DKS REPORT 2021

DKS Co. Ltd.

CONTENTS
DKS’s Identity
1	DKS’s Identity
2	Special Feature
The Significance of DKS—Creating Happiness through the Power of Chemistry4	Philosophy in Practice—The History of DKS Business Development
6

Value Creation Process of the DKS Group8	Explanation of the Value Creation Process
10

Risks and Opportunities

12	Materiality
14	Financial and Nonfinancial Highlights

DKS’s Value Creation
16	Message from the CEO
22	Review of the Medium-Term Management Plans
23	Overview of the Medium-Term Management Plan“FELIZ 115”
26	Financial/Capital Strategies and Total Shareholder
ReturnDKS’s Growth Strategy 1: Innovation
28	Special Feature
The Technology of DKS—Interview with the CTO
30	Proprietary Technologies of DKS
32	Research and Development
34	Business Activities Report

DKS’s Growth Strategy 2: Sustainability
40	Quality and Safety Management42	Human Resource Management
44	Consideration for the Environment46	Discussion between Outside Directors

 DKS Report 2021 Editorial Policy

In 2016, the DKS Group began to publish its integrated 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 theInternational Integrated Reporting Framework promoted by theInternational Integrated Reporting Council (IIRC), which became
part of the Value Reporting Foundation in a June 2021 merger.
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 andgovernance (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 andlong terms. Looking to the future, we will use the DKS Report as acommunication 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” or “the Group”)
 Period Covered by this Report

In principle, this Report contains our activities and data during fiscal
2020 (from April 1, 2020, to March 31, 2021). The data on the Industrial
Accident Severity Rate (ASR) and the Industrial Accident Frequency
Rate (AFR) were obtained from January to December 2020.
 Reference Guidelines

International Integrated Reporting Framework by the International
Integrated Reporting Council (IIRC) (became part of the Value
Reporting Foundation in a June 2021 merger), “Environmental
Reporting Guideline 2012” by the Ministry of the Environment,“Environmental Accounting Guideline 2005” by the Ministry of theEnvironment, “Environmental Accounting Guideline for Chemical
Industries (November 2003)” by the Japan Chemical Industry
Association (JCIA)

48	Organizational Resilience55	Dialogue with Shareholders and Investors
56	Board of Directors, Audit & Supervisory Board, andExecutive Officers

Data

Posted on the Website
The Emission of Notification Substances under the
PRTR Law in fiscal 2020
Transition of the Environmental Impact at Branches
and Yokkaichi Chemical Safety Securement andDisaster Prevention

58	Fundamental Knowledge of Surfactants
60	Glossary62	Domestic/Overseas Network[Forward-Looking Statements]

64	Financial and Nonfinancial 11-Year Summary

Statements contained in this report regarding the plans, projections andstrategies of DKS that are not historical fact constitute forward-looking
statements about future financial results and are subject to risks anduncertainties. As such, actual results might differ significantly from these forwardlooking statements due to changes in various external environmental factors.
Consequently, DKS hopes for your understanding as it does not guarantee thecertainty of such forward-looking statements.

66

Consolidated Financial Statements

69	Environmental Data/Compliance Awareness Survey
Results
71	Corporate Data/On Publishing the DKS Report 2021/
Editor’s Note

DKS’s Identityolim

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理念

Ch a

ll e n

g es

ien
ven
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iety
Contribution to technol

Solutions to Society’st soc

Chemistry provides
a solution.
DKS Credo

Contributing to the nation and society
through industry

ogic
al貢in
n
o
vat
ion

DKS Mottoes

Quality First, Cost Reduction, R&D Efforts

O
ur

“s

ut
ol

ns
io

”
DKS Group Logo

The DKS Group logo symbolizes “Act for a Leap,”
our step for globalization.
It describes the bridge for growth toward“Challenge to 1000.”1

DKS’s Identity

SpecialFeatureThe Significance of DKS—Creating Happiness through the Power of Chemistry

DKS Group Products Around Us
DKS Group products support a variety of products used in our daily life. Here are some examples found in society
and our living environment.

Additives for foodand cosmetics, etc.
Coatings forbuilding materials
and furniture
Silicon wafer
detergents

IT & electronics
materials

Surface modifiers
Flame retardants
Optical fiberconnectors

Shampoos

Sealants forelectric insulation

Health foods

Rock hardening
agentsConductive pastes
for solar cells

Oil spill treatment
agentsPrecisioncleaning agents

Six Core Business Segments

Net sales for the fiscal year ended March 31, 2021
¥59.1 billion
Life Sciences¥435 million (1%)

Electronic Device Materials¥5,758 million (10%)

Surfactants¥17,303 million (29%)

Surfactants
We provide highly functional surfactants
since the Company’s founding in 1909.

Sales by Segment

Functional Materials¥21,077 million (35%)

2

DKS REPORT 2021

Amenity Materials¥7,081 million (12%)
Polyurethane Materials¥7,484 million (13%)

Amenity Materials
We provide materials and peripheral
application technologies necessary for a
comfortable living environment.

Vision for 2030
In the year 2030, Japan will be facing social challenges from major impacts to employment, health care, andsocial welfare from a shrinking workforce due to an aging and declining population. DKS Group aims to use thepower of chemistry to be a smart chemical partner solving various problems people face.

Realizing active
lifestyles throughhealth foods

Supporting abundant
lifestyles with
distinctive cosmetics

A smart chemical partnerthat solves various problems
for people
Environmental
conservation

Regional
revitalization

Innovation

Contributing to safe
and secure lifestyles
through the field ofhealth care

Polyurethane Materials

Electronic Device Materials

We provide industrial materials andpolyurethane raw materials, for example, paints,
adhesives, civil engineering and construction
materials, electric insulating materials.

We provide ceramic materials andconductive pastes for home appliances andelectronics components.

Functional Materials

Life Sciences

We provide products that are essential todaily life and home electronics, for example,
flame retardants, radcure resins, waterborne
polyurethanes.

We provide naturally derived health foods
and technologies for extraction,
concentration and powdering of natural
products.
DKS REPORT 2021

3

DKS’s Identity

Philosophy in Practice—The History of DKS Business Development

1909 Founded1969 Nippon Levulose Co., Ltd.
(later Shiga Plant of DKS) established1914 General partnership company Ohno Kogyo
Seiyakusho established1959 Yokkaichi Chemical Company Limited
established to manufacture and sell
nonionic surfactants

1970 Constructed 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

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

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

1973 Gembu
established1949 Listed as a public company

3/1950Socialchanges

3/19603/19701900s

1930s–1950s

Rapid Growth of the Spinning Industry
With the advent of World War I, the spinning industry undergoes
dramatic growth. Textile goods exceed 50% of Japanese
exports.

Industrial Modernization, Shift to Synthetics
Following World War I, the industry undergoes a period of modernization, during whichtime the textile industry sees an accelerating shift from natural fibers to synthetic
alternatives.

1909 S ILKREELER 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)

Developmentof DKS4

3/1980Main products of this time

1909–1950s

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, achemical for spinning waste cocoons. The Company responded to
textile industry needs by developing and selling a number of textile
oil agents using sulfation and compounding 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 business performance during wartime
and postwar turmoil.
With the development of the textile industry, the Company
established a position as a textile oil agent manufacturer. During thisperiod, the Company developed the nonionic surfactant NOIGEN,
the cationic surfactant CATIOGEN, and various progenitors for othersurfactants, 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
in industrial fields, the Company expanded the scope of anddiversified its industrial products. In anticipation of the future
potential of the polyurethane market—positioned as a downstream
sector within the petrochemical industry—the Company commenced
its polyether business. Moreover, the Company launched one
business after another that would serve as a foundation for the
future, including flame retardants and sucrose fatty acid esters.

 Dai-ichi Kogyo (DKS) Spirit and DKS Mottoes

 Source of Original Technologies

The Dai-ichi Kogyo (DKS) Spirit states that “We must demonstrate thetraditional spirit of the Japanese people—the Yamato spirit—in our
industry, always realize coexistence and co-prosperity between
ourselves and others based on the concept of service, and maintainsincerity to contribute to the prosperity of the nation, society andmankind.” Sincere efforts to manifest this spirit continue to be passed
down through our three Company Mottoes: “Quality First,” “CostReduction” and “R&D Efforts.”

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 the creation of new products. The Company createdsuperior new products and patents and strove to conduct research. In
2002, the Company implemented a patent incentive system ahead ofother companies, contributing to the development and creation of
new businesses such as the current life sciences business.

DKS REPORT 2021

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 new materials. The Company
developed various highly functional surfactants and polyurethane
products. In aiming to become a leader in highly functional

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

2006 R&D labs relocated to Kisshoin, Kyoto,
to develop new technologies

1986 Kyoto Elex Co., Ltd. established to manufactureand sell electronic materials

2015 
Newly established the Kasumi
Plant in Yokkaichi

1988 Dai-ichi Ceramo Co., Ltd. established to strengthen
the electronic materials sector

1996 P.T. Dai-ichi Kimia
Raya established inIndonesia

2009 100th anniversaryof the founding
2011 
Yokkaichi Chemical
Company Limited
become wholly
owned subsidiaries

2002 
ElexcelCorporation
established

Net Sales(Billions of yen)2018 
70
Biococoon Laboratories, Inc.
and Ikeda Yakusou Co., Ltd.
become wholly owned
subsidiaries
60

50
40
30
20
10

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

3/19903/20003/20103/20211960s–1990s

2000s

Growing Environmental and Safety Concerns Lead toHigh-Value-Added Materials
Following the oil shocks of the 1970s, the industry transitions to high-value-added
products. In the 1990s, greater interest is placed on environmental considerationand safety, which accelerates the greater functionalization of existing materials.

Highly Functional Chemicals Sector Developments Resolve
Social Issues
Japan’s chemical industry begins to see the development of highly functional
sectors that actively create and deliver added value to society.

1969 PYROGUARD flame retardant for plastics
1970 DK ESTER food emulsifier
1981 NEW FRONTIER UV/EB-curable monomers and oligomers
1982 SUPERFLEX waterborne polyurethane1990 EIMFLEX polyurethane
1992 HITENOL polymerizable surfactant

2005 ELEXCEL IL ionic liquid2013 RHEOCRYSTA cellulose nanofibers
2018 I. Japonica-Bombyx Fungus (dietary supplement)
Sudachin (citrus sudachi peel extract powder)chemicals, the Company began collaborating with other industries
as a way of addressing new needs. Moreover, the Company
developed nonionic surfactants with a low environmental impact incollaboration with an overseas manufacturer.

creation, and in the same year, the new Kasumi Plant wasconstructed in Yokkaichi of Mie Prefecture, as a mother factory withthe aim of integrating production, sales and development
functions, preparing the foundation for a second renaissance.

2000s

Life Sciences Business Launched,
Full-Scale Shift to DREAM Businesses

Qualitative Change and Second Renaissance
Since 2004, the Company has constructed a business portfolio for ahighly profitable structure and promoted the development andexpansion of new businesses with high added value. With
electronic and IT materials as the next generation of businesspillars, 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 ofqualitative change and promoted the transition to a businessdivision system, management infrastructure development and nonpetrochemicals, thereby strengthening our financial position.
In 2015, the Company formulated a five-year plan for new value A Corporate Culture of Respect for Quality
As early as 1922, uniform product standards were developed and thedivision of duties clearly stated that research staff were responsiblefor quality checks. In 1951, a quality management committee wasestablished to cultivate a corporate culture of respect for quality andengage in organizational development. In the 1960s, QC circles wereactively 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 a technology company.

0With its full-scale entry into the life sciences business in 2018, theCompany 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, along with the environment/energy, and IT
and electronics materials fields, become part of the foundation onwhich the Company is focused for creating a better future.

 Uni-Top Strategy and Inspiring/Inspired Partners
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 we call inspiring/inspired partners. As the profitability of
special nonionic surfactants and radcure resin materials is on therise, they are expected to be growth drivers for achieving ournumerical targets in fiscal 2024.

DKS REPORT 2021

5

DKS’s Identity

Value Creation Process of the DKS Group
Based on its technologies and trust accumulated over the past 112 years, the DKS Group applies originality andimagination to limited resources in delivering materials that enrich our way of life.

DKS Credo

Contributing to the nation and society through industry

DKS Mottoes

Quality First, Cost Reduction, R&D Efforts

Integrate & WARP

Inputs Financial capital
Net assets: ¥37,404 million
Interest-bearing debt: ¥28,529 million

 Manufacturing capital
Manufacturing bases: 13(includes three overseas)

Market needs

Capital expenditures: ¥4,617 million

 Intellectual capital

Sales

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

A 112-year history
and technologicalcapabilities able torespond to the times

R&D expenses: ¥2,821 million

Strengths ofDKSbusinesses

 Human capital
Employees (consolidated): 1,061
Ratio of female employees18.9%
Overseas employees
178
Employment ratio for people withdisabilities: 2.9%()MarketingDiverse productgroups andcombinations

Production
management

Broad customer baseInspiring/Inspired Partners

Research andtechnology
development

Procurement

 Social capital
Inspiring/Inspired Partners
Cooperation with local municipal
governments & universities Natural capital
Energy consumption: 24,600 L/year
Raw materials used: Petroleum, coal, ore minerals,
wood, plants, biological materials

6

DKS REPORT 2021

Uni-Top strategy
DKS’s Seven Critical Issues of Importance(management foundation)

Consideration for the Environment

P.44

Quality and Safety Management

P.40

Regional Society Contributions

P.39

Research and Development

P.32

Organizational Resilience

P.48

Human Resource Management

P.42

Tackling NEXT and DREAM Businesses

P.16

A smart chemical partner that solves various problems for people
Outputs

Outcomes

Six core businesssegments

Fiscal year ended March 31, 2021

 Financial capital

Surfactants

Net assets:¥85,033 million

DREAM (New Businesses)
P.34

Amenity Materials

Total Shareholder Returnfor the Past 10 Years:
12.2%

P.35

Polyurethane Materials

Patents held:

Functional Materials

ACTUAL (Existing Businesses)
P.37

Electronic Device
Materials

Medium-Term Management Plan
FELIZ 115
P.23
ESG-based management initiatives

P.38

G: Establishment of an Advisory Board

Enhancement of theKibi Plant

1,056

Expansion of the life
sciences business Human capital
Ratio of females inmanagement positions:8.8%
Retention ratio of
employees withdisabilities:100%

Diversity promotion
Higher rate of profit
sharing with employees

 Social capital
Regional revitalization,
local community
revitalization

Sericulture innovation

 Natural capitalLife Sciences

Contributions to a
recycling-oriented
society (CN2050)

E: Mitigating environmental impact
of products and raw materials
100-million mulberry tree planting
campaign
S: Appointment of female officers

Total assets:¥135.0 billion

Enhancement of the
Yokkaichi Branch’s
Kasumi Plant

 Intellectual capital
P.36

FY2030

ROIC (4.5%) >
WACC + αM anufacturing
capitalNEXT (Peripheral Businesses)

Future value
creation(Outcomes)& SDGsP.39

100-million mulberry
tree planting campaign

Energy reduction rate:
7.6%

DKS REPORT 2021

7

DKS’s Identity

Explanation of the Value Creation Process1

Business Model

DKS strives to be a company praised for our Uni-Top strategy:
providing unique products that do not pursue scale. Our
business development has the fundamental value-chain cycleof: understanding customer and market needs marketingstrategies that leverage the Company’s strengths
development of products (prototypes, generating orders)grounded in our R&D prowess efficient procurement tofacilitate production appropriate production andmanagement sales activities with strict adherence todelivery deadlines further understanding of market needs.
We have developed products with added value and closealignment with customer needs by leveraging expertise fromour diverse technologies (see p. 30), our transactions in a
broad spectrum of industrial fields, and our ability to combinerich lineups of product groups that number in the thousands.
Our existing businesses (ACTUAL) encompass a broad
B-to-B customer platform, while our peripheral businesses(NEXT) utilize R&D for specific customers, in addition to
specialized production plants. With our relationships withinspiring/inspired partners in particular, we have built up apartner (customer) base that anticipates the needs of (B-to-Bto-C) end-users and is able to mutually inspire andcollaborate with new approaches.
Furthermore, with regard to new businesses (DREAM) thatare our medium- to long-term growth areas, we will continue
to invest in new growth businesses, such as in life sciences,and pursue product development that enhances QOL andcontributes to society in ways that help solve issues such as
the aging population and environmental conservation.

2

Inputs

The following is an overview of the various types of capitalthat support DKS’s business.
Financial capital: While maintaining a sound financial footing
resting on a net D/E ratio of 0.5, we respond to future risks
and opportunities (see p. 10) from environmental changes,
and emphasize capital efficiency, including utilizing interestbearing debt, that constantly keeps ROIC above WACC.
Manufacturing capital: With 13 manufacturing bases insideand outside Japan, we are leveraging our 112 years oftechnology and experience to manufacture products of value.
Furthermore, with regard to capital expenditures, we have
stepped up facility upgrades and growth investments since
the fiscal year ended March 2015. In the past 10 years, wehave implemented cumulative capital expenditures of ¥43,800
million, with total depreciation surpassing ¥18,100 million.
Intellectual capital: Utilizing the range of expertise
accumulated since our founding, and with over 1,000 patents
held, we go beyond simply providing materials through our8

DKS REPORT 2021

diverse product lineup. DKS has technological capabilities
that allow us to customize the function and performance of
products in line with customer requirements and to makeproposals based on the ideal product combination.
Human capital: Human capital is the most importantbusiness resource for DKS, and, in order to meet the needs ofan increasingly diverse society, we aim to maintain talented
human resources and diversity based on the idea of valuing
people. As we do so, we strive to improve our competitive
advantage through human capital.
Social capital: We have established our DKS brand withcustomers while promoting appropriate supply chain
management and trusting relationships built up over many
years with our agencies and inspiring/inspired partners.
Natural capital: As a chemical manufacturer, we consume avariety of natural raw materials. We have devised creative
approaches to using limited global resources efficiently andto contributing to a recycling-oriented economy. Throughthese efforts, and through continuous improvements toenergy consumption and waste product management, we
strive for environmental conservation and biodiversity
preservation.

3

Outputs

While the products and services provided by DKS are quite
diverse, they can be grouped into six core businesssegments. The major products in each segment are:surfactants, amenity materials, polyurethane materials,
functional materials, electronic device materials, and life
science products (see p. 34–39 for details).
Until fiscal year 2018, we had five core business segments;
however, we newly embarked on a full-fledged entry into thelife sciences business by acquiring Biococoon Laboratories,
Inc. and Ikeda Yakusou Co. Ltd. as wholly owned subsidiaries.

4

Outcomes

The paragraphs above outline our primary value creation andreturns on capital through business operations and outputs,
while the details in the following paragraphs address future
value creation and SDG targets we place importance on out
to 2030.
Financial capital: We are targeting total assets and net salesof ¥135.0 billion, with plans for aggressive growth investments
while maintaining the balance of capital and debt. Byleveraging future technological innovation, building resilient
infrastructure, and facilitating sustainable industrialization, we
will contribute to SDG 9 and, in the process, strive to boost

Integrate & WARP: This phrase represents DKS’s new business model, with ‘integrate’ referring to organic growth that fuses
ACTUAL and NEXT, while ‘WARP’ refers to accelerated growth through entry into new DREAM fields.

DKS’s Identity

Value Creation Process of the DKS Group
Based on its technologies and trust accumulated over the past 112 years, the DKS Group applies originality andimagination to limited resources in delivering materials that enrich our way of life.

DKS Credo

Contributing to the nation and society through industry

DKS Mottoes

Quality First, Cost Reduction, R&D Efforts

A smart chemical partner that solves various problems for people

Integrate & WARP

Inputs Financial capital
Net assets: ¥37,404 million
Interest-bearing debt: ¥28,529 million

1

Six core businesssegments

 Financial capital

Fiscal year ended March 31, 2021

Net assets:¥85,033 million

DREAM (New Businesses)
P.34

Manufacturing bases: 13(includes three overseas)

Market needs

Amenity Materials

Capital expenditures: ¥4,617 million

Sales

2

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

A 112-year history
and technologicalcapabilities able torespond to the times

R&D expenses: ¥2,821 million

MarketingNEXT (Peripheral Businesses)

Diverse productgroups andcombinations)

Production
management

P.35

3

Polyurethane Materials

Strengths ofDKSbusinesses

 Human capital

P.36
Research andtechnology
development

Functional Materials

ACTUAL (Existing Businesses)
P.37

 Social capital

Electronic Device
Materials

Inspiring/Inspired Partners
Cooperation with local municipal
governments & universities Natural capital
Energy consumption: 24,600 L/year
Raw materials used:
Petroleum, coal, ore minerals,
wood, plants, biological materials

Medium-Term Management Plan
FELIZ 115
P.23

Uni-Top strategy
DKS’s Seven Critical Issues of Importance(management foundation)

Consideration for the Environment

P.44

Quality and Safety Management

P.40

Regional Society Contributions

P.39

Research and Development

P.32

Organizational Resilience

E: Mitigating environmental impact
of products and raw materials
100-million mulberry tree planting
campaign

P.48

S: Appointment of female officers

Human Resource Management

P.42

Tackling NEXT and DREAM Businesses

P.16

ESG-based management initiatives

G: Establishment of an Advisory Board

DKS REPORT 2021

returns on financial capital.
Manufacturing capital: We will expand and enhance the Kibi
Plant as a new production base, while also using it to target
DREAM businesses. SDG 12 is particularly important for achemical manufacturer. By enhancing manufacturing capital,
we aim for the efficient use and sustainable management of
natural resources, and a broad reduction in waste volume bypreventing, reducing, recycling and reusing waste.
Intellectual capital: As our vision for 2030, we announced aspart of our medium-term management plan FELIZ 115, ourgoal of becoming a “technology developer pursuing progress
and innovation.” Through this, we will strive to boost our ratioof R&D spending to net sales from the 4% range to the 5%
range, so that we can deliver products and services with newvalue. In the life sciences business in particular, we will support
economic development and the good health and well-beingof people in order to contribute to expanding thetechnological innovation cited in SDGs 3 and 9.
Human capital: Based on the plans laid out in FELIZ 115, we
will adopt a performance evaluation system that rewards
contributions to the Company as we continue employee

P.38

Enhancement of theKibi Plant

4

Patents held:

Broad customer baseInspiring/Inspired Partners

FY2030Total assets:¥135.0 billion

Enhancement of the
Yokkaichi Branch’s
Kasumi Plant

 Intellectual capital

Procurement

6

Total Shareholder Returnfor the Past 10 Years:
12.2%

Future value
creation(Outcomes)& SDGsROIC (4.5%) >WACC + α Manufacturing
capital Intellectual capital(

Outcomes

Surfactants

 Manufacturing capital

Employees (consolidated): 1,061
Ratio of female employees 18.9%
Overseas employees
178
Employment ratio for people withdisabilities: 2.9%

Outputs

1,056

Expansion of the life
sciences business Human capital
Ratio of females inmanagement positions:
8.8%
Retention ratio of
employees withdisabilities:
100%

Diversity promotion
Higher rate of profit
sharing with employees

 Social capital
Regional revitalization,
local community
revitalization

Sericulture innovation

 Natural capitalLife Sciences

100-million mulberry
tree planting campaign

Contributions to a
recycling-oriented
society (CN2050)
P.39

Energy reduction rate:
7.6%

DKS REPORT 2021

7

happiness-based management in order to help boost
employee enthusiasm and satisfaction. By doing so, we aim
to contribute to SDG 3. Additionally, as an outcome of efforts
toward human assets, we will further promote diversity andemphasize a higher rate of profit sharing with employees.
Social capital: We will strive for regional revitalization andlocal community revitalization, which are important social
issues in Japan, and we would like to achieve collaborativevalue creation through strong ties with municipalities. Within
this effort, sericulture innovation is one important activity (seep. 39). We think it possible to contribute to SDGs 8 and 17 by
establishing effective public-private-civic partnerships.
Natural capital: Responding to the 2050 carbon neutral goal
(CN2050) and reducing energy consumption are urgent
challenges. Also, as a form of future value creation, we will
promote mulberry tree planting with municipalities as we
expand our life sciences business. Increasing the number oftrees and effectively utilizing mulberry trees as well as
silkworms can lead to CO2 reductions and contribute toSDG 7.

DKS REPORT 2021

9

DKS’s Identity

Risks and Opportunities
Although a risk event could damage the broad value of a company, risk might also lead to opportunities. While
steadfastly avoiding and mitigating risks, DKS also identifies risks considered to be material and implements
initiatives to transform them into opportunities.

Significant risks

Impacts from risks/Impacts on stakeholders

1Raw material price fluctuations

2

Reliance primarily on external
procurement for raw materials• Inability to control prices depending on raw material prices• BCP (Business Continuity Plan) measures become necessary• Bottlenecks, inventory risks

3

Large number of customers• Time taken and costs incurred in customers’ response• Difficulty in narrowing in on target customers

4

Product composition consists of alarge variety of small-lot products• Declining cost competitiveness due to rising production costs• Time required for response from each department (research, sales,
and handling of complaints) due to the wide variety of products

5Increasing demand for inexpensive
products associated with growth inemerging nations• Replacement by inexpensive products from other companies

6• Concerns about losing competitiveness in domestic and overseas
markets• Concerns about patent infringements overseas

7

Improvement in technological leveland productivity in neighboring
countries
Strengthened laws and regulations

8

Stricter quality controls• Loss of trust from customers and society due to negligent quality
control• Particular know-how needed to enter fields that require a higher
level of quality control, such as energy, pharmaceuticals, and food9

Aging facilities/equipment• Manufacturing trouble, quality issues arising from aging equipment• Rising rate of industrial accidents• Declining employee productivity

10

IT security• Loss of trust due to leakage of internal information• Interrupted business activity from unauthorized external access• Business delays due to IT system failure• Pressure on earnings due to rising IT system operating costs

11(primarily naphtha)• Profits influenced by cost fluctuations• Time taken for price negotiation activities to maintain the profit
margin• Decline in market share, lost ground due to price negotiations(transfer to a product of another company in the same industry)

Employees Shareholders

Customers

Employees

Customers

Employees

Customers

Employees

Customers

Employees Shareholders Customers(Global growth opportunities are hard to seize)
Employees

Customers

Employees

Customers

Society

Employees

Customers

Society

Employees Shareholders Customers

Society

Employees Shareholders Customers

SocietyImpact on economic activity due to the • Interrupted business activity from employees contracting disease•D isrupted supply chain from suppliers/distributors contracting disease
spread of an infectious disease

Employees Shareholders Customers

Society mployment diversification; changes inEthe human resources market

Employees• Cost and time impacts from switching to substitute products in order
to comply with regulations• Impacts on performance from delays/interruptions in product supply•D evelopment delays due to less face-to-face interaction with customers

12

10

DKS REPORT 2021

• Intensifying competition for securing talented human resources• Rising retirement rate

1

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 ofnegative impact due to occurrence/disclosure)

4

Extraction of significant risks from the viewpoint of materiality in the
integrated annual report

5

Analysis of impact and response to those risks when they occur

Responding to risks

Prioritization ofthe —
significant risks inthe table below

5

High
Probability of arising risk

Identifying Significant Risks

11
6
2

3

4

9

1

8
7
12

10

Low
Small

Risk significanceLarge(impact on stakeholders)

Opportunities• Survey of raw material price trends, including naphtha• Survey trends of other companies• Gather information from customers• Implement prompt price revisions (securing profit)• Adopt a raw materials formula (naphtha-linked pricing)• Coordinate with suppliers, agencies, and users• If costs cannot be absorbed through our own efforts, we will pass along prices.

• Secure multiple sources for raw materials• Coordinate with suppliers• Draft BCP measures• Fixed costs not needed; superiority arises during economic downturns•C ost reductions are possible by searching out less expensive raw materials.
• Diversify raw material procurement sources• Strengthen BCP measures• Strengthen supply chain management• Select and focus on themes• Deepen market strategies (through “FELIZ 115”) including revenue
management• Information on each industry is easily obtainable due to having customers inevery field.
• Prioritize important themes• Deepen relationships with inspiring/inspired partners• Improve productivity through ‘cluster thinking’• Improve open innovation outcomes• Revise product composition under “FELIZ 115”
• Thorough profit management for each product• Raise prices for products with a smaller contribution to earnings• Boost productivity by discontinuing products•P ossessing a lineup of products that can be used in each field enables avariety of solutions to be proposed.
• Range of options for products increases• Product composition that takes profit performance into account• Promote a differentiation strategy through solution proposals, cost reductions,Japanese quality and customization•H alt sales of low-priced products. Accelerate the shift to highly profitableproducts by deepening customer relationships; proposing solutions,customizing products, etc.
• Uni-top strategy (pursue uniqueness, not quantity)• Alliance and coordination with companies, universities, etc.
• Strengthen the IP Department; strengthen IP asset management (investigate
IP asset rights of other asset holders)• Intellectual property strategies• Gather information on legal revisions• Strengthen internal oversight/checking systems• Strengthen compliance•S hould the same thing happen with another company’s product, it can be
regarded as an opportunity to replace it with a DKS product.
• Improve market share through legally compliant product development• Improve trust through rigorous compliance practices• Promote the development and supply of environmentally and user-friendly products• Utilize PL prevention/management guidelines• Acquire GMP certification• Use PL insurance to avoid liability risks• Ensure safety in the food product field by acquiring HACCP certification• Build and operate a quality control system• Expand business opportunities by leverage of certification• Ability to provide customers with the value of a specialized industry• Improve the level of trust from customers and deliver the feeling of security
and assurance• Consider structural reforms through digital transformation (DX)• Promote production system enhancements and improved production
efficiency by making the Kasumi Plant a mother plant.

•A n opportunity to make business continuity decisions, enabling the beginningof a portfolio review• Improve the profitability of aging factories; promote DX•S trengthen management of routine repairs and preventative maintenanceleveraging DX• Strengthen compliance through employee training and appropriate measuresagainst unauthorized access• Enhance the security of in-house systems• Progress of DX•A bility to build an advanced information security system by promoting DX•S trengthen compliance through employee training and appropriate measuresagainst unauthorized access• Boost the Company’s level of reliability• Promote work-style reform through working from home and telework• Review the supply chain and strengthen BCP measures•C ommunicate the concepts of working from home, teleworking, and healthand productivity management• Reduce fixed costs by aggregating and reducing bases• Strengthen coordination with various associations and educational institutions
to help secure human resources• Implement a human resources training program• Promote health and productivity management• Implement harassment prevention training• Promote work-style reform (develop systems for working from home, child-careleave, reemployment after life events, etc.)• Accommodate hiring of senior workers and extension of retirement• System reforms in response to societal changes• Review and implement personnel system reforms• Improve the work environment of manufacturing sites that accommodate
female workers

DKS REPORT 2021

11

DKS’s Identity

Materiality

ESG Basic Policy

Priority themes

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 populationthat causes food resource and energy problems amid rapid globalization and anincreasingly information-based society. We look to take on these challenges and to protect
our environment and way of life while improving safety and levels of comfort. To do thesethings, we believe that “chemistry provides a solution” and shall contribute to theestablishment of a sustainable society.

1 Quality and Safety Management
P.40

2 Research and Development
P.32

Important Issue Identification Process
At DKS, we are identifying materiality, tackling important issues from a long-term
perspective in management. Based on existing social issues and our corporate philosophy,
we have identified seven important themes from the two perspectives of their significanceto DKS and our stakeholders. At the same time, we have specified the materiality ofchallenges toward addressing these themes. In the identification of that materiality, we
have referenced the UN’s Sustainable Development Goals (SDGs)*, ISO 26000, and otherglobal guidelines, given the important demands the international society places on DKS as
we work to advance business globally.

3 Human Resource Management
P.42*At the UN Sustainable Development Summit held in September 2015, there were 17 SDGs adopted to find solutions to issues the world isfacing.

Step 1

Step 2

Step 3

Step 4

Identify theimportance for theCompany

Identify theimportance forstakeholders

Draw a materiality
map

Identify themateriality

4 Consideration for the Environment
P.44

Important Issue Identification Aims
1 Quality and Safety
Importance for stakeholders

Issues for society• Environmental issues
Climate change, energy depletion,
biodiversity, etc.
• Social issues
Changes in social structure due topopulation growth, increased security
risks due to technological advances
and the advent of the informationsociety, public health, food crises,
elimination of disparities, etc.
Corporate Philosophy andManagement Policy• Corporate mission stated in thefounding spirit and the Company
Credo• Happiness-based management

Management

Extremelyhigh

2 Research andDevelopment

3 Human Resource

Management

4 Consideration for theHigh

Importance for DKS

Environment
5 Regional Society
Contributions
6 Organizational
Resilience
7 Tackling NEXT andDREAM Businesses

5 Regional Society Contributions
P.39

6 Organizational Resilience
P.48

Priority Themes & Focuses of SDGs
Following the principles of our Company Credo and Company Mottoes, and taking into
consideration the technologies and various experiences we have amassed over 112 years
as a chemical manufacturer, we have taken the SDGs (17 goals and 169 targets) and linked
them with specific themes related to contributions that DKS can make to solving social
issues. From this, we identified five SDGs to which we will dedicate particular effort.
Five focus SDGs determined from discussions in 2017:

3: Health and Productivity Management, an aging society with a declining birthrate
7: Renewable energy, environmentally conscious raw materials
9: Development and provision of industrial materials for building social infrastructure
12: Environmental pollution, natural resource
depletion
17: Inspiring/Inspired Partners

12

DKS REPORT 2021

7 Tackling NEXT and DREAM
Businesses
P.16

Materiality for DKS

DKS initiatives

Relevant
stakeholders

Relevant social issues• Providing products with highlevels of safety• Global supply chain management

Customers• Stable supply of products• Promoting occupationalsafety and health• Continuous improvements through occupational safety
and health management systems• Implement hands‑on safety education

Employees• Occupational accident prevention, stable
operations• R&D framework aligned with
Uni‑Top strategies• Superior, imitation‑proof craftsmanship (Uni‑Top strategy)• Establish research centers for each customer, strengthen
initiatives with inspiring/inspired partners

Shareholders
Customers• Commodification of products• Developing products that
contribute to the environment• Promote product development with lower environmental
impacts, such as additives for biodegradable plastics

Customers
Society• Respond to decarbonization and climatechange• Promoting an intellectual
property strategy• Prompt applications for IP rights and aggressive pursuitof quick IP rights acquisition

Employees
Shareholders•P atent infringement• Diversity• Provide workplaces and opportunities for the active
participation of female employees• Appoint female officers and hire overseas employees• Work‑style reforms• Implement personnel system reforms with an emphasis
on outcomes

Employees
Society• Labor shortages of young, next‑generation
workers• Employees with 100‑year life spans (proportionof seniors desiring to work to or beyond theage of 70 rises to 80%)
• Expectations for longer health spans• Enhancement of support for childrearing• Boosting human resource
capabilities• Secure competitive human resources (improvement of
personal market value)• Secure and train global human resources

Employees• Reduced presence of Japan as globalization
progresses• Health and Productivity
Management initiatives• Improve health awareness by adopting a healthinformation app

Employees
Society•R esponse to a stressful society• Responding todecarbonization and reducing
environmental burdens• Green transformation (GX) initiatives• Renewable energy (biomass power generation)• Product development for moving beyond green vehicles(strengthen the battery cell business)• Formulate climate change countermeasures, CN2050
plan, strategies, KPI

Shareholders
Society• Natural resource depletion (raw material
procurement), global warming, appropriate
treatment of waste (recycling)• Various forms of natural environment
destruction and increasing environmental
burdens in the 20th century• Contributing to a
recycling‑oriented society• Respond to the sharing (peer‑to‑peer) economy• Traceability systems (review inventory volume, productloss rates, product profit margins)

Society• Natural resource depletion (raw material
procurement), environmental problems, waste
management (recycling and waste‑loss DX)• Appropriate management ofchemical substances• Respond to more stringent legal regulations

Society• Respond to environmental conservation andenvironmental pollution from industrialization• Regional revitalization• 100‑million mulberry tree planting campaign (initiative
partnering with local municipal governments)• Provide community space for regional societies• Utilize the Kibi Plant (recruit regional workers, provide a
workplace for healthy seniors to be actively involved)

Society• Concentration of urban population, ruraldepopulation• Appropriately securing the
supply chain• Fair tradeSociety• Child labor, inhumane labor environment• Responding to the digitizationof society• Superior, imitation‑proof craftsmanship (Uni‑Top strategy)• Rebuild core technologies and know‑how (standardize
expert craftsmanship)• DX initiatives• Strengthen information security measures

Employees
Shareholders
Society• Use of digital technology leading to a more
intense competitive environment• Reduced control of online society (e.g.,cyberattacks)• Initiatives to strengthen
corporate branding• Digitize communication/PR tools• Strengthen communication/PR with individual
consumers

Employees
Shareholders
Customers• Evolution of corporate
governance• Strategies for improving medium‑ to long‑term
corporate value• Improve effectiveness of the Board of Directors andestablish an appropriate remuneration scheme

Employees
Shareholders
Customers
Society• Increasing corporate scandals• Increasing role of corporations in civil society• Fostering DREAM businesses• Collaborative value creation through the life sciencesbusiness• Success rate of the B‑to‑C business• Acquire “foods with functional claims”• R&D for improving cognitive functions

Shareholders
Customers
Society• Greying society and rise in patients withdementia• Collapse of the social welfare system andhealth care cost reductions ‑‑> rising need forpreventative medicine• Longer health spans• Regional revitalization• Seizing opportunities fordiscontinuous growth• Open innovation• Respond to industry reorganization• Execute M&A that contributes to growth

Shareholders
Customers
Society• Long‑term stagnation of the Japanese
economy

DKS REPORT 2021

13

DKS’s Identity

Financial and Nonfinancial Highlights
Financial Highlights (Consolidated)
Net Sales/Overseas Sales Ratio

Operating Income/Operating Margin
営業利益・営業利益率

売上高・海外売上高比率(Millions of yen)(%)

80,00060.0(Millions of yen)
6,000

45.0

4,500

(%)
20.0
5,053

60,00052,25456,95559,57461,45659,140

4,341

3,944

40,000

30.0

3,000

17.4

16.8

20,000

17.0

17.1

16.8

15.0

0

0

3/20173/20183/20193/2020Dividend per Share/Dividend on Equity (DOE)

0

0

(%)

(Millions of yen)

4.0

40,0003.0

30,000

70

70

70

60
2.5

2.3

2.3

2.1

40

20

0

2.0

20,000

1.0

10,00003/20173/20183/20193/2020ROE

24,59423,863

23,4663/20173/20183/201929,94628,5293/20203/20210

3/2021

 Dividend per ShareDividend on Equity (DOE)
The annual dividend per share was set at ¥70 in consideration offinancial conditions, future business development, and enhanced
shareholder returns.

Interest-bearing debt as of March 2021 decreased by ¥1,417 million
to ¥28,529 million, due to the repayment of long-term borrowings.

Cash Flowsキャッシュフロー

ROE(Millions of yen)

(%)
11.8

12.0

9.0

7,000

9.5
8.4

7.7
6.4

6.0

3,500

0

3,750

5,017
3,886

4,955
3,766

3,236

1,150

414
-1,130-3,5003.0-2,458-3,3363/20173/20183/20193/20203/2021

ROE rose from the previous fiscal year, reaching 7.7%. The capitalturnover ratio dipped due to net sales falling as total capital rose;
however, ROE was higher than the previous year due to the profit
margin on sales rising from higher profits.

DKS REPORT 2021

3/2017-2,076-3,804-7,000014

3/2021

3/2020Interest-Bearing Debt

80

2.4

3/2019

 Operating Income
Operating Margin
Operating income for the fiscal year ended March 2021 came to¥4,485 million (up 8.0% year on year) due to higher revenue andsales efforts such as price revisions and sales expansion in theelectronic device materials segment, as well as a decrease inoperating expenses due to the stay-at-home trend and restrictions
on movement. The operating margin was 7.6% (up 0.8 percentage
points year on year).

(Yen)

60

3/2018

有利子負債

1株当たりの配当金／株主資本配当率（DOE）

70

6.8

5.0

3/2017

 Net Sales
Overseas Sales Ratio
In the fiscal year ended March 2021, although there was strong
growth in radiation-curable monomers and oligomers for IT andelectronics applications, demand dipped in the automotive-related
field due to the stay-at-home trend and restrictions on movement inorder to suppress COVID-19 infections, which led to net sales of¥59,140 million, down 3.8% year on year.
The overseas sales ratio was 17.1% (up 0.3 percentage points year
on year).

7.3

7.6

1,500

3/2021

15.0

10.0

8.9

7.5

4,485

4,154

3/2018

 Operating Cash Flows
Free Cash Flows
For more details, see p. 26.

-5,694-5,8423/20193/2020 Investing Cash Flows

3/2021

Nonfinancial Highlights (Group/Non-consolidated)Number of Patents Held (Group)Amount of Waste Generated (Group)

特許保有件数（グループ）

廃棄物発生量(Patents)

(t)

1,200

25,000

900

378

427

453

479

514

20,77920,00021,65819,605

18,431

3/20203/2021

17,36415,000

600
477

497

508

533

542

300

10,0005,000

003/20173/20183/20193/20203/2021

 Japan  Outside JapanThe number of patents held totaled to 1,056 (an increase of 44
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.

CO2 Emissions (Group)

3/20173/20183/2019The amount of waste generated was 18,431 tons (down 1,174 tons
year on year).

 umber of Employees to Utilize the Child-Care Leave/NChild-Care Part-Time Work Systems (Non-consolidated)

炭酸ガス排出量（グループ）

育児休職・育児短時間勤務制度利用者数（単体）(1,000 t)(Persons)

60

15
51.7

53.5

52.4

53.7

13

48.9

40

10

20

5

12
10

10

10

7

0

0

3/20173/20183/20193/20203/2021CO2 emissions amounted to 48,900 tons (down 4,800 tons year onyear). DKS will continue to work on improving energy efficiency witha focus on global warming prevention.

Ratio of Female Employees (Non-consolidated)

5

5

4

1

3/20173/20183/2019423

1

3/20203/2021

 Male  Female  Child-Care Part-Time Work System
The number of employees using the child-care leave system wasseven (up four from the previous year). The number of employees
using the child-care part-time work system was ten (down two fromthe previous year).

 nnual Paid Leave Rate
A
(Non-consolidated + Assigned Employees)

年休取得率（単体+出向者）

女性社員比率（単体）

(%)

(%)

20.0

80.0

19.0

18.8

18.9

75.0

73.2

70.0
18.0

67.4

17.8
17.5

3

68.5

66.1

65.0

17.5

62.4

17.0

60.0
0

0

3/20173/20183/20193/20203/2021

The ratio of female employees to total employees was 18.9% (up 0.1
percentage points year on year). We will continue to carry out
measures aimed at promoting women’s participation andadvancement.

3/20173/20183/20193/20203/2021The percentage of paid leave used was 66.1% (down 7.1 percentage
points year on year).

DKS REPORT 2021

15

DKS’s Value Creation

Message from the CEO

Becoming a Smart Chemical Partner
Chairman CEO Sakamoto addresses
DKS’s WARP objective.

SAKAMOTO Takashi
Chairman CEO

16

DKS REPORT 2021

Reflecting on FY2020 in the Wake of COVID-19
The year 2021 looks to be an historic time. The Tokyo
Olympics was an international festival with mixed support
given the COVID-19 pandemic. I would like to express mydeepest respect to the all-out effort of the athletes and theevent staff in supporting Japan, as host country, who decided
to hold the Olympic games. There were many amazing
displays, but I was particularly impressed by Japan‘s victory inmixed doubles table tennis, defeating an impregnableopponent and winning Japan’s first-ever gold medal in table
tennis. I was touched by the words of IOC President Thomas
Bach at the closing ceremony, “Thank you, Tokyo! Thank you,Japan!” Furthermore, I was inspired by the song,
Hoshimeguri no Uta (Star-Circling Song), at the end of theceremony. The line “Sora-no meguri-no meate” meaning“our guide to the sky,” is a reference to the North Star, whichis indispensable for voyagers. I reflected on this star’s
importance as an unchanging “guide” for people.
A year ago, in my CEO message I said, “COVID-19 has shut
down economic activity, prompting humans to think againthat the source of value might be analog after all.” Our UniTop strategy, which focuses on unique products that do not
pursue scale, is a strategy that concentrates our intangible
assets and boosts the value of DKS. The Olympics came to aclose while COVID-19 infections reached record levels and we
found ourselves in the fifth wave of the pandemic.
Meanwhile, historically unprecedented rainfall had struck
the Kyushu region and areas across Japan. Reports indicatethat the cause is rising ocean temperatures from global
warming. As the first year of our medium-term management
plan “FELIZ 115,” 2020 was a year for us to ascertain thesuitability of our planned initiatives.
First, I would like to look back on fiscal 2020, then second,
introduce our “path to value creators,” and third, our nextmanagement plan, SMART 2030. FELIZ 115 is a five-year planwith a final-year target of net sales of ¥85 billion andoperating income of ¥10 billion. In the first one to two years,
we laid plans to strengthen our footing, while in the third,
fourth, and fifth years, we will focus on accelerating growth,
including reaping results from capital investments. Last fiscal
year, in the throes of COVID-19, our performance wasbasically in line with the plan. In terms of quantitative results,
while we were close to -4% versus the same period theprevious fiscal year, operating income and ordinary income
outperformed our estimates from the beginning of the year.
This was the result of comprehensive strength in production,
sales, and R&D from our reorganization, for the first time in 12
years, into a headquarters system last fiscal year. Profitabilityrose in areas we refer to as ACTUAL (existing) businesses asof the end of fiscal 2015.
This was the result of concerted effort to improve
profitability by focusing closely on our customers. In
5G-related projects in our NEXT (peripheral) businesses, thefirst year saw stagnation from U.S.-China friction, but we haveinformation suggesting that the field will recover in the latter
half of fiscal 2021. The NYSE’s Dow Jones Industrial Averagehas been on the rise and topped $35,000. I think that the
bedrock strength of U.S. companies is their national culture
and character, which is different from Japan. The overseas
economy, including China, Europe, and Taiwan, has also
improved. Although we are still in the midst of the COVID-19
pandemic with no sign of an end, we forecast a high level ofnet sales and income from a business portfolio that is
showing clear improvement. Risks of fluctuations in fiscal 2021
include rising prices for naphtha and related raw materials. I
am confident that we can overcome this situation through theefforts that the production department has embarked on tominimize costs, as well as effort by the sales department,
whose confidence is buoyed by performance results.

The Path to Value Creators: Turning Non-Financial Assets into Financial Results
I believe it is our mission to create value that makes our fourgroups of stakeholders surrounding the Company feel“happy” (“feliz” is the Spanish word for happy). We made amatrix that shows what kind of value we are creating using
FELIZ as an acronym, starting with “F” (for future) and ending
with “Z” (for Z-FLAG, connoting “challenge”). We arranged
this into five slogans categorized for each stakeholder andmade a 20-item list: 4 stakeholders 5 letters (F-E-L-I-Z).
We are proceeding to arrive ahead of schedule at meetingthe qualitative targets outlined in the management plan. With
regard to value creation, the Octopus Model separates
capital into financial and non-financial groupings. It is
important to have comprehensive strength to take capital,
which is considered to be non-financial and lacking in form,

and make it financial capital that is tangible. Looking back on
the five-year management plan’s first year, which was spententirely caught up in the turmoil of the COVID-19 pandemic, I
made a declaration: we will march forward down the path tovalue creators. The three pillars of our year-two focus
measures are, first, a new system and personnel, second,launching new businesses, and third, establishing the life
sciences business.
In 2020, the year FELIZ 115 kicked off, we took the businessdivision system that we adopted 12 years prior andtransitioned it into a headquarters system with production,
sales, R&D, and administration headquarters. The objective,
from an overall, optimum perspective, was to drive progressfor individually optimized results under the new system. The

DKS REPORT 2021

17

DKS’s Value Creation

Message from the CEO

FELIZ Matrix: Meeting the Expectations of Our Four Stakeholders

FUTUREENVIRONMENTLIFEINNOVATIONZ-FLAG/CHALLENGE

Employees

Shareholders

Customers

Society

Create on your own

PBR=ROE×PER

Reciprocal partner

Humans or AI

Distribute according tocontribution

ESG-based management

C-to-B 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 happinessproduction headquarters created a concise outline ofproduction costs, which boosted their mindset toward profitoriented plants. This mindset includes a more entrenchedawareness of managing activity in a data-driven, quantitative
manner. The Sales Headquarters has thoroughly transitioned
from being product-centric to being customer-centric. The
Administration Headquarters has started efforts to strengthen
management by digital transformation (DX), green
transformation (GX), and AI utilization. Additionally, in termsof human resources, we endeavored to implement personnel
system reforms that reward employee contributions. We
coordinated with the labor union and launched a trial run of
the system in April 2021.
Also, from April 2021, the R&D headquarters adopted a
new system that leads to results by carrying out on-siteverification using DKS’s technical map. The technical map,
sorted and organized from the perspective of productportfolio management (PPM), plots DKS’s fields of technology
on a graph, using a scale of one to five, with “superiority” on
the x-axis and “future merit” on the y-axis. Suppose, forexample, that there is technology field “A.” It receives a “5”if it has superiority in the chemical industry, a “3” if it is onpar, and a “1” if it is inferior. After doing the same regarding
its future merit, the field falls in one of the four categories in
the graph. Does it fall in the category of “cash cow” or“dog”? Or, is it a “problem child” or a “star”? Based on theplot distribution, we moved to the next step.
We checked the validity of our allocation of researchpersonnel addressing each of our current themes. When
comparing the positioning indicated by “superiority” and“future merit” versus the current assignment of personnel,
the executives in charge were astonished to see the weakcurrent lineup. We also performed one more analysis. Thisaddressed themes with superiority/future merit andrelationships with future customers. We are building a
research framework linked with PPM and promisingcustomers. We are ensuring consistency with the customercentric focus of the Sales Headquarters and tying this in withthe portfolio creation targeted by the DKS Group overall. Thisis the new R&D system that we launched in April 2021.
Similarly, we established new departments to promote theideas of management of technology (MOT) and materials
informatics (MI). Starting this fiscal year, we will cement this18

DKS REPORT 2021

system in place and then work to meet our targets in years 3,
4, and 5 of our five-year management plan. This constitutes
the first of 2021’s three pillars.
The second pillar, which is the launch of new businesses,
involves product development that listens to market needs.
We narrowed down by half the themes arranged on thetechnical map. Next, we allocated personnel in relation tosuperiority, future merit, and customer-centrism. We havestrengthened our relationships with customers, universities,
and municipalities, which has led to early results starting toemerge from laboratories and new prototype development.
Projects for research efficiency and productivity areprogressing in parallel with DX activities. Going forward,
further investment will be needed to meet our 2025 and 2030
targets. We are striving to raise total assets from ¥85.0 billion
to ¥135.0 billion and will consider whether to pursue capital
expenditures or M&A in order to increase total assets for
growth. Deciding how to narrow our investment themes is atrue management challenge, but also a challenge for our
R&D Department as well.
The third pillar of our focus measures is establishing the life
sciences business. Biococoon Laboratories, Inc. is tackling thechallenge of dementia, which is a major obstacle for thehuman race. We have spent many years working to produce
purely domestic medical fungus (Isaria Japonica), which we
think holds possibilities for new progress in the field ofcognitive neuroscience. We published a paper in January ofthis year in the U.S. academic journal PLOS ONE. Dr. Alois
Alzheimer argued in 1906 that dementia is caused by cellularinflammation due to amyloid beta proteins. To date, major
global pharmaceutical manufacturers have tried to develop
treatments that prevent inflammation by eliminating amyloid
beta proteins, but these efforts have ended in failure. Research
fellow Dr. SUZUKI Koichi of Biococoon Laboratories has taken abroader look beyond the conventional target of nerve cells andfocused on neuron-supporting glial cells. “Naturido,” a newly
discovered useful component from medical fungus (Isaria
Japonica), was tested in vitro on cell cultures and showed theability not only to promote growth of neurons, but also to
suppress their glial cell inflammation and to enhance astrocyte
proliferation. Furthermore, in animal trials, we confirmed thatbrain function improved in mice fed Naturido. The research
results that Naturido influences glia-neuron interactions

appears to offer a new approach to improving brain function.
20 years ago, there were 6,500 DKS shareholders. On thestock exchange, our market capitalization was around ¥10billion, with an unimpressive trading volume. We strove toimprove our corporate strength and started publicity and PR
campaigns in 2015. Our market capitalization briefly crossed¥50 billion but recently is trending steadily around ¥35 billion.
We have been calmly making structural adjustments ahead of
the Tokyo Stock Exchange market segment reorganization
planned for April 2022. Changes also took place with ourshareholders, with the number of individual shareholders
temporarily decreasing to a number around 3,100. However,after the publication of research in an international academic

journal in late January of 2021, that number rose by nearly
1,000 and we now have close to 4,000 individual shareholders.
My aim is to grow the net sales of the life sciences business to¥10 billion in 2025. For our life science business, we alreadyhave a consolidated workforce of 75 personnel. We havebeen a B-to-B enterprise that manufactures intermediarymaterials as our industrial products since 1973, when DKS
entered what we call our Renaissance period. The life sciencesbusiness is a B-to-C enterprise targeting individual consumers
as we sell products such as “foods with functional claims”
related to dementia. This is the second Renaissance period of
our Company. We will strive to make this new personallifestyle business one-third of our overall business by 2030.

SDGs for the Millennial Capital City of Kyoto and the Steps to Move on“After COVID-19”
Ikezu, bubuzuke, ichigensan. These words express thedistinctiveness of Kyoto, the millennial capital city. Kyoto has
a cityscape that is extremely rare in the world. The grid
structure was learned from Chang’an, the capital of theancient Chinese T’ang dynasty, but it left Kyoto without
defensive walls. I have never seen any city like it in myexperience visiting 60 countries. I think of the “walls”
defending wall-less Kyoto as internal walls of protective
knowledge. The roundabout words and phrases in the Kyoto
dialect are important barriers. Ikezu is sometimes translated
as “mean,” though that is going a bit far. Ikezu means to
express one’s true thoughts without putting them into direct
words. It is similar to the phrase “black humor” in English.
Bubuzuke. This word also appears in rakugo comedy
sketches. It is an indirect, euphemistic way of urging
consideration. This is something like offering a certain kind offood as a gentle sign that it is time for you to leave. Then,
there is ichigensan. It is the opposite of “regular patron,” andin English is like the word “stranger” (in the sense of “firsttime visitor”). Kyoto has been called the city of tradition andchange. In Japan, and certainly in the world, it has uniquelocal qualities.
Kyoto’s famous Kiyomizudera gave me the opportunity to
see first-hand this COVID-19 pandemic. My thought was that
this new coronavirus, which brought a pause to the crowds forthe first time in history, was confronting us with a leap-in-thedark moment. Sakanoue no Tamuramaro, a famous militarycommander of the early Heian period who is said to havebuilt Kiyomizudera, was a man who saw the beginning of
Kyoto, the millennial capital city. Wanting to know more
about Tamuramaro, I went to Kiyomizudera. I was shocked atwhat I saw. The temple has an expansive parking area that is
usually packed with hundreds of vehicles, but on this day,there was not a single one. Even when climbing the hill to thetemple, I saw no one. This must have been the first time forsuch a phenomenon since the temple was founded. With noone in sight, I stood on the balcony of Kiyomizudera, famous
for the saying in Japan, “To leap off the balcony ofKiyomizudera,” meaning “to make a bold decision.” I
trembled from my fear of heights on the 17-meter platform

DKS REPORT 2021

19

DKS’s Value Creation

Message from the CEO

and refrained from taking my own proverbial leap off thestage. Firmly checking each step on the way down the stairs,
my mind wandered to the historical events concerning
Tamuramaro. His conquest of the northern Tohoku region is
like our SDGs. Why did Emperor Konin appoint Tamuramaro
lieutenant of the Inner Palace Guards? And why did Emperor
Kanmu later order Tamuramaro to lead a military campaign
on the north? I think there are three reasons and they are alllinked to the SDGs. The first reason was to procure funds formoving the capital city, which was then in Nara, to Kyoto. The
northern Tohoku region, including what is now Iwate
prefecture, was rich in gold and silver. It was a sustainablesource of capital. The second reason was to control all ofJapan and develop Kyoto into a 1,000-year capital city. And,
third, above all else, was governance (though in this case,through the act of conquest). These objectives were SDGs.
Biococoon Laboratories, Inc. is located in Iwate prefecture
and Dr. Suzuki, founder of the laboratory, is an admirer of thefamous northerner and novelist, MIYAZAWA Kenji. Miyazawa’ssong, Hoshimeguri no Uta (Star-Circling Song), was part of
the Tokyo Olympics’ closing ceremony. In the lyrics, Miyazawa
takes children on a tour of the constellations, from Scorpio to
Ursa Minor, ending with the North Star, our ever-steady guidein the night sky. He was a remarkable man of encyclopedic
knowledge whose writing delved into the questions of, “Whatis life?” and, “What is happiness?” Some of my favorite wordsof his are, “The ever-incomplete is complete.” We keep
trying and trying but do not reach the end. The state of being
incomplete is actually a kind of completion in itself. It seems
to me that Miyazawa was seeking the completeness of theincomplete. A little while after the closing ceremony, I read
The Undefeated, a book by Miyazawa’s contemporary,
SAWAKI Kotaro. Why do athletes devote themselves tocompetition? The book tells the life stories of six people,
among them boxers and runners, pushing toward theirboundless dreams. The book keeps asking, “What is true
happiness?” At Kiyomizudera, I thought of our pursuit of
FELIZ 115. And I thought further. Karl Marx has written about

20

DKS REPORT 2021

topics relevant to the SDGs. The three key phrases are
humanism, planned economy, and national
self-determination.
The objective of the SDGs is a sustainable society. In
human terms, this means living a long life. The wordhumanism, which I came across in school as one of Marx’s
assertions, has at its heart sustainability so that humans may
go on living. The “D” of SDGs is development—planned
economy. Natural resources will run out at some point. We
must use them conscientiously and help them last as long as
possible. Then, there is “G” for governance—democratic
decision making to strive toward our goals. This is precisely
national self-determination and democracy. Both Tamuramaro
in the 8th century and Marx in the 19th century weretranscending time periods and arguing for SDGs.
At Kiyomizudera, my thoughts were of our next mediumterm management plan to succeed FELIZ 115, tentatively
named “SMART 2030.” It is part of our steps toward moving
on after the COVID-19 pandemic. The “S” in SMART stands
more for “survival” than “sustainable.” The “M” represents
our corporate “mission” to remain for the long term. The “A”
stands for “action,” which is a must. The “R” stands for“reliable.” And, the “T” is for “turn” because“transformation” sounds too formal and the nuance we
prefer is that of “turning.” For employees, this means“turning” stronger. Our Company Credo of “contributing to
the nation and society through industry” and our threeCompany Mottoes of “Quality First,” “Cost Reduction,” and“R&D Efforts” are distilled into “SMART 2030.” Of the threeor so steps for moving on after COVID-19, the first is ourapproach to the tightened Corporate Governance Code ofJapan. For example, the Code requires setting up corporate
committees for addressing issues such as a succession planand executive remuneration. We will carry out these projects
in a manner well suited to our organization. Specifically, thismeans establishing an Advisory Board comprised of outside
officers and myself as the DKS representative. At meetings, I
listen to the input of members outside the Company on

executive remuneration. Although we have not disclosed it
publicly, DKS’s remuneration scheme is simple and clear. With
regard to remuneration, succession plans, and the like, we
emphasize an objective perspective. Every six months,
succession candidates are evaluated by outside directors ona five-point scale.
The second step for moving on after COVID-19 is regional
revitalization. Silkworms are the only insect living incoexistence with humans. What that means is that without
humans, silkworms would not be able to proliferate.
Antheraea yamamai are not this way, but humans are requiredin order to make silk. In the past, 3.4 million households weremaking silk, while today it is 350 households. We signed acomprehensive partnership agreement with Yabu City of
Hyogo Prefecture, which has been designated a strategic
agricultural zone. We are making effort to take concrete steps
toward contributing to carbon neutrality by 2050. We willdevelop cooperative efforts between Iwate, Tokushima,
Okayama, and other regions with large company think tanks.
For this, we established a dedicated office in the Tokyo

Headquarters. The third step for moving on after COVID-19 is“people.” Retirement age at DKS is 60 years old, although weare not very particular about mandatory retirement. If an
employee is healthy, motivated, and able to produce results,
the person’s age is not an issue. Since we started publicity
and PR activities, there has been a major shift in the
personnel joining DKS. Over and above the shift in talent andperformance, there has been a change in people’s
countenance and posture. Last fiscal year, one-third of newyoung employees were keenly motivated individuals who had
majored in biological science-related fields. We haveinformed the labor union of how much profit we share withworkers. Before we distribute profit to shareholders, we firsttake care of employees. After that comes capital
expenditures. Then, the remainder is allocated as returns toshareholders. When I explained this at the General Meetingof Shareholders, an attendee later said to me, “That wasawfully bold of you to admit at the meeting!” When I asked,“How so?” the shareholder smiled and said, “Oh, it wasreassuring actually.”“WARP” Speed into Becoming a Smart Chemical PartnerTokyo is called the “Eastern Capital” because it is situated tothe east of Kyoto, which was the capital city for more than
1,000 years. Tokyo is now the capital city of Japan even though
there was never an official declaration of transfer from Kyoto.
Similarly, there is no law stipulating Tokyo as the capital city.
Emperor Meiji exited the west gate of Nijo Castle (Kyoto) andproceeded to Edo Castle (Tokyo). Although the emperor
resides where the seat of government is located, the peopleof Kyoto still consider the emperor to be temporarily “inabsentia.” The imperial departure sent a tremor throughKyoto. In Japan at that time, Tokyo was the largest city, with
one million people. Second was Kyoto with 350,000, thenOsaka with 250,000. The imperial “visit” to Tokyo, however,led to further emigration as 100,000 people left Kyoto andlowered its population to 250,000.
The first Governor of Kyoto Prefecture, NAGATANI
Nobuatsu, realized the crisis. If the exodus continued, themillennial capital city of Kyoto would fall into stagnation.
Nagatani lobbied the new government with his recovery
policies, which were implemented. One of those policies wasfor Kyoto to host Japan’s first World Expo. Kyoto’s Okazaki
District was the location of this first international event inJapan, and also the host site for the 2019 Japan Industrial
Safety and Health Exhibition. One of the attractions of theWorld Expo was the Miyako Odori, a dance performance(then and still now) held in April by geisha and maiko (female
Japanese performers) in Kyoto’s Gion district celebrating thearrival of spring. Another policy of Nagatani was to establish
an institution called Seimi-kyoku, in part a transliteration of
the Dutch word chemie for “chemistry,” and Nagatani’s

proposal was for a Chemical Science Agency. Seimi-kyoku
was the forerunner to Kyoto University, founded in 1870, andJapan’s full-fledged chemical industry got its start in Kyoto.
ONO Mohei, one of the founders of DKS, was a businessman
who came to Kyoto from Yamagata with his sights set on thisburgeoning industry.
The term “warp” is well-known in science fiction forreferring to instantaneous movement. DKS launched a“WARP Force” project team in the life sciences business. We
will prepare by investigating the layout of the “foods withfunctional claims” market and then integrate our capital
resources. Then, if an opportunity presents itself, we will
move at “warp” speed. I understood the meaning of the past
year when I stood on the balcony of Kiyomizudera. At that
temple (a calm within the COVID-19 storm) with a stonemonument to Aterui, Tamuramaro’s worthy opponent, I
thought of chemistry. DX and the online revolution moving
with it are accelerating chemistry’s value creation. We willleverage our Uni-Top strategy—recognized for its
uniqueness—to take DKS’s corner of Japan’s chemicalindustry that emerged from Kyoto and move it into warp
speed. This is the path that DKS is following—the path tovalue creators.

SAKAMOTO Takashi
Chairman CEO

DKS REPORT 2021

21

DKS’s Value Creation

Review of the Medium-Term Management Plans

CHANGE100 Stage I

CHANGE100 Stage II

REACT1000—Changing the Corporate Culture—Expansion along with Earnings— Act for a Leap —April 2009–March 2012

April 2012–March 2015

April 2015–March 2020

Targeted
Figures

Consolidated net sales ¥55 billion or higher

Consolidated net sales ¥60 billion or higher

Consolidated net sales ¥75 billion or higher

Ratio of ordinary income to sales 4% or higher

Ratio of ordinary income to sales 5% or higher

Ratio of ordinary income to sales 8.0%

Slogan“Each of Us Holds the Key to Success”“Each of Us Holds the Key to Success”“Act for a Leap”

VisionBuilding a Business Structure
Necessary as a Leading Industrial
Chemical Company

Staying Ahead of the Times as a
Leading Industrial Chemical
Company

Practicing the concept of “chemistry provides asolution,” we will take up the challenge ofcarrying out our management plan REACT1000

1. Securing a stable profit structure

1. Expanding peripheral business fields

1. Create new corporate value

2. Pursuing greater business efficiency

2. Enhancing and reinvigorating
domestic production facilities

2. Create a clear corporate image

3. Accelerating the creation of new
businesses

4. Maintain and increase optimal ROE levels

Management
Policies

3. Developing and strengthening our
foundation to realize the“technology makes the Company”
concept
4. Accelerating the creation of new
products
5. Enhancing compliance management
6. Improving managerial skills andhuman resource development

4. Pursuing cost reductions
5. Improving management capabilities
and developing human resources

1. Enhancing the enterprise’s power (marketing clout, cost-saving ability,
technical strength and organizational power) = Heightening our corporatevalue
2. Promoting selection and concentration = Determining the withdrawal fromunderperforming 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 business

Review

Successes

22

6. Accelerate and enhance mother plant functions

There are five priority qualitative targets for
implementing the management policy.
1. RETURN: pursuing profitability = sharing returns
with stakeholders (appropriate distribution of profits)
2. EXPORT: improving overseas sales ratio = global
strategies responding to paradigm shifts (overseas
sales ratio of 20%)
3. ADVANCE: moving forward with new plantinvestment = pursuing efficiency for core businesses(restructuring domestic bases)
4. CREATE: establishing new businesses = quickly
commercializing newly developed materials (newbusiness creation fund)
5. TRAIN: systematic human resources training =fostering personnel to pursue ‘leaps’ (coordinatingwith consulting companies)

The initial year saw lingering impacts
from the financial crisis triggered by
the Lehman Brothers bankruptcy. With
revenues growing over the next two
years, however, DKS successfully
achieved a target of the plan byrecording final-fiscal-year (fiscal year
ended March 2012) consolidated net
sales of ¥56.2 billion. In contrast, theCompany was unable to reach theplan’s final-fiscal-year operating
income target due to sharp demand
drops and ongoing high raw materials
prices.

Although DKS aimed to increase net
sales from ¥56.2 billion to ¥60 billion,
the fiscal year ended March 2015 (thefinal year of the plan) ended with net
sales at ¥55.5 billion, below the target
because of delays in investment toraise production in core businesses
and stagnation in the solar cell field.
On the other hand, DKS achieved its
operating margin target given recordhigh operating income, ordinary
income, and net income.

On the quantitative side, sales were revised downward
in the third year of the plan due to an extreme slump insolar 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 thethird consecutive year. After that, however, risingproduction costs for 5G materials, which far exceeded
expectations, insufficient response to soaring raw
material prices, and the COVID-19 pandemic led tooperating income of ¥4.1 billion in fiscal 2019, the final
year of the plan, unfortunately resulting in our fallingshort of the targets. The 20 items in the matrix, which
are qualitative elements, have all launched or are in
progress. As a result, our view is that the foundation for
creating the future has been laid according to plan.

• Increased business divisions’ profits
by instilling a profitability mind-set• Upgraded the management
infrastructure (e.g., commenced
introducing a new ERP system) for
the future•E xpanded business peripheral areas (NEXT) andefforts to create new businesses (DREAM)• Maintained a healthy balance sheet(increased the capital adequacy ratio)•C hanged the balance sheet composition andincreased total assets 1.3 times compared with theend of the final year of the previous plan

• Launched and promoted the Human
Resources Development Project
aimed at instilling an awareness ofmanagement in all departments• Made new investments for growth(made Yokkaichi Chemical a wholly
owned subsidiary) to expand
business fields, purchased land,
began preparation for a new plant

Improve the corporate culture to bringa profitability mind-set to the forefront

Issues

5. Create advantages through collaboration

6. Enhancing overseas expansion andstrengthening administration

Basic Strategies

Plan Outline

3. Ensure more profound corporate governanceRealize a balance in three areas(Balance sheet / business portfolio /human resources)

DKS REPORT 2021

Maintain a robust and healthy balance
sheet to increase earnings•F ocused on business development with new capital
investment and R&D expenses•B rought life sciences-related Biococoon Laboratories
Inc. and Ikeda Yakusou Co., Ltd. into the Group• L aid the foundation for realizing business income andprofits commensurate with total assets, including
up-front investment in new businesses
1. Insufficient precision in market forecasting
2. D elays in reorganizing unprofitable businesses
3. V ague customer countermeasures (selection &concentration)
4. N egative effects of the business division system

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

About

“FELIZ 115”F UTUREE NVIRONMENTL IFE
I NNOVATION
Z -FLAG/CHALLENGE

This word means happiness in Spanish. DKS chose“FELIZ” because we want to provide all
stakeholders with happiness.

FELIZ

Each letter in the word FELIZ represents one of thefive themes of our medium-term management
plan in English.
Looking ahead to the final year of this plan in 2025,
this number expresses our plans for the 115th
anniversary of our founding.

115

FELIZ Matrix: Meeting the Expectations of Our Four Stakeholders
Employees

Shareholders

Customers

Society

Create on your own

PBR=ROE×PER

Reciprocal partner

Humans or AI

Distribute according tocontribution

ESG-based management

C-to-B 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

FUTUREENVIRONMENTLIFEINNOVATIONZ-FLAG/CHALLENGE

Vision for 2030

Targeted Corporate Image

1. Highly profitable Uni-Top intermediary materials manufacturer
2. Technology developer pursuing progress and innovation• As a Uni-Top company, we will conduct management while
sharing happiness with our four stakeholders.

3. A company balancing corporate value and stakeholder
satisfaction• In brief, we will be evaluated for our uniqueness and will
enhance corporate value with a shared sense of excitement.

Current medium-term management plan

PeriodPeriodApril 2025–March 2030

April 2020–March 2025

Previous medium-term
management plan
PeriodApril 2015–March 2020

(Consolidated)

Targets

Theme

Realization of a highly profitable
Uni-Top company¥85.0 billion

Operating income¥10.0 billion¥67.0 billion ¥61.4 billion

Operating margin

Operating income¥6.0 billion

Total assets

March 2030

Net sales¥135.0 billion(twice that of March 2020)

Operating income¥18.0 billion(triple that of March 2020)

11.7%¥92.0 billion (forecast)

9.0%

6.8%

Asset turnover ratio

1.0 times

Profit¥3.6 billion¥2.0 billion

Capital expenditures¥12.0 billion (five-year cumulative)

ROE

10.0%

6.4%

R&D expenses-to-sales ratio

Overseas sales ratio

20.0%

16.8%

ROE

Operating margin

Targets(Consolidated)

March 2025

Net sales

Net sales¥4.1 billion

2030

Basic Approach(Consolidated)
March 2020
results

DKS

 Achieve qualitative enhancements in ACTUAL (existing)businesses, expand and reinforce NEXT (peripheral)businesses, and develop and cultivate DREAM (new)businesses.
 Maximize the use of total assets (asset turnover ratio
target of 1.0 times).
 Establish a headquarters system; optimally allocate
management resources.
Continue employee happiness-based management with aperformance evaluation system that rewards contributions.

Targets
Results

Next medium-term
management plan (tentative)

5.0%
10.0% or higher

Priority Measures
Restructure management resources

Enhance earnings power

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

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

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

DKS REPORT 2021

23

DKS’s Value Creation

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

Basic Approach

1

2

ACTUAL

Qualitative enhancement

NEXT

Expansion, reinforcement

DREAM

Development, cultivation aximize use of total assets resulting fromM
systematic capital expenditures trengthen customer-specific marketing in parallelSwith product-specific management

2030 business composition

ACTUAL

NEXT

DREAM

Existing businesses

Peripheral businesses

New businesses

1/3

1/3

1/3

2025 asset turnover ratio target

1.0 times(Equivalent to annual net sales)3 our headquarters: Sales, R&D, Production andF
Administration

Optimal allocation of management resources erformance evaluation system that rewards
P
contributions

C ontinuing employee happiness-based management

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

Action Strategy

1

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

2

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

3

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

SDGs/ESG-Based Management Objectives
SDGs

ESG

(Sustainable Development Goals)(Environment, Social, Governance)

Life sciences businessnet sales ¥10.0 billion
Solar cell,
exhaust gas businessnet sales ¥10.0 billion
5G businessnet sales ¥10.0 billion

Cooperate with local government
strategic special zones Proactively develop naturally
derived raw materials
Create value with inspiring/inspired partners

Promote the active
participation of womenAppoint female officers

Create employment
Employ foreigners and people fromother industries

Number of outside
directors
One-third or more of all directors

24

DKS REPORT 2021

Priority Measures Road Map
Seven Projects for Realizing “FELIZ 115”

1

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

Restructure
management resources

2

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

Enhance earnings power

3

Revise performance evaluation andremuneration systems; establish system
rewarding contributions.

Strengthen the
management foundation

1. P roject for withdrawing from noncontributing products
2. P roject for increasing contributions from older plants

3. P roject for creating proactive business models centered on solutions
businesses
4. P roject for shortening the product development period byconcentrating product development
5. Project for creating profitable patterns and eliminating hidden losses
6. P roject for eliminating work that does not contribute to customers
or DKS (work-style reform)
7. P roject for strengthening appropriate resource management andrevising evaluation systems

Risks and Countermeasures in Planning
1

Soaring raw material prices due to changes ingeopolitical 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 the spread of 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

Priority Measures
Business Restructuring Timeline
April 1, 2020

April 2021

Business Expansion Timeline
April 2022

April 2023

April 2024

March 31, 2025

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

Review of the First Year arried out a portfolio review, including improvement of profitabilityCand withdrawal from certain projects; reorganized our businessstructure.
Reformed the profit structure of our ACTUAL businesses.
 rought on line Plant #4 in the Yokkaichi Branch Kasumi Plant,Benabling greater production capacity to handle strong demand.
 stablished the Life Sciences Business Headquarters (under directEsupervision of the president), aiming for business on the scale of ¥10billion in 2025.
In order to start and build out new businesses, we revamped our
R&D framework to place priority on profitability.
 e will reform corporate culture to more fairly assess
W
accomplishments, aiming for an HR system that takes employee
happiness into account.

 e will strengthen IR activities with the Public & Investor Relations
W
Department (under direct supervision of the president) and will
strengthen dialogue with stakeholders.
We will establish an Operation Support Group and encourage
employment of people with disabilities.
We proactively hired non-Japanese employees from Mongolia andother countries and strove to promote diversity.
 elected as a “2021 Health & Productivity Stock” for the second
S
year in a row.
Certified as a “2021 Certified Health & Productivity Management
Outstanding Organizations Recognition Program” for the fourthyear in a row.
Certified as a “Sports Yell Company” two years in a row.
Received the highest rank four years in a row in the DBJ(Development Bank of Japan Inc.) Health Management Ranking
Program.

DKS REPORT 2021

25

DKS’s Value Creation

Financial/Capital Strategies and Total Shareholder Return

Financial Position
As of the end of the fiscal year ended March 2021, theCompany had total assets of ¥85.0 billion (up 4.0% year onyear), net assets of ¥37.4 billion (up 9.2% year on year), an
equity ratio of 40.7% (up 1.9 percentage points year on year),and interest bearing debt of ¥28.5 billion (down 4.7% year onyear) due to stronger free cash flow, which improved the net
D/E ratio from 0.57 in the previous fiscal year to 0.45. Cashflows provided by operating activities were ¥4.9 billion, an
increase of 31.6% compared with the previous fiscal year,

capital investments decreased to ¥4.6 billion from ¥6.1 billion
the previous fiscal year, and cash flows used in investing
activities reached ¥3.8 billion. Free cash flows were positive at¥1.15 billion. Net cash provided by financing activities was
slightly positive, totaling ¥0.25 billion, supported by sale andleaseback transactions, even as we repaid debt. As a result,
our balance of cash and deposits at fiscal year-end rose ¥1.4
billion, to ¥11.5 billion.

Financial Analysis of the Past 10 Years
An analysis and comparison of the performance and financial results of the DKS Group for the period from April 2010 to March 2021
are as follows. (Cumulative totals are the totals over the 10-year period from April 2011.)

April 2010–March 2011

April 2020–March 2021

Net Sales¥51.2 billion¥59.1 billion

With the impact of COVID-19, down 3.8% YoY

Operating Income¥2.73 billion¥4.48 billion

The second-highest level in our history, in line with theforecast at the start of the fiscal year

Operating Margin

5.3%

7.6%

On an upward trajectory toward our target of double
digits¥1.15 billion¥2.56 billion

7.7%

7.7%

Total Assets¥47.7 billion¥85 billion

Up 71.8% over 10 years due to growth investments,
etc.

Net Assets¥16.4 billion¥37.4 billion

Increased approximately 2.28 times due to internal
reserves and two capital increases¥14 billion¥28.5 billion

Increased ¥14.5 billion due to aggressive capital
investment

0.54

0.45

Net Profit
ROE

Interest-Bearing Debt
Net D/E Ratio

26

Assessment/Comments

Recovery of 27.2% increase YoY
On-going target is 10% or higher as we aim to
improve our capital efficiency ratio

Stable financial foundation due to higher net assets

Totals for the Past 10 Years

Assessment/Comments

Net Profit Cumulative
Total¥20.4 billion

Continuous profit level at or above ¥2.0 billion since
the fiscal year ended March 2016

Capital Investment
Cumulative Total¥43.8 billion

Depreciation Cost
Cumulative Total¥25.7 billion

Since the fiscal year ended March 2015, growthinvestment became more aggressive; implemented
capital investment with cumulative depreciation costs
exceeding ¥18.1 billion over 10 years

R&D Expenses
Cumulative Total¥26 billion

R&D expenses-to-sales ratio improved from 4% to 5%

FCF Cumulative Total¥(1.4) billion

Reflecting growth investments, operating CF andinvestment CF trended at approximately the samelevel

Dividend Cumulative
Total¥5.6 billion

Dividend has doubled in the past 10 years (from ¥35
to ¥70)Capital Increase¥4.4 billion

Two capital increases through public offerings (March
2011, December 2014)

Share Buybacks¥1 billion

Determined as a shareholder return policy finalized in
January 2017

DKS REPORT 2021

Total Shareholder Return for the Past 10 Years
Total shareholder return (TSR) by dividend and stock price
was as follows. The share price over the past year has beenbasically flat due to a rapid recovery two fiscal years prior. The
medium- to long-term TSR over the past five years was 16.9%,
whereas the annual TSR rate was 12.5% over the past 10

years, exceeding the returns of the TOPIX and TOPIX
Chemicals dividend index. These levels exceeded theshareholder capital cost (approximately 6.0–7.0%) anticipatedby the Company.

DKS(Index)TOPIX

TOPIX Chemicals Index

3/20193/2020

500

400

300

200

100

0

3/20113/20123/20133/20143/20153/20163/20173/20183/2021

Note: Share price trends including dividends (closing price data for March 31, 2011 = 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

0.0%

(11.1%)(3.8%)

118.5%

16.9%

223.4%

12.5%

TOPIX

42.1%

22.1%

6.9%

62.3%

10.2%

179.4%

10.8%

TOPIX Chemicals Index

35.2%

20.5%

6.4%

91.4%

13.9%

250.0%

13.3%

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

Future Financial Strategies/Shareholder Returns
In “FELIZ 115,” our medium-term management plan thatstarted last fiscal year, we are aiming to maximize the use of
total assets resulting from systematic capital expenditures,
while also growing net sales and achieving an asset turnoverratio of 1.0 times in the fiscal year ending March 2025. At thesame time, we will need strategies that emphasize capitalefficiency so that ROIC can exceed our added-value target
for weighted average cost of capital (WACC). On the financial
front, we intend to continue optimizing the cost ofshareholders’ equity and implement financial and capital
policies to support TSR that exceeds this cost of equity.
In addition to our ROIC target, our financial goals include:
1) realize an ROE of 10.0% or higher in the fiscal year ending

March 2025, 2) stably increase the P/B ratio by 1.0 times ormore by maintaining ROE above the cost of shareholders’equity in each fiscal year of the plan, 3) ensure financial
discipline while reducing the cost of capital to a reasonablelevel using moderate leverage and 4) achieve sustainablegrowth 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 selectinvestment projects for which ROIC exceeds the cost ofcapital and aim for a strategy emphasizing PMI (post-merger
integration) that contributes to greater corporate value overthe medium to long term.

DKS REPORT 2021

27

DKS’s Growth Strategy 1: Innovation

Special Feature

The Technology of DKS—Interview with the CTO

DKS’s technological strength is that we go beyond simply providing materials and the ability to customize thefunction and performance of products in line with customer requirements as we make proposals based on theideal product combination. CTO YAMAJI Naoki spoke with MIYANAGA Masayoshi, Tokyo University of Science
Graduate School professor, on DKS’s technological capabilities.

What Supports DKS’s Technology?
Miyanaga Could you give us a concise explanation of the“technology tree,” the technical road map (see p. 30) of
DKS’s technology?
Yamaji
The trunk of our technology tree is surfactants,
which most of us encounter in daily life as detergents. This istechnology for binding, dispersing, and removing substances
like debris, oil, dirt, and dust that do not dissolve or come off
our hands with just water. This category includes
combinations of technologies as well. If you look at our
products for use in battery cells, for example, we havetechnology that derives from surfactant/interface technologythat can add functionality and mix together substances that
normally do not blend.
Similarly, our urethanization technology utilizes surfactant
technology. For example, there are products that blend
functional inorganic materials to create heat discharging
properties needed for uses such as in circuit boards andaround automobile sensors. There is also urethane
technology for civil engineering used in material for rockhardening agents that prevent the collapse of tunnels, etc.,
while a quintessential flame retardation technology is flame
retardant that makes plastics less flammable. Ionic liquid isused in antistatic agents for liquid crystal films. It is not an
overstatement to say that all of these fundamentally comefrom surface chemistry, which deserves credit for the broad
scope of our technology tree.

Essentially, “interface” refers to the border area between
two materials with different properties. Lithium-ion batteries
are a straightforward example. Surface technology isnecessary to create functionality by evenly dispersing active
materials and cathode materials. This employs CMC andcellulose nanofibers utilizing cellulose modification
technology. These products contribute to dispersing cathodematerials, anode materials, carbon, and the like. Surface
technologies are what not only remove dirt, but also can be
useful in many applications.
Miyanaga As a specialty chemical manufacturer, which
technologies do you see as most important?
Yamaji
DKS has diverse and wide-ranging technologies.
Other surfactant manufacturers possess similar technologies,
but I think we have the expertise to know how to combine
technologies to create functionality and differentiation. We,
and other companies as well, are taking pains to createfunctionality while utilizing various technologies.
Consequently, what leads to uniqueness at DKS are the
combinations of technologies that we make until we
ultimately create functionality. We try to emphasize
combinations that have even the slightest advantage andsolve issues for the market and for customers. There are somecases in which we synthesize or formulate materials.
Miyanaga Please tell us about “open innovation
initiatives,” such as joint research with universities and efforts
to gather information from external sources.
YamajiWe recognize that we must accelerate ourtechnology accumulation in the life sciences field, which weneed to grow in the future. Currently, while working on joint
development with universities, we are proceeding to dispatch
personnel to some universities. New discoveries—such as,learning that we can use a certain technology for a certain
application—are vital. We have found that having researchersvisit universities and discuss technologies while interacting withother companies and graduate research laboratories is
extremely important and is an opportunity to transform theWe will meet all types ofindustry needs with our uniqueknowledge and technology.
YAMAJI Naoki
Managing Director, R&D Supervisor

28

DKS REPORT 2021

awareness of researchers. While there are technologies bornfrom open innovation, there are also more than a few ways inwhich this innovation contributes to fostering human resources.
Going forward, we would particularly like to invest in
personnel in the life sciences field. Life sciences is a very wideranging field. Through M&A, we have already welcomed
Biococoon Laboratories, Inc. and Ikeda Yakusou Co., Ltd. into
the DKS Group as we aim to broaden and deepen our scope of
this business field. Since hurdles are especially high forpharmaceutical products, we are first targeting the area of

health supplements and subcategories of pharmaceuticalproducts.
Keeping in mind our Company Credo of “contributing to
the nation and society through industry,” we think that anissue for society will be health span, focusing on how to live
long, healthy lives as the greying of society progresses in the
future. We believe that Biococoon Laboratories’ I. JaponicaBombyx Fungus is a start in that direction, while Ikeda
Yakusou’s Sudachin is also a way to contribute to solvingsocial issues through our life sciences business.

A New Organizational Structure
Miyanaga In April 2021, DKS established a neworganizational structure for R&D. What is the objective ofreforming this structure?
YamajiOne of the most significant changes to our R&D
framework was making the R&D Department the “R&D
Company Department.” The reason for newly establishing
the R&D Company Department came from our belief thatdivisions developing products need to be fully involved in thefirst stages of development, continuing through to profit
management. If the focus is only on gross profit, it is difficult
to judge whether a product ultimately brings a net profit, orto what degree it contributes to the Company’s operating
income. At present, we have a visual perspective of grossprofit for products that may end up in the red, but we want topursue clarity on operating income and the future cash flowthat a product can produce.

We also newly established the MOT Planning Department
and MI Promotion Department. MOT (Management ofTechnology) aims for technology profit management in ouroperations. Meanwhile, MI (Materials Informatics) mainly
focuses on DX and AI initiatives. To date, there have been
aspects of our approach that pursued research through our
researchers’ experience and intuition. However, we would liketo, for example, use AI to input parameters so that acomputer can suggest the necessary data and then research
can be efficiently performed without the involvement ofresearchers. In proceeding with MI initiatives, all of the data
must be taught to the AI, which means that publicly available
research papers, etc. are input in order to make the systemcapable of judgment. It looks like it will take two to three
years to complete this, but we expect it to be a meaningful
way to boost the efficiency of R&D.

Contributing to Society through Technological Capabilities
Miyanaga In pursuing R&D, please tell us about yourthoughts on demands for ESG and the SDGs, in addition to
the challenges you would like to undertake in your mediumto long-term growth strategies.
YamajiFirst, with regard to the theme of a decarbonizedsociety, we are pushing initiatives forward in the life sciencesbusiness. We are allying with government agencies to plantmulberry trees as a way of reusing tracts of unused farmland,with the aim of reducing CO2, creating regional employment
opportunities, productively utilizing abandoned fields, andoffering meaningful activities for the elderly. This project will
help with the stable procurement of raw materials for our
product, I. Japonica-Bombyx Fungus, and, by engaging insericulture in these local areas, we should also be able tocontribute to carbon neutrality and regional revitalization.

With regard to medium- to long-term strategies, we arededicated to developing electronics material-related
projects, including battery cell materials. While DKS is notable to carry out large-scale development, batteries arecontinuing to diversify in various fields beyond automobiles.
It takes approximately the same amount of battery
development effort to pursue applications for automobiles aswell as for other fields. We aim to promote development inareas where volumes are not huge, but where added value
can be delivered. Outside of automobiles, batteries are used
in increasingly diverse and familiar areas such as electronic
assistive devices and mobile phones. Since each area has its
own characteristics, it is difficult for major battery
manufacturers to apply equal effort to all of them. We see thisas a business opportunity for DKS.

MIYANAGA Masayoshi	Professor of Management of Technology, Tokyo University of Science Graduate School of Management

Background: G raduated from the Waseda University School of Law. Professional career includes working at The Nippon Credit Bank, Ltd.
(now Aozora Bank, Ltd.), Schroder Investment Management (Japan) Limited (Director and Head of Asset Management
Division), and Prudential Asset Management Japan Co., Ltd. (CIO in charge of Stock Investment). In 2007, graduated fromthe University of Tokyo Graduate Schools for Law and Politics, then in 2012, completed a Ph.D. at Waseda University
Graduate School of Asia-Pacific Studies. Prof. Miyanaga has been in his current position since 2017. He is also Managing
Director of World Intellectual Capital Initiative (WICI) Japan.

DKS REPORT 2021

29

DKS’s Growth Strategy 1: Innovation

Proprietary Technologies of DKS
Technical Road Map: Proprietary Technologies
Electric
equipment

Precisionequipment

Transportationequipment

Chemicals

Cosmetics

Electric
equipment
Transportationequipment

Construction

Chemicals
Glycidylation

Battery evaluation/assembly

Ionic liquid
Polymer function
designing
UV/EB curing

Organic-inorganic
hybridization

Wet dispersion

Polymer modification

Emulsion polymerization
Polymerizable emulsifierEmulsification/dispersion
Urethane for civilengineering

Glass

Polymer synthesis

Food application
evaluation

Interface/surface control

Isocyanate blocking

Alkylene oxide
function designing

Cellulose
modification

Precision cleaning
agents evaluation

Flame retardation
Urethanization

TextileAlkylene oxide
addition

Bromination

Electric
equipment

Sucroseesterification

Surfactants
Chemicals

Fisheries/
agriculture andforestry

Nano-dispersion

Phenolderivatization

Potting

Cellulose
nanofiberization

TextileSynthesis,
blending,
evaluation,
analysis andapplication
technologies

Hard surface
treatment

Food
products
Extraction& drying
Fungiculture

Precisionequipment

Machines
Steel

Technologies are multiplied to produce new technologies
Basic Technologies
Interface/surface control technology

Urethanization technology

1. To smooth the surface

Cellulose modification 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 emulsificationand dispersion for mixing together substances that normally do not
mix together. For example, although water and oils will separate after
being mixed, adding a surfactant as an intermediate between waterand oils enables the creation of stable emulsion. When washing dishes
to which oil residue has adhered, the surfactant is first absorbed into
the oil residue, where it reduces the interface tension between the oiland dishwashing liquid. Next, it enters between the oil residue anddishware via wetting/penetration. Finally, oil residue is separated fromthe dishware through physical force such as washing by hand. The
residue is adsorbed into the micelles formed by the surfactant andthen dispersed throughout the liquid, which prevents re-adherence ofthe residue. Moreover, improving the wettability of paint and adding
various functionality (e.g., leveling,1 water/oil repellent, antifouling,
lubricity) can be included as types of technology for surface
modification and interface control. For example, fluoropolymers arewidely used in water- and oil-repellent agents for textiles. Our
Company is working to develop PFOA (perfluorooctanoic acid)-freefluoropolymers through the synthesis of various surfactants and theuse of application technology. This makes it possible to respond toneeds for surface/interface control, which had been difficult to achieveusing conventional surfactants.
See p.34

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 of addedmoles. This makes it possible to freely design a surfactant
composition, which satisfies the required performance.

30

DKS REPORT 2021

This technology synthesizes a urethane resin that is a polymer
compound possessing urethane bonds in the main framework of themolecular structure. Through diverse combinations of the raw
materials polyisocyanate and polyol, it is possible to change the typeand length of the structural chain and to change the structure of bothends, thus creating a variety of physical properties. This makes it
possible to create substances such as elastic urethane rubber andurethane 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, waterborne urethane resin
can be obtained by emulsifying urethane resin. Our Company’s
products can be broadly divided into nonreactive and reactive.
Nonreactive waterborne urethane resin is an emulsion product ofurethane resin. Reactive waterborne urethane resin is produced byusing a blocking agent to protect the terminal isocyanate groups
generated by the reaction between polyisocyanate and polyol andemulsification. Reactive waterborne urethane resin is composed of thetwo 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 andpossesses superior solvent resistance and adhesion. Because thematerial combines safety and high functionality, it is used in a wide
range of processes such as film, metal, paper and textile.
This technology synthesizes anionic water-soluble polymers withcellulose 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 by theaddition of quantities of the carboxymethyl group. CMC is easily
dissolved in either cold or hot water and becomes a viscous liquid thatis colorless and transparent. It has an extensive record of use as athickening stabilizer in general, and other uses include as a binding
agent for fish feed and pesticides. CMC is also known for functioning
as a high-performance dispersion stabilizer. It is applied to products
seeking an even higher level of functionality, for example, as a binder
for lithium-ion battery cathode paste.

Sucrose esterification technology

This technology is used to obtain sucrose fatty acid esters (SEs), a nonionic surfactant where natural sucrose is part of the hydrophilic groupand higher fatty acids such as stearic acid and oleic acid are part of thelipophilic group. The high safety of SEs is recognized by internationalorganizations (Joint FAO/WHO Expert Committee on Food Additives),
and SEs are approved as a food additive in 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 andtexture modifiers. Synthesis methods of SEs can be broadly divided
into an esterification reaction method that uses fatty acid chlorides
and fatty acid anhydrides, a transesterification 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 toemulsify 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 iseasy to remove polymerization heat and perform stable temperature
management. A polymerizable surfactant is a type of surfactant thatpossesses a radical polymerizable group3. It is used as an emulsifier foremulsion polymerization. Through copolymerization with monomers
during the process of the emulsion polymerization, it improves themechanical stability, chemical stability, freezing/thawing stability andfoaming 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 molecularcompound before polymerization is called a monomer.
3. The production of vinyl polymer is an important reaction and refers to addition polymerizationin which the growth chain is a radical (free group).

Application Technologies
Nano-dispersion technology

This technology stably mixes immiscible substances to bring out thediverse power inherent in materials. This technology is expected tosupport 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 canbe broadly divided into carbon materials (e.g., fullerene,4 nano tubes,
nano fibers, graphene5), metals (e.g., gold, silver, copper) and metaloxides (e.g., silica, titania, zirconia), all of which possess diverse
characteristics. This technology disperses these nano materials into
mediums such as water, organic solvents and resins. However, as theparticle 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 intransparency. 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 ofradiation-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 ofdiverse fields due to its ability to conserve resources and energy andreduce environmental load. This technology is utilized in our urethane
oligomer, and its uses include clear coatings for construction materials
and furnishings; anti-rust coatings for metal; resistance materials suchas semiconductors, dry film and LCD displays; coatings for items suchas 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, printings/markings

Flame retardation technology

This technology adds/disperses compounds containing flameretardant 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 metalcompounds (Mg hydroxide, Al hydroxide) and nano-composites7(MMT8, CNT9). Flame retardants are broadly divided into halogenatedand halogen-free products that are based on phosphorus or inorganic
substances. Halogenated flame retardants have superior flameretarding 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 ofuse. Moreover, the products interfere little with the superior propertiesof plastic, namely, heat resistance, heat stability, UV stability,
workability, mechanical strength and electrical properties. The
products are capable of satisfying requirements for the flame retardingof plastics, which are increasingly diverse and have 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 liquidstate at/below 100ºC. It has no vapor pressure and is nonflammable.
Because ionic liquid has high safety and ion conductivity, it is used inelectrolyte applications such as lithium-ion batteries and capacitors.10
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 acondenser. In addition, there are some electric double layer capacitors that have an order ofmagnitude larger capacitance than conventional capacitors.

Special Technology
Glycidylation technology

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

DKS REPORT 2021

31

DKS’s Growth Strategy 1: Innovation

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 andthe acquisition of intellectual property rights based on the results of research and development in pursuit of theconcept, “Chemistry provides a solution.” We are also striving to solve social issues such as decarbonization andclimate change.

The Strengths of DKS’s R&D
As a leading industrial chemical manufacturer, it is ourmanagement philosophy to continue to be a prominentcompany that responds to the expanding chemical
requirements of industries. To realize that philosophy, we arefocusing on the research and development of high-valueadded products, with a particular focus on products with IT
and electronics-related applications, and the development of
new applications for battery materials and cellulose nanofibers.

As exemplified by surfactants, DKS’s core technologies
include synthesis and modification technologies, as well as
emulsification, dispersion, and compounding technologies.
By combining these technologies with specialized marketingtargeting niche businesses, we have achieved an amalgam ofproducts and knowledge that brings together disparate fields
and industries.
These technology combinations will continue generatingnovel value for customers in environmental and energy fields,
IT and electronics materials, and the life sciences field.
Furthermore, by newly establishing the MOT Planning
Department, we are addressing profit management for DKS
technologies as we aim for business that leverages technology.
Also, by incorporating MI on the frontlines of R&D, we will
pursue data-driven R&D that is more efficient and accelerated.
As a new initiative starting this fiscal year, we set up an
Advisory Committee within the R&D Headquarters. In orderto evaluate research themes, this committee will clarify
personnel assignments and timing, market scale, competitive
advantages, and technology reliability and profitability in aneffort toward implementing more efficient R&D. By revisingand refining plans, while also optimizing resource allocation(including staffing) in an approach that transcends research
themes and organizational groups every three months, thecommittee will contribute to generating profit by maximizing
ROI from our R&D.
MOT Planning Department

Advisory
Committee

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

R&D Investments

Strategies and Initiatives

R&D Supervisor

Promoting an Intellectual Property Strategy

MI Promotion Department

Under medium-term management plan FELIZ 115, whichtargets an R&D expenses-to-sales ratio of 5.0% for the year
ending March 31, 2025, we are engaging in R&D spending
focused on key projects.

R&D Costs

研究開発費(Millions of yen)
3,000
2,500

2,393

2,307

3/20173/2018

2,765

2,748

2,821

3/20193/20203/2021

2,000
1,500
1,000
500
0

Research Personnel

研究人員(Persons)
250
200
174

180

3/20173/2018

196

208

219

150
100
50

0

3/20193/20203/2021

479

514

Number of Patents Held (group)

特許保有数(Patents)
1,200

New Business Development Department
427

453

477

497

508

533

542

Corporate R&D Department

3/20173/20183/20193/20203/2021

R&D Company Department

 Japan    Outside Japan

900

Intellectual Property Department
R&D Headquarters

378

600

R&D Administration Department
300

Elexcel R&D Department
032

DKS REPORT 2021

Stakeholder Needs and Challenges
As measures to solve social issues, DKS strives to develop technologies and deliver products that meet environmental needs, including
global warming prevention, energy and resource efficiency, environmental protection, and prevention of environmental pollution.

Development of Environmentally Friendly Products
Needs &
challenges

Our product lineup and technology

Global warming
prevention

Binder for lithium-ion batteries, gel electrolyte polymers,
conductive paste for solar cells

Reducing CO2, promoting green energy

Alternative cleaning agents in avoiding ethane andchlorofluorocarbon solvents

Limiting ozone destruction (global warming)

Energy andresource saving

Solvent-free UV-curable materials

Reducing the steps in manufacturing processes (energy-saving)

Polyurethane resin sealants for electric insulation

Extending the useful life of products

Consideration for
the environment(Environmental
protection,
prevention ofenvironmental
pollution)

Low aquatic toxicity, easily biodegradable surfactantsProtecting water environment; reducing water pollution

Cellulose nanofiber RHEOCRYSTA

Delivering products with low environmental impacts by using
renewable raw materials (pulp)

Sucrose fatty acid esters

Delivering products with low environmental impacts by using
renewable raw materials (sucrose)

Polylactic acid (corn derived) resin modifier TRIBIO

Preventing soil contamination, delivering highly biodegradable
products, solving the problem of plastic waste

Waterborne polyurethane resin dispersions
Solvent-free UV-curable materials
Oil spill treatment agents

Value we deliver

Limiting health effects, air pollution, and the like by lowering
VOCs*
Preventing oil dispersion and marine pollution due to spills fromshipping accidents* VOC (volatile organic compounds): A general name for organic compounds that evaporate in air. Volatile organic compounds include toluene, xylene, and ethyl acetate.

ColumnDiscovery of “Naturido,” a new useful component for improving brain function
Our Group company Biococoon Laboratories, Inc. has researched the medical fungus (Isaria Japonica) grown on
domestic silkworms (Bombyx mori) obtained by utilizing sericulture technology and discovered a novel, usefulcomponent called “Naturido” that improves brain function, as
noted in research results published in PLOS ONE (neuroscience), aninternational interdisciplinary journal.
The paper shows how Naturido not only promotes growth ofneurons, but also acts on neuron-supporting glial cells, enhancing
astrocyte proliferation and suppressing inflammation. Research
focused on glia-neuron interaction and investigated a new strategy
to improving brain function. The results indicated that Naturido is a
new candidate for improving functions affected by dementia.
Currently, the DKS Group is conducting clinical trials andaccumulating data targeting patients with mild cognitive
Naturido and its (hypothesized) mechanism of action
impairment, as well as dementia patients. Through the life sciences(image diagram)business, we will continue striving to solve social issues in an aging
society with a declining birthrate.
Journal: PLOS ONE (neuroscience), an international interdisciplinary journal
Article URL: https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0245235
Manuscript title: A novel cyclic peptide (Naturido) modulates glia–neuron interactions in vitro and reverses ageing-related deficits in senescence-accelerated mice

DKS REPORT 2021

33

DKS’s Growth Strategy 1: Innovation

Business Activities Report

Surfactants

1

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 awide variety of fields and applications, including soap and detergents, IT and electronics, rubber
and plastics, paints and color materials, and energy through their emulsifying, dispersing,solubilizing, penetrating, wetting, foaming and defoaming, and surface modifying functions. In
recent years, we have also been promoting the development of products that are compatible withthe globally increasing consideration for the environment. We currently develop and manufacture
these products with petrochemicals and oils/fats as key raw materials primarily at the Yokkaichi
Branch (the Chitose and Kasumi Plants), the Shiga Branch, and Yokkaichi Chemical Company
Limited.

3
 IT and electronics materials
 Soaps and detergents
 Paints and coloring materials

J Business Environment

J Achievements and Issues

This segment is leveraged by the Company’s many years ofexperience and accumulated technologies. The industrial fields inwhich the growth of reactive surfactants can be expected in theyears to come include the paints and coatings field as well asadhesives. On the other hand, there are various competitors inthis business, such as domestic manufacturers of detergents andemulsifying and dispersing agents. However, our abundant lineup
of products has enabled us to introduce optimal products thatmeet customer needs, while we are able to conceive high-valueadded products through our unique development approach.
Going beyond simply providing materials, we work closely withcustomers to find solutions to their problems.

During the fiscal year ended March 2021, net sales in thissegment fell sharply overall.
In Japan, sales for IT and electronics applications were robust,
but sales for machinery and metal applications, as well as textile
applications, were sluggish, and sales for rubber and plastic
applications fell sharply. Furthermore, occupancy rates declinedin the hotel linen market due to the stay-at-home trend andrestrictions on movement in order to suppress COVID-19
infections, leading to the sharp fall in industrial-use soap anddetergent applications.
Overseas, sales for paints and color material applications were
firm, but sales for textile and rubber and plastic applications weresluggish.
Going forward, we will reinforce our Uni-Top strategy andcontinue dedicating effort toward delivering customized productsthat meet customer needs.
Issues facing this segment are as follows.
 Declining earnings and lower relative value for DKS’s products
due to intensifying market competition in soaps and detergent
applications
 Delays in developing markets for environmentally friendly
products

J Initiatives
Amid the global rise in environmentalism, we have been pursuingin recent years research and development on highlybiodegradable, environmentally friendly products that do notcause water pollution.
We are also striving to expand sales of products for IT andelectronics material applications.

J Strengths
The typical function of surfactants is to clean (i.e., dirt removal),
which is represented in soap, a well-known item. Surfactants act
on the surface of substances that do not mix, such as oil andwater, and display emulsification and dispersion actions toremove dirt. Recently, however, the functions that the Company’s
customers require for surfactants have evolved beyond simply
cleaning to more sophisticated and unique applications thatreflect the advancement of the industry. The surfactant synthesis,
analysis, and evaluation technology developed over our morethan 110-year history has enabled the Company to provide
performance and functions tailored to customer needs throughour numerous product lines and combinations.

Net Sales

Having developed, based on Japanese technology, a reactive
surfactant that, after demonstrating its function as a surfactant
improves water resistance and other characteristics, the Company
is focusing on expanding its market. Concrete measures include
the following.
 Strengthening relationships with inspiring/inspired partners
and targeting sales expansion for IT and electronics material
applications
 Building a sales framework and strengthening sales forenvironmentally friendly paints and color material applications(Millions of yen)

25,00020,000J Growth Strategy (medium- to long-term focus businesses)

Operating Income(Millions of yen)

19,793

21,416-8.8%

21,83818,97015,00017,303

2,500
2,000

2,094

1,000

5,000

500

+33.6%

2,171
1,558

1,500

10,000

0

1,752
1,312

0

3/201734

2

DKS REPORT 2021

3/20183/20193/20203/20213/20173/20183/20193/20203/2021

Amenity Materials

1

Segment 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, personalcare (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 andreliable 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.

23 Personal care (cosmetics)
 Food Energy

J Business Environment

J Achievements and Issues

This segment targets industrial fields that place an emphasis on
safety, such as food, personal care products, andpharmaceuticals, as end products that are placed in the mouth,
come into contact with skin, and stimulate the five senses.

During the fiscal year ended March 2021, sales in this business fell
sharply overall.
In Japan, sales of cellulose polymers for energy andenvironmental applications, as well as pharmaceuticalapplications, remained sluggish, while SEs for food applications
also performed sluggishly.
Overseas, sales of SEs for personal care (cosmetics)
applications remained sluggish, while sales for food applications
fell sharply.
Issues facing this business are as follows.
 Expanding sales channels in the CNF business Further developing energy applications
 Expanding into the field of high-value-added SEs

J Initiatives
Recently, we finely divided naturally derived cellulose fibers using
nanotechnology and established technologies to produce a newmaterial called cellulose nanofiber (CNF). Leveraging its
characteristic viscosity and emulsifying, dispersing, and stabilizing
properties, CNF is a noteworthy material that can be used suchas in personal care and general industrial applications.
In recent years, we have been expanding into the field ofenergy, and our proprietary technologies include methods for
manufacturing and testing water-soluble polymers for conductive
pastes in lithium-ion batteries.

J Strengths
With more than 70 years of experience in cellulose polymers(CMC) using pulp, and more than 50 years of experience insucrose fatty acid esters (SE) using sugar, the Company has a long
history in product development and is developing markets basedon the basic and applied technologies accumulated to date.
Among these, SEs are highly characteristic as an edible
surfactant, and DKS is one of only a handful of companies
worldwide producing them. SEs are used as an emulsifier for oil/
fat and cream and as a texture modifier, for example, in cookies
and snack foods.

Net Sales

J Growth Strategy (medium- to long-term focus businesses)
Judging from demographic trends, indications are that major
Japanese market growth looks unlikely. However, while
maintaining our current customer base, we will strive to securestable sales and profitability in Japan. As growth fields, we will
also continue to unlock new customers and aim to improve
lifestyle comfort by expanding sales and providing highly
functional products centered on, for example, overseas food andpersonal care applications. Concrete measures include thefollowing.
 Building a sales framework and strengthening sales inoverseas markets
 Making social contributions utilizing RSPO certification
 Reallocating management resources by reviewing unprofitablebusinesses

Operating Income(Millions of yen)

(Millions of yen)

10,000
8,000
6,986

7,502

8,031

7,994

-11.4%

700

7,081

500

6,000

400

4,000

300

2,000
0

638

600

465

413

281

200

-74.2%

10072

03/20173/20183/20193/20203/20213/20173/20183/20193/20203/2021

DKS REPORT 2021

35

DKS’s Growth Strategy 1: Innovation

Business Activities Report

Polyurethane Materials

1

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 toprovide a variety of high-performance urethane products for a wide array of industries andapplications 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 (the Chitose and Kasumi Plants).

J Business Environment
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 arecontributing to infrastructure projects that make people’s lives
more convenient.

J Initiatives
Plant #3, which manufactures functional polyurethane resin,commenced operations in December 2019. Against thisbackdrop, we will redouble our initiatives with our inspiring/inspired partners.
In addition, our rock hardening agents for tunnel construction
have a broad array of uses that include public roads and railways
while boasting a high market share based on their safety andperformance. We conduct employee training at the safety training
center located at the Kasumi Plant, where these products are
manufactured, with the aim of generating Group-wide synergies.
Furthermore, we are also striving to promote new developmentof IT and electronics materials applications for the electrificationof mobility components prompted by the spread of EVs.

J Strengths
The Company’s urethane materials are used mainly in paints,
adhesives, civil engineering and construction, and electric
insulation materials, with the overriding priority of ensuring
people’s safety through applications mainly for transportationequipment, civil engineering projects and electronic materials.
With the recent diversification of electric appliances and theincorporation of IT in automobiles, electronic components arebeing used under increasingly severe conditions. Meanwhile, theneed for lightweight, compact and integrated electronic
components has increased, while components now need to beprotected from physical and chemical effects to maintain strength

Net Sales

3
 IT and electronics materials
 Civil engineering Automotive industrial

and ensure durability. Lightweight, strong urethane resin plays a
key role in this area. The Company’s electric insulation materials,
which feature a superior balance of insulation, heat-resistant, andflame-retardant properties, have a wide range of uses, from home
appliance to transportation equipment components, to meet theexacting needs of customers.

J Achievements and Issues
During the fiscal year ended March 2021, net sales in thisbusiness fell sharply overall.
Sales of functional polyurethanes for IT and electronics
materials applications grew significantly, but those forconstruction and other applications fell sharply. Sales of civilengineering chemicals were firm, but sales of environmentallyfriendly synthetic lubricants related to CFC regulations dropped
significantly due to the sluggishness of automobile-related fields.
Issues in this business segment are as follows.
 Improving the operation rate of Plant #3 of the Kasumi Plant Delays in new development Strengthening relationships with inspiring/inspired partners

J Growth Strategy (medium- to long-term focus businesses)
Sales growth for rock hardening agents is expected due to theprogress of construction on the Linear Chuo Shinkansen Line.
Additionally, by further deepening initiatives with inspiring/inspired partners, we will pursue development and expanded
sales of IT and electronics materials manufactured at Plant #3. At
the same time, we will accelerate activities for meeting the final
fiscal year targets of the medium-term management plan endingin March 2025. Concrete measures include the following.
 Expanding automotive industrial applications
 Improving the operating rate of Plant #3 and using new
development to expedite the recovery of invested capital Selling rock hardening agents for the Linear Chuo ShinkansenLine Reallocating management resources by reviewing unprofitablebusinesses

Operating Income or Loss

(Millions of yen)

(Millions of yen)

10,000
9,093

9,115

9,026

8,000

-11.6%
8,470
7,484

200
100

6,000

0

4,000

-100

2,000

-200

0

-300

3/201736

2

DKS REPORT 2021

3/20183/20193/20203/2021

127

100
41

-235

3/20173/20183/20193/2020-282

3/2021

Functional Materials

1

Segment Outline

The functional materials segment provides technologies and materials contributing to advanced
performance, including resins used in daily necessities, as well as IT and electronics materials
often used in personal computers, smartphones, and home electronics. Some of the segment’s
products include plastic flame retardants, antistatic agents, lubricants, anticlouding agents to
reduce film and resin clouding, antioxidants suppressing oxidation degradation in a variety ofmaterials, and radiation-curable monomers and oligomers using radcure (UV- or EB-curing)
technology. The waterborne polyurethanes being developed since 1973 are used in wood andplastic 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) andthe Ohgata Branch.

J Business Environment
While many urethane resins are based on organic solvents, DKS is
also researching and developing waterborne polyurethanes, inwhich the polyurethanes are dispersed in water, largely in reaction
to rapidly growing demand for safer water systems as society
places increased importance on environmental concerns. In
addition to being safe for the environment and people, we believethese products are likely to see increased demand thanks to theirability 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
can demonstrate its strengths. While competitors include
electronics materials manufacturers and overseas flame-retardant
manufacturers, the Company looks to secure growth through its
innovative technologies and proposal capabilities.

J Initiatives
DKS monomers are highly functional alcohol-based products using
ethylene oxide (EO) addition technology, which results in low curl,
low viscosity, and enhanced hardness. Our B-to-B-to-C businessmodel focuses on a cooperative relationship with our inspiring/inspired partners to develop innovative one-of-a-kind products.
Additionally, we are building a solutions-oriented materials
delivery framework for film materials.

J Strengths
The technology used in radiation-curable monomers andoligomers is called “radcure technology”, in which a resin
composition such as paint is instantaneously dried and cured byirradiating it with ultraviolet light (UV) or an electron beam (EB).
Radcure technology is widely used in several applications across avariety of fields to conserve resources and energy and to reduce
environmental impact. Applications include the clear paint used inbuilding materials and furniture; anti-corrosive paint for metals;
resist materials for semiconductors, dry films and LCDs; andNet Sales

2

3
 IT and electronics materials
 Flame retardants for plastics
 Film materials

coating agents for mobile phones, optical fibers, plastics, andpaper. Brominated flame retardants are more stable and highly
flame resistant than phosphorous- or inorganic-based flame
retardants when dealing with materials like rubber and plastics.

J Achievements and Issues
During the fiscal year ended March 2021, net sales in thissegment were generally strong.
In Japan, there was sluggishness in the sales of brominatedflame retardants used in rubber and plastics applications but
significant growth in sales of radiation-curable monomers andoligomers for IT and electronics applications.
Overseas, sales for radiation-curable monomers and oligomers
were firm for IT and electronics materials, accompanied also bystrong sales for flame retardants for rubber and plastics.
The DKS brominated flame retardant’s raw material is sourced
from a global bromine production site, and because the raw
material price can fluctuate based on bromine market conditions, it
is important for DKS to maintain proper controls on product prices.
Issues facing this business are as follows.
E xpediting the recovery of capital invested on Plant #4 of theKasumi Plant
E xpanding earnings of the waterborne polyurethane resin business Increasing and strengthening the supply capacity of the flame
retardants business

J Growth Strategy (medium- to long-term focus businesses)
Additionally, by further deepening initiatives with inspiring/inspired
partners, we will pursue development and expanded sales of IT andelectronics materials manufactured at the Plant #4 of the Kasumi
Plant. At the same time, we will accelerate activities for meeting thefinal fiscal year targets of the medium-term management plan
ending in March 2025. Concrete measures include the following.
 Expanding sales of IT and electronics materials and securing profit Accelerating next-generation product development withinspiring/inspired partners
 Reallocating management resources by reviewing unprofitablebusinesses

Operating Income(Millions of yen)

+1.1%

25,00020,84820,00015,00012,517

14,070+3.6%(Millions of yen)
3,000

21,0772,000

16,239

2,832

2,933

3/20203/2021

2,404
1,926
1,305

10,000

1,000

5,000
0

0

3/20173/20183/20193/20203/20213/20173/20183/2019DKS REPORT 2021

37

DKS’s Growth Strategy 1: Innovation

Business Activities ReportElectronic Device Materials

1

Segment Outline

As the information society continues to advance, as evidenced by the rapid spread of the Internet
and smartphones, the electronic device materials segment is focused on developing andsupplying ion-conductive polymers, ionic liquids, ceramic materials and lithium-ion battery
materials, as well as conductive pastes for solar cells.
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 the electronic devicematerials segment are produced at subsidiary companies, Kyoto Elex Co., Ltd. and Dai-ichi
Ceramo Co., Ltd.

2

3
 Solar cells
 Displays
 Lithium ion battery cells

J Business Environment
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 oforganic solvents igniting, manufacturers have been careful toincorporate safety measures, including adding in flame retardants.
We have developed an ionic liquid that remains in that state at
100°C and below, has no vapor pressure and is nonflammable, andbecause it is highly safe and has high ion conductivity, we aredeveloping electrolyte applications for lithium-ion batteries andcapacitors. These kinds of liquids are also attracting attention as
next generation materials in the energy device field and as green
solvents for reducing environmental impacts. Through theseproducts and efforts, the segment is playing an important role inmaking 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, andsolid quality.

the process. Compound technology is one of our key strengths,
allowing us to provide specific materials that meet the needs ofour customers.
One example is conductive pastes, which have precious metals
as the main raw material and are made with inorganic fillers andsoluble binders. Conductive pastes improve functionality in theelectronic devices and components used in solar cells,
automobiles, smartphones, LEDs, office equipment, and medical
equipment. Materials for ceramic and metal powder injection
molding are used to produce small and difficult-to-processcomplex three-dimensional ceramics and metal parts. They often
are used in electronic devices such as smartphones, precisioncomponents such as watches and medical equipment, andautomotive and optical communication components. The segment
also can provide powder injection molding compounds made by
precisely mixing raw material powder, binder, and dispersant.
Another of our strengths can be found in lithium-ion batteries,
where we handle everything from materials research anddevelopment to the manufacture of prototype lithium batteries.

J Achievements and Issues

J Initiatives
DKS is focused on advancing business activity at subsidiarycompanies using its innovative technologies. The Company’s
surface chemistry, which is its core technology, is used in the
mixing techniques of resins and ceramic powders or organic
materials and metal powders.
Furthermore, we have considered pursuing manufacturing andsales of products for solar cell applications in China, a market
where further future growth is forecast in solar cells. With theobjective of expanding DKS’s earnings for these products in the
China market, we plan to establish a local Chinese subsidiary andtarget the manufacture and sale of products inside China for theirdomestic solar cell manufacturers.

J Strengths
DKS can conduct mixing operations under special conditions andwith a high level of viscosity thanks to its detailed know-how inNet Sales

Generally, there was significant growth in net sales in thissegment in the fiscal year ended March 2021.
There was significant expansion in sales of ionic liquids fordisplay applications and in sales of conductive pastes for solar
cells. Issues facing this business are as follows.
• Improving earnings of products for ceramic materials

J Growth Strategy (medium- to long-term focus businesses)
By further deepening initiatives with inspiring/inspired partners,
we will accelerate activities for meeting the final fiscal year targetsof the medium-term management plan ending in March 2025.
Concrete measures include the following.
 Expanding earnings in the solar cell market in China
 Expanding sales and profits of ionic liquids for displays andother applications Accelerating next-generation product development withinspiring/inspired partners

Operating Income(Millions of yen)

+21.4%(Millions of yen)

6,000

5,758

500

4,850
4,000

4,199

3,862

+28.4%
430

400

4,744

335

300
215

200

2,000

100
0

0

3/201738

DKS REPORT 2021

3/20183/20193/20203/202174
33/20173/20183/20193/20203/2021

Life Sciences
1

Segment Outline

With our full-scale entry into the life sciences business in July 2018, DKS 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, thissegment supplies health food products that include I. Japonica-Bombyx Fungus and Sudachin (apeel extract powder made from sudachi, a citrus fruit). The company Biococoon Laboratories is
promoting the quantification of a new substance that it is hoped will have an effect on dementia
and the laboratory is proceeding with the search for high production conditions. Having
established extraction and high concentration technologies from natural products, Ikeda Yakusou
is also working to stabilize product quality and deliver products to customers with the priority
being safety and reliability.

2 I. Japonica-Bombyx Fungus
 Sudachin

J Business Environment

J Achievements and Issues

This business segment is accelerating not only the acquisition of
HACCP and GMP certifications in the manufacture and sale of its
health foods but also its initiatives, including industrygovernment-academia collaboration.

During the fiscal year ended March 2021, net sales in thisbusiness segment were generally strong.
The contract manufacturing business, such as pharmaceuticalraw materials and health foods produced by concentrating andpowdering extracts from natural products, remained firm.
Issues facing this business are as follows.
 Establish the B-to-C business and quickly generate earnings
 Expand new contract manufacturing business

J Initiatives
I. Japonica-Bombyx Fungus developed by Biococoon
Laboratories, a venture company from Iwate University, is a healthfood that has the potential to help address the rise in dementia
patients, a social issue taking hold in Japan.
Developed by making effective use of the peeled skins ofsudachi, which is a representative and previously untapped
regional resource of Tokushima Prefecture, the peel extract
Sudachin arose through industry-government-academia
collaboration with Tokushima University and Tokushima
Prefecture. Preparations are underway to submit applications for
I. Japonica-Bombyx Fungus and Sudachin as “foods withfunctional claims.” Additionally, we are proceeding with
development of general-use food products, carbonatedbeverages, and alcoholic products using I. Japonica-Bombyx
Fungus and Sudachin.

J Strengths
In December 2019, a new manufacturing plant for I. JaponicaBombyx Fungus, was completed at Biococoon Laboratories inthe town of Tanagura, Fukushima Prefecture. Having acquired
HACCP certification, we have further enhanced our quality
control systems to manufacture and provide consumers with safeand reliable health food products.
Ikeda Yakusou manufactures and provides safe and reliable
products. The company also undertakes contract manufacturingbusiness for products related to drug substances and foods
based on high-quality powdering technologies. Also, able tohandle chemical products, Ikeda Yakusou can provide productswith various levels of performance and functions that matchcustomers’ requests.

Net Sales

Aiming for medium- to long-term growth and early generation of
earnings, we established the Life Sciences Supervisory
Department (under direct supervision by the Company CEO) in
April 2021. Currently, the department is taking steps to submit“foods with functional claims” applications for Naturido,
discovered from I. Japonica-Bombyx Fungus, and Sudachin, asubstance extracted from the peels of sudachi (citrus fruit) with
benefits against diabetes and obesity.
The department is also engaging in a 100-million mulberry tree
planting campaign as part of efforts toward contributing toregional communities. Sericulture offers the benefits of CO2
reduction, new regional employment opportunities for seniors
seeking meaningful work and stable income, as well as a securesupply chain for materials of I. Japonica-Bombyx Fungus. Thesebenefits contribute to a longer cycle of healthy lifespan forsociety. Concrete measures include the following.
 Promoting SDGs by revitalizing local communities throughsericulture (Sericulture Innovation)
 Developing health foods and general-use food products (andlater, pharmaceutical products) using I. Japonica-Bombyx
Fungus, Naturido, and Sudachin Establishing and promoting B-to-C business that will be thecore of our new businesses (DREAM)

Operating Loss

(Millions of yen)

+1.7%

500

(Millions of yen)
100

427

400

435

0
-100

300
200

J Growth Strategy (medium- to long-term focus businesses)

-200

239

-300

100

-400

0

-500

3/20193/20203/2021-203-370

3/2019-421

3/20203/2021

DKS REPORT 2021

39

DKS’s Growth Strategy 2: Sustainability

Quality and Safety Management
Improving the quality of products and services offered by corporations will lead to meeting the needs ofcustomers and society, earning trust and enhancing the value provided to society and related capital. To this end,
DKS views quality from four perspectives: design and development, 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 highfunctionality for the future, we will provide customers withsafer, higher-quality products that maximally contribute to thedevelopment of their business. To realize this, we engage inquality 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 foreach department that cover the entire process, fromproduct planning to customer service through design/development, manufacturing and sales. Through theappropriate operation of such standards, we strive toprovide high-quality products that are 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, operate, andmaintain a quality management system and promote
initiatives for on-going improvements.

“DKS Quality Policy”

3. All our employees must observe this basic concept ofquality assurance and carry out tasks in accordance with
the Quality Assurance Management Regulations.

Quality Control System
As a chemicals manufacturer, we are committed to themaintenance and 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 thatcomply with customer requirements as well as with laws andregulations. We thoroughly work on day-to-day activities suchas production control, corrective measures and preventive
actions relating to nonconformities (such as complaints/
abnormalities), audits, change control and training, anddevise improvements by conducting continuous reviews of
the management system. By doing so, we aim to improvecustomer satisfaction.

QC System Diagram
Chairman CEO

Life Sciences Business
Headquarters

R&D Support
Department

Sales
Headquarters

Sales Promotion
Department

R&D
Headquarters

Procurement
Department
Sales departments

Customers

Delivery GroupDKS REPORT 2021

Plants

Quality Assurance
Department

Production
Departments

Quality management(supervision)
Regulatory management
RC promotion activities

Product Quality
Review Meeting

Quality Control
Sections

Customer Support
Department
Support Group40

R&D
departments

Production
Headquarters

Yokkaichi Branch, Ohgata
Branch, Shiga Branch

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

Quality Assurance System
We view QA as fundamental to our business, and as we keep
our Quality Policy in mind, we continue to promote QA activities
from product design/development, manufacturing and sales tocustomer service processes through the relevant departmentsof the R&D Headquarters, Production Headquarters and Sales
Headquarters. With the Chairman CEO as the Chief Quality
Assurance Officer, individuals appointed by the Chairman CEO
as environment, safety, and quality assurance staff ensure robust
quality assurance by raising quality assurance issues, holding
the authority to formulate and recommend solutions, and taking
on the overall responsibility for the quality management system.
The QA Department General Manager takes the lead role insupervising quality assurance and in overall coordination
between our departments, while attempting to establish andstrengthen the QA system. Quality Assurance (PL) Meetings areconvened and given the highest decision-making authority for
quality assurance and quality control activities. In line withdiversifying customer demands and heightened requirementsfor product quality from a social perspective, we remaincommitted to working to ensure product safety and quality, as
well as trying to prevent quality-related issues before they arise.
QA System Diagram
Chairman CEO
Management Committee
Director i/c Environment, Safety & QA
Life Sciences Business
Headquarters

Sales
Headquarters

Sales Promotion
Department

Procurement Department

R&D Support
Department

Customer Support
Department
Each sales department

Quality Assurance (PL) Meetings

R&D
Headquarters

Production
Headquarters

R&D Company Department

Yokkaichi Branch

Corporate R&D Department

Ohgata Branch

Elexcel R&D Department

Shiga Branch

New Business Development
Department

Production Control
Department

Quality
Assurance
Department

Product Safety Mechanism (chemical substance management from design development)
We have in place a product development system based on
our environmental and safety philosophy, which is centeredon “contributing to the sustainable development andrealization of happy societies by considering human health,safety and environmental preservation throughout the
lifecycle of each product, from development to scrapping.”
Ensuring compliance with laws and regulations related tochemical substances in Japan and overseas, we formulate
chemical substance management rules, conduct theappropriate management of chemical substances, andundertake design and development that as far as possible
considers the environmental impact. We are also promoting
the appropriate relaying of information on the chemical
substances contained in our products and information on
applicable laws and regulations. We have adopted a systemfor organizing GHS* classification and legal regulation checks
for each country, making multilingual safety data sheets (SDS)
and labels, and centralizing management of material
composition surveys. Using this system, we are striving tostrengthen our chemical substance management.

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 withapplicable laws 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 and regulations• Environmental impact assessment• Securing of raw materials• Preparation of SDSs, labels, and technicaldocuments• Quality control• Response to improvement requests• Provision of product information• Regulatory compliance• Environmental conservation• Securing of distribution safety

Provision of Product and Technical Information
Our products are utilized in a variety of industrial fields, andwe provide product and technical information tailored to thecharacteristics of each product and service. We always
respond to requests and inquiries from our customers quickly,
adequately and in good faith. We provide information on
hazardous materials to ensure safe handling, including that
relative to product properties, applicable laws andregulations, transportation, handling methods andemergency measures by means of SDSs. We also use
chemSHERPA (an information transfer scheme for chemicals
contained within products throughout the supply chain) as ameans of providing information.

We also promote product labeling and issue an SDS
related to compliance with the GHS* and with local
regulations for exports to the United States, Europe and Asia.
We continuously update our SDSs and labeling to remain incompliance with the revised Act on the Evaluation ofChemical Substances and Regulation of Their Manufacture,etc., and the Industrial Safety and Health Law, as well as the
Poisonous and Deleterious Substances Control Law. Whenintroducing our products, we not only focus on close
communication with our customers through daily businessmeetings but also disseminate information through brochures
and technical documents.

* Globally Harmonized System of Classification and Labeling of Chemicals

DKS REPORT 2021

41

DKS’s Growth Strategy 2: Sustainability

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

Respecting Human Rights and Diversity: Promoting Diversity, Human Resource Development and Education
Human Resource Philosophy Respect for Humanity

Human Resource Development Policies

Our fundamental human resource philosophy is rooted in the ideathat our people 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 toactively play their roles in each workplace; learn, grow and exhibit
their capabilities; and try to fulfill themselves. This way, we believethat they become the power of prosperity of the Company and thesource to make it eternal.
The Company also supports the maintaining and improving of
employee health, which forms a cornerstone of individual employee
self-fulfillment.

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
through their own motivation

In our medium-term management plan FELIZ 115, which welaunched in April 2020, we announced SDGs/ESG-based
management objectives of “promoting the active
participation of women” and “creating employment.” Aspriority measures for strengthening our business foundation,
we are pursuing these as part of our project for strengthening
appropriate resource management and revising evaluation
systems.

J Employment of People with Disabilities
We believe that the most important thing about working
alongside people with disabilities is that it offers diversity,
which brings lessons with it. We established a dedicatedorganization for employees with disabilities. While we work to
maximize their aptitudes and talents, we are striving to raise
our ratio of employees with disabilities by creating anenvironment conducive to their professional participation.

Work-Style Reforms

Efforts to Prevent Harassment

J Work-Life Balance
DKS takes the initiative in activities supporting a balance
between work and family. In terms of systems, we introduced
a telecommuting system in fiscal 2019 and a flextime systemin fiscal 2020, and are working to reform the personnel system
to improve employee productivity and realize diverse work
styles.

We are trying to prevent harassment through, for example,
educational programs in hierarchical training courses(including employees in managerial positions). Several
persons are selected as contacts, even from outside the
Personnel Department, so that anyone can easily findsomeone to talk to and get advice from. Moreover,whistleblower portals inside and outside the Company, as
well as an external Employee Assistance Program (EAP), arein 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 capableof successfully contributing to improvements in Company
performance. We are creating environments in which we canmaximize the abilities of diverse employees, including
women, seniors, people with disabilities, non-Japaneseemployees and members of the LGBT community, andenable them to take an active part in our Company.
J Promotion of Women’s Participation and Advancement
In addition to environments that facilitate female employees
in working for many years, we will maintain work
environments that enable women to develop their careersand implement measures aimed at having 10.0% or more ofmanagerial positions occupied by women. As of March 31,
2021, this figure was 8.8%, and in fiscal 2020, we welcomed
our first female executive officer.
Furthermore, as we ensure that all of our work
environments are conducive to the active participation of
females, we started hiring new female technical college
graduates at manufacturing sites from fiscal 2019 and are
currently continuing a steady pace of hiring.
J Retiree Reemployment System
In reemploying all applicants as Senior Challenge Staff, weconduct monozukuri (manufacturing) by handing down senior
employees’ techniques and skills that make the best use of
the experience they have accumulated over many years.
42

DKS REPORT 2021

Items
Annual paid leave taking rate
Percentage of male employees taking childcare leave
Ratio of female employees in management positions (as of March 31, 2021)
Employment rate of people with disabilities (as of March 31, 2021)
Retention rate of employees with disabilities (up to third year of employment)
New graduate attrition rate (up to third year of employment)

FY2020 Results
66.1%
57.1%
8.8%
2.9%
100.0%
1.4%

Human Resource Development and Education Programs
The three pillars of our human resource development andeducation programs are in-house on-the-job training, external
education to learn skills and abilities, and support for selfdevelopment. In recent years, we have focused on enhancing
our brother/sister program (a backup support system) aimed at
a 0% attrition rate for new employees, while also focusing on
the development of human resources able to handle digitaltransformation (DX) targeting the realization of disruptive
innovation utilizing data and IT technologies. We have createdDX learning opportunities for new employees, speciallyselected employees, and those who show an interest as wework to bring all staff onto our digital platform. In fiscal 2020,
approximately 30% of employees received the training.
DKS is united in focusing attention on human resource
training in other areas as well, including by bolstering our
support for employees aiming to improve their own abilities,
be it through the acquisition of qualifications, orcorrespondence learning (employees finishing courses with
distinction have all fees covered by DKS).

Concept of Health and Productivity Management
Health and Productivity 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 meetings attended by officers in charge to obtain approval for plans formulated based on these results.
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

Work and live in a safe and healthy environment• 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 statusof mental health• Share health checkup results data in-house• Release both internally and externally an assessment byexternal institutions• Explore routes for improvement based on an assessment byexternal institutions• Explore next health management targets based on healthcheckup results and secondary data
• Verify the effect on productivity and corporate value

Plan

Do

ActionCheck• Regular health checkups, special health checkups, specifichealth guidance• Mental care: internal and external EAP, stress checks• In-house education: e-learning, group training, etc.
• Improve conditions of the Company premises andhousing: amenity facilities; implement measures toprevent passive smoking, etc.
• Look into absenteeism and presenteeism• Hold events involving athletic activities• Inspect workplaces; monitor working environments, etc.
• Interview after health checkup and summarize results• Implement workplace improvement activities after stresschecks• 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 and Productivity Management
DKS was selected by the Ministry of Economy, Trade andIndustry (METI) and the Tokyo Stock Exchange (TSE) for thesecond consecutive year as a “Health & Productivity Stock.”
For the fourth consecutive year, DKS and subsidiaries Gembu
Co., Ltd., Dai-ichi Kenkou Co., Ltd., Dai-ichi Ceramo Co., Ltd.,
Kyoto Elex Co., Ltd., and for the second consecutive 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 fromthe Development Bank of Japan Inc. (DBJ) for the fourthconsecutive year. Going forward, assessments of Company
efforts through the eyes ofexternal organizations willcontinue to lead to further
enhancements in corporate
value.

Targets, Activities andOutcomes
Based on our Healthy Company Declaration, DKS strives tomaintain and improve the health of its employees, and at thesame 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 corporate value throughthe maintenance and improvement of employee health. In
recent years, we are strengthening initiatives to prevent
smoking and efforts toward supporting the health of those notyet confronting lifestyle diseases. With regard to supporting
the latter category of employees, from fiscal 2019, we started
holding a walk-a-thon that uses an app that tries to encourage
lasting exercise habits. In fiscal 2020, approximately 60% of
employees took part. Of the participants, approximately 70%
showed an inclination to continue exercising after the event.
The statistic indicating the rate of regular exercise rose from
16% in fiscal 2017 to 22% in fiscal 2020.

Happiness-based management“Employee happiness-based management” is part of thegoals of “FELIZ 115,” and we are pursuing the following three
KPIs in order to target sustainable growth.
Health and Productivity Management Targets
DKS is pursuing the following three KPIs as we target sustainablegrowth by implementing employee happiness-based management
KPIs

2020

Targets for 2024

1

0.8%

Maintain at 2.0%
or below• Reduction of presenteeism2

1.3%

2.0% or below• Improvement of work engagement3

50

51• Reduction of absenteeism

1, 2. Measured using DKS’s own formula.
3. Deviation by stress checks
Please see the glossary on p.61 for details on terminology.

With regard to employee health issues, we established thefollowing four targets and are implementing various initiatives
accordingly
Issues2020

Targets for 2021

• Prevention of health issues among healthy
employees Percentage of employees who
exceeded abdominal girth standards

31.6%

28.5%

•P
 revention of aggravation among high-risk
employees Percentage of employees 40 years orolder at risk for or experiencing
metabolic syndrome

28.9%

25.0%

• Prevention and early detection of
employee mental health issues Ratio of leave taken by employees withmental health issues

0%

Maintain at 0.2%
or below• Creation of environment leading toquitting smoking
Percentage of employees who smoke

20.1%

17.4%

DKS REPORT 2021

43

DKS’s Growth Strategy 2: Sustainability

Consideration for the Environment
Natural capital is a critical common asset for chemical manufacturers, making sincere responses to various
environmental problems a common 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 contributeto the creation of a sustainable society as “chemistry provides a solution” for improving 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 acompany that thrives together with local communities andemployees by supplying products that satisfy customers.
Based on this, our environmental and safety philosophy is tocontribute to the sustainable development and realization of
happy societies by considering the human health, safety andenvironmental preservation throughout the life cycle of eachproduct from development to scrapping.

1) Throughout the life cycle of each product fromdevelopment to scrapping, we evaluate and minimize theimpact of business activities on the environment and makeour best efforts to preserve the environment.
2) We aim at accident- and disaster-free operations to secure
the safety of both local communities and employees.
3) We confirm the safety of raw materials, semifinishedproducts and final products to prevent health-relateddisorders 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 andenvironment not only by strictly complying with relevant
legislation and regulations but also by self-management.

Responsible Care (RC) Activity Promotion System
We set up the safety and environment philosophy, as well asbasic and action policies, based on which we promote ourcorporate activities related to quality, safety and theenvironment. Such issues are discussed and decided by the
RC Promotion Conference, which is the top decision-making
body and is chaired by the president. The environment
preservation meetings, safety and health meetings and quality

assurance (PL) meetings are chaired by the quality, safety andenvironment personnel and joined by plant general managers
and relevant department managers. In these meetings,
corporate targets, action plans and results are discussed topromote RC activities. Under each of these meetingorganizations is a committee to make, implement andevaluate specific action plans for continuous improvements.

RC Promotion System Diagram
Management Committee
RC (Environment, Safety andQuality Assurance) Promotion
Conference

Environment Preservation
Meeting

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

Safety and Health Meeting

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

Quality Assurance (PL)Meeting

Quality Assurance (PL) Committee• Plants

Management System
For DKS, environmental conservation, process safety anddisaster prevention, occupational safety and health, logistics
safety, chemical and product safety, and dialogue with society
are fundamental to our responsible care activities. We haveacquired certification through ISO 9001, ISO 14001, and JIS
Q45100, which are quality, environment, and occupationalsafety and health management systems that we use as tools
for pursuing activities.
Our domestic production plants have acquired ISO 14001
certification and they implement periodical evaluations ofstrict environmental regulation adherence, while also striving
for environmental conservation. We make rigorous efforts tocheck and understand revisions to laws and regulations on a44

DKS REPORT 2021

timely basis, then to thoroughly share this informationinternally.
The Yokkaichi Branch obtained JIS Q45100 in September
2019, which made DKS the first chemical company to receive
this certification. The Ohgata Branch followed in 2020 andplans are underway for the Shiga Branch to be certified aswell. Through occupational safety and health activities basedon these management systems, we will continue aiming forzero accidents and the establishment of workplaces
conducive to comfortable work.
 ur website has information on our occupational safety and health, logistics safety, andOprocess safety/disaster prevention efforts.
https://www.dks-web.co.jp/english/ir/report/index.html

Strategies and Initiatives
Based on the medium-term management plan FELIZ 115, weformulated a medium-term environmental plan for fiscal
2020–2024 and are striving for energy efficiency, GHG
reductions, and waste product reductions. At the same time,in January 2021, we have launched a team for planning Green
Transformation (GX) strategies in order to contribute toachieving a sustainable society as efforts toward
decarbonization spread worldwide. With this team, we

devised long-term GX strategies for moving toward carbon
neutrality in 2030 and out to 2050, and we also made a roadmap based on these strategies. Starting in fiscal 2021, we
have been shifting to a forecasting and analysis approachthat is informed by these strategies. As we strengthen ourcurrent initiatives, we will also expand our targets to initiatives
that take the broader society into consideration.

Improvement of corporate value

GX Strategy Targets

2030

CO2 reductions in the supply chain
Environmentally friendly products

Carbon neutral
Biodiversity

2021

Reduction of GHG emissions

Reducing emissions ofenvironmental impact substances
Zero emissions

Energy saving
Waste reduction

Contribution to businesses

Medium-Term Environmental Plan Activity Targets and Results
Evaluation A: Significant result B: Result in line with the target C: Target unachieved D: Underperformed by a wide margin
Target parameter

Management items

Fiscal 2020 activity targets

Promotion of energy
savingEnergy consumption
per unit1

Improvement of more than
1% YoY

Reduction of GHG
emissions

CO2 emissions2

Reduction of more than 1%
YoY

Generated waste
amountWaste Reduction

Proper management ofchemical substances

Evaluation

Fiscal 2021 activity targets

D

Improvement of more than
1% YoY

Down 9.0% YoY

AImprovement of more than
1% YoY

Reduction of more than 1%
YoY

Down 6.0% YoY

AImprovement of more than
1% YoY

Final disposal rate3

For DKS non-consolidated,maintain at or below 0.1%

0.1%

A

Final disposal amount

Reduce by 100 t or more in
FY2024 compared with
FY2019 results

Reduce by 205 t vs. FY2019
resultsB

SOx emissions
Reduction ofenvironmental impact
substance emissions

Fiscal 2020 results
Up 4.3% YoY(For DKS non-consolidated,
down 0.5% YoY)

For DKS non-consolidated,maintain at or below 0.1%
For DKS Group, at or below
3.8%4
4Reduce emissions ofenvironmental pollutants inthe air

Down 9.9% YoY

B

Up 11.1% YoY

CUp 81.6% YoY

DDown 11.5% YoY

B

COD emissions

Reduce emissions ofenvironmental pollutants inwater

Up 8.4% YoY

CPRTR Regulation designated substances
emissions

Reduce emissions of PRTR
Regulation-designatedsubstances

Up 22.5% YoY

CReduce emissions of PRTR
Regulation-designatedsubstances

Improve green procurement
ratio for paper and stationery

62.1%; fell by 2.3 points
YoY5

C

Improve green procurement
ratio for paper and stationery

Achieve zero environmentrelated accidents

Zero accidents

B

Achieve zero environmentrelated accidents

Comply with environmental
laws and regulations

No legal/regulatory
violations

B

Comply with environmental
laws and regulations

Promoting our environmental
management system

Maintained

B

Promoting our environmental
management system

NOx emissions
Dust emissions
Water discharge

Promotion of green procurement

Elimination of disasters/accidents

Environmental management system

Reduce emissions ofenvironmental pollutants inthe air
Reduce emissions ofenvironmental pollutants inwater

1. Based on the calculation method from the periodical report stipulated by the Act on the Rational Use of Energy
2. Derived from energy use in the production and administrative department
3.The ratio of the final disposal amount to the generated waste amount
4. Since we achieved the Group target for final disposal amount, the fiscal 2021 target was revised to 3.8% or lower and the fiscal 2024 target was revised to 0.5% or lower.
5. In fiscal 2020, we reviewed our method for calculating the green procurement ratio and made retroactive revisions for fiscal 2019.
Please see environmental data (p. 69–70) for details on energy, CO2, waste products, environmental impact substances, and chemicals subject to the PRTR regulation.

DKS REPORT 2021

45

DKS’s Growth Strategy 2: Sustainability

Discussion between Outside Directors
The importance of outside directors is increasing by
the year, as they work to ensure transparent, fair andobjective decision-making. Two DKS outside directors
exchanged their opinions on the effectiveness of
DKS’s corporate governance as well as the Company’s
growth strategies and potential.
(This conversation took place July 2021)

Q: Now that “FELIZ 115” has entered its
second year, what has been the
progress so far, and what do you think
will be necessary for meeting fiscal
2024 targets?
Taniguchi
Since the first one to two years of the plan arefor solidifying the foundation, the points which need
improvement must be continuously worked on with thesupport of employees. The trial run for the Company’s newly
designed personnel system was launched in April this year. In
this second year of the plan, it will be important to examine
how to broadly roll out the new system and drum up support
from employees. To date, the Company has had what could
be called poor equality. An environment conducive to
comfortable work for employees is important for company
development and this “comfortable environment” includes
freedom and the ability to work with peace of mind. At thesame time, it is important to have fair evaluations and acompensation scheme based on those evaluations. I believethat being recognized for one’s diligent effort would improve
the quality of work for the majority of employees.

As far as the progress of FELIZ 115, the market
is watching closely to see if DKS can meet the targets of net
sales of ¥85 billion and income of ¥10 billion, and we are
pursuing business with that sharp focus. Major initiatives forboosting income include continuously improving the weak
points of the Company’s existing businesses and carefully
reviewing areas that are not contributing to DKS.
DKS is also moving forward with reforms to organizationwide sales activities. However, there are different levels ofneeds according to each customer group. The needs ofpeople in management and core departments affect theoperations of the entire company, but they do not always
provide specific standards and features of the product theywant. They come to us and say, “I would like to do such andsuch,” which means, “What expertise does DKS have to makethat happen?” On the other hand, procurement departments
have clear details of the kinds of products they are in a quest
for, due to their needs for low-prices and quick services. They
give these requests not only to DKS, but to our competition
as well, so even if we win the order, we cannot expect a fat
margin. I feel like I have the best understanding of FELIZ 115,
which expresses the CEO’s ambition. Each department
manager is requested to show active top-level diplomacy.
Aoki

46

DKS REPORT 2021

AOKI
Sunao
Director (outside)

Career summary
Executive Vice President and Executive
Officer of Mitsubishi Heavy Industries, Ltd
Visiting Professor of Tsinghua University in
China (current)
Honorary Fellow at St. Anne’s College,
University of Oxford (current)

Q: What are your thoughts on employee
happiness-based management?
Taniguchi
There was a significant amount of debate on
the Board of Directors when incorporating employee
happiness-based management in the medium-term
management plan. Initially, there were heated discussions interms of “what would be the numerical targets?” and “howdo we measure the degree of happiness?” Also, “Do thetargets include non-financial indicators such as the utilization
rate for annual paid leave, the ratio of female employees, andthe hiring rate for people with disabilities?” The attrition rate
at DKS is extraordinarily low. Basically, I think that thefoundation of employee happiness is a system that allows
everyone to enjoy their work and that helps them feel eager
to come to work each day and do their best.
Aoki
The key to happiness-based management is thedefinition of happiness, which is different for each person. A
researcher, for example, may aspire to earn an award at aninternational symposium, while an employee of a company
may only desire to work fixed hours at the office and receive a
steady income. There are individual differences in happiness.
However, the moments that generally make people feel thegreatest happiness are when we achieve something. That iswhy, if the Company engages in initiatives that give
employees a sense of satisfaction, it will lead to happinessbased management. I think that it is important for supervisors

Q: Japan’s Corporate Governance (CG)
Code has been revised. What do you
think of DKS’s initiatives as
expectations grow for stronger
governance?

TANIGUCHI
TsutomuDirector (outside)

Career summary
Chief of the Kyoto-kami Labor Standards
Inspection Office, Ministry of Health,Labour and Welfare
Chief of Tsutomu Taniguchi Labor andSocial Security Attorney’s Office (current)

to give their employees projects—while giving them the
support needed for their achievement—with an image ofwhat their efforts would lead to improving in the Company’s
performance, while also resulting in higher employee salaries.

Q: Please give us your evaluations ofcurrent ESG/SDGs initiatives of DKS.
Aoki
As a manufacturer, DKS can directly contributeto lowering energy consumption and CO2 emissions, andlowering waste that leaves our plants. I think that instillingthese types of efforts throughout the Group is the mostimportant thing. Also, I expect benefits just from updating
aging facilities, creating operation plans that avoid using
electricity at night, and rearranging work shifts.
Taniguchi
Aside from environmental matters, I hope that
we continue to place emphasis on measures to prevent
occupational accidents. It is important to instill a safety
mindset not only in manufacturing processes, but in the
Company’s management as well. In particular, since DKS has
many older plants, it is essential to run them as safe, dangerfree facilities by ensuring constant maintenance and tidying
surroundings. I think that this type of effort will contribute to
the SDGs.

Aoki
With regard to the CG Code, some of its
principles and content are fairly abstract and there are many
items that do not clearly specify “comply,” nor do they
“explain” standards. So, in our most recent Corporate
Governance Report, we “explain“ DKS’s current status withregard to 10 of the corporate governance principles. At theoutset, the CG Code of Japan was based on a U.S.-styled wayof thinking. As the U.S. faced scandals over fraudulent
accounting, the Sarbanes-Oxley Act (SOX) was passed, after
which it was adopted in Japan as J-SOX. However, thegovernance structure between the U.S. and Japan is different.
Whereas management teams in the U.S. possess
extraordinary authority, Japan’s management authority is notespecially strong. The issue in Japan tends rather to be with
non-HQ business sites acting too much on their own, whichmeans there is a need for governance that prevents thisfrontline issue.
The question is, what should outside directors do in thisregard? At once- or twice-monthly Board of Directors
meetings, we receive reports, but even if we ask questions or
make suggestions, there is no guarantee that the informationthat comes back is correct. I think it is useless to simply makesuggestions or rely on management monitoring functions. In
my case, I think it is my responsibility to change DKS by
actually going into the frontline and giving detailed advice on
the mindset toward business, business models, processes,
and the like. The organization will not change if we outside
directors only watch and check things from the outside.
Nothing happens in the conference room. The frontlines arewhere things happen. If we go there directly and offer
guidance, that will support on-site governance.
Taniguchi
The Board of Directors understands that someitems in the Company’s Corporate Governance Report are
so-called “explanatory”. There will be no development for
the Company or happiness for the employees if there is no
explanation of the type of governance that closely fits DKS’s
characteristics (that is, even with regard to the CG Code,explain DKS’s individual circumstances), clarify the issues totackle going forward, and then execute on those points.
Chairman CEO Sakamoto has stated at the General Meetingof Shareholders that “employees are of utmost importance.”
I think that the origin of prosperity for the Company lies inenabling these cherished employees to pursue a sense ofhappiness. My wish is that when we reach the year 2050, we
will be able to hear the words, “DKS flourished because we
implemented employee happiness-based management.”

DKS REPORT 2021

47

DKS’s Growth Strategy 2: Sustainability

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 theorganization becomes exposed to various changes in the outside environment and risks, to achieve sustainable growthand social contributions DKS aims to be an organization that is conscious of resilience and flexibility in addition tosustainability and growth.

DKS’s Framework Supporting Sustainable Growth
The corporate philosophy around which the Company forms the basis 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 Officers andEmployees.
With the selection of five focus SDGs Sustainable Development Goals and the promotion of health-based company
management covered in our new medium-term management plan FELIZ 115, on October 1, 2020 we revised our Codeof Corporate Ethics and Declaration of Action by Officers and Employees and made these known both internally andexternally.

Strategies and Initiatives
Digital Society Initiatives

J Preventative maintenance leveraging DX
Our project for increasing contributions from older plants is
one of the priority measures of medium-term management
plan FELIZ 115. The depreciation period has ended for aging
plants constructed in the Showa period (1926-1989).
Therefore, if these plants stay in operation and produce
products continuously, it could be said that these plants haveearnings power that leads to profit just by selling products.
Consequently, it is important for us to find ways to keepthese fully depreciated plants operating without interruption.
At the same time, the machinery and equipment (pumps,
tanks, etc.) of these plants have aged and bring the risk ofdeclining performance and breakdowns.
One form of DX at production sites is preventative
maintenance we perform that discovers early signs ofmachinery and equipment malfunction. Since this enables
preemptive measures before an incident occurs—and
thereby allows us to minimize production interruptions, weare strategically implementing repairs and maintenance inparallel with our stage-one “smart” Production Headquarters
changes that include profit generation through production
efficiency improvements. Specifically, this includes sensors
that constantly monitor machinery and equipment for sounds
and vibrations during operation and help us visualize minutefluctuations that are difficult for a human technician to detect.

Initiatives to Strengthen Corporate Branding
In our medium-term management plan FELIZ 115, we haveset a target of 10 billion yen in annual net sales in the life
sciences business.
One of our strategies for reaching this target is tostrengthen corporate branding, so we are aiming to further
boost corporate value and presence of DKS.
In order to increase recognition of DKS among the generalpublic, our specific initiatives have included posting
information on social media sites and other activities, such as
opening limited-time pop-up shops in JR Kyoto Isetan andsimilar department stores. Additionally, we are collaboratingwith prestigious companies in Kyoto to develop original
products such as general foods, soft drinks, and alcoholic
beverages using the DKS Group’s unique technologies andmaterials.

Pop-up shop in JR Kyoto Isetan

Using a smartphone (existing
infrastructure) to gather noise data on
equipment being monitored by sensors

48

DKS REPORT 2021

Establishing a Compliance Structure
Since the Compliance Control Committee was established in 2004, the Company has been continuously engaged in thebuilding and maintenance of our compliance system, as well as in activities to instill compliance practices in our
employees. Recognizing that compliance activities are indispensable 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
the basis of its actions is indicated in our Company Credo,
Company Mottoes, and Code of Corporate Ethics. These arealso outlined in our Declaration of Action by Officers andEmployees.
With the selection of five focus SDGs and the promotion ofhealth and productivity management covered in our mediumterm management plan FELIZ 115, we revised our Code ofCorporate Ethics and Declaration of Action by Officers andEmployees on October 1, 2020 and made these known bothinternally and externally.
Additionally, in order to instill our corporate philosophy
among employees, we posted it in various places inside ouroffices and published a Compliance Manga Case Book
detailing issues that tend to arise in everyday work situations.
This book, which was distributed to all employees, uses anapproachable (manga illustrated) format to convey its
information. Furthermore, our e-learning program for all
employees explains and tests participants on our corporate
philosophy as part of efforts to deepen everyone’s

understanding of the philosophy and to offer a valuablereference for making judgments in day-to-day tasks.

Code of Corporate Ethics
To establish corporate ethics that contribute to putting theCompany policies into practice, we established a six-item setof principles as the Code of Corporate Ethics and adhere to
the word and spirit of all laws and regulations, as well asinternational rules. We also respect the culture and customsof each country and region where we practice our businessactivities and declare that we will act with social common
sense.

Declaration of Action by Officers and Employees
Regarding the six-item set of principles established as theCode of Corporate Ethics, we broke down the content as towhat kind of behavior is actually required, clearly state theguidelines for the actions of officers and employees(including seconded and contract employees, as well as
temporary employees) and declare that these guidelines will
be implemented as a code of conduct.

Compliance System
Compliance Control Committee

Whistleblower Hotlines

The Compliance Control Committee is charged withestablishing and maintaining the Company’s compliancesystem. Since its establishment in 2004, the ComplianceControl Committee has been continuously engaged inbuilding the compliance system, implementing educational
activities to entrench compliance practices in our employees
and conducting surveys to ensure understanding of thecompliance system.

DKS has established whistleblower internal and external
hotlines where employees can consult on and report possible
violations to established laws and regulations. Instructions on
using the hotlines are always available internally, such as on
the Company intranet.

Compliance Awareness Survey

Corporate Ethics Month
The Compliance Control Committee has designated Octoberevery year to be Corporate Ethics Month and conducts
activities during the month, including educational activities
and the dissemination of information, centered on aparticular theme.
The theme for fiscal 2020 was the revised Code ofCorporate Ethics and the confirmation andimplementation of the Declaration of Action by
Officers and Employees. In each department, wereiterated the basics of the Codeof Corporate Ethics, anddepartment members deliberated
on specific actions to take.
Additionally, we gathered casestudies from each department oncompliance-related questions inCompliance Manga Case Book
everyday work tasks.
コンプラ
イアンス
ケースブ
漫画
ック

A

2. インサイダー取引って何？

問題があります。担当者に連絡がつかないときは、上司に相談するなどして、すみやかにお客様へ対応してください。

Q

他部署の人に対して、新商品が絶対売れるなどの未公表の会社情報を伝えてもよいでしょうか？

これはすばらしいねえ！
売れるのは間違いないだろう！

事例から学べること

だと
いいん
ですけど

今度の新商品絶対売れるから
！

へー

役員

自分が担当者でなくても、会社の一員である以上、当事者のひとりです。お客様
にとっては、会社を代表する人物であることを自覚しましょう。

クレームは、迅速に対応し、絶対に後回してはいけません。苦情連絡第一報にて

新商品

企画部
Aさん

他部署の
同僚Bさん

所管部署長・関係者に調査依頼し、24時間以内に『一次報告』をお客様に必ず提出します（必要に応じ『1週間以内報告』『中間報告』も提出します）。

自宅で担当者に連絡がつかないときは、上司に相談するなど、すみやかに対応してください。クレームを放置すると、会社の信用を損ない、お客様との関係が悪化する

株価も上がるだろう…
こりゃ買わない手はないな

後日

あなたたち
インサイダー
取引しましたね！

エーッ！
！
なんで僕が！
？

ばれた…！

おそれがあります。クレームの内容によっては、取引の減少、停止、損害賠償請求などにつながるおそれもあります。

クレームの発生後はお客様へ速やかに訪問し謝罪と調査をします。クレームの内

証券取引等
監視委員会
の職員

容は『苦情処理連絡票』を発行して所管部署長と関係者に報告します。

クレーム対応は、お客様との関係を強化する機会です。誠実で適切な対処によって信頼を得ましょう。

企画部の A さんは、非常に画期的な新商品を開発した。役員からも「すばらしい商
品だ！ 売れるのは間違いない」とお墨付きをもらった。

その後、新商品のヒットを確信した A さんは、同期で仲のよい他部署の B さんに「今度の新商品は絶対売れるから！」と自信満々に話した。

B さんは新商品の情報は初耳。平然を装っていたが、内心「いいことを聞いた」と思い、帰宅後にパソコンで自社株を購入した。

新商品発表後、証券取引等監視委員会の職員が、A さんたちの会社にやってきた。
職員に厳しく詰め寄られて、慌てふためく2人。A さんは「自分は株取引をしてい参 照ないのに、なんで疑われるの !?」と納得のいかない様子だった。

We conduct a Compliance Awareness Survey for all
employees each December 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 the following fiscal year.
The fiscal year ended March 2021 was the 16th consecutive
year the Company has implemented the Compliance
Awareness Survey.
The survey assessed respondents’ understanding of therevised Code of Corporate Ethics and Declaration of Action
by Officers and Employees as well as each department’s
achievement of these measures, and awareness of thewhistleblower hotlines.
The survey posed questions about areas of policy that
employees would like to see improved in the future and many
requests were made reflecting current conditions regarding
workplace environments and working from home.

企業倫理憲章１、役員・従業員行動宣言１（３）、I11「製品苦情処理規程」、ISO 文書「製品苦情処理運用規程（B1）」67

Please see the data on p. 70 for survey results.

DKS REPORT 2021

49

DKS’s Growth Strategy 2: Sustainability

Organizational Resilience

Strengthening Risk Management
Diverse and increasingly complex, the corporate risks surrounding the Company could result in adverse impacts on the Company
itself, as well as on employees, shareholders, customers, and local communities. We position risk management as an importantmanagement issue and are taking steps to prevent potential risks and the spread of risks that have already manifested.

Risk Management System
Information Security Rules.
In fiscal 2020, we reassessed our risk management criteria
and process for sharing information when an impactful event
occurs, while we also extended and revised our BCP for
handling earthquakes.
We utilized our e-learning platform to educate employeeson the concept of business continuity management as an
aspect of risk management for addressing businessinterruptions, which allowed us to emphasize the importanceof this concept to employees.

Ascertain the status of the organization
Risk assessment
Identification of risks
Analyzation of risks
Evaluation of risks
Respond to risks

Monitoring & review

Basic Process for Risk Management
Communication &discussion

To address the Group risks and systematically promote
activities, we have established a Risk Management Control
Committee that meets on a regular basis and is composed ofrepresentatives of each department, with an operating
executive officer serving as the chairperson.
The Risk Management Control Committee’s objective is toappropriately manage and set countermeasures for potential
risks that may interfere with our achievement of businesstargets. The activities of the committee are carried out
following the PDCA cycle, based on the basic process of risk
assessment, risk response, monitoring, and review.
In Japan and overseas, the Company and its subsidiaries
are working to maintain and strengthen crisis management
systems so that we can communicate risk crisis information assoon as possible, ascertain the situation, and takeappropriate 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, andBusiness Continuity Plan (BCP)
BCP is an abbreviation for Business Continuity Plan, whichallows a company to maintain critical operations withoutsuspending plans when it is affected by an unforeseen natural
disaster such as an earthquake. Even if business activities areunavoidably interrupted, the BCP focuses on restarting
important functions within the recovery time objective andminimizing the risks involved in interrupted operations.
We have created BCPs for a large-scale earthquake and theoutbreak of a highly virulent H1N1-type influenza, and we areregularly reviewing and updating these plans.

Disaster Preparedness
There has been an increasing prevalence of natural disasters
such as earthquakes and water damage from torrential rain, as

well as extended heat waves and heavy snowfall accompanying
abnormal weather patterns. We are proceeding to implement
and strengthen appropriate measures for these types of risks
to human life and business activities.
In the event of a crisis, our Risk Management Manual
establishes management levels in line with the crisis, with theperson in charge—according to those risk managementlevels—tasked with implementing risk management.
Risk Management Level
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

Initiatives to Prevent the Spread of COVID-19
The Risk Management Control Committee has been using
our intranet and other means to inform all employees of theCompany’s countermeasures to COVID-19, which spreadworldwide in 2020. These countermeasures focus on thepolicies of the central government and local municipal
governments, as well as work styles that take into account thelevel of infections. Primary measures being implemented*
are: prohibiting (in principle) overseas business trips,
establishing strategies to address domestic business trips,
creating standard practices for responding when someone
has a confirmed infection or close-contact exposure,50

DKS REPORT 2021

recommending working from home and following staggered
office hours, promoting the use of our online meeting system,
implementing daily infection prevention strategies (handwashing, gargling, alcohol disinfectant, face masks, etc.),
carrying out temperature checks at building entrances, andsetting up spray-guard partitions.
We are continuing to gather information and pursue
business continuity measures during this time of the COVID19 pandemic.
*Initiatives up to August 2021 (measures are subject to change according to the level of
infections)

Strengthening Corporate Governance
Characteristics of DKS’s Governance
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 thespirit of our founders. Our basic concept on corporate
governance is to establish a management foundation able toearn and maintain the trust of society, as well as to conducttransparent and fair corporate activities that are rooted incorporate social responsibility (CSR). Consequently, we
pursue higher governance as management policy andposition it as one of our most important tasks.

Status of Response to Corporate Governance CodeRegarding compliance with the Corporate Governance Code,we have not implemented nine of the principles. Please refer
to our Corporate Governance Report for the principles andour reasons for non-implementation.

Detailed corporate governance information
https://www2.tse.or.jp/disc/44610/140120210615449019.pdf(Japanese only)

Initiatives for Strengthening Governance
Board of Directors Diversity
Company directors possess knowledge and experience invarious fields such as sales, production, research, purchasing
and logistics, planning, accounting and finance, andpersonnel and general affairs, as well as overseas
management experience. Each outside director has
accumulated extensive business experience and specialized
knowledge from their various backgrounds, including

manufacturing companies in different industries,
administrative agencies related to labor conditions andoccupational health and safety, and university-level
nanotechnology research. 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 officers (directors and Audit & Supervisory
Board Members) carry out self-evaluations based on aquestionnaire prepared by the Office of the Board of
Directors (Secretary Department). The Office of the Board of
Directors tallies these questionnaire results, which are
analyzed and evaluated by outside officers and full-time Audit& Supervisory Board Members. Last fiscal year, outside
officers and full-time Audit & Supervisory Board Members
made a general determination that the operation of theBoard of Directors is appropriate and effective, and theevaluators provided opinions that will facilitate further
elevation of this effectiveness. The Board is striving to makeon-going improvements that take these opinions into
account.

Timeline of Corporate Governance Enhancement Initiatives
Year

Month

Details

2014

June

Appointment of independent outside directors: 1
person in total
Establishment of new provisions for putting Board of
Directors resolutions in writing

2015

May

Establishment of an Outside Officers Committee

2017

June

Appointment of independent outside directors: 2
people in total

2018

June

General Meeting of Shareholders material madeavailable on the internet

2020

May

Online exercising of voting rights made available

2021

May

Adoption of an online voting platform for institutional
investors

2021

June

Establishment of an Advisory Board
Appointment of independent outside directors: 3
people in total (3 of 8 directors are independent
outside directors)

DKS REPORT 2021

51

DKS’s Growth Strategy 2: Sustainability

Organizational Resilience

Organizational Design and StructureOutline of Structure

Company

OutsideGeneral Meeting of Shareholders
Appoint/Dismiss

Appoint/Dismiss

ReportBoard of Directors
Directors: 8 people
Company (5)  Outside (3)    Select/Dismiss
Supervise

Appoint/Dismiss

Audit

Cooperate

Accounting auditor

Audit & Supervisory Board
Auditor: 5 people

Cooperate

Advisory board

Company (2)Outside (3)Company (1)*Outside (7)Decide on resolutions
regarding appointments/
dismissals    
Judge on accounting
audit appropriateness

Auditor assistant

ReportCooperate

Audit
ReportCEOInternal Audit Department

Audit

Management Committee
Deliberate important matters
Managing Directors
Guide/Supervise

Check for illegal
activities

General Affairs andLegal Department

Propose/Report important matters

Senior executive officers: 3 people
Executive officers: 10 people

ReportCompliance Control Committee

RC (Environment, Safety & Quality)
Promotion Conference

Risk Management Control Committee

Report,etc.

(Business execution)

ReportSecurity Export Control Committee

Policies, planningand guidance

Audit

Report,etc.

Policies, planningand guidance

Respective business execution departments/Group companies*“Outside” includes experts

Organizational composition and roles
Management Committee
Chaired by the Chairman CEO, the Management Committee
is comprised of five internal directors, two full-time Audit &Supervisory Board Members, two senior executive officers,
and three executive officers. The Committee reviews andconsiders items which need approval prior to the Board of
Directors (primarily accounts, finance, and performancerelated matters), as well as important resolutions and reports
based on the Official Regulations of Administrative Authority
and the Official Regulations of Accounting and Finance. In
the process, the Committee carries out regulations andadjustments across the Company. The Management
Committee meets on a regular basis (generally twice amonth). In principle, matters brought before the Board of
Directors are first given careful review by the Management
Committee, which endeavors to check their compliance withlaws, regulations, and the Articles of Incorporation, in orderto facilitate rational decision making.

52

DKS REPORT 2021

Matters deliberated by the Board of Directors
No. ofmeetings

Main details

Average timecommitted• Accounts-related items• Executive appointments,
remuneration• Segment business plans

12 times
in total• Progress reports on medium-term
management plan FELIZ 115• Reports on corporate governance• Reports on internal control
evaluations (related to financial
reports) and the Internal Control
Report• Reports related to evaluating theeffectiveness of the Board of
Directors

122 min.

Appointment and Dismissal of the CEO and the CEO Succession Plan
Regarding the appointment of the CEO, the outgoing CEO
proposes a candidate for successor who shall be resolved
after thorough deliberation by the Board of Directors, which
includes three independent outside directors. If the CEO is
not sufficiently fulfilling his role, or if there is a reason todismiss the CEO, the Board of Directors will deliberate andresolve the dismissal.
In addition, succession planning for the CEO is the mostimportant matter for the survival of the Company, thus it iscritical to identify actual and potential capabilities ofmanagement. The succession plan is the exclusive propertyof the CEO, who is familiar with all aspects of the Company.
DKS believes it is desirable to hear the opinions of outside
officers regarding the qualities and aptitude of successors,
thus our successor training committee and our Advisory
Board, which include outside officers as members, provide
opportunities to appropriately incorporate the advice andparticipation of outside directors.

Establishment of an Advisory Board
The Company voluntarily established an Advisory Board as asupplementary body with the goal of improving the fairness,
objectivity, and transparency of the decision-making processof the Board of Directors.

Establishing the Advisory Board ensures appropriate
opportunities for outside officers to participate in and provide
advice on CEO successor selection, officer remuneration, andthe like.
The Advisory Board is comprised of the Chairman CEO, six
outside officers, a majority of whom are independent, andone outside expert. The Board is chaired by an independent
outside director.
Role of the Advisory Board
The Board reviews, deliberates, and advises the Board of
Directors on the following:(1) Matters related to overall management(2) Matters related to selecting director candidates, including
representative directors(3) Matters related to plans for training Company director
successors(4) Matters related to policies and procedures relevant todirector remuneration(5) Matters related to determining and revising the officer
remuneration scheme and remuneration amounts(6) Other matters deemed necessary by the Board of
Directors

Reasons for Selection of Outside Directors
Name

Reasons for selection and expected contribution to the Company

AOKI Sunao

Mr. Aoki has extensive experience and advanced, specialized knowledge from many years inmanagement positions at Mitsubishi Heavy Industries, Ltd. Based on his seven years ofprofessional experience serving as an outside director of the Company, he has played an
appropriate role in overseeing business execution as an outside director by actively providing
his opinions on the medium-term management plan and management strategies, among othersubjects. The Company deems that, going forward, Mr. Aoki will continue offering appropriate
supervision of the execution of Company business and will provide advice from a broad-based
perspective.

TANIGUCHI Tsutomu

Mr. Taniguchi has extensive experience and advanced, specialized knowledge from serving in
key positions at the Labor Standards Inspection Office. Based on his four years of professional
experience serving as an outside director of the Company, he has appropriately fulfilled his rolein overseeing business execution by actively providing his opinions on labor conditions andoccupational safety and health, among other subjects. The Company deems that, going
forward, Mr. Taniguchi will continue offering appropriate supervision and valuable advice.

OKUYAMA Kikuo

Mr. Okuyama has extensive knowledge and experience in the field of nanotechnology,
particularly from his involvement in university-level research. He has also made dedicated effort
toward industry-academia-government collaboration and is expected to offer valuable advice
related to fields in which the Company conducts research, and in the field of life sciences. The
Company deems that Mr. Okuyama will be able to leverage his experience and expertise toimprove the Group’s sustainable growth and corporate value.

DKS REPORT 2021

53

DKS’s Growth Strategy 2: Sustainability

Organizational Resilience

Officer Remuneration
The basic policy regarding director and Audit & Supervisory Board Member remuneration involves a) appropriate compensation for
execution of duties, b) remuneration that encourages actions to improve business performance and maximize corporate value, andc) remuneration that deepens value-sharing with shareholders.

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 businessexecution 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 basedon the size of the role tasked toeach director and their position.

Company performance in the previous
fiscal year is evaluated once each year,with the departments each director is incharge of evaluated twice each year;
then, the amount of remuneration is
calculated and increased or decreased
within a certain range.

DKS introduced a transfer-restricted stock remuneration
system, with decisions as to the specific allocation of monetary
remuneration 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 ofamountAt the 154th Ordinary General Meeting of Shareholders held on June 26, 2018,a resolution determined that monthly 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 153th Ordinary General Meeting of Shareholders heldon June 27, 2017, a resolution determined the amount of stock
remuneration be set at ¥100 million per annum (¥6 million orless per annum for outside directors; this does not include thesalary of employees who concurrently serve as directors), with
100,000 shares as the maximum number of common shares tobe issued or disposed of per annum. All of the above aredrawn up by the CEO and 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 theappropriateness of 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.

Regarding stock remuneration, DKS introduced a transfer-restricted stock
remuneration system, and determines the amount of monetary remuneration to
be paid for granting transfer-restricted shares suitable for the role of an Audit &Supervisory Board Member entrusted by shareholders.

Scope ofamountAt the 141th Ordinary General Meeting of Shareholders held At the 153th Ordinary General Meeting of Shareholders held on June 27, 2017, a
on June 29, 2005, a resolution set maximum compensation at resolution set maximum stock compensation at ¥20 million per annum, with
¥6 million per month (¥72 million per annum).
20,000 shares as the total number of common shares of the Company to beissued or disposed of per annum. All the above are determined and remitted
after consultation with Audit & Supervisory Board Members.

 otal Amount of Remuneration for Each Officer Position, Total Amount of Remuneration by Remuneration Type,T
and Number of Applicable Officers
Officer position

Total remuneration(Millions of yen)

Total remuneration by type (Millions of yen)
Fixed

Performance-linked

Stock-based

Number of applicableofficers (persons)

Director (excluding outside directors)

252

236

(4)

20

10

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

43

39

—

3

2

Outside officers

46

42

—

3

8

Targets for indicators related to performance-linked
remuneration in the fiscal year under review were to exceed
consolidated net sales of ¥59.5 billion, consolidated ordinary
income of ¥4.1 billion, and consolidated operating cash flow
above ¥3.2 billion in fiscal 2018. In the previous fiscal year,

54

DKS REPORT 2021

which the performance-linked remuneration for the current
fiscal year is subject to, consolidated sales increased to ¥61.4
billion and consolidated ordinary income decreased to ¥3.5
billion. In addition, consolidated operating cash flow
increased by ¥3.7 billion.

DKS’s Growth Strategy 2: Sustainability

Dialogue with Shareholders and Investors
Disclosing the necessary corporate information in a timely and appropriate manner, the Company attaches
importance to occasions for communicating 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. The Company arranges regular large and small meetings with investors so that the CEO
can communicate with investors in his own words. In addition, with regard to explaining financial performance andbusiness scope, the personnel in charge of IR meet directly with investors. With this integrated report serving as atool for constructive dialogue, we are working to improve corporate value, including mutual understanding.
Frequent questions from stakeholders

Q Could you give us an overview of the medium-

term management plan and your progress on it?

A In April 2020, we launched our five-year management
plan, FELIZ 115. Focused on the social environment of 2030, it
is a framework for transforming into a company that will persist
for the next 100 years. Our Company Credo, “Contributing to
the nation and society through industry” is everlasting. The
medium-term management plan is positioned in order to charta course to raising corporate value and reaching consolidated
net sales of ¥100 billion. Our general review of the first year of
the plan is as follows:(1) W e carried out a portfolio review, including improving
profitability and withdrawing from certain projects, and wereorganized our business structure.
(2) W e brought on line Plant #4 in the Yokkaichi Branch Kasumi
Plant, enabling greater production capacity to handle demand.
(3) W e established the Life Sciences Business Headquarters (under
direct supervision of the president ), aiming for life sciencesbusiness on the scale of ¥10 billion in 2025.
(4) In order to start and build out new businesses, we revamped our
R&D organization to place priority on profitability.
(5) W e proactively hired non-Japanese employees and strove topromote diversity.

Please see the “Investor Relations” tab on our website for details
on our medium-term management plan (in Japanese only).
https://www.dks-web.co.jp/ir/strategy/index.html

Dialogue with Institutional Investors and Analysts
Every year, we hold briefing sessions and small-groupmeetings with institutional investors covering the full-year
and first-half periods, in June and December respectively. In
fiscal 2020, we made maximum effort to address COVID-19
and therefore reduced the size of these gatherings, whichwere held in a hall adjoining Tokyo Station. With the impactof the state of emergency declaration and priority measures
to prevent spread of theinfection, attendees weremore inclined to follow
stay-at-homerecommendations andthere were only 58
participants (which was
Earnings briefing
fewer than last year).

Q What products are your growth drivers?
A Currently, special nonionic surfactants, rock hardening

agents, radiation-curable resin materials, flame retardants, andelectronic device materials are our growth drivers. Rock hardening
agents are used to prevent tunnel collapse during tunnel digging,while flame retardants are used to make plastic materials andhome insulation materials less flammable. Due to the increased
time people are spending at home during the COVID-19
pandemic, demand has grown for antistatic agents used for liquid
crystal film in TVs, personal computers, and similar devices.

Q What is your philosophy on shareholder returns?
A While keeping our dividend consistent with internal

reserves necessary for future business development, our policy
is to maintain a stable long-term dividend for shareholders.
Additionally, we adopted a shareholder benefit program in
fiscal 2019. In proportion to the number of shares held, thisfiscal year’s benefit program provided shareholders with I.
Japonica-Bombyx Fungus and Sudachin manufactured by the
DKS Group.
Please see the “Investor Relations” tab on our website fordetails on the (consolidated) dividend payout ratio (inJapanese only).
https://www.dks-web.co.jp/ir/library/index.html

Shareholder Survey Results
This section presents some of the results of shareholders’
responses to our survey. On survey questions related to IR
activities, interest was higher than last year with regard to“Website improvements” and “Briefing sessions for retailinvestors,” due to there being an increase in the number ofindividual shareholders. There was also an approximate 20%
increase year-on-year in the number of survey cards completed.
We thank everyone for their valuable and extensive feedback.
Going forward, we will devise approaches to conveying
DKS’s management policies and business direction in theclearest manner possible.
What are your expectations for DKS’s IR activities?
2%

Dialogue with Individual Shareholders and Investors
We held our 157th Ordinary General Meeting of Shareholders
and management briefing at the RIHGA Royal Hotel Kyoto on
Friday, June 25, 2021. Subsequently, on Friday, July 2, we held
another management briefing in Tokyo. Despite thecoronavirus pandemic, there were more attendees than theprevious year and participants provided us with candid input.

5%

6%
11%

43%

15%
18%

 Enhancement of shareholders’reports
 Website improvements Expanded integrated reportcontent Briefing sessions for retailinvestors Shareholder round-tableconference expansion
 Enhancement of the Notice of
the Ordinary General Meetingof Shareholders
 Other

DKS REPORT 2021

55

DKS’s Growth Strategy 2: Sustainability

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

Board of Directors (as of July 1, 2021)
SAKAMOTO
Takashi

URAYAMAIsamu

YAMAJI
Naoki

Chairman CEO

Representative Senior
Managing Director
Production Supervisor

Managing Director
R&D Supervisor

Number of shares held:
33,650 shares

Number of shares held:
15,712 shares

Number of shares held:
5,500 shares

Career summary

April
1970	Joined The Fuji Bank, Limited (current Mizuho Bank, Ltd.)
February 1991	Manager of Madrid Branch of Fuji Bank
May
1994	Manager of Nihonbashi Branch of Fuji Bank
December 1999	Managing Director of Fuji Asset Management Co., Ltd.
June
2001	Joined DKS Co. Ltd.
June
2001	Director
April2004	Executive General Manager in charge of Corporate Planning
Headquarters
June
2004	Managing DirectorJune2007	Senior Managing DirectorJune2011	Representative Vice President
June2013	Chairman and Executive Director (current)June2015	Concurrently President (current)

Career summary
April
October
May
June
June
June
April
April

1975	Joined DKS Co. Ltd.
2007	General Manager of Financial Division and Assistant to Auditor
2008	General Manager of Accounting Department and Assistant to
Auditor2008	Executive General Manager in charge of Financial Headquarters
2009	Director
2016	Managing Director
2020	Representative Senior Managing Director (current)
2021	Production Supervisor (current)

Career summary
April
April

April
April
April
April
June
April
April
April

OKAMOTOOsami

KAWAMURA
IchijiAOKI
Sunao

Managing Director
Sales Supervisor in Chargeof Tokyo Headquarters

Director
Administrative Supervisor

Director (outside)

Number of shares held:
7,613 shares

Number of shares held:
2,902 shares

Number of shares held:
1,051 shares

Career summary
April
April
May
April
October
April
April
April
April
June
April

1989	Joined DKS Co. Ltd.
2006	General Manager of Sales Department, Plastic Additive Materials
Business Division2007	General Manager of East Sales Department, Surfactants Business
Division
2008	General Manager of Planning Office, Functional Chemicals
Business Division2010	Director of Yokkaichi Chemical Co., Ltd.
2013	General Manager of Yokkaichi Reorganization Department,
Production Control Headquarters
2014	General Manager in charge of Management Planning Office,Corporate Planning Headquarters
2016	Deputy Executive General Manager in charge of Corporate
Planning Headquarters
2017	Executive General Manager of Plastic Materials Business Division,
Business Headquarters
Concurrently in charge of Tokyo Headquarters (current)
2017	Director
2020	Managing Director (current)
Sales Supervisor (current)

Career summary
October
April
April
April
April
April
April
June
June

56

Career summary

April1985	Joined The Fuji Bank, Limited (current Mizuho Bank, Ltd.)
August1995	Senior Assistant to Director of London Branch
November 2001	General Manager of Yokohama Branch
April
2002	Assistant Branch Manager, Yokohama-chuo Branch of Mizuho Bank
May
2004	Assistant Branch Manager, Seoul Branch of Mizuho Corporate
Bank, Ltd.
July
2008	Deputy General Manager of Sales Department 6
April
2011	General Manager, International Corporate Sales Department
July
2013	General Manager, International Corporate Sales Department ofMizuho Bank
April
2016	Joined DKS Co. Ltd.
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
April
2021	Administrative Supervisor (current)

TANIGUCHI
Tsutomu

OKUYAMA
Kikuo

Director (outside)

Director (outside)

Number of shares held:
669 shares

Number of shares held:—

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)
2004	Senior Officer for Personnel Planning, General Affairs Division
2006	Chief of the Kyoto-minami Labor Standards Inspection Office2008	Director of the General Affairs Division2010	Chief of the Kyoto-shimo Labor Standards Inspection Office2012	Chief of the Kyoto-kami Labor Standards Inspection Office2014	Executive Director of Kyoto Labor Standards Association2017	Registered as Labor and Social Security Attorney (Kyoto Labor andSocial Security Attorney’s Association)
Chief of Tsutomu Taniguchi Labor and Social Security
Attorney’s Office (current)
Director of DKS Co. Ltd. (current)

DKS REPORT 2021

1991	Joined DKS Co. Ltd.
2013	General Manager in charge of Planning Department, Yokkaichi
Reorganization Division, Production Control Headquarters
2014	General Manager of COO Office2015	Executive General Manager of Plastic Materials Business Division,
Business Headquarters
2016	Concurrently in charge of Tokyo Headquarters
2017	Executive General Manager in charge of Corporate Planning
Headquarters
2017	Director and in charge of Personnel & General Affairs
Headquarters
2018	In charge of Production Control Headquarters
2020	Managing Director (current)
Administrative Supervisor
2021	R&D Supervisor (current)

Career summary
October
April
April
June
June

1990	Professor, Department of Chemical Engineering, Cluster 3, Facultyof Engineering of Hiroshima University
2001	Professor, Department of Chemical Engineering, Graduate Schoolof Engineering of Hiroshima University
2013	Professor Emeritus, Chemical Engineering of Hiroshima University(current)
Special Appointment Professor of Hiroshima University
2017	Managing Director of Hosokawa Powder Technology Foundation(current)
2021	Director of DKS Co. Ltd. (current)

Career summary

April1972	Joined Mitsubishi Heavy Industries, Ltd.
June
2000	Director of Takasago Laboratory, Technology Department
June2003	Director
January 2005	General Manager, Technology Department
June2005	Representative Executive Officer
December 2005	Visiting Professor of Tsinghua University in China (current)
April2006	Representative Managing Executive Officer of Mitsubishi Heavy
Industries, Ltd.
April
2009	Executive Vice President and Executive OfficerJune2011	Vice Chief Director of Mitsubishi Research Institute, Inc.
April
2014	Special Advisor of Mitsubishi Heavy Industries, Ltd.
June
2014	Director of DKS Co. Ltd. (current)Audit & Supervisory Board (as of July 1, 2021)
FUJIOKA
Toshinori

ONISHI
Hideaki

TAKAHASHI
Toshitada

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

Number of shares held:
13,141 shares

Number of shares held:
12,989 shares

Number of shares held:
71 shares

Career summary

Career summary

July

October

April
October

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)

April
April

March
April
April
June
June
April
June
June

1982	Joined DKS Co. Ltd.
2001	General Manager of Plastic Materials R&D Department, Plastic
Materials Business Division
2005	General Manager of Synthesis R&D Supervision Department,
Technological Development Headquarters
2006	General Manager of Plastic Additive Materials R&D Department,
Technological Development Headquarters
2008	Deputy General Manager of Plastic Materials R&D Department,
Plastic Materials Business Division2009	General Manager of Plastic Materials Laboratory, Plastic Materials
Business Division2011	Executive General Manager in charge of R&D Headquarters
2014	Director
2017	Managing Director
2020	Advisor
2021	Audit & Supervisory Board Member (current)

NAKA
HideyaHASHIMOTO
KatsumiAudit & Supervisory Board
Member (outside)

Audit & Supervisory Board
Member (outside)

Number of shares held:
71 shares

Number of shares held:
71 shares

Career summary
April
June
June
June
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)
April
2011	Executive Officer of Bank of Kyoto (Commissioned General
Manager, 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)June2019	President and CEO, Kyoto Credit Assurance Service Co., Ltd.
(current)
June
2020	Audit & Supervisory Board Member of DKS Co. Ltd. (current)

Career summary

April
1982	Joined The Fuji Bank, Limited (current Mizuho Bank, Ltd.)May
2004	Manager of Urawa Branch of Mizuho Corporate Bank, Ltd.
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
June2020	Audit & Supervisory Board Member of DKS Co. Ltd. (current)
Director, Audit & Supervisory Board Member of ITmedia Inc.
(current)

Career summary
April
October
March
May
July
June
July
June

1981	Joined Osaka Regional Taxation Bureau
1984	Joined Asahi Accounting, LLC. (current KPMG AZSA LLC)
1987	Registered as a certified public accountant
2007	Representative Partner of Asahi Accounting, LLC. (current KPMG
AZSA LLC)
2010	Director of Kyoto Office of KPMG AZSA LLC
2019	Left KPMG AZSA
2019	Established Hashimoto Accounting Office as a Representative(current)
2020	Audit & Supervisory Board Member of DKS Co. Ltd. (current)

Executive Officers (as of July 1, 2021)
Senior Executive Officer

MISAWA Hideto

Executive General Manager, Sales
Headquarters

Senior Executive Officer

IWAISAKO Koichi

Supervisor of Administration/Group
Companies, Sales Headquarters

KITADA Akira

Representative Director and Chairman,
Yokkaichi Chemical Co., Ltd.

Senior Executive Officer

Executive Officer

SAKAMOTO Mami

Executive General Manager, Public & Investor Relations
Department

Executive Officer

TAKAHARA Eiji

Executive General Manager, Life Sciences Department

Executive Officer

SHUDO Takuya

Executive General Manager, Administrative
Headquarters

Executive Officer

HASHIMOTO Masayuki

Executive General Manager, R&D Headquarters

Executive Officer

SHIMIZU Shinji

Executive General Manager, Production Headquarters

Executive Officer

OWAN Jiro

General Manager, Yokkaichi Plant, Production
Headquarters

Executive Officer

MORI Yoshiyuki

General Manager, Ohgata Plant, Production
Headquarters

Executive Officer

WATANABE Kisou

General Manager, Shiga Plant, Production
Headquarters

Executive Officer

SHIMIZU Koji

Vice Chairman, Chin Yee Chemical Industries Co., Ltd.

Executive Officer

KATAYAMA Toshihiko

President and CEO, Kyoto Elex Co., Ltd.

DKS REPORT 2021

57

Data

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 performanceof these interfaces.

Basic Structure of Surfactants
Surfactants have a unique chemical structure that has bothhydrophilic and hydrophobic properties. Using this structure,surfactants can achieve a variety of effects such as
emulsification, dispersion, foaming, and adsorption by
weakening surface tension or forming molecular aggregatesor micelles (spheres). When surfactants are dissolved in waterand the result is a low-concentration solution, their molecules
can easily gather and assemble on the interface (surface) of

the solution through a phenomenon called “adsorption.” If
the surfactant concentration is increased, the surfactants form
molecular aggregates or micelles (spheres) when they reachwhat is called “critical micelle concentration” (see illustrations“c” and “d” below). Once micelles have formed, if you add
non-water-soluble oil to the solution, the oil can be encircled(solubilized) by the micelles so that from the outside, it looks
like the oil has dissolved in the water.

Fine powder

Hydrophilic
group

Air
Water

Disperses

Water
Hydrophobicgroup

Emulsion

Emulsiona Extremely thin solutionb Thin solution
a Extremely thin solutionb Thin solution

Disperses

Hydrophilic
Dispersion
group

Dispersion
Makes foam

Makes foam

AirSurfactant solutions

Emulsiﬁes

Surface (interface) tension reduced

Oil / water

Oil / water

Emulsiﬁes

Add surfactants

Water

Water

Fine powder

Add surfactants

Oil

Oil

Surface (interface) tension reduced

Functions of surfactants by reducing surface tension

Hydrophobic
group

Foams

c
micelled Higherc Critical micelle Criticald Higher
Foams
concentration solution
concentration solution
concentration solution
concentration solution

Surfactant Types
Surfactants have four main structural types based on thefunctions they are designed to achieve. Of these four types,
three are ionic surfactants that transform into electrolytic
dissociation ions (atoms or groups of atoms bearing anelectrical charge) when dissolved in water, and the remaining
type is nonionic surfactants, which do not form ions. The
Types of surfactants

58

three ionic surfactants are further subdivided based on thetype of ion they form in water: anionic (or negative ion)surfactants, cationic (or positive ion) surfactants, andamphoteric (containing both positive and negative ions)surfactants.

Characteristics

Main applications

Anionic surfactants• Superb emulsifying and dispersing properties• Good foaming• Not susceptible to temperature

Laundry detergent / Shampoo / Body wash

Cationic surfactants• Absorbed by textiles, etc.
• Antistatic effect• Sterilizing effectHair conditioner / Fabric softener / Disinfectant

Amphoteric surfactants• Non-irritative to the skin
• Superb solubility in water• High compatibility with other surfactants

Body wash / Dishwashing liquid / Shampoo

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

Laundry detergent / Emulsifier and solubilizer /Dispersant / Metal processing oil

DKS REPORT 2021

Main Actions and Applications
Function

Actions and effects

Applications

Emulsifying,dispersing

Mixes
incompatible
substances

Mixes water and oil and makes an emulsion.
Makes a uniform dispersion with fine particles
floating on the water surface.

Ice cream, margarine,
paints, inks

Moistening,permeating

Makes wetting
and permeationeasierSpreads agrochemicals thin and uniform on the leaf
surfaces.
Evenly disperses dyestuff and finishing agents on
textiles and leathers.

Pesticide spraying,permeation ofdyestuff and finishing
agents on textiles

Making,removing foam

Makes and/or
removes foamTakes in air bubbles in water and stabilizes.
Prevents foaming.

Foam concrete, light
gypsum boards

Cleaning

Removes dirt

Moistens the surface between the fabric and the dirt,
then penetrates this interface and strips away thedirt. It also emulsifies and disperses the dirt in orderto remove it.

Householddetergents, bathsoaps, machinery andmetal cleaning agents

Softening,smoothing

Softens andsmooths

Creates soft fabric with gentle feel on the skin.
Improves the smoothness of yarns in the spinning
and/or knitting process.

Textile finishing
agents, metal
processing oils

Antistatic

Prevents static
electricity

Prevents static electricity generation by making thesurfaces smooth. Makes static electricity easier toescape by forming a water-absorptive coating on thesurface.

Antistatic anddustproofing
treatment forsynthetic fibers andplastic products

Rustproofing

Prevents rust

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

Metal surface
treatment

Leveling, fixing

Prevents unevendying, enhances
dye fastness

Makes the dyestuff gradually be absorbed by the
textiles and brings about uniform dyeing.

Textile processing

Sterilizing

Removes bacteria

A positively charged surfactant is absorbed tonegatively charged bacteria, destroys the cells andsterilizes.

Hand sanitizer

Environmental Impact of Surfactants
Most domestic wastewater that contains surfactants iscollected and treated at public sewage treatment plants andreleased to the environment, although some may be released
directly to rivers, oceans, or land.
Because surfactants are biodegradable, even if released
into the environment they eventually degrade to carbon

dioxide and water by bacteria. To preserve the naturalenvironment, products with high biodegradability are being
developed and proactively used in Japan.

DKS REPORT 2021

59

Data

Glossary

Terminology

Description

Absenteeism

A situation in which, due to mental or physical distress, an employee is frequently absent from workor misses work without notice.

Antistatic agent

A compound to prevent the electrification of synthetic fibers and plastics caused by static electricity,
for which a surfactant is mainly used. It is applied to the surface of target materials by spraying andlets static electricity escape.

BCP

An abbreviation for Business Continuity Plan through which, in the event of a disaster or other crisis,companies do not allow critical operations to go offline. Even if business activities are unavoidablyinterrupted, important functions can be restarted within the targeted recovery time, and strategic
preparations for continuing business are carried out in advance to minimize the risks involved ininterrupted operations.

Cash conversion cycle

A term referring to the number of days, from inventory sourcing to sales, that it takes to recovercash.

Cellulose nanofibers

Very thin nano-sized fibers prepared by detangling cellulose, which makes up the cell walls ofplants. The width of the fibers is about 10 nm (nano = one billionth). They are made from woodderived pulp, and when used in plastics and rubbers, they enhance the strength of these materials
while reducing thermal expansion/contraction.

CNF

60

An abbreviation for cellulose nanofibers.
*See “cellulose nanofibers”.

Cocoon unwinding agent

An agent to spin silk yarn from silkworm cocoons.

COD emissions

COD is an abbreviation for Chemical Oxygen Demand. The value indicates the oxygen volume
needed for oxidizing underwater objects and is one of the major indicators used for water quality.

Conductive paste

Paste that conducts electrical current and is used in solar cell panels.

Digital transformation (DX)A response by companies to drastic changes in the business environment by transforming theirproducts, services, and business models through the use of data and digital technologies, based on
the needs of customers and society. The objective is to rethink work tasks, organizations, processes,
and corporate culture and climate in order to secure a competitive advantage.

DuPont model

Also called the DuPont System; a method to analyze return on equity (ROE) by breaking it down tothree categories using the indices below. The name refers to its use by the chemical company
DuPont for financial analysis.
ROE (current net income / capital stock) = Financial leverage × Asset rotation ratio × Sales profit
ratio

Energy consumption per unit

A figure for expressing energy efficiency. It refers to the overall volume of energy consumption, suchas electrical power and fuel, needed to produce a given unit or amount of goods. Generally, it isused as an indicator showing the progress of energy saving measures.

Fair Trade

A trade practice that makes on-going purchases of raw materials and products at fair prices indeveloping countries and aims to improve the lifestyles and independence of producers andlaborers who are in a disadvantaged position in developing countries.

GMP

An abbreviation of Good Manufacturing Practice, which is a set of rules and a system that cover allprocesses from stocking raw materials, to manufacturing and shipping, and ensure consistentquality and safe manufacturing of pharmaceutical products, food products, and the like.

Green transformation (GX)

The concept of transforming the global environment by converting to non-greenhouse gas emitting
green energy, such as renewable energy.

HACCP

An abbreviation for Hazard Analysis Critical Control Point, which is a hygiene approach for ensuring
the safety of food products.

Inspiring/Inspired Partners

Specific business partners of DKS who intuit the needs of end users, collaboratively inspire new
approaches, and provide each other with a mutual spark.

Materiality

A term that refers to how essential something is. Originally, it referred to the general rule ofimportance in the accounting field for items that could have major effects on financial affairs.
Recently, important issues in CSR activities are also identified as “materiality,” and many companies
are using this approach when conducting CSR activities and reporting the results in integrated
reports.

DKS REPORT 2021

Terminology

DescriptionMI

An abbreviation for Materials Informatics, which is a method for using massive volumes of materials
data and AI (deep learning) for the analysis and design of chemical structures and compositions
expected to perform well.

MOT

An abbreviation for Management of Technology, which refers to understanding the company’s
technological capabilities, connecting R&D results to each product/business, and finding economic
value in technology itself.

Organizational Resilience

The capacity, and initiatives related thereto, for adapting to changes in the business environment
and for handling natural disasters.

PPM

An abbreviation for Product Portfolio Management, which is a method for determining investment
and allocation of management resources by plotting businesses and products on a graph whoseaxes are market growth rate and market share.

Presenteeism

The act or state of employees coming to the office and continuing work despite dealing with some
type of disease, disease symptoms, or mental/physical distress.

ResistA protective film, or a substance used to create a protective film, against physical or chemical
processing, mainly in industrial applications.

Responsible Care (RC)
activities

Voluntary control activities by the companies in the chemical industry that promote the safe
handling of materials in every step of the process from manufacturing to distribution, consumption
and disposal. First proposed by the Chemistry Industry Association of Canada in 1985. The Japan
Responsible Care Council was founded in 1995.

Rock hardening agents

Agents used to prevent structural collapse during tunnel construction for bullet trains,expressways, and the like.

ROIC

An abbreviation for Return on Invested Capital, which allows for confirming the extent to whichfunds (invested capital) used for business activities efficiently lead to profit for the company.

RPA

An abbreviation for Robotic Process Automation, which is technology for automating routine tasks
people perform on computers.

RSPO

An abbreviation for Roundtable on Sustainable Palm Oil. Founded in 2004, a group of sevenorganizations, including the WWF, responding to the global increase in voices calling for sustainablepalm oil that takes environmental impacts into account.

SDGs

SDGs is an abbreviation for the Sustainable Development Goals, which are international targets
adopted by world leaders at a summit held at the United Nations in September 2015. The 17
SDGs contain 169 targets for achievement by 2030.

SDS

An abbreviation for Safety Data Sheets. The same materials previously were called Material Safety
Data Sheets (MSDS), however, since April 2012, all have been designated as SDS as used in the
United Nations’ Globally Harmonized System of Classification and Labelling of Chemicals (GHS).

Sharing Economy

A new economic trend and form of service referring to consumers providing or sharing vehicles,
residences, furniture, clothes, and other things, as well as spaces and skills, to people who needthem.

Uni-Top

DKS’s business strategy, which is to “provide unique products that do not pursue scale.”VOC

An abbreviation for Volatile Organic Compounds. VOC is a general term for organic compounds
that are volatile and exist in a gaseous form in the air, and the term encompasses a wide variety ofcompounds such as toluene, xylene and ethyl acetate.

WACC

A popular method for calculating cost of capital that weights and averages the cost of borrowing
and the cost of procuring stock.

Waterborne polyurethane

Polyurethane resin is an overall term for polymer compounds possessing urethane bonds.
Industrially, they result from a polyaddition reaction between polyisocyanates and polyols, andwaterborne polyurethane resin results from the emulsification of this polyurethane resin.

Work engagement

A term that refers to a positive and fulfilling mental state that one has toward one’s work.

DKS REPORT 2021

61

Data

Domestic/Overseas Network
Domestic Network

Ohgata Branch

Headquarters/Laboratory

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

Biococoon Laboratories, Inc.

Gembu Co., Ltd.
Kyoto Elex Co., Ltd.
Tokyo Headquarters
Dai-ichi Kenkou Co., Ltd.

Ikeda Yakusou Co., Ltd.
Nagoya Office
KyushuOfficeK&D Fine Chemical Corporation

Osaka BranchDai-ichi CeramoCo., Ltd.

Yokkaichi Chemical
Company Limited

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

Subsidiary and Affiliated Companies (Japan)
Company name62

Location

Business activities

Yokkaichi Chemical Co., Ltd.

2-1 Miyahigashi-cho, Yokkaichi, Mie 510-0843, Japan
Phone +81-59-345-1161 Fax +81-59-345-1159

Production and sales of surfactants

Gembu Co., Ltd.

5 Ogawara-cho, Kisshoin, Minami-ku, Kyoto 601-8391, Japan
Phone: +81 75 323 5740 Fax: +81 50 3153 1621

Sales of detergents, finishing agents and equipment for
professional laundry
Sales of industrial/professional-use deodorants

Kyoto Elex Co., Ltd.

1 Ogawara-cho, Kisshoin, Minami-ku, Kyoto 601-8391, Japan
Phone +81-75-326-2883 Fax +81-75-326-2884

Production and sales of electronic materials

Dai-ichi Ceramo Co., Ltd.

432 Gokasho Hiyoshi-cho, Higashiomi, Shiga 529-1403, Japan
Phone +81-748-48-5377 Fax +81-748-48-5322

Production and sales of feedstock for powder injection molding

Dai-ichi Kenkou Co., Ltd.

8th Floor, Yaesuguchi Daiei Building, 1-3-1 Kyobashi, Chuo-ku,
Tokyo 104-0031, Japan
Phone +81-3-3275-0583 Fax +81-3-3275-0604

Production and sales of agents for civil engineering andconstruction

Biococoon Laboratories, Inc.

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

Wide-ranging research and development from pharmaceuticals
to health care ingredients
Production of foods as well as health care products

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

Production of drug substances and various ingredients used inhealth foods / Production and sales of life sciences products
including pharmaceuticals and quasi-pharmaceutical products

K&D Fine Chemical Corporation

1 Niihamacho, Chuo-ku, Chiba, Chiba 260-0826, Japan
Phone +81-43-262-2039 Fax +81-43-262-4396

Production and sales of surfactants

DKS REPORT 2021

Overseas Network

Sisterna B.V.
DKS (Shanghai) International
Trading Co., Ltd.

DDFR Corporation Ltd.
Chin Yee Chemical
Industries Co., Ltd.

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

P.T. Dai-ichi Kimia Raya

Operation Bases (World)
Company nameLocation

Business activities

Chin Yee Chemical Industries Co., Ltd.

11F, Lidye Commercial Building, 22 Nanking West Road, Taipei, Taiwan
Phone +886-2-2556-9353 Fax +886-2-2558-6833

Production and sales of surfactants andplastic/electronic materials

Sisterna B.V.

Belder 30A 4704 RK Roosendaal, The Netherlands
Phone:+31-165-524730

Application development and sales ofsucrose esters

P.T. Dai-ichi Kimia Raya

Jl. Maligi II Lot. G-2 Kawasan Industri KIIC, Karawang Barat 41361, Jawa Barat, Indonesia
Phone:+62-21-8904574 Fax:+62-21-8904576

Production and sales of textile agents,
paper processing agents, plastic
additives and sucrose esters

DKS (Shanghai) International Trading
Co., Ltd.

Room #1104, New Town Center Building, 83 Loushanguan Road., Shanghai, P.R.
China
Phone +86-21-6236-8080 Fax +86-21-6236-8700

Trading

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

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

Production and sales of plastic materials

DDFR Corporation Ltd.

25th Floor, One Capital Place, 18 Luard Road, Wanchai, Hong Kong
Phone:+852-2827-7761 Fax:+852-2824-1502

Sales of plastic additives, e.g., flame
retardants

DKS REPORT 2021

63

Data

Financial and Nonfinancial 11-Year Summary
3/20113/20123/20133/2014

51,24556,24951,84354,614

15,131
7,046
8,761
11,441
8,863

18,7797,220
8,634
10,228
11,386

19,486
6,825
8,466
9,666
7,398

20,3597,141
9,564
10,6806,868

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

8,748(17.1)
2,732
2,439
1,155
1,111
1,836
2,010
2,502
(616)
298
0
16,49847,741
14,0988,296(14.7)
2,033
1,742
165
2,312
2,252
2,273
2,309
(2,869)298
0
16,94951,357
15,7007,323(14.1)
1,754
1,544
797
3,664
2,003
2,340
2,477
(3,548)298
018,20055,416
18,7128,103(14.8)
2,477
2,374
1,336
1,512
2,104
2,506
3,553
(1,793)298
019,886
57,57020,680Per-Share Data (yen)2
Net Profit
Net Assets
Cash Dividend

146.90
1,839
35.00

19.35
1,889
35.00

93.40
2,022
35.00

156.602,200
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 (%)

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

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

861
554
221
14.8

995
533
173
14.8

979
526
172
14.8

969
514
170
16.0

6

10

10

8

6

7

11

8

69.0
−
15,774
57.5

66.7−
13,39549.8

62.7
636 (237)
14,42151.9

63.7
660 (245)
12,72452.0

Financial Data (Millions of yen)
Net Sales
Surfactants
Amenity Materials
Polyurethane Materials
Functional Materials
Electronic Device Materials
Life Sciences

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-CarePart-Time Work System (non-consolidated)
Annual Paid Leave Rate
(non-consolidated + assigned employees) (%)
No. of Patents Held (outside Japan)3
Generated Waste Amount (tons)4
CO2 Emissions (consolidated) (thousands of tons)4

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. The carbon dioxide emission calculation method was revised in fiscal 2018 and applied retroactively from fiscal 2016.

64

DKS REPORT 2021

3/2015

3/20163/20173/20183/20193/20203/202155,59752,782

52,25456,95559,57461,456

21,573
6,856
9,442
11,216
6,508

20,7797,208
8,934
11,2594,600

19,793
6,986
9,093
12,517
3,862

21,416
7,502
9,115
14,0704,850

21,957
8,151
9,026
16,2394,199

18,9707,994
8,470
20,848
4,744
427

8,743
(15.7)
2,944
2,717
1,782
3,948
2,153
2,439
2,322
(3,229)474
026,15664,42021,3229,131(17.3)
3,439
3,200
2,198
8,485
2,087
2,380
4,197
(7,687)528
026,74566,05723,2288,794(16.8)
3,944
3,773
2,489
3,786
2,335
2,393
3,750
(3,336)608
1,000
28,044
69,046
24,594

9,929(17.4)
5,053
4,725
3,351
2,467
2,473
2,307
5,017
(1,130)710
131,96073,97623,863

10,139(17.0)
4,341
4,175
2,581
5,802
2,555
2,765
3,236
(5,694)711
033,59175,906
23,466

10,350(16.8)
4,154
3,524
2,014
6,138
2,724
2,748
3,766
(5,842)711
034,26581,73629,94659,14017,303
7,081
7,484
21,077
5,758
435
10,135(17.1)
4,485
4,314
2,563
4,617
3,263
2,821
4,955
(3,804)712
037,40485,03328,529193.452,362
45.00

208.202,425
50.00

237.002,650
60.00

330.302,971
70.00

254.11
3,083
70.00

198.173,115
70.00

251.97
3,405
70.00

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

4.8
7.6
7.7
40.7
0.45
27.8
27.8
3,680
14.6
1.1
1.9

944
508
163
15.9

982
495
219
17.0

967
486
199
17.5

976
497
213
17.5

985
512
170
17.8

1,032
531
177
18.8

1,061
560
178
18.9

11

9

6

12

7

3

7

9

10

13

10

10

12

10

61.0
722 (299)
13,87651.3

64.5
822 (344)
13,19150.9

62.4
855 (378)
17,36451.7

67.4
924 (427)
20,77953.5

68.5
961 (453)
21,65852.4

73.2
1,012 (479)
19,605
53.7

66.1
1,056 (514)
18,431
48.9

DKS REPORT 2021

65

Data

Consolidated Financial Statements
Consolidated Balance Sheets
Assets(Millions of yen)

FY2019FY2020Current assets

FY2019FY2020

11,253

9,404

133

423

7,273

6,698

Current liabilities

Cash and deposits

10,336

11,595

Notes and accounts payable—trade

Notes and accounts receivable—trade

16,08015,413

Electronically recorded monetaryclaims

1,342

1,453

Electronically recorded monetaryclaimsMerchandise and finished goods

9,357

8,928

Lease obligations

236

598

22

22

Accrued expenses

310

302

3,053

4,297

Income taxes payable

702

700

Work in process
Raw materials and supplies
Prepaid expenses

275

278

Other current assets

2,139

2,022

(12)
42,595(13)
43,997

Allowance for doubtful accounts
Total current assets
Non-current assets
Tangible fixed assets

Short-term loans payable

Accrued business office taxes

38

41

Provision for bonuses

746

753

−

375

Provision for waste disposal costs
Other current liabilities

2,948

2,773

Total current liabilities

23,64422,071

Non-current liabilities

28,12730,086

Corporate bonds

6,000

6,000

(16,027)
14,059Long-term loans payable

16,672

15,831

Buildings and structures, net(15,094)
13,032

Lease obligations

529

2,978

Machinery, equipment and vehicles

35,53736,470

Deferred tax liabilities

193

305

Accumulated depreciation(29,533)(30,643)

Net defined benefit liability

111

116

Machinery, equipment andvehicles, net

6,003

5,827

Asset retirement obligations

73

73

3,938

3,990

Other non-current liabilities

246

251

(3,295)642(3,354)635

Total non-current liabilities

23,82625,556

Total liabilities

47,47047,628

9,227

9,273

Net assets

FY2019FY2020

Buildings and structures
Accumulated depreciation

Tools, furniture and fixtures
Accumulated depreciation
Tools, furniture and fixtures, net
Land

1,717

4,645

Leased assets, net(1,046)670(1,442)
3,203

Construction in progress

3,697

1,318

Total tangible fixed assets

33,27434,317

Leased assets
Accumulated depreciation

Intangible fixed assets

Shareholders’ equity
Capital stock

8,895

8,895

Capital surplus

7,250

7,267

Goodwill

675

363

Retained earnings

16,882

18,733

Others455

470

Treasury shares

1,130

833

Total shareholders’ equity(1,051)
31,977(1,040)33,856(537)

484

Foreign currency translation
adjustment

1124

Total intangible fixed assets
Investments and other assets

Accumulated other comprehensive
income

3,465

4,372

Long-term loans receivable1918

Long-term prepaid expenses

257

140

Deferred tax assets

122

195

Net defined benefit assets

608

841

Remeasurements of defined benefit
plans

225

282

Other assets

269

323

(299)

791

(6)
4,737

(6)
5,884

Total accumulated othercomprehensive income

39,141

41,03581,73685,033

Investment securities

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

66

Liabilities

DKS REPORT 2021

Valuation difference on availablefor-sale securities

2,587

2,756

Total net assets

34,26537,404

Total liabilities and net assets

81,73685,033

Non-controlling interests

Consolidated Statements of Income
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
Total non-operating income
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
Extraordinary income
Gain on sales of investment securities
Total extraordinary income
Extraordinary losses
Impairment loss
Provision for waste disposal costs
Loss on disposal of non-current assets
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(Millions of yen)

FY2019FY202061,45645,991
15,46559,14043,961
15,179

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

4,130
6,563
10,693
4,485

6
75
62
24
35
54
258

3
77
57
1
36
70
246

200
3
138
400
146
888
3,524

202
37
−
−
177
418
4,314

−
−

408
408

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

431
385
146
963
3759
1090
(79)
1,010
2,749
185
2,563

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
methodTotal other comprehensive income
Comprehensive income
Comprehensive income attributable to owners of parent
Comprehensive income attributable to non-controlling interests(Millions of yen)

FY2019FY2020

2,350

2,749

(565)
24
(47)

1,021
34
56

(9)

2

(597)
1,752
1,389
363

1,115
3,864
3,655
209

DKS REPORT 2021

67

Data

Consolidated Financial Statements

Consolidated Statements of Cash Flows(Millions of yen)

FY2019FY2020

3,364
2,724
196
400

3,759
3,263
196
−
1
(81)
202
37
−
(57)
146
431

Cash flows from operating activities
Profit before income taxes
Depreciation
Amortization of goodwill
Bad debt loss
Increase (decrease) in allowance for doubtful accounts
Interest and dividend income
Interest expenses
Corporate bond interest
Corporate bond issuance costs
Share of loss (profit) of entities accounted for using equity method
Loss (gain) on disposal of tangible fixed assets
Impairment loss
Loss (gain) on sales of shares of subsidiaries and associates
Decrease (increase) in notes and accounts receivable—trade
Decrease (increase) in inventories
Increase (decrease) in notes and accounts payable—trade
Increase (decrease) in net defined benefit liability
Increase (decrease) in provision for waste disposal costs
Other cash flows from operating activities
SubtotalInterest and dividend income received
Interest expenses paid
Income taxes paid
Net cash provided by (used in) operating activities

(2)
(81)
200
3
138
(62)
160
−
−
462
(467)
(1,546)
(66)
−
(554)
4,866
95
(200)
(994)
3,766

(408)
560
(770)
(1,557)
(247)
385
168
6,030
137
(240)
(972)
4,955

Cash flows from investing activities
Payments into time deposits
Proceeds from withdrawal of time deposits
Purchase of tangible fixed assets
Purchase of investment securities
Proceeds from sales of investment securities
Payments for loans receivableCollection of loans receivable
Proceeds from subsidy income
Other cash flows from investing activities
Net cash provided by (used in) investing activities

(210)
204
(5,538)
(32)
−
(153)
1
70
(183)
(5,842)(117)
263(4,398)
(502)
1,027
−
1
19
(98)
(3,804)

(245)
6,000
(5,289)
5,861
32
(303)
(0)
(1,067)
(42)
4,946
(21)
2,847
7,278
10,126(75)
5,908(7,266)
−
2,918
(477)
−
(712)
(40)
255
(0)
1,405
10,126
11,531

Cash flows from financing activities
Net increase (decrease) in short-term loans payable
Proceeds from long-term loans payable
Repayments of long-term loans payable
Income from issuance of corporate bonds
Revenue from sale and leaseback
Repayments of lease obligations
Purchase of treasury shares
Cash dividends paid
Dividends paid to non-controlling interests
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period

68

DKS REPORT 2021

Data

Environmental Data
Evolution of Environmental Impact
Changes in Energy Consumption

Changes in CO2 Emissions(Yokkaichi, Ohgata, Shiga, administrative sectors, domestic subsidiaries, derived from non-energy)
炭酸ガス排出量(Yokkaichi, Ohgata, Shiga, administrative sectors, domestic subsidiaries)
エネルギー使用量(1,000 KL)(1,000 t)

40

120
95.7

93.7

92.3

30

26.2

25.2

100.0

60

99.5

51.7

53.5

52.4

53.7

2017

2018

2019

48.9

90
26.6

25.9

40

24.6

20

60

10

30

20

0

0

2016

2017

2018

2019

2020

0

2016

(FY)

2020

(FY)

 Energy consumption (left axis)
Index of energy consumption per unit (right axis)
Notes: 1. T he index of energy consumption per unit is calculated for DKS non-consolidated,based on the periodical report stipulated by the Act on the Rational Use of Energy(fiscal 2019 performance—which is the benchmark in the Medium-Term Environmental
Targets (FY2020–24)—is set at 100).
2. S ubsidiary companies include Yokkaichi Chemical Co., Ltd., Kyoto Elex Co., Ltd., Daiichi Ceramo Co., Ltd., and as of fiscal 2019, Ikeda Yakusou Co., Ltd.

 hanges in Generated Waste Amount, External Recycling
C
Amount and External Recycling Rate

(Yokkaichi, Ohgata, Shiga, Kyoto, domestic subsidiaries)
廃棄物発生量、外部リサイクル量、外部リサイクル化率の推移(t)30,00096.2

96.9

24,00091.6

91.8

18,00017,364
15,907

96.7

(t)
1,600

90.5
80
91.1
88.9
21,658
20,77919,591 19,605
18,431
19,063
17,423
16,788 60
40

6,000

20
0

0

2017

2018

2019

2020

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

最終処分量・最終処分率の推移

100

12,0002016

Changes in Final Disposal Amount and Final Disposal Rate

(%)

97.8

94.9

Notes: 1. The administrative sector includes fuel for Company-owned vehicles.
2. S ubsidiary companies include Yokkaichi Chemical Co., Ltd., Kyoto Elex Co., Ltd., Daiichi Ceramo Co., Ltd., and as of fiscal 2019, Ikeda Yakusou Co., Ltd.

1,145
1,023

Changes in SOx, NOx and Dust Emissions

1.5

0

2016

2017

5,000
4,000

20.7

0.7

2.0

0.8

0.7

0.6

15.4

50

0.8

1.0

0.8

2018

2019

2020

3,000
26.3

4,177

40

3,952

3,496
30

27.3

2,000

19.1

20.7

(FY)

 NOx emissions (left axis)
 SOx emissions (right axis)    Dust emissions (right axis)

20
10

1,000

0.5
0

2017

3,908

25.9

0

2016

(FY)

(t)

4,424

0.8

2020

2019

(Yokkaichi, Ohgata, Shiga, Yokkaichi Chemical Co. Ltd.)
排水量、COD排出量の推移

3.0

13.9

2018

Notes: 1. T he final disposal rate is the ratio of the final disposal amount to the generated waste
amount.
2. S
 ubsidiary companies include Yokkaichi Chemical Co., Ltd., Kyoto Elex Co., Ltd., Daiichi Ceramo Co., Ltd., and as of fiscal 2019, Ikeda Yakusou Co., Ltd.

30

10.3

3.0

0

(1,000 m3 )

1.4

767

400

(t)

1.3

4.5

972

800

(t)

10

4.2

Changes in Water Discharge and COD Emission Amounts(Yokkaichi, Ohgata, Shiga)
SOｘ排出量、NOx排出量、ばいじん排出量の推移

17.6

1,044

5.0

 Final disposal amount (left axis)
Final disposal rate (right axis)

Note: S ubsidiary companies include Yokkaichi Chemical Co., Ltd., Kyoto Elex Co., Ltd., Dai-ichi
Ceramo Co., Ltd., and as of fiscal 2019, Ikeda Yakusou Co., Ltd.

20

6.0

5.5
4.8

1,200

(FY)

 Generated waste amount (left axis)
 External recycling amount (left axis)
External recycling rate (DKS
DKS Group) (right axis)

(%)
5.9

0

0

2016

2017

2018

2019

2020

(FY)

 Water discharge (left axis)    COD emissions (right axis)

Note: Yokkaichi Chemical Co. Ltd. possesses no facilities that generate SOx, NOx or dust.

DKS REPORT 2021

69

Data

Environmental Data/Compliance Awareness Survey Results

Evolution of Environmental Impact
 hanges in Emissions of PRTR Regulation-DesignatedC
Substances(DKS, Yokkaichi Chemical Co. Ltd.)PRTR制度対象化学物質排出量の推移

(t)

(t)

80

8.0

74.5
60.6

60.4

60

6.0

47.8

47.6
40

4.0

20

2.0
0.59

0.55

0.54

0

2016

2017

2018

 Emissions to air (left axis)

0.45

0.57

2019

2020

0
(FY)

 Emissions to water (right axis)

Note: The numerical values show the total amount for DKS and Yokkaichi Chemical Co. Ltd.
For the emission and transfer amount of notification substances under the PRTR Regulationin fiscal 2020 (among all notification coverage substances, those of which the emission ortransfer amount was 0.01 tons or more), please visit our website.
https://www.dks-web.co.jp/english/ir/report/index.html

Environment AccountingInvestments and Costs of Environmental Protection
Activities conomic Effects Generated by Environmental ProtectionE
MeasuresMain activities

Investment(Millions of yen)

Costs
(Millions of yen)

Pollution prevention, air pollution control,
water pollution prevention

57.8

257.2

Global environment preservation, energy
saving6.9

81.6

Resource recycling, resource saving,waste treatment/disposal

0.0

547.9

Upstream/
downstream cost

Lowering the environmental impact incontainers/packaging

0.0

0.5

Administrative cost

ISO acquisition/maintenance, greening of
branch premises

1.1

38.1

R&D cost

Environmentally responsive R&D

0.0

577.5

Social activity cost

Providing support grants for environmental
protection to environmental preservationgroups or local communities

0.2

1.1

Environmental
damage cost

0.0

0.0

Total

66.0

1,503.9

Category

Costs within theplant premises

Main activities

Economic effects(Millions of yen)

Sale of valuables

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

3.0

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

Category

3.4

Total

Compliance Awareness Survey Results
Fiscal 2019
2019

18%

7%

14%

23%

36%

2%

Fiscal 2020
2020

14%

4%

14%

25%

42%

1%

 Information management/intellectual property rights    Anti-monopoly act/Subcontract act
 Environmental protection    Harassment    Workplace environment/working from home    Other
Note: These results indicate responses regarding areas in which further compliance awareness activities are desired.

70

DKS REPORT 2021

Corporate Data (As of March 31, 2021)

Corporate NameDKS Co. Ltd.

Foundation

April 1909

Incorporation

August 1918

Paid-in Capital

8,895 million yen

Number of Employees

560 (consolidated: 1,061)

Total Number of Shares
Outstanding

10,684,321 shares

Share Unit Number

100 shares

Number of Shareholders

3,758

Stock Listing

Tokyo Stock Exchange

Securities Code

4461

General Meeting of
Shareholders

Every year in late June

Shareholder Registry
Administrator

Mizuho Trust & Banking Co., Ltd.

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, JapanTokyo
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

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 Nagono, 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

Please refer to the website for a list of major shareholders and the distribution of shareholders (in Japanese only).

https://www.dks-web.co.jp/ir/stockholders/index.html

On Publishing the DKS Report 2021
This issue marks the sixth time that the DKS Group has
published its integrated annual report since the initial reportin fiscal year 2016. This is an important report that explains
the value creation of DKS to all of our stakeholders, and its
objective is to take a medium- to long-term perspective whileproviding accessible explanations of our current condition
and growth strategies for the future.
As the first year of our medium-term management plan
FELIZ 115, 2020 was a year for us to verify the suitability of ourinitiatives. We solidified our footing to face down theeconomic shock of COVID-19. We also reshuffled personnel
to match our new R&D structure. “Feliz” means “happy” inSpanish. FELIZ 115 expresses our wish to support humanhappiness through chemistry. We discovered Naturido, a new,useful component that demonstrates possibilities for
improving brain function from medical fungus (Isaria
Japonica). A paper related to this research was published in a
U.S. interdisciplinary journal on January 27, 2021. As weestablish the life sciences business, we will focus on brandstrategies deserving of the Company name.

The notion of value covered in this integrated report refers
to something created in relationship with stakeholders. We
have charted a path as value creators leveraging a strategic
perspective focused on the future. As the CEO, I would liketo put my name behind the veracity and appropriateness ofthe content of this report. Going forward, we will strive tofurther improve our Company’s disclosure and transparency. I
would be grateful to hear your frank and constructive
feedback.

September 2021
Chairman CEO

SAKAMOTO Takashi

Editor’s Note
The Company’s integrated annual report is now in its sixth issue and this year marks the second year of our medium-term
management plan FELIZ 115.
Amid the increasing severity of spreading COVID-19 infections, we have tried in various ways to explain to stakeholders the
DKS value creation story based on our Uni-Top strategy, which strives for unique products that do not pursue scale. With theprolonged duration of the COVID-19 pandemic, we also rethought the identification of important risks, opportunities, andmateriality in order to ensure value creation. For the first time, we have included a close-up
look at R&D, which is positioned as a critical priority for DKS. Through an interview with the
CTO, we strove to elucidate the Company’s technological capabilities and strategies.
We also sought to cooperate with the production company to improve the report’s
appearance and structure, showcasing the content in a more enhanced way. It is our hopethat this integrated report will serve to deepen dialogue with our stakeholders.
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 2021

71

DKS Co. Ltd.
5 Ogawara-cho, Kisshoin, Minami-ku, Kyoto 601-8391, Japan
TEL: +81-75-323-5911 FAX: +81-75-326-7356
https://www.dks-web.co.jp/english/
Published: December 2021
Printed in Japan