Page Link

Governance and CSR Management

Our Approach to CSR

Top Message

Becoming a Company that Is an Active Innovator beyond the Boundaries of Chemistry

Our high value-added technologies and products will provide solutions to the social issues and our customers as we head toward “where we want to be in ten years’ time”

Speeding up in the final fiscal year of the 2018 Medium-term Management Plan
When formulating the 2018 Medium-term Management Plan (FY2016-2018), we repeatedly discussed where the Hitachi Chemical Group should be in ten years. We used the “where we want to be in ten years’ time” as a foundation for breaking down the long-term plan into three-year periods for backcasting to understand what we should do at the present moment. Through this process we reached an answer: we want to become a company that is an active innovator going beyond the boundaries of chemistry, and based on advanced Functional Materials, operates globally in an extensive variety of businesses which encompass among others devices, systems and services. We set a goal of significantly increasing our sales revenue and achieving an operating margin of 14% or more by transcending the boundaries of chemistry and expanding our potential beyond BtoB to BtoC. If we achieved this, rivaling global chemical companies would be no longer be a dream but a reality.

Hitachi Chemical has been growing by standing alongside its customers, assessing their needs and providing them with solutions, while leveraging its three technology platforms of material technologies, evaluation technologies and process technologies as core competencies. However, with the awareness that it will be difficult to arrive at “where we want to be in 10 years’ time” solely with these strategies amid the drastically changing market environment, we are working on a new business approach for increasing our business conceptualization abilities, such as an ability to discover the true needs of customers and design businesses.

In the 2018 Medium-term Management Plan, which was formulated by backcasting from “where we want to be in 10 years’ time” we are working to promote open innovation through activities such as the acceleration of growth through the acquisition of technologies and business foundations from the outside, the acceleration of commercialization through collaborative creation with outside resources, and the expansion of global, top market share business through our Niche and Cluster Strategies; that is, by transforming businesses into niche businesses with high profitability and a strong growth rate, and into business cluster where strategies for global success can be shared by the groupings of several product families through the exercising our comprehensive strengths.

Expanding our growing operations in this one-year period
In fiscal 2017, our M&A efforts in business areas such as Automotive Products, Energy Storage Devices and Systems, and Life Sciences bore fruit and our operations expanded. As a result, our sales revenue sharply rose by more than 100 billion yen versus the previous year and reached a record-high of 669.2 billion yen (20.8% increase from the previous year). We saw consistent growth in the last year and achieved greater profit even without the non-continuous part resultant from M&A.

However, some issues remain and need to be addressed in fiscal 2018. In the last two years, we have constructed a system for increasing sales revenue but our operating margin in fiscal 2017 was 6.9%, which did not increase as planned.
This is attributable to the fact that we were not able to properly pass the rise in raw material prices onto products prices, and due to reasons such as a sharp decrease in the demand for smartphones and the delay in the creation of synergies with new consolidated Group subsidiaries unexpectedly slowed the increase in our profits around the end of the term. Given that revenue growth means that a base for increasing profits has already been set in place, it is an issue for fiscal 2018 to increase profit corresponding to the increase in revenue. For our new consolidated Group subsidiaries, we will facilitate PMI, leading to the early creation of synergistic effects. Also, we will aggressively invest in areas of growth in our existing businesses. In this way, we will strive to further solidify our growth. We will also strive to establish a profit structure that is less susceptible to influences from fluctuations in raw material prices.

With these initiatives, we are likely to achieve CAGR of 7-8% of revenue, the target for the final year of the 2018 Medium-term Management Plan. While achieving the initial target of 11% for operating margin is difficult, recovery to 8.3% is expected.

Facilitate continued growth in four businesses as we head toward where we want to be in ten years’ time
Looking back on the businesses in fiscal 2017, our advanced Functional Materials business enjoyed strong market conditions for semiconductor materials and the success of our Cluster strategy. Among our Niche products, CMP slurry has gained an established reputation and become a de facto standard item, which resulted in more orders and increased our profits. In the domain of semiconductor packages, we have already seen some cases where our products were designated as de facto items for major customers. Moreover, sales of our anode material for lithium ion batteries, which boast one of the world’s largest shares in the market for vehicle mounted applications, also increased significantly.

In Automotive Products, an increase in revenue of high value-added products led to increased profits. These products include, among others, exterior molding for automobiles and environmentally conscious disc brake pads. The former involves the use of our Group’s unique foaming and molding resin technology that has achieved weight-saving and strength compatibility while the latter complies with the regulation of copper content, which will be introduced in the U.S. in 2021. In the future, we will proceed with environmental actions more strongly, and, among other activities, the Group will unite on project for automatic operation and increasing the reliance of automobiles on electronics. Last year, we acquired ISOLITE, a company in Germany that develops, manufactures and distributes thermal insulation parts for automobiles, aircraft and other industrial applications. With ISOLITE as a new business base, we will strengthen the expansion of our sales to European automobile manufacturers. In the Energy Storage Devices and Systems business, we were affected by a rise in the price of lead, a raw material, in the previous fiscal year. However, we were able to focus on the construction of a business foundation, which is less affected by lead prices. Now a framework for developing the battery business globally, which was previously operated mainly in Japan, has been set in place due to FET joining Hitachi Chemical Group in fiscal 2016 and TSB who joined the Group in fiscal 2017. In fiscal 2018, we will strengthen our product lineup, which makes maximum use of the TSB’s 3K brand and the Hitachi Chemical brand. We are confident that our operation can expand in this business area while strengthening our earnings power.

Strengthen our financial strategies by foreseeing mid- and long-term growth

Expect growth and a higher profit rate by introducing an aggressive financial strategy
For fiscal 2018, we are planning to invest 60 billion yen in equipment. Considering that our annual investment amount in the 2000s was around 30 billion yen, our willingness to invest in the recent years is understandable. Hitachi Chemical’s capital cost ranges between 6 and 7%. As interest rates remain at a historically low level, it is necessary to strategically raise funds to ensure the growth of our operations. Based on this idea, we issued a 20 billion yen bond in fiscal 2017. As a result, the ratio of interests of shareholders of the parent company reached 57%. In fiscal 2018, capacity augmentation and efficiency will be our priorities for equipment investment, and we are planning to construct a new plant to increase the production of the products that make up our strengths.

From the perspective of efficiency of invested capital, the business management of Hitachi Chemical also places importance on ROIC. To efficiently connect capital to profits, the entire Hitachi Chemical Group will manage this index and will increasingly keep an eye on the asset turnover rate and the need for the disposal of assets.

Our dividend-related policy will be based on achieving a stable dividend with a dividend payout ratio of around 30%. Recently, the position of major institutional investors has been changing and we are receiving more requests for investing in mid- and long-term growth strategies instead of buying back our stocks. As President and CEO, I am determined to create an expansive scenario that will help to meet expectations. Additionally, I am willing to talk with investors about the direction of our growth strategies.

The entire Group concerts efforts to facilitate ESG Management

We will contribute to the environment and society with our operations
It is meaningless if our operations and ESG management make progress in different dimensions. The operations of Hitachi Chemical must be environmentally friendly and contribute to society. Based on this idea, Hitachi Chemical has developed sustainable engineering. If each of our staff members becomes aware, proud and happy about contributing to society, this will ultimately transform how we work.

Hitachi Chemical has introduced AI and robots to its indirect operations and production practices thus streamlining production while pushing forward with efforts to reduce the total workload by optimizing business processes. In the days ahead, we will expand overseas in an effort to enhance our productivity on a global scale. In Japan, initiatives such as telework have already been extensively introduced. However, efforts to make such initiatives more readily available still leave room for improvement. Therefore, we will rationally reduce the total workload, clarify the roles shared among staff members, and introduce an assignment method that will help to increase work satisfaction. To this end, we will continue to develop a workplace environment where communication between superiors and subordinates can be stimulated through our Global Coaching Program and its members, and based on our motto of “Develop a culture of dialogue and taking on challenges.” The 2018 Medium-term Management Plan includes a goal for raising the proportion of female managerial positions under the age of 45 to 12%. To achieve the target, we will showcase a guideline for specific educational and other methods to staff members with the aptitude for a managerial-level position, and we will develop a continuous follow-up system for these individuals.

Utilizing Carbon Management Strategy in our business management
As part of the actions to reduce CO2 emissions, we use Carbon Management Strategy. This method involves converting CO2 emissions into an amount of money, deducting it from profits and using it for internal management. This helps to raise awareness about CO2 reduction in our businesses. In fiscal 2017, we used this decision-making method on issues such as energy-saving investments, and successfully achieved our target for CO2 emissions set forth in the 2018 Medium-term Management Plan. In the days ahead, we will further strengthen our efforts to reduce CO2 emissions throughout our supply chain and making maximum use of our sustainable engineering to achieve the long-term environmental targets and SDGs of the Hitachi Group as a whole. Conventionally this method of Carbon Management Strategy was limited to Japan but in fiscal 2017 it was also applied to China. In fiscal 2018, the application of Carbon Management Strategy will be extended to our Group companies in other countries.

Lively exchange of opinions between Directors and Executive Officers meant to facilitate healthy management
The governance of Hitachi Chemical is based on the separation of supervision and execution functions. The Board of Directors plays a supervisory function. In an effort characteristic of Hitachi Chemical, the Outside Directors, who are on our Audit Committee, sequentially visit our Group companies, including those overseas, and provide feedback to our Board of Directors.

In my view, the Board of Directors of Hitachi Chemical is more vigorous than in other companies with our Board of Directors exchanging many opinions. In our monthly Board of Directors Meeting, Executive Officers report on the status of operations of respective divisions and Directors give advice. In addition, Directors and Executive Officers have off-site meetings on topics such as basic management policies and the Medium-term Management Plan for the next business period. The Directors and Executive Officers exchange opinions with an aim to ensure healthy management.

Also, supervision of the successor training plan is one of the roles of the Board of Directors. Based on the advice from Nomination Committee, the Board discusses the requirements for presidential candidates, plans for the training of candidates and other topics in order for Directors to be deeply involved in the training of our future leaders. We currently have candidates for Executive Officers and nominees for presidential candidates. Through discussions with outside managers and training sessions, these candidates are learning more than just management theory; they are acquiring greater depth and versatility in their personalities and developing the culture and aptitude to be managers.

Strengthen our group governance
As we recently announced, it has been ascertained that inappropriate data entries were made in inspection reports submitted to customers regarding certain products among lead-acid batteries for industrial use manufactured at our Nabari Works (Nabari City, Mie Prefecture).

We deeply apologize for the significant inconvenience caused to our customers and all other persons concerned.

The Hitachi Chemical Group has established a special investigative committee that includes outside experts and is thoroughly investigating the causes. After receiving an investigative report from the committee, we will announce the details again after figuring out the specific issues and taking measures to prevent a recurrence. We will do our utmost to restore customers’ trust by conducting a fundamental review of the quality control structure and focusing on the further strengthening of compliance.

Regarding our past cartel behavior in the capacitors business of the Group, we have been cooperating fully in the investigation since 2014, and financial penalties and compensation for damages of around 11.6 billion yen have been imposed on us. While this was a case that occurred before 2010, we have established measures to prevent a recurrence as a concerted effort of the Group while keeping firmly in mind that the misconduct of only a few people could result in an enormous loss.

After M&A and other measures, many like-minded companies joined the Hitachi Chemical Group and the consolidated number of employees in Hitachi Chemical now exceeded 20,000. Due to this, occupational safety and compliance are the cornerstones of management. Through meetings and messages, I will continue to communicate the importance of labor, safety and compliance. The rules at Hitachi Chemical will be spread, including to new Group companies, in an effort to strengthen governance.

Develop businesses that will help to address future social issues
Our 10-Year Strategy aims to facilitate businesses that help to address social issues and enhance our corporate value on a long-term basis while keeping SDGs in mind. To spread awareness, the Group Environment and CSR Committee holds quarterly meetings to share our track record of sustainable engineering activities that contributes to the resolution of environmental issues with products and services. During the meetings, I feel that the idea of materiality for long-term growth is gradually spreading within the Group. Through materiality analysis, we will formally analyze the relationship between Hitachi Chemical’s businesses and social issues and reflect Hitachi Chemical’s attitude toward the social issues in our 2021 Medium-term Management Plan. At the same time, I want all of our employees to have a sense of contributing to society.

Creating a corporate culture for exploring new business directions
Under the slogan of “Working On Wonders,” Hitachi Chemical continues to take on challenges every day to provide new value to our stakeholders. We hold the WOW Global Awards every year to create a climate of taking on challenge for our future. This is part of the WOW-BB activities that we began conducting on the 50th anniversary of Hitachi Chemical’s founding. This year, more than 900 entries were registered from the Group companies around the world, and a range of challenges were taken on. The challenge entry qualifications are as follows: A challenge is an effort that falls under any of Hitachi Chemical’s five challenges, and can also walk the talk. We will continue to materialize wonders that exceed the expectations of customers and society by further deepening our culture of dialogue and taking on challenges.

Remain as a company that is needed for the trends of the times
In the last 30 years, our revenue has more than tripled and our profit rate has also increased dramatically. This is proof of our growth in which our operations have focused on the growing markets of the time and our strength in material technology has been maximized. Today, Hitachi Chemical’s products are needed for the advancement of automatic automobile driving and EV-related technologies as well as for the sophistication of IT communication technologies. This represents a tail wind for us.

We will continue to accurately identify market trends and remain committed to the creation of new products and businesses using our core technologies. To this end, I would like to have meaningful discussions for growth with our stakeholders. We greatly appreciate your understanding of our direction and policies as well as your advices and opinions regarding our future.

  • Page Top