COMPANY RESEARCH AND ANALYSIS REPORT

SAKATA INX CORPORATION
4633
Tokyo Stock Exchange First Section

13-Nov.-2019
FISCO Ltd. Analyst

Masanobu Mizuta

FISCO Ltd.
http://www.fisco.co.jp

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

SAKATA INX CORPORATION
4633 Tokyo Stock Exchange First Section

13-Nov.-2019
http://www.inx.co.jp/english/■ Index■Summary---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 01
1. Global business deployment with printing ink business as the core business. ............................................
2. In FY2019/12 1H, operating income and ordinary income increased and exceeded the forecasts. .............

01
01

3. For the FY2019/12 full year, the profit forecasts have been upwardly revised to forecasts of major
increases in profits.. .....................................................................................................................................

02

4. Is strengthening measures for ESG, while growth is expected in the medium term from the increasein sales of environmentally friendly and high-function products. .................................................................

02

5. Aims for a consolidated dividend payout ratio of 20% to 30%.
Offers a shareholder benefit program to shareholders at the end of December in each year.......................

02■Company profile---------------------------------------------------------------------------------------------------------------------------------------------------------- 03
1. Company profile.. ................................... ......................................................................................................
2. History................................................... ......................................................................................................
3. Global deployment. . .....................................................................................................................................

03
04
06

■Business overview---------------------------------------------------------------------------------------------------------------------------------------------------- 06
1. Is focusing on packaging printing ink. . ... ......................................................................................................
2. Percentages of net sales and operating income by segment. ......................................................................
3. Strengths............................................... ......................................................................................................

06
07
08

4. Products being environmentally friendly and high-function,
high-value-added that have plenty of room for expansion and development. .............................................
5. Risk factors and measures. . .........................................................................................................................

09
09■Results trends--------------------------------------------------------------------------------------------------------------------------------------------------------------- 10
1. FY2019/12 1H results ........................... ......................................................................................................
2. Trends by segment.. .....................................................................................................................................
3. Financial position.........................................................................................................................................

10
12
13

■Business Outlook------------------------------------------------------------------------------------------------------------------------------------------------------- 15
1. FY2019/12 full year outlook................... ......................................................................................................
2. Forecasts for each segment. . ................. ......................................................................................................

15
16■Medium and long-term growth strategy---------------------------------------------------------------------------------------------- 18
1. Demand is shifting to environmentally friendly products. .............................................................................
2. The medium-term business plan 2020.........................................................................................................
3. Targets and priority measures by segment...................................................................................................
4. Strengthening production capacity by capital investment............................................................................
5. Measures for ESG, and expanding sales of environmentally friendly and high-function products. ..............

18
19
20
20
21

■Shareholder return policy---------------------------------------------------------------------------------------------------------------------------------- 23

We encourage readers to review our complete legal statement on “Disclaimer” page.

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

SAKATA INX CORPORATION
4633 Tokyo Stock Exchange First Section

13-Nov.-2019
http://www.inx.co.jp/english/██SummaryIs accelerating growth through active investment, strengthening
measures for ESG, and expanding earnings by increasing sales ofenvironmentally friendly and high-function products
SAKATA INX CORPORATION <4633> (hereinafter also “the Company”) is a major printing ink manufacturer - thethird largest in the world. Since its founding in 1896, the Company has accumulated a versatile set of strengths forover 120 years, including its development capabilities for products that are environmentally friendly and high-function
with high added value, an extensive lineup of those products, high market shares, and high reliability and qualityof its products. Moreover, it is applying and developing core technologies it has cultivated in the development andproduction of ink for its digital & specialty products business. We can expect earnings to expand in the medium term
as it accelerates its global business deployment and increases sales of environmentally friendly and high-function,
high-value-added products.
1. Global business deployment with printing ink business as the core business
The Company is globally deploying its businesses from manufacturing and sales bases in 18 countries and regionsin Japan and overseas, with a focus on packaging printing ink (flexo ink for printing on paper packaging, such as
corrugated boards and containers; gravure ink for printing on packaging film for food, cosmetics and toiletries, daily
goods, and other products; and metal-deco ink for printing on metal cans, such as beverage cans). As it accelerates
global development and expands sales for environmentally friendly high-function, high value-added products, theCompany is growing its business with its primary sources of revenue focused in Asia and North America, which haveconsiderable room for market expansion and development, as well as in functional materials.
2. In FY2019/12 1H, operating income and ordinary income increased and exceeded the forecasts
In the FY2019/12 1H (January to June) consolidated results, net sales increased 5.4% year-on-year (YoY) to¥83,167mn, operating income rose 13.9% to ¥3,051mn, ordinary income grew 5.0% to ¥3,718mn, and profit
attributable to owners of parent decreased 8.5% to ¥2,386mn. There were contributions from the effects of theincrease in sales volume of packaging ink, mainly in Asia and the Americas, the effects of sales price revisions,and the effects of new consolidations (the Thai and Brazil subsidiaries), and also as in the overseas market, therises in the prices of raw materials were less than expected. Compared to the initial forecasts, each profit item wassignificantly above forecast, and operating income and ordinary income, which had been forecast to decline, bothrecovered and increased.

We encourage readers to review our complete legal statement on “Disclaimer” page.

01 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

SAKATA INX CORPORATION
4633 Tokyo Stock Exchange First Section

13-Nov.-2019
http://www.inx.co.jp/english/

Summary

3. For the FY2019/12 full year, the profit forecasts have been upwardly revised to forecasts of major
increases in profits
The FY2019/12 full year consolidated results forecasts (on August 9, 2019, the Company downwardly revised
the net sales forecast and upwardly revised each profit item forecast) are that net sales will increase 4.9% YoY to¥170,000mn, operating income will rise 33.0% to 6,800mn, ordinary income will grow 18.7% to ¥8,200mn, andprofit attributable to owners of parent will increase 11.9% to ¥5,250mn. Sales and profits are forecast to increasesignificantly due to factors including the effects of the increase in sales volume, the effects of sales price revisions, theeffects of the improvement to the product mix, the effects of the new consolidations, the effects of cost reductions,and the effects of the rises in the prices raw materials settling down. Compared to the initial forecasts, each profit
item is expected to be significantly above forecast due to the effects of the improvement to the product mix andalso as the rises in the prices of raw materials have been less than expected. Looking at operating income by fiscal
half, it bottomed-out in the 2H of FY2018/12 and is now recovering.
4. Is strengthening measures for ESG, while growth is expected in the medium term from the increase insales of environmentally friendly and high-function products
The growth strategies set out in the Mid-term Plan 2020 are to expand the printing ink business, which is acore business, and the digital & specialty products business, and to promote the creation of new businesses
through applying and developing the technologies cultivated in the core businesses. In addition, the Company isstrengthening measures for ESG (Environment, Society, Governance) and SDGs (Sustainable Development Target),and it is also developing and working to increase sales of new products that contribute to protecting the global
environment, such as the Botanical Ink series that includes plant-derived components, UV and EB curable inks
that contribute to keeping-down emissions of greenhouses gases, and the Eco Stage series of gas barrier agents
toward reducing food loss. The Company’s strengths include its track record of global development ahead of its
industry peers, its expertise in introducing products tailored to regional characteristics in various countries, andits development, lineup, and high market shares of environmentally friendly and high-function, high-value-added
products. It is expected to grow earnings in the medium term by accelerating global business development andincreasing sales of environmentally friendly and high-function products.
5. Aims for a consolidated dividend payout ratio of 20% to 30%. Offers a shareholder benefit program toshareholders at the end of December in each year.
The Company aims for a consolidated dividend payout ratio in the range of around 20% to 30%. Based on this basic
policy, the forecast for FY2019/12 is the same as for FY2018/12, with an annual dividend per share of ¥30 (¥15 at
the end of first half, ¥15 at the end of the period). Forecasted dividend payout ratio is 33.3%. The Company alsooffers a shareholder benefit program to shareholders who own one trading unit (100 shares) or more of shares asof December 31 every year. On December 31, 2018, the Company changed the shareholder benefit program frombeing based on shareholding to being based on the holding period.
Key Points
Is focusing on packaging printing ink, as the third largest printing ink manufacturer in the world
For the FY2019/12 full year, the profits forecasts have been upwardly revised to forecasts of major increases in
profits• Is accelerating global business development, and earnings are expected to grow in the medium-term from theincrease in sales of environmentally friendly and high-function products••

We encourage readers to review our complete legal statement on “Disclaimer” page.

02 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

SAKATA INX CORPORATION
4633 Tokyo Stock Exchange First Section

13-Nov.-2019
http://www.inx.co.jp/english/

Summary

R esult trend(¥mn)

Net sales (left)(¥mn)

Operating income (right)

180,000

12,000
10,119150,000
7,953

10,000

8,573

8,534

120,000

6,800
5,112

90,000146,569
60,000136,581

151,198

8,000
6,000

157,302
162,056

170,000

30,000

4,000
2,000

0

0
FY3/15

FY12/15

FY12/16

FY12/17

FY12/18

FY12/19 E

Note: FY2015/12 (9 months)
Source: Prepared by FISCO from the Company’s financial results██Company profile
The third largest printing ink manufacturer in the world, boasting ahistory of over 120 years
1. Company profile
The Company has a history of more than 120 years since it was founded in 1896. It is the third largest printing ink
manufacturer in the world. With the printing ink business as its core business, its strengths lie in the development
capabilities, extensive lineup and high market share for environmentally friendly and high-function, high-value-added
products that it has cultivated over its 120-year history and high reliability and quality of its products. Furthermore,
toward realizing its business theme of “Creation of Visual Communication Technology,” the Company is applying anddeveloping basic technologies that have been cultivated in the development and production of inks for its digital &specialty products business, which the Company is aiming to bring up as a new business pillar.

We encourage readers to review our complete legal statement on “Disclaimer” page.

03 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

SAKATA INX CORPORATION
4633 Tokyo Stock Exchange First Section

13-Nov.-2019
http://www.inx.co.jp/english/

Company profile

The global top 10 in ink sales (2018)(US$mn)Rank

CompanyCountry

Net sales

Japan

4,850

Luxembourg

2,400

SAKATA INX CORPORATION

Japan

1,375

4

Toyo Ink SC Holdings Co., Ltd.

Japan

1,370

5

Siegwerk Group

Germany

1,080

6

Huber Group

Germany

890

7

T&K TOKA CO., LTD.

Japan

450

8

Tokyo Printing Ink Mfg. Co., Ltd.

Japan

402

9

Fujifilm North America

U.S.A

400

10

SICPA

Switzerland

375

1

DIC/Sun Chemical

2

Flint Group

3

Source: Prepared by FISCO from "The 2018 Top International Ink Companies Report"(August 2, 2019) by INK WORLD

2. History
Founded in 1896 in Osaka City as a small business under the name of SAKATA INK SEIZOUSHO, the Company
started manufacturing and selling newspaper ink. In 1911, it successfully industrialized the production of varnish
for printing ink using linseed oil for the first time in Japan.
In 1920, it was incorporated as a limited company. In 1961, the Company listed its shares on the Second Section of
the Osaka Securities Exchange. In 1962, it was reassigned to the First Section of the Osaka Securities Exchange.
In 1987, it changed its corporate name to SAKATA INX CORPORATION. In 1988, it listed its shares on the First
Section of the Tokyo Stock Exchange, and in November 2016, it celebrated the 120th anniversary of its founding.
In 1960, the Company established its first overseas office in the Philippines (Manila), followed by a succession ofmajor overseas offices and subsidiaries.
In January 2017, the Company also received certification as “a leading company in Osaka City for empowering
women.” The Company also received the TPM Advanced Special Award for its four main domestic plants (in Tokyo,
Osaka, Shiga, and Hanyu) in December 2017. TPM (Total Productive Maintenance) is advocated by the Japan
Institute of Plant Maintenance, and it has highly evaluated the Company for its construction of innovative production
methods and its business deployment overseas. Also, its thesis on “Improving the equipment guarantee level” wasawarded the second prize in the TPM Excellent Paper Awards, Production Category.
HistoryYear

Main Event

1896

Founded (under the name SAKATA INK SEIZOUSHO) as a private company in Osaka City, and started manufacture and sales ofprinting ink for newspapers

1906

Name changed to SAKATA SHOKAI

1911

Successfully industrialized the production of varnish for printing ink using linseed oil for the first time in Japan

1920

Changed to limited company

1947

Established SAKATA SANGYO, LIMITED by spinning off the industrial chemicals division into an independent company

1953

Upgraded Nagoya Office to Nagoya Branch

1959

Constructed and commenced operation of Itami Plant (now Osaka Plant) in Itami City, Hyogo Prefecture

1960

Opened an overseas office in the Philippines (Manila) (a succession of major overseas offices and subsidiaries were establishedthereafter)

1961

Listed on the Second Section of the Osaka Securities Exchange

1962

Reassigned to the First Section of the Osaka Securities Exchange

1969

Constructed and commenced operation of Noda Plant (now Tokyo Plant) in Noda City, Chiba Prefecture

1975

Established SAKATA KIKI SEIBI KOGYO CO., LTD. (now SAKATA INX ENG. CO., LTD.)We encourage readers to review our complete legal statement on “Disclaimer” page.

04 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

SAKATA INX CORPORATION
4633 Tokyo Stock Exchange First Section

13-Nov.-2019
http://www.inx.co.jp/english/

Company profile

Year

Main Event

1982

Established SAKATA GENZOUSHO CO., LTD. (now SAKATA LABOSTATION CO., LTD.)1987

Established SAKATA INX ESPANA, S.A. in Spain
Corporate name changed to SAKATA INX CORP.

1988

INX INTERNATIONAL INC. (now THE INX GROUP LTD.) established in the U.S. A. as a holding company
Acquired ACME PRINTING INK CO. in the U.S.A.
Listed on the First Section of the Tokyo Stock Exchange

1989

Established PT. SAKATA INX INDONESIA as a joint venture in Indonesia that manufactures and sells printing ink
Acquired MIDLAND COLOR CO. in the U.S.A.
Acquired CHEMICAL PROCESS SUPPLY in the U.S.A.

1992

Consolidated ACME PRINTING INK CO. and MIDLAND COLOR CO. in the U.S.A. under the name of INX INTERNATIONAL INK CO.
Established SAKATA INX INTERNATIONAL CORP. (now SIIX CORPORATION), and transferred businesses related to international
trading of electronic components and other products to the Company
Established THE INX GROUP (UK) LTD. that manufactures and sells printing ink (now INX INTERNATIONAL UK LTD.) in the U.K

1993

Established MEGA FIRST SAKATA INX (now SAKATA INX (MALAYSIA) SDN. BHD) in Malaysia

1994

Constructed and commenced operation of Hanyu Plant in Hanyu City, Saitama Prefecture
Renamed Tokyo Branch to Tokyo Head Office, and instituted a dual Osaka and Tokyo Head Office system

1995

Established MONTARI SAKATA INX LTD. (now SAKATA INX (INDIA) PRIVATE LTD.) in India

1996

Acquired ISO9001 certification at Tokyo Plant (Osaka Plant and Hanyu Plant later acquired certification)

1997

Completed construction of the Technology Building at Osaka Plant

1999

Agreed to strategic alliance with TOYO INK MFG. CO., LTD. (now Toyo Ink SC Holdings Co., Ltd. <4634>)

2000

Established the 50-50 joint venture company LOGI CO-NET CORP. with TOYO INK MFG. CO., LTD. (now Toyo Ink SC Holdings Co.,Ltd.)
Agreed to a capital alliance with TOYO INK MFG. CO., LTD. (now Toyo Ink SC Holdings Co., Ltd.)
Established the 50-50 joint venture company ga city Corp. with TOYO INK MFG. CO., LTD. (now Toyo Ink SC Holdings Co., Ltd.)

2001

Acquired ISO14001 certification at the three main plants (Tokyo, Osaka and Hanyu)
Established SAKATA LABOSTATION CO., LTD. and transferred photography-related businesses to the company

2002

Established ETERNAL SAKATA INX CO., LTD. in Thailand
Established SAKATA INX SHANGHAI CO., LTD. in China (Shanghai)

2003

Established SAKATA INX ENG. CO., LTD. and transferred color management businesses to the company
Completed construction of the Technology and Laboratory Building at Osaka Plant
Established SAKATA INX VIETNAM CO., LTD. in Vietnam

2004

Established a holding company INX EUROPE LTD. in the U.K.
Established INX INTERNATIONAL FRANCE SAS in France
Established MAOMING SAKATA INX CO., LTD. in China (Guangdong Province)
The three main plants (Tokyo, Osaka and Hanyu) earned the Award for TPM Excellence, Category 1, in the 2004 TPM ExcellenceAwards

2005

Established TRIANGLE DIGITAL INX CO. in the U.S.A. (Name changed to INX DIGITAL INTERNATIONAL CO. in 2009)2008

Acquired MEGAINK DIGITAL A.S. in Czech (now INX DIGITAL CZECH, A.S.)
Acquired ANTEPRIMA S.R.L. in Italy (now INX DIGITAL ITALY S.R.L.)
Acquired OSHMS certification at Tokyo Plant (including Hanyu Plant)

2009

Acquired OSHMS certification at Osaka Plant

2010

The three main plants (Tokyo, Osaka and Hanyu) earned the Award for Excellence in Consistent TPM Commitment in the 2010 TPM
Excellence Awards

2012

The three main plants (Tokyo, Osaka and Hanyu) earned the Award for TPM Achievement in the 2012 TPM Excellence Awards

2013

INX DIGITAL INTERNATIONAL CO. merged into INX INTERNATIONAL INK CO.

2014

Commenced operation at Shiga Plant in Maibara City, Shiga Prefecture

2015

Changed fiscal year-end from March to December
Acquired ISO9001 and ISO14001 certification at Shiga Plant

2016

Celebrated the120th founding anniversary
Acquired CREATIVE INDUSTRIA E COMERCIO. in Brazil as the first production base in South America
Acquired OSHMS certification at Shiga Plant

2017

Received the certification as a leading company in Osaka City for empowering women
Further promotion of business and capital alliance with Toyo Ink SC Holdings
Earned the TPM Advanced Special Award for its four main domestic plants (in Tokyo, Osaka, Shiga, and Hanyu)

2019

The plant in China (Maoming City, Guangdong Province) was certified as a “clean production-certified company.”Completed the expansion of the R&D facility (West Chicago, Illinois) in the United States
Completed the second plant in Ho Chi Minh City, Vietnam

Source: Prepared by FISCO from Company materials

We encourage readers to review our complete legal statement on “Disclaimer” page.

05 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

SAKATA INX CORPORATION
4633 Tokyo Stock Exchange First Section

13-Nov.-2019
http://www.inx.co.jp/english/

Company profile

3. Global deployment
The Company’s core business is printing ink business, in which it manufactures and sells ink for paper media(newspaper ink and offset ink) and packaging ink (flexo ink, gravure ink, and metal-deco ink), and it is developing
its printing-related materials business, its functional materials business, and other businesses.
As of the end of FY2018/12 2Q accumulated, the SAKATA INX Group consisted of SAKATA INX CORPORATION,
23 consolidated subsidiaries, 6 equity method affiliates, and 3 non-consolidated subsidiaries. The Company isdeploying its businesses from manufacturing and sales bases in 18 countries and regions in Japan and overseas.
In FY2019/12, ETERNAL SAKATA INX CO., LTD. (ETERNAL) in Thailand and CREATIVE INDUSTRIA E COMERCIO
LTDA. (CREATIVE) in Brazil entered the scope of consolidation. SIIX Corporation <7613> which is an importer andexporter of electronic components and conducts an EMS business, was spun-off from the Company and is anequity-method affiliate.

██Business overview
In the core printing ink business, its strength is environmentallyfriendly and high-function, high-value-added products
1. Is focusing on packaging printing ink
In the printing ink business, the SAKATA INX Group focuses primarily on packaging ink (flexo ink for printing on
paper packaging, such as corrugated cardboard, gravure ink for printing on packaging film for food, cosmetics, andtoiletries, and metal deco ink for printing on metal cans, such as beverage cans) for each market in Japan, Asia,
North America, and Europe. The percentage of total sales provided by printing ink for paper media (newspaper ink
used for printing newspapers and offset ink used for a variety of commercial printing applications, such as books,
magazines, catalogues, posters, brochures, vouchers, etc.) is declining and its impact on results as a whole has
become smaller.
In the graphic arts materials business, the SAKATA INX Group procures and sells plate making materials and related
equipment, mainly in the Japanese market. Products include computer-to-plate (CTP) setters, CTP plates, inkjet
proofers, inkjet proof paper, editing software, color management systems and ink dispensers.
In the digital & specialty products business, the Company manufactures and sells digital printing materials (industrial
inkjet ink used for large output items and textiles, and color toner and monochrome toner used for laser printersand multifunction printers), image display materials (pigment dispersions for color filters), and functional coating
materials for the Japanese, Asian, North American and European markets.
In the other businesses, the SAKATA INX Group primarily conducts chemicals business (SAKATA SANGYO, LIMITED),a display service business (SAKATA LABOSTATION CO., LTD.) and a color management business (SAKATA INX
ENG. CO., LTD.) mainly in the Japanese market.

We encourage readers to review our complete legal statement on “Disclaimer” page.

06 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

SAKATA INX CORPORATION
4633 Tokyo Stock Exchange First Section

13-Nov.-2019
http://www.inx.co.jp/english/

Business overview

In the core printing ink business and the digital & specialty products business, the Company is aiming to increases
sales by accelerating global business deployment, pursuing a strategy of providing products tailored to the local
characteristics in each region, and realizing higher sales volume through expansion in sales of environmentally friendly
and high-function, high-value-added products.

Asia and North America, and digital & specialty products are
growing to be pillars of earnings
2. Percentages of net sales and operating income by segment
In its consolidated accounts, the SAKATA INX Group has adopted the following reportable segments: printing inks
and graphic arts materials (Japan), printing inks (Asia), printing inks (North America), printing inks (Europe), digital& specialty products and other businesses. From FY2019/12, the former printing ink (North America) was changed
to printing ink (Americas) after CREATIVE of Brazil entered the scope of consolidation.
Trends in the percentages of net sales andoperating income by segment before consolidated adjustments(%)
FY2017/12

FY2018/12

FY2019/12

Printing inks and graphic arts materials (Japan)

33.4

32.3

29.5

Printing inks (Asia)

18.4

18.9

20.0

Printing inks (North America)

26.4

26.5

27.9

Printing inks (Europe)

5.3

5.5

5.7

Digital & Specialty Products

6.9

7.2

7.3

Other businesses

9.6

9.6

9.6

100.0

100.0

100.0

Printing inks and graphic arts materials (Japan)

28.4

25.2

9.9

Printing inks (Asia)

29.5

34.2

42.2

Printing inks (North America)

23.0

22.2

34.6

Printing inks (Europe)

0.3

-17.7

-13.8

Digital & Specialty Products

14.3

27.4

19.4

Other businesses

4.4

8.7

7.6

100.0

100.0

100.0

Net sales

Totals before consolidated adjustments
Operating income

Totals before consolidated adjustments

Note: Printing ink (North America) was changed to printing ink (Americas) from FY2019/12
Source: Prepared by FISCO from the Company’s financial results

The percentages of operating income by segment (before consolidated adjustments) in FY2018/12 were as follows;
printing inks and graphic arts materials (Japan) contributed 25.2%, printing inks (Asia) 34.2%, printing inks (North
America) 22.2%, printing inks (Europe) -17.7%, digital & specialty products 27.4%, and other businesses 8.7%.
The Company is achieving growth by accelerating its global business deployment and increasing sales of environmentally friendly and high-function, high-value-added products, with Asia and North America, where there remains
considerable room for market expansion and development, serving as the primary sources of revenue. Moreover,in FY2019/12 1H, printing ink (Asia) provided 42.2% and printing ink (Americas) 34.6%, so the percentages from
Asia and the Americas are rising even further. Printing ink (Europe) is currently undergoing a production-system
restructuring.

We encourage readers to review our complete legal statement on “Disclaimer” page.

07 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

SAKATA INX CORPORATION
4633 Tokyo Stock Exchange First Section

13-Nov.-2019
http://www.inx.co.jp/english/

Business overview

Strengths include its environmentally friendly and high-function,
high-value-added products, and it has acquired high market shares
3. Strengths
The Company’s strengths lie in the development capabilities and extensive lineup of environmentally friendly productsthat it has amassed over a 120-year history since it was founded in 1896 and the reliability and quality of its products.
The Company’s abundant lineup of environmentally friendly and high-function, high-value-added products include
vegetable oil ink, which replaces high-boiling-point petroleum solvent with various types of vegetables oils (including soybean oil); non-VOC ink, which contains less than 1% of high-boiling-point petroleum solvent among its
constituents; botanical ink, which contains 10% or more of plant-derived components in its ink solid constituents;
non-toluene, non- MEK ink, which does not use organic-solvent toluene or MEK (methyl ethyl ketone); and waterbased flexo ink, which offers high performance while being water based.
In the packaging ink field, it boasts the leading market share domestically for water-based flexo ink used to print
corrugated boards, which it developed early as a pioneer in the industry. In addition, it is providing a range of
new technologies such as functional coating materials for the paper industry. For gravure ink used for printing
on packaging, such as on food packaging, and flexo ink used for paper containers, the Company provides highperformance, high quality inks that are environmentally friendly, and it has high market shares in the industry.
In particular, Botanical Ink was launched at the end of 2016. This ink uses plant-derived ingredients and is becoming
popular among major convenience stores including private brand products. Furthermore, the product lineup in the
Botanical Ink series is expanding. EcoPlata, a water-based flexo ink for paper bags, and EcoPino, a water-based
gravure ink for paper cartons, have been launched. Printed matters that use Botanical Ink can use the Company’s
registered trademark on their packages.
Botanical Ink markSource: Reprinted from Company materials

In addition, the Company has become an accredited partner for “Pantone LIVE TM” provided by a U.S. company
named Pantone LLC that makes accurate communication of PANTONE color samples possible in the entire packaging supply chain regardless of the printing method and substrate, which is common throughout the world.

We encourage readers to review our complete legal statement on “Disclaimer” page.

08 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

SAKATA INX CORPORATION
4633 Tokyo Stock Exchange First Section

13-Nov.-2019
http://www.inx.co.jp/english/

Business overview

In printing ink for paper media, the percentage of environmentally friendly products has reached practically 100%.
In newspaper ink, the high-coloration ink called NEWS WEBMASTER Ecopure (Eco Mark certified) has acquired
an excellent reputation. Moreover, the Company has earned considerable trust from newspaper companies for
its technical capabilities and track record in responding to the shift to high quality for color pages and in its color
management system for controlling the color aspects of newspaper production systems. For offset ink also, it aims
to introduce environmentally friendly products onto the market as an industry pioneer, and in addition to providing
inks and related products that can meet a diverse range of customer needs, such as high-speed web-offset ink andsheet ink, it is progressing the development of the Dream Cure series of UV curable inks that are compatible withthe high sensitivity UV printers that have become popular in recent years.
4. Products being environmentally friendly and high-function, high-value-added that have plenty of room for
expansion and development
Both domestically and overseas, the Company’s mainstay products are its environmentally friendly and high-function,
high-value-added products positioned above middle range, and it has high shares in each market. Looking at its
market share in the field of packaging ink, the Company boasts the leading share in Japan for flexo ink for printing
on packaging, such as corrugated boards and paper containers, the second leading share in Japan for gravure
ink for printing on film packaging, such as for food, daily goods and other items, and the globally leading share formetal-deco ink for printing on metal cans such as beverage cans.
Against the backdrop of the global trend toward strengthening measures to address environment issues, there is
still plenty of room for market expansion and development in the field of environmentally friendly and high-function,
high-value added products.

Is strengthening measures for Group synergies to respond to therises in raw materials prices
5. Risk factors and measures
Major risk factors that could affect earnings are fluctuations in the prices of raw materials and the impact of exchange
rates alongside global developments.
In particular, there is a time lag between the rapid rises in the prices of raw materials and the revisions to sales
prices, and this may impact results. The main raw materials, white pigment (titanium oxide) and color pigments, areaffected by the supply capacities of Chinese manufacturers, which account for the majority of world production,
while resins and solvents are affected by the prices of crude oil and naphtha. Since 2017, the supply capacities ofChinese manufacturers have dropped sharply due to the strengthening of environmental regulations and the change
in energy policy in China, and the balance of supply and demand has collapsed, and the prices of white and color
pigments are rising. There was also an additional impact from sanction tariffs resulting from the US-China trade
friction in 2018. In 2019, prices continued to rise compared to in the previous year, but in the overseas market, theprices of some materials have started to settle down.
In response to these risk factors, the Company is progressing optimization through revisions to sales prices. It isalso strengthening initiatives to mitigate the impact of the high prices of raw materials by reducing the costs of raw
materials (such as global procurement of raw materials, etc.) through leveraging group synergies and improving
productivity.

We encourage readers to review our complete legal statement on “Disclaimer” page.

09 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

SAKATA INX CORPORATION
4633 Tokyo Stock Exchange First Section

13-Nov.-2019
http://www.inx.co.jp/english/██Results trends
In FY2019/12 1H, operating income and ordinary income increased
and exceeded the forecasts.
1. FY2019/12 1H results
In the FY2019/12 1H (January to June) consolidated results, net sales increased 5.4% YoY to ¥83,167mn, operating
income grew 13.9% to ¥3,051mn, ordinary income rose 5.0% to ¥3,718mn, and profit attributable to owners ofparent decreased 8.5% to ¥2,386mn. The Thai subsidiary (ETERNAL) and the Brazil subsidiary (CREATIVE) newly
entered the scope of consolidation. The average exchange rate during the period was ¥110.05 to US$1 (¥108.68
in the same period in the previous fiscal year), and after excluding foreign currency translation effects, net sales
increased 6.0%, operating income rose 13.3%, ordinary income grew 4.4%, and profit attributable to owners ofparent decreased 9.4%.
FY2019/12 consolidated results(¥mn)
FY2018/12 1H

Amount

FY2019/12 1H

Percentage ofsales

AmountPercentage ofsales

Increase/decreaseamountForeign
Increase/currency
decrease rate translation
effect amountAfterexcludingforeigncurrencytranslation
effects

Net sales

78,938-

83,167

-

4,228

5.4%

-479

6.0%

Operating income

2,680

3.4%

3,051

3.7%

371

13.9%

15

13.3%

Ordinary income

3,540

4.5%

3,718

4.5%

177

5.0%

20

4.4%

Profit attributable toowners of parent

2,609

3.3%

2,386

2.9%

-223

-8.5%

22

-9.4%

Note: exchange rates during the period ¥108.68 (FY2018/12 1H) and ¥110.05 (FY2019/12 1H) to US$1
Source: Prepared by FISCO from the Company's results briefing materials

Driven by the strong performances of Asia and the Americas, each of sales, operating income, and ordinary income
increased YoY. Sales slumped in Japan due to the impact of the bad weather and the rises in the prices of raw
materials. But there were contributions from the effects of the increase in packaging ink sales volume, mainly in Asiaand the Americas, the effects of sales price revisions, and the effects of the new consolidations (the Thai and Brazil
subsidiaries), and also as in the overseas market, the rises in the prices of raw materials were less than expected.

We encourage readers to review our complete legal statement on “Disclaimer” page.

10 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

SAKATA INX CORPORATION
4633 Tokyo Stock Exchange First Section

13-Nov.-2019
http://www.inx.co.jp/english/

Results trends

Source: Prepared by FISCO from the Company's results briefing materials

YoY change in operating i ncome by factor(¥100mn)

Graphic Arts
Printing Ink
Foreign
Volume Others Materials
Currency
+0.0
+10.4
+0.3
+0.1
Printing Ink
Sales Price
+16.2

60
50
40

Adjustments
+0.1

30

Printing Ink
Digital
Cost
&
-21.8
Specialty
Products
-1.8

20
10

26.8

0
FY2018/12 1H

30.5

FY2019/12 1H

Source: Prepared by FISCO from the Company's results briefing materials

Gross profit increased 5.9% YoY and the gross profit margin rose 0.1 of a percentage point (pp) to 21.2%. SG&A
expenses increased 4.3% and the SG&A expenses ratio declined 0.2 pp to 17.5%. In non-operating earnings,
equity method investment income of ¥449mn was recorded, declining ¥377mn from ¥826mn in the same period
in the previous fiscal year. Profit attributable to owners of parent decreased, including due to the recording of an
impairment loss of ¥190mn in relation to welfare facilities for employees.

We encourage readers to review our complete legal statement on “Disclaimer” page.

11 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

SAKATA INX CORPORATION
4633 Tokyo Stock Exchange First Section

13-Nov.-2019
http://www.inx.co.jp/english/

Results trends

Compared to the initial forecasts (net sales of ¥85,000mn, operating income of ¥2,250mn, ordinary income of¥3,000mn, and profit attributable to owners of parent of ¥2,000mn), net sales were slightly sluggish (¥1,833mn
below forecast), but each profit item greatly exceeded their respective forecasts. Operating income (¥801mn above
forecast) and ordinary income (¥718mn above forecast) had been forecast to decline, but both increased, while thedecline in profit attributable to owners of parent was reduced compared to the forecast (¥386mn above forecast).
Even though the prices of raw materials continue to rise, these rises have been less than expected in the overseas
market, which also contributed.

Asia and the Americas performed strongly.
2. Trends by segment
Trends by segment (before consolidated adjustments and the exclusion of foreign currency, YoY) are as follows.
In printing inks and graphics arts materials (Japan), net sales decreased 2.9% YoY to ¥25,655mn and operating
income declined 25.2% to ¥266mn. In sales, gravure ink for soft packaging materials for food and beverage use
trended stably, but sales of flexo ink for corrugated boards for fresh food use were sluggish due to the impact of thebad weather, while demand declined and sales were low of newspaper and offset ink and of printing plate making
materials and printing plate making-related equipment. In profits, the Company revised sales price and reduced
costs, but profits still declined due to factors including the fall in sales and the rises in raw materials prices. Raw
materials prices have started to settle down in the overseas market, but they are continuing to rise in the Japanesemarket due to the time lag.
In printing ink (Asia), net sales increased 12.2% YoY to ¥17,384mn and operating income rose 62.7% to ¥1,138mn.
In sales, demand in Indonesia was somewhat sluggish and they were also impacted by foreign currency translation
effects due to the strong yen. But sales still increased by double digits from the effects of the increase in gravure ink
sales volume in India and Vietnam, the effects of the new consolidation of the Thai subsidiary, and also the steady
performance of newspaper and offset ink. Profits grew significantly, mainly from the effects of the increase in sales
volume, the effects of sales price revisions, and the effects of the new consolidation of the Thai subsidiary. The risesin the prices of raw materials were less than expected.
In printing ink (Americas), net sales increased 9.8% YoY to ¥24,271mn and operating income rose 49.0% to ¥932mn.
In sales, demand for offset ink fell and sales decreased. But sales trended favorably for flexo ink for packaging
printing, gravure ink, metal-deco ink for metal cans, and highly functional, high value-added UV inks, while theacquisition of new customers and the new consolidation of the Brazil subsidiary also contributed. Profits grew greatly,
including due to effects of the increase in sales volume, the effects of sales price revisions, and the effects of the
improvement to the product mix. The rises in the prices of raw materials were less than expected.
In printing ink (Europe), net sales increased 7.3% YoY to ¥4,994mn and the operating loss was ¥371mn (compared
to a loss of ¥215mn in the same period in the previous fiscal year). Sales increased, because the rise in the sales
volume of gravure ink and metal-deco ink for metal cans absorbed the impact of foreign currency translation effects
due to the strong yen. In profits, the rise in sales volume was a positive factor, but the operating loss still increased,
mainly because of higher personnel expenses and outsourcing expenses due to the expansion of production facilities
and the rises in prices of raw materials. However, profits were still basically at the same level as forecast.

We encourage readers to review our complete legal statement on “Disclaimer” page.

12 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

SAKATA INX CORPORATION
4633 Tokyo Stock Exchange First Section

13-Nov.-2019
http://www.inx.co.jp/english/

Results trends

In digital & specialty products, net sales increased 5.6% to ¥6,321mn and operating income decreased 25.6% to¥522mn. Sales increased due to the steady growth in sales of UV inkjet ink and inkjet ink dispersions for color filters
and toner. But profits declined, mainly because of the rises in the prices of raw materials and the deterioration of
the product mix.
In other businesses, net sales increased 3.1% to ¥8,353mn and operating income grew 17.0% to ¥206mn.
Net sales and operating income by segment in FY2019/12 1H(¥mn)
FY2019/12 2Q

Net sales

OperatingincomeFY2018/12 2Q
AmountAmountPrinting inks and graphic arts
materials (Japan)

26,42225,655-766-

Printing inks (Asia)

15,49917,384

1,885

-428

Printing inks (North America)

22,11424,271

2,157

282

Printing inks (Europe)

4,656

4,994

338

-271

Increase/decreaseamountForeign currencytranslation effectamountDigital & Specialty Products

5,987

6,321

333

-58

Reportable segment total

74,68078,628

3,948

-476

Other businesses

8,106

8,353

247

-

Adjustments-3,848-3,815

33

-3

Total

78,938

83,167

4,228

-479

Printing inks and graphic arts
materials (Japan)

356

266

-89

-

Printing inks (Asia)

699

1,138

438

-15

Printing inks (North America)

625

932

306

13

Printing inks (Europe)

-215

-371

-155

14

Digital & Specialty Products

702

522

-179

2

Reportable segment total

2,168

2,488

320

14

Other businesses

176

206

30

-

Adjustments

335

356

21

1

2,680

3,051

371

15

Total

Note: In FY2019/12, the former affiliates in Thailand and Brazil became consolidated subsidiaries.
Source: Prepared by FISCO from the Company's results briefing materials

3. Financial position
Looking at the Company’s financial position, due to the new consolidations and other factors, total assets increased¥259mn on the end of the previous fiscal year to ¥145,754mn. Liabilities declined ¥784mn to ¥67,313mn due tothe reductions in accounts payable and borrowing. Net assets rose ¥1,043mn to ¥78,441mn, including becauseof the increase in retained earnings. The equity ratio declined 0.4 pp to 50.7%, but this is not particularly at a level
to be viewed negatively and there does not seem to be any problems with the Company’s financial soundness.

We encourage readers to review our complete legal statement on “Disclaimer” page.

13 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

SAKATA INX CORPORATION

13-Nov.-20194633 Tokyo Stock Exchange First Section

http://www.inx.co.jp/english/

Results trends

Key performance indicators(¥mn)
FY2015/12(9 months)

FY2016/12

FY2017/12

FY2018/12

FY2019/12 2Q

Net sales

136,581

151,198

157,302

162,056

83,167

Cost of sales

103,826

113,773

120,371

128,824

65,545Gross profit

32,75437,42536,931

33,232

17,621

24.0

24.8

23.5

20.5

21.2

24,21927,30528,35828,12014,569Item

Gross profit margin (%)
Selling, general and administrative expenses
Selling, general and administrative expenses ratio (%)
Operating income
Operating income margin (%)
Non-operating income

17.7

18.1

18.0

17.4

17.5

8,534

10,119

8,573

5,112

3,051

6.2

6.7

5.5

3.2

3.7

2,601

2,531

3,048

2,476

882

Non-operating expenses

1,067

782

371

678

215

Ordinary income

10,068

11,868

11,249

6,910

3,718

Ordinary income margin (%)
Extraordinary income

7.4

7.8

7.2

4.3

4.5

1,539

801

1,424

285

208

2

386

317

71

192

Income before income taxes and non-controlling interest

11,604

12,283

12,356

7,125

3,733

Total income taxes

3,258

3,798

3,466

2,155

1,032

Profit attributable to owners of parent

7,745

7,837

8,383

4,692

2,386

5.7

5.2

5.3

2.9

2.9

6,265

6,381

9,946

756

1,310

Extraordinary loss

Margin on profit attributable to owners of parent (%)
Comprehensive income

136,564

138,012

145,489

145,495

145,754

Current assets

72,55471,71676,19975,78578,020Noncurrent assets

64,01066,29569,29069,70967,734

66,944

63,69866,72368,09767,313Current liabilities

46,57445,30447,96849,23346,756

Noncurrent liabilities

20,37018,39318,754

18,864

20,556

69,61974,31378,766

77,39778,441

65,23071,55574,737

77,52878,639

7,472

7,472

7,472

7,472

7,472

Total assets

Total liabilities

Total net assets
Shareholders’ equity
Capital
Total number of issued shares at the end of period,
excluding treasury share

60,508,154

60,507,951

58,399,679

58,399,218

58,399,024

Cash flows from investing activities-3,214-6,727-2,737-7,279-2,317

Cash flows from financing activities-5,973-3,552-6,259-122-1,553

Cash and cash equivalents at the end of period

7,888

9,297

9,351

6,788

7,447

Source: Prepared by FISCO from the Company’s financial results

We encourage readers to review our complete legal statement on “Disclaimer” page.

14 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

SAKATA INX CORPORATION
4633 Tokyo Stock Exchange First Section

13-Nov.-2019
http://www.inx.co.jp/english/██Business Outlook
For the FY2019/12 full year, the profit forecasts have been upwardly
revised to forecasts of major increases in profits
1. FY2019/12 full year outlook
The FY2019/12 full year consolidated results forecasts (on August 9, 2019, the Company downwardly revised
the net sales forecast and upwardly revised each profit item forecast) are that net sales will increase 4.9% YoY to¥170,000mn, operating income will grow 33.0% to ¥6,800mn, ordinary income will rise 18.7% to ¥8,200mn, andprofit attributable to owners of parent will climb 11.9% to ¥5,250mn. Compared to FY2018/12, the forecasts arefor sales to rise and profits to increase greatly due to factors including the effects of the increase in sales volume,the effects of sales price revisions, the effects of the improvement to the product mix, the effects of the newconsolidations, the effects of cost reductions, and the effects of the rises in the prices of raw materials settling down.
Compared to the initial forecasts (net sales of ¥173,600mn, operating income of ¥6,000mn, ordinary income of¥7,500mn, and profit attributable to owners of parent ¥5,000mn), net sales will be ¥3,600mn below forecast, mainly
due to foreign currency translation effects and the impact of the sluggish demand in Indonesia in the 1H. But in
addition to the effects of the improvement to the product mix, the rises in the prices of raw materials have been lessthan expected, so operating income, ordinary income, and profit attributable to owners of parent are expected tobe respectively ¥800mn, ¥700mn, and ¥250mn above forecast. At the time of the initial forecasts, the anticipatedexchange rate (average during the period) for the full fiscal year was ¥110 per US$1, which has been revised to¥108 per US$1 for the 2H and to ¥109 per US$1 for the full fiscal year (the FY2018/12 full year result was ¥110.43
per US$1).
Consolidated results trend(¥mn)
Fiscal year

FY2015/12(9 months)

FY2016/12

FY2017/12

FY2018/12

FY2019/12
forecast(revised)(FY2019/12
initial forecasts)

136,581

151,198

157,302

162,056

170,000

173,600

Operating income

8,534

10,119

8,573

5,112

6,800

6,000

Ordinary income

10,068

11,868

11,249

6,910

8,200

7,500

Profit attributable to owners of parent

7,745

7,837

8,383

4,692

5,250

5,000

EPS (¥)

128.01129.53142.76

80.36

89.90

85.62

Dividend (¥)

22.00

28.00

30.00

30.00

30.00

30.00

1,107.63

1,179.38

1,295.39

1,272.41--

Net sales

BPS (¥)

Source: Prepared by FISCO from the Company’s financial results

Looking at the quarterly trends in net sales and operating income, net sales have been trending upward due tothe effects of the increase in sales volume. On the other hand, operating income has been affected by the soaring
prices of raw materials and it declined from the 1H of FY2017/12. However, this decline bottomed-out in FY2018/12
2H and it is now recovering. The prices of raw materials continue to rise, but the pace of these rises settled down
somewhat on entering 2019, while the spread of the sales price revisions and the improvement to the product mix
are also contributing to results.

We encourage readers to review our complete legal statement on “Disclaimer” page.

15 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

SAKATA INX CORPORATION
4633 Tokyo Stock Exchange First Section

13-Nov.-2019
http://www.inx.co.jp/english/

Business Outlook

Qua rterly trends i n net sales and operating income(¥bn)

Net sales (left)

88
49.5

(¥bn)

Operating income (right)

60.0

51.6
45.5

84

48.0

40.1

37.5

80
24.3

76
72

36.0

30.5
26.8

86.8

75.3

75.8

1H

2H

77.2

80.0

78.9

24.0

83.1
83.2

12.0

68

0.0
FY12/16

1H

2H

FY12/17

1H

2H

1H

FY12/18

2H E

FY12/19

Source: Prepared by FISCO from Company materials

The profit forecasts for Asia and the Americas have beensignificantly upwardly revised
2. Forecasts for each segment
The trends in the adjusted forecasts by segment (before consolidated adjustments and before the exclusion offoreign currency translation effects) and the priority measures are described below.
In printing inks and graphics arts materials (Japan), the Company projects net sales to decrease 2.6% to ¥53,313mn
and operating income to decrease 6.4% to ¥1,055mn. It is progressing various measures, including to increase
sales, revise sales price, and reduce costs. But due to the impact of the declines in sales and profits in the 1H, forthe full fiscal year, sales and profits are expected to decline to below forecast. However, the rises in the prices ofraw materials have settled down in the 2H, and on a fiscal half year basis, results are expected to recover in the
2H. The priority measures are to progress the provision of total solutions and to grow sales in the packaging fieldof the Botanical Ink series that include plant-derived components. Furthermore, demand for paper bags is forecast
to increase in the future against the backdrop of global environmental problems, so as a new development, theCompany will pursue sales growth for EcoPlata and EcoPino, which are inks for paper containers in the BotanicalInk series.
In printing ink (Asia), net sales are forecast to increase 12.5% YoY to ¥36,190mn and operating income to rise 68.8%
to ¥2,581mn. Net sales will be below the initial forecast due to foreign currency translation effects and the impact of
the sluggish demand in Indonesia in the 1H. But operating income will be greatly above forecast, with contributions
from the effects of the increase in sales volume, mainly of packaging printing ink, the effects of the new consolidationof the Thai subsidiary, the effects of sales price revisions, the effects of costs reductions, and also as the rises in
the prices of raw materials have been less than expected. Demand in Indonesia is expected to recover in the 2H.

We encourage readers to review our complete legal statement on “Disclaimer” page.

16 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

SAKATA INX CORPORATION
4633 Tokyo Stock Exchange First Section

13-Nov.-2019
http://www.inx.co.jp/english/

Business Outlook

The priority measures that the Company is progressing including building a system able to carry out each aspectfrom product development through to local production, developing a strategy targeting middle- to high-end range
products in the packaging printing ink field, increasing sales that utilize the Group network, reducing the costs of
raw materials through Group synergies, developing products that are tailored to local characteristics, and enhancing
technical services. It acquired a site in January 2019 to build a new plant in Bangladesh, which is scheduled to becompleted in December 2020.
In printing ink (Americas), the forecasts are for net sales to increase 7.9% YoY to ¥48,503mn and operating income
to grow 75.1% to ¥1,737mn. Net sales will be slightly below the initial forecast, including due to the decline indemand for offset ink, but operating income is expected to be significantly above forecast. The contributions will befrom the effects of the increase in sales volume, mainly of packaging printing ink (flexo ink, gravure ink, metal-deco
ink for metal cans, and UV ink), the effects of the new consolidation of the Brazil subsidiary, the effects of sales
price revisions, the effects of costs reductions, and also as the rises in the prices of raw materials have been lessthan expected. The priority measures the Company is progressing include working to increase sales of products
like a high performance flexo ink for laminate, a new gravure ink product, and UV and EB curable inks; actively
developing the business for the South American market; and improving productivity and reducing costs throughadvancing TPM activities.
In printing ink (Europe), the forecasts are for net sales to increase 6.4% YoY to ¥9,921mn and an operating loss of¥690mn (compared to a loss of ¥791mn in FY2018/12). The Company is restructuring the production and sales
systems, and the operating loss will be reduced through the effects of higher sales from the increase in sales volume.
Compared to the initial forecasts, net sales will be above forecast, but the operating loss is expected to rise due tothe higher costs alongside the increase in production. As the priority measures, it is working to increase sales andimprove efficiency through restructuring the production system, with the aim of achieving profitability in FY2020/12.
In digital & specialty products, the forecasts are for net sales to increase 8.9% YoY to ¥13,264mn and operating
income to decline 10.5% to ¥1,094mn. These forecasts of higher sales but lower profits are basically at the samelevel as the initial forecasts. Demand is trending strongly, but profits are expected to decline because of factors
including the deterioration of the product mix, the decline in sales price due to the market environment and thecompetitive environment, and the rises in the prices of raw materials. As the priority measures, for inkjet ink, theCompany will strengthen relations with printer manufacturers, bolster the global production and sales systems, andexpand uses for industrial applications; for pigment dispersions for color filter, it will launch high quality products,
strengthen relationships with resist manufacturers, develop new light emitting materials for displays, and research
new materials that will contribute to the filming of displays and IoT; and for functional coating materials, it will enter
into the energy, optical and electronics-properties coating fields.

We encourage readers to review our complete legal statement on “Disclaimer” page.

17 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

SAKATA INX CORPORATION
4633 Tokyo Stock Exchange First Section

13-Nov.-2019
http://www.inx.co.jp/english/

Business Outlook

Net sales and operating income by segment
Net sales(¥mn)
FY2015/12(9 months)

FY2016/12

FY2017/12

FY2018/12

FY2019/12
forecast(FY2019/12
initial forecasts)

Printing inks and graphic arts
materials (Japan)

42,727

55,11454,98554,95053,31354,626

Printing inks (Asia)

28,071

28,30830,24532,15636,19038,430Printing inks (Americas)

44,92042,04443,56044,95748,503

48,965

Printing inks (Europe)

9,031

7,817

8,777

9,321

9,921

9,688

Digital & Specialty Products

8,230

10,162

11,336

12,185

13,264

13,624

Reportable segment total

132,981

143,447

148,904

153,571

161,390

165,333

Other businesses

9,598

15,16815,79016,335

16,442

16,317

Adjustments-5,999-7,416-7,392-7,851-7,832-8,051

136,581

151,198

157,302

162,056

170,000

173,600

FY2015/12(9 months)

FY2016/12

FY2017/12

FY2018/12

FY2019/12
forecast(FY2019/12
initial forecasts)

Printing inks and graphic arts
materials (Japan)

1,856

2,516

2,253

1,125

1,055

1,153

Printing inks (Asia)

2,875

3,170

2,347

1,529

2,581

2,227

Printing inks (Americas)

2,344

2,218

1,830

992

1,737

1,070

Printing inks (Europe)

126

218

25

-791

-690

-624

Digital & Specialty Products

432

925

1,140

1,222

1,094

1,098

Reportable segment total

Total

Source: Prepared by FISCO from Company materials
Operating income

(¥mn)

7,636

9,049

7,596

4,078

5,778

4,924

Other businesses

295

419

350

390

363

383

Adjustments

602

650

626

643

659

693

8,534

10,119

8,573

5,112

6,800

6,000

Total

Source: Prepared by FISCO from Company materials██Medium and long-term growth strategy
Demand is globally shifting to environmentally friendly products
1. Demand is shifting to environmentally friendly products
Looking at the trends in the printing ink market, the market is expanding for packaging printing ink (packaging
printing flexo ink, such as for corrugated boards and paper cartons; packaging printing gravure ink, including forfoods, cosmetics, toiletries, and daily necessity items; and metal-deco ink for printing on beverage cans and othermetal cans). Packaging printing ink, which the Company is focusing on, constitutes approximately 40% of theJapanese printing ink market.

We encourage readers to review our complete legal statement on “Disclaimer” page.

18 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

SAKATA INX CORPORATION
4633 Tokyo Stock Exchange First Section

13-Nov.-2019
http://www.inx.co.jp/english/

Medium and long-term growth strategy

Accelerating the development and launch of environmentally friendly
products toward realizing high growth in the emerging-countries
market2. The medium-term business plan 2020
In November 2017, the Company announced its three-year medium-term business plan 2020 (2018 to 2020) ~Innovation for the Future.
Toward realizing the business theme of the “Creation of Visual Communication Technology,” and against the backdropof the diversification of information media, the growing awareness in food safety and security, and the strengtheningof environmental regulations, the plan sets out the Company’s basic policies of strengthening the corporate structure
and the management foundation by responding flexibly to changes in the printing market, enhancing CSR activities,
and promoting environmental management. The Company will work to expand the printing ink business, which isits core business, and the digital & specialty products business, and to create new businesses through applying
technologies it has cultivated in its core business.
The target figures for FY2020/12 are net sales of ¥195,000mn, operating income of ¥13,000mn, ordinary incomeof ¥15,000mn, profit attributable to owners of parent of ¥9,800mn, and ROE of 10% or more. The figures do notincorporate the new businesses. The assumed exchange rate is ¥112 to US$1.
In the Company’s growth strategy for the printing ink business, the core policies are to develop and launch environmentally friendly products in the existing printing market and to grow sales of products that improve productivity andproducts that are tailored to local characteristics. During the three-year period, the Company is aiming for growthof 10% in the developed countries market and 40% in the emerging-countries market. The strategic products forsales growth are environmentally friendly products (including water-based flexo ink and gravure ink, non-toluene
and non-VOC ink and high-solid ink), products using plant-derived ingredients (such as botanical ink and rice ink),
products that improve productivity (including highly sensitive UV ink and EB curing ink, etc.), and products tailoredto local characteristics (such as gravure ink, and newspaper and offset ink, etc.).
The growth strategy for the digital & specialty products business is as follows: in the digital printing materials field,
global deployment of industrial inkjet ink and new markets (including building and wall-covering materials, home &textile, and apparel); for the image display materials field, develop pigment dispersions for color filters that match
cutting-edge specifications and actively enter the Chinese market; and in the functional coating materials field,
develop and launch new digital & specialty products.
Furthermore, to create new businesses, the Company is targeting fields other than the existing printing industry
such as housing, architecture, living environment, energy, automotive and electronics, etc. It is working to develop
and launch businesses for a range of products including gas-barrier coating agents for functional films, inorganic
materials pigment dispersions in the display field, transparent insulator materials for optics used as touch-panel
materials in the sensor field, inspection glass coating materials used as clinical testing materials in the medical field,
and decoration molding coloring material dispersions used as new coloring agents.

We encourage readers to review our complete legal statement on “Disclaimer” page.

19 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

SAKATA INX CORPORATION
4633 Tokyo Stock Exchange First Section

13-Nov.-2019
http://www.inx.co.jp/english/

Medium and long-term growth strategy

3. Targets and priority measures by segment
Segment targets (before consolidated adjustments) are as follows: in printing inks and graphic arts materials (Japan),net sales of ¥59,900mn and operating income of ¥2,600mn; in printing inks (Asia), net sales of ¥46,600mn andoperating income of ¥3,900mn; in printing inks (the Americas), net sales of ¥52,700mn and operating income of¥2,500mn; in printing inks (Europe), net sales of ¥9,800mn and operating income of ¥500mn; in digital & specialty
products, net sales of ¥17,400mn and operating income of ¥2,400mn; and in other businesses, net sales of¥16,200mn and operating income of ¥400mn.
In terms of the priority measures, for printing inks and graphic arts materials (Japan), they include active developmentof environmentally friendly and energy saving products, and reducing costs through deepening TPM activities andoptimizing logistics; for printing inks (Asia), advancing the development of products tailored to local characteristics
and further expanding the packaging field, and actively developing environmentally friendly and energy saving
products; for printing inks (the Americas), growing sales of flexo, gravure and meal-deco inks, bolstering packagingrelated production facilities, and strengthening development through consolidating R&D bases; for printing inks
(Europe), strengthening the production and sales structures by reconstructing the bases, and enhancing brandpower; and in the digital & specialty products business, developing differentiated products in a timely manner andstrengthening strategic partnerships.

Strengthening production capacity by active capital investment on ascale of ¥28bn
4. Strengthening production capacity by capital investment
A total of ¥28,000mn is set as an investment framework to accelerate growth (¥18,000mn for capital investmentand ¥10,000mn for strategic investment).
Cumulative capital investment in the three-year is set at ¥18,000mn (printing ink business ¥8,000mn, digital & specialty products business ¥3,900mn, domestic plant reconstruction-related ¥1,600mn, and other regular investment¥4,500mn). By region, it anticipates investing ¥8,500mn in Japan, ¥4,300mn in Asia, ¥4,700mn in North America,and ¥500mn in Europe. It assumes three-year cumulative depreciation expenses will be ¥14,100mn.
As of the end of FY2019/12 Q2, the details of the capital investment are as follows. In May 2019, the expansion andreinforcement of the R&D facility in West Chicago in Illinois, USA was completed, while in July 2019, the second
packaging ink plant in Vietnam was completed.
In terms of the schedule going forward, in Japan, the expansion and enhancement of the Osaka R&D facility isscheduled to be completed in 2020; in North America, the reinforcement of the packaging ink facilities in Wisconsin,
the United States, is scheduled to be completed in 2020; in Asia, the second offset ink plant in Maoming City,
Guangdong Province, China, is scheduled to be completed in 2021, the new plant in the Philippines is scheduled
to be completed in 2020, the reinforcement of packaging ink facilities in Thailand is scheduled to be completed in
2020, and the new packaging ink plant in Bangladesh is scheduled to be completed in 2020; and in Europe, both
the reinforcement of the ink facilities for printing on cans in the UK and the new packaging ink plant in Spain arescheduled to be completed by the end of 2019.

We encourage readers to review our complete legal statement on “Disclaimer” page.

20 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

SAKATA INX CORPORATION
4633 Tokyo Stock Exchange First Section

13-Nov.-2019
http://www.inx.co.jp/english/

Medium and long-term growth strategy

The capital investment plan going forward

Source: Reprinted from the Company's results briefing materials

Strengthening measures for ESG and expects to increase earnings
in the medium-term with expansion of sales for environmentallyfriendly products
5. Measures for ESG, and expanding sales of environmentally friendly and high-function products
The Company is strengthening measures for ESG (Environment, Society, Governance) and SDGs (Sustainable
Development Target), and it is developing new products that will contribute to protecting the global environment.
Measures for ESG

Source: Reprinted from the Company's results briefing materials

We encourage readers to review our complete legal statement on “Disclaimer” page.

21 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

SAKATA INX CORPORATION
4633 Tokyo Stock Exchange First Section

13-Nov.-2019
http://www.inx.co.jp/english/

Medium and long-term growth strategy

For E (Environment), the Company is strengthening its environmental management system, growing sales of its
environmentally friendly products, which are one of its strengths; and progressing the introduction of renewableenergy (such as installing a solar power facility at the Shiga Plant). For S (Society), its measures include improving
working environments by reducing overtime and enhancing occupational health and safety to ensure the safety of
employees. For G (Governance), it has established a corporate governance structure (decision making and businessexecution systems, an audit system and an international advisory board), and is working to strengthen its functions.
In January 2017, the Company also received certification as “a leading company in Osaka City for empowering
women.” Furthermore, in January 2019, its stock was selected as a constituent issue of the S&P/JPX Carbon
Efficient Index, which is a stock index for ESG investment newly adopted by the GPIF.
Moreover, the Company is participating in the Clean Ocean Material Alliance, which was established by the Ministryof Economy, Trade and Industry in January 2019. Toward solving the problem of marine plastic waste, which is a
new global issue, it will promote the sustainable use of plastic products and the development and introduction ofalternative materials and accelerate innovation through partnerships between the public and private sectors. As of
September 3, 2019, the Alliance had 258 participating companies and organizations.
Measures to protect the global environment

Source: Reprinted from the Company's results briefing materials

The Company is working to develop new products with an awareness of being considerate to the environment. For
example, on the point of reducing waste, one development it is progressing as a solution to a societal problem isan inkjet technology that makes possible the production of small lots without having to use a plate. For the problem
of food loss, it is developing products that will contribute to increasing the length of time that food can be stored
through the use of gas barrier agents that prevents oxidation. Toward reducing emissions of global greenhouses
gases, instead of traditional inks that are cured by drying, it is developing inks that are cured by energy, such as UV
and EB. In addition to the above products, it is also working to build recyclable plastics and develop products that
address the need to prevent marine pollution.

We encourage readers to review our complete legal statement on “Disclaimer” page.

22 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

SAKATA INX CORPORATION
4633 Tokyo Stock Exchange First Section

13-Nov.-2019
http://www.inx.co.jp/english/

Medium and long-term growth strategy

Some examples of products that the Company has developed and whose sales are growing are the Botanical Ink
series that include plant-derived components, UV and EB curable inks that contribute to a reduction in emissions ofglobal greenhouse gases, and the Eco Stage series of gas barrier agents toward reducing food loss. Also, in October
2018, the Company jointly developed an insect repellent coating agent with Earth Corporation <4985>. The agent
combines Earth Corporation’s insect repellent, which has very long-lasting effects, and evasion technologies, with
the Company’s printing and coating evaluation technologies, to realize high levels of safety, processing, optimization,and excellent effects. The product is scheduled to be commercialized in 2020.
The worldwide shift towards environmentally friendly products is strengthening, and there remains plenty of room
for the markets to expand and develop globally. The Company has a track record of global business deployment
ahead of its industry peers, and its strengths lie in its expertise in launching products tailored to local characteristics
in each country, development and extensive lineup of environmentally friendly and high-function, high-value-added
products, and high market shares for these products. We can expect earnings to expand in the medium term as
it accelerates its global business deployment and increases sales of environmentally friendly and high-function,
high-value-added products.

██Shareholder return policy
Targeting a consolidated dividend payout ratio in the range of about
20% to 30%, and also implements a shareholder benefit program
With regards to distributing profits, the Company considers returning profits to shareholders, including dividends,
to be an important management issue, in conjunction with working to strengthen its financial position and business
infrastructure. The basic dividend policy is to steadily return profits to shareholders through dividend payments,
while targeting a consolidated dividend payout ratio in the range of 20% to 30%.
Based on this basic policy, the forecast for FY2019/12 is the same as for FY2018/12, with an annual dividend pershare of ¥30 (¥15 at the end of first half, ¥15 at the end of the period). Forecasted dividend payout ratio is 33.3%.

We encourage readers to review our complete legal statement on “Disclaimer” page.

23 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
http://www.fisco.co.jp

SAKATA INX CORPORATION

13-Nov.-20194633 Tokyo Stock Exchange First Section

http://www.inx.co.jp/english/

Shareholder return policy

Di vided per share a nd dividend payout ratio(¥)

Dividend per share (left)

Dividend payout ratio (right)
37.3

40

33.3

35

27.9

30

20

21.6

20.0
28

18

20

35.0

25.0

21.0

17.2

15
10

40.0

30.0

25
18.3

（%）

30

30

30

22

15.0
10.0

5

5.0

0

0.0
FY3/14

FY3/15

FY12/15

FY12/16

FY12/17

FY12/18

FY12/19 E

Source: Prepared by FISCO from the Company’s financial results

The Company also offers a shareholder benefit program to shareholders who own one trading unit (100 shares)
or more of shares as of December 31 every year. On December 31, 2018, the Company changed the shareholder
benefit program from being based on shareholding to holding period.

We encourage readers to review our complete legal statement on “Disclaimer” page.

24 24

Disclaimer
FISCO Ltd. (“FISCO”) offer stock price and index information for use under the approval of theTokyo Stock Exchange, the Osaka Stock Exchange and Nikkei Inc.
This report is provided solely for the purpose of offering information, and is not a solicitationof investment nor any other act or action.
FISCO prepared and published this report based on information which it considered reliable;
however, FISCO does not warrant the accuracy, completeness, fitness nor reliability of thecontents of this report or the said information.
The issuers’ securities, currencies, commodities, securities and other financial instruments
mentioned in this report may increase or decrease in value or lose their value due to influence
from corporate activities, economic policies, world affairs and other factors. This report does
not make any promises regarding any future outcomes. If you use this report or any information
mentioned herein, regardless of the purpose therefor, such use shall be made based on yourjudgment and responsibility, and FISCO shall not be liable for any damage incurred by you asa result of such use, irrespective of the reason.
This report has been prepared at the request of the company subject hereto based on theprovision of information by such company through telephone interviews and the like. However,
the hypotheses, conclusions and all other contents contained herein are based on analysis
by FISCO. The contents of this report are as of the time of the preparation hereof, and are
subject to change without notice. FISCO is not obligated to update this report.
The intellectual property rights, including the copyrights to the main text hereof, the data
and the like, belong to FISCO, and any revision, reprocessing, reproduction, transmission,
distribution or the like of this report and any duplicate hereof without the permission of FISCO
is strictly prohibited.
FISCO and its affiliated companies, as well as the directors, officers and employees thereof,
may currently or in the future trade or hold the financial instruments or the securities of issuersthat are mentioned in this report.
Please use the information in this report upon accepting the above points.

◾ For inquiry, please contact: ◾

FISCO Ltd.
5-11-9 Minami Aoyama, Minato-ku, Tokyo, Japan 107-0062
Phone: 03-5774-2443 (Financial information Dept.)
Email: support@fisco.co.jp