKS Co. Ltd. (current)

April
April

April
April
April
April
April

June

44

DKS REPORT 20201987 	Joined Dai-Ichi Mutual Life Insurance Company (current The Dai-Ichi Life
Insurance Company, Limited)2003 	Senior Portfolio Manager, Kogin-Daiichi Life Asset Management Company(current Asset Management One Co., Ltd.)2009 	General Manager of Global Fixed Income Investment Department, Dai-Ichi
Mutual Life Insurance Company (current The Dai-Ichi Life Insurance Company,
Limited)2010 	General Manager of Global Fixed Income Investment Department, The Dai-Ichi
Life Insurance Company, Limited
2014 	General Manager of Group Pension Business Unit, The Dai-Ichi Life Insurance
Company, Limited
2016 	Executive Officer, General Manager of Group Pension Business Unit, The DaiIchi Life Insurance Company, Limited
2018 	Executive Officer, Chief General Manager, Investment
Concurrently General Manager of Equity Investment Department
2019 	Managing Executive Officer, Chief General Manager, Kansai Market
Concurrently Chief General Manager, Kansai Operations Bureau, The Dai-Ichi
Life Insurance Company, Limited (current)
2019 Director of DKS Co. Ltd. (current)Where Have We Come From,
Where Are We Going?

How Should We Manage?

How Can We Be Sustainable?

Business Activities Report

Data Section

Audit & Supervisory Board (as of July 1, 2020)
FUJIOKA
Toshinori

NISHIZAKI
Shinichi

TAKAHASHI
Toshitada

Audit & Supervisory Board
MemberAudit & Supervisory Board
MemberAudit & Supervisory Board
Member (outside)

Number of shares held:
12,552 shares

Number of shares held:
6,395 shares

Number of shares held:—

Career summary

Career summary

Career summary

April
OctoberApril
1982 Joined DKS Co. Ltd.
2004 	General Manager of Financing Department, General Affairs & Finance Division
July
October 2007 Executive General Manager of Secretary’s OfficeNovember 2008 Executive General Manager of Internal Audit Office and Auditor
April2010 General Manager of Financial Department, Financial Headquarters and AuditorJune2013 Audit & Supervisory Board Member (current)

April
1982		 Joined The Fuji Bank, Limited (current Mizuho Bank, Ltd.)
2004		 Manager of Urawa Branch of Mizuho Corporate Bank, Ltd.
May
November 2005		 Manager of Maebashi Branch of Mizuho Corporate Bank
April
2008		 Manager of Shinagawa Branch of Mizuho Corporate Bank
April
2010		 Chief Auditor, Business Audit Department of Mizuho Corporate Bank
January 2011		 Joined UC CARD Co., Ltd.
February 2011		 Managing Executive Officer of UC CARD
April2020		 Director, Managing Executive Officer of UC CARD
2020		Audit & Supervisory Board Member of DKS Co. Ltd. (current)
June
Director, Audit & Supervisory Board Member of ITmedia Inc. (current)

July
October
June
April
June
June
April
June

1980 Joined DKS Co. Ltd.
2000 	General Manager in charge of General Business Promotion Office, Procurement& Logistics Headquarters
2001 General Manager in charge of Sales Promotion Office, Sales Headquarters
2005 	General Manager of East Supervision Department, Sales Supervision
Headquarters
2007 	Executive General Manager in charge of Personnel & General Affairs
Headquarters
2010 President and Representative Director of Kyoto Elex Co., Ltd.
2011 	Executive General Manager in charge of Procurement & Logistics Headquarters
and President of Osaka Branch2014 Director
2016 	Executive General Manager of RHEOCRYSTA Business Division (Business
Headquarters)
2018 Audit & Supervisory Board Member (current)

NAKA
HideyaHASHIMOTO
KatsumiAudit & Supervisory Board
Member (outside)

Audit & Supervisory Board
Member (outside)

Number of shares held:—

Number of shares held:—

Career summary

Career summary

April
June
June
June
June

April
October
March
May
July
June
July
June

1978		 Joined The Bank of Kyoto, Ltd.
2001		 Manager of Tanabe Branch of Bank of Kyoto
2003		 Manager of Fushimi Branch of Bank of Kyoto
2005		 Manager of Corporate Financial Department of Bank of Kyoto
2007		Executive Officer of Bank of Kyoto (Commissioned Executive General
Manager, Hanshin Sales Headquarters, Sales Administrative Division)
December 2010		Executive Officer of Bank of Kyoto (Commissioned Chair, Nagoya Branch
Opening Committee)
2011		Executive Officer of Bank of Kyoto (Commissioned General Manager,
April
Nagoya Branch)June2013		Managing Executive Officer of Bank of Kyoto (Commissioned General
Manager, Nagoya Branch)June2015		Managing Executive Officer of Bank of Kyoto (Commissioned General
Manager, Tokyo Branch)
December 2015		Managing Executive Officer of Bank of Kyoto (Commissioned General
Manager, Tokyo Sales Department)2019		 President and CEO, Kyoto Credit Assurance Service Co., Ltd. (current)
June
June
2020		 Audit & Supervisory Board Member of DKS Co. Ltd. (current)

1981		
1984		
1987		
2007		
2010		
2019		
2019		
2020		

Joined Osaka Regional Taxation Bureau
Joined Asahi Accounting, LLC. (current KPMG AZSA LLC)
Registered as a certified public accountant
Representative Partner of Asahi Accounting, LLC. (current KPMG AZSA LLC)
Director of Kyoto Office of KPMG AZSA LLC
Left KPMG AZSA
Established Hashimoto Accounting Office as a Representative (current)
Audit & Supervisory Board Member of DKS Co. Ltd. (current)

Executive Officers (as of July 1, 2020)

Senior Executive Officer

Senior Executive Officer

Executive General Manager,
Sales Headquarters
Executive General Manager,
R&D HeadquartersMISAWA Hideto
IWAISAKO Koichi

Executive
OfficerPresident and CEO, Yokkaichi Chemical Co., Ltd.

HASHIMOTO Masayuki

Executive
Officer

General Manager, Life Sciences Department,
R&D Headquarters and President and CEO of Biococoon
Laboratories, Inc.

SHUDO Takuya

President and CEO, Ikeda Yakusou Co., Ltd.

MIURA Hiroyuki

President and CEO, Kyoto Elex Co., Ltd.

KATAYAMA Toshihiko

Executive General Manager, Production Headquarters

SHIMIZU Shinji

Executive General Manager, Administrative Headquarters

SAKAMOTO Mami

General Manager, Shiga Plant, Production Headquarters

SHIMIZU Koji

General Manager, Yokkaichi Plant, Production Headquarters

OWAN Jiro

General Manager, Ohgata Plant, Production Headquarters

MORI Yoshiyuki

Executive
Officer
Executive
Officer
Executive
Officer
Executive
Officer
Executive
Officer
Executive
Officer
Executive
Officer

DKS REPORT 202045

Six Operating Segments
Six Core Business Segments
Life Sciences

Electronic Device Materials¥427 million
0.7%¥4,744 million
7.7%

Surfactants¥18,970 million

30.9%
Net sales for the year
ended March 31, 2020

¥61,456

Functional Materials¥20,848 million

million

33.9%

Sales by Segment

Amenity Materials¥7,994 million
13.0%

Polyurethane Materials¥8,470 million
13.8%

Surfactants

Amenity Materials

Polyurethane Materials

Providing highly functional surfactants
since the Company’s founding in 1909
■ Nonionic surfactants

Providing materials and peripheral
application technologies necessary for
a comfortable living environment■ Anionic surfactants■ Sucrose fatty acid esters■ Cationic surfactants■ Cellulose polymers

Providing industrial materials andurethane raw materials, for example,
paints, adhesives, civil engineeringand construction materials, electric
insulating materials■ Amphoteric surfactants■ Vinyl polymers■ Polyether polyols■ Polymerizable surfactants■ Acrylic polymers■ Urethane prepolymers■ Urethane systems

Functional Materials

Electronic Device Materials

Life Sciences

Providing products that are essential
to daily life and home electronics, forexample, flame retardants, radcure
resins, waterborne polyurethanes

Providing ceramic materials andconductive pastes for home appliancesand electronics components

Providing naturally derived healthfoods and technologies for extraction,
concentration and powdering of natural■ Conductive pastes for electronics

products■ Radiation-curable monomers/oligomers■ Injection molding pellets■ Waterborne polyurethanes■ Functional inorganic materials■ I. Japonica-Bombyx Fungus■ Flame retardants■ Amide-based lubricants

46

DKS REPORT 2020

■ Sudachin

Where Have We Come From,
Where Are We Going?

How Should We Manage?

How Can We Be Sustainable?

Business Activities Report

Data Section

Promoting FELIZ 115
long term and sharing them with customers. The fourth issue,“enhance training for sales personnel,” involves taking necessary
actions in an appropriate manner, such as emphasizing manager
communication with subordinates, establishing manuals andidentifying operations. We have upgraded platforms for consistently
exchanging information that include digitalizing daily sales reports,
but I see plenty of room for the people to use them more speedily.

Q

Please tell us your thoughts about inspiring/inspired
partnership growth strategies.

In the inspiring/inspired partnerships, the key phrase is sustainable
and mutual growth. This requires creating beneficial relationships
able to generate sustainable profits and growth through amutual understanding of technology and operating conditions.
Valuing long-term business relationships, creating supplemental
Managing Director & Sales Supervisor, in Charge of Tokyo Headquarters

OKAMOTO Osami

relationships and sincerely addressing issues will lead to thecreation and enhancement of trustworthy relationships. I also feelthe importance of enhancing my own sales ability as the person
responsible for the Sales Headquarters to properly outline growthstrategies. Sometimes, top-to-top communication is the only way

The Sales Headquarters will pursue customer-oriented

to know what customers really expect of us.

policies and promote inspiring/inspired partnerships toachieve FELIZ 115.

Q

What is your approach for implementing the key

With demands being placed on companies toQhelp create a sustainable society, please shareyour ideas on business expansion through SDGs
and ESG.

initiatives of FELIZ 115?
The DKS Credo and DKS Mottoes are extremely important

I have provided various ideas regarding four issues from the current

elements for sales and profit growth based on an awareness offiscal year as the person responsible for the Sales Headquarters:

the SDGs and ESG. Since joining the Company, I have always

1) promote businesses expected to be sustainable, 2) identify

kept in mind the DKS Credo, “Contributing to the nation andprofit-generating businesses, 3) engage in more customer-oriented

society through industry,” and the DKS Mottoes, “Quality First,”

sales activities and 4) enhance training for sales personnel.

“Cost Reduction” and “R&D Efforts,” which are the cornerstones

The first issue, “promote businesses expected to beof the DKS spirit. I believe this closely imbues our SDG and ESG

sustainable,” refers to businesses that steadily boost long-term
earnings based on stable raw materials procurement and few risks

concepts and initiatives.
Sales departments must take actions that fully consider

posed by chemical substance regulations. In addition, the ability

environmental burdens while targeting sustainable societal growth.

to maintain stable production is important given issues associated

Designing products that meet customer requirements is a matterwith aging production facilities. The second issue, “identify

of course, while the environment and society should be criticalprofit-generating businesses,” goes beyond just corporate profit

elements of our product design. We are searching for an approachcontributions to include margin size, technological evaluations

that generates sales and profits by contributing to society whileof products and whether they contribute to sustainable societal

simultaneously addressing environmental and social issues

growth. The third issue, “engage in more customer-oriented sales

throughout the production process, extending from raw materials

activities,” involves the long-term stable supply of products thatprocurement to product sales.

meet customer requirements at reasonable prices. I believe sales

We aim to contribute to society and achieve sustainable

activities undertaken by sales departments have not always been

growth underpinned by the DKS Credo, the DKS Mottoes, thesufficient. We need to build a win-win relationship with customers

SDGs and ESG.

by continuously pursuing customer-oriented themes over the

DKS REPORT 202047

Six Operating Segments

Surfactants
IT & electronics

Soap & detergents

Paints & colorants

Segment outline
Since the Company’s founding in 1909, the surfactants segment has provided core technologies that have supported DKS for more than 100
years. DKS surfactants provide high added value in a wide variety of fields and applications, including soap and detergents, IT, electronics,
rubber and plastics, paints and color materials, and energy through their emulsifying, dispersing, solubilizing, penetrating, wetting, foamingand defoaming, and surface modifying functions. In recent years, we have also been promoting the development of products that arecompatible with the globally increasing consideration for the environment. We currently develop and manufacture these products withpetrochemicals and oils/fats as key raw materials primarily at the Yokkaichi Branch (the Chitose and Kasumi Plants), the Shiga Branch andYokkaichi Chemical Company Limited.

A review of the fiscal year ended March 2020 and ouroutlook for the future
During the fiscal year ended March 2020, net sales in this segment weregenerally sluggish.
In Japan, there was significant growth in sales for IT and electronics
applications, but sluggish sales for soap and detergent applications,paints and color material applications, rubber and plastic applications, andmachinery and metal applications.
Overseas, sales were slightly weak for rubber and plastic applications
and paints and color material applications but somewhat sluggish fortextile applications.
Looking ahead, we will focus on providing products customized tomeet customer needs in accordance with the Uni-Top strategy.

The strengths of DKS and the main functions of thebusiness
The typical function of surfactants is to clean (i.e., dirt removal), whichis represented in the well-known item “soap.” Surfactants act on thesurface of substances that do not mix, such as oil and water, and display
emulsification and dispersion actions to remove dirt. Recently, however,the functions that the Company’s customers require for surfactants
have evolved beyond simply cleaning to more sophisticated and uniqueapplications that reflect the advancement of the industry. Having developed
a reactive surfactant that after demonstrating its function as a surfactant
improves water resistance and other characteristics—a Japan-original
indigenous technology—the Company is focusing on expanding thatmarket.

Net Sales

The surfactant synthesis, analysis and evaluation technology developed
over its more than 111-year history has enabled the Company to provide
performance and functions tailored to customer needs through its
numerous product lines and combinations.
As a Uni-Top strategy under FELIZ 115, our new medium-term
management plan, we are regarding our use of finely tuned technologies
to meet the performance requirements of our customers as a strength andaiming to expand sales.

Relationship between the segment and society
This segment is leveraged by the Company’s many years of experienceand accumulated technologies. The industrial fields in which the growthof reactive surfactants can be expected in the years to come include thepaints and coatings field as well as adhesives. On the other hand, there arevarious competitors in this business, such as domestic manufacturers ofdetergents and emulsifying and dispersing agents. However, our abundantlineup of products has enabled us to introduce optimal products thatmeet customer needs, while we are able to conceive high-value-added
products through our unique development approach. Going beyond simply
providing materials, we work closely with customers to find solutions totheir problems.
Amid the global rise in environmentalism, we have been pursuing inrecent years research and development on highly biodegradable, ecofriendly products that do not cause water pollution.

Operating Income-13.1%(Millions of yen)
25,00020,77921,416

21,83819,793

18,97020,000(Millions of yen)
2,500

2,190

2,094

2,171

-15.8%

2,000

1,558
15,0001,500

10,000

1,000

5,000

500

0

3/20163/20173/20183/2019Note: Figures have been updated to account for the addition of a new segment.

48

DKS REPORT 2020

3/202001,312

3/20163/20173/20183/2019Note: Figures have been updated to account for the addition of a new segment.

3/2020Where Have We Come From,
Where Are We Going?

How Should We Manage?

How Can We Be Sustainable?

Business Activities Report

Data Section

Amenity Materials
Personal care

Food

EnergySegment outline
The Amenity Materials segment provides materials and peripheral application technologies necessary for a comfortable living environment. The
Company provides materials suitable to the products of customers in a wide range of industries including foods, pharmaceuticals, cosmetics, toiletries,
fisheries/livestock, textiles, pulp/paper, civil engineering, agrochemicals and agro-materials. In particular, products made from naturally derived raw
materials, such as sucrose, fatty acids and pulp, are delivered to our way of life as safe and reliable materials.
In addition to core-technology surfactants, DKS manufactures products made from natural raw materials, including sugar and pulp, at the Ohgata
and Shiga Branches.

A review of the fiscal year ended March 2020 and ouroutlook for the future
During the fiscal year ended March 2020, net sales in this segment weregenerally somewhat weak.
In Japan, sucrose fatty acid esters (SEs) performed well in foodapplications, but vinyl polymers performed somewhat sluggishly in rubber
and plastic applications. Sales of cellulose polymers were robust for
agricultural and agrochemical applications and favorable for pulp andpaper industry applications.
Overseas, sales of SEs were favorable for food applications but slightly
weak for cosmetics applications.
Looking ahead to the overseas market in the years to come, we will
aim to improve comfort in people’s daily lives by providing highly functional
products while working to cultivate customers.

The strengths of DKS and the main functions of thebusiness

SEs are used as an emulsifier for oil/fat and cream and as a texture
modifier, for example, in cookies and snack foods. Recently, we finely
divided naturally derived cellulose fibers using nanotechnology andestablished technologies to produce a new material called cellulose
nanofiber (CNF). Leveraging its characteristic viscosity and emulsifying,dispersing and stabilizing properties, CNF is a noteworthy material that canbe used in personal care and general industrial applications.

Relationship between the segment and society
This segment targets industrial fields that place an emphasis on safety,
such as food, personal care products and pharmaceuticals, as end
products that are placed in the mouth, come into contact with skinand stimulate the five senses. Demographic trends indicate that major
Japanese market growth looks unlikely.
However, while maintaining its current customer base, the Company
will strive to secure stable sales and profitability in Japan. As growth fields,
we will also aim to expand sales of products centered on, for example,
overseas food and cosmetics applications.

With more than 65 years of experience in cellulose polymers using pulp
and more than 50 years of experience in SEs using sugar, the Company
has a long history in product development and is developing markets
based on the basic and application technologies accumulated to date.
Among these, SEs are highly characteristic as an edible surfactant andDKS is one of only a handful of companies worldwide producing them.

Net Sales

Operating Income-0.5%(Millions of yen)
10,0008,000(Millions of yen)
750

7,208

6,986

7,502

8,031

638

7,994
600

-39.5%

465
6,000

450

4,000

300

2,000

150

0

3/20163/20173/20183/2019Note: Figures have been updated to account for the addition of a new segment.

3/2020

0

409

413

281

3/20163/20173/20183/20193/2020Note: Figures have been updated to account for the addition of a new segment.

DKS REPORT 202049

Six Operating Segments

Polyurethane Materials
Construction

Civil engineering

Synthetic lubricants

Segment outline
The segment provides polyurethane materials and industrial materials, including paints, adhesives, civil engineering and construction materials
and electric insulation materials. The Company possesses technologies used to manufacture high-elasticity urethane rubber and urethane
elastomers as well as soft/rigid urethane foams. The Company leverages these properties to provide a variety of high-performance urethane
products for a wide array of industries and applications that include cushioning, thermal insulation, molding and painting materials.
Rock hardening agents used for mountain tunnel projects such as roads and railways are an essential product for infrastructure upgrading.
The Company’s products play a role in maintaining safety in environments where one misstep can put people’s lives in jeopardy.
With petrochemicals as the mainstay raw materials in the segment, the products are mainly manufactured at the Yokkaichi Branch (theChitose and Kasumi Plants).

A review of the fiscal year ended March 2020 and ouroutlook for the future
During the fiscal year ended March 2020, net sales for this segment weregenerally sluggish.
Sales of civil engineering chemicals were strong, but sales of ecofriendly synthetic lubricants in line with HFC regulations and materials forcivil engineering and construction fell sharply.
Rock hardening agent sales are expected to grow as construction for
the Linear Chuo Shinkansen project proceeds.

The strengths of DKS and the main functions of thebusiness
The Company’s urethane materials are used mainly in paints, adhesives,
civil engineering and construction and electric insulation materials, with theoverriding priority of ensuring people’s safety through applications mainly
for transportation equipment, civil engineering projects and electronicmaterials. With the recent diversification of electric appliances and theincorporation of IT in automobiles, electronic components are being used
under increasingly severe conditions. Meanwhile, the need for lightweight,
compact and integrated electronic components has increased, while
components now need to be protected from physical and chemical effects
to maintain strength and ensure durability. Lightweight, strong urethane
resin plays a key role in this area. The Company’s electric insulationmaterials, which feature a superior balance of insulation, heat-resistantand flame-retardant properties, have a wide range of uses, from home
appliance to transportation equipment components, to meet the exacting
needs of customers.

Net Sales

Relationship between the segment and society
After construction had proceeded as planned, the Kasumi Plant located in
Yokkaichi, Mie Prefecture, began operations in December 2015 and serves
as a mother plant that accounts for one-third of the 100,000-m2 site area.
The rock hardening agents manufactured at Plant #1 are indispensable
materials for tunnel construction, including roads and railways. These
products are contributing to infrastructure projects that make people’s lives
more convenient.
Plant #3, which manufactures functional polyurethane resin,commenced operations in December 2019. Against this backdrop, we will
redouble our initiatives with inspiring/inspired partners.
Based on our Uni-Top strategy, we will pursue the development ofmaterials by combining cutting-edge facilities and application technologies
that meet customer needs and are in tune with the times.

Operating Income-6.2%(Millions of yen)
10,000In addition, our rock hardening agents for tunnel construction have abroad array of uses that include public roads and railways while boasting ahigh market share based on their safety and performance.
We will conduct employee training at the safety training center locatedat the Kasumi Plant, where these products are manufactured, with the aimof generating Group-wide synergies.

8,934

9,093

9,115

9,026

8,470

(Millions of yen)
300

230

200

8,000

127

100

100

41

-235

3/20193/2020

6,000
0
4,000
-100
2,000

0

-200

3/20163/20173/20183/2019Note: Figures have been updated to account for the addition of a new segment.

50

DKS REPORT 2020

3/2020-300

3/20163/20173/2018

Note: Figures have been updated to account for the addition of a new segment.

Where Have We Come From,
Where Are We Going?

How Should We Manage?

How Can We Be Sustainable?

Business Activities Report

Data Section

Functional Materials
Electronics

Flame retardants for plastics

Films

Segment outline
The functional materials segment provides technologies and materials contributing to advanced performance, including resins used indaily necessities, as well as IT and electronic materials often used in personal computers, smartphones and home electronics. Some of thesegment’s products include plastic flame retardants, antistatic agents, lubricants, anticlouding agents to reduce film and resin clouding,antioxidants suppressing oxidation degradation in a variety of materials, and radiation-curable monomers and oligomers using radcure (UVor EB-curing) technology. The waterborne polyurethanes being developed since 1973 are used in wood and plastic paints, metal and paper
coating agents, film and wood adhesives, and paper/fiber binding.
These products are manufactured at the Yokkaichi Branch (the Chitose and Kasumi Plants) and the Ohgata Branch.

A review of the fiscal year ended March 2020 and ouroutlook for the future
During the fiscal year ended March 2020, the Functional Materials segment
generally saw notable growth in net sales.
In Japan, there was strong growth in the brominated flame retardants
used in rubber and plastics applications and notable growth in radiationcurable monomers and oligomers for IT and electronics applications.
Overseas, there was a sharp fall in sales of the brominated flame
retardants used in rubber and plastics applications but notable growth
in radiation-curable monomers and oligomers for IT and electronics
applications.
The expansion in radiation-curable monomers and oligomers represents
a success story in our cooperation with our inspiring/inspired partners.

with our inspiring/inspired partners to develop innovative one-of-a-kindproducts. The DKS brominated flame retardant’s raw material is sourced
from a global bromine production site, and because the raw material pricecan fluctuate based on bromine market conditions, it is important for DKS
to maintain proper controls on product prices. Brominated flame retardants
exhibit greater stability and stronger flame retardancy for rubber and plastic
materials than do phosphorus and inorganic flame retardants.

Relationship between the segment and society

The technology used in radiation-curable monomers and oligomers iscalled radcure technology, in which a resin composition such as paint isinstantaneously dried and cured by irradiating it with ultraviolet light (UV)or an electron beam (EB). Radcure technology is widely used in several
applications across a variety of fields to conserve resources and energy
and to reduce environmental impact. Applications include the clear paintused in building materials and furniture; anticorrosive paint for metals; resist
materials for semiconductors, dry films and LCDs; and coating agentsfor mobile phones, optical fibers, plastics and paper. DKS monomers arehighly functional alcohol-based products using ethylene oxide (EO) addition
technology, which results in low curl, low viscosity and enhanced hardness.
Our BtoBtoC business model focuses on a cooperative relationship

While many urethane resins are based on organic solvents, DKS is also
researching and developing waterborne polyurethanes, in which thepolyurethanes are dispersed in water, largely in reaction to rapidly growing
demand for safer water systems as society places increased importanceon environmental concerns. In addition to being safe for the environment
and people, we believe these products are likely to see increased demand
thanks to their ability to allow high-performance finishing in a variety
of applications, including paper and metal processing, as well as film
processability. Given the global trend away from organic solvents, this is a
product group on which we are focusing our energies.
The target markets for this business show a strong potential for
growth and are in areas both in Japan and overseas in which DKS candemonstrate its strengths. While competitors include electronic materials
manufacturers and overseas flame-retardant manufacturers, the Company
looks to secure growth through its innovative technologies and proposal
capabilities.
Construction of a new plant for radiation-curable monomers andoligomers has been completed in June 2020, and it commenced
commercial production in September 2020.

Net Sales

Operating Income

The strengths of DKS and the main functions of thebusiness+28.4%(Millions of yen)
25,000+17.8%(Millions of yen)

2,832

3,000

20,84820,000

2,404
2,400

16,23915,000

11,25912,517

1,926

14,070

1,800

1,305

10,000

1,200

5,000

600

673

0

3/20163/20173/20183/2019Note: Figures have been updated to account for the addition of a new segment.

3/202003/20163/20173/20183/20193/2020Note: Figures have been updated to account for the addition of a new segment.

DKS REPORT 202051

Six Operating Segments

Electronic Device
Materials
Ceramic materials

Solar cells

Lithium ion battery cells

Segment outline
As the information society continues to advance, as evidenced by the rapid spread of the Internet and smartphones, the electronic devicematerials segment is focused on developing and supplying ion-conductive polymers, ionic liquids, ceramic materials and lithium-ion battery
materials, as well as conductive pastes for solar cells.
In 2018, we dissolved Elexcel Corporation and moved the former company’s operations to the R&D Headquarters, with a corresponding
shift to an organizational system specializing in the research and development of lithium-ion battery materials. We intend to further develop
our innovative technologies in each area of operation, while also promoting R&D in line with the trends of the times. Mainstay products in theelectronic device materials segment are produced at subsidiary companies Kyoto Elex and Dai-ichi Ceramo.

A review of the fiscal year ended March 2020 and ouroutlook for the future
Generally, there was significant growth in net sales in this segment in thefiscal year ended March 2020.
Sales of ionic liquids for display applications were strong, and there
was significant expansion in sales of conductive pastes for solar cells.
One threat to the segment is the improvement in technological abilities
in countries throughout Asia, including China. However, by developing
new markets and building firm relationships with customers based on the
BtoBtoC business model, we intend to offer added value that cannot bebeaten by cost competitiveness alone.

The strengths of DKS and the main functions of thebusiness
DKS is focused on advancing business activity at subsidiary companies
using its innovative technologies. The Company’s surface chemistry,
which is its core technology, is used in the mixing techniques of resinsand ceramic powders or organic materials and metal powders. DKS
can conduct mixing operations under special conditions and with ahigh level of viscosity thanks to its detailed know-how in the process.
Compound technology is one of our key strengths, allowing us to provide
specific materials that meet the needs of our customers. One example isconductive pastes, which have precious metals as the main raw material
and are made with inorganic fillers and soluble binders. Conductive pastes
improve functionality in the electronic devices and components used insolar cells, automobiles, smartphones, LEDs, office equipment and medical
equipment. Materials for ceramic and metal powder injection molding are

Net Sales+13.0%(Millions of yen)
5,000

4,850

4,600

4,744

used to produce small and difficult-to-process complex three-dimensional
ceramics and metal parts. They often are used in electronic devices suchas smartphones, precision components such as watches and medical
equipment, and automotive and optical communication components. The
segment also can provide powder injection molding compounds made by
precisely mixing raw material powder, binder and dispersant.
Another one of our strengths can be found in lithium-ion batteries,
where we handle everything from materials research and development to
the manufacture of prototype lithium batteries.

Relationship between the segment and society
The lithium-ion batteries (LiB) used in electric vehicles generally employ
lithium phosphate as an electrolyte and an organic solvent as an electrolytic
solution. However, because there is a risk of organic solvents igniting,manufacturers have been careful to incorporate safety measures, including
adding in flame retardants. We have developed an ionic liquid thatremains in that state at 100°C and below, has no vapor pressure and is
nonflammable, and because it is highly safe and has high ion conductivity,
we are developing electrolyte applications for lithium-ion batteries andcapacitors. These kinds of liquids are also attracting attention as nextgeneration materials in the energy device field and as green solvents for
reducing environmental impacts. Through these products and efforts, thesegment is playing an important role in making all our lives safer and more
comfortable. While the improving technological capabilities of countries in
Asia, including China, are a threat, we believe growth is possible by offering
our proprietary technologies, R&D capabilities and solid quality.

Operating Income(Millions of yen)
400

335

4,199
3,862

4,000

300

215
3,000

200

2,000

100

1,000

０

3

3/20163/201703/20163/20173/20183/2019Note: Figures have been updated to account for the addition of a new segment.

52

74
-65

DKS REPORT 2020

3/2020-100

3/20183/2019Note: Figures have been updated to account for the addition of a new segment.

3/2020Where Have We Come From,
Where Are We Going?

How Should We Manage?

How Can We Be Sustainable?

Business Activities Report

Data Section

Life Sciences
I. Japonica-Bombyx Fungus dietary supplement

Sudachin

Segment outline
With its full-scale entry into the life sciences business in July 2018, the Company acquired two companies, Biococoon Laboratories, Inc. and
Ikeda Yakusou Co., Ltd. as wholly owned subsidiaries. Advancing research and product development with a focus on natural raw materials,
extraction and high concentration technologies from natural products and mass production technology, this segment supplies health foodproducts that include an I. Japonica-Bombyx Fungus (Cordyceps sinensis) dietary supplement and Sudachin (peel extract powder made fromsudachi, a citrus fruit). The company Biococoon Laboratories is promoting the quantification of a new substance that it is hoped will havean effect on dementia and proceeding with the search for high production conditions. Having established extraction and high concentration
technologies from natural products, Ikeda Yakuso is also working to stabilize product quality and deliver products to customers with the priority
being safety and reliability.

A review of the fiscal year ended March 2020 and ouroutlook for the future
Net sales for the year ended March 31, 2020, increased by ¥188 million
year on year to ¥427 million. Sales of the I. Japonica-Bombyx Fungus
dietary supplement were firm, and there was growth in sales from thecontract manufacturing business, such as pharmaceutical raw materials
and health food products produced by concentrating and powdering
extracts from natural products.
Under the new FELIZ 115 medium-term management plan, we willconcentrate management resources in this business and aim to lay thefoundations for the future by creating and strengthening new businesses in
conjunction with regional revitalization at an early stage.

The strengths of DKS and the main functions of thebusiness
In December 2019, a new manufacturing plant for I. Japonica-Bombyx
Fungus, which is made with only pure domestic ingredients, wascompleted at Biococoon Laboratories in the town of Tanagura, Fukushima
Prefecture. Having acquired HACCP1 certification, the company has
further enhanced its quality control systems to manufacture and provide
consumers with safe and reliable health food products. Possessing
manufacturing facilities that have acquired GMP2 for pharmaceuticals,
Ikeda Yakuso manufactures and provides safe and reliable products. The
company also undertakes contract manufacturing business for products
related to drug substances and foods based on high-quality powdering
technologies. Also able to handle chemical products, Ikeda Yakuso canprovide products with various levels of performance and functions thatmatch customers’ requests.
1. HACCP (Hazard Analysis Critical Control Point): A food sanitation management method that was developed
to ensure the safety of food used in the U.S. space programs in the 1960s.
2. G ood Manufacturing Practice (GMP): Rules and systems established to ensure that products are
manufactured safely and that consistent quality is maintained in all processes, from the storage of raw
materials to manufacturing and shipping.

Relationship between the segment and society
This business segment is accelerating not only the acquisition of HACCPand GMP certifications in the manufacture and sale of its health foods but
also its initiatives, including industry-government-academia collaboration.
Developed by making effective use of the peeled skins of sudachi, which isa representative and previously untapped regional resource of Tokushima
Prefecture, the peel extract Sudachin arose through industry-governmentacademia collaboration with Tokushima University and Tokushima
Prefecture. Currently, focusing on the anti-diabetic and anti-obesity effectsof sudachitin, one of the polyphenols contained in Sudachin, we areproceeding with the development of new functional foods using Sudachinbased on a regional consortium of industry, government and academia.
In addition, the newly added I. Japonica-Bombyx Fungus (Cordyceps
sinensis) is a health food that has the potential to help address the rise indementia patients, a social issue taking hold in Japan. A venture company
from Iwate University, Biococoon Laboratories, is proceeding with clinical
trials aimed at receiving permission to label this product as a food withfunctional claims. We will pursue research and development to extend
people’s healthy lives that reflects the spirit of the DKS Credo: “Contributing
to the nation and society through industry.”

Net Sales

Operating Income(Millions of yen)

(Millions of yen)

500

427

200

400

-203

-370

3/20193/2020

0
300

239

200
-200
100

0

3/2019Note: Figures have been updated to account for the addition of a new segment.

3/2020-400

Note: Figures have been updated to account for the addition of a new segment.

DKS REPORT 2020

53

Fundamental Knowledge of Surfactants

Generally, an “interface” refers to the border area between two materials of different states of solid, liquid or gas. A surface active
agent, or surfactant, is a term for a chemical that exhibits functions and improves the performance of these interfaces.

Basic Structure of Surfactants
Surfactants have a unique chemical structure that has bothdispersion, foaming and adsorption by weakening surface tensionhydrophilic and hydrophobic properties. Using this structure,or forming molecular aggregates or micelles (spheres).

surfactants can achieve a variety of effects such as emulsification,

Oil / water
Oil / water
Fine powder
Fine powder

Air

Surface (interface) tension reduced

Water Water

Add surfactants

Oil

Add surfactants

Oil

Surface (interface) tension reduced

Functions of surfactants by reducing surface tension

Surfactant solutions

EmulsifiesEmulsifies

Emulsion
Emulsion
Disperses Disperses

a Extremely
a Extremely
thin solution
thin solution b Thin bsolutionThin solution

Dispersion
Dispersion
Hydrophilic Hydrophilic
group
group
Makes
Makes
foam
foam

Air

HydrophobicHydrophobic
group
group

Water Water

Foams Foams

c Criticalc micelle
Critical micelleconcentration
concentration
solutionsolutiond Higherd Higherconcentration
concentration
solutionsolution

Surfactant Types
Surfactants have four main structural types based on the functions

form ions. The three ionic surfactants are further subdivided based

they are designed to achieve. Of these four types, three are ionicon the type of ion they form in water: anionic (or negative ion)surfactants that transform into electrolytic dissociation ions (atoms

surfactants, cationic (or positive ion) surfactants and amphotericor groups of atoms bearing an electrical charge) when dissolved in(containing both positive and negative ions) surfactants.

water, and the remaining type is nonionic surfactants, which do not

Types of surfactants

54

Characteristics

Main applications

Anionic surfactants• Superb emulsifying a
 nd dispersing properties• Good foaming• Not susceptible to temperature

Laundry detergent• Absorbed by textiles, etc.
• Antistatic effect• Sterilizing effectHair conditioner

Cationic surfactants

Amphoteric surfactants• Non-irritative to the skin
• Superb solubility in water• Synergetic effects with other surfactants

Nonionic surfactants• Balance of hydrophilic and hydrophobic p
 roperties easily adjustable• Superb emulsifying and solubilizing properties• Low foaming• Susceptible to temperature

DKS REPORT 2020

ShampooShower gel
Fabric softener

Disinfectant
Shower gel

Dishwashing liquid

ShampooLaundry detergent

Emulsifier/solubilizer

Dispersant

Metal processing oil

Where Have We Come From,
Where Are We Going?

How Should We Manage?

How Can We Be Sustainable?

Business Activities Report

Data Section

Main Actions and Applications
Function

Actions and effects

Applications

Emulsifying, dispersing

Mixes water and oil and makes an emulsion. Makes a uniform

Mixes incompatible substances

dispersion with fine particles floating on the water surface.

Moistening, permeating
Makes wetting and permeation easier

Making or removing foam

Spreads agrochemicals thin and uniform on the leaf surfaces.
Evenly disperses dyestuff and finishing agents on textiles andleathers.

Takes in air bubbles in water and stabilizes. Prevents foaming.

Makes and/or removes foam

Cleaning
Removes dirt

Removes dirt by moistening the surface of textiles and dirt,
taking the dirt off the textiles by penetrating in between them,and emulsifying/dispersing the dirt.

Softening, smoothing

Improves the smoothness of yarns in the spinning and/or

Softens and smooths

knitting process and makes soft and smooth-textured textiles.

Prevents static electricity generation by making the surfaces

Antistatic

smooth. Makes static electricity easier to escape by forming

Prevents static electricity

a water-absorptive coating on the surface.

Rustproofing
Prevents rust

Adheres to the metal surface and forms a coat to prevent
oxygen (air) and water from contacting the metal and causing
rust.

Leveling, fixing

Makes the dyestuff gradually be absorbed by the textiles andPrevents uneven dying, enhances dye fastness

brings about uniform dyeing.

Sterilizing

A positively charged surfactant is absorbed to negatively

Removes bacteria

charged bacteria, destroys the cells and sterilizes.

Ice cream,margarine,
paints, inks

Pesticide spraying,permeation ofdyestuff and finishing
agents on textiles

Foam concrete,
light gypsum boards

Householddetergents, bathsoaps, machineryand metal cleaning
agentsTextile finishing
agents, metal
processing oils
Antistatic anddustproofing
treatment forsynthetic fibers andplastic products

Metal surface
treatment

Textile processing

Hand sanitizer

Main Actions and Applications
Domestic wastewater contains surfactants. Most such wastewater

Because surfactants are biodegradable, even if released into

is collected and treated at public sewage treatment plants andthe environment they eventually degrade to carbon dioxide andreleased to the environment although some could be released

water by bacteria. To preserve the natural environment, products

directly to rivers/oceans or land.

with high biodegradability are being developed and proactively
used in Japan.

DKS REPORT 2020

55

Proprietary Technologies of DKS
Technical Road Map: Proprietary Technologies
Precisionequipment

Electric
equipment

Transportationequipment

Chemicals

Cosmetics

Electric
equipment
Glycidylation

Transportationequipment

Construction

Chemicals

Phenolderivatization

Potting

Glass

Ionic liquid
Polymer function
designing

Organic-inorganic
hybridization

UV/EB curing

Urethane forcivil engineering

Polymer synthesis

Isocyanate blocking
Flame retardation

TextileUrethanization

Bromination

Electric
equipment

Cellulose
nanofiberization

Battery evaluation/assembly

Nano-dispersion
Wet dispersion

Polymer modification

Emulsion polymerization
Polymerizable emulsifierEmulsification/
dispersion

Food application
evaluation

Interface/surface control
Alkylene oxide
function designing
Alkylene oxide
addition

Cellulose
modification

Sucroseesterification

Surfactants
Chemicals

TextileFisheries/
agriculture
andforestry

Synthesis, blending,evaluation, analysis
and application
technologies

Precision cleaning
agents evaluation
Hard surface
treatment

Food
products
Extraction& drying
Fungiculture

Precisionequipment

Machines
Steel

Technologies are
multiplied to produce
new technologies

Basic Technologies
Interface/surface control technology
A variety of applications can be achieved with surfactants, for example, emulsification, dispersion, solubilization, wetting/penetration, surface/interface tension control, foaming/defoaming and surface
modification. The primary applications of surfactants are emulsification and dispersion for mixing together substances that normally are not mixed together. For example, although water and oils
will separate after being mixed, adding a surfactant as an intermediate between water and oils enables the creation of stable emulsion. When washing dishes to which oil residue has adhered, thesurfactant is first absorbed into the oil residue, where it reduces the interface tension between the oil and dishwashing liquid. Next, the liquid enters between the oil residue and dishware via wetting/penetration. Finally, oil residue is separated from the dishware through physical force such as washing by hand. The residue is adsorbed into the micelles formed by the surfactant and then dispersed
throughout the liquid, which prevents re-adherence of the residue. In this way, the surfactant’s surface tension reduction function, wetting/penetration effect and other effects such as emulsification,solubilization and dispersion are major factors in the washing effect. Moreover, improving the wettability of paint and adding various functionality (e.g., leveling1, water/oil repellent, antifouling, lubricity)
can be included as types of technology for surface modification and interface control. These surfactants exhibit superior solubility in solvents and a high surface tension reduction function with a small
amount of use. For example, fluoropolymers are widely used in water- and oil-repellent agents for textile. Our Company is working to develop PFOA (perfluorooctanoic acid)-free fluoropolymers throughthe synthesis of various surfactants and the use of application technology. This makes it possible to respond to needs for surface/interface control, which had been difficult to achieve using conventionalsurfactants.
>> See P. 48
1. To smooth the surface

Alkylene oxide addition technology
This technology adds ethylene oxide (EO) and propylene oxide (PO) to raw materials of higher alcohols derived from natural sources such as coconut oil or palm oil, as well as phenols and amines.

Alkylene oxide functional design technology
Through the addition of alkylene oxide (AO), in addition to EO and PO sequencing such as random polymerization and block polymerization, this technology enables desired control for the number ofadded moles. This makes it possible to freely design a surfactant composition, which satisfies the required performance.

Urethanization technology
This technology synthesizes a urethane resin that is a polymer compound possessing urethane bonds in the main framework of the molecular structure. Through diverse combinations of the raw
materials polyisocyanate and polyol, it is possible to change the type and length of the structural chain and to change the structure of both ends, thus creating a variety of physical properties. This
makes it possible to create substances such as elastic urethane rubber and urethane elastomer, as well as soft/hard urethane foam in conjunction with foaming reaction. By utilizing these properties,
these substances can be used in products such as cushioning, thermal insulation, molding and coating materials. In addition, water-based urethane resin can be obtained by emulsifying urethane resin.
Our Company’s products can be broadly divided into nonreactive and reactive. Nonreactive water-based urethane resin is an emulsion product of urethane resin. Reactive water-based urethane resin
is produced by using a blocking agent to protect the terminal isocyanate groups generated by the reaction between polyisocyanate and polyol and emulsification. Reactive water-based urethane resin
is composed of the two basic structures of a soft segment and a hard segment, and it undergoes quasi-crystallization during the resin molding process. Consequently, it combines flexibility, toughness
and elasticity and possesses superior solvent resistance and adhesion. Because the material combines safety and high functionality, it is used in a wide range of processes such as film, metal, paper
and textile.

Cellulose modification technology
This technology synthesizes anionic water-soluble polymers with cellulose as the main raw material. The CMC (sodium carboxymethyl cellulose) synthesized via this technology can be used in various
applications by changing the length of the molecular chain and the addition quantities of the carboxymethyl group. CMC is known as a food additive, is easily dissolved in either cold or hot water andbecomes a viscous liquid that is colorless and transparent. It has an extensive record of use as a thickening stabilizer. Uses include as a thickening agent for food seasonings and a binding agent for fish
feed and pesticides. CMC is known for functioning as a high-performance dispersion stabilizer. It is applied to products seeking an even higher level of functionality, for example, a dispersion stabilizer oflactoprotein in lactic acid bacteria beverages, an anti-redeposition agent in detergents and a dispersion/thickening stabilizer for toothpaste.

56

DKS REPORT 2020

Where Have We Come From,
Where Are We Going?

How Should We Manage?

How Can We Be Sustainable?

Business Activities Report

Data Section

Sucrose esterification technology
This technology is used to obtain sucrose fatty acid esters (SEs), a non-ionic surfactant where natural sucrose is part of the hydrophilic group and higher fatty acids such as stearic acid and oleic acidare part of the lipophilic group. The high safety of SEs is recognized by international organizations (Joint FAO/WHO Expert Committee on Food Additives), and SEs are approved as a food additivein Japan since 1959. In addition to food products, SEs are used in a wide range of products such as pharmaceuticals and personal care products. Examples include emulsifiers, viscosity modifiers,
anti-aging agents for starches and texture modifiers. Synthesis methods of SEs can be broadly divided into an esterification reaction method that uses fatty acid chlorides and fatty acid anhydrides, atransesterification method with lower alcohol esters of fatty acids and an enzyme method using enzymes such as lipase as the catalyst.

Cellulose nanofiberization technology
This technology is used to create the new material cellulose nanofibers (CNFs) by chemically or physically treating the naturally derived cellulose fibers to reduce the fiber width to a nano meter size.
Our Company’s CNFs are exceptional for their extremely fine fiber width on the single nano level. This fineness is achieved via chemical modification processing. Furthermore, by utilizing its exceptional
characteristics such as viscosity behavior, emulsification and dispersion stability effect, our CNFs can be used in products such as cosmetics and general industrial products.

Emulsion polymerization technology
This technology conducts polymerization2 by using surfactants to emulsify in water the monomers that do not dissolve in water. This enables synthesis of high molecular weight polymers that cannot be
obtained via bulk polymerization or solution polymerization. Furthermore, because the polymer system is surrounded by water, it is easy to remove polymerization heat and perform stable temperature
management. A polymerizable surfactant is a type of surfactant that possesses a radical polymerizable group3. It is used as an emulsifier for emulsion polymerization. Through copolymerization withmonomers during the process of the emulsion polymerization, it improves the mechanical stability, chemical stability, freezing/thawing stability and foaming property of polymer dispersion, and improves
the water resistance of the polymer film.
2. A reaction in which two or more molecular compounds having a simple structure are combined to form another compound having a large molecular weight. A molecular compound before polymerization is called a monomer.
3. The production of vinyl polymer is an important reaction, and refers to addition polymerization in which the growth chain is a radical (free group).

Application Technologies
Nano-dispersion technology
This technology stably mixes immiscible substances to bring out the diverse power inherent in materials. This technology is expected to support dispersants that enable dispersion in the nano range,
various dispersion methods, and applicability to a wide range of materials such as inorganic powder, organic powder and oil. Nano materials can be broadly divided into carbon materials (e.g., fullerene4,nano tubes, nano fibers, graphene5), metals (e.g., gold, silver, copper) and metal oxides (e.g., silica, titania, zirconia), all of which possess diverse characteristics. This technology disperses these nanomaterials into mediums such as water, organic solvents and resins. However, as the particle size of substances is reduced to nano size, the impact of the Van der Waals force6 becomes stronger,
resulting in problems such as particles being prone to agglomeration and a decrease in transparency. Interface control is required to prevent agglomeration.
Function/usage: Electronic and electric equipment (touch panels for smartphones and tablet PCs), cosmetics (sunscreen), eyeglass frames, etc.
4. Carbon atom cluster
5. Hexagonal lattice carbon allotropes
6. Attractive and repulsive forces acting between molecules

Radiation curing technology
This technology instantly dries and cures coatings and paints of radiation-curable resin compounds by irradiating them with ultraviolet (UV) rays or electron beams (EBs). The technology is also calledradcure (UV/EB curing). Radcure technology is used in a wide range of diverse fields due to its ability to conserve resources and energy and reduce environmental load. Its uses include clear coatingsfor construction materials and furnishings; anti-rust coatings for metal; resistance materials such as semiconductors, dry film and LCD displays; coatings for items such as mobile phones, optical fibers,
plastics and paper; printing ink; plate-making materials; and adhesives. Our Company’s monomers are made from the raw material alcohol using EO precision-addition technology. We offer a full lineup
of products with added functionality (e.g., high hardness, low viscosity, low curling).
Function/usage: Adhesives, paints/coatings, printing/marking

Flame retardation technology
This technology adds/disperses compounds containing flame-retardant elements such as bromine, phosphorus, nitrogen, boron, silicon and/or antimony to/in polymer materials to make them flameretardant by a chemical reaction and bonding resulting from it. Recently, out of consideration for the environment, attention is being placed on the use of inorganic compounds such as hydrated
metal compounds (Mg hydroxide, Al hydroxide) and nano-composites7 (MMT8, CNT9). Flame retardants are broadly divided into halogenated and halogen-free products that are based on phosphorus
or inorganic substances. Halogenated flame retardants have superior flame-retarding efficiency and therefore are most widely used as flame retardants for plastics. Our Company’s products are
brominated flame retardants that give sufficient flame retardancy with a small amount of use. Moreover, the products interfere little with the superior properties of plastic, namely, heat resistance, heatstability, UV stability, workability, mechanical strength and electrical properties. The products are capable of satisfying requirements for the flame retarding of plastics, which are increasingly diverse andhave increasingly advanced functions.
Function/usage: Electronic and electric equipment, OA equipment, construction products, automotive products, railway cars, textile, paper, aircraft, marine vessels, etc.
7. A general term for composite materials in which one material is atomized to a size of 1–100 nm and then kneaded into another material and diffused.
8. Montmorillonite
9. Carbon nanotubes

Ionic liquid
Generally, ionic liquid is an ion pair compound that remains in a liquid state at/below 100ºC. It has no vapor pressure and is nonflammable. Because ionic liquid has high safety and ion conductivity, it isused in electrolyte applications such as lithium-ion batteries and capacitors10. Ionic liquid also is attracting attention as a next-generation material in the energy device field and as a green solvent that
reduces environmental impact. Ionic liquid is a salt composed only of ions (anions, cations). It dissolves a variety of organic and inorganic compounds and can conduct ions.
Function/usage: Reactive solvents, extraction solvents; as electrolytes, dye-sensitized solar batteries, lithium-ion batteries, electric bilayer capacitors and actuators; lubricants, dispersants and antistatic
agents, etc.
10. A
 n electronic component that stores and emits electricity (electric charge), also called a condenser. In addition, there are some electric double layer capacitors that have an order of magnitude larger capacitance than conventional
capacitors.

Special Technology
Glycidylation technology
This technology belongs to Yokkaichi Chemical. Via synthesis technology using glycidyl ether, which is a bifunctional aliphatic epoxy compound possessing a flexible framework in the center of themolecule, the technology generates compounds with improved flexibility, toughness and water resistance of cured materials.
Function/usage: Electronic material

DKS REPORT 202057

Consolidated Financial Statements

Consolidated Balance Sheets(Millions of yen)

FY2018Assets

FY2019Current assets

FY2018FY2019Current liabilities

Cash and deposits

7,485

10,336

Notes and accounts payable—trade

12,926

11,386

Notes and accounts receivable—trade17,872

17,422

Short-term loans payable

6,604

7,273

Merchandise and finished goods

9,456

9,357

Lease obligations

227

236

29

22

Accrued expenses

251

310

Income taxes payable

704

702

Accrued business office taxes

37

38

Work in process
Raw materials and supplies

2,451

3,053

Prepaid expenses

276

275

Other current assets

1,803

2,139

Provision for bonuses

678

746

(15)

(12)

Other current liabilities

2,790

2,948

39,361

42,595

Total current liabilities

24,22023,644—6,000

16,862

16,672

Allowance for doubtful accounts
Total current assets
Non-current assets

Non-current liabilities

Tangible fixed assets

Corporate bonds
25,40728,127Long-term loans payable

Accumulated depreciation(14,451)(15,094)

Lease obligations

497

529

Buildings and structures, net

10,955

13,032

Deferred tax liabilities

298

193

Machinery, equipment and vehicles

34,10735,537

Net defined benefit liability

98

111

(28,754)(29,533)

Asset retirement obligations

73

73

5,353

6,003

Other non-current liabilities

264

246

Total non-current liabilities

18,09523,826

Total liabilities

42,31547,470Net assets

FY2018FY2019Buildings and structures

Accumulated depreciation
Machinery, equipment and vehicles, net
Tools, furniture and fixtures

3,795

3,938

(3,235)(3,295)

559

642

Land

9,182

9,227

Leased assets

Accumulated depreciation
Tools, furniture and fixtures, net

1,470

1,717

Accumulated depreciation(902)(1,046)

Leased assets, net

568

670

Construction in progress

3,104

3,697

Total tangible fixed assets

29,72433,274

Intangible fixed assets

Shareholders’ equity

Goodwill

871

675

Others477

455

Capital stock

8,895

8,895

1,130

Capital surplus

7,237

7,250

Retained earnings

15,934

16,882

Treasury shares(1,068)(1,051)

Total shareholders’ equity

30,99831,977

Total intangible fixed assets

1,348

Investments and other assets
Investment securities
Long-term loans receivable

4,037

3,465

268

19

Long-term prepaid expenses

232

257

Accumulated other comprehensive income

Deferred tax assets

91

122

Valuation difference on available-for-sale securities

28

(537)

Net defined benefit assets

569

608

Foreign currency translation adjustment

26

11

Other assets

277

269

Remeasurements of defined benefit plans

271

225

Total accumulated other comprehensive income

325

(299)

Allowance for doubtful accounts
Total investments and other assets
Total non-current assets
Total assets

58

Liabilities

DKS REPORT 2020

(6)

(6)

5,472

4,737

Non-controlling interests

2,266

2,587

36,545

39,141

Total net assets

33,591

34,26575,906

81,736

Total liabilities and net assets

75,906

81,736

Where Have We Come From,
Where Are We Going?

How Should We Manage?

How Can We Be Sustainable?

Business Activities Report

Consolidated Statements of Income

Data Section(Millions of yen)

FY2018FY201959,574
44,13015,44461,45645,991
15,465

4,577
6,525
11,103
4,341

4,679
6,631
11,310
4,154

6
64
63
35
34
47

6
75
62
24
35
54

Total non-operating income

251

258

Non-operating expenses
Interest expenses
Corporate bond interest
Corporate bond issuance costs
Bad debt loss
Other non-operating expenses
Total non-operating expenses
Ordinary income

196
—
—
—
220
417
4,175

200
3
138
400
146
888
3,524

141
141

—
—

96
240
337
3,979
1,110
57
1,168
2,810
229
2,581

160
—
160
3,364
1,102
(88)
1,013
2,350
335
2,014

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Selling expenses
General and administrative expenses
Total selling, general and administrative expenses
Operating income
Non-operating income
Interest income
Dividend income
Share of profit of entities accounted for using equity method
Insurance income
Rent income
Other non-operating income

Extraordinary income
Gain on sales of shares of subsidiaries and associates
Total extraordinary income
Extraordinary losses
Loss on disposal of non-current assets
Impairment loss
Total extraordinary losses
Profit before income taxes
Income taxes—current
Income taxes—deferred
Total income taxes
ProfitProfit attributable to non-controlling interests
Profit attributable to owners of parent

Consolidated Statements of Comprehensive Income
ProfitOther comprehensive income
Valuation difference on available-for-sale securities
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Share of other comprehensive income of entities accounted for using equity method
Total other comprehensive income
Comprehensive income
Comprehensive income attributable to owners of parent
Comprehensive income attributable to non-controlling interests(Millions of yen)

FY2018FY2019

2,810

2,350

(503)
(326)
(8)
(26)
(864)
1,945
1,824
121

(565)
24
(47)
(9)
(597)
1,752
1,389
363

DKS REPORT 202059

Consolidated Financial Statements

Consolidated Statements of Cash Flows(Millions of yen)

FY2018FY2019Profit before income taxes

3,979

3,364

Depreciation

2,555

2,724

Amortization of goodwill

110

196

Bad debt loss—

400

Increase (decrease) in allowance for doubtful accounts

0(2)Interest and dividend income

(70)

(81)
200

Cash flows from operating activities

Interest expenses

196

Corporate bond interest—

3

Corporate bond issuance costs—

138

Share of loss (profit) of entities accounted for using equity method

(63)

(62)

Loss (gain) on disposal of tangible fixed assets

96

160

Impairment loss

240—

Loss (gain) on sales of shares of subsidiaries and associates

(141)

—

Decrease (increase) in notes and accounts receivable—trade(1,277)462

Decrease (increase) in inventories(1,894)(467)

Increase (decrease) in notes and accounts payable—trade688(1,546)

Increase (decrease) in net defined benefit liability

(185)

(66)

Other cash flows from operating activities

197

(554)

4,432

4,866

SubtotalInterest and dividend income received

155

95

Interest expenses paid

(195)

(200)

Income taxes paid

(1,155)(994)

Net cash provided by (used in) operating activities

3,236

3,766

Payments into time deposits

(43)

(210)

Proceeds from withdrawal of time deposits

49

204

(3,707)(5,538)Cash flows from investing activities

Purchase of tangible fixed assets
Purchase of investment securities

(970)

(32)

Purchase of shares of subsidiaries resulting in change in scope of consolidation

(780)

—

Proceeds from sales of shares of subsidiaries resulting in change in scope of consolidation

130—

Payments for loans receivable

(250)

(153)

Collection of loans receivable1

1

Proceeds from subsidy income

80

70

Other cash flows from investing activities
Net cash provided by (used in) investing activities

(205)

(183)

(5,694)(5,842)

Cash flows from financing activities
Net increase (decrease) in short-term loans payable

(685)

(245)

Proceeds from long-term loans payable

5,918

6,000

Repayments of long-term loans payable(6,005)(5,289)

Income from issuance of corporate bonds

—

5,861

Redemption of bonds

(50)

—

Revenue from sale and leaseback—

32

Repayments of lease obligations

(321)

(303)

Purchase of treasury shares

(0)

(0)

(709)

(1,067)

Dividends paid to non-controlling interests

(41)

(42)

Proceeds from share issuance to non-controlling shareholders

385—(1,510)4,946

Cash dividends paid

Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents

60

(155)

(21)

Net increase (decrease) in cash and cash equivalents(4,123)

2,847

Cash and cash equivalents at beginning of period

11,402

7,278

Cash and cash equivalents at end of period

7,278

10,126

DKS REPORT 2020

Where Have We Come From,
Where Are We Going?

How Should We Manage?

How Can We Be Sustainable?

Business Activities Report

Data Section

Dialogue with Shareholders and Investors

Disclosing the necessary corporate information in a timely and appropriate manner, the Company attaches importance to the occasions forcommunicating with the wide range of people concerned.
While actively conducting dialogues with its many investors, the Company has been able to seize opportunities for dialogue involving
stories about its creation of value.
Through the words of the Chairman himself, the Company arranges regular large and small meetings with investors. In addition, withregard to explaining financial performance and business scope, the personnel in charge conduct interviews and offer direct explanations aspart of their everyday tasks. As this Report serves as a tool for sustainable and constructive dialogue, we are working to improve corporate
value, including mutual understanding through active communication.

Ordinary General Meeting of Shareholders
The 156th Ordinary General Meeting of Shareholders was held at
the Rihga Royal Hotel Kyoto on Wednesday, June 24, 2020. ThisThe Ordinary General Meeting of Shareholders
held on June 24, 2020year, we recommended that voting rights be exercised by writingin advance or via the Internet to prevent the spread of COVID-19.
The venue was able to ensure sufficient social distance, andNumber of shareholders
who attended

the proceedings were conducted with measures taken toprevent infections in consideration of hygiene and health. The
meeting, which prioritized the safety of shareholders, officers andPercentage of those
exercising voting rights

employees, lasted 21 minutes and was attended by 22 people.

22
86.6

shareholders%

Dialogue with Shareholders and Investors
Dialogue with Institutional Investors and Analysts

Dialogue with Individual Investors

We hold briefing sessions for investors covering the first-half and

In consideration of various circumstances including the impact offull-year periods.

COVID-19, the management briefing (Kyoto venue) and round-table

In the fiscal year ended March 31, 2020, large meetings

conference after the general meeting of shareholders, as well as thewere held at the Securities Analysts Association of Japan andmanagement briefing (Tokyo venue) scheduled on a different day,smaller meetings were

were all cancelled. This fiscal year, we will disclose the results of aat the Company’s Tokyo

postcard questionnaire sent to shareholders. When asking about

Headquarters. There was a

newly established IR activities, we received more interest in the

total of 110 attendees for the

integrated report than anticipated. Thus, we will continue to create

first-half and full year, and theand enhance report content so that readers can easily understandCompany hosted a relaxed

our management policy and direction.

dialogue via a Q&A format.
Number of dialogues
in the fiscal year ended
March 31, 2020

190

meetings

Expectation for
expanded integrated
report content%

Question: What are your expectations for DKS IR activities?
3%

Dialogue-Based Activities in the Fiscal Year ended March 31, 2020
Results briefing

18■ Enhancement of shareholder communications

8%

2■ Expanded integrated report content

9%

Small meetings for institutional investors and analysts

106(Of which, meetings with overseas investors)

(6)

44%
18%

■ Website improvements■ Briefing sessions for retail investors■ Shareholder round-table conference expansion

18%■ Other

DKS REPORT 2020

61

Domestic/Overseas Network

Domestic Network

Biococoon
Laboratories, Inc.

Headquarters/Laboratory

Nagoya Office

Kyoto Elex Co., Ltd.
Tokyo Headquarters
Dai-ichi Kenkou Co., Ltd.
Osaka Branch
Gembu Co., Ltd.
Ikeda Yakusou Co., Ltd.
Kyushu Office

K&D Fine Chemical
Corporation

Dai-ichi CeramoCo., Ltd.

Yokkaichi Chemical
Company Limited

Ohgata Branch
Location: 230 Saigata, Ohgata-ku, Joetsu, Niigata
Area: 87,732 m2
Main products: CMC, waterborne polyurethanes,
professional detergents, polyvinylpyrrolidone

Shiga Branch
Location: 427 Gokasho Hiyoshi-cho, Higashiomi,
Shiga
Area: 106,813 m2
Main products: Surfactants, sucrose fatty acid
esters, food additive formulations, professional
detergents

Yokkaichi Branch Chitose Plant

Yokkaichi Branch Kasumi Plant

Location: 7 Chitose-cho, Yokkaichi, Mie
Area: 17,355 m2
Main products: Functional chemical products

Location: 1-23-5 Kasumi, Yokkaichi, Mie
Area: 101,138 m2
Main products: Functional chemical products,
urethane-related chemicals, resin additives

Subsidiary and Affiliated Companies (Japan)
Company nameYokkaichi Chemical Co., Ltd.
Gembu Co., Ltd.
Dai-ichi Kenkou Co., Ltd.
Dai-ichi Ceramo Co., Ltd.
Kyoto Elex Co., Ltd.
K&D Fine Chemical Corporation

62

Location
2-1 Miyahigashi-cho, Yokkaichi, Mie 510-0843, Japan
Phone +81-59-345-1161 Fax +81-59-345-1159
2nd Floor, Osaka Asahi Seimei Kan, 4-2-16 Koraibashi, Chuo-ku, Osaka 5410043, Japan
Phone +81-6-6229-1840 Fax +81-6-6229-1845
8th Floor, Yaesuguchi Daiei Building, 1-3-1 Kyobashi, Chuo-ku, Tokyo 1040031, Japan
Phone +81-3-3275-0583 Fax +81-3-3275-0604
432 Gokasho Hiyoshi-cho, Higashiomi, Shiga 529-1403, Japan
Phone +81-748-48-5377 Fax +81-748-48-5322
1 Ogawara-cho, Kisshoin, Minami-ku, Kyoto 601-8391, Japan
Phone +81-75-326-2883 Fax +81-75-326-2884
1 Niihamacho, Chuo-ku, Chiba, Chiba 260-0826, Japan
Phone +81-43-262-2039 Fax +81-43-262-4396

Biococoon Laboratories, Inc.

4-3-5 Ueda, Morioka, Iwate 020-8551, Japan
Phone +81-19-613-5564 Fax +81-19-613-5570

Ikeda Yakusou Co., Ltd.

1808-1 Nakazu, Shuzu, Ikeda-cho, Miyoshi, Tokushima 778-0020, Japan
Phone +81-883-72-5320 Fax +81-883-72-5005

DKS REPORT 2020

Business activities
Production and sales of surfactants
Sales of detergents, finishing agents and equipment for professional laundry,sales of industrial/professional-use deodorants
Production and sales of agents for civil engineering and construction
Production and sales of materials for ceramics and injection molding
Production and sales of electronic materials
Production and sales of surfactants
Wide-ranging research and development from pharmaceuticals to health careingredients
Production and sales of foods as well as health care products
Production of drug substances and various ingredients used in health foods
Production and sales of life sciences products including pharmaceuticals andquasi-pharmaceutical products

Where Have We Come From,
Where Are We Going?

How Should We Manage?

How Can We Be Sustainable?

Business Activities Report

Data Section

Overseas Network

Sisterna B.V.

DKS (Shanghai) International
Trading Co., Ltd.

DDFR Corporation Ltd.

Chin Yee Chemical
Industries Co., Ltd.

P.T. Dai-ichi Kimia Raya

Chin Yee Chemical Technologies(Wuxi) Co., Ltd.

Operation Bases (World)
Company name
P.T. Dai-ichi Kimia Raya
Chin Yee Chemical Industries Co., Ltd.
DKS (Shanghai) International Trading Co., Ltd.
Sisterna B.V.
Chin Yee Chemical Technologies (Wuxi) Co., Ltd.
DDFR Corporation Ltd.

Location
Jl. Maligi II Lot G-2 Kawasan Industri KIIC, Karawang Barat, Jawa Barat, Indonesia
Phone +62-21-8904574 Fax +62-21-8904576
11F, Lidye Commercial Building, 22 Nanking West Road, Taipei, Taiwan
Phone +886-2-2556-9353 Fax +886-2-2558-6833
Room #1104, New Town Center Building, 83 Loushanguan Road., Shanghai, P.R.
China
Phone +86-21-6236-8080 Fax +86-21-6236-8700
Belder 30A 4704 RK Roosendaal, The Netherlands
Phone +31-165-524730
Plot 88-C, Wuxi National High & New Tech Industrial Development Zone, 214028,
Wuxi, Jiangsu, P.R. China
Phone +86-510-8520-0156 Fax +86-510-8520-4878
25th Floor, One Capital Place, 18 Luard Road, Wanchai, Hong Kong
Phone +852-2827-7761 Fax +852-2824-1502

Business activities
Production and sales of textile agents, paper processing
agents, flame retardant for plastics and food additives
Production and sales of surfactants and plastic materials
Trading
Application development and sales of sucrose esters
Production and sales of plastic materials
Sales of plastic additives, e.g., flame retardants

DKS REPORT 202063Corporate Data (As of March 31, 2020)

Corporate NameDKS Co. Ltd.

Foundation

April 1909

Incorporation

August 1918

Paid-in Capital

8,895 million yen

Number of Employees

531 (consolidated: 1,032)

Headquarters / Laboratory
5 Ogawara-cho, Kisshoin, Minami-ku, Kyoto 601-8391, Japan
Phone: +81-75-323-5911 Fax: +81-75-326-7356
Main Branch
55 Nishishichijo Higashikubo-cho, Shimogyo-ku, Kyoto 600-8873,
Japan
Tokyo Headquarters
8th Floor, Yaesuguchi Daiei Building, 1-3-1 Kyobashi, Chuo-ku, Tokyo
104-0031, Japan
Phone: +81-3-3275-0561 Fax: +81-3-3275-0599

Total Number of Shares 10,684,321 shares
Outstanding
Share Unit Number

100 shares

Number of Shareholders

3,624

Stock Listing

Tokyo Stock Exchange

Securities Code

4461

Date of Record

Every year on March 31, and other dates
as necessary and publicly announced inadvanceAnnual Meeting of
Shareholders

Every year in late June

Shareholder Registry
Administrator

Mizuho Trust & Banking Co., Ltd.
1-2, Yaesu 1-chome, Chuo-ku, Tokyo

Osaka Branch
2nd Floor, Osaka Asahi Seimei Building, 4-2-16 Koraibashi, Chuo-ku,
Osaka 541-0043, Japan
Phone: +81-6-6229-1717 Fax: +81-6-6229-1793
Nagoya Office
7th Floor, Nagoya International Center Building, 1-47-1 N agono,Nakamura-ku, Nagoya 450-0001, Japan
Phone: +81-52-571-6331 Fax: +81-52-586-4539
Kyushu Office
4th Floor, Hakata Ekimae Daiichi Building, 1-2-3 Hakata-eki Minami,
Hakata-ku, Fukuoka 812-0016, Japan
Phone: +81-92-472-6353 Fax: +81-92-472-4989

List of Major Shareholders (Top 10)
Shareholder name

Number of shares

Ratio of shareholding (%)

Japan Trustee Services Bank, Ltd. (Trust account)

1,914,700

18.83

The Master Trust Bank of Japan, Ltd. (Trust account)893,200

8.78

The Dai-ichi Life Insurance Company, Limited

613,400

6.03

Mizuho Bank, Ltd.

427,000

4.20

The Bank of Kyoto, Ltd.

417,000

4.10

380,000

3.74

Asahi Mutual Life Insurance Company

339,400

3.34

Shareholding Association of DKS’s Business Partners

297,400

2.92

DKS Employee Shareholding Association

260,884

2.57

Trust & Custody Services Bank, Ltd. (Securities Investment Trust Unit)

157,200

1.55

BNP PARIBAS SECURITIES SERVICES LUXEMBOURG/JASDEC/
FIM/LUXEMBOURG FUNDS/UCITS ASSETS

Notes: 1. The Company has 514,826 treasury shares that are excluded from the major shareholders above.
2. The ratio of shareholding is calculated after subtracting treasury shares.

Shareholder Distribution
Securities companies 0.86%
Foreign corporations, etc. 2.01%
Japanese corporations 2.37%

Financial institutions 0.83%
Treasury stock 0.03%

Treasury stock
4.82% (4.90%)
Japanese corporations
6.36% (6.45%)

Securities companies
0.44% (0.69%)

Foreign corporations, etc.
9.11% (12.48%)
Financial institutions
55.97% (49.65%)

Individuals and others
93.90%
Individuals and others
23.30% (25.83%)

Composition by Shareholder

Composition by Shareholdings
Note: Figures as of March 31, 2019, are indicated in ( )64

DKS REPORT 2020

Where Have We Come From,
Where Are We Going?

How Should We Manage?

How Can We Be Sustainable?

Business Activities Report

Data Section

On Publishing the DKS Report 2020
This issue marks the fifth time the DKS Group has published its
integrated report since the initial report in the fiscal year 2016. In April,
we started our new five-year plan “FELIZ 115.” This is an important
report that explains DKS value creation to all stakeholders.
With the arrival of COVID-19, which has spread since the beginningof the year and shows no signs of abatement, the source of corporate
value is being questioned. We look at the current state of the Company
and explain the path of future growth in an easily understandable
manner.
COVID-19 provides us with an opportunity to reconfirm the validityof the “FELIZ 115” management plan (April 2020–March 2025)
announced in January. This plan, which we began formulating lastfall, is based on our aims for the year 2030. We revised our 12-yearold business headquarters system and reorganized it into a four
headquarters system. The purpose is to separate management andexecution and improve quick decision-making and management
efficiency. The ratio of outside directors has been increased to onethird, and the function of the Board of Directors is enhanced so thatmanagement recommendations can be expected from external
viewpoints.
The Octopus model is an integrated concept that primarily
considers value creation from six types of capital with nonfinancial
explanations. Through the computer invented in the 20th century, theconcept of value changed drastically in the 21st century. The virtual ordigital age is here. However, COVID-19 has brought a halt to humanactivity, which is the starting point of the economy. We take this asa wake-up call in determining whether the source of value is real or
analog. We must create corporate value and new business models
supported by integrated thinking.

As a chemical intermediary materials manufacturer, I believe thatthe source of value is cost. We will contribute to society by embodying
the intangible, meaning intangible assets that create value over thelong term. The value created by our business model is linked to SDGs
and ESG initiatives. Our Company Credo is “contributing to the nationand society through industry,” and we will focus on putting this into
practice. In March of this year, DKS was selected as a Health andProductivity Management Brand 2020, a symbol of happiness. FELIZ
means happy, and DKS shares happiness with all our stakeholders
through happiness-driven management. As the CEO responsible
for the production of this report, I can attest to the legitimacy of the
publication process and the accuracy of the content herein.
We continue to look forward to feedback from our stakeholders thatwill allow us to produce even more substantial and meaningful reports
in the years ahead.

September 2020
Chairman CEO

SAKAMOTO Takashi

Editor’s Note
Launched at the same time as our new five-year management plan “FELIZ 115,” the Company’s integrated report is now in its fifth issue.
Amid the increasing future uncertainty and lack of transparency brought about by the spread of COVID-19, we have tried in various ways
to explain the DKS value creation story based on the Uni-Top strategy to our stakeholders.
In reviewing the value creation process, we attempted to clarify how value is created by enhancing our business model using
the main management resources at the core of our organization. We are also rethinking the identification of important risks from theperspective of materiality.
For the first time, we have included an interview with an outside director to introduce
our efforts to enhance the effectiveness of corporate governance. At the same time, newmembers were added to the production process to disseminate financial and nonfinancial
information and strengthen report content with consideration for overseas investors.
We also sought to cooperate with the production company to improve the report froma visual perspective, making it easier to read.
We would like to take this opportunity to express our gratitude to all parties concerned
for their cooperation in the editing of this report. We also welcome frank opinions fromreaders as we prepare for the next fiscal year’s publication.

Public & Investor Relations Department

DKS REPORT 2020

65

DKS REPORT 2020

DKS
DKSCo.
Co.Ltd.
Ltd.
5 Ogawara-cho,
Kisshoin,
Minami-ku,
Kyoto
601-8391,
Japan
5 Ogawara-cho,
Kisshoin,
Minami-ku,
Kyoto
601-8391,
Japan
TEL:
+81-75-323-5911
FAX:+81-75-326-7356
TEL:+81-75-323-5911
FAX:+81-75-326-7356
https://www.dks-web.co.jp/english/
https://www.dks-web.co.jp/english/
Published:
November
2020
Published:
November
2020
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