ARISAWA INTEGRATED REPORT

About Arisawa

Value Creation

Management Policy

Sustainability

Company Overview

Management Policy
Sustainability Management

Materiality (key issue) identiﬁcation

As "contribute to solving the social and environmental issues, and realize the sustainable growth" is mentioned in ourManagement Policy, we understand that active engagement in social and environmental issues is required in our businessactivities. Speciﬁcally, we set KGI goals, such as achieving our goals (Scope 1 and 2) of carbon neutrality by 2030, andspeciﬁed them in our mid-term management plan. Toward these goals, we have worked on solving climate change issues,
promoting human capital management, and reducing emissions.

satisfaction", "promotion of circular economy", and "enhance-international Sustainable Development Goals (SDGs) at the ESG

ny-wide efforts.

ments due to environmental issues and how to contribute toCommittee meetings. Consequently, we designated the following

four items as materiality to be tackled in our mid-term management plan: "Contribution to a decarbonized society", "develop-

ment of diversiﬁed human resources and improvement in job

ESG promotion organization
We set up the ESG Committee in December 2021 to take theitems and activity status to the Board of Operating Ofﬁcers, theOperating Ofﬁcer was appointed the chairperson, and Executive

Board of Directors makes ﬁnal decisions. The Board of Directors

initiative on climate change issues. Director and Senior Managing

Ofﬁcers and Division Managers were appointed the committee

members to promote the activities. The ESG Committee holds
four meetings a year to raise awareness and promote sustainabili-

ty-conscious management and discuss such themes as a

response to climate change, realization of a decarbonizedsociety, respect for human rights, consideration for work
conditions, and fair and appropriate transactions with clients.
Regardingenvironmental

conservation

activities,

Management Conference, and the Board of Directors, and thechecks the progress of the mid-term management plan, discusses

measures for issues, and reﬂects the results in the management

strategy and risk management and assessment based on the
periodic reports. As shown above, the Board of Directors is
the goal-setting and the progress of initiatives.

Board of Corporate
Auditors

Board of Directors
Management
Conference

Nomination &Compensation Advisory
Committee

Environment
Social

Our achievement rateHigh

CSR activities with suppliers.

Under the concept of human capital management contribut-

Environmental Protection
and Management Committee

ESG Committee

mittee was established in March 2023 to link management strate-

Procurement Subcommittee

discuss such matters as setting up a human resource strategy.

Human Capital Subcommittee

Linkage

Governance

Low
High

Initiatives on materiality
We set KGIs (key goal indicators) to achieve in each materiality to increase our corporate value.

Board of
Operating Ofﬁcers

ment Policy under the supply chain management and promotes

Carbon Neutrality Project
Emission Subcommittee

Each committee periodically reports important agenda

19

CirculareconomySeverity for our business

The Procurement Subcommittee sets up the CSR Procure-gy to human resource strategy. It holds a monthly meeting to

Decarbonizedsociety

responsible for debating ESG-related agendas and supervising

Emission Subcommittee and continuously improves them.

ing to corporate value improvement, the Human Capital Subcom-

for a sustainable society and the severity for our business.

Human resource
development

theactivities conducted by the Carbon Neutrality Project and theIn the process of identifying materiality, we had the ESG

Committee narrow the items down to four based on the severity

Governance

Environmental Protection and Management Committee, whichworks with the ESG Committee, supervises the progress ofment of governance". To solve these issues, we make compa-

High

In all aspects of our business activities, we promote environmental conservation and contribute to solving social and environmental issues, aiming toachieve sustainable growth.

Severity for a sustainable society

ESG Policy

We discussed how to respond to changes in external environ-

Board of Directors- Supervise the entire sustainability

ESG Committee- Promote the entire activities to overcome challenges for sustainability, such as establishing a general sustainability policy, coordinating to set division goals,
and managing their progress

Procurement Subcommittee- Procure eco-friendly materials, provide suppliers with training on human rights, labor rights, safety and health, and corporate ethics in accordance with the
CSR Procurement Policy, and establish a socially acceptable supply chain

Human Capital Subcommittee- Develop human resources who can implement CIC and promote human resource development by linking management strategy to human resource strategy- Develop future leader candidates who can achieve diversity and ensure equal opportunities

Environmental Protection
and Management Committee- Manage budgets and conduct company-wide coordination for activities to reduce environmental loads, such as setting goals for the Carbon Neutrality
Project and the Emission Subcommittee and managing their progress

Carbon Neutrality Project- Establish and implement measures to achieve carbon neutrality by 2030, such as capital investment, technological innovation, use of renewal energy, andimprovement in energy use efﬁciency

Emission Subcommittee- Take the initiative in reducing, removing, and recycling emissions and waste generated in business activities- Research the technology trend toward the realization of zero emissions in 2050

Materiality

KGI (Key Goal Indicator)

Promising global goals

Contribution to a

- Achieve carbon neutrality by 2030 - Promote energy and resource saving

decarbonized society- Replace with renewable energy

Development of diversiﬁed
human resources- Develop next-generation human resources- Offer low environmental load materials

Improvement in job
satisfaction- Be a company where all employees can work lively

Promotion of- Reduce emissions

circular economy- Establish a sustainable supply chain

Enhancement of- Be an organization with a strong sense of ethics

governance- Build an organizational structure with an open-door policy

20

ARISAWA INTEGRATED REPORT

About Arisawa

Value Creation

Management Policy

Sustainability

Company Overview

Management Policy
Mid-Term Management Plan

Financial strategy
We improve capital efﬁciency by actively returning surplus to shareholders while managing cash ﬂow effectively and converting non-business assets to business assets.

Background of formulating a mid-term
management plan and its basic policy
The environment surrounding us has the following various types
of issues: Climate change, resource depletion, ecosystem

6 % in FY2024 (ﬁscal year ending March 2025).

Our group strives to work on technological innovation andcollapse, tightening of regulations, diversiﬁcation of values andproduct development while fulﬁlling users' needs and realize itsof human rights issues, mobility of workplaces, exposure ofmid- to long-term corporate value. Speciﬁcally, to maintain or

lifestyles, aging society, divisions of the supply chain, exposure

geopolitics and cyber risks, and progress of innovation. While

being strongly requested to tackle these issues by stakeholders,
including investors, companies must produce beneﬁts to continue
business.

Our group formulated a mid-term management policy basedon the management policy (see page 3) with the motto of"Create, Innovate, and Challenge" and released it in October
2020. By maximizing our corporate value with both businessstrategy and ﬁnancial strategy, we aim to achieve an ROIC goal of

Capital investment

Return to shareholders

Strategic investment

Exploration of existing businesses

Active returnM&A and new businesses■ Maintain and expand the revenue base■ Total return ratio: 80% or more

■ Develop new applications

Set the dividend payout ratio as 80%
and consider share buyback asnecessary by taking demand for funds
into account.

sound survival and sustainable growth, thereby increasing its
expand the revenue base of existing businesses, we implement

strategic investments in a new business that maximizes thesynergy effect with existing businesses and has high proﬁtabilityof capital, as well as improving and expanding production

Improvement in capital

capability and investing in the development of new products that
anticipates users' needs. We also select themes that have impacts
on society and the environment and aim to address their issues
through business.

Planned and actual sales
We set an ROIC goal of 6 % by the end of FY2024, which is higher

and the delay in market recovery. Meanwhile, the sales of FRP

The actual sales for FY2022 fell short of the planned sales

steady growth due to the increased demand in the seawaterpressure vessels for industrial structural materials showed

than the capital cost of 5.9 % (as of the end of FY2022).
Business strategy[Enhancement of proﬁtability]■ Strengthen proﬁt management
using ROIC
■ Explore existing businesses■ Create new businesses■ Tap into new markets throughexternal growth■ Create new businesses using existing
technologies

Financial strategy

Maximizationof corporate
value

desalination business. In addition, the sales of honeycomb

announced on May 12, 2022. The main reasons why we failed to[Improvement in capital efﬁciency]

sandwich panels for aircraft were recorded higher than expected

meet the planned sales and revised the estimates downward in thedue to the recovery in demand in the aircraft industry.

mid-term management plan are the prolonged adjustment of■ Convert non-business assets tobusiness assets■ Strengthen return to shareholders

Amid the lingering stagnation of the electronic material

inventories such as smartphones and semiconductors in theelectronic material market, one of our main businesses, and themarket, we will attempt to put our business back on track ingrowth speciﬁed in the plan is likely to occur one or two years

strategy speciﬁed in the mid-term management plan.

FY2023 and FY2024 by steadily implementing the businessslumping Chinese economy and its slow recovery. The anticipatedlater than expected due to the rebound of stay-at-home demandContribution to the development of a sustainable society(Billions of yen）

Overall sales

600

615
549

484

Business strategy
We enhance proﬁtability through "exploration of existing businesses" and "creation of new businesses" and also develop differentiated400

430 430(Billions of yen）

536

427

400
300

453

0

(Billionsof yen）

Strengthen partnershipwith group companies
to discover new applications
and ﬁelds

Enhancement of proﬁtability

Creation of
new businesses■Realize external growth throughﬂexible M&A■Realize internal growth through thedevelopment of new products using
existing technologies

200

2021

100

2021

2022

■Planned (May 12, 2022)

265

273 273

2022

2023

338

2023

■Actual2024■Planned (May 12, 2023)

2024

Industrial structural materials &electrical insulating materials

150

0

339

100

200

Exploration ofexisting
businesses

426
297 297200

products with a focus on ﬁelds with growth prospects.

■Develop differentiated products using
unique technologies■Reduce costs thoroughly■Improve production capability andefﬁciency

Electronic materials

500

96 96

117

124 132

137 142

2022

2023

2024

106

50
0

2021

(Billions of yen）

Display materials

100

Changes in ROIC

2021

2022

2023

2024

Value announced on
May 12, 2022

4.4％

4.4％

5.6％

6.6％

50

Value announced on
May 12, 2023

4.4％
(actual)2.8％(actual)

2.7％

5.2％

0

75

25

41

32 32

35

2021

2022

40

45

2023

48

53

2024

■Planned (May 12, 2022) ■Actual ■Planned (May 12, 2023)

21

22

ARISAWA INTEGRATED REPORT

About Arisawa

Value Creation

Management Policy

Sustainability

Company Overview

Management Policy
Businesses / Outline of Each Segment
Our group offers various products by leveraging our excellent processing technologies and centralized production system.

Electronics Materials

Industrial Structural
Materials

P25-26

P27-28This is our group's main business, which
accounts for more than 60 percent of ourconsolidated sales. There are production sites
in Japan, Taiwan, and China. This business
contributes to the growth of society mainly in
the information device ﬁeld.

This is the second pillar of our group's business.
There are production sites in Japan, Spain, andthe U.S. This business contributes to society byoffering materials to improve fuels for aircraft
and vehicles and produce new energy and cleanwater.

Sales and proportion of major products

Sales and proportion of major products

265

Sales breakdown in the segment

Sales■ Materials for ﬂexible printed circuit boards

Sales
proportion in
the segment

billion yen& semiconductor-related materials■ Rigid printed circuit boards■ Glass cloths for printed circuit boards &prepregs for rigid printed circuit boards

87%
7%
6%

62

Sales in

％

42 7

％

Displaymaterials
Related products& others

1％

Sales and proportion of major productsSalesbillion yen

Industrial
structural
materials

21

P29-30■ Polarization control optical components

54%■ 3D display-related materials

38%■ Others

8%61%■ In-vehicle materials

21%■ Honeycomb sandwich panels for aircraft

9%■ Others

9%P27-28This is a group of products with a long history.
This business contributes to creating a livable
society by offering insulating materials andheat dissipation materials for generators.

％

Electrical insulating
materials

6％

Sales and proportion of major products

26billion yen

Related products & others

23■ FRP pressure vessels for water treatment

Electrical Insulating
Materials

Sales

Sales breakdown in the segment

Sales
proportion in
the segment

10

Sales
proportion in
the segment

billion yen

FY2022

Display Materials

42

91

Electricalinsulating
materials

billionThis is a group of our products that can berecognized by general people. This business
contributes to the development of people's richlives by offering materials for medical andamusement use.

Sales breakdown in the segment

Sales

Sales breakdown in the segment

Sales
proportion in
the segment■ Prepregs for electrical insulation

44%■ Glass cloths & glass tapes

23%■ Others

33%

The related product and other businesses handle pultrusion molding
production, golf driving range operation, and logistics and transport.

24

ARISAWA INTEGRATED REPORT

About Arisawa

Value Creation

Management Policy

Sustainability

Company Overview

Management Policy
Strategy by segment

Electronic Material Segment299

following four core technologies:

Regarding electronic materials, we aim to grow them as our primarybusiness with two strategies. We develop new products mainly in the mobile,
semiconductor, and in-vehicle ﬁelds for business expansion. We also deepenties with our group companies to strengthen the business foundation in the
Asian markets.

Compounding technologyof mixing denaturants
and chemicals into
thermosetting resins

2020

Resin coating
technology

The sales of materials for ﬂexible printed circuit boards and glass

my due to the continued high prices of energy and raw materials

from the previous year due to the downturn in demand for PCs

decline in the Chinese market.

and smartphones, especially in the Chinese market, since theMaterials for ﬂexible printed circuit boards,
prepregs for rigid printed circuit boards, &semiconductor-related materials

new domestic users and in cooperation with ThinFlex for Chineseboards and glass cloths for printed circuit boards to recover.

deliveries of materials for ﬂexible printed circuit boards began forusers.

Glass cloths for printed circuit boards

Overseas ofﬁces［ThinFlex］(Taiwan)

Materials for ﬂexible printed circuit［TopFlex］(China)

S

Strengths-Design ﬂexibility with in-house
resin compounding technology

O

with
high

-Flexible proposals, selectedfrom a variety of products

Business environment
Electronic devices, such as smartphones, are becoming more highly functional, andelectronic circuits have a higher circuit density through reﬁning, accordingly.

There are growing needs for materials supporting fast transmission, high heatdissipation, high heat resistance, and large current in a wide range of application
areas, from home appliances to in-vehicle parts, and we work on developing highly

25

Opportunities-Differentiated products
high functionality andquality

Materials for ﬂexible printed circuit boards

functional products in response to these needs.

products to be used in these markets.

take a while for the sales of materials for ﬂexible printed circuit
Amid ﬁerce competition in products and costs with overseas

competitors, we will boost our competitiveness by offering differentiated products and establishing global ties with our afﬁliates.

In FY2023, there is still an uncertain outlook for the econo-

SWOT analysis based on the present business environmentis shown below:-Support for various types ofprocessing using equipment[Arisawa Fiber Glass]

Inventory adjustments continue due to the decrease indemand for PCs and smartphones, and it is assumed that it willgrow in the long term, so we have developed differentiatedAnalysis of the present situations

amid the prolonged Ukrainian crisis, global inﬂation, and demandlatter half of FY2022. Regarding materials for smartphones,

The semiconductor and in-vehicle markets are expected to[Arisawa](Nakadahara Factory, Nakadahara-nishi Factory,
Minami-honcho Factory)

2022

Business summary for FY2022 and measures and outlook for FY2023

Our group's products range from prepregs for rigid printed circuit boards to materials for ﬂexible printed circuit boards (FPC). Especially,
our materials for ﬂexible printed circuit boards have gained acclaim for its production process with excellence in ﬂexibility, anti-migration
property, and heat resistance at high temperatures and ultra-narrow gaps. With the deep trust of customers, we have retained our position
as one of the top manufacturers specializing in electronic materials.

Business locations

2021

Laminating

cloths for printed circuit boards experienced a signiﬁcant decline

Rigid printed circuit boards

265

on "exploration of existing businesses" and "creation of new businesses".

materials, and printed circuit boards, all of which are key devices for information and communication society, using the[Satosen]298

To enhance proﬁtability according to the mid-term management plan, we work

In the electronic material ﬁeld, we develop and manufacture materials for printed circuit boards, semiconductor-related

Surface processing
technology to maximize
the performanceof glass cloths

Sales transition (Billions of yen）

Business strategy

W

Exploration of existing businesses

Weaknesses-Lower production efﬁciency
due to the production of manymodels in small quantities-An
excessive
numberofinspectors required to maintainqualityT

Threats

Businessstrategy

Goals forFY2023Creation of new businesses

Business enhancement in the mobile ﬁeld

Commercialization in the semiconductor and in-vehicle ﬁelds■ Create value for customers and continue growth by offering
products with originality■ Develop new products and strengthen the business foundationin the Asian markets by establishing ties with our group companies■ Develop new products and enter new ﬁelds■ Expand business in growing ﬁelds by strengthening
competitiveness in production and technology

Higher functionality for application to circuit boards

Development in preparation for versatile application■ Higher density, extra-ﬁne line, and tiering of mobile circuits■ Fast-transmission, high-frequency, and 5G/6G millimeterwave compatible circuits■ In-vehicle: High heat-resistant, large-current, and longer circuits■ Enter new ﬁelds(Explore the needs for application to other than circuits)■ Offer environmentally sound products■ Co-develop products by strengthening partnership with customers,
material manufacturers, and private research institutes-Low-price strategy of overseas
competitors-Slowdown in demand growth forPCs, tablets, and smartphones

TOPICS

Start operation of new coating machine
ai-coater in September 2023
We started operating a new small
experimental coating machine
known as ai-coater in September
2023. It helps us reduce theproduct development period. We
will also use this machine topromote open innovation to win
over co-development projects
and new OEM projects.

Set up a new production line in TopFlex
To capture business opportunities
in the growing market of ﬂexible
printed circuit boards in Asia,
mainly Greater China, we set up a
new production line in TopFlex(wholly owned by ThinFlex) andwill begin the operation in the ﬁrst
half of FY2024.

26

ARISAWA INTEGRATED REPORT

About Arisawa

Value Creation

Management Policy

Sustainability

Company Overview

Management Policy
Strategy by segment

Sales transition (Billions of yen）

Business strategy

Industrial Structural Material andElectrical Insulating Material Segment

111
To enhance proﬁtability according to the mid-term management plan, we work

117
97

on "exploration of existing businesses" and "creation of new businesses".

Regarding industrial structural materials and electrical insulating

materials, we develop unique products for further growth, focusing on thetransportation infrastructure, water treatment, and new energy ﬁelds as our
main businesses.

In the industrial structural material and electrical insulating material ﬁelds, we pursue FRP (Fiber Reinforced Plastic)

2020

molding technology based on our core technologies of weaving and resin impregnation technology. FRP molded products
are made by laminating prepregs, which are semi-cured through the impregnation of resin into the ﬁber, turning them into
a desired shape, and applying heat and pressure to it.

Analysis of the present situations

FRP pressure vessels for water treatment (ﬁlament winding molded products),
honeycomb sandwich panels for aircraft, prepregs, prepregs for electrical insulation)[Arisawa Fiber Glass]

Glass cloths, glass tapes,
special ﬁber woven products[Arisawa Sogyo]

FRP (pultrusion moldings), prepregs[Arisawa Jushi Kogyo]
FRP

Strengths-Consistent development andmanufacturing
throughtheintegration of core technologies
of "weaving, coating, andmolding"-Flexible new resin formulationand improvement

O

Opportunities

Overseas ofﬁces-Demand recovery in the aircraft
ﬁeld［Protec Arisawa Europe, S.A.］(Spain)-An entry to markets requiringhigh heat resistance, highpressure resistance, and gas
resistance［Protec Arisawa America, Inc.］(U.S.)
FRP pressure vessels for water treatment(ﬁlament winding molded products)

Business environment
Amid the shift to a decarbonized society, the demand for FCVs (Fuel Cell Vehicles)

and EVs (Electric Vehicles) has been growing, which requires transportation
methods, including aircraft, to be lighter weight for improved fuel efﬁciency. Thereis also a growing demand for new energy sources that replace fossil fuels.

In the life science ﬁeld, demand is also up for products for water treatment(seawater desalination) and infrastructure reinforcement as measures against

disasters. Our group has developed highly functional products to fulﬁll these needs.

27

S

W

The demand for honeycomb sandwich panels for aircraftcontinued strong demand in the water treatment ﬁeld. Meanwhile,began to pick up again in the latter half of FY2022. The sales ofelectrical insulating materials for infrastructure were stably solid.
FRP pressure vessels for water treatment saw an increase inT

Threats-Competition
domestic
competitors

moderate recovery track. It is also expected that there will be

the prices of energy and raw materials continue to soar, which willneed to be closely watched.

By continuing to produce differentiated products throughsales due to the technical support to Protec and have been

the expansion of application of our materials into new ﬁelds, suchcle materials, we deepened relationship of trust with users andtreatment, we will boost competitiveness through global coopera-

considered to be applied to the medical ﬁeld. Regarding in-vehideveloped differentiated products in new ﬁelds.

as ﬁlament winding technology to other ﬁelds than watertion with our afﬁliates.

Exploration of existing businesses

Weaknesses-Easily affected by market
changes due to many types oflimited products sold to speciﬁccustomers-Lower production efﬁciency
due to the production of manymodels in small quantities-Long-term experience requiredin human resource development

In FY2023, the COVID-19 pandemic has ﬁnally shown signsof abating after a few years, and the aircraft industry is on a

SWOT analysis based on the present business environmentis shown below:[Arisawa] (Nakadahara Factory & Minami-honcho Factory)

Businessstrategy

Goals forFY2023Business enhancement in the transportation infrastructureﬁeld and revenue expansion in the water treatment ﬁeld

■ In-vehicle: Make differentiation and enter markets using unique technologies■ Aircraft: Increase added value through the anticipation of users' needs■ Water treatment: Create new demand by developing
high-performance products

Creation of new businesses
Commercialization in the hydrogen energy ﬁeld
■ Enter the hydrogen energy and superconductivity ﬁelds andpromote the development for commercialization

Higher functionality and versatile application

Development in preparation for versatile application■ Aircraft: Increase the production of honeycomb sandwich panels
for interiors and develop new materials*■ Water treatment: Create new demand by developing
high-performance products, as well as ultra-high-pressure vessels■ In-vehicle: Adopt new mechanical components and materials for
FCVs and EVs■ Hydrogen energy: Do a carbon-neutral business mainly for materials
and products■ Superconductivity: Expand the adoption range by grasping needs anddeveloping customized products■ Offer environmentally sound products■ Co-develop products by strengthening partnership with customers,
material manufacturers, and private research institutes

in costs withandoverseas-Competition in costs with othermaterials (metal, ceramic, etc.)(Fiscal year)

from the previous year due to the steady demand for FRP
pressure vessels for water treatment and in-vehicle materials.

Business locations

2022

Business summary for FY2022 and measures and outlook for FY2023
The sales of industrial structural materials for FY2022 increased

Using glass ﬁber with insulation capability and heat resistance and carbon ﬁber with lightweight, high strength, and a high module of elasticity as main materials and leveraging FRP-speciﬁc anisotropy generated by the orientation of ﬁber optimizes FRP materials to bring out
desired mechanical and thermal properties. With these characteristics, they are used in electrical insulating materials for such devices as
generators and motors, materials for aircraft interiors, primary structural materials, general industrial structural materials, materials in thein-vehicle and new energy ﬁelds, and materials for sports equipment.

2021* High-strength lightweight panels, etc.

TOPICS

Our ultra-thin coating technology is applied to
Toyota's FCV MIRAIOur ultra-thin coating technology is applied to the special titanium foil
used for MIRAI --hydrogen fuel cell vehicle by Toyota Motor Corporation. Special titanium foil is used in a ﬂow channel (separator) for
power generation by combining hydrogen and oxygen. During press
molding, the mold heavily wears as titanium is hard. However, we
succeeded in applying lubricant to this special titanium foil with athickness of a few micrometers. Applied lubricant results in less moldwear, reducing the number of mold replacements by half compared toconventional technologies.

28

ARISAWA INTEGRATED REPORT

About Arisawa

Value Creation

Management Policy

Sustainability

Company Overview

Management Policy
Strategy by segment

Sales transition (Billions of yen）

Business strategy

Display Material Segment

42

To enhance proﬁtability according to the mid-term management plan, we workon "exploration of existing businesses" and "creation of new businesses".

Regarding display materials, we will expand the sales of new products

33
24

utilizing our unique technologies mainly in the medical high-deﬁnition display
ﬁeld.

In the display material ﬁeld, we have expanded our technological areas from front screen molding, UV molding, and thin ﬁlm

2020

coating to 3D images. Xpol® is a 3D image display ﬁlter with ﬁne polarizing elements arranged in order. Attaching thisﬁlter to a ﬂat panel display, such as an LCD, allows 3D images to be viewable without ﬂickering through polarized glasses.
This ﬁlter has been used mainly for medical purposes, such as endoscope monitors.

2022(Fiscal year)

Business summary for FY2022 and measures and outlook for FY2023
An increase in the sales of 3D-related materials and ColorLink(non-medical ﬁelds) while capturing business opportunities inthe total sales for FY2022 from the previous year.

achieving a higher deﬁnition.

Japan's sales of materials for the use of polarization pushed up

We have developed an optical retardation element (wave plate) that can be a phase difference plate using a photo-alignment layer and apolymerizable liquid crystal and offered it as a product. We not only offer optical materials but also add a bit of contrivance to them to gain
the trust of customers. One such example is lamination processing. Our advanced lamination technology has been developed through theexperience of handling a wide range of optical materials and has been highly acclaimed. By reconsidering the properties of "light", we will
work on further product development.

2021

Regarding 3D-related materials, we are working on reduc-ing costs through process improvement, expanding their applica-tion to non-medical purposes, and preparing demonstration
content for proposals to companies in the target ﬁelds.

the medical ﬁeld in the Chinese market. We will also work on
By offering differentiated products, such as PSA (Pressure

Sensitive Adhesive) sheets, and establishing global ties with our
afﬁliates, we will boost our competitiveness.

In FY2023, we aim to continue growth through the expan-

sion of our businesses, mainly Xpol®, and the development andsales of new products. Regarding 3D displays, we are planning toBusiness locations

Analysis of the present situations

expand the sales channels for educational and general industries

SWOT analysis based on the present business environmentis shown below:[Arisawa](Nakadahara Factory)
3D display-related materials[ColorLink Japan]
Polarization control optical components

S

Strengths-Xpol® brand value-In-house 3D optical design-Massproduction
factories
available for in-house core
processing-Flexibility for the production ofmany models in small quantities

O

Opportunities-Growth opportunities in the
Asian markets-Spread of minimally-invasive
treatment to the medical ﬁeld
-Acceleration and penetration of
remote surgeries due to ashortage of doctors

W

Exploration of existing businesses

Weaknesses-Energy costs required tooperatemass
production
facilities (a higher processing
cost percentage)-A lower level of compounding
technology
thanmoldingtechnology

T

Threats

Businessstrategy

Goals forFY2023Creation of new businesses

Business enhancement in the medical
high-deﬁnition display ﬁeld

Commercialization in new ﬁelds■ Expand the share of endoscopes and microscopes and attract
overseas users■ Expand the sales channels for telemedicine and robotics use■ Meet the needs for a higher deﬁnition■ Expand 3D ﬁlter application into non-medical ﬁelds

Higher functionality and versatile application

Development in preparation for versatile application■ 3D display: Expand the sales channels in the Chinese market andnon-medical ﬁelds and achieve a higher deﬁnition■ Screen: Improve the yield rate through technical support to
afﬁliates and expand the application of existing products■ Offer environmentally sound products■ Co-develop products by strengthening partnership with customers,
material manufacturers, and private research institutes-Emergence of different types of
3D displays-Competition in costs withoverseas competitors

TOPICS

Begin offering medical 3D monitors for
robotic surgeries

Business environment
Under circumstances where a shortage of doctors and the concentration of population in urban areas have occurred, the spread of fast communications allows remotesurgeries and robotic arm surgeries, hopefully reducing the workload on doctors. As

the demand for displays is also expected to rise in the education ﬁeld due to theprogress of digitization, we have developed highly functional products to meet theseneeds.

29

Medical 3D monitors, which are designed for endoscopic and microscopic
surgeries, have been offered for robotic surgery use since FY2023. They
were originally introduced as monitors for assistants around the roboticarm, but we are seeing this opportunity as a chance to apply them as cockpit
monitors for operators. As the patent for the major robotic surgery systemda Vinci expired, there are many new entries from various manufacturers.
The expansion of sales channels by gaining new customers will help expand
the needs not only for robotic surgeries but also for the purpose of existingendoscopic and microscopic surgeries.

30

ARISAWA INTEGRATED REPORT

About Arisawa

Value Creation

Management Policy

Sustainability

Company Overview

Management Policy
Financial strategy

Policy of determination on dividends from surplus, etc.
We will proactively return its funds earned during the period topolicy is a total return ratio of 80% or more for perfor-

expansion of its revenue base for existing businesses and thetion of treasury shares in total consideration of demand of funds,

shareholders as well as invest them in the maintenance andAiming for further growth and corporate value improvement
Our consolidated ﬁnancial results for FY2022 saw sales andproﬁt declines with net sales of \42.7 billion (down 0.9 %, year

on year) and operating proﬁt of \2.2 billion (down 32.9 %, year

and enhance proﬁtability.

Our group drew up a new mid-term management plan in2020 with FY2024 set as the target year to clarify that we will be

COVID-19 infections, but there is still an uncertain outlook forbusinesses. We actively return surplus to shareholders andthe economy due to the continued high prices of energy and raw

materials amid the prolonged Ukrainian crisis, global inﬂation, anddemand decline in the Chinese market.

In FY2023, harsh external environments are likely tocontinue, such as continued high energy prices and inﬂation.
Even in such business circumstances, we will develop attractive

Business overview for the past 5 years(Millions of yen)committed to exploring existing businesses and creating new
improve capital efﬁciency by managing cash ﬂow effectively andconverting non-business assets to business assets from theOperating results

proceeding with a business strategy targeting ﬁelds withOperating proﬁt

ﬁnancial strategic viewpoint for a stronger revenue base while

Net sales

prospective future growth.

Ordinary proﬁt
Proﬁt attributable to owners of parent

Aggressive and defensive business management through the introduction
and spread of ROIC management
margin and ROE as our KPI goal. To adapt to changes in expectations required in our business environment and by our stakeholders, however, we decided to adopt ROIC as our KPI goal toward

the shift to capital cost and corporate value-conscious manage-

ment based on the mid-term management plan formulated in

FY2020. The set goal is 6 % or more, which is higher than ourshareholders' cost of capital WACC of 5.9 % (as of the end of

FY2022, calculated by us based on the value measured by athird-party organization).

In addition, we use ROIC not only for management KPI but

also as a judgment tool for investment in facilities.

Electronic materials

Net sales
Segment proﬁt

Industrial application

Net sales

structural materials

Segment proﬁt

Electrical insulating materials

Net sales
Segment proﬁt

Display materials

Net sales
Segment proﬁt

Financial Position
Total assets
Net assets
Equity ratio（％）

Investment for growth

Return on equity（％）

Our group allocates funds we have now and will gain during thecurrent ﬁscal year to production capital expenditure to support
the expansion of existing business areas and growth investment
to create new business. We also spend capital on quality improvement, research and development, human resource development,
and digitization to aim at strengthening the business foundation.

Achieving continuous growth while maintaining our competitive

advantages through these activities will lead to a virtuous cyclethat allows reinvestment for further growth of our group.

Details of capital expenditure for FY2022 to 2024
Increase in production capability

8.1billion

Improvement in the production process

1.1billion

Transition of capital expenditure
100

84

75

25
0

44

31

5.9billion- Innovation Center(Establishment of an open innovation base)- A small coating machine and testing facilities(Exploration of existing businesses and creation of new businesses)

Interest-bearing liabilities
Return on Invested Capital（％）
Cash ﬂows
Cash ﬂows from operating activities
Cash ﬂows from investing activities
Cash ﬂows from ﬁnancing activities
Cash and cash equivalents at the end of period
Per-share Indication
Basic earnings or loss per share (Yen)Net assets per share (Yen)Price earnings ratio(Times)
Dividend per share(Yen)Consolidated dividend payout ratio（％）
Number of shares issued and outstanding(Thousands of shares)
Other
Capital expenditure
Depreciation

26

22

FY2021(Actual)- A waste heat recovery system- Onsite solar energy generation(Promotion of carbon neutrality)- A production management system and security measures(Promotion of DX)

New product development(Billions of yen）

50

- Production facilities in ThinFlex(Expansion of sales in the Chinese market)- Production facilities for insulating ﬁlms for semiconductorboards (Expansion of existing businesses)

Research and development expenses
FY2022(Actual)FY2023(Planned)

FY2024(Planned)

FY2018FY2019FY2020

FY2021

FY2022

44,72845,97046,43943,08942,722

4,297

2,783

3,578

4,204

2,717

3,119

By Segments

Our group used to set a ﬁnancial target with operating proﬁt

ﬁnancial conditions, etc.

differentiated products and expand their sales to further improveon year). This is because economic activities have been resumedby easing restrictions on people's activities during the spread ofcreation of new businesses. Speciﬁcally, the company s basic

mance-linked dividend and we will respond ﬂexibly to an acquisi-

Consolidated number of employees

2,861

2,762
212

3,118
2,160

3,320
3,911

2,228
2,856

28,77029,76531,65029,76826,543

8,395

8,974

8,842

7,053

9,128

2,620
1,393
3,127

2,331
1,475

2,981
939

2,907
872

1,223
1,315

2,984

2,340

2,604

3,699

3,427

2,820

3,253

4,162

73,096

71,70967,257

68,68967,659

69.3%

64.3%

68.8%

69.6%

69.5%

430
114

53,462
5.7%

366
235

49,018
0.4%

7,905

8,356

2,893

4,837

（576）

（4,431）

3.9%（3,304）
7,718
79.15

3.6%

6,580

14,725
6.14

192
221

47,444
4.7%

303
815

47,965
8.3%

2,582
184

1,024

47,107
6.0%

8,273

9,073

10,240

610

5,901

3,471

（5,703）（4,042）（2,572）

4.2%

1,567

11,488
64.94

4.4%

2,869

16,893117.402.8%

508

18,53586.46

1,397.78

1,387.76

1,388.50

1,434.46

1,422.43

30.00

30.00

39.00

95.00

90.00

10.0

130.7

37.9%

488.6%
36,381

2,500
2,001

36,226

1,901
1,432

15.4

14.5

34,47080.9%

33,614104.1%

2,168

2,144

2,268

4,486

2,074

1,905

1,926

1,991

1,982
1,454

60.1%

8.2

2,107
1,433

2,170
1,425

33,541

2,290
1,458

Note: The Accounting Standard for Revenue Recognition, etc. are applied to the ﬁgures from FY2021.

32