Mid‐term Management Plan ACE‐2020
Accountability・ Commitment・ Efficiency

Management Philosophy and Nagase Vision

Management Philosophy
We recognize our responsibility to society and offer beneficial
products and services while maintaining the highest standardsof integrity
integrity. Through our growth
growth, we will contribute to society
and enrich the lives of our employees.

NAGASE Vision
To realize a sustainable world where people live with peace ofmind,, each of us embodies our value p
proposition,p, Identify,y,Develop and Expand thorough daily activities.

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Summary of Long‐term management policy

Goal to 2032

Normalization of the profit more than tripled

Challenges for Growth

Reinforce the Management Platform
for Growth・ Realize a significant growth by allocating
management resources to focused businessand by shifting operation from Japan‐centrism
to multinationalu t at o a managementa age e t system.
syste
・Set up growth investment frame of 200 B
yen. Consider large investment as a methodjto achieve longg term objectives.

・ To lead growth challenges to success,success
construct a management platform that willcontribute to business expansion andglobalization.

• Restructure gglobal ggovernance• Increase flexibility in HR management• Enhance safety and assurance• Consolidate communication infrastructure• IncreaseIgrowthth investmentitt• Accelerate organic growth• Expand overseas operation

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Positioning of ACE‐2020
To achieve our goal by 2032, the last year of Long‐Term Management Policy,
we divide 17 years of its term into 3 and start stage 1 as the beginning of the Mid‐Term management
Plan ACE‐2020.
* Our goal: Normalization of the profit more than tripled.

Long‐Term Management Policy
Environmental
Adaptability

Stage3

Stage2
Stage1｢Reformof Profit structure｣
structure｣｢Reform ofcorporate culture｣
culture｣【ReformReform】】
2016〜2020
2016〜

Change-S 2014

ACE‐2020

The stage that
two reforms permeated
and accelerated thegrowth

The stage that rapidly
growing towards to thegoal【Growth】
2021〜2025【Jump】
2026〜2032

Time
4

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ACE‐2020 Basic Policy
NAGASE TTransforms
fffrom “Sh“Shosha/Trading”
h /T di ”
to “Business Designer”.

Investment

NAGASE strings all the groups together to create and provide new value
to the world through 6 key functions.

R&DLogistics

BusinessDesigner

Leverage Group functions to achieve the quantitativeand qualitative targets.

Gl b lGlobalNetwork

Trading
Manufacturing

Reform Profit Structure

Reform Corporate Culture

Portfolio Optimization

MindsetCategorization of business and executionof strategy that matches with the area
Replacement of asset and reallocationof resources
Acceleration in investment that createscore business of group

Breed independence and responsibility

Expand and Strengthen Revenue
BaseStrengthen Management Platform【6 Functions】

Share the management’s message
Thorough monitoring and PDCA

Pursue efficiency

Accelerate globalization ” G6000”
Improve manufacturing profitability

HR development

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Consolidated Sales
Normalize 1.0 Trillion Yen or more
Sales(100Million Yen)

Sales by Segment (100Million Yen)
10,00010,000

1,187

7,421

1,509

Other+150
Life & Healthcare+332

Sales by HQ and subsidiaries (100Million Yen)

Automotive & Energy
+356

5,000

2,098

933

5,000

3,257
2,555

1,571

1,791

2015年度FY2015

目標TargetEU & USA+356

1,373

ASEAN & Korea
+440

2,827

Greater China+8834,986

Japan＋900458

Electronics+819

1,279,814

7,421855
1,153

10,00010,000

Advanced Materials&Processing
+702

1,944

4,086

Functional Materials+22000FY20152015年度Target⽬標*Figure differs fromSales by region stated in quarterly report
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6

Consolidated Operating Profit
Normalize 30 Billion Yen or more
Consolidated Operating Income（100 Million Yen）

300

81226

Life & Healthcare

25

Automotive &Energy

24Electronics

33Ad
Advancedd Materials
M t i l& Processing
FunctionalMaterials

1625250
37200

14128180180150

NaturalgainFY2015RestructuringNew
itemExpandingarea

Reinforcing
manufactur
ing facility

NewmarketNewbusiness
ModelCounter plan to fill in the gap※ NaturalN tl gain
i： NaturalN tl increaseior decrease
dcorresponding
ditto changes
hiin bbusinessi
conditions
diti
or an iindustryd t※ Counter plan to fill in the gap : Counter plan from Natural gain to Target

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ROE

ROE = Post‐tax Profit ÷ Equity

Normalize Over 6％
ROE/Pre‐tax ROIC/
Pre‐tax Profit Ratio(%)

Invested Capital Turn
Over Ratio（Time）

8.0%

8.0Pre‐tax ROIC = Pre‐tax Profit ÷（Equity＋Interest‐bearing debt）

6.9%

ROIC ＝

6.0%

ROE
4.1%

4.0%

4.4%

Pre‐tax ROIC
Pre‐Tax ProfitRatio
2.1%
2.0 time

Pre‐tax Profit
Sales Amount

P t P
Pre‐taxProfit
fit Ratio
R ti

I
InvesteddC
Capitali l TTurn O
Over RRatioi

All measures that efficiently
increase profit by reduced cost

All measures that efficiently
increases sales with limited asset

Sales of new and added ‐value productIncrease growth investment

Logistics efficiency

M&A

Utilize shared service

Reduce slow‐moving, long‐terminventory

Withdraw from unprofitable business

Utilize group cash management
systemyRationalization

Idle assets liquidation

3.1%

2.2 time

0.0Target
2020年度

Goal to achieve ROE/Pre‐tax ROIC
Pre‐tax profit ratio
Improve 1 point
Invested capital turnover ratio Improve 10％

Sales Amount
Equity＋Interest‐bearing debt

4.0

0.0%

FY20152015年度

×2.1％→3.1％
2.0times→2.2time

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Portfolio Optimization
Categorize businesses and execute strategies suitable for each category

Divide into 4 sectors, “Growth”, “Focus”, “Base” and “Improvement”
to gain maximum efficiency of management resources and expand business.
Focus
Expected further increase in profit
Life & Healthcare

M&A
conductedby HQ thatadds intoFocus andBase area

Growth/Emerging
Transform to “Focus” in 3 years

Electronics【Resource Allocation Policy】
Intensive resource allocation that accelerate growth【Priority Measures】① Expand scale ② Examine profit structure③ Horizontal expansion of market④ Strengthen marketing ⑤ Minimize risk

【Resource Allocation Policy】
Resource allocation to accelerate growth【Priority Measures】① Expand scale ② Examine profit structure③ Strengthen marketing ④ Minimize risk

BaseContributed to stably increase the corporatevalue

Improvement
Immediately required drastic improvementin profit structure【Resource Allocation Policy】
Resource allocation to sustain business【Priority Measures】① Reduce fixed and liquidity costs ② Minimize risk
③ Group synergy ④ Stabilize business⑤ Improve profit structure⑥ Rationalize & Restructure

Create thebusiness (ex.
utilize the VC))
that adds into
Growth area

Withdrawal【Priority Measures】① Review existing strategy② Drastic structural reform that involves
withdrawAccelerateAssetto withdraw
fromReplacement
Re allocation business,andunprofitable
Re-allocation
Accelerate to withdraw from unprofitable business,solidify management resource that can be reallocated,conduct aggressive growth investment
investment.
Categorize profitable and unprofitable business by using NPV(Net Present Value) and comparing hurdle rate/IRR
9to accelerate asset replacement.
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Expand and Strengthen Revenue Base
Accelerate Globalization “G6000”

Proactively execute own market strategy in each area.
Elevate ggroupp presence
pbyy increase in sales.
Aim for *600 Billion Yen of total sales of overseas group• Search and execute growth investment (M&A) that matches with the market strategy of the designated areaand accelerate the business development to expand business (especially focused in North America).
• New market development via strengthened ‘out-out’ organic ties.

Improve Manufacturing Profitability

As a long term strategy, group manufacturing companies manage autonomously,
d create a new businessb i
b d on a scenario
i agreedd upon byb manufacturing,
fid ld sales.
landbased
developmentand•To grow focused businesses by prioritizing and improving mid-term free-cash-flow over the short-term sales profit.

•To pursue profit structure analysis and management stabilization via effective reduction in cost (improve B/E point).

• New product development and placement of the product into market, cultivation of new market andpenetrate into high value added filed. e.g. Overseas sales expansion of Trehalose, capital
investment of epoxy sheet material, R&D on conductive material for coating and etc.
• Creating a scenario and HRD which focuses on overseas market expansion.（Overseas marketing andproduction）＊ The figures on this file are all management accounting data （simple sum)
It is different from the figures disclosed on the consolidated financial statement.

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10

Mindset/Strengthen Management Platform
Build Accountability, Responsibility and Risk AwarenessSet mid‐term management plan as a goal that proactively achieves
and act responsible.
pShare Management’s Message

Create better communication infrastructure,and the entire group collectively strives for the same goal.
Thorough Monitoring and PDCA

Make full use of dashboard and thorough monitoring to carry out PDCA cycle
to achieve KGI/KPI.

Pursue Efficiency

Eliminate excess/duplication and increase efficiency of the organization/function
to improvep
consolidated SGA ratio byy 0.5%
HR Development

Strongly drive HR development
to increase group competitiveness and sustainable growth11
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Summary
KGI（Key Goal Indicator）
KGI

FY2015

FY2020Consolidated Sales Amount
Consolidated Operating Income
ROE

742.1 Billion Yen
18.0 Billion Yen
4.4%

1.0 Trillion Yen or more
30.0 Billion Yen or more
6.0% or more

KPI（Key Performance Indicator）Factor index to achieve KGIReform/Strategy

Increase FocusedBusiness(Portfolio Optimization)

Profit Structure
Reform Indicator

Growing investment distribution ratio in focus area

FY202010.3B Yen

16.9B yen

N/A

35% <

＊Overseas Group Sales

424 7B Yen
424.7B

600B Yen(Expand and Strengthen
Profit Structure)

Sales Growth Rate in USA

N/A

170％

8.3B Yen

14.4B Yen

＊Operating Profit from Manufacturing(Expand and Strengthen
Profit Structure)＊Break‐Even Point Sales Ratio

82%

73%

Pursue Efficiency

Consolidated Selling, General andAdministrative Ratio

9.9%

9.4%

Growth Investment

N/A* 100B Yen

Rating (R&I)[A][A] or more（Strengthen ManagementPlatform))

Financial StrategyIndicator＊Operating Profit in Focus Area

FY2015

Accelerate
Globalization
Increase Manufacturing
ProfitabilityCorporate Culture
Reform Indicator

KPI （Index)

measures

Investment
Financial Structure＊Total numbers in 5 years＊ The figures in this document are all management accounting data (simple sums)
It is different from the figures disclosed on the consolidated financial statement.

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Appendix : Past results and ACE‐2020 TargetConsolidated Sales

ROE

Normalize 1.0 Trillion Yen or more

Normalize Over 6％ at early stage

Sales(100Million Yen)

Consolidated Operating Income
営業利益（億円）（100 Million Yen）

売上⾼（億円）

300
300

10,000ROE （％）
8.0%
6.5%

230

187

4.9%

5,000

150

⽬標

2015
5年度

2014
4年度

2013
3年度

2012
2年度

2011
1年度

2010
0年度

2009
9年度

2008
8年度

2007
7年度

⽬標

2015
5年度

2014
4年度

2013
3年度

2012
2年度

2011
1年度

TargetFY22015
FY22014
FY22013

FY22012

FY2
2011
FY2
2010

FY2
2009

FY22008

2010
0年度

4.4%
4.3%

0.0%

FY2
2007

Target

FY22015

FY22014

FY22013

FY22012FY22011

FY22010
FY22009

FY22008

FY22007

2009
9年度

4.2%
4.0%
3.0%

02008
8年度

4.9%

4.0%

13402007
7年度

6.0%

181 180
155 157

131
125

6.5%

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http://www.nagase.co.jp

These presentation materials contain forward-looking projections based on assumptions,forecasts, and plans as of May 6, 2016. Actual earnings may differ from projections due toglobal economy,
y competitive landscape, currency
yrisks and uncertainties in the future gexchange rates, etc.