Chapter 2

Revie w o f Busine ss Nikke Business Divisions

Industrial Machinery& Materials
Achieving our SDGs by supplying
eco-friendly products

Director and Managing Executive Officer
General Manager of Industrial Machinery & Materials Division

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

1st year

2nd year

3rd year (final year)

Fiscal year ended November 2021

Fiscal year ended November 2022

Fiscal year ending November 2023

Medium-term
plan

Results

Medium-term
plan

Results

DifferenceMedium-term
plan

Sales

22,00020,39024,00023,853

Forecast*(147)

27,20030,900Operating income

1,200

1,235

1,550

1,952

402

2,150

2,200

Operating margin

5.5%

6.1%

6.5%

8.2%

1.7 points

7.9%

7.1%

Evaluation*Announced in January 2023

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

Sales distribution

Operating income distribution
Industrial Machinery& Materials

23,853 million yen

22.6%

Breakdown
Automotive
Environmental
Other industries
Consumer-related

37%
10%
38%
16%

Industrial Machinery& Materials
Breakdown
Automotive
Environmental
Other industries
Consumer-related

1,952 million yen

15.9%

Changes in ROIC (return on invested capital)
ROIC

35%
11%
41%
12%

2022

2018

2019

2020

2021

(fiscal year ended November)

6.4％

7.7％

3.5％

3.6％

5.8％

Main products and services• Automotive: FA equipment, interior materials and cushioning (nonwoven fabric), thread for airbags and seatbelts, motor binding materials• Environmental: Filters (nonwoven fabric)• Other industries: OA and home appliance materials; semiconductor-related and imaging equipment; carpets for homes, offices,and trade shows• Consumer-related: Racket sports related, fishing related, materials for musical instruments

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Nikke Group Integrated Report 2023

Manufacturing FA equipment

OA-use felt members

Environmental high-performance filters (ADMIREX®)

Tennis strings

Business overview● Provision of products, materials, technologies, and services for automotive, environmental, other industrial, andconsumer-related fields

Key policies● Expand profits primarily in the automotive and environmental business● Expand overseas sales● Expand profits in the nonwoven fabric business (synergy between Ambic and Fuji)

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

Business strategy

In the Industrial Machinery & Materials Division, we haveestablished a key policy of expanding profits primarily in theautomotive and environmental fields, whose markets areexpected to grow due to strong demand from society. Eachgroup company has a research and development department,
and we have in place a structure that enables us to develop
competitive products tailored to each market’s needs withregard to use versatility, durability, functionality, andenvironmental friendliness. In addition to maintaining
production bases in Japan, we have also expanded into China
and the ASEAN region to build a value chain capable of quickly
delivering high-quality, low-cost products. We are also atrading company, with sales strength not only in Japan but also
overseas.

In the automotive business, current global efforts to reducegreenhouse gas emissions are driving technological innovationin electrification, automation, and other areas. This represents
golden opportunities for our division to capitalize on theuniqueness and superiority of Nikke Group technologies toactively develop and provide materials for EV, FA equipment,and other products. In the environmental business, protection
against air pollution and other problems is a major global
concern. By supplying high-performance filters and otherenvironmentally friendly products, as well undertaking
environmental load reduction efforts, we will also contribute to
the achievement of the SDGs.

Risks and opportunities
We recognize the risk created by slumping automobile sales,both in Japan and overseas, due to a shortage ofsemiconductors and the economic recession, as well as therisk of rising costs due to yen depreciation and soaring raw
materials and energy prices. At the same time, however, we areworking to capture new sales opportunities for high-function
incinerator filters as a result of stronger environmental
regulations in China, as well as for EV-related materials as aresult of the anticipated expansion in the EV market.

Expanding operations at Sanwa Felt (Vietnam)
In March 2023, Nikke Group decided to transfer andexpand operations at Sanwa Felt (Vietnam) Co., Ltd.
for OA-use felt and nonwovens. This decision wasmade in response tocustomers
relocating their
manufacturingbases from China toVietnam. We will use
this opportunity toexpand business.

Nikke Group Integrated Report 2023

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