Creating Corporate Value Report 2021 Year Ended March 31, 2021
Our vision is to brighten and enliven the lives of customers with air. We have focused on niche markets, and reeled in customers while developing products with the keywords: "understanding through listening, seeing, and using." Our company's strength is the fact that we possess numerous original brands that occupy a large market share in niche markets, such as the deodorizer and air freshener Shoshu- Riki, the mothproofing agent Mushuda, the deodorizer Dashu-Tan, the dehumidifier Drypet, and the mothproofing agents for rice bins Kome-Touban. Presently, our business environment is dramatically changing, as environmental problems become more serious, the social structure transforms, and globalization progresses, however, we will advance the establishment of a robust business foundation to cope with such changes. From now on, we will aim to become a globally operating comprehensive air-care business group that meets society's expectations by contributing to the solution of social issues through our business and utilizing our new unique air-care technologies.
Compilation Policy
This report includes the efforts for creating corporate value as an annual report on the business activities of the S.T. Group. With reference to the requests, opinions, etc. from stakeholders, it includes important issues (financial and non-financial information) for both stakeholders and the S.T. Group. [Scope of reporting] See "Overview of Communication Tools" on page 13. [Target organizations] The document reports on our company, or the S.T. Group (consolidated), if not mentioned. The "S.T. Group" means the entire S.T. Group, the "S.T. Group (in Japan)" means S.T. (non-consolidated) and group companies in Japan, and the "S.T. (non-consolidated)" means S.T. Corporation (non-consolidated). [Target period] April 1, 2020 to March 31, 2021 [Date of issuance] August 2021 [Forward-looking statement] This report contains forward-looking statements regarding S.T. CORPORATION's future plans, strategies, and performance. Such forward-looking statements are based on information available as of the issuance of this report. Please note that the Company's actual performance may differ greatly from forward-looking statements due to the economic situation, business environment, market demand, and foreign currency exchange rate fluctuations in the future. [Market share] INTAGE Inc.'s SRI+ (in value terms) for "deodorizers (for refrigerators)" during a 3-year period from 2018 to 2020, "mothproofing agents for food" during a 4-year period from 2017 to 2020, "disposable warmers, (excluding those for the eye parts)" during a year period from April 2020 to March 2021, other items during a period from January to December 2020, "deodorizers and air fresheners (excluding those for clothes and anti-virus ones)" and "mothproofing agents (excluding those for dolls)." Deodorizers (Market Share: No.1)
Contents
Systems for Overseeing and Supporting Management   P. 6 Accelerating "From Sowing the Seeds of Growth to its Nurturing"  P. 2     Message  P. 4  Financial and Non-Financial Highlights   P. 8     Business at a Glance   P. 10 Sustainability Overview   P. 12 Corporate Data / Overview of Communication Tools  P. 13
Establishment of a Management Foundation that Is Not Affected by
the External Environment
We have set the air-care business as the core of creating corporate value and the following three as growth drivers. Along these three drivers, S.T. Group will continue to provide value not only to households but also to business establishments and public spaces, aiming for all its brands to become the leading name in their categories.
Innovation in the Air-care Business
The first driver is the innovation in the air-care business. We have launched innovations and pioneered the market with our new technologies to solve the social issues of the times. We will continue to set the innovation in the air-care business as the first growth driver and work on market creation by developing new technologies.
Responding to Changes in Demographic Structures
The second growth driver is responding to structural changes in Japanese society and global issues. In response to social issues such as population decline, aging population, and rapid increase in people requiring nursing care, and growing global environmental awareness, we will take on the challenge of developing new fields and new markets by utilizing our new unique air-care technologies and thermal technologies. At the same time, we will work on a recycling-oriented business.
Acceleration of Globalization
The third growth driver is to accelerate globalization. Demand from foreign visitors to Japan has plummeted due to the impact of the novel coronavirus, but there is a strong sense of trust in Japanese products worldwide. S.T. Group will spread its knowledge and new technologies cultivated by handling domestic social issues to the world. Innovation
To Become an Organization that Fulfills What it Says
Review on the Fiscal Year Ended March 31, 2021 In the fiscal year under review, as the final year of the second medium- term management plan, under the management policy "Brand Value Management," we continued to focus on growth in sales and profits based on the concept, "From Sowing the Seeds of Growth to its Nurturing." Under such circumstances, net sales increased to 49.7 billions of yen (4.5% increase from the previous year) as a result of sales growth in all categories due to the demand of people staying and eating at home and the heightened hygiene awareness because of the spread of the novel coronavirus in the fiscal year under review. By looking at each category, we will find that in the Air Care category, sales of products with high unit price and high added value such as Shoshu-Riki Premium Aroma were strong. Also, the performance of Dashu-Tan deodorizer was steady due to the rising demand from people eating at home, and Shoshu-Riki's new products, such as DEOX, etc. contributed to sales. As a result, net sales were 21.4 billions of yen (1.3% increase from the previous year). In Cloth Care category, net sales were 9.4 billions of yen (1.7% increase from the previous year). This was attributed to the growth in mothproofing agents' sales and the contribution of the new product Mushuda, a tick repellent, because of the increased demand for the seasonal change of clothing due to the effects of people staying at home in the spring season of 2020. Net sales in Thermal Care increased to 4.5 billions of yen (3.8% increase from the previous year) because of the rise in demand for disposable warmers due to the effects of the cold weather during the year-end and New Year holidays. In the Hand Care category, net sales augmented to 6.9 billions of yen (20.2% increase from the previous year) since the high demand for gloves, due to heightened hygiene awareness because of the spread of the novel coronavirus both in Japan and overseas. In Humidity Care category, net sales were 3.4 billions of yen (2.0% increase from the previous year) due to the shift to high value-added products and the strong performance of the Bincho-Tan Drypet series. In Home Care category, the performance of products related to people staying and eating at home, such as Kome-Touban and Senjo-Riki washing machine tub cleaner, was favorable. As for BtoB, Dr. CLEAN+, a hygiene-related product, contributed to sales. This resulted in net sales of 4.1 billions of yen (7.9% increase from the previous year). In terms of profits, despite the soaring glove costs and rising marketing costs, due to an increase in sales volume of high value-added products, operating income was 3.9 billions of yen (16.9% increase from the previous year), ordinary income was 3.7 billions of yen (11.7% increase from the previous year), and profit attributable to owners of parent was 2.5 billions of yen (11.7% increase from the previous year). Also, net sales and profits increased, reaching new record highs. The second medium-term management plan and the fiscal year under review can be summarized as follows. Sales and profits increased due to the impact of the spread of the novel coronavirus, but we cannot say that the results are satisfactory. We are halfway through with the five management strategies, which are 1) existing business share to become No. 1 and maximizing profits, 2) entering new fields and adjacent categories, 3) transforming the thermal care business to be a growth driving business, 4) concentrating overseas on strategic areas and specific businesses, and 5) growing into a management foundation that achieves sales of 100 billions of yen. Initiatives Taken in the Year Ending March 31, 2022 This is the first year of the third medium-term management plan, and we have positioned it as a year of building the critical foundation for realizing the vision we want to achieve in the next three years. There is no change in the direction of growth so far. In this term, we will work on the following five priority points with the aim of becoming an organization that Fulfills What it Says. ... ... in the tick repellent market, an adjacent category to mothproofing agents. In addition, we will improve the cost ratio in both businesses which have high volume. (2) For improving resources for growth engines, we will invest management resources in overseas, BtoB, EC, and Thermal Care. First, overseas, we will continue to promote structural reforms and focus on Asia, a strategic area, with products that can be differentiated in the market. Next, in BtoB, we will continue to strengthen the industrial-used business brand S.T.PRO, launched in the fiscal year under review. In EC, we will continue to develop products and new sales methods for EC companies. As for Thermal Care, we will develop new concepts utilizing thermal technology, expand the sales channel of BtoB heat insulation material for food delivery, HEAToGo, and develop new thermal care products for overseas markets. (3) For entry to and development of new fields and markets, we will work on the new Clear Forest business, industrial-used disinfectants, and futuristic air care as seeds for the future. In the new Clear Forest business, we will develop and commercialize new businesses and develop our original brand products. As for industrial-used disinfectants, we will continue to improve Dr. CLEAN+, which was released in the fiscal year under review. In futuristic air care, we will promote the development of air care technology that solves daily problems and social problems. (4) For strengthening the management base through digital transformation and ESG management, we will promote business reforms through core systems, productivity improvement with digital transformation, work style reforms in line with the times, and promotion of ESG management. (5) Improvement of organizational capacity means strengthening organizational capacity through personnel structural reforms, creating innovation through diversity, and creating a culture in which we can actively take on challenges. Accelerating the Shift "From Sowing the Seeds of Growth Nurturing" This is the first year of the third medium-term management plan. In the first medium-term management plan, we focused on profits, and in the second medium-term management plan, we sowed growth seeds. In this term, we will further nurture the growth buds that we have grown so far. We look forward to your continued support in the future. (1) For the solidification of the existing business profit structure, we will work on possessing the No. 1 market share and maximizing profit in the two primary businesses, the air care and cloth care categories. First, in the air care business, we will expand our market share by strengthening area marketing and developing high value-added products such as Shoshu-Riki Premium Aroma and Shoshu-Riki DEOX. In the cloth care business, we will develop the Mushuda brand
We are aiming for the sustainable co-growth of enterprises and society. We think of corporate governance as a system that supervises our activities toward that goal. It is important to develop an environment for securing the transparency and fairness of management facilitating active decision making, and disclosing information properly. We recognize that shareholders, society and the environment entrust us with valuable managerial resources, and aim to realize the sustainable growth of society and the environment and create corporate value in the medium to long terms, in cooperation with stakeholders, and will fulfill our accountability.
Development of Corporate Governance System
In June 2004, in order to enhance the oversight function of the Board of Directors and the quality of management and enrich management practices such as prompt decision-making and agile execution of operation, the Company was reorganized into a company with committees (currently company with three committees), which is more transparent and fair and in which outside directors account for the majority of board members. In June 2008, a female director was appointed for the first time, and in June 2021, female directors make up 30.0% of the board (two out of nine executive officers are also woman). In addition, we appoint outside directors with a wide array of knowledge, experience, and skills such as management, marketing, accounting, and legal affairs, etc. Since 2015, a board evaluation has been also conducted on annual basis to improve the effectiveness of the Board. Remunerations of Directors and Executive Officers The remunerations of directors and executive officers are designed for improving corporate value.
Corporate Governance Structure
☆ Independent Outside Director
Risk Management and Compliance
For internal control, we promote system development in order to secure the adequacy of organizational business operation. In order to accomplish organizational goals effectively, efficiently, and properly, opinions inside and outside the company are constantly grasped and improvements are continuously made, while organizing rules and business processes. We consider that risk control is the most important issue for management. We are working to establish a system that can prevent occurrence of various management risks surrounding the company, minimize damage in the event that incidents do occur, and to prevent their reoccurrence. As for compliance, we observe not only laws and regulations, but also internal and external rules, ethics, and social norms; fulfill social requirements, and expectations by putting our management philosophy, ethical standards and codes of conduct into practice; and strive to maintain and improve the trust of stakeholders. ● Operating income margin (%)
3. Number of issued outstanding shares does not include that of treasury shares. ROA = Profit attributable to owners of parent / average total assets for the fiscal year S.T. Group (in Japan) 17 (People) Ratio of outside directors to total directors / Ratio of female directors to total directors ● Ratio of outside directors to total directors (%)
6. The CO: emissions from the S.T. Group (in Japan) 7. The stock prices were as of the end of the fiscal years ended March 31. 8. As a result of new accounting standards being applied effective from the fiscal year ended March 31, 2019, the figures since fiscal years 2018 reflect those changes Business at a Glance
Promoting Capital and Business Alliances We concluded contracts for capital and business tie-ups with FUMAKILLA LIMITED, NS FaFa Japan Co., Ltd., and AT AROMA Co., Ltd. Development of New Businesses Cultivate domestic new fields and new markets by utilizing our new unique air-care technologies.
Overseas, sales of gloves are growing due to the spread of the novel coronavirus. In the fiscal year under review, we continued our strategic structural reforms. Utilizing the fact that the business areas of the three companies are complementary to each other, we will try to improve the development and profitability of the three comp We will take advantage of the companies possessing different strengths in different business areas (BtoC and BtoB) to achieve mutual business development. Bringing MoriLabo into the healthcare market and Air Forest and Dr. CLEAN+ into the BtoB market using Clear Forest technology which incorporates forest's functional aroma.
Corporate Data Company Name S.T. CORPORATION Headquarters 1-4-10 Shimo-ochiai, Shinjuku Ward, Tokyo 161-8540 Japan Telephone: +81-3-3367-6111 Establishment August 31, 1948 Fiscal Year-end March 31
Employees (As of March 31, 2021) Consolidated: 997 Non-consolidated: 457 (Excluding part-time and temporary employees) Listed Stock Exchange Tokyo Stock Exchange, First Section Group Companies S.T. PRO CO., LTD. S.T. Business Support Co., Ltd. S.T. MYCOAL CO., LTD. S.T. (Thailand) Co., Ltd. Family Glove Co., Ltd. (Taiwan) S.T. Korea Corporation (South Korea) Japan Aroma Laboratory Co., Ltd. Shaldan (Thailand) Co., Ltd. Overview of Communication Tools Creating Corporate Value Report (Japanese edition / English edition) An easy-to-understand annual report (pdf) on activities aimed at creating corporate value for all stakeholders. Corporate Information Website (Japanese site / English site) In addition to introducing each of the Company publications, the Corporate Information Website is a comprehensive tool that provides the latest information and an overview of S.T. CORPORATION to all stakeholders. Creating Corporate Value Report Financial Section (English edition) Compilation Data Book (pdf) and separate supplement containing financial data for the most recent fiscal year. Corporate Profile (Japanese edition / English edition) Investors' Guide (Japanese and English compilation) A compilation and comprehensive tool overviewing the Company as a whole in a  Data Book (pdf) format for the benefit of investors. Communication tools are available within the Library section of the Company's Corporation Information Website. 1-4-10 Shimo-ochiai, Shinjuku Ward, Tokyo 161-8540 Japan https://www.st-c.co.jp/english/